Kenya is seeking to bolster foreign investment in startups and to encourage wider participation in the digital economy.
Kenya’s President, William Ruto, has removed the Equity Participation Clause in the National Information, Communications, and Technology (ICT) Policy, which previously required a minimum of 30% Kenyan ownership for ICT firms to be licensed.
The rule was intended to encourage local participation in the digital economy and protect the interests of Kenyan-owned companies. However, it has limited the growth of startups by making it difficult to meet regulatory requirements and raise funds beyond the equity threshold. The decision, made at a regional business meeting in Nairobi, will enable foreign-owned tech startups to operate in Kenya without concerns about their ownership status.
The Equity Participation Clause
The Equity Participation Clause was added to the Kenyan ICT Policy in 2019 to encourage local stakeholder participation and address concerns over the dominance of foreign-owned firms in the industry. However, it resulted in challenges for startups seeking to establish themselves in the Kenyan tech sector.
Benefits for foreign-owned companies
With the removal of the Equity Participation Clause, foreign-owned companies operating in Kenya will no longer have to sell part of their ownership to regional investors. The move is expected to boost the growth of startups in Kenya and attract more foreign investment into the country.
According to reports, Amazon played a significant role in convincing President Ruto to remove the Equity Participation Clause so that the tech giant could establish its presence in Nairobi.
Countries across Africa, including Ghana and Gambia, are taking steps to boost their digital economies through a series of different measures.
According to the Center for Africa-Europe Relations, Africa’s digital economy is projected to reach USD 180 billion by 2030, while digital transformation should also contribute to the realization of the African Continental Free Trade Area (AfCFTA), thereby spurring further growth.