Konza City offers bag of goodies for ICT park investors

   Former president Mwai Kibaki (centre) is taken through the Konza City plan in January. Investors will enjoy a tax break covering up to 10 years. FILE
Former president Mwai Kibaki (centre) is taken through the Konza City plan in January. Investors will enjoy a tax break covering up to 10 years. FILE  NATION MEDIA GROUP

The government is offering a raft of tax incentives for investors putting up capital at Konza Technopolis as it seeks to leverage the take-off of Kenya’s planned premier city.

Tax exemption from income for the first 10 years, dividends and any other payments made to non-residents during the period are some of the goodies.

The city is meant to be part of the Special Economic Zones that will replace the Export Processing Zones (EPZ) and hopefully create more than 200,000 jobs.

It will be developed under a public-private partnership (PPP) model where the government will provide land and build other infrastructure such as road, railway, water, telecoms and sewerage systems and provide security.

Both local and foreign companies will benefit from the incentives. Foreign firms should be incorporated in Kenya to get a trading licence.

“An applicant for licence to carry out business at Konza Technopolis City will be a limited liability company incorporated in Kenya (whether or not it is one hundred per cent foreign owned), [a Kenyan registered branch of a foreign company, or a partnership registered in Kenya] with the purpose of undertaking the activity sought to be undertaken in the Konza Technopolis,” reads part of the draft proposal.

The fast phase of the project is planned to be implemented between his year and 2017.

The draft policy recommends that the Konza Technolopolis Development Authority be exempt from all existing and future taxes and duties payable under the laws of Kenya.

Currently, the stamp duty on land is two per cent of the value of land in rural areas and four per cent in urban areas.

Ibrahim Mwathane, a property expert, said the exemption of stamp duty is a big incentive that will lower operational capital.

“The exemption of stamp duty is a big incentive to the investors. Taking into account that development at Konza will be urban, the exemption will be four per cent of the value of land purchased,” said Mr Mwathane.

In the draft, the government is proposing 30 years as the minimum contractual period for leasing land at the city as opposed to 99 elsewhere.

Industry experts say this is part of the government’s effort to ensure that land is used for the intended purpose and for a reasonable period. This allows investors to judge whether their business is profitable or not.

Biggest interest

Mr Mwathane added that by reducing the minimum number of years for land lease at Konza to 30, the government intends to ensure that the land given out is used for the intended purpose.

Already the project has attracted a host of local and foreign investors and the proposed incentives are expected to accelerate the momentum ahead of the December phase I launch.

In a previous interview, the Konza Technopolis Development Authority acting managing director Catherine Adeya-Weya said that investors in real estate, telecoms and financial services have shown the biggest interest for stakes in the first phase.

Kenyan investors as at April, she said, made up 81 per cent of the enquiries already registered with the authority.

Foreigners who have shown interest include Chinese Huawei Technologies, Korean electronics giant Samsung, Telemac of the US, Research in Motion (RIM), now Blackberry Ltd, of Canada (the makers of the Black Berry phone).

Others are Google, Craft Silicon, Telemax Technology Corporation of Taiwan and Shapoorji Pallonji Group from India.