Required Report - public distribution

**Date:** 10/22/2004

**GAIN Report Number:** KE4013

KE4013

**Kenya**

**Exporter Guide**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Kevin N. Smith

U.S. Embassy, Nairobi

**Prepared by:**

Carol N. Kamau

**Report Highlights:**

Establishment of personal relationships is key in successfully marketing
agricultural products in Kenya. Once trust is established, a productive
working relationship can be expected.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Nairobi \[KE1\]

\[KE\]

**Section I: Market Overview**

Kenya's new government, which took office in January 2003, was elected
on its promises of economic reform. For the last decade, Kenya's economy
has performed poorly. In 2003, the growth rate was negative 1.8%.
Estimated real growth domestic product (GDP) growth for 2004 is 2.3%.
Slow growth is attributed to a decline in almost all the key sectors,
prolonged drought, high fuel costs, inadequate power supply,
deterioration of infrastructure, pervasive corruption and low aggregate
demand. Depreciation of the Kenyan Shilling for the last 6 months has
also aggravated the problem. This has led to increased poverty and high
inflation. Fifty seven per cent of the total population lives below the
poverty line. Despite the poor recent performance, Kenya remains the
most developed economy in East Africa with a GDP approaching \$10
billion. Kenya enjoys an extensive, though deteriorating infrastructure.
Mombasa provides deep-water facilities to landlocked neighboring
countries as well as Kenya. This port with 21 berths, 2 bulk oil jetties
and dry bulk wharves, handles all sizes of ships and all types of cargo.
Currently the port is undergoing comprehensive restructuring aimed at
enhancing efficiency and delivery of service. Kenya\'s financial and
manufacturing industries, while still small, are the most sophisticated
in East Africa.

# Consumer Market

Kenya has a relatively well-educated population estimated at 31.4
million and a strong entrepreneurial tradition. With 44% of its
population under the age of 15 years, Kenya has a high dependency ratio.
Nairobi, the capital, is the largest city and has the highest population
density. Most of the population in Nairobi is young - 18 to 37 years.
Socio-economic surveys have categorized urban consumers based on their
monthly earnings:

-   Lower Income - monthly earnings below Kshs. 10,000 (US \$ 125); 29%
    of the total urban working population.

-   Middle Income - monthly earnings between Kshs. 10,000 and Kshs.40,
    000 (US \$ 125-500); 59% of the total urban working population.

-   Upper Income- monthly earnings of Kshs. 40,000 (US \$ 500) and
    above; 12% of the total urban working population.

The growing middle class (5-10% of the total population) and the large
expatriate community account for the relatively high demand for high
value consumer-oriented food items.

# Commercial Environment

Good prospects exist for U.S. food and agricultural high value products
in the East African market. There is a growing supermarket industry in
Kenya and competition is intense. Agents and distributors remain the key
to developing export of U.S. consumer-oriented food items. The dominant
supermarket chains in Kenya are offering American high value products
(nuts, snack, salad dressings, sauces, canned and pet foods etc.).

Establishment of a personal relationship with importers is essential to
selling food products in Kenya. There is no established direct presence
of American distribution companies in Kenya. Appointing a sole
distribution agent in Kenya may be a good strategy for some products.
Currently, some Kenyan companies buy from U.S. suppliers and handle all
the details of importing. It is important to have a knowledgeable Kenyan
company involved on the import side to address the special
characteristics of the Kenyan market.

![](media/image2.wmf)

# Section II: Exporter Business Tips

# Local Business Customs

The principles of customary business courtesy, especially replying
promptly to request for price quotations and orders, are a prerequisite
for exporting success.

In general, Kenyan business executives are relatively informal and open.
The use of first or surname name at an early stage of a business
relationship is acceptable. Friendship and mutual trust are highly
valued and once this trust is earned, a productive working relationship
can be expected.

