KenInvest, the Kenya Investment Authority, was created in 2004 and given autonomy in 2007 to market the country’s opportunities, facilitate investors and ensure aftercare.
Several reform bills have been lined up, including a bill on public private partnerships (PPPs), designed to attract much-needed investment to the country’s key sectors.
The Privatization Commission has been set up to manage the Government’s privatization programme in a transparent and competitive way. Furthermore, the Government has published its Vision 2030, which includes clear benchmarks on how it wishes to develop and bring investment into a number of key sectors.
Kenya’s economy was built on agriculture. Today, it is constantly evolving and modernising, and still contributes most to national GDP and is the biggest employer. Products range from small-scale subsistence maize harvests for farmers and their families, to multimillion-dollar international flower and vegetable exports. Kenya is the world’s largest grower and exporter of pyrethrum, and among the largest producers of black tea and coffee.
Horticulture, encouraged by Government, a favourable climate, low-cost labour, year-round international demand, and direct air connections to key markets, is one of the fastest growing agricultural subsectors, and directly or indirectly employs two million Kenyans. The volume of exports of cut flowers, fruits and vegetables rose by 8.9, 5.4 and 13.2 per cent respectively, in 2016. This led to a 12.3 per cent growth in the value of fresh horticultural exports. Key products include French beans, fine beans, and dwarf beans; fresh peas including mange tout, sugar snaps, and garden peas; Brussels sprouts, broccoli, courgettes and baby carrots; and cut flowers including roses, spray and standard carnations, and lilies.
Opportunities in Agriculture
- Diversifying from black tea with no value added – which is how 98 per cent of Kenyan tea is sold – into speciality teas for specific niche markets, green tea, orthodox teas, ready to drink (juice tea), and organic tea.
- Processing dairy products into powdered milk, cheese, butter, yoghurt, ice-cream and flavoured condensed milk.
- Producing, milling, packaging, and marketing of wheat and wheat flour in key growing areas of Uasin Gishu, Narok, Marakwet, Elgeyo, Molo, Londiani, Nakuru, and Timau.
- Processing groundnuts into peanut butter and peanut oil for processed foods, cosmetics, and paints and finishes.
- Building abattoirs and refrigeration plants, processing leather, and providing financial services including loans and banking, in areas rich in livestock.
- Deep sea fishing, and fish and seafood processing and refrigeration.
- Processing organic honey, manufacturing bee-keeping equipment, and promoting bee products in high demand in developed markets, such as Royal Jelly.
Energy matters in Kenya are handled by the Ministry for Energy. The largest share of Kenya’s electricity supply comes from hydroelectric stations at dams along the upper Tana River, as well as the Turkwel Gorge Dam in the west. A petroleum-fired plant on the coast, geothermal facilities at Olkaria (near Nairobi), and electricity imported from Uganda make up the rest of the supply.
Kenya is banking on energy as an infrastructural enabler to transform into it a newly industrialised economy by 2030. Wood and other biomass, imported fossil fuels, geothermal, and hydro power, are Kenya’s main current sources of energy, and it is currently the largest producer of geothermal power in Africa. The country’s dependence on hydroelectric power has steadily decreased, although it is still the main source of electricity, accounting for more than 37 per cent.
Nonetheless, fewer than one in four Kenyans is connected to the national grid, although that is an increase from a little over one in ten in 1990. Kenya currently has an installed generation capacity of 2,295 megawatts (MW) or 168 kWh per capita, but is investing heavily in projects to increase that. Already close to 70 per cent of its power comes from renewable sources. The Lake Turkana Wind Power Project, a privately-invested ‘wind farm’ installing 365 turbines across 40,000 acres of northern Kenya, which will be the largest in Africa, aims to add 310 MW to the national grid once operational in 2018.
Efforts are underway to diversify power sources into wind, solar and more geothermal. To become energy sufficient, Kenya aims to produce 5,000 MW of electricity within five years. Geothermal generation at Olkaria in Naivasha and Menengai near Nakuru are on course to add close to 600 MW by the end of 2017. The discovery of petroleum reserves in Kenya’s north has generated significant interest in the country’s petroleum potential, and coal deposits have been found in the south east in an area known as Mui Basin.
