COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE Investment Authority

KENYA © shutterstock.com COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE KENYA

2016 ACKNOWLEDGEMENTS

This profile has been produced under the framework of Supporting Indian Trade and Investment for Africa (SITA) project, funded by the Department for International Development, Government of the United Kingdom and implemented by the International Trade Centre. SITA is a South-South Trade and Investment project aimed at improving competitiveness of select value chains; and increasing investment in five Eastern African countries through partnerships with institutions and businesses from India.

Special contributions to writing this report have been provided by: Ministry of Industrialization and Enterprise Development African Cotton and Textiles Industries Federation

Quality Assurance: International Trade Centre (ITC), Trade Facilitation and Policy for Business Section (TFPB) TCA Ranganathan, External consultant, Rajesh Aggarwal, Chief (TFPB), Andrew Huelin, Associate Programme Advisor (TFPB) Author: Varun Vaid Design: Iva Stastny Brosig, Design plus Editor: Vanessa Finaughty

The views expressed in this report are those of the authors and do not represent the official position of the International Trade Centre, Kenya Investment Authority and the Government of the United Kingdom. The images used in this profile may not always reflect accurately the country context.

© International Trade Centre 2016 CTA SECTOR INVESTMENT PROFILE: KENYA CTA

4 Table of Contents

KENYA: AN OVERVIEW 7 DEMOGRAPHICS 8 ECONOMY 8 TRADE SCENARIO 10 BANKING SECTOR 11 RESERVE MANAGEMENT 11 TAXATION STRUCTURE 12 FOREIGN DIRECT INVESTMENT (FDI) 13 INDUSTRIAL ZONES 13

WHY KENYA? 15

COTTON, TEXTILES AND APPAREL INDUSTRY STRUCTURE 17 HISTORICAL OVERVIEW 17 RAW MATERIAL SCENARIO 18 MANUFACTURING VALUE CHAIN 19 Naivasha’s textile city 20

MARKET DEMAND 21 GLOBAL MARKET ACCESS AND EXPORTS 21 REGIONAL MARKET ACCESS 23 DOMESTIC DEMAND 23

BUSINESS ENVIRONMENT 25 LEGAL AND REGULATORY FRAMEWORK 25 LOGISTICS AND CONNECTIVITY 25 Port Roads Airports Railways

MANPOWER SCENARIO 26 POWER SCENARIO 26 GOVERNMENT SUPPORT FOR CTA SECTOR 26

KEY INVESTMENT OPPORTUNITIES 27

USEFUL CONTACTS 28

ANNEXES 29 ANNEX I: LIST OF EPZ UNITS 29 ANNEX II: STARTING A BUSINESS IN KENYA 30 CTA SECTOR INVESTMENT PROFILE: KENYA CTA

5 List of Figures

FIGURE 1: KENYA’S AGE-WISE POPULATION SEGREGATION (2015 and 2050(P)) 8 FIGURE 2: SUB-SAHARAN AFRICA’S TOP 10 ECONOMIES (2014) 8 FIGURE 3: KENYA’S ECONOMY’S GROWTH TREND (2004–2014) 9 FIGURE 4: KENYA’S OVERALL EXPORTS AND IMPORTS (2009–2013) (US$ billion) 10 FIGURE 5: KENYA’S MAJOR SUPPLIER NATIONS (2013) 10 FIGURE 6: KENYA’S MAJOR EXPORT MARKETS (2013) 10 FIGURE 7: KENYA’S APPAREL EXPORTS UNDER AGOA (2009–2014) 21 FIGURE 8: KENYA’S CTA EXPORTS (2009–2013) 21 FIGURE 9: KENYA’S CTA EXPORTS – MAJOR MARKETS (2013) 22 FIGURE 10: KENYA’S POWER GENERATION MIX 26

List of Tables

TABLE 1: KENYA’S KEY FISCAL INDICATORS (2009–2020) 9 TABLE 2: KENYA’S FOREIGN-OWNED BANKS 11 TABLE 3: FDI STATISTICS IN KENYA AND EAST AFRICA (2009–2013) 13 TABLE 4: KENYA’S KEY COTTON STATISTICS (2011–2015) 18 TABLE 5: KENYA’S GARMENT FACTORIES IN EPZA (2009–2013) 19 TABLE 6: BREAK-UP OF KENYA’S CTA EXPORTS (2013) 22 TABLE 7: KENYA’S TOP APPAREL EXPORT CATEGORIES (2013) 22

Abbreviations & Acronyms

COMESA Common Market of East and Sothern Africa EAC East African Community EPZA Export Processing Zone Authority FDI Foreign Direct Investment GDP Gross Domestic Product KIA Kenya Investment Authority KNBS Kenya National Bureau of Statistics KRA Kenya Revenue Authority LAPSSET Lamu Port South Sudan Ethiopia Transport MNC Multinational Corporation SME Small and Medium Enterprise VAT Value Added Tax CTA SECTOR INVESTMENT PROFILE: KENYA CTA WB World Bank 6 © shutterstock.com Kenya: An Overview

Kenya is an East African country lying across the equator and bordered by the Federal Republic of Somalia in the north-east, the Federal Democratic Republic of Ethiopia in the north, the Republic of South Sudan in the north-west, the Republic of Uganda in the west, the Indian Ocean in the south-east and the United Republic of Tanzania in the south. Kenya is regarded as East Africa’s regional centre for finance and trade. Its capital city, Nairobi, is Kenya’s biggest city. is another important city and has the biggest seaport in East Africa. Mombasa port serves as a gateway to many other East and Central African nations as well, many of which are landlocked. Kenya is a presidential representative multiparty democratic republic. There are eight provinces in the country, each one supervised by a president-appointed provincial commissioner. In recent years, Kenya has made significant improvement to its business environment. In the 2015 World Bank Doing Business Report, the country was ranked 108 out of 189 countries globally compared to 136 in 2014, making it the third most improved economy in the world and first in Africa. The jump in places was helped by reforms in business and property registration, electricity connections and access to credit..

