Kenya Pipeline back on privatisation card as state makes another u-turn

Kenya Pipeline Company headquarters in Nairobi/ KPC

The government has made another U-Turn on the sale of state-owned fuel transporter and storer Kenya Pipeline Company and now says it's shares will on the shelves at the Nairobi Securities Exchange later this year.

President William Ruto announced the new position at the London Stock Exchange (LSE) on Wednesday. He is visiting the United Kingdom.

This comes as the government makes yet another u-turn on its earlier decision to strike off the petroleum products handling company from the list of state agencies put under the privatisation pipeline.

Energy and Petroleum Cabinet Secretary Opiyo Wandayi had in September last year indicated the government was not keen on listing KPC due to its “strategic nature” coupled with its immense regional impact which demerits the privatisation plans.

According to the CS, at the time, placing KPC in the hands of privateers would amount to ceding certain national and regional aspirations.

“As one of the most profitable government entities, with admirable well thought out divestures, it would be imprudent to let go of the institution now,” he said.

President Ruto however on Wednesday said the entity will be listed, as the country continues to reform the capital markets to enhance their contribution to national development.

“This will offer investors a unique opportunity to deploy capital in one of our most strategic infrastructure enterprises,” said Ruto at the Paternoster Square in London during a bell-ringing ceremony at LSE to mark start of the day’s trading.

The President was welcomed to the London Stock Exchange by the chief executive officer, David Schwimmer.

Also present were Prime Cabinet Secretary Musalia Mudavadi, Cabinet Secretaries John Mbadi (National Treasury), Lee Kinyanjui (Investment, Trade and Industry) and outgoing Afrexim Bank President Benedict Oramah.

Listing at the NSE through an  Initial Public Offer (IPO) will allow the public and private sector to buy shares in the agency, with the government expected to retain majority shareholding, similar to the likes of KenGen where the government holds a 70 per cent share with private investors taking up 30 per cent.

The government has been considering the privatisation of Kenya Pipeline and Kenya Ports Authority, which are well performing, alongside 26 poorly performing state corporations which have been targeted for sale to cut down government spending, mainly year-on-year bail outs (capital injection).

However, the sale has faced legal battles with the High Court in September last year overturning the Privatisation Act 2023 on the grounds of unconstitutionality.

This saw the government revert to the Kenya Privatisation Act of 2005 which provides the legal framework for privatising public assets and operations, including State corporations. 

It established a Privatisation Commission to manage and implement a privatisation programme. The act outlines procedures for asset valuation, information disclosure and appeals related to the privatisation process.

Four state-owned sugar factories: Chemelil Sugar Company, Muhoroni Sugar Company, Nzoia Sugar Company and South Nyanza Sugar Company (SONY) have since been placed under competitive leasing arrangements.

“This initiative is expected to enhance efficiency, restore profitability and protect the livelihoods of farmers,” Treasury CS John Mbadi said during his June 12 budget speech.

Talks have been in place to also privatise the Kenya Meat Commission, Development Bank of Kenya, Tourism Finance Corporation hotels and New KCC, as the government seeks to boost the local capital market’s ability to support development and help cut on debt reliance.

CMA is keen to have the top corporations listed, while it pushes for more offerings by well performing companies among them Safaricom and KenGen, to deepen local investors' turnover at the Nairobi bourse.

Ruto during his LSE visit noted that the world is witnessing growing potential of equity and debt markets that calls for more strengthening.

He said well-functioning domestic capital markets enhance economic resilience by limiting exposure to volatile capital flows.

“They reduce dependence on external debt and diversify investment opportunities,” he said.

Ruto said Kenya will keep drawing experiences from the London Stock Exchange to make the NSE more robust and vibrant. 

“We are committed to a programme that identifies and prepares a pipeline of key government assets to be privatised through the exchange," he said.