Nairobi bourse reckons that Kenya can cut reliance on debt to fund projects in the short term through fresh listings of cash-rich state firms like Kenya Pipeline Company (KPC), Kenya Ports Authority (KPA) and Kenya Airports Authority (KAA).
The mounting public debt has seen Kenya commit more than half of taxes or Sh1 trillion annually to paying loans, leaving little cash for building roads, affordable housing and revamping of the ailing health sector.
The Nairobi Securities Exchange (NSE) has stepped up its push for the sale of additional government stake in Safaricom and cash-rich parastatals like Kenya Ports Authority (KPA) to cut the State appetite for expensive loans in the short term.
The NSE chief executive Geoffrey Odundo told Parliament Tuesday that the State has the potential to raise Sh792.6 billion from the sale of stakes in listed firms including Kenya Re #ticker:KNRE, KCB #ticker:KCB and KenGen #ticker:KEGN.
Nairobi bourse reckons that Kenya can cut reliance on debt to fund projects in the short term through fresh listings of cash-rich state firms like Kenya Pipeline Company (KPC), Kenya Ports Authority (KPA) and Kenya Airports Authority (KAA).
The mounting public debt has seen Kenya commit more than half of taxes or Sh1 trillion annually to paying loans, leaving little cash for building roads, affordable housing and revamping of the ailing health sector.
“Listing of companies and selling more stake is a clear intervention to raise internally raise money and reduce the debt, you can even use some of the money to offset the expensive debt,” Mr Odundo yesterday told the National Assembly Committee on Finance and National Planning.
NSE says the State has the potential to raise Sh150 billion by reducing its stake in Safaricom to 25 per cent from the current 35 per cent. The State in 2008 raised more than Sh50 billion after selling a 25 per cent stake, or 10 billion shares, in Safaricom.
The sale of a 10 per cent stake in KCB can raise Sh15 billion while cutting the government stake in KenGen from 70 per cent to 40 per cent can bring Sh12 billion.
The initial public offering (IPO) of KAA could raise Sh400 billion through the sale of a 40 per cent stake with the listing of part of KPA and KPC shares expected to generate Sh33.9 billion and Sh43 billion respectively.
The share sale proposals presented to Parliament comes weeks to the end of a debt repayment moratorium, which saw China and other richer nations freeze part of loan servicing for six months to June.
The Jubilee administration has ramped up spending since 2013 to build new roads, a modern railway, bridges and electricity plants, driving up borrowing to plug the budget deficit.
Treasury chiefs project in a draft Budget Review and Outlook Paper new loans of Sh1.87 trillion in the two years to June 2020 or Sh2.5 billion daily, pushing Kenya’s debt to Sh8.06 trillion.
If that comes to pass, the Jubilee government will have borrowed at least Sh6.1 trillion to implement his manifesto in 10 years in power having inherited slightly more than Sh1.89 trillion in June 2013.
The NSE has not had major listings since the Safaricom IPO, a move that has seen investors concentrate most of their wealth in a few counters.
Safaricom, East African Breweries Limited, Equity, KCB Group and Co-operative Bank account for 79.36 per cent of the market value of the companies listed at the bourse.
The fresh listings are tipped to cut dominance of the five companies and fill the gap occasioned by the exit of firms like KenolKobil and erosion in the value of blue-chip stocks like Kenya Airways and Kenya Power.
The Capital Markets Authority has previously said that it needs a fresh listing of high-value companies and small and medium enterprises as a way of increasing diversity within the Kenyan market and correct the market imbalance.
Three of the dominant firms — Safaricom, Equity and Co-operative Bank — came into the market during the IPO boom between 2005 and 2009.
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