Kenya

Bureau of Economic and Business Affairs
July 5, 2016

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Executive SummaryShare    

Kenya has a generally positive investment climate that has made it attractive to international firms seeking a location for their regional or pan-African operations. The investment climate is characterized by stable monetary and fiscal conditions and a legal environment that makes few distinctions between foreign and domestic investment. Kenya has a strong telecommunications infrastructure, a robust financial sector, solid aviation connections within Africa and to Europe and Asia, and the Mombasa Port is the major trade gateway for much of East Africa. Increasing integration among the members of the East African Community as well as Kenya’s membership in other regional trade blocks provide growing access to a large regional market outside of Kenya. Key challenges for investors are Kenya’s consistently low rankings on international measures of corruption and ease of doing business, although Kenya has made significant progress on the latter since 2013 as reported by the latest World Bank Group’s Doing Business 2016. Kenya also faces a significant security risk from terrorism and crime.

Key macroeconomic fundamentals are strong. Inflation is stable in the range of five to eight percent. The exchange rate is largely stable, although it has depreciated from an average of 87.92 Kenyan shillings (2014) to 98.6 Kenyan shillings (2015) to the U.S. dollar as the U.S. dollar strengthened internationally. The exchange rate has continued to display relatively less volatility compared with regional currencies. The Central Bank of Kenya (CBK) adopted a tight monetary policy stance in June 2015 in order to anchor inflationary expectations and to moderate demand pressures in the economy attributed largely to exchange rate movements. It raised the Central Bank Rate (CBR) from 8.5 percent to 10.0 percent in June, and further to 11.5 percent in July 2015. It raised the Kenya Banks’ Reference Rate (KBRR) to 9.87 percent in July, from 8.54 percent. The CBK retained the two rates at these levels for the rest of 2015 with the exception of a temporary spike to over 24 percent in September 2015, before it returned to its historic baseline.

The United Nations Council on Trade and Development (UNCTAD) 2014 World Investment Report states that Kenya is becoming a favored regional business hub, not only for oil and gas exploration but also for manufacturing and transport. The report noted overall increases in FDI of 15 percent to $6.2 billion in the East African region as a result of rising flows to Ethiopia and Kenya. The World Bank Group’s Doing Business 2016 report ranked Kenya as the third most improved country, Kenya moved up 21 places to 108 of the 189 economies reviewed on business regulatory reforms.

2015 was also an active year for Kenya in improving the environment for foreign investment. Highlights include:

  • Passage of the new Companies Act (2015) which modernized registration and operating procedures for public and private corporations;
  • Passage of the Business Registration Services Bill (2015) which created a one stop shop agency for business registration;
  • Passage of the Insolvency Act (2015) to modernize the legal framework for bankruptcies;
  • Continued progress by the Kenya Investment Authority (KenInvest) and the Business Environment Delivery Unit to reduce bureaucracy and simplify the business registration process; and
  • Progress on legislative modernization as the Energy, Mining, and Petroleum Bills make their way through the enactment process. In particular, revisions to the Mining Bill (2014) during the last year point to a more positive investment climate for the extractives industries.

Despite its advances in ease of doing business, corruption and some remaining weaknesses in the legislative frameworks continue to undermine Kenya’s business environment. Corruption remains a major impediment to investment, with Kenya ranking 139 of 168 countries on Transparency International’s 2015 corruption perceptions index. Allegations of irregularities in public tenders are frequent, and corruption scandals appear almost daily in local media. Foreign companies continue to complain of significant delays in work permits.

The risk of terrorism and insecurity has hindered the economy since a series of high-profile terrorist incidents beginning with an attack on Nairobi’s Westgate Mall in 20013, killing 67.
Kenya’s tourism industry cites the fear of terrorist attacks and international perceptions about the risk of Ebola in Africa as explanations for the decline suffered since 2013, as well as the slow pace of the industry’s recovery.

Despite these obstacles, American firms are operating successfully in many sectors in Kenya, and more American firms are seeking to set up their operations in the country. The sectors offering the most opportunities to investors are: energy, extractives, transportation, infrastructure, light manufacturing, retail, restaurants, technology, health care, mobile banking, and finance.

Table 1

Measure

Year

Index or Rank

Website Address

TI Corruption Perceptions index

2015

139 of 168

transparency.org/cpi2015/results

World Bank’s Doing Business Report “Ease of Doing Business”

2015

108 of 189

doingbusiness.org/rankings

Global Innovation Index

2015

92 of 141

globalinnovationindex.org/content/page/data-analysis

U.S. FDI in partner country ($M USD, stock positions)

2014

$383

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

World Bank GNI per capita

2014

$1,290

data.worldbank.org/indicator/NY.GNP.PCAP.CD

Millennium Challenge Corporation Country Scorecard

The Millennium Challenge Corporation, a U.S. Government entity charged with delivering development grants to countries that have demonstrated a commitment to reform, produced scorecards for countries with a per capita gross national income (GNI) of $4,125 or less. Kenya is better than the median on more than half of the MCC’s 20 indicators, including on the democratic rights indicators. Kenya is also above the median on at least one indicator in each of the three broad groupings: Economic Freedom, Investing in People, and Ruling Justly. It falls short, however, on the important control of corruption indicator. A list of countries/economies with MCC scorecards and links to those scorecards is available here: http://www.mcc.gov/pages/selection/scorecards. Details on each of the MCC’s indicators and a guide to reading the scorecards are available here: http://www.mcc.gov/pages/docs/doc/report-guide-to-the-indicators-and-the-selection-process-fy-2015.

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Attitude toward Foreign Direct Investment

Kenya has a steadily improving environment for foreign direct investment (FDI). Foreign investors seeking to establish a presence in Kenya generally receive the same treatment as local investors, and multinational companies make up a large percentage of Kenya's industrial sector. There is little discrimination against foreigners in investment, ownership, or access to government-financed research, and the government's export promotion programs do not distinguish between local and foreign-owned goods.

Barriers to FDI in Kenya are shrinking as reforms are put in place, but they still exist. Difficulty in obtaining work permits make it harder to employ expatriates in Kenya (Please refer to section 15 on labor issues for further details). The minimum foreign investment to qualify for Government of Kenya (GOK) investment incentives and an investment certificate is $100,000, a potential deterrent to foreign small and medium enterprise investment, especially in the services sector, which is normally not as capital-intensive as other sectors. Investment Certificate benefits, including entry permits for expatriates, are outlined in the Investment Promotion Act 2004. Investors should be aware that foreigners cannot own land in Kenya, though they can lease it in 99-year increments. The cumbersome and opaque process required to acquire land raises concerns about security of title, particularly given past abuses relating to the distribution and redistribution of public land.

