Report On Consideration Of The Special Economic Zones (amendment) Bill (n.a. Bill No. 8 Of 2026)

REPUBLICOFKENYA

THENATIONALASSEMBLY THIRTEENTHPARLIAMENT-FIFTHSESSION-2026

DIRECTORATEOFDEPARTMENTALCOMMITTEES DEPARTMENTALCOMMITTEEONTRADE,INDUSTRYANDCOOPERATIVES

REPORT ON:

THE SPECIAL ECONOMICZONES (AMENDMENT) BILL (NATIONAL ASSEMBLY BILL NO.8OF2026)

CLERKS CHAMBERS DIRECTORATEOFDEPARTMENTALCOMMITTEES PARLIAMENTBUILDINGS NAIROBI

APRIL 2026

TABLEOFCONTENTS

| LISTOFABBREVIATIONSANDACRONYMS.. | | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------| | LIST OFANNEXURES. | | | CHAIRPERSON'SFOREWORD | | | CHAPTERONE | | | I.O PREFACE. | | | 1.1EstablishmentoftheCommittee. | | | 1.2 Mandate of the Committee.. | | | 1.3 Committee Membership. | 10 | | 1.4 Committee Secretariat. | | | CHAPTERTWO.. | .12 | | 2.0BACKGROUND OFTHESPECIALECONOMICZONES(AMENDMENT)BILL (NATIONALASSEMBLYBILLNO.8OF2026).... | ....12 | | 2.1 Legislative Background and Purpose of the Bill. | ..12 | | 2.2 Challenges Faced by Petroleum Companies in Upstream and Midstream Operations.... | ..12 | | 2.3 Benefits to Companies under the SEZ Framework in Kenya ... | ..13 | | 2.4 Historical Context of the Non-lnclusion of Petroleum Operations in the SEZ Framework....I4 | | | 2.5 Comparative Analysis... | ..14 | | CHAPTERTHREE. | .16 | | 3.0 OVERVIEW OF THE SPECIAL ECONOMIC ZONES(AMENDMENT) BILL (NATIONALASSEMBLY BILL NO.8OF2026) .... | .16 | | 3.1 Introduction.... | ..16 | | 3.2 Objective of the Bill. | .17 | | 3.3Potential Impactof theBill. | .17 | | 3.4Clause byClauseProvisionsof the Bill | 17 | | CHAPTERFOUR... | .20 | | 4.0STAKEHOLDERENGAGEMENTONTHESPECIALECONOMICZONES (AMENDMENT)BILL(NATIONALASSEMBLYBILLNO.8OF2026).. 4.ISTAKEHOLDERSUBMISSIONSONTHESPECIALECONOMICZONES(AMENDMENT) ...21 | ...20 | | 4.1.I Viva Africa Consulting LLP. | ..21 | | 4.1.2 Anjarwalla and Khanna LLP/African Legal Network (ALN) | .21 | | 4.1.3 Association of Special Economic Zones(ASEZ). | ..21 | | 4.1.4 Kenya Private Sector Alliance (KEPSA).. | .22 | | 4.1.5 TRIFICSpecial EconomicZone... | .22 | | 4.1.6 Kenya Association of Manufacturers (KAM) | .22 | | 4.1.7 National EnvironmentManagementAuthority(NEMA). | .22 | | 4.1.8 Oil and Gas Contractors Association of Kenya (OGCA-K) | 23 | | 4.1.9 Petroleum Institute of EastAfrica(PlEA)....... | 23 |

| 4.1.10TsavoOilfiedServices.. | .23 | |---------------------------------------------------------------------------------------|----------| | 4.1.ll Petroleum Outlets Association of Kenya (POAK) | ..23 | | | .23 | | 4.1.12 Gulf Energy...... | .24 | | 4.1.13Special EconomicZones Authority(SEZA). | | | 4.1.l4StateDepartmentforInvestmentPromotion.... | .24 | | 4.1.15 Kenya Revenue Authority (KRA).. | 24 | | 4.1.16 State Department for Lands and Physical Planning.. | .24 | | 4.1.17 Kenya National Chamber of Commerce and Industry (KNCCl). | .24 | | 4.1.18 Council of Governors(CoG)... | .25 | | 4.1.19 Kenya Oil and Gas Association (KOGA). | .25 | | 4.1.20 Eni Kenya.... | ..25 | | 4.1.2I Independent Continental Youth Advisory Council on AfCTA (ICOYACA) | .25 | | 4.1.22Emsi Associates... | .26 | | 4.1.23 Bureau of Special Services Limited | ..26 .26 | | 4.1.24 Blue Logistics Group.... | | | 4.1.25 Bhachu Industries Limited. | ..26 | | 4.1.26 Mo Rapid Solutions Limited. | .26 | | 4.1.27 Idar Groups Security Services Limited | .26 | | 4.1.28 Etom Services Limited. 4.2COMMITTEEOBSERVATIONSANDRECOMMENDATIONSONSTAKEHOLDER | .27 | | COMMENTS. | .27 | | CHAPTERFIVE. | .37 | | 5.0COMMITTEEOBSERVATIONS. | ..37 | | CHAPTERSIX. | 38 | | 6.0COMMITTEERECOMMENDATION REFERENCES.. | .38 .39 |

LISTOFABBREVIATIONSANDACRONYMS

| AfCFTA | African Continental Free Trade Area | |----------|-----------------------------------------------------| | ALN | African Legal Network | | ASEZ | Association ofSpecial EconomicZones | | BPO | Business Process Outsourcing | | BV | BeslotenVennootschap | | Cap. | Chapter | | Capt. | Captain | | CBS | Chief of the Burning Spear | | CEO | ChiefExecutive Officer | | CoG | Council of Governors | | CS | Cabinet Secretary | | DDC | DirectorateofDepartmental Committees | | EACOP | EastAfricanCrudeOil Pipeline | | EGH | Elderof theGoldenHeart | | EITI | Extractive Industries Transparency Initiative | | EMCA | Environmental Management and Co-ordination Act | | EPRA | Energy and Petroleum Regulatory Authority | | EPZs | ExportProcessingZones | | FDI | Foreign DirectInvestment | | FTZ | Free Trade Zone | | FZEs | Free Zone Enterprises | | ICOYACA | IndependentContinental YouthAdvisoryCouncil onAfCTA | | ICT | Information, Communication and Technology | | ITA | Income Tax Act | | KAM | Kenya Association of Manufacturers | | KANU | Kenya African Union | | KEBS | Kenya Bureau ofStandards | | KEPSA | Kenya Private Sector Alliance | | KNCCI | Kenya National Chamberof Commerce and Industry | | KOGA | Kenya Oil and Gas Association | | KRA | Kenya Revenue Authority | | LLP | Limited LiabilityPartnership | | LPG | LiquefiedPetroleum Gas | | MSME | Micro,Small and Medium Enterprise | | NEMA | National Environment Management Authority | | NEPZA | Nigeria Export Processing Zones Authority | | ODM | Orange Democratic Movement | | OGCA-K | Oil andGasContractorsAssociationofKenya | | OGFZA | Oil and Gas Free Zones Authority | | PIEA | Petroleum InstituteofEastAfrica | | PINs | Personal Identification Numbers | | POAK | Petroleum Outlets Association of Kenya | | RDL | Railway Development Levy |

| Rtd. | Retired | |--------|-------------------------------------------------| | SEZA | Special Economic Zones Authority | | SEZs | Special Economic Zones | | TIC | Trade,Industry andCooperatives | | TRIFIC | TwoRiversInternational Finance&InnovationCentre | | UDA | United DemocraticAlliance | | USD | United StatesDollar | | VAT | ValueAdded Tax | | WDM-K | WiperDemocraticMovementKenya | | WHT | WithholdingTax |

LISTOFANNEXURES

I.Adoption Schedule of the Report

• 2.Minutes

Minutes of the 24th Sitting

Minutes of the 25th Sitting

Minutes of the 23rd Sitting

Minutes of the 21st Sitting

3.Copy of theNewspaper Advertisement

• 4.Copy of the Letters Inviting Stakeholders for the Meeting

Ref:NA/DDC/TIC/2026/011

Ref:NA/DDC/TIC/2026/012

Ref:NA/DDC/TIC/2026/010

Ref:NA/DDC/TIC/2026/013

Ref:NA/DDC/TIC/2026/014

Ref:NA/DDC/TIC/2026/015

Ref:NA/DDC/TIC/2026/016

Ref:NA/DDC/TIC/2026/017

Ref:NA/DDC/TIC/2026/018

Ref:NA/DDC/TIC/2026/019;and

Ref:NA/DDC/TIC/2026/020

• 5.A Copy of the Special Economic Zones (Amendment) Bill (National Assembly Bill No. 8of 2026)
• 6.Matrix of the Bill
• 7.Witness Attendance Register for the Stakeholder Engagement Meetings

CHAIRPERSON'SFOREWORD

CooperativesonitsconsiderationoftheSpecial EconomicZones(Amendment)Bill(National Assembly BillNo. 8 of 2026), which was published on 26th February 2026. The Bill underwent its First Reading on and Cooperatives for consideration and reporting to the House, pursuant to the provisions of Standing Order127.

