Kenya Rollno 12

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KENYA: Country Analysis and Trade informationGaurav Kumar , Roll No 12


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Kenya: Country Profile

Economic growth is expected to remain below potential until 2012. Political in-fighting limits

the policy makers' effectiveness. Unemployment is in double digits and predicted to fall

slowly. The economy is still creating around 400,000 jobs per year but most of these are in

the informal sector. The country fails to attract much in the way of foreign investment.

Kenya is one of five countries working to form a common market.

ECONOMIC PERFORMANCE AND POLITICAL FRAMEWORK

Area

582,645 square kilometres

Currency

Kenya shilling (KES = 100 cents)

Location

Kenya lies on the Indian Ocean coast of central East Africa, where it is bounded in the north

by Eritrea, Ethiopia, Sudan and Somalia, in the west by Uganda and in the south by Tanzania.

Although subject to occasional drought, the country has an equable climate and numerous

major watercourses. The capital is Nairobi.

Head of State

President Emilio Mwai Kibaki (2002)

Head of Government

Raila Odinga (2008)Ruling Party

A grand coalition, negotiated following the post-election violence, leads the country.

Political Structure

Kenya has an executive president who is elected for a five-year term by the people. The

National Assembly has 224 members; 210 members are elected for five-year terms in single-

seat constituencies, 12 members are appointed and two are ex-officio members. The post of

prime minister was created as part of the post-election negotiations following the poll in

December 2007.Last Elections

Kibaki was re-elected as president in December 2007, defeating Raila Odinga of the Orange

Democratic Movement. The poll was widely criticised by both western observers and

opposition leaders. It also led to the worst violence since independence. International

negotiations eventually resulted in a change in the composition of the government in March

2008. Part of the agreement was that Odinga would become prime minister. The two

opposing groups have roughly equal representation in the new parliament. In August 2010,

67% of Kenyan voters supported a referendum for a new constitution. Included in the new


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constitution is the introduction of a bill of rights, land reform and new curbs on the

president's power.

International Issues

The government of Sudan accuses Kenya of supporting the rebels fighting in the south of

that country. Fears that Somalia's problem will spill over into Kenya has risen since Ethiopian

troops moved into Somalia. The government failed to set up a tribunal to deal with the

suspected leaders of the political crisis in 2008. In response, the International Criminal Court

in The Hague has agreed to proceed with cases against unnamed leading Kenyan politicians.

Riots following the latest presidential election have led to the cut off of shipments of fuel

and goods to neighbouring states from Kenya's port in Mombasa. In the longer run, many

multinationals and other businesses may relocate their regional headquarters if the political

divisions in Kenya are not resolved.

Economic Structure and Major Industries

The agricultural sector is the cornerstone of the economy but has not performed well owing

to drought and the government's failure to devise a set of policies to deal with water

shortages. Farming still employs about 80% of the workforce. Costs of production are high

and smallholders are barely breaking even. The number of smallholders producing food

crops has been halved over the past two decades. Kenya is the world's largest exporter of

black tea and in overseas sales are booming, driven by increased demand in China and India.

The manufacturing sector consists largely of agro-based industries, along with producers of

wood, cork and basic chemical products. Kenya also has a significant engineering industryalong with producers of glass and construction materials and a large textile and clothing

industry. The real value of manufacturing output fell by 3.1% in 2009. The government

hopes the next growth industry will be business-process outsourcing. Officials plan to create

up to 120,000 jobs in the industry by 2020. A drawback will be the country's erratic power

supplies.

In the service sector, tourism is the dominant industry, accounting for nearly 50% of GDP.

The industry employs approximately 11% of the Kenyan work force. During 2008, thousands

of tourists cancelled their Kenyan travel plans their governments advised against visiting the

country owing to political unrest. The real value of tourist receipts fell by a surprising 37.5%

in 2008 but modest gains were reported in 2009. In 2010, receipts are expected to rise by

7.7%. Even in the best of times, Kenya receives less than one-tenth of the number of tourists

who visit South Africa, its biggest rival.

Business Environment

The sale of state-owned firms in key industries such as banking, electricity,

telecommunications and ports has progressed very slowly The public sector is too large and

inefficient, absorbing an increasing portion of government revenues. The government has

reduced the degree of political interference but business confidence has been severely


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dented by mounting charges of corruption. The dysfunctional government is proceeding too

slowly (if at all) on reform initiatives.

