WT/TPR/S/64 Trade Policy Review
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. Agriculture remains a leading sector, of the Kenyan economy, the largest after services.
Kenya's foreign trade regime for agricultural products has been frequently changed and policy
reversals have often been recorded in the sector for the purpose of food security defined as self-
sufficiency in main foodstuffs.  In addition to tariffs, suspended (stand-by) duties ranging up to 70%apply to basic foodstuffs;  export licences are also in place to this end.  Moreover, the National
Cereals and Produce Board (under restructuring) still intervenes to guarantee floor prices for food
crops with a view to encouraging domestic production.
2. The Kenyan economy has been under reform for nearly a decade.  However, the slowdown in
the implementation of reforms has lengthened the transition of the economy;  almost all the marketingboards are still in operation, albeit with relativ ely limited powers.  This  slowdown together with
Kenya's current economic environment has not encouraged private investment, which could have
filled the vacuum left by certain public enterprises.  Moreover, the dominant position of certain boards
still favours the setting of low prices for certain locally produced inputs (especially cashew nuts and
bixa), thus encouraging exports of unprocessed products.
3. The inward-oriented policies in the agriculture sector have led to the development of agri-
processing industries, the major branch of Kenya's manufacturing sector.  Nevertheless, liberalization
reforms have revealed the weaknesses of the intersectoral linkages and the lack of competitiveness of
the manufacturing sector.  In consequence, several industries, including sugar, textiles, and clothing –
which still carrying the highest tariff rates (Chart IV.1), and electrical machinery, have recorded poor
performance, despite rationalization of the tariff structure that provides them higher effective
protection.
4. Kenya's manufacturing sector is still largely inward-oriented, with part of the production
exported to regional markets.  A two-phase industrialization strategy was formulated in 1997 in an
attempt to increase the value-added of primary exports, particularly agricultural products.  This
strategy also emphasizes the role of agriculture as the basis for Kenya's industrialization.  Industries
requiring significant infrastructure investment, a hi ghly skilled workforce and the formation of large
investment packages are to be promoted during the second phase of the industrialization strategy.
5. The mining sector remains underdeveloped.  Mining activities, which centre around soda ash,
are dominated by state-owned companies present mainly in exploitation activities.  Nevertheless,
mining is the least tariff-protected sector.
6. In terms of contribution to GDP, the services s ector is the most important in the economy.  In
recent years its performance has been poor and the lack of efficiency has imposed a constraint on the
development of other sectors.  Modernization of the services sector is essential to attain higher levels
of productivity.  To this end, some services subsectors have undergone restructuring, including the
introduction of private participation either as a substitute for, or to compete with, state-owned firms.
However, state intervention remains in most subsecto rs including in the financial subsector where the
publicly owned banks hold the major share of deposits and loans.Kenya WT/TPR/S/64
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0.05.010.015.020.025.030.035.0Chart IV.1
Average Kenyan tariffs by ISIC classification, 1999
ISICPer cent
Source :ISIC
111
121
122
130
210
220
230
290
311-312
313
314
321
322323
324
331
332Major groups
Agriculture and livestock production
Forestry
Logging
Fishing
Coal mining
Crude petroleum and natural gas production
Metal ore mining
Other mining
Food products
Beverages
Tobacco
Textiles
ClothingLeather products
Footwear
Wood products
Furniture except metalISIC
341
342
351
352
353
354355
356
361
362
369
371
372
381
382383
384
385
390Major groups
Paper products
Printing
Industrial chemicals
Other chemicals, incl. pharm.
Petroleum refineries
Petroleum and coal productsRubber products
Plastic products
Pottery and china
Glass and products
Other non-metallic mineral products
Iron and steel
Non-ferrous metals
Fabricated metal products
Non-electrical machinery incl. computersElectrical machinery
Transport equipment
Professional and scientific equipment
Other manufactured products
WTO Secretariat estimates based on data 
provided b y the Ken yan Authorities.
Overall tariff average
(18%)WT/TPR/S/64 Trade Policy Review
Page 52
(2) AGRICULTURE
(i) Main features
7. About 80% of Kenya's land surface is either arid or semi-arid.  The remaining area, mainly
the Central, Nyanza, Rift Valley and Western provinces, receives an annual average rainfall of around
1,000 mm;  crops are generally grown in these provinces.  Urbanization and wildlife conservation
further reduce the land area suitable for agriculture.  In consequence, the limited recourse to irrigation
has led to an intensive cultivation of the already small area of arable land, and to a high dependence of
agricultural output on weather conditions.
8. Agriculture (including livestock, forestry, and fishing) is a leading sector of the Kenyan
economy accounting for more than one quarter of GDP and generating around 60% of total
foreign exchange earnings from merchandise exports (Chapter I.1).  Small-scale units, mostly family-owned farms, produce both subsistence and cash cr ops (mixed cropping), representing around two
thirds of Kenya's agricultural output.  Accelerating deforestation has resulted in soil erosion, which,
together with traditional farming practices (the small-scale farm production is based on traditional
cultural practices),  has limited the productivity per unit of labour.  The principal crops include maize
(the staple food), wheat, rice, tea (the leading cash crop), coffee, horticultural products, pyrethrum,bixa, sugar cane, sisal, and cotton (Chart IV.2).  The export base of the sector has remained largely
dependent on tea, coffee and horticulture.  Pastoral farming takes place mainly in the arid and semi-
arid regions, and fishing in the Indian Ocean and the inland lakes (e.g. Lakes Victoria and Turkana).
Kenya's livestock comprises, inter alia , cattle, sheep, goats, poultry and pigs.
0102030405060708090100
1994 1995 1996 1997 1998Chart IV.2
Share of major crops in recorded marketed production 
(at current prices), 1994-98
Maize
TeaWheat
Cattle and calvesSugar cane
Dairy produceCoffee
Other
Source :  Government of Kenya (1999b), Economic Survey 1999,  Nairobi.Per centKenya WT/TPR/S/64
Page 53
9. The recurrence of drought in recent years and El-Niño  rains from the end of 1997 to early
1998 decimated part of the livestock, exacerbated shortages of food (mainly cereals), and induced
shortfalls in the production of certain cash crops.  Indeed, these adverse weather conditions
marginally affected tree crops (e.g. tea) but they induced poor performance of the other crops (e.g.
pyrethrum and food crops).  In consequence, agriculture has recorded a poor performance since 1996:
its annual real growth rate has barely reached 2% (Table IV.1).  Moreover, the contribution ofagriculture to Kenya's real GDP has been on a dow nward path since the 1960s (from more than 30%
on average up to 1989 to around 27% in the 1990s), albeit relatively stable since 1990 (Chapter I.1).
Other factors impeding the development of Kenya's agriculture include, marketing difficulties;
inefficient supplies and application of inputs
1;  weaknesses of infrastructure, including poor rural
roads and transport system;  the limited recourse to irrigation;  the lack of financing (including high
lending rates) for small-scale farmers;  inadequate extension activities and support staff for
application of agricultural research findings;  and poor coordination with the Ministry of Agriculture,
Livestock Development and Marketing (MALDM).2
Table IV.1
Agricultural output and inputs, 1994-98
(KSh billion)
1994 1995 1996 1997 1998a
At current prices
Total output 117.40 127.34 135.57 151.61 163.09
Less inputs 11.60 11.79 10.91 13.61 15.07
Value added 105.84 115.55 124.66 138.00 148.02
At constant (1982) prices
Total output 25.09 26.32 27.07 27.02 27.58
Less inputs 2.70 2.85 2.57 2.27 2.45
Value added 22.38 23.47 24.51 24.75 25.12
a Provisional.
Source : Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
(ii) Policy objectives and instruments
10. The objectives of agricultural policy in Kenya include the enhancement of the role of
agriculture as the primary foundation (the basis for other economic activities, e.g.
provision of industrial raw materials) of rapid and sustained economic growth;  food security (defined
as self–sufficiency in basic foods);  employment creation;  and income and foreign exchange
generation through the diversification of exportable cash crops.  An annual growth rate of 4.4% was
targeted for the sector over the period 1997-2001.  To this end, the Government intends to helpintensify production and improve productivity pe r unit area (mainly in smallholdings) through
increased research and extension services, which are the other areas of its interventions in the sector,
in addition to policy formulation, quality control, and its regulatory role.  The coordination and
linkages among the stakeholders and institutions involved in the agricultural process are to be
institutionalized.  The transformation of subsistence smallholdings from their traditional farmingpractices into small-scale farm enterprises is also  envisaged;  this will make them eligible for
production incentives, such as duty concessions on imported machinery and equipment, for which
only large farm companies currently qualify.
                                                     
1 Fertilizers are imported from South Africa and the Middle East from where the transportation costs to
Kenya are cheaper than from other sources.
2 See Government of Kenya (1996a) for details of some of these difficulties.WT/TPR/S/64 Trade Policy Review
Page 54
11. The ongoing liberalization of the sector is aimed at increasing the participation of the private
sector in production, distribution, marketing, investment , and provision of infrastructural facilities and
services.  Several agricultural marketing boards have been restructured with a view to dismantling the
monopolies held, or exclusive rights exercised by them (section (ii) below).  With the exception of the
producer prices of rice, milk, and pyrethrum, price controls and regulations have been abolished on
virtually all goods, including agricultural products.  Price decontrols and market liberalization havebeen effected in meat (1987), animal feeds (1 989), fertilizer (1989 and 1991), minor crops (1991),
domestically marketed tea, rice and wheat (1991), cotton (1992), milk offered for distribution (1992),
sugar (1992), and maize and maize meals (December 1993). As a result of the reform, the number of
societies and unions operating in the agriculture sector increased from 6,276 in 1994 to 8,667 in
1998.
3
12. Export duties and taxes have been abolished on virtually all agricultural products except
timber and fish.  However, Kenya's foreign-trade regime for agricultural products has frequently been
changed on the grounds of self-sufficiency. To this end, special export licences (Chapter III(3)(iii))
and suspended duties (stand-by duties-rates are selectively modified and imposed depending on
domestic harvests) ranging up to 70% on agricultural products are in place (Chapter III(2)(iii)(b)).Moreover, frequent policy reversals have been recorded in the agricultural sector.  For instance, a ban
was imposed on imports of maize and wheat in August 1994 and removed in September;  on maize,
wheat, milk and related products in April 1995 and lifted in mid-June;  and on dairy products in 1997
and lifted mid-year.
13. Import duties on agricultural products (inclusive of applied suspended duties) range from zero
to 75%, with a simple average of 16.7%;  the mean rate is 21.3% and the maximum 95% if the
Uruguay Round definition of agricultura l products is used (Chapter III(2)( iii)(b)).  Products such as
sugar and flour (especially wheat and meslin flour) are the most protected goods.  Live fowl of the
species Gallus domesticus  weighting not more than 185g are the only duty-free agricultural items.
Imports of agricultural inputs, machinery and appliances are duty free.  Sanitary and phytosanitary
regulations apply to imports and exports of agricultural products.  The introduction of, and research
on, genetically modified organisms are strictly regulated under the Science and Technology Act.Imports of seed for commercial purposes are subject to proof of the existence of enough demand on
local markets.  Agricultural marketing boards are generally exempted from payment of income tax.
Unprocessed agricultural products are exempt from VAT.  However, the Presumptive Income Tax
(PIT) on the gross sales price of selected agricultural products, such as maize, wheat, barley, rice,
sugar cane, pyrethrum flower, tobacco leaf, tea leaf, coffee, cashews, pigs, cotton, hides and skins,introduced in 1989, which was terminated in January 1994, reintroduced in July 1996 and suspended
in 1999, is to be reinstated at its former rate of 2% effective 1 January 2000.
4  During the Uruguay
Round, Kenya bound its tariffs on agricultural products at a ceiling rate of 100%.  Domestic support
provided through general services, and public stockholding for food security purposes and strategic
reserve operations ("Green Box" measures) was estimated by Kenya at KSh 3,791 million, of whichagricultural education represents 29.7%.
5
14. The Agricultural Development Bank (ADB), a state-owned company which replaced the
Agricultural Finance Corporation, aims to develop and promote a crop and livestock insurance cover
in order to underwrite the risks associated with lending to agricultural activities.  On 30 June 1998, the
Agricultural Sector Investment Programme (ASIP) was to replace the other agricultural projects
financed by the World Bank, i.e. the Second National Agriculture and Extension Project, the Second
Coffee Improvement Project, and the Second Agricultural Sector Management Project.  Under the
                                                     
