Invest in Kenya: Focus Kisumu July 2007
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Kisumu Invest in Kenya: Focus Kisumu July 2007 European Business Council for Africa and the Mediterranean Invest in Kenya: Focus Kisumu July 2007 Columbia University, New York, 2007 i Invest in Kenya: Focus Kisumu © Columbia University, 2007. All rights reserved. ii preface Kenya, along with 189 other countries, The idea behind this Guide is to offer the adopted the Millennium Declaration reader a brief description of investment in 2000, which set out the millennium opportunities in the Kisumu area, supple- development goals (MDG) to be achieved mented by a description of the investment by 2015. The MDG implementation climate and of the broader context of process was initiated by the Government Kenya and East Africa. The MCI does not of Kenya in September 2002. The process believe that serious investors can be is spearheaded by the Ministry of Planning attracted to an area through a purely and National Development in partnership ‘promotional’ approach, one that pro- with UNDP-Kenya and the Government motes the positive while hiding the nega- of Finland, through a project titled tive. So the Guide is written to be credible. ‘Mainstreaming MDGs in Kenya’s The challenges that potential investors Development Process’. One component would face are described along with the of the project is support to Kisumu city to opportunities they may be missing if they review its city development strategy and ignore Kisumu. profile investment opportunities to attract private investment from within and outside The Guide is intended to make Kisumu the country. For more on the MDG project and what Kisumu has to offer better in Kenya, see Box I.1 in Chapter I. known to investors. Although we have had the foreign investor primarily in mind, This Guide is part of the work supported we believe that the Guide will be of use to by the project just described. It was pre- domestic investors in other parts of Kenya pared by the Millennium Cities Initiative as well. While by no means the sole driver (MCI), which is an initiative of the Earth of growth and development, foreign direct Institute at Columbia University, undertak- investment does have a distinctive contri- en in cooperation with the MDG Support bution to make. Not only does it bring Team at the United Nations Development scarce capital, it also brings know-how, Programme and the Columbia Program technology and access to foreign markets. on International Investment. The MCI is Furthermore, it helps improve the competi- guided by Jeffrey D. Sachs and co-directed tiveness of domestic enterprises, which by Susan Blaustein and Karl P. Sauvant. Its must be the foundation of all growth. initial effort focuses on helping seven cities in six African countries attract more foreign We hope that our investor readers find the direct investment (FDI). The cities are: Guide a useful practical tool. Kisumu, Kenya; Blantyre, Malawi; Kumasi, Ghana; Akure, Nigeria; Bamako–Segou, Mali; and Louga, Senegal. For more on the MCI, see the MCI website: http://www.earthinstitute.columbia.edu/mci/. The millennium cities were chosen in part for their proximity to the millennium villages (http://www.earth.columbia.edu/ millenniumvillages/). In the case of Kisumu, the first millennium city to have an investors’ guide prepared for it, the millennium village is Sauri, in the neigh- bouring Siaya district in western Kenya. iii Acknowledgements This Guide was prepared by the Millennium Sheil Malde, Laban Mburu, Umesh Menon, Cities Initiative (MCI) of Columbia University Ben Obera, Elijah Oburu, Simon Ochieng, (see Preface), under the responsibility of Karl Ruth Odinga, Nick Ogolla, Lindah Oguttu, P. Sauvant, Co-Director and Executive Director, Joyce Opondo, Seth Otieno, Fred Outa, Columbia Program on International Investment, Sailesh Shah, Tom Shepherd, Jörg Simon, and with the support of the Ministry of Rumi Singh, Christine Tatua, Galib Tejpar, Planning and National Development of the Sanjay Thakkar, Margaret Waithaka, Ferdinand Government of Kenya, UNDP Kenya, and Wanyonyi and George Wasonga. In addi- the Government of Finland. We are grateful tion, the Business Licensing and Regulatory to the Kenya Investment Authority, the Reforms Unit in the Ministry of Finance, Municipal Council of Kisumu, the Lake Basin the Export Processing Zones Authority, the Development Authority, the Kenya Association Export Promotion Council and the Kenya of Manufacturers (Nyanza/Western Chapter) Investment Authority were important and the Kenya National Chamber of Commerce sources of information for the Guide. and Industry (Kisumu Branch) for their assis- tance to the project. We thank Vishwas P. The preparation of the Guide was under- Govitrikar, the lead consultant for the taken in parallel with three other related Guide, and Ashley Hufft, the MCI represen- efforts, all focussing on investment opportu- tative in Kenya, for their role in developing nities in Kisumu and the regulatory frame- this Guide, including the organization and work