Treasury secretary Henry Rotich’s move to revoke the provision in the Companies Act that compelled all foreign companies registering in Kenya to reserve 30 per cent stake for Kenyans is welcome.
The decision comes after the private sector cried foul and termed the rule draconian in Kenya’s liberalised economy.
The adverse effects of the rule would have outweighed the desired positive outcome. For starters, we stood to lose out on foreign direct investment as well as sparking flight of multinationals, resulting in unprecedented loss of jobs.
Again, the regulation would have opened a window for corrupt cartels to cash in on foreign investors through rent-seeking.
The decision also saves Kenya from joining the global pariah status that its peers such as Zimbabwe now find themselves in.
Since 2008, when Harare enacted the Indigenisation and Economic Empowerment Act, the Mugabe administration has pushed foreign companies to cede 51 per cent majority stake to the blacks.
That law that seeks to correct colonial imbalances has largely failed, forcing Zimbabwe to issue an ultimatum in April for the non-compliant multinationals to either effect it or close shop.
The amended Finance Bill 2016 should now aim at making Kenya an attractive investment hub as well as encourage foreign firms to list on the Nairobi Securities Exchange as a way of encouraging local ownership of the companies.