3 Government of Kenya (1999b).
4  The PIT is a final tax for individuals and a withholding tax for companies.
5  WTO Document G/AG/N/KEN/5, 2 March 1998.Kenya WT/TPR/S/64
Page 55
ASIP, expenditure by the MALDM is to be rationalized, and funding will be provided to enhance
sustainable development of the sector.  Cross-sector al issues that influence agricultural development,
including those falling within the mandate of other ministries, e.g. roads, energy, markets, and water,
are also to be addressed under the ASIP.  Certain measures are specified in the ASIP with regard to
land tenure, infrastructure, and credit.  Other measures are to be taken to speed-up the establishment
of a free land market;  the transfer of agricultural land between willing sellers and buyers;  the fullexploitation of high-potential land;  and to develop land rental and leasing arrangements with a view
to enabling potential farmers to farm idle lands.
15.  Irrigation issues are to be addressed through the restructuring of the National Irrigation Board
(NIB).  In fact, Kenya's irrigation policy is implemented by the NIB, which was established to solve
technical problems associated with irrigated rice, onions, cotton, chilli, and experimental cut-flower
production. Its functions include the development of highly productive disease-resistance varieties;
the management of the large irrigation schemes, e.g. Mwea, Ahero, and Bura, and irrigation
development/expansion of existing schemes;  the marketing of produce from the schemes;  land
expansion, planting, and provision of inputs/credit;  and provision of core irrigation infrastructure.
The NIB is being restructured with a view to promoting micro-irrigation projects owned and managedby the private sector.
(iii) Policy by type of product
6
(a) Food crops
16. Maize, wheat, rice, and beans are the principal food crops cultivated in Kenya.  Sorghum and
millet are also cultivated in the arid and semi-arid regions.  The National Cereals and Produce Board
(NCPB) is a "strategic" parastatal;  it was previously in charge of the distribution, storage, marketing,
and pricing of food products, including cereals.  The marketing of cereals, especially maize andwheat, was tightly regulated until 1993.  It was the responsibility of NCPB to appoint and license
agents to purchase, transport, mill, process, and sell cereals;  therefore, it had sole responsibility for
cereals marketing.
17. The liberalization of grain marketing began in 1993 with maize and was completed in 1994.
Steps are being taken to restructure NCPB into a viable cereal trader and market stabilizer throughfamine relief and management of the National Strategic Food Reserve:  the role of NCPB is being
changed to that of a buyer of last resort:  interventions will be to stabilize market price fluctuations,
and to manage the strategic reserve of about 540,000 tonnes of maize.  Its marketing monopoly on
maize was abolished in December 1993.  However, because of the weaknesses of Kenya's
infrastructure (e.g. poor rural roads, lack of storage facilities), and the lack of marketing skills on thepart of dealers and bargaining powers on the part of farmers, the vacuum left by the restructuring of
NCPB has not so far been filled.  Therefore, the Government publishes daily prices of food products
(e.g. maize, rice, beans) across the major markets with a view to reducing the large price differentials
recorded.  NCPB still maintains a floor producer pr ice as a guide and intervenes to help keep prices
above this level;  however, producers are free to charge market prices.  The Kenya Seed Company(KSC), which deals mainly with maize, is also be ing restructured;  it holds a large share of the seed
market.
18. Maize the predominant food crop, provides nearly half of the calories and useable protein
available to Kenyans
7;  it is the staple food in rural areas.  Therefore, for food security purposes,
Kenya's agricultural policy emphasizes supply of maize.  Land constraints have stabilized the area
                                                     
6 The section is partly based on Government of Kenya (1999b) and Government of Kenya (1997b).
7 Government of Kenya (1997b).WT/TPR/S/64 Trade Policy Review
Page 56
under cultivation at around 1.4 million hectares since the early 1990s.  However, because of changes
in weather conditions, maize production has fluctuated between 1.8 million and 3.1 million tonnes.
Domestic production of maize covers on average some 80% of local demand;  the coverage falls to
around 60% during drought years (Chart IV.3).  Traditional farming practices, and marketing and
financing difficulties have hampered maize yields, which average two tonnes per hectare.
020406080100120
1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97
a
Source :Ratio of domestic production to consumption.
Government of Ken ya (1997b ), Economic Review of Agriculture 1996, Nairobi.Chart IV.3
Domestic covera ge of maize consum ptiona, 1970-97
Per cent
19. Wheat is the second staple food, after maize;  wheat and wheat products are mostly consumed
in the urban areas.  Wheat is currently produced by small-scale farmers;  the area under wheat (mostly
soft wheat) is around 150,000 ha in the Central, Western, Nyanza, and Rift Valley Provinces.  The
annual production of around 270,000 tonnes meets some 50% of local demand.  Beans are also
produced by smallholders on between 600,000 and 700,000 ha.  The annual production of beans
fluctuates around 300,000 tonnes.
20. Rice is produced in six main irrigated areas.  Kenya produces both aromatic and non-aromatic
rice;  the bulk of aromatic rice is exported.  Abou t 90% of Kenya's paddy rice is produced under the
control of the National Irrigation Board (NIB);  the Mwea Irrigation Scheme controlled by the NIB
produces around three fourths of the total.  The NIB provides irrigation schemes (which includes the
leasing and irrigation of land) and inputs to all rice farmers;  it also mills the paddy rice it buys from
the growers.  The producer price of paddy rice is set by the NIB:  producers receive around one thirdof the price and, with the remainder, the NIB is reimbursed for the cost of services and inputs
provided on credit to farmers.  Thanks to improvement in yields, rice production increased from
34,442 tonnes in 1994/95 to 37,000 tonnes in 1995/96 despite a decline in the area under cultivation
from 7,852 ha to 7,469 ha.  Wholesale and retail price controls on rice were eliminated in 1991;  the
marketing, milling, distribution, and storage of rice were liberalized in December 1993.  However, theproducer price of paddy rice is still fixed by NIB:  it was sat at KSh 10.50 per kg. of non-aromatic riceKenya WT/TPR/S/64
Page 57
and KSh 15 per kg of aromatic rice in 1995/96, against KSh 12 and KSh 17.55 per kg. in 1996/97.
Distribution (wholesale) prices reached KSh. 32 for milled non-aromatic rice and KSh. 66.7 (more
than three times the price of the paddy rice) for milled aromatic rice in certain regions.8  The NIB is to
be converted into a regulatory body.  The land currently under NIB's control will be transferred to
farmers.
21. Imports of cereals carry an average duty of 40.8%, with a minimum of 15% and a maximum
of 75%.  Import duties average 24% on products such as preparations of cereals, flour, and starch, and
25% on certain roots and tubers.  Imports of products of the milling industry are subject to duties
ranging up to 95%, with an average rate of 21.8%.
(b) Cash crops
22. Kenya's principal cash crops include tea, coffee, horticultural products, pyrethrum, sisal,
sugar cane, cotton and oilseeds.  The area planted with tea is around 110,000 ha, of which nearly three
fourths belong to smallholders.  However, with a yield per hectare substantially higher than that of
smallholders, commercial farmers produce more than 40% of Kenyan tea (Table IV.2).  Nearly 90%
of the production is exported.  Tea accounts for around one fifth of total earnings from merchandise
exports (Chapter I(3)(i));  it is the leading export crop in terms of foreign exchange earnings.  Kenya
is currently the world's major exporter of tea:  it supplied around 22% of world tea in 1995.  Tea is
marketed through dollar-based auctions in Mombasa.  Major destinations for Kenyan tea include the
United Kingdom, Pakistan, Egypt, and Sudan.  The majo r constraint to tea production in Kenya is the
limited processing capacity.
Table IV.2
Production and average yield of tea and coffee by type of grower, 1993-98
1993 1994 1995 1996 1997 1998a
Tea
Production ('000 tonnes)
Smallholders 112.53 119.08 138.95 144.07 129.71 175.63
Estates 98.63 90.34 105.58 113.09 91.01 118.54
Total 211.16 209.42 244.53 257.16 220.72 294.17
Average Yield (kg./ha.)
Smallholders 1,942.42 1,776.29 1,996.12 1,775.13 1,532.13 2,052.71
Estates 3,339.10 3,013.39 3,403.61 4,092.56 2,784.03 3,582.35
Coffee
Production ('000 tonnes)
Cooperatives .. 41.3 62.6 56.9 38.3 32.1
States .. 38.6 32.8 40.1 29.7 21.3
Total .. 79.9 95.4 97.0 68.0 53.4
Average yield (kg./ha.)
Cooperatives .. 342.7 510.0 463.7 312.0 261.8
Estates .. 1,012.6 852.0 1,045.0 774.0 536.5
.. Not available
a Provisional.
Source: Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
                                                     
8 Price data are from Government of Kenya (1997b).WT/TPR/S/64 Trade Policy Review
Page 58
23. The Kenya Tea Development Authority (KTDA) was established in 1964 to foster and
promote the development of tea in small-scale farms.  To this end, it provides to smallholder tea
growers:  extension education on tea husbandry and farm management, to improve productivity and to
increase returns;  inputs on credit;  marketing of green leaf tea;  green leaf tea to grower-owned tea
processing factories;  sales and marketing services for tea processed by smallholder factory
companies;  mobilization of financial resources for investment in the establishment and developmentof tea processing factories;  and management servi ces (including processing and packing of processed
tea) to smallholder tea factory companies.  KTDA pays farmers 70% of the sale price of their green
leaf tea.
9  Subsequent monthly and annual  "bonuses" are paid to the farmers after the sale of processed
tea.  KTDA collects a charge of 4% on the sale price of tea (whether or not produced by small-scale
farmers) to cover the cost of the marketing network it provides.
24. A parastatal, the Kenya Tea Board (KTB), is in charge of, inter alia,   the promotion of the tea
industry;  licensing of tea growers and factories;  control of pests and diseases;  monitoring of tea
exports;  and investigation of, and research into, all matters relating to the tea industry.  KTB has
developed a disease resistant variety.  A Tea (Amendment) Bill, based on recommendations contained
in the Sessional Paper No 2 of 1999 on the Liberalization and the Restructuring of the Tea Industry,has been introduced to Parliament.  The Bill provides for the transfer of regulatory powers to the
KTB.  KTDA is to be converted into a management agency (under the Companies Act) responsible
for the development of tea, i.e. production issues;  it  is to be sold to farmers through their factory
companies.  The ongoing privatization and restructuring of the KTDA is expected to be finalized by
January 2000.
25. The liberalization of packing and distribution of tea gave rise to an increase in the number of
firms involved in such activities:  there were more than 30 new tea-packing firms in 1996.  However,the Kenya Tea Packers (KETEPA), a state-owned company, is still the principal operator.
26. Coffee contributes some 14% to earnings from merchandise exports.  Coffee is marketed
through computerized auctions.  The Nairobi Coffee Exchange, with transactions in U.S. dollars,
replaced the Central Coffee Auction in October 1992.  The Coffee Board of Kenya (CBK), a
parastatal, is the regulator of the subsector;  it is responsible for the processing of coffee, the licensingand control of producers and processors, and it promotes research connected with this product. In
March 1993, a new pricing system replaced the pool system, under which an average price was paid
to lots within a given grade.  Under the new system, sale prices are based on the quality of each lot, to
encourage farmers to supply high-grade coffee.
27. The marketing monopoly of the CBK was abolished on 29 January 1999:  the CBK now
exercises its marketing functions in competition with private operators.  The CBK is to be restructured
through the review of the Coffee Act.  Following the reform, more auction companies in the coffee
market are to be licensed and CBK's activities are to be limited to regulatory functions.
28. The milling of coffee was liberalized in December 1994.  As a result, the Kenya Planters Co-
operative Union (KPCU) lost its milling monopoly.  As of end-July 1999, five milling licences havebeen granted;  the licensees are competing with the KPCU.  The future structure of the coffee market
will be similar to that envisaged for tea.
29. The horticultural subsector is one of the three largest foreign exchange earners beside tourism
and tea.  Kenya's horticultural produce comprises fruit (mangoes, strawberries, macadamia nuts,
avocados, passion fruit, and pineapples) and vegetables (runner beans, snow and snap peas, baby corn,
shelled peas, spinach, spring onions, aubergines, chilli, and okra) in their fresh or processed form, and
                                                     
