Kelvin Kithi

Privatization: What’s the Government doing? Private life is like being a ghost. Nobody knows what you're thinking, where you are, or what you're doing. Sometimes, just existing is all you need, and apparently, our country feels the same way. The powers that be, filled with thieves and con artists, want to shake things up a bit. Based on the government’s track record, we might be heading towards a less greedy path that benefits our country the most. Privatization, a fancy business term for going private, allows the government to step back from managing certain institutions like KWAL and Safaricom, which used to be government-owned. Instead, they let private individuals like companies and investors take ownership of these companies. Most of the time, the government stands to gain the most from privatization. They still retain a percentage of ownership, tax the company, and even allow citizens to get a piece of the action by owning shares. So, let's dive into privatization, its advantages, and the Privatization Act of 2023. We'll also explore which companies have been privatized in the past, their impact on Kenya, and how they've contributed to the nation's development. History of Privatization Privatization refers to the process of transferring ownership of a property or business from the government to private entities. Also, in any country, the government needs to provide public services to citizens because no one else would at a fair price, and that is achieved through parastatals. Back in 1963, after Kenya gained independence, the government set up these things called parastatals (state-owned companies). The idea was to speed up growth in Kenya's economy and society. They also wanted to address economic imbalances between regions and give Kenyans more opportunities to contribute to the nation's growth. It was all about promoting Kenya's nationalism and eventually led to privatization. However, the earliest signs of the shift to privatization can be traced back to 1965, with Sessional Paper No. 10 on African Socialism. The goal was to boost the country's economic development by getting more Kenyans involved in the economy and supporting local entrepreneurship. And by 1979, there was mismanagement of funds, prolonged inefficiency, and malpractices as problems facing parastatals according to a report on Review of Statutory Boards and report of the Working party Government Expenditures of 1982. Now, let's fast forward a bit. In 1986, President Moi wrote a book on African Nationalism. He had this vision for Kenya based on the African Socialism movement that was happening all across the continent at the time. And not long after that, the Kenya Posts and Telecommunications Corporation was privatized, allowing its transformation into a company called Safaricom. Other privatized companies were Kenya Airways. By the year 2000, Kenya owned 60% of Safaricom. That's when they decided to make it a public company through an Initial Public Offering . You see, in the business world, a private company isn't owned by the public, so its shares can't be sold to just anyone. But Kenya Posts and Telecommunications Corporation couldn't sell its shares to the public until 2000 when it became Safaricom and went public (through a shady privatizing scheme). However, it was in 2005 that there was a need for a legal system that would allow for the privatization of public assets and companies, including state corporations. This paved the way for the Privatization Act of 2005 under Kibaki's administration. During his time, companies like Kenya Electricity Generating Company (KenGen) were put up for sale, giving Kenyans the opportunity to participate more in the country's economy. More recently, President William Ruto has also put several state-owned companies up for sale through his new Privatization Act of 2023. Despite the uproar, the Act took effect in October this year, as highlighted on the Privatization Commission website. What Impact Does Privatization have on Kenyans? When it comes to dealing with the government, everything moves at a snail's pace and it can be pretty frustrating. We've all experienced the agony of waiting in government offices, hoping to get things done quickly, only to end up wasting precious time. And let's not even get started on the never-ending queues at public hospitals. Those patients know the drill - arrive early, be the first in line, and pray for a speedy resolution. This just goes to show how government-owned companies can be painfully slow when it comes to providing services. Sometimes, it's simply because they lack the necessary infrastructure. I mean, seriously, can we get some reliable computer systems that don't freeze every now and then? Other times, the issue is much more serious - the government is strapped for cash and can't fund its development plans. Privatization, when executed properly like in the case of Safaricom, has proven to be incredibly beneficial for a larger number of people than initially anticipated. Nowadays, Kenya boasts a reliable and speedy internet connection that covers the entire nation, no matter where you are. Additionally, Safaricom actively engages in campaigns aimed at inspiring and motivating the youth, such as the BLAZE initiative, which focuses on entrepreneurship. Can you imagine if Safaricom had remained in the shadows of Kenya Posts and Telecommunication as a mere department? We wouldn't have had the privilege of experiencing the revolutionary mobile banking service, M-Pesa, which continues to be a profitable venture for the company even today. But then, what are the advantages of privatization to Kenyans? I. Generation of Additional Government Revenues: Privatization offers a remarkable opportunity for the government to bolster its coffers with increased revenues. By divesting public assets, the government can secure compensation, injecting a much-needed financial boost. II. Improvement of Infrastructure and Delivery of Public Services: The infusion of private capital and expertise through privatization holds the potential to revolutionize Kenya’s infrastructure and public service delivery. With private entities at the helm, citizens can expect a surge in efficiency, innovation, and overall quality, ensuring top-notch services and enjoying a modernized infrastructure. III. Reduction of Demand for Government Resources: Privatization serves as a powerful tool to alleviate the burden on government resources. By transferring certain responsibilities to the private sector, the government can redirect its focus and resources towards pressing priorities, such as education, healthcare, and social welfare. This strategic shift allows for a more streamlined and effective governance. IV. Enhancement of Capital Markets: Privatization acts as a catalyst in the development and enhancement of our capital markets. By opening up opportunities for private investment, we create a vibrant ecosystem that fosters economic growth. This, in turn, provides businesses and infrastructure projects with a wider array of financing options, propelling our economy