Kenya’s ministry of information and communication technology has publicly released a policy document to help aid the country’s ICT sector. Among other interesting provisions, the policy states that foreign tech companies should have at least 30% Kenyan ownership before they are licenced to operate in the country.
The policy tagged the “National Information, Communications and Technology (ICT) Policy” states that it wants to help develop the nations’ digital economy, and help grant universal access to ICT infrastructure and services in the country.
It intends to create an enabling environment for Kenyan citizens and stakeholders with the aid of world-class ICT infrastructure, anti-trust legislation, regional and international cooperation among others.
Interestingly, the policy wants to encourage more Kenyans to participate in the country’s ICT sector through equity participation.
Hence, only companies with at least 30% Kenyan ownership, either corporate or individual, will be licenced to operate in Kenya. Companies without majority Kenyan ownership will not be considered Kenyan and will have to meet the minimum threshold.
Tech companies have been given 3 years to meet the local equity ownership and might be given a one-year extension if valid reasons are brought before the Cabinet Secretary.
This rule slightly changes for publicly listed companies, as equity participation will be subject to the rules of the Kenyan Capital Markets Authority.
While the ministry’s aim is to improve equity participation for Kenyans, it might have some downsides.
While Kenya’s ICT policy could mean its citizens can share more in the success of tech companies in the country, it might present a hassle for fundraising. Foreign investors will be coming into the market knowing about 30% is already untouchable.
While this should not be an issue, past figures have shown African startups raise more funding from foreign sources, than they do locally.
“Startup founders get diluted as they grow. No investor is coming into a startup where some people cannot be diluted,” says an experienced policy expert.
The ICT policy might also present problems for companies looking to expand into Kenya. They would either have to look for a Kenyan co-founder(s) or set up shop outside the country.
While Kenya’s policy comes with a number of interesting provisions, it will be interesting to see how its implementation plays out in the coming years.
Jan. 18: Bonus Built in Africa episode: Town Hall meeting with Peter Salovey, President of Yale University
On March 25, 2021, Techpoint Africa will be hosting the brightest minds in decentralised finance/crypto at the Digital Currency Summit tagged “Building the money of the future” Click here for more details, registration and sponsorship. Location: Fourpoint by Sheraton, V.I. Lagos
Report: Millionaire West African startups” raised over $1.806 billion between 2010 and 2019, 97.9% of which went to Nigerian startups. Get a free overview and 50% purchase discount here.