Frequently Asked Questions (FAQs) on Special Economic Zones (SEZs) in Kenya

  1. What is a Special Economic Zone (SEZ)?

A Special Economic Zone (SEZ) is a designated area within a country that offers a unique set of economic incentives and regulations, different from the rest of the country, to attract foreign and domestic investment.

  1. Who regulates SEZs in Kenya?

The Special Economic Zones Authority (SEZA) is the principal regulator responsible for licensing, monitoring, and overseeing SEZ operations in Kenya. SEZA is an agency under the State Department of Investment Promotion.

  1. What is the difference between SEZ and EPZ?

EPZs are primarily export-oriented and allow up to 20% of their sales in the local market (EAC). SEZs accommodate a broader range of sectors and also allow for more flexible local market integration.

  1. What business sectors are eligible in SEZs?

SEZs accommodate various zone types including:

  1. Free Trade Zones
  2. Industrial Parks
  3. Free Ports
  4. ICT Parks
  5. Science & Technology Parks
  6. Agricultural Zones
  7. Livestock Zones
  8. Tourist and Recreational Zones
  9. Convention and conferencing
  10. Business Service Parks
  1. Who can operate within an SEZ?

Three types of entities/ Licensees can operate in SEZs:

  1. Developers: Build and manage the zone infrastructure
  2. Operators: Manage facilities and services within the zone
  3. Enterprises: Conduct business operations within the zone
  1. How much is an SEZ license?
  1. Developer or Operator License: USD 5,000 annually
  2. Enterprise License: USD 1,000 annually
  1. How are SEZ operations different from the rest of the customs territory?

Goods and services entering an SEZ from Kenya are deemed Exports. Those leaving the SEZ into Kenya are Imports and subject to Customs duties. Goods made of 100% local inputs are exempt from import duties when sold domestically.

  1. How are SEZ statutory obligations different from the rest of the customs territory?

Apart from the exemptions explicitly provided for under the SEZ Act, SEZ companies are required to fulfill other statutory requirements related to tax, labour, environment and safety.

  1. What are the main incentives for operating in an SEZ?
  1. Exemptions from customs duty, VAT, excise duty, and stamp duty
  2. 100% foreign ownership
  3. Liberalized foreign exchange regime
  4. Onsite customs clearance
  5. One-stop-shop for investor support and rapid approvals
  1. What are the requirements for obtaining an SEZ Enterprise License?

SEZ license applicants must:

  1. Be a registered Kenyan company
  2. Show financial and technical capacity
  3. Lease or own land/premises within a gazetted SEZ
  4. Engage in approved SEZ activities
  5. Create local employment and comply with environmental laws
  1. Can SEZ enterprises sell in the local market?

Yes, but such goods are considered imports and may attract duty on non-originating components. Locally sourced goods are exempt from such duties.

  1. What regional and international markets can SEZ goods access?

SEZ goods can access markets under:

  1. East African Community (EAC)
  2. Common Market for Eastern and Southern Africa (COMESA)
  3. African Continental Free Trade Area (AfCFTA)
  4. Africa Growth Opportunity Act (AGOA – U.S. market)
  5. EU-Kenya Economic Partnership Agreement (EPA)
  6. Kenya-China trade agreements
  7. United States-Kenya Strategic Trade and Investment Partnership (STIP)
  1. What kind of services does the SEZ One-Stop Shop provide?
  1. Work visas and permits
  2. Construction and development permit facilitation
  3. Business registration and SEZ licensing
  4. Investment and tax advisory
  5. Financial modeling support
  6. Market research and investor information
  1. What is the legal framework that supports governing of SEZs in Kenya?
  • Special Economic Zones Act, 2015
  • The EAC SEZ Policy
  • EACCMA (East African Customs Management Act), 2004
  • Related Tax laws (VAT Act, Income Tax Act, Excise Duty Act, etc.)
  1. Are there existing associations and lobby groups that support the SEZ sector?

Yes.

  1. Association of SEZs (ASEZ) is a national body that brings together SEZ stakeholders to promote collaboration, policy advocacy, and investment facilitation. Membership is open to SEZ developers, operators, enterprises, and support entities.
  2. Africa Economic Zones Organization (AEZO) is a Panafric association that supports SEZs across Africa on development, policy and networking
  3. The World Free Zones Organization (World FZO) is a global organization that brings together free zones, SEZ investment promotion agencies, and related stakeholders from around the world serving as a leading platform for advocacy, knowledge exchange, and capacity building in the free zone sector.

    16. Can an SEZ enterprise operate both inside and outside the zone?

No. SEZs are location-based and operations must occur within the licensed SEZ. However, a related or sister company can be established outside the SEZ to support distribution or administration as long as their operations are in line with the investments and tax regulations.

  1. What is the process of applying for an SEZ Enterprise License?

Among other supporting documents, the following are the basic requirements:

  1. Business plan
  2. Certificate of incorporation
  3. Financial statements
  4. Environmental compliance documents
  5. Lease or title for premises in an SEZ
  1. Are there environmental and social compliance requirements?

Yes. SEZ enterprises must comply with Kenya’s environmental regulations and must not negatively impact the environment or public safety.

  1. How are customs procedures managed in SEZs?

Customs clearance is typically handled onsite or through the SEZ’s One-Stop Shop to simplify documentation, inspection, and release of goods.

  1. What role does SEZA (the Authority) play?

SEZA facilitates the processes licenses, regulates and monitors SEZ activities, facilitates inter-agency coordination, and supports investors with policy and operational guidance.

  1. Compared to EPZs, how are SEZs governed?

Just like EPZs are governed by EPZ Authority (EPZA), SEZs are regulated by the SEZA. In terms of operations, SEZs offer broader sector eligibility and local market access. Kenya is currently working to harmonize EPZ and SEZ programs under a unified framework.

  1. What happens if a company violates SEZ rules?

SEZA being  the facilitator and regulator of the SEZ program has the legal mandate to revoke licenses, impose penalties, or take legal action against companies that breach SEZ regulations or national laws.

  1. How do SEZs support national development?

SEZs drive rapid industrialization, support growth of exports, attract foreign direct investments (FDI), support job creation and innovation- All these directly support Kenya’s national objectives such as Vision 2030, UN Sustainable development goals (SDGs) and Bottom-Up Economic Transformation Agenda (BETA).

  1. Can service-based businesses operate in SEZs?

Yes. Service oriented sectors such as ICT, BPOs, Call centers and research institutions are examples of service businesses that are supported and can operate within SEZs.