Foreign Direct Investment in Kenya's ICT Sector Drops

Foreign direct investment (FDI) in Kenya's ICT sector has dropped as a result of rigid policy on company ownership and investments, said Bitange Ndemo, permanent secretary in the Ministry of Information and Communication.

Kenya's investment policy requires international companies to seek local partnerships. However, ICT multinationals have requested exemptions to this policy, as they would rather hold local ownership through the stock market.

"Large business process outsourcing multinationals have indicated that they will not invest in the country until we sort out local ownership issues," Ndemo said.

Such firms employ in excess of 30,000 BPO (business process outsourcing) agents and invest billions of shilling in Kenya's economy, he explained.

"Kenya must work towards attracting FDI if we have to sort out unemployment of our youth, which has reached crisis levels," he said.

The problem of local equity participation can be summarized by Kenya's experience in its search for a second national operator, Ndemo said. The result was extortion and false promises of funding, he said, as the local partners that purported to have the capacity to raise sufficient capital failed to do so.

"The policy has not protected the interest of Kenyans in allocating infrastructure in the telecoms sector," added John Maina, an analyst in the telecoms sector. "The policy favors foreign investors and not local investors."

In contrast, Edith Adera, an expert in the ICT sector, used the United Arab Emirates as an example of successful FDI management that enhances economic growth. The U.A.E., she explained, has created incentives for international and local investors and manages funds to ensure direct local benefits.

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