Other Investment Policy Reviews

One component of Kenya’s reform effort was a comprehensive policy review by UNCTAD that resulted in the 2005 and 2012 UNCTAD investment guides, published in cooperation with the International Chamber of Commerce (ICC). According to these guides, Kenya faces several key challenges, most notably the absence of a reliable and affordable power supply, dilapidated transportation infrastructure, and burdensome tax administration. UNCTAD observed that at the time of writing, over 50 percent of investor facilitation revolved around foreign work permits. A 2013 follow-up report tracking progress in implementing recommendations from these reviews noted that since 2005, Kenya’s performance in legislative and regulatory reform has been impressive and solid progress has been experienced on nearly all areas which touch on the investment framework.

The 2013 African Development Bank report titled The State of Kenya’s Private Sector, 2013 (http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/The_State_of_Kenya_s_Private_Sector_-_Recommendations_for_Government-Development_Partners_and_the_Private_Sector.pdf) notes that the business climate has improved over the last decade. Political uncertainty, corruption, infrastructural deficits, and an untapped informal sector are recurring challenges that prevent the private sector from reaching its full potential. The report mentioned that Kenya’s transport infrastructure and logistics systems (including customs, goods clearance and weighbridge processes) are persistently weak for a regional trade and transport hub. High energy costs and weak and interrupted supply of power is crippling to business, especially in manufacturing. The report characterizes Kenya’s business climate as “mediocre but improving.”

Laws/Regulations on Foreign Direct Investment

The major regulations governing FDI are found in the Investment Promotion Act (2004). Other important documents that provide the legal framework for FDI include the 2010 constitution of Kenya, the Companies Ordinance, the Private Public Partnership Act (2013), and the Foreign Investment Protection Act. GOK membership in the World Bank’s Multilateral Investment Guarantee Agency (MIGA) provides an opportunity to insure FDI against non-commercial risk. On the legal side, the Employment and Labor Relations Court (formerly the Industrial Court), and the Milimani Commercial Courts have jurisdiction over economic and commercial affairs. KenInvest is Kenya’s official investment promotion agency (www.investmentkenya.com). When President Kenyatta signed the new Companies Act (2015), it contained language requiring a foreign company to demonstrate at least 30 percent of shareholding by Kenyan citizens by birth. However, the Attorney General immediately suspended this clause with support from the President’s office and the Cabinet Secretary of Industrialization, Investment, and Trade – who all expressed surprise that the clause had entered the bill in a late draft and was not recognized before signature. The clause is expected to remain suspended until the GOK can amend the Act. There is no executive or other interference in the court system that affects foreign investors, and foreign investors are free to obtain financing locally or internationally.

Business Registration

In September 2015, President signed into law The Business Registration Services (BRS) Act (2015) and the Companies Act (2015), intended to ensure Kenya becomes an enticing destination for investors. The act establishes a state corporation known as the Business Registration Service to ensure effective administration of the laws relating to the incorporation, registration, operation and management of companies, partnerships and firms. The BRS also devolves to the counties business registration services such as registration of business names and promoting local business ideas/legal entities, thus reducing costs of registration. The Companies Act (2015) deals with specifics of registration and management as they pertain to public and private corporations.

KenInvest has developed an online database known as eRegulations (http://www.investmentkenya.com/) which is designed to provide investors and entrepreneurs with full transparency on investment-related procedures in Kenya. At each step, the system tells you where to go, who to see, what you must bring, what you have to pay, what you will get, what is the legal justification, and even who to complain to in case you have a problem. According to UNCTAD’s Global Enterprise Registration Network (http://www.GER.co), the KenInvest portal makes Kenya one of only 25 countries to earn a perfect rating on its information portal.

In 2014, the GOK also established a Business Environment Delivery Unit aimed at addressing challenges facing investors in the country. The unit has representatives from all ministries and focuses on lessening bureaucracy related to setting up and doing business in the country. Separately, the Business Regulatory Reform Unit operates a web site (http://www.businesslicense.or.ke/) which provides information on how to access detailed information on relevant business licenses and permits, including requirements, costs, application forms and contact details for the relevant regulatory agency.

Industrial Promotion

The government does not steer investment to specific geographic locations but encourages investments in sectors that create employment, generate foreign exchange, and create forward and backward linkages with rural areas. Kenya puts significant effort into assuring the health and growth of its tourism industry. Endeavoring to grow its manufacturing capacity, the government also offers incentives for the production of goods for export. More information on both is available in section 5.2.

An investment guide to Kenya, also referred to as iGuide Kenya, can be found at http://www.theiguides.org/public-docs/guides/kenya/about#. iGuides, designed by UNCTAD and the International Chamber of Commerce, provide investors with up-to-date information on business costs, licensing requirements, opportunities and conditions in developing countries.

KenInvest has also published A Practical Guide to Doing Business which gives a quick overview of Kenya’s investment climate, taxation, types of businesses organizations, and accounting practices. See link: http://www.investmentkenya.com/resources/19-publications

The Kenya Mining Investor Handbook is the first guidebook for investors interested in the mining sector of Kenya: http://www.mining.go.ke/resources.html.

Limits on Foreign Control and Right to Private Ownership and Establishment

According to the World Bank’s 2010 Investing Across Borders Report, Kenya restricts foreign ownership in more sectors than most other economies in sub-Saharan Africa. Foreign ownership of insurance and telecommunications companies is restricted to 66.7 percent and 80 percent, respectively, although the government allows telecommunications companies a three-year grace period to find local investors to achieve the local ownership requirements.

The Capital Markets Authority allows foreign investors to increase their investment with prior written approval if the shares reserved for local investors are not fully subscribed. Foreign equity in companies engaged in fishing activities is restricted to 49 percent of the voting shares under the Fisheries Act. In June 2007, the level of foreign ownership allowed for companies seeking a listing on the Nairobi Securities Exchange was decreased from 75 to 60 percent. This change was not applied retroactively.

Privatization Program

Kenya is undertaking privatization efforts for parastatal organizations in a wide range of sectors. The affected sectors include agribusiness; agricultural, construction, and heavy equipment; education; energy and mining; finance; food processing and packaging; industrial equipment and supplies; and travel. However, Kenya has been slow to open public infrastructure such as telecommunications, power, and rail to competition because the government considers state-owned companies that control infrastructure as “strategic” enterprises.

The Private Public Partnership (PPP) Act 2013 provides the legal framework to enable the structured, methodical, and staged deployment of PPPs to support infrastructure development in Kenya. The World Bank estimates that Kenya has a funding gap of approximately $2 to $3 billion per year to address infrastructure requirements in the next 10 years. The GOK intends to bridge the current development funding gap through PPP deals. On December 31, 2013, the GOK published an approved list of 47 National Priority PPP projects. More information on Kenyan PPP projects can be found at the National Treasury PPP Unit’s website http://pppunit.go.ke. Investors are cautioned that the tendering process for contracts has been criticized as opaque and prone to corruption. The GOK has efforts in place to improve and automate that process, but the effectiveness of those efforts remains to be seen.

