State-owned enterprises have been the major losers at the Nairobi Securities Exchange (NSE) for a few years. This has resulted from mismanagement, personal interests, and corruption which have seen investors, who have backed organisations where the government has a stake or influence, lose billions at the bourse over the past five years.
The investors have recorded a loss of Sh164.1 billion from seven companies, including Kenya Power, Uchumi Supermarkets, East African Portland Cement Company (EAPCC), Kenya Re, Kenya Airways, Mumias Sugar, and KenGen. As of 2017, the companies’ combined market capitalization stood at Sh214.4 billion. As of the first week of February, their combined market cap had dropped to a low of Sh50.3 billion.
Kenya Airways leads the group in terms of lost market value. The national airline stopped trading in July 2020, and its market cap stood at Sh21.7 billion. It recorded a loss of Sh98.6 billion (81.9%) since 2017. With the government having a 48.9% through the national treasury, it has incurred losses resulting from increased competition, excessive spending, heavy borrowing, and the effects of the pandemic.
As a result, since it stopped trading, the company’s shares have remained suspended on the Nairobi Securities Exchange, Dar es Salaam Stock Exchange and the Uganda Securities Exchange. The national airline shows no signs of recovering, as it recently issued a profit warning at the end of 2022, predicting a bigger loss than it had in 2021, which stood at Sh15.8 billion.
Kenya Power has also seen a significant decline in its market value, losing Sh14.8 billion (83.3%) of its value over five years. Its most recent loss was Sh2.1 billion the electricity distributor lost in the 15% tariff discount implemented in 2022. Following an agreement with the government, several state-owned agencies were to implement cost reduction measures; however, only Kenya Power implemented the tariff reduction while others neglected the deal, thus leading to it absorbing the loss.
Power generator KenGen also saw its market value reduced by Sh37.1 billion or 65.5% to stand at Sh19.5 billion. Despite the company recording a profit for the year ending June 2022, the enterprise reduced its dividend payout from Sh0.3 in June 2021 to Sh0.2 in 2022. Beset by mismanagement, the firm has seen billions being wasted. Additionally, it has also suffered from interference from the government in involving it in agreement with other parties. For instance, KenGen incurred the cost of building a substation at Olkaria valued at Sh4.5 billion, after which Kenya Electricity Transmission Company took it over without signing an agreement between
the two parties.
Mumias Sugar, listed in 2001, has also seen its fair share of losses, even being placed under receivership. The company, whereby the government owns a 20% stake, reported a net loss of Sh15.10 billion in the financial year 2018/19 against the previous year’s loss of Sh6.80 billion. This was despite the company receiving a bailout of Sh3.70 billion from the national government. With the bank owing over Sh500 million to KCB bank, Ecobank Kenya (Sh2 billion), Proparco (Sh1.90 billion), and Commercial Bank of Africa (Sh401 million), the miller was placed under receivership in 2019.
With an administrator appointed to recover the money by KCB, the receiver-manager, in July 2021, reported that Mumias Sugar has an asset base of Sh15.7 billion and liabilities valued at Sh30.1 billion while the net assets or owners’ equity stood at negative Sh14.4 billion. Clearly, the company could not meet its short-term and long-term financial obligations and therefore was insolvent. However, in Q4 2022, the miller started production again, following a contract awarded to Sarai Group, a Ugandan company, and the company was cleared to restart
operations. (
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