The Privatisation Commission has outlined reasons why it approved the sale of government stakes in over 26 corporations as the government moves to mobilise additional resources and enhance the efficiency of the parastatals.

Many of the corporations lined up for privatisation have been performing poorly over the years, adding little or no value to taxpayers.

In a privatisation approval document seen by Business Hub, the Privatisation Commission gives the main reason for privatising the sugar companies as meeting the commitments the government made under the Common Market for Eastern and Southern Africa (Comesa) Sugar safeguards.

“The restructuring and privatisation will also address the excess debt and generate the resources required by the company,” the agency explains.

Government-owned sugar companies approved for privatisation include Muhoroni, Miwani, Nzoia, South Nyanza, and Chemelil. Firms facing further State divestiture are KenGen, Kenya Pipeline, Kenya Ports Authority (KPA) Eldoret container terminal, and the development of KPA’s berth 11. 

Private entities

Other notable State corporations whose ownership and control could be handed over to private entities include East African Portland Cement, Kenya Meat Commission, and New KCC.

The government is also seeking to offload its ownership in the National Bank of Kenya (NBK), Consolidated Bank of Kenya, and Development Bank of Kenya.

The Commission gave the reason for seeking to privatise NBK as “to mobilise resources to support the bank’s future growth, support the growth and stability of the financial sector and the capital markets.”

“Other reasons are enhancing corporate governance, broadening shareholding and recouping part of government investment to finance other development projects,” it added. The government holds varying stakes in the corporations approved for privatisation, ranging from 100 per cent to as low as 17 per cent.

It owns a 70 per cent stake in KenGen, a 100 per cent stake in Kenya Pipeline, about 97 per cent stake in Chemelil Sugar, and a 100 per cent stake in Kenya Meat Commission and New KCC.

Various players have been calling on the government to reconsider its stake in State corporations many of which are loss-making.

In July 2021, the International Monetary Fund (IMF) asked the National Treasury to limit its involvement in supporting State-owned enterprises as part of its new financing conditions, saying they posed a huge financial risk to the nation.

This could be one of the factors informing the decision to privatise State-owned corporations.

President William Ruto said last October  that the government would bring six to 10 companies to the market through initial public offerings (IPOs)  on Nairobi Securities Exchange (NSE) in the next 12 months and urged the private sector to also list at least five firms.

Speaking at the bell-ringing ceremony to mark the launch of the enhanced NSE Market Place, he said that government-owned enterprises whose offloading is behind schedule will be sold off to private investors. Kenya’s economy has been experiencing reduced growth, hence, the need to reduce wastage and appease development partners.

In the third quarter of 2022, Kenya’s real gross domestic product (GDP) grew by 4.7 per cent in comparison to the 9.3 per cent growth recorded same quarter in 2021.

Global shocks

Kenya’s real GDP is estimated to have grown at an average of 5.5 per cent in 2022 compared to 7.5 per cent in 2021 due to global shocks and unfavourable weather conditions. The government announced in September last year it would reduce the budget by Sh300 billion in a bid to reduce the nation which has risen to almost unsustainable levels.