By JAMES ANYANZWA

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Kenya’s plan to sell off inefficient and loss-making state-owned corporations has stalled, spelling doom to the Nairobi Securities Exchange (NSE) which had put hopes of increasing the number of listed companies on its dormant stock market on the government’s divestiture programme.

A raft of factors including government’s slowed approval process, frequent suspension of the programme and currently stalled operations at the Privatisation Commission have colluded to stifle attempts to put up parastatals for auction.

A few large players

The Kenyan securities market has been left in the hands of foreign investors and five firms (Safaricom, Equity Bank, East African Breweries Ltd, KCB Bank and Co-operative Bank of Kenya), controlling over 75 per cent of the market in terms of market capitalisation.

“To reduce exposure risk by high market concentration by the top five companies at the bourse, a key initiative would be for the Commission and policyholders to partner in promoting privatisation and divestiture of government stake in some companies,” says the Capital Markets Authority.

“A more enabling legal framework is necessary and this could be achieved through flexibility that would shorten the approval levels and time,” the agency said through its five year-Strategic Plan (2016-2021) report.

Operations at the Privatisation Agency which oversees the sale of all state assets, including mergers, stalled more than a year ago after the board’s term expired in June 2019. As a result the board has failed to sit for 14 months after the term of seven private sector members expired without replacement.

Vacant positions

“We have not had a board since last year. Its term expired in June last year. When I came in January 2019. I only sat on a few board meetings then it expired,” Paul Otuoma, the Privatisation Commission’s chairman told The EastAfrican.

However, in May the National Treasury invited members of the public interested in filling up the vacant positions at the Commission to submit their applications latest June 5, 2020.

The government had suspended the privatisation of state-owned enterprises from 2013 until March 2019 when the suspension was lifted while the privatisation agency has failed to conclude a single transaction in more than 13 years since it was operationalised in 2007.

According to Dr Otuoma, the current Privatisation Act (2005) has made it difficult for the Commission to proceed and conclude a transaction largely due to provisions that provides for several approvals of the transaction along the line.

“We have an Act that has made it almost very difficult to carry out the privatisation process. Although it was supposed to bring in transparency in the process it has made it difficult to privatise an entity. That is why we have only had one privatisation, and even that is not fully done. So we have not actually done anything,” said Mr Otuoma.

The agency considers the Privatisation Act rather restrictive and argues that while approvals at various levels may be good for accountability purposes, expected benefits from privatisation could be diluted by such delays.

The Commission is a corporate body established under Section 3 of the Privatisation Act (2005). It was operationalised in December 2007 to implement the inaugural Privatisation Programme under the Act, comprising 26 enterprises and projects, which was approved by the Cabinet in December 2008.

Since its establishment the Commission has only completed Phase One of the privatisation of Kenya Wines Agencies Ltd involving the sale of 26 per cent of the company’s shares to Distell of South Africa. The transaction was approved by Cabinet in November 2011 and Parliament in January 2013.

In the pipeline

The Commission’s strategy plan (2016-2021) on parastatal reforms was recommended by the Presidential Taskforce on Parastatal Reforms released in 2013. However, its ability to achieve its core mandate was initially suffered after privatisations were frozen in 2013.

State-owned corporations earmarked for sale are Kenya Pipeline Corporation, Kenya Ports Authority, Consolidated Bank of Kenya, Kenya Meat Commission, Development Bank of Kenya, East African Portland Cement, KenGen, and sugar millers (Chemilil, Sony, Nzoia, Miwani, Muhoroni), New Kenya Co-operative Creameries, Agrochemical and Food Corporation, Numerical Machining Complex, isolated power stations, five hotels and KTDC-associated companies.