Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
Prior to shipment, Kenya requires both pre-shipment verification of conformity (PVoC) with Kenyan standards in the country of origin, and since March 1, 2009, an import standards mark is also required.
Companies usually engage the services of distributors or agents to cut on costs related to staffing, logistics, and infrastructure as well as to leverage the expertise of the dealers it contracts within particular markets or geographical segmentation.
A distributor, depending on the nature and magnitude of the business, may also sub-contract other distributors to deal in the areas that they feel are under served or experiencing high demand. Distributors reduce the costs of market transactions by taking advantage of economies of scale, as well as reduce information costs that a company might incur. Distributors in different areas are therefore used to gain information and relay the same to the companies for appropriate strategy formulation. Further, local logistics functions can prove complicated for less experienced companies.
Using an Agent to Sell U.S. Products and Services
Kenya has no laws or policies requiring the retention of a local agent or distributor by a U.S. or other foreign company exporting to Kenya. However, it is highly advisable for a U.S. company to retain an agent or distributor who is resident in Kenya. If the product to be exported requires servicing, qualified service personnel and a reasonable supply of spare parts must be provided. To locate an agent, distributor, or partner, U.S. business representatives may contact the nearest U.S. Department of Commerce Export Assistance Center (USEAC) and request an International Partner Search (IPS) or a Gold Key Service (GKS). The Commercial Service charges fees for these services to cover costs. The Commercial Service in Nairobi also provides extensive counseling services for U.S. businesses and their partners and representatives. In addition, the American Chamber of Commerce Kenya (AmCham) helps U.S foreign and local enterprises do business in Kenya.
Establishing an Office
To establish a legal presence in Kenya, U.S. firms may need to register with the Kenyan Registrar of Companies as a foreign company. Incorporation of a company in Kenya as a subsidiary of a U.S. corporation, as opposed to the registration of a U.S. firm, is a more complicated and expensive process.
The Registrar of Companies issues a “Certificate of Compliance” that certifies that the requirements of the Kenyan Companies Act have been fulfilled. This allows the company to obtain trading licenses from local authorities and the Ministry of Industry, Trade and Cooperatives.
The U.S. Commercial Service Kenya recommends that U.S. firms obtain the services of a local attorney to undertake registration.
For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of Department of State’s Investment Climate Statements website.
Franchising is growing in popularity with brands such as Cold Stone Creamery, Domino’s Pizza, KFC, Pizza Hut, Cold stone Creamery, and Subway present in Kenya. While franchising is most common in the hospitality industry, other franchising industries in Kenya include the clothing industry and real estate.
Key impediments to franchising include lack of support by the judicial system in terms of intellectual property protection and timely resolution of IPR cases. Other challenges include: the lack of available local supply that meet required quality standards; frequent infringement of the franchise agreement and a lack of commitment by the franchisees; a limited customer base; and a lack of understanding of the franchising concept in general.
There are no specific franchise laws in Kenya, thus investors must rely heavily on existing commercial laws and various applicable business laws. Despite these challenges, increased local inquiries about U.S. fast food and auto rental franchises clearly indicate that local interest in franchising exists. Consumer Lifestyle Reports in Kenya have also reported an increase in consumer expenditure, on eating, drinking habits and shopping especially among the urban population, because of growing disposable income.
There is some penetration by direct marketers of personal care, home, cosmetics products and Nutraceuticals, but sales volumes in these categories by individual importers and trading companies are larger. Direct marketing in Kenya is however dominated by Asian companies and Products. Recently there has been the entry of an American leading global pharmaceutical and health products developer, manufacturer and distributor into the Market. Major international companies have had success in the Kenyan market. Direct marketing of U.S. products in Kenya today is mostly limited to major-purchase items. This includes major tender (bid) items and/or single sale items.
In 2021, the Competition Authority of Kenya published the draft Joint Venture Guidelines. The guidelines aim to provide clarity, and predictability about joint venture arrangements. It is advisable to obtain local counsel for guidance when or working on a joint venture transaction
Express delivery is earning popularity amongst Kenyans. This is because of the growing international e-market. The two most common modes of shipping from the United States are air and ocean shipping.
Air shipping is considered by importers looking to have their goods delivered within days. Many companies offer air shipping from the United States to Kenya. Some examples include DHL, FedEx, and UPS. With air shipping, volume and weight are crucial factors that will determine the price.
Ocean freight is the most common transport mode used by Kenyan importers. Companies that offer sea shipping from USA to Kenya include Kentex Cargo, States Duka, and Kenfreight Group, among many others. Unlike other modes, sea freight is ideal for shipping items as large as 500 Kgs. Ocean freight is cheaper and has fewer restrictions.
Customers are also advised to visit the Kenya Revenue Authority website at https://www.kra.go.ke/en/ for information on import procedures and requirements, and for download of any of the documents required in the import process.
The U.S. Commercial Service in Kenya can assist U.S. companies or their partners with researching the bona fides, credit worthiness, and business history of companies based in Eastern Africa. From a simple email verification request on the existence or reputation of locally based companies to the more comprehensive and detailed International Company Profile (ICP) service, the U.S. Commercial Service in Nairobi can provide U.S. firms with information from a variety of sources as they decide whether a proposed agent, distributor, buyer, or joint venture partner is a good business counterpart.
The ICP due diligence process involves an assessment of a local company’s registration, analysis of corporate history, corporate structure, company background, executive information, financial profiles, banking and auditing information, operating situation, staff size, range of products, facilities, profiles of subsidiaries and affiliates, current challenges, market capabilities, and more.
For more information on this service, email: Office.Nairobi@trade.gov