Kenya (Commonwealth) _Kenya’s President William Ruto said on Thursday that the government was ready to privatize 35 state-owned enterprises after passing legislation last month to manage the process. Kenya last privatized a state-owned corporation in 2008, with an initial public offering (IPO) for 25% of Safaricom’s shares.
“We have identified the first 35 businesses that we will offer to the private sector.” “We have another close to 100 that we are working with financial advisers on what to do,” Ruto said at the African Stock Exchanges Association’s annual conference in Nairobi.
Finance Minister Njuguna Ndung’u told media that the names of the companies to be sold will be revealed later. The legacy of the COVID-19 epidemic and regular climate change-induced droughts have strained the East African country’s governmental budget, and there is worry about its capacity to receive money from financial markets before a $2 billion Eurobond expires in June.
While Ruto stated that Kenya would now be able to dump potentially “lucrative” enterprises whose growth has been stifled by bureaucracy, Ndung’u stated that the listing effort is not designed to shore up government funds.
“One of the goals is to stimulate market activity.” “Money is secondary,” he explained. Ruto stated that Kenya updated its privatization law last month to eliminate “unnecessary bureaucracies” and that the government’s new initiative will increase Africa’s pipeline of corporate flotation.
African bourses have underperformed this year as global investors avoided riskier assets due to a lack of listings, an increase in global interest rates, and China’s economic woes. With 40 exchanges throughout the continent, Africa could have up to five firm listings every day, according to Ruto, but there were few, owing in part to regulatory red tape.
Stock markets, if properly utilized, have the potential to convert Africa into a worldwide economic powerhouse and financial center, according to the president. Thapelo Thseole, ASEA’s president and CEO of the Botswana Stock Exchange, said legal reforms in certain countries have resulted in recent IPOs, citing Bharti Airtel’s listing in Uganda.
Kenya’s privatization process has been extremely sluggish throughout the years, despite the previous regime’s intention to sell 26 parastatals in 2016. However, as part of its economic reduction efforts, the new Kenya Kwanza administration has been intent on expediting the process. The new administration announced intentions in October 2022 to privatize 6 to 10 State Owned Enterprises (SOEs) in the agriculture, energy, and financial sectors within 12 months.
The Kenya Pipeline Company, the Kenya Ports Authority, the Consolidated Bank, the Development Bank of Kenya, and the Kenya Tourist Development Corporation are among the institutions targeted for state divestiture by the Privatization Commission. As a result, the effort is anticipated to revitalise capital markets and stimulate new listings on the Nairobi exchange. This week’s focus will include the following topics:
While the proposed measure is beneficial, economic experts advocate that direct discussions be allowed in cases when an IPO, public tender, and pre-emptive rights all fail to accomplish privatization.
We also advise the government to take steps to enhance the operational efficiency of cash-strapped SOEs in order to make them more appealing to investors during the privatization process. As a result, the government will be able to generate a sizable amount of income from privatization and use the revenues to improve public service delivery.
However, in economic terms, the absence of the legislative approval step in SOE privatization may result in a lack of transparency owing to insufficient monitoring, limiting public engagement. All things considered, they anticipate that if the Privatization Bill 2023 is ratified by the Parliament, the government would be able to accelerate the privatization process and simply unload the non-strategic SOEs that remain.
