Economy

Shares plan for locals in privatisation push

kpc

Kenya Pipeline Company (KPC) petroleum storage facility in the Industrial area, Nairobi. FILE PHOTO | JEFF ANGOTE | NMG

Communities living near parastatals put up for sale are in line to be allocated shares in a plan aimed at ensuring smooth privatisation.

The Privatisation Authority says it will consider proposing that a percentage of shares be ring-fenced for persons who have been for years attached to some of the State-owned firms being sold.

This will, however, most likely apply in situations where the sale is being done through the Nairobi Securities Exchange (NSE), a process technically called initial public offering (IPO), according to the authority.

It will present the proposal to the Cabinet, through Treasury Cabinet Secretary Njuguna Ndung’u, as part of the strategy to manage local interest which may slow down the process.

Read: Privatisation team fights for powers

“[This will apply] if there’s this particular company based in some region and people within that particular locality feel that ‘this is ours because it is on our ancestral land, for example’,” Joseph Koskey, the chief executive of Privatisation Authority, said in an interview.

“We can say that because these people have some attachment to this company, we recommend that, probably, they are given, for example, 30 percent of the stake on sale. They can come up with co-operatives [to pool funds for investments], for example.”

New law

Mr Koskey, however, says the ring-fenced shares which will not be bought by the locals will be made available to the public.

“If they don’t subscribe fully to what they have been allocated, then you sell the remainder to other people. As an authority, we take into consideration all the concerns and we say based on this and that, this is the feeling on the ground and these are our proposals,” he said.

“It is up to the Cabinet to consider or even recommend otherwise. For us, we give a professional opinion and the approval is granted by the Cabinet. From there, we implement what has been approved.”

The Treasury on November 27 made public the 2023 Privatisation Programme, a month after the new law governing the process took effect.

Some 11 State-controlled entities with an asset value of more than Sh190 billion have been put up for sale in the programme, the first since the 2009 one which had earmarked about 26 parastatals for privatisation.

Profitable firms

They include Kenya Pipeline Company (KPC), Kenyatta International Convention Centre (KICC), Kenya Literature Bureau (KLB), New Kenya Cooperative Creameries (New KCC) Ltd and Kenya Seed Company (53 percent State-owned). These are profitable.

The others are National Oil Corporation of Kenya (Nock), Rivatex East Africa Ltd, Numerical Machining Complex (NMC) Ltd, Mwea Rice Mills, Western Kenya Rice Mills and Kenya Vehicle Manufacturers (KVM) Ltd.

Under the Privatisation Act, of 2023, the Treasury is required to consider views from the public before presenting a final list for approval by the Cabinet before the National Assembly passes it.

The public has up to December 11 to present views on the proposed privatisation of the 11 entities.

The William Ruto administration is bidding to kick-start the stalled privatisation of some of the more than 100 firms as part of the International Monetary Fund-backed reforms aimed at restructuring public entities and lessening the financial burden on taxpayers.

Bourse listing

Privatisation of State-owned firms had been paralysed between 2014 and 2022 due to a raft of challenges, including lack of quorum on the board and legal suits.

The sole successful deal under the previous privatisation programme under the repealed law was the initial sale of 26 percent stake in Kenya Wine Agencies Ltd (Kwal) to South Africa’s Distell — the maker of Amarula and Viceroy brands — in 2014.

Privatisation through listing on the NSE will only apply to firms which are profitable in line with rules governing IPOs, with cash-strapped parastatals likely to be sold or leased to strategic investors.

“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,” Mr Koskey said.

Read: MPs fight powers loss in privatisation Bill

“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 may consider getting a strategic investor.”

President Ruto told an annual meeting of African Stock Exchanges Association in Nairobi last month that Kenya has identified 35 State-owned firms for privatisation.

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