Kenya: A land of many investment opportunities

by Dennis K. Waweru

The head of Kenya’s inward investment authority lays out the various investment opportunities for Indian and foreign companies looking to invest in the African nation.

Kenya is the fifth largest economy in Sub-Saharan Africa. It is the dominant economy in the East African Community (EAC), contributing more than 50 per cent of the region’s GDP. Kenya’s annual GDP growth averaged 4.5 per cent between 2008 and 2012 and 5.2 per cent between 2013- 2017 and in 2018, the growth was 6 per cent. The increasing growth reflects strong macroeconomic and structural reforms implemented during the last five years. The annual GDP growth target in Kenya Vision 2030 is double digit.

The Government of Kenya recognises the critical role played by private investment and has put in place measures to attract and retain foreign investment while encouraging the expansion of domestic investment. The aim is to increase private investment to 24 per cent of GDP by 2030.

The Government has put in place strategies and policy initiatives to enhance the investment environment, key among them being:

  1. Vision 2030 – The country’s blueprint towards making Kenya a newly industrialised middle-income country.
  2. Big 4 Agenda – A roadmap of the Government’s priorities for the next five years. The sectors of focus are food security and agricultural productivity, affordable housing, manufacturing, and universal healthcare.
  3. Kenya Industrial Transformation Program (KITP) guided by Vision 2030 – KITP is key in creating an enabling environment to accelerate industrial development.
  4. Buy Kenyan, Build Kenya Agenda – This entails promoting competitiveness and consumption of domestic products and services in both the domestic and international markets.
  5. National Trade Policy -Transforming Kenya into a competitive export-led and efficient domestic economy. Policy aims to strengthen the current supply chain by addressing constraints impeding against development of wholesale, retail and informal sectors.
  6. National Export Development & Promotion Strategy – A five-year sector development plan aimed to induce synergies for higher production in specific export sectors to enable a better export performance and enhance market access.
  7. Kenya Investment Policy – This policy creates an institutional framework that fosters coordination for efficient investment attraction, facilitation, and a favorable investment climate aimed at attracting high-quality FDI into the country while upscaling local investments and SME capacity.
  8. EPZ scheme – Incentives provided under this scheme are meant to make the manufacturing sector to have an export orientation rather than being inward looking.
  9. SEZ policy – This policy stipulates that goods be produced in designated zones closer to raw material sources. The SEZs will help boost industrial manufacturing by allowing for lower tax levels and fewer regulatory hurdles, among other benefits.

Guarantees to Investors

  • The constitution of Kenya guarantees safety of life and property.
  • Kenya is a signatory to the Multilateral Investment Guarantee Agency (MIGA) that insures private investment against non-political risks.
  • Kenya is also a member of the International Centre for Settlement of Investment Disputes (ICSID) that guarantees arbitration of disputes between government and investors in a third-party country.
  • The Foreign Investment Protection Act (FIPA), which has been in place since 1964, guarantees against expropriation of private property by government and if this happens it will be for public good and compensation will be prompt and at market value.
  • The track record of the Government in representing the sanctity of private sector since independence has been second to none.

General Incentives

  1. Capital goods (plant, machinery and equipment) and raw materials are zero-rated;
  2. Some of the plant, machinery and equipment are exempt from VAT;
  3. Investment allowance for investment projects of at least USD 2 million:

-100% if the investment is location in Nairobi, Mombasa and Kisumu cities; and

-150% for those in other parts of the country (must have invested over KES 200 Million)

  1. Market access in COMESA & EAC markets with no taxes.

Indian Investments registered and facilitated at KenInvest

The authority has been able to register and facilitate 157 investment projects from India worth Kshs.32.910 billion. The investments have the potential to create employment to 11,6588 Kenyans.

The sectors that have attracted the highest investment are Manufacturing, Energy, Construction, Service and ICT. The data provided is, however, for companies which registered with the Authority. The Investment Promotion Act, 2004 does not mandate all investors to register with Authority, hence the figures provided do not represent all the Indian investments in the country.

The Agreement on Avoidance of Double Taxation signed between Kenya and India was gazetted and entered into force on 30th August 2017. In recognition of the strong trade ties, the two countries signed a Trade Agreement in 1985 culminating in the formation of the joint Kenya-India Joint Trade Committee in 2017 that provides a platform for the engagement in trade related matters.

