State to change 30 per cent rule
By John Oyuke
Information and Communications Permanent Secretary, Dr Bitange Ndemo says work has been continuing to address many of the impediments to investment in ICT. File picture
Potential foreign investors in the telecommunications sector will soon have up to five years to find satisfactory local partners with whom to develop successful ventures.
The Government is planning major structural re-arrangements for attracting foreign investment in the sector. One of these is relaxation of the rule requiring that foreign companies investing in the local telecommunications sector must allocate 30 per cent shares to Kenyans.
The move comes against the background of an ambitious declaration that 2007 is going to be year of real results in the wider Information and Communications Technology (ICT) industry.
Growth in outsourcing business
Information and Communications Permanent Secretary, Dr Bitange Ndemo said the ministry spent a full year laying the groundwork and it is now time for Kenyans to see results. He said Kenyans were likely this year to see remarkable growth in the outsourcing business with increasing numbers of them getting into it, more products and more employment in the sector.
"We pray that the ICT Bill goes through (Parliament)," Ndemo told FS last week. "If it does, we would be home and dry to do a lot of things that we need to do. So you are bound to see more activities this year than last year."
And having closed the door on negotiating the sale of a further nine per cent stake in Safaricom to Vodafone Plc, Bitange also says the government is studying the local capital markets, with a view to floating the planned Safaricom public offer within the year.
Wrangles threatening e-economy
Ndemo said decision to relax the 30 per cent local stake rule was key to giving more time to potential investors to find local partners that they were happy and can work with. It would also significantly reduce current wrangles threatening to hold back the process of liberalising the sector and development of an e-economy and information society.
"It would no longer be mandatory for a foreign investor to have a local partner until after five years," he said.
He said should the foreign company get an agreeable local partner before they are licensed, that would be fine with the government but the requirement would no longer be something to hold back much needed foreign direct investments.
"What we are saying is that a foreign investor needs time to (get to) know whom he can work with," Ndemo says. "In three years he can do a private placement or in five years do an IPO (initial public offering) or introduce employee option plans, but they must give 30 per cent to locals."
Ndemo said what is happening in the country currently is that a number of people run around telling foreign investors they could help them here and there and then bringing problems to the country, as they cannot raise the money.
Local telecommunications sector insiders say the origins of the problems shaped by the local equity threshold started from a policy statement introduced by the government in 1997.
The Postal Telecommunications Sector Policy Statement, published in November of that year spelt out a new structure for the industry. Specifically, the document stipulated, "any company licensed to provide telecommunications services in the liberalised market should have at least 70 per cent of its equity owned by Kenyans."
In subsequent years, and to make the regime friendlier to foreign investors, the rule was revised to 60 per cent for foreigners and 40 for locals. In the year 2002, the then Minister for Information and Telecommunications Mr Musalia Mudavadi published a gazette notice in which he changed the equity threshold to 70 per cent for foreign investors and a minimum of 30 per cent for locals.
Ndemo told FS that a review of this rule was key if the country is to avoid numerous problems it has had in attracting major foreign companies into the telecoms sector.
Fibre optic to rollout soon
"We have had problems in the past where foreign companies have attempted to invest in the sector without success and if this situation stayed we will continue having the same problems," he said.
Ndemo also promised Kenyans a lot of activities beginning January 26 in the laying out of undersea fibre optic cables to back up the ongoing terrestrial fibre optic rollout. Though he was reluctant to state exact arrangements in place for the project, Ndemo said everything was on course and major announcements on the progress would be made next month.
"We are progressing well and feasibility studies are on which will lead to the financial arranger doing some things and from there we would also award the contract itself," he said.
Telkom Kenya has already signed a Sh5.7 billion pact with Etisalat of Dubai, paving the way for the construction of an undersea cable linking Mombasa to Fujairah in the United Arab Emirates. According to a statement released during the signing of the agreement in Dubai November last year, the construction and supply contract will be awarded early this year and the project, dubbed The East African Marine System (Teams), will be ready by November. Kenya is supposed to have a 40 per cent holding in the project, Etisalat 20 per cent with the remaining going to investors in the East African region.
Ndemo said in the statement that the deal would create work opportunities for Kenyans, especially in out-sourcing business.
The deal came at a time when Kenya and 15 other African countries are locked in a dispute over the ownership and financing of a separate undersea cable that is set to run from Mtunzini, South Africa, to Mombasa. The undersea cable, commonly known as Eassy project, was started in 2003 by the World Bank at a cost of Sh14.4 billion but has been dogged by controversy with several member countries accusing South Africa of trying to hijack it.
Eassy is aimed at connecting eastern and southern African countries through a fibre optic cable system to the rest of the world.
The PS added that the Dubai deal had come about because of delays in concluding the Eassy project, which had made the country miss "huge" business opportunities.
"From our estimates, Eassy will take too long to start and may not even take off and that would be a huge risk for our country," Ndemo said
However, Ndemo emphasised to FS last week that Kenya would not abandon Eassy. Ndemo said the undersea cable was important in connecting Kenya to the outside world through the ongoing terrestrial fibre optic wiring of the country, a process which he added, should be completed by September this year.
