|What is the procedure?||Start a business|
The first step is to register your company at the Companies Registry.
This involves conducting a name search, reserving the name, having an advocate draw up the memorandum and articles of association, and submitting the completed forms and documents (as stipulated on the registry website) along with payment onsite of stamp duty of 1 percent of nominal capital and of registration fee. If all documents have been submitted correctly, the certificate of incorporation will be issued within 5days.
If registering as a foreign company, the Registry will issue a certificate of compliance upon submission of company charter/memorandum duly notarized from the country of origin together with the company registration forms(236,237,238,250)
This is explained further on the registry website (see relevant institutions below).
*Name reservation can be done online using the E-Citizen Portal.
The Kenya Investment Authority (Keninvest) was established by the Investment Promotion Act, 2004; its purpose “to promote and facilitate investment by assisting investors in obtaining the licenses necessary to invest and by providing other assistance and incentives”. Its role is to promote and facilitate investment by:
Foreign investors must also obtain an investment certificate. This requires a minimum investment of US$100,000 and an explanation of how the potential investment will be beneficial to Kenya on the basis of criteria such as employment, skill upgrading, transfer of technology, foreign exchange generation, and tax revenue enhancement.
To apply for an investment certificate, you will need to submit the documents listed in the box below.
Keninvest is expected to make and communicate its decision regarding an investment certificate within 10 working days after receiving a complete application.
You will need to submit the application forms together with copies of:
Issuance of The Investment Certificate from KenInvest upon conforming to Health, Environment and Security requirements. Therefore, if an investor does not have an entry permit or if environmental impact assessment is required, these will need to be obtained before the KIA approves the investment certificate.
The holder of a certificate benefits from the initial issuance of any additional license required for their venture or operation – barring any special legal provision to the contrary, which Keninvest is required to check.
The licenses will be mentioned in the certificate. Until the licenses are actually issued by their issuing authorities, and for a maximum period of 12 months after the issuance of the certificate, the licenses are deemed to have been issued by virtue of the certificate, subject to the submission of appropriate applications and fees. This entitlement is only for the initial issue of licences, after which the laws under which they are normally issued apply as usual.
Another benefit of the investment certificate is that the holder is entitled to entry (work) permits for three members of the holder’s management or technical staff and three fellow-owners (or shareholders or partners). The permits are valid for two years and may be reissued to the same or different persons.
Because of the benefits, local investors may choose to apply for a certificate with a minimum investment of KES 1 million.
You will need to register to pay taxes, both corporate income and VAT, as well as for employer contributions to the National Social Security Fund and the National Hospital Insurance Fund.
This is explained further under the Labour and Taxes tabs.
You will need to register for a single business permit with your county authority.
If you are investing in a project that may have an environmental impact (detailed in the second schedule of the Environment, Management and Coordination Act 1998), you will need to obtain an environmental impact assessment license.
To do this, you will need to submit an environment impact assessment along with the accompanying forms, which are detailed on the National Environment Management Authority website (see relevant institutions). The report will need to be prepared by a NEMA-registered expert, of which details are also on the website.
On submitting the report to NEMA you will need to pay a fee of 0.1% of the cost of the project. If the documents have been correctly submitted and there are no further questions, processing time is between 45 and 90 days.
Decisions of NEMA can be appealed at the National Environment Tribunal.
The process of business registration was seen as relatively straightforward and online registration for taxes and social security is appreciated. Concerns were raised that when difficulties occurred, investors based outside Nairobi may need to travel there to resolve them.
The total population in Kenya was recorded at 41.8 million in 2013 from 8.1 million in 1960, changing 415 percent during the last 50 years.
Kenya has the highest 15+ literacy rate in the region (90 percent). Schools are free. However, access to secondary education is governed by the primary school leaving exam. Priority is given according to score to national schools, then provincial and district schools. Harambee which are only government-subsidized but not free, accept students with lower scores.
There are 30 universities in Kenya. Of these, seven are public (Nairobi, Kenyatta, Moi, Egerton, Maseno, Jomo Kenyatta University of Agriculture and Technology, and Masindo Muliro University of Science and Technology).
Aside from public universities there are a number of private ones, which can be placed into three categories. There are chartered universities, which are fully accredited by the Commission for Higher Education. Then there are a number of universities, such as the Aga Khan University, which had been offering degrees prior to the establishment of the Commission for Higher Education. Finally, there are universities, which are authorized to operate with Letters of Interim Authority.
Parallel to the university system is the vocational post-secondary system. This includes national polytechnics, government training institutes, teacher training colleges and private institutions. They offer certificates, diplomas and higher national diplomas for two to three year courses, but may not offer degrees.
With its large expatriate population, Kenya is also well-served with international schools offering British and international curricula. There are 13 schools in Nairobi and others in Eldoret, Gigil, Kisumu, Mombasa, Nakuru, Thika and Turi.
Employment in Kenya is covered by the Employment Act 2007. This provides for four types of contracts:
An employee's probation period should not last longer than 6 months, though the employee can give consent to have it extended, up to a maximum duration of 1 year. (Section 9-10 of Employment Act, 2007).
Oral contracts are permissible if duration of employment is less than 3 months. Otherwise the contract should be in writing accompanied by a written statement of particulars provided to the employee at the start of employment. The written particulars of employment must be given to the worker within two months of the beginning of employment.
A contract can be terminated by an employer with prior notice as specified by law or compensation in lieu.
Upon the termination of employment contract an employee is entitled to pay for work done before termination and for annual leave not taken.
In addition, employees whose contracts are terminated on redundancy grounds are entitled to severance pay equivalent to 15 days’ salary per year worked at that employer.
Termination of employment on grounds of misconduct does not warrant severance pay.
Typical salary ranges applied by the private sector are listed in the table below.
