Framework Analyses

PESTLE Analysis

ECONOMIC ENVIRONMENT

Kenya’s economy has been hurt by the COVID–19 pandemic. In 2020, GDP growth is expected to decelerate to 1.4% from 5.4% in 2019. Growth is supported by agriculture, while weaknesses in services and industry have had a dampening effect. Domestic demand is subdued while external demand has neither helped nor hurt growth. Expansionary fiscal, monetary, and financial policy measures were introduced to mitigate the impact of the pandemic on businesses and households. Inflation is expected to ease to 5.1% because of lower aggregate demand. The fiscal deficit is expected to widen to 8.3% of GDP—the result of revenue shortfalls and pandemic-related spending increases to deal with health issues and to mitigate the damage to household income and businesses. The current account deficit is expected to narrow to 5.4% of GDP, supported by a sharp reduction in the oil import bill. Foreign exchange reserves declined to $7.8 billion (4.8 months of import cover) at the end November 2020 from $8.96 billion (5.6 months of import cover) at the end November 2019. The local currency weakened by 8.9% to KSH 110 to the US dollar at the end November 2020 from KSH 101 to the dollar a year earlier. The financial sector was affected by spillover effects from major sectors; the capital market was the hardest hit. The Nairobi Securities Exchange share index fell 20% between 30 September 2019 and September 2020, and market capitalization fell 2% over the same period. The pandemic did serious social damage. Nearly 2 million people are estimated to have fallen into poverty, and nearly 900,000 lost their jobs.

Outlook and risks

The growth outlook is positive. The economy is projected to grow by 5.0% in 2021 and 5.9% in 2022. The rebound assumes that economic activity will normalize due to a full reopening of the economy, the Economic Recovery Strategy being successfully implemented, and Kenya capitalizing on an expected improvement in external liquidity and benefiting from initiatives to meet its external financing needs.The external initiatives could include debt refinancing, restructuring and debt service relief, and additional concessional loans. Inflation is projected to remain within the Central Bank of Kenya’s target range of 2.5% to 7.5%, and fiscal and current account deficits are forecast to narrow as a result of improved revenue collection and exports. Downside risks to the outlook could emanate from delays in the full reopening of the economy, failure to secure external financing to execute the budget, a slowdown in global growth, and disruptive social conditions during the run-up to the 2022 elections.

Financing issues and options

Public debt surged to 72% of GDP in 2020 from 61% in 2019, driven mainly by public investment in infrastructure, debt management–related challenges, and the COVID–19 crisis. Kenya is now in high risk of debt distress as determined by the International Monetary Fund. Addressing the emerging fiscal and debt vulnerability risks would require growth friendly reforms, soliciting external financial assistance,concessional credit, and debt refinancing and restructuring. The growth–friendly reforms could entail revenue-related steps to improve tax compliance, widening the tax net by reviewing the list of tax-exempt and zero-rated items, formalizing the informal sector, ensuring that public expenditures reach their intended targets, and deepening the domestic financial market to support private and public sector credit growth.

SOCIAL ENVIRONMENT

Kenya has made major gains in social development, including reducing child mortality, achieving near universal primary school enrollment, and narrowing gender gaps in education. Interventions and increased spending on health and education are paying dividends. While the healthcare system has faced challenges recently, including due to COVID-19 (coronavirus), devolved health care and free maternal health care at all public health facilities will improve health care outcomes and develop a more equitable health care system. Kenya has the potential to be one of Africa’s success stories, given its growing youthful population, a dynamic private sector, skilled workforce, improved infrastructure, a new constitution, and its pivotal role in East Africa. Addressing the challenges of poverty, inequality, governance, the skills gap between market requirements and the education curriculum, climate change, low investment and low firm productivity to achieve rapid, sustained growth rates that will transform lives of ordinary citizens, will be a major goal for Kenya.

TECHNOLOGICAL ENVIRONMENT

According to the Business Monitor International (BMI), Kenya’s Information Technology (IT) market was valued at $635 million at the end of 2020, with computer hardware sales totaling $360 million, while IT software sales were valued at $174 million and the balance on other services. Telecommunications and broadcast equipment also grew by 6% at the end of the year. Kenya is at the forefront of technological innovations in the region and is often referred to as Africa’s ‘Silicon Savannah.’ The Government of Kenya (GOK) has invested heavily in the ICT sector and has recognized the sector as a key contributor to the country’s GDP. Kenya is a regional leader in terms of broadband connectivity, general ICT infrastructure, value added services, mobile money, and mobile banking services. The country’s ICT sector is set to account for up to 8% of the country’s GDP through IT-enabled services (ITES) and create more than quarter of a million jobs by the end of 2021. Internet access has continued to spur economic growth which contributed to the government’s development of the Digital Economy Blueprint, a framework to improve Kenya’s ability to leapfrog economic growth in the region. The document is hinged on five pillars namely, digital government, digital business, infrastructure, innovation-driven entrepreneurship, and digital skills.

The national budget allocations for FY2021/2022 has seen the government set aside $210 million to fund various initiatives in the ICT sector. These include $100 million for government shared services, $67 million for the Digital Literacy Program (DLP), $12m for maintenance and rehabilitation of the National Optic Fibre Backbone (NOFBI) Phase II Expansion Cable, $11m for installation and commissioning of the Eldoret-Nadapal Fibre Optic Cable, and $16m to fast track the development of the Konza Technopolis, Kenya’s first smart city. While the sector is poised for continual long-term growth, it is estimated that total IT spending in Kenya will decrease by 6% in 2021 as the COVID-19 pandemic related shocks hammer the global economy (BMI).