Poor infrastructure pushes up the prices of locally produced goods. To remedy the situation,

the government plans an ambitious upgrade of the road network.

Table 1 Indicators of Business Environment: 2009

Indicator 2009

Business start-up

Cost (% of GNI per capita) 36.5

Duration (days) 34

Dealing with construction permits

Time (days) 120

Cost (% of GNI per capita) 161.7

Employing workers

Rigidity of employment (index) 17

Ratio of minimum wage to average value added per worker 0.55

Redundancy costs (weeks of salary) 47

Tax rate

Total tax rate (% profit) 49.7

Corporate tax rate (statutory rate, %) 30

Labour tax and contributions (% of commercial profits) 6.8

Exporting

Documents for export (no.) 9

Time to export (days) 27

Cost to export (US$ per container) 2,055

Importing

Documents for import (no.) 8

Time for import (days) 25

Cost to import (US$ per container) 2,190


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Table 1 Indicators of Business Environment: 2009

Indicator 2009

Protecting investors

Investor protection index 5

Closing a Business

Time (years) 4.5

Cost (% of estate) 22

Source: Euromonitor International based on the World Bank

Note: Figures for dealing with construction permits refer to the time and cost of building a

warehouse, including licenses and permits. Rigidity of employment takes into account the

difficulty of hiring, the rigidity of hours worked (scheduling of non-standard work hours and

annual paid leave) and the difficulty of firing. The index ranges from 0 to 100 with higher

values indicating a greater measure of rigidity. The redundancy cost indicator measures the

cost of advance notice requirements, severance payments and penalties due when

terminating a redundant worker, expressed in weeks of salary. If the redundancy cost adds

up to 8 or fewer weeks of salary and the worker can benefit from unemployment

protection, a score of 0 is assigned for the purposes of calculating the aggregate ease of

doing business ranking. The cost of exporting and importing is recorded as the fees levied on

a 20-foot container in United States dollars. All the fees associated with completing the

procedures to export or import the goods are included. The total tax rate measures the

amount of taxes payable by the business in the second year of operation, expressed as a

share of commercial profits. The taxes included are profit or corporate income tax, social

security contributions and other labour taxes paid by the employer, property taxes,

turnover taxes and other small taxes (such as municipal fees and vehicle and fuel taxes).

Data referring to labour taxes and contributions assumes the employee earns a salary plus

benefits that are equal to the economy's average wage. The investor protection index takes

into account the extent of disclosure, extent of director liability and the ability of

shareholders to sue directors for misconduct. The index ranges from 0 to 10 with higher

values indicating greater investor protection. The cost of the proceedings for closing up a

business is recorded as a percentage of the estate's value. The cost is calculated on the basis

of survey responses by insolvency practitioners and includes court fees as well as fees of

insolvency practitioners, independent assessors, lawyers and accountants.

Energy Markets

Kenya has no oil of its own, and must import all of its daily consumption of 67,000 barrels.

The government has sought to bring in partners to assist with oil exploration in the country.Recent oil surveys have indicated that more than half of the country has oil potential.


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Limited oil exploration has been going on for the last 40 years, but only 30 wells have been

drilled so far with little success.

Overview of the Economy

Real GDP growth averaged 6% per year in 2004-2007 but this envious record was broken in

2008, owing to the post-election turbulence and violence. The slowdown continued in 2009

when real GDP rose by just 2.1%. Severe drought and the problems associated with the

global recession were complications.

The government has set very ambitious targets for its Kenyan Vision Strategy. They

include annual rates of growth of 10% and the annual creation of 500,000 jobs. Neither of

these goals is likely to be met given the troublesome domestic and international

environment. The economy is still creating around 400,000 jobs per year but most of these

are in the informal sector.

The share of exports in GDP fell to 14.4% in 2009 after rising for the previous several years.

Agriculture is Kenya's most important export sector. In 2009, agricultural exports

represented 52.6% of the total. As such, the economy is dependant on global commodity

markets, as well as on rainfall.

To strengthen Kenya's external competitiveness, the government is trying to reform the

wage-setting system and liberalise trade. Roughly two-thirds of the taxes collected are spent

on servicing debts and paying the inefficient public sector.

ECONOMIC OUTLOOK

Key PointsReal GDP is expected to rise by 4.1% in 2010. This would be a poorer performance than

neighbouring countries and far below Kenya's historical trend. Inflation should ease but

will remain in double digits.