Good opportunities exist in the energy sector to generate electricity using renewable sources such as geothermal, hydro, solar, wind, biomass, biofuels, biogas and municipal waste. Additional information on the Energy Sector in Kenya can be found on the Ministry of Energy and Petroleum website accessible on www.energy.go.ke.
Opportunities in Energy
- Continuing hydrocarbon and petroleum exploration
- Wind, solar, geothermal, and hydropower generation
- Innovations in renewable power generation
- Transformer manufacturing
- Development of diesel plants and hydropower.
- Drilling and steam field development of wells for geothermal.
- Construction of pipeline and storage facilities for petroleum products.
- Exploration of petroleum deposits in other potential regions of the country.
More updates on energy projects are found here.
Tourism and Sports Sector
Kenya’s services sector, which contributes about 61 percent of GDP, is dominated by tourism. The tourism sector, which is managed by the Ministry of East African Affairs, Commerce and Tourism, has exhibited steady growth in most years since Independence and by the late 1980s had become the country’s principal source of foreign exchange. According to a report by the World Travel and Tourism Council (WTTC), the Kenyan tourism sector’s growth is noted to be growing at a steady rate of 5.9 percent and is anticipated to maintain a growth of 6 percent annually for the coming 10 years. This growth is among the highest among other economic sectors in the country. The effect of this growth is felt by the job market in the industry. The tourism sector employed more than 1.1 million direct, indirect and induced people in the year 2016. This accounts for 9.2 percent of the country’s total employment.
Tourists are attracted by the diversity of Kenya’s people, wildlife and habitats. While the national parks and reserves aim to protect flora and fauna and ecosystems, the private conservancies give or guests distinctive wholesome experiences that Kenya offers culturally, historically and ecologically. Kenya prides itself as a major safari destination, attracting tourists each year to its wildlife, beaches, rich culture, striking geographical diversity, and landscapes, making it an ideal choice for hospitality investment. More than half the tourists come from Europe, led by the United Kingdom, Italy, Germany, and France. Tourist numbers from emerging markets such as India and China are on the rise.
The Government is keen to diversify tourism with a greater emphasis on meetings, incentives, conferencing and exhibitions sports and adventure tourism, and the development of Western and Northern circuits. In addition, it is striving to develop new opportunities in this sector, including seeking investments to create resort cities, brand premium parks, and to develop high value niche products and high-end international hotels. Other investment opportunities include hospitality training and development, medical tourism for the regional market, and activity/cultural tourism.
All this requires new, higher quality tourism infrastructure. There is also the potential to integrate tourism facilities in the EAC region as part of a combined offer, with Kenya at its centre.
The sector also organizes events through the Kenya Tourism Board.
The existence of the Kenya Tourism Development Corporation, a development financial institution, provides affordable and accessible financial facilities and business advisory services to the tourism industry. In order to develop and diversify Kenya’s tourism industry by providing a range of financial services to investors in tourism related enterprises. These are attempts to encourage investments in this sector.
Find more information about Tourism investment opportunities here.
Kenya is a sporting nation and renown for prowess in athletics. There is great potential to invest in athletics through setting up centres for training. Investors can help nurture sporting talent from the grassroots level, while also contributing to the development of sporting facilities such as golf courses, car and horse racing etc.
Transport and Infrastructure
The transport sector in Kenya is under the supervision of the Ministry of Transport and Infrastructure. A key task of this Ministry is to position Kenya as the logistics hub of the region by creating a modern and efficient transport system for goods and services within the counties and also with other countries in the region. The sector is crucial for promoting socio-economic activities and development. Its systems comprise of road, rail, air and maritime.
Kenya has been making considerable headway over the past few years on a development agenda designed to strengthen its position as the number one regional transport and logistics centre for Eastern Africa. A key component of Kenya’s infrastructure ambitions is the Lamu Port-Southern Sudan-Ethiopia Transport Corridor project (Lapsset), a €21.6 billion development stretching from northern Kenya across East Africa. Elsewhere, the Standard Gauge Railway (SGR) will connect Mombasa to Malaba on the border with Uganda, and its first phase from the coast to Nairobi was completed and launched in mid-2017.