Key facts Capital: Nairobi Area: 581,309 km2 Population: 44.86 mm (2014) 0–14 years: 42.00% 15–64 years: 55.00% Labour force (over 15 years): 17.5 mm (2014) Population growth: 2.6% (2014) Youth literacy rate (15–24 years): Male: 83.2% (2008–2012) Female: 81.6% (2008–2012) Urban population: 25% (2014) GDP (nominal): US$ 60.94 bn (2014) GDP per capita (nominal): US$ 1358.3 (2014) GDP growth: 5.3% (2014) Inflation rate: 6.9% (consumer price) (2014) FDI inflow: US$ 944.33 mm (2014) Exports: 16.4% of GDP (2014) Imports: 33.9% of GDP (2014) Exchange rate (per US$): KES 99.73 (2015 est.) Govt. expenditure: US$ 14.55 bn (2015 est.) Govt. revenue: US$ 10.6 bn (2015 est.) Currency: Kenyan shillings (KES) Other major cities: Mombasa, Kisumu, and Nakuru Language: English, Swahili

Source: KenInvest, 2015; World Bank, 2015; UN, 2013; CIA, 2016 CTA SECTOR INVESTMENT PROFILE: KENYA CTA

7 DEMOGRAPHICS Kenya’s population is approximately 44.86 million in 2014 and reaches 46 million in 2015, out of which approximately 55% (around 26 million) lies in the working age group of 15–64. Kenya also has one of Africa’s biggest youth populations, with almost 16 million people lying in the age group of 15–34 years. By 2050, it is expected that Kenya’s total population will cross 97 million, with a working age population of approx. 60 million, which is more than 1

the current total population. © shutterstock.com

Figure 1: Kenya’s age-wise population segregation (2015 and 2050(P))

1,3 6,1 60-64 0,8 3,2 2015 population 1,0 3,5 2050 population 50-54 46 million 1,2 4,1 97 million 1,5 5,0 40-44 2,1 5,9 2,7 6,6 2015 30-34 3,5 7,2 2050 (P) 4,0 7,8 20-24 4,2 8,5 4,8 9,1 10-14 5,7 9,7 6,6 10,1 0-14 7,2 10,5

*Source: United Nations Population Division data

ECONOMY There has been a substantial improvement in life expectancy at birth in recent years in Kenya, which Kenya is the second largest East African economy improved from 58.6% in 2009 to 63.52% in 2014.2 and fifth largest economy in Sub-Saharan Africa, The Kenya Health Policy 2012–2030, with its vision with a GDP of approximately US$ 61 billion (2014). to attain the highest possible health standards, Kenya has a market-based economy and not is expected to improve it further by providing many state-owned infrastructure establishments. equitable, affordable and quality health and related Kenya’s GDP tripled from 2004 to 2014, making it services. a fast-growing African economy. During this period, Kenya’s status progressed from low-income to The country also has a high youth literacy rate of lower middle-income, driven largely by growth in 85.90% (2015). School life expectancy in Kenya manufacturing, agriculture and real estate sectors. is 11 years, which is higher than most of the other African nations. Moreover, secondary level enrolment rates have also increased by 50% in Kenya is the second largest East African last 10 years. Government is now focussing on and fifth largest Sub-Saharan economy improving the quality of education provided at both primary and secondary level.3 Nigeria 568.51 South Africa 350.09 Angola 138.36 Sudan 73.81 Kenya 60.94 Ethiopia 55.61 Tanzania 48.06 Ghana 38.62 Côte d’Ivoire 34.25 1 Source: United Nations Population Division data D R Congo 33.12 GDP in US$ billions 2 Source: World Bank Development Indicator 3 Source: UNESCO Education Indicators 4 *Source: World Bank, 2015 CTA SECTOR INVESTMENT PROFILE: KENYA CTA Source: ITC, country report, Kenya

8 Figure 3: Kenya’s economy’s growth trend Agriculture is the Kenyan economy’s core, (2004–2014) accounting for about 30% of GDP and employing about 75% of the population (2014). The manufacturing sector has shown only GDP (US$ bn) 8,4% a little, but continuous, growth, contributing approx. GDP growth 12% to GDP, while the services sector has a share 4 61 of 13% in GDP (2014). 5,9% 50 5,2% 40 37 4,6% 4,4% 26 19

0,2% 2004 2006 2008 2010 2012 2014

*Source: World Economic Outlook database 2015, IMF

Table 1: Kenya’s key fiscal indicators (2009–2020) Percent of GDP 2009 2010 2011 2012 2013 2014 2020(P) General govt. expenditure 23.13% 24.21% 23.57% 24.21% 25.33% 27.27% 26.29% General govt. revenue 18.79% 19.80% 19.45% 19.17% 19.64% 20.48% 23.11% General govt. net debt 36.86% 40.22% 39.06% 37.06% 38.38% 44.86% 45.31% General govt. gross debt 41.09% 44.40% 43.04% 40.81% 42.24% 48.60% 47.28% Current account balance -5.5% -7.8% -10.2% -9.6% -8.4% -7.3% -6.99%

*Source: World Economic Outlook database 2015, IMF © shutterstock.com CTA SECTOR INVESTMENT PROFILE: KENYA CTA

9 4 Source: ITC, country report, Kenya TRADE SCENARIO

Kenya has a significant trade deficit, with an Figure 4: Kenya’s overall exports and imports exports value of US$ 5.5 billion and an import value (2009–2013) (US$ billion) of US$ 16.7 billion (2013). Exports have grown at a compound annual growth rate (CAGR) of 6% 16,7 Exports from US$ 4.1 billion in 2009, whereas imports have Imports 15,1 grown at a CAGR of 12% from US$ 9.5 billion in 13,2 2009. Coffee and horticultural products are the largest export categories, whereas mineral oils 11,3 and machineries are the largest import categories. 9,5 Almost one-fourth of Kenya’s total exports are concentrated in the markets of Zambia and Uganda. India and China are the largest supplier 5,4 5,5 nations to Kenya, with a combined share of 5,2 4,1 4,3 approx. 43%.5

2009 2010 2011 2012 2013

*Source: UN Comtrade

Figure 5: Kenya’s major supplier nations (2013) Figure 6: Kenya’s major export markets (2013)

Zam bi In a d ia

U 24% g 24% a n s d r a e 10% h t

O 43% s s

r

d e

51% n

h t a 9% l 19% O r e

h t e a N 4% in 8% 5% 5% h C A 8% S U U n K Japa S. UK Africa

*Source: UN Comtrade *Source: UN Comtrade CTA SECTOR INVESTMENT PROFILE: KENYA CTA

10 5 Source: UN Comtrade BANKING SECTOR Regulatory, accounting and legal systems in Kenya are transparent and in line with international norms. There are no exchange controls after the 1994 liberalisation, which removed all restrictions. However, the Proceeds of Crime and Anti-Money Laundering Act of 2009 requires a reporting institution to file reports of all cash transactions exceeding US$ 10,000 or its equivalent in any other currency to the Financial Reporting Centre. Kenya’s banking sector has 43 commercial banks and one mortgage finance company. Thirty out of these 43 banks are locally owned, while the remaining are either 100% foreign owned or have significant foreign share. In these locally owned financial institutions, only three banks have significant shareholding by the government and state corporations; the rest all are privately owned.