The coronavirus pandemic has significantly accelerated digitalization and opened new opportunities for telecom operators and hardware and software vendors. According to the Economist Intelligence Unit (EIU), fast, reliable connections have become vital to businesses, consumers, and governments as they try to cope with this global crisis. For businesses, the pandemic has underlined the benefits of online offerings, automation, and developing the Internet of Things (IoT) to manage supply chains. For consumers, it has increased demand for online goods and services, while for governments it has highlighted the importance of deploying online services, including healthcare, and the potential benefits of advanced data analytics, artificial intelligence (AI) and robotics.

The Ministry of Information, Communications and Technology (MoICT), Innovation and Youth Affairs has the core responsibility for formulating, administering, managing, and developing the information, broadcasting, and communication policies in Kenya. In May 2016, through an Executive Order, the Ministry was split into two state departments: the State Department of Broadcasting and Telecommunications, and the State Department of ICT and Innovation. The Ministry was also merged with the Ministry of Youth Affairs to handle ICT skills and talent development among the youth.

The Ministry of ICT launched the National Broadband Strategy (NBS) 2023, aimed at transforming Kenya into a knowledge-based economy through the provision of quality broadband services to all citizens in the country. There are currently four undersea fiber optic cables that land off the coast of Kenya: SEACOM, TEAMS, EASSY, and LION2, which are the core drivers of fixed internet penetration in the country making it one of the highest, fastest, and most reliable in the region.

By implementing NBS 2023, the government aims at increasing access to broadband coverage of 3G to 94% of the population by 2020, increase digital literacy in schools to 85%, expand broadband to the 47 counties, and obtain 50% digital literacy within the workforce. A multi-stakeholder National Broadband Council shall be set up and mandated to coordinate the implementation of NBS 2023 with the support of monitoring and evaluation by the National Communication Secretariat.

All 47 counties now have ICT Roadmaps that align with the National ICT Master plan and local county development plans (CDPs). Through the roadmaps, counties can provide the best, most cost-effective ICT-enabled services and resources to its citizens. They have also helped county governments to make ICT investments that are consistent with global best practice and with the idea of shared ICT services with the central government and neighboring county ICT infrastructure.

The Information, Communications and Technology Authority (ICTA) under the Ministry of ICT (MoICT) was established in August 2013 and is tasked with streamlining the management of all government ICT functions. This includes providing its Ministries/Departments/Agencies (MDAs) with ICT standards and guidelines, domains, automation and digitization, shared services, and information security. ICTA is also tasked with overseeing and implementing various National ICT programs such as E-citizen services (where the public has online access to several public services offered by various government MDAs), the Digital Literacy Program, (a program borne out of the government’s vision to increase digital preparedness) and to transform learning in Kenya into a 21st century education system.

For Kenya to meet the critical ICT workforce needs and skills gap, the ICT Authority in collaboration with other ICT stakeholders has developed various skills programs to manage the challenge of the gap between industry talent needs. These include the Presidential Digital Talent Program and a Centre of Excellence (CoE) based at the University of Nairobi. The Authority has also partnered with leading U.S. companies such as Oracle and Microsoft for skills development and programs include the E-government capacity building program and ICT skills training respectively.

According to the Communications Authority of Kenya (CA), the sector’s regulator, availability of various technologies and services that offer faster and more reliable internet connections has continued to grow in the country with consumers embracing these services. According to the CA, the number of internet users was reported at 40 million as of December 2020.

A continued push by the government to provide more of its services online has contributed to demand-driven growth of the sector. Some of the major government services that were automated include online applications for acquiring a Personal Identification Number (PIN) for tax purposes and the introduction of iTax, a platform where citizens are now able to file their annual tax returns online.

The global trends for various ICT indicators including fixed telephone subscriptions, mobile cellular telephone subscriptions, fixed broadband subscriptions, active mobile broadband subscriptions and individuals using the internet continued to moderately expand. Below are some statistics for the period ending December 2019, the most recent data currently available.

Telecommunications and Broadcasting: Kenya is currently one of Africa’s fastest growing ICT markets where companies have increased productivity in all spheres of production process and enabled expansion of skills. According to the Economic Survey 2020, the value of the telecom sector expanded by 10.3% from $3,870 million in 2018 to $4,270 million in 2019.

Mobile/Cellular: Kenya’s GSM network has been impressive since the inception of mobile telephone services 25 years go. There are currently four main providers: Safaricom with 71.2% of market share, followed by Airtel at 17.6%, Telkom Kenya at 7.4% and finally the recently Finserve Africa/Equitel at 3.8%. Mobile cellular penetration increased by 7.9% to 114.70 per 100 inhabitants in 2019 which was a slower growth rate compared to the 12.3% growth registered in 2018. In 2019, total mobile telephone subscriptions increased by 10.2% to 54.6 million.

Mobile Money: Mobile money subscriptions decreased from 31.6 million in 2018 to 29.0 million in 2019. Total transfers through mobile money grew by 9.1% from $3,984mn in 2018 to $4,346mn in 2019.

Fiber Optic Coverage: Every county headquarters has been reached by the National Optic Fiber Broadband Infrastructure (NOFBI) in addition to other fiber-optic cables owned by private companies. Total wired subscriptions rose by 40.9% to 427.7 thousand largely due to growth of fixed fiber optic subscriptions, which expanded by 52.9% to 268.8 thousand in 2019. Fixed broadband has continued to expand in the last four years due to its growing preference among businesses and homes. In 2019, Fiber-to-the-Home (FttH) subscriptions rose by 56.2 % to 203,038 customers in 2019. Similarly, penetration of Fiber-to-the-Office (FttO) grew by 43.3 % to 65,715 subscriptions in 2019.

