President Ruto has agreed to privatize government corporations to beef up state revenue


Kenya Pipeline Corporation photo

To generate more money for the government, President William Ruto has insisted on the privatization of state corporations.

Privatization is expected to lead to the sale of government businesses to the general public through initial public offerings (IPOs) (NSE), in addition to more buyouts of state-run businesses that are already listed on the Nairobi Securities Exchange.

President Ruto stated, "I have established the Ministry of Trade, Investment and Industry so that we can look much more closely at our financial markets working with our State Owned Enterprises (SOEs) and assess which ones we can bring for the public to become owners so that we can share in the profits and release some resources for us to deliver on some of our infrastructure requirements without borrowing."

The privatization of state corporations will help to alleviate the Nairobi Securities Exchange's (NSE) listing drought, with the most recent initial public offering (IPO) taking place in 2015.

A win-win situation would result from privatization, since the government would also be able to access crucial financing. For example, the Public Budget Office (PBO) said that selling off firm interests would bring in billions of dollars for the government.

In the past, the Capital Markets Authority (CMA) has suggested that state corporations be sold or divested to improve access to capital.

According to Luke Ombara, director of regulatory policy and strategy at the CMA, "if the government can unload another 10% in its shareholding in Safaricom, that's plenty of funding to handle concerns like budget deficits and debt obligations."

The Kenya Pipeline Corporation (KPC) and the Kenya Ports Authority (KPA) are already on the CMA's list of potential privatization candidates.

The government, on the other hand, has given the Privatization Commission the job of selling off SOEs.

The Commission has only recently put companies in trouble on the market to reduce the risks to the exchequer.

For example, the Privatization Commission put out bids for consultants on Tuesday in order to sell the cash-strapped Consolidated Bank of Kenya and the Development Bank of Kenya(DBK). 

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