Screening of FDI

There is little screening of investment in Kenya, and it has not been discriminatory. KenInvest asks companies to undergo an optional investment registration process that includes health, safety, and environmental impact assessments. However, registration is mandatory for those seeking investment incentives.

Investors in Kenya are required to comply with environmental standards. The National Environment Management Authority (NEMA) oversees these matters and is the principal environmental regulatory agency. Developers of projects involving manufacturing, processing, or any project sited by a body of water or in a conservation area are required to carry out an environmental impact assessment (EIA) and obtain an EIA license prior to project implementation. Upon submission of the EIA, NEMA is required to respond within six months. If no reply is received within nine months, the investor may proceed with the project.

Competition Law

In August 2011, the Finance Minister put the Competition Act of 2010 into effect, thereby replacing the outdated Monopolies and Price Control Act and the Monopolies and Prices Commission. Specifically, the Act created the Competition Authority of Kenya (CAK). All mergers and acquisitions require the Authority’s authorization before they are finalized, and the CAK regulates abuse of dominant position and other competition and consumer-welfare related issues in Kenya.

In 2014, CAK imposed a filing fee for mergers and acquisitions set at one million shillings ($9,700) for mergers involving turnover of between one and 50 billion shillings ($9.7 million to $485 million), while two million shillings ($19,400) will be charged for larger mergers. All mergers and acquisitions require CAK’s authorization.

2. Conversion and Transfer PoliciesShare    

Foreign Exchange

Kenya is an open economy with a liberalized capital account and a floating exchange rate. The Central Bank of Kenya (CBK) engages in volatility controls; however, this form of currency management is strictly aimed at smoothing temporary market fluctuations. Between July 2014 and July 2015, the shilling declined 15 percent but has been stable since then as Kenya successfully navigated through some financial volatility overseas, a strengthening dollar, and a domestic fiscal squeeze. In 2015, foreign exchange reserves continue to grow and now provide more than five months of import cover. Lower oil prices continue to support Kenya’s current account position. The average inflation rate was 6.6 percent in 2015 and the rate on 91-day treasury bills had fallen to 9.81 percent in December 2015, after a spike to over 21 percent in October. According to CBK figures, the average exchange rate in 2015 was Ksh 98.6 to $1.

Remittance Policies

Kenya’s Foreign Investment Protection Act (FIPA) guarantees capital repatriation and remittance of dividends and interest to foreign investors, who are free to convert and repatriate profits including un-capitalized retained profits (proceeds of an investment after payment of the relevant taxes and the principal and interest associated with any loan). Kenya has no restrictions on converting or transferring funds associated with investment. Kenyan law requires the declaration to customs of amounts greater than Ksh 500,000 for residents or $5,000 or the equivalent in foreign currencies for non-residents as a formal check against money laundering. Foreign currency is readily available from commercial banks and foreign exchange bureaus and can be freely bought and sold by local and foreign investors. However, the Central Bank of Kenya Act (Cap 491) Act states that all foreign exchange dealers are required to obtain and retain appropriate documents for all transactions above the equivalent of $10,000. As of June 2014, the Central Bank of Kenya had licensed 17 money remittance providers following the operationalization of the Money Remittance Regulations in April 2013.

Kenya is listed as a country of primary concern for money laundering and financial crime by the State Department’s Bureau of International Narcotics and Law Enforcement. Kenya’s ongoing progress in creating the legal and institutional framework to combat money laundering and the financing of terrorism resulted in the The inter-governmental Financial Action Task Force (FATF) announcing that Kenya would be removed from the FATF Watchlist in June 2014.

3. Expropriation and CompensationShare    

The 2010 constitution guarantees safety from expropriation except in cases of eminent domain or security concerns subject to the payment of prompt and fair compensation. The Land Acquisition Act governs compensation and due process in acquiring land, although land rights issues in Kenya remain contentious and can cause significant delays in projects. See “Real Property” in section 7 for details.

4. Dispute SettlementShare    

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

Although Kenyan media regularly features reports of corruption in the judiciary, the Kenyan courts are generally staffed with competent and independent judges. The 2010 constitution establishes an independent judiciary with a Supreme Court, a Court of Appeal, a Constitutional Court, and a High Court. The legal system is based on English Common Law. The previously existing subordinate courts remain in place – Magistrates, Khadis (Muslim succession and inheritance), Courts Martial, and Commercial and Industrial Courts. In 2014, the judiciary renamed the Industrial Court as the Employment and Labor Relations Court. The Chief Justice of Kenya is required under the constitution to issue an annual “State of the Judiciary and Administration of Justice Report.”

The Foreign Judgments (Reciprocal Enforcement) Act provides for the enforcement in Kenya of judgments given in other countries that accord reciprocal treatment to judgments given in Kenya. Kenya has entered into reciprocal enforcement agreements with Australia, the United Kingdom, Malawi, Tanzania, Uganda, Zambia, and Seychelles.

Without such an agreement, a foreign judgment is not enforceable in the Kenyan courts except by filing suit on the judgment. Foreign advocates are not entitled to practice in Kenya unless a Kenyan advocate instructs and accompanies them, although a foreign advocate may practice as an advocate for the purposes of a specified suit or matter if appointed to do so by the Attorney General.

Bankruptcy

The World Bank Group’s Doing Business 2016 report puts Kenya at 144 of 189 countries in the “resolving insolvency” category. This is up 10 rankings from 2015. In September 2015, the GOK published the Insolvency Act (2015) which repeals the Bankruptcy Act and updates the legal structure relating to insolvency of natural persons and incorporated and unincorporated bodies. Section 720 grants the force of law to the United Nations Commission on International Trade Law (UNCITRAL) Model Law. Creditors' rights are comparable to those in other common law countries, and monetary judgments typically are made in Kenyan shillings. In Kenya, bankruptcy is not criminalized. Similarly, the new Insolvency Act (2015) increased the rights of borrowers and prioritizes the revival of distressed firms. The new law states that a debtor will automatically be discharged from debt after three years.

Investment Disputes

There have been very few investment disputes involving U.S. and international companies in the last decade, with only one that has engaged the attention of Embassy Nairobi. There is no particular pattern to the disputes. Commercial disputes are more common, particularly with respect to government tenders. Please refer to sections 7 and 12 for more information.

