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U.S. Department of State
Kenya Country Commercial Guide
Office of the Coordinator for Business Affairs
COUNTRY COMMERCIAL GUIDE
K E N Y A
FISCAL YEAR 1996
AmEmbassy Nairobi Means Business!
TABLE OF CONTENTS
CHAPTER TITLE
I. EXECUTIVE SUMMARY
II. ECONOMIC TRENDS AND OUTLOOK
III. POLITICAL ENVIRONMENT
IV. MARKETING U.S. PRODUCTS AND SERVICES
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENTS
VI. TRADE REGULATIONS AND STANDARDS
VII. INVESTMENT CLIMATE
VIII. TRADE AND PROJECT FINANCING
IX. BUSINESS TRAVEL
X APPENDICES:
A. COUNTRY DATA
B. DOMESTIC ECONOMY
C. TRADE
D. INVESTMENT STATISTICS
E. U.S. AND KENYAN CONTACTS
F. MARKET RESEARCH - KENYA
G. TRADE EVENTS SCHEDULE
This Country Commercial Guide (CCG) presents a comprehensive look at
Kenya's commercial environment through economic, political and market
analyses.
The CCGs were established by recommendation of the Trade Promotion
Coordinating Committee (TPCC), a multi-agency task force, to consolidate
various reporting documents prepared for the U.S. business community.
Country Commercial Guides are prepared annualy at U.S. Embassies through
the combined efforts of several U.S. governement agencies.
CHAPTER I
EXECUTIVE SUMMARY
1. OVERVIEW
In recent years, Kenya has undergone a significant economic and
political transformation conducive to developing a more positive
commercial environment. In 1992, multiparty parliamentary politics was
allowed after almost 30 years of single party rule. On the economic
front, the Government took positive macro-economic policy reform
initiatives: elimination of price and import licensing controls,
liberalization of the foreign exchange system to include market
determined exchange rates, development of more disciplined monetary and
fiscal policies, and enforcement of greater monetary discipline with
respect to the commercial banks.
The Kenyan economy has responded positively: Gross Domestic Product
(GDP) grew by 3.0 percent in 1994 compared to 0.2 percent in 1993.
Foreign exchange reserves increased from just under two weeks of annual
average imports in March 1993 to $506 million or 3 months cover as of
December 1994. Inflation fell to below 10 percent in May 1995, from 41
percent a year before, and a high of over 100 percent in 1993. At the
end of 1994, balance of payments showed a surplus of 1 percent of GDP on
the current account. (The current account is the net of imports,
exports, invisible trade (tourism), and aid grants.) Investment
portfolio grew by 13.4 percent in 1994 as compared to a decline of 3.6
percent in 1993. The government foresees this economic expansion
continuing in 1995 by 5 percent and 5.6 percent in 1996. The overall
level of business confidence is optimistic for 1995. Kenya is committed
to a program whereby the private sector will become the engine of the
country's future economic growth.
Kenya has undertaken economic and political reforms largely in response
to World Bank, IMF, and other multilateral and bilateral donors'
initiatives. Not all elements of the Government of Kenya (GOK) have
fully supported the reforms and there has been, therefore, some
regression since December 1994. Because of the slippage, donors and the
GOK scheduled a mini-Consultative Group meeting in Paris on July 24,
1995. However, the overall trend of economic, and, to some degree,
political reforms since 1991 has been significant and positive.
Agriculture and tourism dominate Kenya's economy, and are Kenya's main
foreign exchange earners. Total 1994 earnings in the two sectors were
estimated at $1,796 million. The manufacturing sector has historically
been import substitution focused. The country's main imports are
petroleum and industrial goods, including, machinery, equipment, and
agro-chemicals. The country has no known mineral resources of
commercial significance. In 1994 the country's imports were valued at
$2,568.7 million while exports were valued at $1,860.7 million.
Significant investment, from domestic and international sources,
including the U.S., is expected to increase slowly. Kenya has a vibrant
and expanding stock market; the 1995 GOK budget doubled the permitted
level of foreign ownership of locally traded shares to 40 percent. The
country has an emerging secondary capital market besides the merchant
and investment banking services offered by multinational banks.
Kenya has been politically stable since independence in 1963. Relations
with the United States have been friendly and cordial. The country has
adopted a multiparty system with a vibrant parliamentary opposition. In
recent years, the press has enjoyed a great deal of freedom, but
incidents of intimidation and harassment of the independent papers
continue to occur. The next general election is expected in 1997.
Although there has been general unhappiness among non-reformers over the
effects of Kenya's structural adjustment program and the government's
visible reform lapses, the general consensus is that reform is
inevitable and irreversible.
2. COMMERCIAL ENVIRONMENT
About 75 American companies maintain offices in Kenya, and the U.S. is
Kenya's third largest trading partner after the United Kingdom and
Germany with 1994 U.S. exports estimated at $170 million. Principal
U.S. exports included wheat, maize (corn), fertilizer, aircraft parts,
and petroleum/bituminous products. The country is open and hospitable
to trade and investment from the U.S. However, its traditional ties to
the United Kingdom, the former colonial power, its almost exclusive use
of British business laws and practices, a relatively less developed
market, and its distance from the U.S. are all factors which have served
to limit direct U.S. business relationships in this country. Many U.S.
firms market in Kenya via their European affiliates, thus making it more
difficult to track U.S. sourced goods and services provided via Europe.
The 1994 Kenyan import market was estimated at $2,568.8 million. Almost
all balance of payments assistance was suspended from late 1991 to 1993
by multilateral development banks and bilateral donors, but resumed in
1994 at lower levels. Foreign exchange reserves have greatly improved
from a few days of imports at the end of 1992 to three months at the end
of June 1995. The Paris Club debt, according to the June 1995 budget
speech, is 29.5 percent of overall 1995/96 budget. Government debt was
rescheduled in the Paris Club. Kenya is meeting its debt repayment
schedule. Importer interest in sourcing from the U.S. is increasing as
the country's economy liberalizes and diversifies and as U.S. products
and services become more competitive with the more attractive
shilling/dollar rate.
3. MAJOR BUSINESS OPPORTUNITIES
Investment opportunities exist in the tourism, agriculture, and
manufacturing sectors. Specific areas of interest to U.S. business
include the hotel industry, ecotourism, power generation equipment,
telecommunication equipment, agricultural inputs, and food processing
and packaging equipment. Kenya's liberalized economy and the country's
constitutional guarantee of investment protection provide investment
incentives. Other incentives include lucrative tax and investment
incentives such as an investment allowance, duty remission, and tax
exemptions in the country's export processing zones and its
manufacturing under bond system. U.S. firms are encouraged to consider
using Kenya as a base to assess and penetrate the larger combined East
and Central African market.
4. EMBASSY ASSISTANCE
The Commercial Service (U.S.& Foreign Commercial Service), with a
regional operation based in Nairobi, along with the Foreign Agricultural
Service (FAS) and other Embassy elements, stands ready and eager to
assist U.S. businesses in their efforts to penetrate this relatively
dynamic and regional market hub.
Country Commercial Guides are available on the National Trade Data Bank
on CD-ROM or through the Internet. Please contact Stat-USA at 1-800-
STAT-USA for more information. To locate Country Commercial Guides via
Internet, please use the following world wide WEB address: WWW.STAT-
USA.GOV. CCGs also can be ordered in hard copy or on diskette from the
National Technical Information Service (NITS) at 1-800-553-NTIS.
CHAPTER II
ECONOMIC TRENDS AND OUTLOOK
A. MAJOR TRENDS AND OUTLOOK
1. OVERVIEW
The government has made significant strides in the implementation of
economic reform measures necessary to stabilize the economy and restore
sustainable economic growth in Kenya. By April 1994, the government had
removed nearly all administrative controls on producer and retail
prices, imports, foreign exchange and grain marketing. The lifting of
price controls on petroleum products in October 1994 and the
announcement in December 1994 that, beginning 1995, foreigners would be
permitted to invest in the Nairobi Stock Exchange signalled the end of
the significant remaining controls. Some problems however, have
continued to arise. In August 1994 and again in April 1995, the
government reintroduced bans on agricultural imports, in one case on
maize, in the other on maize, wheat, sugar and milk, but the bans were
short lived.
While the overall consumer price index generally declined in 1994,
initially wages failed to match escalating basic day to day living
expenses as price decontrols elicited price increases on basic foods and
commodities unmatched by commensurate wage increases. The
liberalization of foreign exchange regulations contributed initially to
a stronger Shilling, which was allowed to seek its own market level when
dollars and other hard currencies flowed into the country. A
liberalized import system impacted on heretofore protected domestic
producers. After the Structural Adjustment Program (SAP) initiated with
the World Bank and an Enhanced Structural Adjustment Facility with the
IMF in late 1993 were in place, the Government of Kenya (GOK) in 1994/95
introduced various social action programs to ameliorate the short-term
impact of the SAP. The last quarter of 1995 saw some regression in the
agricultural sector reform program. Concerned by these slippages, and
even more by increasing political repression, donors called for a mini-
Consultative Group (CG) meeting with full GOK participation. Since
1993, Consultative Group meetings have been held in June and
November/December to review reform efforts. The overall trend in
economic and, to some degree, political reforms has been significant and
positive.
Serious efforts have been undertaken to mop up excess liquidity and
improve management of the financial sector. Management of the financial
sector, and banks in particular, has generally improved. Weak banks
have been closed or brought under statutory management while irregular
advances have been curbed. Meridien BIAO Bank is the latest (March
1995) to be put under statutory management. Inflation was brought down
to below 30 percent by December 1994 compared to a peak of 100 percent
in mid 1993; it is expected to be approximately 8 percent in 1995.
The country made a moderate recovery in 1994, with an estimated annual
GDP growth rate of 3 percent as the economy responded to economic
reforms. In the first quarter of 1995, the economy grew at a rate of
6.3 percent. The positive effects of the reform measures, however,
remain dampened by repressive measures on the political front. The
pluralistic brand of politicking introduced in 1991 has yet to grow into
sensible competitive multi-party politics. The economy still suffers
from a large (but declining as compared to 1993) government budget
deficit of 5 percent of GDP, according to the World Bank. The budget
deficit is largely due to inadequate implementation of parastatal
divestiture, a bloated civil service and fiscal indiscipline.
In the area of regional cooperation, there has been renewed interest
among the East African leaders of Kenya, Uganda, and Tanzania in
reviving the East African Economic Community. They have signed an
economic cooperation treaty which provides for removal of trade
barriers. However, tension between Kenya and Uganda appears to have
retarded progress.
2. ECONOMIC REFORMS
After years of slow progress in economic reform, in 1993 the government
embarked on substantive economic reform measures to bring the economy
back on track. In a relatively short period, the government instituted
several measures to open the economy to market forces. By the end of
the first quarter of 1994, the government had dismantled most foreign
exchange controls, allowed a free-floating exchange rate, removed import
licensing and liberalized domestic marketing of all major items
including grain. At the same time, government decontrolled prices of
all major items except petroleum products. Petroleum products were
later decontrolled in October 1994. The efficacy of these policy
measures is best demonstrated by the results: GDP grew from 0.2 percent
in 1993 to 3.0 percent in 1994, foreign exchange reserves stabilized at
$506 million or equivalent to three months import coverage up from just
under two weeks in March 1993. Inflation fell to below 10 percent in
May 1995, from 41 percent a year before, and a high of over 100 percent
in 1993. At the end of 1994, balance of payments showed a surplus of 1
percent of GDP on the current account.
The government foresees this economic expansion continuing in 1995 with
a 5 percent GDP growth rate and 5.6 percent GDP growth rate in 1996.
The overall level of business confidence is optimistic for 1995. Kenya
is committed to a program whereby the private sector will become the
engine of the country's future economic growth.
The reforms were implemented with the support and guidance of the
IMF/World Bank. They have largely removed some of the major impediments
to doing business in Kenya. Implementation of the new policies has been
reasonably progressive. However, by the end of 1994 and early 1995 some
serious signs of slippage on the reform program began to emerge.
Backtracking on agricultural sector reform, due in part to problems of
handling sudden surpluses after two years of drought, elicited fears
among reform-watchers that reversals might occur in other sectors. The
primacy of the government grain marketing board (NCPB) was reinstated
for grain purchases, an inflated indicative price of KSh. 950/90 kg bag
in effect reintroduced price controls on grain, and in April 1995 the
GOK banned importation of maize, soft wheat, sugar, and milk. The ban
was rescinded in June 1995.
A decision in January 1995 to build a third international airport at
Eldoret at a cost of $85 million raised questions about the wisdom of
GOK priorities, especially regarding infrastructure and commercial
borrowing. Finally, the GOK commitment to curbing corruption was called
into question in view of the perceived foot-dragging on the infamous
Goldenberg/Exchange Bank case. This case has become the litmus test of
how the GOK intends to deal with corruption in the future.
In spite of concerns in certain quarters as to whether Kenya will
continue and enhance economic reforms, as well as pursue seriously
related political reforms, much has been accomplished since 1991 to
improve the commercial and economic climate. It is not unexpected that
in undertaking such significant reforms not all elements of government
and the political system are fully in favor of all aspects of the
IMF/World Bank led SAP. Despite some backsliding as Kenya struggles to
integrate the SAP into its own political and economic framework, the GOK
appears to be fully committed to proceeding with the SAP.
3. MONETARY POLICY REFORM
During the 1994/95 time frame the Central Bank of Kenya (CBK) continued
to enforce monetary discipline begun in 1993 and added a number of
measures. Five locally-owned banks were closed in the first half of
1995 when they failed to meet an increased paid-up capital requirements
of 7 percent introduced in December 1994. In the first quarter of 1995
the GOK imposed a foreign exchange exposure limit of 20 percent of a
bank's capital. Meridien BIAO was affected after transferring large
amounts of foreign exchange to its parent bank in the Bahamas. It was
put under statutory management in March 1995. The required commercial
bank cash ratio was decreased from 20 to 18 percent in the third quarter
of 1994 and remains at that level.
Beginning the last quarter of 1994, the CBK worked on establishing
foreign exchange bureaus to handle small transactions. More than twelve
bureaus had been licensed by the second quarter of 1995. As of July
1995, only five had become operational. CBK requirements are reportedly
stiff, but bureaus are attracting interest. It is hoped that with the
opening of the foreign exchange bureaus, there will be more competition
and that better exchange rates will be available for smaller
transactions. Finally, non-bank financial institutions were required to
become full banks. As of July 1995, four have converted while ten are
making preparations, and four others will merge with parent companies.
The Central Bank has stopped lending to the public sector. Commercial
bank lending to the public sector nearly doubled and total credit to the
private sector increased by 29 percent between December 1993 and
December 1994. The popularity of Treasury Bills declined as interest
rates went down from 70 percent in 1993 to the mid-teens by June 1995.
Although growth in the money supply remained stable in the first half of
1994, it accelerated to 31 percent in the third quarter. During 1994,
funds continued to enter the commercial banking system in the form of
productive transfers, speculative transfers and assistance flows. Cost
overruns of various GOK departments forced them to borrow from the
Central Bank. Also, the government as a whole continued to borrow
heavily.
Short and medium term commercial credit has followed the trend of
lowered inflation and declining government interest. Commercial bank
base interest rates averaged 15 percent in the period ending June 1995,
although effective borrowing rates were almost 10 points higher.
Interest on savings accounts grew.
Kenya's budding, but vibrant stock exchange, has received government
support. As of June, 1995 foreign participation of up to 40 percent was
permitted. Since foreign participation in the local stock market was
allowed in mid-December 1994, about $2.5 million from foreigners has
been invested in stocks traded on exchange.
4. FINANCE
Kenya's financial sector has 36 commercial banks, 51 finance houses, six
building societies, seven development finance companies, five
representative offices of foreign banks, a post office savings bank, 37
insurance companies and over 1,500 poorly structured cooperative savings
and credit unions. The banking sector is dominated by two multinational
banks (Barclays and Standard Chartered) and two parastatal banks. U.S.
owned Equator Bank has a subsidiary (Kenya Equity Management) and
Citibank a branch. Other U.S. banks have correspondence relationships
with Kenyan banks.
The financial sector includes a young and vibrant Capital Markets
Authority. The Capital Markets Authority retains significant regulatory
powers over the stock market which has one securities exchange based in
Nairobi (Nairobi Stock Exchange) and 20 brokerage firms. The Nairobi
Stock Exchange (NSE) handles 56 listed firms with a virtually non-
existent secondary capital market. The low listing is largely due to
government requirements for detailed information many firms consider
confidential. Requirements for financial discipline, availability of
subsidized credit in the money market, disclosure and reporting
requirements are some of the other factors militating against public
quotation. The stock market, and stockbroking, were on January 1, 1995
opened up for direct foreign participation. The limit on foreign share
ownership is 40 percent.
At the beginning of 1994, shares traded at the NSE shot up dramatically
due to significant shifts from Treasury Bills to shares. The interest
rate offered on Treasury Bills reached its lowest level in February,
1994 prompting investors to scramble for the limited shares offered in
the NSE. At the time, there were large sums of cash still floating in
the economy which have since been effectively mopped up.
Although the Nairobi Stock Exchange trading floor is currently
computerized, it has been using, up to late 1994, outdated trading
practices such as notice board call-overs. However, it is no longer a
closed shop. Despite the presence of such multinational banks as
Barclays, Stanbic, Citibank, Equator Bank, and Standard Chartered,
merchant and investment banking is still underdeveloped. A local firm
has established operations dealing with commercial paper and the
secondary and tertiary market, but it is still in its infancy. In the
insurance sector, restrictive legislation and the government's
interventionist approach have forestalled more flexibility in the
investment strategy of the insurance companies. Therefore, sources of
long term capital such as corporate bond markets and discount houses are
limited in Kenya.
5. TRADE POLICY REFORM
Kenya's trade policy has improved significantly. Import licensing
controls were dismantled in 1993, except for a small negative list based
on health, environmental and security concerns. Imports are still,
however, subject to some approvals. All imports with F.O.B. value of
more than KSh. 100,000 ($1,613) are subject to preshipment inspection
for quality, quantity, and price and require a Clean Report of Findings
by a government-appointed inspection agency (Cotecna Inspections, Inc.,
Bureau Veritas, and SGS). Commercial banks are required to ensure that
importers have submitted Import Declaration forms, invoices, and a Clean
Report of Findings as well as a copy of the Customs entry before
releasing foreign exchange to importers. Prior exchange control
approval must be obtained for imports of machinery and equipment which
are regarded as a contribution toward equity capital or are purchased
via loans. Authorized banks in Kenya may not issue shipping guarantees
for the clearance of imports until they receive the report. All goods
purchased by importers in Kenya must be insured with companies licensed
to conduct insurance business in Kenya.
Trade barriers on certain products are maintained by high import duties
and value added tax. The June 1995 budget, however, reduced duties on
some high tech equipment - computers, went from 20 percent to 10
percent, and photocopiers from 30 percent to 10 percent - and the
standard value added tax (VAT) was reduced from 18 percent to 15
percent. Discriminatory application of these taxes has in the past
distorted trading, especially in sugar, maize, and milk powder.
Procurement decisions can be dictated by donor-tied aid, or influenced
by corruption. Customs and immigration rules are detailed and rigidly
implemented. These restrictions have seriously inhibited manufacturing
under bond schemes. A strict constructionist attitude among customs
officials often leads to delays in clearing both imports and exports.
As Kenya carries out and enhances its Structural Adjustment Program
(SAP), the implementation of its trade policy will see certain
adjustments and modifications. For example, in April 1995, the
government banned most grain imports contrary to SAP protocols.
However, the ban was lifted in June, 1995. Notwithstanding this
backsliding, the overall trend is to continue with the economic reforms
initiated in 1993 and 1994.
6. FOREIGN EXCHANGE REFORM
In October, 1993, the market and the official exchange rates were
unified and opened up to market fluctuation. Since then, the Shilling
has grown stronger, rising from a peak of KSh. 83/$1 in November 1993 to
KSh. 63 at end of March 1994, and KSh. 33/$1 in October, closing 1994 at
KSh. 45/$1. As of July 1995, the exchange rate was Ksh 54/$1. In
February 1994, the government announced more liberal foreign exchange
measures which will eventually replace the highly restrictive foreign
exchange control legislation. All exporters are allowed to retain all
foreign exchange proceeds in foreign currency accounts at commercial
banks in Kenya. They may use the retained proceeds to finance business-
related current expenses and debt service payments or sell them to banks
at the market determined exchange rate. Banks are permitted to sell the
foreign exchange they purchase in the retention market for their own
accounts, and to offer forward exchange contracts to exporters and
importers at market-determined rates. No limits apply to the amount or
period of cover.
There are no official schemes for currency swaps or exchange rate
guarantees for external debt servicing, except for the Exchange Risk
Assumption Fund, which covers the foreign exchange losses associated
with exchange fluctuations occurring after July 1, 1989 for three
development finance institutions.
Measures announced in February, 1994 permit Kenyans and other residents
to operate foreign currency accounts and borrow from the off-shore
market at the LIBOR interest rates provided they do not seek a
government guarantee. The measures give foreign investors in Kenya
access to local credit and tourists a chance to settle their bills,
obtain air tickets and pay airport taxes in either Kenya Shillings or
foreign currency. Restrictions on remittance of new foreign investment
income have been removed. Remittances of funds in blocked accounts can
be made at a rate of $100,000 per year through commercial banks. Non-
residents on a work permit in Kenya may operate foreign currency
accounts and remit after-tax employment earnings without government
approval. International travelers are allowed to carry up to KSh.
100,000 in Kenyan currency, a move that is particularly beneficial to
travelers within the Eastern Africa region where the Kenya Shilling is
convertible. The recently licensed foreign exchange bureaus should
reduce the large spread between the buy and sell rates, especially for
smaller transactions.
The foreign exchange market, as is expected, is not highly developed nor
sophisticated. In October 1994, for example, the Kenyan shilling
appreciated against all major currencies, reaching KSh. 33 to the
dollar. Fluctuations in the exchange rate of Kenya shillings occur from
time to time, but these are the result of small amounts -- five to eight
million dollars are traded during an average week -- compared to some
900 to 1,300 million dollars in Kenya. Traditionally, speculators have
moved funds to Kenya to take advantage of relative economic stability
and higher interest rates compared to what can be earned is the United
Kingdom (currently 17 percent in Kenya versus 7 percent in U.K.).
Taking into account a 5 percent interest risk spread used by the
speculators, the result has been an inflow of speculative funds. Other
sources of excess foreign exchange liquidity include flight capital from
surrounding countries, official regional development and disaster funds,
deposits by NGOs and religious organizations operating in surrounding
less stable countries, and dollars received by higher coffee and tea
prices. Almost all of these funds, which are in short term monetary
instruments, could be transferred out of the country in a matter of
hours. They are not a source for long term, 20 year horizon investments
which are needed for job creation and sustained economic development.
Kenya, as part of its SAP, agreed to Section 8 of the IMF, declaring it
would not arbitrarily set exchange rates for the future. The GOK,
however, does have other monetary and fiscal policies and regulations at
its disposal. The SAP does not call for an ideal exchange rate, but
rather stresses that the rate should be market determined. However, the
IMF/World Bank and GOK are interested in maintaining a fairly stable
exchange rate, free of short term wild fluctuations. The exchange rate
which went from KSh. 26/$1 in March 1991 to KSh. 83/$1 in November 1993,
and KSh. 33/$1 in October 1994, has now appeared to stabilize in the
KSh. 50-55/$1 range.
7. GRAIN SECTOR REFORM
The government took major steps in dismantling grain marketing controls
in 1993. Supported by the donor community, the government decontrolled
producer and retail prices of grain including maize (corn). In August
1994, the government imposed a temporary ban on the import of certain
grain. However, in the face of strong World Bank/IMF and donor
pressure, this ban was lifted a month later.