Comprising seven (7) clauses, the Bill seeks to implement resolutions made by the Houses of Parliament upon consideration and adoptionof theReportoftheJoint CommitteeoftheNational AssemblyDepartmental Committeeon Energy and theSenate Standing Committee onEnergy on Consideration of theFieldDevelopment Plan and Production Sharing Contracts for Blocks T6 and T7 in South Lokichar Basin, Turkana County. The Reportrecommendedtheneedtoextendfiscalincentivesandconcessionstoinvestorsinmidstream and upstream petroleum operations. To actualise the resolutions by Parliament, it has become necessary for the National Assembly to formulate a legal framework to address identifiable gaps in the prevailing legal framework, and thereby facilitate commercial development of oil discoveries and exploratory activitiesintheLokicharBasin.

TheBillalsoseekstoamendtheSpecial EconomicZonesAct,Cap.5I7Ato:strengthentheSpecial Economic Zones (SEZs) framework and align it with the operational requirements of large-scale capital in midstream and upstream petroleum by ensuring that the SEZ regime accommodates the structure and activities; allowSEZ developers andoperators in oil and gas zones to undertake enterprise activities within the SEZ; and harmonise tax incentives applicable to SEZ entities undertaking activities in oil and gaszones.

The Bill further makes consequential amendments to the Miscellaneous Fees and Levies Act,Cap. 469C, the Income Tax Act, Cap. 470, and the Value Added Tax Act, Cap. 476 to align the fiscal incentives availableunderthoselawswiththeproposedamendments-to-the-SEZ-framework.

In accordance with Article 118 (1) (b)of the Constitution and StandingOrder 127(3),the Committee placed advertisements in the print media on 16rh March 2026 requesting for comments on the Bill from the public and relevant stakeholders. Further, through letters Ref: NA/DDC/TIC/2026/01l and NA/DDC/TIC/2026/012dated24thMarch2026;Ref:NA/DDC/TIC/2026/010,NA/DDC/TIC/2026/013, NA/DDC/TIC/2026/014, NA/DDC/TIC/2026/015, NA/DDC/TIC/2026/016 and NA/DDC/TIC/2026/017dated25thMarch2026;andNA/DDC/TIC/2026/018,NA/DDC/TIC/2026/019 and NA/DDC/TIC/2026/020 dated 27th March 2026, the Committee invited stakeholders to a public stakeholdersmadeoral submissionsbeforetheCommittee.

The Committee wishes to extend its sincere appreciation to the Offices of the Speaker and the Clerk of the National Assembly for the logistical and technical support extended throughout its sessions. We also acknowledge the valuable input from all the stakeholders that submitted their memoranda and attended the stakeholder engagement meeting. Lastly, I express my deep gratitude to the Honourable Members of the Committee and the Committee Secretariat for their dedication and contributions to the development andproduction of thisreport.

On\_behalf of the Departmental Committee on Trade, Industry and Cooperatives, and pursuant to Standing Order I99(6), it is my privilege and honour to present to this House the Committee's Report on the Special Economic Zones (Amendment) Bill (National Assembly Bill No. 8 of 2026).

Having considered the Bill, the Committee recommends that the House PASSES THE BILL WITHOUTAMENDMENTS.

Hon.Bernard Masaka Shinali, CBs, MP Chairperson, Departmental Committee on Trade,Industry and Cooperatives

I.0PREFACE

I.I Establishmentofthe Committee

• The Departmental Committee on Trade, Industry and Cooperatives is one of the twenty Departmental Committees of the National Assembly established under Standing Order 216 whose mandate pursuant toStandingOrder 216(5) is as follows:
• To investigate,inquire into,and report on all matters relating to the mandate,management,activities, administration, operations and estimates of the assigned ministries and departments;
• ii. To study the programme and policy objectives of Ministries and departments and the effectiveness of theirimplementation;
• ili. On a quarterly basis, monitor and report on the implementation of the national budget in respect of its mandate;
• iv. Tostudy andreviewall thelegislationreferredtoit;
• V. To study, assess and analyse the relative success of the Ministries and departments as measured by the resultsobtainedascomparedwiththeirstatedobjectives;
• vi. may deem necessary,and as may be referred to them by the House;
• vil. To vet and report on all appointments where the Constitution or any law requires the National Assembly to approve, except those under Standing Order 204(Committee on appointments);
• vii. To examine treaties,agreements and conventions;
• ix. Tomake reports and recommendations to the House as often as possible,including recommendation ofproposedlegislation;
• To consider reports of Commissions and Independent Offices submitted to the House pursuant to the X provisionsofArticle254oftheConstitution;and
• XI. To examine any questions raised by Members on a matter within its mandate.

1.2MandateoftheCommittee

• 2.In accordance with the Second Schedule to the Standing Orders, the Committee is mandated to consider trade, including securities exchange, consumer protection, pricing policies, commerce, micro, small &medium enterprises (MSMEs),and small and medium enterprises (SMEs),intellectual property, industrial standards, anti-counterfeit policies and cooperatives development.
• andtheMinistryofCooperativesandMSMEsDevelopment.

CHAPTERONE

1.3 Committee Membership

4. The Departmental Committee on Trade, Industry and Cooperatives was reconstituted by the House on5thMarch2025and comprises thefollowingMembers:

Chairperson

Hon.BernardMasakaShinali,CBS,MP llkolomani Constituency ODM Party

Vice-Chairperson

Hon. Marianne Jebet Kitany, MP Aldai Constituency UDA Party

Hon. Adhe Wario Guyo, MP North Horr Constituency KANU

Hon. Adams Korir Kipsanai, MP Keiyo North Constituency UDA Party

Hon. Anthony Tom Oluoch, MP Mathare Constituency ODM Party

Hon. Alfred Kiprono Mutai, MP Kuresoi North Constituency UDA Party

Hon.(Dr.) Beatrice Kahai Adagala, MP Vihiga County ANC Party

Hon. Amos Maina Mwago, MP Starehe Constituency Jubilee Party

Hon. Joshua Mbithi Mutua Mwalyo, MP Masinga Constituency IndependentMember

Hon.John Okano Bwire, MP Taveta Constituency WDM-K Party

Hon. Joyce Kamene, MP Machakos County WDM-K Party

Hon.Samuel Parashina Sakimba,MP Kajiado South Constituency ODM Party

Hon.Robert Githinji Gichimu,MP Gichugu Constituency UDA Party

Hon. Michael Wainaina Wambugu, MP Othaya Constituency UDA Party

Hon.(Dr.)WilberforceOjiamboOundo,MP Funyula Constituency ODM Party

1.4CommitteeSecretariat

• 5.TheCommitteeisfacilitatedby thefollowingSecretariat:

Ms. Laureen Omusa Wesonga

ClerkAssistantI/HeadofSecretariat

Ms. Carolyne Musyoka

Hansard Reporterll (ClerkAssistant)

Ms.Doreen Karani

Ms. Priscilla Wangu Fiscal Analyst Il

Principal Legal Counsel Il

Ms.Priscilla Saidi Research OfficerII

Ms.PaulineSifuma Hansard Officer I

Mr. Ambrose Nguti MediaRelationsOfficerIll

Ms.MargaretWainaina Protocol OfficerIll

Ms. Peris Kaburi

Mr. Kelvin Lengasi Audio Assistant

AssistantSerjeant-at-Arms

CHAPTERTWO

2.0 BACKGROUND OF THE SPECIAL ECONOMIC ZONES (AMENDMENT) BILL (NATIONALASSEMBLYBILLNO.8OF2026)

2.1 Legislative Background and Purpose of the Bill

6. The proposed Special Economic Zones (Amendment) Bill(National Assembly Bill No. 8of 2026) seeks toimplement theobservationsandrecommendations containedin theReportof theJoint Committee of the National Assembly Departmental Committee on Energy and the Senate Standing Committee on Energy on Consideration of the Field Development Plan and Production Sharing Contracts for Blocks T6 and T7 in South Lokichar Basin, Turkana County. 2. /. TheReportmadeproposalsontheneedtoextend theambitofspecial economiczoneslegal and and concessions to investors in midstream and upstream petroleum operations. 8. The Petroleum Act,2019 defines the terms"midstream and upstreampetroleum operations"by reference to the stage of the petroleum value chain at which operations occur. Upstream petroleum operations means the exploration for, and the development and production, separation and everythingthathappensbeforepetroleumleaves thegroundorwellheadsuch as seismicsurveys, exploratory drilling, appraisal of discoveries, field development planning, and actual extraction of drilling operations under the Production Sharing Contracts for Blocks T6 and T7 are engaged in upstream operations. Midstream petroleum operations means all or any of the operations related This covers pipelines, storage tanks, primary separation facilities. In the Lokichar Basin context, the current transportation in phase I is via specialised steam heated road tankers, this is a midstream asset. 9. Downstream petroleum operations, cover distribution of petroleum to end users including retail salebut the Bill deliberately excludes these.Petrol stations,refineries,and LPG bottlingplants are downstream. This is an important point to note because the Bill is not extending SEZ benefits to refineries or fuel retailers. The immediate policy need as identified in the Joint Committee Report is to facilitate the Lokichar Basin development, that is, getting oil out of the ground in Turkana and transporting it, from the wellhead to the export terminal (upstream and midstream).

