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PERFORMANCE CONTRACT.

his Performance Contract (hereinafter referred to as ‘Contract’) is entered into

between the Government of the Republic of Kenya (hereinafter referred to as

‘GoK’ through its Ministry of Trade of P.O. Box 30430 – 00100 G.P.O.

Nairobi (together with its assignees and successors) of the one part, and the Board of

Directors of Export Processing Zones Authority ( hereinafter referred to as the ‘the

Board’), a State Corporation having its registered office at Administration Building Athi

River Export Processing Zone ( together with its assignees and successors) of P.O. Box

50563 – 00200 City Square Nairobi of the other part.

T

WHEREAS

The GoK is committed to clearly defining the working relationship between

itself and the Export Processing Zones Authority;

The parties recognize the need for adequate and reasonable managerial and operational

autonomy to facilitate achievement by the Board and management of the Export

Processing Zones Authority of the agreed and freely negotiated performance targets set

out in this Contract;

The parties are desirous of enhancing transparency in the management of public

resources and accountability for results;

The Board has indicated its capacity and competence to perform the duties and undertake

the functions specified under this Contract;

NOW THEREFORE, the parties hereto agree as follows:

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PART 1

(a) Vision

A leading agency contributing to the socio-economic growth and

transformation of Kenya into a global hub for investment and trade.

(b) Mission

To enhance economic and social development by promoting, facilitating and

creating enabling environment for investments in Special Economic Zones

(SEZs).

(c) Objectives.

i. To transform the Export processing Zones into that of special economic zones (SEZ) to create employment, expand realm of activities and earn foreign exchange.

ii. To attract new investments;

iii. To diversify sectors and activities;

iv. To increase linkages to other sectors of the economy;

v. To enhance corporate image and communication;

vi. To have effective investor facilitation programmes.

PART II

Commitments and Obligations of the Export processing Zones Authority Board.

The Export Processing Zones Authority Board is committed to do the following:

To review and implement Strategic Plan and ensuring it is linked to National policy

documents such as National Development Plan, Vision 2030, e.t.c.

To identify performance targets.

To assign weights to performance indicators.

To negotiate performance targets/sign performance contract.

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To ensure achievement of performance targets.

To prepare employees in the organization for the desired changes in working styles,

attitudes and work ethics.

PART III. Commitments and Obligations of the Government.

For the Export Processing Zones Authority to carry out its commitments under Part II

effectively, the Government is requested to:

1. Facilitate the enactment of the Special Economic Zones Bill in accordance with

the Cabinet approval of the transformation of EPZ policy into SEZ policy.

2. Facilitate establishment of one stop shop for EPZ operations in conformity with

the EPZ Act Cap. 517 of the Laws of Kenya.

3. Facilitate timely disbursement of government grant in line with expenditure

requirements.

4. Facilitate the creation of an enabling environment for EPZ businesses to thrive so

as to make Kenya a competitive investment destination.

PART IV.

Frequency of Monitoring and Information Flow.

The board shall submit quarterly and annual performance reports in the prescribed format

as per the provisions of Legal Notice Number 93 of 10th August 2004 and Performance

Contracting Guidelines.

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PART V.

Duration of Contract.

The performance contract will run for 12 months from 1st July 2009 to 30th June 2010.

Signed:

Export Processing Zones Authority:

……………………………………….. Date: ………………………

Mr. Mathenge Wanderi.

CHAIRMAN.

……………………………………….. Date: ………………………

Mr. Kenneth B. Nyachae.

DIRECTOR.

Government: Ministry of Trade:

……………………………………….. Date: ………………………

Dr. (Eng) Cyrus Njiru PhD, CBS.

PERMANENT SECRETARY.

Counter-Signed:

Ministry of Finance:

……………………………………….. Date: ………………………

Mr. Joseph K. Kinyua, CBS.,

PERMANENT SECRETARY.

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Performance Evaluation Criteria, Criteria Weights and Performance Targets.

WT 2008/09 2009/10 CRITERION VALUES Achieveme

nt

Raw score

Weighted

scoreCRITERIA UNIT Excel

lent (1.00-1.49)

Very Good (1.50-2.49)

Good (2.50-3.59)

Fair (3.50-3.59)

Poor (3.60-5.00)

A Financial & Stewardship.- Compliance with set

budgetary levels% 4 100 100

- Cost reduction Kshs M 2 -0.63 4- AinA Kshs M 7 79.17 113- Utilization of Allocated

funds % 3 100 100

- Development Index (Development Exp/Recurrent Exp.)

