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Kenya Begins Privatisation of 11 State-Owned Companies - FULL LIST
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Kenya Begins Privatisation of 11 State-Owned Companies - FULL LIST

President William Ruto (Centre) at the Nairobi Securities Exchange (NSE) in October 11, 2023. The head of state says the state corporations are either going to be sold outright or listed at the NSE.
President William Ruto (Centre) at the Nairobi Securities Exchange (NSE) in October 11, 2023. The head of state says the state corporations are either going to be sold outright or listed at the NSE.

Barely a week after President William Ruto revealed the government’s commitment to sell off at least 35 state corporations, the National Treasury has announced the first 11 government-owned companies set to be privatised.  

In a notice to the public on Monday, November 27, Treasury CS Njuguna Ndung’ u extended an invite to Kenyans to share their views on the plan to put the near-dozen corporations that include the Kenya Pipeline Company in private hands.

According to the CS, the privatisation of these companies aligns with the government's objectives of achieving fiscal consolidation and promoting economic development.

"Pursuant to the Constitution, the Privatisation Act 2023 and all other relevant legislation, the National Treasury invites members of the public to submit written comments and/or input/memoranda on the 2023 Privatisation Programme, in the prescribed format and send them electronically to privatisation@treasury.go.ke [...] on or before of close of business on Monday 11th December 2023," the notice reads in part.

Written comments can also be submitted via post or hand delivered to the Principal Secretary, National Treasury P.O Box, 30007 - 00100 Nairobi. 

11 Corporations to be Privatised

The entities the National Treasury has lined up for privatisation include;

1. Kenya Literature Bureau

2. Kenyatta International Convention Centre

3. National Oil Corporation

4. Kenya Seed Company Ltd

5. Mwea Rice Mills

6. Western Kenya Rice Mills Ltd

7. Kenya Pipeline Co.

8. New Kenya Cooperative Creameries 

9. Kenya Vehicle Manufacturers Ltd

10. Rivatex East Africa Ltd

11. Numerical Machining Complex

The most recent instance of Kenya privatising a state-owned company occurred in 2008 through an initial public offering (IPO), involving the sale of 25% of the shares in the telecommunications firm Safaricom.

This development follows President Ruto’s remarks during the opening ceremony of the African Stock Exchanges Association's annual meeting in Nairobi on Thursday, November 23, where he revealed that another 100 state-owned companies, in addition to the 35, were being lined up for privatisation.

“I’m very happy that we have settled the law and now we have close to 35 government companies that some we will be selling outright, others we will be bringing to the stock exchange,” President Ruto said. 

Data from EFG Hermes Kenya, a financial services corporation, show the Kenya Ports Authority (KPA) was the most profitable state corporation in 2021, during a period when state corporations recorded a combined net loss of Ksh12.5 billion, an improvement from the Ksh38.1 billion net losses registered in 2020.

KPA registered a net profit of Ksh13.9 billion in 2021, followed by KenGen (Ksh10 billion), Kenya Pipeline Company (Ksh3.1 billion) and Kenya Power (Ksh1 billion) among the top four most profitable state corporations in Kenya for FY 2021.

New Privatisation Law

On October 9, 2023, President  Ruto signed into law the Privatisation Act, 2023, marking a significant departure from the previous legal framework that mandated Parliamentary approval before a state-owned company could be privatised.

The Act replaces the Privatisation Act, 2005, introducing key changes that reshape the landscape of privatisation in Kenya including vesting powers in the Cabinet Secretary responsible for Finance (i.e. Treasury CS). One of the key reasons given for the change in law was to remove government bureaucracy. 

“We have otherwise very lucrative companies but they are trapped in government bureaucracy when the services they are offering can actually be better offered by the private sector. So we will make these opportunities available and I want to tell our Kenyan private and public sectors that opportunity is coming and they should prepare for being part owners," the head of state remarked on Thursday. 

Privatisation Act, 2023, in Brief

1. Privatisation Authority Formation:

  • Core Change: The Privatisation Act 2023 establishes the Privatisation Authority (the Authority), supplanting the Privatisation Commission.
  • Enhanced Role: The Authority assumes a more expansive role, guiding the government, executing policies, collaborating with institutions, and overseeing privatisation initiatives.
  • Centralised Oversight: This signifies a departure towards a centralised approach to privatisation oversight, potentially increasing efficiency. Law strips MPs of their oversight role in the sale of government-owned companies.

2. Appointments of Authority Members:

  • Shift in Approval: Unlike the previous requirement for National Assembly approval, the Act empowers the Cabinet Secretary for the appointment of Authority members based on relevant skills and competencies.
  • Streamlined Process: This change streamlines the appointment process, in what is said to be an attempt at improving the Authority's effectiveness.

3. Privatisation Programme Framework:

  • Thorough Criteria: The Act mandates the Cabinet Secretary to employ a comprehensive set of criteria for selecting entities for privatisation.
  • Approval Process Shift: Notably, the Act shifts the approval process from a multilayered system to National Assembly ratification, aiming to expedite the timeline.
  • Strategic Considerations: The criteria include alignment with government policies, strategic priorities, and potential benefits, signalling a more strategic approach to privatisation.

4. Privatisation Strategies and Agreements:

  • Innovative Methods: Introduces innovative privatisation methods, such as the sale of shares through public tendering, alongside traditional methods like initial public offerings.
  • Participation Dynamics: Open participation to both Kenyan and non-Kenyan entities, with the Cabinet Secretary empowered to restrict non-Kenyan involvement.
  • Detailed Proposals: Privatisation proposals are now more detailed, encompassing foundational information, financial health, and socio-economic investment considerations.
  • Shift in Methodologies: Discontinues asset liquidation as a privatisation method unless approved by the Cabinet, introducing a more structured and strategic privatisation approach.

5. Objections and Appeals:

  • Defined Procedures: The Act establishes clear procedures for objections and appeals, outlined in the Third Schedule.
  • Escalation Path: Dissatisfied parties can escalate concerns from the Authority to the Privatisation Review Board and, if necessary, to the High Court.

6. Expectations and Implications:

  • Discretionary Powers: The Act grants the Cabinet Secretary discretionary powers to restrict privatisation involvement to Kenyan nationals, potentially reshaping the ownership landscape.
  • Economic Catalysis: Aims to expedite the privatisation process, attract investors, and catalyse private sector growth.
  • Public Participation: Introduction of share sales through public tendering provides an avenue for public involvement in privatised firms.
  • Accountability Concerns: Sidelining parliamentary approval raises concerns about accountability and transparency, urging stakeholders to navigate the nuances of the Act.
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