For certain occupations, the government, as required by the Labour Institutions Act, 2007, publishes the Regulation of Wages Order, setting out minimum wages. Investors tend to add a premium of 20 percent to these.
|Senior manager||USD||1350 - 1680||2015||per month|
|Middle manager||USD||500 - 670||2015||per month|
|Graduate entry||USD||270 - 440||2015||per month|
|Skilled technician||USD||330||2015||per month|
|Shop assistant||USD||200 - 270||2015||per month|
|Office assistant||USD||170 - 200||2015||per month|
|Security guard||USD||115 - 126||2015||per month|
|Driver||USD||140 - 260||2015||per month|
|Unskilled labourer||USD||135||2015||per month|
Employers are required by the Employment Act (Section 34) to provide healthcare coverage for their employees. Membership of the the National Hospital Insurance Fund (NHIF), the primary provider of health insurance in Kenya, is mandatory. In addition to NHIF, which is a public facility, employers may also offer private medical insurance to their employees. Registration is done via the website (see relevant institutions below). Contributions to NHIF are deducted by the employer from an employee's salary and paid into the fund.
Both employers and employees are required to contribute to the National Social Security Fund. The Fund provides pension, invalidity and other social security benefits. Employers and employees contribute equally to the NSSF, as below.
|Category||Percentage of gross salary|
|Medical insurance (NHIF), employer contribution||0|
|Medical insurance (NHIF), employee contribution||Varying amount - see NHIF Act|
|Pension, employer contribution||6 (subject to a maximum of 2,160 KES)|
|Pension, employee contribution||6 (subject to a maximum of 2,160 KES)|
Termination indemnities in case of redundancy are stipulated in the table below. In case of redundancy, the Employment Act (2007) sets out the procedures to follow.
|Payment in lieu of notice (if employer decides)||One month|
|Payment per year worked||15 days|
|Relevant documents||Employment Act, 2007|
The Labour relations Act regulates employer-employee relations in Kenya. Approximately 40 percent of the labour force is affiliated to a trade union. The Central Organisation of Trade Unions (COTU) is the national umbrella body governing about 30 unions.
Kenya also has industrial courts to hear and settle industrial disputes. These are established in the Labour Institutions Act, 2007.
Investors and expatriates need an entry permit (work permit) to work in Kenya.
Foreign enterprises can obtain entry permits for expatriate employees who are key personnel such as managing directors, senior finance and marketing executives and highly specialized technical positions. In addition, entry permits are available for any category of skilled labour if Kenyans are not available demonstrated by showing that following the job being advertized, no suitable candidates applied.
Expatriate employees who plan to work for a duration of less than 3 months, such as to install equipment, train or do an internship, can obtain a special pass.
Foreign investors can also obtain entry permits for themselves if they have met the condition of the Investment Promotion Act 2004 which is to have registered the company in Kenya and to have invested a minimum of US$ 100,000.
East African investors still have to register for work permits but they do not incur any fee.
The Kenya Investment Authority works with the Immigration Department to facilitate the acquisition of entry permits, which can be obtained on arrival in Kenya if applied for beforehand.
Labour relations were judged to be good.
Difficulty in finding skilled workers and technicians were raised. University graduates were in plentiful supply.
Serious concerns were raised with regards to obtaining work permits for expatriate workers. Investors mentioned unexplained delays and difficulties for skilled workers who did not have academic degrees.
Electricity provision is focused on urban areas and relatively low in rural areas. Current total installed electricity generating capacity is 1,720 MW. However, electricity generation depends significantly on hydro-electric power. The government is keen to diversify to alternative sources of energy and to attract to attract investment in renewable energies and geothermal energy. Generation has grown steadily with both public and private sector investment, but with growth forecast at 7 % annually, remains an opportunity. Limited cross-border imports also take place with Uganda and the United Republic of Tanzania.
|450 Volts||KES||5.75 /Unit||2013||Fixed Charge= KES 800, Demand charge per KVA= KES 600|
|11,000 Volts||KES||4.75 /Unit||2013||Fixed Charge= KES 2500, Demand charge per KVA= KES 400|
|33,000 Volts||KES||4.49 /Unit||2013||Fixed Charge= KES 2900, Demand charge per KVA= KES 200|
|66,000 Volts||KES||4.25 /Unit||2013||Fixed Charge= KES 4200, Demand charge per KVA= KES 170|
|132,000 Volts||KES||4.10 /Unit||2013||Fixed Charge= KES 11,000, Demand charge per KVA= KES 170|
|What is the procedure?||Investor Power Plan|
|Relevant documents||Power to transform Kenya - 5000 MW by 2016 Feed-in tariffs policy, 2012 Renewables interactive map - Country profile Kenya, 2014 Scaling-up renewable energy programme (SREP) - Investment plan for Kenya|
Water is provided at the following average rate.
|Water||USD||0.46||2013||1 m3 industrial consumption|
Kenya’s telecommunications infrastructure has seen rapid growth. The country is now connected to four undersea fibre-optic cables (Seacom, TEAM System, LION and EASSY). Through a national backbone, this ensures broadband access to the main urban centres through fixed-line access and in certain locations, microwaves.
There are currently four mobile operators. These are Indian-owned Airtel and Yu, French- owned Orange (which took over the former national operator Telkom) and Safaricom, which is locally listed. All four mobile operators offer 3G access and some are trialling 4G.
By the end of 2014, the total number of mobile subscribers was predicted to be 33.2 million, a penetration rate of 79 percent.
The sector is regulated by the Communications Authority of Kenya, governed by the Kenya Information Communications Act, 2011 and the Kenya Information and Communications (Amendment) Act, 2013.
Development of the sector is overseen by the ICT Authority, which operates under the Ministry of Information and Communications. Its mandate includes among other objectives, promoting competitive ICT industries in Kenya and investment into such industries, developing capacities in the sector, including through working with academic institutions, and increasing access to all communities in the country. One of its flagship projects will be the creation of an ICT technology park (Konza Technology City), on the outskirts of Nairobi and in the vicinity of Jomo Kenyatta International Airport. Investors are being sought for this.
|Relevant documents||Information and Communications Act, 2011 Informations and Communications (Amendment) Act, 2013 Kenya National ICT Masterplan, 2014-2017|
Kenya currently leads in African connectivity with the highest bandwidth per person on the continent the fastest speeds, and some of the lowest internet costs.
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The landing of the East African Submarine Cable System (EASSy), The East African Marine System (TEAMS), SEACOM and LION high-capacity submarine cables brought a 20-fold increase in international bandwidth in the country to 20Gbit per second. This is a result of government policy of increasing the number of carriers.
