Parastatal reforms must be allowed to work if the economy is to take off

What you need to know:

  • However, nothing has changed. From what I gather, the processing of the State-Owned Enterprise Bill, the key piece of legislation meant to institutionalise the changes, has been held hostage by sterile disagreements between the implementation committee and the National Treasury.
  • There is supposed to be one financial services sector regulator, taking over the roles of the Retirement Benefits Authority, the Capital Markets Authority, and the Sacco Societies Regulatory Authority.
  • This economy cannot have a sustainable take-off if the cost of electricity remains prohibitive, industrialists cannot get imported inputs on time because of an inefficient port, and Nairobi loses its position as the transport hub of the region because of a poorly run airport.

I found myself reflecting on what President Uhuru Kenyatta could do differently in the new year in terms of managing the economy.

One of the things he must do is crack the whip on bureaucratic resistance to parastatal reform. What he has started is this country’s best chance at reforming this critical sector.

Two years ago, the President of Nigeria, Mr Goodluck Jonathan, appointed a taskforce headed by the former head of Nigeria's public service, Mr Stephen Oronsaye, to recommend comprehensive reforms for the parastatal sector.

The bureaucrats made sure that the reforms stalled by starving the process of funds and delaying the passing of laws.

From what I have observed, all indications are that the recommendations made by the presidential taskforce on parastatal reform that was led by presidential adviser Abdi Kadir Mohammed and corporate executive Isaac Awuondo appear headed in the same direction.

We must not forget that when the taskforce completed its report, President Kenyatta announced that implementation would start in three months, meaning that the desired changes should have been in force by February this year. A permanent implementation committee was set up to drive the process.

HELD HOSTAGE

However, nothing has changed. From what I gather, the processing of the State-Owned Enterprise Bill, the key piece of legislation meant to institutionalise the changes, has been held hostage by sterile disagreements between the implementation committee and the National Treasury.

Until recently, the expectation was that the Bill would be presented to Parliament this month. However, it is still stuck at the Constitutional Implementation Committee, ostensibly because the National Treasury has not had the time to attend stakeholders’ roundtable meetings.

Consequently, the Bill must now wait until Parliament reconvenes next year.

That delay has major implications for the running of parastatals. We must not forget that appointment of directors and chairmen of many parastatals has been put on hold to await the new legal framework.

There is supposed to be one financial services sector regulator, taking over the roles of the Retirement Benefits Authority, the Capital Markets Authority, and the Sacco Societies Regulatory Authority.

The Kenya Forest Service and the Kenya Wildlife Service are supposed to be merged. There was a proposal to bring the operations of the Customs and Immigration departments under one roof.

The much-touted and new corporate governance code, Mwongozo, cannot be effected. There is also the proposed Government Investment Corporation, which is to own and manage commercially-oriented parastatals. All these changes cannot be effected until the Bill is passed.

BUREAUCRATS

Apparently, the bureaucrats are also pulling in different directions with regard to implementation of the Sovereign Wealth Fund Bill.

Despite the fact that the recommendations of the taskforce on the creation of a sovereign wealth fund were endorsed by the President, leading to the drafting of the Bill, the National Treasury has been resisting it.

President Kenyatta must stand his ground and complete what he started. It is his legacy that is at stake here. Parastatals are a critical sector.

This economy cannot have a sustainable take-off if the cost of electricity remains prohibitive, industrialists cannot get imported inputs on time because of an inefficient port, and Nairobi loses its position as the transport hub of the region because of a poorly run airport.

You cannot transform the economy in any significant way if you do not reform the running of parastatals, especially the large utilities providing critical infrastructure such as the Kenya Ports Authority, the Kenya Airports Authority, Kenya Power, KenGen, the Kenya Pipeline Company, the Geothermal Development Corporation, the Kenya Electricity Transmission Company, and the National Oil Corporation of Kenya.

Singapore developed from its sovereign wealth fund’s pension assets. And the equivalent in that country of the  Government Investment Corporation we are trying to create here — Tamasek — has been clinching large transactions in international mergers and acquisition markets.

There are 17 sovereign wealth funds in Africa. Why are we resisting what other countries have succeeded in doing and are benefiting tremendously from?