On 7 August 2020, the National Information Communications and Technology (ICT) Policy Guidelines, 2020 (the 2020 ICT Policy) were published in the Kenya Gazette under the Kenya Information and Communications Act (No.2 of 1998) (KICA). KICA empowers the Cabinet Secretary for Information, Communications, Technology, Innovation and Youth Affairs to issue to the sector regulator, the Communications Authority of Kenya, policy guidelines relating to the implementation of KICA.
The Kenya Information and Communications (Broadcasting) Regulations 2009 (the Broadcasting Regulations) and the Kenya Information and Communications (Licensing and Quality of Service) Regulations 2010 enacted under KICA provide that the shareholding of a licensee shall at all times comply with the Government's Communications Sector Policy, as may be published from time to time.
Increase in local equity ownership requirement from 20
percent to 30 percent
Based on the Government's aim to encourage Kenyans to
participate in the ICT sector through equity ownership, one of the
key changes introduced by the 2020 ICT Policy is a requirement for
licensed companies in the ICT sector to have "at least 30
percent substantive Kenyan ownership".
The 2006 ICT Policy had originally provided for a 30 percent Kenyan equity ownership requirement. However, in 2007, pursuant to a Gazette Notice, the threshold was brought down from 30 percent to 20 percent. The 2020 ICT Policy has reverted to the original position requiring all companies providing "ICT Services" to have at least 30 percent Kenyan ownership, either corporate or individual, in order for them to be licensed.
Notably, the term "ICT Services" has not been defined under KICA or the 2020 ICT Policy although "information and communication technologies" has been defined under KICA as "technologies employed in collecting, storing, using or sending out information and include those involving the use of computers or any telecommunication system".
This is a broad definition that is likely to be interpreted to cover all services that require a licence under KICA. Entities that undertake any services that fall under this definition or that fall under the ambit of KICA and require licensing for their operations will, therefore, be required to comply with the 30 percent local ownership requirement.
Compliance Period and Applicability to Existing
Licensees
Licensees will have 3 years to comply with the new local ownership
requirement. However, it is unclear how the new requirement will be
interpreted in relation to existing licensees who have not met the
30 percent local ownership requirement and whether the intention is
for the 3 years to commence from the date of the gazettement of the
2020 ICT Policy (i.e. August 2020) or the date of grant of a
licence.
The 2020 ICT Policy provides that a licensee may apply to the Cabinet Secretary for a 1-year extension with appropriate acceptable justification. However, the policy does not give any guidance on what may be deemed an "acceptable justification".
Inconsistencies with existing regulations
There are also inconsistencies with existing legislation. For
instance, the Broadcasting Regulations provide that a subscription
management services licensee (this includes the provision of
support services to a subscription broadcasting service such as
subscriber management support, subscription fee collection, call
centres, sales and marketing, and technical and installation)
shall be required to have minimum local equity
participation of 20 percent.
It is therefore unclear whether the 20 percent local shareholding requirement will continue to apply to subscription management services or whether the 30 percent local shareholding requirement under the 2020 ICT Policy will apply to these services. Whilst there is a requirement for the shareholding of a licensee to at all times comply with the Government's Communications Sector Policy, as may be published from time to time, the 2020 ICT Policy acknowledges that for it to be fully implemented, the legal, institutional and regulatory framework must be reviewed at the government's initiative in order to be aligned with the policy and to give the 2020 ICT Policy legal and binding effect. However, we understand that the implementation process of the 30 percent local ownership requirement is likely to commence immediately.
We understand that the process of aligning the current regulatory framework under KICA with the provisions of the 2020 ICT Policy is underway and that the aim is to ultimately have all companies offering ICT Services comply with the 30 percent local ownership requirement. It would, therefore, be prudent for companies to begin implementing measures to adhere to this requirement.
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