Kenya

Kenya Investment Authority

BACKGROUND on KenInvest

Kenya Investment Authority (KenInvest) is a government agency mandated to promoting and facilitating investments in Kenya for both domestic and foreign investors. The facilitation of investments are in all sectors, but with particular focus on flagship sectors identified under the Kenya Vision 2030.

Our Vision

“To Make Kenya a Country of Choice for Investments”

Our Mission

“To Attract, Facilitate, Retain and Expand both Domestic and International Investments in Kenya through Provision of Quality Services”

The Core functions of KenInvest include;

 

Policy Advocacy

Review the Investment environment and make recommendations to Government and others, with respect to changes that would promote and facilitate investment, including changes in licensing requirements.

Investment Promotion

  • Providing Information, on Investing opportunities or sources of capital.
  • Promote the opportunities for investment available in Kenya through organizing forums, workshops road shows and other marketing initiatives.

 

Investment Facilitation

  • Investor Tracking and After Care Services.
  • Assisting in Issuing Investment Certificates.
  • Assisting in obtaining necessary licenses and permits.
  • Assisting in obtaining incentives or exemptions under various Acts and other regulations.

 

The latest government policy guiding KenInvest in investment promotion is the Kenya Vision 2030, especially more so the economic pillar which visualizes the country as a middle income nation with a GDP growth of 10% per annum by 2030. The Vision 2030 notes that in order to feed this growth, the level of investments must raise to approximately 30% GDP by 2012/2013. In this regard KenInvest is playing a significant role in fulfilling the desired investment goals of the Vision.

BRIEF ON GROWTH ISSUES & INVESTMENT OPPORTUNITIES

The Kenyan economy has performed significantly well since 2008 under the noble foundations of the Kenya Vision 2030. The Kenya Vision 2030 is the new economic development blueprintaimed at transforming Kenya into a middle income country by the year 2030 by accelerating economic growth to 10% per year, through strategic and specific reforms and investments in the social and political aspects of the economy. The Vision 2030, implemented under the Medium Term Plan (MTP)-2008-2012 has laid down sound economic management systems that has led to improved macro-economic management which has consequently put Kenya in new growth path.

From a slow start in 2008-2009 of 2.1% average growth in real GDP, the economy picked up and the real GDP growth reached 5.6% in the fiscal year 2009-2010. These developments were as a result of good macroeconomic stability, increased credit to the private sector, low inflationary pressure, and improved weather conditions. In addition, the country benefited from improved prices of the main exports. Similarly increased investor confidence in Kenya as an investment destination ensured improved FDI capital inflows into the economy thereby boosting growth.

Macroeconomic development highlights: In guaranteeing growth, the government has adopted strong macroeconomic discipline to ensure stable environment. Among the key fiscal policy milestones was the adoption of fiscal policy geared towards consolidating the economic recovery and putting the economy back on the Vision 2030 targets. As growth stimuli, the government engaged in serious infrastructure development to stimulate. In the same period, the government targeted inflation below 5.0%. The result was seen in 2010 whereby the average annual inflation was 4.1% from a high of 10.5% recorded in 2009.

At the dawn of January, 2012 the economic prospects are however looking much more promising; with good weather conditions leading to enhanced food production, the strengthening of the Kenyan shilling to average at KShs 85 to the US$; stabilization of interest rates; decline in oil prices, and containment of the run way inflation are good signals for restoring investor confidence.

Sectoral performance: The resilience of the Kenyan economy in terms of performance was driven certain key sectors. The performance is summarized below:

Table 1: Performance of key sectors by growth between 2008-09/2010-11

Sector 2008-09 2009-10 2010-11
Manufacturing 14.5 7.3 11.8
Construction 4.6 24.0 16.2
Tourism -19.4 18.6 18.0
Wholesale & Trade 4.8 3.8 7.8
Agriculture 20.1 11.0 6.5

Source: Economic survey 2011-KNBS

 

Summary of the economic outlook

The outlook for 2011-12 is promising and a combination of trends could contribute to ensure positive prospects in the short to medium term. The promulgation of the new constitution, continued investment in infrastructure and government policies targeting development in the private sector should all enhance Kenya’s business environment and reinforce a dynamic private sector to foster growth in the coming future. Secondly, the deepening of the regional integration and the launch of the East African Community common market are creating a single trading and investment environment in which Kenyan firms will have access to a larger market hence more gains through trade and cross border investments for Kenya. Thirdly, to facilitate investors Kenya is the process of digitally unify various government regulators, facilitators and business support organizations for investors under a single point of contact in a streamlined and coordinated manner via a Digital One Stop Shop – DOSS. Lastly, prudent monetary and fiscal policy is expected to reduce inflation and keep interest rates low thus maintaining credible and stable macroeconomic environment for doing business. Given these prospects, we still remain confident that the economy will recover and stay forecast to grow by 5.3% in 2011 and 6.0% in 2012.