2.2 Challenges Faced by Petroleum Companies in Upstream and Midstream Operations

• 10.The core operational challenge thathasheldback theLokicharBasin development is infrastructure, specifically the absence of a pipeline to move crude oil from Turkana to an export point. The Lokichar crude oil is waxy and solidifies at ambient temperature, requiring the pipeline or tankers transporting it to be heated and heavily insulated to remain fluid during the journey. The capital cost

• forconstructionofapipelinefromLamu toLokicharhasbeenestimated ataroundKshs.I13to121 and also heated has an estimated cost of USD 5 billion to USD 5.8 billion. Financing a project of this scale requires bankable offtake agreements, stable fiscal terms, government guarantees, and a regulatory framework that gives lenders confidence over the project's life.
• Il. On the fiscal side, petroleum companies have consistently raised concerns about the cost recovery and profit-sharing terms under the Production Sharing Contracts, which were negotiated when oil prices and development cost assumptions were different. The tax and royalty regime applicable to negotiation between the government and contractors. Companies have argued that the overall government take (combining royalties, corporation tax, profit petroleum share, and other levies) makes marginal fields economically unviable at realistic oil price scenarios.

12. On the regulatory side, the multiplicity of agencies with overlapping jurisdiction over petroleum operations has been a persistent complaint. The Petroleum Act brought some rationalisation but companies still navigate EPRA, NEMA, county governments with land jurisdiction, the National Land not run on coordinated timelines.The sociallicence dimensionhas alsobeen significant. Communities in Turkana County have at various points disrupted operations over grievances related to local content, employment, land compensation, and benefit-sharing. These disruptions have

• 13.The absence of an SEZ framework for petroleum has meant that companies cannot access the fiscal incentives in terms of duty exemptions on capital equipment, VAT zero-rating on inputs, reduced pumping unit imported for the Lokichar development has been subject to standard import duty treatment.For aprojectof this capital intensity,the cumulative duty andtaxburdenon imports is material. As earlier observed, competitors in other jurisdictions have benefited from more tailored fiscalincentiveframeworksfortheirpetroleumsectors.

2.3 Benefits to Companies under the SEZ Framework in Kenya

• I4. The SEZ regime under the SEZ Act, Cap. 517A offers a comprehensive package of fiscal and nonfiscal incentives designed to make operating within the zones significantly more attractive than operating in thegeneral Kenyan economy.

15. On the tax side,SEZ enterprises enjoy a corporate income tax rate of ten percent for the first ten percent applicable outside the zones.WHTon dividends paid to non-residents is exemptfor the first ten years. As established under paragraph 73 of the First Schedule to the ITA, royalties, WHT for the first ten years of operation. Stamp Duty is exempt on transactions within the zone. VAT is zero-rated on supplies made to SEZ enterprises, meaning their inputs carry no VAT burden.

16. On the customs side, goods introduced into the customs-controlled area of an SEZ are exempt from import duties. Capital equipment, construction materials, and raw materials brought into the zone for use in zone activities are not subject to customs duties. The zone effectively sits outside the customs territory for duty purposes. 17. On the non-fiscal side, SEZ enterprises benefit from streamlined licensing and permitting through a within the zone, and a more predictable regulatory environment than the general economy.

2.4 Historical Context of the Non-lnclusion of Petroleum Operations in the SEZ Framework

18. At the time of the enactment of the Special Economic Zones Act in 20l5, the SEZ programme appears to have been primarily oriented towards advancing manufacturing and export services.This may be understood in the context of the earlier Export Processing Zones programme, which had structural limitations, including its restriction to export-oriented manufacturing, limited accommodationofservices,andadministrativeconstraints.TheSEZActwasdesignedtocreatea more flexible and comprehensive regime for industrialisation broadly defined to include 19. At the same time, the petroleum sector in 2015 was, at a fundamentally different stage. The first majoroildiscoveryintheSouthLokicharBasinhadbeenmadebyTullowOilfrom2012butthe sectorwasstill inearlyappraisalandexploration.Commercialdevelopmentwasnotimminent,no Field Development Plan had been approved, no Final Investment Decision had been taken, and the pipeline project was at a very early conceptual stage. It may therefore be inferred that petroleum sector investments were not yet a central consideration in the design of the SEZ framework. 20. Comparative experience suggests that jurisdictions such as Angola, Mozambique, and Nigeria which developed tailored regimes that respond to the specific infrastructure,regulatory,and fiscal requirementsoftheoilandgassector. 21. In light of the foregoing, the proposed Bill therefore seeks to amend the Special Economic Zones Act to accommodate midstream and upstream petroleum operations within the SEZ framework. The amendment is intended to enhance the responsiveness of the SEZregime to evolving investment including oil and gas.

2.5ComparativeAnalysis

22. In Nigeria, SEZs are regulated by the Nigeria Export Processing Zones Authority (NEPZA) and the Oiland Gas Free Zones Authority (OGFZA)which oversee industrial,manufacturing and commercial freezones aswell aszones dedicatedto theoil andgassector.Major operational hubs

• include the Lekki Free Trade Zone in Lagos, Calabar Free Trade Zone in Cross River, Kano Free Trade Zone,andvarious oil andgaszones such as Onne.
• federal, state and local government taxes, levies and rates); customs (duty-free import of raw profits and dividends); and regulatory support (simplified licencing and one-stop-shop administrative processes).

24. To operate in a SEZ or Free Trade Zone (FTZ) in Nigeria, businesses need one of two primary licencesissued by the NEPZA,theFreeZone Developers'Licence forentities(public,private or public-private partnership) establishing or developing a free zone or the Free Zone Enterprise Licence for businesses conducting approved activities (manufacturing, trading, and services) within an existing Free Zone. The licences are generally valid for 5 years. 25. To obtain a licence to operate in a SEZ or FTZ, a company must be duly incorporated in Nigeria by the Corporate Affairs Commission (CAC). 26. Prior to the Nigeria Tax Act, 2025, FZEs under both the NEPZA and OGFZA enjoyed broad exemption from all federal,state and local taxes.However,the Actprovides thatprofitfrom these entities is fully exempt from tax only where the entity's sales are wholly derived from export activities. 27. In Malaysia, the Johor-Singapore SEZ is a significant bilateral initiative, established between Malaysia and Singapore in 2025, aimed at transforming Johor into a high-tech, sustainable economic hub. Operators and developerswithin the zone cantake advantage of various incentives,including a 5% Eligibleskilledprofessionalsworkingin thezonecanbenefitfrom areducedpersonal incometax rate of up to 15% for 10 years, and designated areas within the zone have duty-free status.

• 28.The-Malaysia-Investment-Development-Authority-(MIDA)-offers-renewable-licences-valid-for periods rangingfromI0 to20years.Malaysia has successfullyutilised itsspecialisedSEZframework to attract billions inFDl,particularlyinthe oil refiningsector.

29. In Rwanda, the law governing SEZs regulates the establishment, development, operation, and maintenance of SEZs in the country. The Special Economic Zones Regulatory Authority of Rwanda (SEZAR) oversees the licencing process, which is designed to attract investments in manufacturing, exports,andtechnology. 30. Zone developers or operators must be legal entities incorporated in Rwanda and must demonstrate bothfinancial and technical capabilities,in line with the provisions of the Principal Act.Licenced investors can benefit from incentives such as reduced corporate income tax, customs duty exemptions on raw materials and facilitatedworkpermits,provided they hold valid licences.

CHAPTERTHREE

(NATIONALASSEMBLYBILLNO.8OF2026)

3.1 Introduction

31. The Special Economic Zones (Amendment) Bill (National Assembly Bill No. 8 of 2026) is sponsored by Hon. Kimani lchung'wah, EGH, MP, Leader of the Majority Party. The Bill was read a First Time on I2th March 2026 and subsequently referred to the Departmental Committee on Trade, Industry and Cooperatives for consideration and to facilitate public participation pursuant to Standing Order 127. 2. 32.The principal objective of the Bill is to implement the resolutions made by the Houses of Parliament uponconsiderationandadoptionoftheReportoftheJointCommitteeoftheNationalAssembly Departmental Committee on Energy and the Senate Standing Committee on Energy on Consideration of the FieldDevelopmentPlan and Production Sharing Contracts for Blocks T6 and T7 in SouthLokicharBasin, Turkana County. The Report recommended the need to extend fiscal incentives and concessions to investors in midstream and upstream petroleum operations. To actualise the resolutions by Parliament, it has become necessary for the National Assembly to formulate a legal framework to address identifiable gaps in the prevailing legal framework, and thereby facilitate commercial development of oil discoveries and exploratory activities in the Lokichar Basin. 33. The Bill seeks to amend the Special Economic Zones Act, Cap. 517A to:

• a) strengthen the Special Economic Zones (SEZs) framework and align it with the operational operations;
• b) facilitate strategic investments in midstream and upstream petroleum by ensuring that the SEZ regime accommodates the structure and operational needs of capital-intensive projects;
• c) expand the scope of SEZs to include oil and gas sector activities;
• d) allow SEZ developers and operators in oil and gas zones to undertake enterprise activities within theSEZ;and
• e) harmonise tax incentives applicable to SEZ entities undertaking activities in oil and gas zones.