9 Financial Times , 7 January 1999.Kenya WT/TPR/S/64
Page 59
cut flowers.  Fresh products contribute some 50% to earnings from horticultural exports, which
represent around 10% of total foreign exchange earnings from merchandise.  The value of exports of
fresh horticultural products more than doubled between 1994 and 1998 (Table IV.3).  Kenya is the
world's fourth largest supplier of cut flowers,10 which it exports to the Netherlands, France, Germany,
Russia and Switzerland to meet off-season demand.  Cut flowers account for nearly 40% of Kenya's
horticultural exports.  Some 550 hectares are under rose trees (the major flower grown in Kenya) in1999.  Homegrown (a Dutch company) and Sulmak (a British company) are among the few foreign
rose growers in Kenya.  For sanitary and environmental standard purposes, Kenyan companies such
as Waridi and Red Lands have become members of the Dutch standardization/certification body,
which inspects their farms on a regular basis.
11  Substantial investment has been made in horticulture,
mainly to improve the performance of the production branch of cut flowers;  high quality seeds havebeen introduced, a major cargo refrigeration facility was set up, and packaging materials for cut
flowers are being improved to enhance their quality.  As a result, continued growth, especially in the
production of cut flowers, has been recorded.
Table IV.3
Exports of fresh horticultural producea, 1994-98
1994 1995 1996 1997 1998b
Volume ('000 tonnes) 65.2 71.1 84.8 84.2 78.4
Value (KSh billion) 4.9 6.4 7.7 9.0 10.0
a Exports by the Horticultural Crop Development Authority (HCDA).
b Provisional.
Source: Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
30. The Horticultural Crop Development Authority (HCDA) is a parastatal mandated to advise
growers, packers, transporters, distributors, processors, and exporters;  provide extension services;
register and license horticultural crop nurseries and exporters;  carry out inspection of planting
materials for certification;  disseminate market info rmation and statistics to investors, exporters, and
producers for planning purposes;  formulate and implement a national code of practice in
collaboration with key players;  promote consumption/utilization of various horticultural products;
design, introduce and implement standards for locally marketed produce;  carry out surveys on
production and marketing;  and undertake demonstrations and trials on technologies that are beneficial
to the industry.  To improve Kenya's competitiveness in horticulture, the monopoly of KenyaAirfreight Handling Limited (KAHL) on cool storage was dismantled through the licensing of private
cool stores at the Nairobi International Airport, in October 1993, and its handling fees were reduced in
March 1994.  The 1967 legal framework for horticul ture is being reviewed:  the HCDA is being
restructured and the private sector is to spearhead the development of horticulture.
31. Kenya produces between 10,000 and 15,000 tonnes of pyrethrum flowers a year representing
between 70% and 80% of the world production.  Around three fourths of the production is exported.
The Pyrethrum Board of Kenya (PBK), a cooperative organization, controls the production,
processing, and marketing of pyrethrum and pyrethrum products.  PBK pays farmers an interim price
it sets at the beginning of each crop year.  The price is based on the pyrethrin content of the flowers,
which PBK samples and analyzes prior to payment.  A bonus based on the surplus from trading is
paid at the end of the financial year.  The interim price was KSh 4,200 per kg. of pyrethrum in 1997.
Environmental considerations have increased the production costs;  therefore the productivity per unitof capital and per unit of land has declined.  As a result, there has been a decline in the production
                                                     
10  Europa (1999).
11 Jeune Afrique  No. 2000-2001, 11-24 May 1999.WT/TPR/S/64 Trade Policy Review
Page 60
despite marginal increases in the area under pyrethrum.  However, substantial increases in prices
dampened the impact of the decline in quantity on proceeds.
32. Coconut, sunflower, sesame, soyabeans, rapeseed, castor and safflower are Kenya's major oil
crops.  Total annual production of oilseeds fluctuates between 52,000 tonnes and 80,000 tonnes, with
coconut accounting for more than three fourths.  Kenya possesses 30 oilseed processing units (mostly
owned by the State), which are operating below capacity.  Production of edible oil from these cropsmeets some 5% of the annual domestic demand, estimated at about 200,000 tonnes in 1996.  Edible
oils are imported from mainly Malaysia and Indonesia.
33. Kenya's production of lint cotton covers around one fifth of its annual demand;  Kenya
imports cotton lint from Tanzania, Egypt, and Uganda to meet the demand gap.  Established under the
1955 Cotton Act (revised in 1988), the Cotton Board of Kenya is the regulatory body.  The mainfunctions of the Board were to promote and regulate the cotton industry in Kenya.  As a result of
liberalization reforms, five of the Board's six ginne ries have been sold and ten new private ginneries
established.  The Board is currently dormant and is in the process of restructuring  by the Ministry of
Agriculture, Livestock Development and Marketing.  The revised functions of the Board will be to
advise the Government on policy matters on cotton;  set up quality standards;  collect data on thecotton industry;  supervise and undertake research on cotton;  and supply quality seed to farmers.
34. Cashew nuts are produced in the Coast Province.  The Kenya Cashew-nuts Limited (KCL), a
state-owned company, holds the monopoly over the proc essing of the nuts.  Production of cashew nuts
fell from nearly 18,000 tonnes in 1993 to some 10,000 tonnes in recent years because of low producer
prices fixed by KCL.  Moreover, producers prefer to export their unprocessed nuts rather than to sell
them to KCL.  In consequence, exports of unprocessed nuts have increased.  Problems of pest
infestation and disease affect cashew nut production in Kenya.
35. Kenya is the world's leading supplier of bixa,
12 which is grown in the coastal region of the
country.  Bixa is exported, mostly to Japan, after transformation by the Kenya Bixa Limited (KBL), a
state-owned company, which is the only processor in the country.  The pricing of bixa has been
decontrolled.  As a result, the producer price increased from KSh 5 per kg. in the early 1990s to
KSh 30 in 1996.  However, this producer price is still lower than that offered by companies thatexport unprocessed bixa from Kenya (between KSh 40 and KSh 60 per kg. in 1996).  In consequence,
exports of unprocessed bixa have increased.
36. The land area under sugar cane is around 120,000 ha.  Nearly 90% of this area belongs to
small-scale growers.  The majority of sugar factories is owned by the State.  Domestic production
currently meets some two thirds of the demand (Table IV.4).  A Sugar Development Levy is imposedon imported sugar;  the levy was increased from 20% to 40% in 1998.
13  Imports mostly comprise
"industrial sugar".  The imposition of suspended duties of up to 70% is recommended by the Kenya
Sugar Authority (KSA) on the basis of the evolution of the world market and local demand.  In fact,
companies using industrial sugar as an input specify their annual needs at the beginning of each year.
KSA analyzes the needs and recommends the appropriate rate of suspended duty that should beapplied to meet them;  the duties may be increased to avoid an upward adjustment of the needs.  The
producer price of sugar cane was KSh 1,553 per tonne over the period 1994-97.
14  Import duties on
industrial sugar are higher than on non-industrial sugar.
                                                     
12 Bixa contains some bixin, which is used as a natural food colour.
13 Government of Kenya (1999b).
14 Government of Kenya (1999b).Kenya WT/TPR/S/64
Page 61
37. Imports of coffee, tea, maté and spices are subject to a flat duty rate of 15%.  Import duties
average 39.5% on preparations of vegetables, fruit, nuts or other parts of plants, 34.5% on sugar and
sugar confectionery (with a maximum of 95%), and 22% on edible fruit and nuts, and peel of citrus
fruit or melons.
Table IV.4
Production and consumption of sugar, 1994-98
('000 tonnes)
1994 1995 1996 1997 1998a
Production 303.87 384.20 389.00 401.61 449.13
Consumption 560.00 560.00 570.00 580.00 734.44
Exports .. 17.20 24.50 25.05 ..
Sugar cane production 3,569.45 3,826.16 3,870.48 4,278.27 4,661.36
Average yield (tonnes/ha) 62.19 78.75 98.61 97.65 93.02
.. Not available.
a Provisional.
Source: Government of Kenya (1999), Economic Survey 1999 , Nairobi.
(c) Livestock
38. In 1996, Kenya's livestock comprised 12.7 million cattle;  8.35 million sheep (mostly sheep
for mutton);  10.91 million goats;  19.3 million birds;  0.8 million camels;  and other animals such aspigs and rabbits.
15  Some 5 million tonnes of skins are annually produced;  the branch of hides and
skins has never been regulated in Kenya.16  The arid regions contain 20% of Kenya's cattle, 30% of its
sheep, 50% of its goats and donkeys, and almost of all its camels.17
39. The livestock subsector caters for an estimated population of 6 million.  Kenya exports part of
its livestock products.  Because Kenya fails to meet international standards, it does not fill its quotasunder preferential treatment on the markets of developed countries.  The recent adverse weather
conditions decimated part of the livestock;  this partly explains the downward trend in milk
production (Table IV.5).  Availability and quality of feedstuffs are specific constraints to thedevelopment of livestock in Kenya.
40. Under ongoing reforms, animal health care has been privatized, and subsidies on livestock
drugs, artificial insemination services, and animal feed eliminated.  However, the Veterinary Public
Health Division and the Ministry of Health still carry out quality controls on animal products.
41. The Kenya Meat Commission (KMC) assists in the marketing of livestock and has organized
the beef market.  KMC has facilities that slaughte r, process and package meat and meat products.  It
has the capacity to receive, hold, slaughter and store the meat from about 600-800 cattle per day.  This
capacity to handle large numbers of slaughter livestock enables KMC to assist in the Animal Disease
Control programmes, ie. slaughtering of all dise ased animals (Contagious Bovine Pleuropneumonia,
rinderpest, etc.), and during periods of drought.
                                                     
