alexa Taking KQ back to State is fine, but why the official opacity? - Daily Nation

Taking KQ back to State is fine, but why the official opacity?

Tuesday September 17 2019

Kenya Airways

A Kenya Airways plane at Jomo Kenyatta International Airport on October 13, 2017. PHOTO | FILE | NATION MEDIA GROUP 

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So, what is to become of Kenya Airways in the coming months? This is a pertinent question because of the uncertainties surrounding the plans to nationalise the company. And I think the government has done quite a poor job of explaining to the public what the project is all about and what it intends to achieve in both the long and short run.


When KQ was privatised several years ago, we wanted to insulate it from the suffocating grip of State control. Where is the assurance that nationalisation will not spawn a regime of political interference, like in appointment of CEOs? Have we figured out the likely impact of thrusting the national carrier into the stifling procurement regime, within which all government-owned companies must operate?

Following the restructuring of the company’s shareholding two years ago, local banks, under an entity known as KQ Lenders 2017 Ltd, hold a substantial 38 per cent of the airline. So, if we are to nationalise it, the government will have to fork out billions of shillings to pay both the banks and KLM, which still owns 7.8 per cent of the airline.

In addition, you have to pay off minority shareholders, who own 2.8 per cent, and employees, with 2.4 per cent under an employee stock ownership plan.

In terms of the opportunity cost, is paying off the shareholders an urgent national priority, especially in the context of the crippling cash flow in government?


But the biggest gap in the execution of the plan is in communication and public engagement. Inexplicably, the task of communicating the complex processes and transactions that must be implemented as part of execution has been left to the chair of the Transport Committee of Parliament, David Pkosing, who is not famous for deep domain knowledge and experience in the investment banking and complex debt restructuring area.


It is from that committee that we have learnt that the government would, instead of paying off the billions to Lenders 2017 Ltd in cash, give them long-term bonds.

Another important piece of news filtering through from the committee is that a Bill implementing the nationalisation plan was at an advanced stage of drafting and would be tabled in the House together with others in what is called an “omnibus amendment Bill” next month.

Far-reaching changes

Last week, I bumped into Njoroge Murimi, the chairman of the Kenya Airlines Pilots Association — that influential trade union that had just put out a statement that, while supporting the nationalisation, it had concerns about poor engagement with stakeholders on such far-reaching changes.

Mr Murimi argued that for the plan to succeed, the mindset in government, where wholly owned state corporations were governed like appendages of ministries that must take orders and directives from ministers and permanent secretaries, will have to change.

He also said that, unlike the case in Ethiopia, where the national airline is also state-owned, our government was yet to demonstrate that it has the discipline and capacity to allow commercial corporations to operate autonomously.


It seems that, going forward, the pilots’ union will demand to have more say in the execution of the plan. The union will not just stick to narrow worker grievances and terms of collective bargaining agreements, but battle to make an impact on broader issues affecting the operations and profitability of the airline.

Remember when the union precipitated a spate of industrial strife in October 2016, when it demanded an overhaul of the top management, a matter well beyond the CBA they signed with the company?

I don’t see nationalisation happening within the time frame contemplated by the transport committee.

First, it is an open secret that the government has cash flow problems. Secondly, the project does not appear to have a strong champion to drive the fundamental changes through key decision-making centres of the state apparatus.

The state of politics in the Jubilee administration is another factor. With political power within the regime becoming more and more diffused, the appetite for implementing bold decisions as contemplated in the plan has more or less dimmed.


Last is the recent change of guard at the National Treasury following the abrupt exit of both the CS, Henry Rotich, and PS, Dr Kamau Thugge, old hands who could have played a critical role in the bold transition to a nationalised airline.

I support a rescue of Kenya Airways. It’s an urgent issue because we have to do everything to avoid the risk of triggering the $750 million guarantee, which the government issued to international creditors. But where is public participation in all this? Why do we want such a fundamental reform through opaque miscellaneous amendment Bills?