Kenya’s ambitious plan to develop a Special Economic Zone at Mombasa has received a major boost with the Japanese government’s commitment to fund the project.
Japan, which is behind the Master Plan for the Dongo Kundu SEZ and free port has agreed to pump Sh260 billion into the development of the project’s infrastructure ecosystem, and the Mombasa Gateway Bridge.
This is part of the financial agreements worth Sh350 billion signed during President William Ruto’s visit to Japan this week.
These agreements will support projects and programmes in sectors that are aimed at turning around the economic fortunes of the country, according to State House.
The latest developments are a boost to Kenya’s plans of turning Mombasa into an industrial hub, as the country aims at increasing its exports while cutting imports.
The Dongo Kundu SEZ is being developed on a 3000-acre land and will comprise a free port, industrial parks, free trade zones, logistics and warehousing, energy project areas, tourism, and MICE among other developments.
The Japan International Cooperation Agency (JICA) developed the Master Plan, a key development partner at the Port of Mombasa.
Plans for the construction of the first multi-purpose berth to serve the Dongo Kundu Special Economic Zones in Mombasa is at an advanced stage, according to Kenya Ports Authority.
The project, to be developed under a Public–Private Partnership arrangement, is expected to cost at least $340 million (Sh55.4 billion).
The berth is a critical component of the wider Dondo Kundu SEZ, a Vision 2030 project aimed at development of a free trade zone, free port and industrial zones with a view to opening up the Coast and creating employment opportunities.
According to KPA, the Dongo Kundu berth 1 will be 300 metres-long with a depth of minus 15 metres, which will allow it to hold large vessels.
“The SEZ will boost trade and spur economic growth through the expansion of manufacturing, growth of exports as well as positioning Kenya as a trade and logistics hub for the Eastern and Central Africa Region and beyond,” KPA management said.
Dongo Kundu is part of the government’s SEZs developments, including the Naivasha Special Economic Zones, Lamu SEZ and Kenani Leather Park in Athi River, aimed at boosting manufacturing and exports amid efforts to cut on imports.
Already, Taifa Gas Company and East African Tea Traders Association have broken ground at the Dongo Kundu SEZ.
The Tanzanian firm (Taifa) is putting up a Sh20.8 billion LPG facility with a capacity of 30,000 tonnes, in what is expected to shake-up the cooking gas industry in the country which has been dominated by a few individuals and multi-nationals.
The government is hoping Dongo Kundu will attract more investors as it pushes the Special Economic Zones initiative, with incentives to companies taking up space at the facilities.
For instance, licensed SEZ enterprises, developers and operators benefit from various tax rebates such as exemption from excise duty, customs duty, value added tax and stamp duty, advantageous corporate income tax rates and preferential withholding tax rates, especially in relation to profit repatriation.
With a raft of tax and non-tax benefits, the government expects that not only will foreign investors be encouraged to invest in Kenya, but that local industry players will also be afforded an opportunity to competitively access international markets.
The government keen to fast-track development of the Dongo Kundu SEZ, with hopes industrial activities will up and running earlier than its initial timeline of 2026.
Meanwhile, President Ruto and Prime Minister Fumio Kushida also agreed that Kenya will issue a Sh40 billion Samurai bond in Japan to finance energy and infrastructure projects.
A Samurai bond is a yen-denominated bond issued in Tokyo by a non-Japanese company. The bond is, however, subject to Japanese regulations.
Kenya also secured Sh30 billion from the Japan Bank for International Cooperation to purchase heavy machinery and mechanised assets.
The Olkaria Geothermal Development Project will get Sh15 billion. Japan will also provide Sh1 billion for the production of medical oxygen for various hospitals.
Through the United Nations, Kenya will receive Sh320 million humanitarian aid for those affected by the recent El Nino-related floods.
Other agreements include MoUs on cooperation in the ICT, health, finance and security sectors.
The MoU will include enhancing the capacity of the Kenya Medical Research Institute (KEMRI) to build on its pandemic management potential, at a cost of Sh3 billion.
To strengthen the partnership between the two countries in defence, an agreement on Defence Cooperation was also signed. This makes Kenya the first African country to sign a defence pact with Japan.
The President acknowledged Japan’s support for the completion of Phase II of the Mwea Irrigation Scheme and the National Rice Master Plan.
President Ruto witnessed the signing of the bilateral agreements on Thursday after holding talks with Prime Minister Kishida of Japan.