Dealmakers eye windfall from the sale of troubled State firms

President William Ruto speaks during a past event. [DPCS]

Dealmakers are set to rake in a fortune as the government moves with speed to implement the much-awaited privatisation of State-owned enterprises (SOEs).

The sale of the troubled agencies aims to improve their performance and fill the State’s coffers amid high levels of public debt.

According to some market participants, financial and professional advisers for the sale transactions are typically paid a portion of a successful deal, while lawyers are sometimes paid an hourly rate.

Several investment bankers and accountancy firms are already awaiting a windfall from the sale.

The Privatisation Commission will fork out millions of shilling in what will see some firms smile all the way to the bank from advising the government on the sale, internal documents obtained by The Standard show. 

The Baker Tilly Consortium, for instance, is set to earn Sh28.3 million for the provision of consultancy services on the privatisation of the Development Bank of Kenya (DBK), according to information from the commission.

The SIB Consortium will also take home Sh24 million for advising the commission on the sale of DBK.

Both contracts were signed in December 2022 and run for 13 months.

The Standard has learned that other dealmakers are eyeing more mouth-watering contracts as the process goes on.

The William Ruto government, supported by the International Monetary Fund (IMF), is making renewed efforts to offload some of the loss-making SOEs after more than a decade of failed attempts. President Ruto has said the government would privatise between five and 10 State corporations over the next year.

He expects most of the privatisation to be undertaken through public offers at the Nairobi Securities Exchange (NSE).

“My administration will revitalise the 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.”

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 in over a decade.

The government had been looking at selling stakes in the SOEs to strategic investors as well as 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.

State corporations that had been approved for privatisation include DBK, Kenya Pipeline Company, Kenya Ports Authority, Kenya Meat Commission, Consolidated Bank and five sugar millers - Chemilil, Sony, Nzoia, Miwani and Muhoroni - as well as a number of hotels where the government has shareholding.

The government further planned to reduce its stake in KenGen and East African Portland Cement, among other firms.

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