To gain in­vestor con­fi­dence, gov­ern­ments must im­prove in­vest­ment cli­mate.”

The East African - - BUSINESS -

says that the gov­ern­ment’s re­quire­ment for lo­cals to hold at least 30 per cent share­hold­ing in in­sur­ance com­pa­nies may un­in­ten­tion­ally slow down or re­pel for­eign in­vest­ments.

In the Tan­za­nian min­ing sec­tor, for­eign com­pa­nies op­er­at­ing Kenya’s In­vest­ment Au­thor­ity in the coun­try are re­quired to pre­serve 30 per cent share­hold­ing to lo­cal cit­i­zens while the Elec­tronic and Postal Com­mu­ni­ca­tions (Li­cens­ing) Reg­u­la­tions pro­vides that Con­tent Ser­vices Li­cence for free-to-air broad­cast­ing re­quires 51 per cent lo­cal own­er­ship.

In the in­sur­ance sec­tor, all op­er­a­tors are re­quired to set aside a 30 per cent stake for Tan­za­nian cit­i­zens.

Tan­za­nia also en­forces manda­tory hir­ing of lo­cal staff pri­mar­ily through com­pul­sory train­ing and suc­ces­sion plans and quo­tas.

In Kenya, the tele­coms in­dus­try reg­u­la­tor re­quires that for­eign firms that in­vest in the sec­tor pre­serve a 20 per cent share­hold­ing for Kenyans within three years of re­ceiv­ing the li­cence while the Min­ing Act, 2016 re­stricts for­eign par­tic­i­pa­tion in the min­ing sec­tor. The Act re­serves the ac­qui­si­tion of min­eral rights for Kenyan com­pa­nies and pro­vides for 60 per cent Kenyan own­er­ship of min­eral deal­er­ships and ar­ti­sanal min­ing com­pa­nies.

An at­tempt by the Kenyan gov­ern­ment to in­tro­duce a 30 per cent lo­cal own­er­ship re­quire­ment for ev­ery for­eign firm that in­vests in the coun­try through the Com­pa­nies Act, 2015 flopped af­ter in­vestors cried foul.

The rule re­quired for­eign firms to find Kenyan share­hold­ers and sell them 30 per cent shares, a process that was per­ceived to be costly and time-con­sum­ing ow­ing to the due dili­gence re­quired to se­cure cred­i­ble in­vestors.

Kenya also re­pealed regu- De­spite a de­cline in for­eign di­rect in­vest­ment into East Africa, China, In­dia and the UK con­tin­ued to be the ma­jor sources of in­vest­ment, with in­flows amount­ing to $781 mil­lion, $500.9 mil­lion and $438.9 mil­lion re­spec­tively, ac­cord­ing to the East Africa Com­mu­nity trade re­port 2017. The re­port notes that la­tions that im­posed a 75 per cent for­eign own­er­ship limit for firms listed on the Nairobi Se­cu­ri­ties Ex­change, al­low­ing such firms to be 100 per cent for­eign-owned.

Ac­cord­ing to the Kenya In­vest­ment Au­thor­ity (Kein­vest), reg­u­la­tory re­forms are an im­por­tant com­po­nent of re­mov­ing the bar­ri­ers to in­vest­ments and con­tin­u­ous im­prove­ment of the busi­ness en­vi­ron­ment is im­por­tant for economies seek­ing to ben­e­fit from in­creased trade and in­vest­ment.

“To gain in­vestor con­fi­dence, gov­ern­ments must im­prove in­vest­ment cli­mate,” says Kein­vest.

In Rwanda, the gov­ern­ment has been more le­nient to for­eign in­vestors by abol­ish­ing statu­tory lim­its on for­eign own­er­ship or con­trol of lo­cal firms.

Lo­cal and for­eign in­vestors have the right to own and es­tab­lish busi­ness en­ter­prises in the coun­try.

For­eign na­tion­als are al­lowed to own shares in lo­cally in­cor­po­rated com­pa­nies and for­eign in­vestors can ac­quire real es­tate, though there is a gen­eral limit on land own­er­ship. over­all in­vest­ment in­flows were con­cen­trated in the man­u­fac­tur­ing, con­struc­tion and en­ergy sec­tors at $3.1 bil­lion, $795.6 mil­lion and $3.5 bil­lion re­spec­tively. The num­ber of jobs cre­ated as a re­sult of FDI in­flows went up by 73 per cent to 111,316 jobs in 2017 from 64,334 in 2016.

While lo­cal in­vestors can ac­quire land through lease­hold agree­ments that ex­tend to a max­i­mum of 99 years, for­eign in­vestors are re­stricted to leases of a max­i­mum of 49 years with the pos­si­bil­ity of re­newal.

In Uganda the gov­ern­ment al­lows 100 per cent for­eign-owned busi­nesses, and for­eign busi­nesses are al­lowed to part­ner with Ugan­dans with­out re­stric­tions. For­eign in­vestors also have the right to es­tab­lish and di­rectly own busi­nesses in any sec­tor ex­cept crop and an­i­mal pro­duc­tion. The coun­try’s con­sti­tu­tion pro­tects prop­erty rights, and for­eign­ers have the right to own prop­erty.

Al­though there are no gen­eral re­stric­tions im­posed on for­eign in­vestors, they can­not es­tab­lish any busi­nesses un­less they get a li­cence from Uganda In­vest­ment Au­thor­ity.

Uganda’s cap­i­tal mar­kets are open to for­eign in­vestors and there are no re­stric­tions for open­ing a bank ac­count.

For­eign-owned com­pa­nies are al­lowed to trade on the Ugan­dan Se­cu­ri­ties Ex­change sub­ject to some share is­suance re­quire­ments.

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