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4. Barriers to investment
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4.1 Barriers to investment access

There are no entry barriers for foreign direct investment (FDI) in Kenya, but the Kenya Investment Promotion Act specifies that a foreign investor needs to invest no less than US$500,000 to get investment approval from the Kenya Investment Authority. In contrast, the threshold for a local investor is only 5 million Kenyan Shillings (an equivalent of US$65,000). This regulation creates great obstacles to foreign investment, especially in non-capital-driven industries such as the service industry.

4.2 Barriers to investment operation

The Kenyan Government has set different treatment standards for foreign investment in terms of business areas, products, enterprise ownership, and the use of land, and has imposed many restrictions on business activities conducted by foreign investors. All these have seriously deterred foreign investors from investing in Kenya.

4.2.1 Restrictions on business areas

Areas such as Nairobi, Mombasa, Nakuru, Kisumu, Eldoret and parts of Thika are defined by the Kenya Trade Licensing Act as general business areas. Non-citizens shall not conduct business outside the general business areas unless specifically authorized to do so in a license.

4.2.2 Restrictions on products

The Trade Licensing Act also lists a range of about 70 specified goods (from foodstuffs to other manufactured goods) in which non-citizens are banned from conducting a business unless specifically authorized to do so in a license.

4.2.3 Restrictions on ownership

Ownership restrictions are set on companies listed on the Nairobi Stock Exchange, which are required to have at least 25 percent national ownership.

4.2.4 Restrictions on land use

The Kenya Land Control Act prohibits either non-citizen private enterprises or joint venture enterprises make any agricultural land transaction (including land dealing, transfer, leasing and mortgage). However, this Act gives full discretionary powers to the President to grant exemption to any land control transaction.

Presidential exemption thus becomes the main channel through which foreign investors can acquire agricultural land. There are no official procedures or published guidelines that investors can follow, which makes the process for foreign investors to acquire agricultural land very lengthy and unpredictable.

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