Ruto's government gets free hand to sell state agencies

The National Treasury has now unchecked powers in the selling of state after President William Ruto signed the Privatisation Bill, 2023 into law. 

The law allows the exchequer to exclude Parliament from approving the sale of State-owned firms in a move seeking to shorten the approval process for the sale of government assets.

"It is intended to remove the bureaucratic processes in the privatization of non-strategic or loss-making government entities,'' State House said in a statement. 

Although the country has had a Privatisation Act in play since 2005, not much has been done as multiple scrutinies were needed and the selling of any state entity is supposed to be approved by legislators.

The 2010 Constitution gives Parliament—both the National Assembly and Senate—substantial powers to check the decisions of the Executive.

This has seen the Privatisation Commission manage to execute a single deal involving Kenya Wine Agencies Limited in over a decade since it was established in 2008.

The last high-profile privatisation by the government was Safaricom’s initial public offering in 2008.

The State-backed Act comes at a time when the government has announced plans to sell a number of State-owned firms through the Nairobi Securities Exchange (NSE) this year.

In October last year, Ruto said his government would bring to the bourse through Initial Public Offerings (IPOs) between six and 10 companies, urging the private sector also to list at least five companies to boost the Nairobi bourse.

"We have a bad privatisation law and instead of the law helping us in privatisation, it has stalled the process. I have given an order that if we can’t amend it in our first 100 days in office, we will repeal it,” Ruto said in mid-October last year. 

With the approval of the Cabinet Secretary for Treasury Njuguna Ndung'u, the Privatisation Authority will consider privatization through IPOs.

This approach aims to enhance transparency and openness in the disposals, as well as through sales resulting from the exercise of pre-emptive rights.

In such cases, company shareholders are granted the right to have the first option to buy shares when there is an issuance, with the procedure guided by the entity’s charter documents.

The new Act has removed methods like liquidation and leasing that had been suggested in the 2005 law.

Under the proposed changes, the National Treasury CS will appoint members of the Privatisation Authority without oversight from Parliament, handing the exchequer a greater role in the entity's running.

The Privatisation Act of 2005 required the exchequer to appoint members to the Privatisation Commission through a competitive process and approval by the National Assembly.

The Privatisation Commission has lined up 25 entities for state divestiture including the Kenya Pipeline Company, the Kenya Ports Authority, the Kenya Tourist Development Corporation, the Consolidated Bank, the Development Bank of Kenya and the Agrochemical and Food Corporation.

The list also has ailing state millers including Chemilil Sugar, South Nyanza, Nzoia, Miwani and Muhoroni.

Last year, the commission opened the search for consultants to guide the planned privatisation of the Consolidated Bank of Kenya and Development Bank of Kenya.

This is not the first time the government is dealing with the privatisation of some state agencies, with critics fearing that the exclusion of the Parliament will erode the selling process, leading the country into losses.

The country went through a very rough phase of privatisation in the 1990s and 2000s through the World Bank-led structural adjustment programmes (SAPs) that saw the government significantly divest from companies such as Kenya Airways, Uchumi Supermarkets, General Motors, Firestone and Mumias Sugar.

A 2005 report by the World Bank listed 207 non-strategic commercial enterprises that the global lender said needed to be privatised in 1992.