Fresh plan to privatise 200 state agencies

Kenya Pipeline Company, Nakuru depot. [Kipsang Joseph, Standard]

After privatising 35 state agencies, the government is in fresh plans to transform nearly 200 government-owned enterprises (GOEs) into limited private companies, if a Bill goes through.

In the proposed plan, the Treasury will own, run, and set up new ones at will. A policy by the Treasury explains that the law will be amended to convert all commercial agencies into limited private companies so that they can compete with private businesses for opportunities in government and public service.

The policy also adds that the government will privatise the companies when it feels there is no justification for their continued existence as an entity under state ownership. 

“To refocus the GOEs on their commercial mandate and also provide a better legal setting for established corporate governance practices, the entire portfolio of GOEs in Kenya will be transitioned into limited liability companies created under the Companies Act, 2015,” the policy said.

President William Ruto announced in November last year that the government would privatise 35 state companies after enacting the privatisation law.

Already, the State has outlined 11 state corporations, which include the Kenyatta International Convention Centre (KICC), Kenya Literature Bureau (KLB), Kenya Pipeline Company (KPC), and National Oil Corporation of Kenya (NOCK), to be privatized. Others are Kenya Seed Company Limited (KSC), Mwea Rice Mills Ltd. (MRM), Western Kenya Rice Mills Ltd. (WKRM), New Kenya Cooperative Creameries Limited (NKCC), Numeric Machining Complex Limited (NMC), Vehicle Manufacturers Limited (KVM), and Rivatex East Africa Limited (REAL). 

“There are 240 commercially oriented public enterprises with direct or indirect government ownership through ICDC, IDB, KTDA, KTDC, and other entities. Of these, the government has designated 33 as 'strategic enterprises' and intends to retain its ownership and active Board participation in them for the time being,” the Privatisation Commission explains on its website, adding, “The remaining 207 have been classified as 'non-strategic enterprises' and they constitute the government's privatisation program." Of these enterprises, the PRPC has selected 45 to begin the first phase of the privatisation programme, leaving 162 to be processed for subsequent privatisation.”

A source at the Treasury intimated: “Already a team is working on amending the laws.” 

However, the Privatisation Commission says there are 240 commercially oriented public enterprises, and the National Treasury says that the state is also preparing a bill that will ensure a smooth transfer of all other state agencies under treasury from other ministries as private entities. The government's Public Enterprise Reform Programme (PERP) aims to enhance the private sector's role by shifting production and service responsibilities to the private sector, eliminating preferential treatment and monopoly rights.

It says this will enable equitable private sector entry into public enterprises (PE's) activities, fostering a level playing field. Additionally, the programme seeks to optimise resource use, reduce the Exchequer burden, and streamline public enterprise operations.

" It also aims to improve the regulatory environment by adopting economically rational methods and promoting capital market development to diversify ownership and stimulate economic growth,” PC said on its website.

Treasury argues that under the current arrangement, the exercise of various components of ownership rights is diffused among various institutions of GoK, namely the National Treasury itself, the line ministries, and the Office of the President. It says that this arrangement is inconsistent with established and tested good corporate governance practices and tends to create a principal (owner)-agent (state corporation) relationship with a multiplicity of principals who often send conflicting signals to the agent.

“The scope of this policy is confined to state corporations that have a commercial mandate. These commercial state corporations will hereinafter be referred to as government-owned enterprises (GOEs) as defined in Section 210 of the Public Finance Management (National Government) Regulations, 2015,” the policy says, adding, “This will entail amendments to various existing statutes.”

The policy said that since government enterprises often perform non-commercial public policy obligations (PPOs), the National Treasury will now develop a framework to guide how GOEs carry out these obligations. “Because GOEs perform public policy obligations (PPOs), sometimes referred to as public service obligations (PSOs), mainly of a non-commercial nature, either continuously or from time to time, a framework for GOEs to carry out PPOs will be developed by the National Treasury,” the policy said.

Further, the policy said that the policy for owning and managing enterprises will be adjusted and applied to non-commercial state corporations as well.

“The National Treasury, through the Cabinet Secretary to the Treasury as a body corporate established under the Cabinet Secretary to the Treasury (Incorporation) Act, will exercise the ownership rights and responsibilities as envisaged in this policy with respect to GOEs,” the policy said.

GOEs will run their businesses commercially and transparently and will, in principle, not enjoy direct or indirect favourable treatment from the government solely because they are GOEs. Government enterprises (GOEs), whose shares are traded on a public stock exchange, will follow the same rules and regulations as other publicly listed companies, overseen by the capital markets regulator.