Kenya’s Local Ownership Rule for ICT Licensees: From 30% to Nothing

For over a decade, anyone licensing an ICT business in Kenya had to plan around a local shareholding requirement. It moved twice, from 30% to 20% and back to 30%, before disappearing entirely in 2023, and the way it disappeared, by gazette notice rather than an act of Parliament, tells you something worth understanding about how much weight to put on Kenyan sector policy generally.

A Policy Requirement, Not a Statutory One

The local shareholding rule never appeared in the Kenya Information and Communications Act itself. Section 5C of KICA gives the Cabinet Secretary a standing power to issue policy guidelines of a general nature relating to the Act, in writing, published in the Gazette, which the Communications Authority is then required to have regard to. The 30% requirement lived inside guidance issued under this power, the National Information and Communications Technology Policy Guidelines, not inside the statute. That distinction is what made the requirement removable by another gazette notice from the same Cabinet Secretary, rather than requiring Parliament to amend KICA. A rule that arrives by policy guideline can leave the same way.

The Swinging History

The requirement has not been stable. In 2006, companies providing broadcasting and telecommunications services were required to have 30% local equity participation. In 2008, that requirement was reduced to 20% for firms providing communication services generally, while broadcasting companies were held at the higher 30% figure, and the Cabinet Secretary retained a discretionary power to grant waivers in exceptional cases. In 2020, the National ICT Policy Guidelines raised the requirement back up, to 30% local shareholding for all licensees across the ICT sector, not just broadcasting, with a three-year grace period for existing licensees to come into compliance. For a company licensed partway through that period, the practical requirement in any given year depended on where it fell in that grace window, not simply on the headline figure.

The 2023 Removal

The Ministry of Information, Communications and the Digital Economy opened public consultation on removing the requirement in July 2023, inviting written submissions on deleting the equity participation subsection, paragraph 6.2.4 on Market Rules, from the 2020 Policy Guidelines. The stated rationale tied the removal to Kenya’s ambition to be a globally competitive knowledge-based economy by 2030, and to the practical difficulty multinational ICT companies faced fitting a mandatory local-partner stake into corporate structures not built to accommodate one, a difficulty the Ministry’s own consultation materials acknowledged was making the sector less attractive to the foreign direct investment it needed to expand. Gazette Notice 11079, dated 22 August 2023, formally deleted that paragraph, removing the local shareholding requirement with immediate effect. The Communications Authority was directed to implement the change going forward, and the removal was described at the time as covering all ICT sector players, not only the communication-services licensees that had been the main focus of the 2008 reduction.

What This Means Today

As things currently stand, there is no local shareholding floor applying to ICT sector licensing under the Policy Guidelines: a foreign investor can hold 100% of a Kenyan ICT licensee without needing a Kenyan shareholder to meet a minimum percentage. This sits alongside, and is a large part of why, the ICT sector has become one of the more straightforward regulated sectors for a wholly foreign-owned company to enter in Kenya, next to sectors like fintech and energy where separate licensing conditions still apply on their own terms. Because the rule lived in policy guidance rather than in KICA itself, it is worth confirming against the Communications Authority’s current licence conditions for your specific category before relying on this as settled for the long term, particularly for broadcasting, which was treated differently from other ICT sub-sectors through much of this history and is worth checking individually rather than assuming it follows the general ICT sector position automatically.

A company that brought in a Kenyan shareholder specifically to satisfy the 2020 requirement, rather than for a commercial reason, is not required to unwind that shareholding now that the rule has gone; whether to do so is a purely commercial question about the shareholder’s ongoing role, not a compliance one, and any change to the share register still needs to go through the ordinary Companies Act process regardless of why the shareholding was originally structured that way.