Report card: Privatisation Commission underperfomed despite earning big cash

Dock Workers Union protest against privatisation of the Mombasa Port by the Government in 2014. [Omondi Onyango, Standard]
The 11 board members of the Privatisation Commission met 32 times during the 2015/16 financial year to deliberate on issues pertaining to the privatisation of the Government-owned companies.

For their troubles, the board members were paid Sh11.3 million as sitting allowances and other expenses, including travel allowances. Over the same year, the Commission paid its employees Sh104 million in basic salaries as well as other perks including commuter allowance, leave allowance and gratuity.

Over 60 per cent of this was paid to the Commission’s senior management.

In addition, the Commission paid millions of shillings to different consultants for the provision of services such as publicity and transaction advisory.

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It financed all these using some Sh220 million that had been advanced to it by the National Treasury – being its grant from the Government for the year.

Despite the expenditure and the fairly good financing from the Government, the Commission delivered almost nothing during the financial year.

Other than progress reports on the status of privatising the different state entities, the Commission did not conclusively privatise any of the 26 companies that it has been charged with selling on behalf of the Government.

The same scenario has played out for the ten years that the Commission has been in place. And the only transaction that it has delivered is the sale of four per cent stake in the Kenya Wine Agencies Ltd (Kwal) to employees.

And this cannot be said to have been a resounding success considering the employees bought a marginal stake with the balance going back to the Industrial and Commercial Development Corporation.

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The Commission attributes the seemingly underwhelming performance to a mix of factors including bureaucracy that comes with being Government run and the need to hold extensive public consultations.

These include “the risk of delays in obtaining approvals at various Government levels for the privatisation proposals”. “Past delays have happened at the various levels within the Government,” said the Commission in its latest annual report.

An initiative to review and recommend reforms on parastatals has also put on hold certain functions of the Commission. A task force chaired by former Political Advisor to the President Abdikadir Mohammed had recommended a massive reduction in parastatals that would see the number drop from 262 to 187.

The Privatisation Commission’s role was to be taken up by the Government Investment Company, according to the taskforce report. It has however not been implemented and little progress has been made since the taskforce delivered the report in November 2013.

 The Commission, however, said it has adversely affected the privatisation programme as the “process initially led to the stoppage of implementing the privatisation programme pending the completion of reforms.”

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Other factors that have slowed down privatisation include the need to undertake public consultations.

According to the Commission, this has been the case in privatising sugar millers while a slump in tourism sector resulted in low bids and a decision temporarily selling Government stake in three hotels.

“In the case of sugar millers (Chemelil, Sony, Nzoia, Miwani, and Muhoroni) stakeholders had not been consulted on the best way to undertake the transactions. These are currently ongoing and the process is being steered by the Ministry of Agriculture. Discussions have started and we hope to get a breakthrough soon,” said the Commission.

“For the hotels (Intercontinental, Hilton and Mountain Lodge), the sector was not very conducive at the time we were trying to implement the privatisation.”

“The sector was hit by terrorism an people shied away from investing in the sector. When we tried to go to the market, the transaction was not successful. We are hoping that with the calm that we have now, we should be able to move the transactions forward.”

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Privatisation CommissionMombasa Port