News

Story by JILLO KADIDA

ODM yesterday lost in its bid to block the Government from selling 25 per cent of its shares in Safaricom to the public. The party had sought to stop the sale until after the Privatisation Act — passed two years ago but which Finance minister Amos Kimunya had not allowed to take effect through a Kenya Gazette announcement — comes into force.

The sale of the shares worth Sh34 billion had been factored in the Budget read by Mr Kimunya in June. Yesterday, Mr Justice Joseph Nyamu ruled that no illegality on the part of the Government had been proved to warrant cancellation of the sale. While flashing the public interest card, the judge declared that blocking the sale as demanded by the three applicants — MPs Anyang’ Nyong’o, Omingo Magara and Mwandawiro Mghanga — would impact negatively on the economy.

Other key reasons given by the judge as he dismissed the suit was that the application had not only been brought late in the day but it failed to include Telkom Kenya in the suit yet the parastatal owns majority shares in Safaricom. The ruling means that the Government will be able to put one of the gems of its privatisation programme up for sale to the public close to the General Election.

Last year, Safaricom earned Sh17 billion in profit, becoming Kenya’s most profitable company. The earnings equalled about half the national Budget of Rwanda. Its listing on the Nairobi Stock Exchange has been eagerly awaited by the public. Yesterday’s ruling must have come as a relief for the Government which has stated it is banking on the Safaricom offer to raise over Sh30 billion needed to seal its Budget deficit for the current financial year. It is estimated that the Treasury has a Sh109.8 billion deficit.

Cause inflation

Treasury officials have been on record warning that failure to raise the Sh30 billion would cause inflation and related side effects, including a surge in the prices of consumer goods.

Yesterday, in a much-awaited 69-page ruling, Mr Justice Nyamu, who is presiding judge of the Constitutional and Judicial Review Division of the High Court, said: “Granted that the Government is selling ‘the silver of the house’ but unless it is acting illegally it is entitled to do so with finality and without interference in order to realise maximum public benefits. A stay order (an order halting the sale process) would militate against this end.”

Justice Nyamu’s ruling arose out of a case filed by ODM challenging the decision by government to float its shares in Safaricom. The case was filed by Prof Nyong’o (ODM secretary-general), Omingo Magara (treasurer) and Wundanyi MP Mwandawiro Mghanga. They were represented by Mr James Orengo. In the suit papers, the three MPs said neither the Government nor Mr Kimunya had legal powers to implement the sale of the shares.

The Government, they said, also lacked the power to form a privatisation steering committee to implement the process. Also sought by the ODM team was an order requiring Mr Kimunya to give a specific date when the Privatisation Act of 2005 will come into force. But Judge Nyamu said the fact that the real owners of the shares, which was Telkom Kenya, had not been included in the suit rendered the claim by ODM “hollow and grossly incompetent.” Telkom Kenya (which is wholly owned by the Government) owns 60 per cent shares in Safaricom. According to the judge, failure by ODM to include the parastatal in the suit was a fatal defect in law because no valid order can issue against parties not before the court. Secondly, the judge said he would not grant temporary orders to stop the sale because ODM was guilty of inordinate delay in commencing the case.

The judge further noted that the Privatisation Act which is at the heart of the case was assented to on October 13, 2005 and it had taken ODM two years to commence the suit when the sale of the Safaricom shares was only two months to the finishing stretch. And above all there was no explanation given for the delay in instituting the case. Citing the Sh30 billion the IPO is expected to earn and the gap it would seal in the Budget deficit for the current year, the judge said: “It is not in dispute that the IPO has serious financial implications for the country.” Courts of law, the judge explained, were not involved in policy and governance issues. They could not hold to ransom, public authorities and other bodies who must be allowed to undertake their duties of public administration without delay.

Declining to grant orders to compel Mr Kimunya to give a specific date when the Act will come into force, the judge said courts can’t allocate to itself executive powers because this would plainly be unconstitutional. “Heavens would fall if a Permanent Secretary were to purport to exercise judicial power to adjudicate cases,” Mr Justice Nyamu said. He further said the court could not justifiably take over the functions of the Executive arm of government, including the appointment of a specific date when the Act will come into force.

And why? It would be impracticable for the court to appoint a date because a court of law never acts in vain and it should avoid situations where it can’t effectively supervise the implementation of its order. “The court cannot purport to direct the minister on what to do and when to do it,” said Mr Justice Nyamu. Mr Kimunya the court noted had by way of an affidavit demonstrated that there are some necessary steps which must be taken before he sets a date. As a result, what the minister has done or is in the process of doing can’t be said to be unreasonable because it is well within his discretion.

Not commenced

The judge further said since the Privatisation Act 2005 had not commenced and its provisions cannot regulate the subject matter of the action. For ODM to go to court urging for its (Privatisation Act 2005) retroactive application is “a serious misdirection.” And pending the coming into force of a law, the Executive organ of the State must continue with its function as per the current law.

On the basis of evidence before the court the issues of accountability and transparency of the process are very well taken care of by Procurement Act and regulations, said the judge. And in any event, he noted, there is no evidence of any under-sale or under evaluation of the shares. Reacting to the judgment, Safaricom CEO Michael Joseph said the case had delayed the IPO which would have by now led to the privatisation of Safaricom. He said the Opposition was not entirely against the Initial Public Offering because it simply objected to the method used to sell the company.

According to him, the Cabinet delayed in approving the deal meant to transfer Safaricom from Telkom Kenya and the redrafting of the shareholders’ agreement. When it was approved, some omissions were made in the document, leading to fears that the company would be short changed. “Nobody is against the IPO,” Mr Joseph said. According to him the IPO will be completed before the end of the year. Prof Nyong’o yesterday said ODM would issue a comprehensive statement on the ruling after consulting its lawyers.