International Arbitration

The government does accept binding international arbitration of investment disputes with foreign investors. The Kenyan Arbitration Act (1995) as amended in 2010 is anchored entirely on the UNCITRAL Model Law. Moreover, legislation introduced in 2013 established the Nairobi Centre for International Arbitration (NCIA). The NCIA seeks to serve as an independent, not-for-profit international organization for commercial arbitration, and may offer a quicker alternative to the court system.

In June 2014, the Kenya Revenue Auithority (KRA) launched an Alternative Dispute Resolution (ADR) mechanism aiming to provide taxpayers with an alternative, fast-track avenue for resolving tax disputes. Once operational, the KRA claims the ADR mechanism will provide a cheaper alternative for foreign investors and also provide an alternative to the lengthy court processes in Kenya.

ICSID Convention and New York Convention

Kenya is a member of both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, also known as the ICSID Convention or the Washington Convention, and the 1958 New York Convention on the Enforcement of Foreign Arbitral Awards. Kenya signed the ICSID Convention on May 24, 1966, and became a Contracting State on February 2, 1967. Kenyan became a Contracting State in the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards on February 10, 1989. As it relates to arbitration over property issues, the Foreign Investments Protection Act specifically cites Article 75 of the Kenyan Constitution, which provides that “[e]very person having an interest or right in or over property which is compulsorily taken possession of or whose interest in or right over any property is compulsorily acquired shall have a right of direct access to the High Court.”

Duration of Dispute Resolution – Local Courts

The private sector cites weak institutional capacity, inadequate transparency, and inordinate delays in dispute resolution in lower courts. The resources and time involved in settling a dispute through the Kenyan courts often render them ineffective as a form of dispute resolution. International investors anecdotally relate a perceived “home field advantage” enjoyed by Kenyans in their national justice system.

5. Performance Requirements and Investment IncentivesShare    

WTO/TRIMS

Kenya is a World Trade Organization (WTO) member. It has not notified the WTO of any measures that are not in conformity with itsTrade Related Investment Measures (TRIMS) obligations.

Investment Incentives

Kenya's Special Economic Zones (SEZ) and Export Processing Zones (EPZ) offer special geographically-based incentives. More information is provided in Section 16. Further information on government programs to attract investment is available through KenInvest (www.investmentkenya.com).

The government allows all locally financed materials and equipment (excluding motor vehicles and goods for regular repair and maintenance) for use in construction or refurbishment of tourist hotels to be zero-rated for purposes of VAT calculation. The National Treasury permanent secretary must approve such purchases. An additional measure enacted to boost the ailing tourism industry makes one week vacations paid by employers on behalf of employees a tax deductible expense. Aircraft and aircraft parts, tractors, inputs for solar manufacturing, and services relating to goods in transit are fully exempt from VAT. Investors in metal manufacturing and products and the hospitality services sectors are able to deduct from their taxes a large portion of the cost of buildings and capital machinery.

The government’s Manufacturing Under Bond (MUB) program, established in 1986, is meant to encourage manufacturing for export. The program provides a 100 percent investment allowance on plant machinery and equipment and buildings as well as materials imported for production of duty-free products sold domestically and exported. The program is also open to Kenyan companies producing goods that can be imported duty-free or goods for supply to the armed forces or to an approved aid-funded project.

The Finance Act (2014) amended the Income Tax Act to reintroduce after 29 years the capital gains tax (CGT) on transfer of property situated in Kenya. Under this provision, gains derived on sale or transfer of property by an individual or company are subject to tax at the rate of five percent. The effective date of this provision was January 1, 2015, and sales and transfer of property related to the oil and gas industry are taxed up to 37.5 percent.

The Finance Act (2014) also reintroduced the withholding VAT system by government ministries, departments and agencies. Abolished in 2011, the reintroduced system again excludes the Railway Development Levy (RDL) imports for persons/goods/projects; the implementation of an official aid-funded project; diplomatic missions, institutions or organizations gazetted under the Privileges and Immunities Act; and the United Nations or its agencies.

Research and Development

There is no differentiation between local and foreign investors in access to government-sponsored research.

Performance Requirements

The government encourages investments in sectors that create employment, generate foreign exchange, and create forward and backward linkages with rural areas. The law applies local content rules but outside of proposed bills to govern the burgeoning energy sector, they are primarily for purposes of determining whether goods qualify for preferential duty rates within Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). There are no government imposed conditions on permission to invest. For information on work permits for foreign nationals please see section 16. For more information on local content and social responsibility requirements in proposed legislation for the oil and gas and extractives industries, see section 10.

Data Storage

The GOK does not impose any data storage requirements for investors or others. However, the lack of developed cybercrimes legislation can cause tension over how the GOK expects to be able to interact with locally generated content stored outside the country. The GOK has pressured online service providers to violate their privacy policies when it believes that it should have access to or control over certain locally generated content held by the company.

6. Protection of Property RightsShare    

Real Property

The legal infrastructure around land ownership and registration has changed in recent years. Land issues delayed several major infrastructure projects in 2015. The 2010 constitution and subsequent land legislation mandates that all land leases convert from 999 years to 99 years. The state has the power to review leasehold land at the expiry of the 99 years and can deny lease renewal and confiscate the land if it determines the land has not been used productively. The constitution also prohibits foreign ownership of land and converts foreign-owned freehold interests into 99 year leases at a “peppercorn rate” (a nominally low rate used to satisfy the requirements for the creation of a legal contract). However, the government has not yet effectively implemented this provision of the constitution.

The 2010 constitution and subsequent land legislation created the National Land Commission, an independent government body mandated to review historical land injustices and provide oversight of the government’s land policy and management. The creation of the Commission has had the unintended side-effect of introducing coordination and jurisdictional confusion between it and the Ministry of Land, Housing, and Urban Development. Work continues on the National Land Information Management System, though fully digitized, border-to-border cadastral data is still many years in the future.

Intellectual Property Rights

The major intellectual property enforcement issues in Kenya related to counterfeit products are corruption, lack of penalty enforcement, failure to impound imports of counterfeit goods at the ports of entry (especially in Mombasa), and the reluctance of brand owners to file a complaint with the Anti-Counterfeiting Agency (ACA). The prevalence of “gray market” products – genuine products that enter the country illegally without paying import duties – also presents a challenge, especially in the mobile phone and computer sectors.

ACA, the lead agency for IPR enforcement, opened an office in Mombasa in December 2014 and in Eldoret and Kisumu in 2015, but continues to operate with a very limited budget and a small staff. It is also constrained by the lack of implementing regulations to execute its mandate effectively. ACA is currently working on an amendment to the Anti-Counterfeit Act (2008) that would impose a minimum penalty of Ksh 2 million ($194,000). Although the agency has made several high-profile seizures of counterfeit goods shipments, Kenya’s law enforcement agencies have failed to implement the new laws and regulations consistently or effectively. Currently, Kenya does not post information on seizures of counterfeit goods publicly.

