An article on special economic zones (SEZs) published in this newspaper caught my attention. As the regulator, I felt obligated to shed more light on this critically important sector of our economy.
In his article, Jaindi Kisero called for a “rethink” of the special economic zones idea. He opined that there are multiple State agencies offering similar investment incentives including tax benefits, which could open opportunities for regulatory arbitrage especially where an entity secures double licensing.
He gave the example of an entity seeking licensing under both the Nairobi International Financial Centre Act (NIFCA), which falls under the Treasury, and at the same time registering under the Special Economic Zones Act, which administratively falls under the Ministry of Industrialisation, Trade and Investments.
My simple response to this conjecture is that it could never happen in reality. What makes this an impossibility is the fact that a key condition for any entity licensed under the SEZ Act, NIFCA, Export Processing Zone or any other regulatory framework for that matter is that their physical location must be within a specific gazetted area.
An entity cannot be licensed under NIFCA, for example, but operate from an SEZ. Part of the licensing conditions is a thorough inspection of the entity’s physical location, which must be within a specific gazetted area.
Entities licensed under the various investor incentive frameworks must also conform to regular tax compliance and customs inspections, which makes it an impossibility that they could operate under duo or multiple licensing.
Mr Kisero also makes a case for collapsing the various investor promotion and tax incentive regimes in existence into a single investments promotion framework under one State agency.
I would argue that it is still too early in the day to make this call.
For a country like Kenya that is desperately in need of investor dollars and job creation, I would actually contend that we need many more incentives and agencies to bring as much business as possible into the country, across all sectors of our economy.
Simply put, I see it as a case of the need for us to bury many seeds in the soil, to see which ones sprout.
This is, of course, as long as each investor promotion agency serves a clear mandate that is distinct from all others.
From my evaluation of all the existing legal frameworks and investor promotion schemes, there is no overlap at all but a clear demarcation of the mandate that allows investors to choose which regime best suits their operations.
Back to the main topic of the Special Economic Zones.
The Two Rivers International Financial Centre becomes the twentieth private SEZ to be licensed by SEZA.
The other nineteen include Tatu City in Kiambu County, Africa Economic Zones in Uasin Gishu, Compact Free Trade Zone in Nairobi, Northlands in Kiambu, Mount Kipipiri Golf & Resort in Nyandarua and East Africa Free Zone in Mombasa.
All of them are at various stages of operationalization.
Tatu City is a good case study. The 5,000-acre SEZ is a mixed-use development that has so far attracted a total investment of $1.5 billion (about Sh217.5 billion).
It has generated an estimated 5,000 jobs, with the number expected to double by the end of this year. Moderna, the American pharmaceutical giant, is scheduled to break ground for a factory at Tatu City this year.
Only four publicly-owned SEZs are gazetted so far.
They include two that are being developed by SEZA, namely Dongo Kundu in Mombasa County and the Naivasha SEZ.
Dongo Kundu holds significant potential for spurring economic growth through stimulating industrialization, creating employment opportunities; promoting tourism and hospitality; enhancing maritime services and attracting foreign direct investments.
Its strategic location, next to Mombasa Port which is Kenya’s main gateway for international trade makes it ideal for firms targeting global markets and export-oriented industries.
The other two, Mombasa Industrial Park SEZ is being developed by the Mombasa County government while the Konza Technopolis SEZ is under the Konza Technopolis Development Authority.
A key flagship project of Kenya’s Vision 2030 development blueprint, the Konza Technopolis has already achieved $800 million (about Sh1.2 billion) in investor commitments and is on course to becoming a world-class ICT city.
Like in other countries where they have been tested and proven to work, SEZs are expected to accrue multiple benefits to the Kenyan economy.
The economic enclaves have proved to be powerful catalysts for economic growth that attract Foreign Direct Investment (FDI), create jobs and help in skills development, help to develop export industries and encourage technology transfer and innovation.
The Dubai International Financial Centre, Philippine SEZs, Hong Kong and Schengen in China quickly come to mind.
Kenya’s unique location gives it an opportunity to become a gateway to East Africa, Africa and even the Middle East through the SEZs.
President William Ruto’s administration, through the Ministry of Industrialisation, Trade and Investments, is committed to carving a path for long-term economic growth and poverty reduction through the creation of jobs at the SEZs, especially for our highly skilled workers.
Fred Muteti is the Chairman of Special Economic Zones Authority. [email protected]
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