While significant gains have been made in developing infrastructure over the last five years, there is further room to enhance Kenya’s competitiveness. This is being done through the expansion of major airports such as Jomo Kenyatta International Airport and construction of new airports such as Isiolo Airport.
Work is also ongoing to expand the country’s road transport network by building 10,000 km of tarmac roads through annuity financing within five years. This project seeks to create more links between productive areas while accommodating the increased vehicle traffic that Kenya has registered over the last decade. The Government is also considering the development of a light railway system that will serve Nairobi and its suburbs.
The EAC region is also exploring possibilities of adopting the Transports Internationaux Routiers (TIR) Carnet system since the region is already a single custom territory. TIR is governed under the TIR Convention, 1975, which is managed and administered by the United Nations Economic Commission for Europe (UNECE). The TIR Convention permits the international carriage of goods by road from one customs office of departure in one country to a customs office of destination in another country, through as many countries as required, without any intermediate frontier checks of the goods carried, unless customs authorities decide otherwise. The International Road Transport Union (IRU) has been authorised to distribute the international Customs transit and guarantee document, the TIR Carnet, and to manage the international guarantee.
Additional information on the Transport Infrastructure Sector in Kenya can be found on www.transport.go.ke.
Money, Banking and Finance Sector
Kenya’s financial sector comprises of banking, insurance, capital markets, pension schemes and other banking institutions such as savings and credit cooperative societies (SACCOs), microfinance institutions (MFIs), building societies and development finance institutions (DFIs), amongst others. These are all regulated by the Central Bank of Kenya.
Kenya’s financial sector is the largest in the East and Central African region, and requires investment to allow the micro financial sector reach its full potential, as well as the investment banking, lease hire and housing finance sectors.
Kenya is East Africa’s financial services hub, with 43 commercial banks, 12 microfinance banks, and one mortgage company. Its well-established banking industry includes many international firms including Barclays and Standard Chartered, and serves both the domestic and regional markets. Nairobi’s vibrant stock market attracts significant overseas investment. Alongside traditional ‘bricks and mortar’ banks, there has been a recent surge in mobile or virtual banking, which reaches the large number of unbanked Kenyans who never had a bank account before now.
The sector posted the slowest growth since 2012 to stand at 6.9 percent in2016 compared to 9.4 per cent in 2015. The relatively depressed performance was mainly as a result of a decelerated growth of 6.7 per cent in earnings from banking institutions partly due to uncertainty associated with the capping interest rates that came into effect in September 2016. The Nairobi Securities Exchange (NSE), Sub-Saharan Africa’s third largest after South Africa’s and Nigeria’s, lists 63 companies and has a total market capitalisation of €18 billion, or 31 per cent of GDP in 2016. A derivatives market was launched in 2014, part of the Kenyan Government’s efforts to reclassify from a frontier to an emerging market.
Kenya ranks well in Africa for loan access, venture capital, and equity financing. Financial inclusion is improving: FSD calculated by 2016 that 75.3 per cent of Kenyans can afford and access financial services, a 50 per cent increase in a decade and now the third highest proportion in Africa after South Africa and Mauritius. Access to affordable credit has allowed businesses to expand, and create jobs.
Opportunities in Financial Services:
- Funding Micro Finance Institutions as they transform into banks
- Participating to lending to banks to finance infrastructure projects
- Secure financial systems for banks and Micro Finance Institutions
- Innovations in mobile banking applications
Mining in Kenya is relatively modest in scale. Kenya is a potential source of high-value mineral commodities such as titanium and oil that remain unexploited due to inadequate knowledge on their status, economic viability and appropriate mining technologies. In March 2012, oil was discovered in Turkana by the British oil company Tullow.
The Ministry of Mining formed in 2013 was mandated with mineral exploration and mining policy formulation, as well as management, inventory and mapping of mineral resources and mining and minerals development. The Ministry launched the Kenya Mining Cadastre portal with the aim of providing an electronic platform for all stakeholders in the mining sector to engage directly with the Ministry.
