The National Treasury has set in motion the process of selling nearly a dozen government-controlled entities in a bid to raise billions of shillings and free up cash it sinks in supporting operations at some of them every year.
In the move, which is in line with the pledge of the Ruto administration to the International Monetary Fund earlier in the year, Treasury Cabinet Secretary Njuguna Ndung’u has announced plans to offload government shares in 11 State-owned enterprises.
Prof Ndung’u made public the 2023 Privatisation Programme on Monday, a month after the new law governing the process came into force.
Under the Privatisation Act, 2023, the Treasury will incorporate views from the public before presenting a final list for approval by the Cabinet. The list will then be presented to the National Assembly for ratification.
The proposed privatisation programme comprises five entities that are profitable and six cash-strapped ones.
Stable entities lined up for privatisation—either through an initial public offering (IPO) or sale to a strategic investor—include Kenya Pipeline Company (KPC) and Kenyatta International Convention Centre. Others are book publisher and printer Kenya Literature Bureau, New Kenya Cooperative Creameries Ltd and Kenya Seed Company (53 per cent State-owned).
Financially troubled entities up for sale are the National Oil Corporation of Kenya (Nock), Rivatex East Africa Ltd, Numerical Machining Complex (NMC) Ltd, Kenya Vehicle Manufacturers (KVM) Ltd, Mwea Rice Mills and Western Kenya Rice Mills.
President William Ruto has been keen on selling shares in some of the more than 100 parastatals as a way of raising fresh cash for a government battling a cash crunch and to end nearly a decade of primary listing drought on the Nairobi Securities Exchange (NSE).
During his first visit to the NSE trading floor on October 11, 2022, Dr Ruto pledged to offload shares in as many as 10 State-owned firms to the public through the stock market in his first year in office.
Last week on Thursday, the President told an annual meeting of African Stock Exchanges Association in Nairobi that Kenya has identified 35 State-owned firms for privatisation.
“One of (the reasons for privatisation) is to inspire market activity,” Dr Ruto told the gathering, insisting that raising revenue from the sale was “a secondary issue".
The last successful privatisation by the government through an IPO was the hugely oversubscribed sale of 25 per cent shareholding in Safaricom in 2008 by the Kibaki administration. Other large State-controlled firms whose shares were listed on the NSE during the Kibaki era included KenGen, Kenya Reinsurance and Mumias Sugar.
“This [privatisation method] will be determined by the financial health of the institution. If it has been making losses, you cannot take it to the securities exchange,” Joseph Koskey, the chief executive of the Privatisation Authority said. “You must have had consistency in terms of profitability for a period of time. There are conditions that you must meet for you to float the shares of a company [on the NSE].”
That means Nock, Rivatex, NMC, KVM, Mwea Rice Mills and Western Kenya Rice Mills will likely be sold to strategic investors, with the latter two likely to be bought by cooperative societies.
“If it [a parastatal] has been making losses, and you think that what this company is lacking is equipment because they may be still using outdated machines and equipment because they may have not been getting required allocation from the Treasury, then that requires that you consider getting a strategic investor,” Mr Koskey said.
The Privatisation Act, 2023 requires Prof Ndung’u to specify the criteria used to identify the firms to be privatised. The legal considerations include strategic priorities and goals the process will achieve, the strategic role of the firms to be sold to private investors and government policy.
Prof Ndung’u says transferring the operations of KPC, a monopoly in oil pipeline transportation, to a private entity will open the door for strong oversight of its operations, improve efficiency and open up the sector for competition.
The successful conclusion of the process “will attract private sector capital investments and expertise, and offer a good opportunity for expansion of the oil and gas pipeline infrastructure to unserved regions”, the CS adds.