Kenya also has 13 licensed international gateways, according to the Internet Society. The localization of internet connections through the Kenya Internet Exchange Point (KIXP) allows local internet users to interconnect locally, without traffic being pointed back to the US or Europe.
|Internet||USD||48||2014||6 Mbps, Unlimited Data, Cable/ADSL|
The current road network comprises of variety of roads, ranging from forest to farm tracks to the multi-lane urban and suburban highways. The system is divided into classified and unclassified roads, with a total network of 177,800 kilometres of which 63,575 kilometres falls in the classified network.
It is presently estimated that about 70% (44,100 km) of the classified road network is in good condition and is maintainable while the remaining 30% (18,900 km) requires rehabilitation or reconstruction.
There are seven international trunk roads linking centres of international importance and crossing international boundaries or terminating at international ports.
Following a long period of neglect, the
Government is embarking on a large-scale
programme to upgrade the road network. Key
improvement of the Northern corridor which
connects the port of Mombasa, via Nairobi
with Uganda and beyond that, Rwanda,
Burundi and the Democratic Republic of
Congo. 368 km of road will be rehabilitated;
construction of the Nairobi-Thika multi-lane
highway to handle increased traffic on a busy
section of road between Kenya and Ethiopia;
anddevelopment of a new highway linking the
port of Lamu to South Sudan and Ethiopia,
taking in Garrisa, Isiolo, Mararal, Lodwar, and
Following a long period of neglect, the Government is embarking on a large-scale programme to upgrade the road network. Key features are:
improvement of the Northern corridor which connects the port of Mombasa, via Nairobi with Uganda and beyond that, Rwanda, Burundi and the Democratic Republic of Congo. 368 km of road will be rehabilitated;
construction of the Nairobi-Thika multi-lane highway to handle increased traffic on a busy section of road between Kenya and Ethiopia; anddevelopment of a new highway linking the port of Lamu to South Sudan and Ethiopia, taking in Garrisa, Isiolo, Mararal, Lodwar, and Lokicho
Kenya’s rail network, built a century ago, extends from Mombasa to Tororo on the Ugandan border via Nairobi. The same line continues in Uganda to Kampala with a branch to Pakwach. Kenya’s section of the line has the capacity to handle up to 7 million tons of cargo a year but actually handles only a third of this, and only six percent of total cargo on that route – most goes by road. As elsewhere in East Africa, railways in Kenya are in a dilapidated state. There is also a block-train freight service trunning from Mombasa to Kampala, as well as container-carrying trains daily between Kipevu (Mombasa) and the inland container depot at Embakasi (Nairobi).
In 2005, Kenyan and Ugandan railways jointly concessioned their operations to Rift Valley Railways, a South African-led consortium, for a period of 25 years. With a long-term loan of $165 million, the consortium has announced its intention to rehabilitate the network and rolling stock on the entire length of the line.
A number of long term infrastructure projects envisaged by the Government are examined in the Infrastructure section under the opportunities tab.
Below are average prices of transport in Kenya. The prices indicated will vary from the actual prices on the ground and are to be used only as an indicator
|Freight transport||USD||1400||2014||40' container from Mombasa port to main commercial city(Nairobi)|
Land in Kenya is classified by the Constitution into three types: public land, private land and community land.
Public land refers to land owned, used or occupied by the government or a state body. It includes government forests and game reserves. Public land is held in trust by county governments and administered by the National Land Commission.
Community land in Kenya is held by communities on the basis of ethnicity, culture or similar interest. It comprises land registered in the name of group representatives, transferred to a specific community and land held, managed or used by communities as community forests, grazing areas or shrines.
Private Land in Kenya consists of land held by a person under freehold tenure and leasehold tenure.
A non-citizen can only hold land on leasehold tenure, and the lease cannot exceed 99 years.
The Constitutions restricts foreign ownership of private land to leasehold for a maximum of 99 years.
To acquire public land, whether held by national or county government, a developer must apply to the National Land Commission, either directly, or through allocation auctions. Such land must be used for the purposes declared or else reverts back to government.
The acquisition or transfer or private land by freehold or leasehold must be registered with the local land registry in keeping with the Land Registration Act.
Indicative rental costs are displayed below.
The charges are exclusive of service charge and tax.
|Office space||USD||1.20 - 3.05||2014||In main commercial city, per m² per month|
|Warehouse||USD||0.3 - 0.5||2014||7.5 km from main commercial city, per m² per month|
|Furnished expatriate house||USD||1500 - 3000||2014||3-bedroom with garden, in main commercial city, per month|
|Unfurnished expatriate house||USD||900 - 1600||2014||3-bedroom with garden, in main commercial city, per month|
There are currently 50 EPZs in operation or development. Most are close to Mombasa or Nairobi and the largest is at Athi River, 25 km from Nairobi.
Investors in EPZs benefit from a range of fiscal incentives. These include a 10 year tax holiday followed by a 25 year flat tax for the next ten years; exemption from all withholding taxes during the first 10 years; exemption from import duties on machinery, raw materials, and inputs; exemption from stamp duty and from VAT on raw materials, machinery and other inputs.
However, investors must fulfill certain conditions when applying for a license (developer, producer, service or trader) to operate in an EPZ. At least 80 percent of production must be for export outside of the EAC. This needs to be justified by letters from potential buyers. In addition, anything sold locally, within 20 percent of output, must be approved by the Minister and will be taxed at the normal rate.
Plots in EPZs can be rented for up to 50 years. At Athi River, 1 hectare plots cost US$ 5,000 per annum or US$ 100,000 for 50 years. There is an additional 15 percent service charge and a US$ 1,000 annual license fee.
You can obtain a license of the Export Processing Zones Authority by submitting a project proposal and filling out the application forms. Once you have obtained the license you may register the company at the Companies Registry.
|Relevant institutions||Export Processing Zones Authority|
No concerns were raised with regards to obtaining land as commercially-usable land tends to be already categorized as private.
Concerns were raised with regards to the construction permit process where the 0.4 percent levy on total construction costs by the National Construction Authority was judged to be onerous. Concerns were also raised with regards to duplication between county and national levels in obtaining environmental impact approvals.
You must register your company at the Kenya Revenue Authority. This can be done online at their website (see relevant institutions).
The corporate tax year is based on the calendar year. However, companies may under Section 27 of the Income Tax Act and with prior approval of the Commissioner, vary their accounting year.
