business environment in kenya, development and … · along the coast (mombasa and lamu)....
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BUSINESS ENVIRONMENT IN KENYA, DEVELOPMENT AND
OPPORTUNITIES
PRESENTATION BY CAROLE KARIUKI, KEPSA CEO
12 OCTOBER 2018
ABOUT KEPSA - KENYA’S PRIVATE SECTOR APEX BODY
Presidential Roundtable May 2018
KEPSA was established in 2003 to unite businesses
across all sectors under one umbrella and to provide
a unified private sector voice in engagement with the
government and other strategic partners on matters
of interest/concern to Kenyan businesses.
KEPSA Members comprise of Corporates, SMEs,
Trade Unions, Multinationals and BMOs – the total
number is in excess of 500,000 businesses.
KEPSA engages through structured Public Private
Dialogue platform spanning all levels of government
i.e. Presidential, MDAs, Legislature (Senate & National
Assembly), Counties, etc.
The main focus is ensure a stable, secure and
enabling business environment for private sector
development in Kenya. MOU signing between KEPSA and
Embassy of Finland Kenya – March 2018
Population – 48 Million
Size of Economy (GDP) - US$74.9 Billion
Largest contributors to GDP ( in 2017)– Agriculture
(31.5%), Manufacturing (8.4%), Transport and
storage (7.7%), Wholesale and retail trade (7.6%)
GDP Growth – average 5.6% over the last 5 years
(4.9% in 2017); Inflation
Fastest growing sectors - Accommodation & food
services (14.7%), ICT (11%), Construction (8.6%)
FDI inflows – $3.6 billion since 2013; $0.67 billion
in 2017.
Trade: Main exports to Finland – Coffee, tea,
pineapples, cut flowers;
Main imports – paper products, fertilizers,
electrical equipment and equipment, plastic
products.
KEY FACTS ABOUT KENYA
1.6
6.1
0.2
6.9
2.6
8.6
5.7
7.3
14.7
11
3.1
6.1
4.3
6.1
4.9
0 5 10 15 20
Agriculture, forestry and…
Mining and quarrying
Manufacturing
Electricity supply
Water supply; sewerage,…
Construction
Wholesale and retail trade;…
Transport and storage
Accommodation and food…
ICT
Financial and insurance…
Real estate
Professional, scientific and…
Education
Overall GDP Growth rate
GDP Growth rate by sector
WHY INVEST IN KENYA
1. IMPROVED BUSINESS ENVIRONMENT: Kenya ranks 3rd best in Africa and position 80 globally on Ease of Doing Business.
2. SUPPORTIVE GOVERNMENT TO PRIVATE SECTOR INVESTMENT, strong policy and legal frameworks make it a safe low-risk investment environment.
3. STABLE POLITICAL AND MACROECONOMIC ENVIRONMENT (in 2017, Kenya made history by carrying out a successful repeat presidential election and economy still managed to maintain resilience).
4. STRATEGIC LOCATION that makes Kenya the sea gateway to East and Central Africa;
5. QUALITY INFRASTRUCTURE (Kenya has the best quality physical and social infrastructure in East and Central Africa – a Standard Gauge Railway, expanded sea port and a Category 1 airport). Kenya’s internet connection is the fastest in the continent.
6. NUMEROUS OPPORTUNITIES – e.g. in the Big 4 (manufacturing, agriculture, housing, health) and enabler sectors such as ICT and Energy;
7. FAST GROWING LOCAL MARKET - growing middle-class, rapid urbanisation (4.3% growth), and highly educated youthful population (median age in Kenya is 19). This provides both skilled labour and demand.
8. ACCESS TO KEY REGIONAL AND GLOBAL MARKETS - EAC, COMESA, the Tripartite FTA, and Africa Continental Free Trade Area. Globally, Kenya enjoys preferential markets access to US under AGOA, EU under EPAs, among others
9. STRONG PRIVATE SECTOR REPRESENTATION through KEPSA, the apex body, and strong sectoral BMOs such as the Kenya Association of Manufacturers, Kenya Healthcare Federation, among others and sound companies to partner with.
Improved Doing Business Index Ranking Stable GDP growth
129 136
108 92
80
2014 2015 2016 2017 2018
Kenya's Ease of Doing Business Index ranking
Imp
rovem
en
t
102
106
96
90
99 96
91
80
85
90
95
100
105
110
THE BUSINESS ENVIRONMENT
0
1
2
3
4
5
6
7
2012 2013 2014 2015 2016 2017* 2018
Projected
World Real GDP Growth** Sub-Saharan Africa EAC-5 Kenya
Improved Competitiveness (GCI Index by World Economic Forum)
On attractiveness to investment in Africa, Kenya
ranks position 8 in the 2018 Africa Investment
Index up from position 15 last year. (Quantum
Global Group)
The Big Four is Kenya government’s development Agenda for the next 5 years i.e. 2018 – 2022.