15 Government of Kenya (1997b).
16 Government of Kenya (1997b).
17 Government of Kenya (1999a).WT/TPR/S/64 Trade Policy Review
Page 62
Table IV.5
Production and sale of livestock and dairy products, 1994-98
Unit 1994 1995 1996 1997 1998a
Recorded milk productionb Million litres 258 350 257 197 126
KENYA CO-OPERATIVE CREAMERIES
Milk Processed:
Whole-milk and cream Million litres 204 175 165 108 71
Butter and ghee Tonnes 2,409 3,131 2,327 917 480
Cheese " 126 141 193 112 18
Dried whole-milk powder " 2,237 2,480 973 351 396
Dried skim-milk powder " 2,120 3,101 2,349 1,244 434
Other products " 218 208 349 110 30
Livestock slaughtered
Cattle and calves Thousand head 991 1,067 1,2019 1,320 1,443
Sheep and goats " 1,310 1,327 1,407 1,603 1,752
P i g s " 9 19 19 88 8 8 1
a Provisional.
b Including sales licensed by the Kenya Dairy Board.
Source: Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
42. The studies realized under the rehabilitation project, undertaken by the Kenyan Government
and a British company to improve KMC's efficiency, recommended the enhancement of the utilization
of low grade animals for canning;  the absorption of large numbers of livestock during drought years;
the export capacity of livestock products;  and the utilization and processing of by-products such as
blood meat and bone meals, and hoof meals.  KMC will be maintained for regulatory purposes.
43. Milk factories should be registered with the Kenya Dairy Board (KDB), the regulatory body.
The Kenya Cooperative Creameries (KCC), established under the Ministry of Cooperative
Development, had operated under monopoly until the liberalization of the milk market (sales,
purchases, producer and consumer prices, processing) in May 1992.  Following the reforms, KCC lost
its marketing monopoly on milk and milk products, and controls on sales of raw milk were relaxed;more than 40 private companies have been licensed and are competing with KCC.  However, KCC is
still the major player due to its country-wide network established for the marketing of its products:  it
still sets producer prices for milk.
44. Imports of meat, meat offal, dairy products, bi rds' eggs, and other products of animal origin
are subject to a flat duty rate of 25%, while an average rate of 4.7% applies to live animals.
(d) Fishing
45. There are more than 45,000 professional fishermen in Kenya.  Fishing activities take place in
the inland lakes, especially Lake Victoria, which remains the major source of fish production in
Kenya;  Lake Victoria provides over 150 billion tonnes, i.e. around 95% of the total national catch.
Marine fishing (in the Indian Ocean) is underdeveloped because of the fishermen's inability to exploitoffshore fish stocks:  their traditional fishing practices and equipment are inadequate.  Aquaculture is
also at an early stage of development.
46. Overfishing, pollution caused by agricultural and industrial activities, invasion of Lake
Victoria by water hyacinth, and falls in fish farming production have contributed to a downward trend
in the total catch since 1994 (Table IV. 6).  These problems, combined with the predatory nature of
the Nile perch, have contributed to a fall in the number of fish species, mainly in Lake Victoria whereKenya WT/TPR/S/64
Page 63
there are currently only three main species:  the Nile perch, Tilapia and Omena.  The lack of capital
and appropriate storage facilities also affect the fishing subsector.
Table IV.6
Fish production by water body, 1994-97
(Quantities in million tonnes;  values in KSh '000)
1994 1995 1996 1997Source
Quantity Value Quantity Value Quantity Value Quantity Value
Lake Victoria 193,652 3,597,971 181,888 4,678,140 166,460 6,129,838 151,293 4,151,991
Lake Turkana 1,125 12,491 2,232 23,420 4,799 36,286 2,009 50,663
Lake Baringo 7 70 126 2,646 72 1,746 210 5,483
Lake Naivasha 75 2,421 84 4,959 54 3,690 46 3,250
Lake Jipe/Mwatate Dam 117 3,376 150 4,044 109 3,127 95 2,669
Tana River/Dams 1,141 14,033 1,525 23,526 1,591 30,273 1,167 22,847
Fish farming 1,119 77,045 1,083 103,365 89 2,180 135 10,495
Other rivers and dams 725 11,129 706 15,340 897 6,451 118 5,290
Sub-totals (Fresh waters) 197,961 3,718,536 187,794 4,855,440 174,071 6,213,591 155,073 4,252,688
Marine waters (Indian Ocean) 4,904 249,154 5,995 348,869 6,283 349,505 6,099 378,073
Total 202,865 3,967,690 193,789 5,204,309 180,354 6,563,096 161,172 4,630,761
Source: Information provided by the Kenyan authorities.
47. The bulk of the catch is sold (after transformation into dried and salted fish) on the domestic
market, confined to the coastal region and certain metropolitan areas of Nairobi.  The remainder
(some 7% of the catch) is exported to Europe, the Middle East, and Asia.  Exports consist mostly of
marine products, especially lates niloticus  (Table IV.7).  Exports of frozen and fresh Nile perch fillets
have developed in recent years.  However, the ban imposed by the European Union on fish from East
Africa contributed to the poor export performance recorded in 1998.
Table IV.7
Exports of fish and fish products, 1994-98(Quantities in million tonnes;  values in KSh '000)
1994 1995 1996 1997 1998
Commodity Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value
Lates niloticus 11,967 1,158,908 10,983 1,371,138 13,369 2,559,410 12,470 2,147,181 11,698 1,838,242
Prawn 134 16,304 18 3,382 38 9,283 74 22,342 .. ..
Lobsters 22 5,269 7 4,956 4 2,643 7 5,092 .. ..
Cray fish 30 4,282 20 23,339 18 1,543 8 635 .. ..
Octopus 248 21,025 416 47,250 664 82,100 619 113,377 .. ..
Fish maws 128 29,245 67 13,857 34 7,707 3 8,65 .. ..
Marine shells 328 26,879 263 22,586 .. .. .. .. .. ..
Dry shark fins 6 11,033 1 1,693 .. .. .. .. .. ..
Live fish 12 1,648 11 2,336 15 1,812 3 865 .. ..
Beche-de-mer 12 3,813 266 22,900 .. .. .. .. .. ..
Other mixed
fish & marine
crustacea16 375 .. .. .. .. 855 165,183 .. ..
TOTAL 12,903 1,278,778 12,052 1,492,432 14,142 2,664,498 14,041 2,455,540 11,698 1,838,242
.. Not available.
Source: Information provided by the Kenyan authorities.WT/TPR/S/64 Trade Policy Review
Page 64
48. The inland fish market prices are free, while at the coast, minimum producer prices are set
and reviewed annually by a committee comprising the representatives of the Government (the
Department of Fisheries), the fishermen's cooperatives ("coastal" fishers are organized into
cooperatives), and the buyers.  The price control aims to guarantee a minimum revenue to coastal
communities to which fishing is a traditional activ ity and the major source of income.  The minimum
price is currently US$2.5 per kg., irrespective of the species.
49. The Government intends to manage Kenya's fishery resource on a sustainable basis, and to
promote fish marketing and consumption by publishing landing beaches in its Gazette.  A certain
balance between domestic consumption and exports (for foreign exchange purposes) will be
promoted.  Infrastructure such as access roads, rural electrification, and fish preservation at the
beaches is also to be improved with a view to speeding up the transportation of catches toconsumption areas while keeping them fresh and preserving their quality.  The Parliament passed a
motion for the creation of a Fish Development Au thority (a fish management body), which will
reinforce marketing policies and socio-economic benefits to fishermen and small-scale fish traders.
Several fish processing plants have already been established.
50. Regional efforts are being made to harmonize fish trade and quality regulations, especially for
Lake Victoria Nile perch.  Moreover, the Common Market for Eastern and Southern Africa recently
carried out a study on the promotion of further processing of raw products for value addition
purposes.
51. Imports of fish and crustaceans, molluscs, and other aquatic invertebrates are subject to a flat
duty rate of 15%.  Higher import duties averag ing 20% (with a minimum of 15% and a maximum of
25%) apply to preparations of these products.  An export tax of 0.5% applies to all species.  Revenue
from deep sea fishing licence fees collected on foreign vessels amounts to US$20,000 per year.
(e) Forestry and logging
52. Forest currently covers some 216,000 ha of Kenya's land area, down from some 800,000 ha in
1994.
18  Cypress, pine, and eucalyptus are the main species grown, covering about 86% of the area
planted.19  Forestry and logging activities are mostly carried out by public bodies, which also own a
large share of the plantations.  The Forest Department is the main producer of roundwood.
53. Development projects realized with a view to promoting timber plantation and trade, have
resulted in an increase in the production of exotic hardwood (Table IV.8).  However, a drop in the sale
of hard woods and telegraph poles have negatively affected the performance of the forest branch.
Between 8,000 and 15,000 m3 of timber are annually exported, mainly to the Middle East.  The low
recovery rate (between 30% and 40% for most mills) further increases the already high productioncost of the sawmills.
Table IV.8
Forest products, 1994-98
1994 1995 1996 1997 1998a
Area ('000 hectares) 155.0 160.0 159.6 221.6 216.2
Indigenous softwood 4.5 2.8 1.4 4.5 4.5
Indigenous hardwood 7.8 7.7 13.0 7.8 7.8
Table IV.8 (cont'd)
                                                     
18 GATT (1994).
19 Government of Kenya (1996a).Kenya WT/TPR/S/64
Page 65
1994 1995 1996 1997 1998a
Exotic softwoods
Cypress 71.8 72.9 73.6 71.4 69.3
Pines 53.6 53.9 53.4 50.6 47.3
Exotic hardwoods
Timber 6.9 9.2 6.0 76.9 76.9
Fuel 10.4 13.5 12.2 10.4 10.4
Recorded sales ('000 true cubic metres) 1,039.2 1,100.6 5,25.8 6,77.5 328.4
Timber 630.1 692.0 202.4 316.4 287.7
Softwood 625.1 685.7 193.7 314.5 287.3
Hardwood 5.0 6.3 8.7 1.9 0.4
Other ('000 stacked cubic metres) 409.1 408.6 323.4 361.1 41.2
Peels/veneer logs/plywoods 110.0 139.3 142.0 140.7 ..
Pulpwood/paper production 228.0 197.7 136.8 137.3 ..
Fuelwood/charcoal 34.3 33.6 30.0 63.2 36.3
Power & telegraph poles 36.8 38.0 14.6 19.9 4.9
.. Not available.
a Provisional.
Source: Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
54. The Kenya Forestry Master Plan (KFMP) 1995-20, a twenty-five year plan supported by the
Finnish International Development Agency, was formulated in 1994.  The Plan addresses, inter alia :
conservation of biodiversity;  forest management;  rationalization of the forest industry;  protection of
forest against pests, diseases, and fires;  capacity building in the forest branch;  and internationalagreements.  The KFMP provides for the transfer of the management of plantation, currently carried
out by the Forest Department, to private or public enterprises, and to tree farmers or communities;  the
Department will retain the function of Central Forest Authority responsible for policy formulation and
implementation.
20  KFMP comprises an Indigenous Forests Development Programme;  a Farm
Forestry Development Programme;  an Industrial Plantation Development Programme;  a ForestryIndustry Development Programme;  and an Institut ional Development Programme.  Under the Plan,
areas for future support in the forestry branch were identified in 1995.
55. Several forest development programmes have been supported by foreign institutions.  The
Kenya Forestry Development Project (1993-97), supported by the World Bank, aimed to improve the
management of industrial plantations.  The Keny a Indigenous Forest Conservation Projects, supported
by the British Overseas Development Administra tion, promotes the joint management of forestry
resources by adjacent communities, the private sector, and the Government.  Other projects supported
by foreign governments concern the promotion of social forestry and plantation outside gazetted
forests.  Moreover, the Government is drafting a new Forest Act to implement the Forest Policy
(based on the KFMP) approved in 1996.  The modalities for financing the upgrading of equipmentused in the forestry subsector are under study.
56. Exploitation of indigenous timber is banned.  Imports duties on wood, articles of wood and
wood charcoal average 21.3%;  a flat rate of 15% applies to cork and articles of cork.  Exports of
roundwood are prohibited.   An export tax is collected on timber.
                                                     
20 Government of Kenya (1994).WT/TPR/S/64 Trade Policy Review
Page 66
(3) MINING AND QUARRYING
57. The mining sector accounts for around 0.2% of Kenya's real GDP.  Mining activities centre
around soda ash, which is mostly produced at Lake Magadi (Table IV.9).  Kenya also produces
fluorspar, salt, and limestone.  Other products such as gold and gemstones (e.g. ruby and garnet) are
mined in limited quantities.  Some titanium deposits are located in the Coast Province.  Explorations
are under way for minerals such as oil and gaz.21  Parts of the production of soda ash, limestone,
natural carbon dioxide, gypsum, and lead are consumed as inputs by local industries.
Table IV.9
Mineral production, 1994-98
(Quantity in million tonnes;  value in KSh million)
1994 1995 1996 1997 1998a
Mineral
Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value
Soda ash 224.200 1,765.98 218.45 1,393.04 223.00 1,702.00 257.64 1,894.02 242.91 1,473.36
Fluorspar 89.155 268.44 74.23 261.52 83.00 416.32 68.70 331.10 60.85 341.72
Salt 75.757 112.88 73.48 109.50 41.00 30.86 6.28 23.54 21.74 66.26
Limestone
products30.469 29.66 29.57 28.78 31.93 30.18 32.67 31.12 32.00 31.60
Other 40.934 42.58 70.88 53.16 60.77 676.92 10.64 72.12 80.73 461.38
Total 460.915 2,219.54 466.62 1,846.00 439.70 2,856.28 375.93 2,351.90 438.23 2,374.32
a Provisional.
Source: Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
58. Minerals contribute around 10% to Kenya's earnings from merchandise exports, of which
soda ash accounts for more than half (Chart IV.4).  The major destinations are the United States,
Japan, Germany, and Luxembourg for fluorspar;  Switzerland, South Africa, and the United Arab
Emirates for gold; Switzerland and India for ruby;  and Thailand, India, the United States, and
Germany for garnet.  The three main state-owned companies involved in the production of soda ash
were undergoing restructuring in 1992.22
59. Because of low domestic prices of soda ash, the evolution of its total value does not fully
reflect the upward trend in its export price over the period 1994-98 (Chart IV.5).  Moreover, salt
production, pricing, and exports are under the monopoly of a parastatal.  The bulk of production is
locally consumed.
60. Subject to rights granted by a relevant authority, all unextracted minerals are vested in the
Government in accordance with Section 4 of the 1940 Mining Act, revised in 1972 and 1987.  Mineraloils are not covered under the Act.  Prospecting licences are issued by the Commissioner of Mines
and Geology against payment of fees, which vary from KSh 20 to KSh 150 depending on whether
exclusive rights (exclusive prospecting licences) are conferred.  The prospecting rights are granted to
individuals as agents of a company, to bodies of persons, or partnership.  The licence is valid for one
year, renewable.  Prospecting activities are mostly carried out by foreign companies, and exploitationby enterprises owned by Kenyans.  A lease on the land where the mineral is located may be granted
for five to twenty-one years maximum.  The rent amounts to KSh 150 per ha per year or part thereof;
a penalty of 25% applies to amounts due but not paid.
                                                     
21 Barclays (1999).
22 GATT (1994).Kenya WT/TPR/S/64
Page 67
Chart IV.4
Mineral exports, 1998
Source :  Information provided by the Kenyan authorities.Soda ash
58.7Zoisote
3.2Other
4.9Fluorspar
14.7
Gold
9.4
Garnet
2.8
Ruby
6.4
Total: 2.4 KSh billionPer cent
61. Royalties are negotiated between the Government and each mining company;  there is no
standard rate.  Mineral dealers (e.g. sellers, buyers, exporters, cutters, or polishers) must hold a
licence issued by the Commissioner of Mines and Geology.  The licence is valid until 31 December of
the year of issue.
62. The Government is reviewing the Mining Act in an attempt to encourage investment in
prospecting and exploitation activities;  the three mining laws are to be merged.  The future Mining
Act is expected to provide for greater environmental protection.  The private sector is to be the vehicle
for minerals development;  and government interv ention is to be limited to promotion and regulatory
functions.23
63. Import duties on minerals and mineral products average 13.6%.  Imports of soda ash and
limestone are subject to a duty of 15%.  Higher rates apply to products such as salt (25%), articles of
iron or steel (21.5% on average) and articles of ba se metal (20.4% on average). Mineral exports are
subject to a permit issued by the Commissioner of Mines and Geology.
                                                     
