Recently the draft Nigerian Start-up Bill was submitted by the President’s Strategy Committee to the House of Assembly, heralding the commencement of the bill passing process. This move was saluted by many especially the Digital Technology Industry. The bill is being touted by many in that industry as divine commandment that would drive the digital technology industry to the promised land.
With the bill already in the Federal Legislature awaiting passage, the Kaduna State Government has already set in motion the machinery that will enable it domesticate the law when it is eventually passed into law. For a state gearing up to be the next digital tech-based powerhouse, this is a great stride.
What exactly is this law all about? Essentially this is a law that will provide a framework for the administration of the digital technology industry, a rapidly growing industry all over the world. The draft bill amongst other things defines what a labelled start-up is and the incentives a labelled start up enjoys as well as the qualities that a company must possess to be regarded as a labelled start-up.
Even though the bill’s objectives of creating a legal and institutional framework for the development of start-ups in Nigeria, provision of enabling environment for the establishment, development and operation of start-ups, fostering of the development of growth of technology-related talent and also positioning of the Nigerian Start-up ecosystem as the leading technology hub in Africa, is touted as a welcome idea and is believed to be a step in the right direction. It is with the route to implementation of the these set objectives that a nagging question keeps burning in the mind of this writer; with the retinue of the laws that govern the administration of businesses, enterprises and industries in Nigeria, do we really need this start-up law?
To my mind, the already enacted laws in Nigeria that regulate the administration for businesses, enterprises and industries are more than adequate to cater for the needs of Start-ups, if implemented rightly.
The Start-Up Label
One prominent feature of the bill is the start-up label. The qualification which exquisitely robes the company with the privileges of the law when it is passed. The bill streamlines what a start-up is to mean a registered limited liability company registered under the Company and Allied Matters Act 2020 and has been in existence for not more than 10 years with its objects being innovation, development, production, improvement and commercialization of a digital technology innovative product or process. The said company is also a holder or repository of a product or process of digital technology or the owner or author of a registered software with at least 51% of its shares held by Nigerian(s).
Even though, with the worldwide strife of businesses to get on the digital technology bandwagon a lot of companies will foot the bill and get labelled a start-up, a critical look at the bill will reveal that it is a proposed law for the Next Generation of Technology Companies in Nigeria. This is a departure from the worldview of what a start-up is and it also systematically excludes other companies incorporated before Companies and Allied Matters Act, 2020 came to being even though they might be trailblazers in the tech industry.
Start-ups are known in the world over as young companies founded to develop a singular product or service, bring it to consumers and make it irresistible and irreplaceable for patrons.
Rooted in innovation and characterized by rapid growth with a high risk-high reward margin, a start-up aims to remedy deficiencies of existing products or create entirely new categories of products and services, disrupting entrenched ways of thinking and doing business for entire industries. These are not necessarily ‘tech’ companies and a lot of them simply do not rely on digital technology in their innovative process.
The question that arises here is, “What is so special about Tech Start-ups that will warrant them being installed with the singular honor of having this law as their law?
Too Many Laws Spoil The Sector?
Even though the MSME sector is a huge contributor to the growth of the GDP of Nigeria, it is noteworthy that the sector has been less desirably managed. And this is not for the lack of laws and framework for the management of the sector, in fact one might argue that laws are too numerous, it is rather implementation of the laws that have been seriously lacking. This begs the question, “Do we actually need another law or should we rather effectively implement the already existing ones?”
Nigeria has a robust set of laws that govern the business scene. The Company and Allied Matters Act, The Finance Act, the Industrial Development (Income Tax Relief) Act, Federal Competition and Consumer Protection Act etc. all have provisions that if implemented correctly will suffice for the regulation of the digital technology industry. There will be no need to create a separate provision for say Pioneer Status Incentives in the bill when the Industrial Development (Income Tax Relief) Act adequately enunciates the regime, its application and conditions precedents for its grant. Neither will there be the need to create a special set of rules for the governing of the personal income taxes, capital gains taxes and its exclusions (the move to exclude angel investors, venture capitalists etc from paying capital gains when they dispose of their stocks at a profit, to my mind is preposterous keeping in mind that profits in the industry they play in can be unusually high) etc. as there exists already, laws with set down procedures to deal with these issues. These procedures, incentives and exclusions as laid down in Personal Income Tax Act, Capital Gains Tax Act, the Finance Act (as amended) etc. are more than enough to cater for the ‘Start-Up Ecosystem’.
There is also the issue of the proposed National Information Technology Development Agency Act 2021 which is at the bill stage at the National Assembly seeking to regulate the technology industry as a whole and which if passed and implemented will create a conflict great enough to wreck the industry which is at its infancy. The Start Up bill apportions a huge role of its implementation to the National Information Technology Development Agency, with the Agency in the process of amending its law to have oversight function over the entire information technology and digital economy landscape, where the majority of the proposed Labelled Start-ups will operate, there is bound to be a clash of laws and for who will bear the brunt of it, your guess is as good as mine.
All of these do not make a good case for the proposed start-up bill which on closer look comes off as a bill not thoroughly considered and which looking at the composition of the Strategy Group that advised the President on its implementation (consisting of mainly founders and venture capitalist) one which reeks of being a desperate attempt to have a law that favors the founders and in case they fail, their failures insured by the government. To my mind a push for the implementation the existing laws will be better than for another law to be enacted and dumped into the graveyard of ill-implemented laws.
With the hurrah that greeted the sending of the bill to the National Assembly, there is a high possibility that the bill will be passed and Nigeria will then join countries like Senegal and Tunisia that have already implemented their own start-up laws. This bill regardless of the bottlenecks mentioned is a welcome development and will help the growth and sustainability of the digital technology industry when passed, it is however with the implementation regime that the spirit of start-up founders, which has a reputation of being unbreakable, will face its greatest test yet, the still undefeated Nigerian System.