International Internet bandwidth: The total international Internet bandwidth leased in the country increased by 16.1% to stand at 6,241.84 Gbps at the end of December 2019, up from 5,374.02 Gbps recorded during the previous quarter. This increase was attributed to the additional bandwidth from TEAMS with an aim of meeting its customer’s increasing demand for bandwidth.

3G/4G/LTE Coverage: In 2019, the geographical coverage for 3G was 17% of the surface area, comprising 78% of the population, while 4G coverage reached 37% of the population and 15% of the surface area. The country has also started 5G pilots, with the government evaluating the use cases, adoption, and rollout of this new technology concept by major telecom operators.

Internet Domains: Total registered domains grew by 9.8% to 94,166 in 2019. Domains used by government entities and companies rose by 12.5% and 12.1% to 565 and 87,243 in 2019, respectively. Registered domains under mobile content, network devices, and information users declined by 77.8%, 65.3% and 65.0%, respectively in 2019. The decline may be attributed to changing to other domains such as the second level domains (SLDs) or failure to renew website due to business closures. In the year under review, SLDs which were introduced in 2018 increased by 6.1% to 94,166 SLDs in 2019. Enhanced uptake and use of subdomain names because of awareness on the benefits of use led to the doubling of domains under information content, mobile content and those used in network devices.

Broadcast Services and Subscriptions: The number of frequency modulation (FM) radio stations stood at 173 while free to air television stations were 75 in 2018. The number of digital signal distributors in the country remained at 5 digital terrestrial televisions set-top box (STB) subscriptions stood at 4.5 million. Cable TV subscriptions declined by 5.6 % to 160,200 while direct to home satellite subscriptions expanded by 14.6 % to 1.3 million subscribers in 2019.

Newspaper Circulation and online Newspaper Readership: The circulation of daily English and Kiswahili newspapers declined by 10% at the end of 2019 due to online readership of newspapers. Similarly, the number of weekly English newspapers in circulation decreased by 5.9 % over the same period. However, the average online readership of e-newspapers went up by 23.1 % in 2019.

Key ICT Sector Policy Drivers

Kenya National ICT Policy: The MoICT recently launched the Kenya National ICT Policy that outlines requirements for the design, development, acquisition, deployment, operation, support and evolution of public and private ICT sector. It defines the current and forward-looking position of the government on various areas of the evolving and emerging technology landscape in Kenya. The policy identifies key focus areas which are: 1) Mobile first; 2) Market, 3) Skills and Innovation; and 4) Public Service Delivery.

Mobile First: This covers investments in the infrastructure needed for work such as data centers, hardware, software, telecommunications, networks, and broadcasting. It seeks to create an enabling environment for the local assembly and manufacturing of devices. The policy will strengthen payments and logistics infrastructure and stimulate growth and adoption of local e-commerce platforms with global reach. It creates a provision of trusted security and certification infrastructure for all electronic communication and transactions. The policy also promotes accessible news and media platforms both off and online, and affordable marketing and advertising platforms.

Market: The policy aims to increase the overall size of ICT contribution to the digital and traditional economy to 10% of GDP by 2030. In doing so, the policy will provide a blueprint for creating things - infrastructure platforms for sellers and buyers; rules - carefully crafted rules that ensure that there is fairness in the marketplace, that transactions are honored, contracts and agreements are enforced, and that that scarce national resources such as spectrum and rights-of-way are fairly allocated; money - use of ICT to enable more people to make more money faster. Money, technology, and people are the drivers of the digital economy. By mirroring the physical entities used in business, such as bank notes, land titles, certificates and so on with digital equivalents, business can be assisted to move much faster since it is no longer limited by the time it physically takes to move a business item from one geographic location to another. It is the GOK’s goal to give every Kenyan the opportunity to earn a good living by utilizing the digital infrastructure in which the government is investing.

Skills and Innovation: The policy outlines a careful plan designed to jump-start a self-supporting ecosystem that will produce world-class research, technology products and industries. The technology environment is changing fast, and Kenya needs to not just keep up but to lead the charge. To ensure that Kenya is on the right track, the MoICT will every two years reassess research and development priorities and set five new technology goals. The government will fund investment in the selected new technologies, encourage the private sector to focus on the identified research and investment priority areas and help create skills in those technologies by funding scholarships, grants, challenges, and innovation awards.

Public Service Delivery: The policy states that all government will be efficient and open, and all government services must be available online so that every Kenyan has online access and that government services. In order to achieve this the policy requires that: service charters be published by the public sector and citizens sensitized about them; all government services be easily accessible to all citizens using their mobile devices anywhere and anytime; procurement and tender processes be electronically published and open to all; revenue collection to be transparent and accountable; all arms of government implement and manage locally built back-end and front-end systems to deliver services; E-services are provided on platforms that are secure from fraud and breach of privacy of personal information; all government systems currently developed and all future systems be integrated with each other; Kenyan data remains in Kenya, and that it’s stored safely and in a manner that protects the privacy of citizens.

The Digital Economy Blueprint

The Digital Economy Blueprint, presents a framework to improve Kenya’s (and Africa’s) ability to leapfrog economic growth. The blueprint is based on the national priorities as articulated by Kenya Vision 2030 (Vision) and the Big Four Agenda. The Vision aspires to make Kenya a globally competitive and informed society that effectively participates in the knowledge-based economy, and it also identifies ICT as a key enabler in the achievement of economic pillars and a critical factor in driving the economic, social, and political development in our country.

