High taxes force tech firm out of Kenya
- Published on 03 September 2012
Major software development company Craft Silicon has announced plans to relocate its offices from Kenya to Singapore, after the organisation has said that a challenging operating environment and an unfavourable tax regime have made business difficult in the country.
The firm - which sells software to financial institutions across Africa, Asia, Eastern Europe and South America - has said it was finding it difficult to have its operations manned from Kenya because of the high cost of doing business, according to a report in The Standard newspaper.
The announcement comes as a serious warning signal to Kenya, which has been trying to assert itself as the tech hub in the region. The country’s government sees Information and Communications Technology (ICT) as a key pillar to boosting its economic growth.
And as a result, companies such as IBM and Mastercard have set up regional research and business hubs in the country. Kenya is even planning a development dedicated to tech called Konza City, which will be situated just outside Nairobi.
However, Craft Silicon’s chief executive, Kamal Budhabhatti, told The Standard newspaper that Kenya lacks incentives for tech companies.
“The cost of doing business in Kenya is not favourable to the software industry, taxes are way above the small technology companies,” Budhabhatti told the Standard newsppaer.
“We have settled on Singapore for their better incentives that are pro-software developers.
“This is opposed to the 30% corporate tax we pay, the industry is still young and needs to be given some consideration to pick up,” he said.
John Waibochi, the founder and chief executive officer of the Kenya-based Virtual City, agrees that the country’s government needs to take a second look at the key pillars of its Vision 2030 plan.
“Kenya aspires to become a knowledge-based society by 2030, and ICT will play a big role in this,” Waibochi told The Standard newspaper.
“The current tax regime is not favourable to the industry, we need tax incentives to build intellectual properties.”