Investors in undeveloped Special Economic Zones (SEZs) are asking for more time to actualise their investments as the government considers cancelling at least 20 licenses.
This is on the back of concerns by the state, which has blamed some investors for securing the zones on speculation purposes.
According to Investments Principal Secretary Abubakar Hassan, the Special Economic Zones Authority has so far facilitated the gazettement of 38 SEZs, where eight are public with the remaining being under private investors.
However, only 10 of the private licensed zones are operational.
“If we have gazetted these land and you are not developing, there is no use. We are soon going to do an audit of the zones and degazette the ones that are not in use. You must have a plan on how to develop them,” Hassan said.
He spoke in Nairobi yesterday during the launch of the Association of Special Economic Zones (ASEZ), an industry lobby group aimed at addressing sector issues, push for investor-friendly policies and drive investment and economic growth in the SEZ sector.
The new body has however asked the government to re-consider removing the official status of the dormant SEZs, blaming the lack of development partly on government’s failure to provide the necessary on-site and off-site infrastructure and utilities.
These include electricity, road infrastructure and water at some of the zones, which are remotely located.
ASEZ founding chairman and businessman David Langat said infrastructure has been a major challenge, with investors afraid of pumping money on sites that would not give returns on investment.
Lack of good roads, for instance, has hindered delivery of raw materials from farms for value addition, he noted.
“You cannot generalise and say we are going to degazette people yet the problem was on the government side," Langat said.
He said they need to be given at least two years during which the government should meet the requirements for an industrial park to start operating.
"If the government has not delivered the required utilities to support investments, then investors should not be punished," he said.
Langat said players in the SEZ space have been operating in isolation, with lack of a lobby group frustrating their efforts to get the government’s attention including on policies, something he said ASEZ now address.
“We will be pushing for the development of clear policies that will be able to drive growth of industries in the SEZs,” he said.
The SEZs contribute about 3.5 per cent of the country’s GDP, according to the Economic Survey 2024, with the country targeting at between 10-15 per cent by the year 2030, banking on Direct Foreign Investments mainly from the US, Europe and Asian countries led by China and India.
Abubakar affirmed the government’s support for investors including in the SEZs, where it continues to put up the needed infrastructure, and friendly policies to attract investors into the country.
He said the government provides a one-stop-shop for licensing, permits and regulatory approvals, ensuring that investors experience minimal bureaucracy.
It offers a range of tax incentives including corporate taxes, customs duty exemptions, zero-rated VAT and services.
Abubakar also noted that Kenya boasts of a highly skilled workforce to support investments.
The government, through the Special Economic Zones Authority, has been keen on development at SEZs to drive industrialisation and increase the country’s exports and job creation.
Among incentives enjoyed by investors include a 10-year tax holiday in the SEZs and Export Processing Zones. Investors then start paying a 15 per cent corporation tax for 10 years before reaching the 30 per cent cap.
Licensed SEZ enterprises, developers and operators also benefit from other tax rebates such as exemption from excise duty, customs duty, value-added tax and stamp duty. There are also no tax or restrictions on foreign investors for repatriation of profit.
With the raft of tax and non-tax benefits, the government expects that not only will foreign investors be encouraged to invest in Kenya, but that local industry players will also be allowed to competitively access international markets.
Some of the key SEZs include Dongo Kundu in Mombasa, Naivasha, Lamu SEZ and Kenani Leather Park in Athi River.
Meanwhile, the formation of ASEZ brings together SEZ developers, operators, investors, and service providers, creating a unified voice to advocate for better policies, streamlined regulations, and infrastructure improvements.
