State faulted for illegal transfer of Telkom shares

By Wilfred Ayaga

Nairobi, Kenya: A parliamentary committee has found that the process through which the Government ceded its shares in telecommunications giant, Telkom Kenya, to a French company was not procedural.

The team has also recommended investigations into officials involved in the process.

The Public Investment Committee (PIC) found that the process through which the Government lost its shareholding to the French multi-national company, France Telkom, breached the provisions of the licence agreement that had been granted by the Communications Commission of Kenya (CCK), and that the regulator did not approve the restructuring.

“The ceding of shareholding by the Government to France Telkom is in breach of the licence agreement granted by CCK. The Government should therefore regain its rightful shareholding at TKL prior to the recapitalisation and restructuring process,” the committee recommended.

On the spot is the National Treasury, which the committee found to have entered into a commitment without making any budgetary provisions and engaging private legal consultants in the process and without the approval of the Attorney General as required by law.

According to the committee, the Government lost its shares in the company after entering into an agreement with the French outfit without a budgetary provision.

Under the agreement, the Government was to provide Sh4.9 billion towards the restructuring. It however ended up raising only Sh2.4 billion after failure to factor in the balance in the 2012/2013 budgetary estimates.

Not budgeted for

“Government shareholding in TKL was diluted due to its failure to provide funds as agreed between the shareholders. The Treasury failed to ensure that that the commitment of Sh2.4 billion was factored into the subsequent supplementary budget of 2012/2013,” the team concluded.

Telkom Kenya has been on a free fall since efforts to restructure it through partnership with a strategic investor failed. Part of the strategy in raising the fortunes of the company was through the injection of capital, which the committee termed an ‘expensive undertaking’.

The report stated that the identification of France Telkom as a strategic investor during the bidding process did not follow due procedure.

They want the Ethics and Anti-Corruption Commission to probe officials from the Treasury and the Information Ministry involved.