Inside Dongo Kundu’s plan to create a regional industrial hub

Shipping & Logistics

Inside Dongo Kundu’s plan to create a regional industrial hub

Workers put the finishing touches on the first phase of the Dongo Kundu bypass in May. The route is now in use. FILE PHOTO | NMG

The Dongo Kundu Special Economic Zones (SEZ) Authority is set to kick off in July, kicking off a series of events that are expected to establish Mombasa as a regional logistics and manufacturing hub.

The center will include an export processing zone (EPZ), industrial parks, free trade zones, as well as other ancillary services such as tourism, meetings, conferences and exhibitions. It will also have zoned residential areas for workers.

“The first phase consisting of the industrial park – one of the projects whose detailed designs have been completed – will include the port, the free trade zone, the power supply, as well as the water reservoir,” said Kiyonori Matsushima, Special Economic Zone Development Advisor at JiCA.

“Already, an access road to the port inside the SEZA area and administrative block is under construction. The latter should be completed within the year.

The construction of the first phase will be under the JiCA loan program structured as a grant of 6 billion shillings and a concessional loan of 50 billion shillings repayable in 30 years with a grace period of 12 years, and a interest ranging from 0.01% for consultants to 0.1% for civil works. .

The zone, which aims to attract a larger share of foreign direct investment (FDI) and exports, as well as jobs, is being developed under the Ministry of Industrialization and is expected to be fully operational by 2026, according to Mr. Matsushima.

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Complementing the upcoming SEZ is a flowing network of road, sea, rail and air transport corridors, with the four key trade infrastructure facilities nearing completion with its proximity to the standard gauge railway, Moi International Airport and the forthcoming Mombasa Southern Bypass or Dongo Kundu Bypass cutting through the SEZ, as Kenya spearheads significant investment in port infrastructure development with the aim of maintaining its competitiveness in maritime port operations and global shipping in the region.

Kenya faces competition from the Central Corridor from Dar Es Salaam, Tanzania, through the Serengeti to DRC Congo.

The Mombasa Port Gate Project aims to increase Kenya’s export volumes, as part of its export promotion programs.

The area is one component of the Mombasa Port Development Project (MPDP) – a succession of projects aimed at increasing port capacity and improving logistics along the northern economic corridor leading to hinterland countries. East African countries served by the Port of Mombasa.

These countries include Uganda, Rwanda, Burundi, Democratic Republic of Congo (DRC), South Sudan, Somalia and southern Ethiopia, as well as northern Tanzania.

The establishment of SEZs is already attracting more and more attention as a hub for investors with reduced bureaucracy for entry and a favorable tax regime.

In accordance with the revised draft SEZ regulations (2019), companies operating in the zone will be exempt from VAT; reduction of corporation tax from 30% to 10% for the first 10 years and to 15% for the following 10 years; exemption from taxes and duties payable under the Customs and Excise Act (2014), the Income Tax Act (1974), the EAC Customs Management Act (2004) and the stamp duty ; and waiving advertising and license fees at the county level.

In addition to an improved regulatory and administrative regime, a special customs regime and an attractive tax regime, the zone will benefit from four key commercial infrastructures thanks to its strategic proximity to the expanded port of Mombasa with a new container terminal. (CT-2), Standard Gauge Railway, Moi International Airport and the upcoming Mombasa Southern Bypass passing through the Dongo Kundu SEZ linking it to all transport nodes and then to local and regional economies.

The combined elements are expected to strengthen Kenya’s position as a regional logistics and transshipment hub, with an eye beyond the East African countries that have historically relied on the port.

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“The Dongo Kundu SEZ has the potential to completely change the economic dynamics of the region as it connects the Indian Ocean to Africa. And there will be a lot more business activity and investment, which will really revitalize economic activity in this region and create jobs for the region and beyond,” said the Japanese Ambassador to Kenya, Ken Okaniwa.

“With a location for pan-African regional operations – a dedicated area for the African Continental Free Trade Area (AfCFTA) – we expect the port to provide growing access to regional markets and a catalyst for local private sector development.”

The SEZ authority said it would help SMEs establish direct export and subcontracting links with companies in the zone.

Also, through the SEZ, the second container terminal at the Port of Mombasa is nearing completion. The SGR was connected to the harbor for rapid cargo evacuation and the harbor channel was widened to accommodate larger vessels.

With funding from the Japanese and Kenyan governments at a ratio of 95:5, the new container terminal (CT-2) is under development with a loan amounting to 58.8 billion shillings (Phase I—26, 7 billion shillings and Phase 2—32 shillings 1 billion), and for the 28 km Dongo Kundu road, a loan of 40 billion shillings.

“Already, with the port expansion project (CT-2) underway, Kenya is well on its way to more than doubling its container handling capacity,” explained Dr. Stephen Mogere, Infrastructure and Assessment Advisor of Japan International Cooperation Agency (JICA).

“The Dongo Kundu bypass is a very important road project as it will help improve the cargo evacuation system around the port.”

Dr Mogere, speaking last week on a media tour of port development projects, said the projects were “a forward-thinking project.

He said the port of Mombasa had exceeded its design capacity, but still had to manage the growth in imports and exports.

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