Country Report Kenya October 2012

Update Country Report Kenya 21 Sep 2012

Approval of new commissioners will help revive privatisation


A major obstacle to restarting Kenya's privatisation programme, after a two-year hiatus, was overcome on September 10th when parliament approved the appointment of seven members to serve on the Privatisation Commission.


The terms of the original seven commissioners ended in 2010 before a protracted dispute between the former finance minister, Uhuru Kenyatta, and parliament brought the work of the commission-and the privatisation programme-to a halt. Mr Kenyatta sought to reappoint the original seven, but parliament demanded an open recruitment process, eventually winning its case in early 2012 under the new finance minister, Njeru Githae. A key parliamentary committee, after a lengthy vetting and recruitment process, finally endorsed five new commissioners (and two of the original seven) in September. They will serve three-year terms on the 11-strong commission alongside a chairman (appointed by the president), the attorney-general, the finance secretary and an executive director. Mr Githae must still approve the appointments but has promised to respect the committee's verdict.

Barring new hitches, the government will now be able to push ahead with plans, dating from 2008, for the sale of stakes in more than 20 state-owned enterprises, both to strategic investors and via flotations on the Nairobi Securities Exchange. This will help the firms adapt to commercial reality and generate much-needed revenue for the Treasury. Critically, the commission is charged with ensuring that asset sales are undertaken transparently. Sell-off candidates include five sugar refineries, several hotels, two banks (the Development Bank of Kenya and the National Bank of Kenya) and the Kenya Wine Agencies Limited (KWAL). Notably, the delay in privatising KWAL is a primary reason for the breakdown in relations between the parastatal and Distell, its South African partner. Unable to acquire promised equity, Distell gave notice in June terminating their 14-year alliance, although KWAL subsequently secured a High Court injunction pending a full hearing on October 2nd.

Impact on the forecast

The new commission will help to speed up the privatisation programme, although disposals are unlikely to start until after the March 2013 elections and stakes in key infrastructure parastatals may not be offered in the first wave. Our forecast continues to expect the post-election government to maintain a broadly unchanged approach towards privatisation.

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