Four parastatals that have raised eyebrows after being listed for privatisation

On November 27, 2023, a statement from the National Treasury and Economic Planning ministry was issued revealing a list of 11 parastatals that have been marked for privatisation.

Treasury Cabinet Secretary Prof. Njuguna Ndung'u said the 11 will be onboarded on the 2023 Privatisation Programme in accordance with the Privatisation Act 2023 Section 21 (1).

The 11 include the Kenyatta International Convention Centre (KICC), Kenya Pipeline Company (KPC), New Kenya Cooperative Creameries (KCC), Kenya Seed Company Limited (KSC) and National Oil Corporation of Kenya (NOCK).

Others were the Kenya Literature Bureau (KLB), Western Kenya Rice Mills Ltd (WKRM), Numerical Machining Complex Limited (NMC), 35% of Vehicle Manufacturers Limited (KVM) and Rivatex East Africa Limited (REAL) and the Mwea Rice Mills Ltd (MRM).

Four parastatals, however, have raised eyebrows on why they have been considered for privatisation, what lies at risk, or what interests hide behind the curtain.

The four are KICC, KPC, New KCC and KSC.

Kenyatta International Conference Centre (KICC)

Raising the most contention is the three-phase KICC government-owned tower which is recognised as one of the nation's monuments and a landmark.

A majority of Kenyans among them top-brass legislators have questioned why the government made haste to enlist the parastatal for private ownership without exhausting the provisions enshrined in Article 10 2(a) of the Constitution which grades participation of the people as a fundamental component in the national values and principles of governance include.

Nairobi Senator Edwin Sifuna took to X (formerly Twitter) saying; "If ever there was a matter over which a referendum was mandatory then it's the sale of National Assets like KICC, KPC and the others."

He added: "One generation of greedy leaders cannot just strip a nation of its assets without reference to the people. On this one even our children should vote because KICC is not even our property as the current generation of adults!"

Busia Senator Okiya Omtatah on his part wrote: "President William Ruto has surrendered to the IMF and World Bank at the expense of Kenyans' interests."

"We will oppose the programme the International Monetary Fund has endorsed for the government to sell at least 10 public corporations, including KICC, to private entities."

KICC operates in a mature and competitive sector of the market, with other private sector players offering similar services both locally and regionally.

The ministry argues that privatising the monument will generate additional revenue for the government and reduce the demand for exchequer support.

KICC was constructed in 1973 during Jomo Kenyatta's rule and has since then been used as one of the top premises to hold conferences on the African continent.

Kenya Pipeline Company (KPC)

For KPC, Kenyans have questioned the criteria behind opting to hand over the petroleum products distributor.

The State corporation transports petroleum products from Mombasa to the hinterland (through Nairobi to Nakuru, Eldoret and Kisumu) through a 1,342 km refined oil pipeline system.

The company manages and operates the 326,233m3 import storage facility at Kipevu (KOSF) and another 143,014m3 under a lease arrangement with the Kenya Petroleum Refineries Limited (KPRL).

Treasury tries to make the justification that privatizing the company will attract private sector capital investments and expertise, and offer a good opportunity for expansion of the oil and gas pipeline infrastructure to unserved regions. 

They also say it will generate more revenue for the government.

New Kenya Cooperative Creameries (KCC)

As the oldest and largest dairy processor in East and Central Africa, the New KCC was established to play strategic roles as an off-taker of raw milk from the dairy farmers for value addition and to ensure there is price stabilization.

Bearing a potential to grow, Treasury says that privatisation will attract capital investments and expertise from the private sector to modernize the company’s milk processing plants.

Kenya Seed Company (KSC)

A plethora of suggestions have associated the privatisation of KSC to the entry point of Genetically Modified Organisms (GMOs) in the country while in the hands of private investors.

"Take, for instance, the Kenya Seed Company and the foreign powers' angle in sponsoring the introduction of GMOs and repressive laws against the use of indigenous seeds. The company has a lot of other assets, like land, that will be sold along with it," wrote Kenya Kwanza critic and digital strategist Pauline Njoroge on X.

Incorporated in 1956, theSstate-owned company researches, develops and markets field crops and vegetable seeds, alongside the sale of pesticides and fertilizers. 

Kenya Seed Company also established the brands Kibo in Tanzania and Simlaw Seeds  in Uganda.

Amid the strong opposition from a majority of Kenyans, economist Kwame Owino is of a different opinion as he rather welcomed the move.

He argued: "Folks, the privatization of State-owned enterprises is a good policy, even if it is being pursued by a government that seems to be unpopular and which certainly is not trusted for financial probity."

"Do not read the asset values of the firms as equivalent to the market value of these "parastatals". One needs to account for their liabilities, many of which are hidden and will surprise us all when proper due diligence is conducted."

He seemed to make the argument that privatization may provide additional capital for the government but he added that the move would also help release assets for other entrepreneurs to manage and build up.

"In that process, unless the brokers and hidden players will probably skim off a lot of value, the release of these assets for private management is still a good idea," he said.

"To my mind, the privatization program must go ahead despite the fact that GoK is unlikely to make lots of cash from direct sales now."

IMF's hand in the move

Through multi-year fiscal consolidation efforts, the Executive Board of the International Monetary Fund (IMF) has made Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) arrangements for Kenya.

Both arrangements provide medium-term financial assistance to low-income countries (LICs) with protracted balance of payments problems and also longer program engagement and a longer repayment period.

In a move to reform State Owned Enterprises (SOEs), the IMF in a statement dated July 2023 acknowledged the new Privatization Act 2023 which had been submitted to Parliament to support an accelerated privatization process for SOEs. 

IMF cited examples of KPLC and Kenya Airways (KQ) which, in the second half of 2022, posted weaker financial results as improvements in revenues were offset by higher operating costs.

In a bid to settle outstanding dues and offset the balance sheets, IMF welcomed the reforms the Kenya Kwanza government seeks to use to revive the parastatals and "reforms at KPLC will also be supported by the World Bank."

IMF further cited that they were waiting on a draft Ownership Policy for SCs describing a new governance architecture and legal ecosystem to improve performance and transparency, set to be approved by Cabinet and published by end-October 2023.

"The authorities will also begin work with IMF TA on the legal reforms necessary to anchor the new ownership arrangements and other measures outlined in the SOE Blueprint with a view of submitting draft amendments to Parliament by end-February 2024," read the statement in part.