KENYA: An Introduction

KENYA: 2022 COUNTRY PROFILE 

Current economic conditions affecting clients or the legal profession

Kenya’s economy has rebounded relatively well since the COVID-19 pandemic hit in early 2020. The economy, which is East Africa’s biggest, is expected to grow by 6.0% in 2022 based on data by the Central Bank of Kenya. According to data released by the World Bank, the Kenyan economy has shown resilience to the COVID-19 shock, with output in 2021 rising above pre-pandemic levels. Real GDP is expected to have grown by 5.0% in 2021 as a whole, and moving into 2022 and beyond, Kenya’s economic performance is expected to be robust with real GDP growth of 4.9% per year on average being projected over 2022–23, similar to the pre-pandemic pace (5.0% average annual growth, 2010-19).

The anticipated further recovery of various sectors affected by the pandemic depends on substantial vaccination progress to help minimise new waves of infections and reduce the need for associated containment measures. However, available data shows that vaccine acceptance is reportedly high. On 20th October 2021, nightly curfew came to an end owing to confirmed cases falling to the lowest levels since the start of the pandemic.

The World Bank, however, warns that the future course of the pandemic continues to pose the main downside risk to the economic outlook and the full reopening of the economy.

The level of activity, trends and developments in this area

2021 saw a number of acts passed by the National Assembly, with the most prominent being the Public Private Partnerships Act (Number 14 of 2021). The new Act is intended to provide for the participation of the private sector in the financing, construction, development, operation or maintenance of infrastructure or development projects through public private partnerships and to streamline the regulatory framework for public private partnerships.

It further seeks to address the gaps in the existing legal framework, enhances efficiency in the regulatory process of engagement of private parties and the manner in which public private partnerships are conducted and reduces the number of regulatory approvals required so as to ensure the provision of high-quality facilities and services. The Act is expected to speed up project development by facilitating faster processing of Privately-Initiated Proposals and enabling direct negotiations through direct procurement where it is feasible.

The Act also expands the scope of arrangements that qualify as public private partnerships and expands the scope of available procurement methods for public private partnerships by introducing direct procurement and restricted bidding as two additional approved methods. This allows for partnerships to be procured either competitively, or single-sourced through direct procurement, or Privately-Initiated Proposals or through restricted bidding where the complex or specialized nature of works and services is restricted to prequalified tenderers.

New legislation that will have an effect on clients

We identify the Central Bank of Kenya Amendment Act (Number 15 of 2021) as an Act which is likely to have a material impact on Fintech clients. The Act is intended to govern digital credit providers in Kenya, who until the commencement of the Act operated freely in Kenya’s credit market, which had witnessed growth in demand for quick loans. The Act was enacted amidst concerns of low-income earning borrowers applying for quick loans and ending up paying exorbitant interest rates or being bound by unfavourable loan terms due to lack of regulation in that sector. The Act now prescribes for licensing requirements and minimum capital requirements for digital credit providers.

Also important is the Trustee (Perpetual Succession) (Amendment) Act (Number 13 of 2021) which began commencement on 23rd December 2021. The Act is an attempt by Parliament to enable accumulation of generational wealth for the benefit of multiple generations. It also makes provision for and defines various types of trusts including family trusts, charitable trusts and non-charitable purpose trusts.

Data Protection (General) Regulations, 2021, Data Protection (Complaints Handling and Enforcement Procedures) Regulations, 2021 and the Data Protection (Registration of Data Controllers and Data Processors) Regulations, 2021 were passed on 31st December 2021 to give effect to the provisions of the Data Protection Act (Number 24 of 2019). The Data Protection Regulations fill the legislative gaps in the substantive legislation with respect to matters such as the rights of data subjects, the transfer of personal data outside Kenya and the criteria and requirements for registration of data controllers and data processors.

The Proceeds of Crime and Anti-Money Laundering (Amendment) Act, 2021 was also assented into law, amending certain provisions of the Proceeds of Crime and Anti-Money Laundering Act (Number 9 of 2009), which will have far reaching consequences particularly in relation to the legal profession. The Amendment Act essentially brings advocates and their employees under the purview of the Principal Act, which has the consequence of making advocates answerable to Financial Reporting Centre in terms of reporting obligations on matters of proceeds of crime and anti-money laundering. Advocates have now been designated as reporting institutions and will therefore be required to monitor, on an ongoing basis, all complex, unusual, suspicious, large or such other transactions, whether completed or not, and report any of the transactions or activities that could constitute or be related to money laundering or to the proceeds of crime.

This amendment makes serious inroads on the long-established principle of advocate-client privilege. The implementation of the Amendment Act has since been challenged in the case of Mwaura Kabata v Honourable Attorney General & Another (2022) (unreported), and interim conservatory orders were issued on 12th January 2022 stopping implementation and operationalisation of the Amendment Act, pending the hearing and determination of the case.

Potential hurdles or difficulties faced by clients and how these can be overcome

2022 is political season in Kenya, with the general elections expected to be held on 9th August 2022. A new president shall be elected as the incumbent president Uhuru Kenyatta is ineligible to pursue a third term due to the two-term limit in the Constitution of Kenya. In as much as Kenyan elections are largely peaceful, the air of political uncertainty that comes with the elections compels some investors to wait out the season before making any direct investments into the market.

WALKER KONTOS