Information and Communications Permanent Secretary, Dr Bitange Ndemo says work has been continuing to address many of the impediments to investment in ICT. File picture
Potential foreign investors in the telecommunications sector will soon have up to five years to find satisfactory local partners with whom to develop successful ventures.
The Government is planning major structural re-arrangements for attracting foreign investment in the sector. One of these is relaxation of the rule requiring that foreign companies investing in the local telecommunications sector must allocate 30 per cent shares to Kenyans.
The move comes against the background of an ambitious declaration that 2007 is going to be year of real results in the wider Information and Communications Technology (ICT) industry.
Growth in outsourcing business
Information and Communications Permanent Secretary, Dr Bitange Ndemo said the ministry spent a full year laying the groundwork and it is now time for Kenyans to see results. He said Kenyans were likely this year to see remarkable growth in the outsourcing business with increasing numbers of them getting into it, more products and more employment in the sector.
"We pray that the ICT Bill goes through (Parliament)," Ndemo told FS last week. "If it does, we would be home and dry to do a lot of things that we need to do. So you are bound to see more activities this year than last year."
And having closed the door on negotiating the sale of a further nine per cent stake in Safaricom to Vodafone Plc, Bitange also says the government is studying the local capital markets, with a view to floating the planned Safaricom public offer within the year.
Wrangles threatening e-economy
Ndemo said decision to relax the 30 per cent local stake rule was key to giving more time to potential investors to find local partners that they were happy and can work with. It would also significantly reduce current wrangles threatening to hold back the process of liberalising the sector and development of an e-economy and information society.
"It would no longer be mandatory for a foreign investor to have a local partner until after five years," he said.
He said should the foreign company get an agreeable local partner before they are licensed, that would be fine with the government but the requirement would no longer be something to hold back much needed foreign direct investments.
"What we are saying is that a foreign investor needs time to (get to) know whom he can work with," Ndemo says. "In three years he can do a private placement or in five years do an IPO (initial public offering) or introduce employee option plans, but they must give 30 per cent to locals."
Ndemo said what is happening in the country currently is that a number of people run around telling foreign investors they could help them here and there and then bringing problems to the country, as they cannot raise the money.
Local telecommunications sector insiders say the origins of the problems shaped by the local equity threshold started from a policy statement introduced by the government in 1997.
The Postal Telecommunications Sector Policy Statement, published in November of that year spelt out a new structure for the industry. Specifically, the document stipulated, "any company licensed to provide telecommunications services in the liberalised market should have at least 70 per cent of its equity owned by Kenyans."
In subsequent years, and to make the regime friendlier to foreign investors, the rule was revised to 60 per cent for foreigners and 40 for locals. In the year 2002, the then Minister for Information and Telecommunications Mr Musalia Mudavadi published a gazette notice in which he changed the equity threshold to 70 per cent for foreign investors and a minimum of 30 per cent for locals.
Ndemo told FS that a review of this rule was key if the country is to avoid numerous problems it has had in attracting major foreign companies into the telecoms sector.
Fibre optic to rollout soon
"We have had problems in the past where foreign companies have attempted to invest in the sector without success and if this situation stayed we will continue having the same problems," he said.
Ndemo also promised Kenyans a lot of activities beginning January 26 in the laying out of undersea fibre optic cables to back up the ongoing terrestrial fibre optic rollout. Though he was reluctant to state exact arrangements in place for the project, Ndemo said everything was on course and major announcements on the progress would be made next month.
"We are progressing well and feasibility studies are on which will lead to the financial arranger doing some things and from there we would also award the contract itself," he said.
Telkom Kenya has already signed a Sh5.7 billion pact with Etisalat of Dubai, paving the way for the construction of an undersea cable linking Mombasa to Fujairah in the United Arab Emirates. According to a statement released during the signing of the agreement in Dubai November last year, the construction and supply contract will be awarded early this year and the project, dubbed The East African Marine System (Teams), will be ready by November. Kenya is supposed to have a 40 per cent holding in the project, Etisalat 20 per cent with the remaining going to investors in the East African region.
Ndemo said in the statement that the deal would create work opportunities for Kenyans, especially in out-sourcing business.
The deal came at a time when Kenya and 15 other African countries are locked in a dispute over the ownership and financing of a separate undersea cable that is set to run from Mtunzini, South Africa, to Mombasa. The undersea cable, commonly known as Eassy project, was started in 2003 by the World Bank at a cost of Sh14.4 billion but has been dogged by controversy with several member countries accusing South Africa of trying to hijack it.
Eassy is aimed at connecting eastern and southern African countries through a fibre optic cable system to the rest of the world.
The PS added that the Dubai deal had come about because of delays in concluding the Eassy project, which had made the country miss "huge" business opportunities.
"From our estimates, Eassy will take too long to start and may not even take off and that would be a huge risk for our country," Ndemo said
However, Ndemo emphasised to FS last week that Kenya would not abandon Eassy. Ndemo said the undersea cable was important in connecting Kenya to the outside world through the ongoing terrestrial fibre optic wiring of the country, a process which he added, should be completed by September this year.
posted by Mwananchi at 3:27 PM
1 Comments:
Is this the best civeil servant we have out there or not. ICT is going to floruish in kenya if this guy is let to do what he know how to do. hopefully the rest of the civil servants can take his cue and do what is right for the whole country.
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