Like anywhere else in the world, negotiation is paramount. Early Indian
and Arab influences in Kenya introduced haggling at retail level refined
into bargaining at wholesale and distribution levels. Thus, Kenyan
businessmen usually drive a hard bargain.

Business gifts are not common but business entertainment like lunches,
golf and cocktails help finalize major deals and agreements.

Kenyan businessmen appreciate quality and service and are ready to pay
extra if convinced of a product\'s overall superiority. The market is
very price sensitive, however and care must be taken to assure that the
delivery dates are closely maintained and that after-sales service is
promptly honored. While there are numerous factors that may interfere
with prompt shipment, the U.S. exporter should allow for additional
shipping time to Kenya and ensure the Kenyan buyer is continuously
updated on changes in shipping schedules and routing. It is better to
quote a later delivery date that can be guaranteed than an earlier one
that is not completely certain. Since Kenyan importers generally do a
lower volume of business than the U.S. exporters, U.S. exporters should
be ready to sell smaller lots than is the custom in the U.S.

The U.S. exporter should maintain close liaison with the importer to
exchange information and ideas. The importer should serve as a good
source of market information and as appraiser of product market
acceptance. In most instances, mail, fax or telephone communications are
sufficient but understanding developed through periodic personal visits
is the best way to keep the importers apprized of new developments and
to resolve problems quickly.

Prompt acknowledgment of correspondence by fax or email is recommended.

As is the case in most markets, vigorous and sustained promotion is
often needed to launch new products.

# General Consumer Tastes and Preferences

The Kenyan market is very sensitive to price. Most of the consumers base
their buying decisions more on price than quality. A big share of the
food items (over 70 per cent) in the retail and food service sectors are
locally manufactured, though there are some imported foodstuffs (refer
to HRI and Retail Food Sector Reports). Consumers have a limited
awareness of U.S. brands and product range.

# Food Standards and Regulations

Imported foodstuffs must comply with standards stipulated by Kenya
Bureau of Standards (KEBS). In absence of these, Codex Alimentarius
(international) standards apply.

In relation to the retail and food service sectors, the most important
standards are the \"Labeling of prepackaged Foods-KS -05-40 Parts 1-4\",
which has guidelines on nutritional requirements and claims. The
standards are available from KEBS at a cost. According to the
guidelines, labeling must show manufacture and expiry dates, brand/trade
name and country of origin among other requirements. The label must be
in English and/or Kiswahili language. Weights and measure indicators
must be in metric and imperial forms.

KEBS is currently reviewing all food standards and harmonizing with
other standards in the East African region. Imported foods with
non-nutritive sweeteners (e.g. aspartame, potassium cyclamate, sodium
saccharine etc.) are restricted. If imported, KEBS must be informed.

There is no current requirement to label foodstuffs that may contain
genetically modified ingredients. A draft policy on biotechnology and
related aspects is in place and under discussion by relevant
stakeholders.

For further details on Kenya's food and agricultural import regulations,
refer to FAIRS Report KE4009.

**[General import and inspection Procedures]{.underline}**

Agricultural goods and products imported into Kenya from overseas
countries are all subject to Government regulations as implemented by
the Kenya Revenue Authority (KRA) Customs and Excise Department, Kenya
Bureau of Standards (KEBS), Kenya Plant Health Inspectorate Service
(KEPHIS) and Department of Veterinary Services (DVS).

The Customs and Excise Department collects taxes including import duty,
excise duty (both on imports and locally manufactured products), and
value added tax (VAT) on imports. KEBS inspects all imported processed
foods and non-food items, while KEPHIS certifies all exports and imports
of bulk, raw agricultural products and planting materials to ensure that
they are free from pests and diseases. DVS is the regulatory institution
that certifies imports of meat and livestock related products among
other duties.

There is no import licensing except for a few items restricted for
security, health or environmental issues detailed in the Imports,
Exports and Essential Supplies Act (Cap 502).

