News

Written by Mwaura Kimani and Albert Muriuki

Even as investors wait to know the winners of advisory service tenders for the planned Safaricom initial public offering, the sale is turning out to be a political battle front between the Government and the opposition.

Yesterday, it was Finance minister Amos Kimunya’s turn to tell off a group of MPs who want the sale of 25 per cent interest in Safaricom stopped until the applicable law is in force. The opposition led by Langata MP Raila Odinga, however, believes the Government wants to use the IPO to sell its wealth redistribution credentials to the public, a formidable tool ahead of the General Election in December.

“These are socialists and communists who believe in centralised economic management,” Mr Kimunya said during the listing of Kenya Re on the Nairobi Stock Exchange. He said the Government would go on with the flotation even as the Privatisation Act is being operationalised through the formation of a privatization commission. “They want the law in place so that they can stop the Safaricom IPO in its tracks,” he argued.

Questions on ownership of the mobile operator have also been raised with regard to Mobitelea, which indirectly owns a five per cent stake in Safaricom through Vodavone Kenya, which is controlled by Vodafone Plc and the delay in operationalising the Privatisation Act . Critics have maintained that the sale would be illegal as it had not been guided by the Act. The fact that they watched quietly even as KenGen, Mumias Sugar Company (secondary listing) and Kenya Re were floated has created the impression that they are more concerned with the political implications of the Safaricom sale, rather than the legality of the exercise.

Mr Kimunya was given up to Thursday this week by Parliament to effect the legislation, failure to which House Speaker Francis Ole Kaparo said Parliament would take an “undefined action against him.” “We are going to operationalize the Privatization Act, without which they cannot go to Court,” said Mr Kimunya, alluding to the yet to be gazetted law that has already been given Presidential assent.

The minister said those opposed to the privatization processes were doing so to retain the old tradition of the political class doling out public corporations to their associates instead of empowering Kenyans. Although it has so far gone on successfully with minor hitches, the Safaricom IPO has attracted a great deal of public attention pulling in the political class who claim the process is being done to benefit a few select individuals.

Mr Odinga has been among top critics of the planned IPO, and has threatened to go to court but has yet to actualise its threat. He had initially indicated that he intended to go to court on the basis of the Privatization Act but appears to have beaten a retreat after it became apparent that his case would not hold water since the relevant law was yet to come into force. A clear indication from Treasury that it was going to set up the privatization commission, however, came on Friday when the consulting firm of Deloitte placed advertisements in the Press inviting applications for the position.

Once the commission comes into being, it shall comprise a chairman appointed by the President, the Attorney General, the Permanent Secretary to the Treasury, seven members, appointed by the Minister and approved by the finance committee of Parliament, and the Executive Director. The Government needs the Sh34 billion to be raised from the offer to help cover part of the budget deficit for this year estimated at Sh109 billion. Mr Kimunya assured Kenyans that nothing was being done illegally, stating that the Treasury’s legal team had assured him that the processes was within the law and any legal challenge would be appropriately handled.

Investment secretary Esther Koimett was under heightened pressure last week to explain the circumstances in which a financial proposal for one of the legal advisory services was opened a week ahead of the due date which saw the consortium of Hamilton Harrison and Mathews top the list for technical evaluations having scored 90.42 per cent.

She had said tender documents belonging to one of the bidders —the Rachier & Amollo Consortium— had been opened while a Treasury official was packaging the bids. Offers to help the government and companies listing at the Nairobi Stock Exchange (NSE) structure the flotations have been characterized by rock bottom bids ranging between zero and five cents— considerations legal experts contend cannot hold under the law of contracts.

The practice has been more evident among lead transaction advisors and sponsoring stockbrokers during tenders for recent privatisation of State corporations starting with KenGen, followed by Kenya Re and now Safaricom. The Safaricom initial public offering — that seeks to raise Sh34 billion almost five times the KenGen offer—itself promises to attract a lot of foreign interest with a listing either in London or Johannesburg still on the cards.

But even as the vendor picked its advisors for the transaction, observers were concerned that their arrival at Safaricom House may distract the management from their daily obligations — leaving the question as to who would take care of the interest of the company on the table.The unusually low financial bids are therefore likely to be offset by lucrative and potentially long-term dealings with overseas investors.

A parliamentary watchdog— Public Investments Committee (PIC) moved to stop the Safaricom IPO— citing the failure by recent investigations to unmask the owners of a shadowy company with a five per cent stake in Kenya’s most profitable firm.In the PIC report tabled in Parliament demanded that the planned sale of 25 per cent of Safaricom shares to the public through the Nairobi Stock Exchange be put on hold until the owners of Mobitelea are known.