Currently private traders are allowed to import cereals; although in
April 1995 the GOK imposed a six/nine month ban on imports of maize,
soft wheat, sugar, and milk. The ban was lifted for all products except
milk in June 1995. Domestic movement controls have been eliminated,
thereby, effectively ending the maize marketing monopoly of the state-
owned National Cereals and Produce Board. These are substantial steps
toward full liberalization of maize marketing reform. However, the
government-owned National Cereals Produce Board (NCPB) still maintains
minimum produce prices for all the cereals and is an active importer.
The NCPB, which receives considerable subsidies from the government, has
yet to rationalize (privatize) some of its countrywide infrastructure in
line with its reduced role in grain marketing.
As a means of providing protection to domestic growers from cheap grains
imported at subsidized prices under the liberalized marketing system,
the government in September 1994 introduced a variable import duty for
maize, wheat, rice, sugar and milk. The duty was applied whenever the
import reference price fell below the domestic reference price. The
import reference price was calculated from the FOB price of the product
plus the sea freight charges, port charges, and a profit margin of 20
percent for the importer. The domestic reference price was based upon
the minimum buying price from the domestic producer plus transport and
handling costs to the port of Mombasa. The June 1995 budget replaced
the variable import duty with an ad valorem duty and specific duty rates
whichever is greater. The rates under the new structure are equivalent
to the most recent variable import rates.
8. CURRENT ECONOMIC SITUATION AND TRENDS
During the first quarter of 1994, Kenya's predominantly agricultural
economy suffered the impact of inadequate rains in 1993. This increased
the country's dependence on food imports and hindered a quick recovery
from the 1992-1993 slump. Real GDP grew by a paltry 0.2 percent in
1993, but then recovered and reached 3.0 percent in 1994. Poor weather
in 1993, intermittent tribal clashes, high inflation and interest rates
which reached record levels in November 1993 prevented a fuller economic
recovery in 1994.
The current economic environment has significantly improved, when
compared to the situation up to 1993. The Government has pursued tight
monetary policies to counter the inflationary pressure experienced in
Kenya during 1993/94. Interest rates were brought down by instituting
such measures as open market monetary operations, sales of Treasury
Bills, and restriction of commercial banks access to credit from the
Central Bank. Significantly, discount rates on Treasury Bills dropped
from a high of 40.0 percent in fiscal 1993 to a more realistic and
market driven 18 percent in fiscal 1994, and stabilized at 17 percent in
June 1995. These monetary policies coupled with the removal of controls
on prices, interest rates, importation, and exchange rates improved the
conditions of doing business in Kenya.
B. PRINCIPAL GROWTH SECTORS
1. OVERVIEW
Kenya's main growth sectors include agriculture, tourism, power
generation, and manufacturing. Agriculture is the mainstay of the
Kenyan economy, providing livelihood to approximately 75 percent of the
population. The agricultural sector currently contributes an estimated
28 percent of the GDP, and generates 60 percent of the total foreign
exchange. The sector has strong linkages with the manufacturing sector
offering opportunities in technology infrastructure such as packaging,
storage, and transport while creating demand for such inputs as
fertilizer, herbicides and fungicides.
Tourism is currently Kenya's single largest foreign exchange earner. In
1994 the country was host to over 864,000 tourists earning it about $546
million. The sector offers investment opportunities in accommodation,
recreation, and entertainment facilities, including hotels, health spas,
holiday centers and ecotourism.
Horticulture -- producing flowers and fresh fruits and vegetables for
the European market -- is the fourth largest earner of foreign exchange
and the fastest growing sector in the Kenyan economy. The earlier
appreciation of the Kenyan shilling against all major foreign currencies
had adversely affected this sector as well as tourism. With the
shilling in the range of KSh. 55/$1, it is expected this sector will
continue to expand rapidly.
The manufacturing sector is one of the expanding sectors of the economy.
The Government of Kenya pursues a policy of import substitution and has
given priority to the manufacturing sector. Major opportunities exist
in agro-processing, textiles and apparels, automotive components
assembly, electronics, plastics, paper and paper products, chemicals,
and pharmaceuticals.
The new economic policy is expected to place a greater stress on export
manufacturing, rather than just import substitution. As a result of
import substitution, the manufacturing base in Kenya and neighboring
countries is competitive, rather than complementary. With a growing
emphasis on export manufacturing, Kenya hopes to become an African
"tiger," (more properly a "lion," as there are no tigers in Africa) by
the year 2010.
The country has a reasonably well established power generation network
consisting of hydro, thermal, and geothermal plants. Current power
generation is 3,396.3 GWH. Demand for electricity energy is growing at
an estimated 17 percent while generation is growing at a rate of only
2.5 percent. The government is keen on developing both thermal and
geothermal power production to supplement hydro power generation.
However, due to allegations of mismanagement and corruption,
multilateral and bilateral donors in 1991 suspended funding for power
generation projects. This created a gap in the funding pipeline for
power generation resulting in a wide gap between existing and planned
generating capacity and current and future demand. Brownouts and
blackouts may become more frequent over the next several years until
capacity catches up with demand. Sales opportunities currently exist
in geothermal power equipment for an additional three plants which have
been earmarked for immediate development.
2. TOURISM
Tourism is Kenya's second largest foreign exchange earner after
agriculture, that is, including all agricultural exports -- coffee, tea,
horticulture, etc. Tourism levels stagnated in 1993-94, due in large
part to the appreciation of the shilling and the consequent increased
cost of goods and services plus security concerns. Nevertheless, the
country received an estimated 864,000 tourists in 1994 thus earning
about $546 million which surpassed 1993 earnings of $359 million.
Europeans account for some 55 percent of Kenya's tourists; Americans
account for about 10 percent. The 1994 tourism earnings were only
slightly below combined revenues from coffee and tea exports. The
coastal beaches, wildlife, and unique scenery are Kenya's main
attractions. Unfortunately, insecurity, disintegrating infrastructure,
and growing competition from neighboring countries threaten a rapid
expansion of this lucrative industry. On the other hand, political
pressures stemming from competing land uses between humans and animals
makes conservation a high profile issue. Fiscal incentives in the
tourism industry and the recent liberalization of the foreign exchange
regime are likely to reduce costs in the industry and make Kenya an
attractive destination. A plan to permit hunting in a limited basis, if
approved, may also boost revenue. This will improve bed occupancy rates
which declined from 52 percent in 1993 to 43 percent in 1994.
3. ENERGY/POWER GENERATION
Kenya is dependent upon petroleum products for 80 percent of its
commercial energy. Despite over 30 years of exploration, no
commercially viable petroleum has been found. GOK parastatals are
involved in petroleum operations including refining and bulk
transportation; the government recently liberalized pricing modalities.
At the marketing level, seven private international and local oil
companies are involved. The seven oil companies together with the
government-owned National Oil Corporation are licensed to purchase crude
oil and to market petroleum products. In late 1994, the government
decontrolled petroleum prices but imposed a Road Maintenance tax on
petrol and diesel. The net effect of these changes was an increase in
petroleum retail prices by an average of 10 percent. The new tax
replaces all toll stations except those at the international borders.
The 30-year-old Kenya Petroleum Refineries Ltd. (KPR) refines crude oil
into LPG, motor spirits, jet fuel, kerosene, diesel, gas oil and fuel
oil. The refinery has a total throughput of 2.08 million metric tons
(95,000 barrels per stream day) and is operating at about 65 percent of
plant capacity.
The World Bank is understood to be studying the possibility of funding
LPG facilities. Due to the lack of any facilities to import and store
LPG, a product essential for cooking and lighting, the refinery runs a
crude mix to maximize LPG production. The government owns 50 percent of
the share capital of the refinery, while the balance is spread evenly
among Shell International (U.K. Inc.), Caltex and Esso. Management is
provided by the government with assistance from Shell in an advisory
role. The government recognizes the need to upgrade the technology in
the aging refinery if it is to compete effectively with other refined
product suppliers. KPR has an uphill task to reduce the lead content in
gasoline. In the past, the refinery has been able to do this using the
installed plant and equipment. Further improvements would require
substantial rehabilitation work and the substitution of expensive non-
lead additives to produce unleaded gasoline. Petroleum products (white
oils) are transported inland mainly by pipeline. The 14-inch Mombasa-
Nairobi-Eldoret pipeline belongs to the government-owned Kenya Pipeline
Company (KPC). Pipeline extensions, one to Kisumu and another to the
Kenya - Uganda border town of Malaba, are expected to be constructed
soon.
Kenya spends over 21 percent of its foreign exchange earnings on imports
of crude oil and petroleum products. In 1994 the country imported
petroleum products valued at $398 million. Energy demand in Kenya is
growing at about 8 percent a year; the country is therefore looking for
alternative sources. Both hydro-electric generation and geothermal
power have been identified as good possibilities for the future.
Development for these two energy subsectors has been slow due to poor
economic performance and a shortage of donor aid. The government has,
however, steadily increased hydro-electric and geothermal power
generation in the last five years to supplement the more expensive
petroleum fuels. Generation of electricity from other sources is being
actively explored as an alternative to petroleum fuels. The World Bank
has funded a project to develop more geothermal power stations including
Ol'Karia Domes, Eburu,and Suzwa. Potential exists for the use of fuel-
efficient stoves and small-scale solar panels for rural inhabitants.
The country has an installed capacity of 604 MW hydro, 159 MW thermal
oil and 45 MW geothermal electricity. Hydro-electricity supplies 3,068
GWH, including power from Uganda. By the year 2000 the country will
require 949 megawatts to meet national demand. Renewable energy sources
are largely undeveloped. The country depends on imported solar panels.
Animatics, which sells panels from ARTCO Solar Company, is one of the
several major solar companies operating in the country. Biomass, though
cheaper to use and in plentiful supply in rural Kenya, remains untapped.
4. MANUFACTURING
Kenya's manufacturing sector policy was initially focused on import
substitution. This policy, however, has recently been replaced by
export-oriented manufacturing. Opportunities exist for direct and joint
venture investments in various sectors, including: agro-processing,
textile and apparel manufacture, automotive components assembly,
electronics, plastics, paper, chemicals and pharmaceuticals, metal and
engineering products. Specific opportunities are available in:
Paper Products: Kenya imports about 20,000 tons of coated white lined
chipboard and other boards for packaging, and 5,000 tons of newsprint,
waste paper, printed paper, and other types for local consumption.
Investment opportunities exist in paper production using forest
products, bagasse, sisal waste, straw, and waste paper.
Metal and Engineering: Kenya has built up a substantial basic metal
sector making a variety of downstream products from local and imported
steel scrap, steel billets, and hot rolled coils. The country possesses
a broad based metal products sector and imports approximately 277,000
tons of various metals annually. There are various opportunities in the
development of a nucleus foundry.
Vehicle Parts and Assembly: The country's active motor vehicle
population is approximately 350,000 with about 15,000 new entrants each
year. Manufacture of components for use in local assembly and for
export to regional markets is expanding.
Electrical Equipment: Manufacture of electrical equipment in Kenya is
limited. Investment potential exists for the production of fractional
horsepower motors, circuit breakers, transformers and switchgears,
capacitors, resistors, and integrated circuit boards.
Electronics: Key opportunities for direct investment, joint-ventures
and subcontracting exist in the assembly of a wide range of electronic
goods in Kenya. These include the production of: consumer electronics,
such as color televisions, VCRs, printers, floppy disk drives, printed
circuit boards, computer power supplies, transmission equipment, and
industry support items, including cables, cords, and metal plating.
Plastics, Chemicals and Pharmaceuticals: There are many investment
opportunities in chemicals, pharmaceuticals and fertilizers. These
include production of PVC granules from ethyl alcohol; formaldehyde from
methanol; melanin from urea; cuprous for coffee bean disease; caustic
soda and chlorine-based products; and active carbon.
5. OTHER SECTORS
Agriculture: Kenya is basically an agricultural country. In order to
feed itself, further development in the sector is essential. Only 20
percent of its land mass is arable. The country has reduced its annual
population growth rate from 4 percent to approximately 3.0 percent. In
order to maintain per capita food production levels, more modern
agricultural methods and inputs are required, as well as expanded large
and small scale irrigation schemes. Therefore, growth in the
agricultural sector is important in the near, medium, and long terms.
Telecommunications: A modern telecommunications system will be
important if Kenya is to continue to play a regional role and as a
gateway to East and Central Africa. Currently, Kenya is in the process
of examining how to liberalize its telecommunications industry. It is
expected that telecommunications will become a growth sector in the
future.
Computers and peripherals: These will become more important as Kenya's
economy grows. The reduction in June 1995 of duties and VAT on
computers and the need for Kenyan companies to become more competitive
in the "computer age" should help increase this sector's development.
Growth in this sector is expected.
Health Care: Requirements in this sector will steadily increase with a
growing economy and population. With the high level of HIV in certain
segments of the sexually active population, the development of full
blown AIDS and associated medical care will only expand. However, even
though the need may greatly expand, the demand, or ability to pay, may
not.
Other Infrastructure Development: There will be a need to improve the
highway system and modernize airports. Much of these areas will depend
upon World Bank, AFDB, and other multilateral and bilateral funding.
C. GOVERNMENT ROLE IN THE ECONOMY
Privatization and parastatal reforms, a process which is difficult and
complex in most countries, including Kenya, started in earnest in 1993.
Reforms proceeded, albeit somewhat slowly, in 1994/95. By April 1995,
the GOK had divested its interests in 67 enterprises (most of which were
either inoperable or under statutory management) out of a 1991 list of
207 parastatals designated for privatization. Privatization of
"strategic parastatals" has been sluggish. In the case of strategic
parastatals, the GOK intends to "commercialize" them rather than
"privatize" them.
The Kenya Railways Corporation has allowed private contractors to
provide maintenance services. Kenya Airways is due for privatization by
the end of 1995. President Moi in January 1995 stated that
liberalization of the telecommunication industry should be considered.
Since then, there have been some opportunities in the area of "add ons"
such as FAX and telex services, and a tender for a GSM cellular
telephone network. The GOK has introduced reforms to ensure more
transparency in parastatal privatization and to strengthen an otherwise
not so efficient Parastatal Reform Executive Secretariat. The GOK has
stated it intends to periodically review the parastatal reform process
in order to make it more transparent and responsive to local needs.
This trend is expected to continue creating opportunities for U.S.
firms.
As the GOK continues with the privatization process, it will have to
make hard decisions concerning the Railways Corporation, Ports
Authority, the Electricity Company, and other parastatals which continue
to be a drain on the budget. Commercialization or privatization of
these infrastructure state owned entities will not be easy, but other
countries have been successful in developing joint ventures, strategic
alliances, or outright privatization.
Since the 1992 multiparty elections, the Government of Kenya has
consistently striven to maintain policy measures which will consolidate
and reinforce fiscal and monetary discipline for economic growth. Some
of these measures include control of government expenditure, budget
deficit reduction, and programmed restructuring of the economy in favor
of private enterprise. Privatization and parastatal reform plans are
but one indicator of the government's commitment to the implementation
of the policy measures.
Even though there is still debate within the government over the pace
and extent of reforms, the 1995-96 budget continued the government's
two-year old program of fiscal and monetary reform and economic
liberalization. One new measure the Minister of Finance detailed
concerns how the government intended to increase its revenue by the
establishment of a new Kenya Revenue Authority scheduled to start
operation July 1, 1995. The budget, as is the case in most countries,
including the U.S., should be looked upon as a guideline. The public
reaction, including that of the business community, was favorable.
D. BALANCE OF PAYMENTS
The country's balance of payments situation is heavily dependent on the
performance in the agricultural sector. The agricultural import bill
exceeds agricultural export earnings, but the deficit is made up by
earnings from tourism and external grants. Since 1992, the country's
terms of trade have steadily improved. Export prices of coffee,
horticulture, pyrethrum and cement rose. However, prices and export
earnings from tea and vegetable oil declined. The main source of export
growth in 1994 was non-traditional exports such as manufactured products
and horticulture. However, export performance of the manufacturing
sector is not likely to improve in 1995 owing to stiff competition from
the international market, although it may greatly benefit from imports
of intermediate goods.
In 1993 and 1994, the value of both exports and imports grew by an
average of 15 percent annually. Food shipped in to cover production
shortfalls encouraged by the liberalization of import and foreign
exchange controls, has made up an increasing proportion of imports in
the last three years. The volume of wheat imports rose from 100,000
tons in 1992 to 350,000 tons in 1994, maize from 430,000 tons to 760,000
tons and sugar from 150,000 tons to 270,000 tons.
For 1995 favorable weather, improved terms of trade and improved net
long term capital inflows will likely be unable to offset the faster
growth in imports. The outcome of the July 24, 1995 donor Consultative
group meeting with Kenya may be critical in determining future aid
levels. Kenya has a large external debt, close to $ 6.5 billion, which
places a heavy burden on debt repayments. By the end of 1994, Kenya had
accumulated arrears of debt repayments totalling $529 million. Most of
the arrears occurred prior to 1994. The rescheduled government Paris
Club (government) debt, according to the June 1995 budget speech, is
29.5 percent of overall 1995/96 budget. Kenya, however, is current on
its debt repayment.
Foreign exchange reserves have seen a dramatic change from being
equivalent to just six days worth of imports at the end of 1992 to four
months cover ($583 million) in December 1994. By June 1995, reserves
had fallen to three months ($472 million). These reserves can be
expected to fluctuate over time.
E. INFRASTRUCTURE SITUATION
1. OVERVIEW
The Government of Kenya recognizes the critical role of an efficient
infrastructure in economic development. At one time, Kenya had one of
the best infrastructures in Africa. For a variety of reasons, this
infrastructure has deteriorated or failed to keep up with increasing
demands. With assistance from the World Bank, African Development Bank
(AFDB), and other multilateral and bilateral donors, the Government is
implementing reforms aimed at increasing the efficiency of existing
facilities through improved maintenance, rehabilitation, upgrading, and
expansion. The International Development Association (IDA) is providing
$430 million to be spent on infrastructure reforms including the Mombasa
water project, Nairobi-Mombasa road rehabilitation, Kenya Railways
restructuring, and urban transport. Negotiations for infrastructure
rehabilitation loan facilities are taking place between GOK, World Bank,
AFDB, and other international lending agencies.
2. TRANSPORT
a) Airports: Kenya has a reasonably well developed international and
domestic air transport infrastructure. The country has two
international airports: Nairobi's Jomo Kenyatta International Airport
(JKIA) and Mombasa's Moi International Airport, and more than 150
airstrips spread throughout the country. JKIA serves more than 30
airlines providing scheduled services to international cities. In
addition to passenger handling services, it has air cargo handling
facilities, including recently installed chilling facilities for storage
of cut flowers before shipment to Europe. Wilson Airport in Nairobi
handles light aircraft and general aviation, and is the busiest in
Africa. Expansion of the airport at Eldoret to international status has
begun at a cost of $85 million. Some of the existing airport facilities
in Nairobi and Mombasa are currently being refurbished.
b) Seaports: The Port of Mombasa is Kenya's main seaport and serves
most East and Central African countries. It is a deep water port with
21 berths, 2 bulk oil jetties and dry bulk wharves which can handle all
size ships. The port offers specialized facilities, including cold
storage, warehousing, and container terminal. It serves most
international shipping lines and has an annual freight throughput of
about 8.0 million tons. Kenya Ports Authority manages the port
operations. Cargo and containers with proper documentation are
processed through the port fairly quickly. However, in May 1995, out of
the 6,000 plus containers at the port, more than 4,000 had been sitting
there for more than six months, due mainly to a lack of proper
documentation. There are plans to replace or refurbish some of the
equipment at the port. Currently a private firm is constructing a
twenty-five million plus dollar bulk handling and storage facility for
grain and pulses as well as fertilizer in a location adjacent to the
port.
c) Road Network: Kenya has an extensive road network of approximately
95,000 miles connecting most parts of the country. All major commercial
centers are connected by paved roads. The current state of the roads is
deplorable as necessary maintenance has long been lacking. The GOK is
negotiating with international agencies for funds to rehabilitate and
expand the road network, including the badly maintained major highway
from Mombasa, the country's major seaport, to the capital of Nairobi.
It also has legislated a road maintenance levy to raise additional
funds. Kenya and the neighboring countries have established the
Northern Corridor Transport Agreement for facilitation of freight goods
from the Port of Mombasa to Uganda, Southern Sudan, Rwanda, Zaire, and
Burundi.
d) Railway: Kenya Railways Corporation, a GOK parastatal, manages
Kenya's single track railway system which runs from Mombasa through
Nairobi to the Ugandan border with a branch to central Kenya. The
corporation, like most Kenyan parastatals, has heavy operational losses
with consequent deterioration of services. South African Railways has
provided on a lease-hire basis ten 1,200 ton haulage capacity
locomotives for cargo shunting between Nairobi and Mombasa. World
Bank's IDA and the British Overseas Development Administration are
funding a railways rehabilitation program to make KR commercially
viable. IDA has agreed to provide a $60 million facility for the
railway restructuring. The GOK has designated KR as a strategic
parastatal so, to date, has allowed for privatization only of the
corporation's maintenance services.
e) Pipeline: Kenya Pipeline Authority, another strategic parastatal,
operates a UK funded white petroleum products pipeline. Currently the
pipeline runs between the Port of Mombasa, where the petroleum refinery
is located, and the western Kenya town of Eldoret through Nairobi.
Kenya roads are used to haul cargo to and from neighboring land-locked
countries and parts of Tanzania. However, recently, as a measure to
reduce road congestion and increase revenue to the Kenya Pipeline, the
GOK has tried to institute a policy whereby white petroleum products are
to be taken off the pipeline at Eldoret instead of being trucked from
Mombasa. The GOK also has plans to extend the pipeline to another two
western Kenya border towns: Kisumu and Malaba. Unlike other Kenyan
parastatals, the Kenya pipeline has not experienced much corruption and
mismanagement.
3. UTILITIES
a) Telecommunications: The country has one of the most modern
telecommunication systems in the region. Kenya Posts and
Telecommunications Corporation, a GOK parastatal, provides
telecommunication services including: international direct dialing,
subscriber trunk dialing, mobile telephones, telex, facsimile, data
communication and related services. KP&TC is one of the parastatals
slated for sectional privatization. Political interest groups have
stalled rapid privatization which was intended to modernize the
corporation's services. During the June 1995 budget speech, the
Minister for Finance reiterated the GOK's plan to create autonomous
postal services and telecommunications entities and hence upgrade their
services. Japan, which has been a major source of funds for the
modernization of telecommunication, is dominant in the sector.
Investment and strategic alliance opportunities should increase as
privatization proceeds and demand for modern telecommunication services
increases. KP&TC has been providing adequate postal and
telecommunication services, albeit fraught with shortcomings. To keep
abreast of rapid technological changes, it will need to liberalize its
operations and allow for more strategic alliances or joint ventures with
the private sector.
b) Electricity: Kenya's electricity services are provided by Kenya
Power and Lighting Company, another GOK parastatal designated as
"strategic". The company has similar management and operational
problems as other parastatals with resultant deterioration of services.
Power outages and brownouts have become increasingly common due to
constant breakdowns of aged equipment, which is poorly maintained.
Equipment replacement funds are still being sought. Hydro power
generation coupled with thermal and geothermal generation provide the
country with 805 megawatts of electric energy supplied at 240 volts, 50
Hz single phase, and 450 volts, 50 Hz three phase. The standard
electrical plug is the British three blade plug.
c) Water and Sewerage: In Kenya's major towns, local authorities
provide sewerage and drainage systems for residential and commercial
use. Water is supplied by local authorities and other licensed
suppliers. Increased demand for water in Kenya's main urban areas has
led to multi-million dollar water projects in Nairobi and Mombasa.
Water shortages have become a permanent feature although water quality,
for the most part, has been maintained at acceptable international
standards. However, visitors are advised to filter, boil, distill
and/or treat the water, or purchase bottled water.
4. BANK/FINANCIAL SERVICES
Kenya has a well developed financial sector with 33 national and
internationally affiliated banks. These banks offer a range of services
including: mail and cable fund transfer, export and import finance,
letters of credit, and purchase and sale of shares and stocks among
other services. Most of the banks are competent in international
banking practices and provide merchant banking services. Their
services, although lacking competent information technology, is within
acceptable levels. Financial consultancy and management in the country
is still in infancy, but the pioneers have versatile and international
backgrounds. It is anticipated that the major banks will continue to
modernize their data processing equipment and use faster data transfer
means, including satellite links to outlying branches.
