Investors have recorded a wealth erosion of Sh164.1 billion over the past five years from seven companies where the government has a controlling stake or major influence.
The paper losses, most of which are likely to be permanent given the financial condition of the firms such as Kenya Airways, Kenya Power, Uchumi Supermarkets and Mumias Sugar Company, underline the risk of investing in State-run enterprises.
The entities, including East African Portland Cement Company (EAPCC), KenGen and Kenya Re, had a combined market capitalisation of Sh214.4 billion at the end of 2017.
This had whittled down to Sh50.3 billion as of Tuesday last week, reflecting the impact of multi-year losses, insolvency and dividend cuts or suspension.
Over the review period, the paper losses range from 63.3 percent to 95.1 percent across the seven companies.
Kenya Airways leads with the largest market capitalisation shrinkage of Sh98.6 billion to stand at Sh21.7 billion –capturing its valuation on July 6, 2020, when it last traded.
This represents a decline of 81.9 percent. The company’s shares have remained suspended on the Nairobi Securities Exchange, Dar es Salaam Stock Exchange and the Uganda Securities Exchange as the government weighs options for turning around the national carrier.
The National Treasury has a controlling 48.9 percent stake in the company whose losses are the outcome of increased competition, high operating costs and previous mismanagement and an ambitious expansion programme that was fueled by heavy borrowing.
The airline has issued a profit warning for the year ended December 2022 citing foreign exchange losses, indicating that it will make a larger loss than the Sh15.8 billion it recorded a year earlier.
Power generator KenGen saw its market capitalisation drop by 65.5 percent or Sh37.1 billion to stand at Sh19.5 billion.
It is among the State-owned firms that have cut dividends despite higher profitability.
The company reduced its payout by a third to Sh0.2 per share for the year ended June 2022 compared to Sh0.3 per share in the prior year.
Profits, on the other hand, more than doubled to Sh4.7 billion.
KenGen, like other government-owned firms, has no policy guiding dividend payouts. It is also among the companies that have consistently been flagged for misuse and wastage of funds by the Auditor-General.
The government has also forced the related parties into agreements that leave some of them to suffer commercial losses.
KenGen, for instance, incurred the cost of building a substation at Olkaria valued at Sh4.5 billion and which was taken over by Kenya Electricity Transmission Company without even signing an agreement.
Kenya Power, whose market value fell by Sh14.8 billion or 83.3 percent to Sh2.9 billion, was forced to suffer revenue losses of Sh2.1 billion to implement the 15 percent electricity tariff discount last year.