While considering all these, Kenya will remain focused on the Vision 2030 strategic growth sectors and the key growth enabling sectors namely-infrastructure. The strategic sectors are: tourism; agriculture & livestock; wholesale & retail; ICT & BPO; Manufacturing; Financial sector. In the recent time, Kenya has experienced tremendous interest in infrastructure related investments especially in the energy sector. As you may be aware, Kenya is home the large deposits of geothermal energy potential which runs to the tune of over 4,000 megawatts in real energy output.

WHY INVEST IN KENYA: HIGHLIGHTS

Kenya is a desirable investment destination due to a number of key strengths that include;

1)  Kenya being a regional powerhouse

  • Commercial centre of the East African Community
  • A transport hub for the region
  • A business and financial centre and a regional base for investors

 

2) A welcoming environment for investors

  • Government views private sector as engine of growth
  • Establishment of KenInvest to facilitate investors
  • Business-friendly regulatory framework
  • Improved governance through the Kenya Constitution 2010.
  • A fully liberalized economy without exchange and price controls. There are no restriction on domestic and foreign borrowing by residents and non-residents.
  • The most developed stock market in the Eastern and Central African region i.e. the Nairobi Stock Exchange (NSE);

 

3)  Diversified opportunities

  • Infrastructure, horticulture, tourism, natural resource extraction, renewable energy, ICTs, privatization, EPZs
  • A deep pool of educated and skilled manpower
  • An attractive and comprehensive package of incentives offered to investors.

 

 

INVESTMENT OPPORTUNITIES HIGHLIGHTS:

Investment opportunities exist in the following sectors:

1.       Energy sector:

Electric power supply in Kenya falls far below the demand. This calls for private sector investment in power generation for sale to the national grid. The current peak electric power demand is estimated at 1,180 MW and it is projected to grow at 7% annually over the next 10 years, to reach 2,263MW by 2018.

The geothermal resources in Kenya are concentrated in the Rift Valley of Kenya with an estimated potential of over 4,000 MW. Out of this resource potential, 130MW has been developed for electricity generation. Another 35MW is scheduled for commissioning by November 2008, thus raising the total to 165MW.

Coal discoveries in Kenya has made the destination even more attractive. The exploration has reached commendable stages as three (3) new wells with coal seams thickness of 13 metres, 5.37 metres and 4.20 metres have been sunk this year. Seventeen (17) wells previously sunk have coal seam thicknesses ranging from 0.3 metres to 12.6 metres. These coal seams have been discovered at depths ranging from 20 metres to 320 metres below the ground. An area of about 20 km2 has been delineated as a coal zone.

To accelerate coal exploration, the government has also created three more Coal exploration blocks in the Mui basin, which shall be leased to prospective investors for exploration and exploitation.

2.       Agriculture:

Kenya Agriculture sector is the highest contributor of Kenya gross domestic product, so any investment in agriculture in Kenya starts with profits. The major agricultural activities in Kenya are crop production, horticulture, dairy and livestock farming. The principle food crops include maize, wheat, beans, potatoes and rice, while major cash crops are coffee, tea, sugarcane, sisal, and pyrethrum.

i. Tea

Investment opportunities that exist in tea sub-sector include: tea value addition through processing and packaging for export.

ii. Coffee

Investment opportunities that exist include coffee processing and packaging for export.

iii. Horticulture:

The horticultural sector is one of the fastest growing sub-sectors in the economy and is the second largest 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 with Europe as the main market.

iv. 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, seamen, coconut and corn oil.

v. Livestock sub-sector:

Investment opportunities exist in the rearing of livestock for meat and dairy products. The dairy industry has been liberalized, providing new investment opportunities in milk processing for local and regional markets.

vi. Fertilizer production:

Massive opportunity exists for the production of farm fertilizers in partnership with the government under the PPP framework.

3.       Financial sector:

Investment opportunities in the financial sector include:

-          venture capital development & financing

-          sector specific financing systems i.e., livestock insurance

-          hedging finance

-          Trade finance

-          Health care finance

4.       Manufacturing sector
Opportunities exist in the manufacture of high value plastics, polyvinyl chloride (PVC), polyethylene, polystyrene, and polypropylene. Other key product output driven opportunities include: production of PVC granules from ethyl alcohol; fomaldehyde from methanol; melanine and urea; caustic soda and chlorine based products; carbon black; activated carbon; precipitated calcium carbonate; textile dyestuff; ink for ball-point pens; and gelatine capsules.

