Setting Up vs Acquiring: How a Foreign Manufacturer Should Actually Enter the Kenyan Market

A foreign manufacturer entering Kenya faces a much more capital-intensive version of the build-versus-buy question than a technology company does. Land, physical infrastructure and existing licences cannot be stood up in a few months, which changes the calculation considerably compared with a services business. The two routes, building a new plant or acquiring an existing one, carry different legal risks, and the right choice depends on what you are buying besides the equipment.

Greenfield gives you a clean slate, at a real time cost

Building a new facility means securing land, obtaining an environmental impact assessment licence, going through county planning and building approvals, and commissioning the plant before a single unit is produced. Section 58(1) of the Environmental Management and Co-ordination Act requires the proponent of a project listed in the Second Schedule to submit a project report to the National Environment Management Authority before financing, commencing, proceeding with or carrying out the undertaking, whatever other approvals have been granted. This realistically runs well over a year for anything beyond a small operation, and every stage carries its own approval risk. What it buys you is a facility built to your specification, with no inherited compliance history and no legacy liabilities to investigate.

Land needs early attention for a foreign investor. Article 65 of the Constitution allows a person who is not a citizen to hold land on leasehold only, for no more than ninety-nine years, and treats a body corporate as a citizen only if it is wholly owned by citizens. A Kenyan subsidiary with foreign shareholders should therefore expect to hold land as a leaseholder. Lease term, rent review and renewal rights should be negotiated at the outset, because ninety-nine years is a ceiling, not a default, and the length of lease you obtain affects how a lender or later buyer values the plant.

Acquiring an existing facility compresses the timeline but imports its history

Buying an existing manufacturer can put you into production quickly, with a facility, a trained workforce and existing supplier and customer relationships in place. The trade-off is that you inherit the facility’s actual compliance position, not its paperwork: its environmental licence and compliance history, its labour and pension obligations, and the physical condition of machinery that may need more investment than a walk-through suggests. A facility bought cheaply because it needs environmental remediation or equipment replacement is not necessarily the bargain the price implies.

The structure of the deal matters. In a share purchase the licences stay with the company, and so do its liabilities. In an asset purchase you choose what you take, but licences and approvals must be transferred or re-obtained. Section 65 of the Environmental Management and Co-ordination Act allows an environmental impact assessment licence to be transferred by the holder to another person only in respect of the project for which it was issued. Other environmental and operating licences should be reviewed separately against their own terms.

Special Economic Zone status is usually easier to obtain fresh

The Special Economic Zones Act, 2015 requires a person carrying on business as a zone developer, operator or enterprise to hold a licence issued under the Act (section 26), and section 27 provides for the application to the Authority by a person who intends to carry on that business. We found no provision in the Act that transfers a licence automatically to a buyer of the business. If zone incentives are central to your investment case, confirm early and directly with the Special Economic Zones Authority whether an acquired facility’s licence carries over to new ownership on the terms you assume, or whether you would need to apply afresh. Settle this before it is priced into the deal.

Where the decision lands for a foreign manufacturer

If your product needs a bespoke facility, a specific location, or certainty about zone incentives from day one, greenfield is usually the more predictable route despite the longer timeline. If speed to production matters more than a clean legal history, and you can run thorough environmental and labour due diligence before committing, acquisition can work, provided the price reflects what the inspection and compliance review turn up and not just the facility’s book value.

Acquisition due diligence checklist

• Environmental impact assessment licence, annual audit reports and any notices from the environmental regulator.
• Title to the land, the lease term remaining and any restrictions on foreign ownership.
• Operating licences, product standards certificates and county permits, and whether each can be transferred.
• Employment contracts, pension and redundancy obligations, and any pending disputes.
• Zone or export incentives held, and the terms on which they continue after a change of ownership.