Apr 7, 2024

Privatization involves selling government-owned assets (including shares in state-owned companies) to private individuals or businesses. This excludes selling new shares to current shareholders or financial restructuring within a company that might reduce the government's ownership percentage. The proof of long-term inefficiencies, misconduct, poor financial management, and waste in state owned enterprises (SOEs) necessitates the need for privatization which typically tries to increase economic efficiency by increasing a company's performance, hence eliminating or reducing the need for government economic intervention, attract private investment and foster innovation. Furthermore, privatizations have been utilized to promote competition in monopolized industries. By transitioning from state control to private ownership, these enterprises are envisioned to become more agile, responsive to market dynamics, and better positioned to contribute significantly to the nation’s socio-economic development. As at the end of FY’2022/23, publicly guaranteed debt by SOEs stood at Kshs 170.2 bn, a 17.1% increase from Kshs 145.4 bn in FY’2021/22, contrary to the current regime’s target to reduce expenditure. As a result, privatization of state-owned enterprises (SOEs) has been identified as a fiscal enhancement option, and it is one of the requirements imposed by multilateral lenders such as the International Monetary Fund (IMF) for access to concessional lending facilities.

Kenya's privatization efforts have stalled for years. Although the previous government identified 26 state-owned companies for privatization in 2016, none were actually sold. However, the new regime is aiming to speed up the process to improve the government's financial health. In February 2024, Kenya’s Cabinet approved the sale of seven more state owned enterprises bringing the total number to seventeen. Additionally, the Privatization Bill 2023 was assented to the Privatization Act 2023 which replaced the Privatization Act 2005, introducing new regulatory dynamics for privatizing public companies in Kenya. The Act intends to speed up the privatization process, reducing the previously required steps by eliminating certain formalities. In this week’s focus, we shall cover the following:

1. History of SOE Privatization of Kenya,
2. The Privatization Act 2023,
3. The Benefits of Privatizing State Owned Enterprises in Kenya,
4. The Progress of SOE Privatization in Kenya, and,
5. Recommendations and Conclusion.

Disclaimer: The views expressed in this publication are those of the writers where particulars are not warranted. This publication, which is in compliance with Section 2 of the Capital Markets Authority Act Cap 485A, is meant for general information only and is not a warranty, representation, advice or solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor.