Introduction

This paper seeks to provide findings on which of the two countries, Kenya and South Africa, is a
better option for setting up a business. The paper conducts an analysis involving frequency and
descriptive analysis in order to assess some of the factors thought to hinder the establishment of
businesses.
Findings
1. Generator Ownership
Table 1: Generator ownership
South Africa Kenya
Yes 698 680
No 398 320

The results in the above table and the pie chart suggest that about 64 % of the establishments in
South Africa either owned or shared a generator over the course of this fiscal year.
The chart suggests that about 68 % of establishments in Kenya either owned or shared generators
over the course of this financial year.
The table below depicts the average percentages of establishments’ electricity that came from
owned or shared generators in the fiscal year.
Table 2: Percentage of electricity from owned or shared generator
South Africa Kenya
Mean % of electricity from generator 42.54843517 20.90601
SD 36.30538334 29.1849

Results of the analysis suggest that Kenya has a higher number of establishments owning or
sharing generators (68 %) as compared to South Africa (64 %). Further, the analysis
demonstrates that South Africa’s establishments depend more on electricity from generators (M
= 42.54 %, SD = 36.31) as compared to Kenya (M = 20.91 %, SD = 29.18).
Normally, generators are used as backup power options. The results, therefore, suggest that
South Africa is more prepared to deal with power ooutagesas compared to Kenya.
2. Competition against unregistered or informal establishments and tax rates
i. Competition against unregistered or informal establishments
The table below compares the proportion of establishments in Kenya and South Africa that are
competing against unregistered or informal businesses.
Table 3: Competition against unregistered or informal establishments
South Africa Kenya
Yes 592 592
No 395 395
Total 987 987
The results in the table suggest that there is an equal likelihood between South Africa and Kenya
of establishments competing against unregistered or informal businesses (59.98 %). This implies
that there exist a large number of unregistered or informal businesses in both countries
producing/ offering the same goods/ services as registered businesses. Based on this factor, it is,
therefore, difficult to recommend which between the two countries is better for investment.
ii. Tax rates
Results in table 3 above have suggested that there exists a high number of unregistered or
informal businesses in the two countries. Research has found that a major reason associated with
the low rates of business registration in developing countries is high tax rates (Becker et. Al,
2012; Fairfield et.al, 2016). The table below depicts results on how tax rates are an obstacle to
the establishment of businesses in the two countries.
Table 4: Comparing tax rates as an obstacle to business
South Africa Kenya
No obstacle 736 186
Minor Obstacle 282 175
Moderate obstacle 47 270
Major Obstacle 24 293
Very severe Obstacle 4 61
Total 1093 985

The results suggest that more businesses in South Africa do not consider tax rates as an obstacle
to doing business (67.3 %) as compared to only 18.9 % in Kenya. More businesses in South
Africa consider tax rates as a minor obstacle (25.8 %) as compared to 17.8 % in Kenya. More
businesses in Kenya consider tax rates as a moderate obstacle (27.4 %) as compared to 4.3 % in
South Africa. More businesses in Kenya consider tax rates as a major obstacle (29.7 %) as
compared to 2.2 % in South Africa. Finally, the results suggest that more businesses in Kenya
consider tax rates as a very severe obstacle (6.2 %) as compared to 0.4 % in South Africa.
The below table provides the average ratings on how tax rates affect business between the two
countries.
Table 5: Descriptive statistics of tax rates
South Africa Kenya
Mean 1.42452 2.86599
SD 0.71185 1.207703

The results in table 5 suggest that tax rates are more likely to be an obstacle to doing business in
Kenya (M=2.87, SD=1.21) as compared to South Africa (M=1.42, SD=0.71).
iii. Association between competition from unregistered/ informal businesses and tax rates
Research has found that there is a likelihood of businesses evading government registration due
to high tax rates (Vegh & Vuletin, 2015). The below tables provide frequencies of the cross-
tabulation of the two variables.
Table 6: Competition and tax rates cross tab in South Africa
Competition from No obstacle Minor Moderate Major Very Grand
unregistered or Obstacle obstacle Obstacle severe Total
informal Obstacle
establishments
No 272 94 19 8 1 394
Yes 404 150 21 11 3 589
Grand Total 676 244 40 19 4 983

