The planned sale and concession of State corporations is heading into political and legal headwinds that may create a myriad of challenges for the Kenya Kwanza government.
First, members of Parliament are still raising questions about the transparency surrounding the whole process after they were removed from the oversight process in the recently amended Privatisation Act.
Some have gone further to accuse senior leaders in the Kenya Kwanza administration of harbouring vested interests in the intended sale or lease of some strategic assets like Kenya Pipeline Company Ltd and Kenya Ports Authority.
“The entire thing is flawed because the Act left out oversight by Parliament, and the law is also unconstitutional because it has not come to the Senate yet some of the targeted parastatals carry out devolved functions in agriculture, health and water, among others,” says Vihiga Senator Godfrey Osotsi.
Because of the mounting controversy, the Senator says the tussle will definitely end up in court where public interests will most likely supersede commercial and political considerations that appear to be the overriding factor.
Former Mandera Central MP Billow Kerrow, a seasoned chartered accountant who has written extensively on asset management and disposal, argues that mistakes made in the past are just about to be repeated.
The government claims that the privatisation process will be done faster through circumventing parliament because decisions have to be made quickly without wasting valuable time but that is the bone of contention. But critics counter that doing so convolutes the process because it will be shrouded by mysterious and questionable deals due to lack of transparency.
“Some of us are a bit worried because I thought they would focus on institutions that are problematic or have impacted significantly on the economy like the sugar factories but going for Kenya Ports Authority or Kenya Pipeline raises a lot of questions,” says Kerrow.
Economic Analyst Prof XN Iraki also thinks more clarity should be made on the intended privatisation of State assets in various parts of the country.
He argues that the process could get murky unless its objective is made clear over whether it is meant to just dispose off State assets, to make money out of them, getting public assets and making them private or to make those institutions more efficient.
“As far as I’m concerned, the political motive appears to be more important more than even selling or privatising them and so at the moment, I may not be able to answer your question unless we get more details about the process,” said Prof Iraki.
He recounted that President William Ruto promised to float 10 Initial Public Offerings (IPO) before assuming office but nothing has been heard about it one year later.
Prof Iraki equates the unfolding scenario to how the Russian oligarchs made their money through use of political power and connections to monopolise and dominate the industry and promote their own interests by controlling multiple businesses.
“Remember they are saying Parliament will not be consulted, which means it is an executive order and so what happens when a company that has been profitable is targeted for privatisation without scrutiny? he asks.
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He roots for the objective of the process and the method to be transparent and for the whole process to be robustly debated so that Kenyans to agree on the best way of doing it to avoid past failures like what happened to Uchumi supermarkets and others.
Kerrow also struggles to understand the motive behind the concession of services at KPA which is doing pretty well and is very profitable or KPC, another very liquid company making very good profits every year.
He argues that ideally in terms of policy, factors driving privatisation should be a state corporation not doing well in terms of service delivery or when it is draining the Treasury every financial year like Telkom and Kenya Airways.
But he is also aware that the decision to privatise is also based on the vested interests of people in power, the way it happened during the Kanu era when very profitable companies with government shareholding were sold.
“Because of vested interests, they were sold for a song and people in government took up the shares. I think the same thing is being done here. It is because of vested interests but there are also other genuine factors that include drawing on the economy and some entities not working efficiently like those in the sugar sector,” added Kerrow.
Speaking on behalf of farmers, former Kenya Sugar Board chairman Saulo Busolo said he smells a rat due to a lack of public participation.
He fears this will mean the entire process will be subjected to bureaucratic evaluation that is controlled by powerful well-connected networks.
The former MP gave examples of the failed privatisation of Mumias, Miwani and Uchumi companies that went aground because the process was done under bureaucratic oversight.
“The government was represented by PS Treasury. The PS Agriculture also sat on the board throughout. The failure was witnessed by the government. How can they be the ones overseeing again?” Asks Busolo.
He also protested the removal of privatisation from evaluation by Parliament, calling it suspect because it creates a loophole for manipulation by networked interests to control the process.
Whereas farmers are happy with the writing off of debts owed by the sugar companies, they are worried that the assets will be taken over by well-connected private mills blamed for creating chaos and running down affected public mills.
“The worst thing is to have any of operating private mills run these public mills because some of them caused the disorder that crippled them and yet we know they are the ones being fronted by barons and powerful people to buy government mills,” says Busolo.
He also believes the government should offload its shareholding to farmers like they did to the tea industry because that will empower them and spread wealth within the community.
Busolo says farmers can plan or be facilitated to buy if the government floats a bond through which they can purchase those mills and run them the way their tea sector counterparts are doing.
“We have many examples of successful mills around the world that they can copy from and so it is wrong for the discussion to proceed without farmers’ involvement because they have maintained these mills despite the debts,” added Busolo.
There are also fears from past experiences that some of the investors could only be interested in land and asset stripping as happened to Kenya Railways over 10 years ago when an Egyptian investor took over.
Kerrow says the same happened to Kenya Petroleum Refineries Limited where an Indian company Essar Energy Overseas Limited duped the government into signing an agreement on the basis that they were going to upgrade the refinery.
“They turned around and left after making profits and failing to pump money into the refinery as agreed in the contract with the government because there was lack of transparency and that is what we are seeing again,” says Kerrow.
Ten years ago, MPs accused the top bosses of the KPRL of fleecing the taxpayer with an annual management fee of USD2.2 million (Sh187 million), yet KPRL was a 50-50 shareholding between Essar and the government.
The MPs also realised KPRL had taken Sh7 billion in loans from local banks to finance services at the refinery, with the Energy Committee chairman at the time Jamleck Kamau wondering why Essar’s investment in the refinery was done through bank loans.
Politics is already threatening the planned privatisation process of East African Portland Cement Company (EAPCC) after thousands of people who had bought land on the property were evicted.
Naituli says it appears that at EAPCC, the target is to clear people from the land valued at Sh70 billion so that they can sell it.
“We have community land and private land under the Lands Act and so if EAPC acquired it from the county, then it should revert to the county,” says Naituli.
Some MPs from Western also claim they have learned from past experience when Pan Paper Mills with property worth Sh20 billion was sold for a paltry Sh900 million.