Kenya's industrialization strategy has undergone significant changes since the introduction of the Export Processing Zones (EPZs) Act in 1990. The government later introduced the Special Economic Zones (SEZs) Act in 2015 to align with Vision 2030, Kenya's economic blueprint. This shift aimed to move beyond physical manufacturing and include commercial services, logistics, science and technology hubs, and tourism. The SEZ Act led to the creation of the Special Economic Zones Authority (SEZA), separate from the old EPZ Authority.
The SEZ Act has undergone several legislative changes, including the Business Laws (Amendment) Act in 2024, which restructured fiscal benefits for companies operating in these zones. The 2024 amendment introduced a fixed 10-year window of tax incentives from the date of licensing. In 2026, the Special Economic Zones (Amendment) Act was assented to, aiming to strengthen internal corporate reorganizations and allowing firms to restructure assets within the zones without massive tax penalties.
The government has proposed the Kenya Economic Zones Bill, 2026, which seeks to dissolve the EPZ and SEZ Acts and merge them into a single entity, the Kenya Economic Zones Authority (KEZA). The Bill, published on July 2, 2026, has elicited heated debate within the sector. If passed, it will repeal the laws establishing the two existing authorities and transfer pending litigation to the proposed new entity.
One of the contentious issues in the Bill is the proposed Sh5 billion minimum investment threshold for developers, operators, and other entities seeking to enter the economic zones. Sector players oppose this clause, arguing that it may exclude projects that generate employment opportunities or exports. The State Department for Investment Promotion has also made a case against the proposal, pushing for a tiered threshold.
The Association of Special Economic Zones (ASEZs) has petitioned the National Assembly's departmental committee, voicing reservations about the proposal. They argue that the Act should set out the policy, criteria, and enabling power, while the actual monetary thresholds should be prescribed in Regulations by the Cabinet Secretary. This, they believe, will allow for flexibility and adaptability in a fast-changing investment environment.
A fixed monetary threshold in primary legislation may create legislative rigidity, making it challenging to adjust in response to changing sectoral economics, technology, inflation, investment models, and regional development needs. The Association's investment analysis shows that 66.67% of sampled investments may be affected by the proposed threshold. This has raised concerns about the potential impact on Kenya's industrial growth and job creation.
The proposed Kenya Economic Zones Bill, 2026, is currently before the National Assembly's Departmental Committee on Trade, Investment, and Cooperatives. The committee will need to consider the concerns raised by sector players and the Association of Special Economic Zones before making a decision. The outcome will have significant implications for Kenya's industrialization strategy and its ability to attract investment.
Key points
- The proposed Sh5 billion entry ticket for economic zones may deter investment and contradict the goal of fostering industrial growth and job creation.
- Sector players and the State Department for Investment Promotion have raised concerns about the proposal, pushing for a more flexible and adaptable approach.
- The Association of Special Economic Zones has petitioned the National Assembly's departmental committee, voicing reservations about the proposal and advocating for a tiered threshold.
