From: OVERSEAS BUSINESS REPORTS (KENYA)
University of Missouri-St. Louis
Match 9 DB Rec# - 24,471 Dataset-MARKET
Source : USDOC, International Trade Administration
Source key :IT
Program key :IT MARKET
Program :Market Research Reports
Update sched. :Monthly
ID number :IT MARKET 111102778
Title :KENYA - OVERSEAS BUSINESS REPORT - OBR9301
Data type :TEXT
End year :1993
Date of record:02/16/1993
Keywords 1 :
| AFRICA, NEAR EAST AND SOUTH ASIA
| SUB SAHARA AFRICAN COUNTRIES
| SUB SAHARA AFRICAN GROUP
| SUB-SAHARAN AFRICA
KENYA - OVERSEAS BUSINESS REPORT - OBR9301
This article is derived from a report dated January 1993, prepared at the
U.S. Department of Commerce - Washington, DC. The article consists of 27
pages and discusses the economic and commercial climate in Kenya, with
emphasis on information useful for potential U.S. sellers and investors. It
includes the following sections:
FOREIGN TRADE OUTLOOK
TRADE POLICY AND REGULATIONS
SPECIAL CUSTOMS PROVISIONS
BANKING, CURRENCY, AND CREDIT
SELLING IN KENYA
INDUSTRIAL PROPERTY PROTECTION
GUIDANCE FOR U.S. BUSINESS TRAVELERS
OVERSEAS BUSINESS REPORT
Prepared by Chandra D. Watkins, Office of Africa
with the assistance of the U.S. Embassy in Nairobi, Kenya
FOREIGN TRADE OUTLOOK
Opportunities for U.S. Business--Government of Kenya's
Mining--Transport and Communication
TRADE POLICY AND REGULATIONS
Import Licensing--Import Duties--Preferential Trade
Area--Preshipment Inspections--Shipping Documents--
Sanitary and Other Special Certificates--Labeling,
Marking, and Packaging Requirements
SPECIAL CUSTOMS PROVISIONS
Entry, Transit, and Reexport--Warehousing--Samples and
Advertising Matter--Advance Rulings on Classification--
Appeals and Claims
BANKING, CURRENCY, AND CREDIT
SELLING IN KENYA
Distribution Centers--Distribution Channels--Pricing and
Credit--Government Procurement--Marketing Aids
Kenya Policy--Types of Business Organization--Investment
Regimes--Repatriation of Capital--U.S. Investment
Corporate Taxes--Personal Income Tax--Tax Deductions
INDUSTRIAL PROPERTY PROTECTION
Patents and Trademarks--Copyrights
GUIDANCE FOR U.S. BUSINESS TRAVELERS
Entrance Requirements--Business Etiquette--Living
Conditions and Cost--Business Hours--Holidays--General
FOREIGN TRADE OUTLOOK
Kenya is a capitalist country with an economic policy that emphasizes the
role of the free market. Despite overregulation of certain areas of the
economy, Kenya has one of the most open economic systems on the African
continent. Features of the economy include the use of market-based pricing
incentives, a liberal investment code, flexible exchange rate management,
and fairly realistic fiscal and monetary policies.
Kenya's economic performance has been among the strongest in Sub-Sahara
Africa, but because of rapid population growth and depreciation of the
Kenyan shilling against the dollar, economic performance has not been
impressive in either per capita or dollar terms. In 1991, the economy's
gross domestic product (GDP) grew 2.2 percent in real terms. GDP per capita
was $360. The modest growth in 1991 was largely due to lower agricultural
production and partially because of drought.
Manufacturing output grew 3.8 percent in 1991. Coffee, tea, and
horticultural exports were all up, but tourism was down. Kenya received
substantial foreign aid in 1991, but most of it ($865 million) was in the
form of project aid. Program (quick disbursing) aid was suspended by most
donors in the fall of 1991, pending political, economic, and governance
reforms. The amount suspended was about $360 million. Because this is cash
and directly affects foreign exchange availability, the suspension has had a
negative effect on imports, economic growth, and new investment. Prospects
for 1992-93 are not bright because of the aid suspension and political
uncertainty. The aid suspension will be reappraised in the fall of 1992;
elections are expected to be held then or shortly thereafter. Economic
growth is not expected to resume until these issues are settled, and many
observers predict negative growth in 1992. If the elections go well and
economic reforms are energetically pursued, the Kenyan economy could boom in
the nineties. If not, stagnation is likely.
Opportunities for U.S. Business
Major project opportunities for American firms exist in the following
areas: geothermal energy development, the telecommunications sector, the
lease and/or purchase of commercial aircraft, and a new Kenyan export
processing zone with an emphasis on textile equipment. Current plans call
for the development of an additional 280 megawatts (MW) of generating
capacity for geothermal energy generation before the year 2005. In the
telecommunications sector, Kenya Posts and Telecommunications Corporation
may procure several new systems in the coming years. The Kenya Wildlife
Service will also be purchasing a number of aircraft and helicopters for its
game parks. Several local and international companies have indicated
interest in establishing wearing apparel manufacturing operations once the
export processing zones are established.
Best export prospects to Kenya are telecommunications equipment, aircraft
and parts, agricultural chemicals, electrical power systems, industrial
chemicals, agricultural machinery and equipment, plastic materials and
resins, food processing and packaging machinery, computers and peripherals,
and medical equipment.
Government of Kenya's Development Plan
The Government of Kenya's current 5-year development plan (1989-93) targets
an annual 5.4 percent real growth in GDP. This growth rate was not reached
in 1989-91. Resumed growth depends on a strengthened private sector,
stability of coffee and tea prices, adherence to macroeconomic and sectoral
policy reforms, and higher earnings from tourism and nontraditional
exports. Most of these factors will not occur until political stability has
been reestablished and sufficient reforms accomplished to satisfy the
In the meantime, the government has continued with economic reform measures
to encourage private sector industrial growth. These include expenditure
rationalization, price decontrol, export promotion, interest rate
liberalization, and capital market development. Import licensing has been
liberalized in theory, but lack of foreign exchange has prevented much
practical result from this measure. During his annual budget speech in June
1992, Vice President and Finance Minister George Saitoti played safe with
the electorate and introduced almost no changes that would arouse
opposition. Income taxes were reduced. Budget and policy proposals were
generally consistent with the guidelines of the International Monetary
Fund. In addition, donors were promised economic reforms in due course.
Measures that many observers believe are needed to help the declining
economy were not in the budget. These include deregulation of the
agricultural sector, promotion of export-led growth, parastatal reform and
divestiture, civil service reform, and better monetary management.
Agricultural production, the backbone of Kenya's economy, contributes
approximately 30 percent of total GDP, employs over 75 percent of the work
force, and generates about two-thirds of foreign exchange earnings.
Small-scale farmers account for more than three-quarters of total
agricultural production and over half of its marketed production.
Agricultural exports continue to dominate Kenya's foreign trade picture, and
given the structure of the Kenyan economy, they will continue to do so for
the foreseeable future. Coffee, tea, sisal, pyrethrum, and horticultural
products predominate, with coffee and tea accounting for 40 to 50 percent of
overall export earnings. The suspension of the economic provisions of the
International Coffee Agreement in July 1989 temporarily disrupted markets
and drove prices to historical lows. To compensate, Kenya increased its
export volume and substantially drew down its stock carryovers to about 1
million 60 kilogram bags by the end of 1990. Prices somewhat improved for
Kenya's quality arabica coffee in 1991. Nevertheless, coffee earnings
declined from $274 million in 1988 to $200 million in 1990.
Coffee is unlikely to play the dominant role in Kenya's export mix as it has
in the past, and despite its high quality, tea will not make up the
difference. The newest hope on the horizon is horticulture. Horticulture
exports increased from 134,178 metric tons valued at $108 million in 1989,
to 188,825 metric tons valued at $139 million in 1990. Fruit and vegetable
exports in high volumes were recorded, and flower exports registered
In 1990, tourism maintained its lead as the number one foreign exchange
earner. In U.S. dollar terms, tourism earnings increased by 11 percent.
Bookings of coastal hotels showed a marked improvement in 1990, but this
trailed off during the Gulf War-induced decline in early 1991. Hotel
bookings rose dramatically during the 1991 Christmas season; earlier losses
in foreign exchange may now be recovered.
