c r e a t i n g p r o s p e r i t y t h r o u g h i n n o v a t i o n

Kenya: a globally
competitive ICT
outsourcing
destination

Kenya is Running

©
The Ministry of Information and Communications
All Rights Reserved 2006.
Telsposta Towers, 10th Floor
P.O Box 30025-00100, Nairobi, Kenya
Phone: +254 0(20) 251152, 250517, 250978
Fax: +254 0(20) 249664
Email: info@information.go.ke

Text, Editing & Proofreading:

Wanjiku Maina
Jay Bhalla
Peter Kimacia
John Gikang’a
Access Leo Burnett

Cover Pictures:
Photos.com & Adobe Stock Photos

Other Photos:
Thirdworldmedia.com Imagebank
The Tea Board of Kenya
The World Agroforestry Centre
Stock photography from Photos.com

Design&Illustration: John Gikang’a / Thirdworldmedia.com

Printing: Ramco Printing Works / Nairobi, Kenya
Printed on Scandia 2000 Paper

This book is published by the Ministry of Information & Communications.


 The Government of Kenya has made ICT a priority in it’s economic recovery strategy initiatives with the long-term commitment to have
Kenya develop into a globally competitive ICT outsourcing destination, as well as a base for the development, production and sale of
information, knowledge, and technology products and services.

The major force moving the ICT industry is the power of the services sector, and more particularly the spread of international business process
outsourcing. As a recipient of this information booklet, we invite you to share with us the progressive belief that much can be achieved
when people, institutions and Governments work together.


Contents


 i. Introduction
ii. foreword

01 iii. preface

Kenya at a glance / page 12

Kenya at a Glance 12

Contents
The Kenyan Economy 14
Investment Opportunities 18
Agriculture, Tourism, Building & Industry,
Financial & Business Services, Energy,
Natural Resources, Manufacturing
ICT & the Knowledge Industry 44

02
Why Kenya? / page 48

Political Stability 50
Dynamic Private Sector 51
Harmonious Industrial Relations 51
Preferential Market Access 51
Qualified Work Force 52
Convenient Time Zone 53
Frequently Asked Questions 54

03
The Emerging ICT Sector / page 60

ICT Sector Overview 62

Current Market Structure 64
Kenya Fibre Network 66
Important Contacts 68
Abbreviations 70


Introduction
Nations the world over have recognized the developmental opportunities as well
as the challenges brought about by the fast-paced information age whose hallmark
is information and communication technologies (ICTs). Evidence from developed
countries has shown that ICTs can play a dramatic role in enhancing economic and
social development by acting as a production sector for economic growth and an
enabler for social development.

The decisions and actions we take about the use of ICT will be critical in determining
which road we go down as a nation in our fight against poverty. The old debate, about
choosing between ICTs and other development imperatives, has shifted from one of
trade-offs to one of integrating the two approaches in order to harness the benefits of
sustainable economic and social development.

Kenya has reached a point to embrace a knowledge economy. The imminent upgrading
of the ICT sector in Kenya through the formulation of a National ICT Policy and Strategy
is signifificant because it has the potential and prospects to generate additional jobs
and employment opportunities for a growing youthful population. In setting out the
direction, the policy lays emphasis on the development, deployment and exploitation
of ICTs to aid the development of the Kenyan economy.



Foreword
N
ations the world
over have recognized
the developmental
opportunities as well as the
challenges brought about by
the fast-paced information age
whose hallmark is information
and communication technologies
(ICTs). Evidence from developed
countries has shown that ICTs can
play a dramatic role in enhancing
economic and social development
by acting as a production sector
for economic growth and an
enabler for social development.
ICT applications have enabled
these countries make gigantic
improvements in both productivity
and quality in agriculture,
manufacturing, infrastructure,
public administration, and services
such as finance, trade, distribution,
marketing, education and health.
The decisions and actions we take
about the use of ICT will be critical
in determining which road we
go down as a nation in our fight
against poverty. The old debate,
about choosing between ICTs and
other development imperatives,
has shifted from one of trade-
offs to one of integrating the two
approaches in order to harness the
benefits of sustainable economic
and social development.
Kenya’s National ICT Policy (2005)
and ICT Strategy for Economic
Growth (2006) are the start of a
journey that represents our nation’s
vision in the information age. The
preparation of the two documents
was guided by the aspirations set
out in Kenya’s key socio-economic
development framework documents
including: The Economic Recovery
Strategy for Wealth Creation and
Employment, 2003-2007; Poverty

Reduction Strategy Paper; 2001;
Sessional Paper No. 2 of 2005
on Development of Micro and
Small Enterprises for Wealth and
Employment Creation for Poverty
Reduction. The development of this
ICT Strategy for Economic Growth
is a result of wide consultations
involving all key stakeholders in the
public sector, private sector and civil
society.
Kenya has reached a point when
she must shift from depending
on an agricultural base which is
characterized by a relatively weak
industrial foundation and embrace a
knowledge economy. The imminent
upgrading of the ICT sector in
Kenya through the formulation of a
National ICT Policy and Strategy is
significant because it has the potential
and prospects to generate additional
jobs and employment opportunities
for a growing youthful population. In
setting out the direction, the policy
lays emphasis on the development,
deployment and exploitation of
ICTs to aid the development of
other sectors of the economy. It
also provides a basis for facilitating
the socio-economic development
of the country in a globalization
era, dominated by information and
knowledge-based economies.
In developing the ICT Strategy for
Economic Growth, the Government
recognizes the broad challenges
involved in living in an information
age and knowledge economy, and
in harnessing the potential of
ICTs for economic growth and
poverty reduction. Faced with these
realities, the Strategy is based on
four guiding principles, namely:
infrastructure development, human
resource development, stakeholder
participation and appropriate
policy and regulatory framework. regulatory framework.
The Government recognizes that
The Government’s key objective is
skills and knowledge underpin
to transform the Kenyan economy
Kenya’s goal of becoming a
through ICTs by promoting and
knowledge economy and that the
facilitating the private sector to
economic future and the strength
serve as the driver for economic
of our communities will depend
development through innovation in
on the extent of investments in the
the ICT sector. Another long-term
development of human capital. In
commitment is to have Kenya develop
this regard, the development of
into a globally competitive ICT
the right balance of ICT skills and
outsourcing destination as well as a
knowledge that are anchored in
base for the development, production
collaborative partnerships between
and sale of information, knowledge,
the government and all stakeholders
and technology products and services.
in transforming a shared vision
To achieve these objectives, the
into reality through programs and
Government will collaborate with
policy response is now a national
all stakeholders in maintaining a
imperative. The Government is set
favorable climate for investment in
to play a crucial role not only in
ICT manufacturing and services as
assisting local companies benefit
well as Foreign Direct Investment.
from existing and arising market
opportunities, but also more
importantly in fostering the necessary
ICT infrastructure development and Hon. Mutahi Kagwe MP
Minster for Information and
Communications

