The good, bad and ugly of state privatisation plan

The East Africa Portland Cement Company./FILE

Even so, the government has always insisted that privatisation is the most viable way to stop the financial bleeding of those entities.

While some like KenGen and Safaricom have turned out as a success story, the majority like Kenya Airways and several state-owned sugar firms have disappointed.

Safaricom now commands more than 50 per cent of total market cap at the Nairobi bourse worth over Sh1 trillion, while KenGen is reporting massive net profits and leading the country’s reviewable energy, promising investors fat dividends.

Kenya Airways, on the other hand, has sunk into unpredictable financial oblivion. In late August, the airline stunned the market with a staggering Sh12 billion loss in the first half of the year, reversing a net profit of Sh513 million posted in the same period in 2024.

The airline’s revenues dropped 19 per cent from Sh91 billion in 2024 to Sh74 billion this year, as passenger numbers and available seat capacity declined sharply.

In the past weeks, lawmakers, opposition leaders and experts have poked holes in fresh plans to either privatise or sell significant state shares in firms like East African Porland Cement, Kenya Pipeline, Kenyatta International Convention Centre and state-owned sugar firms.

The concerns stem from past mistakes, where investors specifically targeted state entities for privatisation with the aim of disposing of their assets or buy stakes at throwaway prices, shinning the spotlight on rising state capture.

For instance, in late August, Kalahari Cement, a special purpose vehicle backed by Pacific Cement Ltd and entities linked to businessman Ebrahim Munif, who owns cement interests across Kenya, Tanzania, Mauritius, and Zambia, signed binding agreements to acquire a 28.2 per cent stake in Kenya’s second largest cement manufacturer, East African Portland Cement.

While the planned sale is touted as a bid to shore up capital for the Nairobi Securities Exchange-listed cement maker, largely owned by the government, lawmakers, the firm’s board and members of the public are concerned by the discounted cost of the deal at half the firm’s stock price.

Members of Parliament have in the past weeks quizzed several state entities including the Capital Markets Authority, Competition Authority, EAPC management and the Attorney General not just on undervaluation but also market monopoly concerns.

The deal, if allowed by regulatory entities, will see the firm linked to the Tanzanian cement titan purchase of 26.3 million shares at Sh27.30, with a total transaction value of Sh717 million, representing a 42.5 per cent discount to EAPC’s closing price of Sh59.25 on Friday.

Last week, they approved a government plan to partially privatise the Kenya Pipeline Company, clearing the final legislative hurdle for the divestiture of a majority stake in the state-owned enterprise. 

The move paves the way for the government to sell 65 per cent of its shareholding to private investors, primarily through public listing before the end of the year. This will see the state retain a 35 per cent shareholding in the company that manages the country’s fuel transportation network.

This has led to public uproar, with opposition leaders led by Wiper Patriotic Front Party boss Kalonzo Musyoka terming it a ploy by senior state officials to capture the rich state enterprise.

On Saturday during a burial in his Ukambani backyard, Kalonzo castigated MPs for what he termed as Executive arm-twisting to give a nod to the KPC sale, cautioning President William Ruto’s administration and potential investors not to buy or sell the country’s strategic facility.

He chided Ruto’s administration for perpetuating blatant state capture under the guise of privatisation, warning that the opposition will thwart those attempts in court.  

His remarks were echoed by Deputy Minority Leader Robert Mbui, who termed the move as a “daylight auction” of a strategic national asset, accusing parliamentary leadership of irregularly pushing the matter through.

“According to our Standing Orders, members must be made aware before the Order Paper is introduced. This specific issue of KPC was sneaked in after 3pm in the supplementary Order Paper,” the Kathiani MP said.

Kiharu MP Ndindi Nyoro, who is the former chairman of the Budget and Appropriations Committee, has also been vocal about the privatisation of KPC, which he terms “unviable”.

“I am one of the people who would never actually vouch for the listing of Kenya Pipeline. And I'll give you a very practical reason. The current NSE has been bearish this year but companies listed are still grossly undervalued. And I can tell you without blinking an eye,Kenya Pipeline will bring a lot of excitement. Kenyans will buy in the IPO but after the announcement of the financial results in February for the full year, the share price will collapse,” he said.

Nyoro said current investors in the NSE were not buying assets but revenue.

Meanwhile, privatisation of Rivatex East Africa SEZ has begun, with a strategic investor expected to lease the firm by the end of this year.

The goal is to improve the textile firm's financial viability and efficiency by ensuring the uptake of cotton from local farmers. 

In August, a strategic investor was selected to take over the company, and this led to restructuring and the issuance of termination notices to employees last month. This means hundreds of jobs lost with families being hard hit.

