The government is now caught in a dilemma as the mandatory transition to electronic procurement by all State agencies threatens the business of Kenya Pipeline Company (KPC), which has been earmarked for a landmark Initial Public Offer (IPO) before the close of 2025 as part of a plan to raise Sh100 billion for the 2025/26 budget support.
The National Treasury said that KPC now risks losing the remaining share of petroleum product supplies to the lucrative Uganda market following delays in sourcing crucial inputs brought about by the transition to mandatory the Electronic Government Procurement System (e-GPS), effective July 1, 2025.
In July 2024, Uganda ceased sourcing petroleum products through Kenya’s government-to-government arrangement and began sourcing directly through the Uganda National Oil Company Limited (Unoc), denting Kenya’s influence on the market. Unoc still uses KPC infrastructure for storage and movement of its imported products.
Treasury Cabinet Secretary John Mbadi has decried what he says is unnecessary bureaucracy in helping KPC to navigate the complexities of ditching the electronic procurement system it has used all along in favour of the State’s new eProcurement system, terming it a major setback in the business prospects of the company.
"Kenya Pipeline has had a system that they are using for procurement, which is an electronic system. But because we have given instructions to all government Ministries, Departments, Agencies, and State Corporations, Kenya Pipeline now has to abandon that system and get into eProcurement," he said during the launch of the 2026/27 budget cycle.
"However, this is a company whose shares the government now wants to sell, and once that sale takes place, they will go back to yet another procurement system,” he added.
Mr Mbadi revealed that KPC has since sought a waiver from using the portal.
“Kenya Pipeline, however, needs approval, so they have had to come all the way to the National Treasury to seek the approval. That is the kind of bureaucracy that we don’t need. Right now, Kenya Pipeline needs to procure what is going to help the company to service supplies to Uganda, and the longer they delay in making that decision, the more we are likely to lose that market. So, we need faster decision-making in such a company,” Mr Mbadi said.
The government has been wary of losing the Ugandan market in the distribution and consumption of petroleum products following growing competition from Tanzania.
In Sessional Paper No 2 of 2025, which spells out the plan to privatise KPC , the government identifies shifting geopolitical dynamics within East Africa, such as Uganda’s decision to develop a crude oil pipeline through Tanga in Tanzania, as a key challenge to Kenya Pipeline’s regional expansion plans.
The Sessional Paper further identifies Uganda’s discovery of crude oil and commercialisation plans, including the inland refinery in the country, as a threat to Kenya Pipeline’s regional prospects.
The government has since indicated that it intends to court Uganda by inviting participation in the much-anticipated IPO of Kenya Pipeline as a way to claw back on lost ground in the regional petroleum product market.
“We are even asking Uganda to come in and invest in the Kenya Pipeline IPO, and by the way, by Uganda investing, there is some assurance we are getting now because Tanzania is also competing with Kenya to access that market. So, if Uganda has a stake in Kenya Pipeline, that makes it very easy,” Mr Mbadi told the National Assembly’s Public Debt and Privatisation Committee on July 30th when summoned over the planned privatisation of the state corporation.
On August 15, 2025, the High Court issued conservatory orders temporarily halting the State’s plan to sell a 65 percent stake in KPC through an IPO, pending the determination of an application filed by the Consumer Federation of Kenya (Cofek) against the intended sale.
The court issued the conservatory order following transparency queries raised by Cofek and allegations of statutory breach.
The court order issued by Justice Bahati Mwamuye blocks the government from offering for sale, allocating, disposing of, transferring, or otherwise dealing with any shares of the KPC in relation to the contested privatisation plan.
