Why Kenyans are skeptical of planned sale of 11 parastatals

Kenyatta International Convention Centre (KICC). [File, Standard]

The planned sale of 11 parastatals, valued at Sh200 billion, has received condemnation from many Kenyans over fears that the exercise could become a rip-off of valuable assets by well-connected and corrupt individuals seeking quick riches.

Their fears are drawn from the massive looting that happened in such deals in the past. Examples include the concession of Rift Valley Railways, the attempted sale of Uchumi Supermarkets and Kenya Cooperative Creameries (KCC), among others.

Among assets listed for sale are Kenyatta International Convention Centre (KICC), Kenya Pipeline Company (KPC), Kenya Literature Bureau (KLB), National Oil Corporation (NOC), Kenya Seed Company Limited, Mwea Rice Mills, and Western Kenya Rice Mills Limited.

Also listed are New Kenya Cooperative Creameries, Kenya Vehicle Manufacturers Limited, Rivatex East Africa Limited, and Numerical Machining Complex.

Former Prime Minister Raila Odinga last week cautioned Kenyans to be on the watch out because the intention is allegedly only meant to benefit a few individuals but not the entire country.

“Kenyans should read between the lines. They are saying that they want to sell to some private individuals but the truth is that they want to benefit themselves. They want to buy these corporations for their benefit,” he said.

Former Mandera Senator Billow Kerrow also argues that the government should have focused on non-performing entities instead of targeting those that are very viable like KPC and KPA.

“It is worrying because I thought they would focus on institutions that have impact significantly on the economy like the sugar factories but going for KPA or KPC raises a lot of questions,” says Kerrow.

Analyst Martin Andati also says the government will face many challenges in the process of attempting to sell the listed assets because public participation has become part of life in the management of public affairs.

“They are supposed to follow the law and not bypass Parliament when public participation is now part of our life. They will be forced to undertake public participation and I do not see how Kenyans will allow disposal of assets like KICC and Kenya Pipeline to happen,” says Andati.

Many of those interviewed argue the Kenya Kwanza government is ill advised because an institution like KICC is a national monument that cannot be sold.

They say KPC can also not be put in private hands because of its strategic value that makes it an invaluable asset that can be used to sabotage the economy.

Others like KLB have been making a lot of money over the years because they basically publish school books which have a ready market, thus generating steady revenue to the exchequer.

This is not the first time that the government is attempting to sell some of the listed assets because Kenyans protested and stopped the Kanu government from disposing of KCC and Kenya Seed Company in the 1990s.

“They tried to sell KCC and Kenya Seed Company during President Daniel arap Moi’s time but there was a lot of resistance, forcing the government to back off,” says Andati.

Transparency

Prof Gitile Naituli, who is an expert in management and development, also cautions that public assets cannot be disposed of without reference to Article 10 of the Constitution which refers to good governance, integrity, transparency, accountability and sustainable development.

“You cannot dispose public assets without public participation because they are the owners and even before we got the current Constitution, it was done through Initial Public Offering at the Nairobi Stock Exchange for Kenyans to get first priority,” says Naituli.

Former President Uhuru Kenyatta’s Jubilee government sold Telkom Kenya without public participation in another suspect deal but the transaction was reversed by the current administration.

The transaction, conducted during the political transition, raised eyebrows particularly after Controller of Budget Margaret Nyakang’o revealed that senior government officials, including then Treasury Cabinet Secretary Ukur Yatani, pressured her to authorise release of the funds.

President Ruto cancelled that deal saying it was fraudulent after the Ethics and Anti-Corruption Commission opened an investigation into the Sh6 billion transaction that was paid from the National Treasury.

It had been reported that the Treasury withdrew that amount on August 5, 2022, and paid Jamhuri Holdings Ltd, a Mauritius-based subsidiary of Helios, in a transaction that did not get parliamentary approval.

It was for that reason that the deal was cancelled by Ruto, but in a swift turn of events the current administration again sold Telkom Kenya without public participation after the Cabinet approved the controversial Privatisation Bill, 2023, which gave power to the National Treasury to privatise public owned enterprises without the approval of Parliament.

The Cabinet rescinded the decision made in July last year, forcing Helios to pay Sh6.09 billion ($41 million) to the government to exit the telco.

The current administration had in the process proclaimed that Telkom be returned to government because Telkom was a strategic national assets linked to State security.

Telkom was thereafter ordered to source for a strategic partner but a few hours later Treasury Cabinet Secretary Njuguna Ndung’u made another announcement that sealed the Telcos ownership fate as a public institution.

“A competitive process to identify the new investor was set in motion in January 2023, resulting in an evaluation process that recommended the Infrastructure Corporation of Africa LLC (ICA) of the United Arab Emirates, to be the new majority shareholder in Telkom, based on the offer they put forward,” said Prof Ndung’u.

Attempts to privatise Kenya Railways were also rocked by a major scandal when in 2020 parliament opened an inquiry into the collapse of the multimillion-dollar Kenya-Uganda Railway privatisation deal.

The corporation was concessioned in 2006 after suffering from many years of mismanagement and wanton looting of its land, houses and other valuable assets.

Thousands of staff members were retrenched, thus crippling families financially with many relocating to their rural homes and in the process

Rift Valley Railways (RVR) won a 25-year concession in 2006 to provide freight and passenger services on the Kenya-Uganda Railway in what turned out be one of the biggest frauds of that decade.

An Eastern Cape businessman Roy Puffett, owner of Port Elizabeth-based aviation, rail and marine company Sheltam, led the Rift Valley Railways (RVR) consortium that was awarded the 25-year concession in October 2005 by Kenya and Uganda to revamp the railway system.

Five years later, Puffett and Sheltam gradually withdrew from the contract and sold 49 percent of their stake to Egyptian investment company Citadel Capital.

In November 2010, the Public Investment Committee (PIC) tabled a report in parliament on the awarding of the concession that raised major questions about Sheltam’s financial commitment to the project.

High concession fees

Puffett hit back, telling The Mail & Guardian that the Kenyan government demanded “unaffordably high concession fees, particularly in the start-up phase”, and calling his lenders “unrealistic” and “inflexible”.

The PIC report queried why pre-qualification rules specified that bidders should have a total net worth of at least $35-million, while Sheltam Rail Company’s financial statements showed it was operating with a negative working capital of 3.98million Rand. The RVR concession, therefore, failed to invest in the railway, which amounted to reneging on the agreement mandating them to make some investments over the concession period.

Opened in 1975 to create outlets for the equitable distribution of commodities and to create retail outlets for Kenyan manufacturers, Uchumi Supermarket grew to become a retail success story not only in Kenya but in the region and across the continent.

The popular supermarket chain, one of the biggest and most profitable parastatals, opened stores in major towns across East Africa and was the first in the region to list on the Nairobi Stock Exchange (NSE) in 1992.

After steady looting and mismanagement, it was closed down in June 2006 after many attempts to salvage it through capital injection from the exchequer and was eventually delisted from the NSE.

Since the late 1990’s debt and mismanagement crippled many parastatals most of them run by incompetent or semi illiterate officials handpicked through either nepotism or on tribal considerations.