Summary of the Privatisation Act, 2023

Oct 31, 2023 | Bussines, Investments, Law, Our Highlights

The Privatisation Act is an Act of Parliament established on 13th October 2023, which provides a regulatory framework for the privatisation of public entities in Kenya. The Act defines Privatisation as a transaction that results in a transfer, other than to a public entity, of the assets and or liabilities of a public entity, including the shares in a public entity. Privatisation occurs when properties owned by the government are transferred to private entities. One of the advantages of privatisation is it improves infrastructure and the delivery of public services, by involving private expertise and capital.

The primary goals of the Privatisation Act 2023 are to provide for the establishment of the Privatisation Authority and to provide regulatory and institutional frameworks for the implementation of a privatisation. Furthermore, it lists some of the advantages of privatisation under Section 6, namely, encouraging more participation of the private sector, improving infrastructure and the delivery of public services through involving private capital and expertise, and reducing the demand for government resources, amongst others.

Section 7 of the Act further empowers the Cabinet secretary with crucial functions, including, providing policy direction on matters related to privatisation, coordinating the adherence to national, regional, and international obligations relating to privatisation and developing the privatisation programme.

The Privatisation Authority is established under Section 8 of the Act. It is the Authority’s duty to properly advise the government in privatisation matters of public entities, facilitate the implementation of government policies on privatisation, monitor and evaluate compliance to privatisation and implement the privatisation programme inter alia.

As mentioned earlier, the Cabinet Secretary is responsible for the implementation of the Privatisation programme. It is imperative that he engages those who may be impacted by the said privatisation of government services, such as members of the public, organisations representing affected persons, and experts in relevant fields. Public opinions are valuable before privatizing government services, as it will directly affect citizens.

Afterwards, the Cabinet Secretary must scrutinize factors such as the benefits of privatisation, priorities and policy goals that will be achieved and whether the privatisation will lead to a monopoly, amongst others.

The Cabinet Secretary presents the approved programme to the National assembly for ratification, prior to its implementation. Once ratified, the privatisation programme is published in the Kenya Gazette, and it shall be valid for a period of 5 years.

The Privatisation Authority are responsible for ensuring the privatisation programme is successful. Through public offer of shares, sale of shares by public tender and sale resulting from the exercise of pre-emptive rights, the general public is asked to take part in the process.

Once an entity has been identified for Privatisation, the Authority prepares a privatisation proposal which specifies the purpose for the establishment of the entity to be privatized, the financial position of the entity to be privatized and the estimated costs of implementing the proposed privatisation amongst others.

According to Section 38(b) of the Act, a public entity undergoing privatisation is authorized to continue to operate in its ordinary course of business without endangering the interests of the Government or potential buyer. However, they are restricted from incurring any liabilities or procuring assets, other than in the ordinary course of business, without the prior written approval of the Cabinet Secretary.

Following approval and implementation, the registered owner of the shares and cabinet secretary are required to sign a privatisation agreement and seal it. Afterwards, the Authority publishes a notice in the Kenya Gazette, notifying the public about the privatisation.

Ong’anya Ombo Advocates is a law firm situated and operating in Nairobi, Kenya. As a full-service law firm, we provide expertise across several related areas of law such as Tax, Commercial, Corporate, Finance, Public Policy Law, among other legal and socio-economic factors. We support our clients in every stage of privatisation, enabling them to bring a Privatisation deal to a successful conclusion. We also act as the local counsel to foreign companies and investors seeking involvement in Kenyan privatisation programmes.

Through our services, we advise entities on the best way to achieve Privatisation, the process and important details to know before applying. We guide clients through the requirements of privatization, such as facilitating business and assets valuation. Our services include conducting a precise due diligence report, which provides insight on a project beforehand. Additionally, we provide legal consultation services, through which we provide expert opinions on privatization issues.