In 1995, the U.S. trade surplus with Kenya was $12 million, $49 million less
than in 1994. U.S. merchandise exports totaled $114 million in 1995, down $56
million from 1994. Agricultural products and manufactured goods predominated and
included such items as wheat, appliances, fertilizers, soybean oil, and aircraft
parts. Kenya was the United States' one hundred-third largest export market in
1995 and its eighth largest in Sub-Saharan Africa. U.S. imports from Kenya
amounted to $102 million in 1995, six percent less than in 1994.
In 1995, Kenya's economy continued its recovery from a period of near-zero
growth in 1992-1993. The Government estimates that in 1995 the nation's GDP grew
by 5 percent, a 2 percent improvement over 1994, and the 1996, GDP is predicted
to increase by 5-6 percent.
While Kenya, the most industrialized country in East Africa, has a policy of
supporting a free market economy with liberal investment regulations and foreign
exchange system, its parastatal sector is large and requires downsizing.
The Kenyan Government's intention to privatize the parastatal sector began to
make progress in 1994. Of the 207 "non-strategic" parastatals, approximately
110, including 45 tea factories, have been sold and the remaining non-strategic
parastatals are to be privatized by the end of 1997. In December 1995, the
Government sold 26 percent of Kenya Airways to KLM. The Government intends to
sell an additional 48 percent of the national carrier in 1996 as well as
significant shares in the two Government banks and the largest sugar refinery.
After strengthening during the first quarter of 1995, the shilling-dollar
exchange rate declined, stabilizing mid-year at 55 Kenya shillings to the
dollar. The resulting high cost of imports, the relatively high transport costs
from the United States, and competition from Kenya's traditional European
suppliers are major constraints in expanding sales of American products.
In June 1994, Kenya reduced the number of custom duty bands from 8 to 7. In
June 1995, the number of bands was reduced to 5. The maximum tariff fell in 1994
from 50 percent to 45 percent. In 1995, the Government lowered the maximum rate
to 40 percent. The duty on computers, specifically, was reduced in 1995 from 10
to 5 percent. Tariff rates on processed agricultural imports, such as vegetable
oil and breakfast cereal, remain high. The potential increase in U.S. exports if
agricultural tariffs were reduced is probably less than $10 million.
Kenya abolished import licensing in 1993, except for a list of items based on
health, environmental and security concerns. The list includes livestock and
commercial seeds. From April-June 1995, the Government banned the import of
sugar, soft wheat and corn. Imported dairy products were also banned in April
1995. In January 1996, the Government imposed a one-year import ban on dairy
All exports with F.O.B. value of more than $500 require Pre-Shipment
Inspection (PSI). For shipmentsoriginating from the United States, this
inspection is done by the Swiss firm Cotecna Inspection S.A. In addition to a
"Clean Report of Findings" certifying that the goods are consistent with the
invoice, the agencies also furnish a "Valuation Certificate," which enables the
Kenyan Government to determine the correct duty chargeable. The PSI fee, two
percent of FOB value, is high, and, effective Feb. 1, 1996, if importers fail to
obtain the inspection in advance, the penalty is 20 percent for motor vehicles
and 10 percent for other goods.
The Government has recently taken steps to crackdown on corruption at the
Port of Mombasa. Twenty-two officials have been suspended and charged with duty
evasion. The Government has also agreed in principle with the Singapore Port
Authority to have it manage the container terminal at the Port.
STANDARDS, TESTING, LABELING
Since July 1995, the Kenya Bureau of Standards has inspected imports to
ensure conformity to national standards. The fee is 0.2 percent. Agricultural
goods are further subject in some instances to inspection by the Kenya
Agricultural Research Institute (KARI).
Commercial hybrid grain seed must be evaluated for a period of three years by
KARI. In 1995, however, the Government-operated seed company was permitted to
import corn seed without meeting this requirement. Furthermore, in early 1996,
Kenya, citing environmental standards, in effect banned commercial seed imports
by requiring that nearly all approved seed be grown in the country. The rule, if
enforced, would reduce U.S. exports by less than $10 million.
Products must be labeled in metric units. Products must further be packaged
in even units (e.g., 1.5 Ltrs., not 1.51). Shipments which violate these rules,
however, are not re-exported.
Kenya has a buy national rule giving local firms a 10 percent preference in
government tenders. That rule has not been repealed, but it is no longer
followed. According to government regulations, goods worth over $4,000 must be
purchased through open tender. In practice, however, tenders are frequently
awarded to uncompetitive firms in which government officials have a significant
interest. Conflict-of-interest regulations are not enforced. Some of the largest
government contracts, including $83 million for an international airport in 1994
and $50 million for a presidential jet in 1995, have been awarded in secret.
More transparent government procurement could boost U.S. exports by $100-500
In 1992, the Government enacted a duty/VAT remission facility which allows
exporters to purchase imported inputs tax-free. There is no general system of
preferential financing, but sectoral government development agencies in areas
such as tourism and tea are supposed to provide funds at below market rates to
promote investment and exports by Kenyans.