The blueprint identifies five key pillars as foundations for the growth of a digital economy. These pillars are: Digital Government; Digital Business; Infrastructure; Innovation-Driven Entrepreneurship and Digital Skills and Values. The Blueprint also highlights the cross-cutting issues that need to be considered for the success of a digital economy. According to Kenya President Kenyatta, the Blueprint serves as one of Kenya’s contributions in championing the growth of an African-wide digital economy for all Smart Africa Alliance members.

Leading Sub-Sectors

Computer Hardware: Computer hardware accounts for nearly 60% of the IT market in Kenya. Total computer hardware sales were at $409mn at the end of 2019. With the global pandemic forcing millions of Kenyan students and employees to study and work remotely, the demand for personal computers is expected to continue to rise.Consumer Electronics and Smart Devices: The consumer electronics market is expected to register double digit growth by the end of 2020. With the COVID-19 pandemic, the use of smart devices such as tables and smart phones continues to grow. U.S. mobile devices are available and competing for the middle to upper income brackets, with U.S. brands like Apple now being used widely in the market. However, the lower- to middle-end of the market is price sensitive, resulting in wide use of cheap and often counterfeit mobile devices that are easily available and often sold as original devices to unsuspecting customers. In a move to fight the growing counterfeit problem in the sector, the GOK switched off all counterfeit phones from the GSM network crating market for genuine phones. ADSL equipment will continue to have a market as homeowners and apartment owners continue to install Internet services in existing buildings to build their attractiveness to potential tenants. Smart phones and smart devices are also expected to have significant sales as the largest internet population consists of teenagers and young adults who have adapted to accessing the Internet on handheld devices.

Software: Software solutions are expected to rise with the huge demand for computer hardware and computer systems for various industry verticals. Cybersecurity software will also be required to secure data and online applications for both the government and its citizens. Banks and service providers will also continue to invest in various cyber solutions to address cybercrime and cyber security vulnerabilities.

Fixed Data and Mobile Data: Growth in Kenya’s fixed and mobile data segments sector is strong and will continue to grow demand for telecommunication technologies, especially 3G/4G or mobile data enabled devices that support machine to machine solutions. Cellular telephony remains the fastest growing telecommunications sub-sector.

Services: The IT services market has been on an upward trajectory as more small and medium size businesses are entering the online space via creative company websites. A recent report from the Communications Authority of Kenya puts the number of total registered domain names at 62,215 with “.co.ke” (companies) holding the highest share of 92.83%. The adoption of e-commerce has driven revenues for most businesses with some only holding virtual offices as they conduct their trade through online and mobile platforms. The disruptive use of social media in marketing has driven the uptake of data services, both fixed and mobile.

Mobile payments: Mobile money continues to be a huge market in Kenya with nearly 95% of mobile users having access to one or more mobile payment platforms. More public sector and state agencies, utility companies, and various service providers have integrated mobile money platforms with their core banking applications making it convenient for end users to make payments.

Applications: In addition to mobile money, services that rely on 4-digit SMS short codes and GSM USSD (simple, menu-driven interfaces that allow users to work through multiple options along a decision tree on basic mobile phones) are now ubiquitous in Kenya. These mobile interfaces, combined with open-source technology platforms such as Rapid SMS and Ushahidi that facilitate bulk information distribution and crowdsourcing, provide simple and effective tools for innovation across a variety of products and services. Other USSD products are in Agribusiness, Healthcare, Public Information Sharing, to connect users (e.g., farmers to traders, mothers to community workers etc.).

Cybersecurity platforms: Online crime in Kenya has increased significantly in the last few years due to the rapid digitization of the financial sector and more online payment transactions by Kenya citizens. Organized crime has been quick to take advantage of the opportunities offered by the Internet,particularly the growth in e-commerce and online banking. Online criminal groups target individual and government institution networks to steal personal information in bulk to profit from the compromised data available to them.

Opportunities

ICT has been a critical enabler in the achievement of Kenya’s Vision 2030 and will play a central role in supporting the country’s “Big Four” agenda and other sectors. We see opportunities for U.S. firms in various cross-cutting sectors.

COVID-19 ICT solutions: The Government of Kenya has identified ICT as a key enabler and economic driver. In the wake of the pandemic, the Ministry of ICT appointed a COVID-19 ICT Advisory Committee was through Gazette Notice No. 3236 on April 21, 2020, to co-ordinate ICT specific responses to the effects of the COVID-19 pandemic in Kenya. The Committee chaired by the CA’s Director General continues to seek private sector partnerships in providing innovative solutions for the following: Health, the Economy, Food, Livelihoods, Logistics/Transport, and Security.

Digital Economy: According to the 2019 Kenya National Economic Survey report, the value of the ICT sector expanded by 12.9% from $345.6mn in 2017 to $390.2mn in 2018, driven by growth in the digital economy. Kenya’s Digital Economy Blueprint (see above) highlights various key pillars that present commercial opportunities for U.S. companies.

Education sector: The Digital Literacy Program (DLP), commonly referred to as Digi-School is a program, was borne out of the Government of Kenya’s vision to make sure every pupil is prepared for today’s digital world. The program introduces primary school children, beginning with those in lower primary, to the use of digital technology and communications in learning. DLP is targeted at learners in all public primary schools in Kenya and will cover all the 23,951 primary schools, and nearly one million Class One pupils, with a combination of the use of technology, content, and teaching, to transform learning in Kenya into a 21st century education system.