Kenya fails to attract much in the way of foreign investment. Tanzania, with a much

smaller economy, pulls in many times the level of FDI each year. Remittances are also

down

Each year, an estimated 500,000 enter the labour market but the economy has only

created a net 150,000 secured salaried jobs since 2003. Most new jobs are in the informal

sector. Unemployment will be 12.9% in 2010.

Kenya is one of five members of a newly formed common market. However, Kenya hasthe strongest manufacturing sector of the five and is expected to benefit most.

Economic Prospects

Real GDP is expected to rise by 4.1% in 2010. This would be a poorer performance than

neighbouring countries and far below Kenya's historical trend. However, growth in the first

half of the year was much stronger than expected. Agriculture, construction and financial

services are driving the gains. Price increases for some of Kenya's key exports should also

provide a boost to the economy.


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Kenya is one of five members of a newly formed common market. Known as the East African

Community (EAC), the group also includes Burundi, Rwanda, Tanzania and Uganda. Kenya,

however, has the region's strongest manufacturing sector and is expected to benefit most.

Sharp increases in public spending had been planned but the problems in global financial

markets forced their postponement. The government had planned to issue US$500 million

in sovereign debt during 2009 to fund improvements in infrastructure but the sale had to be

cancelled. Ultimately, the fiscal deficit for 2009 was 3.6% of GDP lower than expected

owing to the slow implementation of development projects. Kenya's public debt as a share

of GDP has been slowly falling. In 2009 it was 36.8% of GDP, down from 58.3% in 2004.

Public debt totalled KES881,535 million in 2009.

Poverty is substantial but has fallen in recent years. In Nairobi, 30% of people live below the

poverty line while in the northwest the figure is 95%. Kenya's income distribution is one of

the most unequal in Africa.

Kenya fails to attract much in the way of foreign investment. Tanzania, with a much smaller

economy, pulls in many times the level of FDI each year. Remittances are also down owing

to tighter financial circumstances among Kenyan immigrants in the west.

Kenya's population has doubled since 1978, dropping the median age to around 18 years.

Each year, an estimated 500,000 enter the labour market but the economy has only created

a net 150,000 secured salaried jobs since 2003. Unemployment will be about 12.9% in 2010.

Political Stability and Risks

An estimated 47% of all Kenyans are living in poverty and 20% live in extreme poverty. Thecountry also has a serious HIV/AIDS pandemic, though infection rates have fallen. Currently,

the government estimates that 9.2% of the population is infected.

Crime is widespread and the infrastructure is in serious disrepair. Food insecurity worsened

during 2009. President Kibaki has had a series of strokes and many now believe he is too

enfeebled to continue with his efforts to root out corruption.

Evaluation of Market Potential

Real rates of GDP growth are expected to exceed 6% per year by 2012. However, the

government still faces a host of problems which include food shortages, power cuts, water

scarcity, worsening crime, growing inequality and the threat of ethno-political violence. Yet

the country's politicians appear unwilling or unable to act.

Officials have made it a priority to invest in infrastructure, address the problems of land

distribution and income inequality and tackle corruption. Progress, however, is very slow

owing to political in-fighting. Supply bottlenecks must be addressed if much-needed gains in

competitiveness are to be realised.

Statistical Summary

2004 2005 2006 2007 2008 2009Inflation (% change) 11.6 10.3 14.5 9.8 16.2 9.3
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Exchange rate (per

US$)

79.17 75.55 72.10 67.32 69.18 77.35

Lending rate 12.5 12.9 13.6 13.3 14.0 14.8

GDP (% real growth) 4.6 6.0 6.3 6.9 1.3 2.4

GDP (national

currency millions)

1,286,460.0 1,445,480.0 1,642,400.0 1,825,960.0 2,099,800.0 2,298,162.8

GDP (US$ millions) 16,248.5 19,131.7 22,779.2 27,124.6 30,354.8 29,710.5

Population, mid-year

('000)

35,353.6 36,294.2 37,263.2 38,260.0 39,283.7 40,332.5

Birth rate (per '000) 39.1 39.2 39.2 39.0 38.8 38.4

Death rate (per '000) 12.7 12.5 12.3 12.0 11.6 11.3

No. of households

('000)

