National Policy Ep35: The Distorting Impact of Compliance on Agribusiness in Kenya.

Looking at the BETA approach by the current government of Kenya Agriculture is given paramount priority to increase food security and improve the living standards of the people. This can be better achieved through food supply chain activities like value addition, reduction of post-harvest losses and helping producers to translate their production into income-generating ventures.

With key priorities getting channeled towards modernizing agriculture, you need to expand skills that are aligned with market needs, advancing technology and digital access and strengthening your social safety nets.

Upgrading agriculture requires adopting relevant technology and sustainability practices. However, taking your agricultural venture to the next level as an agribusiness, especially in value-added agro-processing, the food supply chain or services necessitates meeting compliance requirements

However, you are likely to experience some barriers that can prevent you from nailing the intended success that contributes to the overall achievement of the BETA framework. In this article, you will explore a few compliance stumbling blocks that can affect your agribusiness venture.

What is the Landscape of Compliance?

Entrepreneurship has the stewardship that bears many benefits to the communities including acceleration of innovations and employment creation. In this case, shift your focus to Agri-prenuers in the food system sector. They create several opportunities both directly and indirectly.

As an Agriprenuer you are a risk taker through investing in innovations that are intended to offer solutions to your target consumers. You have to be cognizant of the legal environment that has a hand in regulating the industry in which your business operates. This may include payment of some fee to get you registered and recognized as a legal operation.

One of the biggest obstacles you will face is the cost the high cost of compliance. You have to comply with a number of laws during the setup and also in the course of operations, making it to raise the cost of operations.

It has been cited that many young startups are driven out of the business due to the high cost of compliance. The cost may override what the business is generating. This can scare you when you aspire to join the Agriprenuership because of the fear of failure.

While the laws are key in regulating businesses, having too many laws can kill the entrepreneurship spirit. For instance in Kenya, you will need to meet some requirements at both at County and National levels. All of these have separate cost implications. There is no distinction between young businesses and established ventures regarding some categories of ventures.

Mr. Abdalla Mobogo, CEO of FixTea, dealing with beverage production of Kombucha, cited in one of the HealthyDiets4Africa Agribusiness Accelerator Program training sessions, which is funded by the European Union, that for him to be fully registered, he had to pay a fee equivalent to a well-established beverage company where he needed to have 10 compliance documents. In his remarks, the cost was high and it is slowing down the pace of scaling up his company.

The scenario above is indicative that, as an Agriprenuer, you operate on very tight budgets which are mostly strained. Adding the many compliance costs will strain further your business and ultimately stifle the creativity and innovation momentum you had.

Secondly, Compliance can take a lot of your time and energy. This, means resources are diverted to meet the processes rather than used in building the businesses. When you have many compliances and a lot of bureaucracy to climb up the ladder, more time and energy will be spent there in the end you become drained.

In HealthyDiets4Africa Agribusiness Accelerator Program some of the Agriprenuers involved in agro-processing have faced this challenge where they experienced back and forth with the regulators.

“Time and energy spent on compliance is draining. I have done all the processes but it is taking too long for approvals to be done. I am thinking of legal support from a lawyer.” Said Mary Karoki, Team Lead at Onja Foods and a beneficiary of the program, during a dissemination event at KALRO Exhibition Week, 2024.

The many laws can hamper competition both at local and international levels. However good your product cannot reach the market shelves if the product and the business are not compliant. The jurisdiction of your operations becomes limited before you contend with certifications. Linking this to the taxation, you are likely to incur double taxation if guidance is not properly.

Currently, in Kenya, there is another elephant in the room that is part and parcel of the subject matter. The tax regime is quite unpredictable and likely to hinder operations and the thriving of several innovations. This is likely to skyrocket the cost of products which is then transferred to the consumers through higher costs. The metrics of the business are likely to affect the purchasing power and profitability.

For example, if you are doing value addition to the sweet potato value chain, rich in vitamin A, your business is fully registered and product-certified, but tax and licensing costs increase in the course of operations, ultimately, the cost of the product will go up. The target consumers of the product are likely to use other alternatives hence missing the utilization of such a highly nutritive product and impacting the efforts to curb malnutrition. The business can be hit negatively by the demand and supply forces.

What is the way forward?

While there is a need to regulate the business environment, regulators need to strike a balance between over-regulation and the need to provide an enabling legal environment for businesses to thrive. This can increase voluntary compliance and prevent your startup can missing life-changing opportunities due to lack of or staled compliance, which should not be the case.

There is a need for more engagement of young Agripreneurs when it comes to transforming agriculture to make it attractive. A change in the policies can ensure the costs are made favorable by putting distinctive charges for startups.

Despite some sources indicating that over 17 million Kenyans are internet users, representing a 32.7% national penetration rate there is still a challenge in access to information on business compliance. Affordable emerging tools also empower start-ups as catalysts for socioeconomic transformation across Kenya.

You can have access to the internet but limited access to the right information on how to make your venture compliant. Well, you need not to worry more. You can maximize emerging technologies like Community Virtual Hub to learn about business compliance. Here you will be meeting useful learning materials and information from a pool of experts that will guide you on how to break through the compliance issues.

A hostile legal environment can be counterproductive to the efforts to promote innovations and lead to business closures across food systems. This will negatively impact the inclusivity of our communities in agribusiness, especially by the youth and women, job creation, food access challenges leading to nutrition insecurity, and community development. 

For more information, contact info@fspnafrica.org