34. The Bill also seeks to make consequential amendments to the Miscellaneous Fees and Levies Act, Cap.469C,theIncomeTaxAct,Cap.470,and theValueAddedTaxAct,Cap.476to align thefiscal incentivesavailableunderthoselawswiththeproposedamendmentstotheSEZframework.

3.2 Objective of the Bill

35.Theobjectiveof theBillisto:

• a)expand the scope ofSpecial EconomicZones toinclude oil andgas sector activities(midstream andupstreampetroleumoperations);
• EconomicZones;
• c) allow SEZ developers and operators to undertake enterprise activities within the zone;
• e) make consequential amendments to the Value Added Tax Act (Cap. 476), the Income Tax Act (Cap. 470), and the Miscellaneous Fees and Levies Act (Cap. 469C).

3.3PotentialImpactoftheBill

The Bill is likely to have the following impact if enacted:

36. Enhanced business environment. By eliminating rigid statutory limits, particularly regarding incentives that may deter potential investors, the bill will boost capital inflows and liquidity, ultimately contributing to economic growth; 37. Regional integration: Opening up licenses to companies and not incorporated in Kenya will expand market access for SEZ-based industries and promote the development of regional value chains; and 38. Resource Endowments and Comparative Advantages: SEZs should align strategically with the country's existing resource endowments and comparative advantages. Focusing on sectors like oil and-gas, where-Kenya-has-natural advantages, can-enhance-competitiveness-and-attract-investment.

3.4 Clause by Clause Provisions of the Bill

• 39.Clause I of the Bill provides for the short title of the Bill.

40. Clause 2 amends section 2 of the SEZ Act, Cap. 517A (interpretation and definitions) by inserting referencing the definitions in the Petroleum Act, Cap. 308. This is with a view to expand the SEZ commercialdevelopmentofoil discoveriesintheLokicharBasin.

• 41.Clause 3 amends section 4 of the SEZ Act, Cap. 517A (on declaration of special economic zones) in subsection 6 by adding two new zone types, that is, midstream petroleum operations zones and upstream petroleum operations zones, to the list of permissible SEZ designations.

42. Clause 4 of the Bill proposes to amend section 27 of the SEZ Act, Cap. 517A (on application and issue of licence) by:

• a) replacing paragraph (d) of subsection (5) with provision that the duration of licence issued to a SEZ developer, operator or enterprise in the zones designated midstream and upstream petroleum operations shall be subject to the new subsection (5A). Currently, subsection (5)(d) simply provides that a licence shall be valid for the period SEZA decides to prescribe. This could be a one-year licence or a twenty-year licence depending on what the Authority deems appropriate. In practice, it issues annual licences;

3. b inserting anewsubsection5Aprescribing al0-yearminimumlicenceforpetroleumzone operations to enhance investor certainty in this capital-intensive sector; and 4. 9 requiring the Authority to conduct annual compliance audits for the duration of such licences, with annual audit fees payable by licensees. This is the accountability mechanism for the long licence allowing SEZA to run regular checks on whether a licence holder is complying with the termsandconditionsofthelicence. 43. Clause 5 amends section 28(a) of the SEZ Act, Cap. 517A (on other qualifications of a SEZ developer) by deleting the requirement that a SEZ developer be "incorporated in Kenya", to create harmony with the definition of a company under section 2 of the SEZ Act. In that definition, the Act cross-references section 2 of the Companies Act, Cap. 486 and therefore includes a company incorporated outside Kenya and registered under that Act. A foreign company registered in Kenya under the Companies Act would now qualify as an SEZ developer without needing to be locally 44. Clause 6 amends section 29 of the SEZ Act, Cap. 517A (on Special Economic Zone enterprises) in two respects: 7. enterprise licence to undertake activities within petroleum-designated zones. 45. Clause 7 contains the consequential amendments to three tax related Acts:

• a) The first is the removal of the ten-year time limitation in Paragraph 73 of Part I of the First Schedule totheIncome Tax Act,Cap.470 to effectively extend withholding taxexemptions on royalties and management fees paid to non-residents beyond the current ten-year limit.

10. b)The second is theproposed amendment to theValue Added TaxAct,Cap.476 toexpand zero-rating to cover supplies made to SEZ developers and operators (not just enterprises) in order to address an existing gap in the law.

• c)The thirdone is the amendment totheMiscellaneousFees and LeviesAct,Cap.469Cto exempt goods destined for petroleum SEZs from the Railway Development Levy (RDL) thus reducing the cost of importing goods for oil and gas operations and making the SEZ regime morecommerciallyattractive.

47. The Bill relates to matters of energy and fiscal policy, regarding zoning of areas of economic purposes, and the concessions and incentives, both monetary and non-monetary, which may be granted to investors engaged in midstream and upstream petroleum operations in the zoned areas. Thesemattersfallwithin themandateoftheNational Governmentunder theFourthSchedule to the Constitution. Consequently, the Bill does not concern county governments in terms of Article Il0(l) (a) of the Constitution as functions relating to regulation of SEZs and grant of fiscal incentives arefunctionsoftheNationalGovernment.

• 48.Enactment of the Bill will not occasion additional expenditure of public funds.

CHAPTERFOUR

4.0 STAKEHOLDER ENGAGEMENT ON THE SPECIAL ECONOMIC ZONES (AMENDMENT) BILL (NATIONAL ASSEMBLY BILL NO. 8 OF 2026)

Following the call for memoranda from the public through placement of an advertisement in the print media on16th March2026and vide letters Ref:NA/DDC/TIC/2026/011 and NA/DDC/TIC/2026/012 NA/DDC/TIC/2026/015,NA/DDC/TIC/2026/016andNA/DDC/TIC/2026/017dated25thMarch2026; andNA/DDC/TIC/2026/018,NA/DDC/TIC/2026/019andNA/DDC/TIC/2026/020dated27thMarch 2026, inviting stakeholders for a meeting, the Committee received memoranda from the following stakeholders on the Special Economic Zones (Amendment) Bill (National Assembly Bill No. 8 of 2026):

• i. Viva Africa Consulting LLP;

2. ili.Association of Special Economic Zones (ASEZ); 3. ii.Anjarwalla and Khanna LLP/African Legal Network (ALN); 4. iv.Kenya Private Sector Alliance (KEPSA);

• vi. Kenya Association of Manufacturers (KAM);

6. v.TRIFIC Special EconomicZone; 7. viil.National Environment Management Authority (NEMA); 8. ix.Petroleum Institute of East Africa (PlEA); 9. vii.Oil and Gas Contractors Association of Kenya (OGCA-K); 10. x.Tsavo Oilfied Services;

• xii. Gulf Energy BV;
• xi. Petroleum Outlets Association of Kenya (POAK);
• xii. Special Economic Zones Authority (SEZA);

14. xiv.StateDepartmentfor InvestmentPromotion; 15. xv.Kenya Revenue Authority (KRA);

• xvii. Kenya National Chamber of Commerce and Industry (KNCCI);
• xvi. State Department for Lands and Physical Planning;
• xviil. Council of Governors (CoG);

19. Xx. Eni Kenya;

• xix. Kenya Oil and Gas Association (KOGA);

21. Xxi. Independent Continental Youth Advisory Council on AfCTA;

• xxii. Emsi Associates;

23. xxii.Bureau of Special Services Limited;

• xxiv. Blue Logistics Group;

25. XXv. Bhachu Industries Limited; 26. Xxvi. Mo Rapid Solutions Limited; 27. xxvii.Idar Groups Security Services Limited; and 28. xxvili.EtomServices Limited

4.1 STAKEHOLDERSUBMISSIONSONTHESPECIALECONOMICZONES (AMENDMENT) BILL (NATIONAL ASSEMBLY BILL NO.8 OF 2026)

4.1.I Viva Africa Consulting LLP

49. In a meeting with the Committee held on Wednesday, I" April 2026, Ms. Anne Mubia-Murungi, a Partner at Viva Africa LLP informed the Committee that the Company supports the amendments proposed to the SEZ framework as they present a positive step towards strengthening Kenya's the SEZ regime and provide clarity for investors undertaking large scale projects. They proposed that the Bill be amended to provide for the ten-year licensing of all companies under the SEZ regime and not just to developers, operators or enterprises undertaking activities in zones designated for should be allowed to apply for enterprise licenses and not just developers or operators undertaking midstreamorupstreampetroleumoperations.

4.1.2 Anjarwalla and Khanna LLP/African Legal Network(ALN)

50. In a meeting with the Committee held on Wednesday, Ist April 2026, Mr. Dennis Chiruba proposed that that the Bill be amended to provide for the ten-year licensing of all companies under the SEZ regime and not just to developers, operators or enterprises undertaking activities in zones designated for midstream or upstream petroleum operations; the operating license of a company should not be suspended without giving the company a fair hearing; clause 7 should be amended to provide for upstream and midstream petroleum operation zones instead of oil and gas zones; and allcompaniesunder theSEZandEPZregimeshouldbeexemptedfromRDL andnotjustthose undertaking activities in zones designated for midstream and upstream petroleum operations.

