Parliament should be quick in debating people’s welfare than approving privatization of public institutions

Posted by on 7th November 2018

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Economics and all clever arguments aside, privatization in simple language is interpreted to mean incompetence! When a government opts to privatize institutions and their services; what they’re really saying is that they’re incapable of running the said institution efficiently and are thus handing it over to the private sector.

In that regard the Jubilee government has approved a number of public institutions they intend to give up to the private sector. Among them includes: Kenya’s leading electric power generating company, KenGen, the country’s largest dairy processor, New Kenya Cooperative Creameries (KCC) – which happens to be the biggest and oldest dairy processor in East and Central Africa and five sugar factories among other public institutions already earmarked for privatization.

The Executive arm of government already got approval to sell the stakes in the five sugar millers from Parliament in 2014. The House Committee on Finance, Trade and Planning while recommending Parliament approves the sale also noted that it is the only way the industry can becoming competitive and that the COMESA safeguards were coming to an end in February 2015.

It’s hard to understand how MPs easily agreed to privatize these millers without a rigorous debate. Actually, since Agriculture is a devolved function and these sales are likely to hurt counties, one expected the Senators from the counties affected to at least help steer the debate in a manner that is likely to clear the suspicion and any expected underhand deals but no, they’re all happy with the deal. Only the Governors have attempted to get the Executive to come out clear on its intentions.

In a country like ours where people see opportunities in crisis and make incredulous profit at a time when majority are suffering, our Parliament should be more keen going by the historical evidence that privatization has always led to a public rip-off more often than not. More so, where it is an institution under receivership and the new owners want the government settle all the bills like is the case with the sugar companies about to be privatized.

The danger our lawmakers failed to observe or did observe but didn’t think much about is the common case of using taxpayer’s money in the name of clearing debt and transferring ownership only for the company to fail to pick and then the public is asked to save it from collapsing due to poor management. This we have seen with Kenya Airways (although it ran profits for some time; yet the current debt far outweighs any profits made in the past). Mumias Sugar is also another case in point; although the government runs the majority shares.

Another issue here is the terms of these privatization. For instance should the new owners decide that sugar factories were no longer economically viable and decided they wanted to venture into real-estate without any regard to the farmers, is there anything stopping them? As a private entity they will be answerable to the board and not the government.

Consequently, land in Kenya has always been an emotive issue. How does the government hope to handle this in its transfer without disadvantaging the local communities who have depended on the said land?

It appears the die is already cast but we should remember is, this is not just about efficiency but our unregulated appetite for loans. The discussions we’re having now about the bloated public sector with parastatals that are overlapping in functions is a discussion that happened in this country in the 1980s that led to the Structural Adjustment Programs in the 1990s in order for the government to get loans.

First-forward to 2018 and our appetite for loans has grown 100 fold; never mind the government has failed to properly account for the money it is borrowing. In fact it is possible the decision to opt for sovereign bonds is a clever way of avoiding accountability.

In 2014 the government procured Sh250billion Eurobond to finance its “ambitious projects”. Early this year the government got another Sh202billion in a new sovereign bond despite the Auditor General saying the government couldn’t account for the 2014 Eurobond.

Our MPs should do their due diligence; take stock of previously privatized institutions and consider if they have been able to succeed since. Also, figure ways of protecting citizens from unscrupulous business men where important companies like KenGen is concerned. This being the country’s leading electricity power generating company, where does that leave the public interest if it is entirely in private hands where profits rule?

Let’s not even talk about the new KCC and the obvious conflict of interest in government that’s led to its under performance.

While privatization makes economic sense; especially where the government wants to run a free market economy; the needs of the people should be considered in great detail and this is where we expect Parliament to be most vocal – not 2022 politics.

1 Comment

  • by Maundu on 14th November 2018

    Privatisation was the logical culmination of the full implementation of the provisions of the Value Added Tax Act, 2013, especially VAT on petroleum products. Economic decisions have been made with an eye at rent-seeking by a few well-placed officials at the expense of fiscal sanity. As soon as public debts came due, there were only two choices: default, or find "creative" ways to raise funds. Higher tax collection and privatisation were the low-hanging fruit that the National Treasury chose (of course, after its three Eurobonds).