The regulation burden

By Muturi Githae

Kenya has digitised business registration, created a single business permit and promised a single licensing window. Yet the private sector counts more than 540 licences and permits issued by 61 regulatory bodies. The question is no longer whether businesses are regulated. It is why so many agencies need a piece of the same business.

A small workshop in Nairobi does not look like a complicated regulatory proposition.

Five employees. A modest premises. A few machines. Customers who mostly arrive by road.

Yet even such a business can find itself dealing with county licensing, fire clearance, tax obligations, occupational safety requirements, advertising approvals and, depending on what it makes or sells, a thicket of sector-specific rules. Add food, chemicals, imports, construction or health products and the paperwork acquires offspring.

Kenya’s official business-regulation portal lists separate requirements for starting, managing and expanding a firm, with sector-specific rules covering agriculture, education, energy, health, manufacturing, tourism, ICT, finance, construction and import-export.

There is no single number that every Kenyan business must obtain. That is rather the point.

The Kenya National Chamber of Commerce and Industry’s 2026 Business Barometer counted more than 540 licences and permits across 61 regulatory bodies, with compliance estimated to consume 30-50% of business resources.

Erick Rutto, the Chamber’s president, put the complaint more sharply: “The cost of regulation is no longer just administrative; it is a direct barrier to growth.”

That is a serious charge. And unlike the usual business lament about taxes, it points to something harder to see on a balance sheet.

Time.

The licence is only the beginning

Consider the humble single business permit.

Kenya introduced it as a simplification: one county permit rather than a collection of separate local trading licences. In Nairobi, the official process now involves application verification, assessment, invoicing and payment. The government’s own guide lists a KSh200 application fee, alongside indicative charges for a small workshop, fire clearance and advertising.

So far, so streamlined.

But the same government guide says businesses may also require a fire clearance certificate, while enterprises dealing with consumables need health certification and a food-hygiene licence; businesses displaying signs may require an advertising licence.

The single permit, in other words, is not necessarily a single regulatory relationship.

It is a front door.

There are still rooms behind it.

This distinction matters. A government can digitise an application without simplifying the underlying law. It can replace a queue with a website while leaving the queue’s logic intact.

The computer, in such cases, merely makes bureaucracy faster at being bureaucracy.

Sixty-one regulators

The scale of the problem becomes clearer when the regulators are placed side by side.

A manufacturer may encounter the Kenya Bureau of Standards, environmental regulators, occupational-safety authorities, county government, tax authorities and sector-specific agencies. An importer adds customs and trade requirements. A food processor encounters public-health and food-safety rules. A construction company enters an entirely different regulatory thicket.

Each requirement may be defensible on its own.

The accumulation is another matter.

Kenya’s Competition Authority has warned that multiple licences increase transactional costs for MSMEs and can affect supply chains. It specifically notes that investors may require multiple licences simply to open a small retail outlet.

This is regulatory accretion: each rule arrives with a respectable reason. Few regulators are responsible for asking whether the whole edifice still makes sense.

That is how a business ends up complying with the state in pieces.

The cost is not merely the fee

Licence fees are easy to count. Compliance time is not.

A proprietor who spends two days securing a permit has not necessarily paid the government two days’ worth of money. But those two days are still an economic cost. Someone must visit an office, upload documents, answer an inspection request, correct an application or chase an approval.

For a large company, that becomes a compliance department.

For a small company, it becomes the owner.

That distinction is crucial.

Kenya’s draft MSME Policy acknowledges that complicated registration and licensing procedures, multiple permits from different authorities and duplicated or contradictory requirements increase costs and administrative burdens. It identifies the regulatory environment as one of the principal constraints facing micro and small enterprises.

The policy problem therefore has a curious distributional effect. The same rule can be trivial for a multinational and debilitating for a two-person enterprise.

The state sees one regulation.

The entrepreneur sees another bill.

Devolution made the map harder

County government was meant to bring administration closer to citizens. It also created another layer through which businesses must pass.

The County Licensing (Uniform Procedures) Act, 2024 was supposed to deal with precisely this problem. It requires licensing authorities to make applications more efficient, prevent multiple licensing procedures and provide mechanisms for simultaneous applications. It also calls for harmonisation of licensing regulations, procedures and fees across counties.

The legislation is unusually explicit about the disease it is intended to cure.

The cure is still being administered.