Preface
The strategic focus of Kenya’s
ICT Strategy for Economic
Growth is to simultaneously
target the development of the
ICT sector and to use ICTs for
employment creation, poverty
reduction, as well as a broad-
based enabler for economic
recovery and the achievement
of national developmental goals.
Trends in a number of transition
economies such as India, Costa
Rica and Mauritius indicate that
one of the major forces moving
the ICT industry is the power
of the services sector, and
more particularly the spread of
international business process
outsourcing. The Kenyan services
sector remains under-exploited.
The import of this is that there
are numerous opportunities for
the development of a services
sector business hub that produces
and serves the local market and
exports to the region and beyond.
In this connection, the Kenyan
services sector can be expanded
through the Business Processing
Outsourcing (BPO) approach
given the number of advantages
the country has for providing such
services.
It is difficult to ignore Kenya’s
uninterrupted political stability
since independence, its strategic
location with easy access to
regional and world markets, and
a substantial and varied private
sector. In addition, the country
has a highly educated, English-
speaking workforce with the
potential for turning Kenya into
a world-class player as a service
provider. Besides, the country has a
relatively good telecommunications
10
infrastructure which is being
progressively improved, low labor
costs, and a very convenient time
zone to Western and Eastern
countries. When these factors
are combined with the country’s
extensive natural assets for tourism,
they open major opportunities
that can be exploited through the
deployment of ICTs.
We recognize that for ICTs to spur
economic recovery Kenya needs
to have depth of relevant skills,
a good work ethos, managerial
capabilities, entrepreneurial drive,
intellectual property protection
and establishment of linkages
between companies in the first
world and those in Kenya.
Further, the modernization of
our ICT infrastructure is essential
in achieving higher rates of
investment and competitiveness in
our economy. The Government
is currently working on
putting in place an enabling
telecommunications infrastructural
and regulatory framework. We are
conscious of the great potential
for job creation for our youth in
setting up ICT-enabled business
services such as customer, back-
office and professional services
to offshore, near-shore and
in-shore companies that are
keen on concentrating on their
core competencies and cutting
operational costs.
In order to take advantage of
this emerging trend, we shall put
some initiatives in place. These
include among other things:
adjusting our education and
training programs to enable our
youth cash in on new employment
opportunities; taking advantage
of existing and new marketing
networks and promoting local
and international partnerships;
and recruiting highly qualified
staff, motivating and retaining
them as part of the process
of building a critical mass for
emerging business opportunities.
In addition, collaborating with our
universities and the private sector,
we shall establish ICT business
incubators to support existing and
start-up businesses; set operating
standards in accordance with
international principles to ensure
quality assurance; and provide for
decisive response based on market
intelligence and research. In order
to ensure a more broad-based
diffusion of ICTs and benefits
from synergy, the Government
will link the ICT Strategy for
Economic Growth with other
national development policies.
11
The ICT Strategy for Economic
Growth will be implemented
through rolling plans initiated
by inter-sectoral Task Groups
(drawn from public, private and
civil society sectors) working
under the oversight of an ICTs
National Steering Committee.
With the right sets of action plans
it will be possible for Kenya to
embark on an alternative socio-
economic development path that
is guided by the development,
deployment and exploitation of
ICTs within the different sectors
of the economy without first going
through an extensive and tedious
industrialization process.
Bitange Ndemo, PhD.
Permanent Secretary
Kenya at a glance

Geography Demography
Location: Population:
Eastern Africa, on the East Coast 33,829,590 million
of Africa along the Indian Ocean
Workforce Population:
at 1 00 N, 38 00 E
11.85 million
Land Area:
569,250 sq km
Life expectancy
Capital City:
Nairobi Male:
48.87 years
Climate:
Female: 47.09 years
Varies from tropical along coast to
arid in the interior Literacy rate age 15 and over:
85.1%
Time Zone:
GMT + 3 Main Languages:
English (official),
Kiswahili (official), numerous
indigenous languages

Student Enrolment:
Primary – 7,384,800
Secondary – 912,624
Universities – 91,541

12
Government and Legal System Telecommunications
Government: Local Connectivity:
National Assembly 210 members Fully Digital Network
single-member constituencies,
Fixed Line Connectivity:
plus 12 members nominated by
political parties on a proportional 273,000
representation basis. Mobile Connectivity:
The attorney general and the 4,295,000 in 2004
speaker are ex-officio members of Internet Users:
the National Assembly. 1,500,000
Elections are held every 5 years, Data Services:
the last one in 2002. Kenstream, Jambonet ,
Head of State: ADSL services, Analog leased
President lines(Kenline), Kenpac, Kensat,
ISDN
Head of Government:
President Satellite Service:
International Broadcast, VSAT,
Legal System:
Voicecast
Based on Kenyan statutory law,
Kenyan and English common law, Global Connectivity:
tribal law, and Islamic law; judicial Satellite links
review in High Court; accepts
compulsory ICJ jurisdiction,
with reservations; constitutional
amendment of 1982 making
Kenya a de jure one-party state
repealed in 1991 13
The Kenyan Economy

14

K
enya is strategically located
within easy reach of
various markets in the
region and the destination of its
exports has been the European
Community (EC) countries, USA
and other African countries. The
government of Kenya been very
keen to implement economic
liberalization and has instituted
various reforms. This has led to
better economic performance
and an improved environment for
conducting business.
The country has in the last
few decades tried to reduce
dependence on the traditional
agricultural export commodities
such as tea and coffee and has
made serious efforts to promote
non-traditional exports such as
15
The Kenyan Economy
horticultural crops, manufactures,
and most recently the export of
services. Services such as banking,
insurance and business have also
grown and the country’s currency,
the Kenya Shilling, remains fairly
stable.
Kenya is host to numerous multi-
national corporations, majority
of which are from USA, United
Kingdom, Germany and the Far
East, and has for a long time been
viewed as a gateway to the wider
East African region.
The Government of Kenya
is taking a variety of steps to
create an enabling environment
for both foreign and domestic
investment. This is in line with
the Government’s Economic
Recovery Strategy for Wealth
and Employment Creation
(2003–2007), which is focused
on the promises contained in the
manifesto of the ruling party,
the National Rainbow Coalition
(NARC). Priorities are investment
in infrastructure and improving
access to education and health
services. Also at the top of the
agenda are fighting corruption
and promoting good governance.
Kenya’s economy showed signs of
recovery in 2003, after five years
of poor performance, and posted
real economic growth of 1.8%, as
compared to 1.2% in 2002. At the
same time, however, the overall
inflation rate increased from 2% in
2002 to 9.8% in 2003. prices and stable petroleum prices.
Agriculture remains the dominant
sector, it contributed 24% to
the GDP in 2003. Nevertheless,
other sectors like manufacturing,
tourism and business services
16
also make significant contributions
(Figure II.1). Growth in agriculture
increased to1.5% in 2003, up
from 0.7% in 2002, while the
manufacturing sector grew by 1.4%
in 2003, up from 1.2% in 2002 and
0.8% in 2001. This modest positive
growth was mainly attributable
to tight fiscal and monetary
policies, stable exchange rates, low
demand for imports, low food
Considering sub-Saharan Africa’s
(excluding South Africa) GDP
growth of 3.6% in 2003.
Kenya’s economic performance can
be said to be no more than fair.
The Kenyan Economy
17
Investment Opportunities

18
19
Economic Indicators – Over a 3-5 year Period
2000 2001 2002 2003 2004

Population 30.2 30.9 31.8 32.7 33.6

GDP at market prices(Kshs M) 967,838 1,025,918 1,038,764 1,141,780 1,273,716

Real GDP Growth Rates (%) 0.6 4.4 0.4 2.8 4.3

Inflation Rates - - - - 9%

Unemployment Rate - - - - 30-40%

Overall Balance of Payments(Kshs M) - -13,072 -257 -31,385 -4,851

Net International Reserves(Kshs M) +7,833 +4,828 -12,292 +4,487 +383

Imports (Kshs M) 187 200 169 205 245.6

Exports (Kshs M) 191 204 226 260 296.1

Tourist Arrivals (‘000) 1,036.5 993.6 1,001.3 1,146.2 1,360.7

Source: Kenya Investment Authority, Central Bank of Kenya, Central Bureau of Statistics and Telkom Kenya

20
21
22
 Agriculture
Agriculture

Overview Horticulture

Agriculture is the mainstay of the The horticultural sector is one of

economy, providing livelihood to
approximately 75 per cent of the
population. There is considerable
scope for diversification and
expansion of the agricultural sector
through accelerated food crop
production and increase of non-
traditional exports. There are also
opportunities for improvement
in technology infrastructure
such as packaging, storage, and
transportation. Intensified irrigation
and additional value added
processing are marketable areas for
investments.
the fastest growing sectors in the
economy and is the second largest
foreign exchange earner after tea.
Opportunities exist in production
and export of products such as cut-
flowers, French beans, pineapples,
mushrooms, asparagus, mangoes,
macadamia nuts, avocados, passion
fruits, melons, and carrots.