23 Government of Kenya (1996a).WT/TPR/S/64 Trade Policy Review
Page 68
3,0004,0005,0006,0007,0008,0009,000
1994 1995 1996 1997 1998Average export price (Kenyan shillings per tonne)Chart IV.5
Soda ash and fluorspar export prices, 1994-98
Provisional.
Government of Ken ya (1999b ), Economic Surve y 1999, Nairobo.a
Source :Soda ash Fluorspara
(4) MANUFACTURING
64. With a manufacturing sector that accounts for some 13% of real GDP, Kenya is the most
industrialized country in East Africa;  the sector contributes some 25% to earnings from merchandise
exports (Chapter I(1) and I(3)(i)).  The manufacturing sector employed about 216,000 persons in1998, up from 189,000 in 1991;  the textile and apparel industry employs more than half of this total.
Wages represent between 3% and 4% (on average) of manufacturing output.
24  Manufacturing takes
place in the three principal cities (Nairobi, Mombasa, and Kisumu).
65. Food processing industries (e.g. canned vegetables, meat, dairy, bakery and fish products, oils
and fats) constitute the largest branch in terms of output value.  Other industrial activities include
textiles and clothing (some 50 textile mills), leather and footwear, petroleum products (one refinery),
sugar and confectioneries, beverages, processed tea and coffee, cement (two plants), tobacco,chemicals, printing and paper products (one major plant), machinery, and transport equipment (three
assemblers producing some 5,000 motor vehicles on average per year).  The informal sector also
produces consumer goods, motor vehicle parts, and farming implements.  The manufacturing sector is
characterized by relatively low value added (Chart IV.6).  Therefore, due the low level of domestic
production of intermediate and capital goods the manufacturing sector heavily relies on their import.
                                                     
24 Government of Kenya (1999b).Kenya WT/TPR/S/64
Page 69
020406080100
1992 1993 1994 1995 1996Chart IV.6
Value added in the manufacturing sector (at current prices), 1992-96
Source :  Government of Kenya (1997), A guide for investors, Nairobi.Value added Value of inputsPer cent
66. The manufacturing sector has recorded declining performance over the last three decades,
from growth rates of around 10% from independence to the end of the 1970s to rates of less than 5%
since the early 1980s.  Factors that have hampered the development of Kenya's manufacturing sector
include the weakness of infrastructure (e.g. shortfalls in power and water supplies,
telecommunication, roads and rail, and port facilities);  high interest rates;  the lack of industrialspace;  inadequate managerial, technical, and entrepreneurial skills;  weak links between research
institutions and manufacturers, i.e. between suppliers and users of research;  underdeveloped legal
information culture and the continued existence of irrelevant, outmoded, and anti-market laws and
regulations;  and unpredictable and wide discretionary powers of administrators of laws and
regulations.
25  Adverse weather conditions in recent years (drought and El-Niño  rains) have also
negatively affected certain branches, mainly beverages and food processing industries.
67. In line with the economic reforms launched  in 1993, the Government has shifted its
manufacturing policy from import substitution to the promotion of exports, in an attempt to increase
the share of the sector in total earnings from merchandise exports.  The tariff has been rationalized;
its structure is aimed at promoting the processing of export products.  Price and exchange controls,
and import licensing have been eliminated;  and investment incentives have been rationalized.
Several bodies have been established (e.g. the Investment Promotion Centre, the Export PromotionCouncil, the Export Promotion Programme Office, the Export Processing Zone Authority and the
Kenya Anti-Corruption Authority) to strengthen  the institutional framework for manufacturing
activities.  However, because the impediments to the development of the sector (listed above) have
not so far been properly addressed, Kenya's manufacturing remains inward-looking;  a large shore of
                                                     
25 Government of Kenya (1997a).WT/TPR/S/64 Trade Policy Review
Page 70
production is destined for the domestic and regional markets (e.g. beverages, cement, textiles and
clothing are exported to Tanzania and Uganda).
68. The liberalization reforms have revealed the lack of competitiveness of Kenya's
manufacturing sector:  the textiles and clothing, and sugar and electrical machinery branches.
Production has fallen in several factories in these branches (especially in the textiles and clothing
branch) have closed down and others are operating below capacity (at around 60%).  Theliberalization of the petroleum branch in October 1994 has also contributed to an increase in imports
of refined oil, since companies have since been free to import either crude, for refining at the Kenya
Petroleum Refinery Limited, or refined petroleum.   Moreover, existing problems are compound by the
vacuum left by public enterprises, which  has not so far been filled because of Kenya's economic
environment;  another constraint is the suspension of funding from the International Monetary Fund.
69.  In 1997, the Government formulated a two-phase industrial policy designed to accelerate
economic growth (on a sustainable basis) by increasing the value added of primary exports, especially
agricultural products, with a view to further prom oting intersectoral linkages (Chapter I(1)).  The
industrialization strategy is aimed at generating em ployment and increasing exports of local resources
after transformation.  The identification criteria of industries to be promoted during each phase are inline with these objectives (Table IV.10).
Table IV.10
Criteria for phases one and two of Kenya's industrialization strategy
Criteria Industry characteristic
Phase one
Employment Labour intensive.
Technology Low and medium technology.
Market availability Export oriented.
Inputs availability Indigenous resources.
Phase two
Employment High value added.
Technology Medium and high technology.  Capital intensive.
Market availability Import substitution (short term).  Export oriented (long term).
Inputs availability Processed intermediate goods.  Imported raw materials and capital goods.
Source: Government of Kenya (1997a), Industrial Transformation to the Year 2020 , Sessional Paper No. 2, Nairobi.
70. The first phase of the industrialization strategy – covering the period 1997-2006 – is to
emphasize processing industries in which Kenya has operational and technological capabilities.
During this phase, Kenya is to promote the expansion and modernization of existing industries and
attract new investments in light manufacturing and resource-based activities.  In this regard, certain
micro, small and medium-scale industries that utilize and add value to local raw materials, and requirerelatively modest capital investment have been identified (Table IV.11).  Phase one will provide
foundation for Phase-two since Kenya does not have the infrastructure, human capacity, technology,
and institutional framework required for the latter.  The second phase of the strategy is to build on the
achievements of Phase one:  capital-intensive manufacturing industries requiring high capital
investment, well developed technologies, skilled labour and support infrastructure are to be promoted.Kenya WT/TPR/S/64
Page 71
Table IV.11
The industrialization strategy, 1997-2006
(a) Phase-one industries
Sector Immediate promotion Short term horizon
Agri-industries Cotton, sisal and textiles
Skins, hides and leatherHorticultural produce
Fish
SugarCoffee
TeaIndustrial and edible vegetable oils
Pyrethrum
Paper
Building and Construction Brick manufacture
Glass
ToolsCement
Ceramics
Timber and furniture
Others Tourism
(b) Phase-two industries
Initial promotion Long term horizon
Metallurgical Telecommunications
Non-petro based chemical Transport engineering
Petrochemical Electronics
Pharmaceutical Engineering and construction
Machinery and capital goods
Source: Government of Kenya (1997a), Industrial Transformation to the Year 2020 , Sessional Paper No. 2, Nairobi.
71. The industrialization strategy is to be led by the private sector;  the role of the Government
will be limited to the provision of a regulatory a nd enabling environment, e.g. enforcement of the
provisions of the 1989 Restrictive Practices and Monopolies Commission Act to strengthen fair trade,
and development of export and financial markets.  Moreover, Kenya's legal and regulatory
environment is to be reviewed and developed, and access to credit is to be improved for small and
medium-scale enterprises (including those operating in the informal sector).
72. As part of the industrialization strategy the National Industrial Development Council (NIDC)
was to be created to assist the Government in the formulation and implementation of industrial policy,
and to make recommendations. NIDC was to comprise representatives of the public and private
sectors;  it was to be financed by the Government.  An Industrial Development Levy was to be in
place by mid-1998 to finance the activities of the NIDC, the Investment Promotion Centre, the Export
Promotion Council, and the Export Processing Zone Authority.  The policy will be reviewed by the
Kenya Institute of Public Policy Research and Analysis, which, together with the Kenya Industrial
Research Development Institute, undertakes industrial research and techno-economic studies.
73. The Government expects the strategy to contribute to an increase in the annual growth rate of
the manufacturing sector to nearly 8% by the year 2001, and to 15% by 2020.  The share of
manufacturing in real GDP is projected to reach 18% in 2001.
74. Import duties on manufactured products average 18.2%, making manufacturing the most
tariff-protected sector.  On aggregate, the textile, clothing, tobacco, and paper are among the most
highly protected industries (Chart IV.1).  In addition, the escalatory structure of import duties impliesWT/TPR/S/64 Trade Policy Review
Page 72
that the effective protection granted to most industries is higher than the level of nominal tariff
protection.
(5) SERVICES
(i) Overview
75. The contribution of the services sector to real GDP has been stable during the 1990s,
accounting for around 54% of GDP in 1998;  the most important subsectors were commerce,restaurants and hotels, which accounted for 12.4% of GDP, and finance, insurance, and real estate,
which accounted for 10.5%.  The contribution of tourism to GDP, one of Kenya's principal foreign
exchange earners, is effected through several of the services subsectors and its linkages also extend to
the manufacturing and agricultural sectors.  The services sector, including government services,
absorbs 62% of the labour force, and is also a leading foreign exchange earner.  Kenya is a netexporter of services;  however, net receipts from trade in services have been declining since 1992
(Chapter I (3)(ii)).
76.  Despite the importance of this sector in supporting economic growth and development, its
performance in recent years has not been satisfactory.  There has been a decline in productivity in
virtually all subsectors due mainly to a deterioration of infrastructure and mismanagement of state-owned enterprises supplying services.  The role of the State in the services sector continues to be
significant despite efforts to privatize.  The key service parastatals earmarked for priority reform
during the fiscal year (1999/2000) are the Kenya Telkom Company,  Kenya Railways, and Kenya
Ports Authority.
26
77. Kenya's horizontal commitments set limitations on market access regarding commercial
presence as they require foreign service providers to incorporate or establish the business locally.
Horizontal commitments also cover measures concerning the entry and temporary stay of naturalpersons employed in management and expert jobs.  The employment of foreign natural persons has to be
agreed upon by the contracting parties and approved by the Government.
27
78. Kenya's specific commitments under the GATS cover the following areas: communication
services (telecommunication and audiovisual services );  financial services (insurance and insurance
related activities, reinsurance and retrocession, services auxiliary to insurance, banking and otherfinancial services);  tourism and travel-related servi ces (hotels and restaurants, including catering, travel
agencies and tour operators, and tourist guides );  and transport services (Table AIV.1).
79. Since the conclusion of the Uruguay Round, Kenya has participated in the WTO financial
services negotiations;  its offer represented an  improvement of its Uruguay Round commitments in
that sector.
28  However, Kenya has not yet ratified the Fifth Protocol to the GATS, which entered into
force on 1 March 1999.29  Kenya also improved its offer on telecommunications services, although it
did not participate in the 1997 WTO ne gotiations on basic telecommunications.
80. Kenya grants most-favoured-nation (MFN) treatmen t to all WTO Members.  It did not list any
exemption to the principle of MFN treatment.  Kenya does not participate in any preferential
agreements concerning trade in services.
                                                     
26 Government of Kenya (1999c).
27 WTO document GATS/SC/47, 15 April 1994.
28 WTO document GATS/SC/47/Suppl.1, 26 February 1998.
29 WTO document  S/FIN/M/23 , 4 June 1999.Kenya WT/TPR/S/64
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(ii) Financial services
81. As at the end of December 1998, Kenya's financial sector comprised the Central Bank of
Kenya, 53 domestic- and foreign-owned commercial banks, 14 non-bank financial institutions,  2
mortgage finance companies, 4 building societies, and numerous insurance companies and other
specialized financial institutions.  The Nairobi Stock Exchange was established in 1954 and is
overseen by the Capital Markets Authority (CMA) – the supervisory body in charge of capital markets
development in Kenya – established in 1990.  Foreign participation in the Nairobi Stock Exchange
was allowed in January 1995.  As of December 1997, 58 companies, with a total market capitalization
of US$1.8 billion, were listed on the stock exchange.
(a) Banking and non-banking institutions
82. Despite the existence of numerous banks, the banking subsector is dominated by a few banks.
In 1998, nine banks controlled 70% of the market share of total net assets and 69% of total deposits.
Distribution among the non-banking financial institut ions (NBFIs) was more sk ewed with the top two
financial institutions controlling 57% of the market share in terms of total net assets and 63% in terms
of deposits.  A banking crisis during late 1998 caused some flight of deposits from small and medium
banking institutions, exacerbating the skewdness of market shares in favour of the relatively largebanks.
30  These included two state-owned banks, the Kenya Commercial Bank and the National Bank
of Kenya, and the foreign-owned Barclays’ Bank and Standard Chartered Bank, each accounting for
some 8% of bank assets and 9% of bank deposits.
83. Kenya has a network of contractual savings institutions.31  The Postal Savings Bank, the
National Social Security Fund (NSSF), a number of pension provident fund (PPF), and six
development finance institutions (DFIs) which specialize in serving different sectors of the economy
(e.g. agriculture, industry, housing, etc.).32
84. The DFIs were established to finance medium and small-scale enterprises, which had no
access to credit from commercial banks;  however, they did not manage to gain independence in
sourcing for funds and continued to rely on government funding.  Moreover, their presence seems to
have contributed to the segmentation of the financial sector:  the commercial banks concentrate on
short-term loans;  mortgage banks concentrate on residential and commercial construction;  anddevelopment banks provide long-term loans.
33  The DFIs are presently undergoing restructuring to
enhance their capability to operate effectively.34  Government holdings in DFIs are also expected to be
reduced as a result of this programme.
85. Although relatively diversified, Kenya's financial sector is in need of strengthening, in terms
of enhancing competition and restructuring of financial portfolios.  Thus, a number of measures havebeen taken, aimed at promoting competition, reducin g government ownership and control, balancing
the type of institutions (commercial banks, development and household savings banks), and upgrading
                                                     
