Privatisation Law to Direct All State Asset Sale Proceeds to Consolidated Fund
In a bold move to tackle Kenya's escalating budget challenges, the government has unveiled the Privatisation Act, 2025, which mandates that every shilling from the sale of state-owned enterprises flows straight into the Consolidated Fund. This policy overhaul, set to take effect tomorrow on November 4, 2025, is designed to pump vital revenue into the national treasury amid a forecasted shortfall of Sh876.1 billion for the financial year closing in June 2026.
The new legislation represents a clean break from longstanding practices under the previous Privatisation Act of 2005. In the past, funds generated from divesting government stakes in state corporations were first allocated to clear outstanding debts, offset privatisation expenses, and finance fresh capital projects. Only whatever remained after these outflows would trickle into the Consolidated Fund. Now, the Act explicitly requires that any proceeds from the sale of a direct National Government shareholding be paid directly into the Consolidated Fund, eliminating these intermediate diversions and ensuring the full amount bolsters the public coffers.
At its core, this reform is a strategic response to the mounting fiscal pressures squeezing the Exchequer. Kenya's public debt servicing alone devoured 92 percent of tax collections in the last financial year, leaving scant room for essential spending on infrastructure, health, and education. Officials at the National Treasury have set an ambitious target to generate Sh149 billion through privatisation efforts in the 2025/26 budget cycle. These funds are earmarked not just to plug the deficit but also to ease the strain of debt repayments and avert deeper borrowing that could spiral interest costs even higher.
The Consolidated Fund itself serves as the government's primary financial artery, channeling resources toward critical obligations such as settling public debts, disbursing salaries to constitutional office holders, and honoring pension commitments. Any drawdown from the Fund demands explicit approval from the Controller of Budget, adding a layer of oversight to prevent misuse. By routing privatisation windfalls directly here, the law fortifies this mechanism, providing a more predictable stream of income to sustain day-to-day governance and long-term stability.
This shift underscores the administration's urgency in pursuing "creative funding solutions" as traditional revenue sources falter under the weight of economic headwinds. Privatisation has long been floated as a lifeline, but the new Act sharpens its focus by guaranteeing that sale proceeds contribute unhindered to the broader fiscal health. Economists and policy watchers view it as a pragmatic step toward fiscal prudence, though it has sparked debates on whether offloading key assets might erode strategic national interests in vital sectors like energy and manufacturing.
To kickstart the initiative, the government has lined up at least 11 state-owned firms for partial or complete divestment, with transactions slated to unfold over the coming months. Leading the pack is the Kenya Pipeline Company (KPC), a cornerstone of the country's fuel distribution network. The Treasury anticipates raking in at least Sh100 billion by offloading its 65 percent stake in KPC by March 2026. Other high-profile targets include the National Oil Corporation of Kenya, the iconic Kenyatta International Conference Centre (KICC), Rivatex East Africa, and the New Kenya Co-operative Creameries (New KCC).
These entities share a common thread: persistent operational losses that have turned them into perennial drains on public resources. Many have required repeated Treasury bailouts to stay afloat, siphoning funds that could otherwise support growth-oriented programs. By privatising them, the government hopes to not only unlock immediate capital but also inject private sector efficiency, potentially transforming these ailing giants into profitable ventures under new ownership.
The broader implications ripple across Kenya's economic landscape. Proponents argue that channeling full proceeds to the Consolidated Fund will stabilize public finances, freeing up space for investments in social services and infrastructure while curbing the vicious cycle of debt accumulation. Critics, however, caution that rushed sales could undervalue assets or invite foreign dominance in sensitive industries, urging safeguards to protect jobs and local control.
As the Privatisation Act, 2025, lands on the statute books, it signals a pivotal chapter in Kenya's fiscal reset. With the privatisation pipeline already humming, the coming year could see a transformative influx of funds, offering a much-needed breather for an economy grappling with recovery. Stakeholders from Parliament to the private sector will be watching closely to ensure this revenue surge translates into tangible benefits for ordinary Kenyans, rather than vanishing into the black hole of bureaucracy.