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KONZA TECHNOLOGY CITYwhere Africa’s silicon savannah begins...

SUMMARY DOCUMENTApril 2011

where Africa’s silicon savannah begins...

Prepared by:

Pell Frischmann with support from

Hamilton Harrison & Mathews, Nairobi

Summit Strategies Limited, Nairobi

1

i INTRODUCTION 2

ii THE VISION 4

2.1 Masterplan Considerations

2.2 Infrastructure

2.3 Transport Strategy - Summary

2.4 Strategic Environmental and Social Assessment Executive Summary

1 MASTERPLAN 6

1.1 The Site

1.2 Masterplan Concept

1.3 Key Features of the Plan

2 TRAFFIC AND TRANSPORTATION 12

3 INFRASTRUCTURE 14

3.1 Water

3.2 Wastewater

3.3 Storm Water

3.4 Telecommunications

3.5 Power

3.6 Solid Waste

3.7 Summary Analysis of Infrastructure

CONTENTS

VIP SUMMARY CONTENTSKONZA TECHNOLOGY CITY

4 ENVIRONMENT 19

4.1 Water Sourcing

4.2 Waste Management

4.3 Impacts on Protected Migratory Species

4.4 UncontrolledInfluxMagration

4.5 Social Impact

5 PHASING 22

6 ECONOMIC ASSESSMENT 24

7 LEGAL FRAMEWORK 27

7.1 Institutional and Regulatory Framework

7.2 Land Acquisition and Development

7.3 Project Development

7.4 Incentive Framework

7.5 Other Relevant Issues

7.5.1 The East African Common Market

7.5.2 Data Protection

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iINTRODUCTION

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Introduction

The Government of Kenya are to sponsor the development of new-town catalysts, to launch East Africa into Global Business Process Outsourcing. Building on a rapidly expanding demand for providing international top quality financial and business process services, this undertaking will harness talent from a strong well-educated and highly competitive local work force.

The following synopsis provides details of the Masterplan, Economic Assessment and Legal framework prepared by international consultants. The project plan explains how key service provision for infrastructure and development design will be used to construct a state-of-the-art 21st century exemplar city – Konza Technology City. Driven by commercial technology services the site will also be home to Kenya’s Financial City initiative, provide University and Science Parks, potentially house government ministry relocations from nearby Nairobi and establish a modern living community which attracts high calibre professionals to a modern life style.

VIP SUMMARY INTRODUCTIONKONZA TECHNOLOGY CITY

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iiTHE VISION

5VIP SUMMARY THE VISIONKONZA TECHNOLOGY CITY

The Vision

Kenya’s Vision 2030 aims to improve the quality of life for the citizens of Kenya by transforming employment markets, enhancing social infrastructure and securing good governance. Konza Technology City embodies this thinking. Designed to be a beacon of excellence for not only Kenya but all of Africa, the city represents an ambitious vision of a modern, inclusive and sustainable Kenya. Konza Technology City is based on successful new town projects around the world and draws on international best practice to ensure global competitiveness.

6 PREAMBLE VIP SUMMARYKONZA TECHNOLOGY CITY

1MASTERPLAN

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Masterplan

Nairobi60 km

To Mombasa

Konza Technology City

Jomo Kenyatta Airport50 km

Planned High Speed Rail Linkto Nairobi and Airport

4km

A109 Mombasa Road

VIP SUMMARY MASTERPLANKONZA TECHNOLOGY CITY

The 2,000 hectare city will be located on a greenfield site 60km south of Nairobi. It is already a location with excellent transport and communication links. The A109 Highway connecting Nairobi with Mombasa runs adjacent to the site, the mainline Konza rail station is less than 4km away and Jomo Kenyatta airport is under 50km.

NAIROBI

EMALI

MOMBASA

JOMO KENYATTA AIRPORT

A109

A3

B7

B3

A1

A2

B9

B1

NAKURU

MARSABIT

KONZA

KENYA

Kenyan Context

Local Context

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1.1 THE SITE

The site is relatively flat and is crossed by two seasonal watercourses, both of which feed into the Stony Athi. To the east and west there are hills that are locally distinctive landmarks. The existing use of the site is marginal agricultural land and unused land forming part of the Black Cotton plains.

