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You've probably seen the expat founders poster making the rounds recently. You may also have heard about the recently gazetted 30% Kenyan ownership requirement for ICT service providers. Well—guess what?—those two things have absolutely nothing to do with each other.
First of all, such posters are purely driven by an agenda. Even though there's a drop of truth in the portrayal, it's mostly an ocean of sensationalist propaganda with no real solutions proposed. For every poster like the one above, there's another like the one below.
So people have been talking about how Kenya is "making the right move" with 30% local ownership in ICT. Some guys have even become so emboldened that they're now pushing further to require board seats, C-Suite representation, and local worker percentages.
Well, here are the facts. First, this is not a new regulation. The government is simply enforcing the currently existing licensing requirements under the Kenya Information and Communication Act and Regulations. And the definition of ICT there is not what most Kenyans think.
In that document, ICT services are clearly classified as companies providing:
1. Telecommunication services
2. Radio and broadcast services
3. Provision of frequency spectrum
4. Postal services
5. Electronic certification services.
1. Telecommunication services
2. Radio and broadcast services
3. Provision of frequency spectrum
4. Postal services
5. Electronic certification services.
What this means is that Google, Microsoft, Amazon, Facebook, and every single face that has been vilified on that white founders poster ... does not even qualify! Imagine that.
And to think of all the hullabaloo this has raised.
And to think of all the hullabaloo this has raised.
It seems to me that most of the people making noise are folk who have never built anything substantial themselves. They don't understand that successful ventures and investments are built on trust. And you don't earn trust by getting government to grant you 30% right off the bat.
Secondly, let's be a little more critical and ask ourselves, "Why?" Why this? Why now?
I think it was an opportunistic move based on recent sentiments. Strike while the iron is hot. But beyond that, even for the organizations that fit the classification, the why question stands.
I think it was an opportunistic move based on recent sentiments. Strike while the iron is hot. But beyond that, even for the organizations that fit the classification, the why question stands.
I may be wrong, but from my point of view, when I follow the money ... I can only arrive at two answers: dominance, and tax.
Take for example the first category: telecommunications. Safaricom has 65% telecommunications market share, and M-Pesa has 99% of mobile money. Is there really any market share left for a foreign company in that space to capture?
What this means is that there's very little for Kenyans to rejoice over in that space as far as the 30% goes. But also, it means that any incoming companies due to international trade agreements will also be further weakened against existing monopolies.
Now, if a foreign organization still wants to enter the market, what are they most likely to do? In order to comply with the 30% rule, the companies will almost certainly have to set up Kenyan subsidiaries in order to create a degree of separation with their original companies.
By setting up local companies, those subsidiaries come under the jurisdiction and tax laws of Kenya, meaning that tax is guaranteed for value created in Kenya.
Seems clever, right?
Seems clever, right?
Well ... what the government doesn't seem to realize is that you cannot contain the beast called capitalism. A proven strategy is for the international company to charge the local subsidiary up to 99% of revenue as "management fees".
Tax, gone.
Tax, gone.
And that, dear Kenyans, is how you get people excited about absolutely nothing ... as an election approaches.
Stay safe. They don't really care about us.
Stay safe. They don't really care about us.
If you'd like to read the gazette notice for yourself, here it is, from page 3064 to 3080: https://bit.ly/gazette-ict-30-pc