30 Central Bank of Kenya (1998b).
31 The banking system in Kenya expanded and became more diversified in the 1970s and 1980s
especially with the government policy to encourage local participation in the financial system and the setting upof specialized institutions to collect savings and finance investment through issuing new bank and NBFIslicences (Ngugi and Kabubo, 1998, p. 6).
32 The country has six development finance institutions (DFIs):  Industrial Commercial Development
Corporation (ICDC), Industrial Development Bank (ID B), Development Bank of Kenya (DBK), Agricultural
Finance Corporation (AFC), Small Enterprise Finance Company (SEFCO) and Kenya Industrial Estates (KIE).
33 Ngugi and Kabubo (1998), p. 9.
34 Two of these institutions, ICDC and IDB, have already been restructured.WT/TPR/S/64 Trade Policy Review
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services.35  These included, inter alia , a change in regulations pertaining to NBFIs, and a programme
of overall rehabilitation and divestment of most state-owned banks.  NBFIs were brought under the
same cash ratio requirements as commercial banks by end 1995.36  The authorities also embarked on a
programme to rehabilitate and privatize government -owned banks.  The Government sold 40% of two
state-owned banks (Kenya Commercial Bank and th e National Bank of Kenya) to the public during
1988 and 199637, and has agreed to sell a further 25% of the shares.  In addition, in 1993, the
Government deregulated controls and placed reliance on market signals and mechanisms for the
allocation of credit to the private sector.  Direct credit allocation and interest rates control were
abandoned.
86. Despite the attempts to enhance competition, the banking sector seems to have evolved into
an oligopolistic structure with a few banks dominating the market.  In addition, greater efficiency inbanking intermediation has not been achieved;  for instance, the spreads between lending and deposit
rates remain high:  the commercial bank lending interest rate on December 1998 stood at 26.13% and
that of NBFIs was 28.55%, while the three-month deposit interest rate was 14.71% and the savings
rate was 7.8%.
38  High lending rates and wide spreads have been attributed, by the authorities, to
inflationary expectations, and inadequate competitiveness in banking.  The high risk of lending inKenya, which is evident from the high percentage of non-performing loans, also contributes to the
wide spreads.
87. Moreover, during the second half of 1998, the Kenyan banking sector suffered some
instability; one medium-size and four small banks were placed under statutory management.  The
fourth largest bank experienced a deposit run leading to liquidity problems.  Profits in the sector
dropped by 55% from the previous year.  According to the authorities, this was largely due to a higher
level of non-performing loans caused by poor lending practices, which were compounded bymismanagement and outright fraud.
39
88. In an effort to stabilize the banking system the following measures are being undertaken:  an
increase in capitalization by raising the minimum paid-up capital requirements for institutions;
progressive government divestment from the bankin g system;  improvement in the judicial system;
encouragement to small banks to merge;  and tightening of banking regulations (e.g. no shareholderswould be permitted to participate in the management of the institution).  The Central Bank is
committed to bringing the quality of bank supervision to international standards through
implementation of the principles of the Basle Committee on banking supervision;  the Basle
Committee prudential ratios have already been adopted in Kenya.  More attention will be given to the
issue of corporate governance, since, in 1998, the authorities found that the management of all banksthat had had difficulties had permitted reckless lending, and heavy borrowing by insiders.
40
89. Any financial institution intending to operate in Kenya requires a licence.  The Central Bank
examines applications and forwards them to the Minister of Finance with its recommendation.
                                                     
35 The reform of the financial sector in Kenya, was initiated in 1989 when Kenya received assistance
from the World Bank during the second phase of the Structural Adjustment Programme (SAP) (1985-91), whichincluded a financial sector adjustment credit.
36 To promote indigenous financial institutions, the NBFIs were subjected in the past to low entry
barriers, and lower liquidity, capital and reserve requirements than commercial banks (Ngugi and Kabubo,
1998, p.8).
37 Ngugi and Kabubo (1998), p. 6.
38 Central Bank of Kenya (1998c).
39 Central Bank of Kenya (1998b).
40 Central Bank of Kenya (1998b).Kenya WT/TPR/S/64
Page 75
A licence is granted after consideration by the Minister and upon payment of the prescribed fee.41  An
institution incorporated outside Kenya must meet the minimum capital requirements, and, in addition,
assign capital to its Kenya branches in such amount as may be prescribed by the Minister of Finance.
This capital is to be kept in Kenya at all times during the effect of the licence.42  A bank or financial
institution incorporated outside Kenya that does not propose to transact banking or financial business
in Kenya may establish a representative office if approved by the Minister of Finance.43
90. Bank supervision in Kenya is conducted by the Bank Supervision Department of the CBK,
which operates under the Banking Act and the Central Bank of Kenya Act.44  The Bank Supervision
Department has the power to revoke licences of institutions;  to set minimum capital requirements,
prudential ratios and regulations, and the frequency of financial statements;  to audit and review
institutions;  and to approve external auditors.  Overall, the Department can be deemed to have thelegal and regulatory authority to effectively supervise the operations of the banking system in Kenya.
(b) Insurance
91. The Kenyan insurance industry is comprised of insurance companies, insurance brokers,
insurance agents, loss assessors, loss adjusters, risk managers, surveyors, and claims settling agents.
In 1997, 40 insurance companies were registered to supply either long-term, general or both types ofinsurance.
45  Insurance companies can be registered to deal with any type of insurance business.
There are three reinsurance companies registered in Kenya.  One of these, the Kenya Reinsurance
Corporation (a state-owned institution), can provide re-insurance for both types of insurance,46  while
the others, the East Africa Reinsurance Company and Zep-Re (PTA) Company Limited, a regional
company, are registered to reinsure only general in surance.  Every insurer must reinsure a specific
proportion of each insurance policy issued or renewed in Kenya with the Kenya Reinsurance
Corporation.47  In 1997, the Kenya Reinsurance Corporation Bill was introduced in Parliament, with
the purpose of reconstituting the Corporation into a public limited liability company in order to pave
the way for its privatization.
92. The insurance industry in Kenya is governed by the Insurance Act of 1984, revised in 1988
and amended in 1995 by the Insurance (Amendment) Act.  The Commissioner of Insurance in the
Ministry of Finance is responsible for the general administration and implementation of the relevantlegislation, and for overseeing the insurance industry.
93. A licence is required to enable an insurer, br oker, agent, adjuster, surveyor or any other
intermediary to operate in Kenya. Licences must be renewed on an annual basis; the requirements for
initial registration as well as those on returns and performance position statements must be met.  An
insurer is required to pay a fee of KSh 150,000 when applying for registration and the same amount
                                                     
41 The Banking Act, Part II: 4-5 (Application for licence – Licensing of institutions).
42 The Banking Act, Part II:7 (Minimum capital requirements).
43 The Banking Act, Part IX:43 (Representative Offices of Foreign Institutions).
44 In 1995, the Parliament approved an amendment to the Banking Act that provided the CBK with
greater supervisory authority over commercial banks.  The amendment also required non-bank financialinstitutions to comply with cash reserve requirements on the same basis as commercial banks.
45 Long-term insurance business includes bond investment, industrial life, ordinary life, and
superannuation.  General insurance includes aviation, engineering, domestic fire risks, industrial fire risk,
liability, marine, private motor vehicles, commercial motor vehicles, personal accident, theft, and worker
compensation.
46 The Insurance Act (Revised Edition 1998), Part XIII – The Kenya Reinsurance Corporation.
47 The Insurance Act (Revised Edition 1988), Part XIV – Mandatory Reinsurance Cessions.WT/TPR/S/64 Trade Policy Review
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upon renewal of the licence.  Licence fees for other agents vary from KSh 250,000 for a reinsurance
company to KSh 1,000 for an insurance agent.
94. An insurance company must be locally incorporated with a minimum paid-up capital of at
least KSh 50 million.  Not less than one third of the paid-up capital shall be owned by Kenyan citizens
or owned by the Government.48  However, according to Kenya's Schedule of Specific Commitments
(Supplement I) only the insurance companies that  supply long-term insurance are subject to a
restriction regarding the percentage of foreign capital invested.49  In addition, an insurer's admitted
assets in Kenya should not be less than KSh 20 million.50  At least one third of the members of the
board of directors or managment board have to be citizens of Kenya.
95. An insurer applying for registration in Kenya must deposit with the Central Bank of Kenya,
an amount of KSh 1 million in Kenyan Government securities, for long-term insurance business;KSh 500,000 for general insurance business;  and KSh 1.5 million for both long-term and general
insurance business.  Once the application is approved by the Commissioner, the deposit is held by the
Central Bank.  Any interest due and collected by the Central Bank on such deposit is paid to the
insurer.  If the application is not approved by  the Commissioner the deposit is returned to the
applicant.
51
(iii) Telecommunications
96. Kenya is among the 15 largest telecommunication markets in sub-Saharan Africa.52  T h e
number of telephone lines in operation has been increasing since 1990;  nonetheless the number of
main lines per 100 inhabitants has remained stable at around 0.8.  Revenue from the subsector was
KSh 18 billion, equivalent to some 3%  of GDP in 1997, down from 4.2% in 1993.53  Moreover,
investment in the telecommunications sector as a percentage of total revenue declined from 75% in
1993 to 23% in 1997.  The decrease in investment in infrastructure has contributed to hightelecommunications tariffs and a long wait for telephone line connection (Table IV.12).
97. The telecommunications sector is currently bein g restructured with the aim of improving the
quality of the services, lowering call rates, and meeting demand.  Until recently (July 1999) the Kenya
Post and Telecommunications Corpor ation (KPTC), a state-owned company, provided both postal and
telecommunications services and regulated the provision of these services.  Legislation to liberalizethe sector was passed by Parliament in 1998.  The Kenya Communications Act of 1998 provides for
the division of the KPTC into three separated entities:  namely Telkom Kenya Ltd., a
telecommunications company;  the Postal Corpor ation of Kenya (POSTA);  and the Communications
Commission of Kenya (CCK), which would be the regulatory authority  for the sector.
54
                                                     
48 The Insurance (Amendment) Act, 1995;  Registration of Insurers.
49 WTO document GATS/SC/47/Suppl.1, 26 February 1998.
50 The Insurance (Amendment) Act, 1995;  Minimum Capital Requirements.
51 The Insurance Act (Revised Edition 1988), Part IV – Deposits.
52 ITU (1996).
53 Calculations are based on ITU data, where revenue is defined as the earnings from the direct
provision of facilities for providing telecommunications services to the public (i.e. not including revenues ofresellers).  This includes revenue from fixed teleph ones, mobile communications, text (telex, telegraph and
facsimile), leased circuits and data services (ITU (1999)).
54 Government of Kenya (1999b).Kenya WT/TPR/S/64
Page 77
Table IV.12
Telecommunication services in Kenya, 1990-98
Telephone network 1990 1991 1992 1993 1994 1995 1996 1997 1998
Main telephone lines in
operation175,050 200,000 207,442 214,759 228,522 239,639 261,409 269,773 ..
Main telephone lines per
100 inhabitants0.76 0.82 0.82 0.76 0.78 0.79 0.82 0.81 ..
Public payphones 4,615 .. 5,552 5,722 5,899 5,922 5,932 6,069 ..
Telephone network 1990 1991 1992 1993 1994 1995 1996 1997 1998
Waiting list for main lines 82,263 .. 88,035 80,227 70,095 70,581 70,578 77,163 ..
Cellular mobile telephone
subscribers0 0 1,100 1,162 1,990 2,279 2,804 5,345 ..
Total telecom services
revenue (KSh million)4,189 5,893 8,428 14,212 14,492 15,147 17,006 18,044 ..
Annual telecom investment
(KSh million)1,781 3,876 4,615 10,926 3,508 2,831 4,121 4,163 ..
.. Not available.
Source : ITU (1999) Yearbook of Statistics:  Telecommunication Services Chronological Time-series 1998-97 , International
Telecommunication Union, Geneva.
98. Telecommunications services are provided by Telkom Kenya Ltd. and its subsidiary, Safari,
both still state corporations, but operating on a commercial basis.  Under a privatization proposal,
26% of Telkom Kenya Ltd. equity is expected to be sold to a strategic investor;  20% will be sold on
the Nairobi Stock Exchange (NSE); and 3% to 5% will be offered to the staff.  Proceeds of the sale
will be used to finance modernization and expansion of services.  The new company would be free toengage in joint ventures with other private investors.
55  Nevertheless, restrictions on foreign
ownership will remain;  foreign investment is limited to 30% maximum.   According to Kenya's
Schedule of Commitments in Basic Telecommunicati on, the state corporations will retain a monopoly
on the supply of services in Nairobi until 2003.56
99. Even though the use of mobile telephones has expanded rapidly, cellular telephone services
remain inadequate and expensive.  To address the large demand and reduce costs, a new service
provider, Safaricom, a joint venture between Telkom Kenya Ltd. and Vodafone, has been established.
Safaricom will also provide fixed cellular services through wireless public telephone booths.  The
tender process for a second cellular provider is already in process, and licensing was to be completed
in the course of 1999.
100. Kenya has a larger Internet community than most of its East African neighbours.  In 1998,
Kenya Post and Telecommunications introduced a digital backbone in Nairobi and Nakuru, providingInternet access for internet service providers (ISPs ) with a faster and 70% cheaper connection to the
Internet without having to sign up with overseas correspondents.
57  Nev erthel ess,  I SPs com plain of
difficulties of phone line connection – over 77,000 people are on the waiting list – and poor
exchanges as only 60% of phones are digitalized.  Access to the Internet remains slow.58
101. Under the restructuring plan, the CCK woul d be empowered to license and regulate
telecommunications, radio, and postal services in accordance with the provisions of the Kenya
                                                     
