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INVESTMENT OPPORTUNITIES
IN KENYA
By
Andrew Mwaniki
andrewmwnk@gmail.com
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KENYA AT A GLANCE
● Kenya is located in East Africa, and has a population of 50 million
people
● It is the largest economy in eastern and central Africa, with a GDP of
110.5 billion U.S Dollars (2021)
● In 2021, the share of agriculture in Kenya's gross domestic product was
22.43 percent, industry contributed approximately 16.99 percent
● Agriculture is the backbone of Kenya’s economy
● Tourism accounts for 12% of the GDP
● Manufacturing accounts for 13% of the GDP.
● Kenya is a market based/liberalized economy which is fully integrated
in the Global market through multilateral, bilateral trade agreements
and its participation the World Trade Organization (WTO)
● The private sector contributes about 80% of the GDP
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KEY INVESTMENT PRIORITY AREAS
The following is an overview of Key Investment Areas in Kenya
● Agriculture and Agro-processing
● Textile and garment Industry
● Construction and Housing/Real Estate
● Tourism — eco-friendly tourism, hotels, cottages, conference facilities
● Manufacturing — consumer goods like vegetable oils, sugar, dairy
products
● ICT— IT and Related Services, business process outsourcing
● Knowledge-based/Education industries
● Transport and Logistics
● Wholesale and Retail Trade
● Healthcare services
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WHY INVEST IN KENYA
There are many reasons why Kenya is a top destination for foreign investors.
These include:
Low Risk Investment Environment
Kenya’s investment climate is the strongest in the EAC (East African
Community), with FDI (Foreign Direct Investments) flowing in from emerging
and developed markets and a high volume of multinational companies with
regional and continent-wide headquarters in the country. Total investments
in 2019 amounted to $1.332bn
POSITIVE INVESTOR SENTIMENT
FDI has been on the rise and is stronger than investment in other EAC
countries. Given its position as the economic, commercial and logistical hub
of East Africa, private equity capital is now flowing into Kenya.
In 2013, Kenya was the top destination for international investors in the
Eastern Africa Region after attracting 12 private equity deals valued at over
USD 110.5 million; and in 2015, PwC ranked Nairobi as the most attractive
African city for FDI.
“Kenya is developing as the favored business hub, not only for oil and gas
exploration in the sub region but also for industrial production and transport.
The country is set to develop further as a regional hub for energy, services and
manufacturing over the next decade.” – UNCTAD
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A vibrant private sector
The government appreciates that the private sector is the engine of
economic growth and has adopted various policy options aimed at facilitating
and providing an optimum environment for enhanced private sector growth.
Kenya’s private sector is substantial and includes a number of foreign
investors. Key players in voicing private sector concerns include: Kenya
Private Sector Alliance (KEPSA), Federation of Kenya Employers (FKE) and the
Kenya Association of Manufacturers (KAM).
Market Access
Kenya’s membership to regional economic blocs coupled with strategic
geographic position makes the country the gateway to the huge East African
Community (EAC) market with over 135 million people and the Common
Market for Eastern and Southern Africa (COMESA) market with over 450
million people.
Kenya is a beneficiary of several trade preferential arrangements which
includes The African Growth and Opportunities Act (AGOA) which allows for
quota free and duty free access to the US market for over 6,000 items
produced in Kenya and The new Africa Caribbean and Pacific-European
Union (ACP-EU) Economic Partnership Agreement (EPA) which gives duty free
access to the EU among others.
Well-developed infrastructure
Kenya has relatively well developed physical infrastructural facilities
including, four international airports, an extensive road and railway network,
a modern deep sea port at Mombasa capable of handling bulk and other
containerized cargo, an expanding, liberalized energy sector and digital
telecommunication networks.
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As a result, Kenya continues to develop as a financial, other services and
transport hub for the East and Central African region.
Liberalized and strong economy in the region
Kenya is the largest and the most advanced economy in East and Central
Africa; with strong growth prospects supported by an emerging, urban
middle class and an increasing appetite for high-value goods and services.
Kenya is a strong regional player, accounting for more than 50% of the
region’s total GDP.
