Hold off sale of weak firms, State advised

Some of the companies slated for privatisation should be dropped off the list due to their poor financial health, top advisors have warned

Investment bankers steering privatisation processes say disposal of some firms should be halted since such sale would not bring value for money to Government.

Standard Investment Bank Chief Executive Job Kihumba, however, noted that some firms are attractive for privatisation and should be prepped for the State to offload some of their shareholdings.

“There are very many of them (State-owned entities) that can be considered for addition to this list. If you look at the original number, most of them do no look attractive for all sorts of reasons,” he said.

Mr Kihumba was speaking at a forum convened by the Privatisation Commission in Nairobi last week.

Stakeholders decried the slow pace in concluding deals to offload Government’s stake in the firms already cleared for sale. They include sugar millers and some hotels.

The Privatisation Commission has only concluded the sale of Kenya Wine Agencies Ltd (Kwal) to Distell.

The South African firm acquired 26.4 per cent stake from the Industrial and Commercial Development Corporation (ICDC). A further sale down of ICDC’s stake to employees earlier saw them only take a fraction of the four per cent shareholding on offer.

Kihumba noted that the Privatisation Act has been a major hindrance in the privatisation process. “The law needs to be relooked… the Privatisation Act needs to be completely overhauled if we are to make progress on privatisation,” he said.

“As it is, the approval processes are sometimes subjected to individuals… for instance, a CS comes and makes progress and before he is done, another comes in and restarts the process.” “Under the Act, we shall continue experiencing the bottlenecks that have hindered the privatisation process.

He said privatisation through listing at the stock market “is the best route for a lot of the companies. It is the most transparent and has the greatest impact on the economy”.

Officials from the Privatisation Commission and National Treasury conceded that the law has played part in slowing down the process. “The Act is due for amendment… we need to amend it to make it less bureaucratic and speed up the process,” said Janerose Omondi of Privatisation Commission.

She observed that public consultations, especially in the case of sugar millers and non-conducive environment for the hotels have seen the Commission hold back on the sale.