LEATHER VALUE CHAIN INVESTMENT PROFILE
KENYA © ITC (cc) Make it Kenya LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA
2018 Mr. Moses Ikiara Managing Director KENYA INVESTMENT AUTHORITY ( KENINVEST )
FOREWORD
As Kenya strives to become an industrialized, middle-income country by 2030, developing the leather and leather goods sector offers an opportunity for industrialization and diversification of exports, according to a recent World Bank report. Indeed, leather processing has been identified as a priority manufacturing sub-sector in Kenya’s Big 4 Agenda for the period up to 2022. The target for the manufacturing industry is to raise the sector’s contribution to the Gross Domestic Product (GDP) from less than 9% to 15% by 2022.
Despite owning a fifth of the global livestock population, African countries account for 4% of world leather production and 3.3% of value addition in leather according to the report. The world trade in leather is currently growing and is estimated at more than $100 billion a year and the demand for leather and leather products is growing faster than supply.
For Kenya, home to the third largest livestock populations in Africa, leather represents a potential area for sustainable economic growth and employment. However, value addition in the leather sector has been minimal, and most of Kenya’s exports have been in the form of unprocessed, raw hides and skins. The leather sector can contribute to economic growth through expanding exports of both semi-processed and finished leather goods. The development of the sector involves improving the raw material base (especially the quality of hides and skins), boosting the tanning subsector, producing leather goods, and marketing.
The leather sector in Kenya is estimated to be worth over Sh50 billion annually. Unfortunately, exporting raw hides and skins has denied the country billions of shillings in direct earnings and thousands of job opportunities. Over 90% of Kenya’s $94 million (Sh9.4 billion) leather exports are unfinished wet blue leather, yet further processing could create at least 50,000 jobs and $150-250 million (Sh15-25 billion) in GDP.
The Kenya Investment Authority (KenInvest) is a statutory body currently operating under an Act of Parliament (Investment Promotion Act No. 6 of 2004) with the main objective of promoting investments in Kenya, including the investment opportunities in the leather sector. It is responsible for facilitating the implementation of new leather sector related investment projects, providing after care services for new and existing investments, as well as organizing investment promotion activities both locally and internationally. A modern one stop centre has been set up to provide public services to investors under one roof and with utmost effectiveness.
Kenya seeks to produce 20 million shoes by 2022 in the leather industry in order to reduce the current import of finished shoes. The focus will be on training and setting up of 5,000 cottage industries to boost production in addition to a leather park to be established in Machakos to take advantage of the country’s hide and skin production.
This profile guideline prepared by KenInvest in partnership with the International Trade Centre’s SITA project KENYA
is therefore timely. It is expected to provide all the necessary information required by investors interested to invest in the country in the livestock value chain particularly the leather subsector. It is our sincere hope that this guide will encourage and drive the transformation of the leather sector in the country. Kenya is ready and open for business; we welcome investors in the leather sector to consider the immense opportunities in the country. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
4 ACKNOWLEDGEMENTS
This profile has been produced under the framework of the Supporting Indian Trade and Investment for Africa ( SITA ) project, funded by the Department for International Development, Government of the United Kingdom, and implemented by International Trade Centre. SITA is a South-South trade and investment project aimed at improving the competitiveness of select value chains and increasing investment in five East African countries through partnerships with institutions and businesses from India.
Special contributions to writing this report have been provided by:
Quality Assurance: International Trade Centre ( ITC ), Supporting Indian Trade and Investment for Africa ( SITA ) – T.C.A. Ranganathan, External Consultant; Jarmila Sarda, Investment Expert ( SITA ); Authors: Aristide Djimgou Tchakounte, Nicholas Mudungwe
Layout: Jesús Alés
Editor: Vanessa Finaughty
The views expressed in this report are those of the authors and do not represent the official position of International Trade Centre, Tanzania Investment Centre or the Government of the United Kingdom. The images used in this profile may not always accurately reflect the country context.
© International Trade Centre 2018
ITC encourages reprints and translations for wider dissemination. Short extracts may be freely reproduced, with due KENYA
acknowledgement, using the suggestion citation. For more extensive reprints or translations, please contact ITC, using the online permission request form: http://www.intracen.org/Reproduction-Permission-Request/ LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
5 Table of Contents
WHY KENYA? 10 TRADE AND INVESTMENT CLIMATE 27
OVERVIEW 10 TRADE 27 Favourable geographical location 10 Liberal trade policy 27 Political stability and progress 10 Commitment to bilateral and multilateral investment Vibrant GDP performance 10 and trade agreements 27 Effective monetary policy 29 and inflation stability 11 INVESTMENT INCENTIVES Fiscal and financial incentives 30 Liberal foreign exchange regime 12 Export and import incentives 31 Strong financial sector performance 12 Rapid growth in global competitiveness 13 TAXES 32 Foreign direct investment dynamics Transparent taxation system 32 on an upward trend 13 Taxation and company registration Export and import policies 14 procedures 32 Competitive operating and utility costs 16 Customs duties 33 An attractive human resource pool VISAS AND WORK PERMITS 33 and a rising middle class 16 REGISTRATION PROCEDURES FOR COMPANIES 34 GLOBAL AND REGIONAL Registration requirements 34 IMPORTANCE OF LEATHER 18 Sector-specific rules 36
KENYAN LEATHER INDUSTRY OVERVIEW 19 BUYING LAND 37 KENYAN LEATHER VALUE CHAIN 21 Land purchase procedures 37 INVESTMENT OPPORTUNITIES IN THE KENYAN LEATHER SECTOR 22 USEFUL CONTACTS 38 Investment in modernized slaughterhouses 22 REFERENCES 42 Investment opportunities in the production of finished leather 23 Investment opportunities in the production of footwear 23 KENYA
Kariokor Market 24 Kenya Leather Park 25 LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
6 List of Tables
TABLE 1: GLOBAL ECONOMIC GROWTH ( % ) 11 TABLE 2: NOMINAL INTEREST RATE, 2013–2017 ( % ) 13 TABLE 3: COSTS OF UTILITIES AND OTHER PRODUCTION FACTORS 16 TABLE 4: SELECTED SLAUGHTERHOUSES IN KENYA 22 TABLE 5: SELECTED TANNERIES AND THEIR CAPACITY USAGE 23 TABLE 6: SELECTED KENYAN FOOTWEAR MANUFACTURERS 24 TABLE 7: SELECTED KENYAN LEATHER GOODS MANUFACTURERS 25 TABLE 8: NGOZI KENYA LEATHER PARK, KINANIE, MACHAKO COUNTY 26 TABLE 9: INVESTMENT INCENTIVES FOR EXPORT PROCESSING ZONES AND SPECIAL ECONOMIC ZONES IN KENYA 30 TABLE 10: OVERVIEW OF CAPITAL DEDUCTION MEASURES FOR INVESTORS IN KENYA 31 TABLE 11: EXPORT AND IMPORT INCENTIVES 32 TABLE 12: INDIVIDUAL INCOME TAX 32 TABLE 13: BUSINESS TAXES AND EXEMPTION OF TAXES 32 EXEMPTION OF TAXES 33 TABLE 14: CUSTOMS DUTIES IN KENYA 33 TABLE 15: REGULATIONS FOR THE ESTABLISHMENT OF A FOREIGN-OWNED COMPANY IN KENYA 34 TABLE 16: REGISTERING A LOCAL COMPANY ( BY FOREIGNERS ) 35 TABLE 17: REGISTERING A BRANCH OF A FOREIGN COMPANY 35 KENYAN INVESTMENT FACILITATION INSTITUTIONS 38 FINANCIAL INSTITUTIONS 38 KENYA
LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
7 List of Figures
FIGURE 1: KENYA’S GDP GROWTH AND ANNUAL INFLATION RATE AT CONSUMER PRICE ( 2012–2016 ) 11 FIGURE 2: KENYAN SHILLING EXCHANGE RATE 12 FIGURE 3: SHARE OF FDI INFLOWS IN KENYA BY ECONOMIC BLOCS 14 FIGURE 4: DISTRIBUTION OF IMPORTING MARKETS FOR KENYAN EXPORTS 15 FIGURE 5: DISTRIBUTION OF SUPPLYING MARKETS FOR KENYAN IMPORTS 15 FIGURE 6: KENYA’S POPULATION BY AGE GROUP 17 FIGURE 7: LEATHER INDUSTRY VALUE CHAIN 18 FIGURE 8: PRODUCTION TREND OF HIDES AND SKINS IN AFRICA ( 2003–2014 ) 19 FIGURE 9: GROWING TRENDS IN THE LEATHER INDUSTRY 20 FIGURE 10: MAIN SUPPLIERS OF LEATHER FOOTWEAR IMPORTED BY KENYA ( 2009–2016 ) 20 FIGURE 11: OVERVIEW OF THE KENYAN LEATHER VALUE CHAIN 21 FIGURE 12: KENYAN IMPORT OF FOOTWEAR AND PARTS OF FOOTWEAR ( 2006–2015 ) 24 FIGURE 13: TRIPARTITE FREE TRADE AREA MAP 28 FIGURE 14: KENYAN MULTILATERAL TRADE AGREEMENTS 29 FIGURE 15: FORMS OF FOREIGN COMPANY SET-UPS IN KENYA 34
BOX 1: STEPS TO GET AN OPERATIONAL ENTITY 36 KENYA
LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
8 Abbreviations & Acronyms
ACP African, Caribbean and Pacific KAM Kenyan Association of Manufacturers Countries and Regions KenInvest Kenya Investment Authority AGOA African Growth and Opportunity Act KES Kenyan shilling AoA Articles of Association KNBS Kenyan National Bureau of Statistics CBK Central Bank of Kenya KLDC Kenya Leather Development Council CBR: Central Bank Rate KRA Kenya Revenue Authority CFTA Continental Free Trade Agreement LCB Land Control Board CMA Capital Markets Authority LDC Least Developed Country CoI Certificate of Incorporation MFN Most favoured nation COMESA Common Market for Eastern and Southern Africa MoA Memorandum of Articles
CPA Cotonou Partnership Agreement MUB Manufacture Under Bond
DFTP Duty Free Tariff Preference NEMA National Environment Management Authority
EA East Africa NHIF National Hospital Insurance Fund
EAC East African Community NSE Nairobi Securities Exchange
EBA Everything But Arms OSC One Stop Centre
EPA Economic Partnership Agreements PAYE Pay As You Earn
EPZ Export processing zone PIN Personal identification number
FAO Food and Agriculture Organisation SEZ Special economic zone
FDI Foreign direct investment SME Small and Medium Enterprise
FIPA Foreign Investment Protection Act TIFA Trade and Investment Framework Agreement KENYA
FIS Foreign investment survey TREO Tax Remission for Exports Office
GSP General Systems of Preferences VAT Value-added tax
H&S Hides and skins WTO World Trade Organization
IMF International Monetary Fund LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
9 Why Kenya?
OVERVIEW
FAVOURABLE GEOGRAPHICAL LOCATION
The Republic of Kenya is located on the coast of East Africa. Its coastline is approximately 600 km, making Key facts it an easy access point to land-linked Eastern and Capital: Nairobi Central African nations like the Republic of Burundi, Area: 580 370 km2 the Democratic Republic of the Congo ( DRC ), the Population: 48.5 million ( 2017 ) Republic of Rwanda and the Republic of Uganda. 0-14 years: 41.2 % 15-64 years: 55.5 % POLITICAL STABILITY AND PROGRESS Economically active population: 19.8 million ( 2017 ) Female: 47.2 % With a Human Development Index of 0.555, Male: 52.7 % Kenya has the highest score in the East African Population growth: 2.6 % ( 2017 ) Community ( EAC ). This is partly due to its recent Female: 81.6 % ( 2008–2012 ) political reform that stems from the passage of a Male: 83.2 % ( 2008–2012 ) new constitution in 2010 ( introduction of a bicameral legislative house, devolved county government, Urban population: 26.9 % ( 2017 ) and a constitutionally tenured judiciary and electoral Literacy rate: 89.1 % ( 2017 ) body ). Devolution remains the biggest gain from Men: 92.4 % the August 2010 constitution, which ushered in a Women: 87.8 % new political and economic governance system. It is GDP at current market prices: $ 81 880 million ( 2017 ) transformative and has strengthened accountability as well as public service delivery at local levels. GDP per capita ( current ) $ 1 507.8 ( 2017 ) GDP per capita ( PPP ): $ 3 120 ( 2016 ) GDP growth: 4.8 % ( 2017 ) VIBRANT GDP PERFORMANCE Inflation rate: 4.18 % ( March 2018 ) FDI inflow: $ 1 420 million ( 2015 ) Kenya belongs to the top 10 biggest economies in Standard & Poor’s: B+ ( stable ) Africa. Its gross domestic product ( GDP ) rose from Credit rating Fitch: B+ ( stable ) $ 25 800 million in 2006 to $ 81 880 million in 2017. Moody’s: B1 ( stable ) With an average real growth rate of 5.8 %, Kenya is gradually emerging as one of the economic Exports: $ 5 747 million ( 2017 ) powerhouses of the Global South. Even though Imports: $ 16 690 million ( 2017 ) the estimated economic growth for 2017 is lower Currency: Kenyan shillings ( KES ) compared to 2016, this figure is expected to rise in KES 100.8 ( stand: 03.07.2018 ). Exchange rate ( per USD ): KENYA 2018. Moreover, Kenya’s average economic growth Volatility last 90 days = 0.17 % is well above the Sub-Saharan Africa average ( Table Govt. expenditure: $ 14 800 million ( March 2018 ) 1 ). The key drivers for growth include a vibrant services sector, currency stability, low inflation, Govt. revenue: $ 9 500 million ( Feb. 2018 ) low fuel prices, a growing middle-class and rising Other major cities: Mombasa, Kisumu and Nakuru incomes, a surge in remittances, and increased Language: English, Swahili
public investment in energy and transportation. Its Sources: AfDB, 2018; KNBS, 2018; International Trade Centre, 2018; position as the economic, commercial and logistical Trading Economics, 2018; World Bank, 2017; CIA, 2016. hub in Eastern and Central Africa places the country as one of the best investment destinations globally. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
10 Source: World output Sub-Saharan Africa Emerging anddevelopingeconomies Advanced economies The RepublicofKenya The Federal RepublicofNigeria Of which:TheRepublicofSouthAfrica The RepublicofIndia Of which:ThePeople’s RepublicofChina Of which:TheUnitedStatesofAmerica WEO citedinKenyan BudgetPolicy Statement,2018;ProjectionsbytheNationalTreasury. Source: instrumental insupportingeconomicgrowth. per annumbetween2012and2016,hasbeen ( local investmentandforeigndirect conducive tosupportingandsustainingnew over thepast10years.Thisenvironmentishighly which hasresultedingeneralstabilityinflation Kenya hasasoundmonetary policysystem, AND INFLATION STABILITY EFFECTIVE MONETARY POLICY FDI Figure 1: Kenya’s GDPgrowthandannualinflationrateatconsumerprice( ). Theinflationstability, averaging6.97 World Bank,2018. Table 1:Globaleconomicgrowth( Actual 2016 -1.6 5.8 0.3 1.4 7.1 6.7 4.4 1.5 1.7 3.2
% % % Estimated ) 2017 4.8 0.8 0.9 2.7 6.7 6.8 4.7 2.3 2.3 3.7 Projected is dependentonrain-fedagriculture. potential upsiderisktoinflation,asthecountry to stabilizeat5 inflation in Kenya until2022, whichisexpected not farfromStatista’sprojectionoftheaverage 6.99 inflation easedto4.83 of Statistics( According totheKenya National Bureau 2018 % in the same month in 2017. This figure is % inthesamemonth2017.Thisfigureis 5.6 2.1 0.9 3.3 7.4 6.6 4.9 2.7 2.3 3.9 KNBS %. Drought,however, remainsa ), theoverallyear-on-year % in January 2018 from % inJanuary2018from 2012–2016 )
© ITC 11 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA LIBERAL FOREIGN EXCHANGE REGIME sophistication of the Kenyan financial sector. As a result, the Kenyan financial sector is one of the Kenya is an open economy with a liberalized capital most sophisticated and strongest in the East account and a floating exchange rate. Indeed, the African region and the African continent at large. exchange rate regime is fully liberalized, which allows easier and simpler repatriation of foreign currency. In Indeed, the annual growth rates of money supply addition, Kenya’s Foreign Investment Protection Act and private-sector credit were consistent with the ( FIPA ) guarantees capital repatriation and remittance developments in the financial sector, in particular, of dividends. Kenya has maintained a solid import the enforcement of the Banking ( Amendment ) Act cover. Reserves stood at $ 7.7 billion ( 5.1 months of 2016. While money supply ( M1 ) expanded by 6.7 % import cover ) at the end of October 2016 compared in December 2017, the extended broad money to $ 7.6 billion ( equivalent to 5 months of import supply ( M3 ) grew by 8.9 % in December 2017. Credit cover ) at the end of April 2016. These reserves, to the private sector expanded by 2.4 % in 2017 together with the precautionary arrangements with and total domestic credit grew by 7.9 % in 2017. the International Monetary Fund ( IMF ), continue Average deposit rates rose by 1.07 % from December to provide an adequate buffer against short-term 2016 to December 2017 to reach 8.22 %. The shocks. The economy is diversified in terms of commercial banks’ average interest rates charged export products and external markets. This has been on loans and advances declined from 13.69 % in a major source of resilience against the adverse December 2016 to 13.64 % in December 2017, effects of external shocks on exports. As a result, whereas the Central Bank Rate ( CBR ) remained the Kenyan shilling exchange rate as compared to unchanged at 10 %. Table 2 presents nominal most Sub-Saharan African currencies has continued interest rates for the period of 2013 to 2017. to display relatively less volatility ( Figure 2 ). There are 44 banks in Kenya, of which 30 have local ownership and 14 have foreign ownership. STRONG FINANCIAL SECTOR Six of the domestically owned banks are PERFORMANCE institutions with government participation. The foreign-owned financial institutions comprise four Domestic lending has been on an upward trend foreign-owned, not locally incorporated banks in Kenya, contributing immensely to economic ( e.g. Bank of India ) and 10 foreign-owned, locally performance. New credit lines and products to incorporated banks. A list of these financial support short-term and medium-term investments institutions and their respective contacts can have been developed in tandem with the improved be found under the section Useful Contacts.
Figure 2: Kenyan shilling exchange rate KENYA
Source: Central Bank of Kenya, cited in Kenyan Budget Policy Statement, 2018. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
12 Source: Note: 7.65 points,toreach65.15pointsin2018. index ( electricity. Thishasseenitsoverallperformance protecting minorityinvestmentsandgetting in resolvinginsolvency, startinganewbusiness, Bank from 113to80between2016and2018( improving rapidlyoverthelastyearsandmoved its businessenvironment.Itsrankinghasbeen Kenya ismakingsignificant inroadsinimproving reaching anall-timehighof3.93pointsin2016. index averaged3.8pointsfrom2007until2017, the World EconomicForum. Itscompetitiveness 2017 GlobalCompetitivenessReportpublishedby Kenya registered3.85points outof7onthe2016– COMPETITIVENESS RAPID GROWTHINGLOBAL Loans–deposits spread Overdraft Loans andadvances( Saving deposits Average deposits COMMERCIAL BANKS* Inter-bank rate Repo rate Central BankRate 91-Day Treasury BillsRate CENTRAL BANKOFKENYA *Weighted averagecommercialbankinterestrates. ). Significant improvements were recorded ). Significantimprovementswererecorded EconomicSurvey, 2018. KNBS, distance tofrontier, DTF maximum Table 2:Nominalinterestrate,2013–2017( ) ) moving up by ) movingupby
World 10.34 16.51 16.99 2013 Dec. 1.58 6.65 8.98 9.38 8.50 9.52 15.86 15.99 2014 Dec. 9.18 1.85 6.81 6.91 8.29 8.50 8.58 DYNAMICS ONANUPWARDDYNAMICS TREND FOREIGN DIRECTINVESTMENT blocs fortheyear2015,pleasesee information ontheshareofFDIinflowbyeconomic approximately $ from approximately$ from theRepublicofIndiamorethandoubled jointly accountingfor92.17 dominant sourcesofFDIinflowswithinAsia, the RepublicofIndiaarereportedtobe The People’s RepublicofChina,Japanand to reach43 East andtheRepublicofIndiaincreasedby21.3 was reversedin2015,astheFDIinflowfrom Far for 31.9 European Union( According totheFISreport,FDIinflowsfrom billion in2014toapproximately$ to haveincreasedby8 of Statistics( Investment Survey( ( projects in2015,comparedtothepreviousyear in Africaafterbenefitingfroma50 Kenya becameoneofthe largestrecipientsofFDI Santander, 2017
(cc) Make it Kenya % and21.7 % 10.28 18.48 18.30 11.50 2015 Dec. 1.56 8.02 7.72 9.23 9.81 ) %, andthatoftheEUdeclinedto25.9 KNBS 79.2 millionin2015.For further 13.49 13.69 10.00 2016 ). From themostrecentForeign Dec. EU 6.36 6.37 7.33 5.92 8.44 N/A % respectively in 2014. This trend % respectivelyin2014.Thistrend ), total FDI inflows were reported ), totalFDIinflowswerereported FIS ) andtheFar Eastaccounted 39 million in 2014 to 39 millionin2014to % fromapproximately$ ) oftheKenya NationalBureau 13.54 13.64 10.00 2017 % in 2015. FDI inflow % in2015.FDIinflow Dec. 5.41 6.91 8.22 7.27 7.75 8.01 1.4 billion in 2015. 1.4 billionin2015. % increase in FDI % increaseinFDI Figure 3 . 1.3 1.3 % % %. 13 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA Figure 3: Share of FDI inflows in Kenya by economic blocs
Note: Rest of world ( ROW ) includes other European and African countries, Middle East countries, Australia/Oceanic and international organizations. Source: KNBS, FIS report 2016. Calculations based on an exchange rate of 1 USD = 100.74 KES.