MASTERPLAN VIP SUMMARYKONZA TECHNOLOGY CITY

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1.2 MASTERPLAN CONCEPT

The commercial engine of the new city will be a cluster of technology businesses, financial services firms and other enterprises. Konza will be developed with world class infrastructure, especially ICT infrastructure, which will enable firms located there to compete on a global stage.

VIP SUMMARY MASTERPLANKONZA TECHNOLOGY CITY

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The residential community occupies much of the • remaining areas of the proposed Technology City. This will provide accommodation for employees and their families who will work in the BPO Technopark, the CBD and in the various local community facilities. The residential community will include appropriate provision for schools, health -care facilities, churches and mosques, play facilities and sports facilities.

Green corridors are proposed along the alignment • of the watercourses which are protected in the Plan. This will help to avoid flood risk to the new buildings and also provides additional open space. These could also serve as ecological corridors through the site.

The Konza Road is proposed to be paved to provide • easy access for all vehicular traffic.

A “Greenbelt” control zone of approximately 2 • km is proposed around the site to protect the setting of the Technology City and guard against the development of informal settlements on the boundary of the site; to reserve land for the possible future expansion of the Technopolis; and to institute rigorous control of development in the area around the site. This area could also be designated as a Nature Conservancy Zone which could be managed by Kenya Wildlife Services (KWS) to minimise the impact of the new town on local wildlife.

1.3 KEy FEATURES OF THE PLAN ARE:

A radial road structure with the public transport • roads (shown in red) providing the preferred means of access to all parts of the proposed city.

A Central Business District (CBD) is proposed in the • heart of the city, easily accessible to all residents and workers both by public transport, walking, cycling and by car. A modern city centre will include high class shopping, sport, cultural and leisure facilities as well as amenities like a district hospital.

The city will also include safe, well designed • neighbourhoods, providing 35,000 new homes for people working in the city. Schooling will be provided for all age groups from pre-school to university.

The BPO (Business Process Outsourcing) • Technopark is split into two zones to the north and south of the CBD. These areas are easily accessible to local residents expected to work there and also to employees living outside the Technology City. The Technopark provides an attractive setting to attract inward investment into this sector, in accordance with the Government’s Vision 2030.

The Science Park is envisaged to the south of the • BPO Park.

A central park near the CBD is proposed to be laid • out as a public park, providing a green lung for the residents and workers.

A site for a university campus is shown to the north • of the CBD. This will provide an area for academic buildings, student residences and sports and leisure facilities for students. It is accessible to the CBD and will assist in the cross-fertilisation of ideas between the university and businesses on site.

MASTERPLAN VIP SUMMARYKONZA TECHNOLOGY CITY

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KONZA

ROAD

A109 M

OM

BASA

ROA

D

0 1km250m 500m 750m

KeySite areaRivers

LandscapingWater FeaturesSewage Treatment Works

Roads

BPO Techno ParkCentral Business DistrictScience Park

University CampusOpen spacesReserve siteVery High Density ResidentialHigh Density ResidentialMedium Density ResidentialLow Density ResidentialBuildings

VIP SUMMARY MASTERPLANKONZA TECHNOLOGY CITY

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2TRAFFIC AND TRANSPORTATION

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Traffic and Transportation

VIP SUMMARY TRAFFIC AND TRANSPORTATIONKONZA TECHNOLOGY CITY

The Masterplan development sets out a land use scenario which will be supported, integrated and realised through a high quality transport system. Konza Technology City will contribute massively to the regional economic development and its modern transport system will allow the city to function efficiently.

The key aim of the Transport Strategy, which was developed in integration with the land use patterns proposed for the Masterplan, is to propose a transport system which (i) meets travel demands to-from Konza Technology City and (ii) provides for the movement of people and goods in an efficient and sustainable manner.

The Transport Strategy will encompass all modes (public and private transport) and all facilities (highway network, traffic management systems, etc.). Key features for the achievement of a high quality transport system are as following:

Encourage the road widening of the A109 to be • extended from Machakos turn-off up to the site in order to improve site accessibility by reducing journey time and hence transport cost;

Develop the road network on a hierarchical basis • and in integration with the Masterplan to a high standard as there are no physical, land or property boundary constraints;

Develop strategic bus corridors which will inter-• connect the proposed development areas. The strategic corridors should have as their focus the proposed BPO and CBD areas and other facilities proposed under the Master Plan. The corridors should afford extensive priority to buses;

Develop a comprehensive traffic management • programme (covering junction controls, signals, channelisation, road marking, etc.), with particular attention to be paid to parking policy; and

Develop an Institutional Arrangement to set up and • operate the Transport Strategy.