5. HEALTH SERVICES
The country has a widespread health service network. Services are
concentrated mainly in urban areas; they are sparsely available in rural
areas. Sophisticated medical treatment is only available in Kenya's two
main towns of Nairobi and Mombasa where most qualified medical
practitioners practice. Although the country has a contingent of
internationally trained medical personnel, they are few in number and
lack modern equipment backup and highly trained support medical staff.
Nairobi Hospital and Aga Khan Hospital in Nairobi provide some of the
most modern medical services in the country, but are overstretched. For
additional details see Chapter IX - "Business Infrastructure".
6. HOUSING/OFFICE SPACE
Quality, reasonably priced residential and office accommodation is
readily available in Nairobi and Mombasa. There are new housing
developments, mostly with adequate utilities. Utility connections,
telephone, FAX, telex, lines to existing office space usually can be
accomplished in a reasonable amount of time.
CHAPTER III
POLITICAL ENVIRONMENT
A. OVERVIEW OF KENYAN POLITICS AND GOVERNMENT
Kenya has had an elected civilian government since independence in 1963.
It became a de facto one-party state not long after attaining self rule
and was a de jure one-party state between 1982 and 1991. On December 2,
1991, multiparty democracy was reintroduced, but without substantial
change in Kenya's one party constitution. The Government of Kenya
appointed task forces to resolve the discrepancies in order to implement
an effective and smooth transition to multi-party democracy.
Multiparty elections took place in December 1992, and there have been
nineteen by-elections since then. The United States has contributed to
this process through funds for voter education and the Electoral
Commission. Only about five of the ninety-one petitions filed soon
after the 1992 elections are still pending in the high court. While not
perfect, most observers of the 1992 elections believe the elections
reflected the general will.
B. NATURE OF POLITICAL RELATIONSHIP WITH UNITED STATES
America has maintained cordial relations with the Government of Kenya
since just before independence when several hundred Kenyan students were
airlifted (Kennedy Airlift) to the U.S. for university-level studies.
The U.S. has given substantial development and military assistance to
Kenya as a pillar of stability in a region where most of its neighbors
were engulfed in conflict. Kenya and the U.S. have cooperated most
recently in providing emergency assistance to Somalia, Sudan, and
Rwanda.
Notwithstanding the long-term cordial relations between the U.S. and
Kenya, there have been differences concerning the pace of political and
economic reforms over the years, particularly human rights concerns.
These differences are not unique to the U.S., but have been voiced by
other bilateral and multilateral donors. In December 1991, donors
suspended balance of payments assistance. AID to projects continued.
This was followed by a World Bank/IMF led Structural Adjustment Plan.
Some of the strife and rhetoric associated with the lead up to the
December 1992 multiparty elections has subsided. Within the last two
years, a more normal diplomatic relationship has returned with U.S. and
Kenyan officials engaged at all levels.
C. MAJOR POLITICAL ISSUES AFFECTING THE BUSINESS CLIMATE
Internal politics influences the Kenyan business climate. Corruption is
a pervasive issue. Appointments to ministries, parastatals, and
financial institutions based on political connections occur. Tenders
have been awarded on the basis of political correctness.
The U.S., in cooperation with the Government of Kenya, has implemented a
special assistance program to help resolve these problems by promoting
accountability, a responsible, effective parliament, an enhanced
research capability, and strong, independent institutions within civil
society.
The ethnic dimension of Kenyan politics centers around the differences
between the large groups that led Kenya to independence, notably the
Kikuyu and Luo, and the smaller groups, including the Kalenjins who feel
they should access a larger share of the national pie. Some of the
latter are now leading the movement for "majimbo" or federalism, which
in the Kenyan context has been used to promote ethnic uniformity within
certain regions.
Between September 1991, when pressure began to mount on the KANU
government to introduce pluralism, and September 1994, over 1,000
Kenyans died in "ethnic-land" clashes. Many more were injured or
maimed, and over 300,000 were displaced, mainly non-Kalenjins living in
the Rift Valley. Property worth millions of shillings was also
destroyed. The United Nations Development Program (UNDP) engaged in a
resettlement and assistance program for displaced persons, with one-
third resettled by September 1994. The program collapsed in December
1994 and has yet to be resumed.
There is a small, but crucial, business community of South Asian origin
which dominates Kenyan business and is linked internationally to many
other South Asians. This group tends to stay out of politics and to
operate behind the scene. Although resentment against this group has
never resulted in major anti-Asian outbreaks, native African groups
evince concern that they not be dominated by Asians.
On the whole there is, and has been, an enabling commercial climate.
Recent political and economic reforms have increased the level of
business confidence and augmented the commercial environment. Even
though further economic and political reforms need to be taken, such
industries as tourism have continued to grow. The rapid increase in
horticulture exports -- flowers and fresh fruits and vegetables to the
European market -- is another example. Kenya looks particularly
appealing relative to other countries in the region and in Africa.
Kenya must compete with the entire developing world, including the
former Soviet Union and Eastern Europe, for investment. At the moment,
long-term investment, both domestic and international, is not flowing to
a significant degree to Kenya. In the main, existing investors have or
are refurbishing existing plants. It will take some time for investors,
who are by nature conservative, to be reassured that economic and
political reforms will be enhanced and continued.
Nonetheless, Kenya has seen substantial economic and political reforms
since 1991. There is a depth to the Kenyan political and economic
system which could serve as a solid platform upon which the country --
both government and the private sector -- can base overall sustained
development.
D. BRIEF SYNOPSIS OF POLITICAL SYSTEM, SCHEDULE FOR ELECTIONS
AND ORIENTATION OF MAJOR POLITICAL PARTIES.
BASIC POLITICAL SYSTEM
PRESIDENT: His Excellency Daniel T. arap Moi
VICE PRESIDENT: The Honorable George Saitoti
CABINET: Twenty-three cabinet ministries
GOVERNMENT
Centralized, largely modeled on British pattern. Central government
administrative control exercised through a system of commissioners
appointed by the President for the 8 provinces and 55 Districts. Kenya
is a member of the British Commonwealth.
LEGISLATURE
Unicameral. Consists of 200 voting members, 12 nominated by the
President. Attorney General and Assembly Speaker are ex-officio, non-
voting members. Procedures generally follow British pattern.
Legislative term is five years.
PARTIES
There are eleven registered parties in Kenya, four of which are
paramount: the Kenya African National Union (KANU), the Forum for
Restoration of Democracy-Asili (FORD-A), the Forum for Restoration of
Democracy-Kenya (FORD-K), and the Democratic Party. President Moi, re-
elected to a five-year term in 1992, belongs to KANU. Under the new
multiparty system, presidents may serve no more than two five-year
terms. KANU also holds a majority of seats (119) in the assembly.
FORD-K has 32 seats, Ford-A, 24, and DP, 22. FORD-K, as the largest
opposition party, hold the "official opposition" title.
Two smaller parties, the Kenya National Congress (KNC) and the Kenya
Social Congress (KSC) each have one elected MP. The Party of
Independent Candidates of Kenya (PICK) lost its only seat to KANU in a
by-election on January 19, 1995. The Kenya National Democratic Alliance
(KENDA), holds no seat, but often speaks on national issues. The
Islamic Party of Kenya (IPK) has never been registered due to the ban on
parties with an ethnic or religious basis.
ELECTION SYSTEM
There is universal suffrage for all citizens over 18. Voting is by
secret ballot at the party nomination stage. Secret ballot general
elections among the top three candidates are then held. Electoral
supervision is by central government civil servants. First general
election was in 1963; the last general election was in December 1992.
The next elections are scheduled to be held by December 1997. However,
elections could be called earlier.
CHAPTER IV
MARKETING U.S. PRODUCTS AND SERVICES
A. OVERVIEW
Kenya represents an excellent market for U.S. goods and services. U.S.
exporters are advised to seek markets here which can service elsewhere
in Eastern and Central Africa. Standard international marketing and
distribution methods are widely used in Kenya. The country has sizeable
and experienced wholesalers and resalers who have represented
international manufacturers and service providers. Local advertising
agents and affiliates of international advertising agencies, affiliates
of international market research companies, and a vibrant and competent
media provide commercial services for manufacturers and international
exporters.
B. DISTRIBUTION AND SALES CHANNELS
Product representation may be achieved through one of the following
methods.
--Establishing a local representative/distributor.
--Selling through an agent or distributor who can cover the entire
region including the neighboring countries of East Africa.
--Selling through established dealers.
The Kenyan market presents no unique marketing problems for U.S.
suppliers. Price usually is the major consideration when deciding to
purchase goods. Establishing a local representative is the most
realistic market penetration strategy for U.S. exporters to Kenya and
the region.
Kenyan businesspeople prefer to buy from international sources with an
established after sales service. An effective servicing and after sale
system is recommended in this market to be competitive. Since Kenyan
dealers and retailers generally do a smaller volume of business than
their American counterparts, U.S. exporters should be prepared to sell
smaller lots.
The distribution system, especially at the retail level, consists of
small outlets by American standards. Wholesalers are also retailers.
They purchase goods from manufacturers and then distribute them either
directly, or through retail outlets to their customers.
Common methods of selling are through the retail outlets, agents or
distributors, established wholesalers or dealers, or selling directly to
the end-users who include government agencies and other private local
organizations.
C. USE OF AGENTS/DISTRIBUTORS; FINDING A PARTNER
There are no Kenyan laws requiring the retention of a local agent or
distributor for a foreign or U.S. company exporting to Kenya. However,
it is advisable that a U.S. company trying to penetrate this market
consider retaining a person or persons residing in Kenya. If the
product to be exported requires servicing, then qualified service
personnel and a reasonable supply of spare parts must be considered.
Failure to address the issue of after sales support and service would be
an impediment to success in this market. To locate a local agent,
distributor, or partner, U.S. businesspeople should contact the U.S.
Department of Commerce District Office nearest to them and request an
agent/distributor search service (ADS) or a World Trade Data Report
(WTDR). ADS is a service intended to assist U.S. exporters find
interested and competent foreign representatives and agents. A WTDR is
a composite trade profile of a foreign firm and contains such company
details as commercial background, information on the reliability of the
firm, credit standing, summary evaluation of the firm, and a
recommendation as to the suitability of the firm as a trade contact.
The Commercial Service at the U.S. Embassy in Nairobi also provides
counselling services for visiting U.S. businesspeople. A nominal fee is
usually charged for the ADS and WTDR services.
D. FRANCHISING
Other than for the multinational Coca Cola Co., franchising in general
has not been successful in Kenya. The main impediments have been
infringement of the franchise agreement by the franchisees and
incompetent management. The distance between the U.S. and Kenya has
made franchisee supervision and training difficult. Local
businesspeople lack knowledge about, and exposure to, franchising. To
successfully enter the Kenyan market, U.S. franchisors will need to
reassess franchising terms with a view to accommodating local
conditions. Local inquiries for such franchises as McDonald's, Burger
King, Pizza Hut, etc., would seem to indicate some interest in these
types of franchises.
E. DIRECT MARKETING
Direct marketing of U.S. products in Kenya would only succeed for big
ticket items. This would include major tender (bid) items, and/or
single sale items. For these items, the Commercial Service in Nairobi
originates "Trade Opportunities" (Tops) and "Foreign Government Tenders"
(FGTs) which are then distributed through the electronic Economic
Bulletin Board (EBB) and National Trade Data Bank (NTDB) of the Office
of Business Analysis, Department of Commerce. U.S. businesspeople can
subscribe to these sources through their nearest U.S. Department of
Commerce District Office.
F. JOINT VENTURES/LICENSING
Unlike franchising, joint ventures and licensing are common features of
the Kenyan business scene; they are understood and practiced. While the
Nairobi U.S. Commercial Service office recommends joint ventures or
licensing as a practical arrangement for entering the Kenyan market,
because it combines local marketing expertise and U.S. manufacturing
competence, we caution that such arrangements should only be finalized
through a local attorney. As indicated above under franchising, there
is a tendency in Kenya for local businesspeople to infringe on product
and other rights and more so where those rights may not be specifically
protected by Kenyan laws. The local attorney should include a clause in
the agreement stipulating infringement penalties based on Kenyan
commercial law and enforceable by Kenyan courts. Joint ventures and
licensing arrangements are generally recognized and protected by Kenyan
commercial law.
G. STEPS TO ESTABLISHING AN OFFICE
As a means of establishing a legal presence in Kenya, U.S. firms should
register with the Kenyan Registrar of Companies as a foreign company
rather than register a business name or incorporate in Kenya.
Incorporation of a company in Kenya as a subsidiary of a U.S.
corporation, as opposed to the registration of a U.S. firm, is more
complicated and usually more expensive. The registration entails:
within 30 days of establishing a place of business in Kenya, deliver to
the Registrar of Companies, at the Companies Registry, Attorney General
Chambers, Nairobi the following:
(1) A copy of the charter, statutes or Memorandum and Articles of
Association or other instrument constituting or defining the
constitution of the company certified accurate by a Notary Public;
(2) A list of the company directors and the secretary containing
details of their full names, physical and/or postal address,
nationalities, business occupation and directorships (if any) of Kenyan
companies;
(3) A statement of all mortgages or charges (if any) created by the
company over any property situated wholly or partly in Kenya;
(4) The names and postal addresses of one or more people resident in
Kenya authorized to accept service of legal proceedings or notices on
behalf of the company;
(5) The full physical and postal address of the company's Head Office
or registered office; and
(6) The physical and postal address of the company's place of business
in Kenya.
The Registrar of Companies issues a "Certificate of Compliance" that the
requirements of the Kenyan Companies Act have been fulfilled. This
allows the company to obtain trading licenses from the local authority
and the Ministry of Commerce and Industry.
The Commercial Service recommends U.S. firms obtain the services of a
local attorney to undertake the registration. Kenyan-based well
established legal firms will provide the services for a nominal fee of
$500.00 plus a value added tax. Interested U.S. firms should contact
the Commercial Service for a list of attorneys, or see the list in
Appendix E(12).
Kenya has, in the main towns of Nairobi and Mombasa, well-established
realtors specializing in all areas of real estate management. U.S.
firms with assistance from the Nairobi U.S. Commercial Service can
select the realtors best positioned to provide office accommodation
services.
H. SELLING FACTORS/TECHNIQUES
Catalogs and product brochures are useful tools for selling in Kenya.
They serve as convenient reference points for both resalers and end
users. The Kenyan market is still unsophisticated and requires visual
representation for most products. Catalogs and brochures are ideal for
this and more so for technical details. Technical details are important
in product brochures since Kenyan technical personnel are poorly trained
and, for complex equipment, the brochures serve as reference for
maintenance details. They supply both end-users and importers with up-
to-date product information, including prices and the latest
technological developments. U.S. firms should, as far as practical, use
Kiswahili as a second language on the flyers, with English being the
first language.
Import licenses are no longer required in Kenya. Import tariffs have
been harmonized and lowered: from July 1, 1995, duty rates have been
reduced to between 40 percent and zero. The Government of Kenya
requires exporters to obtain certificate of inspection for quality and
price comparison from Cotecna Inspections, S.A. of Switzerland (U.S.
address: Cotecna Inspections, Inc. 11305 Sunset Hills Rd., Reston, VA
22090, Phone: 703-689-0805), or the Society Generale de Surveillance
S.A., 1 Place des Alpes, B.P. 898, CH-1211 Geneva 1, Switzerland (U.S.
address: SGS Control Services Inc. 42 Broadway, New York NY 10004).
Under new Kenyan regulations, the inspection agency also establishes the
customs classifications of the goods to be imported. It is important
for American exporters to ensure that their shipments are classified at
the lowest legal tariff rate.
I. ADVERTISING AND TRADE PROMOTION
The most widely used advertising media in Kenya are press, radio, and
television. The development and use of other media is limited and not
cost effective. Kenya has three main daily newspapers: The Daily
Nation, East African Standard, and Kenya Times; seven weekly newspapers:
The People, Sunday Times, Sunday Nation, Sunday Standard, East African
Chronicle, The East African, The Target; two weekly magazines: Economic
Review, and Weekly Review; four monthlies: The Option, Finance,
Presence and Law Monthly; and a professional journal: East African
Computer News; all with national distribution. The government-owned
Kenya Broadcasting Corporation (KBC) operates both radio and television
on a commercial basis. Government radio air time is 5:00 am to 12
midnight, while government television air time is limited to about 12
hours daily. Kenya Television Network, run by the ruling party, runs a
24 hour channel with considerable CNN programming. The GOK continues to
be reluctant to license private radio and television companies. A new
KBC cable station is expected to start up shortly.
Some of the leading international advertising agencies, including Ogilvy
& Mather, and Young & Rubicam, have local offices or affiliates.
Although there are no restrictions on importing ready-to-use advertising
materials, U.S. firms should closely liaise with locally based
advertising firms to obtain leads on accepted advertising norms and help
adapt the material to fit local situations including translation
services as necessary.
The U.S. Commercial Service in Nairobi would be pleased to assist
individual firms in conducting solo exhibitions or technical seminars on
a reimbursable basis. The U.S. Cultural Center multi-media room can be
reserved and booth materials can be supplied for such exhibitions and
seminars upon prior notice. The U.S. Commercial Service also
periodically sponsors industry-wide, as well as industry-focused, trade
shows in Nairobi. Interested parties should contact the Commercial
Service in Nairobi as follows:
Senior Commercial Officer
The Commercial Service
Unit 64100, Box 51
APO AE 09831-4100
Fax: + (254)-(2)-216-648
Tel: + (254)-(2)-334-141, Ext. 407
Telex: 22964 AMEMB
The Nairobi International Trade Fair, an annual six day all products
exhibition organized by the Agricultural Society of Kenya, is an
appropriate venue for exhibition and promotion of such products as
agricultural machinery, equipment and inputs, construction equipment,
food processing and packaging equipment, and road construction
equipment. There also are some specialized trade exhibitions organized
annually in Nairobi covering computers, horticulture and medical and
telecommunications equipment. U.S firms marketing regionally should
examine the possibility of participating in solo U.S. Regional Trade
Fairs and in U.S. pavilions organized in other countries in East and
Central Africa. U.S. firms should contact the U.S. Commercial Service,
U.S. Embassy, Nairobi, Kenya for details on these trade exhibitions.
J. PRICING PRODUCT
Although many U.S. firms prefer to quote prices f.o.b. U.S. port, price
quotations for Kenyan-destined goods should be on c.i.f. Mombasa or
Embakasi (Nairobi) basis, i.e. costs, insurance, and freight to the
point of disembarkation; Mombasa for sea freight and Embakasi for air
freight. The c.i.f. quote in U.S. dollars is generally acceptable and
preferred by Kenyan importers as they are familiar with customs charges,
including taxes, that are levied at the local ports/airports, and
brokerage and handling charges.
K. SALES SERVICE/CUSTOMER SUPPORT
U.S. firms exporting big ticket and other durable items to Kenya should
show a willingness and ability to provide trained headquarters service
personnel, to train local staff, and to establish strong liaison with
end-users for continuous equipment performance assessment.
Manufacturers, in conjunction with the local representative, should
provide detailed product information, including operating instructions.
This is important because most of the operating personnel in Kenya are
undertrained and the end-users's support staff are prone to mishandle
equipment if they do not receive initial instructions and are not
provided with comprehensive manuals. Strong integrated back-up service
is also important as is ready availability of spare parts.
L. SELLING TO THE GOVERNMENT
All major Government of Kenya procurements are done through a tendering
(bidding) system. The Commercial Service in Nairobi notifies potential
U.S. suppliers of the GOK's intended procurements by preparing a
"Foreign Government Tender" (FGT). The FGT, just like TOP referred
earlier, is distributed by the Office of Business Analysis of Department
of Commerce through an Economic Bulletin Board (EBB). It is also
included in the monthly National Trade Data Bank (NTDB) database. Both
EBB and NTDB are available at Department of Commerce District Offices
located in major U.S. cities. U.S. firms responding to large World
Bank/Multilateral donor projects should be competitive and follow tender
instructions especially in financing. Some government tenders are
invited only from prequalified firms. The U.S. Commercial Service is in
the process of determining how interested U.S. firms may prequalify.
Interested U.S. Firms should contact the U.S. Commercial Service in
Nairobi for further information.
M. PROTECTING YOUR PRODUCT FROM IPR INFRINGEMENT
Kenya is a member of the Paris Union International Convention for the
Protection of Industrial Property (Patents and Trademarks). It also has
among its statutes legislation enacted in 1990 for protection of patents
and trademarks. Trademarks are protected for a period of seven years
from the date of application. The 1990 legislation created the Kenya
Industrial Property Office (KIPO) for receipt of IP international
applications, issuance of industrial property rights, screening
technology transfer agreements and licenses, and dissemination of patent
information.
Kenyan protection of copyrights is neither extensive nor efficient. The
Copyright Act of 1989 has provisions for protection from audio copyright
infringement, but not for video. Kenya has law firms with IPR-
specialized attorneys who can advise U.S. firms on Kenyan IPR
legislation. The U.S. Commercial Service in Nairobi will gladly assist
U.S. firms wishing to contact such law firms.
N. NEED FOR A LOCAL ATTORNEY
The Kenyan legal system is based on English law. Although not
substantially unlike the U.S. legal system, Kenyan legal practices and
procedures differ, hence requiring services of either a Kenyan based
attorney or an attorney licensed to practice within the British
Commonwealth, commonly referred to only as the Commonwealth. U.S. firms
should ensure they seek services of such attorneys whenever legal
services are required; contravention of the Kenyan legal practices and
procedures, including using the services of a non-Commonwealth attorney
could result in serious repercussions such as deregistration of the
company, loss of IPR protection, and nullification of any and all legal
agreements, contracts, charges, etc. U.S. firms are advised to seek
clarification of all legal terminologies as legal terms in Kenyan
English may differ in meaning for the same legal terms in American
English. See appendix E Section 12 for a list of attorneys familiar
with commercial law, regulations, and practices.
CHAPTER V
LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
A. BEST PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES
SUMMARY
RANKING PRODUCT Est. Total Est. Imports
Market from U.S.
(In $ Million) (In $ Million)
1. Telecommunication Equipment 89.5 15.0
2. Electrical Power Systems 51.0 8.4
3. Industrial Chemicals 72.0 37.0
4. Food Processing & Packaging Eq. 24.7 2.4
5. Automobile Parts & Service
Equipment 101.5 1.5
6. Plastic Materials & Resins 83.6 3.6
7. Agricultural Machinery & Equipment 24.0 2.7
8. Laboratory Scientific Instruments 23.0 2.7
9. Computers & Peripherals 20.2 5.4
10. Aircraft and Parts 53.5 16.5
BEST PROSPECT FOR NON-AGRICULTURAL GOODS AND SERVICES
1. Telecommunications Equipment (TEL)
Comments:
There is no significant local production of telecommunication equipment.
U.S. know-how is respected in this market, but U.S. firms have a
continuing problem in matching the financing terms (concessionary and
mixed credits) offered by other competitors. The telecommunications
sector is the key to the sustained development of Kenya. The GOK has
accepted that liberalization of this sector is essential. There should
develop in the near future opportunities in strategic alliances or joint
ventures, especially in the areas of cellular telephone and value add-
ons to the traditional telephone system. With the liberalization of the
telecommunications sector, Kenya could possibly play more of a regional
role, especially if AT&T's Africa One Fibre Optics project goes ahead.
1994 1995 1996
($ Millions)
Total Market Size 84.0 87.4 89.5
Total Local Production N/A N/A N/A
Total Exports N/A N/A N/A
Total Imports 84.0 87.4 89.5
Imports From the U.S. 12.1 13.0 15.0
MOST PROMISING SUB-SECTORS: Market Size Est. 1995
Line Telephone & Telegraph Apparatus $35.5
Navigational Equipment & parts 2.2
2. Electrical Power Systems (ELP)
Comments:
Kenya's annual capital expenditure for transmission lines and substation
investment will trend upward over time although the government will have
to balance its intention to provide electricity for all Kenyans with
budgetary constraints. Areas of particular interest to foreign
suppliers include the continuing Rural Electrification Program and the
World Bank-sponsored geothermal power generation project. Demand for
replacement equipment for existing facilities also will be a
considerable factor. There is no local production of any of the items
covered in this category.