Agricultural Support

Investment opportunities exist in

seed production, manufacture of
sprayers and pesticides, veterinary
services, construction of dams and
bore holes, installation of irrigation
systems and services. Opportunities
also exist in support services, such as
cold storage facilities and refrigerated
transport for horticultural and other
perishable products.

23
24

Agro-Processing
Numerous investment
opportunities exist in this sector.
Edible and other oils produced
locally include butter, ghee and
margarine as well as sunflower,
rapeseed, cottonseed, sesame,
coconut and corn oils, while a large
quantity of palm oil is imported.
Investments to develop substitutes
for palm oil imports are welcome.
Kenya produces excellent beer,
utilising locally grown barley. The
country has recently developed
papaya and grape wines that
can be exported to regional
and international markets.
Opportunities exist in coffee
roasting and grinding, with a
further potential such as in the
production of decaffeinated coffee
for export.
Sugar production, at 402,000
tonnes per annum is below the
domestic demand estimated
at 600,000 tonnes per annum.
Molasses, a by-product of sugar
production, is processed into
power alcohol, potable alcohol,
and baker’s yeast. There is also
considerable potential for the
expansion of chocolate and
confectionery products for export.
Opportunities for investment exist
in the production and processing
of sugar, tea, meat and dairy
products.
Poultry Products
Hatcheries for the production of
chicken for both domestic and
regional consumption are under-
exploited.
Fisheries
Kenya’s water resources of the
Indian Ocean and Lake Victoria
provide vast fishing potential.
At present, deep sea fishing,
prawn and trout farming are in
their infancy but growing rapidly.
Opportunities also exist in fish
processing (filleting and fish meal
production), as well as fisheries-
support infrastructure (refrigerated
transport, cold storage, etc.).
25
Agriculture
Leather and Leather Goods
Most hides and skins are processed
up to the wet blue stage for export
while investment opportunities
exist in production of finished
leather, offering potential for the
manufacture of shoes and other
leather products.
Livestock
Investment opportunities exist in
the rearing of livestock for meat
and dairy products. The dairy
industry has been liberalised,
providing new investment
opportunities in milk processing
for local and regional markets. Non
conventional livestock farming, for
example, of ostrich and crocodile
farming, represent an exciting new
area of investment. Bee keeping
and honey processing are untapped
potential in Kenya.
26

Tourism and Leisure
Overview
T
he tourist sector is one of
the most important sectors
of the Kenyan economy.
The sector provides employment
to thousands of people directly
and many more indirectly. It is the
second highest foreign exchange
earner after agriculture.
The tourism sector has been
performing well over the last
one year, becoming the leader in
service sector. During the first
three quarters of 2005, visitors
by air and sea increased by 28.2%
to 605,969 from 476,471 in the
corresponding period of 2004.
The robust growth in the tourism
sector was attributed to the
stepped up marketing particularly
in non-traditional markets such
as China, Japan, India and the
domestic market, and also the
widened area covered by Kenya
Airways. Some of the newly
inaugurated Kenya Airways routes
include Cairo-Istanbul, Bamako-
Dakar, Harare-Maputo and Dubai-
Guangzhou.
The success in marketing benefited
from the negative effects of the
Tsunami in the Asian and Indian
Ocean Islands markets and
Tourism improved security in the
tourism circuits. The diversification
away from traditional beaches and
wildlife tourism to new circuits in
the western and northern parts
of Kenya also contributed to the
27
Tourism
improved performance. Looking
forward, tourism is expected to
remain buoyant in the medium term
following the stepped up marketing
campaigns. The World Cross
Country Championship that is to
take place in Mombasa in 2007, the
delayed negative effects of bird flu
and the effects of the Tsunami in
Asian markets is also expected to
help boost tourism.
Tourism is Kenya’s third largest
foreign exchange earner. The
tourism industry is growing as a
result of the liberalisation measures,
diversification of tourist generating
markets and continued Government
commitment to providing an
enabling environment, coupled
with successful tourism promotion
and political stability. Enormous
opportunities exist for investment
in film production; recreation
and entertainment facilities in the
following areas:
Conference Tourism
Cultural tourism
Cruise ship Tourism
Aviation/tour and travel
Tourism
Eco-tourism
Potential investors can take full
advantage of these opportunities
through direct investments or
joint-ventures with Kenyan
entrepreneurs. Opportunities
also exist in this sector in the
construction of tourist hotels and
game lodges all over the country.
Kenya is a vast country with a
wide range of potential tourist
attractions, which have not
been fully exploited. Currently,
the tourism industry is mainly
28
concentrated at the country’s
coastal area and in the National
Parks and Game Reserves. As a
policy matter, the Government
of Kenya is strongly committed
to the regional diversification of
this very important industry to
other areas for some good reasons.
Similarly, the potential for the
domestic market has not been fully
exploited. There is also need to
identify other tourist attractions
besides the existing National Parks,
Game Reserves and the Beach.
In order to extend the length of
stay of “safari” tourists in Kenya,
emphasis will be put into the
development of inland “resorts”
situated close to the national parks
and game reserves. It is noted
that the main constraint to the
development of such resorts has
been lack of sufficient investment
capital. Participation in such
investment ventures will, therefore,
be very much encouraged by the
Government of Kenya in order
to exploit the tourism potential in
those areas.
 Tourism

Tourism
The tourism industry is
mainly concentrated at
the country’s coastal area
and in the National Parks
and Game Reserves.
As a policy matter, the
Government of Kenya is
strongly committed to the
regional diversification of
this important industry

29
Building and
Industry
Overview
Development of infrastructure is
one of the key pillars in achieving
the economic recovery and has
been identified as a priority area
in Economic Recovery Strategy
for Employment and Wealth
Creation. In 2003,the building
and construction sectors’ key
economic indicators recorded
improved performance. Cement
consumption went up by 4.5
per cent from 1,212.3 thousand
tonnes in 2002 to 1,267.0 thousand
tonnes in 2003 partly due to use of
cement in road construction and
maintenance.
The index of government
expenditure on roads increased
from 62.7 in 2002 to 68.5 in 2003.
The total value of building plans
approved increased by 2.7 per cent
from Kshs 10,607.4 million to
Kshs 10,892.6 million in the years
2002 and 2003 respectively. The
total estimated cost of new private
buildings completed registered an
30
increase of 2.2 per cent from KShs
1,395.6 million in 2002 to KShs
1,426.2 million in 2003.
The overall construction cost
index recorded an increase of
7.1 per cent in 2003 as compared
to 1.4 per cent in 2002. Wage
employment increased marginally
from 76.5 thousand persons in
2002 to 76.6 thousand persons in
2003. E/N/no emergency Fund
reconstructed several roads spread
across the country at a total cost of
KShs 522.2 million. Commercial
banks’ loans and advances to the
 Building and Industry
sector went down marginally by
7.1%
1.8 per cent from KShs 17,298 The overall construction cost
million in 2002 to KShs 16,995 index recorded an increase
million in 2003. The Kenya Roads
Board disbursed a total of KShs
of 7.1 per cent in 2003 as
6.92 billions to the various roads compared to 1.4 per cent in
agencies in 2003
2002
Road Construction

Rehabilitation of Airports

Rehabilitation of port facilities

at Mombasa, which is ongoing
Rehabilitation of inland port
facilities
Development of a Second Port
at Lamu
Kenya - Uganda & regional
pipeline extension (Petroleum)
employment
Wage employment increased
marginally from 76.5 thousand
persons in 2002 to 76.6
thousand persons in 2003

Construction of upstream
refinery

Construction or upgrading
disbursed
The Kenya Roads Board
of storage, distribution, and
product handling facilities disbursed a total of KShs 6.92
(Petroleum) billions to the various roads
Solar / wind energy plants agencies in 2003
Urban housing development by
private and public sector

31
financial
and Business Services

32

Financial and Business Services
Overview
In 2003 the Central Bank pursued
a prudent monetary policy stance
aimed at sustaining a stable
macroeconomic environment.
The monetary policy adopted for
the calendar year 2003 targeted
to contain inflation below the
5.0 per cent level and allow real
GDP growth to recover to 3.0 per
cent in 2003 up from 1.2 per cent
growth attained in 2002. The major
challenge in the implementation
Financial Services
of the monetary policy was the Some areas for investment
expansionary fiscal policy due to opportunities:
the -implementation of government
Lease Hire
programme’s such as the free
universal primary education scheme Micro-Financing on whole sale basis
for public schools that resulted in a
Investment Banking
wider budget deficit for the fiscal year
2003/2004. At the same time, the Insurance Services
government relied more on domestic
Business Advisory services –
non-bank public sources of finance
trusteeship and Receiverships
as opposed to borrowing from the
banking sector in 2003.
33
Energy
Overview
Kenya’s energy policy emphasizes
the need for sustainable energy
supplies in adequate quantities at
effective costs, so as to achieve
national development goals. The
policy also emphasizes delivery
of quality energy services so
as to ensure that Kenya will
continue to attract investments
in those economic activities of
which energy inputs are basic to
production at competitive prices.
The country is dependent mainly
on three forms of energy namely:
petroleum, electricity and wood-
fuel. To a lesser extent wind, solar
and biogas are used as alternative
energy sources.
Petroleum is the major source
of commercial energy in the
country providing about 87% of
the country’s requirements. The
transport sector consumes more
than half of the petroleum fuels
used in the country. Industry
consumes some 31% of petroleum
fuels.
Hydro electric power accounted
for 54.8% of electricity supply
in the country, while geothermal
and thermal sources accounted
for 18.8% and 26.4% respectively.
During the same period of 2004,
hydro-electric power accounted
for 60.4% of domestic power
generation while geothermal and
thermal sources accounted for
19.5% and 20.2% respectively.
Electricity consumption grew by
5.9% during the period reflecting
increased demand to support the
pick up in the economy. Average
crude oil prices remained high
with Murban Adnoc crude oil
from Saudi Arabia increasing
from US $ 41.4 per barrel in
September 2004 to US $ 61.1 per
barrel in September 2005. The
sharp increase in crude oil prices
continues to be associated with
political risks, rising global demand
and disruption in the US oil plants
by bad weather. However, prices
may drop in the coming months
as the market recovers from
damaging hurricanes Katrina and
Rita in the USA in late August
and September. In addition, the
unseasonably warm weather in the
North eastern part of USA has
34
curbed demand for heating oil and
allowed refiners to build stocks.
Presently, the Kenyan oil market,
whose total sales volume reaches
around 2.3 million cubic metres per
annum, is served by eight private
companies. The Government
of Kenya expects that, upon
deregulation of the oil industry, the
Kenyan market will open up to new
companies.
Moreover, potential demand for
Liquefied Petroleum Gas (LPG)
is expected to increase to twice its
present amount in the near future.
However, supply and distribution
of LPG have been constrained
by a number of factors including
limitation of production from
the Kenyan Petroleum Refineries
Ltd. (KPRL). LPG supply and
distribution thus represents an area
where opportunities are available
for investment.
The Government also plans to
invest in the petroleum sub-
sector, embarking on projects like
oil exploration and oil pipeline
rehabilitation.
 Energy
87%
Petroleum is the major
source of commercial
energy in the country
providing about 87% of the
country’s requirements

growth
Hydro electric power
accounted for 54.8% of
electricity supply in the
country, while geothermal
and thermal sources
accounted for 18.8%
and 26.4% respectively
Electricity consumption
grew by 5.9% during the
period reflecting increased
demand to support the pick
up in the economy

35
Electricity sub-sector
The demand for electricity is
estimated to have increased at
the rate of 5.4% per annum
between 1994 and 2000. To meet
this demand, the Government,
in collaboration with the World
Bank, has prepared an investment
programme for the electricity
sub-sector. The National Power
Development Plan recommends
that during the next 15 years
geothermal generation should
increase to 280MW, partly due
to the predicted abundance of
geothermal energy resources in the
country.
Transformers
Local investors intend to promote
a project based on joint ventures
with interested investors, to
manufacture transformers mainly
for electric power. Currently, all the
requirements of the country are
imported.
36
Petroleum
Following liberalization of power
generation by the Government
in 1994, projects earmarked for
development through least cost
development criteria have been
and will continue to be offered for
implementation on the basis of
international competitive tenders.
These projects include geothermal
energy, hydropower, oil based
thermal and any other economically
competitive source. Advertisements
for such projects will be made
both locally and internationally
from time to time. In addition, all
such projects will be screened for
their environmental impact and
mitigation cost weighed against
potential benefits to ascertain their
economic viability.
 Energy
Water

The demand for water supply

and sewerage facilities has been
outstripping the development of
the same. While most urban centres
in Kenya have functional facilities,
the level of service has not been
at the expected level and most of
these systems are in dire need of
rehabilitation and augmentation to
meet the rising demands. One major
area that needs improvement is the
management of the water utilities,
and private sector involvement
would be welcome in order to
improve on the efficiency and
accountability. There are still quite
a number of urban centres that
require the development of new
facilities, as the existing facilities can
no longer cope up with the demand.
However, with the new policy which
advocates for the adoption of the
user pays and the polluter pays
principles, development of these
facilities could be undertaken by
the private sector as viable business
ventures with the arrangement that
the developer will be granted water
undertaking.

37
38

Environment and
Natural Resources
Overview
Sustainable exploitation of
natural resources for Economic
Recovery Strategy for Employment
and Wealth Creation is a major
challenge for them Government
as it endeavors to put in place
policies to guide the process in all
environment and natural resources
sub-sectors. The Government is
in the process of reviewing and
implementing policies that govern
the natural resources exploitation,
management and conservation.
Water Supply
The Government through the
Ministry of Water Resources
Management and Development
has the responsibility of ensuring
that all Kenyans have access to safe
drinking water within a reasonable
walking distance and in achieving
the set goals of the Millennium
Development Goals (MDGs). It
is estimated that about 75.0 per
Environment and Natural Resources
cent of the urban population Fisheries
and nearly 50.0 per cent of rural
Fish continues to play an important
population had access to safe
role not only as a source of food
drinking water in 2003. However,
and income for local fishing
with the increasing population
communities but also for the export
coupled with inadequate resources
market. The Government has
for expansion and maintenance of
directly put in place a task force to
water supply programme’s, these
develop a comprehensive fisheries
proportions are deteriorating. In
policy that will guide the sector
this regard, the Government has
towards the MDGs. It will also take
put in motion a reform process in
cognizance of all environmental
the water sector and has embarked
issues and within the framework of
on implementing the Water
the Economic Recovery Strategy
Act 2002. The new legislation
paper.
encompasses commercialization
of the urban water programme’s
and community participation
Forestry
in the rural water supply. The
new policy details Government’s The Department of Forestry has
role, including, regulation and continued to experience difficulties
supervision of water resources; in discharging its mandate due
while welcoming stakeholders to limitations of the current
and beneficiary communities to forest policy and legislation. An
participate in the implementation, emergency tree planting programme
financing, operation and is being implemented to address the
maintenance of water resources serious degradation and destruction
and supply facilities. The purpose of the country’s forests.
is to attract investment in the water
sector and provide adequate water
and sanitation services to meet the
various sectoral demands.
39
Mining
The Government through the
Department of Mines and Geology
in the Ministry of Environment
Natural Resources and Wildlife
has prepared a mining policy and
is in the process of enacting a new
mining law. The aim is to develop
a comprehensive policy framework
for regulating the mining sector
and an appropriate legal and fiscal
framework, which are in line with
the current global mining trends.
The proposed law once enacted,
will attract, guide and encourage
private investments into the sector
as well as tap the country’s huge
mineral potential. Under the
envisaged mining law, a new mining
licensing system is to be introduced
to provide for among others;
a simplified and harmonized
licensing of mining operations, a
considerably curtailed discretion on
the part of the Minister in charge
of mining and a greater security of
tenure for mining investors. The
new law also seeks to harmonize
mining with the Environment
Management and Co-ordination
Act of 1999 and requires a
restoration and rehabilitation of
mined out areas and cushioning of
local communities against adverse
effects of mining.
Kenya has well-developed
cement processing plants that
satisfy the domestic market and
exports to the regional market.
Approximately 1.2 million tones
of cement are consumed locally
each year. Opportunities exist in
the production of glass, as the
country is not self-sufficient. A
few manufacturing units produce
ceramic pottery and tiles, however,
substantial quantities of ceramic
pottery, tiles, sanitary-ware,
and insulators are imported.
Investment potential exists in
prospecting and mining of other
minerals such as gold, precious
stones and petroleum.
Refuse Management
Accumulation of refuse in most
urban centers in the country
remains a serious health and
environmental problem. The
emergence of such substances
40
as mobile phone scratch cards,
polythene bags and plastic bottles
has raised concern about the
products’ effects on environment,
as they do not decompose. The
situation is more serious in major
towns of Nairobi, Mombasa,
Kisumu and Nakuru where the daily
refuse accumulation out-paces the
quantity disposed. This is a result
of limited resources allocated to
most local authorities coupled with
inefficient waste disposal methods.
Fisheries
Kenya’s water resources of the
Indian Ocean and Lake Victoria
provide vast fishing potential. At
present, deep sea fishing, prawn and
trout farming are in their infancy but
growing rapidly. Opportunity also
exists in fish processing (filleting
and fish meal production), as well
as fisheries-support infrastructure
(refrigerated transport&cold storage.
Investment in Forestry
In order to achieve sustained forest
management, there will be a need to
carry out a well-focused investment
in the following areas:
 Environment and Natural Resources
Forest valuation

