By Samuel Mwendwa Kisuu, Director at Africa Law Partners
On 7 August 2020, the Cabinet Secretary for Information, Communications, Technology, Innovation and Youth Affairs (the Cabinet Secretary) issued the National Information Communications and Technology Policy Guidelines, 2020 (the 2020 Guidelines) under the Kenya Information and Communications Act, No. 2 of 1998 (the Act). The Guidelines are a review of the ICT Sector Policy Guidelines, 2006 (the 2006 Guidelines).
The 2020 Guidelines seek to modernise the sector-wide policy and to be in line with Kenya’s Vision 2030 (as well as the lessons learnt thus far) offering structured and orderly development of the sector.
Africa Law Partners highlights the key policy provisions and their impact across the ICT sector in Kenya.
The 2020 Guidelines provide for the creation of a rotating venture capital fund (the Fund) whose top management will comprise:
- a chairperson to be determined by the Cabinet Secretary;
- a representative of the Kenya Sovereign Fund (yet to be established);
- a representative from the Kenya Private Sector Alliance;
- the Chief Executive Officers of the three largest private sector pension funds at any one time; and
- four (4) other members with ICT sector experience as the Cabinet Secretary may determine from time to time.
The essence of the Fund, as the 2020 Guidelines provide, will be to provide catalytic first loss capital to promising Kenyan start-ups to enable them unlock further investment from private investors.
The 2020 Guidelines provide a framework for the government to raise risk capital for early stage start-ups as well provide incentive to long-term funds which invest in early stage Kenyan enterprises. Under the 2020 Guidelines pension funds are encouraged to set aside 5% of their investments for the local ICT start-up ecosystem.
In addition to venture capital, the 2020 Guidelines provide a framework for the establishment of crowd-funding and mentoring networks. We are of the view that technology hubs and funding platforms will receive legislative incentive for establishment and operation.
Local shareholding requirement
The ICT sector in Kenya is a regulated sector where the Act, in certain instances, explicitly provides for minimum local shareholding requirements for certain licensees. Notably, the Kenya Information and Communications (Broadcasting) Regulations, 2009 and the Kenya Information and Communications (Licensing and Quality of Service) Regulations, 2010 provide that licensees shall comply with the shareholding requirements provided for under the Government’s Communication Sector Policy.
The 2020 Guidelines provide that only companies with at least 30% substantive Kenyan ownership, either corporate or individual will be licensed to provide ICT services. It is worth noting that the 2006 Guidelines provided for a similar threshold which was subsequently lowered under Gazette Notice 7481 of 2007 to 20%.
It remains undefined under the Act and other subsidiary legislation as to which activities fall within the purview of ICT services, however we expect that the regulator will require this threshold for all businesses which fall within its mandate. Current licensees have three (3) years to meet the local shareholding requirement and they may apply to the Cabinet Secretary for a one (1) year extension with appropriate acceptable justifications.
This alert is for general use only and should not be relied upon without seeking specific legal advice on any matter.