Table 2: Kenya’s foreign-owned banks Name of Bank Shareholding Origin Bank of India 100% foreign owned India Bank of Africa (K) Ltd Foreign owned, but locally incorporated Regional Bank of Baroda (K) Ltd Foreign owned, but locally incorporated India Barclays Bank of Kenya Ltd Foreign owned, but locally incorporated UK Citi Bank N.A. Kenya 100% foreign owned US Diamond Trust Bank Kenya Ltd Foreign owned, but locally incorporated Regional Ecobank Ltd Foreign owned, but locally incorporated Regional First Community Bank Foreign owned, but locally incorporated USA Habib Bank A.G. Zurich 100% foreign owned Switzerland Habib Bank Ltd 100% foreign owned Switzerland K-Rep Bank Ltd Foreign owned, but locally incorporated UK Standard Chartered Bank (K) Ltd Foreign owned, but locally incorporated UK UBA Kenya Bank Limited Foreign owned, but locally incorporated Regional

*Source: Central Bank of Kenya

Apart from the commercial banks, there are RESERVE MANAGEMENT financial institutions with the mandate to promote and finance Kenya’s regional trade, such as PTA Reserve money targeting has traditionally been Bank and East African Development Bank. These the de jure monetary policy in Kenya, although institutions provide financial as well as consulting targets on net domestic assets have become more and advisory roles to facilitate and foster trade, prominent recently. The central bank has been socioeconomic development and regional paying increasing attention to short-term interest economic integration between their member states. rates, which is reflected in less volatile interest As a member country, Kenya is also eligible to get rates since mid-2000. To maintain discipline in credit support from African Exim bank for various fiscal and monetary policy, a forecasting and policy sectors, including agriculture, trade, industry, analysis system (FPAS) has been implemented in infrastructure, energy and tourism. collaboration with IMF, where a team consisting of IMF staff and external experts has been enrolled to provide training to Central Bank of Kenya (CBK) staff to generate a medium-term forecast, in order to create a model-based evaluation of applicable monetary policy issues that result in alternative risk scenarios. This forecast will be given to policymakers, along with a monetary policy recommendation.6 CTA SECTOR INVESTMENT PROFILE: KENYA CTA

4 Source: East AFRITAC News, October 2014 11 TAXATION STRUCTURE The tax system in Kenya has experienced constant reform during the last two decades to make it less time-consuming and more investor friendly. The current individual and business tax rates applicable in Kenya are as follows. Foreign investors can acquire shares in a listed company subject to a minimum reserve ratio of 40% for domestic investors, with the remaining 60% considered as free float available to local, foreign and regional investors without restrictions on the level of holding. To encourage the transfer of technology and skills, the government allows © shutterstock.com foreign investors to acquire up to 49% of local stockbrokerage firms and up to 70% of local fund management companies.

a. Individual income tax Taxable income (in KES) Approx. US$ equiv. Rate of Tax (%) Up to 121,968 Up to 12,197 10% 121,969–236,880 12,197–23,688 15% 236,880–351,792 23,688–35,179 20% 351,793–466,704 35,179–46,670 25% More than 466,704 More than 46,670 30% Exchange rate: US$ 1 = KES 100

b. Business taxes Resident Non-resident EPZ units* Corporate tax** 30% 37.5% 0% for the first 10 years and 25% for next 10 years Withholding tax 5% 10% 0% for the first 10 years on dividends*** VAT 16% 16% Exempted except on motor vehicles

* Units in EPZs also enjoy stamp duty exemption and 100% a 20-year investment deduction on capital outlays. ** Corporate tax for companies newly listed on stock exchange: % age of share issued Corporate tax At least 20% of issued share capital listed 27% At least 30% of issued share capital listed 25% At least 40% of issued share capital listed 20% *** Dividends are exempted from tax when paid by a resident company that controls 12.5% or more of the share capital.

Foreign investors are able to obtain shares in a listed company dependent on a 40% minimum reserve ratio for domestic investors, with the balance of 60% deemed to be free float accessible by regional, local and foreign investors with no restrictions on the holding level. To promote skills and technology transfer, the Government of Kenya permits foreign investors to acquire as much as 70% of local fund management firms and as much as 49% of local stockbrokerage companies.7 CTA SECTOR INVESTMENT PROFILE: KENYA CTA

12 7 KPMG Services Proprietary Limited (2012). Kenya – country profile. Available from www.kpmg.com/Africa/en/KPMG-in-Africa/Documents/ Kenya.pdf. Accessed March 2016. FOREIGN DIRECT INVESTMENT (FDI) In last few years, Kenya has been one of the most attractive FDI destinations in Africa. Between 2009 and 2013, FDI in East Africa increased at a CAGR of only 12%, whereas, in Kenya, it increased at a remarkable CAGR of 45%.

Table 3: FDI statistics in Kenya and East Africa (2009–2013) In US$ million 2009 2010 2011 2012 2013 CAGR Kenya 115 178 335 259 514 45% East Africa 3 928 4 511 4 778 5 378 6 210 12%

*Source: Central Bank of Kenya

There are no sectors or regions prohibiting foreign It covers 339 hectares of land, out of which investment. There are no local participation 292 hectares has been accorded for primary requirements other than for investments in the manufacturing activities, while the remaining telecommunication sector, where locals must hold 47 hectares is for supporting developments. The at least 30% interest, and in listed companies, zone infrastructure consists of industrial buildings where locals must hold at least 25% shares. for rent, service industrial plots for lease, a health However, foreign investment in agriculture is clinic, zone staff canteen, zone administration controlled if it entails land ownership or leasing. office, in-house customs, port authority office and In Kenya, foreigners may not own land, but they vocational training school. Private investments have can rent it in 99-year increments. There is a need been made for the development of the housing to obtain a license from the investment authorities area, public health centres, canteen facilities, banks in Kenya. To obtain the certificate, the amount to and additional business and social services in the be invested by a foreign investor has to be at least zone premises. The other publically owned EPZ is US$ 100,000 or the equivalent in any currency. Kipevu public EPZ in Mombasa.

INDUSTRIAL ZONES EPZs provide incentives for: To promote export-oriented investments, export a. Resource-based product manufacturing, processing zones (EPZs) have been developed including food processing, wood, leather in Kenya. In these zones, investors can enjoy and animal-based products, building fiscal incentives and availability of readymade material and minerals infrastructure. Rapid project approval, no minimum b. Market-driven products, including investment levels, operation of foreign current cosmetics, pharmaceuticals, medicals, accounts, access to offshore borrowing, exemption packaging material, and electrical and from statistics and trade licensing act, independent electronics equipment control on investment proceeds, on-site custom documentation and inspection, and no import c. Services, including printing, publishing, declaration form are the procedural incentives transport, audio, visual, education and provided to the manufacturers in these zones. consultancy Most of the existing zones are industrial parks and Commercial activities like trading and distributions consist of enterprises that lease or buy property are not eligible for the tax exemptions provided to within the zone and use the provided infrastructure these zones. and common centres. By the end of 2014, 52 such zones were established, most of which are The Kenyan Government is planning the concentrated in the port city of Mombasa. establishment of industrial parks in Naivasha, Of these 52 zones, two are established and run by , Samburu and Voi. the public sector, while the rest all are private. Athi- River EPZ is the biggest publically owned zone. CTA SECTOR INVESTMENT PROFILE: KENYA CTA

13 CTA SECTOR INVESTMENT PROFILE: KENYA CTA

14 © shutterstock.com Why Kenya?