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3INFRASTRUCTURE

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Infrastructure

VIP SUMMARY INFRASTRUCTUREKONZA TECHNOLOGY CITY

The Konza site has little existing infrastructure and presents what is essentially a “green field” site for development. Whilst this might be perceived as a challenge, the lack of existing infrastructure represents an opportunity to develop a fully integrated, modern infrastructure, designed specifically for the intended land use. Opportunities exist to incorporate sustainable solutions for water recycling, energy recovery and waste minimisation within the design, thus reducing the dependency upon raw resources and leading to a green eco-friendly development.

The location of the Technology City, beside the main Nairobi-Mombasa route, provides not only excellent road and rail transport links, but also direct access to Kenya’s existing long-distance power and telecommunications transmission systems.

Perhaps the biggest challenge for the development will be the incorporation of a suitable water source. The Konza region, in common with most of Kenya, has a significant water deficit. Limited groundwater sources are available close to the site. Konza will need to be incorporated within a bulk regional water scheme including the construction of new dams and pipelines to supplement and reinforce supplies from existing dams and water transfer schemes in the region.

3.1 WATER

The demand for water has been based upon the proposed land use allocation and phasing, together with typical water consumption data for domestic, commercial, irrigation and other uses. Demand will be offset by the use of treated wastewater for certain irrigation uses. Allowances have also been made for leakage and for daily variability in demand to give a forecast average supply requirement of 10 mega litres per day (Ml/d) in the 1st Phase, rising to 34 Ml/d upon completion of all forecast development. Rainwater recycling may offer a means to further offset the demand for potable water. “Greywater” collected from roofs may be stored and used for non-potable applications such as toilet flushing and irrigation.

The proposed water infrastructure comprises a single centralised water treatment works and an associated network of distribution mains. The water treatment works will be located to the north of the site to take advantage of higher levels in this area and enable a supply pressurised by gravity to most areas.

The scale and complexity of the water treatment process will be dictated by the quality of available water sources, land take has been provisionally estimated as 10 hectares; based upon a conventional treatment process comprising flocculators-clarifiers, sand filtration, activated carbon and chlorination. The land area includes treated water reservoirs to provide secure storage of 1½ days’ supply.

The distribution mains will be divided into four supply zones to enhance control, security and the phased development of the site.

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3.2 WASTEWATER

Wastewater will be collected in a network of sewers, separate from the surface water (i.e. rainfall) drainage system. The existing topography facilitates a gravity driven sewerage system following ground contours to a wastewater treatment works located at the south-western corner of the development area. A pumping station will lift the wastewater at the inlet to the wastewater treatment works, allowing a gravity flow through the treatment stages and onwards to a discharge point into the Stony Athi river. The proposed site is also downwind of the major development areas for both the summer and winter prevailing wind directions.

The wastewater treatment process proposed is waste stabilisation ponds (WSPs), in line with current strategies for wastewater treatment at other large population centres in Kenya. This process utilises long retention times and natural sunlight and oxygen to achieve effective treatment of wastewater by removing pollutants and killing pathogens. The treated wastewater will be suitable for discharge to the river (subject to the necessary consents) or for reuse for irrigation of certain crops and landscaped areas, which will reduce the development demand upon potable water. WSPs are particularly well suited to the Kenya climate and offer a much more sustainable solution than alternative power-intensive wastewater treatment processes such as activated sludge. They are also extremely simple to build, operate and maintain, requiring a minimum of equipment, and have a low risk of odour or noise nuisance. WSPs do, however, require a large area of land in order to provide the necessary retention times. The land area required for the wastewater treatment works has been estimated as 35 hectares for Phase 1, rising to 50 hectares in future.

The sludge which accumulates in the ponds is removed periodically, after draining. It provides a valuable source of nutrients as an agricultural fertiliser.

Methane can be collected from the initial, anaerobic stage of the WSP system. This gas can be used in combined heat and power (CHP) engines to generate electricity and provide hot water for local use.

INFRASTRUCTURE VIP SUMMARYKONZA TECHNOLOGY CITY

3.3 STORM WATER

The surface water collection system will be kept separate from the wastewater sewers to prevent contamination of the rivers or dilution of the wastewater. The network of pipes and large diameter drains will permit the rapid collection and discharge of surface water into the dry rivers which pass through the development.

