The government is making renewed efforts to offload some of the State corporations after more than a decade of failed attempts to privatise the troubled enterprises.
President William Ruto has said the government would privatise between five and 10 State corporations over the next one year.
He also said there are plans to review the legal framework, which has in the past been cited as among the hindrances to the privatisation process.
The president, who spoke yesterday at the Nairobi Securities Exchange (NSE), expects most of the privatisation to be undertaken through public offers at the bourse, which he noted would also give Kenyans an avenue to buy into the companies.
“My administration will revitalise that capital markets by embarking on privatisation of state corporations where divestiture is overdue and strategic as well as introduction of such innovative products as a domestic dollar denominated bond,” he said.
“I have made a commitment that between five and 10 public enterprises that are mature should be listed in the next 12 months. I expect that the private sector will work with the capital markets so that we can have private sector companies to also list at the stock exchange.”
The government in 2008 came up with a plan to privatise 26 parastatals through the Privatisation Commission but it has only managed to conclude a single deal involving Kenya Wine Agencies Ltd (KWAL) in over a decade.
Then, the government had been looking at selling stakes in the entities to strategic investors as well as selling to the public through listing at NSE. The dismal performance has been attributed to, among other factors, a bureaucratic process in the existing legal framework.
President Ruto yesterday said there are plans to revise the law to ease the process of privatising the state owned entities.
“The government is embarking on review of the current privatisation law with a view if repealing it or replacing it with a legal and less inhibiting and more facilitative policy framework to steward rapid privatisation processes,” he said.
Stanley Kamau director general at National Treasury’s Public Investments and Portfolio Management, said a bureaucratic framework had stalled the process of privatising the State-owned entities and that it was necessary to review the law for the process to continue.
“To privatise a state corporation, there are about 16–17 steps and each step will take three to five months. We need to look at the Act and see what areas we need to remove or simplify,” he said.
“If you even have to sell even one share as government, we will need to go through the whole privatisation process that could possibly take three years. We need to overhaul the law and create a framework that is a little bit faster.”
Privatisation Commission Executive Director Joseph Koskey said the agency had already started the process to review the Privatisation Act to reduce the bureaucracies and enable the government to offload shareholding in some of the parastatals.
“Cognisant of the fact the privatisation process as envisaged today in the current Act is a bureaucratic process, we have taken a proactive role to start the process of reviewing the Act,” he said during the NSE event.
“I want to commit that this process has started. We have started mapping out our stakeholders and we believe we will have this Act amended within 100 days.”
President Ruto also said he is keen on increasing participation of retail investors in the capital markets.
Privatisation of government entities has in the past drawn a huge number of Kenyans to invest in NSE. These include the Safaricom initial public offering (IPO) in 2008 that was oversubscribed by 532 per cent.
Others are KenGen (oversubscribed by 333 per cent) and Kenya Re (334 per cent) that also brought in hundreds of thousands of new investors to the bourse.
“As I ring the bell, I shall be inviting all Kenyans – the hustler nation – into the NSE and take the NSE to all Kenyans,” Dr Ruto said.
“We must work deliberately to equalise and democratise opportunities for wealth acquisition. I look forward to having more Kenyans having the opportunity to buy, sell and grow their wealth through NSE…to that boda boda guy trading stocks on his phone when waiting for the next customer instead of betting that is full of guessing and people losing money.”
“I am looking forward to the day our bonds will be shared between small and big investors in equal measures. I want to ask that we bring the other Kenyans into that space. It is a profitable space.
“It is not always you get interest of 10–12 per cent guaranteed by the government. The banks are doing well, but the small people are not. They are getting one per cent or two per cent for the money they save in the banks.
State corporations that had been approved for privatisation include Kenya Pipeline Company, Kenya Ports Authority, Kenya Meat Commission, Consolidated Bank, Development Bank of Kenya and the five sugar millers - Chemilil, Sony, Nzoia, Miwani and Muhoroni - as well as a number of hotels where the government has shareholding.
It further planned to reduce its stake in KenGen and East African Portland Cement.