4.1.3 Association of Special Economic Zones (ASEZ)

51. In a meeting with the Committee held on Wednesday, I" April 2026, Mr. Phillip Nderitu, CEO of ASEZproposedthefollowingamendments-tothe-Bill:the-definition-ofmidstream-petroleum"be amended by deleting the words"transportation and storage"to avoid designating existing standalone transportationandstoragefacilitieswhichdelayscollectionofrevenuebytheGovernment; paragraph 4(d) of the Bill be deleted because it is covered under the new subclause 5A; new subclause 5A be amended by providing that all companies under the SEZ regime benefit from the 10-year licensing; new subclause 5B be amended by deleting the words,"terms and conditions of license as the Authority may prescribe"and substituting with the words,"terms and conditions of the license"; new subclause 5A be amended by deleting the words, "and the developer, operator or enterprise shall pay such annual audit fees to the Authority as may be prescribed' because audit fees should be part of operational costs for the Authority and not unpredictable expenses to investors; and incentives under the Miscellaneous Fees and Levies Act should apply to all companies under the SEZ regime. 2. 52.He proposed the following new amendments to the Bill: new amendments to section 24 of the Act to give developers rights to develop housing for staff with fiscal benefits and introducing a 2.5%

surcharge at saleto the customs territory;and new amendments tosection35of theActtoprovide thatwheregoodsareremovedfrom azonetoadomesticmarket,anystandardsrelatedlevyshall beassessedonlyonthevalueofdomesticsales andnotontheannual turnover.Theyfurther proposed deletion of subsection35(5) of the Act.

4.1.4 Kenya Private Sector Alliance (KEPSA)

53. In a meeting with the Committee held on Wednesday, Is April 2026, Mr. Emmanuel Otieno, a Manager at KEPSA supported the amendments proposed in the Bill. However, he proposed that Clause 4 should be amended because there may be delays and cost hurdles on the conducting of

4.1.5 TRIFiC Special EconomicZone

• 54.In a meeting with the Committee held on Wednesday, Ist April 2026, Mr. Brian Mwau, Head of BusinessDevelopmentsubmittedthatthefocusof theBill shouldnotonlybeonthe oil andgas sector.He proposed the following amendments tothe Bill:thelO-year license period is discriminatory if it does not include other sectors in the SEZ regime; and investors should be allowed to operate in the country without being incorporated in Kenya to encourage investment in the country.

4.1.6 Kenya Association of Manufacturers (KAM)

55. In a meeting with the Committee held on Wednesday, I't April 2026, the Head of Trade Policy, Mr. Walter Kamau, proposed the following amendments to the Bill: amend definitions of midstream and SEZ regime; amend paragraph 4(b) to allow the CS National Treasury and Economic Planning to have powers to provide exemptions and other incentives to oil and gas operators and developers; pay various taxes; delete paragraph 6(a) because Kenyan taxpayers will provide extensive incentives toforeigncompanies that donot have any tax obligations inKenya;amendclause 8 to restrict provision to oil and gas operators, allow residents to benefit from the exemption and allow the CS National Treasury and EconomicPlanningpower to include other sectors in the exemption on a customs territory;and insert a new clauseproviding that customs and dutiespayablebygoods from SEZs be less of local content to encourage integration between the domestic market and SEZs/EPZs.

4.1.7 National Environment Management Authority (NEMA)

56. In a meeting with the Committee held on Thursday, 2"d April 2026, Mr. David Ong'are, Director of Compliance informed the Committee that NEMA supports the Bill subject to strict adherence to theenvironmentalsafeguardframeworkestablishedunderEMCA.Hereiteratedthat all

developments under SEZs are subject to rigorous environmental assessment, monitoring, and enforcement.

4.1.8OilandGasContractorsAssociationofKenya(OGCA-K)

57. In a meeting with the Committee held on Thursday, 2nd April 2026, Mr. Mwendia Nyaga, Director at OGCA-K submitted that OGCA-K supports the amendments proposed in the Bill. He proposed that the Bill be amended to widen parameters of SEZs to incorporate regions where midstream and upstream petroleum sector operations in Kenya are conducted.

4.1.9PetroleumInstituteofEastAfrica(PlEA)

58. In a meeting with the Committee held on Thursday, 2"d April 2026, the General Manager, Ms. Wanjiku Manyara submitted that the Bill should be amended to expand the scope of SEZs to include

4.1.l0TsavoOilfiedServices

• and CEOproposed that the Bill be amended to:expand the concept of petroleum-related SEZ activities to include the full services ecosystem; require a local content and Kenyan participation plan; add safeguards to the broader eligibility language; tie the ten-year licence period to performance review; protect independent enterprises from discriminatory treatment; require reporting on fiscal incentives and economic outcomes; and provide for county and host-area consultation.

4.1.lIPetroleumOutletsAssociationofKenya(POAk)

60. In a meeting with the Committee held on Thursday, 2"d April 2026, the CEO and National Coordinator, Mr. John Njogu proposed the following amendments to the Bill: amend section 29 of the Act to provide that fiscal incentives given to licenced petroleum SEZ enterprises shall remain unchangedforthe duration of the initial licence period, notwithstanding-changes-in-the-ITA-and-VAT Act; introduce a "Local Sourcing Preference" clause in Regulations; and provide for a joint audit frameworkbetweenSEZA,KRAandEPRA.

4.1.l2GulfEnergy

• 61.In a meeting with the Committee held on Thursday, 2"dApril 2026, Mr.Paul Limo, Group CEO informed the Committee that Gulf Energy supports all amendments proposed in the Bill because theyreinforcetheNationalInvestmentPolicy2019withregardtopredictableincentivesand simplified licencing;Vision 2030with regard to manufacturing-led growth,logistics expansion and energysecurity;andKenya'sindustrialisation andregional competitivenessobjectives.

4.1.13Special EconomicZones Authority(SEZA)

• 62.In a meeting with the Committee held on Thursday, 2nd April 2026, the CEO, Dr.Kenneth Chelule proposed the following amendments to the Bill:Amend definition of"industrial parks"toinclude annual audit fees with licence fees; insert provision for penalty to a developer, operator or enterprise that fails to pay the prescribed annual fees within sixty days; and provide for suspension of a license foranenterpriseordeveloperthatviolatestheSEZActor theEastAfricanCommunityCustoms Management Act,2004 or any other applicable law.

4.1.14 State Department for Investment Promotion

• Secretary, informed the Committee that the State Departments supports all the amendments proposedintheBill.

4.1.15Kenya Revenue Authority(KRA)

64. In a meeting with the Committee held on Thursday, 2"d April 2026, Mr. David Ontweka, Ag. Deputy Commissioner submitted that companies should comply with registration under section 974 of the CompaniesActtoenable them obtainPiNsforaccountingof taxincentives.

4.1.16 State Department for Lands and Physical Planning

65. In a meeting with the Committee held on Thursday, 2"d April 2026, Ms. Sarah Maina, Secretary, Lands,informed the Committee that theState Department had reviewed the amendments proposed in the Bill and were in agreement with both form and content of the Bill.

4.1.17 Kenya National Chamber of Commerce and Industry (KNCCl)

• 66.In a memorandum dated 31st March 2026, Mr.K.K. Mutai, Chief Executive Officer proposed that: petroleum-zone terminology across section 4(6),theFirst Schedule and fiscal provisions should be harmonisedtoeliminatethethree termmismatchcreatedbytheBill;clarityshould beprovided that theI0year minimum licenceperiod does notcurtail theAuthority's powers torevokelicences for non-compliance;replace blanket annual audits withrisk-basedproportionate audit frameworks; provide that companies should be registered inKenya under the Companies Act; provide a clearly boundedperiod from the date of firstoperation tobenefitfrom income taxexemption;theVAT zero-rating and levy exemptions should only be given to certified, authorised SEZ activities backed by SEZ Authority certification and KRA verification controls; require a Local Content and MSME Linkages Plan as a mandatory condition of every petroleum zone licence; and establish annual creation.

4.1.I8 Council of Governors(CoG)

• 67.In a letter,Ref:COG/6/50/1A Vo.22 (111) dated 25thMarch2026,Ms.Mary Mwiti,ChiefExecutive officer submitted that the Bill should explicitly provide for the role of county governments within theSEZsframework,particularlywheresuchzonesaredomiciledoncountyland.Theresources provided under the SEZ Act result in county governments foregoing certain own-source revenues, including those that would ordinarily accrue from licencing regimes like business permits.Host counties should therefore derive equitable socio-economic benefits,including revenue sharing arrangements and community benefits.

4.1.l9KenyaOil andGasAssociation(KOGA)

• 68.In a letter,Ref:Gen-001-2026 dated 23rd March 2026,the Chairman,Mr.Franklin Juma,submitted that: the National Assembly should pass the Bill as drafted; SEZA to publish energy-SEZ regulations within90 days of assent of theAct togive effect tolicence tenure,audits andfiscal alignment; the National Treasury and KRA to issue practice notes clarifying VAT zero-rating for developers/operators, withholding-tax treatment and RDL exemption workflows for petroleum SEZ liquidbulkjettiesandsharedutilities aredeliveredonbankableschedules.

4.1.20EniKenya

69. In their letter, Ref. MD/DM/132/2026.O dated 25th March 2026, Ms. Daniela Morra, Managing Director, proposed that geothermal zones be included in the First Schedule to the SEZ Act to integrate geothermal energy into the national SEZ classification framework which is consistent with the designation of the Olkaria geothermal area as an SEZ, thereby supporting a consistent framework applicableto the sectorfor futureprojects.