Moreover, the Foreign Investment Protection Act ( FIPA ) guarantees the repatriation of capital, after tax profits and remittance of dividends and interests that result from investing in the country. The constitution also provides a guarantee against expropriation of private property unless for security or public interest, and, in these cases, a fair and prompt compensation is paid.
EXPORT AND IMPORT POLICIES
Duties are charged on exports, imports and particular services and goods as described in the amended East Africa Custom Management Act of 2004. This act sets out the services and goods chargeable as well as the rates of these duties, along with the exempt services and goods. Usually, exports are not taxed if the person who profits from the services or goods being exported is not a Kenyan resident. Importing into Kenya entails using a clearing agent to electronically process the import documentation through Kenya’s customs and clear the goods. The country trade regime is liberalized, except KENYA
for a few import-licensing controls based on environmental, health and security concerns. As a result of this liberal trade policy, the country’s estimated value of its overall product import in 2017 was well above the estimated value of its overall product export in the same year; that is approximately $ 16.7 billion for overall product import and $ 5.7 billion for overall product export. While the United States of America is the largest importer of Kenyan products, followed by the Kingdom of the Netherlands and the United Kingdom of Great Britain and Northern Ireland, it is the People’s Republic of China that heads the imports of products to Kenya, with the Republic of India being the second and Japan the third. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER (cc) Make(cc) it Kenya
14 Figure 4: Distribution of importing markets for Kenyan exports
Source: International Trade Centre, 2018.
Figure 5: Distribution of supplying markets for Kenyan imports KENYA
Source: International Trade Centre, 2018. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
15 COMPETITIVE OPERATING AND UTILITY COSTS
Operating costs like utilities ( water and electricity ), wages, the price of land and transport costs, among others, have a bearing in the determination of industrial competitiveness and consequently attracting investment. The cost structure of some © ITC these variables in Kenya are summarized in Table 3.
Table 3: Costs of utilities and other production factors Item Cost ( in USD )
Cost of water ( per 1 000-litre unit ) 0.53 to 0.63 0.041 to 0.061 • Sixteen per cent value-added tax ( VAT ) of standing charge Cost of power ( charge per unit, kWh ) and and taxable value of electricity energy consumed with the government taxes on power and lighting exemption of the first 200 units under domestic consumption • Rural Electrification Programme ( REP ) levy at 5 % of revenue from unit sales • Energy Regulatory Commission ( ERC ) levy at 3 cents per kWh Industrial complex ( two-storey ) • 290–320 Cost of construction ( USD per sq. metre ). Rates Warehouses ( Ditto ) are for Mombasa, Nairobi and Kisumu. • 270–310 Office blocks ( four-storey ) • 350–380 Minimum wages for agricultural industry: • Unskilled employees – 64.16 Minimum wages* ( averages per month ) • Skilled and semi-skilled employees – 85.95 Minimum wages in urban areas: • Nairobi, Mombasa and Kisumu cities – 198 • All other towns – 160-174
*Kenya minimum wage rate is set by the government and varies by location, age and skill level. All figures were converted at a rate of USD 1 = KES 100. Source: Kenya Power and Lighting Co. Ltd., 2018; Nairobi City Water and Sewerage Company, 2018; Trading Economics, 2018; Kenyan Ministry of Labour and Social Protection, 2018; Institute of Quantity Surveyors of Kenya, 2015.
AN ATTRACTIVE HUMAN RESOURCE POOL AND A RISING MIDDLE CLASS As a lower-middle income country, consumer spending is considered a key economic driver Kenya prides itself on a large pool of young, highly in Kenya. BMI Research ( cited in Deloitte, 2016 ) KENYA
educated, English-speaking, skilled and sought- predicts that private spending will increase twofold after workforce in Africa, trained from within the from $ 47 billion in 2015 to $ 87 billion in 2020. As country and in institutions around the world. Of a result of rising incomes, Kenya has a favourable the adult population, 89.1 % are literate, with a life population structure ( expected to increase by 40 expectancy of 67 years at birth. Kenya also has million between 2015 and 2050, giving rise to an one of the largest youth populations in Africa, expanding working age population ) and growing with almost 16 million people in the age group financial inclusion. Subsequently, the country’s of 15–34 years. Kenya’s entrepreneurship and middle class, which is currently estimated at human capital give it a huge potential for further 44.9 % of the population, is expected to continue growth, job creation and poverty reduction. expanding by an average annual growth rate of 5 %. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
16 Source: UnitedNationsDepartmentofEconomic andSocialAffairs( Figure 6:Kenya’s populationbyagegroup UN DESA ), 2015( cited inDeloitte,2016 ).
© ITC 17 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA Global and regional importance of leather
Leather is one of the most widely traded commodities The leather industry value chain comprises four in the world. The leather industry plays a major role broad stages ( see Figure 7 ). During the first stage, in the global economy, with an estimated global raw hides and skins ( H&S ) are obtained. In the trade value of approximately $ 100 billion per year, second stage, raw H&S are converted to semi- which is greater than the combined value chain of processed ( pickled and tanned ) and the third stage meat, sugar, coffee and tea. The leather industry produces fully processed ( finished ) leather. In the has grown at a different pace in the different parts fourth stage, leather products are manufactured, of the world depending on the general economic e.g. footwear, garments, accessories such as development of the country and geography. watch straps, handbags, tabletops and notepad covers, and automotive or furniture upholstery.
Figure 7: Leather industry value chain KENYA Source: S. Dubey, cited in ITC, 2016. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
18 The production of hides and skins can be considered The leather industry is a key strategic sector for mainly a by-product of the meat industry. The second the socioeconomic and industrial development of and third stages are the most capital intensive, many African countries. It has a rich and renewable while the fourth stage can be viewed as the most natural resource base in Africa’s large population labour intensive. This differentiation has an impact of cattle, sheep and goats, which accounts for on how related activities tend to spread globally. nearly 20 % of world share. The production of cattle The spread in the availability of animals, capital, hides, sheepskins and goatskins from African cheap labour and different rules and regulations lead countries between 2003 and 2014 is presented in to an overall trade picture. In general, developing Figure 8. Overall, the figures reveal considerable countries benefit from cheap access to raw materials production growth in tens of thousands of pieces and lower labour cost and are able to produce of cattle hides, sheepskins and goatskins. leather at lower cost than developed countries.
Figure 8: Production trend of hides and skins in Africa ( 2003–2014 )
Source: Food and Agriculture Organization ( FAO ), 2018.
Looking at Figure 8, it is clear that the African KENYAN LEATHER INDUSTRY leather industry has a potential supply of hides and OVERVIEW skins that can make a transformative contribution to the economic and industrial development of the The development of the leather sector is one of the continent. The quality of hides and skins is, however, top priorities of Kenya’s Industrial Transformation the primary restriction on the development of the Programme, which is part of the president’s African leather supply chain as a whole. Lower quality action plan. This development is supported by can arise from poor husbandry practices, improper several facilities already present at national level, processing or both. Diversity of origin, non-uniformity including: 25 formal footwear manufacturing units, of preservation methods, different water quality 11 registered leather products micro, small and KENYA and climatic conditions, unavailability of standard medium-sized enterprises ( MSMEs ), 15 registered chemicals and lack of modern technology throughout tanneries, 4 packaging and logistics companies, the leather value chain are further constraints to a small and medium-sized enterprise ( SME ) park, the development of the leather industry in Africa. a training centre for increased value addition, It is certainly not impossible to resolve all these subsidized housing for workers and more. Kenya issues. With the appropriate amount of investment has a big potential to develop its leather sector. and the right institutional environment, the African The country contributes to only 3.5 % of leather leather industry’s potential can fully be attained. Indeed, there is scope for developing countries in general and African countries in particular to gain increased benefit from these commodities. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
19 20 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA Source: (cc) Make it Kenya KenInvest, 2017. Figure 9:Growingtrendsintheleatherindustry Source: InternationalTrade Centre,2017. Figure 10:Mainsuppliersofleatherfootwearimported byKenya (2001–2017) including footwear and leather goods, and there including footwearandleathergoods,there the aggregatedemandofallconsumergoods, The rapidgrowthofKenya’s economyisincreasing especially inrelationtocapitalavailability. shortcomings andmuchroomforimprovement, more stillneedstobedone,astherearemany but graduallybeingtapped.Nonetheless,much seen in importance oftheleatherindustryinKenya as and 29millionrespectivelyby2022.Thegrowing figures areprojectedtoreach27million,50million 27.7 milliongoatsand17.1sheep.These had anestimatedpopulationof17.5millioncattle, In 2014,Kenya’s largelivestockresourcebase base onwhichtodeveloptheleathervaluechain. the UnitedRepublicofTanzania. Thisformsagood the Federal DemocraticRepublicofEthiopiaand the third-biggestlivestockresourceinAfricaafter production ontheAfricancontinent,despitehaving China, IndiaandthePhilippines,respectively. suppliers ofimportedKenyan leatherfootwearwere Figure 10.For thefiscalyear2017,threebiggest than fivefoldbetween2001and2017asdepictedin value ofleatherfootwearimports,whichgrewmore shortage ofdomesticsupplyisseenintherising in ashortfallof36.7millionpairsperannum.This was estimatedat3.5millionin2016,thusresulting to expand46.8millionpairsin2022.Shoesupply 36 was estimatedat42millionpairsin2014,ofwhich in thecountry. ThedemandforfootwearinKenya is asizeabledomesticmarketforleatherproducts % were leather shoes. The demand is projected % wereleathershoes.Thedemandisprojected Figure 9 shows that the potential is slowly showsthatthepotentialisslowly chain intoavibrantvalue-adding andexport-oriented one. within thesector. Itsaimistotransform theleathervalue as asectorsupportinstitution forpublicandprivateentities Kenya LeatherDevelopmentCouncil( on thisopportunity, the Kenyan Governmentestablished the In an efforttosupportthelocalleather value chainandcapitalize Kenyan leathervalechain ispresentedin related tofineleatherproduction.Anoverviewofthe funding forinvestmentinmoderntechnologyandfacilities 4 the valuechainisstillverylow( in finished leatherandproducts in theformofwetblueandcrust.Theshare the producedhidesandskinsareexported are exportedunprocessed,whereas89 crust. Indeed,barely5 moving towardsprocessedwetblueand from exportingrawhidesandskinsto has madebigstepsinmovingaway chain’s potential,theKenyan Government Having recognizedtheleathervalue more than34 Moreover, theleathersectorhasseen camel hidesand1,000crocodileskins. 2.4 millionsheepskins,0.5 million bovinehides,3.5goatskins, and fish.In2009, Kenya produced2.6 pigs, camels,rabbits,crocodiles,ostrich of leather, includingcattle,goats,sheep, and diversifiedresourcebaseforproduction manufacturers. Kenya boastsanabundant leather footwearmanufacturers,andgoods exporters, tanners,artisanalfootwearand facilities owners,hidesandskinstraders farmers, livestocktraders,butcheries,slaughter The Kenyan leathervaluechainisinclusiveoflivestock KENYAN LEATHER VALUE CHAIN Source: % ofquantityexported S.Dubey, citedinITC, 2016. % exportgrowthperyear. % of hides and skins % ofhidesandskins Figure 11:OverviewoftheKenyan leathervaluechain ) as there is still insufficient ) asthereisstillinsufficient respectively 2 KLDC % of % of Figure 11 ). The KLDC acts ). TheKLDCacts % and % and .
