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Special Economic Zones Act

The Government has proposed to set up Special Economic Zones (SEZs) in key urban areas; this establishment of SEZs is a flagship project under the national development blueprint of Vision 2030., the country’s development program 2008-2030 Launched by former President Mwai Kibaki. SEZs are to contribute towards the transformation of the country’s economic base in order to realize higher sustained growth, employment creation, and poverty reduction.

Background to the legislation

The introduction of the Special Economic Zones Act, 2015 (the Act) is intended to facilitate unlimited access to local and international markets. The SEZs are expected to help investors cut down on key cost drivers such as transport and provide benefits in terms of tax exemptions.

Principal objectives of the legislation

The purpose of the Act is to establish SEZs and to create incentives for economic and business activities in designated areas as well as removing impediments to economic and business activities that generate profit for enterprises in these zones.

To whom does the legislation apply?

The Act applies to any persons seeking to carry on business as a SEZ developer, operator or enterprises. The zones are currently undergoing a pilot programme in Mombasa (the nation’s second-largest city, on the Kenyan Coast), Lamu, and Kisumu.

How does the legislation apply?

A person must apply for a licence permitting them to operate in a SEZ. The licensed SEZ enterprises (SEZEs), developers and operators enjoy numerous exemptions. For example, they are exempt from existing taxes and duties payable under the Customs and Excise Act, Income Tax Act, East African Community Customs Management Act and Value Added Tax Act.

Future review/revision and steps required in regard to the legislation

There needs to be clear transition provisions with respect to the fate of Export Processing Zones (EPZs) it has been suggested that the government plans to freeze new investments within its EPZs before the end of 2015 as it takes up the SEZs model.