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Kenya: Trade zones to inject life into local firms

Published date:
Saturday, 19 December 2009

Local firms that have remained largely shut out of the Export Processing Zones will receive a major boost when special economic zones are rolled out next year.

The zones set up in 1990s, mainly to tap into the huge market provided under the African Growth and Opportunities Act have largely been a preserve of foreign companies.

Agoa provides duty and quota free access to most of the products from Africa but local firms which lack access to capital, market knowledge and appropriate technology have had little to show for it.

“Kenya owned enterprises in EPZ are fairly low at 17 per cent. This can be solved through incubation to develop local enterprises,” said Trade minister Amos Kimunya during a workshop held at the Kenyatta International Conference Centre last week to discuss a draft policy on the special zones.

In the proposed draft policy, small and medium enterprises (SMEs) will be helped to operate alongside giants in the zones.

SEZs will provide a framework to support the SMEs through provision of opportunities for business, support services, subcontracting, mentoring and subsidised rental charges.

The glitter that attracted investors to Kenya has in the recent years been fading, but this could change if the envisaged special economic zones are successfully implemented.

They will replace the current export processing zones, largely viewed as faltering in their initial objectives of accelerating establishment of industries and promotion of exports in the country.

When rolled out, Kenya will join other states like China, India, Mauritius, Egypt, Philippines which have adopted the SEZ as a growth model.

First step

“We intend to implement the policy as soon as possible. The ministry is ready to implement the policy as soon as it is in place. As a first step, we will undertake sensitisation activities,” said Mr Kimunya.

These will include land availability, eligible activities for local participation in value addition, strategies for small scale producers, farming co-operatives and community based organisations.

By its own admission, the government said the export processing zones have not delivered as envisaged, with several weaknesses identified in what was then touted as the anchor to rapid industrialisation in the country.

“The performance of the EPZ programme has been hampered by the current legal framework that does not allow value addition to primary production activities, lacks a policy on developing industrial clusters and support of small and medium enterprises,” says the draft.

Other identified weaknesses are low local content in the final products, poor backward linkages, minimal local participation, low technology transfer and dependence on few export items.

In 2006, foreign investment inflows were $51 million, which increased to $728 million in 2007. However, this is insignificant compared to countries like Egypt which attracted $10 billion in 2006 and $11 billion in 2007. Uganda and Tanzania also received higher inflows than Kenya.

Among the reasons why investors prefer Uganda and Tanzania have been the high cost of land to set up, particularly for start-ups locally, high cost of energy, inefficient water supply, high taxation and corruption.

In the proposed special economic zones policy, the government will provide land and offer additional tax incentives which are likely to reverse the trend of investors shunning the country.

The zones that will be set up across the country, will first target major towns connected to railway and highways and are expected to spread out investments in Kenya.

Test ideas

Knowledge based industries which will enable researchers, innovators and students to test their ideas and develop them for market will also be promoted through establishment of technology parks.

The first is Athi Basin Industrial Corridor located at Dongo Kundu. Others are free trade zones located at Jomo Kenyatta International airport, Moi, Kisumu and Eldoret airports.

The draft after discussion will be taken to the Cabinet for approval before being taken to Parliament for debate.

The document says the government will set up land banks through out the country for SEZs through allocation, buying from willing sellers, leasing and in some instances compulsory acquisition.

“ Latest AGOA Trade Data currently available on

Click here to view a sector profile of Kenya's bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.

Other regularly updated trade statistics on include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.

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