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Kenya, with a gross domestic product (GDP) approaching US$12 billion, is the most developed economy in Eastern Africa. The country possesses an extensive infrastructure, a generally well-educated population, and a strong entrepreneurial tradition. The Kenyan economy remains dominated by Agriculture which still accounts for 30% of GDP. The sector is itself diversified, consisting of varied food crop and cash crop sub-sectors as well as livestock, forestry and fishing. The main agricultural exports are tea, pyrethrum, coffee, vegetables and cut flowers. Manufacturing accounts for another 17% of GDP with the rest being mainly services.
Trade Incentive MAJOR INVESTMENT INCENTIVES The Government policy is to create an enabling environment for private sector investment. The following is a summary of investment incentives: INVESTMENT ALLOWANCE Investors in manufacturing and hotel sectors outside Nairobi and Mombasa are eligible for an investment allowance of 85 percent on plant, machinery, buildings, and equipment. Investments located in Nairobi and Mombasa are eligible for the investment allowance at 35 percent. For manufacturers under bond, the applicable rate is 100 per cent for all locations. DEPRECIATION Liberal rates are allowed for depreciation of assets based on book value as follows: Hotels................................................4% per year Industrial buildings...............................25% per year Plant and machinery..........................125% per year Vehicles, trucks, and tractors..............25-37% per year. LOSS CARRIED FORWARD Business enterprises that suffer tax losses can carry forward such losses indefinitely to be offset against future taxable profits. REMISSION FROM CUSTOMS DUTIES Duties on machinery and equipment may be reduced to 10% where the investment is expected to have net foreign exchange earnings or savings for Kenya. Imported plant and equipment intended for industries located outside major towns are also charged custom duties at 10%. A 50 per cent remission of duties and tax is granted to industries established within designated boundaries of Nairobi, Mombasa and other urban centres. DUTY REMISSION FACILITY Materials imported for use in manufacture for export or for the production of duty free items for sale domestically are eligible for duty remission, irrespective of the source of financing. This programme is open to all types of investment whether they are for expansion, replacement or rehabilitation or new manufacturing plants. MANUFACTURING UNDER BOND To encourage manufacturing in Kenya for world markets, the Government has established an in-bond programme open to both local and foreign investors. Enterprises operating under the programme are offered the following incentives: Exemption from duty and VAT on imported plant, machinery and equipment, raw materials and other imported inputs. 100 per cent investment allowance on plant, machinery, equipment and buildings. Bonded manufacturing enterprises can be licensed to operate in Nairobi, Mombasa, Kisumu, Eldoret, Nakuru, Nyeri and Thika or within the immediate environs of these towns. MARKET ACCESS Exports from Kenya enjoy preferential access to world markets under a number of special access and duty reduction programmes. Regional Markets:- Kenya is a member of Common Market for Eastern and Southern Africa (COMESA) with a population of approximately 400 million. Exports and imports within member countries are entitled to tariff rates. ACP/Lome Convention:- Exports from Kenya entering the European Union are entitled to duty reductions or exemptions and freedom from all quota restrictions under the terms of the LOME Convention. Trade preferences include duty free entry of all industrial products and a wide range of agricultural products including beef, fish, dairy products, cereals, fresh and processed fruits and vegetables. Generalized System of Preferences (GSP): Under the Generalized System of Preferences, a wide range of Kenya’s manufactured products are entitled to preferential duty treatment in the United States of America, Japan, Canada, Switzerland, Norway, Sweden, Finland, Australia, Austria, New Zealand, and most East European countries. In addition, no quantitative restrictions are applicable to Kenyan exports of any of the 3,000 plus items currently eligible for GSP treatment. Kenya was the first country to qualify for preferential access into the United States Market, under the African Growth Opportunity Act (AGOA) of 2001. GUARANTEES TO INVESTORS Kenya provides the following guarantees to local and foreign investors: Repatriation of Capital and Profits: Capital repatriation and remittance of dividends and interests are guaranteed to foreign investors under the Foreign Investment Protection Act (FIPA) (Cap.518). To be eligible for FIPA guarantees, investors should obtain a Certificate of Approved Enterprise from the Ministry of Finance. Guarantee Against Expropriation: The Kenyan Constitution provides for a guarantee against expropriation of private property. Expropriation may only occur either for security reasons or public interest, upon which fair and prompt compensation is guaranteed. Other Guarantees:- Kenya is a member of the World Bank affiliated Multilateral Investment Guarantee Agency (MIGA), which issues guarantees against non commercial risks to enterprises that invest in signatory countries. Kenya is also a member of the International Centre for Settlement of Investment Disputes (UCID). Sector Opportunities Many trade and investment opportunities exist today in Kenya, especially in the agriculture, manufacturing and mining industries, as outlined below. AGRICULTURE Agriculture is the mainstay of the economy, providing livelihood to approximately 75 % of population. The agricultural sector currently contributes approximately 24% of Gross Domestic Product, generates 60% of the total foreign exchange earnings and provides direct employment to over 311,000 people. The sector has strongly forward and backward linkages providing most of the basic raw material and inputs to local agro-industries. The major agricultural activities in Kenya are crop production, horticulture, dairy