Why Kenyan Diaspora Startup Bill 2020 is weak in practice

After Senator Johnston Arthur Sakaja’s recent brush with the law over flouting Covid-19 restrictions, the legislator has got back to doing what legislators do best. Drafting bills. His latest brainchild is the Kenyan Diaspora Startup Bill 2020. The bill has good intent but is weak in practice, argues David Monda. 

The Kenyan Startup Bill 2020 is an innovative bill that starts from a palatable conceptual framework but ends up being bogged down in bureaucratic malaise. Reviewing the bill broadly reveals that it is stuck in an amorphous space between the county and national governments.

The incubation hubs referenced in the bill are centered around a national regulatory body called the Kenya National Innovation Agency (KNIA). To reach the public faster, and to be more sensitive to innovation from below, these innovation hubs need to be decentralized with the core function of registration falling on the county rather than the national government. Counties are the governmental structures closest to the people. They are most sensitive to the needs of wananchi on the ground.

The Kenya National Innovation Agency (KNIA) should be limited to coordinating county innovation hubs specifically as it relates to innovators that come to Kenya with capital and human resources to invest in the country. KNIA will provide these innovators an open tablet of the counties and allow interested parties decide where to invest their time and capital at the county level.

Another area of contention in the bill is the reference to quotas and affirmative action. The affirmative action clause in the bill in section 4(j) pg. 402 is well intentioned but not necessary at this stage of developing the bill. Quotas in the bill, in a sector that is still at an infant stage, will only result in waste, redundancy and corruption. At this stage of the development of the bill, it serves the public better to look for the best talent on merit to develop and grow the sector. Quotas referencing matters of equity and representativeness can be addressed once the sector matures.

In addition to this, the question of ownership needs to be amended in the bill. The current bill in section 8(1)f (p.405) limits registered entities to “majority owned by one or more Kenyans“. This is a clause that needs to be removed altogether. Foreign innovators are not going to bring their capital to Kenya to become minority shareholders in companies they established abroad.

A fundamental of global capital is that it knows no national borders. Only profit. Capital seeks an enabling environment to multiply. If the Kenyan government allowed 100% foreign ownership in companies coming to Kenya, the country will attract volumes more in investment. Should an investor decide to leave Kenya for another destination, the multiplier effect of their capital while it is in Kenya, will do more to help the economy than hurt it. This will be in addition to the transfer of technological skills and employment of the youth.

Thinking more broadly on this issue, would Kenyans want to be minority shareholders in Kenyan companies they started in Tanzania or Rwanda? Probably not. If Kenya has a progressive policy on the issue of ownership, it will force regional states to reciprocate. This can only benefit Kenyan companies when they venture in the region.  

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It is also quite puzzling to read in the bill that the Kenya National Innovation Agency (KNIA) makes a requirement of 15% on research for startups. Shouldn’t this be better determined by the investor? The 15% requirement should be amended to become a recommendation rather than a requirement. Companies will gladly invest more than 15% if the investment environment is conducive, and they are sure they can easily repatriate their investment.

In conclusion, the general tone of the bill is highly bureaucratic and appears to be excessively burdensome on the registrant. There are too many registration bottlenecks and legalistic jamborees. This makes the process of registration of an innovation hub and a startup a torturous endeavour rather than an initiative to raise living standards for the most impoverished via innovative ideas.

The less bureaucracy we have in the bill, the fewer opportunities for the proliferation of patron-client corruption networks that are so synonymous with crippling innovation in Kenya.

With a few amendments to the Startup Bill 2020, it can become a tool to grow innovation and technology in Kenya. Allowing the Senator from Nairobi some well-earned respite from his earlier trepidations with law enforcement. Indeed, he who laughs last, laughs best.   

Prof Monda teaches Political Science, International Relations and American Government at the City University of New York (York College), New York, USA. He can be reached at: dmonda1@york.cuny.edu