The cost of delays in pushing through Kenya’s privatisation plans has begun to be felt, with revelations that expansion plans by three high end hotels slated for sale have been put on hold.

It is emerging that investors in the three hotels — Hilton, Intercontinental and Mountain Lodge Ltd — are putting pressure on the government to push through the sale.

Following Cabinet approval, the Treasury was to off load its 40.7 per cent shareholding in International Hotels Kenya Ltd, which owns the Nairobi Hilton, and a further 33.8 per cent in Kenya Hotel Properties, which owns the Nairobi Intercontinental. The government was also to dispose of its 39.11 per cent stake in Mountain Lodge Ltd.

Declining quality

Top officials in the tourism sector said the delays have forced shareholders to postpone plans to renovate the facilities before they are put up for sale.

As a result, the three hotels are finding it difficult to charge room rates based on their star ratings due to the declining quality of the facilities.

It is understood the hotels are having to offer discounts on the over $300 a night global rates.

The privatisation plan was approved by Cabinet in November last year and the government has prevailed on the shareholders to hold back any renovation and expansion plans.

But executives of the Europe-based brands — Hilton and Intercontinental — have been pushing for a speedy conclusion.

“The shareholders are unhappy with the pace of the sale plan,” said a top official in the Tourism Ministry. The three are among 11 hotels, in which the government has a stake, that are to be put up for sale.

Last week, Parliament removed one of the biggest hurdles to the process by approving names of commissioners to the board of the Privatisation Commission — the agency charged with the government’s divestiture plan.

Treasury and Parliament have for the past year been tussling over who had the mandate to appoint the commissioners, with the latter urging public participation in the recruitment.

Finance Minister Njeru Githae is expected to gazette the names of the commissioners this week.

The delays have also meant that Treasury has had to seek funding elsewhere to fill a budget shortfall in funding public projects after it was unable to raise Ksh8 billion ($95.2 billion) it had targeted from the sale of several parastatals that included sugar millers, banks, hotels and utility firms.

Mid this year, the government turned to three international banks, Citi Bank, Standard Chartered and CFC Stanbic, for a $600 million syndicated loan.

“Blame the delays on Treasury. Shareholders have been looking to pump money into these hotels, but this would have meant diluting the government’s shareholding,” said Chris Okemo, chairman of the Parliamentary Finance Committee, which was vetting the privatisation team.

The government is expected to meet with the hotels’ shareholders this week at the Africa Hotel Investment Forum, which begins in Nairobi on Tuesday.

Growing hope

“The hope is that the hotels are sold as soon as possible. They are holding up many planned investments,” said Marianne Ndegwa Jordan, managing director of the Kenya Tourist Development Corporation (KTDC).

KTDC is a government-sponsored development fund that finances the construction of hospitality facilities on concessionary terms and holds varying stakes in the hotels on behalf of the state.

The plan is to give existing shareholders priority to exercise their pre-emptive rights when putting the three top-end hotels up for sale.

Most of the government hotels managed by the KTDC have been run down over the years, prompting the State to restructure them by selling to investors.

Other hotels up for grabs in the divestiture plan are Ark Ltd (5.6 per cent), Golf Hotel (80 per cent), Kabarnet Hotel (98.2 per cent), Mt Elgon Lodge (39.1 per cent), and Sunset Hotel (95.4 per cent).