7,767.9 8,014.4 8,267.5 8,527.1 8,792.7 9,063.7

Total exports (US$

millions)

2,684.0 3,292.9 3,436.9 4,079.9 4,972.2 4,463.4

Total imports (US$

millions)

4,552.7 6,148.9 7,311.4 8,989.4 11,074.4 10,206.8

Tourism receipts

(US$ millions)

486.0 579.0 687.0 917.0 752.0 800.1

Tourism spending

(US$ millions)

108.0 124.0 178.0 265.0 266.0 292.3

Urban population

('000)

7,155.3 7,429.5 7,719.8 8,028.2 8,354.3 8,699.1

Population aged 0-14

(%)

43.0 42.8 42.7 42.7 42.8 42.8

Urban population (%) 20.5 20.7 21.0 21.3 21.6 21.9

Population aged 15-

64 (%)

54.3 54.5 54.6 54.6 54.6 54.6

Population aged 65+

(%)

2.8 2.7 2.7 2.7 2.7 2.6

Male population (%) 49.9 49.9 49.9 50.0 50.0 50.0

Female population

(%)

50.1 50.1 50.1 50.0 50.0 50.0

Life expectancy male

(years)

51.5 52.0 52.5 53.2 53.8 54.5

Life expectancy

female (years)

52.6 52.9 53.4 54.0 54.7 55.3

Infant mortality 78.0 79.0 79.0 77.5 75.9 74.3
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(deaths per '000 live

births)

Adult literacy (%) 76.8 77.6 78.4 79.2 80.0 80.7

Imports and Exports

Major export destinations 2008 Share (%) Major import sources 2008 Share (%)

Africa and the Middle East 40.7 Africa and the Middle East 35.4

Europe 31.5 Asia Pacific 34.3

Asia-Pacific 12.7 Europe 20.9

North America 6.6 North America 4.5

Other countries 6.2 Other countries 2.7

Australasia 2.1 Latin America 1.5
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Investment and Trade in kenya

Key Facts:

Land area: 582,646 km2

Population (July 2002): 31.1 million

Capital city: Nairobi

Major Towns: Mombassa, Kisumu, Nakuru, Eldoret and Thika

Currency: Kenya shilling (Ksh)

Average exchange rate: 78.597ksh/US $ (2001)

GDP real (2001 est): 31 billion

GDP per capita (2001):$ 1, 000

GDP growth (2001):1%

Composition of GDP: services (63%), agriculture (24%), industry (13%)

Budget (2001 surplus): $ 60 million

Inflation( 2001):3.3%

Productivity growth (industrial): -0.7%

Rate of unemployment (2001): 40%

Official language: English

Language of the media: English, Kiswahili

Exports: $ 1.8 billion, f.o.b

Main exports: Coffee, Tea, Horticultural products, Soda ash, Cement, Pyrethrum.

Imports: $3.1 billion, f.o.b

Main imports: Petroleum, Machinery and transportation equipment, motor vehicles, textiles, Iron

and Steel, Pharmaceutical, resin and plastics


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MAJOR INVESTMENT INCENTIVES

Investment Allowance

Investment allowance is provided at the rate of 100% as an incentive for investment in the

manufacturing and hotel sectors. For manufacturers under bond, the applicable rate is 100%. In

addition, eligible capital expenditure has been expanded to include infrastructure and environment

protection equipment expenditure related to the manufacturing activity.

Loss Carried Forward

Business enterprises that suffer losses can carry forward such losses to be offset against future

taxable profits.

Remission from Customs Duties

Duties on capital goods, plant and machinery are applicable at the rate of 5%. Large scale private

investment projects (i.e. with expenditure on productive physical assets>US$ 5 million within a two-

year period) which will generate net economic benefits for the country can recover the value of

import duties on capital goods against income liability.

Duty Remission Facility

Material imported:

(i) for use in manufacturing activities for export(ii) for the production of raw materials for use in export manufacture or(iii) for the production of duty free items for sale domestically

is eligible for duty remission.

Manufacture Under Bond


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To encourage manufacturing activities directed at world markets, the government has established

an in-bond programme which offers investors the following incentives:

(i)

Exemption from duty and VAT on imported raw materials, plant, machinery and equipmentand other imported inputs and

(ii) 100% investment allowance on plant, machinery, equipment and buildings. IPC, togetherwith the Ministry of Finance, administers this programme.