Upon conducting a chi-square analysis to assess the association between competition from
unregistered/ informal settlements and tax rates in South Africa, the analysis found that there
lacks a significant association between the variables ( x 2=0.8122 , p=0.9368 ). This implies that
competition from unregistered or informal establishments is not influenced by the country’s tax
rates.
Table 7: Competition and tax rates cross tab in Kenya
Competition from No obstacle Minor Moderate Major Very Grand
unregistered or Obstacle obstacle Obstacle severe Total
informal Obstacle
establishments
No 74 81 112 106 15 388
Yes 107 91 153 184 45 580
Grand Total 181 172 265 290 60 968

Upon conducting a chi-square analysis to assess the association between competition from
unregistered/ informal settlements and tax rates in Kenya, the analysis found that there lacks a
significant association between the variables ( x 2=0.0235 , p=0.9999 ). This implies that
competition from unregistered or informal establishments is not influenced by the country’s tax
rates.
3. Labour regulations and workforce education
Another factor that firms consider before setting up businesses is labour regulations and the level
of education of the workforce across different countries.
i. Labour regulation
The table below shows frequencies of how labour regulation is likely to affect business.
Table 8: Labour regulation
South Africa Kenya
No obstacle 746 391
Minor Obstacle 300 346
Moderate obstacle 37 182
Major Obstacle 12 66
Very severe Obstacle 0 7
Total 1095 992

The results suggest that more establishments in South Africa would consider labour regulation as
no obstacle to doing business (68.1 %) as compared to 39.4 % in Kenya. More businesses in
Kenya would consider labour regulation as a minor obstacle (34.9 %) as compared to 27.4 % in
South Africa. More businesses in Kenya would consider labour regulation a moderate obstacle
(18.3 %) as compared to 3.4 % in South Africa. More Kenyan business consider labour
regulation a major obstacle (6.7 %) as compared to 1.1 % in South Africa. Finally, more Kenyan
businesses consider labour regulation a very severe obstacle to setting up businesses (0.7 %) as
compared to South Africa.
The average obstacle levels of labour regulation for the two countries are shown in table 9
below;
Table 9: Descriptive statistics of labour regulation
  South Africa Kenya
Mean 1.37443 1.94355
SD 0.60672 0.95178

The results in table 9 suggest that there is a higher likelihood of labor regulations being an
obstacle to doing business in Kenya (M=1.94, SD=0.95) as compared to South Africa (M=1.37,
SD=0.61).
ii. Labourforce education
The table below shows frequencies of how workforce education is likely to affect business
between the two countries.
Table 10: Workforce education
South Africa Kenya
No obstacle 767 438
Minor Obstacle 268 315
Moderate obstacle 42 144
Major Obstacle 15 84
Very severe Obstacle 1 12
Total 1093 993

Workforce education
80.0
70.2
70.0
60.0
50.0 44.1
40.0
31.7
30.0 24.5
20.0 14.5
8.5
10.0 3.8 1.4 0.1 1.2
0.0
No obstacle Minor Obstacle Moderate Major Obstacle Very severe
obstacle Obstacle

South Africa Kenya

The findings suggest that more establishments in South Africa consider an inadequately educated
workforce as no obstacle to setting business (70.2 %) as compared to 44.1 % in Kenya. More
businesses in Kenya consider an inadequately educated workforce a minor obstacle (31.7 %) as
compared to 24.5 % in South Africa. More Kenyan businesses consider an inadequately educated
workforce a moderate obstacle (14.5 %) as compared to 3.8 % in South Africa. More Kenyan
businesses consider an inadequately educated workforce a major obstacle (8.5 %) as compared to
1.4 % in South Africa. Finally, the analysis reveals that more businesses in Kenya consider an
inadequately educated workforce a very severe obstacle to doing business (1.2 %) as compared
to 0.1 % in South Africa.

