Nairobi traders, already under pressure to secure trading permits by the March 31 deadline, have been hit by a sharp increase in annual licence fees, undermining efforts to improve ease of doing business in the city.
The traders said the county government’s decision to bundle the licences has more than doubled the trading permit burden and reversed recent gains in reducing the cost of doing business.
The single business permit fee increase has hit small businesses hardest, forcing them to pay up to three times what they paid last year.
An eatery located on the city’s Moi lane (between Moi Avenue and Tom Mboya Street) with a seating capacity of about five customers, for example, paid Sh10,000 last year for annual permit but is required to renew the same for Sh31,000 this year.
Taxi operators, who paid Sh7,000 permit fees last year, are now required to pay up Sh11,200.
Small shops that paid about Sh5,000 last year are now required to pay between Sh9,500 and Sh13,700, according to current billings.
The Nairobi county government said the increase is the result of consolidation of charges that traders were not paying for before, including signage fees (advertising) and fire certificates.
Nairobi County Executive Committee Member for Trade, Industrialisation, Co-operative Development and Tourism Anna Othoro said the traders have not been paying some licence fees and that the new billing system does not amount to an increase.
“There has been no increase in licensing fees. The fire licence and advertising signage are mandatory by law and have always been charged. Many business people have not been paying for them. When we pooled together all the licences into the unified business permit, it now means the businesses have to pay all licences due to the county,” Ms Othoro said.
The unified licence regime was launched last year but was to come into force this year. Many traders have, however, been caught unawares and are questioning the county government’s increased appetite for cash, while there is little to show in terms of improved services.
Consumer Federation of Kenya secretary-general Stephen Mutoro termed the increase in licence fees burden “unjustified and counterproductive” as it would translate itno a general increase in the cost of consumer goods and services despite the poor quality of services residents are getting from the city government.
“There has been an outcry over the increases disguised as a lumping together of many taxes, but in reality there is no connection between these higher fees and improved services. More taxation only ends up in increased cost of doing business and eventually higher prices to the consumers. It has also come at such a wrong time when people are facing financial hardship,” said Mr Mutoro.
Traders said they would pass on the additional expenses to consumers.
“We will be forced to raise the prices or else just close shop because it will not be sustainable. We have to sell cheaper to attract customers in this ugly environment as city authorities only visit to collect revenues,” said Joyce Wairimu.
Moi Lane, for example, is littered with garbage and stagnant spills from faulty sewerage pipes.
Operators of Westlands-bound public service vehicles that line up the road have attempted to seal the huge potholes holding the stinking water in vain. The close to 200 vehicles pay Sh3,650 each in annual licence fees to the county government.
Nairobi City County director of public communications Beryl Okundi described licence fees in Nairobi as the ‘lowest’.
“We are charging as low as Sh4,500 for a stall that would ordinarily attract Sh10,000 in a year. We don’t even make much from the licence fees and that is why we are consolidating them. As for the claims of poor services, I think business people must also be responsible and ensure the cleanliness of their premises,” she said.
City Hall insists the fees depend on the nature of business, including extra fees for food businesses that require health certificate and food hygiene.
Businesses like small shops dealing in clothes are, however, outraged by the requirement that they pay Sh4,200 for signage and advertising while their arrangement in small cubicles had no provision for putting up any signage or advertising.
The addition of Sh4,500 for fire extinguishers also surprised many business owners given that the buildings they operate from had complied with the same requirements.
“They just want to ensure you have paid, whether you have a fire extinguisher or you know how to use it does not matter. We were never warned of these upsurges and now most of us may have to close shops or relocate,” said Ruth Njeru who sells clothes along Moi Avenue.
The traders are also facing high start-up costs with some small shops in the CBD asking for as much as Sh1 million as goodwill.
Data from the Kenya National Bureau of Statistics released at the end of October 2016 shows that 2.2 million micro small and medium enterprises (MSMEs) shut down in the past five years because of inability to cope with high operating expenses, declining income and losses incurred from businesses.
The higher taxes could worsen, resulting in more job losses and even lesser tax collection to the government. Businesses will also find ways to avoid complying with the high fees, creating more informal operations in the city. City Hall is already battling an influx of hawking business in the CBD.
Credit: Business Daily