We are pleased to announce that our client, Moderna, Inc., a global pioneer in messenger RNA therapeutics and vaccines, has finalised an agreement with the Government of Kenya that will see Moderna establish a vaccine manufacturing facility in Kenya. The facility will be Moderna’s first mRNA vaccine manufacturing facility in Africa.
Moderna’s entry into Kenya and Africa signals Kenya’s and the continent’s continued attractiveness to foreign direct investment.
The COVID-19 pandemic greatly highlighted Africa’s reliance on imported vaccines and medicines, and the need for Africa to develop vaccine and medicine resilience. Moderna’s entry into Africa represents a monumental step in strengthening Kenya’s and Africa’s pandemic preparedness and the capacity to meet local and regional vaccine and medicine needs.
For Kenya, Moderna’s investment is particularly timely and, in our view, novel for several reasons. Firstly, Kenya has historically relied on GAVI The Vaccine Alliance (GAVI) for its access to vaccines. Some of the vaccines Kenya has been able to access with GAVI support include Yellow Fever and Measles-Rubella vaccines. The support Kenya receives from GAVI is based on its ability to pay and this is determined by its Gross National Income. Due to its economic growth, Kenya’s Gross National Income has been on an upward trend, slowly phasing out the support received from GAVI. With Kenya moving towards self-financing status, the establishment of Moderna’s vaccine manufacturing facility could not come at a more critical juncture.
Secondly, the Special Operating Framework Agreement with the Government is the first one since the re-introduction of special operating framework arrangements under Kenya’s tax regime. Special operating framework arrangements are used to incentivise investment in specific sectors with a view to achieving a country’s strategic goals such as, in Kenya’s case, vaccine self-reliance and pandemic preparedness.
The Finance Act, 2022, amended the Income Tax Act to provide for the ability of the Government to enter into special operating framework arrangements with companies undertaking the manufacture of human vaccines whose capital investment is at least KES 10 billion (approximately USD 76 million).
Moderna’s vaccine manufacturing facility will be set up in a Special Economic Zone (SEZ) under the Special Economic Zones Act, 2015. SEZs are designated geographical areas where certain business-enabling policies are adopted and applied by the Government to incentivise investments. In recent months, the Government has emphasised its intent to attract investments into SEZs to boost manufacturing and increase foreign direct investment. The Government has announced that it aims to increase foreign direct investments to USD 10 billion annually from USD 448 million.
Moderna’s vaccine manufacturing facility is an example of such an investment and it is estimated to be capable of producing up to 500 million vaccine doses a year upon full commercialisation. The development and operation of this facility will move Kenya closer to its target of having manufacturing contribute at least 20% of its Gross Domestic Product, and more importantly, to vaccine self-reliance.
ALN Kenya is pleased to have advised Moderna on the negotiation of the special operating framework agreement with the Government for the establishment of the facility, working together with Doug Maguire and his colleagues at Brownstein Hyatt Farber Schrek. We look forward to seeing healthcare in Kenya transformed in the years ahead.
Should you have any questions regarding the information in this legal alert, please do not hesitate to contact Karim Anjarwalla, Daniel Ngumy, Amyn Mussa, or Ian Gaitta.