Economy in Kenya:
Kenya serves as a crucial hub in the growing regional market and remains the leading economic force in East Africa, playing a vital role in regional stability. Despite the new government under President William Ruto, investment challenges persist due to significant savings pressure. However, the need for infrastructure development remains critical.

As one of the largest economies in sub-Saharan Africa, Kenya’s economy is diverse, though agriculture remains the cornerstone, with key exports including cut flowers, coffee, tea, fruits, and vegetables. Investments in agriculture are essential to maintain international competitiveness.

Kenya also boasts a thriving local consumer goods industry and a robust service sector, particularly in tourism and finance. The country’s start-up scene, often called "Silicon Savannah," is highly dynamic, with numerous new enterprises in FinTech, GreenTech, AgriTech, logistics, e-commerce, and energy sectors.

The East African Community (EAC) customs union enhances Kenya’s position as a regional hub. The port in Mombasa is pivotal for regional trade.

Facts and Figures:

• Official Name: Republic of Kenya
• Capital City: Nairobi
• Languages: English, Swahili
• Population: 54 Million (2022)

SWOT Analysis

Strengths:

• Large and diversified economy
• Open and liberal economy with strong institutions
• Nairobi and Mombasa as regional hubs with good connectivity
• Well-developed capital and labor markets, with access to capital and skilled labor

Weaknesses:

• Moderate current economic situation
• Financing issues, with the private sector lacking capital and the state heavily indebted
• Some sectors are dominated by political families

Opportunities:

• Investment opportunities in a diversified economy with relatively good access to capital
• Participation in construction and infrastructure projects funded by donors
• Supply and consulting opportunities in energy, water, waste, and health sectors
• Broad range of opportunities in consumer goods and agriculture

Threats:

• Potential payment delays when dealing with the state
• Corruption, though less than in some other African countries, still requires caution

Potential Industries in Kenya

Healthcare Industry:
Kenya’s healthcare sector is growing rapidly due to increasing demand for treatments for chronic diseases like cancer, diabetes, and cardiovascular diseases. There are opportunities for European companies to supply pharmaceutical products and medical technology. Local production of medical consumables and equipment is also becoming important.

Investment Opportunities:

• Supplying pharmaceutical products and medical technologies
• Establishing local manufacturing facilities for medical consumables
• Partnering with local healthcare providers to enhance service delivery
• Investing in telemedicine and digital health solutions

Construction Industry:
Kenya plans significant investments in road construction. Although Chinese firms dominate, European suppliers of construction machinery, tools, building materials, and chemicals can also participate. There is demand for fittings, tiles, facades, windows, interior design, and electronics. Consultants often produce studies and oversee government projects, while architectural firms are involved in private projects.

Investment Opportunities:

• Supplying construction machinery, tools, and building materials
• Participating in large-scale infrastructure projects
• Offering consultancy services for construction supervision and project management
• Engaging in private sector construction projects

Energy Industry:
Kenya’s electricity network needs urgent expansion to meet rising demand. Geothermal energy is expected to attract significant investment. The market for off-grid solutions, such as solar systems for industries, farms, and households, is growing. European suppliers, project developers, and technical consultants find Kenya’s electricity market particularly attractive.

Investment Opportunities:

• Developing geothermal and solar energy projects
• Supplying and installing off-grid solar solutions
• Providing technical consultancy for energy projects
• Investing in energy storage and distribution systems

Water and Environment:
Rapid population growth, urbanization, and environmental challenges make investments in the water and wastewater sector increasingly necessary. Technical components and consulting expertise are in demand. Stricter environmental regulations for large water consumers require industries and agricultural companies to invest in wastewater treatment. Solutions for waste disposal are also needed.

Investment Opportunities:

• Developing and supplying water and wastewater treatment solutions
• Offering consulting services for environmental management
• Investing in waste management and recycling facilities
• Partnering with local governments on sustainable urban development projects

Agriculture:
Kenya’s agriculture sector needs more investment to meet growing domestic demand. Key areas include meat, dairy products, sugar, grains, fruit, and vegetables. Export-oriented commercial agriculture is gaining importance, with tea, coffee, and horticulture (like flowers) standing out. Demand for avocados and macadamia nuts is currently booming.

