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Agency seeks legal changes to hasten disposal of State firms

By Macharia Kamau | February 23rd 2019
Joseph Koskey(Left) Executive Director CEO The Privatization Commission with Paul Otuoma(Right) chairman The Privatization Commission during an update on the privatization process. PHOTO:WILBERFORCE OKWIRI

Hands tied: Privatisation Commission has only concluded one deal since inception

Agency seeks legal changes to hasten disposal of State firms

Lengthy processes delaying Government exit with the risk of low returns.

A review of the legal framework on privatisation of State firms is expected to clear some of the major hurdles that have held back sale of Government stake in the companies.

The Privatisation Commission has cited the lengthy process required by the Privatisation Act in disposing of Government shareholding in the firms as a key challenge to executing its mandate.

Set up close to a decade ago, the commission has successfully concluded only one transaction, the sale of part of Government’s shares in Kenya Wine Agency Limited (KWAL).

It now wants the law amended to speed up the process and proposes that decision makers along the privatisation chain should be time bound to take action when proposals are handed to them.

Currently, such proposals have to go through the National Treasury, Cabinet and Parliament, as well as stakeholders’ consultation phases.

“Much as it (the lengthy approval process) is good to ensure transparency, it also holds back the privatisation process,” said the commission’s chief executive, Joseph Koskey.

“We would want to see a situation where if a proposal is taken to Treasury, it is dispensed within a certain period, which should also be the case with the Cabinet and Parliament. This would ensure that the fundamentals that informed a decision to privatise are still valid when the transaction is concluded.”

“We have submitted recommendations to Treasury which include proposals to amend the Act so that different players are bound to take action within a specified amount of time once they receive a document proposing the sale of an entity.”

The commission in 2018 concluded the sale of a 26.4 per cent stake in KWAL to Distell, which was being held by the Industrial and Commercial Development Corporation (ICDC).

A further sale of ICDC shares to employees failed to excite the workers, who only took a fraction of the four per cent shareholding on offer.

Other companies that have been earmarked for sale, but whose transactions are still at early stages, include five sugar millers (Chemelil, Sony, Nzoia, Miwani and Muhoroni), three hotels (Intercontinental, Hilton and Mountain Lodge) and a further dilution of the ICDC shareholding in KWAL.

Though he did not specify the timings that the commission is working with, Mr Koskey said they hope to conclude the sale in some of the nine entities.

“We have the go-ahead to privatise these nine companies and we have made progress in some areas,” he said.

The commission’s chairman Paul Otuoma, said delays in concluding sale of the firms usually results in some of them decaying to a point where there is risk of little return for the State, while it has to keep allocating money for their continued survival.

“We are looking at how to accelerate the processes because when we take too long to privatise, factors at play tend to change and we now see that the companies that were selected for privatisation 10 years ago struggling while others are on their deathbed,” he said.

The commission has previously said the sale of the sugar millers has stalled because of the need to engage stakeholders in the sugar belt.

The sale of the three hotels had been put on hold following turbulent years between 2014 and 2016 for the tourism industry, which resulted in players shying away from making major investments in the country, and the commission felt it would not get a good deal.

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