21 (cc) Make it Kenya LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA 22 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA acquisition andmodernizingofexistingfacilities. range fromjoinventureswithlocalcompaniesto is providedin potential. Informationonselectedslaughterhouses Yet, themajorityhavenotreachedtheirfull investors whobroughtinnewideasandapproaches. activity sector ( slaughterhouses. Indeed,Kenya’s slaughterhouse with agrowingnumberofpotentiallyhigh-standard leather goods.Kenya canboastitselfasacountry is oneofthemaindeterminantsquality of modernandwell-functioningslaughterhouses leather, whichleadstopoorprofit.Theavailability also badforbusiness–itleadstopoor-quality Poor welfareofanimalsisnotjustunethical,it SLAUGHTERHOUSES INVESTMENT INMODERNIZED IN THEKENYAN LEATHER SECTOR INVESTMENT OPPORTUNITIES ) was stimulated by the entry of local private ) wasstimulatedbytheentryoflocalprivate previously a government and parastatal previously agovernmentandparastatal Source: Njiru Slaughterhouse – Kiserian,Nairobi Keekonyokie Slaughterhouse Choice MeatsLtd–KahawaWest, Nairobi Dagoretti Slaughterhouse–Kikukyu Kakuzi Ltd–Thika Investment Limited–BabaDogo,Nairobi Neema LivestockandSlaughtering River ontheoutskirtsofNairobi The Kenya MeatCommission–Athi KLDC,2018. Company nameandlocation Table 4 . Investment opportunities . Investmentopportunities Table 4:Selected slaughterhousesinKenya • • • • • • • • • • •
opportunity foraseriousinvestortoreviveit. lack ofcapital.Itcouldpotentiallybeagood slaughtered perday, butdeteriorateddueto Previously hadacapacityof300cattle waste fromtheslaughterhouse day byusinganimalbloodand Generates 600kgofbiogasper ( Fund forEconomicDevelopment A jointventurebetweentheAgaKhan Halal slaughterhouse One ofthemajorslaughterpointsinKenya Sources exclusivelylocalmarket heads ofcattleperday Has acapacityof4407 of livestockperday Has acapacityof4500heads Built ona16-acrepieceofland Formed in1950 Africa andCentral Biggest meatprocessorinEast AKFED ) andNorturaofNorway Description • • • • • • • Beef, goats,sheep;100cattleperday and 400sheepperday Beef, goats,sheep;120cattle Beef, goats,sheep;200cattleperday Beef, goats,sheep;200cattleperday Beef, goats,sheep;200cattleperday 1 000goatsandsheepperday Beef, goats,sheep;900cattleand 300 cattleperday Beef, goats,sheep;1 Product range and current Product rangeandcurrent output inslaughterhouse
© ITC INVESTMENT OPPORTUNITIES IN THE PRODUCTION OF FOOTWEAR
An investment in the footwear production segment targeting men and women’s formal shoes – as the INVESTMENT OPPORTUNITIES IN lower end of the market is dominated by SMEs focusing on the production of school shoes – will THE PRODUCTION OF FINISHED generate positive returns in the short run. Indeed, LEATHER of the 15.2 million pairs of leather shoes purchased annually in Kenya ( 36 % of total footwear purchase ), The Republic of Kenya has 15 registered 3.3 million pairs are produced locally ( 2.6 million tanneries that are expected to increase low-price shoes and 0.7 million middle-price to 21 after the completion of six mini- shoes ) and the rest are imported from abroad leather processing units under construction ( World Bank, 2016 ). The local production of high- in six counties ( Bungoma, Baringo, end leather footwear is still quite insignificant. Kajiado, Garissa, Makueni and Wajir ). The However, there is growing demand for this type opportunities for investment in the tanning of high-quality leather footwear, which may be sector lie in joint ventures associated with explained by the growing Kenyan middle class. installation of finishing lines in existing tanneries and their modernization as well as new tanneries. There are 25 enterprises engaged in formal footwear Tanning capacities of some of the leading and leather goods manufacturing. Table 6 gives tanneries in Kenya are summarized in Table 5. an overview of some of these Kenyan footwear manufacturers. In addition, there are hundreds of informal footwear manufacturing units, small and medium-sized enterprises ( SMEs ), which cover 55 %–60 % of the local footwear production.
Table 5: Selected tanneries and their capacity usage
Level of production Quantity of wet Goat and sheep Annual turnover salted hides skins ( pieces ( USD ) / number Wet blue Crust Finished Tannery per month per month ) of employees Crust/finished Bata Shoe Limited N/A x x x 600 000 sq. ft. Alpharama Ltd 650 tons 400 000 x x x Leather Industries 300 tons 100 000 x x X of Kenya Aziz Tanneries Ltd 300 tons 200 000 x x x Sagana 200 tons 50 000 500 000 / 30 x x x Tanneries Ltd Nakuru 200 tons 150 000 7.2 million / 90 x x x Tanneries Ltd KENYA
Dogbones Ltd 300 tons N/A x Nairobi 50 tons 50 000 x Tanneries Ltd East Africa N/A 250 000 x x x Tanneries Ltd Athi River Tanneries 250 tons 100 000 x MAS Trading 200 tons N/A 18 million / 150 x Company
Source: KLDC, 2018; World Bank, 2015. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
23 24 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA cushions andsimilararticles;gaiters,leggingsarticles,partsthereof( * Parts offootwear, incl.upperswhetherornotattachedtosolesotherthanoutersoles;removablein-soles, heel Source: Source: Industries –Nairobi Shoe Wind Khan Ltd–Nairobi Ltd –Nairobi Crown Industries Ltd –Nairobi United Footwear Limited – Limuru Bata Shoe Company name Company name and location Table 6:SelectedKenyan footwearmanufacturers facility for the production of quality footwear and facility fortheproductionofqualityfootwearand the heartofNairobi,intoacommonmanufacturing aims totransformtheKariokorMarket,situatedat the KariokorMarketUpgradeproject.Theproject Table 7 these leathergoodsmanufacturerscanbefoundin The recentincreaseofleathergoodsunits( KARIOKOR MARKET KLDC,2018. International Trade Centre,2018. Figure 12:Kenyan importoffootwearandparts(
) has contributed to KLDC’s decision to launch ) hascontributedtoKLDC’sdecisionlaunch • • • • • • • Product range women shoes Handcrafted menand women shoes Handcrafted menand soles designer Leather shoesand Sandals School andsportsshoes process ) vulcanizing ( using Safety andmilitaryboots ) slippers ( especially shoes Men, womenandchildren per month 5 000pairs per month 4 000pairs per day 3 000pairs per month 7 000pairs per day 60 000pairs Capacity some of some of excluding articlesofasbestos huge opportunityonwhichinvestors cancapitalize. promoting theleathersector, and thus representsa example ofthelocalauthorities’ engagementin Park presentedinthenextsection chain. Thisproject( efficiency andgoastepfurtheronthevalueaddition enhance theKenyan leathersector’sproductivityand materials. Themainobjectiveofthismeasureisto footwear andotheritemsmadefromleather specializing intheproductionofawiderange ( point formanufacturingcompanieswithMSMEs leather goods.TheKariokorMarketisaconcentration to betwotimesthatofnewfootwearimports second-hand imports,whosequantityisestimated of footwearimportsintoKenya ( be seenin products meetingtherulesoforigin.Thistrendcan markets, whereKenya hasduty-free accessforall ( COMESA) Africa Southern Market forEasternand the EACandCommon growing rapidlyinto market isalso The footwear more than200stallsandthousandsofMSMEs 2006–2015 Figure 12 ). ) along withtheKenyan Leather , which illustrates a rapid growth , whichillustratesarapidgrowth this does not include this doesnotinclude ) is a concrete ) isaconcrete ). ) )
© ITC Sources: The detailsofthisprojectcan beseenin of increasedforeigndirectinvestment intoKenya. enabling environmentforthe attractionandfacilitation Zones Authority( land hasbeenprovidedbytheExportProcessing sector’s economicpotential( and innovationtowardsunlockingtheKenyan leather set ona500-acresite,willpromotevalueaddition International Airport Kinanie, MachakosCounty( establishment oftheNgoziKenya LeatherPark at Kenyan Governmentisinvesting$ In anefforttoboostlocalleatherproduction,the KENYA LEATHER PARK Sanabora DesignHouseLtd Rift Valley LeatherLtd Kraw LeathersLtd Habib LeatherIndustry Gonzala Leathers Classics Ltd. Annabelle Thom–African African Lily Adelphi, theLeatherShop Adele Dejak company Name ofmanufacturing KLDC,2018;Kenyaplex, 2018. EPZA ). TheNgoziKenya LeatherPark, ). The park aims to create an ). Theparkaimstocreatean Table 7:SelectedKenyan leathergoodsmanufacturers 60 km away from Nairobi 60 kmawayfromNairobi KLDC, 2017 Physical address,e-mailandwebsite www.sanabora.com/ [email protected] Development, 3 Aqua Plaza,oppositeKenya InstituteofCurriculum https://www.rift-africa.com/ [email protected] Tembo Road,Karen,Nairobi http://krawleathers.yolasite.com [email protected] Falcon Road,Nairobi https://habibleather.wordpress.com/ [email protected] P.O. Box100848( https://gonzalaleathers.wordpress.com/ [email protected] Santack Estate,NgongRoad2204,Nairobi annabellethom.com [email protected] Dagoretti Corner, NgongRoad,Nairobi Ground Floor, JunctionShoppingMall, http://www.african-lily.com [email protected] PlaceWaiyaki Way,ABC Nairobi www.adelphileather.biz [email protected] Yaya Centre,1 http://www.adeledejak.com [email protected] P.O. Box944-00621,VillageMarket,Nairobi 62 million into the 62 millionintothe Table 8 ). The ). The st Floor, ArgwingsKodhek Rd,Nairobi rd Floor, Murang’aRoad,Nairobi 00101 . ), Nairobi
www. and itemsforthecateringhotelindustry including corporategiftitems,sportsitems Produces high-qualityleatherproducts, and Africanprintproducts Produces qualityleather, canvas Produces assortedleathergoods and belts,amongothers including wallets,purses,handbags Produces leatheraccessories, and corporategiftitems wallets, briefcases,accessories Produces bags,handbags,folders, Produces assortedleathergoods Product range Produces assortedleathergoods and belts,amongothers products, includingbags,wallets Produces high-qualityleather footwear andotherleatheraccessories Produces leatherbags,sandals,purses,
© ITC 25 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA 26 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA (cc) Make it Kenya Source: Investment incentives World-class infrastructure Convenience Project overview KLDC, 2017. Dimension Table 8:Ngozi Kenya LeatherPark, Kinanie,MachakoCounty • • • • • • Business services • • • • • Taxation, withregardtoexport-oriented investors • • • • • • • • • • • • • • • • • • • • The establishmentofa500-acreleatherclusterwithhostservicestopromotethesector, including: High environmentalstandardsinlinewithEUregulations Plug andplaylocation On-site training Convenient infrastructure Connected toMombasabyamajorhighwayandnewstandardgaugerailway Distance fromPort ofMombasais450km Close toexistingleatherindustries,e.g.tanneriesandslaughterhouses Standard oflivinghighgivenproximitytoNairobi The existing339-hectaresitehostsmorethan40industries Ease andcostoftransportation( Located nexttoNairobi,withaccesskeylabourmarketsandlocalpartnerships Integrated facilitiessuchasresidentialcomplex,schools,healthandrecreationalcentres Export processingzone( Reduced labourandelectricitycost Training centretoenhancevalueaddition A smallandmedium-sizedenterprisepark Three tofourpackagingandlogisticcompanies Eight totenleathertanneries Five tosixleatherfootwearmanufacturers On-site customsdocumentation One-stop shopserviceforfacilitation andaftercare Unrestricted investmentbyforeigners Foreign currencyaccountsandoffshore borrowingallowed–noexchangecontrols Project approvalandlicensingwithin 30days Full operationunderonesinglelicence Exempted fromVAT Inputs exemptedfromimportandexportduties Exempted fromstampduty taxholidayof10years Withholding Corporate taxholidayof10years Shared productionfacilities–lasercuttingmachinesandcomputer-aided designmachines EPZ ) benefitsontaxationandtrade air androad ) criticalforre-exporting Benefits Trade and investment climate
