Kenya: Audit Telkom Kenya assets to stop taxpayers’ losses

In less than two weeks, Kenyan taxpayers could lose billions of shillings if the Treasury does not pay up its share of a rights issue called by Telkom Kenya, which it jointly owns with global telecommunications giant France Telecom.

The French company’s shareholding in Telkom Kenya is set to rise permanently to 70 per cent, if the government does not cut a Sh2.4 billion cheque to help the firm offset commercial bank and shareholder loans in its books.

From a 49 per cent stake six years ago when the French firm acquired a majority stake in Telkom Kenya, the State’s ownership has been diluted by successive shareholder cash calls that have come as a result of the entity’s loss-making business.



What was intended to be a relief on the Treasury’s budget has become an ever-deepening hole swallowing billions of shillings.

The shrinking government ownership in Telkom Kenya represents not only a declining clout on the board and management of the company, but also amounts to indirect transfer to the foreign firm of prime assets built by Kenyan taxpayers over half a century.

Like most other State corporations, Telkom Kenya has on its balance sheet prime land and buildings across the country that would be the envy of any real estate developer.

Even as the government’s ownership of the company continues to shrink, Telkom Kenya’s balance sheet has remained a secret known only to representatives of France Telecom and a few top government officials.

What this means is that the public does not know what it is losing to France Telecom through the continued dilution of ownership.

The Telkom Kenya privatisation debacle is proving to be a costly mistake not only financially, but also in terms of human suffering by thousands of employees who were lost laid off in a restructuring to make it more attractive to investors.

What is most ironical is that Safaricom, which was a mere department in the defunct Kenya Posts and Telecommunications Company, is now a thriving business that is not only the most profitable in the region, but also the biggest tax payer.

Evidence of huge related party transactions and shareholder loans by France Telecom to the Kenyan business point to a firm that is fairly comfortable with the status quo, and has little incentive to innovate in a highly competitive telecommunications sector.

The government should do an immediate audit of Telkom Kenya’s assets and re-negotiate shareholding in the company accordingly, as a first step towards regaining its rightful control in the firm and putting to stop tax payer losses.

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