Kenya withdraws 30% shareholding rule for Big Tech

The Kenyan government has reversed its 30% shareholding rule that was imposed on Big Tech and other multinational companies in the country. Starting June 2016, foreign companies registering in Kenya were required to cede at least 30% of their shareholding to persons who are Kenyan citizens by birth.

The Companies Act 2015 that backed this rule also stated that investors who fail to comply with the fresh ownership rules will be slapped with a fine of Sh5 million. When this law was implemented the World Bank said it will slow down inflow of international investments. Ignoring the caution, the government reiterated the shareholding rule in its National Information, Communications and Technology (ICT) Policy in 2020. A similar rule was also imposed on foreign firms in the mining sector.

However, President Williams Ruto administration has said that: "For Kenya to be an attractive investment digital hub, it is proposed that the equity participation subsection be deleted".

"Kenya has a vision to be a globally competitive knowledge-based economy by the year 2030. 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 Kenyan ICT ministry was quoted in ITWeb.

With this reversal, Airtel who has find it difficult to get Kenyan investors to buy a 30% stake will operate freely. President Ruto believe that more companies will expand into the country with this move.

Local media reports that e-commerce giant Amazon convinced the Kenyan government to abandon the foreign ownership rules to enable it establish a presence in Nairobi. Last year, the company disclosed its plan to launch a Amazon Web Services Local Zone in the country, in partnership with Safaricom.

A similar shareholding rule in South Africa

This shareholding rule is not unique to Kenya. To operate in South Africa, internet service provider (ISP) are required to sell 30% equity to historically disadvantaged groups—including black people, women, youth, or people with disabilities.

The above is said to be the reason why Starlink has not expanded into the country. Despite oppositions, the South African government has not shown willingness to reverse the rule. Just last week, the country's Communications minister Mondli Gungubele  reiterated that it would not be possible to allow Starlink to officially operate in the country unless it met the country's ISP ownership equity rules.

Starlink is currently in several African countries including Nigeria and Rwanda, the service will be available to about 35 other countries on the continent later this year and in 2024. "It is simply laughable that an international multibillion dollar company must hand over at least 30% of its equity to the ANC government to operate within South Africa," says Dianne Kohler Barnard, a South African opposition leader.

Last year, the Independent Communications Authority of South Africa (ICASA) said that it is discussing with SpaceX regarding Starlink. Although an agreement has not been reached, the ISP's roaming feature allows South African residents to use Starlink if they are able to import it from neigbouring countries.