The planned initial public offering (IPO) of the Kenya Pipeline Company (KPC) is one of the most ambitious privatisations Kenya has attempted in decades. The government is seeking to raise 106.3bn shillings ($825m) through the sale of 11.8bn shares at 9 shillings ($0.07) each, a transaction that will reduce state ownership in the parastatal to 35% and hand private investors a 65% stake.
The offer opened on 19 January and closed at 5 pm on 19 February, with KPC shares scheduled to trade on the Nairobi Securities Exchange (NSE) on 9 March. [On 19 February the offer was extended to 24 February, with reports that it was under-subscribed.r]
KPC runs Kenya’s midstream petroleum infrastructure, operating an extensive network of pipelines and depots that move refined products from the Port of Mombasa to demand centres nationwide. As an absolute monopoly, the firm has consistently delivered strong financial results and regularly pays dividends to the state.
For the year ended 30 June 2024, KPC posted revenue of 35.4bn shillings ($274m), a 14.6% rise from 30.9bn shillings ($239m) the previous year. Operating profit stood at 11.80bn shillings ($91m), while profit after tax climbed to 6.87bn shillings ($53m), up from 4.50bn shillings ($35m) a year earlier. The company paid out 7bn shillings ($54m) in dividends to the exchequer.
KPC was valued at 120bn shillings ($930m) in the National Treasury’s disclosures to parliament in mid 2025, but the IPO values it notably higher at 163bn shillings ($1.27bn) based on 18.17bn shares priced at 9 shillings each.
Kenya has not witnessed a privatisation transaction this consequential – in terms of deal size or the strategic nature of the underlying asset and business – since Safaricom’s 2008 IPO during former President Mwai Kibaki’s tenure. His administration oversaw the sale of shares in several state-owned firms such as Mumias Sugar, Kenya Reinsurance and electricity producer Kengen. His successor as president, Uhuru Kenyatta, did not privatise any parastatal.
Reviving the privatisation agenda
After previously being held up by the courts, President William Ruto has revived the privatisation agenda, framing it as a pragmatic way to raise revenue in a difficult funding environment. On top of the KPC IPO, Kenya’s government is set to trim its holdings in Safaricom after inking a deal with Vodacom Group to sell it a portion of its shareholding.
The South African telco operator – which is 65.1% owned by UK’s Vodafone – agreed to buy 15% of Safaricom from the Kenyan government, along with an additional 5% stake from its parent Vodafone in a deal valued at $2.1bn. Once complete, Vodacom’s overall holding in Safaricom will increase to 55%, leaving the Kenyan government with 20% and public investors with 25%.
Kenyan lawmakers are in the process of reviewing both thes proposed transactions. Observers believe the transactions, which enjoy Ruto’s support, will likely be approved given the solid majority that the president and his political allies in the government command in the house. Overall, the government hopes to net around Sh350bn ($2.72bn) from the two transactions.
Innovative infrastructure financing
Ruto has stressed that proceeds from privatisation will not be used for debt repayment or recurrent expenses like salaries, but will be ring-fenced to serve as seed capital for two national funds – a national infrastructure fund and a sovereign wealth fund, both of which were approved by the cabinet in December.
The infrastructure fund will finance projects such as roads, ports and power. Through the fund, the government hopes to de-risk these projects and crowd in up to ten times more capital from private investors – helping it to catalyse development without adding to the nation’s already high debt burden.
“Every shilling invested through the Fund is expected to crowd in up to 10 additional shillings from long-term investors, including pension funds, sovereign partners, private equity funds and development finance institutions,” read a cabinet memo outlining the decision to establish the funds.
The sovereign wealth fund will combine proceeds from privatisation with revenues from mineral and petroleum resources and make strategic long-term investments that can deliver commercial returns. Both funds will be professionally and independently managed under clear governance, transparency and accountability frameworks, the government said.
Privatisation timely but unsustainable
Churchill Ogutu, an economist at IC Asset Management who covers Kenya, welcomes the move to fund infrastructure through strategies such as privatisation that neither add to debt nor burden taxpayers with additional levies. “For one-off instances, as Kenya currently finds itself in its quest to institutionalise key infrastructural funds, [privatisation is] a better proposition than borrowing or taxation,” he tells African Business.
However, he cautions that privatisation cannot be sustainably relied on as a fundraising strategy due to the scarcity of profitable parastatals. Kenya has over 260 parastatals but the majority are loss-making and highly dependent on government support.
Ogutu argues that Kenya’s heightened debt vulnerabilities mean that policymakers have little choice but to resort to measures like privatisation to raise funds without increasing fiscal strain. “Fiscal consolidation remains out of reach, given revenue slippages and runaway spending requirements… the current authorities have latched on to of these off-balance sheet capex transactions such as PPPs [public-private-partnerships], securitisations and privatisations, to help control debt vulnerabilities,” he says.
Finding a way out of debt
“The money is not enough – but it helps” says John Mburu, an economist at Expertise Global, a Nairobi-based management consulting firm focused on public finance management. He tells African Business that the country’s debt metrics point to a concerning situation that has necessitated asset sales. Roughly 64% of government revenues are consumed by debt service, leaving limited fiscal space for development spending. Kenya’s debt-to-GDP ratio rose from roughly 42% in 2013 to over 70% in 2023 on the back of massive infrastructure spending, including the standard gauge railway between Mombasa and Nairobi.
Public debt had reached 11.1 trillion shillings ($86bn) as of January, while the country’s debt-to-GDP ratio was estimated at 67%, a slight decline from 2023. Credit ratings agency Moody’s in January upgraded Kenya’s long-term foreign currency sovereign credit rating to “B3” from “Caa1”, saying the country’s near‑term risk of default has eased on improved buffers. The upgrade notwithstanding, Kenya’s debt levels are still widely seen by the majority of analysts as unsustainably high.
Taxation is not the most effective fiscal policy instrument to tackle Kenya’s high debt at the moment, Mburu argues. “We saw what happened in 2024 when a 136bn shilling ($1.05bn) tax Bill led to social unrest.”
This makes privatisation the best bet for now, he notes. He contends, however, that while privatisation offers Kenya momentary fiscal relief, the country’s best way out of debt is through “the introduction of policies that support growth in productive sectors”. This includes targeted support for sectors such as agriculture and manufacturing as well as increased social spending to boost household resilience.
“For the last 10 to 20 years, we have focused on infrastructure and built railways and a lot of roads. I think now it’s time to focus on production. Here I would mention the manufacturing sector, especially agro-processing,” he says. “It’s an engine of growth that can be really helpful in supporting farmers, which are a huge chunk of the people that are in this country.”
Increased social spending in sectors such as education and healthcare is another lever to drive growth, Mburu adds. “Given the high taxes that Kenyans have been subjected to for some time, it’s high time the government put more money in social services.”