The Education Broadband Connectivity project is another holistic, multi-faceted and national approach to provide internet connectivity for the nation’s secondary schools and tertiary institutions. A particular focus will be secondary schools that are already teaching the computer studies curriculum which will be examinable at the end of their four-years of study. The provision of necessary ICT training to the teachers in participating institutions to ensure that they are well prepared to make use of connectivity; provision of broadband connection and support to the education cloud and learning management system that established by the Kenya Institute of Curriculum Development (KICD). This will facilitate ready access to digital content developed by KICD as well as to other approved local or international education content and resources; and technical support to ensure that the connected schools are not hindered by technical problems from the full benefit of broadband connectivity. Both hardware and software components will be needed to support this ambitious project.

Health IT Sector: Health IT continues to gain momentum as the government of Kenya rolls out it’s eHealth strategy. The Ministry of Health (MoH) has a well-defined eHealth strategy (2016-2030) that identifies five main areas of focus and implementation: Telemedicine; Health Information Systems; Information for Citizens; mHealth, and eLearning. With the COVID-19 pandemic posing major challenges in Kenya’s healthcare systems solutions for logistics and transportation of critical drugs and tests, contact tracing applications, patient monitoring and others will be required by the public health facilities as well as private hospitals.

Cybersecurity: According to an Interpol report released in August 2020, on online organized crime in Africa, digitization has is made it significantly easier for petty hackers and criminals to operate. In Africa, the Interpol ranks Kenya among the countries where transnational criminal organizations operate. The report estimates that Kenyans lost $210Mn to cyber and cyber-enabled crimes in the year 2017. Kenya has been in the spotlight of the U.S. Federal Bureau of Investigation (FBI) as a source of scams and destination of funds obtained from cyber financial fraud.

The National KE-CIRT/CC is mandated to offer technical advice on cybersecurity matters nationally and coordinate response to cyber incidents in collaboration with relevant stakeholders. The National KE-CIRT/CC detected 33,747,678 malware threat events at the end of March 2020 as compared to 34,854,959 at the end of December 2019 over a quarterly reporting period. In response, the National KE-CIRT/CC issued 1,559 cyber threat advisories. The increase in the number of advisories given on botnet/DDoS attacks, online impersonation, online abuse, website application attacks, and other vulnerabilities provides opportunities to U.S. companies. Kenya also lacks proper Information Sharing and Analysis Centers (ISACs) and Financial ISACs, which are consortiums that can benefit key players in the tech and financial sectors when it comes to cyber-attacks prevention, response, and mitigation.

LEGAL ENVIRONMENT

The Business Laws (Amendment) (No.2) Act of 2021 (the Act) came into force on 31 March 2021. The amendments introduced by the Act are intended to support business activities in Kenya.The key statutes amended by the Act include the Law of Contract Act, Stamp Duty Act, National Social Security Fund Act (2013), National Hospital Insurance Fund, Industrial Training Act, Companies Act (2015) and the Insolvency Act.

Convenient remittance of employment statutory deductions

The Act has aligned the remittance dates for the National Hospital Insurance Fund (NHIF) and the National Social Security Fund (NSSF) to the due date for the remittance of Pay As You Earn (PAYE). These statutory deductions are now due by the ninth day of each month.Moreover, employers are now allowed to remit National Industrial Training Authority (NITA) payments at the end of their financial year provided the same is remitted not later than the ninth day of the month following the financial year end.However, the Act repealed the one-month delay afforded to employers for the remittance of NSSF contributions. Employers are required to remit the contributions on the prescribed date, otherwise a 5% late payment penalty will accrue.

Execution of documents by companies

The provisions of the Law of Contracts Act have now been aligned to the provisions of the Companies Act, 2015. The use of company seals is no longer mandatory in the execution of company documents.The Companies Act, 2015 provides that documents may be executed by a company by:

Two authorized signatories
A director of a company in the presence of a witness who attests the director’s signature
A duly appointed attorney
Virtual and hybrid company meetings

To adopt to the new ways of doing business necessitated by the COVID-19 pandemic, the Act has now amended the Companies Act, 2015 to allow virtual and hybrid general meetings. A hybrid meeting in relation to a company’s general meeting is a meeting where some participants are in the same physical location while other participants join the meeting through electronic means including video conference, audio conference, web conference or such other electronic means. A virtual meeting in relation to a company general meeting is a meeting where all members join and participate in the meeting through electronic means.

Documents exempt from stamp duty

Contracts, chargeable as conveyances on sale and that attract a fixed duty of KES100 are now exempt from stamp duty.

Insolvency

The Act has made the following amendments to the Insolvency Act, among others:To obtain a moratorium, company directors must prepare a document setting out the terms of the proposal and a statement of the company’s financial position containing such particulars of its creditors and of its debts and other liabilities and of its assets.

Directors are required to establish why a moratorium is necessary to assist in agreeing to an informal restructuring or other agreement with creditors or entering a formal insolvency procedure which could lead to the rescue or efficient liquidation of the company. Directors are now required to submit the financial statements to the Monitor for consideration and comment. A moratorium ends after 30 days from and including the day on which it takes effect, unless the moratorium period is extended under Section 669.

During a voluntary arrangement, the Company is now required to appoint a Monitor, not a provisional supervisor as previously required. The Monitor has to be an insolvency practitioner who will supervise the voluntary arrangement including issuing an opinion as to whether a moratorium has a reasonable prospect of achieving its aim and if the company is likely to have sufficient funds available to it during the proposed moratorium to enable it carry on its business.