% 4 17.35 29

- Debt Equity Ratio % 0 0 0Weight Sub Total   20

B Service Delivery Implementation of Service

Charter % 8 90 100

Customer Satisfaction. % 8 55 60

Service Delivery Innovations

No. 4 1 3

Weight Sub Total 20

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WT 2008/09 2009/10 CRITERION VALUES Achieveme

nt

Raw score

Weighted

scoreCRITERIA UNIT Excel

lent (1.00-1.49)

Very Good (1.50-2.49)

Good (2.50-3.59)

Fair (3.50-3.59)

Poor (3.60-5.00)

C Non Financial   Compliance with

Strategic Plan% 1.5 100 100

Corruption Eradication % 1.5 95 100 Prevention of HIV

Infections% 1.5 100 100

Statutory Obligations % 1.5 100 100 ISO Certification % 4 95 100 Disposal of carry over

idle assets.% 1 50 100

Disposal of idle assets % 0.5 N/A 100 Competency

Development% 2 N/A 100

Automation % 1.5 70 75Weight Sub Total 15

D Operations outputs

-Newly licenced enterprises Number 3 20 25-New majority licenced Kenyan owned enterprises

% 2 40 40

New SME Projects (Incubator)

Number 2 2 4

- Local Promotion events. Number 2 5 5-Corporate Image Enhancement Programme

% 2 100 100

-Retain Investors % 2 91 100-New Business linkages Number 2 4 5-Industrial Relations Outreach Activities

Number 3 2 3

- Compliance Audits;√ AGOA compliance audits

for EPZsNumber 3 15 15

√ Other compliance audits Number 3 10 15 Project Implementation

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WT 2008/09 2009/10 CRITERION VALUES Achieveme

nt

Raw score

Weighted

scoreCRITERIA UNIT Excel

lent (1.00-1.49)

Very Good (1.50-2.49)

Good (2.50-3.59)

Fair (3.50-3.59)

Poor (3.60-5.00)

-Timeliness % 2 100 100-Quality % 1 100 100-Relevance % 1 100 100-Cost Efficiency % 1 100 100-Completion Rate % 1 100 100

Weight Sub Total   30E Dynamic/Qualitative

Work Environment % 1.5 52 60 Employee satisfaction % 2 70 80 Repair % 1.5 100 100 Maintenance % 1 100 100 Safety Measures % 1.5 60 100 Research & Devt. % 1.5 100 100 Prevention of Drug and

Substance Abuse% 3 95 100

Gender mainstreaming % 1 N/A 100 Resolution of Public

ComplaintsCertificate

1 N/A 100

Disability mainstreaming

% 1 N/A 100

Weight Sub Total 15

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NOTES

A. Financial and Stewardship.

1. Compliance with Set Budgetary Levels.EPZA will comply 100% with set budgetary levels. All the funds allocated by the Government and funds internally generated will be expended as approved in the budget.

2. Cost Reduction.Cost reduction measures undertaken so far include:

Efficient utilization of stationery by printing on both sides of paper and reuse of draft prints.

Introduction of VOIP to cut on telephone expenses. Maximizing on email for internal and external communication. Control of transport expenses by enforcing vehicle requisition for scheduled

meetings a day in advance, and enforcing pooling and vehicle sharing by officers heading same or nearby destinations.

Contracting out the management of the medical scheme to an insurance company and setting limits on expenses.

Controlling electricity expenses by switching off unnecessary lights. Improvement in transport management by enforcing use of work tickets and

enforcing regular audits of trips and fuel utilization.

Cost reduction measures in 2009/10 shall focus on: Utilizing investment promotion funds optimally to yield more licensed firms. Further improvement in transport management by enforcing use of work tickets

and enforcing regular audits of trips and fuel utilization.

3. Appropriation in Aid (AinA)EPZA generates its internal revenue by charging application fees; license fees; rent on land and buildings, service charge and selling of water. During 2009/10 AinA is projected at Ksh 113 million up from estimated amount of Kshs 79.17 million in 2008/09.

The revenues are indicated by the following table:

AinA 2009/10 in Kshs.Source of AinA Kshs

Application Fees 675,000License fees 19,876,104Rent 42,915,205Service Charge 8,529,691Water Sales 29,100,000Other Income 11,904,000Total 113,000,000

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4. Utilization of Allocated Funds.The allocated funds shall be utilized for the intended activities and projects as approved by the Board and in line with Government financial guidelines issued from time to time.

5. Development Index.In 2008/09, the major development projects for the Authority were the

Completion of Incubator project Phase I and start of Phase II, Refurbishing of industrial buildings and EPZA headquarters administration

building. Fencing of EPZA Sewerage land and portion of land of Athi River EPZ where

Vocational Training Institute is located. Construction of the incinerator.