A large number of pharmaceutical formulations are produced locally in the form of tablets, syrups, capsules, and injectables, but the bulk of pharmaceuticals are imported.

Opportunities for investment abound in the manufacture of broad-spectrum anti-biotics, analgesics and other healthcare utilities and instruments. There is room for additional investment in the construction of specific health service provision facilities.

5.       Tourism sector:

Kenya’s tourism sector is a thriving growth industry, and presents many excellent opportunities for investment. Despite the low performance in this market, due to the political disputes, following the elections of 2007, the industry is recovering tremendously with great potential for growth. Kenya encourages both local and foreign investment in tourism, as a means of creating employment opportunities while expanding the tourism infrastructure.

Investment opportunities exist in:

-          Integrated tourism development units namely: the resort cities development,

Marinas

-          Investment in classified lodges, tented camps and luxury camps

-          Theme park investments: convention centres.

 

KEY INCENTIVES

 

(a)    Capital Investment Allowances

Additional tax incentives offered to resident companies take the form of capital allowances offered to those investing in capital projects.  These are offered on a reducing balance basis and include.

(i)                  Investment Allowance Based on Location

This is provided as follows:

  • Qualifying investment exceeding KShs. 200 million (outside Nairobi, or the Municipalities of Mombasa or Kisumu) 150%
  • Other qualifying investment 100%

 

(ii) Investment Deduction

This incentive is granted to encourage development in manufacturing industries. It is granted once at 100% in the first year of use, to any person who incurs capital expenditure on construction of a new building and installation therein of new or old manufacturing machinery. It is also offered for the construction of a hotel that is certified to be an industrial building.

(iii)              Industrial Building Allowance (I.B.A)

IBA is granted on capital expenditure incurred on the construction of an industrial building.  A rate of 2.5% per annum is applied to the qualifying cost of the construction of an industrial building and 4% per annum is applied on the qualifying cost of a hotel building.

(iv)              Farm Works Deduction

This is granted at the rate of 33.33 % per annum for three years to the owner or tenant of any agricultural land who incurs capital expenditure on the construction of farm works. Farm works means labour quarters, farm house and any other immovable building necessary for the proper operation of the farm such as fences, dips, drains, dams, water and electrical supply works etc

(v)                Shipping Investment Deduction

This is granted at the rate of 40% on capital expenditure and only one such deduction can be allowed in respect of the same ship. To qualify the purchase must be that of a new, unused power driven ship of more than 495 tonnes or on the purchase and subsequent refitting for the purpose of shipping business of a used power driven ship of more than 495 tonnes.

(vi)              Mining Allowance

This is granted to a person who incurs capital expenditure on searching for, discovery, testing and winning access to minerals; expenses incurred in obtaining acquisition rights over deposits; expenses related to purchase of machinery and buildings together with the development, general administration and management prior to commencement of production. This is granted at the rate of 40% in the first year and 10% from the second to the seventh year.

(b)    Export Processing Zones (EPZs)

 

  • 10-year corporate income tax holiday and a 25% corporation tax rate for a further 10 years thereafter (except for EPZ commercial enterprises)
  • 10-year withholding tax holiday on dividends and other remittances to non-resident parties (except for EPZ commercial licence enterprises)
  • Perpetual exemption from VAT and customs import duty on inputs.
  • 100% investment deduction on new investment in EPZ buildings and machinery, applicable over 20 years.
  • Exemption from any quotas or other restrictions or prohibitions on imports or exports with the exception of trade in firearms and military equipment.

(c)    Special Economic Zones

Kenya’s Cabinet has approved a memorandum on the establishment of the envisaged Special Economic Zones programme.  This is in line with international best practices, where countries that embraced the concept of EPZ as an economic programme geared towards export-oriented processing, have been moving to SEZ programmes.

  • Anchored on Vision 2030, envisaging establishment of free trade zones, business process outsourcing and free ports.
  • Other activities – establishment of agricultural parks, industrial parks, science and technology parks for the development and production of information technology software and hardware products, tourism and recreation parks, business incubators.
  • Through SEZ, line ministries are spearheading the first free trade zone corridor, stretching from Nairobi to Mombasa.

 

For More Information

Kenya Investment Authority (KenInvest)

Railways Headquarters Block D, 4th Floor

P.O. Box 55704 Nairobi, City Square, 00200, Kenya,

Tel: (+254) (020) 2221401-4,

Mobile Phones: (+254) (0) 722-205424, 733-601184,

Fax: (+254) (020) 243862,

Email: info@investmentkenya.com | Website: www.investmentkenya.com