It’s evident, the Government of Kenya should not engage in business

Kenya in many respects can be described as a country of knowledge for the sake of it. We are good at digging deeper, studying harder and investigating details that end up no further than that.

We are awash with all manner of fact-based reports, our drawers are full of reports from commissions of inquiry and our in-trays are littered with recommendations from special teams.

Even our public domain and discourses many times seems to go round, wither away and dry off. Of note is the issue of public debt that has dominated our economic talks for quite long now.

The other one is that of public corporations. In his first term, President Uhuru Kenyatta appointed a team that was charged with a responsibility of coming up with a report of how best to reform the many state-owned companies and corporations with an aim of bringing some sanity in these entities and across the spectrum.

Government invests in some companies and certain thresholds inform the wisdom to engage public resources in those moves. First, of course, is strategic interest among others.

STAKE BACKED

Some economies have grown in different dimensions and through different routes. Countries choose their growth paths depending on certain circumstances mainly their advantages and time. In the case of China for example, most big companies are state backed. In some other economies like the West, economies are private sector driven. In our case though, we seem to be stuck in some gray area not expressly being able to define what works for us.

However, in theory, we seem to favour a robust private sector leaving the government to do regulation and the very important role of being an enabler. However, the government still engages in business activities that can’t be termed strategic thereby the confusion.

On a level playing ground, government can never do business more efficiently as the private sector. Again, the core functions of any government are more than enough to afford time for other activities.

As above stated, different countries encounter different circumstances. The largest company on earth, Saudi Aramco, is state-owned.

NEPOTISM

Among the most profitable companies in Russia like Gazprom are state-owned. However, the fact that both companies are natural resources based is telling. Again, the levels of corruption in our country makes it almost impossible for the government to run a truly efficient company devoid of siphoning, nepotism, and operational lethargy.

It’s time we rethink our growth path as a country and align our expectations with our current actions and policies. When it comes to business, the government has made blatantly bad decisions in the past. GoK owns over 240 state corporations – wholly owned or majority owned. Most of these entities bleed cash.

Take a case of a company like National Oil Corporation with a turnover of over Sh20 billion last financial year, the company had a deficit of over Sh300 million.

In a nutshell, very few of our state corporations make money. Most are on their knees on the basis of operational inefficiencies and wrong capital allocation and many others are used to siphon public funds.

STRATEGIC VALUE

What strategic value is there in investing in loss making entities like East African Portland cement? How does the government benefit from investment in National Bank, Uchumi, Development Bank of Kenya, Consolidated Bank and such?

The most disturbing fact is that most of these companies report losses despite being in highly profitable sectors. It therefore only makes sense to conclude that governments should never be in business of doing business.

Taking the debate closer home, the government must never bailout companies like Uchumi and Mumias. Only a mad man does the same thing expecting different results. These companies have proven to be inefficient and their existence under the ownership of the government unsustainable. It is even ridiculous to know that government owns some loss making hotels and lodges.

RAISE THE BAR

Of what value are these companies to the government? They should be sold off and free the government the much needed time to concentrate on  more yielding activities.

We must also raise the bar in regards to government investments to avoid falling back into the same abyss.

A lean government is obviously more efficient and all efforts should be put into reducing the size of our government.

The remaining government backed authorities and companies ought to be consolidated.

It’s enough for the government to regulate and then leave the field to the private sector. A combination of a lean government and a robust private sector is what we need for Kenya to rake off and to reduce the avenues of corruption.

 Mr Ndindi Nyoro is the Kiharu MP and an Economist