1994 1995 1996
($ Millions)
Total Market Size 45.2 48.3 51.0
Total Local Production NIL NIL NIL
Total Exports NIL NIL NIL
Total Imports 45.2 48.3 51.0
Imports from U.S. 7.0 7.8 8.4
MOST PROMISING SUB-SECTORS: Market Size Est. 1995
Switchgear Motors/Engines $8.2
Transmission/Distribution
Equipment $6.0
3. Industrial Chemicals (ICH)
Comments:
Kenya imports all its industrial chemical requirements. European
suppliers are the current market leaders. New investment in
manufacturing is encouraged by the Government of Kenya. Thus, this
sector has growth potential as new industrial materials are required.
U.S. industrial chemical manufacturers/suppliers should actively
consider utilizing Kenya as a base for penetrating the entire Eastern
and Central African market.
1994 1995 1996
($ Millions)
Total Market Size 70.5 71.3 72.0
Total Local Production NIL NIL NIL
Total Exports NIL NIL NIL
Total Imports 70.5 71.3 72.0
Imports From U.S. 36.0 36.5 37.0
MOST PROMISING SUB-SECTORS: Market Size Est. 1995
Hydrocarbons $8.0
Carboxylic Acids & derivatives 6.0
Synthetic Organic dyes 6.5
4. Food Processing & Packaging Equipment (FPP)
Comments:
Domestic production of food processing machinery is limited to small
commercial ovens used in the baking industry. No significant expansion
is expected in local production in the near future; for all practical
purposes, imported machinery has the total market. With a greater
emphasis being placed on food security in the Greater Horn of Africa,
there will be an increasing demand for food processing storage and
distribution. In addition, the June 1995 budget cut tariffs on FPP
significantly. Thus, this sector should see continuing solid growth for
the future.
1994 1995 1996
($ Millions)
Total Market Size 22.6 24.0 24.7
Total Local Production N/A N/A N/A
Total Exports N/A N/A N/A
Total Imports 22.6 24.0 24.7
Imports from U.S. 2.1 2.3 2.4
MOST PROMISING SUB-SECTORS: Market Size Est. 1995
Vegetable Oil Milling Machinery $12.1
Sugar Processing Equipment 1.2
5. Automotive Parts & Service Equipment (APS)
Comments:
Automotive parts and service equipment are imported mainly from Europe
and from East Asia because Japan and Europe dominate the auto and truck
market. Kenyan statistics mix CKD kits with auto parts and service
equipment. Thus, the breakdown of the total market and import figures
are estimates. By local standards this is a large market with great
potential for expansion considering that neighboring countries of
Uganda, Tanzania, Southern Sudan, Ethiopia, Rwanda and Burundi are also
supplied through this market. With the deplorable state of roads, plus
the influx of used cars in recent years, there is a growing demand for
spare parts and vehicle maintenance. With U.S. firms perhaps becoming
more competitive in Japan, there should be some potential market growth
in Kenya and East Africa. Opportunities exist in this sector, but
success will require aggressive marketing.
1994 1995 1996
($ Millions)
Total Market Size 99.2 100.2 101.5
Total Local Production N/A N/A N/A
Total Exports N/A N/A N/A
Total Imports 99.2 100.2 101.5
Imports from U.S. 0.5 1.0 1.5
MOST PROMISING SUB-SECTOR: Market Size Est. 1995
Auto Engine Parts (Aftermarket) $16.0
Auto Body Parts 2.4
6. Plastic Materials & Resins (PMR)
Comments:
There is no local production of artificial resins. As economic reforms
lead to longer-term sustained economic development, consumer demand for
plastic products is expected to rise. Thus an increase in future
exports is expected in this sector. Competition is from third country
suppliers.
1994 1995 1996
($ Millions)
Total Market Size 82.0 83.0 83.6
Total Local Production N/A N/A N/A
Total Exports N/A N/A N/A
Total Imports 82.0 83.0 83.6
Imports from U.S. 2.0 2.6 3.6
MOST PROMISING SUB-SECTORS: Market Size Est. 1995
Resins $11.0
Unsupported Film Sheets 4.5
7. Agricultural Machinery & Equipment (AGM)
Comments:
There is no significant local production of agricultural equipment. The
Kenyan market for imported agricultural equipment is growing, but at a
very spotty rate. The growth of the market will be influenced by
external macroeconomic factors such as the international price of coffee
and tea. Sugar consumption is growing in Kenya and several large
projects are underway to increase sugar cultivation. However, with a
greater emphasis on food security in the Greater Horn of Africa, there
will be a greater emphasis on the use of modern inputs to agricultural
production, transportation, storage and food processing.
1994 1995 1996
($ Millions)
Total Market size 21.9 23.5 24.0
Total Local Production NIL NIL NIL
Total Exports NIL NIL NIL
Total Imports 21.9 23.5 24.0
Imports from U.S. 1.5 2.1 2.7
MOST PROMISING SUB-SECTORS: Market Size Est. 1995
Tractors $8.7
Dairy Farm Machinery & Parts 5.0
Horticultural, Poultry &
Bee Keeping Machinery 3.3
8. Laboratory Scientific Instruments (LAB)
Comments:
Kenya imports all laboratory scientific instruments. There is no local
production of laboratory scientific instruments. The big consumers are
schools, government agencies and parastatals. With many Kenyans
educated in the U.S., there is a familiarity with U.S. manufactured
scientific equipment.
1994 1995 1996
($ Millions)
Total Market Size 22.4 22.7 23.0
Total Local Production NIL NIL NIL
Total Exports NIL NIL NIL
Total Imports 22.4 22.7 23.0
Imports from U.S. 2.0 2.4 2.7
MOST PROMISING SUB-SECTORS: Market Size Est. 1995
Measuring and Analyzing Instruments $9.5
9. Computers and Peripherals (CPT)
Comments:
The figures below reflect the documented (legal) market. There are no
locally produced computers. A substantial number of personal computers
are imported illegally, or are imported by affiliates of European based
U.S. firms, thus, the statistics do not always register U.S. imports to
Kenya via Europe. The documented market is, therefore, estimated to be
more than half the total market. Mainframes and minicomputers account
for two-thirds of the market in terms of installed value. The combined
duty and VAT on computers is 26.5 percent (10 percent duty, 15 percent
VAT) down from 135 percent three years ago.
1994 1995 1996
($ Millions)
Total Market Size 18.4 19.0 20.2
Total Local Production N/A N/A N/A
Total Exports N/A N/A N/A
Total Imports 18.4 19.0 20.2
Imports from U.S. 4.8 5.0 5.4
MOST PROMISING SUB-SECTIONS: Market Size Est. 1995
Personal Computers $2.6
Local Area Network Equipment 1.3
Mainframe Computers 1.5
10. Aircraft and Parts (AIR)
Comments:
Domestic production is nil. The national carrier, Kenya Airways, needs
replacement aircraft. Kenya Airways is reorganizing its management. A
consulting subsidiary of British Airways has been given a management
contract to restructure and privatize the airline. New aircraft orders
are expected when the restructuring and possible merger with another
carrier is completed, and when finances become available. These
potential new aircraft have not been included in the estimates below
because it is unlikely that the planes will be bought before 1996.
However, U.S. firms are encouraged to maintain their marketing presence,
as big ticket items take many years before a purchase contract is
signed. Nairobi's Wilson airport is the busiest general aviation
airport in Africa. Marketers should maintain and expand marketing
activities for smaller civil aircraft, especially in the face of strong
marketing by South African firms since the lifting of sanctions.
1994 1995 1996
($ Millions)
Total Market Size 52.7 53.0 53.5
Total Local Production NIL NIL NIL
Total Exports NIL NIL NIL
Total Imports 52.7 53.0 53.5
Imports from U.S. 15.8 16.0 16.5
MOST PROMISING SUB-SECTORS: Market Size Est. 1995
Aircraft Parts $3.0
Aircraft Engines 2.0
Aircraft General Aviation 1.5
B. BEST PROSPECTS FOR AGRICULTURAL PRODUCTS
SUMMARY
RANKING PRODUCT Est. Total Est. Imports
Market Size From U.S.
(Metric Tons) (Metric Tons)
1. Wheat 620,000 150,000
2. Sugar 500,000 20,000
3. Oilseed & Products 185,000 6,000
4. Rice, Milled 96,000 10,000
5. Corn 3,100,000 15,000
BEST PROSPECTS FOR AGRICULTURAL PRODUCTS
A. Rank: 1
B. Name of Sector: Agriculture
C. ITA or PS&D Code: Wheat (0410000)
1993 1994 1995 1996
('000 Metric Tons)
D. Total Market Size 580 590 610 620
E. Total Local Production 150 200 220 230
F. Total Exports 0 0 0 0
G. Total Imports 532 300 460 400
H. Total Imports from U.S. 407 150 200 150
I. Exchange Rate 58.81/ 562/
1/ Based on annual average
2/ Quoted on August 2, 1994
Comments:
Kenya does not produce enough wheat to satisfy domestic requirements;
imports are needed. Kenya produces about 30 percent of its annual wheat
requirements estimated at 620,000 tons. The production outlook for the
1995/96 season is 230,000 tons, 4.5 percent above the previous year's
estimate. To cover the production deficit, the industry is expected to
import close to 400,000 tons. The greatest demand is for hard or high
protein wheat used in blending for bread flour as Kenya does not produce
this type of wheat. The total import volume from the U.S. is forecast to
drop to 150,000 tons in 1996, down from 200,000 tons a year earlier.
The decline is a result of the GOK's decision to impose both dumping and
ad valorem or specific duties to protect its local industry from the
influx of cheap imported wheat. The dumping duty is equal to the export
subsidy. Prospects to import wheat also suffered from the import ban on
soft wheat and other agricultural commodities instituted by the GOK in
April, 1995. The ban was lifted effective June 15, 1995.
A. Rank: 2
B. Name of Sector: Agriculture
C. ITA or PS&D Code: Centrifugal Sugar (0612000)
1993 1994 1995 1996
('1000 Metric Tons)
D. Total Market Size 452 460 500 500
E. Total Local Production 382 380 400 400
F. Total Exports 0 0 0 0
G. Total Imports 70 60 90 120
H. Total Imports from U.S. 10 15 20 20
I. Exchange Rate 58.8 1/ 56 2/
1/ Based on annual average
2/ Quoted on August 2, 1994
Comments:
Although sugar is considered to be Kenya's second most important food
item after corn, the health of this vital sector continues to
deteriorate. Over the past 10 years sugar imports have maintained an
upward trend as domestic production has failed to satisfy demand. The
industry is plagued by frequent factory breakdowns, soaring cost of
inputs, and inadequate credit facilities to expand cane production. In
an attempt to protect the industry from massive imports, the GOK imposed
a variable duty on sugar. This duty has been replaced by an ad valorem
duty, currently at 15%.
Kenya's normally substantial sugar consumption levels are declining.
The current retail price of sugar in Nairobi and other major cities has
limited the purchasing power of the majority of Kenyans. Although the
GOK's consumption forecast is estimated at 600,000 tons in 1996, post
believes that total consumption will not exceed 500,000 tons.
A. Rank: 3
B. Name of Sector: Agriculture
C. ITA or PS&D Code: Oilseed and Products (06001)
1993 1994 1995 1996
(' 000 Metric Tons)
D. Total Market Size 165 173 180 185
E. Total Local Production 75 76 80 80
F. Total Exports 0 0 0 0
G. Total Imports 90 97 80 130
H. Total Imports from U.S. 4 4 5 6
I. Exchange Rate 58.8 1/ 56 2/
1/ Based on annual average
2/ Quoted on August 2, 1994
Comments
Increased edible oil production in Kenya remains a problem largely due
to the relatively low cost of imported palm oil. Low yielding seed
varieties, inadequate farm credit, and poor technical farm advisory
services are additional factors which have discouraged domestic oilseed
production.
Although Kenya's oilseed production has picked up slightly in the past
several years, production continues to fall significantly short of
installed capacity estimated at 160,000 tons. Domestic production of
edible fats and oils has risen from 17,000 tons in the mid-1980's to a
forecast of 80,000 tons in 1996. The country's oilseed production is
dominated by sunflower oil, accounting for 90 percent of total output.
The Cotton Board estimates that the demand for cottonseed by crushers is
approximately 25,000 tons per year. In recent years, about 8,000 to
10,000 tons of edible oil was produced from corn. With the past
season's good harvest of corn crop, corn oil production is projected up
marginally.
A. Rank: 4
B. Name of Sector: Agriculture
C. ITA or PS&D Code: Rice, Milled (0422110)
1993 1994 1995 1996
('000 Metric Tons)
D. Total Market Size 91 92 94 96
E. Total Local Production 28 31 34 40
F. Total Exports 0 0 0 0
G. Total Imports 61 60 60 65
H. Total Imports from U.S. 10 10 12 10
I. Exchange Rate 58.8 1/ 56 2/
1/ Based on annual average
2/ Quoted on August 2, 1994
Comments:
Over the past three years Kenya's rice production has averaged 31,000
tons, milled basis. The implementation of a new rice irrigation scheme
and the rehabilitation of existing projects continue to run behind
schedule. Rice is an important food item for the Kenya's Asian
community and in the coastal and lake regions of the country.
Approximately 80 percent of Kenya's paddy production is accounted for by
the National Irrigation Board's (NIB) 4 rice schemes. The Board's
largest irrigation projects are located in Mwea, Central Province, about
60 miles northeast of Nairobi. Mwea contributes close to three-fourths
of the Board's total rice output. The other three rice schemes are
located in Western Kenya around Lake Victoria. Together these 4
irrigation schemes have close to 8,000 hectares devoted to rice
cultivation.
Rice imports run about 60 to 65 thousand tons annually. Imported rice
usually is supplied by Pakistan and Thailand and consists of basmati or
aromatic type. Imports are being handled by private traders who
maintain that U.S. rice is not competitively priced against other
suppliers.
A. Rank: 5
B. Name of Sector: Agriculture
C. ITA or PS&D Code: Corn (0440000)
1993 1994 1995 1996
('000 Metric Tons)
D. Total Market Size 2808 2900 3000 3100
E. Total Local Production 2100 2700 2700 2900
F. Total Exports 0 0 0 5
G. Total Imports 600 762 200 10
H. Total Imports from U.S. 77 50 35 2
I. Exchange Rate 58.8 1/ 56 2/
1/ Based on annual average
2/ Quoted on August 2, 1994
Comments:
In response to large stocks, depressed prices, and the abundant harvest
during the 1994/95 season, the GOK has implemented several measures to
protect the country's corn growers. These measures included: (1) a
sharply increased variable import levy (replaced in June 1995 by an
equivalent ad valorem or specific duty system); (2) authorizing the
National Cereals and Produce Board (NCPB) to purchase corn from local
growers; and (3) permission for millers to export wheat flour provided
they use the revenues to purchase corn. In addition, the NCPB invited
domestic tenders for the sale of wheat in order to generate extra funds
to purchase locally produced corn.
The renewed large role of the NCPB in the local corn market runs counter
to the direction that the Kenyan government took at the end of 1993 to
increase privatization in the grain trade. Another aspect of the
liberalization was to allow private traders to import corn directly. As
the private trade entered the import market, foreign purchases
increased, reaching the record level of 762,000 tons in CY 1994. Partly
due to large imports, internal corn prices were depressed as supplies
mounted, and the GOK felt pressed to intervene.
It is feared that the prevailing low market prices will discourage corn
planting during the 1995/96 season, and that less fertilizer will be
applied, resulting in lower yields. At the same time, lower market
prices are expected to lead to an increase in consumption of corn, which
is a staple in the Kenyan diet, but stocks at the end of the 1994/95
marketing season are still projected at a very high level.
C. SIGNIFICANT INVESTMENT OPPORTUNITIES
1. OVERVIEW
Kenya has a number of growth areas which have not been fully developed.
The Government of Kenya through its Investment Promotion Center has
identified those sectors which the government has prioritized for
investment. The U.S. Commercial Service, Nairobi, has identified those
sectors below in which U.S. firms may be interested in seeking more
information.
2. MAJOR INVESTMENT OPPORTUNITIES
A. HORTICULTURE: The horticultural sector is one of the fastest
growing sectors in the economy. Opportunities exist in the production
and export of products such as cut-flowers, French beans, pineapples,
mushrooms, asparagus, mangoes, macadamia nuts, avocados, passion fruit,
melons and carrots.
B. AGRICULTURE SUPPORT: Investment opportunities exist in seed
production, manufacture of sprayers and pesticides, veterinary services,
and installation of irrigation systems. Opportunities also exist in
support and product distribution, such as cold storage and transport of
horticultural produce.
C. AGRO-PROCESSING: Numerous investment opportunities exist in this
area. Kenya produces excellent beer utilizing locally-grown barley.
There is potential for additional investment due to rapidly increasing
domestic demand. Coffee roasting and grinding are carried out in Kenya,
and further potential such as production of decaffeinated coffee for
export, exists.
Sugar production is below the domestic requirement. Molasses, a by-
product from sugar production, is processed into power alcohol, potable
alcohol, and baker's yeast. There is also considerable potential for
the expansion of chocolate and confectionery products. Investment for
development of palm oil processing is sought.
D. POULTRY PRODUCTS: Hatcheries for the production of chicken both for
domestic and regional consumption represent an under-exploited
opportunity.
E. FISHERIES: Kenya's water resources in 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 fish meal
production), as well as fisheries-support infrastructure.
F. LEATHER AND LEATHER GOODS: Approximately 1.5 million hides and 5
million skins are available in Kenya each year. Most hides and skins
are processed into the wet blue stage for export. Investors have
recently begun producing finished leather, offering potential for the
manufacture of shoes and other leather products.
G. LIVESTOCK: Investment opportunities exist in the rearing of
livestock for meat and dairy products. Non-conventional livestock
farming, for example ostrich and crocodile, farming represent an
exciting new area of investment. Approximately 70 percent of Kenya is
suitable for ranching. American-owned Solio Ranch is a good example.
H. PAPER PRODUCTS: Kenya has one major plant producing paper and paper
board from renewable forest products in an integrated pulp and paper
mill. Investment opportunities exist in the production of paper from
other raw materials such as bagasse, sisal waste, straw and waste paper.
I. TEXTILE AND APPARELS: The textile industry in Kenya has
traditionally concentrated on cotton textile manufacture, predominantly
using local cotton fibre. The basic raw material inputs such as dyes
and chemicals are imported, as is all textile equipment and most spares.
Investment opportunities exist in manufacturing under bond and the
Export Processing Zones for the production of items such as yarn and
garments for export.
J. METAL AND ENGINEERING: The country possesses a broad-based metal
products sector with various independent engineering foundries and
metal-workshops. Opportunities exist in the development of a nucleus
foundry making precision castings.
K. VEHICLE PARTS AND ASSEMBLY: The motor vehicle component industry is
rapidly developing to supply the needs of the three motor vehicle
assemblers. Opportunities exist for manufacturing of components.
L. ELECTRICAL EQUIPMENT: Only a few activities of this type exist in
Kenya. Investment potential exists in the full range of this sector.
M. ELECTRONICS: Although Kenya's electronics industry is still in its
infancy, key opportunities for direct investment, joint-ventures and
subcontracting exist.
N. PLASTICS, CHEMICALS and PHARMACEUTICALS: Many attractive investment
opportunities in this sector remain unexploited.
O. MINING AND MINERAL PRODUCTS: Investment potential exists in
prospecting and mining of minerals such as gold, precious stones and
petroleum.
P. CONSTRUCTION: With the increase in population, opportunities exist
in the construction of residential housing, including prefabricated,
low-cost housing.
Q. TOURISM: Enormous opportunities exist for investment in
accommodation, recreation and entertainment facilities in the following
areas: health spas; new tourist class hotels, villas, holiday centers;
a floating ship hotel on Lake Victoria; and water sports facilities.
There also are opportunities in ecotourism.
For more information on the above sectors interested U.S. firms should
contact the Commercial Service, U.S. Embassy, Nairobi.
The Government of the United States acknowledges the contribution that
outward foreign direct investment makes to the U.S. economy. U.S.
foreign direct investment is increasingly viewed as a complement or even
a necessary component of trade. For example, roughly 60 percent of U.S.
exports are sold by American firms that have operations abroad.
Recognizing the benefits that U.S. outward investment brings to the U.S.
economy, the Government of the United States undertakes initiatives,
such as Overseas Private Investment Corporation (OPIC) programs,
investment treaty negotiations and business facilitation programs, that
support U.S. investors.
CHAPTER VI
TRADE REGULATIONS AND STANDARDS
A. OVERVIEW
Kenyan business has been overregulated in the past. Economic reforms
initiated in 1993 and continuing today allow, for instance, decontrol of
prices, foreign exchange, and imports; as well as deregulation of the
grain sector; these liberalizations have all enhanced the Kenyan
business environment. These actions coincide with a trend in Kenya over
the past two years during which Kenya consistently lowered tariffs and
reduced licensing requirements. Customs rules are still detailed and
rigidly implemented, and they have affected smooth operations of such
practices as manufacturing under bond. This strict constructionist
approach has led to serious delays in clearing both the import of inputs
and the export of finished goods. Although some manufacturers believe
the delays are generated purposely so illegal payments can be made to
customs officers, the Government of Kenya is currently streamlining its
Customs Department operations to make it more user-friendly while
maximizing revenue collection. This is supported by continuous review
and reduction of various duty rates.
Some negative factors do exist, such as foreign investors having limited
access to domestic credit markets and being excluded from some
government tenders. Kenyan importers must use local insurance
companies to insure imports. Insurance companies must reinsure part of
their business with a GOK parastatal reinsurance company. All
commodities imported into Kenya are subject to pre-shipment inspection,
including price comparison, by a Government of Kenya (GOK) appointed
inspection firm.
The U.S. Commercial Office in Nairobi continues to contribute to the
U.S. Mission's dialog on reforms and the problem of overregulating
commercial activities.
B. TRADE BARRIERS/TARIFFS AND IMPORT TAXES
Kenya applies tariffs which are based on the international harmonized
system (HS) of product classification. GOK's FY '95 budget proposals
reduced the number of tariff rates from six to five, and the maximum
tariff rate from 50 percent to 40 percent. The budget placed some items
which were previously allowed in duty-free on a lower tariff category.
Duties on a number of manufactured items have been reduced; for example
computer imports are assessed a duty of 10 percent as compared to a
previous 20 percent; and combined duty and value added tax on
automobiles ranges from 65 to 131 percent, as compared to over 200
percent previously.
The government maintains lower duties and value added tax for selected
items which it considers important for priority sectors. Those items
include: palm oil and tallow, bicycles, steel billets, wire rods,
graphite lead, windmills, power transformers, cables, and active
ingredients used for preparation of human and veterinary
pharmaceuticals, fungicides and pesticides.
In September 1994, the GOK introduced a variable tariff for key imported
food commodities -- wheat, rice, milk, maize (corn), and sugar. The
duty was applicable whenever the import reference price fell below the
predetermined domestic reference price. The import reference price was
based on the F.O.B. price plus freight cost, port charges, and a profit
margin of 20 percent for the importer. The domestic reference price was
based on the minimum buying price from the domestic producer plus
transportation and handling costs to the port of Mombasa. The variable
tariff has been replaced by an equivalent system of ad valorem or
specific duties.
Non tariff barriers include the requirement to use a GOK appointed
inspection firm for imports. Some U.S. firms may find packaging and
labelling requirements difficult to meet. The lack of certain
intellectual property rights (IPR) protection, e.g. on videos, results
in U.S. firms being reluctant to export their goods and services to
Kenya. Insurance of imported items being restricted to companies
licensed in Kenya also may result in constraints.
