10 January 2013

Kenya: MPs Adopt Report to Privatise Parastatals

PARLIAMENT yesterday adopted a report that proposes the privatisation of state owned companies and parastatals.

The report will give the Privatization Commission the go-ahead to privatise five public sugar companies, three hotels owned by Kenya Tourist Development and Kenya Wine Agencies.

The hotels that are targeted include Intercontinental (International Hotels Kenya Limited), Hilton Hotel (Kenya Hotel Properties Limited) and Mountain Lodge.

The sugar companies earmarked for privatisation include Nzoia, Sony, Chemelil, Muhoroni, Kibos and Miwani, some of which are said to be in massive debts.

The privatisation of the sugar companies was first approved by the cabinet in 2010. Most of these factories are underperforming and heavily indebted while two are under receivership.

The cabinet however underscored the need to protect the interest of farmers in the privatisation process. As such, farmers will be given an opportunity to actively participate in buying shares in the factories as individuals and co-operatives.

Under the Sugar (Amendment) Act, sugar cane farmers and outgrowers are entitled to a 51 per cent stake in all government-controlled sugar companies which are set to be privatised.

The departmental committee on finance planning and trade said that the move to privatise them is expected to attract investors to help turn around their fortunes.

Golf Hotel in Kakamega, Sunset Hotel in Kisumu, Kabarnet Hotel, Mount Elgon Lodge, Mountain Lodge, The Ark Limited and the Kenya Safari Lodges and Hotels Limited will also be considered for privatisation.

Other state parastatals lined up to be privatized include Consolidated Bank, National Bank of Kenya, Development Bank, Kenya Meat Commission, Kenya Pipeline and East African Portland Cement.

In November, Finance minister Njeru Githae appointed members of the Privatization Commission in a Gazette notice. In July last year, the minister directed the commission's chief executive to priorities the sale of Kenya Wine Agencies' 30 per cent stake to South Africa's wine maker, Distell.

Currently, the government owns a 72.65 per cent stake in KWAL through Industrial and Commercial Development Corporation, while Centum Investment owns 26.43 per cent.

The Transition Authority will help in the separation and validation of existing assets and liabilities as either belonging to the government or the county government.

The Privatization Act states that the earnings from the sale of government shares shall be paid into the Consolidated Fund, while the proceeds from the sale of a state corporation's equity holding shall be deposited in a special interest bearing account established specifically for that state corporation to maintain the balance sheet of the corporation.

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