The Kenyan Government is working hard to improve performance in the tourist
sector. The depreciation of the Kenyan shilling should help to offset the
adverse impact of the 1991 Gulf Crisis and higher fuel costs.
Kenya depends largely on wood, petroleum products, and hydroelectricity for
energy. The government regulates the importation and pricing of crude oil
and petroleum products. In an effort to conserve foreign exchange and
increase energy independence, Kenya is rapidly expanding hydroelectric
generation and supply to rural areas. Ongoing oil exploration efforts have
not found commercially exploitable deposits. Two foreign oil exploration
companies are continuing to drill wells in northern and eastern Kenya, but
prospects of a commercially viable strike appear remote after 36 years of
General: Electric current in Kenya is most commonly 240 volt, 50 cycle,
single; 415 and higher voltages, 50 cycle, 3 phase exists in certain areas.
Kenya's consumption of all types of electricity increased by 23 percent
between 1986 and 1990. The share of imported electricity fell from 9
percent of the total to less than 6 percent between 1986 and 1989. In 1991,
total generating capacity in Kenya amounted to 732 MW, of which 78 percent
was hydroelectric. Geothermal energy in the Rift Valley contributes 45 MW
to Kenya's installed capacity.
Water: Adequate supplies of water for both personal and industrial purposes
are available. The Ministry of Water Development is the principal
government agency responsible for managing, developing, operating, and
maintaining water supplies, sewage disposal, and pollution control. The
Ministry of Agriculture's National Irrigation Board is responsible for
developing and maintaining large-scale irrigation schemes for agricultural
The International Development Association is funding a $43.2 million water
project, titled "Second Mombasa and Coastal Water Supply Engineering and
Rehabilitation." The project conducts preinvestment studies and engineering
designs for the extension of the Mombasa and Coastal Water Supply System and
the related wastewater disposal systems. The project also reduces the water
supply deficit through rehabilitation/augmentation of existing facilities.
Although its industrial sector accounted for only 11.4 percent of 1990 GDP,
Kenya is still the most industrialized country in East Africa.
Manufacturing activities include food processing, beverages, and production
of tobacco, footwear, textiles, cement, metal products, paper, and
chemicals. In 1990, manufacturing output grew by 5 percent, reflecting
perhaps the initial impact of a $110 million World Bank Industrial Sector
Adjustment Program started in 1988.
Industrial expansion since independence has been geared towards import
substitution and the East African market. Industry has been heavily
protected. In order for Kenyan manufacturers to become more competitive in
world markets, the government has articulated plans to create a more
favorable climate for foreign and domestic investment, which has been
stagnating for the past 10 years. Elements of the plan include
liberalization of imports, rationalization of tariffs, and promotion of
export policies aimed at making industry more efficient and competitive.
The Kenyan Government controls the rights to all minerals within the
boundaries of its jurisdiction. Prospecting is lawful only under a license
granted to qualified persons for a nominal fee. Exploitation of any
discovered mineral or petroleum deposits requires payment of royalties to
Kenya's laws governing the issuance of prospecting licenses are quite
liberal. The license must delineate the area covered and specify an
obligation to drill and to expend a minimum sum of money. Kenyan Government
negotiators have wide leeway to set the specific terms of licenses, although
their duration is limited to 10 years. Succession or inheritance of land by
noncitizens is protected by the Constitution of Kenya and therefore is not
affected by these controls.
Land Ownership: Foreign investors are permitted to own or lease land on
industrial sites in Kenya, subject to the country's land-tenure laws and
regulations. Land in Kenya is held on either a freehold or leasehold basis
and is available to industry for periods of 99 years. Rentals for
industrial sites are established by reference to prevailing market prices in
Kenya. One-fifth of the assessed value of the undeveloped land must be paid
by the lessee as a lump sum, followed by a yearly payment of 5 percent of
the remaining four-fifths. This rental remains constant during the 99-year
tenure. Also, the purchaser is required to pay the development costs for
the installation of railway sidings, roads, sewers, etc. Approved
industrial enterprises may be able to negotiate favorable terms for the
acquisition of land. There are no onerous covenants contained in the leases
other than that which requires the construction of the building of suitable
design or stipulated minimum value within 2 or 3 years of the date of the
Investors obtaining industrial plots in Kenya are advised to contact the
Ministry of Industry, P.O. Box 30430, Nairobi, Kenya.
Transport and Communications
Roads: Kenya has 51,368 kilometers (km) of established roads, of which
5,336 km are bitumen surfaced. Buses and coaches operate everywhere, but
services are not yet well developed outside the towns. Taxis are difficult
to obtain except around the larger tourist hotels, and fares are expensive
and should be negotiated in advance. Avis, Hertz, and other car rental
agencies operate in Nairobi and offer daily and monthly rates considerably
higher than those in the United States. Driving is on the lefthand side of
Rail: The Kenya Railways Corporation (KRC) operates some 2,651 km of
railway. The main line extends from Mombasa at the Indian Ocean coast to
Malaba on the border with Uganda. KRC carries 30 to 40 percent of total
freight traffic in Kenya. In 1988, KRC hauled 3.1 million metric tons of
freight on 3 foot- gauge track. The predominate locomotive supplier is
General Electric. Modern trains, with sleepers and dining cars, run between
Mombasa, Nairobi, and Kisumu. Fares are moderate.
Water: Mombasa is Kenya's only modern harbor where international ships can
dock. The Mombasa Port serves Uganda, Tanzania, Rwanda, Burundi, and
Zambia, as well as Kenya. One of the finest natural harbors in the world,
it has 15 deepwater quays, numerous transit sheds and back-of-port sheds for
dry cargo, the Kipevu Oil Terminal capable of accepting tankers up to 65,000
tons, and a lighterage wharf.
Kenya does not have freighters, tankers, and bulk carriers. The government
established its own national shipping line in 1990. The national shipping
line does not own ships, but charters space on foreign vessels. Two U.S.
shipping lines service Kenya. They are Lykes Lines and American
Air: Air travel and air freight are well developed. Kenya's major airports
are Moi International (Mombasa) and Jomo Kenyatta International Airport
(Nairobi). In addition, many towns such as Kisumu and Malindi have
airports, and there are a number of "bush" airstrips throughout the
country. Kenya Airways, the country's national carrier, operates on
international as well as domestic routes. Lufthansa, British Airways, Air
France, and other international carriers also service Kenya. No American
airlines fly into Kenya.
Telephone and Telex Facilities: Kenya has over 46,000 direct exchange lines
and more than 70,000 telephones in use. Local telephone service is
available in most cities and larger provincial towns, although delays of one
to several hours are often experienced on long distance calls within the
region. Telex services are available at some hotels and public telex
offices. The large hotels have public telephone booths. Local telephone
calls cost one shilling. International direct dial is available between the
United States and Kenya. AT&T Calling Card Service to the United States is
available. Kenya's country code is 254. Nairobi's and Mombasa's city codes
are 2 and 11 respectively.
Radio and Television: The Voice of Kenya (VOK), transmitting in English,
Swahili, and Hindustani, provides effective coverage of Kenya as well as
adjacent sections of Tanzania and Uganda from three medium-wave stations.
Parts of Kenya are served by a short-wave relay station at Langata. Almost
1.4 million radios reach about 85 percent of the total adult population in
Kenya television, also provided by the VOK, serves the Nairobi and Mombasa
areas, including the main cities in the Rift Valley and Kisumu.
Approximately 40 hours of English, Swahili, and Hindustani are broadcast
weekly. The privately owned Kenya Television Network (KTN) broadcasts in
English around the clock. Coverage includes local news programs, CNN, and
rerun serials from the United States and the United Kingdom.
TRADE POLICY AND REGULATIONS
Kenya has imposed import licensing procedures to conserve foreign exchange.
Import licenses are issued by the Ministry of Commerce. The ministry must
receive an import license application by the Kenyan importer before orders
are placed abroad. Applications for the allocation of foreign exchange for
imports are forwarded by the ministry to the Central Bank, which grants
Since early 1992, Kenya has experienced critical shortages of foreign
exchange. At times, foreign exchange reserves have covered only 2 weeks'
worth of imports. The shortage of foreign exchange has resulted in several
months delay in the issuance of import licenses. In view of the foreign
exchange situation, American exporters should ensure that any business
transactions with Kenya are covered by irrevocable letters of credit
confirmed by prime American or international banks.
