In a bid to bolster economic growth and address financial challenges faced by state-owned enterprises, Kenya is set to embark on an ambitious privatization initiative targeting eleven prominent government-owned entities. President William Ruto recently signed into law the Privatization Bill 2023, signaling a significant shift in streamlining the privatization process by removing bureaucratic hurdles previously hindering the sale of non-strategic or struggling government entities.
The privatization drive, scheduled to be completed before December 11, invites public comments on the proposed privatization of notable entities, including the Kenya Pipeline Company, New Kenya Cooperative Creameries (NKCC), Kenyatta International Convention Center (KICC), National Oil Corporation, Kenya Seed Company, and the Kenya Literature Bureau (KLB), among others.
The government’s rationale behind this privatization endeavor is twofold. Firstly, it aims to unlock working capital and attract investment, citing a decline in state resources. Secondly, the move is intended to address the dearth of business expertise within the government in managing commercial operations efficiently.
Specifically, the National Oil Corporation, cited for its poor financial performance due to fierce industry competition, is slated for restructuring through privatization. This involves separating its upstream and downstream operations into two entities, with NOCK retaining upstream operations and an expanded mandate to oversee all oil fields/blocks on behalf of the government.
Similarly, enterprises like the Kenya Pipeline Corporation and New Kenya Cooperative Creameries Limited are earmarked for privatization to attract additional capital and expertise. The government emphasizes that privatizing these entities will modernize infrastructure and broaden private ownership in the Kenyan economy.
The new law introduces methods for privatization, including Initial Public Offering (IPO) of shares, public tender sales, or other methods as defined by the Cabinet. Proceeds from the sale of government shares will be channeled into the Consolidated Fund, aiming to generate additional revenue and reduce dependence on exchequer support for certain entities, such as the KICC.
President Ruto, speaking at the African Securities Exchange Association (ASEA) conference, expressed optimism about injecting capital into struggling entities and breaking the IPO drought at the Nairobi Securities Exchange. He revealed plans to offer 35 companies to the private sector and hinted at an additional close to 100 entities undergoing evaluation with financial advisors.
Moreover, the legislation establishes the Privatization Authority, tasked with managing the privatization process and overseeing the proper discharge of its functions. The program formulation falls under the Cabinet Secretary’s purview, subject to Cabinet approval and subsequent ratification by the National Assembly.
The government’s long list of entities earmarked for privatization includes various state corporations, such as Chemelil Sugar, Nzoia Sugar, Sunset Hotel Kisumu, Kenya Safari Lodges and Hotels, among others. The move seeks to encourage private sector participation, broaden ownership, and reduce the demand for government resources.
President Ruto hailed the law as a game-changer, streamlining privatization through international best practices while eliminating bureaucratic obstacles. This initiative, coupled with structural reforms, aims to revitalize the Kenyan economy and bolster the growth of its securities exchange.
As Kenya takes bold steps toward privatization, it is poised to reshape its economic landscape, attract investments, and foster a more dynamic and competitive business environment.
This comprehensive privatization plan marks a pivotal moment in Kenya’s economic trajectory, setting the stage for increased private sector participation and paving the way for sustainable economic growth.
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Article curated from Kenyan Wall Street Journal.
