Ruto seeks to surpass Kibaki with 10 Nairobi bourse IPOs

President William Ruto with (from left standing) governor Johnston Sakaja Nairobi Securities Exchange chairman Kiprono Kittony, Trade CS nominee Moses Kuria and Deputy President Rigathi Gachagua during the bell-ringing ceremony at the bourse on October 11, 2022. PHOTO | PSCU

President William Ruto has set a target surpassing the number of State-owned firms that the Mwai Kibaki administration sold through the Nairobi Securities Exchange (NSE).

Dr Ruto said Tuesday his government would bring to the bourse through initial public offerings (IPOs) between six and 10 companies, urging the private sector to also list at least five companies at the NSE.

Listing of additional shares of State corporations will end a six-year IPO drought at the NSE that has lasted since October 2015 when the Stanlib Fahari REIT was listed.

The last successful privatisation by the government was the Safaricom IPO in 2008, meaning that no State-owned firm was sold at the NSE during the ten-year tenure of President Uhuru Kenyatta.

Former President Kibaki privatised six companies, including Kengen, Kenya Reinsurance, Safaricom and Mumias Sugar, through the NSE between 2003 and 2008.

He sold Telkom Kenya shares through a strategic sale and leased out Kenya Railways Corporation through a concessionaire.

Kenya privatiSed eight companies through public offers between 1990 and 2002 during the Moi era, including CMC Holdings, National Bank and Kenya Airways.

“As we prepare between six and 10 companies for listing in the stock exchange in the next 12 months, and I promise you we will deliver on that commitment, I also want to encourage the private sector as we bring 10 companies, please bring five,” Dr Ruto said.

The President has indicated that his government will raise financing for government projects through the Nairobi bourse as opposed to borrowing from external markets.

Proceeds from privatisation would earn the Ruto administration funds to meet budget shortfalls and reduce the burden on the exchequer, with a World Bank 2021 study estimating State corporations cost Kenya Sh532.2 billion in grants and subsidies.

Three of the dominant firms at the NSE — Safaricom, Equity and Co-operative Bank — came into the market during the IPO boom years of 2005 to 2009.

Their dominance has made it difficult for investors to measure the true performance of the bourse due to the companies’ outsized influence on key market indicators.

The privatization plan comes in a period of market volatility, with foreign investors exiting emerging markets for better returns in western markets due to high interest rates sharply.

Cooperative Bank boss Gideon Muriuki, however, said the bank listed at the end of the 2008 financial crisis and still managed to meet targets.

“We had started our IPO preparation in 2007, and we had to deal with pessimists with the global financial crises/low Investors activity that set in just before our IPO in 2008. The IPO raised remarkably over Sh5.4 Billion,” Mr Muriuki said.

The President did not name the companies targeted for privatisation.

Previously, the government had targeted 26 firms for privatisation, including Kenya Pipeline Company and parts of Kenya Ports Authority (KPA).

The government is also keen on selling hotels, including Kabarnet, Mt Elgon Lodge, Golf Hotel, Sunset, Kenya Safaris Lodges and stakes in Hilton Group of Hotels, InterContinental Hotels Corporation and Mountain Lodge Limited.

Consolidated Bank, Development Bank, Kenya Meat Commission and Kenya Cooperative Creameries were also targeted for sale.

The Privatization Commission planned further divesture from KenGen, Kenya Wines Agencies and Portland Cement.

NSE chairman Kiprono Kittony has made proposals for the Treasury to cut government ownership in companies such as Safaricom (35 percent), KCB Group (19.7 percent) and Kenya Re-Insurance (60 percent) which have room for additional re-issuance of shares.

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