House committee hearings lift the lid on how economy was plundered

Public Investments Committee on Commercial Affairs and Energy committee member Kasarani MP Ronald Karauri flanked by other members when East African Portland Cement Company's Managing Director Oliver Kirubai appeared before the Committee at the Continental House, Nairobi on April 19, 2023. [Elvis Ogina,Standard] The proceedings of the Senate Committee on Energy have lifted the lid on the entrapment that consumers of electricity have been put into due to official negligence. Similar investigations have been ongoing in the National Assembly with the House freezing any new contracts at least for the next four months. The controversy surrounding the details of the contracts signed with the Independent Power Producers (IPPs) is not new to the country. In March 2021, former President Uhuru Kenyatta formed a task force to review the dealings of Kenya Power and IPPs following a public outcry on the cost of electricity in the country. He suspended any new contracts in September the same year after the Task force's recommendations. However, in a strange twist of events, the Cabinet lifted the moratorium in February this year. The Cabinet did not bother to provide a valid justification to the public on the basis of vacating the earlier decision. This is despite an additional 200 MW having been injected into the national grid through power imports from neighbouring Ethiopia in January. Curiously, the Kenya Kwanza Alliance and affiliate parties have absolute majority in Parliament that made the resolution suspending any new Power Purchase Agreements by Kenya Power. The mood from the Senate Energy Committee seems to follow the path taken by their colleagues in the National Assembly. Entrenched interests The contrasts emerging from the Cabinet and Parliament signal the magnitude of the deeply entrenched interests in the energy sector. A casual search on countries with the most expensive power tariffs for both domestic and industrial users ranks Kenya among the top in Africa. Among East Africa Community Member States, we top in cost for the industrial category and only second to Rwanda for the domestic tariff. The centrality of the role of sustainable energy cost in the development of any economy is well documented empirically. It is the discovery of fossil fuels that created the industrial revolution and subsequently revolutionised agriculture, transport, manufacturing and communication technologies. Today, business and country competitive advantages are built on energy cost-effectiveness. It is not a surprise that the country seems to be continuously losing out on her competitive edge in the region. Not long ago, I shared most recent evidence that shows significant Foreign Direct Investment decline into the country compared to Ethiopia, Tanzania and Uganda. Comparatively, the three neighbouring countries have the cheapest average electricity tariffs in the region respectively. While we may think we are clever in our domestic wickedness, foreign investors are pragmatic and make decisions based on objective assessment of a country's business environment. As a primary driver of cost of production, the long term stability of energy prices ranks top in their choice of investment destinations. They have no loyalty to any single nation, for any country can fairly grant them access to the Eastern African market. Not surprisingly, the impunity of the electricity marketer is so daring that they have unitarily decided not to show the cost distribution on the consumer power purchase invoices/receipts. This was in response to the widespread lynching of the company's pricing by consumers on social media. It is as if the consumers will cease to feel the pain on the metre if they do not see the worth of their purchase. The broader questions here, however, are: How far is too far for those who plunder the economy and profit from the suffering of the masses? What do those who sign these contracts know and why are they unwilling to unmask the true benefactors behind these shadowy companies registered in well known tax havens? What is the future of an economy saddled by such wheeler-dealings across all sectors? Defining factors Going forward, the Hustler administration has no choice but to destroy these powerful cartels if they are to reset the economy and open some fiscal space. As I have always pointed out, every evil committed against the economy ultimately has its endurance limit. With no borrowing space left, runaway cost of living and growing public disquiet, fixing the economy is no longer optional for this administration. It is the only way out -period! The following four factors will be defining as to whether the administration will succeed where previous administrations have not. First will be the resoluteness of the relevant political and regulatory institutions. The zealousness with which the two houses of Parliament seem to have brought in current ongoing inquiries is commendable. But we must not be excited to lose our guard in demanding their undivided fidelity to their constitutional obligations and responsibility to the electorates. We have seen such passion on previous matters of great public interest only to be buggled when they retreat to compile their report or at the plenary of the full house. Street wisdom informs us that brown envelopes exchange hands under the table in the cover of darkness. On other instances, party lines are drawn to whip members to dance to the tunes of powerful people in the executive at the expense of public good. I pray this time the elected representatives will remain true to the people and do what must be done to right things at Kenya Power. But while they sweep in the corridors of Kenya Power, the broom must be extended to question the relevance of the regulator. Of what use is funding institutions that fail to achieve the intended outcomes? The second point is the answer to the monopoly of Kenya Power that has now evidently gone rogue. It is inevitably clear to anyone with basic common sense that the monopoly of Kenya Power has long outlived its usefulness to the economy. That power is now a threat to the strategic interest of the nation and future generations. It is mind-boggling how such contracts come into being from professionals with a consience. For instance, on what basis does anybody with basic business sense justify paying only about 35 per cent of their cost of supplies to the supplier of 80 per cent of their raw materials; and 65 per cent of their cost of supplies to the suppliers of only 20 per cent of the raw materials? Where else can such business absurdity be found except in Kenya? We must apply the lessons learned from the once giant Kenya Postal and Telecommunication Corporation. Third is to revisit how we deal with those who sabotage the economy and commit intergenerational crimes against the people. For as long as we do not inflict severe economic pain on the perpetrators, they will continue to hurt our collective interest. There is no society in the world that has developed by harbouring economic criminals in their ranks. The most effective means to punish economic crimes is to take away what is stolen from public coffers, restore it to the people and withdraw the freedoms of perpetrators. Finally, the oversight agencies and the executive must find a balance in navigating through the sanctity of existing contracts and protecting public good. A good exit strategy would be to pursue the option of letting the IPPs compete in an open market after killing Kenya Power's monopoly. That way, forces of demand and supply would help the country discover the right price for electricity in the country while giving the consumers an option to choose where to source their energy supplies.

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