Privatisation in Kenya 2025: Legal Framework, Process, and Recent Developments

Table of Contents

1. Introduction

   
   

2. What is Privatisation?

   
   

3. Historical Background of Privatisation in Kenya

   
   

4. Legal Framework Governing Privatisation

   
   

5. Methods of Privatisation in Kenya

   
   

6. Stages of the Privatisation Process

   
   

7. Benefits of Privatisation

   
   

8. Challenges and Risks in the Privatisation Process

   
   

9. Recent Developments and Court Decisions

   
   

10. Case Law on Privatisation in Kenya

    
    

11. Practical Implications for Investors and Businesses

    
    

12. Conclusion

    
    

13. Frequently Asked Questions (FAQ)

1. Introduction

Privatisation has long been central to Kenya’s economic reform strategy, aimed at improving efficiency, reducing the fiscal burden on government, and stimulating private sector growth. Over the decades, the transfer of state-owned enterprises (SOEs) into private hands has reshaped sectors such as telecommunications, energy, and transport.

Following the nullification of the Privatisation Act, 2023, the Privatization Act, 2025 was enacted to restore investor confidence and provide a transparent, accountable, and constitutionally compliant framework for privatisation. This new law reflects Kenya’s commitment to good governance, fair competition, and economic diversification.

2. What is Privatisation?

Privatisation refers to the process by which the ownership, control, or management of public enterprises is transferred to private entities or individuals.

The primary objectives of privatisation include improving enterprise performance, promoting efficiency, reducing public sector borrowing, and attracting private investment. It is also used to broaden citizen participation in capital markets through public offerings.

In Kenya, notable examples include the privatisation of Kenya Airways, the Safaricom IPO, and the restructuring of energy utilities to encourage private investment in generation and distribution.

3. Historical Background of Privatisation in Kenya

Kenya’s privatisation journey dates back to the late 1980s under the Structural Adjustment Programmes (SAPs) driven by the World Bank and the International Monetary Fund.

In the 1990s, the government began reducing its involvement in non-strategic industries, paving the way for the first wave of privatisations. The 2000s saw landmark transactions such as the partial sale of Kenya Airways and the Safaricom IPO, both of which symbolised Kenya’s emerging capital market strength.

Between 2015 and 2020, privatisation slowed due to political sensitivities and legal challenges. The Privatisation Act, 2023 was introduced to revitalise the programme, but it was declared unconstitutional in 2024 for lack of public participation.

The enactment of the Privatization Act, 2025 re-establishes a clear legal foundation, aligning the process with constitutional principles and global best practices.

4. Legal Framework Governing Privatisation

The Privatization Act, 2025 (Act No. 18 of 2025) is now the principal legislation governing privatisation in Kenya. It repeals the Privatisation Act, 2023.

Key features of the new Act include:

• Establishment of the Privatisation Authority as the lead agency overseeing all privatisation programmes and ensuring compliance with transparency and accountability standards.

  
  

• Approval by Parliament and the Cabinet to guarantee democratic oversight and political legitimacy.

  
  

• Mandatory public participation before any privatisation is approved, ensuring citizens and stakeholders have a voice.

  
  

• Adherence to constitutional principles under Articles 10, 201, and 227, requiring integrity, equity, and competitiveness in the management of public resources.

  
  

• Expanded methods of privatisation, including hybrid models such as joint ventures, management buyouts, and public-private partnerships (PPPs).

  
  

The Act also provides mechanisms for monitoring post-privatisation performance to ensure service delivery, employment retention, and fair value realisation.

5. Methods of Privatisation in Kenya

Under the Privatization Act, 2025, the government may implement privatisation through several approved methods, including:

• Initial Public Offerings (IPOs): Listing state corporations on the Nairobi Securities Exchange to allow public participation and ownership.

  
  

• Public Tender Sales: Competitive sale of shares or assets to qualified investors to ensure fair market value.

  
  

• Pre-Emptive Rights: Granting existing shareholders or strategic partners priority rights to acquire government shares.

  
  

• Joint Ventures and Public-Private Partnerships (PPPs): Allowing private investors to co-own and co-manage state enterprises.

  
  

• Strategic Sales or Management Contracts: Where control or management of a state enterprise is transferred to a private entity for improved performance.

  
  

These methods promote market efficiency, transparency, and inclusivity while safeguarding public interest.

6. Stages of the Privatisation Process

The privatisation process in Kenya generally follows these stages:

1. Identification and Selection: The Cabinet, in consultation with the Privatisation Authority, identifies enterprises suitable for privatisation.

   
   

2. Public Participation and Approval: Stakeholders and the public are invited to provide input before the proposal is approved by Parliament.

   
   

3. Valuation and Structuring: Independent experts conduct asset valuations and structure sale terms to ensure value for money.

   
   

4. Marketing and Sale Execution: Assets are marketed publicly or through targeted tenders, followed by transparent sale or listing.

