A Refiner Inside the Pipe: Dangote's Quarter of Kenya Pipeline Needs a Referee NowA Refiner Inside the Pipe: Dangote's Quarter of Kenya Pipeline Needs a Referee Now

Speaking in London on Wednesday, the Nigerian industrialist said his group had bought the Kenya Pipeline Company stake that changed hands this week: "We bought 25% of their pipeline network for the distribution of petroleum products." The stake is about 4.5 billion shares, or 24.76% of KPC, worth roughly KSh 42.5B ($327.4M).

We do not object to the buyer. We object to the silence around him.

A fuel producer that is also planning a refinery at Lamu has taken a large seat inside Kenya's fuel highway, and the Competition Authority of Kenya, the Energy and Petroleum Regulatory Authority and the state bodies that sold must each act before that seat turns into influence nobody can see.

A refiner on both sides of the valve

KPC is not an ordinary listed company. It runs a 1,342km pipeline loop from Mombasa through Nairobi to Nakuru, Eldoret and Kisumu, according to the company's own tariff application to EPRA, and its customers are the licensed oil marketers who sign transport and storage agreements with it. Fuel bound for Uganda, Rwanda and South Sudan leaves Kenya the same way.

That makes KPC the road every rival must use. When a company that wants to move its own fuel on that road buys a quarter of the road itself, the question is not whether it will behave badly. It is whether anyone could tell if it did. Capacity allocation, loading schedules and depot slots are decided inside KPC, and Mwenendo has found no public record of how they are shared out that an outside marketer could check.

Dangote's own words frame the purchase as a distribution play. His group is already planning a refinery at Lamu and has offered the government power from it. A supplier that wants its products moving through East Africa has every commercial reason to want influence over the pipe that moves them. That is rational business.

It is also precisely the situation competition law exists for.

Sized to slip under Kenya's rules

The deal sits just below two lines. As Mwenendo set out in its explainer on the 24.76% block, Kenyan takeover rules presume "effective control" at 25% of the votes, which would have forced an offer to every shareholder. The stake stopped about 43 million shares short of that line.

The second line is competition law, and it is less tidy. The Competition Act does not stop at majority ownership. Section 41(3) says a person controls a business if it has "the ability to materially influence the policy of the undertaking", and section 42 forbids implementing a merger until the Authority approves it.

Breaking that rule can cost up to 10% of a firm's Kenyan turnover the previous year, plus fines and possible jail for those responsible.

Whether a 24.76% holder in KPC can materially influence its policy is a question of fact: board seats, veto rights, any side agreement with other holders. That is exactly the evidence the public has not seen. We do not claim the law has been broken. We say the Authority is the only body that can answer the question, and it has not been asked in public.

The case for leaving it alone, and why it falls short

The strongest argument against intervention deserves a fair hearing. Kenya wants foreign capital. A buyer willing to pay about KSh 9.44 ($0.07) a share for a business that made KSh 11.6B ($89.36M) in profit last year is a vote of confidence the Nairobi bourse badly needs. A minority investor cannot set tariffs, which EPRA approves.

Heavy-handed scrutiny, the argument runs, would tell every future investor that Kenya changes the rules after the cheque clears.

We accept most of that. But nobody is asking for the rules to change. We are asking for the existing ones to be applied in daylight. A tariff cap does not prevent a shareholder from learning which rival booked how much capacity, or from shaping who gets the next depot slot when the line is full. Those are the quiet advantages that never show up in a tariff schedule, and the only cure is rules written down before the advantage exists.

There is a second reason for urgency. The sellers were public bodies. Kiharu MP Ndindi Nyoro has questioned whether they received fair value, putting the exit price between KSh 9.02 and KSh 9.36 a share, roughly 7 US cents, against an IPO price of KSh 9 ($0.07). Those claims are his, and they are unverified. The way to settle them is a published record, not a presidential reassurance.

Three deadlines for three institutions

First, the Competition Authority of Kenya should state publicly, by 30 November, whether it has received a merger notification for this acquisition and, if not, whether it considers the stake a change of control under section 41. If it does, it should attach conditions on information barriers and non-discriminatory access before approval.

Second, EPRA should publish binding open-access rules for KPC's pipeline and depots: how capacity is allocated, how disputes are settled and quarterly data on which marketers moved what volume. Those rules should be in force before any Dangote nominee takes a seat on the KPC board, and in any case by 31 December.

Third, the National Treasury and every state body that sold, including, by several accounts, the National Social Security Fund, should publish by 15 November how many shares each sold, at what price and on whose decision. Pension savers own that money; they are entitled to the arithmetic.

The Capital Markets Authority has a smaller but real task: confirm which Dangote company holds the shares and whether any other holder is acting alongside it, because roughly 43 million more shares bought by the group, or by anyone working in concert with it, would cross the takeover line.

Kenya sold 65% of this pipeline to the public in an offer that listed in March. Seven months later almost a quarter of it belongs to the owner of Africa's biggest refinery, and Kenyans learned his name from a conference stage in London. Regulators can still make this a deal Kenya chose with open eyes. They have weeks, not years, to do it.