Kenya's eight tax treaties normally follow the Organization for Economic
Cooperation and Development model for the prevention of double taxation
of income. At the moment there is no tax treaty between Kenya and the
United States; however, a negotiation framework is being pursued.
C. CUSTOMS VALUATION
All imports with F.O.B. value of more than $1,613 must undergo a
preshipment inspection for quality, quantity, and price; they must be
issued with a Clean Report of Findings by one of the three Government of
Kenya (GOK) appointed inspection agencies: Cotecna Inspections SA ( U.S.
address: Cotecna Inspections Inc., 11305 Sunset Hills Rd., Reston, VA
22090, Tel: 703-689-0805); Bureau Veritas, and Societie General de
Surveillance (U.S. address: SGS Control Services Inc. 42 Broadway, New
York, NY 10004). Customs valuation is based upon the price determined
by the government appointed inspection firm. U.S. firms should ensure
that the lowest possible price evaluation is used for customs valuation
purposes by the preshipment inspection firm.
D. IMPORT LICENSES
Import licensing controls were dismantled in 1993 except for a small
number of imports bearing health, environment and security concerns.
Imports are, nevertheless, still subject to some paperwork and
approvals. Imports of machinery and equipment classified as equity
capital or loan purchases must receive prior exchange approval; banks
are not to issue shipping guarantees for clearance of imports in absence
of the approval. All goods purchased by Kenyan based importers must be
insured with companies licensed to conduct business in Kenya.
Importation of animals, plants, and seeds are subject to quarantine
regulations. Certain pets require an import license. Feline and canine
animals are issued with an import license only after a veterinary
surgeon has certified the animal to have been vaccinated against rabies
and has no symptoms of any contagious disease. The Kenyan Embassy in
Washington, DC and in other countries may issue the import license.
Importation is allowed only at designated entry points.
E. EXPORT CONTROLS
Kenyan export regulations are generally liberal and contain few export
restrictions. The country allows export of all items except for the
following which are considered either of aesthetic value to the country
or have national security importance: military equipment and munitions;
antiques and works of art; bullion and coins; archives; live animals
other than livestock and pets; wood charcoal and lumber; ivory, rhino
horn and other products related to the endangered species; human bones;
and specially built transport equipment and automotive vehicles (e.g.
armored cars and tanks). Export of these items must receive prior
authorization by the relevant Kenyan Ministry before an export license
is issued.
F. IMPORT/EXPORT DOCUMENTATION
All Kenyan imports are required to have the following documents:
customs entry forms and import declaration forms from the Kenyan Customs
Department, valid invoices from the exporting firm, and a clean report
of findings from the preshipment inspection firm. Firms exporting from
Kenya need to obtain Form C 29 from Customs Department; and the
following documents, which serve as certificates of origin, from Kenya's
Ministry of Commerce: G.S.P. Form A for U.S. destined goods, EURO 1 for
exports to the European Union, PTA Certificate of Origin for exports to
the PTA(COMESA) area, and Ordinary Certificate of Origin for exports to
all other parts of the world.
G. TEMPORARY ENTRY
Kenya allows entry into the country free of duty goods destined for
neighboring countries or for transshipment. Bonds must be executed.
Such goods must be held in bonded warehouses designated by Kenyan
Customs. Release of the goods into the Kenyan market is prohibited and
only allowed after making statutory customs payments. Samples and
exhibits/displays for trade fairs may be imported into the country duty
free. It is a Customs Department requirement, however, that the items
are re-exported or are certified destroyed by a customs certification
officer after use. An importing firm which fails to meet these
requirement will be surcharged import duty and value added tax on the
presumed value of the items.
H. LABELLING/MARKING REQUIREMENTS
Special labelling is required for condensed milk, paints, varnishes,
vegetables, and butter ghee. In addition, imports of prepackaged paints
and allied products must be sold by metric weight or metric fluid
measure. Some U.S. firms may have to adjust to these metric
requirements. Manufacturers are required to indicate on the labels of
all consumables both the date of manufacture and expiry date. Weights
and measure indicators must be in metric form or both metric and
imperial forms. Labelling for pharmaceutical products should include:
therapeutically active substances, inactive ingredients, name and
percentage of any bactericidal or bacteriostatic agent, expiry date,
Batch number, any warnings or precautions, name and business address of
manufacturer, and registration number of the product.
I. PROHIBITED IMPORTS
It is illegal to import the following items unless exemption has been
granted by the relevant Kenyan Minister: plants, soil, endangered
species, arms and munitions, and non-pharmaceutical drugs. As the list
of prohibited imports is continuously changing, importing firms should
always check with the Kenyan Customs Department, Ministry of Finance,
P.O. Box 30007, Nairobi, Kenya, Fax: 254-2-718417, Tel: 254-2-715540.
J. STANDARDS
The Kenya Bureau of Standards (KBS) is a government regulatory body
under Kenya's Ministry of Commerce and Industry which is mandated to
ensure conformance to International Standards Organization (ISO) product
standards. KBS conducts product testing for individual product category
and undertakes certification. To indicate conformance with mandatory
product requirements, a KBS mark is placed on the certified product. It
is a legal requirement that all locally manufactured consumer products
bear the KBS mark before they are presented for sale. Kenya Bureau of
Standards has legal authority to stop sale of uncertified products, and
to prosecute the offending parties. KBS conducts random checks on
imported products to ensure they conform to ISO standards; those
products that do not meet the standards are withdrawn from the market
and the importer is prosecuted. To obtain the KBS standards, U.S.
exporters should contact: The Kenya Bureau of Standards, P.O.Box 54974,
Nairobi, Kenya, Tel: 254-2-502211, Fax: 254-2-503293.
The Pest Control Products Board (PCPB) registers all agricultural
chemicals imported or distributed in Kenya following local testing by an
appointed research agency. It also inspects and licenses all premises
involved in the production, distribution, and sale of the chemicals.
The board has the right to test chemicals sold locally to assure their
compliance with originally certified specifications. No chemicals can
be imported into Kenya without prior PCPB authorization and chemicals
can only be sold for the specific use permitted by the board.
Unfortunately violations do occur, endangering the environment. For the
most part, however, major horticulture producers and exporters apply
strict European Union and U.S. standards in the application and use of
agricultural chemicals.
All organizations involved in the manufacture, distribution, and sale of
agricultural chemicals in Kenya are members of the Pesticide Chemical
Association of Kenya (PCAK). Members have to sign a "Code of Conduct"
based on the U.N.'s Food and Agriculture Organization Code. This
document requires rigid controls in manufacture, packaging, labeling,
and distribution. It also mandates an ethics code. For specific
requirements, both PCAK and PCBP can be contacted at: Pest Control
Products Board, P.O.Box 14733, Nairobi, Kenya, Tel: 254-2-446-115.
The Kenya Bureau of Standards is currently reviewing all standards.
There are about 1,500 standards which still need to be reviewed. The
U.S. government is looking at possible technical assistance for this
review.
K. FREE TRADE ZONES/WAREHOUSE
Sameer Industrial Park is Kenya's only privately owned export processing
zone (EPZ). Located in Nairobi's industrial area, it has been
operational for over five years. The Government of Kenya has
constructed another at Athi River a nearby Nairobi suburb; a third one,
also government owned is under construction in Mombasa, Kenya's main
seaport. Export Processing Zones are exempted from import duty and
value added tax on imported plant, equipment, and raw materials. They
are accorded a ten-year tax holiday followed by a 25 percent tax levy
(as compared to a regular 35 percent corporate tax levy) for the
subsequent ten years. For the first ten years the zones are exempted
from withholding taxes on dividends and non-resident payments.
Withholding tax is imposed on royalties, interest, dividends, and
management fees.
The Manufacturing Under Bond (MUB) scheme has been operational in Kenya
since 1988. The MUB scheme is accorded most of the incentives of EPZ's
without the requirement of location at predetermined sites. The only
requirement for the manufacturer is to reimburse GOK all costs of the
customs officer and guards at site. During the GOK's FY 96 budget
speech, the Minister for Finance liberalized manufacturing-under-bond
rules to allow tax deductions for purchase of used equipment on leased
sites.
The Export Processing Zone Authority (EPZA) is a Kenya Government
parastatal tasked to facilitate participation in manufacturing in the
EPZs. Details on joining the EPZs can be obtained from: Executive
Chairman, Export Processing Zone Authority, British-American Center
Bldg, P.O. Box 50563, Nairobi, Kenya, Fax: 254-2-713-704. The
Commercial Service of US&FCS, Nairobi, will be glad to assist in
obtaining specific EPZ details for interested U.S. firms.
Nairobi and Mombasa, Kenya's main trading and importing towns, have
sufficiently large warehousing facilities. Most of the warehouses are
for private warehousing; however, some specialized ones provide bonded
warehousing services. Dutiable goods entering Kenya may be stored in
the bonded warehouses without payment of duty and value added tax; but
duty and tax become due and payable when the goods are released from the
bonded warehouse for commercial use. Prevailing tariff rates then
apply.
L. SPECIAL IMPORT PROVISIONS
Kenyan customs regulations have no special provisions for importation of
goods. All goods must be duty rated; however, Kenyan customs
legislation allows the Minister of Finance to waive part or all rated
duty. Legislation disallows waiver on commercial imports. In practice,
waivers are sometimes granted to politically connected individuals.
M. MEMBERSHIP IN FREE TRADE ARRANGEMENTS
Kenya is a member of Common Market for Eastern and Southern Africa
(COMESA) former Preferential Trade Area (PTA). Under the COMESA/PTA
agreements, Kenya exports are accorded preferential treatment; nominal
tariffs are levied in the country of final destination. COMESA/PTA
member countries are working towards a harmonized taxation system.
Kenya is also a signatory to major international trade agreements such
as the United Nations Conference on Trade and Development, World Trade
Organization, and the Lome Convention.
The three east African countries of Kenya, Uganda, and Tanzania have
established a protocol, known as the East African Cooperation Treaty,
intended to revive the operations of the long defunct East African
Community. The East African Cooperation (EAC) intends to enhance and
promote economic, trade, and development programs within the east
African region through integration of infrastructural services;
harmonization of inter-territorial trade & tariffs; and in long term,
currency re-alignment. Political foot-dragging has delayed opening of
the EAC Secretariat, which will be based at the old East African
Community Headquarters in Arusha, Tanzania.
CHAPTER VII
INVESTMENT CLIMATE
A. OPENNESS TO FOREIGN INVESTMENT
The Government of Kenya encourages foreign investment, as it has done
since independence. It stresses investments both for the Kenyan market
and for re-export. The government recognizes the need to improve the
investment climate, especially to generate employment, skills and
foreign exchange. This climate, however, is marred by bureaucratic
inefficiencies, delays in privatization and parastatal reforms, and a
clique of influential politicians, who also have substantial interests
in the private sector, and view foreign investors with suspicion. A new
investment code aimed at making Kenya more attractive for foreign
investment is nearing completion. The code is expected to set clear
guidelines for processing investment applications through the Investment
Promotion Center (IPC). This legislation is intended to strengthen the
one-stop office of the IPC which approves applications and gives
permission for an investor to start operating in the country.
The government has undertaken major economic reforms which have opened
up the Kenyan market to free competition. Major policies undertaken
include government expenditure rationalization, price decontrol, tight
monetary control, export promotion, interest rate and foreign exchange
rate liberalization, and capital market development. The de facto
restrictions on the repatriation of profits, dividends, license fees and
royalties, as well as on capital gains, that had been a major
disincentive have been removed. The Investment Promotion Center has
reduced delays in granting approvals.
In approving new investments, the government gives preference to foreign
equity capital which brings with it management skill, technical know-
how, risk bearing and profitability. The investors are expected to be
domestic resource-use intensive and base their operations outside the
congested centers of Nairobi and Mombasa.
B. CONVERSION AND TRANSFER POLICIES
The Government has relaxed restrictions on remittance of income from
foreign investments earned after February 28, 1994. Such earnings can
be remitted without Central Bank of Kenya (CBK) approval, provided all
taxes have been paid.
Non-Kenyans on a resident work permit in Kenya are permitted to operate
foreign currency accounts and remit after-tax employment earnings
without GOK approval. They may use the funds in their accounts without
restriction.
The GOK has not fully liberalized restrictions on capital transfers.
Foreign investors are allowed limited participation in the local stock
market. The limit on portfolio investment by foreigners in Kenyan
companies quoted on the stock exchange is 40 percent and the limit on
individual portfolio holdings is 5 percent.
The investment legislation does not discriminate against foreign
investors. Following liberalization of foreign exchange controls, the
GOK allows exporters to retain all their foreign exchange earnings in
export retention accounts. Current restrictions on the use of the funds
remain unchanged. In April 1994, the GOK relaxed restrictions on local
borrowing by foreign firms operating in the country. Although the firms
are not limited on the amount they can borrow, the GOK has cautioned
commercial banks to exercise their prudential credit policy in assessing
the viability of each borrower. Previously, such firms were permitted
to borrow only up to an equivalent of 20 percent of their share capital
and reserves. Currently the firms are permitted to borrow 100 percent
of their requirements.
The GOK has no restrictions on the amount all firms operating in Kenya
may borrow from the off-shore market to finance their investment,
including working capital requirements, provided interest on such
borrowing does not exceed the London Inter-bank Offering Rate (LIBOR) by
more than two percentage points. Local lending rates range from 20
percent to 30 percent. Most foreign companies, including American firms
operating in Kenya, find it more attractive to borrow from the off-shore
market at lower interest rates. This encourages parent companies to
procure raw materials abroad on credit for their local Kenyan branches.
C. EXPROPRIATION AND COMPENSATION
The Kenyan constitution prohibits the nationalization of private
property without prompt and full compensation. There has not been any
cases of expropriation. The government of Kenya accepts binding
international arbitration of investment disputes between foreign
investors and the state.
D. DISPUTE SETTLEMENT
There have been some investment and contract disputes since
independence. They include Firestone's 1981 claim with the Overseas
Private Investment Corporation (OPIC) over Firestone's inability to
repatriate dividends. American Life Insurance Company of Kenya (Alico)
and Galana Ranch both faced difficulties being compensated for their
assets. The Firestone claim was settled when the Government of Kenya
reversed its decision and permitted repatriation of dividends. Alico's
dispute over the sale of assets was resolved after a contentious seven-
year negotiation with the government. Galana's owners received fair
compensation for their property about seven months after they vacated
the premises.
There are other pending disputes or trade complaints involving
parastatal or private entities and U.S. firms. At times, resolution of
these disputes is delayed either due to the influence of the person
involved, or because authorities are reluctant to take action because of
the perceived political importance of the individuals. U.S. firms are
advised to take all normal business precautions in conducting their
affairs in Kenya, just as they would at home and in other countries.
Once made, errors in business judgements or practices are often
difficult to rectify.
Kenya is a member of the International Center for the Settlement of
Disputes (ICSID).
E. POLITICAL VIOLENCE
Kenya has been politically stable since independence in 1963. This does
not mean that a certain amount of violence associated with politics has
not occurred. There was a coup attempt in 1982 by certain elements of
the military against the government. However, the military in Kenya is
known for being apolitical. Recent ethnic clashes have marred the
political scene. These, for the most part, have not had an effect on
investment and doing business and trade in Kenya. There has occurred
from time to time conflicts in the border areas. Again, these are
removed from where most foreigners travel or do business. Publicity
concerning criminal activity, both in the cities and game parks,
detracts from the commercial environment. On the whole, international
companies doing business in Kenya and potential investors do not
consider political violence as a significant factor in their investment
decisions. Criminal activities, car hijacking, and street violence
create more concern than political violence.
F. PERFORMANCE REQUIREMENTS/INCENTIVES
The government has developed a duty exemption scheme that provides all
exporters with relief from import duty payments on inputs that are
subsequently re-exported. There are 40 enterprises housed within three
export processing zones in Nairobi, Athi River and Mombasa. Several
Manufacture Under Bond schemes in Nairobi, Mombasa, Nakuru and Eldoret
also exist. The GOK has abolished export duties and most export
licensing requirements. The three major export institutions are the
Export Processing Zones Authority, the Export Promotion Council and the
Export Promotion Programs Office under the Ministry of Commerce which
coordinates export promotion activities.
The government grants a one time 35 percent investment allowance tax
deduction for the cost of investment in industrial buildings, fixed
plant, and machinery in Nairobi and Mombasa, and 85 percent for those
located outside these towns. This has an overall effect of reducing
income taxes in the early years of a project.
Exporters to the Common Market for Eastern and Southern Africa (COMESA)
regional market covering 22 countries receive taxation advantages and
have the option of trading in local currencies. The market has a total
population of 320 million and a GDP of 80 billion dollars. The aim of
COMESA is to establish a common market with no barriers across member
countries' borders by the year 2000. Currently COMESA member countries
enjoy a 70 percent duty reduction on a reciprocal basis. Kenya, Uganda
and Tanzania also have signed an agreement for the formation of the East
African Community (EAC). However, the formation of a parallel regional
community in Southern Africa (Southern African Development Community
(SADC), of which Tanzania is a member, has weakened progress in both
COMESA and EAC.
Kenya required until implementation of recent reforms that international
investments include local content and employment targets. The local
content requirements have been lifted. Obtaining work permits for
expatriates has always been difficult, and thus, except for some senior
management and operational control positions, employees and workers are
Kenyan. Foreigners also must meet certain total investment
requirements.
Kenya is a member of major international trade organizations such as
UNCTAD and WTO, and is a signatory to the Lome Convention and Uruguay
Round. It is therefore subject to various requirements agreed to under
these umbrellas.
G. RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
Foreign and domestic private entities have a right to establish and own
land and business enterprises and engage in all forms of remunerative
activity in Kenya, except in utilities which are the preserve of the
government, and retail trade which is mainly in the hands of Kenyans.
The GOK investment regulations provide for the right of private entities
to freely establish, acquire, and dispose of interests in business
enterprises. Private and public enterprises have equal access to the
domestic product market, business licensing and acquisition of inputs.
In April 1994, the GOK relaxed restrictions on local borrowing by
foreign firms operating in the country. Although the firms are not
limited on the amount they can borrow, the GOK has cautioned commercial
banks to exercise their prudential credit policy in assessing the
viability of each borrower.
H. PROTECTION OF PROPERTY RIGHTS
Kenya is a member of the Paris Union - International Convention for the
Protection of Industrial Property (Patents and Trademarks) - along with
the U.S. and 80 other countries. Businesses and individuals from
signatory states are entitled to protection under this convention,
including national treatment and "property right" recognition of
patents. Although a unified system for the registration of trade marks
and patents for Anglophone Africa was signed in 1976, the effort has
remained stagnant due to lack of cooperation among the signatory states.
A future prospect for patent, trademark, and copyright protection is
embodied in the African Intellectual Property Organization, although its
enforcement and cooperation procedures are as yet untested. Kenya also
is a member of the African Regional Industrial Property Organization.
PATENTS: In 1990, the Kenyan Government enacted industrial property
legislation and established an Industrial Property Office for granting
industrial property rights, screening technology transfer agreements and
licenses and providing patenting information to the public. The office
issues patents, utility model certificates and industrial design
certificates. It also acts as a receiving office for international
applications. The Act established an independent national patent law
which replaced the use of pre-independence British procedures.
In March 1994, KIPO issued the first patent certificate under the Kenya
Industrial Property Act to three Kenyan scientists for their work in the
development of a tick resistance vaccine, Novel Tick Resistance
Antigenic Indicators (TRAI). In its fourth year of operation, KIPO has
received 127 patent applications and 38 industrial designs which are
being processed. Of these 127, 93 are foreign and 34 are local.
Similarly, of the 38 industrial design applications 15 are local.
COPYRIGHTS: Although Kenyan laws regarding copyrights are not as
extensive as those offered in many developed countries or elsewhere in
Africa, the Copyright Act of 1989 does provide for protection from audio
copyright infringement. Video copyright infringements are not covered
by the law and are widespread.
TRADEMARKS: Trademark protection is available from the Kenyan
government for a period of seven years from the date of application.
The first applicant for trademark protection is entitled to
registration.
I. REGULATORY SYSTEM: LAWS AND PROCEDURES
Kenyan regulations allow for the establishment of public and private
corporations, as well as joint ventures, and branches. The law does not
permit manufacturers to distribute their own products. They also are
required to supply information about their distributors. The GOK has
legislation to control monopolies.
Private foreign investment in Kenya is governed by Kenya's Foreign
Investment Protection Act (FIPA). The Act is being reviewed in the
light of recent liberalization of foreign exchange and import controls
which have made a number of provisions redundant. For example, FIPA
rules require foreign investors to apply for a certificate of approved
enterprise from the Treasury which allows them to repatriate capital and
profits. Such restrictions have been done away with. There are no
formal requirements on minimum local participation in either equity or
management.
There are no legal limitations on the percentage of foreign ownership,
but the government seeks higher levels of Kenyan participation in all
foreign investments. It is clear that Kenyans prefer foreign investors
form partnerships with local private investors, rather than 100 percent
foreign ownership. Foreign investors are required to sign an agreement
with the government stating training arrangements for phasing out
expatriates. Expatriate work permits are increasingly difficult to
renew or acquire. Government approval for ventures in agriculture,
distributive trade, and small-scale enterprises have become more
difficult to get as the government seeks to indigenize these sectors.
Under the parastatal reform program, the GOK has proposed to introduce a
bill that will facilitate privatization of certain aspects of the public
utilities. Such a reorganization should provide opportunities for
foreign investment in telecommunications, power and railways.
There are no special requirements imposed on foreign investors. All
investors (foreign and local) receive the same treatment in the initial
screening process. The government screens each private sector project
to determine its viability and its implications for the development
aspirations of the country. For example, a rural agro-based enterprise,
with many forward and backward linkages is likely to receive licensing
fairly quickly. However, new foreign investment in Kenya has in the
past been constrained by a time-consuming and highly discretionary
approval and licensing system that has been vulnerable to corrupt
practices. To counter this, the government amended the Investment
Promotion Center Act in September 1992 to required the Center, through
its "one-stop-office," to process applications for foreign investors
within one month.
Despite the changes in 1992, the process still does not work well. The
GOK has proposed, therefore, to adopt a new investment code which will
cover local and foreign investment and govern the Investment Promotion
Center. The code is expected to set clear guidelines for processing
investment applications and will incorporate the means to ensure
transparency and accountability. It will provide information on various
incentives to investors, including the procedures for obtaining such
information, and how the incentives are implemented. At present, the
IPC, lacks proper authority to implement many available incentives and
procedures.
Incoming foreign investment through acquisitions, mergers or takeovers
is governed by antitrust legislation that prohibits restrictive and
predatory practices that prevent the establishment of competitive
markets. The legislation is also aimed at reducing the concentration of
economic power by controlling monopolies, mergers and takeovers of
enterprises. Mergers and takeovers are subject to the Companies Act,
the Insurance Act (in the case of insurance firms) or the Banking Act
(in the case of banks).
Although the GOK has officially stated it will conduct the privatization
process in a fair and transparent manner, it is not yet clear how this
will be done. Senior officials, government and non-government, have
repeatedly stated that local people should be given higher priority.
Divestiture through public share issues provides little opportunity to
corporate investors. As has been the case in past divestitures, shares
are thinly spread over many applicants thereby ruling out a possibility
of a foreign investor acquiring a big stake in a single company.
Under a World Bank export development program, the GOK has abolished,
except for a few categories, export licensing requirements and initiated
three export incentive schemes for both local and foreign investors. It
provides import duty/value added tax remission to importers of raw
material inputs used for the manufacture of exports. Manufacturing
under bond facilities and export processing zones exist. In addition,
the GOK has an Exporter Assistance Scheme and an Export Development
Support project, both of which provide grants for export promotion
including export market studies and seminars.
In 1990, the GOK strengthened the law on health and safety in factories.
The revised Act authorizes the Labor Minister to undertake formal
investigations of occupational accidents and disease. Factories which
employ over 20 employees are required to have a safety and health
committee. The GOK also has established a National Advisory Committee
on Occupational Health and Safety and an Occupational Health and Safety
Fund.
