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).
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 trade.
Despite the hype, SEZs in Africa that are modeled 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.