In an attempt to combat the importation of counterfeits, the Ministry of Industrialization and the Kenya Bureau of Standards (KEBS) decreed in 2009 that all locally manufactured goods must have a KEBS standardization mark. Several categories of imported goods, specifically food products, electronics, and medicines, must have an import standardization mark (ISM). Under this new program, U.S. consumer-ready products may enter the Kenyan market without altering the U.S. label but must also carry an ISM. Once the product qualifies for a Confirmation of Conformity, KEBS will issue the ISM free of charge.

For additional information regarding the IPR environment in Kenya, also see USTR’s Special 301 Reports at https://ustr.gov/issue-areas/intellectual-property/Special-301. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Resources for Rights Holders

Contact at U.S. Embassy Nairobi:
David Pemberton
Economic Officer
+254 (0)20-363-6048
ICSKenya@state.gov

For a list of local attorneys, please see http://nairobi.usembassy.gov/attinkenya2.html

7. Transparency of the Regulatory SystemShare    

Transparency of Kenya’s regulatory system is good and improving as outdated laws receive updates. Proposed laws and regulations pertaining to business and investment are published in draft form for public input and stakeholder deliberation before they are passed into law in Parliament Kenya’s business registration and licensing are systems fully digitized and transparent. Computerization of other GOK processes to increase transparency and close avenues for corrupt behavior is on-going, albeit slowly. The Kenyan regulatory system is governed by the 2010 constitution, the judicial system outlined in section 4, and organizations such as the Competition Authority of Kenya, outlined in section 1.8.

Kenya is a member of UNCTAD’s international network of transparent investment procedures, https://kenya.eregulations.org/. Foreign and national investors can find there detailed information on administrative procedures applicable to investment and income generating operations, including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time and legal bases justifying the procedures.

Many GOK laws have granted significant discretionary and approval powers to their administrators, which can create uncertainty among investors. While some government agencies have either amended laws or published clear guidelines for decision making criteria, others have lagged in making their transactions transparent. For instance, foreign work permit processing continues to be in disarray with overlapping and sometimes contradictory regulations. American companies have complained about delays of up to 7 months and non-issuance of permits that appear to be compliant with known regulations.

The GOK is working to address tendering and procurement corruption. Section 227 of the Constitution of Kenya provides for the establishment of a system for procurement of goods and services that is fair, equitable, transparent, competitive and cost-effective. The Public Procurement and Disposal Act (2014) prescribes a framework for procurement and asset disposal. With the support of the World Bank and in collaboration with the Kenya ICT Board, the Public Procurement Oversight Authority (PPOA) is developing a web-based Market Price Index and an e-Procurement system. The International Budget Partnership found that as of 2014, the majority of counties had yet to establish County Budget and Economic Forums (CBEF), a measure of the Public Finance Management Act (2012) meant to ensure wide participation in public finances.

8. Efficient Capital Markets and Portfolio InvestmentShare    

Foreign investors are able to obtain credit on the local market; however, the number of available credit instruments is relatively small. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. The Kenyan National Treasury is seeking to launch its mobile money platform government bond to retail investors locally. The name of the product is M-Akiba, through which local Kenyans will be able to purchase bonds as small as $30 on their mobile phones.

Though small by Western standards, Kenya’s capital markets are the deepest and most sophisticated in East Africa. The Kenyan capital market has grown rapidly in recent years and has also exhibited strong capital raising capacity. The bond market, however, is still underdeveloped and dominated by trading in government debt securities. Long-dated corporate bond issuances are uncommon, leading to a lack of long-term investment capital. As of February 2016, the domestic government bond market denominated in local currency represents a total of $14 billion dollars, of which only five percent is comprised of international institutional investors.

The Central Bank of Kenya (CBK) is working with regulators in EAC member states through the Capital Market Development Committee (CMDC) and East African Securities Regulatory Authorities (EASRA) on a regional integration initiative and has successfully introduced cross-listing of equity shares. The combined use of both the Central Depository System (CDS) and an automated trading system has moved the Kenyan securities market to globally accepted standards. Kenya is a full (ordinary) member of the International Organization of Securities Commissions.

Money and Banking System, Hostile Takeovers

The CBK is the primary regulator of financial institutions, with the current focus on banking regulation. As of December 2015, Kenya had 43 banking institutions – 42 commercial banks and one mortgage finance company, while two banking entities entered “receivership” in September/October 2015 – seven representative offices of foreign banks, twelve deposit-taking microfinance institutions (DTMs), 107 foreign exchange bureaus, and two credit reference bureaus (CRBs). Out of the 43 banking institutions, 29 are locally owned – three with public shareholding and 26 privately owned – and 13 are foreign owned. The twelve DTMs, two CRBs and 79 forex bureaus are privately owned. The foreign owned financial institutions are comprised of eight locally incorporated foreign banks and four branches of foreign incorporated banks. Some major international banks operating in Kenya include Bank of India, Barclays, Citibank, and Standard Chartered. These are listed as commercial banks on the CBK website.

The total population with access to financial services, either through conventional or mobile banking platforms is now 77 percent. According to the World Bank, M-Pesa, Kenya’s largest mobile banking platform, processes more transactions within Kenya each year than Western Union does globally. As of September 2015, 37.8 million Kenyans were using mobile phone platforms to transfer money, according to CBK figures. There were over 135,724 agents facilitating transactions in excess of Ksh 2.7 trillion ($2.6 billion) in the 2014/2015 fiscal year, a sum equivalent to half of Kenya’s GDP in the same period. The National ICT Masterplan 2017 envisages the sector contributing at least 10 percent of GDP growth by 2017, up from 8.4 percent recorded in 2014. As of February 2016, Kenyan mobile money platform SimbaPay has received approval to operate in five European countries catering to the Kenyan diaspora, allowing them to bank in Kenya from abroad.

Company takeovers are possible if the share buy-out is more than 90 percent, although such takeovers are rarely seen in practice.

9. Competition from State-Owned EnterprisesShare    

In 2013, the Presidential Task Force on Parastatal Reforms (PTFPR) published a list of all state-owned enterprises (SOEs) and recommended proposals to reduce the number of State Corporations from 262 to 187 in order to eliminate redundant functions between parastatals, close or dispose of non-performing organizations, consolidate functions wherever possible, and reduce the workforce. However, progress is slow. The taskforce’s report can be found at http://www.cofek.co.ke/Report%20of%20The%20Presidential%20Task%20force%20on%20Parastatal%20Reforms.pdf.

