Doing Business in Kenya - RSM International

Less than 20% of the land is suitable for cultivation, of which only 12% is classifiedas high potential (adequate rainfall) agricultural land and about 8% as mediumpotential land. The rest of the land is arid or semi-arid with a potential for cultivationthrough the use of irrigation systems.2.5.2 ManufacturingManufacturing, contributing to 10% of GDP, plays an important role in adding valueto agricultural output and providing forward and backward linkages. Over the years,the sector has been supported by a vibrant domestic demand as well as the regionalmarkets. A wide range of opportunities for direct and joint-venture investments existin the manufacturing sector, including agro-processing, manufacture of garments,electronics, paper, chemicals, pharmaceuticals, metal and engineering products forboth domestic and export markets.2.5.3 TourismTourism is Kenya’s third largest foreign exchange earner with over one millionvisitors annually. The tourism industry is growing as a result of the liberalisationmeasures, diversification of tourist generating markets, continued Governmentcommitment to providing an enabling environment and successful tourism promotioncampaigns. Kenya is also becoming a hub for regional and international conferences.The negative foreign press which in most cases overplays the security concernsin Kenya continues to negatively impact the sector. Enormous opportunities existfor investment in film production; recreation and entertainment facilities includingconference tourism, cultural tourism, cruise ship tourism, aviation/tour and traveltourism and eco-tourism.2.5.4 FinancialThe banking sector was liberalised in 1995 and all exchange controls were lifted.The Central Bank of Kenya (CBK) is responsible for formulating and implementingthe monetary policy, fostering liquidity and solvency and overseeing the properfunctioning of the financial system. The banking industry in Kenya is governed bythe Companies Act, the Banking Act, the Central Bank of Kenya Act and the variousPrudential Guidelines issued by the CBK.The banking sector comprises 44 banking institutions. Most banks operate underthe traditional banking model where interest on loans is their principle source ofearnings. Loans and advances are the principal assets largely funded from customerdeposits. Until recently when the Government introduced long-term bonds withmaturities of up to 30 years, most savings and investment products had short tomedium tenures of 5 to 7 years. This model negatively affected the growth of mediumand long-term lending products which were required for projects with long gestationperiods, especially those in the infrastructure and real estate development sectors.DOING BUSINESS IN KENYA11