STRONG AND LARGE REGIONAL PLAYER
Kenya has the second largest population within the EAC (East African
Community) at 50 million and is growing at a rate of 2.7 per cent per annum.
There is a rising trend towards urbanization, which is contributing to an
increase in consumer demand for high value goods.
This trend is fore casted to continue, with 50 per cent of the population
expected to live in urban areas by 2050.
The size of Kenya’s middle class is growing as evidenced by the growth in its
gross national income per capita, which has increased at a CAGR of 2 per
cent over the past 10 years.
Strategic Location
Kenya is strategically located as a gateway to the East and Central African
region.
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With a border to the Indian Ocean, Kenya is well suited as a production and
distribution base to service Africa, Europe, the Middle East, South Asia and
other Indian Ocean Islands.
Jomo Kenyatta International Airport functions as an effective Air hub
between Africa, Europe and Asia. Kenya also serves as the Communication
Hub of the region.
Highly developed human resource
Kenya has a huge pool of labor force and is one of the best educated in the
world, English-speaking and extremely adaptable. Qualified professional staff
can be hired at reasonable pay-scales, in all occupations and at all levels of
expertise.
Vibrant Capital Markets
Kenya has a vibrant capital market with Foreign participation in NSE (Nairobi
Stock Exchange): 54.1 per cent of total equity turnover.
Political and MacroEconomic Stability
Kenya enjoys a stable macroeconomic environment. The government
operates sound macroeconomic policies that promote growth by providing a
more secure environment for private sector investment decisions.
Political stability and supportive legal environment
Kenya is a multi-party Democracy with a unicameral Parliament which
creates laws which are administered by the Executive arm of the
Government.
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The Kenyan Constitution protects private property and provides safeguards
against expropriation of such property without compensation. Kenya is also a
signatory to Multilateral Investment Guarantee Agency (MIGA), an agency of
the World Bank and a Member of the International Council of Settlement of
Investment Disputes (ICSID).
In case of Commercial disputes, Kenya has a Commercial Court under the
Kenyan Judiciary.
Reducing energy costs and energy availability
Kenya is ideally positioned to unleash Africa’s power generation capacity
through its focus on green energy and cost effective sources of energy, set to
contribute to a 5000MW increase in the national power grid.
POWER & ENERGY STRATEGY
Increasing share of power generated from green and more cost effective
sources, with a target to increase electricity generation capacity by 5,000MW
from the current 1,644MW to 6,700 MW in 40 months.
Key Power Project and Recent Resource Discoveries
WIND POWER PROJECT
300 MW Lake Turkana Wind Power Project valued at USD 823 million
WATER DISCOVERY
Two new water sources at Turkana Basin and Lotikipi Basin holding 250
billion m3 of water, sufficient to supply Kenya for 70 years.
OIL DISCOVERY
Discovery of reserves by Tullow oil are estimated to extract as much as one
billion barrels.
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GEOTHERMAL POWER PROJECT
43,000 MW Geothermal Power Project in Baringo valued at USD 135 million.
COAL POWER PLANT
5900 -1,000MW Coal Power Plant in Lamu.
NATURAL GAS PLANT
6700-800 MW Natural Gas Fired Plant near Mombasa through a PPP.
Investment Incentives
Investment allowance at 100% on plant, machinery, equipment and buildings
Liberal depreciation allowances as follows:
● 􀂙 2.5% on industrial buildings
● 􀂙 4 on hotels
● 􀂙 12.5% on plant and machinery
● 􀂙 25-37.5% on motor vehicles, trucks and tractors
● 􀂙 30% on computers and office equipment
● 􀂙 Businesses that suffer losses can carry forward such losses to be
offset against taxable profits
Manufacture Under Bond Programme – Grants 100% investment allowance,
duty and VAT exemption on plant, machinery, equipment, raw materials and
immediate inputs.
Duty Remission Facility – Imported materials intended for use in manufacture
of exports are eligible for duty remission under the Export promotion
Programmes Office (EPPO)
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Business friendly tax system
The tax regime is relatively low with VAT at 16%and corporation tax at 30% or
25% depending on the type of business. However, for investment within the
Export Processing Zones, the tax regime and benefits include:
● 10 year tax holiday
● Duty and VAT exemption
● Single license
● Exemption from stamp duty and withholding tax
● 25% Corporate tax for 10 years after expiry of the first 10years
● 100% Investment Allowance
Other taxes include:
● Excise duties levied on beer, tobacco, matches, wines, spirits, mineral
water and confectionaries
● Personal tax is charged on the income earned in Kenya. Rates are
graduated to a maximum of 30%.