All imports procured by Kenyan based importers must be insured with
companies licensed to conduct business in Kenya.

# Import Documents

Imports to Kenya may be entered under any of the following categories:
for direct home use, warehousing, use in a bonded factory, transit,
temporary importation and use in an export processing zone facility.

All Kenyan imports are required to have the following documents: import
declaration form(IDF -- initiates the inspection process and is
submitted by the importer after which a clean report of finding(CRF) is
issued by the preshipment inspection firm), C63 form -- a customs
declaration form which is a requirement for clearance of imports and
valid proforma invoices from the exporting firm.

An Import Declaration Form (IDF) is a form filled by the importer
showing details of goods

being imported. The form is subject to government levy of 2.75% of
C.I.F. value declared.

KEBS also charges an inspection fee of 0.2% of C.I.F value on imported
processed foods.

During the budget for Fiscal Year 2002/3, the government reduced the
2.75% IDF fees to Kshs.5000 applicable to imported goods used for
manufacturing goods for export.

Goods with F.O.B. value of US \$5,000 and above are subject to
pre-shipment inspection for quality, quantity and price. A Clean Report
of Findings (CRF) report is then issued by one of the two government of
Kenya appointed inspection agents: Cotecna Inspections Inc. (in charge
of North America region and other countries not covered by Intertek
Testing Services International Limited which pre-inspects imports from
Europe, Asian countries, North Africa and Middle East. The CRF must be
obtained and produced at the time of goods clearance. Failure to produce
CRF would be of serious consequence, as goods will be held at the port
of entry till local inspection is done resulting in high demurrage
charges. Random inspections are also undertaken even for shipment of
goods with a F.O.B. value below US \$5,000 at the port of entry.

It is advisable to have all documentation ready two weeks before the
arrival of sea shipments and one week respectively for airfreight.

Foodstuffs containing radioactive ingredients are subject to radioactive
analysis by Ministry of Health. A levy of Kshs. 3000 (US \$ 37.50) is
charged for each sample analyzed.

**[Documents required by Customs and Excise Department.]{.underline}**

Depending on the mode of transportation, the following documents are
required by the Kenya Customs and Excise Department:

\(a\) Original bill of lading for sea freight and air bill for
airfreight duly stamped and endorsed at the back by shipper.

\(b\) IDF

\(c\) Commercial/valid proforma invoice from the exporter.

\(d\) Packing list

\(e\) CRF where applicable

\(f\) C63 Form.

# Import Taxes

Kenya\'s import regulations on agricultural products change frequently
depending on politics, domestic supply and demand. Currently, the import
duty on foodstuffs competing with Kenyan products is 35%. These
foodstuffs include meat and meat products, dairy products, poultry and
poultry products. To protect the local dairy industry, duty on imported
powdered milk is 60%.

Value Added Tax (VAT) is levied on goods imported into or manufactured
in Kenya, and taxable services imported or provided. The standard VAT is
16%. Restaurant services are also taxable at 16%.

Excise duties are levied on fruit juices, beer, tobacco products,
matches, spirits, wines, mineral water and biscuits. The rates vary for
different products; for example, for fruit juices is 10%, biscuits is
Kshs.70 per kilogram (US \$ 0.875).

# Section III: Market Sector Structure and Trends

Kenya's food retail, food service and food processing sectors are simple
but diverse.

Food wholesaling and distribution is relatively simple and direct. There
is limited direct importation from the United States. Most high value
food products from the US are imported via consolidators in Dubai
(United Arab Emirates) or suppliers in South Africa and Europe.

Importing companies or agents sell the goods directly to the
supermarkets and hotels and/or through appointed
distributors/wholesalers. In contrast to local manufacturers, importers
do no promotional activities.

Locally manufactured goods are sold either directly to the supermarkets
and the food service sector and/or through appointed distributors.

