New business registrations in the country declined by 7.6% in the period up to December, with 130,527 entities registered compared to 141,193 in 2023. This is a reversal from the growth trend seen in 2023 when new registrations increased by 2.9% from 137,188 in 2022.
According to BRS data, the decline was mainly driven by a 15.3% drop in business name registrations which fell to 70,693 from 83,458 in 2023. Business names are mostly sole proprietorships – small ventures owned and operated by individuals.
Other types of business entities covered in the BRS data include private companies, public companies, foreign companies, companies limited by guarantee, limited liability partnerships and limited partnerships. The decline in new registrations is due to economic uncertainty and a tough business environment.
Economic Factors Stifle Business Growth
The decline in new registrations was during a period of high taxation and high interest rates. Investor perception of an economic slowdown and high interest rates played a big role in discouraging people from starting new businesses.
Ken Gichinga, chief economist at Mentoria Economics said that by the start of last year, economic conditions were already gloomy, and many delayed their investment plans. “By the start of last year, the perception of an economic slowdown was already rife based on high interest rates and the general operating environment. This suppressed the Kenyan entrepreneurial spirit and many delayed their businesses,” he said in an interview.
Investors also found alternative opportunities such as government securities that were attractive, reducing the appeal of new businesses.
Private and Foreign Companies See Modest Growth
Despite the overall decline, some categories saw growth. New private company registrations increased by 3.2% to 58,193 from 56,376 in 2023. Foreign company registrations also grew by 4.4% to 189 from 181 in 2023.
Companies limited by guarantee also grew by 327 to 833 entities. However, new public company and limited liability partnerships registrations decreased by 26 and 68 respectively to 64 and 514.
Business Closures and Administrations RisingThe tough business environment also saw an increase in business closures. In 2024, 1,845 entities were delisted from the register, same as 1,861 in 2023. 22 companies went into administration, a sign of the financial struggle's businesses are facing due to high taxes and high borrowing costs.
Company administration is a process where an insolvency practitioner is appointed to restructure a struggling business to preserve its value. This process temporarily stops legal proceedings against the company, giving room for recovery.