Lafarge to gain clout in Portland Cement power balance shift
What you need to know:
A task force appointed by President Uhuru Kenyatta recommends that Portland does not qualify to be a parastatal because National Social Security Fund (NSSF) shares do not belong to the State but to contributors.
If the recommendations are implemented, the Portland board representation will be based on shareholding and its chairman and CEO will be appointed by the directors, a move that would alter the balance of power in the boardroom to favour Lafarge.
The government will lose the power to appoint the chairman of East African Portland Cement Company (EAPCC) under the proposed reforms in parastatals, shifting clout to French giant Lafarge.
A task force appointed by President Uhuru Kenyatta recommends that Portland does not qualify to be a parastatal because National Social Security Fund (NSSF) shares do not belong to the State but to contributors.
This recommendation will see the State ownership drop below 50 per cent, given that the government has been treating the NSSF shares as its own, making the cement firm a State corporation.
If the recommendations are implemented, the Portland board representation will be based on shareholding and its chairman and CEO will be appointed by the directors, a move that would alter the balance of power in the boardroom to favour Lafarge.
In Portland, the government’s stake stands at 25 per cent compared to NSSF’s 27 per cent, Lafarge (41 per cent) and remaining six per cent is held by investors through the Nairobi bourse.
“Investments by NSSF are not government investments as the Fund and its board of trustees are different entities and it follows, therefore, that the NSSF shareholding in NBK and EAPCC are not government shares,” notes the task force report.
“It is recommended that the NBK and EAPCC should be treated like any other company in which the government owns minority shares but not as State corporations.”
The taskforce further proposes that a new body to be called Government Investment Corporation (GIC) takes over the hiring of State corporations board members from cabinet secretaries and competitively hire the directors.
It also proposed that all chairpersons of State corporation boards must have at least a master’s degree and up to 10 years’ experience in a relevant field, applying academic qualifications on directorships for the first time.
But Portland Cement will be exempted from these rules. In 2011, plans by the NSSF to reduce its stake in Portland and ultimately remove the firm from the list of parastatals triggered the disbandment of the cement maker’s board by the government.
The directors, including chairman Mark ole Karbolo, Kephar Tande (Portland CEO), Kenya Airways CEO Titus Naikuni and lawyer Hamish Keith, moved to court to block their ouster. The court reinstated them in a legal battle that also saw former President Mwai Kibaki’s appointment of Mr Karbolo’s replacement revoked.
Lafarge and the government have been at cross-purposes this year. Differences emerged when Lafarge appealed against a court ruling declaring Portland Cement a State corporation.
Lafarge also opposed a decision by the government to force it to sell its stake in the firm and reduce its influence in the cement sector since it owns 60 per cent of rival Bamburi Cement.