Capacity building in resource

assessment, planning
and management, impact
assessment, geographical
information systems, monitoring
and evaluation

Research in non-wood tree

products to enhance their
economic potential

Development of credit support

to private forest investments

Improving data and information

for management planning
through regular surveys and

Forest inventories

Developing and improving

marketing of forest products

Modernisation of forest
industries to improve efficiency

41
Manufacturing
Overview
In 2002–2003, the manufacturing
sector contributed about 19%
of Kenya’s GDP. Kenya has
traditionally been an exporter
of a variety of manufactures to
the East African region. More
recently, it has begun to export
garments to the US market. A
wide range of opportunities for
direct and joint-venture investment
exist in the manufacturing sector,
including the manufacture of
textiles and garments, the assembly
of automotive components and
electronics, and the manufacture
of tyres, plastics, paper, chemicals,
pharmaceuticals, and metal and
engineering products for the
domestic and export markets.
Textiles and apparel
Within two years of qualifying
for the African Growth and
Opportunity Act (AGOA), Kenya’s
exports of clothing and investment
in the textile sector have
experienced a remarkable growth.
There is a cotton-textile-apparel
42
supply chain in place, but only
the apparel part of it can be said
to be thriving or competitive.
Cotton production is insufficient,
and the capacity to produce
high-quality fabric is lacking. The
option of sourcing fabric from
other AGOA-eligible sub-Saharan
African countries is limited, since
the region does not meet the
fabric requirements of its apparel
sub-sector because of supply
constraints and poor quality.
For quality fabrics to be supplied
locally and competitively,
substantial capacity building in the
lower parts of the cotton-textile
chain would be required.
Metal, Steel and Iron
The country possesses a broad-
based metal products industry with
various independent engineering,
foundry and metalwork shops.
Opportunities exist in the
development of a nucleus foundry
making precision castings that can
then be processed into precision
components, aluminum cans, high-
strength reinforcement bars, ductile
iron rolls, and so on. Vehicle parts
and assembly The number of new
motor vehicle registrations has
been increasing, with about 34,000
vehicles registered in. Products
such as tyres, tubes, batteries,
springs, radiators, brake pads,
cables, rubber components and
filters are now produced locally,
with a number of firms fabricating
bodies for commercial vehicles.
General Motors East Africa
has a supply chain development
programme and buys close to $20
million worth of local supplies.
There are opportunities in the
manufacture of components for
use by local assemblers and for
export to regional markets.
Electronics and electrical
equipment
Although Kenya’s electronics
industry is still in its infancy,
a number of firms in the
assembly, testing, repair and
maintenance of electronic goods
are in operation and are rapidly
increasing their scope to meet the
growing demands of the industry.
Investment potential can be found
in the production of motors,
circuit breakers, transformers,
switch gears, irrigation pumps,
19%
capacitors, resistors, insulation The manufacturing sector
tape, electrical fittings, integrated contributed about 19% of
circuit boards, and a wide range of
other electronic goods.
Kenya’s GDP
metal
Plastics, chemicals and
pharmaceuticals
The plastics industry is well The country possesses a
developed and produces goods
broad-based metal products
made of polyvinyl chloride (PVC),
polyethylene, polystyrene and industry with various
polypropylene. A number of
pharmaceuticals are produced
independent engineering,
locally in the form of tablets, foundry and metalwork
syrups, capsules and injectables,
shops
but the bulk is imported. Many
opportunities in the manufacture
of chemicals, pharmaceuticals
medicine
and fertilizers remain unexploited.
These include the production of
PVC granules from ethyl alcohol;
formaldehyde from methanol; Some pharmaceuticals are
melanine and urea; mixing and produced locally in the form
granulating of fertilizers; cuprous
oxychloride for coffee bean
of tablets, syrups, capsules
disease; caustic soda and chlorine- and injectables
based products; carbon black;
activated carbon; precipitated
calcium carbonate; textile dyestuff;
ink for ballpoints; and gelatin
capsules.
43
Information
and Communication

44
Information and Communication
45
46

Information and
Communication
Sector
The Government of Kenya
has made ICT a priority in it’s
economic recovery strategy
initiatives. With the incentives and
benefits of other Countries that
Kenya has to offer, the following
areas can be investment in:
I.T. Enabled Service
Call Center for both inbound
and outbound calls
Wide range of Business Process
Outsourcing activities
Disaster Recovery
Software Development
Education and Training
ICT Habitats
Development of Broadband
Infrastructure
Knowledge
Industry
To complement all the above
sectors, Kenya aspires to
attract internationally reputable
educational institutions,
Universities and training centers.
The following areas exist for
investment:
Science and Technology centers
IT Centers of Excellence
Training Centres for the
Hospitality industry
School Fashion and Design
R&D Institutes
Schools for Business and
International Marketing
47
Kenya is
progressively improving
an existing relatively
good telecommunications
infrastructure
we offer
low labor costs, and a
very convenient time zone
to Western and Eastern
countries
we have
extensive natural assets
for tourism that are being
exploited through the
deployment of ICTs
we are
working to establish ICT
business incubators to
support existing and start-up
businesses
Why Kenya?

