Foreign firms get boost to set up local operations

The revoked law requiring foreign companies setting up shop in Kenya to cede a third of their shareholding to locals, will have little or no impact in attracting investors.

According to the Cabinet Secretary of Trade and Industrialization, Adan Mohamed, the law was in bad taste and it almost became impossible for companies to comply with.

However, the CS is yet to hear of a company that was fined Sh5 million for not complying.

“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,” Mr Mohamed said in an interview with Citizen Digital.

National Treasury Cabinet Secretary Henry Rotich changed the provision in the Companies Act as contained in the Finance act 2016.

With the previous law, companies would be forced to wait longer to register their companies in the country as they sort for local companies with whom they could work with.

“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 as a way of understanding the local market and that is happening everywhere and that has been happening without any legislation,” he stressed.

Kenya has been working on its ease of doing business index to attract foreign investment which the Cabinet Secretary said will provide foreign companies with the adequate support thus there will be no complaints from previously registered companies affected by the changes.

“I have heard more people sighing this rule is stopping people from coming to register foreign business in our country as opposed to people complying and then not knowing what to do and that is a constraint as opposed to reversing what has happened,” the CS said.

The law will however not apply in all sectors as the insurance act has a different law governing the sector that stipulates individual ownership at 25 percent.

The law change is expected to take effect in January 2017.