With the deepening of economic globalization, Kenya’s market prospects are very broad and has great potential for economic development. The Kenyan government has listed energy, infrastructure, construction, agriculture, manufacturing, mining, tourism, wholesale and retail, financial services, and information technology as key areas of focus in its Vision 2030 long-term plan. Chinese enterprises and individuals can strengthen cooperation with Kenya in the above fields. Kenya is a member of the East African Community, the Common Market for Eastern and Southern Africa, and the Southern African Development Community, with a total of 26 member states across the three economic communities. Trade between member states of the East African Community and the Common Market for Eastern and Southern Africa is duty free, while member states of the Southern African Development Community enjoy preferential tariff rates for imports and exports. Investing in Kenya provides access to a market of 500 million people. To effectively attract foreign investment, the Kenyan government has formulated a series of preferential investment policies. Foreign entrepreneurs in Kenya can freely choose their investment scope, and the Kenyan government encourages investment projects in agricultural production materials and services, non-traditional agricultural export products, manufacturing and construction projects. Goods that cannot be produced domestically or are urgently needed for import are exempt from tax or subject to low tax. The Kenyan government has abolished the import licensing system, and except for individual commodities that affect the ecological environment and national security, imports are not restricted as long as there is foreign exchange. Imported machinery, equipment and other materials used for production are exempt from tariffs. To increase the country’s foreign exchange earnings, the government is actively encouraging investment enterprises to increase exports and has formulated a series of export incentive policies. For example, raw materials, equipment, etc. imported by enterprises producing export products are fully exempt from import duties, VAT and export taxes. The country also provides export subsidies. It implements a bonded processing plan, under which participating enterprises enjoy preferential policies: exemption from customs duties and VAT on imported machinery, equipment, raw materials and other materials; 100% investment subsidy on factory machinery, equipment and buildings. Kenya has set up export processing zones where investments enjoy relevant preferential policies: enterprises in the zones are exempt from income tax for the first ten years, after which income tax is levied at a maximum rate of 25%. At the same time, it requires that at least 75% of the products produced in the zone must be exported, which means that up to 25% of their output can be sold domestically in Kenya. If an investor sells 5% of the products domestically in Kenya, the income obtained can be fully remitted back to the home country, or the investor can choose to continue investing in Kenya.
kenya has formulated special policies to support the construction of export processing zones and special economic zones
In 2003, the Kenyan government launched an economic revival strategy and made efforts to improve the investment environment. In 2008, the Kenyan government officially launched Kenya Vision 2030, with the goal of transforming Kenya into a newly industrialized middle-income country by 2030. Kenya Vision 2030 is being implemented over three five-year medium-term plans. The first medium-term plan (2008-2012) focused on the strategic recovery of the Kenyan economy after the 2008 financial crisis, and specifically pointed out that industrial parks and special economic zones would be established in the manufacturing, wholesale and trade sectors. The second medium-term plan (2013-2017) stated that the government would cooperate with private investors to establish special economic zones in Mombasa, Kisumu and Lamu to increase high value-added manufacturing and exports. During this period, Kenya passed the Special Economic Zones Act in September 2015, aimed at promoting the establishment of special economic zones and accelerating Kenya’s industrialization process. Kenya is currently in the implementation stage of the third five-year medium-term plan. In addition, Kenya enacted the Export Processing Zones Act in 1990, which established the Export Processing Zones (EPZ) program managed by the Export Processing Zones Authority (EPZA) to promote export-oriented industrial investment in designated areas.
kenya provides a series of preferential policies for enterprises in export processing zones and special economic zones
According to the Special Economic Zones Act, Kenya’s special economic zones include but are not limited to free trade zones, industrial parks, free ports, ICT parks, science and technology parks, and agricultural zones. According to the Export Processing Zones Act and the Special Economic Zones Act, developers and operators of Kenya’s export processing zones and special economic zones need to be: 1. Registered and headquartered in Kenya with the sole purpose of developing and operating export processing zones or special economic zones; 2. Have relevant financial capabilities, technical and management expertise; 3. Own or lease land in the export processing zone for at least thirty years, or own or lease land in the special economic zone. It should be noted that any natural person or legal entity (regardless of nationality) can become a developer, operator or enterprise in the special economic zone and export processing zone as long as they are willing to abide by Kenya’s laws. In terms of land, developers, operators and enterprises in export processing zones and special economic zones can be exempted from rent and lease restrictions. Developers also have the right to acquire, dispose of or transfer land or other assets in the special economic zone. In terms of taxation, export processing zones enjoy huge incentives. According to the Export Processing Zones Act, developers, operators and enterprises in the zones enjoy the following incentives according to the Customs Act and the Value Added Tax Act: 1. Exemption from all taxes and duties on all imported machinery, spare parts, tools, raw materials, intermediate products, construction materials, etc. used for qualified business activities; 2. Exemption from income tax for the first ten years, after which income tax is levied at a maximum rate of 25%.
kenya has initially established several export processing zones and pilot special economic zones
Since the “Export Processing Zone Program” was proposed in 1990, according to the Export Processing Zones Act, Kenya has established 44 export processing zones (EPZs), of which 42 are public and 2 are private. In terms of special economic zones, Kenya has designated Mombasa, Lamu and Kisumu as pilot special economic zones. On July 7, 2017, Kenya’s first special economic zone, the Zhongjiang Special Economic Zone in Mombasa, was officially established. To date, Chinese companies have also made tremendous contributions to the development of Kenya’s special economic zones. Chinese companies have jointly planned and constructed several zones in Kenya for Kenya, including the Zhongjiang Special Economic Zone, the Mombasa Special Economic Zone, and the Naivasha Industrial Park.
china-invested enterprises need to be aware of kenya’s foreign investment policies
Chinese investors investing in Kenya must comply with relevant provisions for foreign investors in Kenya’s Investment Promotion Act. That is, Chinese investors must obtain approval from the Kenya Investment Authority, and the minimum amount for a single investment project in Kenya by Chinese investors is USD 500,000. The invested project must also be legal and beneficial to Kenya. In addition, foreign investors’ investment activities in Kenya are managed by the Kenya Investment Authority under the Ministry of Industry, Trade and Cooperatives. The Authority provides one-stop information services and assistance to investors. The Export Processing Zones Authority under the Ministry of Industry, Trade and Cooperatives is responsible for the management and investment promotion of export processing zones. The Special Economic Zones Authority under the Ministry of Industry, Trade and Cooperatives is responsible for implementing the government’s policies and programs regarding special economic zones.
In summary, Kenya has huge market potential and has introduced preferential policies to attract foreign investment into export processing zones and special economic zones. However, Chinese investors need to be aware of Kenya’s relevant investment policies and approval procedures when investing in Kenya.