48

Investment Opportunities
Strategically located in the
Eastern part of Africa, bordering
the Indian Ocean, Uganda,
Tanzania, Ethiopia, Sudan and
Somalia, Kenya is poised to be an
outsourcing powerhouse. With
a population of slightly over
30 million people, an improved
business environment, easier
investment environment and a
convenient time zone (GMT +3),
Kenya positions itself as a leading
destination for call center, Business
Process Outsourcing, software
development and other related
activities.
Kenya is making great strides
towards becoming an outsourcing
Investment Opportunities
giant in Africa. The practice of
outsourcing is evolving from
simply a cost cutting measure to
a core strategic activity, aimed at
enabling companies to focus on
their core business. The internet
has created opportunities for
firms to outsource some functions
to companies outside their own
countries, taking advantage of
various benefits such as different
time zones and lower labor costs.
Outsourcing to companies in
developing countries gives US &
European firms access to highly
skilled, well educated staff able to
provide high quality services at a
reasonable cost.
49
Political Stability
Since independence, Kenya has
maintained remarkable stability
despite changes in its political
system and crises in neighboring
countries. Particularly since the
re-emergence of multiparty
democracy, Kenyans have enjoyed
an increased degree of freedom.
A cross-party parliamentary reform
initiative in the fall of 1997 revised
some oppressive laws inherited
from the colonial era that had been
used to limit freedom of speech
and assembly. This improved
public freedoms and contributed to
generally credible national elections
in December 1997.
In December 2002, Kenyans held
democratic and open elections,
which were judged free and
fair by international observers.
The 2002 elections marked an
important turning point in Kenya’s
democratic evolution in that power
was transferred peacefully from
the single party that had ruled the
country since independence to a
new coalition of parties
Under the presidency of Mwai
Kibaki, the new ruling coalition
promised to focus its efforts on
generating economic growth,
combating corruption, improving
education, and rewriting its
constitution.
Dynamic Private Sector
The Private Sector has played an
important role in the economic
development of the country. It
has participated extensively in
the Manufacturing, Agriculture,
Tourism and Financial Sectors of
the economy, and is now looking
towards ICT sector.
Harmonious Industrial
Relations
Kenya has enjoyed decades of
stable and harmonious industrial
relations in all sectors of the
economy with trade unions
existing in every sector.
50
Preferential Market Access
Given its Geographic position in
Africa, Kenya is a hub to the rest
of Africa and the World. A market
outlet of over a billion people
can be reached from Kenya, and
Kenya is an active member of most
regional and International trade
agreements.
Kenya’s major trading partners
are the COMESA and EAC
members, the European Union,
Japan, the United Arab Emirates
and the United States. It is the
largest single exporter to the EAC
and COMESA. Geographically,
Kenya is well placed to be the
financial and air transport hub of
the region, making the country an
ideal investment destination for
investors targeting regional markets.
The country’s strategic location
provides easy access to the EAC
market, with a population of over
93 million, and COMESA, with a
population of 385 million.
In March 2004, Kenya, together
with Tanzania and Uganda, signed
the East African Community

Customs Union Protocol, which
came into force in January
2005. This agreement is a major
breakthrough in establishing the
region as a single market and
investment area. The Protocol
makes provisions that bind
Kenya, Tanzania and Uganda to
remove existing barriers to trade
(tariff and non-tariff) in order
to move towards the institution
of a full free trade regime in five
years. The Protocol provides
for a three-band external tariff
(0% for raw materials, 10% for
intermediate goods and 25% for
finished goods). Membership in
the African, Caribbean and Pacific
States (ACP) and the Generalised
System of Preferences (GSP)
enables eligible agricultural
products Kenya to qualify for
preferential tariffs on exports to
member countries. Kenya also
has access to the US market,
provided by the African Growth
and Opportunity Act (AGOA).
Kenya is also a member of
the World Bank’s Multilateral
Investment Guarantee Agency
(MIGA), which offers insurance
Reasons why
against non -commercial risk, and
of the International Centre for the
Settlement of Investment Disputes
(ICSID) between foreign investors
and the Government. The you should
invest in
country’s legal system is flexible,
and investors have a choice of
entry mechanisms. The most
common methods of investing
in Kenya include the setting up
of a new corporate body, a joint
Kenya?
venture with existing investors, and
the acquisition of the whole or 1. Qualified Work Force
part of an existing local company.
2. Dynamic Private Sector
Convenient Time Zone 3. Harmonious Industrial
Relations
With a very Convenient Time
Zone (GMT +3), Kenya positions
itself as a leading destination
4. Preferential Market Access
for call center, Business
5. High Returns
Process Outsourcing, Software
development and other related 6. Convenient Time Zone
activities.
7. Political Stability
51
Qualified Work Force
Kenya prides itself in its large
pool of professional workers,
trained both within the country
and in institutions in Europe,
North America, Australia and
other parts of the world. For years,
Kenya has produced well-educated
professionals, fluent in English
and highly trained in various fields.
Kenya holds the distinction of
having the highest number of
university and college educated
English speaking professionals in
East Africa.
Most Kenyan universities offer
degree courses in IT and various
colleges, technical and management
training institutions offer diploma
courses. Kenya therefore has skilled
personnel in the IT profession,
including computer programmers,
software developers, hardware
maintenance engineers, systems
analysts, and I T consultants.
The Kenya Government has also
started training its own staff on
IT related subjects and proposes
mainstreaming of IT training
within all schools, colleges and
universities.
Kenya has a well developed
education system, with the primary
language of instruction being
English. There exists a large pool
of English speaking workers,
trained in various professions.
There are over 11 universities,
4 polytechnics, 41 technical
training institutions, and several
management training institutions
in the country.
Information Technology degrees
are offered by most of Kenyan
universities, while diploma courses
are also offered by both the public
and private sector technical and
management training institutions.
52
 Investment Opportunities
Why the Kenyan
Professionals?
1. Very good English and other
international languages
2. Well-trained in recognized
institutions of higher
learning – locally and
overseas
3. Highly-skilled, college
graduate staff
4. Highly computer-literate
5. Up to 40% lower
professional fees than in
Europe and North America
6. 24 hour availability

53
Frequently Asked Questions

54

What are the procedures of
establishing a business in Kenya?
Registration of a company in Kenya
with the Registrar of companies.
This could be:
A branch office of an overseas
company, or
A locally incorporated company
Registration could also be done
under the Business Names Act.
What are the approval and
licensing procedures of new
investment?
The Kenya Investment Authority
(KIA) will process and grant
approvals of new investment,
once proposals are submitted on
a prescribed application form.
Proof of company registration
must be attached to the
application.
Where the investment may
have adverse impact on security,
health or environment, clearance
from the competent authorities
(such as, National Environment
Frequently Asked Questions
Management Authority
(NEMA), Public Health
Are there any restrictions to
authorities, etc) will be required
doing business in Kenya?
before approval is granted.
Equity restrictions are only in
Also, clearance is required from
telecommunications sector (a
parent ministries for investments
minimum of 30% must be local).
in restricted areas before IPC
approval is granted. These Investments in the insurance
investments comprise:- industry must have local
participation.
Investments to produce
excisable goods (clearance from Ownership of agricultural land by
Customs and Excise is a pre- foreigners is restricted.
condition.
Engagement in petty business by
Investments in forest products foreigners is also restricted.
and mining (clearance from
Ministry of Environment and
Natural resources). How are the living conditions?
Investments in energy and Security
petroleum products (clearance
Security situation in Kenya is
from Ministry of Energy)
satisfactory and not worse than that
Investments in the manufacture prevailing in many parts of the world.
Under Bond Programme (MUB)
(authority to manufacture under
Health
bond must be obtained from
Minister for finance). Adequate health facilities of
international standards are available,
Investments in the tourism
particular in urban areas.
industry (clearance from the
Ministry of Tourism).
55
Education
High quality educating for investors
locating in Kenya is available for
their families. Overseas curricular
is available in most of the
international schools.
Entertainment
There are adequate world class
entertainment facilities for the
comfort of the investor and his
family.
Communication
Adequate communication channels
by air, road, sea, postal and
telecommunication are available to
any destination in the world.
What are the immigration
requirements?
Investors are given work
– permits Class ‘H’ for directors
and Class ‘A’ for expatriate
employees. KIA can facilitate
Entry into Kenya will require
visitors to obtain business visa or
visitors visas.
Expatriate professionals,
engineers or technicians who are
required to install machineries or costs of production. This will
train local employees for a short- be done through occasioning
period are issued with special building
passes.
Housing – 150,000 units need to
Health certificates are required be build annually
as proof of inoculation against
Further private investments
yellow fever from some
required in health and education
countries in Asia. This includes
sector
cholera and malaria
Investments in ICT and other
For those issued with work
knowledge based industries
– permits, passes are issued to
their dependants. Research & Development
Exploration of natural resources,
petroleum and minerals.
What opportunities are available
for investment in Kenya?
Kenya’s economy is basically Does the Government grant
agricultural 24% of GDP incentives to investors?
is derived from agricultural
Incentives
activities. Capacity is required
to boost production such as
in irrigation, better inputs and MUB Program
better technologies
100% investment allowance
Value-addition of agricultural
Duty and VAT exemption on
materials.
machinery, equipments and raw
Infrastructure and utilities materials.
Further investment required to
open up new areas and reduce
56