● Import duties range: From 0% to 35% for finished products 0% for
capital goods, intermediate inputs and basic raw materials.
● Corporate tax stands at: 30% for all companies, 25% for new listings at
Nairobi Stock Exchange for 5 years.
● Withholding tax is 5%
● Rate of VAT: Standard 18%, Restaurants 16%
● VAT rate for Input for health care, education and exports of goods and
services is 0%
Simple Investment procedures
● Registration of the business by the Registrar of Companies
● Applications for approval of investments are submitted to Investment
Promotion Centre (IPC)
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● Approval is based on security, health and environmental requirements
● Approval is within four weeks from the date of application
● Issuance of Certificate of General Authority by IPC– The certificate
enables the investor to immediately commence implementation of his
projects as he processes other relevant licenses
INVESTMENT OPPORTUNITIES IN KENYA
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Agriculture and Agro-processing
Agriculture is the mainstay of Kenya's economy with abundant opportunities
for investment in the following areas:
● Seed production;
● Manufacture of sprayers and pesticides;
● Installation of irrigation systems to forestall the overreliance of rain fed
agriculture, which is susceptible to vagaries of weather.
As the country moves towards a more structured agricultural system to meet
its stated goal of food security, irrigation and its systems will continue to take
a centre stage, and there is a lot of investment opportunity in this sector.
Services that enhance production of industrial crops such as oil
seeds, barley, sugarcane, groundnuts.
For export market, opportunities exist in the following areas:
● Cut flowers
● Various types of beans;
● Fruits (pineapples, mangoes, avocado, passion, melon) etc.;
● Asian vegetables.
In agro processing, opportunities exist in the following areas:
● Oil crops production and processing (Palm oil, groundnuts,
sunflowers, cottonseed, sesame, coconut, corn/maize)
● Wine production
● Coffee: packaging, roasting, blending, decaffeination, gourmet;
● Tea packaging for direct sales to consuming markets;
● Leather & leather products.
● Processing fruit concentrates
● Milk and meat processing.
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Manufacturing
There is potential for investment in the textile industry, while there is also big
demand for electronic goods, paper made from non-traditional raw materials
and assembly of automotive components, iron and steel and plastics.
Other investment opportunities include
● Chemicals
● Pharmaceuticals
● Metals and engineering products for domestic and export markets.
● Manufacture of fertilizers
● Sheet glass production
● Dyes for textile industries
Wholesale and Retail
Trade has been identified as a key engine of the economy due to its
significant contribution to GDP (10.1 per cent) and job creation, employing
about 190,000 people a year. It has expanded considerably over the years, in
line with a growing middle and upper-income group.
Other key factors include improved infrastructure, which have facilitated the
movement of goods and led to better quality products at lower prices.
Meanwhile, a sustained property boom has encouraged retailers to open
outlets in prime locations near residential neighborhoods, offering greater
convenience to consumers
Furthermore, the Government has reviewed the regulatory regime to allow
for elimination, simplification, consolidation or harmonization of the
business-license process.
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Aggressive competition has also promoted innovation among Kenyan
supermarkets, where the retail sector is dominated by several supermarket
chains.
In an effort to secure consumer loyalty and boost revenue, Kenya’s nascent
supermarket chains are now doing their own packaging and creating their
own brand-labels. A recent increase in online retailing platforms is also
spurring growth.
Opportunities for investment include:
● Opening more supermarkets, hypermarkets and luxury outlets (e.g. in
clothing and cosmetics);
● Establishing modern, world-class trade, exhibition and convention
centres;
● Internet retailing and;
● Establishing trade logistics, such as warehouses
Mining and minerals
The mining sector has been identified as one of the key drivers for economic
growth and transformation. It is currently contributing less than 1 percent of
GDP but this is expected to rise to at least 10 percent by 2030 with the
discovery and exploitation of new minerals.
