Inside Politics

Kenya eyes special zones to spur trade

Tuesday, November 17th, 2020 00:00 |
Workers at an Export Processing Zone (EPZ) factory work on garments. Manufacturing units will have to implement Covid-19 measures on reopening.

Steve Umidha @UmidhaSteve

Kenya has deepened its pitch for foreign investments with a planned gazettement of more special economic zones (SEZs), Kenya Investment Authority has said.

The authority’s Chief Executive Moses Ikiara said yesterday that this move seeks to increase the number of SEZs by attracting investment into those zones.

Revelations come barely months after the Industrialisation Ministry expanded and simplified tax incentives it offers for investment in the special zones.

Kenya presently has nine SEZs with such areas meant to promote and facilitate export-oriented investments as well as boost trade balance, employment, job creation and effective administration.

“Today we have nine special economic zones in the country and about 75 export processing zones, and we will gazette more special economic zones in order to facilitate investments in this area where we feel there is potential growth,” said Ikiara, speaking ahead of the Kenya International Industrial EXPO 2020 and Shandong Export Commodities Exhibition slated for November 26th at Sarit Centre.

Processing zones

In January, the Industrialization Ministry announced new draft regulations to simplify rules on its existing tax holiday incentives for investors looking to build facilities in special zones.

The proposals are meant to grant investors a tax break based on the size of their investments.

Chinese investors look set to be the greatest beneficiaries from the announcement with a host of companies believed to be ready for the yet to be gazetted spaces.

“The Chinese exhibitors will have their local representatives being present at their various exhibition stands at the expo and this provides an excellent opportunity to set up operations here,” said Gao Wei, the managing director of Afripeak Expo Kenya Limited – with this year’s theme christened, Trade Property amid Covid-19 pandemic.

Enterprises at the SEZs enjoy several tax incentives under a tightly monitored set-up to avoid losses of government revenue.

The preferential tax terms include value added tax (VAT) exemption on all supplies of goods and services to enterprises, reduction in corporate tax to 10 per cent from 30 per cent for a period of 10 years of operation and 15 per cent for a period of 10 years.

Cut key cost drivers

Such cuts are meant to help investors cut down on key cost drivers such as transport, with the hope that surplus funds would go towards value addition.

The latest development comes amid the ongoing consultations between Kenya and the US with the former mulling a free trade deal agreed in February through their respective leaders to initiate formal talks on a bilateral trade pact that might help offset concerns about China’s expanding investment imprint on the continent.

Kenya wants to do a deal with Washington before the expiry of the Africa Growth and Opportunity Act (Agoa), which allows sub-Saharan African states to export thousands of products to the United States without tariffs or quotas until 2025.

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