Food service is a very important sector in the Kenyan tourism industry.
Tourism is the third largest foreign exchange earner in the country.
Earnings from the sector declined by US \$ 39.5 to US \$ 141 M in the
first eight months of 2002 compared with US \$ 180.6M in a similar
period in 2001. Tourists arriving at the main international airport
(JKIA) declined by 9.5% in the same period. The slowdown is attributed
to deterioration in the global economic environment and the threat of
international terrorism.

With the economic growth rate estimated at 2.3% in 2004, a positive
growth is also expected in the food industry.

NOTE: Please refer to the 2002 HRI Food Sector and 2000 Retail Food
Sector Reports

**Section IV: Best High-Value Product Prospects**

Generally, a wide range of the dry groceries. Specifically,

· Breakfast cereals

· Snack foods (popcorn, sweets, confectioneries, etc\...)

· Canned foods

· Nuts and dried fruits (almonds, peanuts, hazelnuts, walnuts).

· Salad dressings

· Soups and sauces

· Rice (brown long grain US rice and parboiled)

· Bread Spreads (jams, jellies, marmalade, and butter)

· Californian wines

· Energy Drinks

· Processed fruit and energy juices

**Section V: Key Contacts and Further Information**

US Embassy, Nairobi

Office of Agricultural Affairs

Unit 64114

APO AE 09831

Tel: 254-2-363 6340

Fax: 254-2-363 6349

Email: <AgNairobi@usda.gov>

Website: **http://www.fas.usda.gov**

Contact: Kevin N Smith, Regional Agricultural Attaché

Foreign Commercial Service

Unit 64100

APO AE 09831- 4100

Tel: 254-2-363 0000

Fax: 254-2-363 6065

Email: <nairobi.office.box@mail.doc.gov>

# Government of Kenya 

Kenya Bureau of Standards

P.O. Box 54974

Nairobi, Kenya.

Tel: 254-20-600034/66 or 69028201/401/410

Fax: 254-20-609660/503293

Email: <info@kebs.org>

Website: **http://www.kebs.org**

Contact: Eng. John Masila, Managing Director

Kenya Revenue Authority

Office of Commissioner General

P.O.Box 48240 00100

Nairobi, Kenya.

Tel: 254-20-2817700/7800 or 343342

Fax: 254-20-341342

Email: <cic@kra.go.ke>

Website: **http://www.revenue.go.ke**

Cotecna Inspections East Africa

Head Office

P.O.Box 86337 80100

Mombasa, Kenya.

Tel: 254-41-226683/313485/314874

Fax: 254-41-315535/226683

Email: <ciealmsa@cotecna.co.ke>

Or

P.O. Box 62526 00200

Nairobi, Kenya.

Tel: 254-20-2719397/2718169/2719642

Fax: 254-20-2712030/2718180

Email: <coinsnbo@cotecna.co.ke>

Cotecna Inspections Inc.

14200 Park Meadow Drive, Suite 120

Chantilly, VA 22021

Tel: 703-814-4000

Fax: 703-814-4020

Kenya Plant Health Inspectorate Service(KEPHIS)

P.O.Box 49592

Nairobi. Kenya

Tel: 254-20- 884545, 882933, 882387

Fax: 254-20- 882265

Email: <kephis@nbnet.co.ke>

Website: **www.kephis.org**

Contact: Dr. C.J. Kedera, Managing Director

Department of Veterinary Services

P.O. Private Bag. 00625, Kabete.

Tel: 254-20- 631383/2231/1287

Fax: 254-20-631273

Email: <cvfovetlabs@kenyaweb.com>

Contact: Dr. William Chong, Managing Director

![](media/image3.wmf)

**Table B: Consumer Food & Edible Fishery Products Imports**

![](media/image4.wmf)

**Table C: Top 15 Suppliers of Consumer Foods & Edible Fishery
Products**

![](media/image5.wmf)

**[NOTE]{.underline}: Based on most recent trade data from the UNTrade
database.**