Licensing System: The Kenyan licensing system classifies import items into
three broad categories. Category 1 comprises high priority capital goods,
raw materials, and intermediate inputs which can be identified easily. In
principle, license requests for Category 1 goods are approved
automatically. Category 2 contains goods subject to special import
authorization such as fertilizers, cattle, live poultry, live fish, powdered
milk, cheese, wheat, rice, maize, cereal, flours, nuts, refined sugar,
spices, petroleum products, selected motor vehicles, and tractors. Category
3 has three schedules: A, B, and C. Schedule A lists technical items of
exceptionally high priority such as engineering components, spare parts,
precision instruments, chemicals, special plastic, glass, and metal
products. Approval is usually delayed because the items are handled on a
case-by-case basis. Schedule B lists semiessential goods, mainly consumer
goods. Licensing depends on the foreign exchange reserve position.
Schedule C lists items which the government considers undesirable. Approval
for such items is difficult to obtain.
Kenya is a signatory to the General Agreements on Tariffs and Trade. Kenya
uses a single-column tariff based on the Harmonized System. All charges and
duties are payable in Kenyan shillings. Duties are assessed on the c.i.f.
value comprising the original cost of the goods plus freight and insurance.
If this information is not available, duties are assessed at the port of
entry on the price that the goods would command in the local market. Kenya
has a value-added tax on virtually all goods and services which averages
between 18 and 35 percent.
Import duties cover a wide range of rates. The amount of duty depends
largely on whether or not the item is considered essential, luxury, or if it
is readily available locally. Specific duties, where applicable, are based
on the weight, length, area, volume, or number of the imported goods. Where
duty is assessed according to weight, the net weight is used. However, if
the package does not indicate the net weight of its contents, then the duty
is assessed on the gross weight of the package and its contents.
Excise duties are assessed ad valorem on beer, sugar, tobacco, matches,
spirits, soap and soap products, woven fabrics, paints, varnishes, lacquers,
enamels, and distempers.
Duty Exemptions: Exemptions from import duties are allowed for emergency
medical equipment, items for personal use, diplomatic and consular goods,
and items for the use of the Kenyan Government. Duty refunds can be granted
for imported materials to be used for local production. The Ministry of
Commerce may also grant refunds of duty where it would be in the public
interest to do so, or where payment of duty would operate harshly or
inequitably. Suspended duties are found on a number of items for which
local production is nonexistent or insufficient, but for which expanded
production is planned.
For information on the import tariffs applying to specific products, contact
the International Trade Administration's Office of Africa, U.S. Department
of Commerce, Washington, DC 20230, or call (202) 377-4564.
Preferential Trade Area
Kenya is a signatory to the Preferential Trade Agreement (PTA). The PTA,
established in 1981, is a regional organization of Eastern and Southern
African states. Members include Burundi, Comoros, Djibouti, Rwanda,
Somalia, Swaziland, Ethiopia, Lesotho, Malawi, Mauritius, Tanzania, Uganda,
Zambia, and Zimbabwe. Angola, Botswana, Madagascar, and Mozambique have
signed the PTA treaty but not ratified it. The PTA is regarded as the first
step toward the establishment of a common market and eventually an economic
community. The PTA aims to boost trade amongst its members by giving their
products a tariff advantage over imports from outside countries. PTA member
states currently reduce tariffs on imports coming from other PTA members
states by 30 percent. The PTA member states agreed that intra-PTA tariffs
will be reduced 100 percent to zero by the year 2000.
Most commodities imported into Kenya are subject to preshipment inspection
for quality, quantity, and price comparison. Contecna Inspection S.A.
conducts the inspection in the country of origin. Suppliers should give
Contecna at least 10 days notice before indicating the place where the goods
can be inspected and the expected time of shipment. Upon satisfactory
completion of the inspection and receipt of all required documents, Contecna
Inspection will issue a "Clean Report of Findings." Banks may not make
payment against a letter of credit or a bank draft unless a Clean Report of
Findings has been issued. The cost of the inspection services is paid by
the Kenyan buyer.
Contecna Inspection S.A. has an office in the United States located at:
11305 Sunset Hill Road, Suite B5, Reston, Virginia 22090 (tel: (703)
No prescribed form of invoice or consular document is needed for shipments
to Kenya, and there are no consular fees. Documents required are the
commercial invoice, the bill of lading, and certain sanitary and other
certificates. Required documents for goods sent by air are the same as
those for goods sent by ship or other forms of transportation.
Shipping documents should be forwarded (separately from the goods) as soon
as possible by airmail to ensure their receipt by the consignee prior to the
arrival of the goods at the port of entry.
Any alterations made on any document, prior to its acceptance by the various
customs authorities, must be made in such a manner as to show the error and
the alteration in legible form. Each alteration must be initialed and dated
by the person making the correction.
The ordinary customs declaration, submitted in duplicate, can be used for
import declarations. The following information should be shown on the
invoice: country of origin; quantity of goods; true market value in the
country of origin; all costs of packing, insurance, and freight up to the
port of entry; the exact nature of any discounts and/or commissions given by
the seller to the buyer; and the import license number.
Invoices, shipping marks, and bills of lading should correspond exactly to
ensure prompt clearance by customs. In addition, weight measure on which
freight is charged may also be added.
Although not required by law, a packing list facilitates clearance through
customs. A packing list is especially recommended for consignment of
miscellaneous goods. There are no special requirements for the preparation
of bills of lading. No invoice is required for bona fide private parcel
post shipments. "Trade goods" (packages other than those addressed to a
private individual for his own use) shipped by parcel post which exceed $28
in c.i.f. value, must be accompanied by the proper customs invoice.
Sanitary and Other Special Certificates
Importation of animals, plants, and seeds is subject to quarantine
regulations. Importation is allowed only at designated ports of entry.
Every imported animal must be accompanied by a certificate from a qualified
veterinarian stating that the animal was free from disease at the time of
exportation. Examination by a veterinarian at the port of entry is also
Kenya requires a special import permit for the import of fresh fruits,
plants, and seeds, issued by the Kenyan Director of Agriculture. In
addition, a certificate signed by an appropriate government official in the
exporting country is required. Plants not covered by this special permit
will be destroyed. Seeds not covered by permit will not be destroyed unless
they come from the following plants: coffee (except roasted beans), cotton,
tobacco, tea, cacao, coconuts, groundnuts, lucerne and clover, rubber,
maize, wheat, cloves, peach, barberry, buckthorn, and potatoes.
The Kenyan Government bans the import of used clothing intended for sale,
but a considerable amount of U.S. used clothing still enters the market.
Labeling, Marking, and Packaging Requirements
There are no specific requirements pertaining to the labeling or marking of
imported goods, except for condensed milk, paints and varnishes, and
vegetable and butter ghee. Imports of prepackaged paints and allied
products must be sold by net metric weight or metric fluid measure. Paints
packed in tubes or boxes, commonly sold as artists' or children's paints,
are excepted from these requirements. Imports of pharmaceutical products
from the United States may be labeled according to U.S. pharmacopoeia
standards. However, all goods bearing any wording in the English language
should indicate the country of origin.
Senate Concurrent Resolution 40, adopted July 30, 1953, invites U.S.
exporters to inscribe, insofar as practicable, on the external shipping
containers in indelible print of a suitable size: "United States of
America." Although such marking is not compulsory under U.S. laws, American
shippers are urged to cooperate in publicizing American-made goods.
All goods should be securely packed to withstand excessive tropical heat,
moisture, rough handling, and pilferage. East African importers recommend
that American shippers avoid use of thin cardboard and plywood containers
because such containers are easily broken into and readily damaged if
exposed to the weather. To ensure safe arrival at the port of destination,
all packages should be of sturdy construction, properly supported,
preferably on the inside, and banded on the outside with steel strapping.
SPECIAL CUSTOMS PROVISIONS
Entry, Transit, and Reexport
Entry must be made within the prescribed time after arrival of the ship in
port. Goods inadmissable at port of entry are moved to a government
warehouse after 21 days from the date of commencement of unloading and are
sold if not admitted after 3 months.
