Privatising Parastatals to Raise Ksh 100B as Kenya Races to Meet IMF Demands

Njuguna Ndugu
Treasury CS Prof. Njuguna Ndugu During the signing of Aid Credit Facility Agreements between the Governments of Kenya and Hungary, March 27.

In a strategic manoeuvre to boost local revenues and appease multilateral lenders such as the International Monetary Fund (IMF), the government is forging ahead with plans to privatise a significant portion of its state-owned enterprises.

The ambitious proposal aims to generate over Ksh100 billion in revenue, signaling a seismic shift in the country's economic landscape.

Last week, revelations surfaced regarding the government's intentions to privatise approximately 200 government-owned enterprises (GOEs), following the successful privatisation of 35 state agencies.

If the proposed bill gains momentum, these GOEs will undergo a transformation into limited private companies, granting them the flexibility to compete in both the government and public sectors.

Under the envisioned plan, the Treasury will assume ownership and management control of these entities, empowering it to establish new ventures as needed. A policy framework laid out by the Treasury outlines amendments to existing laws, converting commercial agencies into private entities capable of navigating competitive markets.

Documents submitted to Parliament this week shed light on the anticipated savings of over Ksh100 billion, aligning with the demands set forth by international financial institutions like the IMF and the World Bank.

With the Kenya Revenue Authority facing challenges in meeting collection targets, the government has revised its revenue projections for the 2023/2024 fiscal year downward.

Kenya Pipeline Company.
A Kenya Pipeline Company fuel reservoir.

Initially targeting a tax revenue of Ksh2.428 trillion under the IMF programme, the government now anticipates raising Ksh2.178 trillion, with current tax revenue standing at Ksh1.746 trillion. This recalibration will likely be subject to scrutiny during the next IMF review scheduled for November 2024.

The envisioned privatisation drive is part of President William Ruto's agenda, announced last November, aimed at streamlining state-owned enterprises. Already, the State has earmarked 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). 

While the Privatisation Commission identifies 240 commercially oriented public enterprises, the government is poised to introduce legislation facilitating the seamless transfer of additional state agencies under Treasury jurisdiction. The Public Enterprise Reform Programme seeks to bolster private sector participation, optimize resource utilization, and enhance regulatory frameworks.

Addressing concerns of corporate governance, the Treasury aims to consolidate ownership rights and responsibilities under its purview, promoting transparency and accountability. Emphasising commercial viability, government-owned enterprises will be subject to market regulations akin to publicly listed companies.

Moreover, the policy stresses the distinction between commercial and non-commercial obligations of state enterprises, with the Treasury slated to develop frameworks guiding the latter's execution. This comprehensive approach underscores Kenya's commitment to fostering a conducive business environment and stimulating economic growth.

President William Ruto at State House in May 2023.
President William Ruto at State House in May 2023.