Cotton, textile and apparel sector investments in Kenya can benefit from the following six factors. a. Preferential market access: Kenyan exports e. Stable political climate: Since independence, have preferential access to the regional and Kenya has become one of Africa’s most stable global markets. Kenya also has duty-free countries. Kenya is a multi-party democratic market access to the EU under the Economic nation whose last elections were held in Partnership Act (EPA) and the United States of 2013. The elections were peaceful, with no America (USA) under AGOA. Recent extension instances of political violence. The incumbent of AGOA for the next 10 years will provide government is in power until 2018. additional confidence for investment f. Investor-friendly policies: Export-oriented in Kenya. businesses established in EPZ get attractive

investment incentives, including tax holidays, Kenya is also a member nation of the Common duty exemptions and a flexible expatriate Market for Eastern and Southern Africa recruitment facility. Additionally, EPZ/SEZ (COMESA) and the East African Community Acts offer incentives focused on exports and (EAC), which can be leveraged to foster regional markets regional trade. Kenya is also a part of Tripartite Free Trade Area (TFTA) between the Southern African Development Community (SADC), As a member of the World Trade Organization COMESA, and EAC, which is expected to (WTO) and Multilateral Investment Guarantee come into force by 2017. Agency (MIGA), Kenya enables its investors to insure their investment against a large variety b. Labour availability: Kenya has an abundant, of non-commercial risks. The country is also a well-educated and easily trainable workforce member of the African Trade Insurance Agency available at reasonable rates. In addition, (ATI), which is a multilateral political risk and the presence of large export-oriented apparel export credit agency for COMESA member states, manufacturing units has helped create a pool and of International Council for Settlement of of relatively trained workers. Investment Disputes (ICSID), which provides c. Good infrastructure: Kenya has the investors with additional confidence that they will advantage of having a port of its own – be treated fairly by the Kenyan Government. Mombasa – which is East Africa’s biggest port and serves as the gateway for Central and East African markets. Kenya is also a regional centre for airlines, which enables easy access to and from any global destination. The general infrastructure – power, roads and upcoming railways – is superior to most of the other East African nations. The Mombasa port is considered the most efficient in East Africa in terms of amount of cargo processed and cost of handling. There are further plans to double the capacity over the next 5 years. d. Strong buyer linkages: The country has established an effective garment trade network of raw material as well as market linkages. Large buyers are present in the country and are aware of the competencies they can leverage. This is a key advantage that Kenya has over other competing East African countries, which are at the start of their sector growth cycle. CTA SECTOR INVESTMENT PROFILE: KENYA CTA

15 CTA SECTOR INVESTMENT PROFILE: KENYA CTA

16 © shutterstock.com Cotton, Textiles and Apparel Industry Structure

The cotton, textiles and apparel (CTA) industry is Kenya’s second largest manufacturing industry after food processing and has been classified as a core industry. Kenya’s CTA manufacturing value chain comprises researchers, ginners, farmers, spinners, input suppliers, textile manufacturers and extension service providers, to name but a few. It is estimated that approximately 40,000 farmers are involved in cotton farming, while the overall sector provides livelihood to approximately 200,000 households.8

HISTORICAL OVERVIEW In 1902, the British colonial administration In the early 1990s, government decided to liberalize introduced cotton into Kenya. The Cotton Lint and the sector. Government support started declining Seed Marketing Board was founded in 1953 to and the market was thrown open. A sector that was undertake processing, marketing and production protected for decades was not ready to compete in the cotton sector. Simultaneously, cooperative with inexpensive imports from Asian suppliers. unions were also established to deal with key Cotton production, too, started declining. As a activities such as payment to farmers and input result, influx of imported goods increased rapidly supply. and the domestic industry entered a downward spiral. At the time of independence in 1963, private ginners dominated Kenya’s CTA industry. In the At the turn of century, AGOA came into force and following decade, government offered good the sector started on a recovery path, albeit slowly. support to the sector: it invested in textile mills, Realizing the exports and employment potential fixed producer prices, controlled marketing margins of the sector, in recent years, government also and aided cooperative societies in buying ginneries announced a number of policy measures to attract from the colonialists. The Government of Kenya investment in the CTA sector and enhance exports. also safeguarded the local industry by levying a In 2014, Kenya replaced Lesotho as the largest 100% duty on imported goods. This enabled the garment exporter to the USA under AGOA. Kenya local textile industry to grow fast, with a typical is expected to remain the largest beneficiary of the production capacity of more than 70%. recent 10-year extension of AGOA. CTA SECTOR INVESTMENT PROFILE: KENYA CTA

8 Source: Cotton Development Authority, Kenya, and Kenya Labour Market Profile (2014) by Danish Trade Union 17 RAW MATERIAL SCENARIO

COTTON

Cotton in Kenya is mainly grown by about 30,000 to 45,000 smallholder farmers in arid and marginal regions, under rain-fed conditions on small land holdings of about one hectare. Most of the country’s cotton is cultivated in the , Western Province and Eastern Province, and the rest is cultivated in Central and Rift Valley Provinces. Kenya has an estimated 385,000 ha of land that is suitable for cotton – 350,000 rain-fed and 35,000 irrigated – with a production potential of more than 300,000 tons of cotton seed. Nevertheless, only a fraction of that land is under cotton cultivation. Current production of cotton lint in Kenya is approximately 7,000 tons versus a potential production of 200,000 tons of lint or 750,000 tons of seed cotton.

The production has been volatile for the last few years and has not been sufficient to meet the domestic mill requirement. As a result, Kenyan firms import cotton from neighbouring cotton-producing countries such as Uganda and Tanzania.

