Foreign Tech Companies to Give Up At Least 30% Ownership in Kenya’s Revised ICT Policy

Kenya has reviewed its National Information Communication and Technology (ICT) Policy. According to the new update, foreign-owned ICT companies and startups must have at least 30% Kenyan ownership to continue operating in the country.

Already existing foreign tech companies which fail to meet the requirement after a three-year threshold will have their licenses revoked or must then apply for a one-year extension backed by credible reasons. Companies yet to begin operations must satisfy the stated 30% local ownership requirement to be licensed to execute business in Kenya.

The new national ICT policy aims to create an avenue for Kenyan individuals and corporations to actively get involved in the country’s ICT sector.

The government strongly encourages Kenyans to participate in the ICT and science and technology sector through equity participation. It is the policy that only companies with at least 30 percent substantive Kenyan ownership, either corporate or individual, will be licensed to provide ICT services. For purposes of this rule, companies without majority Kenyan ownership will not be considered Kenyan, and may thus not be calculated as part of the 30 percent Kenyan ownership calculus.

Regulatory policy published by the ICT Ministry

Majority of the tech startups in Kenya are owned or co-owned by foreigners. In 2019, Forbes conducted a survey of 1,079 co-founders across 788 startups in Kenya, Ghana and Nigeria. It reported that Kenya had the highest concentration of foreign expatriates (37%) in its tech space, compared to Ghana’s 10% and Nigeria’s 5%.

The revised ICT policy tries to level the playing field in Kenya’s ICT sector by providing equity distribution which extends to local owners and co-owners of Kenyan nationality and also ease the entry barrier.

Foreign-owned companies largely receive more funding than their indigenous counterparts. This is due to the foreign cultural bias and local founder apathy on the part of investors who favour foreign owners over local ones. In 2019, Kenya-based startups raised a venture capital of $428.9 million in total. Foreign-owned startups received 87.8% of that amount to the tune of $376.7 million.

In the same year, more than 40% of foreign-owned startups were funded, less than 10% down from the previous year.

In summary, the reviewed ICT law by the Kenya Ministry of Information, Communication and Technology will hope to reduce the heavy dependence of the nation’s tech businesses on foreign owners, rather than discourage expatriate investment in its ICT sector.