Without a privatisation commission, there can be little foreign investment

The government’s privatisation programme is completely stuck.

We have not had a privatisation commission, the body supposed to prepare and pass transactions, since the tenures of the former commissioners expired in October last year.

In November last year, Finance minister Uhuru Kenyatta appointed a new set of commissioners and presented the list to the Parliamentary Committee on Finance.

But the committee rejected the names on the grounds that the appointments did not reflect ethnic diversity.

Is it not an outrage that in the name of trying to restore a balance in the ethnic arithmetic by fighting to ensure members of a ‘‘certain community’’ do not dominate this key institution we have not had commissioners since November last year?

Meanwhile, the commission’s secretariat, a full bureaucracy with tens of employees, has been idle gobbling taxpayer money.

Granted, privatisation is a very controversial issue. It evokes strong opinions especially from trade unions and the political elite.

Political pressure and agitation by trade unions is what forced the government to suddenly drop interest in plans to privatise some operations of Kilindini Port.

All evidence showed that the restructuring of the port’s operations as proposed under the privatisation plan was going to increase efficiency by a big margin.

We dropped the idea even after spending hundreds of millions of shillings paying transaction advisers.

The political class will just not see the ownership of this family silver and cash cow go to foreigners without throwing a tantrum.

When it comes to the role of foreigners in privatisation, we practise double standards.

That is why, when the Kenya Commercial Bank, the TransCentury Group and Equity Bank expand their footprints by buying and merging with companies in Rwanda, Uganda, and Tanzania, we applaud the spirit of enterprise displayed by these corporate icons.

But when a foreign investor expresses interest in the privatisation of Kilindini, we insist that they are motivated by greed.

Implemented well, privatisation can be a strong tool for not only attracting investment, but also restructuring the economy.

Our sugar factories are inefficient, not merely because we are bad managers; it is mainly because they are suffering from the paralysing effect of state ownership.

Government ownership is what has turned these factories into perpetually under-capitalised entities, with neither the capacity to withstand catastrophes nor the ability service debts.

Yet most of the debt in their books is money they borrowed, not because they needed it, but because influential individuals imposed on them expansion plans through which the politicians wanted to reap economic rent.

In October last year, the Cabinet approved a privatisation plan with the objective of restructuring the sugar sector.

That plan had three parts. First, cleaning up their balance sheets by writing off the debts, second, merging the Chemelil and Muhoroni sugar companies, and, finally, amending the Sugar Act to exclude the provision that 51 per cent of a privatised sugar company must be owned by farmers.

The plans to restructure the ownership of the National Bank of Kenya has not progressed because we do not have a privatisation commission in place.

Nor has there been progress in privatising Consolidated Bank. The last time I checked, all that had been done was the appointment of a consultant to conduct due diligence on the bank. Everything is waiting for the appointment of a new commission.

The plans to transfer ownership of New KCC Ltd. to its rightful owners – the local dairy farmers – are also stuck because we do not have a commission.

Part of it is due to resistance by ministers. In retrospect, it would appear our ministers were not wholly sold to the idea of an independent commission with powers to sell assets under their ministries without reference to them.

The Ministry of industrialisation strongly opposed plans to privatise the Numerical Machining Complex.

The Ministry of Tourism came up with its own parallel proposals for privatising the shares owned by the Kenya Tourist Development Corporation in hotels such as Hotel Intercontinental and the Nairobi Hilton.

Just the other day, the ministry of Trade came up with a privatisation plan for the Kenya Wines Agency without reference to the Privatisation Commission.

jkisero@ke.nationmedia.com