Kenya Cabinet Lifts ICT Rule Requiring 30% Local Ownership

In a significant move aimed at boosting foreign investments and promoting the growth of Kenya’s digital economy, the Kenyan Cabinet has approved the reversal of the 30% local ownership rule for Information, Communications, and Technology (ICT) companies. The decision comes after President Ruto expressed his desire to remove the clause requiring companies to cede 30% ownership to local citizens in order to attract more investment and establish Kenya as an attractive digital hub.

The National Information, Communications, and Technology (ICT) Policy in Kenya previously included a clause called Equity Participation, which encouraged Kenyan citizens’ involvement in the ICT and Science and Technology sectors through equity ownership. Under this policy, foreign companies registering in Kenya were required to allocate at least 30% of their shareholding to Kenyan citizens by birth. However, the recent cabinet meeting resolved to remove this requirement, paving the way for a more investor-friendly environment.

President Ruto earlier in year stated, “For Kenya to be an attractive investment digital hub, it is proposed that the equity participation subsection be deleted,” emphasising the importance of fostering technology and knowledge transfer and expanding the country’s digital economy. The Cabinet’s approval of this policy shift aligns with the government’s vision outlined in the Administration’s Bottom-Up Economic Transformation Agenda (BETA).

The cabinet meeting resolution noted that the reform aims to enhance the ease of doing business in Kenya and ensure legislative consistency in the governance framework for foreign investments. By revising the minimum threshold for local shareholding in the ICT sector, the government seeks to attract increased foreign investments in technology, thereby positioning Kenya as a hub for innovation and economic growth.

The decision to reverse the local ownership rule is expected to have a significant impact on international companies interested in operating in Kenya’s ICT sector. Previously, the requirement had posed challenges for many foreign businesses seeking to establish a presence in the country. With the removal of this barrier, these companies will now have greater freedom to invest and expand their services in Kenya.

Rumors have circulated that major players in the ICT space, including e-commerce giant Amazon, had lobbied for the removal of the rule to facilitate their expansion into the Kenyan market. While these rumors may hold some truth, the decision ultimately benefits not only large multinational corporations but also smaller enterprises and startups looking to enter the Kenyan ICT sector.

By attracting foreign investment and fostering technological advancements, Kenya aims to strengthen its position in the global digital economy. The government’s commitment to creating an enabling environment for businesses and promoting innovation is expected to yield positive outcomes for the country’s economy and its citizens.

As the reversal of the 30% local ownership rule takes effect, the Kenyan government is poised to drive growth in the ICT sector, encourage knowledge transfer, and unlock new opportunities for both domestic and international players. The move represents a significant step forward in positioning Kenya as a digital hub in Africa and showcases the government’s dedication to fostering a vibrant and competitive digital economy.