4.1.2I Independent Continental Youth Advisory Council on AfCTA (ICOYACA)

• 70.Intheir memorandum dated-25h-March-2026,ICOYACA-proposed-that-the-Bill-be-amended-to: clarify the incentive position after ten years; specify that licence conditions for petroleum zone cost recovery amounts claimed and approved, (i) payments into the local community trust fund under section 58 of the Petroleum Act, 2019, and (iv) compliance with the EITl standards as adopted by Kenya; restore the 10 year limitation in paragraph 73 of the ITA or confine the perpetual pricing compliance reporting; amend the new paragraph (xix) of the Miscellaneous Fees and Levies Act to cross reference the EPZ Act,Cap.517 and SEZ Act,Cap.517A and specify the certifying authority for each zone type; and provide that the incentives and benefits available to licenced petroleum SEZ enterprise, developer or operator under this Act shall apply in addition to and not in substitution for the terms of any petroleum agreement entered into under the Petroleum Act, 2019.

4.I.22EmsiAssociates

71. In a letter dated 25th March 2026, Ms. Mary Chege, Managing Partner, proposed the following amendments to the Bill: amend the Bill to consolidate all proposed zones i.e. BPO zones, service focused zones, educational zones, midstream petroleum operations zones and upstream petroleum operations zones,and such other sectors as may be prescribed by the CS responsible for SEZs; provide that a licence shall remain valid from the date of issue subject to payment of prescribed fees andinspectionbytheAuthority;deletesubclause5B;andamendsection28and29oftheActto require that foreign companies register a branch or incorporate a subsidiary in Kenya in accordance with provisions of the Companies Act, Cap. 486.

4.1.23 Bureau of Special Services Limited

• 72.In a letter, Ref: Bss/Adm/vol i/0l6/26 dated 23rd March 2026, the CEO,IP Rtd.Ekai Lomoru Nicholas, HSC proposed that the Bill be amended by widening parameters of SEZs to incorporate

4.1.24 Blue Logistics Group

73. In a letter dated 23rd March 2026, Mr. Duncan Wagura, Managing Director, East Africa supported the Bill because its enactment will enhance efficiency in cargo movement, lower the cost of doing business, attract investment and technology transfer, improve infrastructure and logistics capacity,

4.1.25BhachuIndustriesLimited

74. In a letter dated 25th March 2026, Mr. Gurveer Bhachu proposed that the Bill be amended to expand operations arecurrentlyunderway astheyarenotcoveredbytheSEZAct,Cap.517A.

4.1.26 Mo Rapid Solutions Limited

75. In a letter, Ref: mo/25/2026 dated 23rd March 2026, the Director, Mr. Amos Cheruiyot proposed that the Bill be amended to expand SEZs to include areas where midstream and upstream petroleum operations are takingplacing.

4.1.27 Idar GroupsSecurityServicesLimited

76. In their letter, Ref: 001/03/EPZ/NA dated 23rd March 2026, the Director, Capt. (Rtd.) Augustine Ekitelaproposed that theBill be amended towiden theparameters of SEZs toincorporateregions where midstream and upstream petroleum operations are currently conducted.

4.1.28EtomServicesLimited

77. In their letter, Ref: Etom-005-2026 dated 26"h March 2026, Mr. Fredrick Ejore, Managing Director, supported the amendments proposed in the Bill because incorporating the area in the SEZ framework will create jobs, improve infrastructure, develop skills and retain talent, create

4.2COMMITTEEOBSERVATIONSANDRECOMMENDATIONSONSTAKEHOLDER COMMENTS

Clause2

78. Clause 2 amends section 2 of the Special Economic Zones Act, Cap. 517A by inserting definitions of "midstream petroleum operations"and "upstream petroleum operations,"both cross-referencing the Petroleum Act (Cap. 308). 2. 79.KAM proposedeither replicating thePetroleum Act definitions directlyinsection2of theSEZAct, or adopting tailored definitions limited strictly to the scope relevant to this Bill to avoid overreach. KNCCl proposed an explicit cross-reference to section 2 of the Petroleum Act by chapter number, and an implementing note clarifying that SEZ licensing does not substitute for Petroleum Act approvals. KNcCI further proposed a harmonisation clause confirming that definitions in section 2 of the SEZ Act apply for purposes of all consequential fiscal amendments in the Bill's Schedule thereby addressing the risk that KRA and courts construe the same terms differently under tax and midstream petroleum operations to avoid the inadvertent designation of existing standalone and distort the application of the zone regime to infrastructure already operating outside the SEZ framework. SEZA proposed accommodating midstream and upstream operations under industrial parks.

Committee-observations/Recommendation

The definitions of midstream petroleum operations and upstream petroleum operations by cross-reference to thePetroleumAct,Cap.308are in order.They are consistent with the sector's primary legislation and avoids duplication. The Committee accordinglyapprovedClause2asproposedintheBill.

Clause3

• 80.Clause 3 amends section 4(6) of the Special Economic Zones Act, Cap. 517A by adding two new zones(l)tothelistofpermissibleSEZdesignations.

81. SEZA proposed accommodating petroleum activities within the existing industrial scheme framework by expanding the definition of industrial park to include upstream and midstream

petroleum operations rather than creating new zone types. This is consistent with SEZA's ongoing policy review proposing consolidation of all zone types into three broad schemes: Industrial, infrastructure, fiscal, and regulatory frameworks applicable to industrial parks. Eni Kenya proposed insertion of a new paragraph (m) geothermal resource zones into section 4(6) of the SEZ Act, a si sn r l a p s o d s challengesasupstreamandmidstreampetroleumoperations.

Committeeobservations/Recommendation

The committee observed that midstream and upstream operations will be designated special economic zones. This amendment is the operational heart of the Bill.The designation of midstream and upstream petroleum operations zones within the SEZ framework is a targeted and deliberate policy response to the specific investment characteristics of the Lokichar Basin development. Upstream petroleum operations and midstream petroleum operations are capital-intensive, technically complex, and long-cycle activities that require a stable, predictable, and comprehensive regulatory and fiscal environment over periods of twenty years or more.

The Committee acknowledged the coherence of SEZA's proposal in the context of its ongoing policy review and the consolidation agenda it represents.However, the through the industrial park framework would conflate two fundamentally different that was not designed to accommodate the technical, environmental, safety, and infrastructure requirements of petroleum operations. The industrial park framework also does not carry the same legal and regulatory specificity that the dedicated petroleum zone types provide, and investors seeking project financing for large-scale petroleum infrastructure require the legal certainty of a distinct and unambiguous regulatory designation. Further while the Committee acknowledged the strategic importance of geothermal resources the insertion of geothermal zone types goes beyond the subjectmatter of the Bill which is confined tomidstream and upstream petroleum operations in the Lokichar Basin. The proposal to extend the SEZ framework to geothermal operations should be advanced through the ongoing SEZA policy review or through a separate legislative process informed by equivalent sectorspecificanalysis.

The Committee accordingly approved Clause 3 as proposed in the Special Economic Zones (Amendment) Bill (National Assembly Bill No. 8 of 2026).

Clause4

82. Clause 4 amends section 27 of the SEZ Act, Cap. 517A by replacing paragraph (d) of subsection (5) with a validity provision subject to new subsection (5A), and inserting two new subsections: (5A) the Authority to conduct annual compliance audits for the duration of such licences,with annual auditfeespayablebylicensees. 83. The policy rationale is that petroleum projects involve enormous upfront capital investment over long development cycles, and investors need confidence that their licence will not be shortened or Act provides for a twelve-monthlicencevalidity,after which an investor hasnolegal certainty of continuedoperationuntil renewal. 3. extending it to all industrial park SEZ developers, operators, and enterprises. ASEZ, KAM, TRIFIC SEZ,KEPSA,ALN,and VIVA Africa Consulting supported extending the ten-year minimum licence duration to all SEZ sectors,on the basis that the capital intensity and long 4. 85.SEZA proposed that the extended licence period be accompanied by strengthened enforcement payment of annual licence fees.SEZAproposed anewsection27(5C) imposing double the annual fee where payment is not made within sixty days of the due date. TRIFIC SEZ specifically proposed renewal. POAK proposed a provision that fiscal incentives granted to a licensed petroleum SEZ enterpriseremain applicablefor thedurationof thelicence notwithstanding amendmentstotaxlaws effectively a fiscal stabilisation clause protecting investors from adverse changes introduced through annualFinanceActsduringtheticenceperiod. 86. Several stakeholders challenged the imposition of audit fees on licensees. ASEZ, KAM, TRIFIC SEZ, and KEPSA argued that compliance audit costs should be borne by SEZA as an operational cost of the Authority, already captured within the annual licensing fee paid by the investor.They proposed deletion of the audit fee provision and suggested that if a fee is necessary, it should be prescribed through regulationsforflexibilityrather than fixed in primary legislation.SEZA proposed substituting annual audit fees with annual licencefees,and inserting a newsubsectionexpressly providing for the payment and consequences of non-payment of annual licence fees. 87. Emsi & Associates proposed deletion of section 27(5B) on the basis that EPRA's existing audit regime under the Petroleum Act is sufficient and the additional SEZA audit constitutes unjustified jurisdictional duplication. POAK proposed a joint institutional audit mechanism involving SEZA, KRA,and EPRA as analternative.TheKNCCI proposed thattheBillincludes an express clarification that SEZ licensing operates alongside and does not substitute for petroleum sector approvals under

the Petroleum Act, and that SEZA be required to publish a joint licensing guide with petroleum regulatorswithintwelvemonthsofcommencementofthisAct.