Values in ’000 (480-pound) bales Year from 1 August to 31 July Table 4: Kenya’s key cotton statistics (2011–2015) Year Opening Prod- Import Total Mill Use Exports Ending Harvested Yield Stocks uction Supply Stocks Area (000) Pounds/ Acres Acre 2015 13 18 15 46 35 0 11 52 166 2014 11 32 5 48 35 0 13 94 163 2013 11 28 10 49 35 3 11 86 156 2012 9 32 10 51 40 0 11 96 160 2011 12 32 5 49 40 0 9 109 141

*Source: US National Cotton Council database

Another fibre produced in Kenya is sisal, a bast fibre traditionally used for making ropes and OTHER TEXTILE FIBRES twines. Sisal production in 2012 was reported at 28,000 tons, which is approx. 13% of global sisal Wool is also produced in Kenya, but the production production.10 is relatively small. Kenya has a total sheep population of 18.5 million (2013)9, but only a fraction of it is wool Kenya does not have any synthetic fibres and sheep. Kenya’s chief wool breeds include Corriedale, filament production facilities. All the demand for merino and Romney Marsh. Another breed is such inputs is catered for by imports, mainly from Hampshire Down, and there are cross-breeds China and India. In 2013, Kenya imported US$ between two or more of the mentioned breeds. In 55 million and US$ 30 million of manmade fibres addition, there are crossbreeds between the wool and manmade filaments, respectively. In 2009, the breeds, pure breed and indigenous sheep. The wool corresponding values were US$ 21 million and is processed locally or exported to world markets. In US$ 13 million for manmade fibres and manmade filaments, respectively, indicating a significant 2013, Kenya exported approx. two million kilograms 11 of raw wool, out of which approx. 85% was exported growth of imports. to India.

9 Source: FAOStat 10 Source: FAOStat CTA SECTOR INVESTMENT PROFILE: KENYA CTA 11 Source: UN Comtrade 18 MANUFACTURING VALUE CHAIN

GINNING APPAREL

There are 23 ginneries in Kenya, with an installed Approximately 170 large-scale and 75,000 small capacity to gin roughly 140,000 bales yearly, but and micro apparel manufacturers are estimated only eight of them are currently operational. The to be in business in Kenya. Out of these, 37 utilized capacity is presently only 20,000 bales units are export oriented and contribute to the (approximately 14%). The ginning units are mostly bulk of the sector’s export revenue. Twenty-two using outdated equipment; as such, Kenya’s of these export-oriented units are based at the ginning outturn is only 33.3%, which is quite export processing zones (EPZs) at Athi River and low. The low utilisation rate leads to significantly Mombasa. reduced productivity, thereby inflating processing costs. The ginning overcapacity also harms the quality of Kenyan lint Table 5: Kenya’s garment factories in EPZA (2009–2013) by fostering competition for inputs Indicator 2009 2010 2011 2012 2013 between ginners. No. of enterprises 19 16 18 22 22 TEXTILES Employment (no.) 24,359 24,114 25,169 28,298 32,899 Investment (US$ million) 60 76 80 117 139 Kenya’s installed capacity is Exports (US$ million) 164.6 204.3 235.6 239.3 278.3 approximately 140,000 ring spindles Quantity of exports 58.1 70.3 65.6 81.3 82.4 and 900 open-end (OE) rotors. (million pieces) However, most of the installed capacity is quite old and is only *Source: EPZA, Kenya Annual Performance Report partially operational. Yarn spinning is mostly being done by semi-integrated and fully integrated textile mills. 10% to 20% of the yarn produced is exported, mainly to the Republic of Rwanda, Uganda, Tanzania and the Federal Republic of Nigeria. The remaining 80%–90% continues along the domestic value chain to the weaving and knitting segment. As with the spinning segment, fabric producers (weaving, knitting and processing) in Kenya operate well below capacity, operating at roughly 40%–50% utilisation levels. Most of the units are located in Mombasa, Nairobi and the nearby © shutterstock.com areas of Athi River and Thika. They rely mostly on imported yarns from the Republic of India, the Republic of Indonesia, the People’s Republic of China and Taiwan. Fabric production is mostly for the domestic and regional markets of Uganda, Tanzania, the Republic of Zimbabwe, Rwanda and Nigeria. Fabric supply to garment exporters is very limited.

The local domestic market’s apparel product range includes: ƒƒFor local and regional markets Uniforms, trousers, vests, overalls, inner garments ƒƒFor export markets Trousers, pants, Jeans, shorts, blouses, shirts, dresses and nightwear

Kenya imports roughly 93% of its fabric supply, mainly from China, Hong Kong, Taiwan, the Islamic Republic of Pakistan and India. The local production of accessories (buttons and zippers, etc.) and garment

trims is also limited when it comes to quality and variety; as a result, they are also imported. SECTOR INVESTMENT PROFILE: KENYA CTA

19 Naivasha’s textile city

The Government of Kenya has launched an ambitious project to build a textile city at Nakuru County’s Naivasha town, north-west of Nairobi. It is situated on Lake Naivasha’s shore, and along Uganda Railway and the Nairobi-Nakuru highway. Due to being geothermally active, Olkaria area, situated to the south of Lake Naivasha, is being utilized to generate increasing amounts of clean electrical power. The region has an estimated potential of 2,000 MW. Units located in Naivasha’s textile city will have access to uninterrupted power at just 5 cents a kWh and inexpensive steam. This makes the location extremely attractive for textile projects such as spinning, fabric manufacturing

and processing, since power is a major cost © shutterstock.com component of these projects. Government plans to develop the entire city with complete support infrastructure to attract domestic and foreign investors to the zone. © shutterstock.com CTA SECTOR INVESTMENT PROFILE: KENYA CTA

20 Market Demand

GLOBAL MARKET ACCESS AND EXPORTS

Kenya enjoys duty-free market access to the Figure 7: Kenya's apparel exports US under the African Growth and Opportunity Act under AGOA (2009–2014) (AGOA) and to EU under the Economic Partnership Agreements (EPAs). Kenya-based garment Values in US$ million exporters are also beneficiaries of third country fabric provision under AGOA as well as EPA, which means the garments qualifying for duty-free 379 preferences can be made from imported fabric 14% as well. Kenya is among the few Sub-Saharan countries 309 that have successfully leveraged duty-free 261 advantage available under AGOA in the US market. 254 Apparel exports to the US market have increased 202 from US$ 195 million in 2010 to US$ 379 million in 195 2014, registering a CAGR of 14%. In 2014, Kenya © shutterstock.com replaced Lesotho as the largest garment exporter to the USA under AGOA.

Overall, sector exports from Kenya have grown from US$ 253 million in 2009 to US$ 377 million 2009 2010 2011 2012 2013 2014 in 2013 at a CAGR of 8%. *Source: OTEXA, US Trade under AGOA

Figure 8: Kenya’s CTA exports (2009–2013)

US$ million

8%

377 342 318 253 266

2009 2010 2011 2012 2013

*Source: OTEXA, US Trade under AGOA CTA SECTOR INVESTMENT PROFILE: KENYA CTA

21 The USA is the single largest market, accounting for almost 82% of Kenya’s CTA exports. Within the US market, knitted apparel is the largest category, followed by woven apparel, while textile exports to the US are almost negligible.

