Business Daily (Nairobi)
9 July 2009
editorial
Concrete moves to privatise State institutions have been rather slow since the Safaricom IPO was concluded in June last year. It had been expected that the State would raise Sh8 billion in the 2008/9 budget, but this was never to be.
Now the government has announced that it is keen to sell off - at least - part of its existing stake at Consolidated Bank as well as at the National Bank of Kenya.
Both institutions have been making profits in recent years showing that their previous problems were probably engineered by peddlers of political patronage, who interfered with their management and board.
With regard to the NBK, the issue is still whether a departure of government from the institution would also signify the exit of the National Social Security Fund (NSSF), in which the State has traditionally tended to have a lot of influence even though, strictly speaking, the provident fund is not a parastatal.
NSSF holds nearly a half of the total shareholding at the NBK and questions have always arisen as to whether it is prudent for an institution holding billions worth of pensioners' funds to concentrate its assets in one place.
Is diversification not the right thing for the NSSF?
With regard to the Consolidated Bank, its history is filled with gaps and horror tales of investments in the institutions that collapsed and were amalgamated to form it in 1991.
Some of the investors have been fighting to get back their rightful shareholdings and they would be happy to be offered the opportunity to buy shares in such an IPO.
The problem is that it is taking too long for the process of privatisation of these banks to take off and that does not augur well.
Even though the markets had been hit by under-subscription of the previous IPOs as jittery investors stayed away due to the plunge in the worth of their investments at the Nairobi Stock Exchange.
But this might be the time, if the governments want to sell its stake via an IPO, to do it.
The bear market sentiments that have prevailed for about a year may, however, prove only temporary with the current upturn in markets globally.
Indeed, the NSE has regained a substantial amount of its value in the past few months even though, compared year to date, it is still down.
The proper thing for the government to do is take advantage of the improving market sentiments and speed up the sales.
It is likely that the lower valuation of stocks will also impact on the sale price of both banks, but then that is in the interest of the investors who would not mind a bargain.
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