TRADE African Growth and Opportunity Act ( AGOA ): This is a non-reciprocal trade preference agreement offering certain LIBERAL TRADE POLICY commodities from eligible Sub-Saharan African countries duty-free access to Trade policy in Kenya has evolved over time, the United States of America’s market. changing from an inward-looking import substitution AGOA has been renewed until 2025; policy regime to a trade policy whose primary objective is the promotion of exports of consumer Trade and Investment Framework and intermediate goods, while simultaneously laying Agreement ( TIFA ): Signed between the base for eventual production of capital goods for the United States of America and the domestic and export markets. This is expected to East African Community ( EAC ) in 2008. lead to higher earnings of foreign exchange, which, This provides strategic frameworks in turn, will help to reduce the balance of payments and principles for dialogue on trade deficit and the unemployment problems. The Kenyan and investment issues between the Government has put in place various incentives, United States of America and the such as the duty and VAT remission, Manufacturing other parties to the agreement; under Bond Scheme, and export processing zones. This is reinforced by the pursuance of a flexible and Economic partnership agreements realistic exchange rate that promotes exports. ( EPAs ): These are agreements between the EU and African, Caribbean and Pacific countries and regions ( ACP ) COMMITMENT TO BILATERAL that aim to promote ACP–EU trade AND MULTILATERAL INVESTMENT – and ultimately contribute, through AND TRADE AGREEMENTS trade and investment, to sustainable development and poverty reduction; Kenya’s external trade policies are designed to create an environment conducive to promoting its Cotonou Partnership Agreement ( CPA ), products in international markets, especially those also known as African Caribbean of the developed countries in Europe, the United Pacific European Union ( ACP- States of America and Japan, without prejudice EU ) Partnership Agreement: This to the promotion of intra-African trade. Trade agreement established the Generalized policies are formulated with the view to speed up System of Preferences ( GSP ) – a Kenya’s industrialization process, and in such a non-reciprocal preferential treatment way make access to foreign markets easier for granted to developing countries; Kenyan products. In pursuing these objectives, Kenya has entered into multilateral, regional, Everything But Arms ( EBA ): This bilateral and preferential trade arrangements. is a European Union ( EU ) initiative under which all imports to the EU KENYA
Kenya is a member of several trade from the least developed countries arrangements and a beneficiary to trade- ( LDCs ) are duty-free and quota-free, enhancing schemes, including: with the exception of armaments;
World Trade Organization ( WTO ): Being African Continental Free Trade Area a member of the WTO implies that ( AfCFTA ): This refers to the free trade Kenyan products have access to more area agreement between 44 member than 90 % of world markets at most- states of the African Union signed favoured-nation ( MFN ) treatment; during the 10th Ordinary Session of African Union Heads of State summit held in Kigali in March 2018. The AfCFTA is now the largest free trade area since the creation of the WTO. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
27 The aim of this agreement is to create Furthermore, Kenya is also a member of the East a continental market for products and African Community ( EAC ) and the Common Market services ( a market of approximately for Eastern and Southern Africa ( COMESA ). For EAC 1.2 billion people and cumulated GDP imports, the duty rate is zero, whereas for COMESA of approximately $ 3.4 trillion ) with imports, the duty rates are in the range of 0 %–1 %. free movement of business partners The following COMESA countries have reduced and investment. This is expected to customs duty rates ( 0 % ) for eligible products in promote intra-African trade, to support order to fully participate in the free trade area: the the regional and continental integration Republic of Burundi, the Union of the Comoros, the of Africa, and to further develop the Republic of Djibouti, the Arab Republic of Egypt, African economy’s manufacturing sector. the Republic of Kenya, Libya, the Republic of The free trade area agreement will Madagascar, the Republic of Malawi, the Republic become operational after 22 countries of Mauritius, the Republic of Rwanda, the Republic have ratified it. In the meantime, it of the Sudan, the Republic of Zambia and the is still possible for countries that Republic of Zimbabwe. See Figure 13 for more did not sign the agreement to do understanding on the geographical distribution of so before it comes into force. countries within COMESA, EAC and Southern African Development Community ( SADC ) regional blocks.
Figure 13: Tripartite Free Trade Area map KENYA
Source: UNCTAD LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
28 These multilateral trade agreements not only give Kenya preferential access to a global market valued at approximately $ 36.8 trillion, but also to a network of more than 1.4 billion potential consumers. These figures are detailed in Figure 14. The
recently signed African Continental Free Trade Area Make(cc) it Kenya ( AfCFTA ) agreement adds to the already impressive statistics of Kenya’s global market potential.
Figure 14: Kenyan multilateral trade agreements
Source: KenInvest, updated with World Bank figures, 2015 / 2016.
The Republic of Kenya has also signed bilateral trade Under these agreements, Kenya and its contracting agreements with several countries: the Argentine partners accord each other most-favoured-nation Republic, the People’s Republic of Bangladesh, treatment in all matters with respect to their the Republic of Bulgaria, the People’s Republic of mutual trade relations. This is also an instrument China, the Union of the Comoros, the Democratic used to promote trade and improve economic Republic of the Congo ( DRC ), the Republic of relations between Kenya and these countries. Djibouti, the Arab Republic of Egypt, Hungary, the Republic of India, the Republic of Iraq, the Republic of Korea, the Kingdom of Lesotho, the Republic INVESTMENT INCENTIVES of Liberia, the Kingdom of the Netherlands, the KENYA
Federal Republic of Nigeria, the Islamic Republic Kenya’s investment code, articulated in the of Pakistan, the Republic of Poland, Romania, Investment Promotion Act of 2004, is designed the Russian Federation, the Republic of Rwanda, to shape the administrative and legal procedures the Federal Republic of Somalia, the Kingdom of to achieve a more effective investment climate. Swaziland, the United Republic of Tanzania, the The Investment Promotion Act’s goal is to attract Kingdom of Thailand, the Republic of Zambia, and and facilitate investment by assisting investors the Republic of Zimbabwe. Additional agreements in obtaining the licences necessary to invest and are under negotiation with several other countries: providing other assistance and incentives. the Republic of Belarus, the Czech Republic, the Federal Democratic Republic of Ethiopia, the State of Eritrea, the Islamic Republic of Iran, the Republic of Kazakhstan, the Republic of Mauritius, the Republic of Mozambique and the Republic of South Africa. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
29 One of the main achievements of the efforts to The OSC has a few incubation promote investment is the establishment of export rooms where investors can start processing zones ( EPZs ) and special economic operations before they have offices; zones ( SEZs ). The objective is to support the transformation of Kenya into a newly industrialized Investors can get information on middle income country providing a high-quality life investment opportunities available in to all its citizens by 2030. The smooth regulation of all counties and across all sectors; these zones is ensured by the Export Processing Zones Authority ( EPZA ) and Special Economic Zones Advice on the best investment Authority ( SEZA ). EPZs and SEZs offer a variety of schemes in special economic zones, advantages, which are summarized in Table 9. export processing zones or other options available in Kenya; and
Table 9: Investment incentives for export processing Registration of businesses, acquisition zones and special economic zones in Kenya of work permits, and facilitation Export processing Special economic of other permits and licences that zones ( EPZs ) zones ( SEZs ) are necessary for their investment • Corporate tax of 10 % can be done at the OSC. • Corporate tax holidays for the first 10 years of 10 years • Corporate tax of 15 % for • Corporate tax of 25 % another 10 years and FISCAL AND FINANCIAL INCENTIVES for another 10 years 30 % for the 21st year • Withholding tax holidays • Withholding tax holidays In order to encourage investment, the Kenyan of 10 years on remittances of 10 years on remittances to non-residents Government has put in place incentives such to non-residents • Stamp duty exemption as investment allowance, offsetting of losses by • Stamp duty exemption • Import duty and VAT • Import duty and VAT future taxable profits, remissions from capital exemption on raw materials, exemption on raw materials, goods, and export promotion programmes like machinery and other inputs machinery and other inputs • Investment deduction of EPZs. Investors in export zones enjoy a 10-year • Investment deduction of 100 % over 20 years on tax holidays followed by a 25 % corporate tax 100 % over 20 years on building and machinery building and machinery rate for the following 10 years, and investors in EPZs are exempted from paying import duties. Other benefits Other benefits • Fully operational in • Ready-made factory building under one year Fiscal incentives are mainly in the form of and office premises • Project approval and capital deductions. Generally, these deductions • Readily available services – licensing within 30 days water, sewerage, electricity are made when computing the profits of the • Foreign currency account and and landscaping, etc. company or individual for any year. Capital offshore borrowing allowed • High security standards – no exchange controls deduction can be divided into: industrial – 24-hour security and • Unrestricted investment building deductions, farm works deduction, illuminated perimeter fences by foreigners • On-site customs wear and tear deduction, and investment • One-stop shop service for documentation deduction. Details can be found in Table 10. facilitation and aftercare
Source: KenInvest, 2017.
