Investors have lost a combined market capitalization of Sh164.1 billion over the past five years in seven companies in Kenya where the government has a controlling stake or major influence.
These companies include Kenya Airways, Kenya Power, Uchumi Supermarkets, Mumias Sugar Company, East African Portland Cement Company (EAPCC), KenGen, and Kenya Re.
Their market capitalization went from Sh214.4 billion at the end of 2017 to Sh50.3 billion as of last week due to multi-year losses, insolvency, and dividend cuts or suspensions.
The largest market capitalization shrinkage was seen in Kenya Airways, which has declined by 81.9% to Sh21.7 billion, due to increased competition, high operating costs, and previous mismanagement.
The government’s controlling stake in the company has resulted in the company being suspended from trading.
KenGen also saw a 65.5% drop in market capitalization due to cuts in dividends, despite higher profits. Other government-owned firms have also been criticized for misuse and wastage of funds.
These losses raise concerns about the risk of investing in state-run enterprises in Kenya. The lack of policy guiding dividend payouts in companies like KenGen and the forced agreements with related parties has led to commercial losses for some.
Kenya Power, for example, was forced to suffer revenue losses to implement the 15% electricity tariff discount last year.
The lack of clear financial management and transparency in these companies raises questions about the safety of investing in them.
The financial condition of companies like Kenya Airways and Mumias Sugar Company suggests that the paper losses are likely to be permanent.
This highlights the importance of careful evaluation of the financial health and stability of state-run enterprises before investing in them.
In addition to the financial concerns, state-run enterprises in Kenya have also faced criticism for mismanagement and corruption.
The Auditor-General has consistently flagged companies like KenGen for misuse and wastage of funds. The government’s control over these companies has also raised questions about political interference and the potential for corruption.
These issues further increase the risks associated with investing in state-run enterprises in Kenya.
Moreover, the large paper losses in companies like Kenya Airways, Kenya Power, and KenGen highlight the need for comprehensive reforms in the management and operations of state-run enterprises.
The government must work towards ensuring transparency and accountability in these companies and develop policies to guide their operations. This will not only benefit the investors but also ensure that these companies play a positive role in the economic development of the country.
In conclusion, the recent losses in state-run enterprises in Kenya raise significant concerns for investors. The risks associated with investing in these companies, including mismanagement, corruption, and lack of transparency, make it important to approach these investments with caution. The government must take steps to improve the financial health and stability of these companies to ensure their long-term viability and attract investment.
