Push for local ownership raise in telcos unrealistic

ICT secretary Joe Mucheru. PHOTO | WACHIRA MWANGI | NMG

What you need to know:

  • In 2007, the ownership threshold was brought down from 30 percent to 20 percent before it was reverted.
  • Foreign-owned companies have been struggling to meet the local investors' threshold and pushing it higher may even be a more uphill task.

The government's move to encourage Kenyans to participate in the ICT sector through a new ownership law that has pushed shareholding of locals in telecommunications companies to 30 percent from 20 percent is noble.

But what is the point of having a rule that may not be implemented?

In 2007, the ownership threshold was brought down from 30 percent to 20 percent before it was reverted.

Foreign-owned companies have been struggling to meet the local investors' threshold and pushing it higher may even be a more uphill task.

In 2005, Kenya warned foreign investors that had not surrendered 30 percent shareholding in their businesses to locals. It threatened to fine them Sh5 million. This ruffled feathers among foreign investors looking to set up shop in Kenya, casting doubts on the competitiveness of the country as an investment destination. The law was shelved.

The ICT ownership law, reintroduced by the 2020 ICT Policy, has affected Airtel Kenya, which will be forced to sell a 30 percent stake to Kenyans over the next three years.

Other companies may have to list on the Nairobi Securities Exchange for compliance, though most non-compliant firms would prefer to sell a stake directly to billionaires or high-net-worth investors like local pensions fund.

The Capital Markets Authority says it needs a fresh listing of high-value companies to increase diversity. Listing of more telcos would help.

But past attempts by the government to enforce the local ownership rule in the industry hit a snag after foreign firms faced difficulties in securing local partners with the right expertise and financial muscle to support the business. This time around, it will not be easy either

The economy is reeling from the effects of the coronavirus pandemic and the number of billionaires in Kenya is not rising. Getting an individual or a corporate to buy a stake in foreign-owned telecommunications companies may not be easy.

The focus now should be more on the quality of services and costs, which will spur new cottage and auxiliary businesses.

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