The Agenda was born out of the President’s engagement with Kenyans during his election
campaign in 2017, where he identified the main challenges facing a majority of Kenyans e.g.
shortage of decent jobs, poverty incidence that is still high at 36.1%, food insecurity following
a persistent drought in 2016-2017, challenges in access to affordable healthcare, shortage of
affordable housing in urban areas, among other challenges.
These challenges were harmonized with the country’s Vision 2030 development Agenda, the
SDGs and the government’s development priorities; and 4 priority areas (manufacturing
competitiveness, food security, affordable housing for all and universal healthcare) identified
that if implemented have the potential to stimulate growth and accelerate Kenya’s Social
economic transformation towards a rapidly industrializing middle income economy providing
high quality of life for its citizens by year 2030.
BACKGROUND OF THE BIG FOUR
Manufacturing
Value chains development,
SEZs, Market opportunities
(Local, regional and global
trade agreements e.g.
AfCFTA, EAC, AGOA, etc.)
Food Security
Large scale food
production through
Irrigation, blue
economy, Food
processing and value
addition
Affordable Health Care for All
Health Insurance cover,
specialised treatment,
innovative medical
solutions, local
manufacturing of
pharmaceuticals and
health equipment
Affordable Housing
Large scale housing,
Affordable Construction
materials, innovative
building technologies,
PPPs in development of
affordable houses
BIG FOUR AGENDA: OPPORTUNITIES FOR PRIVATE SECTOR PARTICIPATION
1. ENHANCING MANUFACTURING COMPETITIVENESS
11.3 11.8 11 10.7
10 9.4 9.1
8.4
4.5
7.2
-0.6
5.6
2.5 3.6
2.7
0.2
-2
0
2
4
6
8
10
12
14
2010 2011 2012 2013 2014 2015 2016 2017
Manufacturing Contribution to GDP/Yr (%)
Manufacturing Sector Growth/Yr (%)
Manufacturing currently accounts for 18% of Kenya’s Total Exports
1. Kenya aims to grow
manufacturing contribution to
GDP from 8.4% in 2017 to 15%
in 2022 (US$6.5B to US$18B).
2. Key priority value chains
earmarked for development
include cotton, textile and
apparels, Agro-processing,
Leather, Construction materials,
Oil, mining and gas, Iron and
steel, ICT and Fish processing.
A legal framework was established through Special Economic Zones Act 2015, Special Economic Zones Regulations 2016 and SEZ Authority established.
Three special economic zones are set to be established to enhance value addition, innovation and job creation – one near lake Victoria (Kisumu) and 2 along the coast (Mombasa and Lamu). Incentives have been gazetted for investors in these parks including tax exemption, duty exemptions, work permit facilitation, and protection & repatriation of profits.
According the World Bank, it is estimated that SEZs in China accounted for 60% of China’s exports as of 2007 and created over 30 million jobs. The SEZs also accounted for 22% of China’s GDP, and about 46% of the FDI. In Rwanda, the Kigali SEZ produced $43.6 m worth of exports in 2017 up 554% from $5.5 m in 2016.
SPEACIAL ECONOMIC ZONES
OPPORTUNITIES FOR INVESTMENT IN MANUFACTURING SECTOR
The value chain development agenda presents numerous
opportunities for both Kenyan and foreign investors
1. Leather: a leather park is under establishment in Machakos and 3 others
will be identified along the SGR. 5,000 cottage industries are also set for
establishment with a policy to reduce imports of finished leather.
2. Apparels/cotton: Industrial sheds to be established in Athi River (near
Nairobi), and 200,000 hectares of BT cotton to be produced annually to
support the industry.
3. Agro-processing - the plan is to map coffee, tea, sugar, meat, dairy, and
crops value chains. Warehousing and cold chain sites will be developed,
while a food value hub will be set up in Mombasa. For tea, there are
opportunities for two global tea processors in Mombasa.
4. Fish processing - opportunities include Marine and Fresh water fish
processing; creation of fish feed mills, and an aquaculture SEZ is set to
established around Lake Victoria, which could see Kenya's fish exports grow
from 2,500 tons annually to 18,000 tons and create over 20,000 jobs.
OPPORTUNITIES FOR INVESTMENT IN MANUFACTURING
5. For manufacturers of construction materials, 70 per cent of
housing materials will be sourced locally – an opportunity to invest
locally.
