Why government should leave business to the private sector

Saturday May 25 2019

housing

President Uhuru Kenyatta (left) on May 22, 2019 views model houses representing the proposed Park Road Estate to be built in Nairobi's Ngara. The government should leave the housing business to the private sector. PHOTO | COURTESY  

GUCHU NDUNG'U
By GUCHU NDUNG'U
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When I was growing up in the vibrant town of Kagio in Kirinyaga, a civil servant who had just been retrenched during the IMF-driven cutbacks in the 90s landed in the town with a spring in his bounce and money in the bank.

Since he worked in the Transport department, he got this bright idea to buy lorries and start a transport business. It collapsed within months.

“Running a business is like hunting for a rabbit in the wild. Running a government is like slaughtering a rabbit that has been caught,” he nowadays tells villagers when asked why his businesses collapsed.

My neighbour is in the same predicament afflicting the government today. By going into business, it wants to perform tasks just because it sounds good even when it lacks the capacity or efficiency to do them.

NO RESOURCES

The latest is the decision to go into housing through the creation of the Kenya Mortgage Refinance Company that is supposed to lend out cheap money to buy houses, and the establishment of a Stawi Fund for small businesses.

Most of the cash to put up the houses will come from a deduction of 1.5 per cent of our money.

As the tussle over the deductions continues in court, taxpayers are awaiting a ruling on whether the government will deduct their money the same way a sober man arrested in a bar sits in a police lorry knowing no matter what happens, his time and money or both, will be wasted.

The government should quit not just this housing business, but all other businesses, and leave it to the private sector.

The government should not be in the business of being in business. By its very nature, a government is not structured to run a business.

A business needs innovativeness, customer-focused products, competent managers and a compelling vision, which are mostly in short supply in government institutions.

COMPETENCE

The first reason the government should not be in business is the people it hires and the weak systems in place in government.

In a business, owners pick the most competent managers and give them clear job descriptions to deliver value to shareholders and employees.

Governments, on the other hand, mostly pick the politically correct and connected individuals from the Cabinet seccretary's tribe or who will serve their interests. They serve their master and not the clients, citizens or businesses.

The competent ones who make it are dragged through the mud due to opaque systems and political interference.

That is why fully State-owned enterprises operating even in industries that are prospering are still making losses.

Our majority-government-controlled banks like National Bank, Post Bank and Consolidated Bank are struggling while private ones like Equity and Barclays are flourishing.

ACCOUNTABILITY

Even in manufacturing, sugar-milling start-ups like West Kenya are thriving while government-controlled ones like Mumias, Sony and Muhoroni are on their knees.

Then there is the attitude. Employees and, sometimes, board members in government-owned institutions perceive that the organisations have no owners and can thus be run down as there will be no complainant.

Hii ni mali ya umma (This is public property) is the common mantra in government offices. No one feels responsible to grow the company and those who do are reminded that ni mali ya umma.

Have you seen how rundown government housing estates are? The houses look drab, toilets have sunk and bushes are overgrown. Because no one cares. Ni mali ya umma.

This combination of weak systems, theft and incompetence then leads to the collapse of these government-run institutions, which then ask for a bailout and our money ends up being used to bail out enterprises that should not have been started in the first place.

DEBTS

In budget documents presented in Parliament this month, the Treasury revealed that Sh27.2 billion worth of dormant loans will be written off, including Sh25 billion owed by Kenya Airways.

Even as the government wrote off these debts, it is still staring at more defaults totalling Sh116.8 billion lent to 29 other institutions that have stopped making repayments.

Water companies are the most notorious defaulters, owing Sh41 billion yet they make money.

Even Co-operative Bank owes the government Sh476 million despite being a top-tier lender that makes billions in profits.

Nobody wants to pay because, well, ni mali ya umma. So, why should the government keep investing our cash in money-draining schemes?

SERVICES

The State should remain as regulator, equaliser and provider of social services.

When it has to invest, it should remain a minority shareholder with little say in management.

Let them build transport and water infrastructure and ensure all estates are well-planned, leaving spaces for public facilities.

After they do that, let them get out of the way and let property firms put up houses and consumers decide whether to buy or not.

And instead of establishing Stawi, the government should stop borrowing domestically so that SMEs can easily access funds.

The writer is the Assistant Editor, Sunday Nation; [email protected]

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