Market Access

Kenya is a member to regional trade blocs and access to preferential markets has played a significant role in attracting multinationals to locate in Kenya. Kenya is a beneficiary of several trade preferential arrangements which includes the African Growth and Opportunities Act (AGOA) which allows for quota free and duty-free access to the USA market for items produced in Kenya. Kenya is also a beneficiary of the East Africa Community-European Union (EAC-EU) Economic Partnership Agreement (EPA) which gives duty and quota free access to the European Union.

At the regional level, the African Continental Free Trade Area treaty entered into force on 30 May 2019. The Treaty is expected to spur intra-African trade and stimulate competitiveness of African industry.  It will also create positive multiplier effects for companies that choose to invest in Africa due to liberalized markets. In this regard, Kenya’s position in East and Central Africa makes it an ideal launch pad to access the markets of East and Central Africa (EAC) with over 150 million people, and the Common Market for Eastern and Southern Africa (COMESA), with over 430 million people, and indeed the wider African Continental Free Trade Area.

Ease and Cost of Doing Business

The Government is working round the clock to ensure that the business environment is conducive for business to grow and thrive. Several initiatives have been established; these include but not limited to the below:

  1. Establishment of a One Stop Centre to ensure efficient and effective facilitation of the implementation of new investment proposals and cost-effective operations of existing investments and businesses are handled from a central position.
  2. Automation of service delivery and making it more efficient and accessible through innovative business platforms such as huduma namba, e-citizen, e-regulations, iTax, single-window electronic clearing system, land registry, and e-opportunities.
  3. Presidential Round Table sessions and other forums geared towards addressing bottlenecks to doing business. There is a Cabinet Committee that tracks issues of business environment – for example, on the high cost of energy, there has been significant reduction including the introduction of an electricity rebate scheme for manufacturers.
  4. Improvement in transport logistics, where a container now gets to Kampala, Uganda in about 4 days. Discussions are ongoing to further enhance the logistics and transport sector with congestion at the ports having reduced considerably, including removing non-tariff barriers. Infrastructure development is ongoing with completion of the expansion of the northern bypass and extension of Standard Gauge Railway to Naivasha being on schedule.

Through the above initiatives, Kenya’s improvement in the quality of her business and investment environment continues to be recognized in various forums.  The country’s unprecedented rise in the ranking under the World Bank’s Ease of Doing Business (from 136 globally in 2014 to 61 currently) is a great achievement. In the Global Competitiveness report released on October 2018, Kenya was ranked as the seventh most competitive economy in Africa (and 93 globally) behind Mauritius (49th globally), South Africa (67), Morocco (75), Tunisia (87), Botswana (90), and Algeria (92). Several independent reports also indicate that Kenya remains the preferred investment destination on the African Continent.

Kenya’s attractiveness as an investment destination continues to spur with strength and clarity of regulatory and legal frameworks for investment, which provide for adequate investor protection in line with most international standards (including safeguards for property rights and expropriation). Kenya is a signatory to MIGA, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (which established ICSID), and a member of the Africa Trade Insurance Agency (ATIA), headquartered in Nairobi.

Role of KenInvest

Kenya Investment Authority’s mandate as provided for in the Investment Promotion Act, 2004 is to promote and facilitate investment in Kenya by both local and foreign investors. This is achieved through research and policy advocacy, marketing initiatives, tracking and aftercare, issuance of Investment Certificate and Provision of One Stop Centre services which include: business registration; immigration; advice on matters relating to taxation in Kenya; advice and license on environmental impact assessment; assist investors in power connections; advice and issue business permit licenses and any other approvals required by the county government; and advices investors on the export processing zones scheme, and licenses and facilitates investors within the zones.

We welcome all new investors from India to invest in Kenya. We at Kenya Investment Authority are ready to offer any kind of support/facilitation that investors may require to invest in the country.

Dennis K. Waweru is the Chairman of the Kenya Investment Authority.

2019-09-13T14:35:50+00:00September 13th, 2019|2019, Global Edition – September 2019|

About the Author: Dennis K. Waweru