MPs now want foreigners to get permits before investing in Kenya

In a potential shift, foreigners seeking to establish businesses in Kenya may soon be mandated to secure investment permits, pending Parliament's approval of a proposal set forth by MPs.

According to the Trade Committee of the National Assembly, although the Investment Promotion Act stipulates that foreigners must invest a minimum of $100,000 (equivalent to approximately Sh13.39 million at current exchange rates), it currently lacks a mandatory requirement for them to obtain permits.

MPs have raised concerns about the abuse of this loophole by some foreigners.

Embakasi North MP James Gakuya, chairing the committee, highlighted the gap in the law regarding the registration of foreign investors under the Investment Promotion Act.

He noted that while Section 3(1) of the Act allows foreign investors intending to invest in Kenya to apply for an investment certificate, it does not make this requirement mandatory.

The Trade Committee of the National Assembly has recommended that Parliament utilise its legislative authority to revise Section 3(1) of the Investment Promotion Act.

The suggested revision aims to make it obligatory for foreign investors to apply for an investment certificate, ensuring adherence to the requirements outlined in Section 4(2) of the Act.

Unfair trade practices

The committee's recommendations follow allegations made last year by local traders regarding unfair trade practices by Chinese-owned China Square.

The traders accused the establishment of undercutting local businesses by selling goods at lower prices to eliminate competition.

China Square commenced operations at Unicity Mall in Juja at the end of January last year, gaining attention for its pricing strategy that undercut other businesses in the area.

The approach sparked protests and accusations from local traders who felt threatened by the presence of China Square.

In a report presented to Parliament on March 7, the committee criticized the government for its lack of a coordinated approach to handling foreign investors.

This inconsistency has created confusion and allowed some investors to exploit legal loopholes, according to the committee's findings.

"The Cabinet Secretary in charge of the Ministry of Investment Trade and Industry in consultation with the Council of Governors within 60 days of the adoption of this report to develop a policy framework for the development and implementation of investment policies that mirror the two levels of Government," the committee recommended.