Privatization refers to transactions that result in a transfer of the assets of a public entity (other than to a public entity) including the shares in a state corporation but excluding sale of new shares or any balance sheet reorganization which leads to dilution of shares held by a public entity.
Privatization may take various forms including a sale to the public or to a strategic investor, exercise of pre-emption rights or sale of an asset of the business.
The Kenyan privatization agenda started in 1994 through the Parastatal Reform Program. The Program coordinated privatizations until 2008 when the Privatization Act, No. 2 of 2005 was enacted. The Act establishes a Privatization Commission that formulates, manages and implements the privatization programme approved by the Cabinet Secretary to the National Treasury.
The privatization of Kenya Airways in 1995 was the first flagship of the Parastatal Reform Program. The privatization was done through the sale of 26% of the shares to KLM Royal Dutch Airlines and an offer of shares to the public at the Nairobi Stock Exchange in 1996. The Kenyan government retained about 23% and remains the largest shareholder.
Other privatized entities include the Kenya Electricity Generation Company Limited (KenGen), Telkom Kenya (2007) Mumias Sugar Company Limited, Kenya Commercial Bank Limited, Safaricom Limited and the Kenya Reinsurance Corporation Limited.
Public Enterprise Reforms
The Government of Kenya is currently undertaking a restructuring and reform programme to support and rationalize the privatization programme and public private partnerships initiatives.
There has been a move towards the liberalization of some sectors of the Kenyan economy. The energy and telecommunications sectors have been progressively liberalized by reducing government’s direct involvement in these sectors.
The government embarked on liberalization of the telecommunications sector at a time when telecommunication services were mainly provided by the Kenya Posts and Telecommunications Corporation (KPTC). KPTC was broken down into Telkom Kenya Limited, Postal Corporation of Kenya and Communications Commission of Kenya in 1999.
The reform of Kenya’s electricity sub-sector commenced in the 1990s. In 1997, the generating function was separated from transmission and distribution. The generating function is now carried out by Kenya Electricity Generation Company Limited (KenGen) and transmission and distribution are done by Kenya Power & Lighting Company Limited (KPLC). This was followed by the entry of new players in the generating function referred to as Independent Power Producers (IPPs).
The Kenyan banking, insurance and maritime sectors have also been liberalized.
Public Private Partnerships
Kenya enacted its first Public Private Partnership law in 2013 (the “PPP Act”), followed by the PPP regulations in 2014. Since the enactment of the PPP Act in 2013, several PPPs have been undertaken under the relatively new PPP regime. The PPP Act gives express powers for contracting authorities to enter into PPP Agreements and further to designate its assets for the use by a private party, in relation to, and during a project.
It is clear from the existing PPP Framework in Kenya and the existing PPPs that the Government of Kenya intends to create an enabling environment for the development, investment and financing of infrastructure to achieve its ambitious development goals.