Committeeobservations/Recommendation

The Committee considered whether the mandatory minimum ten-year licence tenure should be extended to all SEZ sectors or retained as petroleum-specific. Upon careful consideration, the Committee resolved that the provision should remain confined to petroleumzonesasproposedintheBill.

The Committee observed that while the policy case for longer licence tenures is broadly applicable across capital-intensive investment sectors, the extension of a mandatory minimum tenure across the entire SEZ programme is not a decision that can be made without a proper risk-benefit analysis. Long-term licences carry inherent risks,particularly speculative licence holding,where investors secure access to land, infrastructure, and fiscal incentives without genuine development. This can lock up scarce resources and delay economic activity, employment, and revenue that the SEZ programme is intended to generate.

The Committee observed thatthe case for a minimumlicence tenure in thepetroleum sector is grounded in well-documented, sector-specific characteristics namely the scale of capital investment, long development timelines, and technical complexity of upstream and midstream operations established through theJoint Committeeprocess preceding this Bill. No comparable analysis has been undertaken for other SEZ sectors. Extending a minimum tenure in the absence of such analysis would therefore be. premature and potentially undermine the integrity of the broader SEZ framework.

The Committee accordingly resolved that the question of extending the minimum licence tenure to otherSEZsectorsbereferred to the CabinetSecretaryresponsible for investment, the Special Economic Zones Authority, and the Cabinet Secretary responsible for finance for consideration within the ongoing comprehensive review of the SEZ policy and legal framework, to be informed by a proper sector-by-sector needs analysis thatweighs theinvestment certaintybenefits of longer tenures against the regulatory flexibility and anti-speculation risks specific to each zone type.In the interim, the Bill maintains a focused and proportionate objective: to support investment in the petroleum sector through targeted interventions that address gaps in the existing SEZ framework without disrupting the broader architecture of the SEZ programme.

On the proposed annual audit obligation under section 27(5B), the Committee ten-year minimum licence tenure as the extended licence tenure limits the Authority's ability to rely on non-renewal or early revocation, continuous oversight becomes essential. The annual audit provides this oversight by enabling regular monitoring of soundevidentiarybasisforenforcementwhererequired.TheCommittee therefore affirmed the annual audit as a critical safeguard within the petroleum zone licensing framework.

The Committee accordingly approved Clause 4 as proposed in the SEZ (Amendment) Bill,2026.

CLAUSE5

88. Clause 5 deletes the expression "incorporated in Kenya" from section 28(a) of the principal Act, replacing it with the broader term "company". The existing definition of "company" in section 2 of the principal Act adopts the meaning assigned by the Companies Act (Cap. 486) and expressly includes a company incorporated outside Kenya but registered in Kenya under that Act. The effect of this amendment is to extend eligibility as an SEZ developer or operator to foreign-incorporated entities operating through registered branches in Kenya, without requiring the establishment of a locallyincorporatedsubsidiary. 89. TsAVO Oilfield Services proposed requiring foreign companies to register a branch or subsidiary in Kenya under the Companies Act as a condition of SEZ participation.ICOYACA raised qualify without introducing compensating disclosure obligations or requirements for substantive local presence. Tsavo further proposed that where the Bill uses the term a company, conditions should require tax compliance, beneficial ownership disclosure, a substantive local presence, and implementation of local participation obligations.KRA did not object to the removal of the local incorporation requirement and proposed that any company seeking to benefit under the amended provision complieswithsection974of theTaxProceduresActbyobtaining aPersonal ldentification Number as a condition of accessing SEZ benefits so that KRA can identify it, track its transactions, issueassessments,andadministeritstaxobligations.

CommitteeObservations/Recommendation

• 90.TheCommitteeobservedthattheamendmentaccommodates thecorporate structures typicallyused byinternationalpetroleum investorswhowould notreadily Committeenoted thatthepolicyjustificationfor theremoval iswell-founded in the context of this Bill.Large-scale international petroleum investors including the companies currently engaged in the Lokichar Basin under Production Sharing involving holding companies, project vehicles, and operating entities incorporated acrossseveral jurisdictions.The Committeeresolved that the amendmentas proposed international petroleum investment into the Lokichar Basin. SEZA, in its licensing regulations, may expressly require proof of PiN registration as a condition precedent to the issuance of the SEZ developer, operator or enterprise licences proposed in this Bill.

The Committee accordingly approved Clause 5 as proposed in the Bill.

Clause 6

91. Clause 6 amends section 29 in two respects: repiacing "is incorporated in Kenya" with "is a company" in subsection (2)(a), and inserting a new subsection (3) enabling petroleum zone developers and operatorsto apply for anenterpriselicence toundertake activitieswithinpetroleum-designated zones.

CommitteeObservations

The Committee observed that the change accommodates the corporate structures typically used by international petroleum investors who would not readily establish a new Kenyan subsidiary purely to qualify as an SEZ participant. The Committee noted that the policy justification for the removal is well-founded in the context of this Bill. Large-scale international petroleum investors including the companies currently engaged in the Lokichar Basin under Production Sharing Contracts typically operate through complex multi-jurisdictional corporate structures involving holding companies, project vehicles, and operating entities incorporated across several jurisdictions. The Committee resolved that the amendment as proposed is necessary and appropriate to achieve the Bill's objective of attracting large-scale international petroleum investment into the Lokichar Basin. SEZA, in its licensing regulations, may

The Committee accordingly approved Clause 6 as proposed in the SEZ (Amendment) Bill, 2026.

Clause 7

92. Clause 7 amends the First Schedule to the SEZ Act, Cap. 517A by adding "oil and gas zones" as paragraph(i)to theenumeratedzonetypes.

CommitteeObservation/Recommendation

93. The Committee observed that the amendment enables the Authority topermit oil and gas zones within the SEZ programme, anchoring this new zone type to the declaration framework under section 4 of the principal Act. The Committee accordingly approved clause7asproposedintheBill.

Clause8

• 94.The Bill makes the following three consequential amendments under clause 8:

• a) under the Income Tax Act, Cap. 470, it deletes the ten-year establishment cap in paragraph 73 management fees paid to non-residentsbeyond the current ten-year limit;
• b) under the VAT Act, Cap. 476, it extends zero-rating to supplies made to SEZ developers and operators (not only enterprises); and

3. c)under theMiscellaneousFees and LeviesAct,Cap.469C,itexemptsgoods destined forEPZsor SEZs designated for petroleum operations from the Railway Development Levy.

CommitteeObservations/Recommendation

The Committee observed that the amendment to the Income TaxActwas necessary to harmonise the withholding tax incentive with the long investment and production competitiveforthescaleofinvestmenttheLokicharBasinrequires.TheCommittee FirstScheduletotheIncomeTaxAct.

The Committee further observed that extension of zero-rating to developers and operators,isconsistentwiththeintentionsof theBillandharmonises thetaxincentives applicable toSEZ entities across all licence categories.In the context ofpetroleum operations, developers and operators are the entities that incur the heaviest capital expenditure in establishing and equipping zone infrastructure. The Committee accordingly approved the extension of VAT zero-rating to SEZ developers and operators asproposed.

The amendments to theMiscellaneousFeesand LeviesActare consistentwith the broader objective of harmonising the fiscal incentive regime applicable to petroleum zone activities and removing fiscal burdens that would otherwise impede the capital investmentflowstheBillisdesigned toattract.

The Committee observedthat thethree consequentialamendments forman integrated fiscal package that, read together with the substantive amendments in the entire Bill constitutes a coherent and proportionate response to the investment barriers facing petroleum operators in the South Lokichar Basin. The Committee proposed intheBill.

ProposedNewProvisions

95. KNCCI proposed inserting definitions of local enterprise cross-referenced to the MSME Act No. 55 of 2012 and local content aligned to the Petroleum Act's local content concepts into section 2. This would create the statutory basis for MSME-linkage licensing conditions across the Act. TsAVO Oilfield Services proposed a more detailed Local Participation Plan requirement for all applicants

for petroleum SEZ licences, covering employment of Kenyan nationals, technical training and skills development, collaboration with local institutions, procurement from Kenyan firms, SME supplier development, technology transfer, inclusion of women, youth, and regional enterprises, and periodic reportingofoutcomes.