Already, an appropriate mineral prospecting and mining policy conducive to investment and private-public partnerships (PPP) in the mining sector is in place. Investors can focus on value addition through direct or joint venture partnerships. U.S. oil companies have also entered the market with plans to begin drilling exploratory wells.
ICT and Knowledge Sector
Kenya is known as Silicon Savannah: its ICT sector is the country’s fastest growing, accounting for more than 10 per cent of GDP and expected to create 180,000 jobs by the end of 2017. Nairobi is home to a series of tech co-working and incubation spaces including iHub, m:lab East Africa, Nailab, and GrowthHub. They link to innovative research and development institutions including the University of Nairobi’s Fab Lab, Strathmore University’s iLab Africa, and Kenyatta University’s Chandaria Business Innovation and Incubation Centre. The tech boom has already launched start-ups that are making waves globally, including Ushahidi, BRCK, M-Farm, and Eneza Education.
Kenya’s market for e-business is growing rapidly. Broadband internet subscriptions rose by 37 per cent in one three-month period in 2016 alone, and 10 million Kenyans now have a 3G or better connection. The country has a total of 22 million internet users, or 58.4 per cent of the population, far in excess of the global average of 40 per cent.
Kenya is also leading the world in mobile money transactions and the country’s M-PESA system is justifiably famous. The Communications Authority of Kenya (CA) calculated that in the last quarter of the 2016/2017 Financial year, the number of mobile money subscriptions stood at 28.0 million while the number of agents registered was 180,657. A total of 480.5 million transactions (withdrawals and deposits) valued at 1.2 trillion Kenya shillings were made during the quarter. In addition, goods and services purchased over mobile platform amounted to 692.1 billion Kenya shillings which involved 316.5 million mobile commerce transactions. Person to person transfers were valued at 541.8 billion Kenya Shillings. The positive growth witnessed in the mobile money transfer service was largely driven by the widespread use of mobile money solutions and adoption of the service among traditionally underserved groups (rural populations), and increasingly broad range of mobile money services (including insurance and loan products) in Kenya.
The Government’s ICT master plan aims to enhance Kenya’s competitiveness in Business Process Outsourcing (BPO) to make it the top destination for the industry on the continent by 2030. The national ICT Authority is leading a number of initiatives to improve digital growth, including the National Optic Fibre Backbone (NOFBI), Kenya Open Data Initiative (Kodi), County Connectivity Project (CCP), Digital Villages, Huduma Centres, and the Vision 2030 Konza Technology Park.
Kenya has embraced technology and created a supportive enabling environment for start-ups, especially tech start-up.
Opportunities in ICT
- Computer games, film animation and production
- Training and technical assistance
- Value-add services and apps for mobile phone subscribers
- Cyber-security and efficient anti-fraud systems
- Mobile, web, and image processing for international business transactions
- Designing, customising, and distributing e-learning
- Customised mobile and web applications
According to the United Nations Conference on Trade and Development (UNCTAD) – Revised Edition 2012 report, Kenya aims to become a prime supplier of basic goods to the eastern and central African markets before moving into the manufacture of niche products for other markets.
The strategy proposes to invest in training, research and development and attract large investors in agro-processing industries to target local and international markets. As such, the development of economic clusters and SME business parks is envisaged.
Despite being East Africa’s most industrialised country, Kenya’s manufacturing industry contributes only 14 per cent to its GDP and has been more or less stagnant since the 1980s. Shortages in hydroelectric power, high energy costs, poor infrastructure, high taxation, and the increasing availability of cheaper imports have combined to create this stasis. The sector’s operations are concentrated in Kenya’s largest cities, Nairobi, Mombasa, and Kisumu, where the largest companies are based, including BOC Kenya, Williamson Tea Kenya, British American Tobacco Kenya, Baumann Co, Carbacid investments, Bamburi Cement, East African Breweries, Crown Berger, East African Cables, Unga Group, EA Portland Cement, Athi River Mining, and Kenya Orchards.