J. CAPITAL MARKETS AND PORTFOLIO INVESTMENT
Kenya has a small capital market consisting of the six-year-old
government-owned Capital Markets Authority (CMA), one securities
exchange (the 36-year-old Nairobi Stock Exchange, or NSE), twenty
brokers, several dealers and numerous financial advisors. There is no
securities exchange outside Nairobi. The NSE trades in stocks from 56
publicly quoted companies. The daily volume of trade varies from KSh.
10 million to KSh. 30 million, involving about 250 transactions.
In July 1994, the NSE acquired a new trading floor with a capacity to
accommodate 100 dealers and 20 brokers. The settlement period takes an
average of seven days. The facility is fitted with computer terminals,
and 20 boards catering for about 400 companies. The new facility has a
200-seat public gallery and boards able to take 800 listings. The
trading floor has been designed to accommodate foreign companies in
anticipation of such listings after the capital market is fully
liberalized. The NSE is in the process of introducing new instruments
and has a separate facility (board) where small and medium-size
companies can seek listing. In addition to normal stocks, the NSE has
issued Treasury Bills and Bonds. The instruments traded in the capital
market are, however, few. A secondary market for these instruments
remains largely underdeveloped, though at least one private company is
attempting to expand the market. Plans also are under way to trade
corporate and municipal bonds, mortgage-backed securities and other
investment vehicles. Activity in the stock market will significantly
increase when a compensation fund for investors, an independent central
depository and a credit rating agency are established. These are in the
planning stage.
Local lending rates have remained much higher than international rates,
largely due to the tight monetary policy maintained by the government in
1993 and 1994. Weekly sales of Treasury Bills at attractive rates by
the Central Bank of Kenya have reduced the availability of credit to the
private sector. Foreign investors have no access to credit offered at
below market rates. Although there are no restrictions on local
commercial credit to foreign investors, the high rates make it
unattractive. Merchant banking, though in an immature stage of
development, is rapidly expanding. At least five of the 23 commercial
banks operating in the country have established subsidiary merchant
banks.
It is anticipated that as more parastatals are privatized the stocks of
these companies will be listed on the NSE. Between 1992 and June 1995,
the government privatized 67 parastatals out of a possible 212 public
sector enterprises. The privatization process has, however, slowed down
due to criticism from potential investors over the government's lack of
transparency and a clear privatization policy. The government is
expected to offer its shares to potential local investors in many of the
remaining parastatals.
K. BILATERAL INVESTMENT AGREEMENTS
Kenya has bilateral investment agreements with the United States
(Overseas Private Investment Corporation and ExImBank programs only) and
the Netherlands.
L. OPIC PROGRAMS AND OTHER INVESTMENT INSURANCE PROGRAMS
OPIC offers investment insurance in Kenya against the risks of
expropriation, war, revolution, insurrection, and civil strife. OPIC's
total insurance exposure now totals approximately $100 million. Kenya
is off cover for ExImBank programs.
M. LABOR
Kenya's estimated 3.0 percent demographic growth rate far outstrips
economic development and job creation, with rising social costs for
health care placing an extra burden on wage-earners. Both men and women
are active in the work force. In 1995, an estimated 1.1 million males
and 360,000 females engaged in formal wage employment. In the formal
sector, women worked overwhelmingly in services, men in agriculture,
education, manufacturing, building and construction, trade, and
transport. The highest percentage of female formal sector workers was
in education, where women constituted one-third of the total work force.
Over one-quarter of the women worked in this area, but only 15 percent
of men. Women also constituted more than 25 percent of the work force
in finance, insurance, and other business services and over 20 percent
in public administration and agriculture. Some textile factories,
however, are staffed almost exclusively by women.
An estimated 60 percent of Kenya's population is under fifteen years of
age. Providing these youth with jobs will be a great challenge for
Kenya. Unemployment is high among urban youth, while underemployment is
prevalent in rural areas. Many university and secondary school
graduates can no longer find jobs. Urban unemployment is estimated at
over 20 percent in the formal sector; rural unemployment is estimated by
the government at 12 percent, but underemployment may be as high as 60
percent. The gap between population and jobs has led to periodic
outbursts of unrest, especially in poor areas of the capital, Nairobi.
The majority of Kenyans, especially women, work in agriculture at low
wages or for small returns. The informal sector increasingly accounts
for job growth, about 75 percent of all new jobs created outside small-
scale agriculture. An estimated 28 percent of employed Kenyans now work
in the informal sector. Non-wage employees, largely self-employed and
unpaid family workers, in the modern sector, usually engaged in trade
and agriculture, also has increased in recent years.
Kenya has a tripartite structure (government, labor, and business)
active in and knowledgeable about international labor affairs. It had
ratified 46 ILO conventions as of March 1994. Although Convention 87,
Freedom of Association and Protection of the Right to Organize is not
among them, the right of freedom of assembly and association is
contained in Chapter 5, Article 80 of the Kenyan Constitution. Article
80 (d) addresses specifically the question of registration of trade
unions. Fundamental rights and freedoms of the individual, protection
of freedom of conscience, expression and movement are among the other
constitutional rights.
Kenyan labor law and practice derive from British models. Most laws
predate independence, but have been revised since then. In 1990, the
Kenyan parliament amended the 1951 Factories Act, broadening its scope
to include agricultural, service, and government sectors. Kenya also
has laws, however, which are inconsistent with its constitution. The
Public Security Act and the Chiefs' Authority Act, among others, have an
adverse effect on labor freedoms and rights.
Kenya's laws provide many safeguards and benefits for workers, with
mechanisms and procedures to address complaints relating to worker
rights. The Regulation of Wages and Conditions of Employment Act sets
the normal working week at not more than 52 hours spread over six days
per week. A worker on night duty works not more than 60 hours per week,
and cannot work more than 144 hours during any two-week period
(including overtime). Overtime on a workday is calculated at one and a
half times normal hourly rates. On holidays or normal rest days, this
rises to twice the normal rate. The normal work week for shop
assistants is not more than eight hours per day and no more than 50
hours per week. Shop assistants are entitled to the afternoon off
(after 1 p.m.) on at least one weekday per week.
After twelve consecutive months of service, every employee is entitled
to not less than twenty-one working days leave with full pay. Employees
with only two months' consecutive service are entitled to 30 days' sick
leave with full pay and a maximum of 15 days with half pay in each
consecutive twelve-month period. A woman may receive two months'
maternity leave, but in that case shall forfeit annual leave in that
year. Since pregnancy is not an illness, women are not entitled to
medical benefits for childbirth. On the other hand, women cannot lose
privileges or their jobs during periods of maternity leave.
The Employment Act of 1976 proscribes the employment of children under
the age of 16 in any industrial undertaking. The law does not apply to
the agricultural sector, where about 70 percent of the labor force is
employed, or to children serving as apprentices under the terms of the
Industrial Training Act. Ministry of Labor officers are authorized to
enforce the minimum age statute. Given the high levels of adult
unemployment and underemployment, the employment of children in the
formal wage sector in violation of the Employment Act is not a
significant problem. Night work for women is also prohibited. A task
force appointed by the Attorney General is now reviewing laws related to
women. Children often work as domestics in private homes, in the
informal sector, and in family businesses and farms.
Kenya has a minimum wage scale for twelve different categories of
workers, from unskilled to skilled. In May 1995, the government raised
the minimum wage for Nairobi and Mombasa to KSh. 1,904 per month, but
wage levels for formal sector workers in rural areas were set at less
than KSh. 1,100 per month. The agricultural minimum wage rose by only 8
percent to KSh. 669 per month. The highest minimum wage on the twelve-
rank scale was KSh. 4,296 per month. Kenyans across the tripartite
spectrum agree that the lowest minimum wages place families far below
the poverty level.
Organized workers, through collective bargaining agreements (CBAs),
normally receive much higher amounts than the minimum wage. CBAs in
Kenya normally cover a two-year term. Wage guidelines, which provide a
complicated formula by which workers may receive raises based on
increases in the cost of living, were relaxed in 1994 to permit larger
increases.
Benefits account for a high proportion of Kenyans' compensation package,
usually between 25 and 50 percent, sometimes even more. Benefits range
from housing, health, protective clothing, and transportation, to home
travel allowances, meals, and loans for small and large purchases. In
the 1990's, inflation eroded the value of all cash payments. Housing,
though, remained a boon as costs skyrocketed. The complicated nature of
wages and benefits in Kenya have led some employers to adopt a unified
salary/benefits structure.
The Factories Act of 1951, as amended in 1990, establishes detailed
health and safety standards protects nearly all workers in the formal
and informal sectors, including agriculture, services, and the
government sector. An ILO project to improve health and safety
inspection in the work place by better training of inspectors and follow
up has cut down on work accidents and complaints. Actual practice,
however, does not always embrace safeguards. Workers, for a variety of
reasons, often refused to utilize their health and safety equipment.
AIDS is now a major issue in Kenya with up to 30 percent HIV infection
rates among the sexually active population near Uganda and Lake Victoria
and along the major trans-African transportation routes. Nairobi and
Mombasa and the routes between them also show a 10-20 percent infection
rate within the same group. The HIV-positive population elsewhere
remains under 10 percent. Government studies have shown, however, that
the prevalence of HIV among Kenyans working in the modern sector is
twice that of Kenyans in the small-farming sector. Women also are far
more vulnerable than men. AIDS-affected workers and their families
quickly exhaust health benefits. The government has taken a broad-based
approach to HIV/AIDS, but AIDS education in the work place is still
novel.
Kenyan workers receive the following national holidays: New Year's Day
(January 1), Good Friday, Easter Monday, Labor Day (May 1), Madaraka Day
(June 1), Moi Day (October 10), Kenyatta Day (October 20), Independence
Day (December 12), Christmas Day (December 25), and Boxing Day (December
26). Id ul-Fitr, and Id al-Adha are holidays for Muslims, while Diwali
is a holiday for Hindus. The government announces the specific dates
for these holidays.
N. LABOR RELATIONS
Two main bodies represent Kenyan private employers and labor,
respectively: the Federation of Kenya Employers (FKE) and the Central
Organization of Trade Unions (COTU). COTU has 29 affiliates and 245,000
dues-paying members. Forty-five percent of all modern wage sector
employees work in the highly-organized public sector. The government
employs some 200,000 teachers (most of them members of the independent
Kenya National Union of Teachers, KNUT) as well as civil servants and
parastatal workers. All workers are free to join unions of their own
choosing, except for central government civil servants. At least 33
unions represent approximately 350,000 workers, or 20 percent of Kenya's
industrialized work force.
In theory, the Trade Disputes Act permits workers to strike provided
that 21 days have elapsed following the submission to the Minister of
Labor of a written report detailing the nature of the dispute. Doctors
and university academic staff formed unions and struck during 1993-4 but
without achieving recognition of their associations. Other major
strikes in 1994-5 involved the transport sector. Strikes also hit banks
(the highest-paid sector), guard companies, and factories, most
privately-owned. No strikes, except the doctors' and professors'
strikes, lasted more than a few days. The military, police, prison
guards and members of the National Youth Service are precluded by law
from striking. Kenyan labor legislation is silent on the issue of
national strikes.
Internationally, COTU is affiliated with both the continent wide
Organization of African Trade Union Unity and the International
Confederation of Free Trade Unions. COTU affiliates are linked to
international trade secretariats of their choice.
While not having the force of law, the 1962 Industrial Relations
Charter, executed by the government, COTU and the Federation of Kenya
Employers, gives workers the right to engage in legitimate trade union
organizational activities.
Both the Trade Disputes Act and the Charter authorize collective
bargaining between unions and employers. Wages and conditions of
employment are established in the context of negotiations between unions
and management. In 1994, government wage policy guidelines, which
limited salary increases, were relaxed relative to employers' ability to
declare workers redundant. Collective bargaining agreements must be
registered with the Industrial Court. The Export Processing Zone
Authority has decided that local labor laws, including the right to
organize and bargain collectively, will apply in EPZs. Although
conditions in the EPZs aroused public criticism in 1994, minimum wages
tend to exceed those of workers outside the zones.
The constitution proscribes slavery, servitude, and forced labor. Under
the Chiefs' Authority Act, a local authority can require people to
perform community service in an emergency, but there were no known
instances of this practice in 1994. People so employed must be paid the
prevailing wage. The International Labor Organization's (ILO) Committee
of Experts has found this provision of Kenyan law to contravene ILO
Conventions 29 and 105 concerning forced labor.
In 1995, minimum unskilled worker salaries averaged less than thirty
dollars per month, but this figure was achieved mainly through an upward
revaluation of the Kenya shilling. The normal work week, by law, is
limited to 52 hours, except for nighttime employees (60 hours) and
agricultural workers (excluded). Non-agricultural employees receive one
rest day in a week minimum, one month's annual leave, and sick leave.
By law, total hours worked (i.e., regular time plus overtime), in any
two-week period for night workers cannot exceed 144 hours; the limit is
120 hours for other workers. The Ministry of Labor is tasked with
enforcing these regulations, but reported violations are few.
Inspection of work sites continued to improve. "Whistle blowers" are
not protected, however. Kenya's worker compensation regulations do not
yet comply with provisions of ILO Convention No. 17.
O. FOREIGN-TRADE ZONES/FREE PORTS
In 1990, the government established an Export Processing Zones (EPZA)
Authority charged with the responsibility of developing the legal
framework for EPZs in the country. Three EPZ parks have been
established, one each in Nairobi, Athi River and Mombasa, with 40
companies. Two others, in Nairobi and Mombasa, are single company
zones. Four others are in the process of being established or
developed.
In 1987, the government established a manufacturing under bond (MUB)
program exclusively for export. The MUB program is coordinated by the
government's Investment Promotion Center which offers information on
investment rules, procedures and opportunities. To qualify for the MUB
scheme, an investor must provide firm documentary evidence showing
financial ability, technical know-how and market availability. An
investor must prove that the total value of exports will be in excess of
$440,000 per year, or alternatively, demonstrate that the enterprise can
create employment for at least 50 Kenyans. There are 30 local and
foreign firms operating in the MUB scheme. These are mainly garment
firms that export exclusively to the European and U.S. markets. The
stumbling block is high operational costs and export and import delays
at customs. The clearing process at Mombasa harbor, the main seaport,
is slow, and charges at the ports of entry high.
P. CAPITAL OUTFLOW POLICY
Government economic reforms have encouraged the return of flight
capital, liberalized exchange rate policies and repatriation of foreign
capital. Restrictions on the repatriation of profits, dividends,
license fees and royalties have been removed. The Government has
relaxed restrictions on remittances of income from foreign investment
earned after February 28, 1994. Such earnings can be remitted without
Central Bank approval, provided all taxes have been paid. Unremitted
funds earned before February 28, 1994 may be remitted by commercial
banks at a rate of $100,000 per year. Remittances in excess of this
amount require CBK approval. Foreign life insurance companies face
specific limits on the percentage of profits which can be repatriated.
Kenyans may only invest $500,000 outside the country without Central
Bank of Kenya authorization.
Q. FOREIGN DIRECT INVESTMENT STATISTICS
The flow of direct foreign investment in Kenya stagnated in the 1980's
owing to a deterioration of the investment climate. Investors
complained of excessive government regulation, high taxation and delays
in profit and dividend repatriation which had fallen three years in
arrears. During this period, corruption increased and infrastructure
deteriorated. In the 1990's the GOK began implementation of a series of
policy measures aimed at improving the investment climate. These
include liberalization of exchange controls for exporters, price
decontrol of most items, interest rate decontrol and development of
export processing zones. These changes have substantially improved the
business environment.
Kenya does not keep data on the value of foreign direct investment
(position/stock and annual direct investment capital flows) by country
of origin or by industry sector destination. Neither is data available
on Kenya's direct investment abroad.
R. MAJOR FOREIGN INVESTORS
A reliable source for the value of foreign investment in Kenya is
lacking. From available information, over 200 multinational
corporations have invested in Kenya. The British lead with about $2.0
billion. The book value of U.S. investment is estimated at $83 million,
while the market value is over $285 million. Investment from Far
Eastern countries, including China and Japan, though insignificant, is
rapidly rising. Major investors in key subsectors of the economy are
listed below.
NAME OF FOREIGN
SUBSECTOR INVESTOR COUNTRY
Canned Fruits Del Monte Britain
Oils, Fats and Fruit Unilever Inc. Britain
Tea and Coffee Brooke Bond Liebig Britain
Mineral Water and
Confectionery Cadbury Schweppes Ltd Britain
Paper Oriental Paper Mill India
Cement Bamburi Portland Cement Britain
Knitted Fabric Raymond Woollen Mills India
Metal/packaging cans CMB (owned jointly by
Metal Box Ltd UK &
Carnaud Ltd) France
Vehicle Assembly General Motors U.S.A
Leyland Motors Britain
Pharmaceutical Sterling Drug U.S.A
Toiletries Colgate Palmolive U.S.A
Unilever Britain
Cosmetics & Allied
Industries Cheeseborough-Pond's U.S.A
Henkel Germany
Synthetic resin
emulsions and other
chemicals Hoechst Germany
Pharmaceutical and
Cosmetics Nicholas Kiwi U.S.A.
Pharmaceutical and
Infant Food Glaxo Holdings Britain
Electric and
Electronic Equipment Philips Holland
SANYO Japan
Telecommunications
Equipment Siemens Germany
L.M. Ericson Sweden
Textiles Amatex T. OmbH & Co Germany
S.I.F.I.D.A. France
Hisata Spinning Co. Japan
Khatau Group India
Petroleum Refining/ Esso U.S.A.
Distribution Caltex U.S.A.
Total France
Shell/BP UK/Netherlands
Agip Italy
CHAPTER VIII
TRADE AND PROJECT FINANCING
A. THE KENYAN BANKING SYSTEM
Although Kenya inherited at the time of independence a financial system
typical of all British colonies in Africa -- a currency board; a
commercial banking system wholly dominated by two major British banks; a
Post Office Saving Bank and a small number of non-bank financial
institutions (NBFIs) providing mortgage finance, insurance and other
near bank financial services -- the sector has grown into a substantial,
sophisticated one. The sector comprises: The Central Bank of Kenya
(CBK); 36 commercial banks with branches, agencies and other outlets
throughout the country; 51 NBFIs with an excellent branch network in
Kenya's major cities; 6 building societies; 37 insurance companies; 7
development finance companies providing long-term finance; the Post
Office Savings Bank, with a large network of branches around the
country; and over 1,500 poorly structured savings and credit unions.
In spite of the number of established banks, the banking sector is
essentially dominated by four major commercial banks with an established
tradition of working together. However, NBFIs recently have exhibited
an ability to compete with commercial banks, particularly because of the
less restrictive regulatory framework within which they operate. On
paper, NBFIs operate as merchant or investment banks. In practice, they
operate as commercial banks, taking deposits and making short-term
loans. In June 1994, the Central Bank instructed NBFIs to convert and
operate as commercial banks. So far six NBFIS have either converted or
joined parent companies. Kenya, already a regional leader, is expected
to develop one of the largest commercial banking industries in Africa.
Despite the existence of a relatively developed and sophisticated
financial system, Kenya's capital market is still in its infancy. The
market for short-term securities is dominated by Treasury Bills and
bonds. Although there is relatively light trading in commercial paper,
there is virtually no secondary market in government paper.
The Nairobi Stock Exchange (NSE) is the only licensed trading exchange
in the country. NSE originally started as a private association, but is
now a fully fledged stock market. Currently there are 56 companies
listed and the value of shares traded between October 1994 and March
1995 was about $40.2 million. NSE trading has picked up. The NSE index
as of December 1994 was 4,559.4 compared to 2,513.7 in December 1993.
The number of shares traded quadrupled between October 1994 and February
1995. The market capitalization as of December 1994 had reached $3.0
billion as compared to $1.1 billion in December 1993. The exchange is
fully computerized. However the NSE is still in its infancy. The
strengthening of the Capital Markets Authority, the exchange regulator,
through revised legislation in 1994 and new budget measures in June
1995, should help the exchange grow. With the right macroeconomic
framework, it has the potential of joining the ranks of strongly
emerging markets such as Hong Kong or Thailand.
B. FOREIGN EXCHANGE CONTROLS AFFECTING TRADING
In conjunction with the removal of import licensing requirements, Kenya
has moved to a market-determined exchange rate. During the June 1995
budget speech, the GOK announced plans to completely repeal the Exchange
Control Act legislation before end of 1995. The repeal will mean
freeing all the existing controls on foreign exchange. This policy
measure is expected to attract foreign investors. The Central Bank of
Kenya is already licensing foreign exchange bureaus. These bureaus will
be opening longer hours than banks and are expected to increase
competition in the foreign exchange market. Currently, only the
following capital transactions have foreign exchange restrictions:
1) Investment by foreigners in shares (set in June 1995 at not more
than 40 percent of shares traded on the NSE) and government securities,
which will continue under exchange control;
2) Investments by Kenya residents outside Kenya exceeding $500,000,
which must be approved by the Central Bank.
Residents and non-residents are now permitted to buy or sell foreign
exchange from/to authorized dealers up to the equivalent of $5,000
without the need to obtain permission from the Central Bank of Kenya.
The recent GOK-sanctioned setting-up of forex bureaus will facilitate
smaller forex transactions.
Exporters are now authorized to retain all their export proceeds in
foreign currency accounts with local banks or sell such proceeds to
obtain local currency. All restrictions on current account transactions
have been removed, including restrictions with regard to the annual
maximum amount of foreign exchange remittable. Unremitted funds earned
before February 28, 1994, may be remitted by commercial banks at a rate
of $100,000 per year. Remittances in excess of this amount require CBK
approval. The Central Bank has streamlined the paperwork requirements
by abolishing the requirement to fill out export forms.
The Central Bank has also revoked its provision regarding blocked funds.
Residents may borrow abroad with no limit on the amount. However, the
government will not guarantee any borrowing by the private sector.
Although payments under technical, management, royalty and patent fees
are freely remittable, the relevant agreements and renewals will be
subject to approval.
Persons leaving or entering Kenya are permitted to take or bring into
the country Kenyan currency up to a maximum of KSh. 100,000 and foreign
currency equivalent to a maximum of $5,000. Amounts beyond these limits
may be taken out or brought into the country, provided they are declared
at the point of departure or entry.
C. GENERAL FINANCING AVAILABILITY
U.S. companies doing business or interested in doing business with Kenya
have the full range of private sector financing available to U.S. firms
doing business in other countries. This includes a range of commercial
financing available to American firms in the U.S. Most major commercial
banks in Kenya have correspondence relationships with U.S. banks. See
Section E below for a list of such banks. Interested firms may contact
their local banker or their nearest U.S. Department of Commerce District
Office for more details. Alternatively, U.S. firms may seek advice by
calling 1-800-USA TRADE. For specific financing of projects and
investments in Kenya, U.S. firms may contact financial organizations
listed below in Section F. SOURCES OF FINANCE.
Kenya is currently off cover for all ExImBank programs, but this is
under review. A special ExImBank program for Africa has been initiated
whereby short term ExImBank programs may be made available in the
private sector for importers with established credit ratings/experience
with a reputable international bank, even though the country is off
cover for other programs. Interested U.S. firms may contact Richard
Feeney or Annmarie Emmet, ExImBank, Washington, D.C., Telephone (202)
565-3933, FAX: (202) 565-3921 for further information.
Multilateral Development Banks, NGO's, and other international aid
organizations have hard currency sources for financing their imports and
projects. The World Bank and the African Development Bank are two major
sources of loans for commercial projects in Kenya. Substantial project
aid was maintained by both bilateral and multilateral donors during the
period after the end of 1991 when balance of payments support was
suspended. World Bank balance of payments support was resumed in 1993.
U.S. firms may wish to target their marketing in Kenya in the first
instance to these types of organizations, and then expand to other
commercial sectors after gaining experience in the market. Interested
U.S. firms can contact the Multilateral Development Bank Office, U.S. &
Foreign Commercial Service, U.S. Department of Commerce, Washington,
D.C., Tel: (202) 482-3399, FAX: (202) 482-5179 for further information.
