Foreign-owned ICT firms have a deadline of three years to ensure they have a 30% ownership by Kenyans.
In the latest Gazette Notice Vol. CXXIII—No. 69, dated 9th April 2021, Joe Mucheru, Kenya’s ICT Cabinet Secretary, has given these foreign firms a deadline of March 2024 to comply.
The notice said the Government encourages Kenyans to participate in the ICT sector through a policy that will require 30% local ownership of all foreign-owned ICT firms, either through local firms or individual Kenyans.
An already existing foreign ICT firm with less than 20% local ownership before August 7th, 2020, will be required to raise this to the 30% threshold at the end of the grace period, with effect from March 25th, 2021.
A new applicant for a licence will have three years to meet the local equity ownership threshold from the license date.
However, the legal notice states that a company registered to exclusively offer Business Process Outsourcing (BPO) Services will be exempt from this local equity participation rule.
An affected foreign ICT firm is allowed to apply to the Cabinet Secretary for extension or exemption under this guideline,” said the ICT Cabinet Secretary in the notice dated March 25th, 2021.
Listed firms will be required to adhere to equity participation rules of the Capital Markets Authority.
ICT firms most affected by the rule
On the list of foreign ICT firms affected by this new requirement is Airtel Kenya, a subsidiary of Airtel Africa that Bharti Airtel wholly owns.
Figures indicate that Airtel Kenya is the second largest telco in Kenya, with an estimated 16.2 Million subscribers and a 27.2% market share.
Airtel Kenya could be forced to sell part of its equity to local firms or individuals or seek to list at the Nairobi Securities Exchange(NSE) to comply.
The 30% local equity participation rules for foreign-owned ICT firms was first introduced in Kenya 15 years ago but was revised to 20% in 2007.
Kenya published the National ICT Policy Guidelines in August 2020, specifying that firms must have “at least 30 per cent substantive local ownership.
Airtel Kenya was granted an exemption to this rule in 2013.