Kenya has a fully developed one-stop centre ( OSC ) KENYA
under the Kenya Investment Authority ( KenInvest ). The institutions already on board include: the National Environment Management Authority ( NEMA ), Kenya Power, Registrar of Companies, Kenya Revenue Authority, Export Processing Zones Authority, National Social Security Fund, National Hospital Insurance
Fund, Kenyan Department of Immigration, and Nairobi Make(cc) it Kenya County Government. Other relevant institutions will be brought on board as needed. Investors are expected to benefit from the following services at the OSC: LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
30 Table 10: Overview of capital deduction measures for investors in Kenya Capital deduction Description and advantages Deduction on capital expenditure incurred for the construction of an industrial building. Some deductions include: • Capital deduction of 2.5 % applicable Industrial building within the first 40 years of operation; deduction • Capital deduction of 25 % on rental residential building approved by the minister in a planned developed area; • Capital deduction of 25 % on commercial building in a developed area. Deduction granted on cost of a building and machinery installed therein. Some applicable rates include: Investment • Investment allowance of 100 % for investments situated within Nairobi, deduction Mombasa and Kisumu; • Investment allowance of 150 % for investments worth 200 million Kenyan shillings and situated outside Nairobi, Mombasa and Kisumu. An allowance granted to the investor to cater
for wear and tear on machinery. Some include: Make(cc) it Kenya • Allowance of 37.5 % on heavy earth-moving, self-propelling equipment and 25 % allowance Wear and tear on other self-propelling machines; deductions • Allowance of 12.5 % on non- self-propelling machines; • Allowance of 30 % on office electronic EXPORT AND IMPORT INCENTIVES machinery and equipment; • Allowance of 20 % for five years on a straight line basis for computer software In relation to exports, there are several incentives and for telecommunication equipment. to promote investment and value addition in the
Source: Kenya.eRegulations/KenInvest. Kenyan leather industry. Some of these include:
Provision of technical advice Other fiscal and financial incentives include: to exporters by the Department of Veterinary Services; Depreciation – liberal rates are allowed for depreciation 1 % of the free on board ( FOB ) value of assets based on value; of wet blue leather charged by the Department of Veterinary Services. Loss carryforward – business The Kenya Revenue Authority enterprises must recover from ( KRA ) does not charge any levy, previous losses before paying thus encouraging value addition; corporate tax again; KENYA
0.5 % of the FOB value of crust leather Duty remission facility – exemption on charged by the Department of Veterinary duties and VAT on raw material used Services, which goes to the Veterinary to process confirmed exports orders; Services Development Fund ( VSDF ). KRA does not charge any levy; Capital expenditure – duties paid for capital expenditure of more No levies charged on finished than $ 70,000 can be recovered leather by either KRA or the from corporate tax; and Department of Veterinary Services.
Capital goods and basic raw More generally, there are also several incentives material – are duty-free. to promote international trade in Kenya. Table 11 summarizes the most important ones. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
31 Table 11: Export and import incentives TAXES Tax incentive category Description of benefits TRANSPARENT TAXATION SYSTEM The EA Customs Management Act provides for drawback of import duty on goods imported for the manufacture of goods, which are to be exported, In tandem with all segments of business in Kenya, transferred to a free port and transferred to an the taxation system has also undergone significant export processing zone. Some conditions apply before you can claim duty drawback, such as: reforms in order to enhance its capacity to meet the basic conditions of a good taxation system following • Obtaining authorization from the Commissioner of Customs before you begin manufacturing; the principles of fairness, adequacy, simplicity, Duty drawback • The goods for export must be a direct result of transparency and administrative ease. The country’s the imported goods used in their manufacture; tax system has many modern elements, including • Presenting the goods destined for export a pay as you earn ( PAYE ) individual income tax for examination to the proper officer. A declaration is then required to the effect that with graduated, but moderate rates and a credit the conditions under which drawback may be invoice value-added tax ( VAT ). The main sources allowed have been fulfilled and that the goods have of tax revenue in Kenya are duties on goods and actually been exported. The claim for drawback services and income tax, which account for 47 % must be presented within a period of 12 months from the date of exportation of the goods. and 40 % respectively of total tax revenue. This aims to promote industrial production for the export market. By allowing manufacturers TAXATION AND COMPANY REGISTRATION to import plant, machinery, equipment and raw materials tax free, for exclusive use in the PROCEDURES manufacture of goods for export. The MUB is open to both local and foreign investors. Manufacture A licence is required from the Commissioner The Kenya Revenue Authority ( KRA ) is the tax Under Bond of Customs to operate a bonded factory. collection agency that acts on behalf of the ( MUB ) Specific incentives provided: Government of Kenya. The Kenya Revenue • Exemption from customs and excise duty and Authority collects a number of taxes and duties, VAT on imported plant, machinery, equipment, including income tax, value-added tax and raw materials and other imported inputs; customs tax. All business entities in Kenya must • Investment allowance of 100 % on plant, machinery, equipment and buildings. register with the KRA, which issues taxpayers with a personal identification number ( PIN ) certificate The TREO scheme aims to encourage local manufacturers to export their products by that specifies the taxpayer’s tax obligations, and remitting duty and VAT on raw materials used a unique taxpayer PIN. Detailed information on in the manufacture of goods for export. It also the tax rates are found in Tables 12 and 13. provides tax remission on inputs to make goods Tax Remission defined as essential for the domestic market. Table 12: Individual income tax for Exports TREO encourages Kenyan manufacturers to Office ( TREO ) produce for the export market by granting: Taxable income ( in KES ) Approx. USD equiv. Tax rate ( % ) scheme • Remission of import duty on inputs; Up to 121 968 Up to 12 197 10 • Exemption of import declaration fees 121 969–236 880 12 197–23 688 15 on inputs except for payment of a processing fee of KES 5 000; 236 880–351 792 23 688–35 179 20 • Remission of VAT on inputs; and 351 793–466 704 35 179–46 670 25 • Remission of excise duty on fuel oil and kerosene. More than 466 704 More than 46 670 30 The Kenya Association of Manufacturers ( KAM ) facilitates this scheme, which is administered by the Ministry of Finance. One should apply to the Table 13: Business taxes and exemption of taxes KENYA
Ministry for duty and VAT remission through KAM. Category Resident Non-resident EPZ units* The application for remission must be supported by: 0 % for the first 10 • An export order or contract for specified Corporate tax** 30 % 37.5 % years and 25 % for export goods or a letter of credit; the next 10 years Application for • A detailed production plan; • A list of goods to be imported; and Withholding tax tax remission 5 % 10 % 0 % for the first 10 years • Tariff classification, quantity, value and on dividends*** amount of duty or VAT to be waived. Exempted except on VAT 16 % 16 % A security bond will need to be posted covering the motor vehicles taxes and is cancelled only after the reconciliation declaration has been verified and approved by *Units in EPZ also enjoy stamp duty exemption and 100 % on a 20-year the TREO office and any unused imported goods investment deduction on capital outlays. have been re-exported or duty has been paid. ** Corporate tax for companies newly listed on stock exchange. ***Dividends are exempted from tax when paid by a resident company Source: KLDC, 2015. that controls 12.5 % or more of share capital. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
32 Percentage of shares issued Corporate tax VISAS AND WORK PERMITS At least 20 % of issued share capital listed 27 % Work and residence permits are issued to any At least 30 % of issued share capital listed 25 % non-Kenyan wishing to engage in employment in At least 40 % of issued share capital listed 20 % Kenya whether in gainful employment or voluntary service. The Kenya Citizenship and Immigration Regulations 2012 regulate work permits and Exemption of taxes visas ( classified from A to M ). Various classes of permits and their respective requirements are EPZ illustrated in the table below. A special pass can Corporate tax – 0 % for the first 10 years and 25 % for next 10 years be obtained for short-term engagements ( less VAT – exempted than three months ) or as an interim measure Withholding tax – 0 % for the first 10 years while waiting for a work permit to be issued.
Exemption from stamp duty on the execution of any instruments related to the business activities of an EPZ enterprise. Some work permit classes and their respective requirements
Classes Requirements CUSTOMS DUTIES • One should obtain the necessary licences and registrations; Kenya applies tariffs based on the international • For renewals, current licence held harmonized system ( HS ) of product classification. Class A: Issued to for prospecting minerals and copy of PIN are required; Customs duties include import duty, excise persons who intend to • One has sufficient capital or duty, VAT and import declaration fee. Customs engage in prospecting resources for investment; duties are payable by importers of the goods for minerals or mining • Processing fee is KES 10 000 at the point of importation. Table 14 lists the ( approximately $ 100 ); • Issuance fee is KES 250 000 for one duties and rates applied for imports to Kenya. year ( approximately $ 2 500 ). • Proof of land ownership or leasehold Class B: Work permit interest in land for the purpose; issued to persons • Proof of capital available for the purpose; wishing to invest • Clearance from relevant bodies; Table 14: Customs duties in Kenya in agriculture and • Processing fee is KES 10 000 ( approximately $ 100 ); Item Rates ( % ) animal husbandry • Issuance fee is KES 100 000 for one 0 %–25 % ( for some sensitive year ( approximately $ 1 000 ). Import duty items 35 %–100 % ) • Copies of academic and professional Excise duty 0 %–130 % Class D: Issued to a certificates along with the CV; • Evidence that the organization failed to fill VAT 0 % or 16 % person who is offered specific employment the vacancy from the local labour market; Import declaration fee 2.25 % • Form 25 dully filled in, signed by a specific employer and sealed by the company; Raw materials 0 % qualified to undertake • Processing fee is KES 10 000 Intermediate goods 10 % that employment ( approximately $ 100 ); • Issuance fee is KES 200 000 for one Finished goods 25 % year ( approximately $ 2 000 ). Capital goods: 0 % • Documentary proof of capital to KENYA Chemical + components depending Import duty rate on: be invested or already invested – on the level of processing: machinery, chemicals minimum of $ 100 000 or equivalent and components • 0 % for basic materials; Class G: Work in any other currency; • 7.5 %–12 % for semi-processed; permit issued to • Registration certificate of the company • 25 % for final product. or certificate of incorporation; investors in specific • Copies of personal and company Source: KRA, 2017. trade, business PIN if business is running; or consultancy • Processing fee is KES 10 000 ( approximately $ 100 ) non-refundable; • Issuance fee is KES 100 000 for one year ( approximately $ 1 000 ).
