Introduction
Thanks to the internet, the world is indeed a global village. E-commerce, which is the buying and selling of goods and services over the internet, plays a significant role in this “village” by enabling goods and services to be exchanged remotely. An examination of the Kenyan market illustrates the prevalence of e-commerce, with companies like E-Mart, Jumia and Uber being household names. In addition to these natively online businesses, more traditional businesses like supermarkets, for example, have embraced the Internet and now offer services through websites and mobile applications. Additionally, per the National E-commerce Strategy published in 2023 (the E-Commerce Strategy), Kenya boasts one of the largest e-commerce markets in Africa, with revenues for the year 2023 projected at about USD 3.6 Billion.
Legal and Policy Framework for E-Commerce in Kenya
Kenya has enacted various laws, regulations and policies that either directly or indirectly apply to e-commerce:
1. The Data Protection Act No 24 of 2019
Enacted to give effect to the right to privacy guaranteed under article 31 of the Constitution, the Data Protection Act No 24 of 2019 (DPA) is a generally applicable law regulating the way enterprises handle personal data. The DPA requires enterprises collecting and processing data to register as data handlers with the Office of the Data Protection Commissioner which ensures compliance with data protection standards. As e-commerce platforms operate over the internet, they inevitably collect personal data which includes names, phone numbers, ID numbers, to name a few. These platforms must, therefore, register as data handlers.
Additionally, the DPA requires e-commerce platforms to process customer data lawfully and to respect the rights of their customers with respect to the data provided during e-commerce transactions. For example, under the DPA, customers must be informed of the kind of data being collected in the course of e-commerce transactions and the purposes for which it will be used. Customers must also give unequivocal consent to the use of their data in the stipulated ways. Further, e-commerce service providers may not use customer data for purposes other than those consented to by the customer.
2. The Consumer Protection Act, Cap 501
The Consumer Protection Act, Cap 501 (the CPA), is another law significant to e-commerce. Significantly to the e-commerce industry, the CPA recognizes internet agreements, defined as “consumer agreements formed by text-based internet communication”, and remote agreements, defined as “consumer agreements entered into when the consumer and supplier are not present together”. For both of these agreements, suppliers are required to disclose certain “prescribed information” and ensure the customer can access and retain it. Further, suppliers are required to provide a copy of the relevant agreement to the customer by delivering the copy in the “prescribed manner”. Finally, the law gives consumers the right to cancel these agreements in certain situations provided for under the act, including a supplier’s failure to provide the “prescribed information”. In addition, the law criminalizes misleading advertisements to protect consumers from exploitation.
3. The Kenya Information and Communications Act No. 2 of 1998
The Kenya Information and Communications Act No. 2 of 1998 (KICA) also provides significant regulation on e-commerce. Most significant to the e-commerce discussion, KICA provides that contracts formed over electronic messages are valid and enforceable unless any law prescribes a different method of contract formation. The import of this is that contracts formed and concluded through short message services, email and other social media sites are valid, removing the need for physical documents and meetings.
4. The Income Tax Act Cap 470
The Income Tax Act prescribes the payment of income tax and stipulates the types of income subject to income tax. Accordingly, any person whose income accrues from business carried out over the Internet or through a digital marketplace is subject to income tax. Further, the law prescribes a digital service tax, which is charged at 1.5% and is payable on a monthly basis by both resident and non-resident persons “whose income from the provision of services is derived from or accrues in Kenya through a business carried out over the internet or an electronic network including through a digital marketplace”. Digital Service Tax Regulations elaborate further on the range of taxable services, which include the provision of a digital marketplace and streaming services. Persons wishing to engage in e-commerce in Kenya must, therefore, be aware of this law to ensure they remain tax-compliant.
5. The Computer Misuse and Cybercrimes Act No. 5 of 2018
The Computer Misuse and Cybercrimes Act provides the legal framework for combating cybercrime in Kenya. Consequently, it prohibits the intentional publication of false or misleading data. It works hand-in-hand with the prohibition against posting misleading advertisements under the CPA, ensuring that sellers and buyers engaged in e-commerce provide accurate information in the course of those transactions.
6. The National E-Commerce Strategy
The E-Commerce Strategy is a collaborative effort between various government and private sector stakeholders, including the Ministry of Information, Communication and Digital Services, the Ministry of Investment, Trade and Industry and industry players such as Jumia and Copia. It analyzes the current status of the e-commerce industry in Kenya and the challenges facing it and elaborates on interventions to remedy the challenges and develop the country’s e-commerce industry.
7. Sufficiency of the Legal Framework
While the current legal framework is quite comprehensive, there is room to further strengthen the laws, regulations and standards.
The CPA, for example, does not elaborate on what “prescribed information” and the “prescribed manner” of delivery are used in relation to internet agreements and remote agreements. Further, the responsible ministry has not actualized any regulations elaborating on these issues.
Additionally, unlike other nations, there are no industry-specific regulations applying to e-commerce in Kenya. The United Kingdom, for example, enacted the Electronic Commerce (EC Directive) Regulations in 2022. These regulations work in harmony with other generally applicable laws like the Data Protection Act and Consumer Protection from Unfair Trading Regulations 2008 to provide a comprehensive regulatory framework for e-commerce. Kenya should adopt a similar approach and enact industry-specific regulations which could cure some of the current gaps in the existing legal framework, including on matters to do with dispute resolution and the provision of adequate information to customers.
8. Additional measures to improve e-commerce
The E-Commerce Strategy provides that the e-commerce industry in Kenya is largely an urban outfit, with much of it concentrated in Nairobi, Kiambu, Nakuru, Mombasa and Eldoret. This situation is a result of various factors, including limited access to electricity and electronic payment services, inadequate capital and financial resources and varying degrees of familiarity with information technology among members of the public. The government should, therefore, work to cure this disparity and ensure inclusivity.
The E-Commerce Strategy recommends several interventions, including reducing transaction costs for electronic payments, reviewing the digital service tax, providing continuous digital training for entrepreneurs and merchants and, most importantly, ensuring that the entire population has access to electricity. These interventions should ensure that everyone gets a slice of the cake.
Please note that this is not legal advice and is intended primarily for information purposes. If you require tailored advice or further information, please contact us at sarinke@mckayadvocates.com.