Figure 9: Kenya’s CTA exports – major markets (2013)

d appare tte l ni K

s r e 43%

h

t U

O 15%

82% S A

Uganda 1% 39% Canada 1% l Textiles 0% re Tanzania 1% a p ap Woven

*Source: UN Comtrade

Also at the overall level, apparel categories (knitted and woven) command a major share of approx. 86%, while textiles is a minor export category. Values in US$ million Table 6: Break-up of Kenya’s CTA exports (2013) Commodity Export value Share Knitted apparel (HS 61) 169 45% Woven apparel (HS 62) 155 41% Misc. vegetable fibres (HS 53) 26 7% Made-ups (HS 63) 13 3% Others 14 4% Total 377

*Source: UN Comtrade

Within apparel, the top five categories have a share of 25% of the exports. Values in US$ million Table 7: Kenya’s top apparel export categories (2013) Commodity Export value Share Women’s and girls’ suits, jackets, dresses and skirts, etc., woven (HS 92 28% 6204) Jerseys, pullovers and cardigans, etc., knit or crochet (HS 6110) 54 17% Men’s and boys’ suits, jackets and trousers, etc., not knit (HS 6203) 38 12% Women’s and girls’ suits, dresses and skirts, etc., knit or crochet (HS 36 11% 6104) T-shirts, singlets and other vests, knit or crochet (HS 6109) 25 8% Other knitted and woven apparel categories 79 24% Total apparel 324

*Source: UN Comtrade CTA SECTOR INVESTMENT PROFILE: KENYA CTA

22 REGIONAL MARKET ACCESS Kenya is a member of East African Community Kenya is also a member state of COMESA, which (EAC), which is the regional intergovernmental provides it with duty-free access to the markets of organization of the Republics of Kenya, Burundi, Burundi, the Union of the Comoros, the Democratic Rwanda and Uganda, and the United Republic Republic of the Congo, the Republic of Djibouti, of Tanzania. EAC headquarters are in Arusha, the Arab Republic of Egypt, the Republic of Malawi, Tanzania, and it has a collective population of 145.5 the State of Eritrea, Libya, the Republic of the million people and a gross domestic product (GDP) Sudan, the Republic of Mauritius, the Republic of of $147.5 billion in 2015. Madagascar, Rwanda, the Kingdom of Swaziland, Uganda, the Republic of Zambia, the Republic of The EAC’s objectives are to consolidate the Seychelles and Zimbabwe. (Note: Ethiopia is yet to customs union, establish a monetary union, accede to COMESA FTA.) move towards a common market and set the foundations for a political federation. The strategy also promotes the development of economic DOMESTIC DEMAND infrastructure (including energy) that would support and spur economic growth in the member states. At present, Kenya imports second-hand clothing A customs union was created and signed by the or mitumba worth US$ 137 million (2013), which is Republic of Kenya, Tanzania and Ethiopia in 2004. a big deterrent for the domestic market. However, In 2008, the Republics of Burundi and Rwanda the aspirations and disposable incomes of the joined the customs union and, in July 2009, they Kenyan population are growing rapidly. Domestic began to apply its instruments. Kenya also enjoys consumption of various consumer products, duty-free access to the Republic of Burundi, including textiles and apparel, have grown in recent Rwanda, Tanzania and Uganda under EAC. EAC years and can be linked to overall economy growth member nations have adopted a three-band and an increase in consumer spending power. common external tariff regime – 25% for finished With a GDP per capita of US$ 1,358 (2014), products, 10% for semi-processed products, and a population base of 44.86 million and good 0% for raw materials and capital goods. economy growth prospects, Kenya is soon going to be an attractive market for garment producers.

The Rules of Origin (ROO) for both EAC and COMESA state the following.

Garments may enjoy duty-free access if produced in a partner state wholly or partially from material imported from outside the partner state or of undetermined origin by a process of production that effects a substantial transformation of those materials such that: The CIF value of those materials does not exceed 60% of the total cost of the materials used in the production of the goods; or The value added resulting from the process of production accounts for at least 35% of the ex-factory cost of the goods; or The goods are classified or become classifiable under a tariff heading other than the tariff heading under which they were imported.

Kenya is also a part of Tripartite Free Trade Area (TFTA) between EAC, COMESA and Southern African Development Community (SADC), which will be implemented by 2017 (after ratifications and approvals by member state governments). The tripartite will create an integrated market with a combined population of almost 600 million people. This will further enhance the regional reach of Kenya’s garment exports, including that to South Africa, which is a large garment importer (US$ 1.8 billion imports in 2013). CTA SECTOR INVESTMENT PROFILE: KENYA CTA

23 CTA SECTOR INVESTMENT PROFILE: KENYA CTA

24 © shutterstock.com Business Environment

LEGAL AND REGULATORY The port is recognized as one of the most secure ports of East Africa following installation of an FRAMEWORK integrated security system. Introduction of a The key corporate and investment laws applicable single-window clearance system has brought in Kenya are the Companies Act (Cap 486) and the huge improvement in port efficiency. The container Investment Promotion Act, 2004. The Promotion terminal is under expansion and is expected to Act guarantees foreign investors remittance increase its capacity by 450,000 TEU by the end of of dividends, interest and capital repatriation. 2016,and will add further port capacity of A new competition law that seeks to ensure a 1.2 million TEU by 2019. These improvements in more competitive market was brought into effect capacities will further reduce the dwell time at port. in 2012. In June 2013, and the Capital Markets (Futures Exchanges, and Licensing Requirements) ROADS Regulations and the Capital Markets (Real Estate The total size of the road network in Kenya is Investment Trusts, and Collective Investment 160,000 kilometres. Kenya has witnessed a Schemes) Regulations came into force. significant improvement in highway connectivity in recent years. Resurfacing and improvement of Over the past few years, there have been major the Mombasa-Nairobi highway has reduced the efforts to privatize commercial sectors that were transit times. Also, the introduction of High Speed previously government owned or managed and Weigh-in-Motion, which weighs the vehicle while it to encourage foreign investment in these sectors. is moving, has speeded the flow of traffic. In 2013, The government’s stated aim is to have minimal reduction in police roadblocks and weighbridges interference in business and it is increasingly have reduced the transit times from 18 days to five adopting the role of regulator rather than active days from Nairobi to Mombasa’s port. market participant. To promote investment in Kenya, the government reduced the number of licenses AIRPORTS required to set up a business from 300 to 11. The Business Regulatory Reform Unit in the Ministry There are four international airports in Kenya of Finance continues streamline the process. – Mombasa International Airport (MOI), Jomo Kenyatta International Airport, Eldoret International A new Public Private Partnerships Act, 2013 Airport and Kisumu Airport. Nairobi’s Jomo has been introduced and aims to expand the Kenyatta International Airport is Kenya’s largest private sector’s participation in infrastructure and airport and serves most of the international development projects through concessions or destinations. contractual profit-sharing arrangements. RAILWAYS LOGISTICS AND CONNECTIVITY Kenya Railways Corporation, with support from China, is developing a new standard gauge railway line with a route length of 472 km and a total length PORT of 609 km. Extending from Mombasa in the south- Kenya’s geographic location is its inherent east to Malaba, a western town on Uganda’s border, advantage. There are three major sea ports in the rail line will also go to Kigali in Rwanda, with a Kenya – Mombasa, Lamu and Malindi. In addition, branch line to Juba in South Sudan. Within Kenya, Kenya has a lake port at Kisumu on Lake Victoria. it will go through Mombasa, Nairobi, Kwale, Kilifi, Kenyan ports also serve other neighbouring Kajiado, Taita-Taveta, Machakos and Makueni. landlocked countries like Uganda, Rwanda and Branch lines along the route will extend to Pakwach, Burundi, thus making Kenya a gateway to East and Kasese and Kisumu.12 Central Africa. The railway line is expected to be complete by Mombasa’s port is East Africa’s biggest port, December 2017 and will reduce commuting time with a capacity of 800,000 TEU per year. It is also from Mombasa to Nairobi from more than 10 hours considered the most efficient in its operations. In to only four hours. Freight trains will also be able to

