MPs seek strict check on foreign investors to cushion locals

Local traders protested unfair competition from traders prompting the inquiry by Parliament

In Summary
  • Inquiry was prompted by activities of China Square in 2023.
  • The report points to loopholes in the current law that are favouring foreign investors over local traders
Embakasi North MP James Gakuya on July 20, 2023.
GRAFT CASE: Embakasi North MP James Gakuya on July 20, 2023.

MPs have recommended strict measures to curb the influx of foreign investors as part of measures to protect local traders.

National Assembly Trade and Industry Committee in a report seek a rigorous vetting exercise before allowing foreign investors in Kenya.

In the proposal, it will be mandatory for all foreign investors to apply for investment certificate before setting up business in the country.

Currently, it is not mandatory for investors to get the license before setting shop in the country.

The Committee chaired by Embakasi North MP James Gakuya now wants a review into the provisions of the Act especially Section 3.

 “The gap in law is that registration of foreign companies under the Investment Promotion Act is not mandatory,” the report recommends.

“That Parliament in exercise of its legislative authority, to review provisions of Section 3(1) of Investment promotion Act, to provide for a foreign investor to apply for an investment certificate to ensure compliance with the requirements, set out under section 4(2) of the aforementioned Act.”

The report further compels the National Investment Council to prepare an annual report on investments proposals filed by foreign investors and submit to the Cabinet Secretary in charge of Investment, Trade and Industry.

“The Cabinet Secretary responsible for Investment, Trade and Industry in consultation with the relevant stakeholders to review various investment policy framework and regulation with the aim of coming up with an amicable regulatory and policy frame that is friendly to both foreign and local traders,” the report suggests.

The report further pointed to confusion on regulations guiding investment in both national and county governments.

According to the report, foreign investors at time utilise the confusion to disadvantage the local players.

“There is fragmentation and multiplicity of investment policies at the County and National levels,” the report states.

“Lack of coordination in policy development, implementation and enforcement by respective ministries, departments and agencies as well as County Governments creates challenges and loopholes that may be exploited by to the detriment of local investments.”

To avoid the confusions, the report, Trade CS and Council of Governors to develop and adopt a regulatory framework that is friendly to both foreign and local traders.

The Gakuya-led Committee was inquiring into alleged trade malpractices by foreign investors in the country.

This was necessitated by uproar by local traders over the overreaching activities of China Square, which they claimed was driving them out of business.

The traders from Nairobi’s Nyamakima, Gikomba and Kamukunji held weeks of street protests seeking government interventions.

They accused the foreign retail shop of undercutting them hence creating unfair competition in the local market.

China Square is a retail company, which commenced operations in the country in 2023.

It trades in consumer goods/household items, hardware and furniture.

Appearing before the Committee, China Square Limited submitted their business satisfied all the requirements including the creation of employment to Kenyans.

“China Square Ltd. submitted that they obtained all necessary permits and certificates required to operate their business in Kenya, and believe that foreign investment can be a positive force for economic growth and job creation in the country,” the report states.

The retail shop also downplayed existing gaps in the current Act arguing that the current provisions are sufficient to government foreign investments.

“On the issue of concerns about their business harming local traders, the Company submitted that whereas some traders may feel threatened by their presence, they believe they can coexist with other businesses and offer consumers additional choices and value,” the report reads.

“They said they do not intend to drive anyone out of business, and believe that healthy competition benefits all stakeholders.”



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