Source: Ministry of Interior and Coordination of National Government; Kenya eRegulations, 2018. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
33 34 LEATHER VALUE CHAIN INVESTMENT PROFILE KENYA of Kenya who wishtodobusinessinKenya company inKenya ( owned localcompanyorabranch ofaforeign overview ofstepstobetaken toregisteraforeign- and directorship. corporate status,companyname, sharecapital of anychangestothebusiness,including the Registrar. Theyarealsorequiredtofile notice companies arerequiredtofileannualreturnswith and businessnames.UndertheCompaniesAct, responsible forregisteringincorporatedtrusts corporate entitiesinKenya. TheRegistrarisalso registering andregulatingtheoperationsofall responsibility oftheRegistrarCompaniesentails As establishedundertheCompaniesAct, REGISTRATION REQUIREMENTS Sources: the set-up ofaforeign-ownedcompanyinKenya. Table 15 or branch operate eitherasacompanyonitsown( intends toconductbusinessinthecountrycan registrar ofcompanies.Aforeigncompanythat details ofdirectorsandshareholders,etc.tothe e.g. memorandumandarticlesofassociation, is requiredtosubmitthenecessarydocumentation, wishes toestablishacorporateentityinthecountry of operationsandplansinKenya. Anypersonwho company set-up dependsonthecompany’snature operation ofcorporateentities.Theexacttype The CompaniesActgovernstheset-up and FOR COMPANIES REGISTRATION PROCEDURES Time-frame Number ofdirectors Shareholding andcapital Kenya eRegulations,2018;BusinessSwedenAnalysis,2017. describes some regulations concerning describessomeregulationsconcerning ) orpartnerwithalocalentity( Table 15:Regulations fortheestablishmentofaforeign-ownedcompanyinKenya Table 16 companies incorporated outside companies incorporatedoutside and • • • • • public ) and ( private Limited liabilitycompany issued atradingcertificatefromtheRegistrar. In additiontotheCoI,publiccompaniesare the certificateofincorporation( Takes anaverageoffiveweekstoobtain person At leastoneforprivatecompanies( required intheincorporationprocess. $ maximum numberofshareholders. public companiesandnolimitonthe A minimumofsevenshareholdersfor shareholders forprivatecompanies. At leastoneandatmost50 1 000 is the minimum paid-up share capital 1 000istheminimumpaid-upsharecapital Table 17 ). Atleasttwoforpubliccompanies. give an givean iue 15 Figure subsidiary subsidiary ).
. ) CoI Source: ). a natural a natural Figure 15:Forms offoreigncompanyset-upsinKenya Writer’s illustrationbasedonBusinessSwedenAnalysis,2017. Branch officeofaforeigncompany • • • • • ( to obtainthecertificateofcompliance Takes anaverageofthreeandahalfweeks representative shouldbeappointed. set-up. However, atleastonelocal Same directorasperforeigncompany company intermsoftheCompaniesAct. as longitisregisteredaforeign activities viaabranchofficein Kenya Allowed tocarryoutitssalesandservice on everythingapartofrepresentationactivities. Allowed tokeepaccountingbooksandpaytax Same shareholderasperforeigncountryset-up. equivalent totheCoIforbranchoffice ).
(cc) Make it Kenya Table 16: Registering a local company ( by foreigners ) Requirements Cost Entity in charge
Apply and pay for registration • Passport ( copy ) for each director showing the biodata page • Passport photo ( copy ) for each director • KES 10 000 for company Companies Registry • Notarized certificate of incorporation registration Harambee Avenue, P.O. Box ( copy ) ( if legal person ) • KES 600 for CR12 for list of 30031, Nairobi, 00100 shareholders certificate Submit signed application forms • KES 50 for eCitizen Online application at: https://www.ecitizen.go.ke/ • Signed notice of registered address – CR8 ( copy ) convenience fee • Signed company registration form – CR1 ( copy ) • Signed memorandum of a company with share capital – CR2 ( copy ) • Signed statement of nominal capital ( copy )
Source: Kenya.eRegulations, 2018.
Table 17: Registering a branch of a foreign company Requirements Cost Entity in charge
Apply and pay for registration • Certified certificate of incorporation ( copy ) • Certified memorandum and articles of association ( copy ) • Passport ( copy ) and passport photo • Passport photo ( copy ) • KES 6 800 for registration of a Companies Registry • Additional for Kenyan local representative: copy branch of a foreign company Harambee Avenue, P.O. Box of PIN certificate and national ID card • KES 600 for list of directors 30031, Nairobi, 00100 and shareholders Submit signed application forms • KES 50 for eCitizen Online application at: https://www.ecitizen.go.ke/ • Application for registration of a foreign convenience fee company – FC2 ( original ) • Notice of place of business – Form FC4 ( original ) • Notice specifying opening hours of company – Form FC6 ( original ) • List of directors ( copy )
Source: Kenya.eRegulations, 2018.
It is worth mentioning that Table 16 and Table Box 1 presents an example of all the steps 17 refer only to the registration process, which needed to get an operational entity in Kenya, is one of the six activities required to be done to in this case, a subsidiary of a foreign company. start a business in Kenya ( company reservation, This is an example from Business Sweden and company registration, obtain taxpayer registration, it is based on their personal experience. KENYA
obtain unified business permit, social security registration, and National Hospital Insurance Furthermore, any person who, in the course of Fund ). The total time-frame ( including the six business, has supplied or expects to supply activities ) to start a business in Kenya ranges taxable goods or services or both, with a value of between 12 and 26 days and the total cost of the KES 5 million ( approximately $ 50,000 ) or more procedure is KES 34,700 ( approximately $ 347 ) in a period of 12 months, should register for and KES 31,500 ( approximately $ 315 ) respectively VAT. Export of goods and taxable services are for starting a foreign-owned local company and zero-rated; that is, taxable at a rate of zero. opening a branch of a foreign company. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
35 SECTOR-SPECIFIC RULES the remit of the Communication Authority of Companies operating in certain sectors of the Kenya. Furthermore, county governments have economy might be required to obtain additional certain by-laws governing businesses operating approvals and licences from the relevant regulatory in their localities, which establish levies, fees and bodies governing them. For instance, banks related charges, as well as business permits. are regulated by the Central Bank of Kenya ( CBK ) through the Banking Act, and insurance The Capital Markets Authority ( CMA ) governs the companies are overseen by the Insurance issuance of shares to the public. All companies that Regulatory Authority through the Insurance Act, intend to list in the Nairobi Securities Exchange ( NSE ) while telecommunication companies come under must make an application to the CMA and the NSE.
Box 1: Steps to get an operational entity
As a concrete example, the figure below summarizes the main steps required to make a subsidiary operational. However, it is worth noting that this is just a rough estimation. The duration could vary depending on external factors. It is, therefore, advisable to put a margin into account. KENYA
Source: Writer’s illustration based on Business Sweden Analysis, 2017. LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
36 BUYING LAND the mode of payment and documents to be supplied by the seller to facilitate registration of the transfer of the land to LAND PURCHASE PROCEDURES the buyer. At this point, the seller may ask the buyer to pay a 10 % deposit, The Kenyan Constitution ( from 2010, together with but it is advisable not to part with a the Land Act of 2016 and the Land Registration penny until you get clearance from the Act of 2012 ) permits foreign investors to acquire Land Control Board ( LCB ), which has land within any county providing they comply with the final say on land transactions; the following procedures of buying and selling land in Kenya. The key steps are as follows: Land Control Board clearance ( LCB ) – this is a forum that comprises area Land identification – this is elders and county commissioners where potential buyers identify and its duty is to ensure that land land that suits their needs; transactions are conducted in a transparent manner – e.g. stopping Search at the lands registry – a a husband from selling family land prospective buyer should obtain a without the wife’s consent. This costs copy of the land title deed from the $ 100. However, instead of waiting for seller to facilitate the search ( normally, the main LCB meeting, the parties can it takes two hours and costs $ 5.20 ). schedule a special meeting involving the Search results show details of the land, assistant commissioner at a cost of $ 50; including the registered owner of the land, acreage and any caveats registered Transfer and procurement of completion against the title deed. A valid search documents – once the payments are should not be more than six months; made and the seller signs the land transfer forms, the buyer should proceed Search at the county office – the to the ministry armed with the consent search helps to identify any unpaid from LCB, land search, clearance from land rates, which should be factored the county, three passport photos, KRA into the purchase price. A certificate of PIN certificate, sale agreement and the clearance from City Hall will cost $ 75, old title deed to change the ownership but the fees vary across counties; of the land. It takes two weeks and $ 50 to process the new title deed; Obtain ( two ) land maps – the maps can be acquired from either the land Stamping the transfer – the buyer is ministry or the local surveyor at a cost required to apply for the valuation of the of $ 3 each. One map is normally drawn land by the government value using the to scale and the other is an overview valuation form filled in by the seller. The of the land showing adjacent plots; lands officer will use these documents to compute the stamp duty payable. The Ground verification – after obtaining the stamp duty, which should be paid to the maps, the buyer visits the land ( together Commissioner of Domestic Taxes, is 4 % with the seller and the surveyor ) to of the land value for urban areas and KENYA
verify the dimensions. Once this is 2 % of the land value for the rural areas; done, the soon-to-be owner must erect beacons to avoid future disputes; As of 1 January 2015, stamp duty has been collected concurrently Sale agreement – buyers are advised to with a 5 % capital gains tax. appoint a lawyer to represent them in the signing of the sale agreement. The agreement, which is usually prepared by the seller’s lawyer, indicates the terms of sale, including the names of the buyer and seller, the price of the land, LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
37 Useful Contacts
Kenyan investment facilitation institutions Institution Role Contact
Kenya Leather • Advisory services to current investors Development on best practices to embrace; [email protected] Council • Equips potential investors with relevant information in all segments of the leather industry.
• Investment promotion and facilitation; • Provides information on investment Kenya Investment opportunities and sources of capital; [email protected] Authority • Assists in obtaining necessary licences and permits; • Investor tracking after-care services; • Assists in issuing investment certificates.
Export Processing • Promotion and facilitation of export-oriented investments and development of an enabling [email protected] Zones Authority environment for such investments.
• Development and registration of all SEZs in Kenya and development of enabling environment for such investment and for connected purposes; Special Economic [email protected] Zones Authority • Development and management of enabling environment for global and local investment under the special economic zones.