Export Processing Zones Programme

Enterprises operating in export processing zones in Kenya enjoy the following advantages:

(i) Ten years tax holiday and a flat tax rate of 25% for the next ten years;(ii) Exemption from all withholding taxes on dividends and other payments to non-residents

during the first ten years;

(iii) Exemption from import duties on raw materials, machinery and intermediate inputs;(iv) No restrictions on managerial or technical arrangements;(v) Exemption from stamp duty;(vi) Exemption from VAT; and(vii) Operate on one license only.

INVESTMENT OPPORTUNITIES

ARICULTURE

Agriculture is the mainstay of the economy, providing livelihood to approximately 75 per cent of the

population. There is considerable scope for diversification and expansion of the agricultural sector

through accelerated food crop production and increase of non-traditional exports. There are also

opportunities for improvement in technology infrastructure such as packaging, storage, and

transportation. Intensified irrigation and additional value added processing are marketable areas forinvestments.

Agricultural Support

Investment opportunities exist in seed production, manufacture of sprayers and pesticides,

veterinary services, construction of dams and bore holes, installation of irrigation systems and

services. Opportunities also exist in support services, such as cold storage facilities and refrigerated

transport for horticultural and other perishable products.


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Horticulture

The horticultural sector is one of the fastest growing sectors in the economy and is the secondlargest foreign exchange earner after tea. Opportunities exist in production and export of products

such as cut-flowers, French beans, pineapples, mushrooms, asparagus, mangoes, macadamia nuts,

avocados, passion fruits, melons, and carrots.

Agro-Processing

Numerous investment opportunities exist in this sector. Edible and other oils produced locally

include butter, ghee and margarine as well as sunflower, rapeseed, cottonseed, sesame, coconutand corn oils, while a large quantity of palm oil is imported. Investments to develop substitutes for

palm oil imports are welcome.

Kenya produces excellent beer, utilising locally grown barley. The country has recently developed

papaya and grape wines that can be exported to regional and international markets. Opportunities

exist in coffee roasting and grinding, with a further potential such as in the production of

decaffeinated coffee for export.

Sugar production, at 402,000 tonnes per annum is below the domestic demand estimated at

600,000 tonnes per annum. Molasses, a by-product of sugar production, is processed into power

alcohol, potable alcohol, and baker's yeast. There is also considerable potential for the expansion ofchocolate and confectionery products for export. Opportunities for investment exist in the

production and processing of sugar, tea, meat and dairy products.

Poultry Products

Hatcheries for the production of chicken for both domestic and regional consumption are under-

exploited.

Fisheries

Kenya's water resources of the Indian Ocean and Lake Victoria provide vast fishing potential. At

present, deep sea fishing, prawn and trout farming are in their infancy but growing rapidly.

Opportunities also exist in fish processing (filleting and fishmeal production), as well as fisheries-

support infrastructure (refrigerated transport, cold storage, etc.).

Leather and Leather Goods

Most hides and skins are processed up to the wet blue stage for export while investment

opportunities exist in production of finished leather, offering potential for the manufacture of shoes

and other leather products.


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Livestock

Investment opportunities exist in the rearing of livestock for meat and dairy products. The dairy

industry has been liberalised, providing new investment opportunities in milk processing for local

and regional markets. Non conventional livestock farming, for example, of ostrich and crocodile

farming, represent an exciting new area of investment. Bee keeping and honey processing are an

untapped potential in Kenya.

MANUFACTURING

Manufacturing sector is an area where investment opportunities exist. Initially developed under the

import substitution policy, there has now been a shift to export oriented manufacturing as the thrust

of Kenya's industrial policy. The sector plays an important role in adding value to agricultural output

and providing forward and backward linkages, hence accelerating overall growth.

The manufacturing sector now comprises of more than 700 established enterprises

and employs directly over, 218,000 persons as at the year 2000. A wide range of opportunities for

direct and joint-venture investments exist in the manufacturing sector, including agro-processing,

manufacture of garments, assembly of automotive components and electronics, plastics, paper,

chemicals, pharmaceuticals, metal and engineering products for both domestic and export markets.

Paper Products

Kenya has an integrated pulp paper mill plant producing paper and paper board from renewable

forest products. However, the country imports coated white lined chipboard and other boards for

packaging, newsprint, printed paper and other types of paper. Investment opportunities exist in the

production of paper from other raw materials such as bagasse, sisal waste, straw and waste paper.