The Kenya Government’s Industrial Transformation Programme, launched in 2015, aims to galvanise manufacturing by stimulating exports, investing in a food processing hub, building local content for resource and infrastructure investments, and enhancing non-industrial sectors such as ICT and wholesale and retail trade. Alongside this, there are moves to increase support for small and medium sized manufacturing firms, and to commercialise results from research and development (R&D) projects.
A key factor in the drive to industrialise is Kenya’s focus on creating a series of special new industrial estates and areas where like-minded companies can gather together. For example, 120 companies manufacturing only for export markets today operate in 58 Export Processing Zones (EPZs) across Kenya, enjoying business-friendly regulations and significant tax benefits. Similar operations called Special Economic Zones (SEZs), for firms focused on domestic as well as export trade, are to be launched in Mombasa and Lamu on the coast, Kisumu in the west, and Naivasha in the Rift Valley. Priority businesses include agro-processing, fertilisers, tea and coffee, and fish processing.
Opportunities in Manufacturing
The shift to export oriented manufacturing is from 7% to 15 % according to KenInvest ,and investment opportunities exist for direct and joint-venture investments in:
- Iron and steel industries;
- Manufacture of fertilizer and agro-processing;
- Machine tools and machinery;
- Motor vehicle assembly and manufacture of spare parts;
- Manufacture of garments;
- Assembly of automotive components and electronics; and
- Manufacture of plastics, paper, chemicals, pharmaceuticals, metal and engineering products.
All these opportunities exist for both domestic and export markets
Notwithstanding the stagnation of the Kenya manufacturing sector over the last two decades and the continued lack of competition and production within its subsectors, Kenya has experienced a steady growth in recent years. Massive investment in infrastructure and improvements to the business environment are driving this. In a bid to increase its share of the East African regional market from 7 per cent to 15 per cent, Kenya is shifting towards export-oriented manufacturing and SEZs. Investment opportunities within the manufacturing section include making fertilizer, agro-processing, food processing, machine tools and machinery, consumer goods, textiles and clothing, automotive assembly, plastics, paper, and engineering products.
|Operating License||Single license from EPZ Authority||Sector specific|
|Utilities||Full support services on site|
|Corporate Income Tax||10-year holiday then 25 per cent rate for the next 10 years*||10 per cent for first 10 years, 15 per cent for the next 10 years.|
|Withholding Tax and Dividends||10-year holiday on dividends and non-resident remittances*||10 per cent for professional services and interest (other than dividends) to non-residents. Dividends tax-exempt.|
|VAT and Import Duty||Perpetual exemption on raw materials, machinery, office equipment, some boiler and generator fuel, building materials, and others. VAT exempt for local purchases of goods and services. Vehicles that leave EPZ lose exemption.||Supplies are VAT exempt|
|Stamp Duty||Perpetual exemption on legal instruments||Exempt for any instrument related to firm’s SEZ activities.|
|Investment Deduction||100 per cent on EPZ buildings and machinery, over 20 years.||150 per cent for investments greater than €1.8m outside Nairobi, Mombasa, Kisumu.|
|Work Permits||Skill specific||Entitlements for up to 20 per cent of full time workers. SEZ Authority may recommend more for specialized services.|
|Repatriating capital and profits||Easy repatriation of capital and profits. Access to foreign currency accounts, domestic and off-shore borrowing.||All capital and profits may be fully repatriated without foreign exchange restrictions|
|Other incentives||One stop shop service for facilitation after care by the EPZ investors support division||Available but sector-specific|
Exceptions include for EPZ commercial activity. Refer to website for full details.
Building and Construction Sector
The construction industry grew by 9.2% in 2016 from an expansion of 13.9% registered in 2015. This was attributed to the steady growth in property development, a vibrant real estate sector and the ongoing mega infrastructure projects. Increased activity in the construction of roads and development of housing translated to an increase in employment sector from 148.6 thousand jobs in 2015 to 163.0 thousand jobs in 2016. Construction of Phase I of the Standard Gauge Railway (SGR) was completed and launched in May 2017.
The growth was also mirrored in cement consumption as well as that of other building materials.
Opportunities for Investment in the sector are vast, especially in manufacturing and supply of building materials, construction of low income housing and upgrading of informal settlements.