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Kenya: Cabinet Secretary Removes Local Equity Requirement for All ICT Sector Players with Immediate Effect

23 August 2023
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Overview

  • The Kenyan Cabinet Secretary for Information, Communications and the Digital Economy has formally notified the general public of the amendment of the National Information Communications and Technology Policy Guidelines, 2020 (Policy Guidelines) by deleting a paragraph relating to the 30% equity participation requirement.
  • Going forward, entities operating within the Kenyan ICT sector will not be required to comply with the 30% local equity participation rule as part of their licence-related compliance requirements.
  • This is a positive regulatory policy change that will facilitate a more rapid digital transformation where the local equity requirements do not restrict foreign investment, shareholding and ownership.

Following the call for public comments and public participation published by the Ministry of ICT (“the Ministry”) in July 2023, the Cabinet Secretary for Information, Communications and the Digital Economy has formally notified the general public (through the Gazette Notice 11079 dated 22 August 2023) of the amendment of the National Information Communications and Technology Policy Guidelines, 2020 (“the Policy Guidelines”) to remove the 30% local shareholding requirement which applied to licensees in the ICT sector. This change will be effective immediately from 22 August 2023 by deleting paragraph 6.2.4. of the Policy Guidelines.

The Communications Authority of Kenya (“the CA)” has also been duly notified of the removal of the 30% local equity participation rule and has been directed to implement this policy change going forward.

This amendment to abolish the local equity participation rule is a welcome move for all licensed entities and other companies operating in the ICT sector. This policy shift will attract foreign investment while fostering a mutually beneficial environment for all stakeholders.

Companies can now invest in Kenya directly, which will exponentially increase the attractiveness of Kenya’s economy as a key gateway hub for foreign companies and multinationals seeking to expand their operations in Africa.

This policy change underlines the need to ensure that government policy is geared towards resolving prevailing business-related challenges and promoting investments within the economy. There is no doubt that foreign direct investments present many opportunities, including the transfer of knowledge, expertise, and relevant technology from foreign companies to local companies.

The creation of Public Private Participation projects (PPPs) in place of the local equity participation requirements can also hasten the rollout of technological infrastructure, such as data centres and internet exchange points and networks, facilitating a more rapid digital transformation where local equity requirements do not restrict foreign investment, shareholding and ownership.

A number of licensed entities had already begun the process of complying with the Policy Guidelines, 2020. We are on hand to advise on the next steps in terms of regulatory engagement owing to this significant policy shift.   Please also see our previous newsflashes on clarity on local participation requirements in Kenya,   an overview of  the telecommunications sector in Kenya,  understanding the regulatory environment   and   compliance with telecommunications licence obligations in Kenya