Let's avoid Russia's mistakes during privatisation of State corporations

Suleiman Shahbal, Chairman of Gulf Group. [Elvis Ogina, Standard]

If you want to understand the perils of uncontrolled privatisation, read Chapter 11 of Naomi Klein's book 'Shock Doctrine'. It describes in chilling detail how key corporations of the Soviet Union were sold for a song and ended up in the hands of a few people who became known as the "Oligarchs".

In 1991, Russia President Yeltsin went to Parliament and made an unorthodox proposal. If they gave him one year of special powers, under which he could issue laws by decree rather than bring them to Parliament for a vote, he would solve the economic crisis and give them back a thriving healthy system. What Yeltsin was asking for was the kind of executive power enjoyed by dictators, not democrats, but Parliament was still grateful to the President for his role in resisting the attempted coup.

The answer was yes. Yeltsin could have one year of absolute power to remake Russia's economy. This led to the first phase of rapid-fire privatisations where 225,000 state-owned corporations were privatised for a song - and Parliament was absent, silent or deaf by its own democratic consent. While our situation is not so extreme, the Executive's demand that Parliament abrogates its oversight role on privatisation of State corporations sounds like Yeltsin's demand for carte blanche powers on what to sell.

Russia's economy was in dire straits just as we are now. It didn't work in Russia, it won't work here. So, what is Parliament's responsibility on our parastatals and have they executed their mandate effectively? Successive parliaments have failed to stop the rot in parastatals. Parliament set up a "Privatisation Commission" and those in the private sector derisively called it "the graveyard of projects." The commission is bogged down by government bureaucracy, which has effectively neutered its ability to execute its mandate. If we depend on this commission to effectively privatise, then we will still be waiting in 2027.

President Uhuru Kenyatta set up a commission to study our moribund and loss-making parastatals and make implementable recommendations. The 'Abdulkadir Commission' presented an excellent report with excellent policy and business recommendations. The report was not made public and is gathering dust to date. The unequable recommendation is that most parastatals have not fulfilled their promise or mandates and are a waste of public resources and so many must be sold off.

The commission confirmed what is already known; government cannot do business, not in Kenya, US or Europe. Government has no business being in business. Clearly, there is a need to change course. So, what to do? We need to find a middle path between Parliament's right of oversight and the Executive's desire for quick fixes to the economy that will lighten the financial burden caused by loss-making parastatals on the exchequer. Government wants to give the mandate of privatisation to the Cabinet Secretary and to the Executive.

Technically efficient, but if unchecked, could lead to the Soviet scenario. If left to Parliament, they will end up bogged in endless debate and Parliament could take years to make any decision, particularly where the parastatal has political implications at the constituency. The middle path is a blend. Let the Executive send to Parliament a list of all parastatals that they recommend for privatisation and why they want to privatise them. Let Parliament approve the list.

Thereafter, appoint independent consultants who will value the corporations and present terms of engagement and the process of how these parastatals will be privatised. The process of privatisation should be managed professionally and transparently, not politically. This is the only way Kenyans will get value for their assets.

The writer, Suleiman Shahbal, is the Chairman of Gulf Group.

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