Goods admitted in transit are allowed to pass through Kenya under security
bond. They are under customs control until reexported. Goods for
transshipment can be transshipped directly from the importing vessel or
within 21 days if the appropriate customs officer permits. Goods admitted
in transit, or for transshipment under bond, on which import duties were not
paid can be reexported from a bonded warehouse.
Where goods are reexported and duties were paid at the time of importation,
a refund of the amount originally paid can be obtained. A claim for such a
refund (or drawback) can be made under the following circumstances: the
owner produces such goods for examination and subscribes to a declaration
that such goods have actually been exported and will not be reimported into
Kenya; and the owner was, and is, the person entitled to the drawback, and
presents his claim for drawback within 12 months of exportation of the goods.
Drawback is prohibited under the following conditions: if the value of such
goods for home consumption is less than the amount of the drawback that may
be allowed; if the import duty thereon was less than 40 shillings; if the
exported goods have been destroyed by accident on board aircraft or vessel;
or if the goods have been materially damaged at any port or place in the
country. Furthermore, drawback is prohibited unless the goods are exported
in the original packages in which they were imported, or unless the contents
were unpacked and repacked by authority, and under supervision of a customs
Any duty paid in error will be refunded. No duty refund will be allowed for
reexported goods unless the claim is submitted within 12 months of time of
Goods may be stored in a bonded warehouse for a period of 2 years, after
which, if not cleared by the owner, they may be sold by the Customs
Goods admitted for domestic consumption that remain in any warehouse more
than 14 days may be forfeited to the government or destroyed as the
Commissioner of Customs and Excise may direct. Dutiable goods on first
importation may be stored in a bonded warehouse without payment of duty.
Goods deposited in a government warehouse are subject to rent and other
charges as may be prescribed. If these charges are not met, the goods may
be sold and the proceeds applied to the charges. Goods that have been
abandoned to Customs will be destroyed or disposed of at the owner's
expense. Duty on such goods may be refunded on application to the customs
Samples and Advertising Matter
Kenya is a member of the International Convention to Facilitate the
Importation of Commercial Samples and Advertising. Samples that the
Commissioner of Customs and Excise decide on and are of no commercial value
may be admitted duty free. The duty on samples not so exempted must be paid
on entry, and the deposit later refunded, provided the samples are
reexported within 6 months of the date of importation. The period of 6
months may not be extended. Imports of samples and advertising matter into
Kenya are subject to normal licensing and documentary requirements.
Price lists and catalogs are permitted duty-free entry. Showcards and
similar printed matter advertising goods grown or produced, or services to
be supplied from outside Kenya and imported for advertising purposes only
(but not including calendars, diaries, date indicators, desk pads, and other
advertising stationery) are also admitted free of duty.
Advance Rulings on Classification
Requests for advance rulings on customs classification of merchandise not
specifically mentioned in the customs tariff, or on a doubtful
classification may be submitted in writing (together with sample, if
practicable, or advertising notes) to the Commissioner of Customs and Excise
at any customs house in Mombasa or Nairobi. However, such advance rulings
are not binding on the authorities.
Appeals and Claims
The Commissioner of Customs and Excise, with the consent of the importer,
may settle a dispute between the importer and a customs officer. Otherwise,
the dispute will be settled in court. There is no appeal against decisions
of the Commissioner of Customs and Excise where the accused offender has
consented to accept the Commissioner's decision. In cases heard by the
courts, penalties and forfeitures inflicted by the courts may be appealed in
accordance with the rules of the court.
When any vehicle or goods have been seized by customs authorities as
forfeited, the Commissioner may--by written notification--require the
claimant to institute suit against him for recovery, or may himself cause
suit to be instituted in any competent court for the forfeiture of the
vehicle or goods. In the former instance, if the claimant does not enter
his suit against the Commissioner within 2 months, the goods are
automatically forfeited. If the Commissioner fails to notify the claimant
within 2 months or fails to institute proceedings himself, ownership of the
goods reverts to the claimant.
BANKING, CURRENCY, AND CREDIT
The Kenyan banking sector consists of the Central Bank of Kenya, 24
commercial banks, and 6 development finance institutions. In addition,
there are 47 insurance companies, a number of building societies, and over
900 savings and credit institutions.
Central Bank of Kenya: The Central Bank of Kenya, established in 1966, is
the principal financial institution in Kenya. It regulates the Kenyan
monetary and banking system, issues bank notes, administers exchange
control, and provides banking and other services to the government. In
addition, the Central Bank regulates commercial bank liquidity and interest
rates as a mechanism of government monetary policy.
Commercial Banks: The commercial banks have over 400 service centers
throughout the country. They offer a wide range of services, including
short-term financing and letters of credit. Occasionally, commercial banks
will offer medium-term financing. Additionally, commercial banks offer a
number of donor-aided term finance windows and offshore lines of credit to
support projects. The commercial banking sector is dominated by four large
banks. These banks with their American correspondents are the National Bank
of Kenya (Manufacturers Hanover Trust Company and Morgan Guarantee Trust
Company), Kenya Commercial Bank (Bankers' Trust, Manufacturer's Hanover
Trust Company, Chase Manhattan, and Citibank), Barclay's Bank (Barclay's
Bank of New York), and Standard Chartered Bank (Standard Chartered Bank of
New York). The National Bank of Kenya and the Kenya Commercial Bank are
Foreign Commercial Banks: Citibank is the only American bank that operates
in Kenya. The Commercial Bank of Africa, previously owned by Bank of
America, is now locally owned. Manufacturers Hanover Trust maintains a
representative office in Kenya. Other foreign commercial banks operating in
Kenya include the Bank of India, Ltd.; the Bank of Baroda, Ltd.; Habib Bank
(Overseas) Ltd.; and the Banque Indosuez.
Foreign Exchange Certificates: In November 1991, the Government of Kenya
issued foreign exchange certificates as a means of encouraging repatriation
of foreign exchange held abroad by Kenyan residents. The certificates are
issued by the Central Bank and sold through commercial banks. The
certificates are denominated in dollars, and the purchaser pays in dollars
or other hard currencies. The purchaser receives the value of the currency
in Kenyan shillings along with the exchange certificate. The certificate
gives the bearer the right to repurchase the same amount of foreign exchange
initially sold, plus interest from the date of issuance to the date of
Kenya's unit of currency is the shilling. The value of the Kenya shilling
is based on five major currencies: the U.S. dollar, British pound, Japanese
yen, the Deutschmark, and the French franc. The Central Bank of Kenya
circulates notes in 5, 10, 50, 100, 200, and 500 shilling denominations; and
5, 10, 50, and 100 cents denominations in coins. The Kenya shilling (KSh)
was exchanged at the rate of 32KSh equaled $1.00 as of June 1992.
There is very little foreign-source commercial credit offered to Kenya
except on an intercompany basis or for consumer goods and small machinery.
Exporters from the United States and other countries customarily sell on the
basis of irrevocable confirmed letters of credit. Financial institutions
such as the U.S. Export-Import Bank offer government-supported export credit
at commercial rates. (Occasionally, these institutions will offer credit at
better than commercial rates.) This type of credit usually requires a
guarantee either from a local bank or from the Government of Kenya. Local
commercial bank credit is available on a limited basis to importers in
Kenya, although at higher rates. Interest rates on loans were deregulated
in 1991, and as of June 1992 were 20 percent.
SELLING IN KENYA
Kenya's main points of population concentration are Nairobi, the capital
(1,350,000); Mombasa (465,000); Kisumu (185,000); Nakuru (162,000); Machakos
(116,000); Meru (78,000); Eldoret (50,000); and Thika (57,000).
Nairobi: Nairobi, the commercial hub of East Africa, is centrally located
with regard to both Kenya and East Africa as a whole. It is located at the
edge of the prosperous agricultural settlements of the Kenyan Highlands and
serves as a regional wholesale distribution center. Many firms operating
throughout the region have their headquarters in Nairobi. The city also
serves as a retail center for a large part of the surrounding area. Nairobi
derives a certain commercial advantage from its role as an administrative
center. Consequently, most marketing services are available there. U.S.
exporters should take advantage of these services in developing sales
promotion programs geared to the regional market.
