National Treasury Cabinet Secretary Njuguna Ndung’u will get more powers in President William Ruto’s plans to sell select parastatals to generate much-needed cash for the exchequer.
The Privatisation Bill, 2023 sponsored by the Treasury seeks to turn the Privatisation Commission into a parastatal –the Privatisation Authority – that will be domiciled at the Treasury and run by a managing director.
Privatisation of state-owned enterprises (SOEs) has emerged as a priority in President Ruto’s fiscal consolidation plan, with proceeds from the sales to be deposited into the Consolidated Fund for budgetary spending.
Should the Bill be passed, Prof Ndung’u will be responsible for the formulation and development of the government’s privatisation programme, subject to Cabinet approval, a mandate currently held the commission. According to the Bill, the CS “shall identify and determine the entities to be included in the privatisation programme”, before the Authority takes over to implement the sale.
The Bill says the privatisation drive will help shift production and delivery of products and services to the private sector, improve infrastructure and delivery of public services through the involvement of private capital and expertise, and reduce government expenditure on bailouts.
“The principal object of this Bill is to provide a revised regulatory framework for the privatisation of public entities with a view to improving the efficiency and competitiveness of Kenya’s productive resources,” says Prof Ndung’u in his memorandum to the Bill.
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The Privatisation Authority is envisioned to constitute a technical advisory committee that will, on an ad hoc basis, scrutinise a proposal to privatise a parastatal.
The Bill comes at a time Dr Ruto’s government has already kicked off the process to sell parastatals that are financially struggling. The Privatisation Commission this month announced that the government majority-owned Agro-Chemicals and Food Company (ACFC) is on sale. It said the government is seeking to sell its stake in the firm amid accumulating losses and growing debt.
The government owns a 56 per cent stake in the company while Indian conglomerate Mehta International Limited owns the remaining 44 per cent. ACFC owes the government Sh9.63 billion, including Sh737 million in accrued interest and accumulated losses amounting to Sh8.36 billion.
The state is also seeking to sell its stake in Consolidated Bank of Kenya Limited (CBKL) and Development Bank of Kenya (DBK).
The government owns an 89.3 per cent stake in DBK, while Trans Century Limited owns a 10.7 per cent stake. It also fully owns CBKL, with Treasury holding 93.4 per cent of the shares in the loss-making lender while the remaining shareholding is spread over 25 parastatals and quasi-government agencies.
Treasury last week said the government is exposed to a fiscal risk of Sh2.75 trillion should parastatals default on the debts they took from both commercial and multilateral lenders for which it gave guarantees.
Treasury Principal Secretary Chris Kiptoo promised extensive reforms in SOEs, including privatisation, mergers and strengthening of those that play strategic roles in the economy to reduce exchequer financial risks.