The first private special economic zone (SEZ) in Kenya focused exclusively on services has been set up in the capital Nairobi, aimed at furthering the country’s position as a regional hub for tech talent and companies.

The Two Rivers International Finance and Innovation Centre (Trific) was officially established as an SEZ in June 2023. The free zone will span 259,000 sq m in the Gigiri/Runda neighbourhood across an existing 412,800 sq m mixed-use development, which includes offices, a hotel, residential apartments and shopping mall.

James Mworia, the CEO of Centum Group, a listed investment company that owns a majority stake in the Two Rivers development, tells fDi that the free zone will act as a “plug-and-play solution” for companies seeking a local partner in establishing part of their business in Africa.

“We have moved beyond saying Kenya is an attractive location by actually making it actionable and easy for enterprises to come and establish part of their business here,” he says. The Two Rivers development already has in place 1.2MW of solar installations, utilities and a master plan to develop up to 1.2m sq m of land.

High-growth sectors

Trific is aiming to attract companies in the business process outsourcing (BPO), technology and financial services sector. Mr Mworia says that “more than 20 entities” are in the process of applying to become an SEZ enterprise and set up in Two Rivers.

“Kenya has a very deep pool of human capital and talent that is globally competitive,” he says, adding that setting up in Nairobi could help companies address labour shortages in the rest of the world.

As part of Kenya’s established services sector – which accounted for 54% of GDP in 2021 – and booming tech start-up ecosystem, nicknamed Silicon Savannah, a number of companies have established offices in Nairobi in the past year. This includes Ethiopian research consultancy Frontieri and France-based Hummingbirds, which develops and finances carbon projects. 

In fact, Nairobi is the most popular destination city for foreign business services investments in east Africa, according to fDi Markets data, but it trails other African hubs such as Johannesburg, Cape Town, Casablanca and Cairo.

Kenya’s 2023 Finance Bill, which was introduced to Parliament in April 2023, has also resulted in a number of changes to taxes in the east African country. Mr Mworia notes that “a number of issues were resolved”, including the introduction of deferred taxation of shares that start-ups issue to their employees, which makes Trific even more attractive.

According to a study of 13 African cities undertaken on fDi Benchmark, Nairobi is the fourth most competitive African city to set up shared services centre/BPO operations, behind Addis Ababa, Cairo and Accra. The model allocates a weighting of 75% to cost factors and 25% to quality factors.  

Competition with other free zones

There are 24 other free zones in Kenya, including Tatu City in Nairobi, but most are more focused on attracting manufacturing, agriculture and logistics companies. Trific was established in co-operation with the Kenyan government, which has actively been using SEZs as a means to attract FDI and generate employment.

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• DRC and Zambia set for EV free zones

Mr Mworia says that Trific will be “complementary” to other zones, and is engaging with the Nairobi International Financial Centre, which was established in 2021 to foster close co-operation with and investment from financial institutions.

A number of fiscal incentives will be offered to SEZ-designated companies. These include corporation tax of 10% (compared with 30% outside the SEZ), withholding taxes on dividends, interest and royalties of 5% (compared with 15%) and exemption from import duties on equipment.

Mr Mworia says that the incentives offered to SEZ entities means they “can be globally competitive at the point of providing the service”, whether they are providing them to customers in Kenya or internationally.

“Now you have a hub that pulls everything together and overlays it with some degree of fiscal competitiveness,” says Mr Mworia, who adds that there will be a “huge relaxation” on work permits and residency for companies seeking to bring in foreign talent.

This article first appeared in the August/September 2023 print edition of fDi Intelligence.