In 2009/10, based on the budget submission, the Authority plans to implement the following projects:

Completion of Incubator project Phase II, Refurbishment of buildings and infrastructure

The printed development budget is Kshs 73.1m while recurrent expenditure is Kshs 245m.

6. Debt Equity Ratio.This was a new indicator in 2008/09 financial year and EPZA did not borrow any funds. In 2009/10 EPZA commits not borrow any funds during the contract period.

B. Service Delivery

1. Implementation of Service Charter.The Service Charter has been developed, launched and adopted. The charter has been uploaded on the EPZA website, and members of staff sensitized. Members of staff have been sensitized.

In 2009/10, the Authority intends to accomplish the following activities:

The Charter shall be translated to Kiswahili and displayed in strategic locations. Implementation shall continue taking into account the findings and

recommendations of the customer satisfaction survey undertaken in April/May 2009.

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2. Customer satisfaction.An independent customer satisfaction survey has been undertaken in the 4 th quarter of the 2008/09 performance contract.In 2009/10 financial year:

An independent customer satisfaction survey shall be carried out in the fourth quarter of the contract period to determine the level of customer satisfaction.

Improve the level of customer satisfaction by enhanced service delivery services.

3. Service Delivery Innovation.

In 2009/10 EPZA undertakes to develop 3 service delivery innovations.

C. Non Financial.

1. Compliance with Strategic Plan. The Authority is in the process of finalizing its strategic plan 2009-2013.In 2009/10, the Authority will comply with all the activities that fall within 2009/10 period.

2. Corruption Eradication.In 2008/09 corruption eradication measures that have been be undertaken in accordance with the Kenya Anti Corruption Commission (KACC) policies, include:

Formulation of an anti-corruption policy; Operationalizing corruption prevention-integrity committees; Developing corruption prevention plans; Developing a code of conduct; and Undertaking integrity training Submitting quarterly reports on corruption eradication to Kenya Anti Corruption

Commission.

In 2009/10 the activities to be undertaken include: Carrying out a baseline survey to determine level of corruption Reducing the level of corruption by implementing 50% of corruption prevention

plans. Staff sensitization. Train additional integrity assurance officers. Submitting quarterly reports on corruption eradication to KACC.

3. Prevention of HIV Infections.EPZA has been issuing condoms and creating awareness on HIV. It shall continue to this in accordance with National Aids Control Council strategy and specifically as given in

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the performance contract guidelines. In achieving Prevention of HIV Infections the activities to address include

Promoting counseling and emphasize testing for staff to know status through the medical scheme,

Promotion of condom use by making them available at the work place, Promoting behavior change communication for vulnerable groups, Prevention of mother to child transmission by offering comprehensive

medical cover to all employees.The Authority will submit quarterly reports on HIV and AIDS to the National Aids Control Council.

4. Statutory Obligations.The Authority has been complying with statutory requirements and in 2009/10, EPZA will ensure full compliance and enforcement of all the relevant statutory requirements that apply. These include complying with:

Signing of Performance Contract. Statutory returns, such as PAYE remittance, and Statutory Deductions (NSSF,

NHIF, Pension) by due date. Preparation and submission of Financial Accounts by 30th September.

5. ISO Certification.EPZA is implementing ISO 9001: 2008 and ISO 14001:2004 quality and environment management systems. It has contracted certification services from SGS Kenya ltd. It is planned that by 30th June 2010, EPZA will be ISO 9001:2008 and ISO 14001:2004 certified.

EPZA in 2009/10 plans to

Undertake corrective actions as per SGS Kenya Ltd Audit Report

6. Disposal of Idle Assets.On disposal of idle assets, in 2009/10 EPZA:

Shall dispose all the remaining indentified assets in the 2008/09 contract period.

Identify idle assets. Dispose 100% of identified assets by June 2010 in conformity with the

existing legal requirements.

7. Competency Development.

The activities to be carried out include the following;1. Skill and competence needs assessment. This will entail

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Identification of critical skills and competences for performance and growth.

Identification of common skills and competences required at various levels.

Periodical baseline surveys to determine skill levels. 2. Intervention programs. This encompasses

Training projections/attachment or internship plans Human Resource Plans Actual Training/attachment or internship undertaken Induction training for new employees.