The rate differs between resident and non-residents (A resident company is one incorporated in Kenya.) Companies listed at the Nairobi Stock Exchange are taxed at slightly lower rates than other companies.
Expenses allowable as deductibles include: legal cost expenses, incidental expenses relating to authorization and issue of shares, debentures or similar securities offered for purchase by the public and expenses incurred for the purposes of listing on any securities exchange operating in Kenya (without raising additional capital.)
|Tax||Resident rate||Non-resident rate|
|Interest: Government bearers bonds||15%||15%|
|Interest: Bearer bonds with 10 year and above maturity||10%||25%|
|Interest: Other bearer instruments||25%||25%|
|Withholding taxes: Dividends||5%||10%|
|Withholding taxes: Management, technical or professional fees||5%||20%|
|Withholding taxes: Royalties||5%||20%|
|Capital deduction for investment in buildings and machinery for manufacturing and hotels, in Mombasa, Nairobi and Kisumu||100%||--|
|Capital deduction for investment in buildings and machinery for manufacturing and hotels, elsewhere||150%||--|
|Investors in EPZs not engaging in local commercial activities||10 year tax holiday, then 25% for next ten years|
|Capital gains from transfer of property (currently suspended)|
Registration for VAT can be done online at the Kenya Revenue Authority website.
Registration is compulsory where the annual turnover is expected to be KES 5 million and more.
The normal rate of VAT is 16 percent. Certain list of fuel and oils are exempt from the commencement of the VAT Act on September 2013 for a maximum of 3 years before been standard rated. Food products are generally exempt as are a number of services. Goods and services that are exported or supplied to specified privileged persons/ organizations (such as projects in international organizations) are zero-rated.There is also a list of zero-rated goods linked to basic foodstuffs, medical products and machinery.
More details available in the VAT Act 2013.
Excise taxes are imposed under the Customs and Excise Act (Chapter 472), and are levied on alcoholic beverages, tobacco products, petroleum products, motor vehicles, carbonated drinks and mineral water, cosmetics, jewellery and cell phone airtime. Sample rates are listed below
|Fruit juices||7 %|
|Beer||65 KES per litre|
|Tobacco products||130 %|
|Gas oil||10,305 KES per 1,000 litres|
|Diesel oil||3,700 KES per 1,000 litres|
|Motor vehicles||20 %|
As a member of the East African Community (EAC) customs union, all goods manufactured in one EAC country and sold in another and which meet rules of origin criteria are treated as if they were manufactured locally, by virtue of there being no internal tariffs between partner countries.
If you invest in export processing zones you will be exempted from paying import duties.The full schedule of tariffs is available in the EAC Common External Tariff Handbook below.
|Raw materials||0 %|
|Intermediate goods||10 %|
|Finished goods||25 %|
It is levied on income from business, employment, rent, dividends, interest and pensions, among others and paid by any person residing and working in Kenya. Pay As You Earn (PAYE) is the method of collection for individuals in gainful employment.
As an employer, you will need to withhold personal income tax from your employees under pay as you earn (PAYE). If you are self-employed, you must declare and pay your own PAYE on a monthly basis. A foreign employee of a non-Kenyan firm who is resident in Kenya is subject to tax on all emoluments.
Kenya Revenue Authority issues taxpayers with a Tax registration Certificate after successful registration. Tax returns can be filed online.
|On the first KES 121, 968||10 percent|
|On the next KES 114,912||15 percent|
|On the next KES 114,912||20 percent|
|On the next KES 114,912||25 percent|
|On all income over KES 466,704||30 percent|
|Canada||Income and capital|
|Denmark||Income and capital|
|France||Air and sea transport|
|Germany||Income and capital|
|India||Income and capital|
|Italy||Income and capital|
|Norway||Income and capital|
|Sweden||Income and capital|
|United Kingdom||Income and capital|
|Zambia||Income and capital|
Investor feedback indicated that experience with tax authorities and customs depended on using good quality accountants, auditors and freight forwarders.
Concerns were raised in the hospitality sector that the various exemptions granted were not immediately honoured by customs.
The Government of Kenya has put in place a number of legal and treaty measures to provide protection for your investment.
The Constitution of Kenya guarantees protection of private property. At the same time, the Foreign Investment Protection Act guarantees against expropriation of private property by government. However, private property may be expropriated where it is in the public interest and where due process is followed. In such cases adequate and prompt compensation must be provided. This is detailed in the Land Act.
Kenya is a signatory to and member of the Multilateral Investment Guarantee Agency (MIGA), an affiliate of the World Bank, which insures investors against loss of Investment to political problems in host countries.
Further measures are provided by various bilateral agreements with other countries (further below).
A foreign investment certificate may be revoked:
In all cases, the holder of the certificate shall receive written notice of the KIA’s intention to revoke it and shall be provided the opportunity to make representations. In practice, the KIA has rarely revoked licenses. It normally relies on counselling to achieve the desired corrective action.
No foreign exchange controls currently exist. Both residents and nonresidents may open foreign-currency accounts with domestic banks. No person except authorized dealers is allowed to engage in the foreign exchange business, except where the Central Bank permits a specific person or class of persons to do so, subject to the conditions it may impose.
|Relevant institutions||Central Bank of Kenya|
|Relevant documents||Arbitration Act 1995 Foreign Judgements Reciprocal Enforcement Act 1984|
Bilateral investment agreements are currently in force with the following countries:
Germany (entered into force in 2000)
Italy (entered into force in 1999)
Netherlands (entered into force in 1979)
Switzerland (entered into force in 2009)
United Kingdom (entered into force in 1999)
Kenya has laws to register and enforce intellectual property rights, being a member of the World Intellectual Property Organization (WIPO) and its various conventions and protocols, as well as the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and the African Regional Industrial Property Organization. Foreign investors also benefit from the same rights as local investors.
The Kenya Industrial Property Institute (KIPI) considers applications for and grants industrial property rights. Foreign applicants are entitled to right of priority and for international filing. Other Kenyan organizations include the Kenya Copyright Board (KECOBO), the Kenya Plant Health Inspectorate Service (KEPHIS), which among other things, protects new seed and plant varieties, and the Anti-Counterfeit Agency (ACA).
