Kenya’s investment climate can be identified as being low risk since Foreign Direct Investments (FDIs) are increasing and multiple multinationals are active or entering operations in the country.  From 2009 to 2013 the FDI in Kenya has increased by a staggering 346%, a growth which is continuing to date.^[1] The force driving this increase includes manufacturing.  FDI in the past has been received from UK, US, India, Mauritius, South Africa, and Japan.  It is more recently that we have seen FDI from countries like China, Belgium, Nigeria, France and Germany.^[2]

Kenya takes part in trade-enhancing schemes known as the Africa Growth and Opportunity Act (AGOA), World Trade Organization and EAC-EU Trade Agreement.  The aim of these schemes is to promote open economies and build free markets.20 Furthermore, the EAC, COMESA and Southern African Development Community (SADC) institutions are working towards a Tripartite Free Trade Area (TFTA) which is an agreement that envisages the free movement of persons and goods within the region.

As a country, Kenya has liberalized its economy to create an open market access system. The obstacles in trade flow, private investment, exchange controls, import/export licensing, restrictions on remittances of profits/dividends have been reduced and the recent devolution of the national government to a county has empowered counties to take on investment opportunities locally. In order to drive industrial growth, Kenya has developed Special Economic Zones (SEZs), industrial parks and other initiatives that encourage joint-investment opportunities. The infrastructure sector in Kenya is improving as 20 Billion USD is geared towards development of railways, highways, dams etc (see Table 3). This has been made possible through Public Private Partnerships whereby there is external donor funding, joint venture opportunities both locally and internationally. Government of Kenya joins hands with governments/private companies/institutions in order to accomplish these projects.

In addition, Kenya is improving the power generation capacity in the country by contributing 5000MW into the national power grid, from the current 1644 MW.  Investments in green and cost effective energy sources are ongoing and in an effort to increase the power generation in the country the following projects have started: Wind Power Project, Water Discovery, Oil Discovery, Geothermal Power Project, Coal Power Plant, and Natural Gas Plant. [3]

- Special Incentives promoting trade in the industry

According to KENINVEST there are currently no specific incentives provided for investments in the Kenyan pharmaceutical market. However, there are incentives that are cutting across different sectors and that promote investments in the country. Investments in the Kenyan pharmaceutical sector can also benefit from these.

- Export Processing Zones and Special Economic Zones

The GOK established Special Economic Zones (SEZ) whereby investors and businesses can profit from lower taxation, furthermore the SEZ Act provides incentives for investments. SEZ can be established by foreign or local investors, and products can be exported or sold locally.  For example preferential terms for taxes and duties under the Customs and Excise Act, Income Tax Act, East African Community Customs Management Act and Value Added Tax Act on all special economic zone transactions. The preferential tax terms will include value added tax (VAT) exemption on all supplies of goods and services to enterprises, reduction in corporate tax to 10 per cent from 30 per cent for a period of 10 years of operation and 15 per cent for the next 10 years.

On the other hand, Export Processing Zones (EPZs) aim to aid manufacturing companies that export their entire production.  This model makes products internationally more competitive.  During this period of production and export, there was a tax holiday.  Thereafter some companies left making this model less favourable. 

The Industrialization Ministry plans to take up the SEZ model in the first quarter of 2016 and eliminate the EPZ.  EPZs are larger geographically and promotes both local and foreign investment. 

The SEZ model focuses on goods being produced closer to the raw material source; in addition, investors receive preferential terms on matters of licensing.  This in effect will also bring down cost of transport.

In addition, the SEZ law provides incentives for industries operating in designated zones.  They will be offered discounts on power bills.  This is due to the proximity of the power plants in these areas to the plants. 

The SEZs are currently undergoing a pilot programme in Mombasa, Lamu and Kisumu.  At the expiry of their contractual period, existing investors in the EPZs will be required to start paying taxes in line with Kenya's taxation laws. 

Currently, the EPZ concept is under review. 

- Opportunities for investments in the pharmaceutical sector in Kenya

The Kenyan pharmaceutical sector provides for a very lucrative investment market with the rising needs of the increasing population and disease burden. 

There are only two laboratories in Kenya pre-qualified by WHO, they are NQCL and MEDS.  There are great opportunities for creating quality control laboratories in Kenya.  They are much needed as the burden on these two laboratories is immense, and causes delays in the analysis and approval procedures for registration of drugs in the country. Tests for the EAC are often sub contracted to South Africa. There is only one Bio Equivalence centre in COMESA. It is located in Addis Ababa, Ethiopia. With the new requirement, effective from 2017 onwards that all new drugs submitted for registration shall require Bio Equivalence studies. A New Bio Equivalence centre would be overwhelmed with work. 

The Ministry of Health welcomes partnerships for all of the above mentioned opportunities

Table X. Opportunities for pharmaceutical sector investments.

^[2] Investors Guide to Kenya, 2016

^[3] Invest in Kenya, 2016.