3. Monitoring and evaluating intervention programs. This will entail Operationalizing EPZA Training Committee Taking statistics of the number trained in critical competences and Skills inventory

4. Performance Appraisal. This will involve Implementation of agreed training in the appraisal instrument Periodical staff appraisal

5. Assessment of career progression.

7. Automation

Under automation, in addition to maintaining the current level of automation, EPZA shall:

Automate cash office operations. Establish a project tracking system.

D. Operations.

1. Newly Licensed Enterprises.The Authority will develop and implement a marketing strategy with a focus on priority sectors and markets to yield twenty five new licensed enterprises in 2009/10.

2. New Majority Kenyan Owned Enterprises.One of strategic objectives of EPZA is to increase Kenyan participation in the EPZ programme. In the promotional market strategy it will aim at sensitizing and encouraging Kenyans to invest in the EPZ. Thus out of the twenty five new enterprises targeted to be licenced in 2009/10, ten or 40% are envisioned to be majority Kenyan owned EPZ enterprises.

3. SME Enterprises (Incubator)The incubator building Phase 1 has been completed and hosts two SME projects. These are enterprises that require support in order to prosper and grow to become major contributors to the EPZ programme and thus the economy. In 2009/10, EPZA targets to licence and host five SME enterprises.

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4. Local Promotion Events.

In 2009/10, five local promotion events will be held.

5. Corporate Image Enhancement ProgrammeIn 2008/09, the Authority undertook the following activities in order to enhance her corporate image:

Organized corporate positioning events with Government Ministries and Departments;

Facilitated visits by foreign missions in Kenya to EPZs; held 5 media briefs; Organized motivational talks for staff; Produced 2 quarterly news letters.

In the year 2009/10 EPZA shall develop corporate communication strategy and implement activities that fall within the contract period

6. Retain Investors.Retention of investors is a key objective of the organization. EPZA aims at retaining 100% of her customers through:

Improved service delivery. Strengthening of the ‘one stop shop’ operations. Advocating for favorable policies and removal of impediments to EPZ operations. Holding quarterly EPZ investor forums.

7. New Business Linkages Developed.To maximize EPZ benefits to the local economy, EPZ enterprises should spend more of their revenue locally. This is in terms of payments to labour, utilities such as power, water and telephone, and sourcing of local raw materials. In the year 2008, local expenditure stood at about Kshs 10 billion compared to total production of Kshs 29billion to yield local content value of about 30%. To increase this value, new business linkages need to be developed. In this contract period new business linkages will focus on agricultural and manufacturing linkages.

8. Industrial Relations Outreach ActivitiesIn 2008/09 the industrial outreach activities undertaken include:

Training employers on Social Accountability Standards (SA 8000); Training Human Resource personnel in EPZ companies on good labour

practices. Convening tripartite meetings with Trade Unions, Ministry of labour and EPZ

employers for the purpose of maintaining harmonious industrial relations.

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EPZA plans to undertake three industrial relations outreach activities in 2009/10. These are :

Sensitizing EPZ companies on good labour practices. Training on supervisory skills. Facilitating tripartite meetings with Trade Unions, Ministry of labour and EPZ

employers for the purpose of maintaining harmonious industrial relations

9. Compliance Audits.EPZ enterprises are obligated to comply with both local laws and International Trade Agreements and EPZA has a regulatory role. EPZA regularly carries audits to assess the level of compliance and take corrective actions. During the contract period:

All companies exporting under AGOA will be audited on AGOA requirements. Currently there are 15 garment enterprises that export under AGOA. Thus all of them will be audited. These are:

1. Kapric Apparels EPZ2. Ashton Apparels EPZ 3. Sino Link EPZ 4. Protex EPZ

5. Mirage Fashion Ware EPZ6. Global Apparels EPZ7. Alltex EPZ8. Blue Birds Garments EPZ9.Senior Best EPZ

10. Shin Ace Garments EPZ11. Future Garments EPZ12. United Aryan EPZ13. Africa Apparels EPZ14. Kenya Trading EPZ15. Ricardo Garments EPZ

15 companies will be audited on other compliance audits (labor, Immigration, EPZ and Environment Acts). These include :

1.Vermont Flowers EPZ2. Real Beverages EPZ3. Newland EPZ4. Norbrook EPZ5. Ideal Solutions EPZ

6. Blue Sky EPZ7. Gold Crown EPZ 8. Kenya Marine EPZ9. Revital Health EPZ10. Peng Candles EPZ.

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E. Dynamic/Qualitative.

