01 April 2019

Kenya has partnered with China for the construction
of Friendship City which is expected to start late this year at a
cost of US $2bn. The two firms involved, Chinese’s Damei Investment Company and
Kenya’s  Zuri Group Global, will construct the mega project
in Nairobi’s Athi River area and will have the status of a Special Economic Zone (SEZ).

Jiannan Bao, director of Damei
Investment said the development will occupy 1200 acres of land with
five separate functional parks. It will feature homes, factories and
amenities like hospitals, schools and shopping malls all in one location.

The project is anticipated to
create 150,000 direct jobs and 500,000 indirect jobs. Bao
additionally said that the project will attract an initial foreign direct
investment of approximately US $2bn into Kenya with the potential of up
to US $7.5bn by the time the entire development is complete.

SEZs in Kenya have tax shields offered within the
confines of an SEZ. They are considered to be outside the customs territory of
Kenya, thereby operating within a jurisdictional bubble that shields investors
from taxes and similar regulatory hurdles that directly or indirectly impede

Despite the hype, SEZs in Africa that are modelled
in Chinese style have proved underwhelming, limited by operational and legal
bottlenecks. One such projected is Konza City, also in Kenya, whose development
is still way behind schedule. Konza City aims to be a smart city driven by
technology and is fondly referred to as the “Silicon Savannah”.

“With a raft of tax and non-tax benefits, it is expected that the SEZ will not only attract foreign investors such as those from China, but also lure local industry players who will be afforded an opportunity to competitively access international markets,” said Jiannan Bao.

Read the latest issue

Latest Issue