Kenya pursues growth in the manufacturing sector

Posted on : Thursday, 27th November 2014

 Kenya’s government is currently considering the final iteration of a bill that would establish three special economic zones (SEZs) within the country. The SEZs will allow lower levels of taxation and fewer regulatory hurdles, and will focus primarily on industrial activity, in particular textile production. The SEZ bill is part of a broader initiative to boost the manufacturing sector, diversify the country’s exports and encourage the creation of up to 1m industrial jobs annually.

The law establishing the SEZs is expected to be passed by parliament by the end of June. In addition to providing land, tax holidays, duty-free imports and waivers on value-added tax to potential clients, the government is hoping the zones will directly create 10m jobs over the next 30 years. The SEZs are planned for Mombasa, where 2000 sq km of land has already been set aside, the Indian Ocean port city of Lamu, and the western city of Kimusu, near Lake Victoria.

The Cabinet Secretary for Industrialisation and Enterprise Development, Adan Mohamed, also announced in February that the zones would specifically target foreign textile firms, with a view to enticing producers from the textile industries in Myanmar, China, Vietnam and South Africa. Mohamed has estimated that two to three additional years will be required before the zones can be marketed to investors.

In addition to a single free trade zone in Mombasa, Kenya has established Export Processing Zones (EPZs), which contributed $543m to the Kenyan economy in 2013. EPZ Authority CEO Cyrille Nabutola has said that EPZs account for roughly 10% of Kenya’s total exports – the bulk of which are textiles and apparel sent to the US – as well as 3.2% of GDP. As of 2012, garment manufacturers accounted for 29% of EPZ companies, 56% of EPZ exports and 30% of EPZ private investments.