In general, competitive equality is the standard applied to private enterprises in competition with public enterprises. Certain parastatals, however, have enjoyed preferential access to markets. Examples include Kenya Reinsurance (Kenya-Re), which enjoys a guaranteed market share; Kenya Seed Company, with fewer marketing barriers than its foreign competitors; and the National Oil Corporation of Kenya (NOCK), which benefits from retail market outlets developed with government funds. Some state corporations have also benefited from easier access to government guarantees, subsidies, or credit at favorable interest rates. In addition, “partial listings” on the Nairobi Securities Exchange offer parastatals the benefit of financing through equity and GOK loans (or guarantees) without being completely privatized.

Beyond energy and agriculture, SOE competition with private enterprise is expected and encouraged in Kenya. Energy remains the most publicly-owned sector in Kenya while most SOE’s in the agricultural sector have been accorded material advantages such as preferential access to land and raw materials inputs. Commodity SOEs generally spend on-par with private companies, and SOEs do not tend to spend far more than the private sector on R&D. Research and standardization SOEs often have a proportionally large R&D budget, and may use funding from donors.

On procurement from the private sector, SOEs are guided by the Public Procurement (Preference and Reservations) (Amendment) Regulations (2013). The amendment reserves 30 percent government supply contracts for youth, women, and SMEs.

Kenya is neither a party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO) nor an Observer Government.

OECD Guidelines on Corporate Governance of SOEs

The PTFPR’s October 2013 report references the 2005 OECD guidelines and recommends a more comprehensive set of guidelines for State Owned Enterprises. In response, the Government Owned Entities Bill (2014) is currently under internal review and stakeholder consultations. The Bill will bring Kenya more in line with OECD guidelines.

According to the PTFPR report, “Appointment of CEOs and Boards are [sic] sometimes political. CEOs and Boards feel a hand over their heads and pressure to toe the political line.” Although President Kenyatta has publicly called for reform in the way parastatals are managed, he continues to lean toward appointing political supporters. However, in 2015, to address governance and management challenges in parastatals, President Kenyatta launched a new Code of Governance for State Corporations under the name “Mwongozo.” The Code addresses matters of effectiveness of boards, transparency and disclosure, accountability, risk management, internal controls, ethical leadership, and good corporate citizenship. As part of the on-going parastatals reform program, Mwongozo aims to ensure that sustainability, performance and excellence becomes the norm of Kenya’s Government Owned Entities.

SOEs have reporting lines and financial accountability to Parliament, various boards and advisory councils, and Kenya’s Cabinet. The Office of the Auditor General (OAG) is mandated to provide statutory audit to all the SOEs, although it can, and frequently does, delegate this to private audit companies. SOE’s are subjected to the same taxes and the same value added tax rebate policies as their private sector competitors.

Sovereign Wealth Funds

Kenya is in the process of establishing a sovereign wealth fund through the Kenya National Sovereign Wealth Fund Bill (2014). The fund will receive income from privatization proceeds, dividends from state corporations, all oil, gas and minerals revenues due to the national government, revenue from other natural resources, and funds from any other source. The bill is still undergoing internal review and stakeholder consultations. The fund will have the triple goal of shielding the economy from cyclical changes in commodity prices, saving for future generations, and supporting infrastructure investment. According to the working draft of the bill, “Investments shall be directed to both local and foreign markets except to the extent restricted under this Act or under the investment Guidelines.”

10. Responsible Business ConductShare    

The Environmental Management and Coordination Act (1999) establishes a legal and institutional framework for the management of the environment while The Factories Act (1951) safeguards labor rights in industries. The legal system, however, has remained slow to prosecute corporate malfeasance in both areas.

The GOK has been hesitant to enact and enforce regulatory pressures aimed at encouraging Corporate Social Responsibility (CSR) for fear of discouraging investment. It is not an adherent to the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, and it is not yet an Extractive Industry Transparency Initiative (EITI) implementing country. Nonetheless, good examples of CSR abound as major foreign enterprises drive CSR efforts by applying international standards relating to human rights, business ethics, environmental policies, community development, and corporate governance. Private sector companies affiliated with American, European, and Japanese multinationals embrace transparency and accountability as key to conducting business in a socially responsible manner.

The proposed Petroleum Bill (2015) and Mining Bill (2014) contain statements on local content, local participation, and local training, but the Bills do not establish a clear regulatory framework or monitoring and evaluation mechanisms and would likely need clarifying amendments before local resourced based conflict issues are enforceable. Similarly, the Draft National Energy and Petroleum Policy (2015) does not provide the administrative and institutional structure necessary to implement local content laws or policy.

11. Political ViolenceShare    

The disputed 2007 presidential election sparked ethnically-charged political violence, resulting in approximately 1,200 deaths and the displacement of more than 300,000 people. Property damage was in the millions of dollars, and GDP growth dropped to 0.2 percent in 2008 before increasing to 3.3 percent in 2009 and 8.4 in 2010. Security expenditures represent a substantial operating expense for businesses in Kenya.

Kenya’s current constitution was approved in 2010 in a violence-free referendum. Elections in 2013 were relatively peaceful as well. The next national elections are scheduled for August 2017. Various stakeholders continue to work to mitigate tensions and issues that have in Kenya’s past led to electoral violence.

The United States maintains a travel warning for Kenya due to the threat of terrorism and crime. Instability in Somalia has heightened security concerns and led to increased security measures aimed at businesses and public institutions around the country. In the coastal regions, tensions flare occasionally within and between ethnic communities. Regional conflict also threatens Kenya’s stability, most notably in Somalia and South Sudan. Kenya has faced increased refugee flows from South Sudan since the outbreak of violence in December 2013.

Kenya and its neighbors are working together to mitigate the threats of terrorism and insecurity through African-led initiatives such as the African Union Mission in Somalia (AMISOM) and the nascent Eastern African Standby Brigade (EASBRIG). Calls for Kenya to leave Somalia increased in some quarters of Kenyan society after a January 2016 al-Shabaab attack on a Kenyan Defense Forces base in Ceel Adde, Somalia killed a large number of Kenyan soldiers. Despite the attack, the Government of Kenya has maintained its commitment to remaining in Somalia.

12. CorruptionShare    

Corruption in Kenya is pervasive and entrenched, and Kenya is ranked among the world's most corrupt countries. Transparency International’s (TI) 2015 Global Corruption Perception Index ranks Kenya 139 out of 168 countries, essentially flat compared to its 2014 ranking. Lack of political will, little progress in prosecuting past corruption cases, and the slow pace of reform in key sectors were reasons cited why Kenya is still ranked among the lower scoring countries. Corruption is an impediment to FDI with local media reporting on allegations of high-level corruption related to energy, airport construction, and infrastructure contracts awarded to foreign firms that allegedly did not comply with public procurement laws.