Other recent changes

Employment (Amendment) Act, 2021

This Act provides that an employee who adopts a child is now entitled to one month's pre-adoptive leave with full pay from the date of the placement of the child. The employee is required to give the employer a notice of at least 14 days of the intention of the adoption society to place the child in the custody of the employee. The notice shall be accompanied by documentation evidencing the intention of the adoption society to place the child in the custody of the employee and written authority by the adoption society allowing the employee to adopt.

Intellectual Property Bill, 2020

The Intellectual Property Bill, 2020, (the Bill) was published in 2020 with the aim of consolidating the existing intellectual property laws in Kenya. Currently, intellectual property in Kenya is regulated under the Kenya industrial Property Act, the Trademarks Act, the Copyright Act and the Anti-Counterfeit Act. These Acts in turn establish various governing bodies namely: the Kenya Industrial Property Institute (patents, trademarks, technology innovations and utility models), the Kenya Copyright Board (copyright administration), and the Anti-Counterfeit Authority (deals with counterfeit goods and related rights). The Bill proposes the merger of all these existing governing bodies into one institution, the Intellectual Property Office of Kenya (IPOK), to be responsible for the promotion and protection of intellectual property rights. IPOK will deal with the registration, custody and enforcement of intellectual property in Kenya. The Bill proposes that the Cabinet Secretary responsible, in consultation with stakeholders, develop a national intellectual property policy and strategy to govern the intellectual property framework in Kenya and create public awareness about economic, social and cultural benefits of intellectual property rights. The Bill proposes to establish an Intellectual Property Tribunal (the Tribunal) to have original and appellate jurisdiction over all intellectual property matters in Kenya.

The Data Protection Act, 2019

The Data Protection Act of 2019 was assented to by Kenya’s President on 8 November 2019 (the Act). The key highlights of this Act include: Establishment of the Office of the Data Protection Commissioner – the Commissioner is mandated with the following responsibilities: overseeing the implementation and enforcement of this Act; establishing and maintaining a register of data controllers and data processors; exercising oversight on data processing operations; receiving and investigating any complaint by any person on infringements of the rights under this Act; publicizing the provisions of this Act; carrying out inspections of public and private entities with a view to evaluating the processing of personal data; and promoting international cooperation in matters relating to data protection, among others. The first Data Protection Commissioner was appointed on 12 November 2020.

Registration of data controllers and data processors – the Act provides that the Commissioner is granted authority to prescribe the threshold for registration of data controllers and data processors to be registered with the Office of the Commissioner.Transfer of personal data outside Kenya – the Act provides that data controllers and processors can only transfer personal data to another country where they have evidenced to the Commissioner the appropriate safeguards with respect to the security and protection of the personal data.

Exemptions to the provisions of the Act – exemptions include where it relates to processing of personal data by an individual in the course of a purely personal or household activity; if it is necessary for national security or public interest; disclosure is required by or under written law or order of the court; it is required in the prevention or detection of crime; it is required in the assessment or collection of a tax or duty; or where publication of data would be in the public interest.

Most recently, the Data Commissioner issued various Regulations (i.e., draft Data Protection (General) Regulations, 2021, the draft Data Protection (Compliance and Enforcement) Regulations, 2021, and the draft Data Protection (Registration of Data Controllers and Data Processors) Regulations, 2021) for public consultation.

Companies Act (Beneficial Ownership Information) Regulations 2020

The Companies Act, 2015, now requires companies to maintain a register of their beneficial owners. Pursuant to this amendment, companies are now required to file with the Registrar a copy of their register of beneficial owners (in a prescribed form) within 30 days of its preparation. Any amendments to the register are to be filed with the Registrar within 14 days of making the amendments.

The Companies (Beneficial Ownership Information) Regulations, 2020 define a beneficial owner as “the natural person who ultimately owns or controls a legal person or arrangements or the natural person on whose behalf a transaction is conducted, and includes those persons who exercise ultimate effective control over a legal person or arrangement.”

The Regulations further identify a beneficial owner as a person who meets any of the following conditions:

Holds at least 10% of the issued shares in the company either directly or indirectly.
Exercises at least 10% of the voting rights in the company either directly or indirectly.
Holds a right, directly or indirectly, to appoint or remove a director of the company.
Exercises significant influence or control, directly or indirectly, over the company.

By a notice dated 27 January 2021, the Companies Registry extended the deadline, from 31 January 2021 to 31 July 2021, for companies to prepare and file their registers of beneficial owners with the Registrar of Companies in accordance with the Regulations.

Enforcement of local ownership rule in the Information, Communication, Technology (ICT) sector

On 7 August 2020, the Cabinet Secretary, Information, Communication, Technology, Innovation and Youth Affairs gazetted the National information Communication and Technology Policy Guidelines, 2020 (the Policy).A key legal requirement introduced by the Policy, is the requirement that at least 30% of the substantive ownership of ICT companies is to be held by Kenyans. This provision constituted a revision from the previous 20% substantive Kenyan equity ownership requirement for the issuance of telecommunication licences. All companies licensed by the Communications Authority were allowed a three-year period within which to meet the local equity requirements. On 25 March 2021, through another gazette notice, the Cabinet Secretary published an amendment aimed at clarifying the local ownership requirements as follows:

An existing licensee with less than 20% local equity ownership that has not exhausted its three-year grace period will be required to meet the 30% local equity ownership at the end of its grace period. An existing licensee that met the 20% local equity ownership prior to 7 August 2020 will have two years to meet the 30% local equity ownership threshold with effect from the said date.

