Kenya Is Walking Back A Contentious Rule That Spooked Tech Companies

Global tech giants including Amazon, Microsoft, and Google will no longer be required to relinquish at least 30 percent of their shares to local stakeholders. This change comes after the Kenyan government agreed to remove the rule from the national ICT policy guidelines.

In a recent notice, the Ministry of ICT invited public comments on the proposed amendment, emphasizing Kenya’s vision of becoming a globally competitive knowledge-based economy by 2030. To achieve this, the government aims to develop and promote the ICT sector, attracting investments and generating employment opportunities for Kenyans. Consequently, the proposal suggests deleting the equity participation subsection, which previously encouraged local ownership to foster healthy competition within the ICT industry.

“Kenya has a vision to be a globally competitive knowledge-based economy by the year 2030. One of the government strategies to achieve the vision includes the development and promotion of the ICT sector to spur investments and create employment for Kenyans,” the ICT ministry stated, according to Business Daily.

“For Kenya to be an attractive investment digital hub, it is proposed that the equity participation subsection (under section 6.2.4 on market rules) be deleted from the national ICT policy guidelines, 2020.”

Under the previous regulations, foreign ICT licensees were given a three-year grace period to comply with the local equity ownership requirement, set to be enforced until March 2024. The policy stated that only companies with a minimum of 30 percent Kenyan ownership, either corporate or individual, would be licensed to provide ICT services. Non-Kenyan companies without majority Kenyan ownership would not be considered as part of the 30 percent requirement. However, the stance was challenged when Amazon Web Services, a unit of the US-based e-commerce giant, made it clear that reviewing this rule was a prerequisite for its establishment in Kenya.

President William Ruto had previously hinted at a pending review of regulations on local ownership in foreign ICT-based companies, acknowledging that the requirement had deterred global tech giants such as Microsoft and Google from investing in Kenya. The country risked losing out to alternative launchpads for tech firms in Nigeria and South Africa. In response to the concerns raised by Amazon, President Ruto assured a delegation of visiting US investors that the government would remove the local ownership requirement to facilitate greater investment in Kenya’s ICT sector.

“This position is untenable and has made it impossible for large corporations to invest in Kenya. We will review this position and remove this requirement to facilitate greater investment in our ICT sector,” Dr Ruto told a delegation of visiting US investors.

The repeal of this rule also brings relief to telecom multinationals, most notably Airtel Kenya, which had been obligated to sell a 30 percent stake to comply with ownership regulations. In the event that the government retained the local ownership condition as part of licensing requirements, Airtel Africa, the parent company operating in 14 African countries, expressed readiness to list its Kenyan operations on the Nairobi Securities Exchange (NSE). The listing of Airtel Kenya would provide an opportunity for locals to trade shares in the second-largest telecommunications company, challenging the market dominance of Safaricom. Airtel had previously been compelled to list its Ugandan unit on the Uganda Securities Exchange as part of the country’s national telecoms operator license.

Throughout the year, Airtel had been engaged in discussions with the Communications Authority of Kenya and the Ministry of ICT to explore options such as a sale deal with a strategic investor or listing on the NSE. Airtel Africa however maintains it remains committed to meeting any lawful requirements of its license, whether it entails listing or other obligations.

“We are working on ways to comply with any lawful requirement of our licence. So if we are obliged to list, we will list. But once again, there’s been some indication from Kenyan authorities that this may not be a requirement. But whatever requirement there is, we will meet it,” Airtel Africa Group CEO Segun Ogunsanya reiterated.

Featured Image Credits: The Africa Report