In TI’s East African Bribery Index 2014 released in December 2014, the Kenyan police ranked as the most bribery-prone institution, accounting for almost half of all bribes paid at 43.5 percent. Land Services was second at 11.9 percent followed closely by the judiciary at 11.6 percent. Thirty-one percent of Kenyan respondents said they paid a bribe because it was the only way to access services. Eighty-one percent described the level of corruption as “high” and felt it had increased in the past year. When asked to predict the level of corruption in the next year, 51 percent said corruption would likely go up. Almost 60 percent of respondents said they felt government anti-corruption efforts were insufficient. Fifty-seven percent said they had done nothing to fight corruption in the past year, with about 90 percent admitting that they did not report bribery to the authorities.

According to a 2014 PricewaterhouseCoopers (PwC) report, about one in three Kenyan business leaders reported procurement-related fraud in the previous two years. Four out of every 10 Kenyan CEOs reported being asked to pay bribes to win a tender or get business. Asset misappropriation remains the most common economic crime in Kenya, affecting 77 percent of businesses. Accounting fraud affects 38 percent of firms, procurement fraud 31 percent, bribery and corruption 27 percent, and cybercrime 22 percent of firms.

Kenyan law provides for criminal penalties for official corruption but no top officials were prosecuted successfully for corruption in 2015. In March 2015, however, President Kenyatta made public a list of 124 government officials under investigation for corruption crimes, including five cabinet secretaries, and suspended these officials pending investigations. In November 2015, Kenyatta formally dismissed five cabinet secretaries from the government.

In July 2015, during a visit to Nairobi, President Obama along with President Kenyatta announced a 29-point “Kenya-U.S. Joint Commitment to Promote Good Governance and Anti-Corruption Efforts in Kenya” (Joint Commitment). In the Joint Commitment, Kenya agreed to take measures to institutionalize good governance, raise public awareness about corruption, implement international standards related to corruption and money laundering, increase the use of technology to fight graft, and build the capacity of institutions to end impunity. Implementation of the Joint Commitment is ongoing.

Kenya’s framework for dealing with corruption is defined by the 2003 Anti-Corruption and Economic Crimes Act, the 2003 Public Officers Ethics Act, the 2004 Code of Ethics Act for Public Servants, the 2005 Public Procurement and Disposal Act, the 2007 Supplies Practitioners Management Act, and the 2012 Leadership and Integrity Bill. The Ethics and Anti-Corruption Commission (EACC) monitors and enforces compliance with the above legislation.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Kenya is a signatory to the UN Convention Against Corruption (UNCAC), and in 2015 completed a peer review process of its UNCAC compliance. A report of that review can be accessed here: https://www.unodc.org/documents/treaties/UNCAC/CountryVisitFinalReports/2015_09_28_Kenya_Final_Country_Report.pdf

Kenya is not a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Kenya is a signatory to the East African Community’s Protocol on Preventing and Combating Corruption.

Resources to Report Corruption

Philip Kinisu
Chairperson and Commissioner
Ethics and Anti-Corruption Commission
P.O. Box 61130 00200 Nairobi, Kenya
Phones: +254 (0)20-271-7318, (0)20-310-722, (0)729-888-881/2/3
Email: pkinisu@integrity.go.ke

Samuel Kimeu
Executive Director
Transparency International Kenya
Phone: +254 (0)722-296-589
Email: skimeu@tikenya.org

13. Bilateral Investment AgreementsShare    

Bilateral Taxation Treaties

Kenya does not have a bilateral investment agreement with the United States. However, Kenya is a beneficiary of the African Growth and Opportunity Act (AGOA), which provides duty-free access to the U.S. market for Kenyan textile, apparel, and other export goods. More information on AGOA is available in section 16. Kenya is also part of a Trade and Investment Framework Agreement with the United States as part of COMESA since 2001, and as part of the EAC since 2008.

Kenya has signed bilateral investment agreements with Burundi, China, Finland, France, Germany, Iran, Italy, Libya, The Netherlands, Slovakia, Switzerland, and the United Kingdom, although only those with France, Germany, Italy, The Netherlands, Switzerland, and the United Kingdom have entered into force. The EAC signed an Economic Partnership Agreement with the EU in 2014.

Kenya does not have a bilateral taxation treaty with the United States. Tax administration in Kenya is a significant concern for investors. In 2013, reforms in taxation ushered in by the new Value Added Tax Act (2013) to enhance tax administration and improve efficiency reduced the list of exemptions from 400 to 40 and reoriented taxation toward consumption rather than production. Despite this, filing taxes in Kenya remains burdensome, and the reduction in exemptions has increased the tax burden and consequently the cost of business in Kenya. Disputes over tariffs and taxation are resolved through the judicial system, which is subject to delays and uncertainty.

14. OPIC and Other Investment Insurance ProgramsShare    

OPIC is actively engaged in funding programs in Kenya and is a key agency partner in President Obama’s Power Africa initiative, which aims to add more than 30,000 megawatts of generating capacity and increase access by adding 60 million new home and business connections across Africa. In 2015, President Obama signed into law the Electrify Africa Act of 2015 which offers legal framework to Power Africa by requiring organizations like OPIC to prioritize electricity projects in sub-saharan Africa. In 2011, OPIC approved up to $310 million in financing for the expansion of Nevada-based Ormat’s geothermal plant in Kenya. In total, OPIC has earmarked approximately $500 million in finance or insurance for projects in education, energy, healthcare, telecommunications, and microfinance lending in sub-Saharan Africa and South Asia.

15. LaborShare    

Kenya has not officially published complete labor statistics since 2009. All official and non-official reporting cites a 40 percent unemployment rate from the 2009 KNBS census, with unemployment and underemployment for youth approaching 60-70 percent. Employment in Kenya’s formal wage sector was 2.4 million in 2014 and increased by 3.8 percent between 2013 and 2014. Average wages for this sector are Ksh. 65,232 ($633) annually.

Kenya’s large informal sector makes accurate labor reporting difficult. In the formal sector government is the largest employer, with an estimated 700,800 government workers in 2014. Agriculture, forestry, and fishing employ 333,300 workers, with 87 percent in the private sector, and manufacturing employs 287,400 workers, with 91 percent in the private sector.

The Ministry of Labor, Social Security, and Services is currently reviewing and ensuring that Kenya’s labor laws are consistent with the 2010 constitution. Kenya’s labor laws comply, for the most part, with internationally recognized standards and conventions. The Labor Relations Act (2007) provides that workers, including those in export processing zones (EPZs), are free to form and join unions of their choice. The law permits workers in collective bargaining disputes to strike but requires the exhaustion of formal conciliation procedures and seven days’ notice to both the government and the employer. Anti-union discrimination is prohibited, and the government does not have a history of retaliating against striking workers. The law provides for equal pay for equal work. Regulation of wages is part of the Labor Institutions Act, and the government has established basic minimum wages by occupation and location.