55 Government of Kenya (1996a).
56 WTO documents S/C/W/107, 12 May 1999 and GATS/SC/47/Supppl.2, 18 November 1999.
57 Africa Research Bulletin , 16 May-15 June 1999.
58 Africa Research Bulletin , 16 May-15 June 1999.WT/TPR/S/64 Trade Policy Review
Page 78
Communications Act of 1998.  Licences are valid for specified periods and may be renewed.  If the
Commission does not renew the licence it shall notify the licensee in writing of the reasons for
refusal, within thirty days;  the licensee may appeal to the Tribunal.
102. The CCK is responsible for ensuring fair competition and optimal development of the sector.
No monopoly or duopoly licence to operate a te lecommunication system or provide any
telecommunication services will be granted.  To encourage effective competition, the country hasbeen divided into several regions where local network operators compete with Telkom Kenya.
59
(iv) Transport
103. The overall performance of the transport sector was adversely affected by the general decline
in the country's economic performance in 1998.  The deteriorating state of infrastructure and the high
cost of borrowing funds exacerbated the poor performance of the sector. The recession experienced inthe tourism industry during 1998, coupled with the depressed demand for freight and passenger road
transport services, had detrimental spill-over effects on services incidental to transport, including
booking and travel, storage, and warehousing. Thus, total receipts from the road transport industry
declined by 8.3%, largely attributable to th e poor state of the roads in 1998 following El Niño  rains.
In addition, tonnages moved by road and rail have showed a declining trend since 1993/94.
60  I n
contrast, the volume of outward and incoming cargo at the port of Mombasa recorded a slight
increase, attributed to the increase of tea exports in 1998 and in the total volume of white petroleum
products pumped during the same year.61
(a) Land transport
104. Kenya has a road network of approximately 95,000 miles, connecting most parts of its
territory.  All major commercial centres are connected by paved roads.  The roads handle about half of
the traffic.62  The quality and service level of the network is inadequate due to poor maintenance;  this
leads to high transport costs, which hinder exports and increase the costs of imported inputs and
capital goods.63
105. The causes of poor roads include inadequate funding for periodic maintenance, increased
traffic volume, high axle overloading, and inadequate railway transport capacity.64  According to the
Government, corruption in the award and supervision of infrastructure contracts has also been a majorhindrance to quality infrastructure in general.  The Government is committed to ensuring more
transparency in the award and execution of these contracts and monitoring compliance with
contractual obligations by both parties.
65  In addition, the authorities have intensified efforts to
provide adequate financial resources for road maintenance.  To this end, revenue from the automotive
fuel levy and the transit toll charges is directed to the road maintenance fund.66
106. Railway transport is the second most important mode of transportation, after road transport.
It is particularly important for the carriage of bulky goods, especially over long distances.  Thus, its
efficiency and reliability are important, not only for international trade and transit traffic to
                                                     
59 Government of Kenya (1999c).
60 Government of Kenya (1997a).
61 Government of Kenya (1999b).
62 Dun and Bradstreet (1998).
63 Government of Kenya (1996a).
64 Government of Kenya (1996a).
65 Government of Kenya (1997a).
66 Government of Kenya (1996a).Kenya WT/TPR/S/64
Page 79
neighbouring countries, but also in supplementing road transport and in reducing road damage by
reducing road traffic demand.
107. Rail operations in Kenya are carried out by the Kenya Railways Corporation (KRC), a
government-owned corporation, which was established in 1978 by the Kenya Railways Corporation
Act.  The KRC is a monopoly provider of rail transport service country-wide.67  The KRC operates a
rail network of over 2,700 km, as well as an inland transport waterway on Lake Victoria.  The mainline extends from the Indian Ocean coast at Mombasa to Malaba on the border with Uganda, with a
branch to central Kenya. Another branch connects Kenya to Tanzania via Taveta.  There are several
sidings in the major towns, opening up the areas for industrial development.  The existing line has a
capacity of more than 6 million tonnes per annum.
68
108. Freight tonnage has been decreasing since 199569, but recovered slightly in 1998 due to
increased cargo transportation to neighbouring countries (Table IV.13).  The increase in passengers'
journeys during 1997-98 was largely due to the expansion in commuter train services, in response to
an upsurge in demand for urban transport in Nairobi.  With the exception of passenger fares ad
services provided in distant parts of the country, other railway freight services are not subsidized.
Table IV.13
Railway traffic, 1994-98
Unit 1994 1995 1996 1997 1998a
Freight
Tonnes '000 1,901.0 2,090.1 1,826.5 1,620.6 1,688.0
Tonne-km Million 1,172.0 1,456.1 1,218.8 1,068.2 1,111.0
Revenue KSh million 152.0 171.3 156.7 123.9 157.7
Revenue per  tonne-km Cents 259.4 235.3 257.1 232.0 283.9
Passenger
Journeys '000 1,910.6 1,624.1 2,379.0 1,981.0 2,843.0
Passenger-km Million 408.0 363.0 371.0 393.0 432.0
Revenue KSh million 15.2 14.5 14.9 14.6 13.4
Revenue per passenger-km Cents 74.5 79.9 80.3 74.3 62.0
a Provisional.
Source : Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
109. According to the authorities, the KRC has been loosing passengers and freight traffic, because
its service is unreliable, and slower and more expensive than road transportation.70  Moreover the
financial position of the KRC has deteriorated in recent years.71  To address this problem and improve
KRC's financial performance, and expand and upgrade services, the Government is considering
private-sector participation through the granting of concessions, as well as the possibility of
separating the ownership of the railway line from that of the rolling stock with a view to facilitatingprivate-sector competition in the latter.
72  Certain rail transport lines have been leased to the private
sector.  In addition, the Corporation expects to improve performance by reducing the work force and
                                                     
67 There is, however, the exception of a private leased line operated by the Magadi Soda company.
68 Government of Kenya (1997a).
69 Tonnages moved have shown a declining trend since the late 1980s, from 3.6 million tonnes in
1989/90 to 2.2. m illion 1993/ 94 (Government of Kenya (1997a) .
70 Government of Kenya (1996a).
71 Currently, freight haulage accounts for more than 80% of KRC's total annual revenue (Government
of Kenya, 1996a).
72 Government of Kenya (1997a).WT/TPR/S/64 Trade Policy Review
Page 80
overhauling and improving maintenance of its equipment.  For instance, staff reductions began in
September 1994;  600 separations were recorded as of June 1995, resulting in a staff of some 17,300
employees.
(b) Maritime transport
110. Maritime transport in Kenya consists of port facilities in Mombasa, shipping and inland water
transport, and inland container depots at Nairobi, Kisumu and Eldoret.73  Mombasa, the only
commercial seaport in Kenya, is the leading port and major distribution center of Kenya.  It serves as
a trade artery for Burundi, the eastern portion of the Democratic Republic of Congo, Rwanda,
Tanzania, Uganda, and southern Sudan.74  The secondary ports are Kisumu and Lamu.75
111. The Kenya Ports Authority (KPA) was established by the Kenya Ports Authority Act of 1978
and was charged with the responsibility of providing, operating, maintaining, regulating, andimproving all port services and facilities along the Kenyan coast.  The KPA has a monopoly on cargo
handling at the Port of Mombasa and manages the different container depots.
112. The performance of port services has been below expectations.  The rated capacity of the port
of Mombasa is 22 million tonnes annually.  However, in the recent past, port throughput has averaged
8.1 million tonnes, of which imports constitute 72%.  Although the KPA has undertaken somerehabilitation work both on the equipment and in the storage areas at the Port of Mombasa, to improve
efficiency, handling charges remain 50% higher than international standards, and container turnover is
three times slower.
76  According to the authorities, the KRA pl ans to peg tariffs to costs.  Operations
at the port of Kisumu, currently owned and managed by the KRC, will also be reviewed and
streamlined.77
113. To restore efficiency and competitiveness at Kenyan ports, the Government is planning to
offer concessions for the container terminals, inla nd container depots, and general cargo berths;  the
KPA would remain only as a regulator.
114. The Kenya National Shipping Line (KNSL) was formed in 1989 as a joint venture between
the KPA and UNIMAR of Germany.  KNSL operates under the Merchant Shipping Act of 1989 and
UNCTAD's Code of Conduct for Liner Conferences.78  Since its inception, KNSL has had no vessels
of its own and has operated as a non-vessel operato r (NVO) relying on cargo space allocated to it by
other carriers.  However, as a result of liberalization, KNSL no longer enjoys the privileges of a
designated shipping line.
115. The maritime transport industry is regulated by the Merchant Shipping Superintendent who
administers the Merchant Shipping Act of 1989.  A survey fee is payable for all ships that are certified
as seaworthy.  A merchant shipping fee, calculated on the percentage of the tonnage carried, is leviedon all cargo vessels that call at the port of Mombasa.
                                                     
73 Government of Kenya (1996a).
74 Bureau of National Affairs (1998).
75 Dun and Bradstreet (1998).
76 Government of Kenya (1997a).
77 Government of Kenya (1997a).
78 Dun and Bradstreet (1998).Kenya WT/TPR/S/64
Page 81
(c) Air transport
116. Air transport is a key subsector for the development of tourism, the transportation of high
value exports and perishable goods (especially horticulture, which is a major source of foreign
exchange), and for promoting regional integration.  Responsibility for the administration of civil
aviation and related services is vested in the Ministry of Transport and Communications.  The
Ministry deals with policy, administration, and fiscal matters relating to civil aviation.
117. The Civil Aviation Board was established by the Civil Aviation Act of 1977.  The Board is
required to consider and advise the Minister on a wide range of matters including the establishment of
air services; civil aviation legislation (including legislation to give effect to conventions); measures to
promote or support any airlines designated by the Government for the purposes of any international
air service agreement;  fares and freight rates and related matters, including implementation of anyresolution of the International Air Transport Association (IATA); air navigation facilities and
services;  and the cost of establishing and maintaining air navigation facilities and the policy to be
adopted to recover such costs.  In addition, the Board is in charge of granting licences for international
and domestic non-scheduled air service operations into and within Kenya.  The Board meets four
times a year to consider licence applications. An application fee is payable as well as an annuallicence fee.
118. Scheduled air transport services are subject to Bilateral Air Services Agreements (BASA)
negotiated by the Ministry with assistance and advice from the Ministry of Foreign Affairs, Attorney
General Chambers,  and Kenyan Airways.  Kenya Airways is the designated national carrier operating
scheduled services into and out of Kenya in accordance with BASAs.  In December 1995, the
Government sold 26% of Kenya Airways to KLM.  An additional 48% of the national carrier was sold
to the public (including foreign investors) in April 1996 
79;  the rest is owned by the Government of
Kenya.  However, other companies are allowed to operate:  international and domestic charter airlines
operate into and out of Kenya as well as within Kenya.  Some charter operators are locally owned
while others are foreign owned.80
119. Following the privatization of Kenya Airways, the Government's attention in this sector
focused on improving of efficiency in airport facilities.81  Kenya has two international airports:
Nairobi's Jomo Kenyata International Airport (JKLA) and Mombasa's Moi International Airport.
Table IV.14 details the performance of commercial traffic at Jomo Kenayatta and Moi International
airports; total passenger movement rose modestly while total freight handled dropped significantly by
some 25% during 1994-98.  The latter could be attr ibuted to the general slowdown of the economy.
There are medium-size airports at Nairobi (Wilson Airport), Kisumu, and Eldoret.  In addition, thereare more than 150 airstrips throughout the country.
82  Airports are publicly owned and managed by
the Kenya Airports Authority (KAA), a parastatal.
                                                     