towards new heights. V. Efficiency and Responsiveness to Market Forces: Embracing privatization empowers our economy to become more agile and responsive to market forces. By reducing bureaucratic red tape and introducing competition, we unlock the potential for enhanced economic performance. This dynamic environment encourages businesses to adapt swiftly, innovate, and thrive, ultimately benefiting the society as a whole. Do we have proof? Seeing is believing, and we don't believe in ghosts because we can't see them. Maybe they exist, or perhaps they don't, but who even cares, right? What really matters to us Kenyans is how the government is fulfilling its duties to serve the people. In the case of privatization, is there proof that companies have been better after the government lessened it control? Apart from Safaricom, what other company has been successful in dispensing it’s activities to the nation? KenGen In 2005, the Privatization Act opened the door for the sale of state-owned companies, including KenGen, National Bank, East African Portland Cement, and sugar factories. This move came after the public rejected the idea of giving away these companies without any legal structure, calling it a thieving act. Fast forward to 2023, KenGen has some exciting news to share. They announced a whopping 14% growth in revenue, KSH 5.2 billion in profits after tax, thanks to the successful operation of the Olkaria V Geothermal Power Plant. This plant, with a capacity of 165MW, has played a significant role in boosting KenGen's profits. It's clear that KenGen is making remarkable progress in the sustainable electricity sector. But that's not all. The government has been working hard to attract investors to the country. They've introduced policies like the creation of special economic zones, such as the famous Tatu City. These initiatives have made electricity more affordable for everyone, as the government owns a 60% share in KenGen. According to Epra’s director general Daniel Kiptoo, “We will have one uniform tariff of Sh10 across all SEZs except Kedong whose tariff remains unchanged,” showing the commitment of the government through KenGen to ensuring that electricity is supplied to the important places that stimulate economic growth in Kenya. The named Kedong Special Economic Zone had received a pilot tariff of ksh 5 per Kilowatt-hour for Olkaria Kedong SEZ in Naivasha. Kenya Wines Agencies Limited KWAL Established back in 1969, KWAL had one main goal in mind: to create a platform for importing and distributing wines and spirits, giving indigenous Kenyans a chance to get involved in the industry. Fast forward to 2014, and KWAL underwent privatization to boost efficiency and competitiveness of the country's resources. The decision to privatize KWAL was driven by a few key factors. Firstly, it aimed to enhance the company's performance and make it more adaptable to market forces. Secondly, it aimed to relieve the government of the burden, allowing it to focus on other pressing priorities. Lastly, it aimed to attract foreign investment, which would bring in fresh ideas and perspectives. This led to Distel, a South African company, acquiring shares in KWAL when it went public, and subsequently introducing South African Wine brands to the market. KWAL has quite the impressive track record. In 1982, they pioneered the development of the first commercial winery. And now, they're proudly showcasing their state-of-the-art manufacturing facility in Tatu City that cost KSH 4 Billion. This facility is equipped with cutting-edge technology, solidifying KWAL's position as a leader in the industry. Not only will this facility create numerous job opportunities for Kenyans, but it will also pave the way for future business growth in the manufacturing sector, contributing to Kenya's overall economic development. The Privatization Act of 2023 Since the release of the Sessional Paper in 1965, the goal of facilitating the privatization of government assets has undergone a gradual evolution. The nation has been striving to streamline and enhance the process, making it more efficient and accessible to all. The Privatization Act of 2005 is replaced by the Privatization Act of 2023 where the key changes include; 1. Establishment of a privatization authority that oversees privatization processes. 2. Removing the parliament from the process of approving privatization of state-owned companies and assets. 3. Elimination of bureaucracy that hinders the privatization of companies. 4. Allowing more Kenyans to participate in the process. 5. Existence of a privatization review board that will resolve any disputes and appeals under the Act or other written laws. The Kenya Kwanza government has listed at least 35 companies to be privatized after the Privatization Bill was passed. The newly formed Privatization Authority responsible said it would ensure that communities living close to these companies and feeling entitled to them could enjoy opportunities designed for them. Joseph Koskey, the CEO of Privatization Authority said, “[This will apply] if there’s this particular company based in some region and people within that particular locality feel that ‘this is ours because it is on our ancestral land, for example’ “We can say that because these people have some attachment to this company, we recommend that, probably, they are given, for example, 30 percent of the stake on sale. They can come up with co-operatives [to pool funds for investments], for example,” he explained in an interview. This means that a company like Kenya Ports Authority for instance, would have shares allocated to the community should they feel the company belongs to them because it exists in their neighborhood. Often, during privatization, companies offer shares to their employees as in the case of KWAL, helping citizens improve their livelihoods as the company accrues more sales. This is how the government intends to allow Kenyans to participate in the company’s affairs as it tries to stimulate growth. Both individuals and companies purchase shares, essentially lending money to the government to support the provision of services to fellow Kenyans. Privatization, as a concept, holds great potential for our country, particularly in areas where financial issues, often tied to infrastructure, impede the delivery of public services. By allowing private entities to take charge, we can address these challenges more effectively. Despite the politics around privatization, some of these companies like Safaricom, KWAL, KenGen, and others have provided significant economic strides in Kenya. We are connected because of Safaricom, drunk because of KWAL, and have expensive power tariffs in regions out of the Special Economic Zones because of KenGen. Maybe Kenya could consider reviving the oil refinery at Mombasa and allowing for the production of milk-based products that we often import, especially with companies like New KCC and KPC being set up for privatization. This could potentially bring about a revival in the country's economy and create new opportunities for growth.