In an internal memorandum dated September 3, 2025, addressed to all employees, acting managing director Stanley Bett confirmed that the textile company was terminating contracts across the board under the leasing framework.

“Following the ongoing restructuring of Rivatex East Africa SEZ Limited under the leasing framework, and in accordance with Section 40 of the Employment Act 2007, the company hereby issues notice of termination of your services on account of redundancy,” the memo read.

The retrenchment affects both fixed-term and permanent employees. Staff on fixed-term contracts that expired on August 30, 2025, will not have their contracts renewed.

Meanwhile, employees on permanent and pensionable terms will face termination effective September 3, 2025, with a three-month notice period. Their final working day will be November 30, 2025.

As the state embarks on several privatisation plans, past ventures have failed, leading to collapse, asset stripping and general distortion of social economic well being of those who relied on them, both directly and indirectly.

When the gates of Mumias Sugar Company first swung open for him 18 years ago, Peter Otsieno thought he had found a job for life. He was 25 years then, full of dreams and proud to be part of one of Kenya’s most iconic industries.

Today, at 43, he walks the crowded streets of Nairobi, a reluctant migrant searching for casual work after years of false promises, failed bailouts and policy missteps that turned Kenya’s sugar belt into a graveyard of broken livelihoods.

Otsieno’s story mirrors the decline of an industry once regarded as the economic lifeline of Western Kenya. For decades, Mumias Sugar was the pride of Kakamega — providing employment to thousands, sustaining smallholder farmers, and fueling local businesses.

But years of mismanagement, corruption, attempted receivership and political interference brought the miller to its knees. Multiple government bailouts totaling billions of shillings were pumped into the company in a bid to revive it. None of it worked.

“I stayed because I believed things would get better,” Otsieno recalls. “Every year we heard that new investors were coming, or the government was injecting more capital. But salaries stopped coming, and the machines stopped running.”

He has since relocated to Nairobi where he earns a living as a wielder, surviving hand to mouth.

Otsieno’s scenario is the new nightmare staring at thousands of employees at four state-owned sugar firms lined up for privatisation. Although the venture was billed as a restructuring plan, promising jobs and economic opportunities, the opposite is clear.

Letters seen by the Star show that on August 12, Agriculture Principal Secretary Kiprono Ronoh directed four millers, Nzoia, South Nyanza, Chemelil and Muhoroni Sugar companies to issue formal redundancy notices to employees as part of a government leasing programme.

For hundreds of workers in the sugar belt, however, the announcement has sparked fear and anger. Many say they have endured years of uncertainty, salary delays, and failed promises of revival — only to be rewarded with termination.

In Kakamega, Kisumu and Bungoma, whispers of another round of layoffs are bleeding old wounds afresh.

Some of the failed privatisation attempts include Kenya Railways’ meter-gauge line which was effectively privatised in 2006 through a 25-year concession agreement with the Rift Valley Railways consortium, to manage and upgrade the rail network in Kenya and Uganda. 

The agreement, a public-private partnership, was however terminated by the Kenyan and Ugandan governments in mid-2017 due to RVR's persistent failures to invest in infrastructure and meet its contractual obligations. 

The operations of the railway reverted back to Kenya Railways Corporation and Uganda Railways Corporation.

“They mismanaged the entire railway system. One of the achievements that I feel to date is taking back from that private operator who mismanaged our system,” Kenya Railways managing director Phillip Mainga told the Star during a recent interview.

Although tainted with corruption allegations, industry experts believe that privatisation of state entities if done well will lead to meaningful economic gains for the country.

The Kenya Association of Manufacturers has supported the privitisatisation of state agencies, mainly those with industrial functions, a move it says will improve their efficiency.

“If done the right way it will be a plus. It will mean more investments including machinery to improve efficiency. The decision is good but must be done correctly,” KAM chief executive Tobias Alando told the Star. 

The Federation of Kenya Employers also supports privatisation that brings  efficiency, attracts investment and is carried out transparently, with full protection of jobs and based on genuine engagement of all stakeholders.

“Privatisation, when done well, can bring efficiency, attract new investment, and secure the long-term sustainability of enterprises that have faced serious challenges over the years. In that sense, it has the potential to create more opportunities for employment and support communities that depend on these industries,” executive director and CEO Jacqueline Mugo told the Star.

“However, we are equally clear that the process must be managed professionally and in line with the Privatization Act, 2023 and our constitution.”

FKE insists on meaningful stakeholder involvement, safeguarding of jobs, transparency and accountability, balancing efficiency with social impact and turning around the performance of the entities.