The Government of Kenya does not have a specialized financial
institution exclusively focusing on export/import business like an
export/import bank. Nonetheless, bank services similar to ExImBank-type
financing and bundling facilities are undertaken by multinational banks.
Many banks and specialized financial institutions in Kenya finance
Kenyan exporters and importers. These banks have adequate liquidity to
meet the financial demands of Kenyan firms. The credit supplied is
highly influenced by the needs of the local firm, its stature in the
market and the experience and its financial position. Credit terms are
stiff to meet, usually requiring fixed assets exceeding one to three
times the amount of credit requested.
D. HOW TO FINANCE EXPORTS/METHODS OF PAYMENT
Differences in business practices extend into export financing. U.S.
firms are strongly advised to discuss the best methods and transaction
details with an experienced international bank familiar with Kenya.
U.S. firms are advised to determine the range of financing offered by
competitors. Further information on financing sources is given in
Section C. above.
There are several basic methods of receiving payment for products sold
in Kenya, the choice of which is determined by the degree of trust in
the buyer's ability to pay. Payment alternatives U.S. exporters might
consider, in order of the most to the least-secure include: 1) cash in
advance, 2) confirmed irrevocable letter of credit (if concerned about
the importer and international standing of his bank), 3) irrevocable
letter of credit (if concerned only about the reliability of the
importer) 4) documentary drafts for collection (checks drawn on the
importers bank), 5) open account, 6) consignment sales. Being paid in
full in a timely manner is always a major concern of any exporter, as
well as relative commercial risk.
U.S. exporters selling to Kenya are advised only to transact business on
the basis of an irrevocable letter of credit confirmed by a recognized
international bank. Any other form of payment is potentially hazardous.
The U.S. Department of Commerce offers a World Traders Data Report
(WTDR) service, which provides U.S. exporters with credit information
and industry standing and reputation of potential Kenyan importers.
Interested U.S. firms may contact their nearest U.S. Department of
Commerce District Office for further details.
Kenya has various types of export financing and insurance schemes which
are attractive and quite useful to Kenyan exporters. These include
overdraft facilities, revolving lines of credit, pre-shipment
rediscounting facility, and post-shipment financing.
E. TYPES OF AVAILABLE EXPORT FINANCING AND INSURANCE
U.S. firms requiring information on export financing can contact their
nearest U.S. Department of Commerce District Office, their international
bankers, or call 1-800-USA-TRADE. As indicated above in Section, C.,
Kenya is off cover for ExImBank programs, but is initiating a program,
including insurance, for short term U.S. exports to the private sector.
The Overseas Private Investment Corporation, Washington, D.C., Tel:
(202) 336-8400, FAX: (202) 408-9859 supports and promotes U.S.
investment in Kenya by financing investments projects through loans,
loan guarantees, or equity investment and by providing insurance against
certain types of political risk including non-convertibility, and civil
disorder. Further information about OPIC's programs is available from
the nearest U.S. Department of Commerce District Office. For other
sources of export financing available to U.S. firms, please see Section
C. above.
Kenyan banks provide the following pre-shipment facilities to Kenyan
exporters which include the following:
1) Advances against contracts;
2) Advances against letters of credit (L/C);
3) Overdraft facilities; and
4) Issue local currency for indirect domestic exporters.
Eight commercial banks provide post-shipment financing to exporters.
Some of the facilities available under this scheme are:
1) Confirmation of Letters of Credit (L/C);
2) Discount sight Drafts Presented under L/C;
3) Discount Time Drafts under L/C;
4) Discount Time drafts Under Export Collections; and
5) Overdraft facilities.
The receipt of a letter of credit and presentation of the appropriate
documents evidencing shipment is required for banks to provide post-
shipment facilities. Acceptances are created under the issuing bank's
letter of credit in New York or London where a secondary market exists.
Kenyan banks also create acceptances that are held in portfolio due to
lack of a secondary market.
To qualify for any of the above facilities, the client must show
evidence of appropriate security to the bank. However, multinational
companies with lines of credit with foreign banks in London or New York
do not need collateral. Advances against collateral vary from about 40%
of value of the property to as much as 85 percent on more liquid cash
and securities. Lending against inventory is not considered by banks.
Domestic collateral either in real property or in cash and securities
that is easily accessible to banks is preferred.
A few banks use the Preferential Trade Area (PTA) arrangement for
settling letters of credit for their clients. However, delays in
payment from some PTA member countries have adversely affected the
efficiency and operations of this scheme.
Private export financing in Kenya is a relatively new development. Many
banks have called for additional incentives from the government in order
to provide more funds to exporters. Some banks refuse firm orders or
letters of credit as collateral, particularly, if they come from small
to medium size exporters. Many financial institutions do not as yet
undertake transaction-based export financing. Custom bond facilities
necessary for control of an exporter's inventory and which can be used
as collateral are lacking. Trading of banker's acceptances is limited.
Commercial banks do not focus exclusively on export credit and the
traditional working capital lines of credit are fully collateralized
with cash, securities or property. The lack of a secondary market for
export bills acts as a dis-incentive to providing export financing.
However, despite these problems, export guarantees and insurance have
played an important role in the development of an export financing
market in Kenya.
F. SOURCES OF FINANCE
INDUSTRIAL DEVELOPMENT BANK (IDB)
IDB is a Government funded financial institution. IDB provides medium
and long term loan finance, direct equity investment and guarantees for
loans from other sources. It also underwrites security issues, shares,
stocks and similar obligations:
CONTACT: Managing Director, IDB,
National Bank Building, 18th Floor, Harambee Avenue
P.O. Box 44036, Nairobi, Tel. 337079, Fax 335594
INDUSTRIAL AND COMMERCIAL DEVELOPMENT CORPORATION (ICDC)
ICDC has been the Government's main conduit for joint venture
investments and has made equity investments in many industrial and
commercial ventures along with local and foreign partners. ICDC
provides project and commercial financing.
CONTACT: Executive Director, ICDC,
Uchumi House
P.O. Box 45519, Nairobi, Tel. 229213, Fax 333880
DEVELOPMENT FINANCE COMPANY OF KENYA (DFCK)
DFCK is owned jointly by the Kenya Government through ICDC, the
Netherlands Overseas Finance Company (FMO), the Commonwealth Development
Corporation (CDC), the German Development Bank (DEG) and the
International Finance Corporation (IFC). DFCK provides medium-term
local and foreign currency financing for projects in the industrial,
agro-processing, and tourism sectors.
CONTACT: The General Manager, DFCK
Finance House, Loita Street
P.O. Box 30483, Nairobi, Tel. 340401/2/3, Fax 338246
EAST AFRICAN DEVELOPMENT BANK (EADB)
The bank's shareholding is held primarily by the governments of Kenya,
Uganda and Tanzania. The EADB provides medium and long-term loans
designated in foreign currencies.
CONTACT: Resident Manager, EADB
Bruce House, Standard Street
P.O. Box 47685, Nairobi, Tel. 340641, Fax 216651/
KENYA INDUSTRIAL ESTATES LTD. (KIE)
KIE provides term loans, and a package of other services. The loans are
designated in Kenya shillings.
CONTACT: The Managing Director, KIE,
P.O. Box 78029, Nairobi, Tel. 542300, Fax 553124
KENYA EQUITY MANAGEMENT LTD. (KEM)
KEM provides equity and term financing, and particularly supports
existing companies who wish to expand rather than start-up operations.
CONTACT: The Managing Director, KEM
P.O. Box 62360, Nairobi, Tel. 340549, Fax 227147
THE AFRICA GROWTH FUND (AGF)
AGF managed by Kenya Equity Management, an affiliate of the U.S. owned
Equator Bank, invests in the full range of productive businesses,
including manufacturing, agriculture, finance and service industries.
Typically, funded projects are between $5 million and $50 million in
size. Funding comes from the U.S. Overseas Private Investment
Corporation (OPIC).
CONTACT: The General Manager, AFG
P.O. Box 34045, Nairobi, Tel. 721566, Fax 722240
INTERNATIONAL FINANCE CORPORATION (IFC)
IFC is an affiliate of the World Bank and finances private sector
investment projects in agriculture, manufacturing and tourism. IFC
extends term loans and makes equity investment in projects entailing
investment of more than $20 million. It normally does not finance more
than 25 percent of the project cost. The term loans are generally made
in foreign currencies. IFC also manages the Africa Enterprise Fund
which can support projects with lower project costs.
CONTACT: Resident Representative, IFC
View Park Towers,
P.O. Box 30577, Nairobi, Tel. 224726, Fax 219980.
AFRICAN PROJECT DEVELOPMENT FACILITY (APDF)
APDF is a facility established by IFC, UNDP, USAID and The African
Development Bank (AFDB). The facility supports medium-sized, African-
owned projects by offering assistance in project preparation, locating
joint venture partners and negotiating project finance.
CONTACT: General Manager, APDF,
International House
P.O. Box 46534, Nairobi, Tel 337490
INDUSTRIAL PROMOTION SERVICES LTD. (IPS)
IPS is a venture capital company owned by the Aga Khan, IFC Washington,
Kenya Commercial Bank, and a merchant bank in the U.K. IPS offers
equity investments up to 40 percent of share capital, provides loans and
management assistance. IPS also assists in project development and in
locating sources of technical know-how.
CONTACT: Managing Director, IPS
IPS Building
P.O. Box 30500, Nairobi, Tel. 228026/728207, Fax 214563
ECONOMIC DEVELOPMENT FOR EQUATORIAL AND SOUTHERN AFRICA (EDESA)
EDESA provides medium and long term financing in foreign and local
currency. EDESA offers tailor-made package financing for start-up,
rehabilitation, and expansion of local ventures which include loans,
convertible loans, guarantees and equity.
CONTACT: General Manager, EDESA Kenya Ltd.
P.O. Box 56038, Nairobi, Tel. 822920-4, Fax 822925/822907
EUROPEAN DEVELOPMENT BANKS
A number of European development banks provide finance to ventures in
Kenya. They include the Netherlands Overseas Finance Company in Kenya
(FMO), the Commonwealth Bank (DEG), the Danish Development Bank (IFU),
and the Swedish Fund for Industrial Development of Africa (SFIDA).
Private insurance and pension funds are also important mobilizers of
long term savings in Kenya. These institutions normally invest their
funds in real estate and listed securities.
LIST OF COMMERCIAL BANKS
Bank Postal Address of Head Office
ABN Amro Bank Box 30262, Fax 713391 Nairobi
African Mercantile Bank Box 30090, Fax 333818 Nairobi
Bank of Baroda Box 30033, Fax 333089 Nairobi
Bank of India Box 30246, Fax 334545 Nairobi
Bank of Oman Box 11129, Fax 330792 Nairobi
Barclays Bank of Kenya Ltd. Box 30120, Fax 337201 Nairobi
Biashara Bank of Kenya Ltd. Box 30831, Fax 221064 Nairobi
Bullion Bank Box 11666, Fax 221338 Nairobi
Citibank N.A. Box 30711, Fax 337340 Nairobi
Commercial Bank of Africa Box 30437, Fax 335827 Nairobi
Consolidated Bank of Kenya Box 51133, Fax 340213 Nairobi
Co-operative Bank of Kenya Box 48231, Fax 330227 Nairobi
Credit Banking Corporation Box 75501, Tel 336446 Nairobi
Daima Bank Box 54319, Tel 338079 Nairobi
Delphis Bank Box 44080, Fax 219469 Nairobi
Euro Bank Box 43071, Fax 221781 Nairobi
First American Bank Box 30691, Fax 333868 Nairobi
Giro Bank Box 40263, Fax 230600 Nairobi
Guilders International Bank Box 67437, Fax 218030 Nairobi
Habib Bank AG Zurich Box 30584, Fax 218699 Nairobi
Kenya Commercial Bank Ltd. Box 48400, Fax 338006 Nairobi
Meridien Biao Bank of Kenya Box 30132, Fax 219392 Nairobi
Middle East Bank Ltd. Box 47487, Fax 336182 Nairobi
National Bank of Kenya Ltd. Box 41862, Fax 330784 Nairobi
Prime Bank Box 43825, Fax 334549 Nairobi
Stanbic Bank Box 30113, Fax 330227 Nairobi
Standard Bank Chartered Bank Box 30003, Fax 330506 Nairobi
Transnational Bank Ltd. Box 75840, Fax 210335 Nairobi
Trust Bank Ltd. Box 46342, Fax 334995 Nairobi
United Bank Limited Box 403, Fax 42551, Kisumu
G. PROJECT FINANCING AVAILABLE
Each year Kenya receives significant project financing assistance from
donors. There are three sources of external assistance, namely,
multilateral, bilateral and Private Voluntary Organizations (PVOs). The
first category can further be divided into United Nations Organizations
and Non-United Nations Multilateral institutions. Bilateral donors lead
in provision of project financing, followed by multilateral and PVOs.
In FY 1995, project assistance to Kenya was about $509.1 million. This
figure excludes PVOs contribution.
In December 1991, multilateral and bilateral donors temporarily
suspended balance of payments assistance to Kenya. There was no
interruption of project financing flows to Kenya. A large amount of aid
goes to NGO's for projects instead of directly to the Government of
Kenya for balance of payment support or for government infrastructure
projects. Only recently have the World Bank and others been seriously
examining restoring infrastructure project funding which is expected to
proceed.
The largest overall multilateral donor is the World Bank. World Bank
funded projects are listed below. The private lending arm of the World
Bank Group, International Development Association (IDA), provided
substantial amounts of finance to the private sector, particularly those
investments with a potential of generating foreign exchange. The
African Development Bank/Fund has not had its concessionary lending
facility replenished for more that a year and a half. Thus, the only
AFDB funded projects were those already funded and in the pipeline.
These include the $60 million Greater Nakuru Water Supply. It is
anticipated that the AFDB will recommence concessionary lending
operations in the near future. U.S. firms also should examine the
possibility of using the private sector window established at the AFDB.
For more information on opportunities for projects funded by
multilateral development banks, U.S. firms can contact the Multilateral
Development Bank Office, U.S. & Foreign Commercial Service, U.S.
Department of Commerce, Washington, D.C., Tel: (202) 482-3399, FAX:
(202) 482-5179 for further information.
Japan tops the list of bilateral donors followed by Germany, the United
Kingdom and the United States. In FY 95, U.S. bilateral assistance to
Kenya, including food aid, was approximately $22.6 million. This amount
includes Development Fund for Africa and PL 480 Title II.
Project assistance covers ten key sectors of the Kenya's economy. The
top five sectors in order of importance are Economic Management;
Agriculture, Forestry and Fisheries; Health; Transport and
Communications; and International Trade. Other equally important
sectors are: Social Development, Human Resources, Natural Resources and
Industry. The distribution of assistance in the top five sectors is
highly skewed towards the sectors which contribute to economic
development. For example, in economic management, over 90 percent of
the assistance goes to macroeconomic policy planning. In agriculture,
over half goes to food crops and support services, while in the
international trade of goods and services, export promotion subsector
alone accounts for over 60 percent.
Listed below are current World Bank funded projects in Kenya:
Project Funding Value
Mombasa Water III World Bank $105.0
Nairobi/Mombasa Road World Bank $ 50.0
Railways Restructuring World Bank $ 60.0
Urban Transport World Bank $115.0
Energy Sector World Bank $100.0
Arid Lands Rehabilitation World Bank $ 21.4
For further information on project financing available, refer to Section
F. Sources of Finance above.
E. LIST OF BANKS WITH CORRESPONDENT US BANKING ARRANGEMENT
Almost all major commercial banks in Kenya have either direct or
indirect correspondent offices in London and the US. They include the
following:
Stanbic Bank Ltd
Kenya Commercial Bank
Standard Chartered Bank
Bank Indosuez
Barclays Bank of Kenya
Bank of Baroda
Bank of India
Mashereabank PSC
Commercial Bank of Africa
Citibank
ABN AMRO Bank
Habib Bank A.G. Zurich
Habib Bank Ltd
National Bank of Kenya
CHAPTER IX
BUSINESS TRAVEL
A. BUSINESS CUSTOMS
There is solid sales potential for U.S. goods and services in Kenya.
However, Kenya is a developing country with a complex market. The U.S.
exporter should keep certain factors in mind to achieve maximum success.
Given the good business and political relations between Kenya and the
U.S., there are significant commercial opportunities for U.S. firms.
The principles of customary business courtesy, especially replying
promptly to requests for price quotations and orders, are a
prerequisite for exporting success. In general, Kenya business
executives are relatively informal and open. The use of first names at
an early stage of a business relationship is acceptable. Friendship and
mutual trust are highly valued, and once an American has earned this
trust, a productive working relationship can usually be expected.
Given the competitive market and increasing experience, Kenyan firms are
developing expertise in international business. Kenyan buyers
appreciate quality and service, and, if justified, are willing to pay
extra if they are convinced of a product's overall superiority. The
market, however, is very price sensitive. As would be the case in other
markets, care must be taken to ensure that delivery dates will be
closely maintained and that after-sales service will be promptly
honored. While there are numerous factors that may interfere with
prompt shipment, the U.S. exporter should allow for additional shipping
time to Kenya and keep in touch with the buyer. It is much better to
quote a later delivery date that can be guaranteed than an earlier one
that is not completely certain. Since Kenyan wholesalers and retailers
generally do a lower volume of business than their American
counterparts, U.S. firms should be prepared to sell smaller lots than is
the custom in the U.S.
U.S. firms should maintain close liaison with distributors and customers
to exchange information and ideas. In most instances, mail, fax or
telephone communications is sufficient, but the understanding developed
through periodic personal visits is the best way to keep distributors
appraised of new developments and to resolve problems quickly. Prompt
acknowledgement of correspondence by air mail or fax is recommended.
If the market size warrants, U.S. marketers should seriously consider
warehousing in Kenya for speedy supply and service of customers. As
would be the case in most markets, a vigorous and sustained promotion is
often needed to launch products. Products must be adapted to both
technical requirements and to consumer preferences, as well as meet
Kenyan Government regulations. It is not sufficient to merely label a
product in conformity to national requirements to achieve successful
market penetration. Consumers must be attracted to the product by the
label and packaging as well as ease of use.
B. TRAVEL ADVISORY AND VISAS
Kenya is a developing East African country known for the wildlife in its
national park system. Tourist facilities are widely available in
Nairobi, on the coast, and in the game parks and reserves.
A passport and a visa are required. Visas may be obtained at any Kenyan
Embassy or Consulate, or upon arrival at a Kenyan port of entry.
Evidence of yellow fever immunization may be requested. There is an
airport departure tax of twenty U.S. dollars which may be paid in hard
currency or Kenyan Shillings. Further information may be obtained from
the Embassy of Kenya, 2249 R Street, N.W., Washington, D.C. 20008,
telephone (202) 387-6101. There also are Kenyan Consulates General in
Los Angeles and New York.
Kenya has recently entered a political transition period, from a system
of single-party democracy to a system of multi-party democracy. From
time to time, political or ethnic tensions, associated with this
transition, increase resulting in localized areas of instability. These
ethnic and political clashes have had little affect on tourism in Kenya
and have little potential to do so in the future.
Adequate medical services are available in Nairobi. Doctors and
hospitals often expect immediate cash payment for health care services.
U.S. medical insurance is not always valid outside the United States.
Supplemental insurance with specific overseas coverage, including air
evacuation, has proved useful. Information on other health matters,
including the incidence of malaria in the country, can be obtained from
the Centers for Disease Control's international travelers hotline,
telephone (404) 332-4559.
There is a high rate of street crime against tourists in downtown
Nairobi, Mombasa, and at the coastal beach resorts. Reports of attacks
against tourists by groups of two or more armed assailants are on the
rise. Pickpockets and thieves are also involved in "snatch and run"
crimes near crowds. Visitors have found it safer not to carry valuables
with them, but to store all valuables in hotel safety deposit boxes or
safe rooms. There have been reports of thieves snatching jewelry and
other objects from open vehicle windows while motorists are either
stopped at a traffic light or in heavy traffic. Armed carjackings are
increasingly common in Nairobi, with approximately ten vehicles stolen
by armed robbers each day. There also is a high incidence of
residential break-ins. Thieves and con men have been known to
impersonate hotel employees, police officers or government officials.
Tourists who accept sweet biscuits, or juice from new acquaintances on
intercity buses in Kenya have been robbed after being drugged by food
laced with sedatives. Highway banditry is common on the roads leading
to the Somali border. Air travel is the safest means of transportation
when visiting any of the coastal resorts north of Malindi. Walking
alone or at night in public parks, along footpaths or beaches, and in
poorly lit areas can be dangerous. The Kenyan mail system can be
unreliable, and monetary instruments (credit cards, checks, etc.) are
frequently stolen. International couriers such as Federal Express or
DHL have proven to be the safest means of shipping envelopes and
packages.
The loss or theft abroad of a U.S. passport should be reported
immediately to the local police and to the nearest U.S. Embassy or
Consulate. The pamphlets "A Safe Trip Abroad" and "Tips for Travelers
to Sub-Saharan Africa" provide useful information on protecting personal
security while traveling abroad and on travel in the region in general.
Both are available from the Superintendent of Documents, U.S. Government
Printing Office, Washington, D.C. 20402.
There are strict limitations on the amount of Kenyan currency which may
be taken out of the country. It is sometimes difficult to exchange
Shillings for dollars upon departure. Destruction of Kenyan currency is
strictly against the law.
Travelers who do not use the services of reputable travel firms or
knowledgeable guides and drivers are at risk. Safaris are best
undertaken with minimum of two vehicles so that there is a backup in
case of mechanical failure. Solo camping is always risky.
U.S. citizens are subject to the laws of the country in which they are
traveling. Penalties for possession, use, or trafficking in illegal
drugs are strictly enforced. Convicted offenders can expect a mandatory
minimum ten year jail sentence and fines no matter the amount and type
of illegal drugs.
Water in Nairobi is potable. In other parts of the country, water must
be boiled or bottled water used. Travel by passenger train in Kenya may
be unsafe, particularly during the rainy season, because of the lack of
routine maintenance and safety checks.
U.S. citizens may register at the Embassy in Nairobi and obtain updated
information on travel and security in Kenya. The U.S. Embassy is
located at the intersection of Moi and Haile Selassie Avenues, Nairobi.
The telephone number is (254)-(2) 334-141. The mailing address is P.O.
Box 30137, Nairobi, Kenya. The APO address is Unit 64100, APO AE 09831.
The basic monetary unit is the Kenya Shilling (KSh). The shilling comes
in paper currency of Sh. 5, Sh.10, Sh. 20, Sh. 50 Sh. 100, Sh. 200 Sh.
500 and Sh. 1,000 notes. Coins are issued in 5, 10, 50, cents, and 1,
5, and 10 Shilling units. The Shilling is subdivided into units of 100
cents.
With the freeing of foreign exchange regulations, the Kenya Shilling
floats daily. The Shilling has steadily appreciated against major hard
currencies. As of June 1995 the mean exchange rate was KSh. 55/$1.
Visiting business executives should check the financial section of the
daily newspapers for the current exchange rate which could change
radically and quickly.
International major credit cards are usually accepted with proper
identification such as a passport. Travelers checks are usually
accepted by banks and major hotels.
C. HOLIDAYS AND BUSINESS HOURS
A 40-hour workweek is the norm for offices and factories. Offices
working hours are 8:00 am to 5:00 pm with lunch from 1:00 pm to 2:00 pm.
Banking hours are from 9:00 am to 3:00 pm. Most retail stores are open
from 9:00 am to 6:00 pm.
The following are the official statutory holidays when most commercial
offices are closed:
New Year's Day January 1
Id-Ul-Fitr Variable
Good Friday Variable (April)
Easter Monday Variable (April)
Labor Day May 1
Madaraka Day June 1
Moi Day October 10
Kenyatta Day October 20
Jamuhuri Day December 12
Christmas Day December 25
Boxing Day December 26
D. BUSINESS INFRASTRUCTURE
Transportation: Taxis and rental automobiles are available in large
towns. Traffic moves on the left-hand side of the road. Visiting
American business executives rarely use the bus system or train.