Textiles and Apparels

Textile, Garment and Apparel manufacturing has a very high potential in Kenya. The basic raw

material inputs such as dyes and chemicals are imported, as are all textile equipment and most spare

parts. Investment opportunities exist under the Manufacturing Under Bond scheme and in the

Export Processing zones for the production of items such as yarn and garments.

Metal and Engineering Works

Kenya has a basic metal sector making a variety of downstream products from local and imported

steel scrap, steel billets and hot rolled coils. Kenya imports steel billets, coils, wire rod and wires,


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steel plates, sheets, steel scrap and pig iron. The country possesses a broad-based metal products

sector with various independent engineering, foundry and metalwork workshops. Opportunities

exist in the development of a nucleus foundry making precision castings that are then processed into

precision components.

Vehicle Parts and Assembly

The motor vehicle component industry is rapidly developing to supply the needs of a few motor

vehicle assemblers to meet certain local content requirements. Opportunities exist for manufacture

of components for use by local assemblers for domestic market and for export to regional markets.

Electrical Equipment

Investment potential exists for the production of motors, circuit breakers, transformers, switch

gears, irrigation pumps, capacitors, resistors, insulation tapes, electrical fittings and integrated

circuit boards for both the domestic and export markets.

Electronics

Although Kenya's electronic industry is still at its infancy, a number of firms in the assembly, testing,

repair and maintenance of electronic goods are in operation and are rapidly increasing their scope of

activities to meet the growing demands of the industry.

Key opportunities for direct investments, joint-ventures and subcontracting exist in assembly of a

wide range of electronic goods in Kenya, especially within the Manufacturing Under Bond scheme

and Export Processing Zone Programmes.

These include the production of:

.Consumer electronics, such as colour televisions, Video Cassette Recorders (VCRs), printers,floppy disk drives and Compact Disk Roms (CD-Rs);

Telecommunication equipment, such as printed circuit boards, and transmission equipment; and Support items such as cables, cords, die casting and metal plating.With a labour force which is well-equipped to meet the labour skill requirements for the industry

and the relatively large domestic and export market potential of electronics in the region, Kenya

offers an enormous potential for the manufacturing and assembly of electronic items.


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TOURISM

Tourism is Kenya's third largest foreign exchange earner. The tourism industry is growing as a result

of the liberalisation measures, diversification of tourist generating markets and continued

Government commitment to providing an enabling environment, coupled with successful tourismpromotion and political stability. Enormous opportunities exist for investment in film production;

recreation and entertainment facilities in the following areas:

Conference Tourism Cultural tourism Cruise ship Tourism Aviation/tour and travel Tourism Eco-tourismPotential investors can take full advantage of these opportunities through direct investments or

joint-ventures with Kenyan entrepreneurs. Opportunities also exist in this sector in the construction

of tourist hotels and game lodges all over the country.

Telecommunications and transport projects

Telecommunications

The ongoing liberalisation and privatisation offer important investment opportunities to private

investors, particularly in the information technology and telecommunications sectors. Investors

possessing the necessary skill in those sectors can form joint ventures, particularly for the provision

of cellular phones and internet services.

Road sub-sector

To ensure that the future road network effectively supports the socio-economic development of the

country, it is proposed to improve the network by undertaking several projects. In fact, there is a

proposal to venture into the construction of an underground transport system as is found in

European cities. The Industrial and Commercial Development Corporation (ICDC) is willing to go into

partnership with investors to team up with investors from the Czech Republic who have expressed

interest in the development of infrastructure for urban transport.


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Tyres

The country currently has only one tyre manufacturing facility namely Firestone (E.A.)Limited. ICDC

is convinced that another tyre manufacturing facility would be a feasible proposition and is thereforelooking for joint venture partners to promote one.

Port facilities

Berths

Investment opportunities exist in the rehabilitation of berths to give them a new lease of life for

efficient and economic operations.

Conversion of port berths into container berths - Mombasa

Investment opportunities are available in the conversion of berths at Mombasa port into container

berths to cater for increased container traffic.

Container terminal management systems

Opportunities exist in the study and installation of modern information technology systems at

Mombasa Container Terminal to enhance the fluidity of container traffic movements.

