SEZ is an area in a country that is designed to generate positive economic growth and usually has more favourable economic regulations compared to other regions in the country, to create an enabling environment for investors to flourish through the development of integrated infrastructure facilities and government incentives and support to eliminate impediments to economic & business activities in SEZs.
SEZs are regulated by the SEZs Authority (Established in 2015 via the SEZs Act, No.16 of 2015) (hereinafter referred to as “SEZA”) which was established to attract, facilitate, and retain domestic and FDIs in SEZs. SEZs Authority regulates both private and public SEZs in Kenya.
Section 4(4) of the SEZs Act (“the Act”) was amended by the Finance Act 2023 (Sec. 100) to define SEZ as a designated geographical area that may include both customs controlled area and noncustoms controlled area where business enabling policies, integrated land uses and sectorappropriate onsite and off-site infrastructure and utilities shall be provided, or which has the potential to be developed, whether on a public, private or public-private partnership basis, where development of zone infrastructure and goods introduced in customs-controlled area are exempted from customs duties in accordance with customs laws.
Activities carried out in SEZs
Sec. 4(6) of the Act outlines some of the sectors that can operate in SEZ including free trade Zones, industrial parks, free ports, information communication technology parks, science and technology parks, agricultural zones, tourist and recreational zones, business service parks, livestock zones, and convention and conference facilities. Some of the firms/companies that are established in SEZs include technology firms, SMEs and private equity firms, investment companies, industrial, financial services, tourism, and hospitality companies.
Licensing of SEZs
To operate in SEZ, an operator or developer must: be a company incorporated in Kenya; have financial, technical, and managerial expertise in developments or operational projects required for SEZ; and own or lease land/premises within SEZ.
A business enterprise is granted a Licence to operate in SEZ if: It is incorporated in Kenya; proposes to engage in activities eligible for SEZ; and proposed activities do not have a negative impact on the environment, are not a threat to security, and do not present a health hazard.
SEZA is required to give notice to KRA of every SEZ developer, operator, or enterprise specifying the activities for which the enterprise is licensed and the conditions attached to the Licence, if any. The licensing process is as follows:
a) Application by a developer, operator, or enterprise;
b) Payment of the prescribed fee;
c) Evaluation of the application by SEZA; and
d) Issuance of a Licence by SEZA.
The Licence must be in the prescribed form, authorize the licensee to conduct business in SEZ as a developer, operator, or enterprise, be valid for a period of one year with an option of renewal subject to meeting the conditions set by SEZA for renewal and may contain other conditions, if necessary.
SEZA may amend the Licence or revoke it for want of compliance. All approved applications for establishment in SEZ are gazette in the Kenya Gazette. Licensed SEZ enterprises, developers, and operators are entitled to work permits for up to 20% of their full-time employees.
Article by CG Mbugua & Yvonne Muriithi