Flood lagoons, placed at strategic locations on the dry rivers, will control the rate of flow in the rivers, improving flow efficiency and reducing the risk of scouring in flood conditions.

3.4 TELECOMMUNICATIONS

The Konza site is ideally placed for high speed, high bandwidth communications, being adjacent to the main route for long-distance fibre-optic cables between Nairobi and Mombasa.

Within the development itself, a state-of-the-art access network will comprise four exchanges, linked by dual-redundant fibre-optic networks, distributing outwards via star-configuration fibre-optic cables. This network will offer a complete modern telecommunications package of high-speed internet, telephony and video services.

Kenya has a rapidly developing mobile telephone market with healthy competition and major investment by the major service providers. By involving the service providers in the development process, they can expand their coverage to suit the needs of the Technology City.

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3.5 POWER

The power demand for the site has been estimated using international codes and standards and knowledge gained from previous projects. The estimated total demand for all development phases is 675 MVA.

It is proposed that the supply to the site will come from the 400 kV line proposed between Mombasa and Nairobi. A new 400/220 kV Main substation will be constructed to connect the site to the grid. Additional security of supply could be achieved through the provision of site based standby generation facilities, if required, although careful consideration of the integration of these would be necessary in order to make appropriate and effective utilisation of these assets.

Appropriate distribution substations, transformers and ring mains will be distributed across the site in order to adequately and securely meet demand.

VIP SUMMARY INFRASTRUCTUREKONZA TECHNOLOGY CITY

3.6 SOLID WASTE

The strategy for solid waste management is based upon principles of sustainable development and the protection of human health and the environment by producing less waste and by using it as a resource wherever possible. Sustainable waste management aims to apply the ‘waste hierarchy’ of reduction, re-use, recycling and composting (to use waste as a source of energy) and only disposing as a last resort.

The first stage is to move collected waste to strategic transfer stations and associated treatment system. The system will incorporate a mix of technologies complementing each other to provide a range of recyclates and products for use locally, along with the generation of energy and heat for local commerce and housing. Efficient operation will ensure the quantities of wastes generated is collected, treated, processed and disposed of without being noticed by the general populace. Vital to this system and underpinning it is the provision of a secure landfill site for the disposal of residuals, the management of fluctuations in the waste stream and to act as a buffer for process down time.

18 INFRASTRUCTURE VIP SUMMARYKONZA TECHNOLOGY CITY

Infrastructure Element

Existing conditions Proposed strategy

Water No existing infrastructure. Local water resources inadequate.

Offsite major supply source, incorporated within a regional supply scheme. Central water treatment works and reservoir storage.

Maximise water re-use and rainwater harvesting to supplement.

Wastewater No existing infrastructure. Centralised treatment works using waste stabilisation ponds.

Effluent reuse for irrigation. Sludge disposal to agriculture for reuse as a soil conditioner.

Storm Water No existing infrastructure. Run-off flows to dry rivers.

Comprehensive network of storm drains.

Power No existing infrastructure on the site.

To obtain a 400kV dual supply to the site from an overhead line. This will be transformed to 66kV and 11kV at strategic points around the site.

Solid Waste No existing infrastructure. Identify suitable local site for landfill and collection points, develop commercial incentives for recycling and reuse (Energy from Waste) and managed collections in line with the integrated waste management philosophy.

Telecoms Good GSM coverage & fibre optic cables nearby.

New fibre optic Access network, providing high speed internet, voice and video connectivity.

3.7 SUMMARy ANALySIS OF INFRASTRUCTURE

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4ENVIRONMENT

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Environment

A Strategic Environmental and Social Assessment (SESA) has been undertaken based on the guidance provided by the National Environment Management Authority (NEMA) and International Finance Corporation (IFC) to evaluate the impact of the proposed Konza Technology City, recommend appropriate mitigation and assess legal and institutional aspects relevant to the impacts and risks.

The SESA is based on a master-plan for 80,000 jobs. It is proposed that this be increased to 175,000 jobs in which case a revised assessment will be needed.