The government also continued to implement a range of programs for the elimination of child labor with dozens of partner agencies, and has actively pursued the elimination of forced labor. However, extremely low salaries and the lack of vehicles, fuel, and other resources make it very difficult for labor inspectors to do their work. Employers in all sectors routinely bribe labor inspectors to prevent them from reporting infractions, especially in the area of child labor. The Labor Commissioner’s Report for 2014 notes that “under-staffing and in particular of technical officers (inspectorate staff) has affected efficient delivery of services.”

Visas and Work Permits

Work permits are required for all foreign nationals intending to work in Kenya. International companies have complained that the visa and work permit approval process is slow and sometimes bribes are solicited to speed up the process. In 2015, the Directorate of Immigration Services made administrative additions to the list of requirements for work permits and special passes applications. The application form will now be stamped with the institution’s official stamp in addition to being signed; copies of both academic and professional certificates have to be certified; and the Department of Immigration must receive a Clearance letter from the relevant ministry or institution. Recent policy changes also mandate assured income of at least $24,000 annually for the issuance of a work permit. However, firms in agriculture, mining, manufacturing, or consulting sectors can avoid this with a special permit.

The Kenyan government issues permits for key senior managers and personnel with special skills not available locally. Firms seeking to hire expatriates must demonstrate that the requisite skills are not available locally through an exhaustive search, although the Ministry of Labor plans to replace this requirement with an official inventory of skills that are not available in Kenya. A permit can cost up to Ksh 200,000 ($1,940). Firms must also sign an agreement with the government describing training arrangements for phasing out expatriates.

A company holding an investment certificate granted by registering with KenInvest and passing health, safety, and environmental inspections becomes automatically eligible for three class D entry permits for management or technical staff and three class G, I, or J permits for owners, shareholders, or partners. More information on permit classes can be found at https://kenya.eregulations.org/menu/61?l=en.

16. Foreign Trade Zones/Free Ports/Trade FacilitationShare    

Kenya is a beneficiary of the African Growth and Opportunity Act (AGOA), a U.S.-sponsored export promotion program which Congress renewed in 2015 for an additional 10 years. Kenya officially overtook Lesotho as the largest textile exporter to the United States under the AGOA preferential trade agreement in 2013. Kenya's Export Processing Zones earned Kenya $543 million, or 10 percent, of all exports, the bulk of which consisted of textile and apparels exported to the United States which contributed Ksh 24 billion ($279 million) to the economy. Eighty percent of textile and apparel originates from EPZ-based firms. Textiles and apparel represents Kenya’s third largest export behind tea and horticulture. EPZs were introduced in Kenya over two decades ago and now account for 3.2 percent of GDP. Approximately 50 percent of all firms in the zones are fully owned by foreigners (mainly from India) while the rest are locally owned or joint ventures with foreigners.

By the end of 2014, Kenya had 52 designated Export Processing Zones (EPZs) in which 84 companies operated, employing 46,501 workers and producing roughly 5 percent of exports. The overwhelming majority of EPZ products are exported to the United States under AGOA. The majority of the exports are textile products, mainly apparel, and more recently handicrafts. According to the Kenya National Bureau of Statistics’ Economic Survey 2015, apparel exported through EPZs under AGOA increased from $279 million in 2013 to $300 million in 2014. A number of expatriates owned and served in mid and senior management positions at EPZs. Most EPZ firms operate in factory space managed by the EPZ Authority (EPZA).

The GOK has an ambitious target of expanding AGOA exports by $1 billion and creating employment for an additional 100,000 people by the end of 2016. The proposed Textile City, to be set up at the Athi River EPZ, is also expected to attract more than 100 textile investments by December 2016.

The GOK is currently in the process of adding special economic zones (SEZs) to work in parallel with EPZs. Special economic zones are broader and open to local economies; hence goods produced are consumed both internally and externally. The SEZs will allow for a wider range of commercial ventures, including primary activities such as farming, fishing and forestry, and will not be restricted to the enclaves. The addition will allow for a more flexible market orientation with higher domestic sales, in addition to the focus on exports. The establishment of SEZs will also allow for the existence of free ports and trade zones across the coastal strip, science and technology parks, agricultural free zones, and tourism development zones.

The Second Medium Term Plan of the Vision 2030 economic development agenda calls for establishing SEZs in Mombasa (2000 sq. km), Lamu (700 sq. km), Kisumu (700 sq. km), and eventually to towns throughout the country. In February 2014, the Kenyan Cabinet announced it approved the establishment of a free trade zone in the port city of Mombasa to stimulate local, regional and international trade, as well as investments. The zone would be the first of its kind in Kenya.

17. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

 

Host Country Statistical source

USG or international statistical source

USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) ($M USD)

2014

$ 60,938

2014

$ 59,850

UNCTAD data available at http://unctadstat.unctad.org/wds

Foreign Direct Investment

Host Country Statistical source

USG or international statistical source

USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)

N/A

N/A

2014

$383

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Host country’s FDI in the United States ($M USD, stock positions)

N/A

N/A

2014

$-8

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Total inbound stock of FDI as % host GDP

N/A

N/A

2014

7.3%

UNCTAD data available at http://unctadstat.unctad.org/wds

Table 3: Sources and Destination of FDI

N/B Total inward data for China PR Hong Kong and Japan were suppressed by reporting economy to preserve confidentiality. Information was unavailable for many countries.

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward

3,885

100%

Total Outward

803

100%

U.K

1,086

28%

Uganda

395

49%

Mauritius

675

17%

Mauritius

293

37%

Netherlands

652

17%

South Africa

52

6%

France

315

8%

Mozambique

37

5%

South Africa

309

8%

Italy

12

2%

"0" reflects amounts rounded to +/- USD 500,000.

Source: IMF Coordinated Direct Investment Survey. Figures are from 2012 (latest available).

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets

Top Five Partners (Millions, US Dollars)

Total

Equity Securities

Total Debt Securities

All Countries

3,885

100%

All Countries

2,817

100%

All Countries

833

100%

U.K.

1,086

27%

U.K

974

35%

Netherlands

353

42%

Mauritius

675

17%

Mauritius

618

22%

France

174

21%

Netherlands

652

17%

Netherlands

299

11%

U.K.

112

13%

France

315

8%

South Africa

290

10%

Mauritius

57

7%

South Africa

309

8%

Germany

181

6%

Switzerland

55

7%

Source: IMF Coordinated Portfolio Investment Survey. Figures are from 2012 (latest available).

18. Contact for More InformationShare    

David Pemberton
Economic Officer
+254 (0)20-363-6048
ICSKenya@state.gov