Government shareholding in Telkom Kenya and two other companies in which the Treasury spent a total of Sh12.5 billion to acquire additional shares between July 2022 and June last year remained unchanged over the period, according to a new report.
The report from the Treasury shows that the value and number of shares held by the government in Telkom Kenya, African-Export Import Bank (Afreximbank), and Eastern Southern African Trade & Development Bank (PTA Bank) had not changed as of June 2023.
Treasury on July 28, 2022, paid Sh6.19 billion to acquire an additional 60 percent shareholding (71,229,696 shares) in Telkom Kenya to ostensibly make the government the sole owner of the company.
On December 28, 2022, it also spent Sh5 billion to acquire some 2,161 shares in Afreximbank, before releasing another Sh752.6 million two days later to acquire 491 class A shares in PTA Bank.
Yet another transaction of Sh544 million to acquire 328 Class A shares in PTA Bank was made on June 12, 2023, bringing to Sh12.5 billion the total amount the Treasury released under Article 223 of the Constitution -- which allows the government to spend public funds without approval for emergency needs -- to acquire shares in the three companies.
While the money left public coffers, however, the Treasury’s report on comprehensive financial statements for semi-autonomous government agencies (Sagas) in the financial year 2022/23 shows that the number of shares the government held in the three institutions remained unchanged between June 2022 and June 2023.
Cabinet Secretary Njuguna Ndung’u had on Monday indicated that the Treasury would provide a response on the turn of events, but yesterday he referred the Business Daily to a different ministry to get the responses, stating that the Treasury was engaged on Eurobond roadshows.
The Cabinet in October rescinded the government purchase of the 60 percent stake in Telkom Kenya, citing “governance challenges” in that transaction.
It later announced that the United Arab Emirates-based Infrastructure Corporation of Africa LLC (ICA) would take over the stake from private equity firm Helios after a competitive process.
The report shows that government ownership in Telkom was 31,614,848 shares with a nominal value of Sh712,296,960 by June 30, 2023, just as it was a year before the Sh6.19 billion was spent.
Government shareholding in Afreximbank by June 30, 2023 also remained 1,333 shares valued at $5.96 million just as it was the previous year. And in PTA Bank, the shares remained stagnant at 1,068, valued at $24.2 million.
Auditor-General Nancy Gathungu in the past indicated that she was denied access to details regarding the transactions.
Ms Gathungu, in a report of a special audit of expenditures under Article 223 of the Constitution in December 2023, indicated that when digging into the spending of Sh12.5 billion that had not been factored in the budget in fiscal 2022/23, auditors were not allowed access to Afreximbank, PTA Bank and Jamhuri Holdings Limited (JHL) –the entity from which Telkom shares were acquired.
“Requests to visit the two banks’ headquarters in Burundi and Egypt, respectively, as well as the registered offices of the company that sold off the Telkom Kenya Limited shares in Mauritius and the United Kingdom were either declined or not responded to,” Ms Gathungu stated.
She said she was unable to confirm that the Treasury actually bought the shares “and to determine whether there were any benefits that may have accrued to the Government of Kenya for the purchase of the shares.”
The Auditor-General reported that Treasury documents indicated that the government bought shares in Eastern and Southern African Trade and Development Bank and Afreximbank in order to increase its influence and relevance in the bank’s activities.
“This was especially on investment decisions, with the intention of having the banks channel more investments to Kenya,” the audit report indicated.
Ms Gathungu, however, raised concerns over the three transactions and expressed doubts that there was value for money in the spending of Sh12.5 billion.
The government also did not provide proper justification for purchasing the shares under Article 223 of the Constitution, which is reserved for unforeseen emergency spending, the report noted.
“Further, there was no reason why [sic] the payment could not have been budgeted for in the normal budget process. As a result, the amount of Sh6,196,584,631 paid to JHL was not approved by the National Assembly,” the report noted.