EPZ Programme
10 year tax holiday
Duty and VAT exemption
Single license
Exemption from stamp duty
Exemption for withholding tax
25% corporate tax for 10 years
after the first 10 years expire
100%investment allowance
Duty Remission
Exemption on duties and VAT
on raw materials utilized to
process confirmed exports
orders.
Liberal Depreciation Rates
Loss-Carry forward
Business must recover previous
losses before paying corporate
What taxes are levied by the
tax.
government?
Capital expenditure
Duties paid for capital
expenditure in excess of US$
70,000 can be recovered from
corporate tax.
Capital goods and basic raw
materials are zero-rated.
Tourism
Investments in tourist hotels can
apply for waiver of duties and
VAT on
Foreign investors are allowed
to bring in cars for personal use
duty free
100% investment allowance
for new investments in
manufacturing and tourist hotels.
25% corporate tax for
companies issuing initial public
offers in the Nairobi Stock
Exchange.
Computers are duty free
Income Tax
Corporate tax 30% for local
companies, 37.5% for branch
57
Frequently Asked Questions
overseas of foreign companies
Withholding tax 5%
Pay-as-you-earn: graduated up to
a maximum of 30% of income
Customs Duty
4 bands from 0 – 35%
Excise
Tax applicable to cigarettes,
alcohol, petroleum,
confectionaries
VAT - 16% Standard Rate.
Do Kenyan produced products
have access to other markets?
Unrestricted entry into USA
market under African Growth
and Opportunity Act (AGOA) for
specified Kenyan products.
Market access to the COMESA
market of 400 million people.
Market access to the EAC market
of 80 million.
Market access to the European
Union under the Lome Cotonou
 Agreement.
Many Kenyan products have
access to other markets in
Europe, USA, and Japan under
the GSP.
Are there double taxations
agreements and Investment
Protection Agreements between
Kenya and other countries?
Kenya has concluded agreements
with EU, Germany, India, Belgium,
Switzerland, etc. Other earlier
agreements are being revised and
others negotiated.
What has the government
done to reduce corruption,
dilapidated infrastructure, and
insecurity?
Declared zero-tolerance to
corruption
Established an anti-corruption
police unit.
Emphasized on the rule of law
To enhance transparency in
the licensing process through
enactment of an Investment
Act.
Streamline government
procurement procedures.
(Procurement act enacted)
Enhancing accountability in the
judicial system.
What customs procedures are
applied when goods are being
imported?
Import Declaration Form (IDF)
must be completed in respect of
the consignment.
Proforma invoices showing the
value of the goods.
Specification of the goods and
packing list.
Bill of lading.
Inspection certificates in respect
of goods exceeding Kshs.
500,000
58
Do you have labour laws in
Kenya ? What are the important
provisions these laws?
Minimum wages set by the
government depend on skills.
It is specific for different urban
areas. (for example in Nairobi,
Mombasa and Kisumu general
laborers should be paid a
minimum of Kshs. 3,905, while
artisans Grade 1 are supposed
to be paid a minimum of Kshs
8,813 per month.
Workers are allowed to join trade
unions related to their sectors of
work
Wages are negotiated through
tripartite agreements (between
trade unions, government and
employers.
Disputes are settled through the
Industrial Court .
Are foreign investments
protected in Kenya ?
The constitution of Kenya
guarantees protection of life and
private property.

The Foreign Investment
Protection Act guarantees
against expropriation of private
property by government. If
expropriation ever occurs, it will
be for public good and prompt
compensation must be given.
Kenya is a signatory to and
Member of the Multilateral
Investment Guarantee Agency
(MIGA) an affiliate of the World
Bank which guarantee investors
against loss of Investment
to political problems in host
countries.
Kenya is also signatory to
International centre for
Settlement of Investment
Frequently Asked Questions
Disputes which is a channel for
settling disputes between foreign
investors and host governments.
Do you have adequate business
support infrastructure?
Banks, insurance, transport,
professional services legal,
engineers, human resource with
advanced skills, international
languages, research institutions.
Kenya has a well developed
professional services sector with
some multinational professional
companies such as KPMG, E&Y
etc having regional offices in
Nairobi. most major insurance
companies, Banks etc have a
presence in Kenya.
59
60
The Emerging Information &
Communication Technology Sector

61
ICT Sector Overview
In the past decade, Kenya’s has
had one of the largest and fastest
growing Internet sectors in
Africa. Since the internet came to
Kenya in 1994, the country has
experienced phenomenal growth
in its use. There are now numerous
internet hosts, close to 100 licensed
Internet Service Providers and over
quarter million internet users in the
country.
Information Technology
The country is also rapidly gaining
a reputation as one of Africa’s
forerunners in the development of
Information Technology. Kenya
has always been in the forefront
of developments in Information
Technology and is emerging as
one of Africa’s leaders in this area.
Indeed, Information Technology is
one of the fastest growing sectors
in the country. In recent years,
there has been a considerable
drop in the cost of hardware and
software, and this has further led to
the growth of this sector.
In the past decade, Kenya’s has
had one of the largest and fastest
growing Internet sectors in
Africa. Since the internet came to
Kenya in 1994, the country has
experienced phenomenal growth
in its use. There are now numerous
internet hosts, close to 100
licensed Internet Service Providers
and over quarter million internet
users in the country.
Kenya which has always been
in the forefront of Information
Technology developments in
Africa, establishing the first public
Internet peering point for ISPs in
Africa (outside of South Africa).
The country also recently rolled
out its first national Internet
backbone connecting six cities with
the use of digital switches, fiber-
optic cable and satellite services.
Telkom (K) Ltd is also in the
process of laying fiber optic cables
to facilitate faster connections. The
effect of all these developments
will be to reduce further the cost
of internet access, thereby enabling
universal use of the medium in
most parts of the country
62
Information Technology is now
in use in various sectors of
the economy such as banking,
accounting, medical services,
transportation, mining, research,
defense, agriculture, and
communications. Key Kenyan
para-statal organizations and
some government institutions are
also progressively making use of
Information Technology and there
is a strategy in place to link all
Government departments, agencies
and service providers with a view
to providing efficient, effective and
citizen focused public services on a
24/7 basis.
Telecommunications
Infrastructure
In July 1999 the government
officially liberalized the
telecommunications sector and
the Communication Commission
of Kenya (CCK) was formed to
regulate the sector.
It is felt that these initiatives will
highly improve the country’s
telecommunications infrastructure,
 The Emerging Information & Communication Technology Sector
and ensure competitiveness in
international markets

Successful use of information

technology in any given
country is driven by the state
of the telecommunication and
information infrastructure
available in that country. Kenya
is one of the fastest growing
Mobile markets in Africa. Within
a 5 Year period Kenya growth
in the Mobile industry has
managed to connect 5 million
subscribers. Since the 1970’s the
Kenya government has shown a
very keen interest in improving
telecommunications in the country,
and has in fact recently set a target
to increase Tele-density in both
urban and rural areas by about five
times by the year 2015.