Since late 1995, the National Cereals and Produce Board (NCPB) has sold
403,000 metric tons of subsidized corn to Southern Africa. The combined
production and export subsidy amounts to approximately $75 per ton.
LACK OF INTELLECTUAL PROPERTY PROTECTION
Kenya is a member of the World Intellectual Property Organization (WIPO) and
the African Regional Industrial Property Organization. It has joined both the
Paris Convention on the Protection of Industrial Property and the Berne
Convention for the Protection of Literary and Artistic Works. Although a unified
system for the registration of trademarks and patents from anglophone Africa was
signed in 1976, the effort has remained stagnant due to a lack of cooperation
and funds. A future prospect for patent, trademark and copyright protection is
embodied in the African Intellectual Property Organization, although the
enforcement and cooperation procedures are untested.
Kenya is in the process of amending its intellectual property laws to conform
to WIPO guidelines and international conventions. In December 1995, the
Parliament revised the Copyright Act, incorporating, among other changes,
protection for computer technology and satellite transmissions. The Industrial
Property (Patent) and Trademark Acts are scheduled to be amended in 1996.
The Copyright Act Protects sound as well as video recordings. Violations are
subject to a fine of up to 200,000 Kenya shilling ($3,600) or 5 years'
imprisonment or both. In practice, however, the Attorney General's Office, which
is responsible for copyright matters, and the police seldom enforce the laws.
Pirated sound recordings are common and nearly 100 percent of the videos
available in shops are unlicensed.
At the end of 1995, the Kenya Broadcasting Corporation owed the local music
copyright community nearly $100,000 for artists' royalties. Kenya Film
Corporation, a bankrupt parastatal which until 1993 controlled the importation,
distribution and exhibition of feature films, routinely shows unlicensed films
at Nairobi's biggest movie theater. Other commercial theaters and a Kenyan Cable
Television Company also violated copyright norms in 1995. Given the small size
of the market, improved copyright protection might increase exports by less than
There are no explicit barriers on the provision of services by U.S.
professionals. For example, a U.S. bank is the top provider of foreign exchange
services in Kenya, and a U.S. life insurance firm is the leader in its industry
sector. Nevertheless, foreign companies offering services in construction,
engineering and architecture may face discrimination when bidding for public
projects, and the Kenyan Bar has declined to admit foreign lawyers for over 10
years. New foreign investors with expatriate staff are required to submit plans
to phase them out.
Foreign Equity Investment on the Nairobi Stock Exchange has been authorized
since January 1, 1995, Subject to certain limits. The limits were increased in
June 1995 to 40 percent for combined foreign ownership and 5 percent for
individuals. Life insurance companies are required to have at least 33 percent
local ownership. In other industrial sectors, local partners are encouraged but
not mandatory. Small-scale
commercial enterprises no longer require a Kenyan partner. Technology
transfer requirements and foreign exchange controls have been abolished.
Difficulty in obtaining clear title to land, lack of confidence in speedy and
fair resolution of disputes and requests from officials for illicit payments
continue to hamper investment.
LACK OF ACTION AGAINST ANTI-COMPETITIVE
The Kenyan Government has removed most of the monopolies, including all
trading monopolies, formerly enjoyed by the country's "strategic" parastatals.
Nevertheless, several of these state corporations are still a major source of
anti-competitive practices. In the case of the media, the Government allocates
licenses based on political loyalties. Kenya Broadcasting Corporation (KBC) is
no longer the sole provider of television, but the only other current operator
is controlled by the governing party. A third TV broadcasting license has been
given to a private Kenyan company with close ties to the Government. KBC Radio
will have a competitor beginning in the fall of 1996, but again the license was
awarded to a firm with connections to the governing party. In 1995, the
government, also prevented an opposition leader from buying the country's second
most important daily newspaper.
The Government has been hesitant to open up public infrastructure to
competition, Although there may soon be progress in this area. Private power
companies are not yet allowed to operate although the Government is soliciting
bids for a limited build-own-operate private program. There has been discussion
of allowing private firms to build and operate roads. Since 1994, refined oil
products may be imported, but they are Subject to high duties to protect the
national refinery's market share. The state re-insurance company is still
entitled to 20 percent of all general insurance business.
Kenya Posts and Telecommunications Corporation has authorized private pay
phones and private Very Small Aperture Terminals (VSAT), but has dragged its
feet on authorizing various satellite and Internet projects and more direct
competition in telephone services. The company is scheduled to be split into
three parts by December 1996: posts, telecommunications and a regulatory Agency.
Thereafter at least a 30 percent share in the telecom company will be sold to
the public. Removal of these barriers in telecommunications alone could allow
U.S. firms to increase their exports by $10-25 million.
The state agriculture sector is another area in which anti-competitive
practices abound. Only the National Cereals and Produce Board is permitted to
export corn. All coffee produced in Kenya must be sold through the Coffee Board
of Kenya. Kenya Seed Company and the National Dairy Cooperative are subsidized.
Private firms do not restrict the sale of U.S. goods and services. There is, in
fact, significant demand for U.S. products. The difficulty lies in overcoming
the bias by importers and distributors toward additional suppliers in Europe and
the United Kingdom, Kenya's former colonial ruler, in particular.