Apple has complicated arrangements with most carriers that carry the iPhone. When you buy an iPhone on contract, you will pay a fixed amount of money per month for a duration of usually 2 years and the carrier will throw in some data and some minutes. Now if you add the total contract value plus the small upfront payment of lets say USD 97, the cost of the phone will be much higher than if you bought 'Pay-As-You-Go' or contract free. Contract free does not mean unlocked though.
Now the situation in the UK is different, with 3 carries, O2, Orange and Vodafone carrying the iPhone. So Apple simply ships them unlocked; but you will pay market price for them; around GBP 450 for 16GB and GBP 590 for a 32GB.
With Orange KE, the prices is just not logical. It is among the highest in the mainstream iPhone carrier networks. May be Rita can give us a justifications. I think that has curtailed the penetration of the iPhone in the Kenyan market. Most people I know with iPhones have had to ship them from other countries. Now if Orange KE can have a reasonable price for the iPhone, I am sure they will sell much more units and even catalyze an ecosystem of iPhone developers like they way Nokia is doing. I would love to do all banking and airline reservation and ID application on some sleek iPhone App. Of course these Apps can be ported to other platforms; though I don't normally do other platforms but there are some people who do.