Kenya’s Trade Mark Act (1957, last amended in 2009) allows trademark infringement to be fined up to KES 5,000. In the area of patents, the Industrial Property Act (2001) provides for civil proceedings in case of non-intentional patent infringement, with remedies in the form of injunctions, damages and compensation. In the case of intentional patent infringement it mandates criminal proceedings, with penalties that include a fine and up to five years in prison; going beyond minimum standards required by Kenya’s international obligations. Border measures including anti-counterfeit measures are addressed under the Anti-counterfeit Act (2008).
Kenya has taken a liberal stance in regard to competition and price setting, with market forces being allowed to determine who enters or exits a given business and what prices are to be charged.
Safeguarding competition in the Kenyan economy is the role of the Competition Authority of Kenya, established by the Competition Act, 2010.
Of particular interest to foreign investors are its guidelines on merger thresholds and public interest tests, below.
|Relevant documents||Competition Act, 2010 Guidlines on public interest test in merger determinations Guidelines on exclusion of proposed mergers from Part IV of the Competition Act|
|Relevant institutions||Competition Authority of Kenya|
The overall impression among investors was that the government was investor-friendly and that no attempts were made to retrieve private property.
Kenya is signatory to a number of multilateral and bilateral trade agreements as part of its trade policy. Kenya is a member of the World Trade Organization (WTO) making her products access more than 90% of world markets at Most Favoured Nation (MFN) treatment.
In addition, Kenya is member to several trade arrangements and beneficiary to trade-enhancing schemes. Kenya is a member of the East African Community (EAC) comprising Kenya, Uganda and Tanzania with a population of more than 80 million people.
Kenya is also a member of the Common Market for Eastern and Southern Africa (COMESA) with a population of about 400 million people.
The East African Community (EAC) comprises Burundi, Kenya, Rwanda, Tanzania and Uganda. Its membership means being part of a single market with a population of 138 million and a GDP of $82.1 billion.
As a member of the EAC single market, all goods manufactured in one EAC country and sold in another are treated as if they were manufactured locally, by virtue of there being no internal tariffs between partner countries. Non-tariff barriers to trade are also being removed. The same countries also levy a common external tariff for goods entering the EAC, with the aim of promoting manufacturing and the processing of raw materials. Under this scheme, raw materials are imported duty free, intermediate goods are charged 10 percent and finished goods 25 percent.
Future steps being considered include a monetary union and a political federation. Expansion is also being considered. In 2011 South Sudan, with its petroleum industry, applied to join, at the invitation of Kenya and Rwanda. DRC, with its vast mineral reserves has observer status.
|Relevant documents||EAC map (UN cartography)|
COMESA forms a major market place in Africa bringing together as it does 19 member states covering a total population of 444 million. A Free Trade Area (FTA) was created in 2000 and now encompasses 15 of the 19 member states (all but Democratic Republic of the Congo, Eritrea, Ethiopia and Seychelles). A customs union is planned in the close future with the eventual elimination of quantitative and non-tariff barriers for goods originating from within the region. Common external tariffs are also foreseen. Given the technical and legal challenges posed by a number of countries being both members of COMESA and the EAC single market, it is likely that the conditions of the COMESA union will be harmonized with that of EAC.
Its member countries are: Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe.
Under European Union's Everything But Arms Initiative (EBA), least developed countries (LDCs) enjoy duty-free access to the EU market for all products except arms and ammunition. Sugar and other processed foods are permitted.
Under the African Growth and Opportunity Act (AGOA) Sub-Saharan African countries benefit from duty-free access to the United States for an additional range of 1,800 products that are excluded from the Generalized system of preferences. These include most textiles and apparel; watches; and most footwear, handbags, and luggage products. With regards to apparels, the textiles and yarns must in general originate from Sub-Saharan African countries or the United States.
The implementation of the 2010 constitution has led to the devolution of significant powers to Kenya’s x counties. This has led to the construction of new country government offices and displacement of civil servants and spending power from Nairobi to county capitals, with the attendant impact on local economies. The devolution of development funds to county budgets has also led to an increase in road and other construction at the county level. This has led to significant opportunities in construction and property development in the counties.
Kenya currently has an installed power generation capacity of 1,330 MW. Eighty percent of that is produced by KenGen, a stateowned company, which derives 65 percent of its power from hydroelectric sources. Thirty percent of its power is obtained from seven dams on the Tana River.
Thus not only is the country’s power generation susceptible to climatic conditions, but with peak electricity demand currently at 1,191 MW and growing at seven percent a year, power outages during dry periods are frequent.
This gap is partly addressed through diesel generation. KenGen has an emergency power producer agreement with Aggreko for 290 MW. Separately, many businesses also own standby generators. Aware of the environmental and financial cost, the Government is encouraging the production of energy from renewable sources and has implemented a policy of feed-in tariffs to support this.
Chief among the energies being promoted, although not subject to a feed-in tariff, is geothermal power, for which there is an estimated capacity in the Rift Valley of between 3,000 and 5,000 MW, and which, since 1957, has already proved itself as a source of energy, albeit at a current output of 202 MW. To this end, the Government created the Geothermal Development Company. Its role is to prospect and develop blocks and then sell exploitation licenses to investors to develop steam turbine power generation plants. The first project consisted of 25 wells drilled in the Ol Karia field, which yielded 196 MW. The second project, currently underway is Menegai Phase 1 and consists of four blocks with an estimated capacity of 400 MW. GDC is mapping these blocks by drilling 120 wells. With further development, GDC estimates that the Menegai field could yield 1,250 MW. Overall, GDC hopes to produce 2,000 MW of steam and is seeking total investment of US$10 billion, of which it has already obtained a significant amount. Other geothermal projects include one by KenGen for 280 MW.
In addition to geothermal energy, the Government is keen to encourage wind power generation and several projects have been announced. This includes a 300 MW average capacity wind farm of 353 turbines on Lake Turkana (by Lake Turkana Wind Power), and a 60 MW wind power project on the Kinangop Plateau (by Aeolus Kenya).
Other sources being encouraged are solar, biomass and small hydro plants.