Table 11: Descriptive statistics of workforce education

South Africa Kenya
Mean 1.36688 1.909366
SD 0.634876 1.013449

Results in table 11 above suggest that businesses in Kenya are more likely to consider an
inadequately educated workforce as an obstacle to doing business (M=1.91, SD=1.01) as
compared to South Africa (M=1.37, SD=0.63). This implies that there is a likelihood of literacy
levels in Kenya than in South Africa.
iii. Association between labour force regulations and inadequately educated workforce.
A pivot table is generated and a chi-square analysis is conducted to assess the association
between the two variables.
Table 12: Pivot table for the relationship between labour force regulations and inadequately
educated workforce in South Africa.
Inadequately educated workforce
Labour regulation No obstacle Minor Moderate Major Total
Obstacle obstacle Obstacle
No obstacle 708 50 7 2 767
Minor Obstacle 29 225 12 2 268
Moderate obstacle 5 19 14 4 42
Major Obstacle 4 3 4 4 15
Very severe Obstacle 2 2
Grand Total 746 299 37 12 1094

Upon conducting a chi-square analysis to assess the association between labour force regulations
and inadequately educated workforce in South Africa, the analysis found that there lacks a
significant association between the variables ( x 2=0.000 , p=1).
Table 13: Pivot table for the relationship between labour force regulations and inadequately
educated workforce in Kenya
Upon conducting a chi-square analysis to assess the association between labour force regulations
and an inadequately educated workforce in Kenya, the analysis found that there lacks a
significant association between the variables ( x 2=0.000 , p=1).
4. Transport
Transportation is another important factor that influences the establishment of businesses. The
table below shows the frequencies of how transport is likely to affect business in the two
countries.

Table 14: Transport

South Africa Kenya
No obstacle 763 303
Minor Obstacle 243 311
Moderate obstacle 64 210
Major Obstacle 23 135
Very severe Obstacle 2 27
Total 1095 986

Transport
80.0
69.7
70.0
60.0
50.0
40.0 31.5
30.7
30.0 22.2 21.3
20.0 13.7
10.0 5.8
2.1 0.2 2.7
0.0
No obstacle Minor Obstacle Moderate Major Obstacle Very severe
obstacle Obstacle

South Africa Kenya

The results suggest that more businesses in South Africa do not consider transport as an obstacle
(69.7 %) as compared to 30.7 % in Kenya. More businesses in Kenya consider transport as a
minor obstacle (31.5 %) as compared to 22.2 % in South Africa. More businesses in Kenya
consider transport as a moderate obstacle (21.3 %) as compared to 5.8 % in South Africa. More
businesses in Kenya consider transport a major obstacle (13.7 %) as compared to 2.1 % in South
Africa. Finally, more businesses in Kenya consider transport a very severe obstacle (2.7 %) as
compared to 0.2 % in South Africa.
Table 15: Descriptive statistics of transport
South Africa Kenya
 Mean 1.409132 2.261663
SD 0.71229 1.117317

Table 15 suggests that businesses are more likely to consider transport as an obstacle in Kenya
(M=2.26, SD=1.12) as compared to South Africa (M=1.41, SD=0.71). This suggests that it is
likely that the transport network in South Africa is more developed as compared to Kenya.
5. Political instability
Political instability is another factor thought to influence the establishment of businesses, with
more businesses likely to be established in countries that are more stable politically.
Table 16: Political instability
South Africa Kenya
No obstacle 678 147
Minor Obstacle 163 173
Moderate obstacle 70 188
Major Obstacle 105 341
Very severe Obstacle 76 139
Total 1092 988

