alexa With KQ and Ethio Telecom, Kenya and Ethiopia pick each other’s brains - Daily Nation

With KQ and Ethio Telecom, Kenya and Ethiopia pick each other’s brains

Friday November 22 2019

By BANKELELE
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Yesterday my friend Henok lamented about Ethiopia taking baby steps in the space of Fintech and mobile money compared to 'advanced' Kenya where Sh300 billion has been transferred in nine months this year. I jokingly asked if we could swap mobile money and national airline management teams and ideas. Yet that is actually happening.

Ethiopia is currently seeking investors to set up two telecommunications companies. It also plans to privatise its incumbent monopoly, Ethiopia Telecom, and have it compete with the new entrants who have all been given targets to serve the 90 percent of the country within five years. Safaricom is expected to bid with Vodacom and other financial partners aiming at one of the new licenses.

Meanwhile, Kenya is about to embark on a re-nationalisation of Kenya Airways (KQ) to pursue a model that Parliament believes will emulate the success of Ethiopian Airlines.

Kenya's has pursued a more liberal economy for the last 30 years, opening up state enterprises to private investors and shifting, at the behest of structural adjustment programs, from a state-owned enterprise model. The KQ deal in which the sector’s 113,000 shareholders bought 22 percent of the airline in 1996, was advised by the International Finance Corporation (IFC) and was the most celebrated IPO until the Kenya Electricity Generating Company (KenGen), and later Safaricom.

Now, both Parliament and the current management of KQ believed that, as a listed private company, the airline will recede into being a regional player whose market share will continue to drop. Introducing a report in Parliament in July 2019, Transport Chairman David Pkosing called for a new national aviation holding company that incorporates ground handling, catering, and management of airports. He argued that nationalising KQ was the way forward as its main competitors were all national and heavily subsidized – airlines that did not pay airport fees, which meant they could charge tickets cheaper fares than KQ that was private and not subsidised.

Kenya Airways will be another subsidiary of the company, but one with probably more say in aspects of service like aviation licensing, luggage, lounges, security, and immigration that are now out of their control.

But Ethiopian has no serious local competitors, and enjoys a virtual monopoly of airline passenger services, airport cargo, ground handling, and food services. It recently opened new hotels for transit passengers. That model may not work in Kenya where the private sector including influential leaders have interests in airport services, cargo, local airlines and the hotel business.

The government is at a point of no return, as it was committed to go forward and not go back. It will have to invest more.

Last week, the airline CEO and Chairman, in interviews to mark a year of direct flights to New York, said KQ needed another Sh45 billion over the Sh75 billion debt that was guaranteed by the government. Pkosing had estimated that it would cost Sh800 million to buy out 80,000 minority shareholders and that in six months, KQ would be able to compete with its peers.

CONSPIRANCIES

Kenyans, by default, believe there are conspiracies and corruption behind every recent large government projects decisions. and there is little that has been shown recently to combat the existence of this notion. Even the proposals to restructure the airline, banks and the airport management never escaped this scrutiny and that may have scuttled the earlier plan of KQ to run JKIA for 25 years.

Going national and private will also reduce media exposure on KQ. There will be no quarterly statements and no Annual General Meetings for shareholder. Instead there will be reports from the Auditor General. At this point KQ probably needs to start producing sustainability reports like Safaricom and KCB to show their overall multiplier impacts through tourism and regional connectivity on the economy compared to the support they will get.

Finally, at this point, mobile money which provided the most significant J-curve in Safaricom's history, through M-Pesa, does not seem to be a feature of the Ethiopia telecommunication licensing plans. But whatever the outcome of these new directional ventures in Kenya and Ethiopia, we agree that we can continue to compete on the athletics track in the middle and long-distance races.

Twitter: @bankelele