However, the key generic challenges are shown below:

4.1 WATER SOURCING:

The development has the potential to have several impacts on the water environment; positive impacts include maintenance of the two existing water courses on site, maintaining natural drainage systems. The project will include the development of infrastructure which will increase water resources to the area and will include water treatment facilities which will help maintain the area’s water quality.

A significant challenge however, is the large increase in the demand for water resources; the area already experiences water shortages with demand outstripping supply. With no feasible on-site sources, water will need to be sourced from offsite. Water supply options will require a full EIA in order to determine the environmental and social impacts of water extraction -including those upstream and downstream of any extraction location once determined.

4.2 WASTE MANAGEMENT:

The development of the city will result in the creation of large amounts of construction, commercial and household waste, if this is not disposed of appropriately then it could result in a moderate/large negative impact on the environment in the form of air, ground and water pollution.

The Konza Technology City should include the provision of waste transfer, sorting and recycling centers and measures for the promotion and education of workers and residents in the means of reuse, reduction and recycling of waste. Alternative means of waste disposal other than conventional landfill should also be explored.

ENVIRONMENT VIP SUMMARYKONZA TECHNOLOGY CITY

21VIP SUMMARY ENVIRONMENTKONZA TECHNOLOGY CITY

4.3 IMPACT ON PROTECTED MIGRATORy SPECIES:

The current proposed development covers a land area of 2,000 hectares providing a loss of habitat and grazing area and the displacement and disturbance of wildlife currently located on site. Migratory herbivores such as the wildebeest, zebra and antelope were identified on site during a site visit in July 2010. The development will result in the loss of usable grazing area for the migratory mammals from the Athi Kapati migratory corridor to the west. The initial project included a 2 km buffer zone and a set of measures designed so that while the choice was of development over biodiversity conservation, the potential negative impact was minimized. Should the revised Masterplan be taken forward a new EIA assessing the impacts of the additional land area on migratory species will be required.

4.4 UNCONTROLLED INFLUx MIGRATION:

A large indirect negative impact of the city will be the potential for informal unregulated development attracted to the area and the rapid development of slums. This would result in further land take, pollution, resource consumption etc associated with urban sprawl. This has the potential to have greater impact than the development itself due to the unregulated nature of growth, and lack of pollution control measures and waste facilities. This growth is likely to take place within the planned buffer zone, impeding the implementation of mitigation measures and significantly altering the initial baseline data.

4.5 SOCIAL IMPACT:

The project has potential significant long term positive impacts in terms of providing direct job and training opportunities as well as the stimulation of economic activity in the surrounding area and the district as a whole.

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5PHASING

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Phasing

Phase 2 Phase 4

VIP SUMMARY PHASINGKONZA TECHNOLOGY CITY

Konza Technology City is designed to allow phased development which will permit rapid growth while ensuring that the civic amenities and infrastructure grow with the population’s needs.

Phase 1 Phase 3

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6ECONOMIC ASSESSMENT

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Economic Assessment

Market Demand

Konza Technology City presents a promising opportunity for Kenya to develop an alternative and complimentary path for economic development in line with Vision 2030 by exploiting ITES and IT Products in the ICT Park1. Konza also provides an opportunity as noted in the comparator countries to transform the country into a knowledge economy. Thus, this is a policy driven initiative as a tool for job creation, national transformation to launch the country to new frontiers. Government will aim to structure the project so as to recoup as much as possible of this initial investment funding in later phases.

The key focus areas of opportunity within the ITES are BPO, ITO, KPO and CSO as illustrated below. A key strategy to realise this goal include;

To sell demand and only then sell talent and other • infrastructure advantages. Availability of talent and infrastructure provides a foundation but is not sufficient to excite investors. There exists unexploited local demand, which will provide comfort to international actors.

To sell Konza ICT Park as a product of the Eastern • African region for the world. This takes advantage of the expanded East African Community market to provide language variety e.g. French from Rwanda and Burundi and the larger market access.

ITES industry is people based and thus will drive • uptake at Konza by shifting people – Centre of Excellence (COE) for Africa at Konza, affordable housing in the Technology City for up to 20% of ICT Park staff, mass transport system to Nairobi, low cost of space, among others.

