Kenya: State frees Airtel, tech giants from 30% local stake sale
Telecommunications operator Airtel Kenya and global tech giants such as Amazon, Microsoft and Google will not cede at least 30 per cent of their shareholding to locals after the government agreed to have the rule deleted from the national ICT policy guidelines. Eric Musau, Executive Director, Research at Standard Investment Bank joins CNBC Africa for more.
Wed, 12 Jul 2023 13:59:22 GMT
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AI Generated Summary
- The government of Kenya has removed the requirement for telecommunications operator Airtel Kenya and tech giants like Amazon, Microsoft, and Google to cede 30% of their shareholding to locals, in a move to attract more foreign direct investment.
- The policy change is aimed at creating a conducive environment for multinational companies to operate in Kenya and encourage the expansion of tech firms in the country over the next five years.
- The decision is expected to benefit both multinational corporations and young Kenyan startups, by fostering innovation, job creation, and skills development within the market.
The Kenyan government has made a significant policy reversal that will have a major impact on telecommunications operator Airtel Kenya and global tech giants such as Amazon, Microsoft, and Google. The rule, which previously required these companies to cede at least 30 per cent of their shareholding to locals, has been deleted from the national ICT policy guidelines. This decision comes as a move to attract major multinationals into the country and boost foreign direct investment. Eric Musau, Executive Director of Research at Standard Investment Bank, shed light on the reasons behind this policy change in an interview with CNBC Africa. Musau noted that the initial focus of the regulation was primarily on telecommunications companies, with Airtel being the main target. The aim was to promote local ownership, and it was initially expected that Airtel would list a portion of its shares on the Nairobi Securities Exchange to comply with the regulation. However, with the recent reversal, this requirement has been lifted for the company. The shift in policy has been met with mixed sentiments within the market. While some view it as a positive step towards attracting foreign direct investment, others raise concerns about the impact on local ownership and participation in the market. The move is seen as a means to create a more conducive environment for major multinational companies to operate in Kenya without facing challenges related to local ownership requirements. Companies like Google, Microsoft, Visa, MasterCard, and IBM, which already have a presence in the country, would have found compliance with the previous regulation problematic, given their global structures. By removing this barrier, the government hopes to encourage the expansion of multinational tech firms in Kenya over the next five years. The decision also aims to support job creation and expertise development within the market. In addition to the impact on multinational corporations, the policy change is expected to benefit young Kenyan startups looking to establish themselves in the global market. The regulation will need to be flexible enough to accommodate new players and startups, allowing them to test their business ideas without facing high initial license fees. This approach is expected to foster innovation and entrepreneurship in the country, while also balancing the need for job creation and skills development. The future of Airtel Africa's listing on the Nairobi Securities Exchange remains uncertain following the policy reversal. While there are still advantages to listing, such as access to capital and improved visibility, the urgency to comply with the 30% local ownership requirement may no longer be a driving force behind the decision. The investor appetite for the Kenyan market is a key consideration in this context. Despite the presence of major multinational companies in the country, Kenya has not seen substantial foreign direct investment in recent years. The government's initiative to attract more FDI is aimed at boosting economic growth and creating a more competitive business environment. The move also aligns with efforts to encourage investment across various sectors, including pharmaceuticals, where recent major investments have been observed. Overall, the reversal of the policy requiring Airtel and tech giants to cede 30% local stake reflects a strategic shift towards enhancing foreign direct investment in Kenya and promoting economic growth.