Economy
President Ruto backs push to sell parastatals without MPs’ approval
Wednesday March 22 2023
President William Ruto, Deputy President Rigathi Gachagua and Prime Cabinet Secretary Musalia Mudavadi and a host of Cabinet Secretaries during a Cabinet Meeting held at State House Nairobi. PHOTO | PCS
President William Ruto has backed a push to sell parastatals without the approval of Parliament, in a law change that will give the Treasury unchecked powers in the privatisation plan.
The Cabinet on Tuesday approved the Privatisation Bill, 2023, which gives power to the National Treasury to privatise public-owned enterprises without the approval of Parliament, describing an early process seeking the legislators’ nod as “bureaucratic.”
The decision is set to put the Executive on a collision course with Members of Parliament, some of whom had rejected the proposals in the Bill.
Read: New Bill eliminates Parliament’s nod in sale of parastatals
According to the Cabinet, the sale of non-strategic, non-performing public entities will help improve the upgrade of infrastructure and the delivery of services to Kenyans.
“The privatisation, it (the Cabinet) explained in its Tuesday session at State House, will also tame the demand for government resources and generate more funds to drive the Government’s development agenda,” said a State House statement.
Should the Bill be passed by Parliament it will repeal the Privatisation Act, 2005 which requires the Finance minister [Treasury Cabinet Secretary] to present a report on the privatisation proposals approved by the Cabinet to the relevant committee of Parliament.
The 2010 Constitution gives Parliament—both the National Assembly and Senate—substantial powers to check the decisions of the Executive.
“The Bill gives power to the Treasury to privatise public-owned enterprises without the bureaucratic approvals of Parliament,” said the statement from State House.
The Privatisation Commission, which will be renamed the Privatisation Authority if the proposed changes are adopted, argued that granting powers to the Treasury Cabinet Secretary to appoint members to the authority would be a threat to its independence.
“We want to remain independent and wouldn’t want to be a rubberstamping authority on Treasury’s decisions. We do, however, want to help the government to sell entities to realise value for money,” said Privatisation Commission chairman Faisal Abass in an earlier interview with the Business Daily.
Under the proposed changes, the Treasury Cabinet Secretary will appoint members of the Privatisation Authority without oversight from Parliament, handing the exchequer a greater role in the running of the entity.
The Privatisation Act, of 2005 requires the Treasury Cabinet Secretary to appoint members to the commission through a competitive process and approval by the National Assembly.
The Privatisation Commission has lined up 25 entities for State divestiture, including the Kenya Pipeline Company, the Kenya Ports Authority, the Kenya Tourist Development Corporation, the Consolidated Bank, the Development Bank of Kenya and the Agrochemical and Food Corporation.
The list also has ailing State millers — Chemilil Sugar, South Nyanza, Nzoia, Miwani and Muhoroni.
The programme also proposes further share divestitures by the government in listed firms, including KenGen, East Africa Portland Cement and the National Bank of Kenya.
Kenya’s privatisation history has had its fair share of controversy, with critics pointing to the process in the past being hijacked by well-connected individuals to snap up some of the State corporations for a song.
The country went through a serious phase of privatisation in the 1990s and 2000s through the World Bank-led structural adjustment programmes (SAPs) that saw the government significantly divest from companies such as Kenya Airways, Uchumi Supermarkets, General Motors, Firestone and Mumias Sugar.
A 2005 report by the World Bank listed 207 non-strategic commercial enterprises that the global lender said needed to be privatised in 1992.
Another 33 strategic commercial enterprises were to be restructured and retained in the public domain.
These included the Agricultural Development Corporation, the Kenya Power & Lighting Company, the Kenya Railways Corporation, the Kenya Ports Authority, and the Kenya Broadcasting Corporation.
Read: State to ‘fast-track sale of 18 ailing parastatals’
President Ruto has indicated that he would like to revitalise the private sector, and has even noted that his government was shopping for a buyer for the troubled Kenya Airways.
He has also promised to rejuvenate the Nairobi Securities Exchange (NSE) by bringing to the bourse through initial public offerings (IPOs) between six and 10 companies, a target that if met would see him surpass the record set by former President Mwai Kibaki’s administration.
A report tabled in the National Assembly on November 15, 2020, by the Treasury showed that out of 12 companies in which the government has less than 50 percent shareholding, only three paid dividends, amounting to Sh28.4 billion in the 2019/20 financial year.
About 92 percent of these dividends came from Safaricom, with the Treasury pocketing Sh26.2 billion from the telecommunications giant.
Three of the remaining nine companies are insolvent, with Mumias Sugar and Uchumi under administration. Kenya Airways might soon return to the government’s fold.
