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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 TRA