6. In iron and steel, Kenya seeks $1 billion in new investments and
exploit coal and iron deposits identified in Kenya’s Southern
Eastern and Coastal areas. Incentives will be developed to attract
investors in the sector. The government also seeks iron and steel
manufacturers to form joint ventures with.
7. In ICT, Kenya seeks to attract local electronics assemblers/
manufacturers (at-least 2 investors in 2018, 5 BPO players,
incubators and accelerators.
8. In oil and mining, Kenya seeks to attract global scale players in
mining value addition.
9. Kenya also aims to create an EXIM Bank and a Kenya
Development Bank to fund industry development.
2. Opportunities under Food security
1. Large-scale production of the main staples (maize, potato, and rice): Kenya targets to place under irrigation 700,000 additional acres of land through private-public partnerships. The target is to increase Kenya's maize production from the current 40 million bags to 67 million by 2022; potatoes from 1.6 million tons to 2.5 million tons; and Rice from 124,080 tons to 406,486 tons over the same period.
2. Diversification of agricultural production beyond the main staples e.g. production of pulses to increase production of nutritious food. The surplus can be exported to Asian countries where there is a ready market.
3. Supply of agricultural inputs: quality seeds, modern farming technologies, locally blended fertilizers which will be used on a 50/50 basis, etc.
4. Investment in post-harvest handling technologies and market distribution infrastructure. The government is committed to give incentives for post-harvest technologies e.g. waive duty on cereal drying equipment, hematic bags, grain cocoons/silos, cold storage for fish, etc. in bid to reduce postharvest losses from 20% to 15%.
5. Fishing: Kenya seeks to secure investors to construct a new shipyard (a site already exists), increase domestic fishing fleet by 68 vessels in the coast and curb illegal fishing in Kenya's waters. Incentives will also be given for fishing and aquaculture equipment and feeds.
6. Production of animal feeds: Kenya aims to establish a commercialized feed systems under PPPs for livestock, fish, poultry and piggery to revolutionize feed regime and enhance traceability of animals.
7. Contract production for Strategic Food Reserves and other off-takers which is aimed at reducing the cost of food. 300,000 bags are targeted to be produced in 2018.
8. Under Big 4, Kenya aims establish East Africa’s Premier food hub, which will drive small holder productivity and create numerous opportunities for investors.
9. Investment in Agro-processing which is one of the priority value chains under manufacturing for improved export earnings. 1,000 SMEs are targeted for training in food processing along the value chain.
10. Implementation of capacity development programs for Kenyan farmers including training on modern farming techniques, value addition, etc.
Opportunities under Food security
3. AFFORDABLE HOUSING
The government has committed to support the agenda through:
Provision of public land for affordable housing development,
15% corporate tax incentive for large scale development of +100 affordable housing units.
Deduction of 5% of cost on taxable income for rental residential building in a planned Development area
25% deduction of the cost of infrastructure provided by developer - Taxable income.
The target is to increase real estate and construction sector contribution to GDP from 7% to 14% by 2022, and create 350,000 jobs
Kenya has a Housing Deficit of over 2 million units and an annual supply shortage of 150,000 units.
The target is to build 500,000 affordable housing units over the next 5 years (60% of which is expected to be financed by the private sector, 30% will be financed from the National Social Security Fund (pension) and 10% through budget allocation.
Opportunities for investment include:
housing development in designated areas,
leveraging on PPPs in housing and infrastructure development e.g. access roads, water and sewerage, power and lighting, etc.
financing developers and home buyers
supply of low cost construction materials, innovative building solutions/technologies.
4. UNIVERSAL HEALTHCARE - INVESTMENT OPPORTUNITIES
Opportunities for investors include:
• Roll out of innovative affordable health insurance options e.g. micro-insurance, to the uninsured (especially the informal sector, the elderly and the Bottom of Pyramid) for universal coverage.
• Investment in local manufacturing of pharmaceuticals and medical equipment to cut cost of healthcare
• PPPs opportunities in development and roll out of healthcare facilities across the country, acquisition of medical equipment, and roll out of critical infrastructure, etc.
• Leveraging on technology to provide innovative healthcare solutions – tele- medical solutions.
• Investment in specialized treatment e.g. dialysis, cancer diagnosis and treatment, etc. to complement public healthcare. Cancer is the 3rd leading cause of death in Kenya after Pneumonia and malaria
• Collaborations in medical research , sharing infrastructure, expertise and information to enhance response to infectious diseases, and improve quality of healthcare in the country.
• Training of health practitioners to ensure sufficient medical personnel is available for UHC.
To achieve 100 per cent universal health coverage by 2022 from the current 36 per cent coverage, Kenya
aims to increase spending on health, reconfigure the National Hospital Insurance Fund, and expand the free
maternity programme to missionary and private hospitals
Thank you!