will spend over Ksh406.5 billion ($5.42 billion) in projects that have over the
past years inhibited business growth.
Latest statistics from the just
concluded 2010/2011 budget presentation show that the government will spend the
money for the enhancement of investment climate.
To usher in more inflows, Treasury
said that it was determined to bring down production costs. Leading the pack is
the radical proposal to cut power overheads incurred by firms, as Finance Minister
Uhuru Kenyatta said in his budget speech that that the country will be shifting
its reliance on hydropower to alternative but cheaper energy sources.
The new development will see
businesses use more of geothermal, wind as well as solar power it its operations.
The shift is also likely to reduce pressure on hydropower, especially with the
ballooning demand for energy.
Analysts say the diversification of
power sources is likely to spur company margins as energy costs have eaten
deeply into their revenues.
Reports show that alternative
energy sources account for only 6.4 per cent of Kenya’s total energy use.
“The government is aware that there
are many private investors who are keen to invest in the energy sector and
especially in alternative and cheaper sources. However, there are concerns that
the procedures take too long. In this regard, Treasury commits to support the
Ministry of Energy by removing all procedural and licensing impediments so that
private investment in the energy sector can be fast-tracked,” Mr Kenyatta said.
Currently, the Energy Regulatory
Commission is formulating a system that will see the electricity tariffs
reviewed to ensure predictability of power costs.
In the 2010/2011 fiscal year
budget, more than Ksh34.1 billion ($455 million) will be pumped into the sector
with more than Ksh15.6 billion ($208 million) invested in expansion of the
national grid system and Ksh11.6 billion ($154.7 million) for geothermal
development and coal exploitation.
Geothermal power generation is
likely to be expanded substantially this fiscal year as public-private sector
partnerships help the country exploit an additional 500MW in the next four
years. This will bring installed power capacity to a total of 800MW by 2014.
In an effort to open borders to
foreign businesses and increase the county’s competitiveness, the minister
proposed that radical reforms be introduced especially in the regulatory institutions
“whose mindset appear to be aimed at preventing not facilitating business.”
This apparently referred to local
authorities that have in the recent years come under sharp criticism over their
archaic regulations, which have substantially affected business operations.
Nairobi City Council is a
conspicuous example for its bureaucratic, corrupt and overlapping licensing procedures.
“This budget proposes measures to
improve our regulatory framework supportive of private sector-led growth. One
key action in this direction will be the enactment of the proposed Business
Regulation Bill which is now ready for submission,” the Finance Minister said.