Construction of bypass to substitute the Likoni Ferry

The Likoni Ferry in Mombasa presents a major transportation bottleneck. ICDC intends to approach

investors with the necessary technical know-how and finance to construct a road bypass to replace

the Likoni Ferry.


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Civil Aviation

Airports

Potential opportunities exist in the form of developing airports to cater for the ever-increasing

passenger volumes and the growth of air traffic.

The energy sector

Presently, the Kenyan oil market, whose total sales volume reaches around 2.3 million cubic metres

per annum, is served by eight private companies. The Government of Kenya expects that, upon

deregulation of the oil industry, the Kenyan market will open up to new companies.

Moreover, potential demand for Liquefied Petroleum Gas (LPG) is expected to increase to twice its

present amount in the near future. However, supply and distribution of LPG have been constrained

by a number of factors including limitation of production from the Kenyan Petroleum Refineries Ltd.

(KPRL). LPG supply and distribution thus represents an area where opportunities are available for

investment.

The Government also plans to invest in the petroleum sub-sector, embarking on projects like oil

exploration and oil pipeline rehabilitation.

Electricity sector

The demand for electricity is estimated to have increased at the rate of 5.4% per annum between

1994 and 2000. To meet this demand, the Government, in collaboration with the World Bank, has

prepared an investment programme for the electricity sub-sector. The National Power Development

Plan recommends that during the next 15 years geothermal generation should increase to 280MW,

partly due to the predicted abundance of geothermal energy resources in the country.


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Pharmaceutical industry

Some of the potential projects identified by the Department of Industries are as follows:

construction of a multipurpose chemical plant for bulk production of intermediate inputs such asparacetamol, aspirin etc;

construction of a chemical plant to manufacture the anti-tuberculosis, anti-leprosy and antibioticrifampicin from the penultimate state;

manufacture of Quinine; and extraction of Hecogenin and syntheses of Betamethasone from Hecogenin.

Salt works

ICDC has received a proposal for a joint venture in a 400 ton per day salt processing plant on the

Kenyan coast. The local partners are looking for other interested investors to facilitate the

realisation of the project.

Agribusiness

UTIITIES

Electricity


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Electricity is supplied at 240 volts, 50 cycles single-phase and at 415 volts, 50 cycles three-phase. The

government is encouraging private sector participation in the production of electricity. Under the

Parastatal Reform Programme, the functions of generation and transmission, and distribution were

separated, creating the Kenya Electricity Generating Company (KENGEN) and the Kenya Power and

Lighting Company (KPLC) , respectively.

The Electric Power Act also established the Electricity Regulatory Board (ERB) whose functions, inter-

alia, are setting tariff rates and licensing of private sector applicants.

Water and Sanitation

For industrial and domestic purposes, water is supplied by local authorities and other licensed

suppliers. Major towns in Kenya provide sewerage and drainage systems for residential and business

use. In view of increasing demand, the various local authorities are undertaking major investments

for the supply of water. The overall goal of the government is to ensure that Kenyans have access to

safe drinking water. Currently, water policy focuses on providing an enabling environment and

regulatory framework for all stakeholders in the sector.


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SEA AND AIR CONNECTIONS

Airports

Kenya has well-developed international and domestic air transport facilities. There are international

airports in Nairobi, Mombassa and Eldoret and more than 150 airstrips throughout the country.

Nairobi's lomo Kenyatta International Airport serves more than 30 airlines,providing direct

scheduled services to major capitals in Africa, Europe, Middle East and Asia. Wilson Airport, which is

also in Nairobi, handles light aircraft and is one of the busiest in Africa.

Passenger traffic through Nairobi, Mombassa and Eldoret Airports rose significantly by 12.2 per cent

from 3,558,000 travellers in 1999 to 3,990,000 travellers in the year 2000. This was due to a

rejuvenated tourism sector. The volume of cargo exported increased from 130,600 tonnes in 1999 to

400,145 in the year 2000 because of increased exports of fresh produce and cut flowers to foreign

markets.

Seaports

Mombassa is the principal seaport of Kenya and one of the most modern ports in Africa, providing

connection to landlocked neighbouring countries. This deepwater port with 21 berths, 2 bulk oil

jetties and dry bulk wharves, handles all sizes of ships and all types of cargo. In addition, the port has

specialised facilities including cold storage and warehousing and its container terminal is one of the

best equipped in the region.

