Kenya Removes 30% Local Shareholding Requirement In ICT Sector

• Published date: 12 March 2024
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Media, Telecoms, IT, Entertainment, Inward/ Foreign Investment, Corporate and Company Law, Mobile & Cable Communications
• Law Firm: Anjarwalla & Khanna
• Author: Mr Dominic Rebelo and Anne Kiunuhe

The Kenyan Government has recently done away with the local shareholding requirement in the ICT sector that has been in place for over ten years. It is expected that this move will encourage the ease of doing business in the ICT sector and attract more foreign investment into the sector.

On 22 August 2023, the Ministry of Information, Communications, and the Digital Economy published in the Kenya Gazette an amendment to the National Information Communications and Technology Policy Guidelines, 2020 (the 2020 ICT Policy) which required companies to have at least 30% substantive Kenyan ownership, either corporate or individual, in order to be licensed to provide ICT services (the Equity Participation Rule). Prior to that, licensees in the ICT sector were required to have 20% local ownership.

The recent amendment deletes the provisions of the Equity Participation Rule, thereby removing the local shareholding requirements for companies providing ICT services in Kenya.

ALN Kenya participated in the legislative process leading to the removal of the Equity Participation Rule.

The Equity Participation Rule was initially introduced with the aim of enhancing Kenyan involvement in the ICT sector. While the Equity Participation Rule and similar local shareholding requirements in other sectors aim to secure economic benefits for Kenyans, they can also hinder the growth of these sectors.

Given the high capital outlays required, foreign direct investment (FDI) into Kenya's ICT sector is crucial to the sector's expansion. The mandatory requirement to cede a portion of ownership to...