The National Treasury is seeking more powers to shape the privatisation of State-owned enterprises, in changes that broaden the role of the Government and Investments and Public Enterprises (Gipe) unit it hosts.
Gipe is the department through which the National Treasury Cabinet Secretary (CS) exercises oversight and ownership in State corporations and other government investments.
In proposed changes through the 2024 Government Investment Regulations, the Treasury seeks to have Gipe prepare the privatisation process—raising a possible clash with the Privatisation Authority which broadly handles the function presently.
“The functions of the National Treasury Department responsible for government investments shall be to prepare the privatisation programme for consideration by the Cabinet Secretary before submission to the Cabinet for approval,” the draft regulations said in part.
Gipe has until now played a limited role in the process by only providing technical support for divestitures, privatisations, and public-private partnerships. It also monitors contingent liabilities and other fiscal risks of State corporations.
Additionally, Gipe currently provides technical and policy support to ministries departments and agencies on restructuring of mega infrastructure projects like the Standard Gauge Railway, the planned crude Oil pipeline, and other green field projects.
The Privatisation Authority, which recently rebranded from the Privatisation Commission, is tasked with advising the government on all aspects of privatisation of public entities and implementing the programme.
The Authority also facilitates the implementation of government policies on privatisation and prepares long-term divestiture sequence plans.
The creation of a more powerful unit at the National Treasury to initiate the privatisation process mirrors the exchequer’s increased push for the control of the process that seeks to bring part of State-owned enterprises into private hands in an attempt to ensure the sustainability of the entities while reducing on the firm’s reliance of taxpayers for funding.
The National Treasury attempted to curtail the oversight of Parliament in the privatisation process through amendments to the Privatisation Act by removing the requirement for approvals by MPs.
The move would have seen the exclusion of Parliament in approving the sale of State-owned firms, shortening the approval process for the sale of government assets.
The exchequer lost the bid as the final bill reinstated the nod of the National Assembly as critical in the privatization process.
“Upon the approval of the privatisation programme by Cabinet, the CS shall submit the approved privatisation programme to the National Assembly for ratification before the implementation of the programme,” reads part of the 2023 Privatisation Act.
The new Act which was signed into law in October last year provided a new regulatory framework to improve the efficiency of the privatisation process.
The process shall be initiated by the National Treasury Cabinet Secretary who is expected to formulate the plan after making ‘appropriate’ consultation with relevant institutions and persons likely to be affected by the initiative.
The Cabinet Secretary is required to identify and determine the entities to be included in the privatisation programme before making submissions to the Cabinet and subsequent ratification by Parliament.
Privatisation can take various forms including the initial public offer of shares, sale of shares by public tender, or a sale resulting from the exercise of pre-emptive rights.
The government has stepped up on its privatisation plan having kicked off the sale of its stake in several enterprises including five hotels, including Kenya Safari Lodges, Mt Elgon Lodge Limited, Golf Hotel Limited, Sunset Hotel, and Kabarnet Hotel in which it holds a joint Sh671million stake.
The State is also looking to dispose of its 43.77 percent stake in the Kenya Wines Agencies Limited (Kwal) and its stake in the Development Bank of Kenya (DBK).
The government has nevertheless run into headwinds in implementing some of the desired disposal including litigation.
