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A policy shift in Kenya’s tech sector has opened the doors for multinational technology giants to invest more freely in the country.  The removal of the requirement for foreign technology firms to have a 30 per cent local ownership stake has gained traction and is attracting more interest from global tech players.

Amazon Web Services (AWS) and Microsoft, two prominent US-based tech companies, have reportedly been cleared to establish data centres in Kenya and provide technology solutions at Konza Technopolis, a technology hub in the country.

The move comes after the ICT and Digital Economy Cabinet Secretary, Eliud Owalo, formally announced the amendment to the National Information Communication and Technology Policy Guidelines 2020, which eliminated the 30 per cent local shareholding requirement for licensees in the ICT sector.

Equity ownership

Owalo cited the exploitation of this rule by “tenderpreneurs” as a reason for its removal. “Even though the rule, enacted through the 2020 ICT Policy to encourage indigenous firms to participate in the ICT sector through equity ownership, Kenyans have not been able to exploit this piece of legislation,” he said.

Analysts view the change, which took effect from August 22, 2023, as a positive policy shift that will attract more foreign investors in the sector and foster a mutually beneficial environment for all stakeholders.

According to analysts at Bowmans, a leading African law firm that specialises in corporate law, banking and finance law, foreign companies will now be able to invest directly, which will exponentially increase the attractiveness of Kenya’s economy as a key gateway hub for foreign companies and multinationals seeking to expand their operations in Africa.

“The creation of a public-private partnership projects in place of the local equity participation requirement can also hasten the roll-out of technological infrastructure like data centres and internet exchange points and network, facilitating a more rapid digital transformation where local equity requirements do not restrict foreign investment, shareholding and ownership,” they say.

AWS is the world’s most comprehensive and broadly adopted cloud, offering over 200 fully featured services from data centres globally.

A source privy to privileged information but did not want to be quoted said Microsoft was also among technology multinationals that pushed for the policy changes, after the regime of retired President Uhuru Kenyatta made it mandatory for foreign firms to give a percentage of their shareholding to locals.

The two now join Chinese telecoms giant Huawei, which set shop at the Konza Technopolis in 2019 to build a data centre, smart city and surveillance project at the facility with $172.7 million (Sh17.5 billion) Chinese concessional loan.

The National Data Centre will have a capacity of 1.6 petabytes, the largest in East Africa, poised to play a key role in supporting the demands and application deployment models, including the Internet of Things (IoT) and other modern technology. Technopolis also has plans to partner with the Nairobi Securities Exchange (NSE) to connect investors with viable tech start-up businesses that will be incubated by the Konza Technopolis Development Authority (KoTDA).

The mission of KoTDA is to ensure that Konza grows into a sustainable, world-class technology hub and a major economic driver for the nation, with a vibrant mix of businesses, workers, residents, and urban amenities.

KoTDA is responsible for overseeing the development and management of Konza, and for establishing a strong value proposition for businesses to locate and expand in Konza.

Licensing requirements

In June, Airtel Africa also said it was ready to list its Kenyan operations on the NSE if the government retained the condition on local ownership as part of licensing requirements.

“As part of our licence obligation, there is a requirement to list in Kenya. For the last couple of months, there has been a discussion around whether that condition is going to be changed or is going to stay. We still have been waiting for clarity from Kenya whether there’s still an obligation to list,” Airtel Africa Group CEO Segun Ogunsanya said.