An existing licensee that had a waiver granted under the ICT Sector Policy Guidelines of 2006 will have three years to meet the local equity ownership threshold with effect from the date of this Notice. A new applicant for a license will have three years to meet the local equity ownership threshold from the date of issue of the license. A company registered to exclusively offer Business Process Outsourcing Services will be exempt from the 30% local ownership requirement.

Competition Tribunal decision on abuse of buyer power

The Competition Tribunal in Majid Al Futtaim Hypermarkets Limited v Competition Authority of Kenya & another [2021] eKLR, issued on 20 April 2021 addressed the issue of abuse of buyer power under the Competition Act, 2010. The matter before the Tribunal was an appeal instituted by the Majid Al Futtaim Hypermarkets Limited (Majid) on the decision of the Competition Authority that required the retailer to amend various clauses of its standard supplier contract which the Authority deemed to have facilitated the abuse of power.

Majid was said to have abused its “buyer power” by: transferring commercial risks to Orchards; refusing to receive Orchards’ goods for reasons which could not be ascribed to Orchards; unilaterally terminating the commercial relationship without notice and applying rebates and listing fees marked as discounts; and requiring Orchards to deploy staff as its own cost.

Section 24(2B) of the Act stipulates that the Authority, in determining buyer power, must take into consideration the nature and determination of contract terms; the payment requested for access to infrastructure; and the price paid to suppliers. Buyer power is defined by the Act as “the influence exerted by an undertaking or group of undertakings in the position of a purchaser of a product or service to obtain from a supplier more favorable terms, or to impose a long-term opportunity cost including harm or withheld benefit which, if carried out, would significantly be disproportionate to any resulting long-term cost to the undertaking or group of undertakings.”

The Tribunal in finding that Majid abused its buyer power stated that “the influence of power of the buyer becomes evident when the buyer engages in the offending conduct” and therefore, “by engaging in conduct which amounts to abuse of buyer power, there’s buyer power.” This case is expected to set precedence in the enforcement of “buyer power” abuse not only in Kenya but also in other African countries where the issue has not been determined judicially.

ENVIRONMENT

The Kenyan environmental and climate change regimes are enshrined in the Constitution of Kenya, and supported by several sector-specific statutes and policies. Further, pursuant to Article 2(5) of the Constitution, the general rules of international law, which include principles of international environmental law, form part of Kenyan law relating to the environment and climate. The international environmental legal regime has contributed greatly to the development of Kenyan policies and legislation on the protection of the environment. Treaty law has also been imported into Kenya's legal regime pursuant to Article 2(6) of the Constitution and the Treaty Making and Ratification Act 2012.

International environmental principles such as the 'polluter pays' principle, public participation in environmental conservation and management, sustainability, and inter- and intra-generational equity, among others, find expression to varying extents in Kenyan legal texts on the environment and climate change.

As a starting point, the preamble to the Constitution states that 'the people of Kenya are respectful of the environment, which is Kenya's heritage, and are determined to sustain it for the benefit of future generations'. Several provisions of the Constitution reflect this elevation of broad environmental principles. Article 10 entrenches the principle of sustainability as one of the national values and principles of governance, while Article 42 guarantees the right to a clean and healthy environment, including the right to have the environment protected for the benefit of present and future generations.

Although a number of legislative and policy options have been set in motion by the Kenyan government2 to mainstream environmental and climate change obligations into the country's economic blueprint, the Climate Change Act 2016 and the regulations contemplated under it qualify as the most notable recent direct legislation in this area.

In terms of policy initiatives, the Climate Change Act 2016 requires the cabinet secretary to formulate a National Climate Change Action Plan (NCCAP), which shall be reviewed every five years.3 The resultant NCCAP 2018–2022 (the Plan) aims to 'further Kenya's development goals by providing mechanisms and measures to achieve low-carbon climate-resilient development'.4 The Plan provides a framework for Kenya to deliver on its nationally determined contributions (NDCs) under the Paris Agreement.5 The Plan focuses on seven priority climate action areas where government efforts should be directed to achieve low-carbon-resilient development. These priority action areas are disaster (drought and floods) risk management, food and nutrition security, water and the blue economy, forestry, wildlife and tourism, health, sanitation and human settlements, manufacturing, and energy and transport.6 The NCCAP is aligned with the Kenyan government's developmental policy roadmap comprising Vision 20307 and sustainable development goals (SDGs), all which reflect the commitment by the Kenyan government to achieve low-carbon and climate-resilient development.

Vision 2030 was launched in 2008 as Kenya's development blueprint covering the period 2008 to 2030. It was aimed at making Kenya a newly industrializing 'middle income country providing high-quality life for all its citizens by the year 2030'. Under the Social Pillar of Vision 2030, it is explicitly stated that Kenya's journey towards widespread prosperity involves the building of a just and cohesive society that enjoys equitable social development in a clean and secure environment. The vision of a clean and sustainable environment by 2030 is to be attained with improved pollution and waste management, improved capacity to adapt to global climate change and the harmonization of environmental laws for better environmental governance and planning.

As an example of its commitment to this vision, the Kenyan government has at times taken radical conservation measures such as involuntary relocation of rural communities from ecologically sensitive areas such as the Mau Forest, a major water catchment area. This is part of the broader plan to rehabilitate the degraded environment and achieve 10 per cent forest cover nationally.8 The forest is the largest remaining indigenous forest in Kenya and contains the largest of the country's five water towers, as well as the largest closed-canopy forest ecosystem. Despite political resistance and legal challenges on the mode of carrying out the relocations, the action demonstrates renewed commitment by the Kenyan government to sustainability and environmental restoration.