2013, the Port of Mombasa handled 22.3 million complete this journey in less than eight hours. SECTOR INVESTMENT PROFILE: KENYA CTA tons, with around 6.6 million tons of transit cargo. 25 12 Railway-Technology (2015). Mombasa-Nairobi Standard Gauge Railway Project, Kenya. Available from www.railway-technology.com/projects/ mombasa-nairobi-standard-gauge-railway-project. MANPOWER SCENARIO GOVERNMENT SUPPORT FOR Kenya is very competitive in terms of human CTA SECTOR capital. As previously mentioned, there is an There is significant government support for the cotton, textile abundant and relatively well-educated population and apparel sector in Kenya. Cotton is one of the key industrial available at internationally competitive rates. It has crops earmarked by Kenya’s government for value addition, a high literacy rate of 87%. Almost 55% of the promotion and integration with the manufacturing sector in 44.86 million population lies in the working age order to generate employment opportunities in Vision 2030. group of 15–64 years. Current wage rates for an Respective public sector ministries have made strategic unskilled worker in the textile and apparel sector interventions across the value chain a priority, beginning with range from US$ 70 to US$ 130, whereas that of a processing, production and manufacturing.14 skilled worker ranges from US$ 125 to US$ 170. The Government of Kenya does not offer a subsidy for cotton Kenya’s constitution protects the right to trade growing or price support for marketing, ginning or producers. union activities, reasonable working conditions Instead, it provides targeted support to smallholder farmers. and fair remuneration, as well as the right to This entails providing seeds to plant, and an advisory service strike in the Bill of Rights as an essential freedom. through extension research and service. It also supports Labour laws mandate that the total hours that irrigation scheme rehabilitation to restore irrigated cotton should be worked in a two-week period must not production over the course of the next five to 10 years. be more than 120 hours. Wage regulation is part of the Labour Institutions Act, and the Kenyan Kenya Investment Authority (KenInvest) is a legal body that Government determines basic minimum wages aims to encourage investments in Kenya. It provides aftercare by location and occupation, setting a minimum services for existing and new investments, facilitates the for hourly, daily and monthly work in each execution of new investment projects, and organizes local and category. Conditions of employment and wages international investment promotion activities. Pre-investment are negotiated between and established by services include issuing necessary licenses, helping investors management and unions. However, a substantial receive any applicable exemptions or incentives, providing portion of Kenya’s employees depend largely on information on opportunities and regulations, sources of capital the informal sector for income, which results in and the business environment, etc., and coordinating with other them not being protected by minimum wage laws. government bodies to help investors obtain any other permits or approvals. All expatriates need work permits in order to work in Kenya and any enterprise, both foreign and Government is also providing investment support under EPZs, local, can employ expatriates in all categories of which includes tax incentives and holidays, VAT exemption, skilled labour if there are no Kenyans available. business allowance and investment deductions. The Export However, it is necessary for foreign firms to sign Processing Zones Authority (EPZA) expedites product an agreement with Kenya’s government that manufacturing for exports in the EPZ, and provides information defines training arrangements planned to phase for investments in the EPZ. It is also planning the establishment out expatriates. Visas are normally valid for three of industrial parks in Naivasha, Mtwapa, Samburu and Voi. months and an application for an extension can be made to the immigration department. Figure 10: Kenya’s power generation mix

d 0,2% POWER SCENARIO Win Others al 1,8% Kenya has one of the most well-established erm th power sectors in Sub-Saharan Africa. Kenya’s eo G total installed capacity is 1,783 MW. It is also Africa’s largest producer of geothermal 13% energy. Geothermal energy currently accounts for 13.2% of Kenya’s total installed capacity. Further, untapped geothermal resources are

H

approximated to be between 7,000 MW and 43% y

d

13 r 10,000 MW just in the Rift Valley province. o

The average power cost in Kenya is approx. 42% US$ 0.14/kWh. However, EPZ units enjoy a

subsidized power supply at US$ 0.09/unit. T h Government is working towards reducing power e rm rates to a single digit for all units. The average al

CTA SECTOR INVESTMENT PROFILE: KENYA CTA downtime is two to three hours a week, with a monthly average of 10 hours. *Source: UN Comtrade 26 13 Norton Rose Fulbright LLP (2013). Investing in the African electricity sector, Kenya: Ten things to know 14 ACTIF (2013). Policy research on the Kenyan textile industry. Findings and recommendations. Prepared by Charmy Investments Limited, Kenya, June 2013. Key Investment Opportunities

