Will Removing The 30% Shareholding Cap Spur ICT Growth?

The Kenyan Ministry of Information, Communications, and Technology has proposed the removal of the 30% local shareholding requirement for foreign ICT companies. This move is aimed at making Kenya a better investment destination for global ICT giants.

Currently, the National ICT Policy Guidelines, 2020, require all licensees to comply with the 30% local shareholding provisions within a 3-year grace period. With this proposal, the government’s strategy is to develop and promote the ICT sector in order to spur investments and create employment for Kenyans.

The goal is to make Kenya a globally competitive knowledge-based economy by the year 2030 and an attractive investment digital hub.

“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 on Tuesday, “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.”

The Ministry has now invited stakeholders, members of the public, and all interested parties to provide suggestions, views, and inputs on the proposed removal of the 30% local shareholding requirement for foreign ICT companies.

In the past year, we have witnessed a number of ICT companies moving away from the country claiming that the regulatory environment is not condusive to run a profit-making business. An example is B2B e-commerce firm Wasoko which closed its Kenyan office and shifted to Zanzibar. This was after the ICT firm partnered with the Zanzibar government to set up the Wasoko Innovation Hub.

However, for the case of Wasoko, it is not because of the 30% shareholding cap because the company was founded by Kenyans. Wasoko, along with a few other companies left the country because of high taxation.

If the 30% shareholding cap will also help locally founded companies to operate better, then it is the best thing for the Kenyan ICT sector right now. Other companies that moved out or was forced to close shop sited competition from global ICT companies.

The removal of 30% shareholding cap will definitely bring more global tech giants to invest in Kenya. However, it is important to also look at how this will affect growth of the locally founded ICT companies.

Some global giants, however, are coming in to help the growth of startups in the country. Industry players will have to look at both sides of the coin while giving feedback on the new proposal.

What’s definite is that Kenya will have more global ICT companies setting up shop in the country.