In a similar vein, the Kenyan government banned the introduction of all plastic containers, straws and other related products to any national park, national reserves or conservation areas effective June 2020.9 There has been some corresponding fiscal incentive for corporates investing in recycling, including a 15 per cent corporate tax incentive for the first five years of operation and VAT exemption for the supply of machinery and equipment used in constructing plastic recycling plants and services to those plants.10

Legislative framework

The Constitution of Kenya 2010

Article 10 of the Constitution lays out national values and principles of governance, such as sustainable development, that guide government action in implementing laws or policy. Article 42 guarantees the right to a clean and healthy environment and requires the environment to be protected for present and future generations.

Article 69 provides for the sustainable use, management and conservation of natural resources to ensure equitable sharing of accruing benefits. Article 70 reinforces the right to a clean and healthy environment and provides a means for enforcement action and compensation for those deprived of this right.

Of notable significance is the creation of the Environmental and Land Court under Article 162. This specialised court has the status of a High Court in Kenya and deals with environmental protection matters. The court has powers to make preventive, cessation and compensatory orders.

The Environment and Management Co-ordination Act (EMCA) 1999

This Act is the operative law on matters concerning the environment. It is Kenya's first framework environmental law. It sets out general principles, creates administrative bodies, lays out environmental quality standards and provides for the inspection, enforcement and punishment of environmental offences. It complements other sectoral laws on water, land, forest, mining and wildlife, among others. EMCA was enacted against a backdrop of 78 sectoral laws dealing with various components of the environment, the deteriorating state of Kenya's environment, and increasing social and economic inequalities, the combined effect of which negatively impacted on the environment. The supreme objective underlying the enactment of EMCA 1999 was to bring harmony in the management of the

country's environment.

The Climate Change Act 2016

The goal of the Climate Change Act 2016 is to provide a regulatory framework for an enhanced response to climate change, and to provide mechanisms and measures to improve resilience to climate change and promote low carbon development. The Act adopts a mainstreaming approach, provides a legal basis for climate change activities through the National Climate Change Action Plan, and establishes the National Climate Change Council and the Climate Fund.

With this enactment, Kenya joins the league of nations that have taken concrete steps to domesticate the Paris Accord on Climate Change. The main object of the Act is to be applied in the development, management, implementation and regulation of mechanisms to enhance climate change resilience and low-carbon development for the sustainable development of Kenya.11

The Energy Act, 2016

The Act has a very broad scope, covering all forms of energy, from fossil fuels to renewables. The Act mandates the government to promote the development and use of renewable energy, including biodiesel, bioethanol, biomass, solar, wind and hydropower, among others. The Act provides a useful supporting framework for the transition to a green economy with likely gains in environmental protection and climate change.

SWOT Analysis

WEAKNESSES

Reliant on hydropower and rain-fed agriculture: sensitive to drought and flooding
Weak public resources (17% of GDP)
Persistent bottlenecks due to lack of infrastructure and skills shortages
Terrorist risk in the north near Somalia; political, social and ethnic divisions
Chequered relationship with the IFIs and wider donor community, partly reflecting perceptions of corruption.
Twin deficits in fiscal and current accounts.

OPPORTUNITIES

Services (45% of GDP), particularly trade and telecommunications with the rise of online money movements, are the main beneficiaries. Investment will remain timid. Its public component will continue to be constrained by the deterioration in the budgetary situation, which is compounding recurrent deficiencies in areas such as under-execution, under-financing, late payments and judicial remedies.
However, housing construction is expected to return to its previous strength, with an estimated shortage of 300,000 units, while water supply, sanitation and roads will benefit from international financing.
The private sector will have to contend with caution in the banking sector, with doubtful loans making up 15% of banks’ portfolios at the end of 2020, despite restructuring.
Furthermore, Exports (12% of GDP) will continue to benefit from resilient tea (23% of exports), fruit and vegetable (14%) and coffee (4%) markets. Flower sales will depend on the reopening of European florists.

THREATS

In 2020, the COVID-19 crisis took the edge off the usual strong growth. The main cause was the fall in tourist activity (10% of GDP and 9% of employment) with international flights suspended until August.
Investment (17% of GDP in terms of demand) was hit by budget cuts and a drop in confidence among national and foreign private decision-makers. Despite the reduction in employment, particularly in tourism, consumption was relatively spared due to the absence of a total lockdown, but also because of the resistance of expatriate remittances and tax giveaways. Overall, the fact that agriculture accounts for a major share of the economy (40% in terms of supply) undoubtedly played a protective role.

STRENGTHS

Seventh-largest African economy (2019), but the biggest in East Africa, playing a pivotal role in the East African Community, Africa's number-one common market
Diversified agriculture (third-largest tea producer in the world) and expanding services sector (telecommunications and financial services)
Mombasa is the third-largest port in Africa
Hydrocarbon deposits discovered in the northwest region of Turkana
Fast-growing population and emerging middle class
Continued execution of the president’s Big Four Agenda, which is focused on food security, manufacturing employment, universal and affordable access to health, and affordable housing
Large domestic market (population 45mn and member of a regional trading bloc, East African Community, which is expanding and offering good business opportunities.
Vibrant horticultural and tourism sectors, although the latter is volatile, subject to domestic political stability and regional security concerns.
Regional energy sector has significant potential (including offshore gas fields), with direct (exploitable reserves within Kenya’s territory) and indirect (inputs through Kenyan ports and exports from them) benefits.

Risk Analysis

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