and livestock farming. The principle food crops produced include maize, wheat, beans, potatoes and rice, while major cash crops are coffee, tea, sugarcane, sisal, and pyrethrum. There exists potential in cotton production. Horticulture Opportunities exist in production and export of products such as cut flowers, French beans, pineapples, mushrooms, asparagus, mangoes, macadamia nuts, avocados, passion fruits, melons, and carrots. Support services include cold storage facilities and refrigerators for horticultural and other perishable products, seed production, construction of dams and bore holes,and installation of irrigation systems. Fisheries Australian imports from Kenya comprise mainly of fish and related products, and there is room for growth in this area considering the vast fishing potential of the Indian Ocean and Lake Victoria. At present, deep sea fishing, prawn and trout farming are in their infancy but growing rapidly. Opportunity also exists in fish processing (filleting and fish meal production), as well as fisheries-support infrastructure (refrigerated transport, cold storage, etc. Agro-processing Numerous investment opportunities exist in this sector. Edible and other oils produced locally include butter, ghee and margarine as well as sunflower, rapeseed, cottonseed, seamen, coconut and corn oil, while a large quantity of palm oil is imported. Investments to develop substitutes for palm oil imports are welcome. Other opportunities include coffee roasting and grinding, with a further potential such as in the production of decaffeinated coffee for export,manufacture of sprayers and pesticides, and the production and processing of sugar, tea, meat and dairy products. Poultry Products Hatcheries for the production of chicken for both domestic and regional consumption are under-exploited. Leather and Leather Goods Most hides and skins are processed up to the wet blue stage for export while investment opportunities exist in production of finished leather, offering potential for the manufacture of shoes and other leather products. MANUFACTURING Kenya's manufacturing sector plays an important role in adding value to agricultural output and providing forward and backward linkages, hence accelerating overall growth. The sector now comprises of over 700 established enterprises and directly employs over 200 000 Kenyans. A wide range of opportunities for direct and joint-venture investments exist in the manufacturing sector, including agro-processing, manufacture of garments, assembly of automotive components and electronics, paper, chemicals, pharmaceuticals, metal and engineering products for both domestic and export markets. Paper products Kenya has an integrated pulp paper mill plant and paperboard from renewable forest products. However, the country imports coated white lined chipboard and other boards for packaging, newsprint, printed-paper and other type of paper. Investment opportunities exist in the production of paper from other raw material such as bagasse, sisal waste, straw and waste paper. Textiles and Apparels Textile, Garment and Apparel manufacturing has a very high potential in Kenya. Sufficient, experienced, productive and inexpensive Labour is locally available, in addition, a well-developed infrastructure, dependable air and sea transport links and support services required by the textile manufactures are already in place to enhance the development of the industry. Vehicle Parts and Assembly The motor vehicle component industry is rapidly developing to supply the needs of a few motor vehicle assemblers to meet certain local content requirements. The plants assemble passenger cars commercial vehicles. Kenya has over 20,000 new registrations annually. Products such as tires, tubes, batteries, springs, radiators, brakes pads, cables, rubber components and filters are now produced locally. A number of firms fabricate bodies for commercial vehicles. A small-scale bicycle assembly venture and a large ship repair operation exist as well. Opportunities exists for manufacture of components for use by local assemblers for domestic market and for export to regional markets. Electrical Equipment Investment potential exist for the production of motors, circuit breakers, transformers, switch gears, irrigation pumps, capacitors, insulation tapes, electrical fittings and integrated circuits for both the domestic and export markets. Plastics, Chemicals and Pharmaceuticals A large number of pharmaceutical formulations are produced locally in the form of tablets, syrups, capsules, and injectables, but the bulk of pharmaceuticals is imported. There is room for additional investment in the pharmaceutical industry. Many attractive investment opportunities in chemicals, pharmaceuticals and fertilizers remain unexploited. These include the production of PVC granules from ethyl alcohol; formaldehyde from methanol; melamine and urea; mixing and granulating of fertilizers; cuprous ox chloride for coffee bean disease; caustic soda and chlorine based products; carbon black; activated carbon; precipitated calcium carbonate; textile dyestuff; ink for ball-point pens; and galantine capsules. MINING & MINERAL PRODUCTS Kenya has well-developed cement processing plants that satisfy the domestic market and exports to the regional market. Approximately 1.2 million tones of cement are consumed locally each year. The Kenya Mining Industry is dominated by production of non-metallic minerals which are mainly: - soda ash (trona), flourspar, diatomite, vermiculite, natural carbon dioxide, kaolin, barytes, a variety of gemstones, limestone and lime products including various construction materials. In the case of metallic minerals, some quantities of gold are being produced. Iron ore is produced from localised small deposit and is utilised in the manufacture of cement in the country. Opportunities exist in the production of glass, as the country is not self-sufficient. A few manufacturing units produce ceramic pottery and tiles, however, substantial quantities of ceramic pottery, tiles, sanitary-ware, and insulators are imported. Investment potential exists in prospecting and mining of other minerals such as gold, precious stones and petroleum. |
