Kenya gets US$365 million dividend windfall from investments

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Earnings from public investments by the government reached a record high of US$365million (Kshs. 43.66 billion) during the fiscal year that ended in June of this year, providing a boost to the National Treasury, which is under pressure to find the cash to support essential economic initiatives.

The increase in dividend profits for 2021/22 of 13.67 billion Kenyan Shillings over the target amount of 29.9 billion Kenyan Shillings that the exchequer had set for the period indicates stronger financial performance.

  • In the fiscal year ended June, the government earned US$365 million from public investments, boosting the National Treasury’s ability to finance development initiatives
  • The dividend profits are less than half of the 116.14 billion shillings that the government generated from its shareholdings in the 2019/20 fiscal year
  • The Treasury will receive a total payout of Sh19.4 billion for its 35 per cent stake in  Safaricom

It is anticipated that the money, which was wired by parastatals, state agencies, as well as listed and private enterprises in which taxpayers have an interest, will help improve cash flow issues at a time when tax receipts have not entirely recovered from the economic shocks caused by the Covid-19 outbreak.

Economic slump

However, the dividend profits are less than half of the 116.14 billion shillings that the government generated from its shareholdings in the 2019/20 fiscal year.

The fall in dividends demonstrates that businesses have not yet fully recovered from the economic depression induced by the Covid-19 outbreak, which resulted in lower earnings even as others stopped dividend payouts to protect cash reserves.

According to data provided by the Inspectorate of State Corporations, Kenya has more than 280 state organisations. However, the Inspectorate of State Corporations reports that very few of these corporations are commercial businesses that earn appropriate dividends for the government.

A number of commercial parastatals, including Kenya Wine Agencies, KenGen, Kenya Power, the Central Bank of Kenya, the Kenya Meat Commission (KMC), and the East African Portland Cement Company, are owned in part by the Kenyan government.

In addition, the National Treasury has a financial interest in Safaricom, Kenya Airways (KQ), Kenya Reinsurance Corporation (Kenya Re), and a number of local banks and financial institutions, including National Bank, KCB, Consolidated Bank, Stanbic Bank,  Housing Finance Bank and Development Bank.

Dividend declaration

Safaricom, the government’s primary source of dividends, substantially increased its dividends payout. Other state-controlled enterprises, like the power generator KenGen and Kenya Re, also increased their contribution during the review period, which helped to boost the total amount of dividends.

The Treasury will receive a total payout of Sh19.4 billion for its 35 per cent telco ownership due to the dividend announcement, making it one of the most significant recipients of the windfall.

In February, Safaricom paid an interim dividend to the Treasury in the amount of 8.97 billion Kenyan shillings.

Safaricom declared a final dividend of 0.75 shillings per share, which will entitle it to receive an additional 10.5 billion by the 31st of August.

Last year, the Central Bank of Kenya (CBK) paid out Sh10.5 billion in dividends to the Treasury, which helped ease a liquidity bottleneck at the exchequer. The CBK earns its income through interest on loans made to banks, government overdrafts, and currency exchanges.

Read: Kenya: Centum to pay shareholders KSh 391 million in dividends amid KSh 1.33 billion loss

 

Maingi Gichuku is passionate about helping African businesses grow by offering technology solutions. With a BSC in Zoology and biochemistry, Gichuku yearns for an Africa that can find solutions to its challenges. My drive is to see an economically dynamic Africa and embrace its populations by creating opportunities cutting across the social and economic strata.

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