Mombasa: Mombasa is the leading port and major distribution center of
Kenya. It serves as a trade artery for Uganda, Rwanda, Burundi, and eastern
Zaire. Although Mombasa's function in retail and local wholesale trade is
small, some of the larger import/export firms, and many smaller ones, are
based there. In addition to these firms, the Uganda Coffee and Lint
Marketing Boards maintain large warehouses in Mombasa.
Nakuru/Eldoret: Nakuru and Eldoret developed principally as trading centers
for the affluent European settlers of Kenya's former White Highlands area.
They are distinguished by large-scale commercial units, including the Kenya
Grain Growers Cooperative Union, which distributes agricultural machinery,
fertilizers, and supplies.
Kisumu: Kisumu, serving a large area of dense African settlement, is
becoming increasingly important as the commercial center of western Kenya.
Provincial administrative centers also play a significant role in
distribution; their respective importance is generally related to the size,
population, and prosperity of the area they serve. Most merchants in these
areas are retailers, although several may also sell goods to smaller traders
in the more remote areas.
Although Kenya offers the U.S. exporter a wide variety of methods for
distributing and selling his product, the specific means chosen must be
tailored to fit the individual requirements of the product and its potential
market. The principal methods of selling are as follows: employing the
services of an agent or distributor, selling through established wholesalers
or dealers, selling directly to cooperatives and other indigenous
organizations, or establishing a branch or subsidiary.
Agents and Distributors: Agents are often used for the distribution of a
wide range of consumer goods and raw materials. The choice of an agent is
particularly important. It can be a deciding factor in the eventual success
or failure of the marketing effort. When seeking an agent or distributor in
Kenya, U.S. exporters should visit the country since firsthand knowledge of
the market is highly desirable before any long-term commitment is made.
Also, such a visit provides an opportunity for a personal appraisal of the
relative merits of prospective agents or distributors. The large and
well-established import houses tend to be overburdened with agencies and
frequently find it difficult to allocate sufficient time and personnel
resources to the promotional effort required for newer product lines.
Alternatively, smaller agents are ordinarily prepared to devote considerable
time and attention to individual product lines. However, they may lack the
capital, personal contacts, and physical facilities necessary for a
successful sales effort. As agents often represent several different
product lines, the U.S. exporter should avoid appointing an agent who
currently is handling a directly competitive brand.
For those products requiring servicing, the exporter should ensure that
qualified personnel and the necessary parts are readily available for the
after-sales service. European competitors capitalize on their geographic
proximity to the Kenyan market by making spare parts and service personnel
available to local customers on short notice. More than one U.S. firm has
lost a valuable order through failure to provide prompt and efficient
service for its product.
The U.S. Department of Commerce can help exporters locate agents
and distributors through the Agent Distributor Service (ADS) program. The
ADS is a Commerce program which will locate interested and qualified agents
or distributors for U.S. businesses. This information is available through
the local district offices of the Department of Commerce's U.S. and Foreign
Commercial Service (US&FCS--part of the International Trade
Administration). The cost of one report is $125.
In appointing an exclusive representative in Kenya, the U.S. exporter is
legally entitled to certain exemptions from U.S. antitrust laws. The
Webb-Pomerene Act allows limited exemptions from antitrust laws by allowing
exporters to agree on prices, sales terms, and territorial divisions.
Wholesalers and Retailers: Almost all goods pass through wholesale
channels. Wholesalers play an important role in the distribution system.
Local produce trading and wholesale distribution may be very closely linked,
particularly in the more rural districts. Although major cash crops are
marketed through cooperatives and various marketing boards, most of the
minor cash crops are still handled by traders who are also wholesale
Nearly one-half of all wholesale establishments are located in the Nairobi
area. Other concentrations occur in the Coast, Rift Valley, and Central
Provinces. The smallest number are located in the sparsely populated
Northeastern Province. Most of Kenya's wholesalers are private registered
companies or partnerships.
The distribution of retail establishments closely parallels wholesale
trade. Approximately one-third of the establishments are located in the
Nairobi area. Most of the establishments operate on a small scale. Half
of them are individual proprietors and the other half are partnerships.
Most of the retail outlets in Kenya lack specialization. Practically all
shops are general stores stocking a wide range of goods. Only in the larger
towns are there any specialty shops. There are no extensive chain stores
except for the state-owned Uchumi Supermarkets.
Trade License: A company engaged in wholesale or retail trade must obtain a
license after it has acquired a place of business. Noncitizens are
precluded from operating in many towns; it is therefore essential to
determine in advance whether the location is in what is termed a "general
Manufacturing firms are not allowed to distribute their locally produced
merchandise, but must sell through African distributors.
Pricing and Credit
In quoting prices to Kenyan importers, costs should be computed on a c.i.f.
basis. In general, clarity of price quotations is vital to successful
selling. An effort should be made to quote in terms which the Kenyan
importer is familiar.
Local sources of commercial credit are generally inadequate to finance the
growing volume of import transactions. In most instances, liberal credit
terms offered by a foreign supplier can outweigh a considerable differential
in price. Therefore, the ability of the U.S. exporter to extend liberal
credit terms is an extremely important factor in determining the overall
success of the Kenyan marketing effort. Foreign competitors in many
instances grant credits for a period of 180 days for consumer goods and 24
months for small machinery and equipment.
Long-term credits for the purchase of more expensive capital equipment have
been extended by foreign firms for as long as 7 years. The offer of
long-term credits includes a 5 percent payment at time of order and a 10
percent payment on delivery up to a year later. The German, Italian, and
Dutch Governments discount paper for their exporters at similarly liberal
terms and at low interest rates.
To assist U.S. exporters in formulating sound credit policies applicable to
local markets, credit information on individual Kenyan firms is available
through the World Traders Data Reports (WTDRs) service. WTDRs, prepared by
US&FCS, are available for $75. Similar information is also available from
Procurement in Kenyan Government tenders of goods worth over $4,000 is done
through open tenders published by tender boards. The established tender
boards are the Central Tender Board, Ministerial Tender Boards, the
Department of Defense Tender Board, and the District Tender Boards.
Most goods and services which do not exceed $80 are procured without written
quotations or agreements. Procurement of goods worth up to $4,000 requires
at least three competitive quotations, but is not referred to a tender
board. Adjudication of the quotations must be made by three or more
Barriers: The Government of Kenya provides preference to domestic suppliers
for small procurements and contracts. Foreign suppliers are not eligible to
bid for contracts valued at less than $50,000. Barriers against foreign
goods and services exist in construction, engineering, architecture,
insurance, and shipping.
For instance, foreign construction companies are not allowed to make bids
except on projects with foreign financing, or where there are substantial
amounts of imported material being utilized. Any Kenyan-financed project
using only Kenyan material must be constructed by a Kenyan firm.
Engineering and architectural contracts are awarded to Kenyan firms unless
there are technical reasons for using a foreign firm or foreign financing.
Kenyan insurance companies must give 25 percent of their written business to
the Kenya Reinsurance Company, a government parastatal. Additionally, Kenya
Reinsurance Company gets 25 percent of all reinsurance business placed
abroad. There is also a 2 percent tax on reinsurance business placed
outside Kenya. As for shipping, Kenyan registered ships receive preference
on bids. There is a parastatal Kenyan national shipping company which also
receives preference. The shipping company has no ships, but charters space
on foreign registered vessels.
Foreigners have good opportunities to sell to the Government of Kenya, but
these opportunities are largely dependent on foreign exchange availability.
Foreign suppliers have experienced difficulty obtaining foreign exchange
remittances. Most big projects and capital purchases are normally donor
financed. The aid agreements often require that contractors and supplies
come from Kenya and the donor country.
Bids by U.S. companies represent an estimated 20 percent of the total number
of bids received by Kenyan tender boards. U.S. companies win about 30
percent of the bids they make. U.S. companies have attempted to win
government contracts in the supply of aircraft and spare parts,
telecommunications, food processing, and computers. Failure of U.S.
companies in some bids has been either due to noncompetitiveness or
corruption. In many cases, U.S. financing for major contracts is not
competitive with mixed credits offered by other donors and suppliers.