Investment Opportunities:

• Investing in modern agricultural technologies and practices
• Developing commercial farming operations for export crops
• Establishing processing facilities for agricultural products
• Partnering with local farmers to improve yield and sustainability

Market Access

Legal Framework, Founding, Investing

Legal System:
Kenya’s legal system is influenced by British common law due to its colonial past. Many legal acts are based on British models, and judges often reference British legal acts and decisions. Kenyan customary law and Islamic law apply in certain areas but are generally not relevant for commercial disputes.

Legal Disputes:
Companies should consider arbitration in legal disputes. An arbitration award can be obtained locally under the Arbitration Act, based on the UNCITRAL Model Law. Alternatively, arbitration awards obtained abroad can be recognized and enforced in Kenya under the New York Convention of 1958. Companies can also file claims in Kenyan courts, with the High Courts’ Commercial and Maritime Divisions handling commercial disputes.

International Organizations
Kenya is a member of:

• African Union (AU)
• African, Caribbean and Pacific Group of States (ACP countries)
• East African Community (EAC)
• Common Market for Eastern and Southern Africa (COMESA)
• United Nations (UN)
• Commonwealth of Nations
• World Trade Organization (WTO)
• Multilateral Investment Guarantee Agency (MIGA)
• World Intellectual Property Organization (WIPO)
• African Regional Intellectual Property Organization (ARIPO)

International Agreements and Bilateral Treaties
Kenya is part of several international treaties, including:

• New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
• African Continental Free Trade Area Agreement (AfCFTA)
• ICSID Convention on the Settlement of Investment Disputes

Bilateral agreements between Kenya and Europe include:

• Double Taxation Agreement
• Investment Protection and Promotion Agreement

Setting up a Company in Kenya:
Company formation is regulated by the Companies Act, 2015, and is done electronically via the E-Citizen platform. After formation, companies must be registered in the Companies Registry. The process takes around 14 days, though longer times may be expected.

Establishment Requirements for Selected Legal Forms:

• Private Company Limited by Shares: No minimum capital, max 50 shareholders, limited liability, electronic formation, registry registration required.
• Public Company Limited by Shares: Minimum capital of 6,750,000 KES, at least 1 founder, limited liability, electronic formation, registry registration required.
• Branch: At least 30% local ownership, appointment of local representatives, higher corporate tax, registry registration required.

Investing in Kenya:
The Investment Promotion Act governs investments, with KenInvest serving as the responsible authority. KenInvest offers a one-stop center for handling bureaucratic steps. Foreign investment is allowed in most areas, but there are restrictions on land purchases and hiring foreign workers. Corporate tax is 30% (25% for the first 5 years), with branches of foreign companies taxed at 37.5%. VAT is 16%, and various withholding taxes apply.

Import Duties:
Kenya, as part of the EAC, has a customs union with a common external tariff. Import duties are 25% for finished goods, 10% for intermediate products, and zero for raw materials and capital goods. Some sensitive goods have higher duties. The regular VAT rate is 16%, and excise duties apply to harmful and luxury goods. Customs clearance fee is 3.5%, with an additional 2% infrastructure fee.

Companies in EPZs and SEZs receive customs and tax relief. The EU-Kenya bilateral free trade agreement concluded in June 2023, pending ratification, will further facilitate trade.

Custom Declaration:
Customs declarations are made electronically via the Kenya TradeNet System. Only approved customs agents can access this system, and importers can apply for a license. Declarations must be submitted within 21 days of goods arriving in Kenya. The SCT system in the EAC simplifies customs clearance, and companies can apply for AEO status for expedited processes.

Standards for Imported Goods:
Almost all goods must meet standards set by the Kenyan standards authority KEBS, with verification through the PVoC program. SGS is the contact for exports from Europe. Non-compliant goods are not released by customs. Certain products, such as animals, plants, and used vehicles, are exempt from PVoC but are checked upon arrival.

Trade Barriers:
Import permits or licenses are required for some goods, including agricultural products, mineral oil products, pharmaceuticals, and chemicals. Import bans exist for counterfeit goods, harmful cosmetics, certain chemicals, plastic bags, used tires, and cars older than eight years.

Labor Market and Wages:
Regular employment is estimated at 5.3% of the population. Companies compete for a small pool of highly qualified workers, offering good retirement and medical benefits to attract and retain talent. The qualification of young professionals to meet the needs of the economy is a major challenge.

Development Projects and Tenders:
International donors, particularly the World Bank and African Development Bank, support many development projects in Kenya. These projects often result in international tenders for consulting, delivery, and construction services.

Prepared by: Vincent Oluoch Odhiambo