Investment Opportunities In the Energy Sector
|What is the procedure?|
|Relevant documents||Scaling-up renewable energy programme (SREP) - Investment plan for Kenya|
Kenya is endowed with vast geothermal potential estimated at between 7,000 and 10,000 MW. It is currently Africa's largest geothermal producer with 210 MW of capacity. Recent discoveries include a commercially exploitable geothermal seam in Menengai. The Kenyan Government has recently initiated the Scaling-up Renewable Energy Program (SREP) investment plan in line with its national renewable energy development strategy.
Kenya offers fine natural attractions, combined with a network of hotels and game lodges that give visitors good value for their money. With its national parks, game reserves, marine parks, biosphere reserves, archaeological sites and pearly beaches, Kenya remains a natural tourism magnet. The most popular tourist attractions in Kenya are the wildlife and beaches. Others include museums, snake parks and historical sites.
However, many of these resources remain largely unexploited. Kenya currently receives about one million visitors a year, which is around half the number visiting South Africa. The main markets for Kenyan tourism in descending order of visitor numbers are the UK (who travel mainly by scheduled flights), the US, Italy, Germany, (of which the latter two mainly travel on charter flights to Mombasa), France and India. Emerging markets are growing in importance and the Kenya Tourist Board is focusing on them as well as Australia.
Focus is also growing on domestic tourism, which currently fills 35 percent of bed capacity and which ensures greater value-added for local operators. Regional markets are also growing in importance. For example, Uganda is a market for medical tourism while South Africans visit Kenya in search of a safer and more authentic experience. The further development of the domestic and regional market will provide an effective bulwark against any slump or disruption in the international market so as to depart from a past image of low cost beach tourism.
At the same time, Kenya is trying to diversify the offer both within the traditional beach and safari products as well as to new sectors. This is called the Brand Kenya initiative. The authorities are also keen to make use of EAC integration by promoting regional circuits. One area is in meetings, incentives, conferencing and exhibitions (MICE), which Kenya is well positioned for given its position as an African commercial and transport hub. It is estimated that such delegates spend an average of US$ 400 per stay, helping maintain an occupancy rate in Nairobi of 80 percent. This sector is currently focused on the Kenya International Conference Centre (KICC).
However, KICC is in need of renovation and with competition on the continent restricted to Cape Town, Cairo and Marrakesh, and a new 3,000-seat capacity conference centre built in Kigali, there is likely to be plenty of demand for new conference centres for which the Government is seeking investors in the towns of Mombasa or Kisumu.
The Government is also looking to tap into the growing sports and adventure tourism market. One proposal is to exploit Kenya’s athletic reputation to develop high altitude training camps. Hiking can also be further developed around Mount Kenya as can other activities such as white water rafting, game fishing, and kite surfing. The Government is also keen to increase the provision of golf courses in the country, of which there are currently 45.
All these activities also require the provision of accommodation. New areas that the Government is keen to develop are the Western circuit, the Northern circuit and new coastal resorts. The Western circuit comprises Mount Elgon, the second highest in Kenya, Ruma National Park, which is famed for its rare species of antelope, Lake Baringo, and the area around Lake Victoria. The Northern circuit takes in a more arid landscape and comprises Lake Turkana, Kenya’s second largest lake, the Tana River Basin and the North Eastern Province. New coastal areas include Lamu in the North and Shimoni on the border with the United Republic of Tanzania. Major resort developments are also taking place in Watamu and Kilifi, which are both North of Mombasa in an area famed for the quality of its beaches. Currently the largest investors in tourism are local private companies, such as Serena and Sarova, and the Kenyan Government. Smaller lodges tend to be owned by investors from the UK as well as from Kenya.
In order to encourage further investment, the Kenya Tourism Development Corporation (KTDC) can provide concessional funding, typically a US$ 500,000 loan on a US$ 3-4 million investment. KTDC can also facilitate land acquisition. Hotel and restaurant licenses as well as a tour operator’s licenses are delivered by the Ministry of Tourism. Six-monthly health inspections are conducted by the local authority and the fire department is in charge of delivering fire safety certificates. With regards to land use, this must be approved by the local authority or the Kenya Wildlife Service if the facility is a game park.
Nevertheless, a number of challenges remain for the sector. Among these is security. While crime may have decreased, the effects of instability in neighbouring Somalia is being felt close to the border. With regards to promoting regional tourism circuits on a wider basis, the absence of a single visitor’s visa for the EAC, and by extension a single visa fee instead of multiple ones, will discourage a more seamless integration.Investment Opportunities in Tourism
The Serena hotels and lodges are distinguished by the quality of their service and their attention to local tradition in architecture and decor. With roots in Kenya, Serena Hotels now operates throughout the Eastern African region as well as in Afghanistan, Mozambique, Pakistan and Tajikistan.
While it owns seven properties in Kenya (Nairobi, Mombasa, Amboseli and Mara, among others), it also owns eight properties in the United Republic of Tanzania (Lake Manyara, Ngorongoro, Serengeti and elsewhere), two in Uganda (Kampala and Lweeza), one in Burundi (Bujumbura) and two in Rwanda (Kigali and Gisenyi). The latter is now the scene of considerable expansion with plans to eventually expand to seven properties.
In seeking out new properties, Serena tends to focus on locations that have been bypassed by other business or luxury chains. Serena Hotels employs 1,200 staff in Kenya. Recognizing them as its greatest single asset it places much emphasis on employing local staff, providing extensive training, rotating them around its properties and promoting from within.
The Serena chain in Africa is the brand name of Tourism Promotion Services Eastern Africa Limited. TPSEAL has operated in Kenya since 1971 and floated nearly 39 million shares on the Nairobi Stock Exchange in 1997. The shares, then valued at KShs 13 each, now trade at KShs 57 each. TPSEAL owned 37 percent by the Aga Khan Fund for Economic Development (AKFED), which is incorporated as a commercial entity under Swiss law. AKFED, founded in 1984, is the only for-profit entity in the Aga Khan Development Network (AKDN), also based in Switzerland, and sees its aim as going beyond profits to encompass employment creation, human resource development, and the preservation of natural and cultural assets. AKDN has a history in East Africa going back to the late nineteenth century.
The installation of a broadband backbone connected to three undersea fibre-optic cables (Seacom, TEAM System and EASSY) has significantly improved Kenya’s connectivity and prospects for the ICT sector, be it in business process outsourcing (BPO) or the development of IT-enabled services (ITeS).