63
Market Structure
1 . Facility-based Public
Telecommunications Service
Providers
Regional Telecom Operators
(Regional Carrier)
Long-Distance Telecom
Operators (Inter-Regional
Carriers)
International Telecom
Operators (International
Carriers)
Local Loop Providers (Local
Loop Operators)
2. Land Mobile based radio
communication services
Cellular Mobile Telephone
Service Providers (Mobile
Operators)
Public Radio Paging Service
Providers (Paging Service
Providers)
Commercial Trunked Radio-
Communications Network
Operators (CTROs)
Private Radio Paging
Networks
Private Radio Trunking
Networks
Private Two-Way Radio
Networks
3. Fixed and mobile satellite
services
Public Commercial Satellite
Uplink/Downlink Gateway
Services(Gateway Services)
Private VSAT network
operator
Commercial VSAT Network
Operators
Global Mobile Personal
Communications via Satellite
(GMPCS) Gateway Services
Operator
Satellite-based Paging
Network and Services
Global Mobile Personal
Communications via Satellite
(GMPCS)
Interactive VSAT terminal
(station) licence
VSAT terminal for radio
determination and related
services
VSAT terminal for space
research and related services
VSAT terminal for amateur
satellite services
64
4. Enhanced Facility based
communication networks and
services
Public Data Network
Operators (PDNO)
Private fixed
telecommunications data
networks
Broadcast signal distributor
Cable Television Networks
5. Other facility based providers
Infrastructure by utility service
providers, e.g. electricity, gas,
railways, oil, etc
6. Internet facilities and services
Internet Service Providers
Internet Backbone & Gateway
Services(IB& GS)
Internet Exchange Point
Services (IXP)

7. Value added services
Premium rate service providers
Audio text service providers
Store and forward service
providers
Electronic data interface
service providers
Premium Rate Service Providers
Credit Card Validation Platform
Services Providers
Number portability Platform
Services Providers
Call Centre Operators and
Service Providers
Other new types of Value
Added Service (VAS) Providers
8. Resale services
Bandwidth/leased circuit resale
service providers
National payphone service
providers
National telecommunications
Access Bureaux (including
cybercafés, Telephone Bureaus,
Multi-purpose Community
Telecentres (MCTs)
Market Structure
9. Telecommunications dealers
and Contractors Licence
Telecommunications dealers
licence
Telecommunications
Contractors licence
10. Telecommunications
technical personnel licence
Telecommunications
Engineers licence
Telecommunications
Technicians licence
11. Electronic Commerce
Market Structure
National Certification Service
Provider
International Certification
Service Provider
65
Kenya Fiber Portion of The East Africa Backhaul Transmission Link
Project Status
Basic EADTS Configuration is a
SDH transmission system: from
Mombasa to Malaba (Kenya-
Uganda border) through Nairobi
with Spurs to major towns within
the country.
Phase 1 of the project consists
of system from Nairobi to
Mombasa.
Contract for this phase has been
awarded and work is expected to
finish by April 2006.
Phase 2 of the project consists
of system from Nairobi to
Malaba (Kenya –Uganda
border).
Telkom Kenya in partnership
with Kenya Power & Lighting
Co. Ltd are in the process of
jointly developing phase 2.
Project is planned to be
completed ahead of of the
EASSy System as it is one of
the regional backhaul links
upon which EASSy will heavily
depend.
66
Kenya Fiber Portion of The East
Africa Backhaul Transmission Link

Bungoma Eldoret
Malaba
Timboroa
Muhoroni
Nakuru

Naivasha

Kisumu
Longonot E/S
Kericho
Nairobi

Mtito Andei

Voi

Mombasa

67
References & websites

68
 References and Websites
Useful Websites

www.information.go.ke - ministry portal

Ministry of Information and Communications
www.ict.go.ke - industry portal
Ministry of Information and Communications
www.tradeandindustry.go.ke - Ministry of Trade and Industry
www.foreignaffairs.go.ke - Ministry of Foreign Affairs
www.tourism.go.ke - Ministry of Tourism and Wildlife
www.planning.go.ke - Ministry of Planning and National Development
www.cbs.go.ke - Central Bureau of Statistics
www.investmentkenya.com - Kenya Investment Authority
www.nationaudio.com - Daily Newspaper
www.eastandard.com - Daily Newspaper
www.yellowpageskenya.com - Kenya Yellow Pages
www.ICTPark.com - One Stop Shop for Outsourcing

69
Institutions discussed in this book

Investment Promotion Centre Nairobi City Council

National Bank Building, 8th Floor City Hall, City Hall Way, Nairobi
Harambee Avenue, Tel.: 254 20 224 2 82
P.O. Box 55704 Nairobi, City Square, 00200 Fax: 254 20 218 291/214 780
Tel.: 254 20 221 401-4
Fax: 254 20 243 862
Websites: www.investmentkenya.com Ministry of Planning and National Development
www.ipckenya.org Treasury Building, Nairobi
Tel.: 254 20 338 111
Website: www.planning.go.ke
Export Processing Zones Authority (EPZA)
P.O. Box 50563-00200, Nairobi
Tel.: 254 20 271 2801/6 Principal Immigration Officer
Fax: 254 20 271 3704 Immigration Department
E-mail. info@epzakenya.com Nyayo House, Nairobi
epzahwq@africaonline.co.ke Tel.: 254 20 333 531
Website: www.epzakenya.com
Registrar of Companies
Sheria House, Harambee Avenue, Nairobi
Ministry of Information and Communication
Tel.: 254 20 227 461
Kenya Bureau of Standards
Ministry of Trade and Industry
P.O. Box 54974, Nairobi
Teleposta Towers, Nairobi
Tel.: 254 20 502 210-2
Tel.: 254 20 315 001-7
Fax: 254 2503 293
Website: www.tradeandindustry.go.ke
E-mail: info@kebs.org
Website: www.kebs.org
Telkom Kenya Ltd
Telposta Towers, Kenyatta Avenue
Ministry of Finance& Kenya Revenue Authority
Tel.: 254 20 323 2000
Treasury Building, Nairobi
Fax: 254 20 243 338
Times Towers, Haile Selassie Avenue,
E-mail: marketing@telkom.co.ke
Tel.: 254 20 310 900/315 553
Website: www.telkom.co.ke
Website: www.treasury.go.ke

70
 Institutions discussed in this book
Abbreviations

Central Bank of Kenya (CBK) BPO—Business Process Outsourcing

P.O Box 60000, Nairobi,
City Square, 00200, Kenya
Tel: (254) (20) 226431 / 246000
Fax: (254) (20) 216945 / 340192
Email: info@centralbank.go.ke
Website: www.centralbank.go.ke
Kenya Investment Authority (KIA)
P.O Box 55704, Nairobi,
City Square, 00200, Kenya
Tel: (254) (20) 221401 /4
Fax: (254) (20) 336663
Email: info@investmentkenya.com
Website: www.investmentkenya.com
Capital Markets Authority (CMA)
P.O Box 74800, Nairobi, City Square, 00200 Kenya
Tel: (254) (20) 221910 / 221869
Fax: (254) (20) 216681
Email: corporate@cma.or.ke or
cmake@arcc.or.ke or info@cmake.org
Website: www.cmake.org
Nairobi Stock Exchange (NSE)
P.O Box 43633, Nairobi GPO, 00100, Kenya
Tel: (254) (20) 230692
Fax: (254) (20) 224200
Email: nseinfo@nse.co.ke
Website: www.nse.co.ke
CSK—Computer Society of Kenya
CSO— Civil Society Organization
Eassy—Eastern Africa Submarine Cable System
EPC—Export Promotion Council
EPZA—Export Processing Zones Authority
EPZ—Export Processing Zones
FDI—Foreign Direct Investment
GDP—Gross Domestic Product
ICTs—Information Communication Technologies
IPC—Investment Promotion Centre
IT—Information Technology
KICTANET—Kenya ICT Action Network
MDGs—Millennium Development Goals
NCSNational Communications Secretariat
NGO—Non-Governmental Organization
SME—Small and Medium Enterprise
TechnoParks—Technology Parks
TESPOK—Telecommunications Service providers of
Kenya
VoIP—Voice-over Internet Protocol
VSAT—Very Small Aperture Terminal

71
 The Ministry of Information & Communications
Telsposta Towers, 10th Floor
P.O Box 30025-00100, Nairobi, Kenya
Phone: +254 0(20) 251152, 250517, 250978
Fax: +254 0(20) 249664
Email: info@information.go.ke

Communications Commission of Kenya

Waiyaki Way, P.O Box 14448, Westlands, 00800 Nairobi, Kenya
Phone: +254 0(20) 4242209
Fax: +254 0(20) 315147
Email: info@cck.go.ke

Kenya is Running
72