Export-Import Bank of the United States: The Export-Import Bank of the
United States (Eximbank) is the U.S. Government agency that provides
financial assistance to U.S. exporters when bidding on foreign government
procurement projects. Under Eximbank's Direct Loan Program, foreign buyers
can obtain medium- and long-term loans at minimum fixed interest rate for
the purchase of U.S. capital equipment and services that face officially
subsidized foreign competition. The maximum loan is 85 percent of contract
price. More information on Eximbank's programs can be obtained from the
Export-Import Bank of the United States, 811 Vermont Avenue, NW.,
Washington, DC 20570 (tel: (202)566-4490).
Several advertising agencies with headquarters in Nairobi offer a full range
of sales promotion services throughout East Africa.
Most local distributors of imported merchandise expect their suppliers to
provide substantial advertising and promotional support, particularly when
introducing a new product or brand name. Good sales ability is the most
important element in selling the product. Clear and simple operating
instructions, displays of the product in use, sample handouts, and frequent
personal visits are all vital tools for the successful sales representative
Advertising: A variety of newspapers and magazines, in both English and
Swahili, are read by East African consumers. Among the English-language
newspapers, Nairobi's Daily Nation, Sunday Nation, and The Standard report
the largest circulation. Black and white newspaper advertising costs vary
from 250 KShs. to 350 KShs. per column centimeter. Full color ads range
from 12,000 KSh. to 15,000 KSh. per column centimeter. In addition,
specialized trade and industry journals are published by various local
industry groups, commodity marketing boards, and government institutions.
The Voice of Kenya, the government-owned broadcasting company, offers
advertising facilities on both its radio and television services. Privately
owned Kenyan Television Network also provides television advertising. Radio
spot announcement rates vary from 1500 KShs. for 15 seconds to 5,000 KShs.
for 1 minute. Sponsored-program costs range from 10,000 KShs. for 15
minutes to 25,000 KShs. for a 1-hour show (6 minutes commercial content).
Television spot announcement rates range from 1500 KShs. for 15 seconds to
4,000 KShs. for 60 seconds. A 15-minute sponsored program costs 8,000
KShs.; 1-hour show, with 6 minutes of commercial content, 30,000 KShs.
Voice of Kenya advertising inquiries should be addressed to the Commercial
Manager, Voice of Kenya, P.O. Box 30456, Nairobi, Kenya. Kenya Television
Network's advertising inquiries should be addressed to Commercial Manager,
Kenya Television Network, P.O. Box 30958, Nairobi, Kenya.
Short films are another popular form of advertising for consumer articles.
A number of these films are shown in local movie houses. To show a
30-second film costs 2,500/3500 KShs. per week (16 showings) at major
theaters. For advertising in more remote areas, East African Touring
Circuits, managed by Factual Films, Ltd. of Nairobi, operates 17 mobile
theaters, each of which gives 29 shows per month at 464 towns and villages
in selected agricultural areas throughout Kenya. Audiences average 2,000
per show, and monthly exhibition charges per circuit range from 1200 KShs.
for a 10-second filmlet to 4,000 KShs. for a 60-second presentation. Longer
films are prorated to the 60-second rate. Also, Factual Films will accept
advertising records and arrange for the distribution of leaflets in
Posters and point-of-sale reminders are an important part of the advertising
package in Kenya. Brochures and special advertising materials can be
prepared by local printers at standard rates. Billboard advertising is used
in some localities but is prohibited in urban areas. Neon signs are rigidly
controlled by local authorities. Both billboard advertising and neon signs
are permitted in railway stations and are used extensively by local
advertisers. Interior and exterior bus advertising is also popular.
Packaging is an extremely important sales factor. Eye appeal has proven to
be the most effective means of attracting consumer attention, and the
supplier who takes into account consumer tastes in color and design, and
appeals to habits and attitudes peculiar to the locality, enhances his
product's saleability. Popular among low-income African consumers is a
reusable container--a bottle, jar, or box that can be re-used.
Participation in Kenya's trade fairs can also offer the U.S. exporter an
opportunity to develop local interest in his product. Among the best known
events is Kenya's Nairobi Show, usually held during the last week of
September, which offers broad agricultural-through-industrial coverage.
Periodically, the U.S. Foreign Commercial Service sponsors all American
trade shows in Nairobi. Information on these shows can be obtained from
US&FCS (tel: 254-2-334141; fax: 242-2-340838) in Nairobi, or from the Kenya
Desk Officer in the United States at the Department of Commerce in
Washington, DC (tel: (202)377-4564; fax: (202)377-5198).
Market Research and Trade Organizations: Major Kenyan advertising agencies
will undertake special market research activities for their clients. Kenyan
banks will also provide assistance on market research. These services are
frequently available in the United States through correspondent arrangements.
Local support for market research projects may also be obtained through the
Kenya National Chamber of Commerce and Industry, P.O. Box 47024, Nairobi.
The chamber has branches in all major towns and has the largest membership
of any local business association.
The Kenya Association of Manufacturers, P.O. Box 30225, Nairobi, Kenya, is a
representative organization of industrialists who seek to advance the
interest of the private sector and to make their experience available to
potential investors and traders. The association also publishes a list of
members and their products, which is a useful guide to local industry.
Among the other informative publications dealing with East African commerce
in its various aspects, the following are particularly noteworthy: The East
African Trade and Industry, a privately published monthly journal on
developments in the engineering, construction, electrical, textile,
furniture, hardware, automobile, and shipping trades in East Africa; and the
Kenya Export News, published by the Kenya External Trade Authority, which
deals primarily with external trade.
The Government of Kenya encourages foreign investment. In approving new
investments, the government gives preference to investors whose firms are
expected to earn or save foreign exchange, increase the country's technical
knowledge, increase employment, utilize local resources, and are based
outside the congested centers of Nairobi and Mombasa.
Private foreign investment in Kenya is governed by Kenya's Foreign
Investment Protection Act (FIPA). The government requires foreign investors
to apply for a Certificate of Approved Enterprise from the Treasury, which
allows them to repatriate capital and profits.
Franchising and Licensing: Kenya law does not contain specific provisions
for franchising or licensing. The primary consideration in either
arrangement is the formalization of a remittance procedure for any fees,
royalties, etc. to the franchisor or licensor. Such arrangements require
prior approval of the Central Bank.
International Agreements: Kenya is a signatory of the Settlement of
Investment Disputes Between States and Nationals of Other States, to which
the United States is a party. An investment guarantee agreement is in force
between the United States and Kenya.
Foreign Ownership of Business Entities: There are no restrictions on the
right of foreign nationals to acquire and own business entities in Kenya.
Most foreign companies are urged to have Kenyan participation in the new
business. Local financial participation increases Kenyan support and
provides the benefits of local knowledge and experience.
Credit Access: Foreign investors have limited access to domestic credit
markets and are encouraged to seek credit from outside sources. All foreign
firms are permitted to borrow locally up to the amounts required to pay
customs duty on imported capital equipment. Foreign investors are also
permitted limited credit from local financial institutions based on the
amount of equity capital.
Types of Business Organization
American firms that desire to set up operations in Kenya may establish a
subsidiary company or a representative office. Only a subsidiary company
may conduct trade. An authorized representative can trade on the company's
behalf only as an agent, but may collect orders for the company's products.
Firms doing business in Kenya must have a resident bank account.
Kenyan officials have strongly endorsed the joint enterprise type of
investment arrangement. In order to regulate establishment of business
operations, Kenya has published a Companies Act patterned after the United
Kingdom's Companies Act of 1948. Companies that may be organized under the
terms of this legislation include limited-liability companies, partnerships,
and companies limited by guarantees.
Limited-Liability Companies: Limited liability companies are limited by the
number of shares they may distribute. The liability of each individual
shareholder is restricted to the amount unpaid on the held shares. The
limited liability company is the usual type of corporate business
organization in Kenya. This type of corporate business organization may be
public or private.
A public limited-liability company is comparable to the typical U.S.
corporation. This type of company must have at least seven shareholders.
Private limited-liability companies are usually formed to obtain the
advantages of limited liability for family businesses, small companies, and
for subsidiaries to other companies. Most overseas firms establishing a
branch in Kenya set up private limited-liability companies. Such companies
must restrict the transfer of shares. They must also prohibit subscription
invitations from the public for shares or debentures. The number of
shareholders must not be fewer than 2 or more than 50.
Partnership: Partnerships are used for professional enterprises, small
trading concerns, and frequently for the business of manufacturers'
representatives that handle or distribute imported commodities.
