Nairobi Gate Industrial Park has become the first special economic zone (SEZ) to be gazetted and receive approval from the Kenyan Revenue Authority as a consolidated customs-controlled area in East Africa.
The SEZ will support the manufacturing industry, create jobs and help grow the local economy while positioning Nairobi Gate as a preferred locality for industrialists, manufacturers, exporters, importers, fast-moving consumer goods companies, retailers, cold storage and third-party logistics companies.
It offers fiscal benefits to tenants and developers which include corporate tax rate reductions from 30% to 10%, zero-rated VAT, reduced withholding taxes, preferential import duties, excise duty, import declaration fees, a 100% investment deduction allowance and lower business permit fees.
Nonfiscal benefits include rapid project approval and licensing with exemptions of projects requiring approval from the National Environmental Management Authority; no exchange controls with easy repatriation of capital and profits; and on-site customs documentation and inspection by customs staff.
Unlisted SA property investment group Improvon and private equity investor Actis, through their investment vehicle Impact North, are the developers of the park. It is situated on the Eastern Bypass of Nairobi with easy access to main arterial roads and close to Jomo Kenyatta International Airport, the inland container depot and the Southern Bypass.
“We expect to see rising demand for modern logistics and warehouse facilities in the park,” Dean Shillaw, an MD at Impact, told Business Day.
Shillaw said it is possible for Nairobi Gate to expand its boundaries onto adjacent land parcels, with opportunities arising from Mombasa Port or Eldoret International Airport — initially driven by light manufacturing followed by the logistics sector.
He said there is a limited supply of modern A-grade industrial park developments in Nairobi — considered top drawer — adding that Nairobi Gate is well positioned to capture market share.
The Actis and Improvon portfolio, mainly located in SA with interests in Zambia and Kenya, is diversifying away from rand currency and attracting dollar-denominated rentals. In Nairobi Gate, for example, leases are dollar-denominated, thus future-proofing shareholders’ interests.
According to Special Economic Zones Authority (SEZA) CEO Kenneth Chelule, until recently legislation to provide customs control provisions within a SEZ had not been passed. Nairobi Gate Industrial Park marks the first SEZ with full customs control provisions consolidated within the zone and comes after the passing of a bill that outlines the regulation of these zones.
“As SEZA, we believe the Nairobi Gate Industrial Park represents the flagship SEZ that will unlock significant economic growth opportunities and create multiple jobs, positioning Kenya to compete not only regionally but on the international stage as a manufacturing destination of choice,” said Chelule.
Shillaw said they expect to see growing demand for space along with rental growth. “In the past three years rentals have increased 3%-5%, which bodes well for A-grade light industrial and the logistics sector.”
Nairobi has more than 22-million square metres of gross lettable area (GLA) of industrial property. Less than 150,000m2 is A-grade.
The logistics sector has been controlled by international and regional third-party logistics providers who are still operating from very low volumetric-based facilities at inflated operational costs on a per-pallet basis.
Shillaw said demand comes from small to medium-sized businesses looking for units measuring 550m2-3,000m2. Many established businesses are also looking to relocate from older premises to newer ones to increase efficiencies and reduce costs.
Other users of modern facilities include businesses in light manufacturing, pharmaceutical companies, medical supply businesses, agricultural or agri-processing businesses, plastics manufacturing, food processing, dark kitchens and consolidated distribution centres for multi-use facilities.
“We see significant demand for A-grade facilities as the market increasingly appreciates its associated efficiencies and margin improvements,” said Shillaw.
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