The CS for industrialization and trade, Adan Mohammed, has revoked the law requiring foreign companies setting up shop in Kenya to cede a third of their shareholding to locals saying it will have little or no impact in attracting investors.
According to the Industrialization CS, the law is a barrier when it comes to promoting foreign investments.
In the past, most foreign companies have been forced to wait for long in order to get their companies registered, after which they are then forced to partner with local companies as a way of getting into the market. The new law seeks to revert that.
He said, “Most foreign businesses in their own accord without being forced through regulation will always look for local partners anyway because it’s the best practice geared towards understanding the local market, and that’s happening everywhere and that has been happening without any legislation.”
The provision has since been changed by the CS for National Treasury, Henry Rotich, in the Companies Act as contained in the Finance act 2016.
Kenya has for a long time been trying to attract foreign investors as a way of promoting economic growth and the creation of employment. The current law is expected to provide adequate support .The change will not affect previously registered companies.
According to the CS, “We don’t want to arm twist anybody, we have been successful as a country in attracting investment by being open to both local and international investors and I don’t think we have the luxury of saying to people you must forfeit this, you must forfeit that.”
The law change which is expected to take effect as from January 2017, will however not apply to all sectors as the insurance act has a different law governing the sector that stipulates individual ownership at 25 percent.