96. POAK proposed an express minimum local procurement requirement for SEZ petroleum enterprises. ASEZ made a proposal to introduce an express provision entitling SEZ enterprises to develop housing facilities for their staff within the zone. The proposal further introduces a surcharge of 2.5 percent payable on sale of goods from the SEZ into the customs territory. ASEZ also proposed to amend section35of theSEZ Act,Cap.517A toprovide thatwhere anSEZ enterprise is liable to pay the standards levy in respect of exports, that levy be assessed on the value of domestic sales only and noton the enterprise's annual turnover.ASEZfurther requested the Committee to delete the ten-year cap in section 35(5) of the SEZ Act, Cap. 517A, which currently limits the period during which SEZ enterprises may enjoy the benefits conferred under that section. 2. within the African Continental Free Trade Area trade regime. KNCCl proposed a Single-Window Licensing System, statutory thirty-day decision timelines for licensing determinations, a joint SEZincorporating key performance indicators covering FDl inflow, employment creation, export volumes and MSME participation share. KNCCl requested integration of zone declarations with National and County Spatial Plans under the Physical and Land Use Planning Act, 2019 and on the consequential amendments, a bounded withholding tax exemption of ten years from the date of first operationwithamaximumoffifteenyearsforpetroleumzones.

Committee Observations/Recommendation

98. The Committee considered the proposals submitted during public participation and rejectedthemforthefollowingreasons:

• a) The Petroleum Act already provides for local content. Introducing parallel provisions through the SEZ (Amendment) Bill, 2026 would risk regulatory duplication, inconsistency, and compliance confusion. Any enhancement of local content requirements should be pursued under the Petroleum Act or through the ongoingSEZApolicyreview.
• b) The proposal to amend the standards levy basis engages the Kenya Bureau of Standards Act and KEBS's administrative framework, which fall outside the scope of this Bill. It was not supported with evidence of consultation with KEBS or by a fiscal impact assessment of the potential revenue implications.
• c) The proposed deletion of the ten-year benefits cap under section 35(5) constitutes a cross-cutting reform of the SEZ incentive framework affecting all sectors and zone types. It is a matter of general policy that should be addressed through the ongoing SEzApolicyreview.

• d) On staff housing, the Committee observed that the proposal poses a significant risk to the integrity of the SEZ regime.While the existing framework alreadypermits developers to provide staff housing as part of zone infrastructure,extending an express entitlement toSEZ enterprises would create a riskofabuse.Enterprises benefiting from SEZ fiscal incentives could develop housing for sale or lease to persons outside the zone, effectively turning SEZs into vehicles for subsidised real estate development unrelated to their export-oriented purpose. In the absence of clear safeguards on occupancy, use, and applicable incentives, such provisions would bevulnerable to exploitation andcoulddivertscarcezoneresourcesfromproductive investment.TheCommitteefurthernotedthat housingdevelopmentis comprehensively addressed under existing government policy and legal frameworks, andexpandingSEZenterpriseactivitiestohousingwoulddilutetheprogramme's focus by extending fiscal concessions beyond their intended purpose.
• e) On AfCFTA alignment, the Committee acknowledged the strategic merit of orientingpetroleumzones toward thecontinental trade architectureunderKenya's AfCFTAcommitments and Article 2(6) of the Constitution.However,this is a matter of implementing policy and regulatory strategy rather than primary legislation,andgoesbeyondtheBill'sscope.

3. Committee endorsed the substance of these proposals as sound regulatory practice but observed that they engage the broader regulatory architecture of multiple agenciesbeyond thescopeofthisBillandcarryinstitutionalresourceimplications that attract money Bill considerations under Article I l4 of the Constitution.

• g) The Committee further noted that Standing Order I33(5) prohibits amendments that expand a Bill beyond its subject matter. This Bill is narrowly focused on extending the SEZframework to upstream and midstreampetroleum operationsin February-2026. The-proposals-considered-were-not-directed-at-this-objective-and wouldconstituteanexpansionofscope.
• h) In addition, several proposals carry direct fiscal implications including the removal of the benefits cap, introduction of a 2.5% surcharge on domestic sales, and changes assessments or recommendations from the Cabinet Secretary responsible for finance,as required underArticle Il4 of the Constitution.

General Observations on Proposed Stakeholder Amendments

• participation process.Having done so,the Committee makes the followingfundamental observations whichapply uniformlyto all proposed amendments:
• a) Upon careful consideration, the Committee observed that majority of the proposed amendments sought to reform the broader SEZ programme, extend incentives to sectors not contemplated by the Bill,introduce local content frameworks,address MsME participation,create new zone theLokicharBasindevelopmentobjective.
• b) Standing Order 133(5) prohibits amendments that go beyond the subject matter of a Bill or expand it unreasonably. While meritorious in their own right, the proposals fall outside the Bill's definedscope and theirincorporationwouldconstitute an unreasonable expansion contrary to StandingOrderI33(5).
• c) The Committee further noted that proposals with money Bill implications had not been s requiredunderArticlell4oftheConstitution.
• d) The Committee recognised that several broader reformproposals,particularly thoserelating to incentivecontinuity on licencerenewal,extension offiscal corrections across allSEZsectors, recommends that these be considered within the ongoing comprehensive review of the SEZ policy and legal framework by the Cabinet Secretary responsible for industrialisation, in consultation with SEZA and the National Treasury, informed by stakeholder submissions.
• e) For the foregoing reasons, the Committee rejects all proposed stakeholder amendments. In the interim, the Bill maintains a focused and proportionate objective: to support investment in the petroleum sector through targeted interventions that address gaps in the existing SEZ framework withoutdisruptingthebroader architectureof theSEZprogramme.

5.OCOMMITTEEOBSERVATIONS

Having considered the Bill, the Committee made the following observations on the Special Economic Zones(Amendment) Bill(National AssemblyBill No.8of 2026):

• . The Special Economic Zones(Amendment) Bill,2026 represents a timely and necessary intervention tostrengthenKenya's investment andindustrialisationframework.The Billseeks to address longstanding constraints in the SEZ regime, particularly in relation to regulatory inefficiencies, Special Economic Zones Authority and enhancing licensing, administration, and incentive structures, the proposed amendments provide a foundation for a more responsive and competitive SEZ ecosystem.

2. TheBill ispremisedon aresolutionofbothHousesofParliamentadoptingtheReportof theJoint Committee of the National Assembly Departmental Committee on Energy and the Senate Standing Committee on Energy on the Field Development Plan and Production Sharing Contracts for Blocks 3. The absence of an SEZ framework for petroleum has meant that companies cannot access the fiscal incentives in terms of duty exemptions on capital equipment, VAT zero-rating on inputs, reduced pumping unit imported for the Lokichar Basin development has been subject to standard import ismaterial.Competitors in other jurisdictions havebenefited frommore tailored fiscal incentive frameworksfortheirpetroleumsectors.

CHAPTERFIVE

CHAPTERSIX

6.0COMMITTEERECOMMENDATION

The Committee having reviewed the Special Economic Zones (Amendment) Bill (National Assembly Bill No.8of2026)recommendsthattheHousePASSESTHEBILLWITHOUTAMENDMENTS.

SIGNED...

07 2oPC

....DATE..

HON.BERNARD MASAKASHINALI,CBS,MP CHAIRPERSON,

DEPARTMENTALCOMMITTEEONTRADE,INDUSTRYANDCOOPERATIVES

REFERENCES

• 1.Report of the Joint Committee of the National Assembly Departmental Committee on Energy and the Senate Standing Committee on Energy on Consideration of the Field Development Plan and Production Sharing Contracts for Blocks T6 and T7 in South Lokichar Basin, Turkana County.

2. https://kenyalaw.org/kl/fileadmin/pdfdownloads/lncomeTaxAct(Cap.470).pdf 3. https://new.kenyalaw.org/akn/ke/act/2013/35/eng@2024-12-27accessedon19-03-2026 4. https://rwandali.org/akn/rw/act/law/2011/5/eng@2011-03-30/source 5. https://www.investmalaysia.gov.my/media/r00jypsc/free-zones-act-1990.pdf

THIRTEENTH PARLIAMENT-FIFTH SESSION - 2026

DEPARTMENTALCOMMITTEE ON TRADE,INDUSTRYANDCOOPERATIVES

ADOPTIONSCHEDULE

Cooperatives today, Saturday, 4th April 2026 do hereby affix our signatures to this Report on the Special Economic Zones (Amendment) Bill (National Assembly Bill No. 8 of 2026) to affirm our approval and confirm its accuracy,validity and authenticity:

| S/NO. | NAME | SIGNATURE | |---------|---------------------------------------------------|-------------| | | Hon. Benard Masaka Shinali, CBS,MP Chairperson | | | 2. | Hon. Marianne Jebet Kitany, MP - Vice-Chairperson | | | 3. | Hon. Adhe Wario Guyo, MP | | | 4. | Hon. Anthony Tom Oluoch, MP | | | 5. | Hon. (Dr.) Beatrice Kahai Adagala, MP | | | 6. | Hon. Joshua Mbithi Mutua Mwalyo, MP | | | 7. | Hon. Joyce Kamene, MP | Ceurne | | 8. | Hon. Robert Githinji Gichimu, MP | hnrgy | | 9. | Hon.(Dr.) Wilberforce Ojiambo Oundo,MP | | | 10. | Hon. Adams Korir Kipsanai, MP | | | I1. | Hon. Alfred Kiprono Mutai, MP | | | 12. | Hon. Amos Maina Mwago, MP | | | 13. | Hon. John Okano Bwire, MP | | | 14. | Hon. Samuel Sakimba Parashina,MP | | | 15. | Hon. Michael Wainaina Wambugu, MP | |