Big changes are brewing in Kenya’s startup scene. The country’s Senate has just passed the 2022 Startup Bill, which could transform the industry in major ways. But there’s a catch – the bill has some controversial requirements that are raising eyebrows.
If President William Ruto signs the bill into law, Kenyan startups will have to allocate at least 15% of their expenses to research and development (R&D) and maintain Kenyan ownership to qualify for legal recognition and government support.
The goal is to encourage innovation and growth, but critics are worried that these requirements could stifle progress instead.
The bill’s local ownership mandate is particularly contentious. Many successful Kenyan startups have foreign co-founders or investors, and this requirement could exclude them from key benefits.
This could undermine Kenya’s appeal to international investors, who have poured millions of dollars into the country’s startups over the last decade. In 2024 alone, Kenyan startups raised $638 million.
On the other hand, the 15% R&D expenditure mandate has been well-received. It aims to encourage deeper innovation and competitiveness within the Kenyan startup ecosystem. As the sector matures, this requirement will push companies to prioritize long-term innovation and intellectual property.
However, some experts are cautioning that this approach may be overly prescriptive. Steve Okoth, a tax director at BDO East Africa, argues that a more flexible, incentive-driven approach would be more effective in fostering sustainable innovation and growth.
It’s clear that the Startup Bill has the potential to make a major impact on Kenya’s startup ecosystem. But it’s also important to consider the potential risks and challenges that come with it. As the bill awaits presidential assent, all eyes are on President Ruto to see what’s next.