Kenya is one of the world’s leading producers of natural carbon dioxide,
fluorspar, soda ash and titanium. Twenty other minerals have been identified
and confirmed, including a unique type of ruby.
Opportunities include:
● Petroleum exploration, on- and off-shore;
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● Mineral exploration and extraction and;
● Investment in mining logistics and related infrastructure.
Tourism
Tourism is one of Kenya’s most important industries, and has strong linkages
with transport, food production, retail and entertainment. Kenya is one of
the world’s most popular tourism destinations, attracting millions each year
to its wildlife, beaches, rich culture, striking geographical diversity and
landscapes.
This makes the country an ideal destination for hospitality investment.
Though other attractions include museums, snake parks and historical sites,
many of these resources remain largely unexploited.
More than half the tourists come from Europe, including the United
Kingdom, Italy, Germany and France, as well as from the United States.
Tourist numbers from emerging markets, such as India and China, are on the
rise. The Government targets to double the number of tourists and the
revenue they generate by diversifying the source countries and the country’s
tourist offering.
Investment opportunities include:
● Conference facilities
● Hotels
● Cottages
● Ecofriendly tourism in the parks and cruise ship tourism.
Kenya, under Vision 2030 is working on creating resort cities in different
parts of the country. This offers an extremely positive, lucrative and
long-term investment.
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Information and Communications Technology (ICT)
The information and communications technology (ICT) sector is the success
story of the decade in Kenya. New information technologies are playing an
increasingly important role in nearly all areas of the economy.
The installation of a broadband-backbone connected to three under-sea
fiber-optic cables (Seacom, TEAM System and EASSY) has significantly
improved Kenya’s connectivity and its ICT prospects, be it in business-process
outsourcing (BPO) or the development of IT-enabled services (ITeS).
The Government has identified ICT as a key enabler in attaining the goals and
aspirations of Vision 2030, with the vision to transform Kenya into a
knowledge and information-based economy.
Investment opportunities include:
● Affordable Internet Solutions/Services and distribution (4G/5G
Network)
● IT Services
● Business Process Outsourcing (BPOs)
● Front office operations, including call and contact centers-BPO
● Back office operations, including data hosting, archiving and
processing, as well as software development, maintenance and
customization, and e-commerce;
● KONZA Techno City – a Vision 2030 flagship project, available ICT
investors, 60km from Nairobi.
Transport and logistics
Rapid cargo-throughput growth at Kenya’s airports and ports has generated
increased business for companies in freight, storage, distribution, clearing
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and forwarding. Most imports are capital goods and raw materials for
industrial production while exports are generally of agricultural products.
The Government continues to invest heavily in transport infrastructure to
improve efficiency.
With continued development of roads, rail, water and air transport networks,
competition in the logistics industry is rising. The biggest players now include
Kenya Airways, Saudi Airlines Cargo Company, Aramex, Transglobal Cargo
Centre, Swissport Cargo Services and DHL.
Opportunities in the sector include:
● Cargo-handling and storage facilities;
● Domestic air-freight routes;
● Road-cargo transport to serve the LAPSSET corridor;
● Rail-cargo transport, especially with the completion of the standard
gauge railway and;
● Acquisition of local courier companies;
Construction
Kenya has a well developed construction industry. Quality engineering,
building and architectural design services are locally available.
Kenya's construction and real estate sector is one of the fastest growing, with
a projected growth rate of more than 20% by 2021. Government investment
in public infrastructure development projects and the real estate sector are
generally attributed to the growth (road, rail, energy, port, and airport
modernization)
In 2019, the construction, mining and quarry industry contributed 5.6% and
0.7% of Kenya's GDP respectively . The construction industry grew at a
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Compounded Annual Growth Rate (CAGR) of 13.8% from USD 3.1 billion in
2015 to USD 5.2 billion in 2019(KNBS).
Real estate development is a lucrative investment option for entrepreneurs
who don't want to invest in unfamiliar areas. Kenya's economy has been on
the rise, and now may be one of the best times to start this business as there
are still many undeveloped areas.
Investment Opportunities
● Low-cost housing
● Residential real estate – rented apartments,
● Commercial real estate – office buildings, recreational centres, ultra
modern shopping malls, restaurants and fast food outlets.