Political instability
70.0
62.1
60.0

50.0

40.0 34.5
30.0
17.5 19.0
20.0 14.9 14.9 14.1
9.6
10.0 6.4 7.0

0.0
No obstacle Minor Obstacle Moderate Major Obstacle Very severe
obstacle Obstacle

South Africa Kenya

Results of the analysis suggest that more businesses in South Africa do not consider political
instability as an obstacle (62.1 %) as compared to 14.9 % in Kenya. More businesses in Kenya
consider political instability as a minor obstacle (17.5 %) as compared to 14.9 % in South Africa.
More businesses in Kenya consider political instability a moderate obstacle (19.0 %) as
compared to 6.4 % in South Africa. More businesses in Kenya consider political instability a
major obstacle (34.5 %) as compared to South Africa (9.6 %). Finally, more businesses in Kenya
consider political instability a very severe obstacle (14.1 %) as compared to 7.0 % in South
Africa.
Table 17: Descriptive statistics of political instability
South Africa Kenya
Mean 1.844322 3.153846
SD 1.293889 1.287283

The table suggests that there is a likelihood of more political instability in Kenya (M=3.15,
SD=1.29) as compared to South Africa (M=1.84, SD=1.29).
6. Corruption
Corruption hugely hinders the establishment and growth of businesses. The table below presents
the frequencies of how likely corruption affects businesses in the two countries;
Table 18: Corruption
South Africa Kenya
No obstacle 694 230
Minor Obstacle 177 235
Moderate obstacle 60 161
Major Obstacle 105 243
Very severe Obstacle 55 115
Total 1091 984

Corruption
70.0
63.6
60.0

50.0

40.0

30.0 23.9 24.7

23.4
20.0 16.2 16.4
9.6 11.7
10.0 5.5 5.0
0.0
No obstacle Minor Obstacle Moderate Major Obstacle Very severe
obstacle Obstacle

South Africa Kenya

The results suggest that more businesses in South Africa do not consider corruption as an
obstacle (63.6 %) as compared to 23.4 % in Kenya. More businesses in Kenya consider
corruption a minor obstacle (23.9 %) as compared to 16.2 % in South Africa. More businesses in
Kenya consider corruption a moderate obstacle (16.2 %) as compared to 5.5 % in South Africa.
More businesses in Kenya consider corruption a major obstacle (24.7 %) as compared to 9.6 %
in South Africa. Finally, more businesses in Kenya consider corruption a very severe obstacle
(11.7 %) as compared to 5.0 % in South Africa.

Table 17: Descriptive statistics of corruption

South Africa Kenya
Mean 1.762603 2.77439
SD 1.214744 1.35629

The results suggest that there is a likelihood of more political instability in Kenya (M=2.77,
SD=1.36) as compared to South Africa (M=1.76, SD=1.21).

Conclusion
The paper sought to evaluate which of the two countries, Kenya and South Africa) is the best
option for opening up business. Both descriptive and frequency analyses were conducted in order
to arrive at a decision. Based on the results of the analysis, the paper established that South
Africa is more alert and ready to deal with power outages due to a higher percentage of
electricity from generators as compared to Kenya. The paper also found that labour force
regulations in South Africa are more business-friendly as compared to Kenya. Further, it was
established that South Africa is less likely to consider an illiterate workforce as an obstacle to the
business establishment, meaning that literacy levels are higher among the South African
workforce than in the Kenyan workforce. The analysis further found that transport is more likely
to be an obstacle in doing business in Kenya than in South Africa, which implies that the
transport network in South Africa is more developed. Moreover, the analysis found that political
instability is more likely to be an obstacle in Kenya than in South Africa, implying that South
Africa is more politically stable. Finally, the analysis found that corruption is a more likely
obstacle to doing business in Kenya than in South Africa.
Recommendation
Based on the study findings, the company should set the branch in South Africa.
References
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Fairfield, T. and Jorratt De Luis, M., 2016. Top income shares, business profits, and effective tax
rates in contemporary Chile. Review of Income and Wealth, 62, pp.S120-S144.
Vegh, C.A. and Vuletin, G., 2015. How is tax policy conducted over the business
cycle?. American Economic Journal: Economic Policy, 7(3), pp.327-70.