The government plans to tighten Special Economic Zones (SEZs) rules by withdrawing incentives for developers of residential houses not meant for the zone's employees
Investment Promotion Principal Secretary Abubakar Hassan Abubakar said amendments to the Business Laws (Amendment) Bill, 2025 will clearly stipulate that only staff housing linked to SEZ enterprises will continue to qualify for fiscal benefits.
The move seeks to prevent abuse of SEZ incentives by real estate developers who are putting up commercial or speculative housing projects under the guise of SEZ-linked developments.
“We have seen residential buildings coming up in some SEZs, but our position is that such developments should not enjoy SEZ incentives unless they are meant to accommodate employees working within the zone,” said Abubakar.
The proposed changes are part of five key amendments targeting the SEZ regime, including clarity on tax stability for investors, admission of specialised educational institutions, provisions for Business Process Outsourcing (BPO) firms and expansion of capital gains tax exemptions.
The government has been positioning SEZs as key drivers of industrial growth, with fiscal incentives designed to attract manufacturing, export-oriented businesses, and service industries.
However, officials say the entry of speculative real estate projects risks diluting the program's core objectives.
He points out that, the new law will ensure that SEZ incentives are ring-fenced to directly support industrial and service enterprises, rather than general residential development.
Speaking during the opening of the country’s first SME focused - Kifaru Exim Special Economic Zone at Tatu City, the PS said local investors are increasingly taking advantage of local incentives on investments through the SEZA Authority.
“This investment solves a critical challenge for SMEs by providing ready industrial spaces and linking them to fiscal incentives available in SEZs. It marks a turning point in building our industrial base and creating jobs for Kenyans,” said Abubakar.
The PS revealed that the government has implemented a series of reforms to strengthen the SEZ program, with 15 key amendments introduced over the last three years.
The latest round, under the proposed Business Laws (Amendment) Bill 2025, will provide further clarity on incentives, expand opportunities for business process outsourcing and specialised training institutions, and ensure predictability for investors.
“The President has directed us to keep refining the SEZ framework to make it globally competitive. Stability of incentives, industrial spaces, and access to financing remain our priority areas,” he said.
Kenya association of Manufactures CEO Tobias Alando lauded the launch of a new Sh500 million facility, terming it a major step towards accelerating Kenya’s industrial growth and creating opportunities for small and medium-sized enterprises.
The facility, developed by local investors, consists of nine grade-A warehouses covering 100,000 square feet, and is designed to host SMEs in sectors such as electronics assembly, household goods, and mobile devices.