The port of Mombassa is linked to the world's major ports with over 200 sailings per week to

Europe, North and South America, Asia, the Middle East, Australia and the rest of Africa. Freight

haulage through Mombassa increased by 6.7 per cent to 8,837,000 tonnes in the year 2000 from

8,284,000 in 1999, Kenya Ports Authority which manages port operations is one of the strategic

parastatals. Currently, it is undergoing comprehensive restructuring aimed at enhancing efficiency

and delivery of service.


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FORMALITIES FOR SETTING UP ENTERPRISES IN KENYA

The Investment Promotion Centre Act provides that all new investments should comply with

established environmental, health and security requirements. IPC processes, amongst others,applications for export oriented projects under the Manufacturing Under Bond (MUB) programme.

Procedure

Potential investors are required to submit their project applications to the IPC on the prescribed

application form (obtainable at the centre) together with copies of the following documents:

(i) Certificate of Incorporation or Registration; and(ii) Joint Venture, Royalty and Management Agreements (where applicable).

Through the information provided by the investor on the application form, the IPC is able to identify

the types of approvals and licenses required and facilitate their acquisition from ministries as

appropriate. IPC endeavours to complete this process within a period of four weeks upon receipt of

all the required information.

PROCEDURES FOR ESTABLISHING A COMPANY IN KENYA

The principal types of business enterprises in/Kenya are:

1. Registered Companies (Private and Public)

2. Branch offices of companies registered outside Kenya

3. Partnerships

2.

Sole Proprietorships3. Co-operativesCompanies are registered as limited liability companies as in 1 and 2 above, and regulated by the

Companies Act (Cap 486). Kenya's legal system is based on English law and practice. A wide range of

legal services are locally available.

Company Registration

The initial step in forming a company is to register the proposed company name with the Registrar

of Companies at the Attorney General's Chambers in Nairobi. The Memorandum and Articles of


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Association should be filed with the Registrar of Companies who, upon satisfaction, issues the

Certificate of Incorporation.

Opening a Branch Office of an Overseas Company

An overseas company wishing to open a branch office in Kenya should deliver the , following to the

Registrar of Companies:

A certified copy of the Charter, Statutes or Memorandum and Articles of Association of theCompany, or other instruments defining the constitution of the company;

A list of the directors and secretary of the company, giving full names, ~ nationality and otherdirectorships of companies in Kenya;

A statement of all existing charges entered into by the company that may affect properties inKenya;

Names and postal addresses of one or more persons resident in Kenya authorised to accept, onbehalf of the company, service of notices required to be served on the company;

Full address of the registered or principal office of the company in its home country; and,

Full address of place of business in Kenya.Both private and public companies may allot shares for consideration)n other than cash. Companies

should inform the Registrar of Companies of such allotments and submit a written contract

constituting the title of the allottee.

PATENTS AND TRADE MARKS

Patents are regulated by the Industrial Property Act and administered by the Kenya Industrial

Property Office (KIPO), while trademarks are regulated by the Trade and Service Marks Act (Cap 506)

and administered by the Registrar of Trade marks at KIPO. The duration of trademarks is seven years

from the date of filing and renewable every 14 years.

WORK PERMITS

The Government allows investors to have key expatriate staff in senior management positions or

where locals with specific skills are not available. Work permits for such expatriates are issued by the

Immigration Department and are valid for two years, renewable on application.


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IMPORT AND EXPORT PROCEDURES

There is no import licensing except for a few items restricted for security, health or environmental

reasons detailed in the Imports, Exports and Essential Supplies Act (Cap 502).

During the Budget for Fiscal Year 2001/02 the Minister agreed to waive the 2.75% ImportDeclaration Form (IDF) fees applicable on imported goods used for manufacturing goods for exports

under the Export Promotion Programme Office (EPPO) scheme. Manufacturers under the EPPO will,

however have to pay Kshs. 5000 which is processing fees.

Business Hours

Government offices operate on a five-day week while most private businesses are run on a six-day

week. The official working hours are 8 a.m. to 5 p.m. on weekdays, with a one-hour lunch break.

Sunday is not a working day.

Tourist and Transit Visas

A visitor should be in possession of a valid travel document and a return ticket. Visas will be issued

as appropriate.

Customs

Personal effects may be imported duty free. The importation of firearms and game trophies is

restricted, and pornographic literature is prohibited. Domestic animals and pets may be imported

provided they have valid veterinary certificates.