johndoe34

The EPZ zones (Export Processing Zones) are indeed the best location to set up factories or warehouses. You can offer jobs to staff typically from India or so, or why not, from Kenya, to work there. Things tend to be entirely tax-free, and you do not need to worry about local politics. I would not put down a factory full of expensive equipment in Kenya. In terms of governance and risk evaluation, it really does not sound like a good idea to do that. The staff would have to come over to the EPZ to work from there.

The rule is not that simple to apply. Can a company be owned by another company? I would assume so. If yes, what the "localness" status of a local company? Is it also "local"? If it is, the rule can easily be circumvented:

Imagine the ownership structure of company A1:

A1 = { X:70%, local:30% }

Imagine a chain of ownership that looks like this:

A1 = { X:70%, local:30% } A2 = { X:70%, A1:30% } A3 = { X:70%, A2:30% }

In that case, A3 the compounded ownership for local is: 30%^3=2.7%. Hence, the compounded ownership of A3 is:

A3 = { X:97.3%, A2:2.7% }

Therefore, if you want to restrict local ownership to a maximum of M, you will need a chain of ownership with n nodes, with:

n >= ln(M) / ln(0.3)

Therefore, if they want the rule to be more difficult to circumvent than that, they will have to either prevent chains of ownership and/or beef up initial incorporation charges and/or periodic incorporation maintenance fees.

For large business activity, it could still be worthwhile to set up a 25-node chain or so.

Another way to make the rule ineffective, is to accept local ownership but only if the local owner deposits a sufficiently large amount in escrow in a third country, say, South Africa. Of course, you would have to pay the local owner for doing that, but if he ever misbehaves, you can repossess the amount escrowed in South Africa, where both of you are foreigners, and where being a local Kenyan has no particular advantage over being a non-Kenyan.