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Ruto backs plan to sell parastatals without Parliament's approval

President William Ruto chaired a Cabinet meeting which approved the Privatization Bill 2023, which gives the Treasury CS power to sell parastatals without Parliament’s approval.

President William Ruto at the 36th Ordinary Session of the Assembly of Heads of State and Government of the African Union in February 2023

According to a cabinet brief sent to newsrooms, Cabinet said the bill would facilitate the government’s disposal of loss-making enterprises and free up resources for development.

To support the state’s divestiture from non-strategic sectors of our national life, Cabinet approved the Privatization Bill.

The revised policy shift seeks to revitalize Kenya’s capital markets through the review of the framework for state divesture as part of a wider reform process targeting public enterprises,” the statement read.

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The bill is expected to set the executive on a collision course with MPs, when it is transmitted to the National Assembly where President Ruto’s UDA controls a majority.

If approved by the National Assembly, the government will expedite the selling of targeted parastatals such as Kenya Meat Commission, Kenya Wine Agencies, Agro-Chemical and Food Company, Development Bank of Kenya, Consolidated Bank, Kenya Safari Lodges and Hotels, Sunset Hotel Kisumu, Miwani Sugar, Nzoia Sugar, Golf Hotel, Mt Elgon Lodge, Kabarnet Hotel, South Nyanza Sugar, and Chemelil Sugar.

The proposed legislation aims to transform the Privatisation Commission into a new entity named the Privatisation Authority, which will operate as a parastatal organization withing the National Treasury.

The Privatization Bill 2023, which will replace the 2005 law, aims to give Treasury Cabinet Secretary Njuguna Ndung'u and the board of the Privatization Authority more authority in the sale of government-owned companies.

"Upon preparation of a privatisation proposal, the proposal shall be approved by the Board with the concurrence of the Cabinet Secretary,” the draft Privatisation Bill 2023 reads in part.

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This will effectively bypass the National Assembly's role in the privatisation of parastatals.

Currently, the Cabinet Secretary is required to submit a report in the form of a sessional paper on a privatisation proposal approved by the Cabinet to the National Assembly for consideration.

The report is then reviewed by a parliamentary committee before it is tabled in the National Assembly for approval.

Under the new proposals, however, the Treasury Cabinet Secretary is expected to take on the mantle of the privatisation process, including identifying and determining which entities should be included in the programme.

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In a briefing to the media on Tuesday, January 24, Trade CS Moses Kuria said that the he would surpass the targets given to him to facilitate the sale of at least three parastatals by June 2023.

The proposed exclusion of Parliament from approving the sale of state-owned firms has raised concerns among analysts.

Ken Gichinga, an economist at Mentoria Economics said, “I find it a bit strange given the privatisation process involves the conversion of public assets into private assets. I am surprised to see the process left entirely to the National Treasury which is part of the Executive.

The government's privatisation plan comes at a time of market volatility, with foreign investors exiting emerging markets for better returns in western markets due to high-interest rates.

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The government had previously targeted 26 firms for privatisation, including Kenya Pipeline Company and parts of Kenya Ports Authority (KPA), as well as hotels and stakes in several international hotel chains.

The last successful privatisation by the government was the Safaricom IPO in 2008.

During his reign, former President Mwai Kibaki privatised six companies, including KenGen, Kenya Reinsurance, Safaricom and Mumias Sugar, through the Nairobi Securities Exchange (NSE) between 2003 and 2008.

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