Partnerships may constitute between 2 but not more than 20 persons, either
orally or in writing. Each partner must contribute capital or labor for the
joint benefit of partnership with the objective of making a profit. Should
these essentials be lacking, no partnership is deemed to exist. The
liability of the partners cannot be limited by private agreement, and each
partner is jointly and severally liable for all debts contracted by the
Limited-Liability Companies Established Outside East Africa: Each company
incorporated outside East Africa that establishes a place of business in
Kenya must, within 30 days of such establishment, file with the Registrar of
the country the following materials: a certified copy of the charter,
statutes, or memorandum and articles of the company or other instrument
constituting or defining the constitution of the company; a list of the
directors and secretaries of the company; a statement of all subsisting
changes created by the company; the names and addresses of one or more
resident persons authorized to accept on behalf of the company service of
process and notice required to be served on the company; and the full
address of the principal office of the company.
The Government of Kenya offers a number of specific regimes to investors.
These various regimes are described below.
Manufacturing Under Bond: The Government of Kenya operates a Manufacturing
Under Bond (MUB) scheme as part of its export expansion strategy. The MUB
program is coordinated by Kenya's Investment Promotion Center (IPC). IPC
offers free information on investment rules and procedures, opportunities,
and possible financing sources. Goods produced under MUB are exempted from
all customs duties and sales taxes on plant, machinery and equipment, raw
materials, components, and any other imported inputs. Also, goods produced
under MUB are exempt from all export taxes and levies. Additionally, they
receive top priority in allocation of import licenses. To qualify for the
MUB scheme, an investor must demonstrate financial ability, technical
know-how, and market availability. An investor must prove that the total
value of exports will exceed $440,000, or demonstrate that the enterprise
can create employment for at least 50 Kenyans.
Export Compensation: Kenya's export compensation scheme was established by
the Export Compensation Act of 1974. This system of payment compensates
exporters for high production costs due to tariffs on imports. The scheme
is offered to firms which sell all or part of their manufactured products
abroad. Export compensation is paid as a percentage of export value for
eligible manufactured products. Manufacturers of most goods are eligible
for a refund equivalent to 20 percent of the f.o.b. value of their exports,
provided that the goods sold abroad have a local value-added component of at
least 30 percent. Another provision is that duties paid on major imported
raw materials or components must account for at least 20 percent of the
c.i.f. value of the imports. Firms manufacturing under bond are not
eligible to participate in the export compensation scheme.
Tax Incentives: The government grants a one time 35 percent tax deduction
for the cost of industrial buildings, fixed plant, and machinery for
investments in Nairobi and Mombasa. If the plant is located outside Nairobi
and Mombasa, an 85 percent tax deduction in granted. In addition, depending
upon the investment location, a 2- to 5-year tax holiday is granted.
Kenya's tax treaties follow the Organization for Economic Cooperation and
Development model for the prevention of double taxation of income. There is
no tax treaty with the United States.
Export Processing Zones: Kenya has five export processing zones. Two
export processing zones are owned by the government (Mombasa and Athi) and
the remaining three are owned by private industry (Nairobi, Della Rue, and
Nakuru). These zones are designed to generate jobs, introduce technology,
and generate foreign exchange. They offer the following advantages:
1. No foreign exchange controls
2. Low-cost labor
3. Access to PTA markets
4. No quotas on manufactured exports to Europe or
the United States
5. Tax holiday for 10 years and 25 percent for the next
6. Complete exemption from duties
7. 100 percent foreign ownership
8. No withholding tax on dividends
9. Exemption on value-added and sales taxes
10. No restrictions on management and technical
Repatriation of Capital
The 1964 Foreign Investments Protection Act authorizes Kenya's Finance
Minister to issue Certificates of Approved Status. These certificates
guarantee foreign investors the right to repatriate profits after deduction
of taxes and dividends. 1976 amendments to the act stipulate the investor,
rather than the Government of Kenya, must assume the foreign exchange risks
of investment. The Kenyan Government will not guarantee in advance the
repatriation of capital gains realized upon liquidation of an investor's
In theory, the Kenyan Government allows profits to be repatriated annually.
In practice, because of chronic foreign exchange shortages, repatriation of
dividends is usually delayed. For instance, as of June 1992, American
companies have been waiting over two and one-half years for authorization to
repatriate profits. Meanwhile, these companies continue to suffer erosion
of profit value because of foreign exchange losses. These delays are a
major negative factor for potential new investors. To remedy this
situation, the Government of Kenya has said that it plans to spread out
authorizations over the course of the year, rather than group them after the
end of the calendar year. If implemented, this procedure would be an
The United States is the second main source of foreign investment in Kenya
after the United Kingdom. There are approximately 80 U.S. firms with
established offices in Kenya.
Private direct investment by U.S. firms is reported by U.S. Department of
Commerce/Bureau of Economic Analysis to have a year-end 1991 book value of
$83 million. U.S. firms manufacture batteries, soap products, and canned
goods for home consumption and export. They provide banking and insurance
services, and international transportation. Included among American firms
with major manufacturing facilities in Kenya are Colgate-Palmolive, Crown
Cork, Ralston Purina, General Motors, CPC International, and Coca-Cola.
Overall, American investment in Kenya has declined in the past decade. With
few exceptions, U.S. investments in Kenya have proven successful, but
economic difficulties and certain Kenyan Government policies have adversely
affected the financial returns of many U.S. firms.
Corporate and personal income taxes in Kenya are levied according to rules
specified in the 1973 Income Tax Act. The amounts of personal allowances
and taxation rates are fixed by the act. The machinery for assessment and
collection is operated by the Kenya Income Tax Department.
The corporate tax rate for industrial enterprise is 35 percent of the
profits, excluding dividends received from resident companies. The tax on
the income of branches of foreign firms is 42.5 percent. The tax rate for
life insurance profits and mining activities is 35 percent. Residents and
nonresidents must pay a 15 percent withholding tax on dividends and a 10
percent withholding tax on interest.
Personal Income Tax
Residents and nonresidents alike must pay tax on income accrued in Kenya.
Taxes on chargeable income are usually withheld from employees on a
pay-as-you-earn system. The income tax rates range from 10 to 40 percent.
In addition to expenses wholly and exclusively incurred in the production of
income, Kenya tax law specifies various other permissible deductions.
Annual deduction for certain classes of capital expenditure incurred for
business purposes are allowed as follows:
(a) Industrial buildings, such as factories: 4 percent; "approved" hotels:
6 percent annually on the expenditure incurred.
(b) Plant and machinery: heavy self-propelling vehicles such as
tractors--37.5 percent on the written down value; other self-propelling
vehicles such as cars--25 percent; all other machinery, including
(c) Mining: 40 percent of expenditure in the first year and 10 percent in
each of the following years; and
(d) Farm works: 20 percent of expenditure in the first year and each of the
4 following years.
An additional deduction is available at the following rates on the cost of
(a) Ships--40 percent.
(b) New factory buildings and new machinery installed in
(c) New hotels--2 percent.
No deductions on charges are made when a business as a whole is disposed
of. Purchasers of assets are entitled to write off the residue of
expenditures not allowed to the vendor. A loss in business (calculated
after allowing capital deductions as above) is set off against other income
of the same year. If a deficit results, the losses may be set off against
profits of the preceding year or carried forward indefinitely and set off
against profits of succeeding years. The provisions apply to all approved
companies, both public and private, that operate in Kenya, whether
incorporated in Kenya or overseas.
INDUSTRIAL PROPERTY PROTECTION
Patents and Trademarks
Kenya is a member of the Paris Union, the international convention for the
protection of industrial property. Kenya is also a member of the African
Regional Industrial Property Organization. Thus, investors are entitled to
national treatment and "priority right" recognition for their patent and
trademark filing dates.
The Kenyan Government implemented the 1990 Industrial Property Act and
established an Industrial Property Office. The Industrial Property Act
establishes an independent national patent law to replace the use of
pre-independence British procedures. The Industrial Property Office is
responsible for granting industrial property rights, screening technology
transfer agreements and licenses, and providing patent information to the
public. The office also provides patents, utility model, and industrial
design certificates, and acts as a receiving office for international
The office responsible for receiving trademark applications is
the Department of the Registrar General, P.O. Box 30031, Nairobi, Kenya.