In July 2026, the State Department for MSME Development said consultations were under way to amend the law because implementation gaps had emerged. The proposed reforms include a single operating licence to replace multiple county licences for related activities and a Kenya Investment Single Window through which businesses could handle registration, tax identification, permits and county licences in one place.

The government therefore finds itself trying to simplify a system that it has, over time, helped proliferate.

That is not unusual in public administration. Regulations are easier to create than abolish.

A digital maze is still a maze

Kenya’s answer has increasingly been digitisation.

That is sensible. An online licence is generally better than a paper licence. A payment made from a phone is better than a trip across town. Shared databases are better than asking the same company for the same certificate five times.

But digitisation cannot resolve overlapping mandates by itself.

The World Bank’s Business Ready framework makes a similar distinction. It assesses not only the quality of regulations, but also public services and the efficiency with which firms actually obtain them. In other words, good rules on paper are insufficient if the machinery applying them is slow or fragmented.

This is where Kenya’s regulatory reform has sometimes been weakest.

The ambition has been to put more services online.

The harder ambition is to ask whether some of those services should exist at all.

Manufacturing pays the higher price

The burden becomes particularly visible in manufacturing, where regulatory compliance intersects with physical premises, environmental standards, worker safety, product quality, county permits and imports.

Tobias Alando, chief executive of the Kenya Association of Manufacturers, recently described the problem in stark terms. “To run a manufacturing business in Kenya today is to be perpetually compliant,” he wrote, describing a system characterised by a “multi-agency, multi-fee, multi-inspection cycle”.

The numbers give his complaint some context.

Manufacturing’s contribution to GDP has fallen from around 10.9% in 2013 to about 7.2% in 2025, according to KNCCI. The Chamber links the decline to a combination of energy costs, taxation, import pressures and regulatory burdens.

Regulation is not solely responsible. That would be too convenient.

But when Kenya says it wants manufacturing to become a larger engine of growth, every avoidable compliance cost becomes an industrial-policy question.

A factory cannot export a certificate of compliance.

It must export a product.

The paradox of formalisation

There is an even more awkward consequence.

Kenya wants informal enterprises to formalise. Formalisation brings access to finance, public procurement, larger customers and legal protection.

But formalisation also brings the regulator closer.

A recent academic review of Kenya’s MSME regulatory system found that fragmented regulation, complex standards and compliance costs remain obstacles to formalisation. It also found that only 23% of SMEs complied with Kenyan standards, compared with nearly 77% of large firms.

The lesson is uncomfortable.

If compliance is designed around the administrative capacity of a large corporation, the smallest firm is not being invited into the formal economy. It is being asked to behave like a large firm before it has become one.

That encourages informality.

And informality, in turn, gives regulators a reason to demand more enforcement.

A neat little circle.

What would a simpler system look like?

Not a lawless one.

A functioning economy needs standards. Food should be safe. Buildings should not collapse. Workers should not be poisoned by machinery. Financial institutions require supervision. Environmental damage has costs that firms may otherwise avoid.

The argument is about duplication and proportionality.

A better system would begin with a basic question: what information does the state already possess?

If KRA has a company’s tax identity, why should another agency repeatedly demand proof of existence? If a county knows a premises has a valid operating permit, why should three other departments require essentially the same information? If one regulator has inspected a facility for a particular risk, when is another inspection justified?

The answer should be encoded in the system rather than left to the entrepreneur to discover.

Kenya’s County Licensing Act already gestures towards this principle by requiring licensing authorities to prevent multiple procedures and facilitate simultaneous applications.

The proposed Kenya Investment Single Window goes further, promising a common digital entry point for registration, tax, permits and county licences.

But the real test will not be whether the portal works.

It will be whether the number of doors behind it falls.

The licence count that matters

There is a temptation to make the 540 figure the headline.

It should not be.

The number is an inventory of licences and permits across Kenya’s regulatory system, not a bill handed to every entrepreneur. A restaurant, a bank, a boda-boda operator and a cement factory do not face the same obligations.

The more important number is the one no agency routinely publishes: how many hours does an ordinary Kenyan business spend each year proving to the state that it is allowed to do what it is already doing?

That figure would expose the true cost of regulation.

The fees are visible. The waiting is not.

And in a country where the government says it wants more investment, more manufacturing and more formal jobs, waiting is not a neutral activity. It is capital lying idle.

The reforms now being proposed are therefore less about making government friendly to business than making government economical with its own demands.

That is a better standard.

A business should have to prove that it is safe, lawful and fit to operate.

It should not have to prove the same thing to everyone.