State gets Sh44bn dividend windfall from investments

divindends

The Treasury is one of the biggest beneficiaries of the dividend announcement and will get a gross payout of Sh19.4 billion for its 35 per cent stake in the telco.

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The government’s earnings from public investments hit Sh43.66 billion in the financial year ended June this year, handing a boost to the National Treasury which is pressed for funds to finance key development projects.

The dividend earnings for 2021/22 are Sh13.67 billion more than the Sh29.9 billion that the exchequer had targeted during the period signalling better financial performance.

The amount —wired by parastatals, state agencies as well as quoted and private firms where taxpayers have a stake — is expected to ease cash flow challenges at the time tax receipts are yet to fully recover from the economic shocks of the Covid-19 pandemic.

The dividend earnings are however less than half of the Sh116.14 billion that the government earned from its shareholdings in the financial year 2019/20.

Economic downturn

This shows that firms are yet to fully recover from the economic downturn caused by the Covid-19 pandemic that led to lower earnings by the firms even as others froze dividend payouts to preserve cash.

Kenya has more than 280 state corporations according to data from the Inspectorate of State Corporations, but only a few are commercial entities that generate reasonable dividends to the government.

The State owns stakes in commercial parastatals such as KenGen, the Central Bank of Kenya (CBK), Kenya Power, Kenya Wine Agencies (KWAL), Kenya Meat Commission (KMC), and the East African Portland Cement Company (EAPCC).

The National Treasury also holds stakes in Safaricom, Kenya Airways (KQ), Kenya Reinsurance Corporation (Kenya Re), and in local lenders such as KCB, National Bank, Stanbic Bank, Consolidated Bank, Development Bank, and Housing Finance Bank.

Dividend announcement

 The dividends were largely boosted by Safaricom— the largest source of dividends for the government— as well as other State-controlled firms such as power generator KenGen and Kenya Re which increased payout in the review period.

The Treasury is one of the biggest beneficiaries of the dividend announcement and will get a gross payout of Sh19.4 billion for its 35 percent stake in the telco. The Treasury received an interim dividend of Sh8.97 billion from Safaricom in February. It is also set to receive Sh10.5 billion by August 31 after the telco announced a final dividend of Sh0.75 per share.

The CBK, which generates its income from interest on loans extended to banks and government overdrafts as well as currency conversions, disbursed Sh10.5 billion in dividends to the Treasury last year helping ease a cash crunch at the exchequer.

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