Kenya has benefitted from a benign fiscal regime, which has been hampered by headwinds created by the geopolitical situation.
May 28, 2021
Africa - East
Relatively straight-forward Production Sharing Contract ("PSC") fiscal regime, with no royalty and with the contractors income tax liability being paid by the government. Cost recovery is negotiable, and production sharing is based on a sliding scale mechanism with project profitability (R-Factors). The State, through Kenya National Oil Company (KNOC), is entitled to a 10% stake in the event of a commercial discovery with no development carry.
Kenya has a positive investment climate that has made it attractive to international firms seeking a location for regional or pan-African operations. The novel coronavirus pandemic has affected the short-term economic outlook, but the country remains resilient in addressing the health and economic challenges. In July 2020 the U.S. and Kenya launched negotiations for a Free Trade Agreement, the first in sub-Saharan Africa. In the World Bank’s 2020 Doing Business report Kenya improved 7 places, ranking 56 of 190 economies reviewed. In the last three years, it has moved up 54 places on this index. Year-on-year, Kenya continues to improve its regulatory framework and its attractiveness as a destination for foreign direct investment. Despite this progress in the ease of doing business rankings, U.S. businesses operating in Kenya still face aggressive tax collection attempts and significant bureaucratic processes and delays in issuing necessary business licenses. Corruption remains endemic and Transparency International’s (TI) 2019 Global Corruption Perception Index ranked Kenya 137 out of 198 countries, worsening by seven spots compared to 2018.
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
© 2021 Oil & Gas Advisors Limited
Website by Rugby Web Design