Kenya

Investment & Operational Criteria

Key Indicators

Risk Premia

0.625

%

Outlook

Neutral

Rating

DDD|3U|±

Ranking

108

Reserves (1P)

Total

mm boe

Oil

0

%

Summary

Kenya has benefitted from a benign fiscal regime, which has been hampered further by geopolitical headwinds.

Updated

February 15, 2024

Country Basics

Region

Africa - East

Reserves (1P)

Oil

mm bbl

Gas

bcf

Location

KenyaKenya

Eastern Africa, bordering the Indian Ocean, between Somalia and Tanzania.

Outline

Tax Regime
Type

Multiple (PSC/Concession)

Tax Regime
Notes

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.

Investment & 
Operational
Climate

Kenya has a positive investment climate that has made it attractive to international firms seeking a location for regional or pan-African operations. Kenya’s August 2022 general elections ushered in a new government that is focused on attracting more foreign direct investment (FDI) and enacting policies that are conducive to Foreign investment. The new administration’s five-year economic development plan, dubbed the Bottom-Up Economic Transformation Agenda, identifies agriculture; micro, small and medium enterprises (MSMEs); affordable housing and settlement; universal healthcare coverage; digital superhighway; and the creative economy as core pillars towards achieving transformational inclusive growth. In July 2022, the United States and Kenya launched the Strategic Trade and Investment Partnership negotiations, a first-of-its-kind bilateral trade agreement in sub-Saharan Africa with the US. In April 2023, the President of Kenya announced a series of tax and regulatory reforms aimed at improving Kenya’s investment climate, including completing Kenya’s National Tax Policy by June 2023, and keeping it in place for a minimum of three years. The President also committed to, by June 2023, removing the VAT on exported services, paying all verified tax refund claims within six months or if not repaid allowing the taxpayer to offset the claims against future tax liabilities, and removing the tax on unrealized gains on employee-allocated shares for startup companies. All these reforms and others were incorporated into the 2023 Finance Act signed by President Ruto in June 2023; implementation of these reforms remained pending as of July 2023 due to legal challenges to other components of the Finance Act. Despite this progress, Foreign businesses operating in Kenya still face burdensome bureaucratic processes and delays in receiving necessary business licenses. Corruption remains pervasive and Transparency International ranked Kenya 123 out of 180 countries in its 2022 Global Corruption Perception Index – reflecting modest progress over the last decade but still below the global average.

Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.

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