There has been significant interest from the international investor community in the textile and apparel sector in Kenya. In 2013, 46 new textile and apparel sector projects were awarded licenses by Kenyan authorities, which is a historical high. The key investment opportunities that exist in Kenya’s textile and apparel sector include the following. a. Garment manufacturing c. Garment accessories Garment manufacturing in Kenya remains the most Local production of garment accessories (buttons, attractive investment option for global investors zippers, labels and tags, etc.) is quite restricted due to the duty advantage under AGOA and other when it comes to quality and variety. Therefore, benefits as explained earlier. AGOA’s extension these accessories are imported by the majority for the next 10 years has removed the cloud of of garment manufacturers. As the industry in the uncertainty hovering over the future of this sector country and region grows, there will be a ready in Kenya. market available for such items. An investment targeted at manufacturing and import substitution Import duty in the US market for synthetic garments of such items can be a good proposition. is much higher than that for cotton garments (32% vis-à-vis 10%). In other words, Kenya-made synthetic garments will be 32% cheaper than d. Services garments made in Asian countries that do not have duty advantage. For cotton garments, this With the growing production of textile and apparel duty advantage will only be 10%. Hence, Kenya factories, opportunities will arise to provide is a more beneficial location to produce synthetic associated services like buying houses, testing garments (as opposed to cotton garments) and houses, technical consultancy, brokerage services, export to US markets. export marketing, and training, etc. b. Textile (yarns and fabrics) manufacturing Textile manufacturing set-up, including yarn manufacturing, weaving, knitting and fabric finishing, is not well developed in Kenya. The existing units have old technology machines that are not able to cater to the demand of export- oriented garment businesses. Hence, they are forced to operate at reduced utilisation and cater mainly to low-end domestic and regional markets. New investments in these sub-segments with latest technology machines that are cost and quality © shutterstock.com competitive can get access to a ready market not only in Kenya, but also in other neighbouring countries where apparel exports are growing. Kenya can specifically focus on building a strong export-oriented synthetic manufacturing value chain for catering to regional exporters, as there is hardly any such set-up available in the region. Useful contacts

Ministry of Industrialization and Enterprise Kenya Investment Authority Development Kenya Railways Headquarters, Block D, Telephone: +254 20 273 1531 4th Floor Workshop Road, off Haile Sellasie Avenue E-Mail: [email protected] P.O. Box 55704 - 00200 City Square Nairobi, Kenya. Website: www.industrialization.go.ke Telephone: +254 (730) 104-200 E-mail: [email protected] Website: www.investmentkenya.com

Cotton Fibre Directorate (formerly CODA) – Export Processing Zone Authority Agriculture, Fisheries and Food Authority (AFFA) Administration Building,Viwanda Road, Telephone: +254 387 2421 off Nairobi-Namanga Highway, Athi River, Kenya +254 387 2497 P.O. Box 50563 Nairobi 00200 Kenya +254 387 4445 Telephone: +254 45 6621000 E-mail: [email protected] E-mail: [email protected] Website: www.agricultureauthority.go.ke Website: www.epzakenya.com

Export Promotion Council Kenya Association of Manufacturers (KAM) Telephone: +254 20 222 8534/8 Telephone: +254 (0) 722 201 368 Website: www.epckenya.org +254 (0) 734 646 004/5 Website: www.kam.co.ke © shutterstock.com © shutterstock.com CTA SECTOR INVESTMENT PROFILE: KENYA CTA

28 Annexes

ANNEX I: LIST OF EPZ UNITS

List of EPZ units COMPANY PRODUCT LOCATION 1 Africa Apparel EPZ Ltd Garment manufacturing Nairobi 2 Alltex EPZ Ltd Garment manufacturing Athi River 3 Ashton Apparels EPZ Ltd Garment manufacturing Mombasa 4 Balaji EPZ Ltd Garment manufacturing Ruaraka 5 Celebrity Fashion K. EPZ Ltd Garment manufacturing Athi River 6 Future Garment EPZ Ltd Garment manufacturing Athi River 7 Global Apparel K. EPZ Ltd Garment manufacturing Athi River 8 Hantex Garment EPZ Ltd Garment manufacturing Mombasa 9 Kapric Apparels EPZ Ltd Garment manufacturing Mombasa 10 Kenya Knit Garments EPZ Ltd Garment manufacturing Mombasa 11 Kenya Trading EPZ Ltd Garment manufacturing Nairobi 12 Mega Garment EPZ Ltd Garment manufacturing Mombasa 13 Mombasa Apparel EPZ Ltd Garment manufacturing Mombasa 14 New Wide Garment K. EPZ Ltd Garment manufacturing Athi River 15 Premium Machinery Distributor EPZ Trading (sewing machines & spares) Athi River 16 Protex Kenya EPZ Ltd Garment manufacturing Athi River 17 Ricardo Garment EPZ Ltd Garment manufacturing Athi River 18 Royal Garment EPZ Ltd Garment manufacturing Athi River 19 Rupa Cotton Mills EPZ Ltd Yarn manufacturing Athi River 20 Sajan Printers EPZ Ltd Garment labels & tags Mombasa 21 Sajan Trading EPZ Ltd Trading (apparel, machine & spares) Mombasa 22 Senior Best Garments (K) EPZ Ltd Garment manufacturing Mombasa 23 Shin Ace Garments (K) EPZ Ltd Garment manufacturing Mombasa 24 Sino Link EPZ Ltd Garment manufacturing Mombasa 25 Tex Trade EPZ Ltd Accessories Mombasa 26 United Aryan EPZ Ltd Garment manufacturing Nairobi 27 Wild Life Works EPZ Ltd Garment manufacturing Muangu 28 YKK Kenya EPZ Ltd Accessories Mombasa CTA SECTOR INVESTMENT PROFILE: KENYA CTA

29 ANNEX II: STARTING A BUSINESS IN KENYA The registration of a business in Kenya can take between four and five weeks and costs upwards of 25,000 KES (approx. US$ 250) based on the initial capital required. The time and cost of individual steps for registering a business in Kenya are detailed in below.

List of EPZ units PROCEDURE DAY(S) ASSOCIATED COST 1 Reserve a unique company name at the 1 day on average US$ 1 (KES 100) per name reservation Companies Registry 2 Stamp the memorandum and articles of 5 days 1% of nominal capital (US$ 0.2 or KES 20 for association, and a statement of the nominal every US$ 22 or KES 2 000 or part thereof of capital capital) + US$ 22 (KES 2 000) for stamp duty on memorandum and articles of association 3 Pay stamp duty at a designated bank 1 day US$ 1.1 (KES 100) for bank commission 4 Sign the Declaration of Compliance before 1 day US$ 2.2 (KES 200) a commissioner of oaths or a notary public official 5 Register with the Registrar of Companies at the 12 days on average US$ 80 (KES 7 360) Attorney General Chambers in Nairobi 6 Register for taxes at the Kenya Revenue 1 day No charge Authority 7 Apply for a business permit 5 days US$ 164 (KES 15 000) 8 Register with the National Social Security Fund 1 day No charge (NSSF) 9 Register with the National Hospital Insurance 1 day No charge Fund (NHIF) 10 Make a company seal 2 days Between US$ 27 and US$ 38 (KES 2 500 and KES 3 500)

*Source: Doing Business in Kenya, 2014, World Bank CTA SECTOR INVESTMENT PROFILE: KENYA CTA

30 © shutterstock.com SITA project implemented by: SITA project funded by: CTA SECTOR INVESTMENT PROFILE: KENYA CTA

31 © shutterstock.com