The main operators in this sector are Technobrain (BPO and ITeS), Direct Channel (BPO and ITeS), Kencall (callcentre), Horizon (callcentre), Adept Systems (BPO), A24 (content provider), Craft Silicon (software developer for banks), Spanco (BPO servicing Airtel), and IBM (servicing Airtel). A number of Kenyan companies also have inhouse divisions. Further, regional offices have been set up by Microsoft, Google, Cisco, Oracle, IBM and SAP.
Currently, the sector is focused on the local market, providing services to banks, insurance, cable and telecommunications, power, water and other utilities. The size of this market is estimated at US$ 500 million and it is of note that companies such as Spanco, followed Airtel into Kenya to continue servicing them. However, in the medium term, it is expected to expand into the region both on its own account, given its relative sophistication compared to neighbouring markets, and in order to service its clients’ expansion plans into the EAC and beyond.
However, Kenya has yet to use its assets in terms of human resources, English language and European time zone to make a significant impact on the world market. A reason given for this is the increasing sophistication and scale of required to compete at the global level or rival established centres such as India. Call centres, for example, are now required to deal with the total customer experience, which includes getting new customers, processing and analyzing data, verifying inventory and credit, identifying customers to whom to market new products and selling these, and data mining. In addition, this requires the technical capacity to integrate themselves into different companies’ databases and systems, a capacity which companies in Kenya are only now achieving.
The Government has been an important driver in the sector. In 2010, the Ministry of Information and Communications, with support from the World Bank, established the Kenya ICT Board. Its role is to implement Government policy in this area through developing infrastructure and capacity. Important projects supported by the Board include the development of a technology park located near Jomo Kenyatta International Airport. Called Konza City, it will provide land and facilities for BPO and ITeS. It is also intended that it feature a science park, operated by the University of Nairobi, a financial district, conference facilities, schooling and accommodation. The Board is still open on how to develop it and is interested in working with investors.
Other parks that might be developed by private investors are Tatu City, to the North of Nairobi and Eldoret City. The Board is also undertaking other important initiatives that will create demand in the sector and spur further development. These include:
Investment Opportunities in ICT
Launched in July 2011 by the Ministry of Information and Communications, the Kenya Open Government Data Portal makes freely available online core government development, demographic, statistical and expenditure data that can be drilled down, where relevant, to the province or county level.
It is aimed at researchers, policymakers, ICT developers and the general public. The Government expects that Opendata will have three main benefits.
Firstly, the availability of information should provide an economic benefit in better identifying how savings and efficiencies can be made, and how service delivery can be improved.
Secondly, it equips parliamentarians, policy makers, civil society and individuals with the data they need to analyze and make informed decisions.
Thirdly, it is expected to contribute to transparency and accountability in providing detailed and timely information on the operations of government.
Opendata currently carries 160 datasets from different government departments. This includes the 2009 census, national budget data, nation and county public expenditure data, information on health care and school facilities. Other examples include soil maps, which could be of use to farmers. The raw data is also available for download so technical users and developers can analyze data and use it to build applications for the web and mobile.
Kenya envisages a massive upgrading and extension of the country's infrastructure. In this regard, the country has highlighed a number of infrastructure projects that present significant opportunities for investors in the coming years.
It is important to note that while the Government has put forward plans on how it would like to develop infrastructure, it is equally open to ideas and proposals from potential investors.
Investment Opportunities in Infrastructure include:
The Northern Corridor comprises the road and rail network between the port of Mombasa and Tororo on the Ugandan border, taking in along the way, Nairobi and Kisumu. It is important transit route to the Great Lakes region (Burundi, D. R. Congo, Rwanda and Uganda) as well as the Northern areas of the United Republic of Tanzania.
The corridor handles about 40 million tonnes of cargo annually including agricultural goods, cement, coffee, dairy products, fluospar, grains, paper, petroleum products, salt, soda ash, sugar and timber.
With only six percent of cargo travelling by rail, investment is already taking place in rehabilitating the Kenya Uganda Railways under the private concession Rift Valley Railways.
However, investment is still sought for the development of a commuter railways system around Nairobi (population 3.13 million) to allay the city’s growing traffic problems. This will involve the rehabilitation of approximately 160 km of the existing rail system within the Greater Nairobi area and the construction of a spur to Jomo Kenyatta International Airport, as well as the rehabilitation and construction of new stations.
Plans are also being made to build a standard gauge line to replace the current Kenya-Uganda railway. Parallel to the railways, the plan also envisages the rehabilitation of 368 km of road and the possibility of toll-paying dual carriageways, and the development of inland container ports to facilitate distribution and logistics.
The lack of capacity at the port of Mombasa and the creation of South Sudan and its strategic orientation towards Kenya has given new impetus to the development of a transport corridor from Lamu to Juba and Ethiopia.
This corridor would be composed of several elements:
The Government is keen to attract investment into these projects and envisages either direct investment or public-private partnerships.
It should be noted that the corridor and consequent transport infrastructure could enable further investment opportunities in agriculture. Twenty four million hectares of land along the corridor could be used for livestock production. Furthermore, 9.2 million hectares have potential for crop production if irrigated from the Tana Delta and Athi and Tana rivers.
The EPZ Act was passed in 1990 and created the Export Processing Zones Authority (EPZA) as the regulatory body.
Most EPZs are close to Nairobi or Mombasa, with the largest at Athi River, 25 kilometres from Nairobi.
It should be noted that operations such as horticultural farms can also be designated EPZs. The largest single investment by a company in an EPZ has been De La Rue in security and printing (US$ 48 million).
Investors in EPZs benefit from a range of fiscal incentives. These include a 10 years tax holiday followed by a 25 percent flat tax for the next 10 years; exemption from all withholding taxes during the first 10 years; exemption from import duties on machinery, raw materials, and inputs; no restrictions on management or technical arrangements; and exemption from stamp duty and from the VAT on raw materials, machinery and other inputs. However, investors must fulfill certain conditions when applying for a license (developer, producer, service or trader) to operate in an EPZ.
At least 80 percent of production must be for export. This needs to be justified by letters from potential buyers. In addition, anything sold locally, within 20 percent of output, must be approved by the Minister and will be taxed at the normal rate.
