10/21/2007
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Postpone SafariCom IPO
Safaricom House
October 17 2007:
The controversy surrounding the pending and much awaited Safaricom initial public offering goes to show the immediate need of the government to get out of private business.
Although the government legally owns Safaricom, through Telkom Kenya, and has the right to sell the shares to the public, one must wonder about the timing.
On the one hand, the government argues that it needs the Sh34billion generated through the sale of the IPO to finance government initiatives, while on the other hand the Opposition, specifically ODM, fears that the government wants to use the proceeds to fund its political campaign.
This explains why certain ODM officials have taken legal action to prevent the IPO from seeing the light of day under the Kibaki government.
History has proven that government is an inept and inefficient entrepreneur. It is better for private forces, driven purely by profit motivation, to undertake economic enterprises.
Based on this point, it makes sense for the government to privatise Safaricom. But as we all know, Kenya is a country marked by shady deals, malfeasance, and gross government corruption, thus, the public must question the government's eagerness to privatise as soon as possible.
We must question why Finance minister Amos Kimunya does not want the biggest IPO deal to be subjected to the Privatization Act passed in 2005.
Although the government can easily quote the law and resort to claims of public interest, Kenyans must not be hoodwinked into believing that the deal is without dubious government interest.
Considering that the IPO process is complicated, translucent and not open to public scrutiny, it is possible to manipulate the underwriting process in favour of the government and politicians determined to win the coming election. It is not heretical to wonder why the biggest IPO in Kenyan history coincides with the General Election.
I can understand the bragging rights that the current government stands to gain if it succeeds in executing one of the biggest IPOs in Africa. I also appreciate the global significance and the positive economic impact that this IPO will create for Kenya.
However, we are better off waiting until the General Election is over.
More importantly, we must make sure that the IPO is subject to law that informs business practices in the land — in this case the Privatization Act — in order to eliminate unethical scheming that might cast the financial market in bad light. Some at Treasury department contend that if the IPO is not implemented as soon as possible the country risks inflation.
They are assuming that if individual investors can't buy Safaricom shares immediately they will opt to spend the money and flood the economy with extra cash, causing the price of goods and services to soar. But I beg to differ.
Kenyans are capable of saving their money until the time is right.
If we have to wait for a few more months in order to get the best investment deal then, as smart investors, we must do so. It is foolhardy for the government to use an IPO deal as a tool of controlling the country's monetary policy.
If Kenyans really appreciate what the government has delivered, then President Kibaki will regain the presidency and maybe Mr Kimunya will continue to serve as Finance Minister.
If ODM leader Raila Odinga wins the presidency, his government will put in place the right team to execute the Safaricom IPO. I am sure that no new government will act in a manner which precludes Kenya's economic progress.
Mr Raila is as much of a capitalist as Kibaki and he too realizes both the urgency and the benefits-both to the government and the citizenry — of implementing the Safaricom IPO.
Mutua is based in Atlanta, Georgia, USA.
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