1. Work Environment.On work environment, the Authority has provided basic working tools such as computers, telephones and conducive work stations with desks and allied equipments. It has also improved internal communication by providing feedback to employees as well as encouraging employees to participate in the affairs of the organization through participation in the preparation of performance contracts and service charter. A work environment survey undertaken in the fourth quarter of the 2008/09 Performance Contract indicates 52% level as per the draft Employee and Work Environment Survey Report. In 2009/010 EPZA shall:

Improve level to 60% through implementation of 70% of the identified areas in the Survey for improvement. This will be approached as a total package of the results of work environment.

2. Employee Satisfaction.EPZA is planning to carry out an employee survey to gauge level of satisfaction in April/May 2009. The Employee Satisfaction survey undertaken in the fourth quarter of the 2008/09 Performance Contract indicates 70% level as per the draft Employee and Work Environment Survey Report. In 2009/10 the level will be improved by 10% to 80% through:

Implementing 30% of the recommendations of the employee satisfaction survey report

Undertake employee satisfaction survey in the fourth quarter of the PC period.

3. Repair.EPZA has been repairing her equipments and tools such as computers and photocopier machines. In 2009/10 it aims at repairing 100% of all identified assets for repair in addition to keeping records of all equipments and tools repaired.

4. Maintenance.The Institution has a schedule to maintain her vehicles, lifts and computer hardware. The Authority has been able to meet the dates and mileages as per manufactures recommendations. In 2009/10 EPZA aims at 100% maintenance rate by:

Adhering to maintenance schedules for all its assets ; Entering into Service level Agreements with specific maintainace companies.

5. Safety Measures.With regard to safety measures the Authority has fire fighting equipments such as fire extinguishers, fire hydrants; provides protective devices as for instance gloves and aprons; ensures appropriate disposal of hazard wastes, has a first aid kit in addition to

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access to Medical Clinic within Athi River Zone; ensures safety for drivers and authorized passengers through provision of safety belts, life savers and up to date maintenance of vehicles. It has secured her documents by ensuring that access to documents are accessible only to authorized employees and kept in secure cabinets. A committee on safety has been established. In 2009/109 EPZA shall:

Continue to implement Safety Policy that guides staff and customers on safety within the premises.

Training on safety will also be carried out.

6. Research and Development.EPZ garment/apparel firms have in the recent past been facing difficulties leading to decline in employment at enterprise level and some closures. Most of the firms export to the US market and the world recession could have contributed to reduced orders. In order to make appropriate recommendations:.

Research will be undertaken in the apparel/garments sector to clearly understand the challenges. This will entail desk and field research.

7. Prevention of Drug and Substance Abuse.On prevention of drug and substance abuse, a committee has been established in addition to training seven counselors. A baseline survey is expected to be undertaken in May/June 2009. In 2009/10 financial year the Authority shall:

Train counselors on drugs and substance abuse; Create awareness on drug and substance abuse; Undertake counseling on drugs and substance abuse.

8. Gender mainstreaming.The activities to be undertaken include;

i. Establishing gender committeeii. Identification of gender concerns, needs and priorities and devising ways

to address them.iii. Compliance level with 30% gender representation policyiv. Collection of sex disaggregated data to guide in planning and

programming in the institution.

9. Resolution of public complaints.EPZA will

Establish mechanism of working together with the public complaints standing committee (PCSC) to address complaints referred to EPZA.

10. Disability mainstreaming. The activities to be undertaken include;

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Establishing a disability mainstreaming committee Training all staff in disability awareness and provision of services to

persons with disabilities Submitting biannual report to the National Council for People with

Disabilities

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PROJECTS.

EPZA projects are:

1. Carrying out a skills and competence needs assessment.2. ISO 9001:2008 certification on quality management system3. ISO 14001: 2004 certification on environmental management system4. New projects approved5. Environmental Conservation Project (Plantation Maintenance).6. Influence removal of Impediments to EPZ operations7. Corporate Social Responsibility events.

Each of the projects timeliness, quality, relevance to mandate, cost effectiveness, project completion rate is indicated by the following table:

Project Timeliness (Date)

Quality Relevance Cost Effectiveness

Project Completion Rate

1. Carrying out a skills and

competence needs assessment.

31st December 2009

100% 100% 100% 100%

2. ISO 9001:2008 certification on

quality management system

30th June 2010 100% 100% 100% 100%

3. ISO 14001: 2004 certification on environmental management system

30th June 2010 100% 100% 100% 100%

4. New EPZ projects approved 30th June 2010 100% 100% 100% 100%5. Environmental Conservation Project

(Plantation Maintenance).30th June 2010 100% 100% 100% 100%

6. Influence removal of Impediments to EPZ operations.

30th June 2010 100% 100% 100% 100%

7. Corporate Social Responsibility Events

30th June 2010 100% 100% 100% 100%

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