KPC privatisation model should give Kenyans maximum shareholding

I recall in 1973 when Parliament debated incorporation of Kenya Pipeline Company (KPC), the maverick Butere MP, Martin Shikuku, remarked that the project was a white elephant and that taxpayer money should instead be invested in a water pipeline from Lake Victoria, over Mau hills to irrigate Rift Valley farms.

KPC, a petroleum logistics monopoly protected by effective regulations, replaced transhipment of petroleum by railways and trucks to become one of the most profitable cash-rich companies in Kenya.

However, it is the distribution of these massive revenues that has historically created negative governance issues at KPC, as most of the surplus cash was perpetually re-invested in projects, leaving only token dividends to the Treasury, the sole shareholder.

The recently announced plans to privatise KPC, among other 11 commercial parastatals, should be modelled in a way that permits Kenyans, including hustlers, to own a chip of the company.

It should be a phased IPO that initially targets a 50 percent public offer at the Nairobi Securities Exchange (NSE) with a gradual step up. This will release much-needed cash to the Exchequer without necessarily surrendering a strategic critical infrastructure to foreign ownership which would end up draining foreign exchange in dividends.

As a petroleum infrastructure, KPC is obviously under threat from energy transition.

Water pipelines

It is a fact that petroleum demands will face gradual replacement by various forms of renewable energy especially through electrification of transport, with as much as 50 percent of KPC demands likely to evaporate in the next 10 years.

Any intending investor, local or foreign, will not ignore this threat when deciding on participation in KPC privatisation. Yes, in the end, we may have to reconsider late Shikuku’s water transportation alternatives for KPC pipelines.

Let me make a case for New KCC, the State milk marketing company, also listed for privatisation.

I am a dairy farmer and would not imagine a situation where we surrender the milk sector to total control by private players.

I feel that New KCC should be targeted for 50 percent shareholding by Kenyans, especially dairy co-operatives. This way, the company can continue with the excellent work of stabilising milk markets. The new KCC was revived by the late President Mwai Kibaki specifically for this purpose.

Back to KPC. It is not the first time that KPC privatisation has been mooted, but this time around it appears that it will happen.

The intentions and modalities for effecting the sale should target financially empowering Kenyan taxpayers who funded its establishment and growth.

The writer is a petroleum consultant.  (email protected)