Treasury Eyes Tax Cuts for Foreign Companies to Boost Investment

The National Treasury of Kenya is preparing a set of tax incentives aimed at attracting more international investors to key sectors like clean energy, sustainable agriculture, and climate infrastructure.

The move, led by the Treasury, is part of the government’s strategy to tap into private capital to finance its green transition and reduce reliance on public debt and donor funding.

According to the July 2025 Legal and Regulatory Bulletin by the African Private Capital Association (AVCA), Kenya is among the governments across Africa that are focused on creating fiscal environments that make private capital more competitive with donor or state-led development finance.

However, this investor push comes amid concerns over recent court rulings that may limit the ability of foreign companies to enforce contracts in Kenya.

According to the report, the move raised questions about whether legal risks could undercut Kenya’s efforts to become a hub for sustainable investment.

The goal is to unlock billions in private funding to accelerate Africa’s green transition while easing pressure on strained public budgets affected by climate shocks like flooding and droughts.

“Private capital has the potential to fill Africa’s financing gap, especially in sectors that promote sustainability, innovation, and job creation,” the AVCA bulletin notes.

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Treasury Balancing Incentives and Legal Uncertainty

Although Kenya’s tax proposals show a welcome step forward, recent High Court rulings have cast doubt in the investor community, especially those dealing with cross-border transactions and commercial disputes.

For instance, in a high-profile case of Stichting Rabobank Foundation v Ava Chem Limited & another, the court ruled that Rabobank, a Dutch lender, could not sue a Kenyan company that defaulted on a loan. 

The court decided that Rabobank was not registered as a foreign company under Kenya’s Companies Act.

This interpretation hinges on Section 974 of the Act, which states that foreign companies cannot carry on business in Kenya unless registered.

Consequently, the report noted that the rulings risk making Kenya appear hostile to international capital, especially at a time when the government is courting green investors through fiscal reforms.

Also Read: Win for Small Investors As NSE Announces Changes in Trading Rules

Decisions by Other African Countries

On the other hand, Africans governments are dealing with the pressure of attracting foreign capital while maintaining regulatory control.

The AVCA bulletin outlines several policy shifts that could reshape how private investment flows into the continent including;

Tanzania is considering new laws that would require foreign investors to cede majority ownership to local partners in key sectors.

Ghana is moving to criminalize greenwashing, proposing penalties—including jail time—for companies that falsely advertise environmental or social credentials.

Mauritius, long known as an offshore financial hub, is tightening anti-money laundering rules in response to international scrutiny, particularly from the EU.

South Africa has approved the continent’s first crypto-backed ETFs, signaling growing formalization of the digital asset space.

And the African Union has begun early-stage discussions on a cross-border pension system, which could one day allow African workers to contribute to a single retirement fund usable across member states.

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