BPO ITO KPO CSO

Horizontals Most developed with local captive markets dominating – services include contact centres and digitisation

Emerging with software development as key area of focus targeting local and foreign investors

Activity in this space not significant if any and provide opportunity

Emerging with few companies starting animation

Verticals Banking Financial Service & Insurance

Telecommunications

Government developing a shared service platform, digitisation

1 Note that the ICT Park is within the Konza Technology City. The ICT Park is expected to be the focus of the first phase of development of the wider Konza Technology City project together with some city amenities and residential development that will support the ICT Park staff working during the day and house a significant part of the ICT Park staff and their families over time that will reside in the Technology City. Additional development of the city is expected to take place as the ICT Park becomes established over time but such demand for the wider city was not part of the ICT Park demand study.

VIP SUMMARY ECONOMIC ASSESSMENTKONZA TECHNOLOGY CITY

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With the strong government commitment as demonstrated in the purchase of the 5,000-acre land for the City, the project could help generate 15,000 ITES/ electronic manufacturing direct jobs (and 45,000 indirect jobs) nationally in phase 1 by 2015. Konza itself would host approximately 8,000 direct jobs by 2015. Revenue generated arising from Konza ICT activities would be US$ 244 million annually. In phase 2, the jobs created nationally would rise to 39,000 direct jobs with half of the direct jobs in Konza ICT Park. Konza ICT Park jobs are expected to generate US$ 607 million annually. By 2032 the national market would generate 349,000 jobs (approximately 1million indirect jobs). Konza ICT Park is expected to host the bulk of the direct jobs while the rest are in other private sector driven initiatives. Total revenue generated at Konza ICT Park is projected at US$ 5.4 billion by 2032. This market will initially be driven by regional demand and therefore Kenya can exploit the first mover advantage by positioning Konza ICT Park as regional product for the world.

These figures are conservative compared with comparator countries and sites of Cyberjaya (Malaysia), Cyber City (Mauritius), Smart Village (Egypt) among others and the projections are inspired by early trends of mature markets of India and Philippines. Recurring success factors in these comparator countries that inspire the design of Konza Technology City are;

A very focused and visionary government • commitment over the long term to give the private sector comfort through a proof of concept in the first phase of the project

Progressive inclusion of private sector to increasing • take over some of risks

Parks are increasingly generic in design and • implementation, thus the differentiator is the value addition demonstrated through commitment and a superior operating environment, strategic access to other markets in the neighbourhood of eastern African region, market insights, access to talent, geopolitical stability macroeconomic stability

A self-sustaining ecosystem within the City and • its neighbourhood comprising of Incubation, Science Park, Research and Development, Centre of Excellence and Universities

This is a long-term project and will be developed through a sequenced approach with clear milestones driven by a high-level champion to handhold and transition the project into the future.

The government identified the need to establish Special Economic Zones (SEZs) to cater for industrial activities and requirements for agro-industrial, manufacturing, Information and Communications Technology and Small and Medium Enterprise (SME). The SEZ framework will address key factors that enhance Kenya’s competitiveness as an investment destination through infrastructure provision, simplification of business regulations, value chain integration and clustering, expanded market access for SEZ goods and services, and reduced taxation. SEZ will be a vehicle that may be applied to enhance investment attractiveness at Konza Technology City.

ECONOMIC ASSESSMENT VIP SUMMARYKONZA TECHNOLOGY CITY

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7LEGAL FRAMEWORK

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Hamilton Harrison & Mathews (HH&M), as the legal transaction advisors to the project, carried out a legal and regulatory framework review in order to identify the legal implications of all legislation and other pertinent laws on the project. The following were the key issues identified by HH&M:

7.1 INSTITUTIONAL AND REGULATORyC FRAMEWORK

The Government intends to set up the project under a Special Economic Zones (SEZ) program, currently being formulated by an inter-ministerial team. HH&M reviewed the draft SEZ bill dated August 2009 and identified various deficiencies. We understand that these deficiencies are currently being addressed by the inter-ministerial team but ultimately, the SEZ law should provide an enabling institutional and regulatory framework under which SEZs can operate. Key areas that need to be adequately addressed include:

the establishment of an autonomous regulatory i. authority with adequate powers and statutory functions necessary to implement the objectives of the SEZ law;

a clear framework for the designation of SEZ land ii. and development of SEZs which allows for private sector participation;

a transparent licensing regime that not only iii. encompasses a “one-stop shop” but also provides tools to ensure harmony between the SEZ authority and other regulators (such as CCK and KRA); and

a suitable incentive framework that is not only iv. attractive to investors but also ensures that the objectives of the SEZ program are achieved.

