Privatisation accelerates public and private cross-sector convergence

President William Ruto (right) and his deputy Rigathi Gachagua at State House, Nairobi. [PCS]

President William Ruto signed into law the Privatisation Bill 2023 recently. A key interest of his administration is efficiency and productivity of government-owned entities, and the Privatisation Act 2023 aims to achieve this goal.

There are those who have suggested that instead of privatising the non-performing parastatals, the government should seek competent people from the private sector to run them.

Lest we forget, President Daniel arap Moi made a similar move in the late '90s. He poached expatriates from the private sector to improve efficiency and speed up economic recovery. The 'dream team' as it was referred to, was led by Dr Richard Leakey and had five other members. It was disbanded in less than two years for lack of progress. 

While there are many CEOs and managers in the public sector who are competent, their efforts to improve parastatals have been held back by corporate governance.

Corporate governance entails a system of practices, rules and processes by which organisations are controlled, directed and held to account by various stakeholders. By seeking to privatise these parastatals, President Ruto is looking beyond the integrity of people running them to a total paradigm shift of their corporate governance.

A major difference between government-owned entities and private-owned ones is the sheer number of stakeholders that need to be satisfied. Parastatals have to satisfy a complex range of economic, social and political objectives, which subjects them to different sets of external constraints than their private sector counterparts. Stakeholders of public entities may include the ministry the parastatal belongs, other government officials, clients and customers, the electorate through Parliament, the general public and the surrounding community.

We have heard politicians demanding a share of employment slots for the locals or tenders getting awarded in a particular way. Running such parastatals involves concerted efforts in balancing the interests of the many stakeholders, sometimes convoluted and in conflict with each other. The outcome is inefficiency and outright ‘legislated’ wastage with far-reaching financial and economic implications in the name of meeting stakeholders’ demands. 

The implementation of these corporate governance policies within an organisation in satisfying the various interests of stakeholders lies with human resource management (HRM). Traditionally, the differences in the way HRM in public and private organisations are run arose from the different models of managing employees and work. Public organisations adopted the ‘soft’ model that aimed at improving employee welfare. In public sector, the policies tend towards the social function, where the social aspects are given predominance.

This explains why there is talk that job security is higher in the public than in the private sector. On the other hand, private organisations adopted the ‘hard’ model of HRM, whose aim was to improve performance. In private sector, internal policies tend towards the market function and are linked to profit-making. The differences have existed despite the two sectors working under the same labour laws. Although this is changing, HR functions in the two sectors have operated in almost opposite ends of the same yard stick.  

Today public sector has performance contracting, just like the private sector, while the government has enacted some of the stringent labour laws protecting the welfare of employees in both public and private sectors. Kenya also has extensive public-private partnerships. With a strong regulatory framework, the government is scaling down its involvement and by extension the overbearing stakeholders. By going private, government is simply accelerating the inevitable.


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