   
   

5. Transfer and Settlement: Legal and financial transfer of ownership occurs after compliance checks.

   
   

6. Post-Privatisation Oversight: Monitoring is undertaken to ensure contractual compliance and service standards.

7. Benefits of Privatisation

Privatisation offers wide-ranging benefits to Kenya’s economy:

• Efficiency and Innovation: Private ownership often leads to improved management and innovation.

  
  

• Revenue Generation: Proceeds from sales provide funding for public infrastructure and social programmes.

  
  

• Investment Promotion: Opens up sectors for local and foreign investment.

  
  

• Market Deepening: Encourages the growth of capital markets through IPOs.

  
  

• Improved Service Delivery: Enhanced accountability and customer focus in formerly state-run enterprises.

8. Challenges and Risks in the Privatisation Process

Despite its potential, privatisation faces various challenges:

• Public Opposition: Concerns about job losses or increased costs of essential services.

  
  

• Corruption and Lack of Transparency: Risk of insider deals or undervaluation of assets.

  
  

• Legal and Political Uncertainty: Frequent litigation and political interference can slow the process.

  
  

• Socio-Economic Impact: Potential adverse effects on vulnerable populations if key public services are privatised.

  
  

The 2025 Act seeks to mitigate these risks through stronger governance, oversight, and public participation requirements.

9. Recent Developments and Court Decisions

A landmark decision in Orange Democratic Movement Party & 4 others v Speaker of National Assembly & 5 others (Constitutional Petition E491 of 2023 & E010 & E025 of 2024 (Consolidated)) [2024] KEHC 11494 (KLR) (Constitutional and Human Rights) (24 September 2024) (Judgment), declared the Privatisation Act, 2023 unconstitutional, citing inadequate public participation and lack of accountability safeguards.

The government responded by introducing the Privatisation Bill, 2025, which became law on 4 November 2025. The new Act addresses the constitutional defects identified by the High Court, especially on transparency, stakeholder engagement, and socio-economic rights protection.

This development restores a clear legal path for privatisation and reassures investors of Kenya’s commitment to the rule of law.

10. Case Law on Privatisation in Kenya

Several cases have influenced Kenya’s privatisation landscape:

• Orange Democratic Movement Party & 4 others v Speaker of National Assembly & 5 others (Constitutional Petition E491 of 2023 & E010 & E025 of 2024 (Consolidated)) [2024] KEHC 11494 (KLR) (Constitutional and Human Rights) (24 September 2024) (Judgment):  Struck down the 2023 Act for lack of public participation.

  
  

• Independent Electoral and Boundaries Commission (IEBC) v National Super Alliance(NASA) Kenya & 6 others [2017] KECA 436 (KLR): Reaffirmed the constitutional imperative of public participation in policymaking, indirectly shaping future privatisation frameworks.

11. Practical Implications for Investors and Businesses

For investors, the Privatization Act, 2025 creates new opportunities in energy, transport, manufacturing, and agriculture. However, compliance with due diligence, ethical standards, and constitutional requirements remains critical.

Businesses should engage legal counsel to navigate procedural approvals, valuation rules, and post-sale obligations. The Act also offers potential for strategic partnerships through PPPs and joint ventures; attractive for both local and foreign investors seeking stable returns.

12. Conclusion

The Privatization Act, 2025 marks a new era for Kenya’s economic reform agenda. By embedding transparency, accountability, and citizen participation into the process, the law strengthens investor confidence while safeguarding public interest.

As Kenya continues to balance economic efficiency with social equity, privatisation, when implemented under the new legal safeguards will remain a key driver of national development and private sector growth.

13. Frequently Asked Questions (FAQ)

Q1. What is privatisation in Kenya?

Privatisation is the transfer of ownership or control of public enterprises to private entities to improve efficiency and attract investment.

Q2. What law currently governs privatisation?

The Privatization Act, 2025 (Act No. 18 of 2025), which came into effect on 4 November 2025, is the current law.

Q3. Why was the Privatisation Act, 2023 struck down?

It was declared unconstitutional for lack of public participation and insufficient safeguards on transparency and accountability.

Q4. Who oversees privatisation under the new law?

The Privatisation Authority, working with the Cabinet and Parliament, manages and approves privatisation programmes.

Q5. What methods of privatisation are recognised?

IPOs, public tenders, pre-emptive rights, PPPs, and joint ventures are all permitted.

Q6. How does the new law protect public interest?

It mandates public participation, value-for-money assessments, and post-privatisation monitoring.

Q7. What sectors will likely see privatisation first?

Energy, transport, agriculture, and manufacturing remain high priorities.

Q8. Can foreign investors participate?

Yes. The Act allows both local and foreign investors to participate in privatisation opportunities.

Q9. What are the key risks investors should consider?

Political shifts, litigation, and compliance risks may affect timelines or approvals.

Q10. How can businesses prepare for upcoming opportunities?By engaging legal advisors early to ensure compliance with the Act and sectoral regulations.

To learn more, see the Privatization Act, 2025 (Act No. 18 of 2025)

Privatisation in Kenya 2025: Legal Framework, Process, and Recent Developments