Financial institutions • Postal address: P.O. Box 30426 – 00100, Nairobi • Telephone: +254-20-2222542 Bank of India • E-mail: [email protected] • Website: http://www.boikenya.com/english/Home_kny.aspx • Postal address: P.O. Box 30120 – 00100, Nairobi • Telephone: +254-20-4254000, 4254601 Barclays Bank of Kenya Limited • Fax: +254-20-2213915 • E-mail: [email protected] • Website: https://www.barclays.co.ke/personal/ • Postal address: P.O. Box 72833 – 00200, Nairobi • Telephone: +254-20-3638000/11/17/18/20/21, 3268000, 3269000, 0711-0688000 CfC Stanbic Bank Limited • Fax: +254-20-3752901/7 • E-mail: [email protected] • Website: https://www.stanbicbank.co.ke/ KENYA • Postal address: P.O. Box 43252 – 00100, Nairobi Charterhouse Bank Limited • Telephone: +254-20-2242246/47/48/49 • Fax: +254-20-2219058, 2223060, 2242248 • E-mail: [email protected] • Postal address: P.O. Box 66015 – 00800, Nairobi • Telephone: +254-20-2774000, 0732174100, 0703074000, 0736-432025, 0703074101 Chase Bank ( K ) Limited • Fax: +254-20-4454816/4454800-10 • E-mail: [email protected]; [email protected] • Website: http://www.chasebankkenya.co.ke LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
38 Financial institutions • Postal address: P.O. Box 30711 – 00100, Nairobi • Telephone: +254-20-2754000/2711221 Citibank N.A. Kenya • Fax: +254-20-2714810/1 • E-mail: [email protected] • Website: https://www.citigroup.com/citi/about/countries-and-jurisdictions/kenya.html • Postal Address: P. O. Box 30437-00100 Nairobi • Telephone: +254-20-2884000, 2884444, 0711056000, Commercial Bank of 0732156000, 0734600234, 0732156444 Africa Limited • Fax: +254-20-2734599 • E-mail: [email protected] • Website: www.cbagroup.com • Postal address: P.O. Box 51133 – 00200, Nairobi Consolidated Bank of • Telephone: +254-20-340208/340836, 340551, 340298, 340747, 340298, 211950, 0703016000 Kenya Limited • Fax: +254-20-340836 • E-mail: [email protected] • Website: www.consolidated-bank.com • Postal address: P.O. Box 48231 – 00100, Nairobi Co-operative Bank of • Telephone: +254-20-3276000, 2776000, 0711049000, 0732106000 Kenya Limited • Fax: +254-20-2245506 • E-mail: [email protected] • Website: www.co-opbank.co.ke • Postal address: P.O. Box 61064 – 00200, Nairobi • Telephone: +254-20-2222300/2220789/2222317, 2283000, 0728607701, 0738222300 Credit Bank Limited • Fax: +254-20-2216700 • E-mail: [email protected] • Website: www.creditbank.co.ke • Postal address: P.O. Box 30483 – 00100, Nairobi • Telephone: +254-20-3340401/2/3, 3340416, 2251082, 3340198, 3340478, Development Bank of 3317449, 3344184, 2250143, 3317449, 3340416 0724253980/1, 0735046336 • Fax: +254-20-2250399 Kenya Limited • E-mail: [email protected] • Website: www.devbank.com • Postal address: P.O. Box 61711 – 00200, Nairobi Diamond Trust Bank • Telephone: +254-20-2849000, 0732121000, 0719031000, 0732121000, 0719031000 Kenya Limited • Fax: +254-20-2245495 • E-mail: [email protected] • Website: http://www.dtbafrica.com • Postal address: P.O. Box 49584 – 00100, Nairobi Ecobank Kenya Limited • Telephone: +254-20-2883000, 4968000, 0719098000 • Fax: +254-20-2883304, 2883815 • E-mail: [email protected] • Website: www.ecobank.com • Postal address: P.O. Box 52467 – 00200, Nairobi Spire Bank Ltd • Telephone: +254-20-4981000, 4981202, 4981301, 4981405, 0713600724, 0733333780 • E-mail: [email protected] • Website: www.spirebank.co.ke • Postal address: P.O. Box 75104 – 00200, Nairobi
• Telephone: +254 20 2262000/2262956/2262828, KENYA
Equity Bank Kenya Limited 0763026000, 07633026956, 0763026828 • Fax: +254-020-2737276 • E-mail: [email protected] • Website: www.equitybankgroup.com • Postal address: P.O. Box 74145 – 00200, Nairobi • Telephone: +254-020-3252000, 3318940/2/7, 2244166, Family Bank Limited 2240601, 0733332300, 0728120444/555 • Fax: +254-020-318174 • E-mail: [email protected]; [email protected] • Website: www.familybank.co.ke LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
39 Financial institutions • Postal address: P.O. Box 26219 – 00100, Nairobi • Telephone: +254-20-2843000-3, 07202843000, 0738-407521 First Community Bank Limited • Fax: +254-20-344101 • E-mail: [email protected] • Website: www.firstcommunitybank.co.ke • Postal address: P.O. Box 20613 – 00200, Nairobi • Telephone: +254-20-3284000, 073084000 Guaranty Trust Bank ( K ) Ltd • Fax: +254-20-342024 • E-mail: [email protected] • Website: www.gtbank.com • Postal address: P.O. Box 67681 – 00200, Nairobi • Telephone: +254-020-2226771, 2226774, 2226341, 2226483, 0722-282213, 0733-888060 Guardian Bank Limited • Fax: +254-020-2216633 • E-mail: [email protected]; [email protected] • Website: www.guardian-bank.com • Postal address: P.O. Box 43683 – 00100, Nairobi • Telephone: +254-20-2740000, 2718608/9, 2740111, 0711075000 Gulf African Bank Limited • Fax: +254-20-2715655 • E-mail: [email protected] • Website: www.gulfafricanbank.com • Postal address: P.O. Box 30584 – 00100, Nairobi Habib Bank A.G. Zurich • Telephone: +254 20 310 694 • E-mail: [email protected] • Website: www.habibbank.com • Postal address: P.O. Box 43157 – 00100, Nairobi • Telephone: +254-20-2226433, 2222786, 2226401/7 Habib Bank Limited • Fax: +254-20-2224636, 2214636 • E-mail: [email protected] • Website: www.hbl.com • IN RECEIVERSHIP • Postal address: P.O. Box 44905 – 00100, Nairobi Imperial Bank Limited • Telephone: +254-20-2874000, 3343416, 0711-019000, 0732-119000 • Fax: +254-20-2719705/2719652, 3342374, 2719498 • E-mail: [email protected] • Website: www.imperialbank.co.ke • Postal address: P.O. Box 30238 – 00100, Nairobi • Telephone: +254-20-3221000, 3271375/27, 0719088000, 0753221000 • Fax: +254-20-2711994 I & M Bank Limited • E-mail: [email protected] • Website: www.imbank.com • Postal address: P.O. Box 22741 – 00400, Nairobi • Telephone: +254-20- 2224238/9, 2214976, 2219626, Jamii Bora Bank Limited 2210338/9, 0722-201112, 0734600682 • Fax: +254-20-341825 • E-mail: [email protected] • Website: www.jamiiborabank.co.ke • Postal address: P.O. Box 48400 – 00100, Nairobi • Telephone: +254-20-3270000, 2851000, 2852000, 0711012000, 0734108200 KCB Bank Kenya Limited • Fax: +254-20-2242408’ 2216405
KENYA • E-mail: [email protected]
• Website: www.kcbbankgroup.com • Postal address: P.O. Box 47387 – 0100, Nairobi Middle East Bank ( K ) Limited • Telephone: +254-20-2723120/24, 2722879, 2723124, 2723130, 0722-205903, 0733-333441, 0731001310, 0717531448 • Fax: +254-20-343776/2256901 • E-mail: [email protected] • Website: www.mebkenya.com LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
40 Financial institutions • Postal address: P.O. Box 72866 – 00200, Nairobi • Telephone: +254-20-2828000, 0711-038000 National Bank of Kenya Limited • Fax: +254-20-311444/2223044 • E-mail: [email protected] • Website: www.nationalbank.co.ke • Postal address: P.O. Box 44599 – 00100, Nairobi • Telephone: +254-20-2888000, 4849000, 0711041000, 0732141000 NIC Bank Limited • Fax: +254-20-2888505/13 • E-mail: [email protected] • Website: https://www.nic-bank.com/ke/ • Postal address: P.O. Box 44080 – 00100, Nairobi • Telephone: +254-20-2228461/2, 0734333291, 0722209585 M-Oriental Bank Limited • Fax: +254 20 2219469 • E-mail: [email protected] • Website: www.moriental.co.ke • Postal address: P.O. Box 14001 – 00800, Nairobi • Telephone: +254-20-4449266/7/8, 446106 /7, 4441528, 4441527, Paramount Bank Limited 0723564254, 0734258020, 0728-606652, 0735445506 • Fax: +254-20-449265 • E-mail: [email protected] • Website: www.paramountbank.co.ke • Postal address: P.O. Box 43825 – 00100, Nairobi • Telephone: +254-20-4203000/116/148, 4450810, 0722205491 Prime Bank Limited • Fax: +254-20-4451247 • E-mail: [email protected] • Website: www.primebank.co.ke • Postal address: P.O. Box 34886 – 00100 SBM Bank ( Kenya ) Limited • Telephone: +254-20-2242348, 2248842, 2244187 • Email: [email protected] • Website: https://globalpresence.sbmgroup.mu/sbm-bank-kenya • Postal address: P.O. Box 25363 – 00603, Nairobi • Telephone: +254-20-3906000-7, 0711-058000-7, 0732-158000 Sidian Bank Limited • Fax: +254-20-3568995 • E-mail: [email protected] • Website: www.sidianbank.co.ke • Postal address: P.O. Box 30003 – 00100, Nairobi • Telephone: +254-20-3293000, 3293900, 3291000, 3294000, 0719081000, 0732104000, 0703093000 Standard Chartered • Fax: +254-20-3747880 Bank Kenya Limited • E-mail: [email protected] • Website: www.standardchartered.com • Postal address: P.O. Box 34154 – 00100, Nairobi • Telephone: +254-020-3612000/1/2 UBA Kenya Bank Limited • Fax: +: +254-020-3612049, 0726-926367, 0735-500196/180/175 • E-mail: [email protected] • Website: https://www.ubagroup.com/countries/ke • Postal address: P.O. Box 41114 – 00100, Nairobi • Telephone: +254-20-2719499, 2719815, 2710271, 2716108, Victoria Commercial Bank Limited 2719814.2713208, 2716196, 0721328183
• Fax: +254-20-2713778/2715857 KENYA
• E-mail: [email protected] • Website: www.victoriabank.co.ke LEATHER VALUE CHAIN INVESTMENT PROFILE VALUE LEATHER
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