Hello, minority shareholder
Friday November 25 2022
What is the state of minority shareholder consciousness in listed companies in Kenya?
In Kenya Power, more than 49 per cent of shares are in the hands of minority shareholders compared to 50.1 per cent for the government. At the KCB small shareholders cumulatively own more shares than the State. Yet the government appoints and can remove all directors at anytime.
I blame it on the level of minority shareholder consciousness. As a young business writer covering AGMs, one of the things that used to fascinate me was the shareholder who would ask tough questions and heckle the directors.
Today, the typical shareholder who attends an AGM goes there to be given branded t-shirts, hats, and umbrellas.
I have digressed.
The subject of shareholder consciousness was top of my mind after the government orchestrated the exit from the board of two elected directors — Ms Vivian Yeda and Yida Kemoli — from the board of Kenya Power.
All it took was for Treasury Cabinet Secretary, Njuguna Ndungu, to give a notice that the majority shareholder would be moving a motion to have them removed during the company’s AGM on December 31.
How I wish that we will one day have activist and assertive shareholders capable of mobilising the rest of the small shareholders to challenge the government, especially in circumstances when it is clear to everyone that the majority shareholder is abusing its voting powers.
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I say so because in removing Yeda and Kemoli from the board of the electricity utility, the majority shareholder was not motivated by altruism.
He has merely acted to tilt the balance of power on the board from a team of public-spirited individuals who have been on a mission to restore the fortunes of the company to powerful cartels and tenderpreneurs who have captured the company’s supply chain for years.
And when I refer to this group as a cartel, I am not just mouthing a cliché.
A tiny elite of suppliers of meters, poles, transformers and cables has organised themselves into a formal association.
Since March last year, the cartel has engaged the company in protracted court battles over tenders of cables, meters and equipment for substations, the consequence of which is that Kenya Power has been unable to buy essential supplies.
In a tender floated in March this year, the Board of Kenya Power decided to introduce higher quality standards in the meters, transformers and substation equipment.
First, a requirement that the tenderer had to have 15 years of technical experience in manufacturing meters and transformers.
Second, the brand of the equipment was required to be in service and used in at least three of the following regions- Europe, North America, Africa, Asia, and South America.
Third, the company would only buy metres that had been tested for accelerated life expectancy tests in a certified laboratory.
Finally, it was a requirement that the metre offered had to have a non-volatility memory with a long-term retention period of not less than ten years.
The tenderpreneurs would have non of it. They challenged Kenya Power by advancing the following arguments.
First, the quality standards introduced were aimed at discriminating against local producers.
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Secondly, Kenya Power was bound by the policy of the government of ‘buy Kenya build Kenya’ that requires that locals be given preference in tenders.
Finally, the introduction of stringent rules was a violation of the 2010 constitution.
They lodged a challenge at the Public Procurement Appeals Tribunal where they lost. They took the case to the High Court and lost. They went to the Court of Appeal and lost.
If you track and trace beneficial ownership of members of the Energy Assemblers and Manufacturers Association, you will find that it resembles a list of ‘who is who of operatives within major political parties.
Yeda, Kemoli, and Abdulrazak Ali, Elizabeth Rogo, Caroline Kittony and Sachen Gudka before did not exit from the board of Kenya Power of their own volition. The government had changed. The boot was on the other foot.
With the field cleared, who will win the multi-billion tender for metres, transformers and equipment for substations?