There are no provisions for automatic protection or recognition of a mark
previously registered in the United Kingdom. In Kenya, registrations are
valid for 7 years from application date and renewable for 14-year periods.
The first person to apply for a mark as its user or intended user is
entitled to its registration. Applications are published for opposition for
Kenya's Copyright Act protects intellectual property, audio-visual works,
photographs, sound recordings, broadcasts, and programs carrying signals
from infringement. The copyright is valid for 50 years. Kenya has adhered
to the Universal Copyright Convention to which the United States and about
50 other countries also adhere. Therefore, U.S. nationals who have a U.S.
copyright on their marks receive automatic copyright protection in Kenya by
inserting on their works, their name, date of first publication, and the
letter "c" in a circle (symbol of copyright registration).
GUIDANCE FOR U.S. BUSINESS TRAVELERS
A valid U.S. passport and Kenyan visa are required for entry into Kenya.
Visas are issued by the Kenyan Embassy, 2249 R Street, NW., Washington, DC
20008, and by the Principal Immigration Officer at Nairobi. Visas may be
for either single or multiple entries; a letter of recommendation from the
company the traveler represents must accompany the visa application.
Temporary entry is usually granted for a maximum period of 6 months, with
two extensions of 6 months each. Visitors deciding to remain longer, but
are not interested in applying for permanent residence, must leave the
country and seek readmission.
Visitors while in Kenya are not permitted to accept remunerative
employment unless they hold a valid Temporary Employment Pass issued by the
Immigration Authorities. Such permits are ordinarily granted only if
personnel with comparable skill are not locally available, and in most
cases, immigration officials will require a Security Bond covering each
alien so employed. Entry requirements for persons wishing to take up
residence or to seek long-term employment are more stringent.
All persons traveling to Kenya must have been vaccinated against smallpox
and inoculated against yellow fever and carry with them the International
Yellow Fever and Smallpox Certificates. Typhoid, tetanus, thyphus, plague,
cholera, and diphtheria inoculations are recommended. The regular use of a
malaria suppressant is advisable. There are no limitations on the
importation of dollars, travelers checks, or other instruments of payment.
The importation and exportation of Kenyan currency is prohibited.
Free entry is permitted of necessary wearing apparel and personal effects
that are proved to have been in personal or household use by the traveler
and are not for sale, and of instruments and tools for professional use.
With the exception of stipulated personal allowances of alcoholic beverages
and tobacco products, all other goods, whether imported for personal use or
sale, including goods intended for residents of Kenya, are subject to duty.
Travelers deciding to import any vehicle (including trailers or cycles) or
other goods intended for their use, convenience, or comfort, but not for
consumption, must deposit at the time and place of importation a sum equal
to the duty that would be imposed. Simultaneously, a claim for temporary
exemption should be presented in duplicate. The vehicle or goods must then
be exported within 6 months or such further period as the Commissioner of
Customs and Excise may allow. These conditions also apply to articles
imported for exhibition or demonstration and subsequent reexport. If the
prescribed conditions are not met, the visitor will be liable for the full
duty of the vehicle or goods imported. A guarantee may be made by an
authorized organization, however, in which case no deposit is required. The
organization thereby assumes the liability for the duty if the vehicle or
goods is not reexported within the prescribed period.
In general, business customs are similar to but less formal than those in
the United Kingdom. Both English and Swahili are official languages in
Kenya. English is the most widely used in business and commerce. Business
correspondence, catalogs, and advertising material prepared in English are
readily understood by most potential buyers. Business cards are widely
used. They are usually imprinted in black and white, although there is no
objection to the colored American styles. Academic titles and degrees are
most frequently cited by members of the European and Asian expatriate
communities. U.S. businesspeople will ordinarily use their firm's name and
their title within the organization.
Correspondence and personal calls each play a significant role in the
conduct of business in Kenya. Expeditious handling of correspondence is
expected and greatly appreciated.
Standards of appropriate business attire in the larger towns are comparable
to those in most U.S. cities. In the coastal areas, tropical-weight
clothing is appropriate throughout the year; in the highlands, wool suits
may be more comfortable. A raincoat is essential, particularly during the
April to June and October to November rainy seasons; a topcoat is rarely
Personal visits are warmly welcomed and generally regarded as the most
efficient method of establishing new trade contracts. Punctuality is
important to Kenyan businesspeople, and the business visitor should make
every effort to be on time for appointments. As a general rule,
appointments should be made in advance of a business call.
Living Conditions and Costs
Most business travelers and residents find the Kenyan climate healthy and
agreeable. Although the incidence of malaria is negligible in the cities
and at altitudes over 5,000 feet, it is advisable to take antimalarial
precautions when traveling at the lower elevations. Medical facilities in
the major cities are generally adequate. British and Dutch equivalents of
standard household medicines, including vitamins and pain relievers, can be
purchased at a local "chemist." Any special medicines should be carried
with the traveler.
Kenya has several large hotels in Nairobi (Ambassador, Nairobi Hilton, Hotel
Inter-Continental/Nairobi, Nairobi Safari Club, Norfolk, and New Stanley)
and in Mombasa (Castle, Oceanic, Hotel Inter-Continental/Mombasa, Nyali
Beach Hotel, and the Mombasa Beach Hotel). Impromptu hotel accommodations
in Kenya are often difficult to obtain; therefore, reservations should be
made well in advance. Hotels in the principal cities are generally
comparable to first rate American standard, but accommodations in smaller
towns may be less satisfactory.
Suitable long-term housing accommodations are often difficult to obtain, and
business travelers planning a lengthy visit should allow 4 to 8 weeks in a
hotel until more permanent housing can be located. Boarding houses, which
are considerably less expensive, are available, but generally do not provide
accommodations of the standard considered satisfactory by Americans.
Eating habits are generally comparable to those prevailing in Western Europe
or the United States, and American travelers ordinarily experience no
difficulty in adjusting to the local cuisine.
Buses and taxis serve the residential areas of the cities, but the schedules
are such that they may not be considered a reliable means of transportation
for business purposes. Private cars are available for hire in the main
commercial centers, with or without chauffeur. Railway service is available
only between large cities.
Business Hours and Holidays
Business establishments and government offices in Kenya are open Monday
through Friday from 8:00 a.m. to 1:00 p.m. and from 2 p.m. to 5:00 p.m.
Some offices also are open on Saturdays from 8:15 a.m. to noon.
The official Kenyan holidays are as follows:
New Year's Day January 1
Good Friday Varies
Easter Monday Varies
Labor Day Monday 1
Madaraka Day June 1
Kenyatta Day October 20
Independence Day December 12
Christmas Day December 25
Boxing Day December 26
Visitors to Kenya should show respect for the President and all he
symbolizes. They should stop before a presidential motorcade, stand for the
national anthem, and under no circumstances destroy or deface a portrait of
the President. The normal spending money of Western visitors amounts to a
small fortune for many Kenyans, and foreigners are therefore asked not to
spend money ostentatiously.
The import and unauthorized use of addictive drugs is a particularly serious
U.S. business visitors are encouraged to use the U.S. Embassy in Nairobi and
the Kenya Embassy and Consulate-General in the United States. The U.S.
Embassy in Kenya is located at the corner of Moi and Haile Selassie Avenues,
P.O. Box 30137, Nairobi (tel: 254-2-334141; fax: 254-2-340838). U.S.
Department of Commerce's Foreign Commercial Service is located at the same
address and telephone numbers. There is a U.S. Consulate in Mombasa located
in Palli House, Nyerere Avenue, P.O. Box 88079, Mombasa, (tel:
254-11-315101). Kenya is represented in the United States by an embassy at
2249 R Street, NW., Washington, DC 20008, (tel: (202) 387-6101); by its
Mission to the United Nations, 15 East 51st Street, New York, NY 10022,
(tel: (212) 421-4740); and its Consulate at 9100 Wilshire Boulevard,
Beverly Hills, California 90212, (tel: (213) 274-6635).
This file extracted from Dept. of Commerce National Trade Data Bank (NTDB)
CD-ROM SuDoc No. C 1.88:993/12. Processed 12/01/1994 by software developed
by RCM (UM-St. Louis Libraries) / OBR_0008