Kenya to increase cash threshold for foreign investors
Kenya has lined up drastic changes to its investment promotion law in a bid to seal loopholes exploited by foreigners to compete with local small traders and commit crimes such as money laundering.
Interior Cabinet Secretary Fred Matiang’i says the ministry will be seeking parliamentary approval of amendments to the law, including raising the minimum investment threshold for foreigners.
The Kenya Investment Promotion Act requires foreigners to have a minimum of $100,000 (Sh10.92 million) to obtain an investment certificate that qualifies them for incentives such as investment deductions and tax rebates.
Dr Matiang’i told the National Assembly’s Committee on Administration and National Security that the current minimum investment threshold was too low given the size of the Kenyan economy.
The committee is investigating the deportation of Turkish national Harun Aydin, an ally of Deputy President William Ruto, for suspected involvement in money laundering despite coming in on a work permit as an investor in solar energy.
“For a country our size and the economy of our size, we now need to be a bit more careful when we look at these kinds of things (rules for foreign investors) in future because we have learned the bitter way from some of these things,” the minister said on Friday.
“That’s how some people can come in [including] money launderers and engage in ‘wash-wash’ (informal language for black money)… and then masquerade around as business dealers.”
The Kenya Investment Authority (KenIvest) has proposed a flexible minimum foreign investment threshold, depending on the capital requirement of different sectors based on feedback from stakeholders during engagements that led to the development of the country’s first investment policy, launched in November 2019.
Moses Ikiara, the investment promotion agency’s director-general, said the stakeholders wanted the minimum capital for foreigners to be tripled to $300,000 (Sh32.76 million) for capital-intensive sectors such as construction, energy, manufacturing, oil and gas.
Others, he added, felt that the threshold should be lowered for sectors such as ICT whose ventures may not require as much capital.
“There are many people who were thinking $100,000 is high and were saying when people were innovating something like M-Pesa, they wouldn’t have needed that minimum capital. There are some types of businesses where you require human resources or knowledge more than capital,” Dr ikiara told Business Daily in April.
“The thinking is to allow innovative investments that are not capital-intensive not to be locked out.”
The proposed legal amendments, the KenInvest chief had added, will also seek to ring-fence local investors.
Lawmaker Mishra Swarup (the Kesses MP), a member of the National Security Committee, said the investment threshold for foreigners needed to be raised as much as ten-fold to protect small traders.
“What’s Sh10 million for investment. It should be a minimum of Sh100 million or Sh200 million. These [foreign] investors are blocking …progress of our citizens,” Dr Mishra said.
Kenya in June 2019 deported seven Chinese nationals found trading illegally in Gikomba, the country’s largest informal market for second-hand clothes and footwear.
At the time, the Interior Ministry said three of the Chinese had no valid work permits while the other four were found to be in employment and other “income-generating activities” at Gikomba contrary to the terms under their respective work permit classes.
“As soon as we amend the law and they give us a higher threshold, we will implement the threshold they give us. So, maybe as Parliament, it is now an opportunity that you have to implement what Hon Mishra says,” Dr Matiang’i told the parliamentary committee sitting in Mombasa.