governing it, by KPMG, UNIDO, and conduct of a feedback workshop in Kisumu. Cravath, Swaine & Moore LLP. These are still ongoing. Their results will be available Our thanks are owed to the companies and in due course, and will complement and government agencies that participated in deepen the information provided by the the workshop in Kisumu, as well as to the Guide. We thank the Corporate Council on government agencies that participated in a Africa and the European Business Council feedback meeting in Nairobi hosted by the for Africa and the Mediterranean for their Kenya Investment Authority. Among those cooperation in this project. who provided substantial inputs to the Guide or the workshop, we should particu- Photographs for the Guide were provided larly like to thank Jit Bhurji, Susan Blaustein, by the Kenya Investment Authority, the Calvin Burgess, Leon D’Souza, Munira and Municipal Council of Kisumu and Vishwas Salima Gilani, Heikki Haili, Ghulam Abbas P. Govitrikar. Administrative assistance Hirani, Peter Jones, Susan Kikwai, Shirish in Kisumu was provided by Susan Siaji. Limaye, Saida Mäki-Penttilä, Gideon Mailu, Nelson Vigneault designed the Guide. disclaimer This publication is for informational purpos- does not constitute an offer, solicitation, or es only and is meant to be purely educa- recommendation for the sale or purchase tional. While our objective is to provide of any security, product, or service. useful, general information, the Millennium Information, opinions and views contained Cities Initiative and other participants to this in this publication should not be treated publication make no representations or as investment, tax or legal advice. Before assurances as to the accuracy, completeness, making any decision or taking any action, or timeliness of the information. The infor- you should consult a professional advisor mation is provided without warranty of any who has been informed of all facts relevant kind, express or implied. This publication to your particular circumstances. iv Table of contents iii Preface iv Acknowledgements 3 Executive summary 4 Maps 5 Kenya and Kisumu in brief 7 I. The broader context 7 1. A sketch of Kenya & East Africa 7 • The country 10 • The region 11 2. The economy 11 • Markets for investors 13 • Exports and imports 15 • Foreign direct investment 15 • Debt, reserves, etc. 17 II. Investing in Kisumu 17 1. Introduction 18 2. Opportunities for investors 18 • Main areas of interest to potential investors 24 • Other areas of interest to potential investors 32 3. Incentives, EPZs and related matters 32 • Incentives in Kenya 33 • Investment and tax treaties 34 4. The business environment 34 • Infrastructure 36 • Human resources 40 • The private sector in Kenya and in Kisumu 40 • Doing business in Kenya 43 5. Kisumu as an investment location: A summary for investors 45 III. Taxes and laws 45 1. Taxation in Kenya 45 • Corporate tax 45 • Personal income tax 45 • Excise tax 45 • Import duties 45 • Other 46 2. Legal framework for investment 46 • Investment law 46 • Incorporation and exit 46 • Priorities and restrictions 49 • Investment protection, investor treatment & dispute settlement 49 • Land 49 • Foreign exchange 51 IV. Investors and investment climate 51 1. Investor assessment of the investment climate 53 2. Foreign investors in Kisumu and in Kenya 56 Appendix 56 Pointers to further information 58 Sources consulted 1 Investment opportunities are abundant in Kisumu, from agriculture to construction and manufacturing. The city also offers an attractive and safe living environment. Investment in Kenya generally, and in Kisumu particularly, would grow and thrive even more if governments at all levels were more proactive in its cause and concentrated on creating a more enabling environment for investors. Sailesh Shah, Director, Swan Industries 2 Executive summary Kisumu is an attractive city in Kenya on offers opportunities. There may be oppor- the eastern shore of Lake Victoria, one of tunities in construction as well, as there is the Great Lakes of Africa. Established as a real shortage of low-cost housing. Port Florence, the lakeside terminus of the Uganda Railway, over a hundred years A number of regional and international ago, it grew into a trade and transport trade agreements enhance Kenya’s access hub for East Africa over the following fifty. to foreign markets. The EAC Customs Its prosperity continued into the first Union Protocol is already in place in the decades after independence, which came three founding members of the EAC to Kenya in 1963. In 1977 occurred the (Kenya, Tanzania and Uganda) and will first setback in Kisumu’s fortunes, as soon be extended to the two new mem- the then East African Community (EAC) bers, Burundi and Rwanda. Kenya is also collapsed and long-established transport a member of the Common Market for and other links were severed. Kenya, and Eastern and Southern Africa (COMESA) Kisumu with it, then went through a long and one of the 11 (out of 20) countries period of relative decline, caused by poor that belong to its free-trade area.