Plots in EPZs can be bought on 50 year lease or rented. At Athi River, 1 hectare plots cost US$ 5,000 per annum or US$ 100,000 for 50 years. There is an additional 15 percent service charge and a US$ 1,000 annual license fee.
Main foreign sources of EPZ investment are from China, Taiwan Province of China and India. The African Growth and Opportunity Act (AGOA) has brought in a large number of investors in the garment sector, although there is uncertainty over the duration of the third country provision.
In addition, the expansion of the EAC customs union has restricted the usefulness of EPZs as a platform for exporting to the region. To this end, the Government is looking at moving towards Special Economic Zones of the type present elsewhere in Africa under which investors can have access to quality infrastructure to produce both for the local and foreign markets.
At the same time, the removal of offshore status make it easier for investors to source from Kenyan suppliers, thus creating backward linkages into the local economy.
This sector is mainly agro based at the moment and plays an important role in adding value to agricultural output by providing forward and backward linkages with agricultural sector. However, there is a shift to export oriented manufacturing as the main thrust of Kenya's industrial policy since the country aims to raise the share of products in the regional market from 7% to 15 % and develop niche products for existing and new markets.
Kenya is promoting development of Special Economic Zones (SEZs), Industrial Parks, Industrial Clusters, promotion of small and medium scale manufacturing firms, development of niche products, commercialization of research and development results.
Investment opportunities in Manufacturing
With a combination of active government support, favourable agro-climatic conditions (22°C-30°C in the day, 6°C-12°C at night and 60-80 days of rain), availability of low-cost farm workers and the know-how, reach and financial weight of foreign investors, matched by the year-round demand for certain vegetables in international markets, and direct air connections to Europe, horticulture has emerged as one of the country’s fastest growing sectors within agriculture, making Kenya a major exporter in this field. Horticulture production is divided into fruits and vegetables on the one hand, and cut flowers on the other.
Fruits and vegetables
Participation by foreign investors (mainly Dutch and British) in the growing, processing and export of fruits and vegetables has been significant and has helped secure market access and raise quality, both to meet EU sanitary and phytosanitary standards and additional ones, for example those set by the British Retail Consortium. The most common vegetables are fresh beans (French beans, fine beans and dwarf beans), fresh peas (mange tout, sugar snap and garden peas), brussels sprouts, broccoli, courgettes, and baby carrots.
There has been a cut flower industry in Kenya since the 1980s. However, it is only since the 1990s that foreign investment has enabled the industry to acquire new technologies, upgrade quality control and improve infrastructure. Principal flowers exported from Kenya are roses, spray and standard carnations, statice, alstromeria, lilies and hypericum. Peak periods for this sector include Valentines Day, UK and European Mother’s Days, Easter, St Nicholas, Christmas and France for New Year’s Eve.
The floriculture industry, located for the most part on the shores of Lake Naivasha, but present in a number of areas through the Rift Valley and Mount.Kenya region, is vertically integrated, depending to a large extent on outgrower arrangements (more so than fruits and vegetables). Small cut flower farms in Kenya produce and sell their flowers to larger local Kenyan or foreign companies, which control, grade, bunch and export the flowers via cold storage facilities at Jomo Kenyatta International Airport in Nairobi. The industry employs 2 million people, or 7 percent of the population, directly and indirectly.
In response to requirements introduced by buyers in international markets with regards to standards of environmental management, product and food safety, quality, traceability, and the occupational health and safety of workers, the two main horticultural producer groups, the Fresh Produce Exporters Association of Kenya and the Kenya Flower Council have both launched codes of practice, which are benchmarked to the international Global-GAP (good agricultural practice) initiative. Fruit and vegetable producers are certified under Kenya- GAP, while cut flower producers are certified under the Kenya Flower Council’s code of practice
Oserian was established in 1969 as a five hectare family-owned farm producing white and green asparagus. It also incorporated an agrochemical business, later sold to Bauer Ltd. In 1982, the company diversified into cut flowers, starting with statis, which it exported to the Netherlands. At the time, it was the first flower farm in Africa. Since then it has grown to be, at 256 hectares, the largest single farm in Kenya, producing an average of one million stems a day. Flower varieties include carnations, lisianthus, flox, rascus, snap dragon, solidago, sunflower, and spray roses.
Flowers are picked every day between 5 a.m. and 6 a.m., are packed by 9 a.m. and are at Jomo Kenyatta International Airport by noon where they are placed in cold storage. At 11 p.m. they are loaded onto cargo flights and are in a depot in Rotterdam at 11 a.m. the next day. Twenty fours later they are at supermarket warehouses across Europe, and 60 hours after picking are on the supermarket shelf.
Oserian’s strategy hasn’t just focused on growing its operations in Kenya. It also set up its own auction house in the Netherlands, now sold, called Teleflora, specifically for imported flowers. The auction house was complemented by marketing arms in the UK and mainland Europe, enabling Oserian to directly supply UK supermarkets.
Over the years it has had to overcome a number of challenges. These have included initially high freight costs, clearances for EU sanitary and phytosanitary standards, and the high quality requirements of EU customers. In 1985 the Government of the Netherlands banned Kenyan flower imports, though this was short-lived.
The company has invested significantly in research and development. It is now producing scented roses with a guaranteed seven-day shelf-life, and in partnership with the Kenyatta Agricultural Research Institute is working on new varieties of strawberries with taste colour and sweetness for the local market, as well as disease resistant yam, cassava, sorghum and millet. It is also examining natural remedies to avoid pesticides. The farm is certified Fairtrade, Max Havelaar, Leaf, Kenya Flower Council and Global Gap.
Oserian has placed great emphasis on its social and environmental commitments. All staff are housed or provided with allowances. Medicine, transport and work gear are provided as is severance pay, funeral allowances. An onsite vocational training centre offers courses in driving, computing, carpentry and other subjects, enabling staff to move to higher paying posts. Furthermore, all energy needs are provided onsite through two geothermal plants.
The Kenya Investment Authority has published a list of investor-ready projects. Please see below.
|Relevant documents||Investor Ready Projects|
|Relevant institutions||Kenya Investment Authority|
|Official name||Republic of Kenya|
|Country area||581,309 km2|
|Local currency||Kenya Shilling,KSh||Code: KES|
|Other national language(s)|
|GDP per capita||943 USd|