● Industrial real estate – warehouses, factory floors
The growing interest in the Kenyan market is as a result of huge demand
buoyed by increasing urban population and changing shopping culture
among the expanding middle class, which has resulted in the construction of
numerous shopping malls.
Growth in the sector has also been enhanced by the entrance and expansion
of new and existing multinational companies in sectors such as ICT, oil and
gas, retail merchandising and finance.
Discerning developers have focused on the construction of high-end
residential houses, commercial developments as effective demand has been
strongest for these groups of developments. There has also been an
encouraging increase in the construction of flats and condominium –type
houses, to aid affordability.
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INFRASTRUCTURE AND SUPPORT
● Road, railway and telecommunications and postal services
● 3 international and several domestic airports
● Mombasa port that ranks among the largest and busiest on the East
African Coast
● Nairobi as the hub of East and Central Africa
● Only United Nations office in the Third World
● Diplomatic capital of the region
● Largest number of foreign correspondents in Africa
● Kenya Airways providing links to much of Africa
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INVESTMENT PROMOTION AND PROTECTION
Protection of all investors in Kenya is governed primarily by the Kenya
Constitution (2010), contracts and domestic legislation.
These instruments provide substantive protections and allow private
enterprises to freely establish, acquire, and dispose of interest in business
enterprises.
There is no differentiation between local and foreign investors in access to
Government-sponsored research.The Government encourages investment in
sectors that create employment, generate foreign exchange, and build
forward and backward linkages with rural areas.
The law applies local-content rules but only for the purposes of determining
whether goods qualify for preferential-duty rates within the Common Market
for Eastern and Southern Africa (COMESA) and the East African Community
(EAC).
Kenya’s Foreign Investment Protection Act (FIPA) guarantees capital
repatriation, and the remittance of dividends and interest to foreign
investors. They are free to convert and repatriate profits, including
un-capitalized retained profits (proceeds of an investment after the 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 of amounts above KSh
500,000 (about USD 5,600) as a formal check against money laundering.
Foreign exchange is readily available from commercial banks and
foreign-exchange bureaus, and can be bought and sold freely by local and
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foreign investors. The Kenyan shilling has a floating exchange rate tied to a
basket of foreign currencies.
The Constitution of Kenya 2010 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
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
Foreign investor may exit from an incorporated company. In practice, a
company faces no obstacles when divesting its assets in Kenya, if the legal
requirements and licenses are satisfied.
The Companies Act gives the procedures for both voluntary and compulsory
winding-up processes.Private enterprises can freely establish, acquire and
dispose of interests in business enterprises. The Kenyan legal system is quite
flexible on exit options, which are normally determined by agreement
between one investor and the others.
PROTECTION OF PROPERTY RIGHTS
Kenya has a comprehensive legal framework to ensure intellectual property
rights (IPR) protection, which includes the Anti-Counterfeit Act, the Industrial
Property Act, the Trade Marks Act, the Copyright Act, the Seeds and Plant
Varieties Act, and the Universal Copyright Convention.
Kenya’s Copyright Act protects literary, musical, artistic, and audiovisual
works; sound recordings and broadcasts; and computer programmes. Kenya
is a member of the Convention establishing the World Intellectual Property
Organization (WIPO), the Paris Convention for the Protection of Industrial
Property and the Patent Co-operation Treaty.
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Kenya is a signatory to the Madrid Agreement Concerning the International
Registration of Marks.
These laws can be found in The National Council for Law Reporting also
known as Kenya Law. www.kenyalaw.org
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INVESTOR GUARANTEE
Kenya constitution guarantees against expropriation of private property
except for purposes of public use or security. Removal of exchange controls
guarantees investors repatriation of capital, profits and interests.
Member of the Multi-lateral Investment Guarantee Agency (MIGA), an affiliate
of the World Bank that insures foreign investments against non-commercial
risks
Kenya is a member of the International Centre for Settlement of Investment
Disputes (ICSID) which arbitrates cases between foreign investors and host
governments
The country is also a member of the Africa Trade Insurance Agency (ATIA)
which insures investors against political risks.
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