Legal Framework

7.2 LAND ACqUISITION AND DEVELOPMENT

Pursuant to the provisions of the new Constitution, all existing land laws will be revised, consolidated and rationalized and this will significantly affect the manner in which land in Kenya may be acquired, utilised and disposed. For instance, under the new Constitution, all public land (including land owned by the state or state agencies) will be vested in the National Land Commission. The Constitution further provides that public land may only be used or disposed in terms of an Act of Parliament specifying the nature and terms of that disposal or use. It is therefore necessary that the SEZ law grant express powers to the SEZ authority to dispose land acquired by it for SEZ purposes in such manner as it may deem necessary in order to achieve the objectives of the SEZ law.

With regard to development of SEZ land, it will be necessary to harmonize the physical planning laws and the SEZ law to ensure that the objectives of the SEZ policy are taken into account in developing regional and local development plans and in granting development approvals. It will also be important to harmonize the roles of the different regulators involved in this process (such as the local authorities, the physical planning department and the Commissioner of Lands).

LEGAL FRAMEWORK VIP SUMMARYKONZA TECHNOLOGY CITY

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7.3 PROjECT DEVELOPMENT

The Government intends to develop the project under the PPP Framework. The existing PPP framework sets out an elaborate procedure for the approval of PPP arrangements (including approval by cabinet) and these have significant time and cost implications which will need to be taken into account in planning the project schedule. In addition, the relevant decision makers will need to be satisfied that the project meets the overall objectives of the PPP framework before approving the proposed PPP arrangements.

Regarding ownership of the project, it is possible for the Government to transfer the land and the development of the project to a separate entity e.g. a state corporation incorporated under the State Corporations Act and the Companies Act or a development authority incorporated by statute. This entity can then, as a separate legal entity, perform the role of developer or appoint a master developer, and in the future, be able to act as the ‘landlord’ to charge levies and maintain standards of construction and maintenance of the developments.

The advantages of this are that a State Corporation can be set up fairly quickly; the project can be run by an autonomous body (although this will still be subject to PPP law, procurement law etc.); the autonomous body can have private participation in the future (by way of shareholders, independent directors etc); and this body can be financially independent from Government (save for the shareholding or ownership of the body by Government). Further consultations and advice needs to be taken if this option is to be considered by Government

7.4 INCENTIVE FRAMEWORK

The SEZ bill proposes various procedural and fiscal incentives. Some of these, particularly the fiscal incentives will need to be incorporated into the existing tax legislation in order to bring them into effect. More importantly, it is important to bear in mind the provisions of the multilateral treaties that Kenya has ratified, as these cannot be easily amended.

The other issue to bear in mind is that under the new Constitution, county governments may be able to impose additional taxation over and above that imposed by the national government. In this regard, the national government will need to educate county governments on the general objectives of SEZ program in order to ensure that the taxation policies established at county level do not defeat the objectives of the SEZ program. That said, it could be argued that the SEZ program is a matter of national importance and to that extent any laws passed at county level that are inconsistent with the SEZ law will be superseded by the SEZ law.

7.5 OTHER RELEVANT ISSUES

7.5.1 The East African Common Market

The East African Common Market Protocol, which came into force on 1st July 2010, provides for free movement of people, goods, services and labour within the East African Community (“EAC”). It is not clear how SEZs will be treated once the Common Market Protocol comes into force. There will be need for amendments to the Customs Union Protocol to make suitable provisions relating to SEZs including import duties and market access conditions and perhaps this is something that the Government should begin engaging other EAC member states in.

7.5.2 Data Protection

Kenya has no specific data protection legislation. The absence of data protection legislation is something that may discourage investment in the project and we would recommend that suitable data protection legislation be enacted in order to give investors confidence that the privacy of their communications and transactions will be adequately safeguarded.

VIP SUMMARY LEGAL FRAMEWORKKONZA TECHNOLOGY CITY

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Permanent Secretary Ministry of Information and Communications Telposta Towers, 10 Floor Kenyatta Avenue P.O. Box 30025, 00100 Nairobi, Kenya

Tel: +254 20 225 1152

The CEO Kenya ICT Board Telposta Towers, 12 Floor Kenyatta Avenue P.O. Box 27150, 00100 Nairobi, Kenya

Tel: +254 20 208 9061 Email: info@konzacity.com

www.konzacity.com