Airports: Kenya has two major airports (Jomo Kenyatta in Nairobi and
Moi in Mombasa). Inland passenger and freight are conveyed by the road
and rail network.
Lodging: Kenya has good hotels located in major cities, and a range of
lodges in the game parks. Business travelers are advised to make their
hotel reservations in advance, especially during tourist high season
from July to March.
Language: The official languages of Kenya are English and Swahili.
However, many different languages and dialects are spoken throughout the
country. The commercial language is English. Language barriers pose no
problem, but in legal documents it is advisable to have lawyers who can
interpret between American English and Kenya English usage.
Communication: The telecommunications system, which includes direct
dialing telephone service and fax to the U.S., is available throughout
the country. From time to time interruptions in service occur. Some
telecommunication links, especially those via microwave, do not meet the
quality requirements for transmission of high speed business data and
communications.
Housing: Adequate housing is available. However, security concerns
should be seriously considered in the location of housing. More and
more expatriate business executives are leasing compound housing as it
is more modern and more secure.
Utilities: Water and 220 volt 50 Hz single phase and three phase
electricity is available. The British three blade plug is used widely.
Interruptions of supply frequently occur, include cuts in industrial
zones during evening peak hours. Most housing have attic reserve water
tanks. Permanent or long term residents should consider purchase of
standby electrical generators as electricity demand is expected to
exceed generating capacity with frequent interruptions or brown outs.
Bottled LPG is available, but supply cannot always be guaranteed.
Health: Adequate medical services are available in Nairobi. Malaria
is not prevalent in high elevations, but precautions must be taken in
lower areas, especially in the coastal regions. Residents should follow
a strict sanitary regime in washing and preparing food. Other
precautions should be taken to avoid contracting endemic tropical
diseases.
Food: There is plenty of high quality food available, including a large
variety of fresh fruits, vegetables, meats, poultry and fish. Fresh
milk and milk products are available. With the lifting of import
controls, a variety of canned and prepared foods are available.
However, imported foodstuffs are very expensive. Periodic shortages of
milk, sugar, flour, etc. have occurred in the past. Fruits and
vegetables may be seasonal.
CHAPTER X
APPENDICES
APPENDIX A
COUNTRY DATA
Population: 25.3 million (1994 estimate).
Population Growth Rate: 3.0 percent
Religions: Christian, Islam, Hindu, and traditional.
GOVERNMENT SYSTEM: Kenya has a democratic government with an elected
president and a directly elected parliament modeled on the British
pattern.
LANGUAGE: The official languages of Kenya are English and Swahili. Many
dialects are also spoken throughout the country. English is the
Commercial language; therefore, language is not a barrier to business
transactions.
WORKWEEK: 40 hours for both offices and factories. Working hours are
8:00 am to 5:00 pm with lunch from 1:00 pm to 2:00 pm. Monday through
Friday. Banking hours are 9:00 am to 3:00 pm.
APPENDIX B
DOMESTIC ECONOMY
(In $ millions of unless otherwise specified)
1994 1995 1/ 1996 1/
GDP at Mkt Prices 7,050 7,262 7,480
GDP Growth Rate (%) 3.0 5.0 5.6
GDP Per Capita: (in '000) 0.278 0.292 0.308
Government Spending
(% of GDP) 48.6 45.0 41.0
Inflation (%) 28.8 8.8 10.0
Unemployment (%) 32.0 34.0 34.0
Foreign Exchange Reserves 506.0 550.0 580.0
Av.Exch. Rate: KSh/$ 55.3 55.0 60.0
Debt Service Ratio 31.0 32.3 32.0
U.S. Economic/Military Assistance 18.2 22.6 18.2
1/ Estimates
APPENDIX C
TRADE
(In $ million unless otherwise specified)
1994 1995 1/ 1996 1/
Total Country Exports 1,912 2,008 2,120
Total Country Imports 2,569 2,697 2,848
U.S. Exports 169.5 N/A N/A
U.S. Imports 108.7 N/A N/A
1/ Estimates
APPENDIX D
INVESTMENT STATISTICS
(In Million $ unless otherwise specified)
1992 1993 1994
Total Direct Foreign Inv. 2,040 2,050 2,100
U.S. Share (%) 13.5 13.5 13.5
FOREIGN DIRECT INVESTMENT STATISTICS
The flow of direct foreign investment in Kenya stagnated in the 1980's
owing to a deterioration of the investment climate. Investors
complained of excessive government regulation, high taxation and delays
in profit and dividend repatriation which had fallen three years in
arrears. During this period, corruption increased and infrastructure
deteriorated. In the 1990's the GOK began implementation of a series of
policy measures aimed at improving the investment climate. These
include liberalization of exchange controls for exporters, price
decontrol of most items, interest rate decontrol and development of
export processing zones. These changes have substantially improved the
business environment.
Kenya does not keep data on the value of foreign direct investment
(position/stock and annual direct investment capital flows) by country
of origin or by industry sector destination. Neither is data available
on Kenya's direct investment abroad.
MAJOR FOREIGN INVESTORS
A reliable source for the value of foreign investment in Kenya is
lacking. From available information, over 200 multinational
corporations have invested in Kenya. The British lead with about $2.0
billion. The book value of U.S. investment is estimated at $83 million,
while the market value is over $285 million. Investment from Far
Eastern countries, including China and Japan, though insignificant, are
rapidly rising. Major investors in key subsectors of the economy are
listed below.
NAME OF FOREIGN
SUBSECTOR INVESTOR COUNTRY
Canned Fruits Del Monte Britain
Oils, Fats and Fruit Unilever Inc. Britain
Tea and Coffee Brooke Bond Liebig Britain
Mineral Water and
Confectionery Cadbury Schweppes Ltd Britain
Paper Oriental Paper Mill India
Cement Bamburi Portland Cement Britain
Knitted Fabric Raymond Woollen Mills India
Metal/packaging cans CMB (owned jointly by
Metal Box Ltd UK and
Carnaud Ltd) France
Vehicle Assembly General Motors U.S.A
Leyland Motors Britain
Pharmaceutical Sterling Drug U.S.A
Toiletries Colgate Palmolive U.S.A
Unilever Britain
Cosmetics & Allied
Industries Cheeseborough-Pond's U.S.A
Henkel Germany
Synthetic resin
emulsions and other
chemicals Hoechst Germany
Pharmaceutical and
Cosmetics Nicholas Kiwi U.S.A.
Pharmaceutical and
Infant Food Glaxo Holdings Britain
Electric and
Electronic Equipment Philips Holland
SANYO Japan
Telecommunications
Equipment Siemens Germany
L.M. Ericson Sweden
Textiles Amatex T. OmbH & Co Germany
S.I.F.I.D.A. France
Hisata Spinning Co. Japan
Khatau Group India
Petroleum Refining/ Esso U.S.A.
Distribution Caltex U.S.A.
Total France
Shell/BP UK/Netherlands
Agip Italy
APPENDIX E
U.S. AND KENYAN CONTACTS
1. U.S. EMBASSY AND U.S. GOVERNMENT TRADE RELATED CONTACTS
U.S. & Foreign Commercial Service
U.S. Embassy, Nairobi
P.O. Box 30137
Nairobi, Kenya
Tel: 254-2-334141
FAX: 254-2-216648
Contact: Gene R. Harris, Commercial Counselor
Economic Section
U.S. Embassy, Nairobi
P.O. Box 30137
Nairobi, Kenya
Tel: 254-2-334141
FAX: 254-2-340838
Contact: Donald Cleveland, Economic Counselor
Agricultural Attache
U.S. Embassy, Nairobi
P.O. Box 30137
Nairobi, Kenya
Tel: 254-2-334141
FAX: 254-2-340838
Contact: Henry Schmick, Agricultural Attache
Regional Labor Officer
U.S. Embassy, Nairobi
P.O. Box 30137
Nairobi, Kenya
Tel: 254-2-334141
Fax: 254-2-340838
Contact: Mr. C. Steven McGann, Regional Labor Attache
The Multilateral Development Bank Office
U.S. & Foreign Commercial Service
U.S. Department of Commerce
14th and Constitution, N.W.
Washington, DC 20007
Tel: 202-482-3399
Fax: 202-482-5179
Contact: Ms Brenda Ebeling, Director
Trade Promotion Coordinating Committee (TPCC)
Information Center
U.S. Department of Commerce
Washington, D.C. 20230
Tel: 1-800-USA-TRADE
U.S. Department of Agriculture
Foreign Agricultural Service
Trade Assistance and Promotion Office
Tel: 202-720-7420
FAX: 202-720-7772
International Economic Policy (IEP)
Office of Africa
U.S. Department of Commerce
14th & Constitution Avenues, N.W.
Washington, D.C. 20230
Tel: 202-482-4564
FAX: 202-482-5198
Contact: Ms. Chandra Watkins, Kenya Desk
2. AMCHAM AND/OR BILATERAL BUSINESS COUNCILS
Kenya National Chamber of Commerce & Industry
P.O. Box 47024
Nairobi, Kenya
Tel: 254-2-334413
Contact: Mr. Kassim Owango, Chairman
American Business Association
c/o American Embassy
P.O. Box 30137
Nairobi, Kenya
Tel: 254-2-334141
Fax: 254-2-216648
Contact: Mr. Paul Fletcher, Chairman
American Women's Association
P.O. Box 47806
Nairobi, Kenya
Tel: 245-2-580158
Contact: Jan Carmony, Chairwoman
3. COUNTRY TRADE OR INDUSTRY ASSOCIATIONS IN KEY SECTORS
The East African Association
Jubilee Insurance House
P.O. Box 41272
Nairobi, Kenya
Tel: 254-2-218317
Contact: Mr. Charles A. Gardner, Resident Representative
Marketing Society of Kenya
Witu Road
P.O. Box 69826
Nairobi, Kenya
Tel: 254-2-544717
Fax: 254-2-544717
Kenya Association of Manufacturers
Peponi Road
P.O. Box 30225
Nairobi, Kenya
Tel: 254-2-746005/6
FAX: 254-2-746030
Contact: Mr. Joe W. Kuria, Chief Executive
Federation of Kenya Employers (FKE)
Waajiri House, Hurlingham
P.O. Box 48311
Nairobi, Kenya
Tel: 254-2-721929
FAX: 254-2-721990
Contact: Mr. Tom Owuor, Executive Director
Central Organization of Trade Unions (COTU)
Solidarity House, Digo Road
P.O. Box 13000
Nairobi, Kenya
Tel: 254-2-761375
FAX: 254-2-762695
Contact: Mr. J.J. Mugalla, Secretary General
Kenya National Farmers Union (KNFU)
Adamali House, City Center
P.O. Box 43148
Nairobi, Kenya
Tel: 254-2-228894
FAX: 254-2-339905
Contact: Mr. Joseph K. Waweru, Chief Executive
Kenya Bureau of Standards
Off Mombasa Road, Nairobi South C
P.O. Box 54974
Nairobi, Kenya
Tel: 254-2-502211
FAX: 254-2-503293
Contact: Eng. E.O. Nyamunga, Managing Director
SGS Kenya Ltd.
Rank Xerox House
P.O. Box 72118
Nairobi, Kenya
Tel: 254-2-751811
FAX: 254-2-741468
Contact: Mr. M. Politi
SGS Control Services Inc.
42 Broadway
New York, N.Y. 10004
Tel: (212) 482-8700
Cotecna Inspections Inc.
1105 Sunset Hills Road
Reston, VA 22090
Tel: 703-689-0805
Bureau of Veritas-Bivac
ABC Place
P.O. Box 34378
Nairobi, Kenya
Tel: 254-2-443891
FAX: 254-2-447022
4. COUNTRY GOVERNMENT OFFICES
Ministry of Agriculture
Kilimo House
P.O. Box 30028
Nairobi, Kenya
Tel: 254-2-718870, 718879
FAX: 254-2-720586
Contact: Eng. Peter Wambura, Permanent Secretary
Ministry of Commerce & Industry
Co-Operative House
P.O. Box 30430
Nairobi, Kenya
Tel: 254-2-340010
FAX: 254-2-226036
Contact: Mrs. Margaret Githinji, Permanent Secretary
Ministry of Finance
Treasury Building
P.O. Box 30007
Nairobi, Kenya
Tel: 254-2-338111
FAX: 254-2-330426
Contact: Mr. Benjamin Kipkulei, Permanent Secretary
Department of Defence
Office of the President
P.O. Box 30510
Nairobi, Kenya
Tel: 254-2-227424
Contact: Mr. E. Njiru, Deputy Secretary
Ministry of Transport & Communication
Ngong Road
P.O. Box 52692
Nairobi, Kenya
Tel: 254-2-729200
FAX: 254-2-726362
Contact: Mr. Sospeter Arasa, Permanent Secretary
Ministry of Planning & National Development
Harambee Avenue
P.O. Box 30005
Nairobi, Kenya
Tel: 254-2-338111
FAX: 254-2-330426
Contact: Mr. Fares Kuindwa, Permanent Secretary
Ministry of Labour and Manpower Development
Social Security House
P.O. Box 40326
Nairobi, Kenya
Tele: 254-2-729800
FAX: 254-2-726497
Contact: Mr. Stanley K. Murage, Permanent Secretary
Customs and Excise Department
Ministry of Finance
P.O. Box 30007
Nairobi, Kenya
Tel: 254-2-715540
Contact: Mr. J. Cheruiyot, Commissioner of Customs
Industrial & Commercial Development Corporation
P.O. Box 45519
Nairobi, Kenya
Tel: 254-2-229213, 222031
FAX: 254-2-333880
Contact: Mr. Hasan Kaittany, Managing Director
Investment Promotion Center
National Bank Building
P.O. Box 55704
Nairobi, Kenya
Tel: 254-2-221401
FAX: 254-2-336663
Contact: Mr. Martin Kunguru, Executive Chairman
Kenya Ports Authority
P.O. Box 96009
Mombasa, Kenya
Tel: 254-11-312211
FAX: 254-11-311867
Contact: Mr. Simon Mukala, Managing Director
Kenya Posts & Telecommunications Corporation
P.O. Box 30301
Nairobi, Kenya
Tel: 254-2-227401
FAX: 254-2-339437
Contact: Mr. Samson Chemai, Managing Director
Kenya Power & Lighting Company
Electricity Hse. - Harambee Avenue
P.O. Box 30177
Nairobi, Kenya
Tel: 254-2-221251
FAX: 254-2-337351
Contact: Mr. Samuel Gichuru, Managing Director
Export Processing Zones Authority
British-American Center Building
P.O. Box 50563
Nairobi, Kenya
Tel: 254-2-712800
FAX: 254-2-713704
Contact: Mr. Silas Ita, Executive Chairman
5. COUNTRY MARKET RESEARCH FIRMS
Research International (EA) Ltd.
Ngano House, Commercial St.
P.O. Box 72951
Nairobi, Kenya
Tel: 254-2-558825
FAX: 254-2-558502
Contact: Mr. M.R. Jewell, Managing Director
Price Waterhouse Associates
Rattansi Education Trust Building
P.O. Box 43963
Nairobi, Kenya
Tel: 254-2-221224
FAX: 254-2-335937
Contact: Mr. Joseph Mwangi, Manager-Economic Section
Deloitte & Touche
Kirungii House, Westlands
P.O. Box 40092
Nairobi, Kenya
Tel: 254-2-441344
FAX: 254-2-448966
6. COUNTRY COMMERCIAL BANKS
Barclays Bank of Kenya Ltd.
Bank House - Moi Ave.
P.O. Box 30120
Nairobi, Kenya
Tel: 254-2-332230
FAX: 254-2-213915
Contact: Mr. P.C. Geer, Managing Director
Kenya Commercial Bank Ltd.
Kencom House, Moi Avenue
P.O. Box 48400
Nairobi, Kenya
Tel: 254-2-339441
FAX: 254-2-335219
Contact: Mr. Alexander Kaminchia, Executive Chairman
Standard Chartered Bank (K) Ltd.
Stanbank House, Moi Avenue
P.O. Box 30003
Nairobi, Kenya
Tel: 254-2-330200
FAX: 254-2-330506
Contact: Mr. Tony Groag, Managing Director
Citibank N.A.
Fedha Towers - Muindi Mbingu St.
P.O. Box 30711
Nairobi, Kenya
Tel: 254-2-333524
Fax: 254-2-337340
Contact: Paul Fletcher, General Manager
First American Bank of Kenya
ICEA Building
P.O. Box 30691
Nairobi, Kenya
Tel: 254-2-333960
FAX 254-2-230969
Contact: Mr. M. Blasetti, Managing Director
Commercial Bank of Africa
Wabera Street
P.O. Box 30437
Nairobi, Kenya
Tel: 254-2-228881
Fax: 254-2-335827
Contact: John Docherty, Managing Director
Stanbic Bank Kenya Limited
Kenyatta Avenue
P.O. Box 30550
Nairobi, Kenya
Tel: 254-2- 335888
Fax: 254-2- 330337
7. MULTILATERAL DEVELOPMENT BANK OFFICES
World Bank
Hill Park, Upper Hill Road
P.O. Box 30577
Nairobi, Kenya
Tel: 254-2-714141
Fax: 254-2-720612
Telex: 22022
Contact: Mr. Stephen O'Brien, Representative
International Finance Corporation
P.O. Box 30577
Nairobi, Kenya
Tel: 254-2-714141
Fax: 254-2-720604
Contact: Mr. Guy Antoine, Chief of Mission
African Development Bank
01 BP 1387
Abidjan 01
Cote D'Ivoire
Tel: (225) 204444
FAX: (225) 204902
8. TRADE DIRECTORIES
The Kenya Association of Manufacturers Directory
P.O. Box 30225
Nairobi, Kenya
Tel: 254-2-746005
FAX: 254-2-746028
Contact: Mr. J. W. Kuria, Chief Executive
Kenya Business Directory
Nation Marketing & Publishing Ltd.
Nation Center, Kimathi Street
P.O. Box 30211
Nairobi, Kenya
Tel: 254-2-221222
FAX: 254-2-214047
East Africa Business Directory
Nation Marketing & Publishing Ltd.
Nation Center, Kimathi Street
P.O. Box 30211
Nairobi, Kenya
Tel: 254-2-337710
FAX: 254-2-214047
9. MAJOR KENYAN NEWSPAPERS
The Nation
Nation Center, Kimathi Street
P.O. Box 49010
Nairobi, Kenya
Tel: 254-2-337691
FAX: 254-2-214047
Contact: Mr. Alfred Kiboro, Chairman
The East African Standard
Kitui Road, Industrial Area
P.O. Box 30080
Nairobi, Kenya
Tel: 254-2-540280
FAX: 254-2-553939
Contact: Mr. Bob Holt, Managing Director
The Kenya Times
Kingsway House, Muindi Mbingu Street
P.O. Box 30958
Nairobi, Kenya
Tel: 254-2-224251
FAX: 254-2-340695
Contact: Mr. Michael Ngwiri, Managing Editor
10. MAJOR BUSINESS JOURNALS
Economic Review
Mitchell Cotts House
P.O. Box 44271
Nairobi, Kenya
Tel: 254-2-219603
Contact: Mr. Peter Warutere, Editor
East African Computer News
Fatuma Court, Argwings Kodhek Road
P.O. Box 67335
Nairobi, Kenya
Tel: 254-2-567277
FAX: 254-2-568756
Contact: Dr. Crowther N. Pepela, Publisher
11. TRADE EVENTS
Nairobi International Show
P.O. Box 21340
Nairobi, Kenya
Tel: 254-2-562676
FAX: 254-2-565882
Contact: Mr. Alex Kambona, General Manager
12. KENYAN ATTORNEYS (COMMERCIAL/BUSINESS)
Archer & Wilcock, Advocates
Old Mutual Building - Kimathi Street
P.O. Box 10201
Nairobi, Kenya
Tel: 254-2-227-531
Fax: 254-2-335-091
Daly & Figgs, Advocates
Lonrho House - Standard St.
P.O. Box 40034
Nairobi, Kenya
Tel:254-2-336-331
Fax: 254-2-334-892
Kaplan & Stratton, Advocates
Queensway House - Kaunda St.
P.O. Box 40111
Nairobi, Kenya
Tel: 254-2-335-333
Fax: 254-2-340-827
Hamilton, Harrison, & Mathews, Advocates
ICEA Building - Kenyatta Ave.
P.O. Box 30333
Nairobi, Kenya
Tel: 254-2-225-981
Fax: 254-2-222-318
APPENDIX F
MARKET RESEARCH - KENYA
A. USFCS-NAIROBI SUB-SECTOR ANALYSES (ISAS)
The following are FY '95 U.S. Commercial Office, Nairobi industry sub-
sector analysis reports for Kenya:
FY '95 REPORTS
Report Title Date
Vegetable Oil Milling Machinery 04/95
Telecommunications Equipment 05/95
Sugar Processing Equipment 07/95
Resins 08/95
Agricultural Tractors 09/95
The following are FY '95 U.S. Commercial Office, Nairobi planned
industry sub-sector analysis reports for FY '96 for Kenya:
FY '96 REPORTS
Report Title Date
Navigational Aid Apparatus 11/15/95
Electrical Transformers 01/15/96
Synthetic Organic Dyes 02/25/96
Dental Instruments & Supplies 03/15/96
Food Service Equipment 04/10/96
Bakery Machinery 04/30/96
Sugar Processing Equipment 05/30/96
Computer Software 06/20/96
Resins 07/15/96
Agricultural Implements 08/15/96
The U.S. Commercial Office, Nairobi's Industry Sub-Sector Analysis (ISA)
reports are available on the National Trade Data Bank (NTDB) and through
local U.S. Department of Commerce District Office. For information and
phone orders for the NTDB, contact the NTDB help line (202) 482-1986
B. FAS-NAIROBI AGRICULTURAL REPORTS
The following is a list of upcoming FAS-Nairobi Commodity Reports and
Market Briefs including those planned through FY '96.
FY '95 REPORTS
Report Title Date Country
Tree Nuts Annual 03/01/95 Kenya
Grain and Feed Annual 02/17/95 Kenya
Sugar Annual 04/16/95 Kenya
Coffee Annual 06/17/95 Kenya
FY '96 REPORTS
Report Title Date Country
Tree Nuts Annual 01/15/96 Kenya
Grain & Feed Annual 04/01/96 Kenya
Sugar Annual 04/15/96 Kenya
Coffee Annual 05/15/96 Kenya
Tobacco Annual 06/01/96 Malawi
Tea Annual 09/15/95 Kenya
Agricultural Sit. Annual 09/30/96 Kenya
Grain & Feed Annual 09/30/96 Tanzania
FAS commodity reports are available from the Reports Office, USDA/FAS,
Washington, DC 20250.
APPENDIX G
TRADE EVENTS SCHEDULE
A. TRADE EVENT SCHEDULE
The U.S. Commercial Service, U.S. Embassy, Nairobi is examining possible
appropriate trade events for FY 96. The possibility of organizing a
U.S. Pavilion at the Nairobi International Show, September/October 1996
will be examined. Post will look at possible spin off delegations from
the many trade missions and matchmakers and other events being held in
South Africa. The Commercial Service will also look at International
Buyer Delegations to the U.S. now that there has been a freeing of
foreign exchange restrictions in Kenya. In addition, U.S. participation
in other trade events in the region will be considered as an active and
aggressive regional commercial program is being developed in concert
with other U.S. Missions in the area.
Post welcomes opportunities to hold broad based catalog shows with
products suitable for developing countries. Post has asked to be
included in any such shows. A Products for Development Catalog Show is
planned for September 1995.
Post has available a USIA facility suitable for business sponsored
promotions. This facility is available to local U.S. firms or visiting
U.S. companies wanting a solo exhibition.
U.S. firms should consult the U.S. Department of Commerce Export
Promotional Calendar in the NTDB, or contact the Commercial Service,
U.S. Embassy, Nairobi, for the latest information on trade events in
Kenya and the region.
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