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Wednesday, March 26, 2008

ODM Statement On The Privatisation Of Safaricom

Few public events in the financial realm have been as eagerly awaited in the history of our country as the forthcoming Safaricom public offering. The company is one of the most successful in our country’s history, thanks to the investments made by Kenyans’ hard-earned tax contributions.

For ODM, the most important dimension of this and all other privatizations of public corporations is to ensure that the ordinary Kenyan is able to compete in the purchase of shares on a level playing field with all other Kenyans and institutions. These public offerings offer Kenyans not only an opportunity to benefit from their small investments the way the well-to-do have always been able to do, their purchase of such shares also gives them a stake in the future of this country’s peace and stability.

ODM last year opposed the sale of Safaricom because it did not meet this cardinal test of providing a level playing field for all Kenyans who wished to participate in the Safaricom share offering, rather than organized business enterprises which stood to reap most of the benefits. To ensure that this level playing field obtains for ordinary Kenyans, ODM believes that exceptional arrangements must be made for a sale as eagerly sought by millions of Kenyans as this one. For example, the requirement that shares need to be purchased only through banks and brokerage houses which are difficult for most Kenyans to access need to be reviewed.

We also believe that the entire offering, and not just a portion as currently envisaged, must be made available for Kenyans.

There are, of course, a host of other important reasons which forced us to oppose the sale. We moved to the High Court of Kenya to seek orders compelling the Government to bring into operation the Privatization Act and to conduct the intended privatization of Safaricom within the provisions of the Act. ODM had the following major concerns with the Safaricom privatization:

· The ownership of shares worth in excess of five billion shillings in Safaricom by MOBITELEA under circumstances that have never been made public and which appear to have been made otherwise than as a “true investment” by the owners of MOBITELEA poses the danger that these “ghost owners” will now be unjustly enriched. The identity of MOBITELEA and its shareholders is still a secret; having been kept hidden by the Government;

· The Privatization Act was enacted in 2005 to regulate all future privatizations. By the time that ODM moved to Court, the Minister for Finance had not published a notice in the Gazette bringing the Act into full force and effect, a period in excess of two years, thereby rendering the legislative authority of Parliament nugatory.

· The Privatization Act requires Parliamentary approval of all privatizations and sets up a Privatization Commission, imposing standards of transparency to protect the public interest which were not being followed in respect of the Safaricom privatization.

· Issues of equity with regard to the distribution of Safaricom shares amongst various income groups, gender and regions of Kenya had not been addressed.

· There was a deliberate attempt by the Government to fast-track the privatization of Safaricom before the General Elections in December 2007 even though the fundamentals, such as the capacity of the Nairobi Stock Exchange to handle the transaction, remained doubtful. The timing just before the Election and the Christmas gift buying period meant there would be a less than robust appetite for the stock among ordinary Kenyans. There was strong suspicion that the speeding up of the process was being caused by considerations other than the public interest.

The court case by ODM was therefore initiated in the public interest: to protect the legislative authority of Parliament, to bring transparency to the privatization of Safaricom, to stop unjust enrichment by a few individuals who appear to have acquired interest in Safaricom vide MOBITELEA, and to demand equity in the distribution of the shares of Safaricom to all segments of Kenyan society.

The High Court declined to grant the orders sought by ODM. ODM then proceeded to the Court of Appeal but its appeal was further denied. ODM’s only interest in pursuing the case was the public interest.

In the meantime, the Minister for Finance, Amos Kimunya, published a Gazette Notice bringing the Privatization Act into full force and effect from January 1, 2008. He then proceeded to appoint a Privatization Commission. All these actions are a direct result of the pressure generated by ODM’s court case.

ODM is keen to ensure that the privatization of Safaricom proceeds as smoothly and as quickly as possible. However, certain fundamental questions in addition to those stated above need to be addressed.

1. The privatization of Safaricom must be in conformity with the provisions of the Privatization Act. The process should therefore be transferred from the docket of the Investment Secretary at the Treasury to the remit of the Privatization Commission, as the law requires.

2. The preparation and submission of a Privatization Strategy to Parliament for public debate is required under the Privatization Act.

3. The issues of equity raised above need to be formally and systematically addressed. Given the recent problems at the Nairobi Stock Exchange, is this the right time to undertake such a major privatization at the Exchange? In any event, concrete measures have to be taken to address the regulatory and structural inefficiencies of the bourse.

4. How was the value of Safaricom shares established?

Theses and numerous other questions that remain unanswered must now be addressed in the interest of transparency on a subject that it is of such immense interest and concern for countless Kenyans. The only prudent approach therefore is to subject the entire privatization process of Safaricom to the requirements of the Privatization Act, as now in force.

Our aim as a party is to encourage and support economic growth with equity and social justice in our country. As such, the sale of Safaricom through the Stock Exchange is a very positive step forward which Kenyans applaud, but we must ensure that the sale is conducted in a way that will benefit the greatest number of them. We should therefore proceed with the offering within the requirements of the Privatization Act, which will of course mean that the share offering needs to be delayed.

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