MPs block 'rich cabal' from Sh100b KPC sale

Parliament has ring-fenced privatisation of Kenya Pipeline Company (KPC) by imposing strict conditions to prevent a select group of wealthy investors from dominating the share sale and ensure wide access for ordinary citizens.

The resolutions, passed by the National Assembly on Tuesday, represent a direct challenge to the Treasury’s urgent push to sell a stake in the profitable energy monopoly to raise an estimated Sh100 billion for the national budget. 

Lawmakers, explicitly fearing a takeover by a powerful “cabal” of tycoons, have instead mandated a model of “broad-based ownership” to safeguard what they deem an asset of “critical national and regional significance, serving as the backbone for petroleum transportation and storage in Kenya and neighbouring countries.”

The policy directives, by MPs also impose a definitive stake cap on the transaction. The government has been ordered to “retain not less than thirty-five percent of shares” and may only “privatise not more than 65 per cent of government ownership.” 

MPs directed the Privatisation Commission to “safeguard against excessive concentration of shares in a single entity or related parties.” and to “set a maximum ownership limit for any one shareholder to help preserve broad-based ownership, promote market competitiveness, and protect national and energy security interests.”

“This is a strategic national asset, not a trophy to be handed to a few billionaires in a backroom deal,” a senior parliamentary official involved in the process, told The Standard. “The resolutions, particularly number six on ownership limits, are a clear legislative instruction: this IPO must be for Kenyans, not for a privileged few.

The directives specifically mandate that the Commission “implements a minimum level for participation by Kenyan citizens, ensuring broad local ownership from all walks of life including, and in as far as possible, the youth, women, persons with disabilities.” This aligns the process with “national economic empowerment objectives.”

KPC employees will also not be left out, from the windfall with Parliament demanding that “the employees of Kenya Pipeline are included in an Employee Share Ownership Plan (ESOP),” guaranteeing they have a stake in the company’s future they helped build.

The parliamentary blueprint leaves no room for ambiguity, demanding a level of transparency unprecedented in Kenyan privatisations. 

It directly orders the Privatisation Commission to ensure “that the valuation of the company is contained in the prospectus,” and additionally to “publish a separate citizen-friendly IPO valuation report that should be produced and publicised for the general public.” A full forensic valuation must also be undertaken and submitted to the Assembly, one that accounts for “the future potential of the business.”

To eliminate any doubt about the integrity of the entire process, Resolution 4 mandates that “the Office of the Auditor General audits the processes relating to privatization of Kenya Pipeline Company Limited to ensure value for money and submit a report to the National Assembly within six months of completing the processes.”

In a significant move to control costs and prevent profiteering by advisors, lawmakers have directly capped the fees for transaction advisors. Resolution 9 stipulates that their procurement must be done “transparently and competitively, and the cost of the transaction (currently set at Sh100 million) should not deviate from reasonable market rates, and approval from the National Treasury should be sought before any increase.”

The resolutions reveal deep parliamentary concern over hidden risks that could undermine KPC’s valuation and defraud future shareholders. 

The House also provided a detailed list of the liabilities, demanding they be addressed. They include “Pending lawsuits amounting to Sh5.75 billion”; “Unresolved compensation claims worth Sh3.8 billion by residents of Makueni County due to historical grievances linked to pipeline operations.” 

To protect competition in the vital petroleum sector and prevent the emergence of a private monopoly, Parliament decreed in Resolution 13 that the privatised KPC must be structurally restricted to its core mandate. The Treasury, led by Cabinet Secretary John Mbadi, had been pushing an aggressive timeline for the sale. However, Parliament’s extensive conditions are likely to complicate and potentially delay that expedited schedule.