79 USTR (1999).
80 East Africa , [online].  Available at:  http://www.africansafariair.com/, 26 May 1999.
81 Government of Kenya (1996a).
82 Dun and Bradstreet (1998).WT/TPR/S/64 Trade Policy Review
Page 82
Table IV.14
Commercial traffic at Jomo Kenyatta and Moi International airports, 1994-98
1994 1995 1996 1997 1998a
Passengers ('000')
Landed 1,187.4 1,104.8 1,137.2 1,259.6 1,312.0
Embarked 1,214.4 1,186.4 1,158.0 1,275.1 1,306.4
In Transitb370.8 383.5 395.8 300.5 255.0
Total 2,772.6 2,674.7 2,691.0 2,835.2 2,873.4
Freight ('000 tonnes)
Cargo:  Landed 23.0 22.0 23.8 23.9 24.0
             Loaded 59.2 49.1 40.2 41.7 37.4
Mail:    Landed 1.2 1.1 1.0 1.1 1.0
             Loaded 0.8 0.5 0.5 0.5 0.5
Total 84.2 72.9 65.5 67.2 62.9
a Provisional.
b Passengers in transit are those continuing their journey in the same aircraft.
Source: Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
(v) Tourism
120. Tourism is one of Kenya's major foreign exchange earners and an important employer,
accounting for some 16% of GDP.  The country has received on average 600,000 to 700,00 visitors a
year since 1991, earning about US$500 million.  Since 1995, the sector has faced a crisis, mainly due
to bad weather.  The crisis has intensified since 1997 as a result of security concerns and competitionfrom new emerging tourist markets in the African region.  According to the authorities, other
underlying causes for the weak performance of the tourism industry in recent years include:
insufficient tourism promotion and marketing efforts;  inadequate diversification of tourism products
and market segments;  a weak institutional and regulatory support framework;  deterioration of the
country's tourism infrastructure and other tourism-related services; a lack of skilled labour;environmental deterioration;  and poor control over tourism development.
83
121. The number of visitor arrivals and the average length of stay – key determinants of the level
of tourism earnings – continued to fall in 1998:  visitor arrivals fell by 10.6%, from more than 1
million persons recorded in 1997 to 894,300;84  and average length of stay dropped from 11.8 to 9.6
days (Table IV.15).  There was a general decrease in the number of visitor arrivals with the exceptionof transit visitors.  The total number of days stayed also declined, precipitating a sharp reduction
(of 22.7% ) in tourism receipts from US$323 million recorded in 1997 to US$250 million in 1998.
Table IV.15
Tourism in Kenya, 1994-98
Visitor arrivals
Purpose 1994 1995 1996 1997 1998a
Holiday 823.6 795.7 820.8 804.8 686.9
Business 104.0 100.5 103.7 101.7 86.8
Table IV.15 (cont'd)
                                                     
83 Government of Kenya (1996a);  and  Government of Kenya (1998).
84 Substantial decreases in visitors arrivals were registered throughout the year.  However, the highest
decrease was registered in the third quarter.  This was probably due to the effect of the bombing of the AmericanEmbassy in Nairobi in August 1998 and the subsequent negative travel advice (Government of Kenya, 1999b).Kenya WT/TPR/S/64
Page 83
Visitor arrivals
Purpose 1994 1995 1996 1997 1998a
Transit 58.4 55.8 56.2 72.3 101.9
Other 22.3 21.6 22.3 21.8 18.7
TOTAL 1,000.3 973.6 1,003.0 1,000.6 894.3
Number of days stayedb
Purpose 1994 1995 1996 1997 1998a
Holiday 13,472.2 10,371.2 12,087.6 9,603.0 7,132.7
Business 1,309.6 1,203.7 1,246.1 785.4 646.0
Transit 204.4 232.5 264.5 284.7 404.4
Total 14,986.2 11,807.4 13,598.2 10,673.1 8,183.1
Average length of stay in days 15.5 12.5 14.2 11.8 9.6
a Provisional.
b Excludes "Other visitors" category.
Source: Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
122. The decline in the number of visitors to parks and game reserves, which started in 1995, has
worsened.  In 1998 the number of visitors fell by 20.9% from 1,364,500 in 1997 to 1,079,400.
Substantial decreases affected all eight major national parks;  Amboseli, Tsavo East and Tsavo West
had the highest decrease (46.3%, 45.7% and 38.0%, respectively, compared with 1997).  Thisunsatisfactory performance was mainly due to the poor state of the roads and continued effects of the
1997 disturbances at the coast.  Only three national parks recorded increases in the number of visitors
in 1998.
85  Conference tourism has also declined.  There has been diminishing activity in terms of
international conferences held at the Kenyatta In ternational Conference Centre (KICC), as conference
organizers prefer to use major hotels with international-standard conference facilities.
123. Europe continues to be the major source of visitors to Kenya, especially Germany and the
United Kingdom, followed by Africa and North America.  The share of visitors from Europe fell from
64.5% in 1997 to 63.9% in 1998, of which over 85% were holidaymakers.  Africa, remains the second
largest source of visitors (15% of the total, of which 56% originated in Uganda and Tanzania(Table IV.16).
Table IV.16
Visitors by country of residence and purpose of visit, 1997 and 1998
('000)
Holiday Business Transit Totala
Country of residence
1997 1998 1997 1998 1997 1998 1997 1998b
Europe 515.8 466.4 34.9 31.6 32.7 45.4 583.4 543.4
Africa 67.4 61.0 42.6 38.5 20.2 28.0 130.2 127.5
North America 56.5 51.1 6.7 6.0 4.3 6.0 67.5 63.1
Asia 39.3 35.5 7.5 6.8 4.5 6.3 51.3 48.6
Australia and New Zealand 13.3 12.0 1.5 1.4 1.2 1.7 16.0 15.1
All other countries 52.0 46.9 0.8 0.7 3.3 4.5 56.1 52.1
Total 744.3 672.9 94.0 85.0 66.2 91.9 904.5 849.8
a Not including "Other visitors" category.
b Provisional.
Source: Government of Kenya (1999b), Economic Survey 1999 , Nairobi.
                                                     
85 Government of Kenya (1999b).WT/TPR/S/64 Trade Policy Review
Page 84
124. The Government body in charge of promoting tourism is the Department of Tourism of the
Ministry of Tourism and Wildlife (MOTW).  The Kenya Tourism Board (KTB) is mandated to
coordinate tourism promotion activities.  At the international level, this is achieved through the
activities of the tourism offices located in the major tourism-generating countries namely France,
Germany, Italy, South Africa, Switzerland, Sweden, the United Kingdom, and the United States.  The
Board and the Ministry participate in international tourism fairs.  The private sector, especiallythrough the major hotel chains, also promotes tour ism with special emphasis on their establishments.
A new private-sector initiative, through the recently formed Kenya Tourism Federations (KTF), is
expected  to supplement these activities.
86
125. No specific incentives have been granted to the tourism industry in Kenya.  However, as part
of the effort to support tourism, in fiscal year 1999/2000, 50% of the proceeds of the CateringTraining and Tourism Development Levy (CTTD Le vy), a 2% levy charged on all tourism services, is
expected to be spent on tourism promotion.
87  More emphasis will be put on promoting domestic
tourism to supplement foreign arrivals, especially during the low season.  To complete these efforts,
VAT on hotel and restaurant services will be reduced to 13% to compensate for the 2% CTTD Levy,
thus hotels and restaurants will face the same 15% tax rate as other Kenyan industries.88  Finally, the
Government has suspended visa fees for visitors staying for "up to 30 days".89
126. The tourism sector is regulated by the Hotels and Restaurant Act of 1986 and the Tourist
Industry Licensing Act of 1990.  The Foreign Investment Act is also relevant as it regulates
investment in all sectors of the economy (Chapter II).  The Hotel and Restaurant Act establishes the
Hotel and Restaurant Authority, which is in charge of reviewing the standards of hotels and
restaurants; stipulating the specific licensing requirements for hotels, and fees for the granting of a
hotel and restaurant licence;  and regulating prices through fixing minimum or maximum chargesmade by any hotel or restaurant.  The fee for the hotel licence varies according to the number of beds
while the licence fee for a restaurant is based on the previous year's gross receipts (Table IV.17).
These fees are in addition to those specified in the Tourist Industry Licensing Act.
Table IV.17
Licence fees for hotels and restaurants
Licence fees for Hotels
Beds KSh
    5 to   10 500
  11 to   20 1,000
  21 to   40 2,000
  41 to   80 3,000
  81 to 120 4,000
121 to 200 5,000
201 to 300 6,000
301 to 400 7,000
401 and over 8,000
Table IV. 17 (cont'd)
                                                     
86 Government of Kenya (1999b)
87 Government of Kenya (1999c).
88 Government of Kenya (1999c).
89 Government of Kenya (1999c).Kenya WT/TPR/S/64
Page 85
Licence fees for restaurants
Gross receipts KSh
Over KSh 240,000 but not more than KSh 400,000   500
Over KSh 400,000 but not more than KSh 600,000 1,000
Over KSh 600,000 but not more than KSh 800,000 2,000
Over KSh 800,000 but not more than KSh 1,000,000 3,000
Over KSh 1,000,000 but not more than KSh 1,500,000 4,000
Over KSh 1,500,000 5,000
Source : The Hotels and Restaurant Acts.
127. The Tourist Industry Licensing Act regulates licensing requirements and fees for all tourism
industries.  Any person who wishes to establish a business in the tourism industry requires a license.
The authorities have discretionary powers to issue or refuse a licence, or to modify a licence, and may
impose such conditions as they deem desirable in the interests of the tourism industry as a whole.
Licences are valid for a period of one year from the date of issuance and are non-transferable.
However, governments-operated enterprises and taxi-cabs are exempt from licensing requirements.90
128. Tourism enterprises are classified as Class "A" or Class "B", and licence fee varies
accordingly (Table IV.18).  The licence fee for Class "A" regulated tourism enterprises is KSh 2,000;in addition, those receiving foreign tourists pay a KSh 10 fee per tourist.  The licence fee for
Class "B" enterprises is KSh 500.  In addition, Class "B" enterprises (such as hotels, motels, and
travel bureaux or booking offices offering tours or safaris that do not include hunting) receiving
tourists booked in advance from outside Kenya, in groups of six or more, pay a fee of KSh 10 for each
tourist.  Travel bureaux or booking offices of an airline operating international air routes but notcarrying on any tourist activities in Kenya, are not subject to this additional fee.
91
Table IV.18
Regulated tourist enterprises
Class "A" enterprises
Enterprises (whether carried on alone or in conjunction with some other enterprise) connected with the tourist industry in Keny a (other
than the excepted enterprises), and falling within one or more of the following classes:
1. Proprietors, owner-drivers and self-employed drivers of passenger vehicles used wholly or partly in a tourist enterprise
2. Tour or safari operators
3. Safari outfitters
4. Taxidermists
5. Motor-vehicle-hire enterprises offering tour transport facilities, whether self-driven or chauffeur-driven
6. Big-game-fishing outfitters
7. Proprietors of safari, hunting, or sightseeing lodges and proprietors of tented camps catering for tourists
8. Airlines based in Kenya accepting tourists as aircraft passengers on other than international flights, whether publicly or
privately owned
9. Travel bureaux or booking offices, other than those described in item 7 of Class "B" enterprises, and other than those of an
airline which operates international air routes and does not carry on any tourist activities in Kenya
10. Guides and couriers
11. Professional safari photographers
Table IV.18 (cont'd)
                                                     
90 The Tourist Industry Licensing Act.
91 The Tourist Industry Licensing Act.WT/TPR/S/64 Trade Policy Review
Page 86
Class "B" enterprises
Enterprises (whether carried on alone or in conjunction with some other enterprise) connected with the tourist industry in Keny a (other
than the excepted enterprises), and falling within one or more of the following classes:
1. Professional hunters, however classified by the Game Department, including trainee professional hunters, whether or not they
engage in any other employment
2. Hotels, motels, and similar establishments catering for tourists, unless exempted
3. Interpreters
4. Shopkeepers, stallholders and standholders and any other persons offering for sale to tourists, as a substantial part of their
business, goods made by hand from indigenous raw materials, and manufactures of such goods
5. Persons letting out vessels, whether manned or not
6. Proprietors of enterprises offering camps and camping equipment for hire
7. Travel bureaux or booking offices which (alone or with other business) offer tours or safaris that do not include hunting of
game animals or game birds, other than those of an airline which operates international air routes and does not carry on any
tourist activities in Kenya
Source: The Tourist Industry Licensing Act.Kenya WT/TPR/S/64
Page 87
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