The National Social Security Fund has reduced its stake in the East African Portland Cement Company (EAPCC) in what has seen the cement-maker cease being State-owned because the combined government holding has fallen below 50 per cent. The State-controlled NSSF has reduced its stake from 27 to 23 per cent after it transferred 3.6mn shares now worth KES200mn to its workers retirement benefit scheme—which is a private entity. This has cut the government shareholding in the cement company to 48 per cent since Treasury has a 25 per cent direct stake. This will remove State restrictions on EAPCC’s operations in Kenya’s competitive cement market. Portland Cement has maintained that its compliance with State rules, especially on procurement, was blunting its competitive edge at a time when its rivals like Bamburi Cement and Athi River Mining (ARM) are not shackled by bureaucratic regulations, allowing them to make decisions fast. “NSSF reduced its stake by four per cent, meaning that the State’s shareholding has now reduced to below 50 percent, and that we are now a public limited company and not a parastatal,” said Mr. Kephar Tande, the firm’s managing director. “I would like to emphasise that part of the problem with the running of EAPCC involved a lot of government restrictions, specifically the Public Procurement Act and the State Corporations Act. We will now operate like a strictly commercial enterprise.” The NSSF move was informed by the conversion of its workers pension scheme from a defined benefit plan to a defined contribution, which employers bear the risk of the performance of the fund as opposed to the latter where the burden is shouldered by employers. Pension laws state that companies must pay the difference between a fund’s liabilities and assets upon conversion—a regulation that prompted NSSF to transfer part of its holding to its workers scheme. “Technically, we did not sell but ceded the shares as the sponsors of the pension scheme for our employees,” said Alex Kazongo, the managing trustee of the NSSF. The fund’s 23 per cent stake is currently worth KES1.14bn based on yesterday’s trading price of KES55 a share. The share transfer is major coup for EAPCC since the reduction of the government’s interest in the firm through the Nairobi Securities Exchange (NSE) has been on the cards for the past six years. Work at the Privatisation Commission of Kenya—which was charged with sheepherding the offer—has remained in limbo since the State-owned agency does not have a board to approve its decisions. But the firm is expected to lose State benefits such as loan guarantees—which partly egged on Kenya Power to restructure its balance sheet to earn the government a shareholding of more than 50 per cent. The below 50 per cent holding by the government in the electricity distributor was never a problem until December 2005 when investment firm TransCentury Group bought a four per cent stake from the NSSF, which reduced the combined holding of NSSF and government from 51 per cent to 48 per cent. Mr. Tande said the State holding had not been a big problem in the previous operating environment, arguing that Portland is currently disadvantaged, given the ongoing vicious battle for market share that has ushered price wars. Increased cement capacity arising from new entrants and increased production by existing players has seen the price of a 50-kilogramme bag of cement fall from KES770 in December to KES660 despite a rise in cost of raw material.