The Changing Landscape of Venture Capital in Africa
Over the past decade, Africa has welcomed venture capital as a crucial driver of its technology revolution. However, a wave of new regulations introduced this year is creating uncertainty for investors and startups across the continent.
New Regulations Impacting Investment
Countries such as Ghana, Kenya, and Uganda have recently implemented or proposed tighter restrictions on foreign investment. These include limitations on ownership in strategic sectors, new exit taxes, and enhanced disclosure requirements. Such changes come at a critical juncture for Africa’s startup ecosystem, unsettling both investors and entrepreneurs.
Contradictions in Ghana’s Legislative Environment
In Accra, the situation is particularly complex. Last month, the Ghanaian Parliament passed the Ghana Investment Promotion Authority Bill 2026, eliminating the previous US$500,000 minimum capital requirement for fully foreign-owned enterprises. This was seen as a significant breakthrough for tech founders in the country.
Concerns Over National IT Regulations
Contrarily, a forthcoming Article 37 in the National Information Technology Authority Bill suggests reserving licenses for certain digital services exclusively for entities “wholly owned by the people.” This raises alarms among industry experts, as highlighted by tech policy commentator McJordan DeGajor, who warns that such measures threaten the foreign partnerships and expertise essential for Ghana’s growth, pointing to successful domestic firms like Hubtel and mPharma.
Tax Changes and Their Implications in Kenya
Meanwhile, in Kenya, the government is broadening its tax framework with the recent Finance Bill 2026. This legislation proposes a 15% capital gains tax on offshore sales involving shares that derive their value from Kenya, targeting the traditional holding company structures favored by foreign venture capitalists and private equity firms. The move stems partly from high-profile tax disputes, including a notable US$161.7 million tax demand related to Tullow Oil’s offshore exit.
Concerns Voiced by Financial Experts
The Institute of Certified Public Accountants of Kenya (ICPAK) has expressed alarm over the proposed tax provisions, labeling them as excessively broad. Robert Waruiru, managing partner at Ichiban Tax and Business Advisory, noted that the tax could inadvertently impose burdensome compliance requirements, warning that, as written, it risks taxing legitimate internal transactions.
Legislative Developments in Uganda
In Uganda, President Yoweri Museveni signed the Sovereignty Protection Bill on May 17, which criminalizes actions that promote foreign interests at the expense of Ugandan interests. This broad language raises concerns among human rights activists, who fear it could suppress political opposition. Although amendments to the bill have removed a clause requiring Ugandans receiving foreign exchange to register as foreign agents—previously deemed potentially disastrous by the Bank of Uganda—anxiety persists among the diaspora and international development partners.
Funding Challenges in the Startup Ecosystem
The timing of these regulatory changes is critical, as funding for African startups is already slowing. According to Africa Data: Big Deals, only 162 unique investors participated in startup deals of US$100,000 or more between January and April 2026, marking the lowest figure in five years and a 26% decline from the previous year. Equity funding for African startups also fell by 13% during this period, raising concerns about the continent’s investment climate.
Local Responses to Regulatory Uncertainties
In response to these tensions, some local capital is beginning to fill the gap. The African Finance Corporation recently announced a US$100 million investment initiative aimed at promoting local participation in startups. AFC President Samaira Zubair emphasized that the main challenge facing Africa now is not a shortage of talent and innovation but rather a lack of sustainable institutional capital. Whether this new local investment can effectively counteract the regulatory pressures remains to be seen.
