Why Privatisation of State Agencies is Misguided

Prof Fred Ogola

The Current Privatization is evidencing the Kenya Kwanza Government Does not know where they are taking Kenya.

When the then Deputy President launched the Bottoms up Economic Model, I penned over 20 articles in the local newspapers why I believed the Heteronymic economic model has never worked, does not work and will not work anywhere.

It didn’t take even a week after taking oath of office that I started viewing one wrong economic move after the other. The most important move to note was when the President and hid deputy Gigathi Gachagua hit on his predecessor to have left them with a dilapidated economy.

This didn’t make sense since it was impossible that Kenya was functioning well, cost of living, fuel, inflation was under control the night before Uhuru left office and with handing over the sword to President Ruto, the economy was now collapsing.

They made noise that led to investors, workers among all Kenyans started adopting wait and see approach to the economic as nearly all stakeholders continue to lose trust in the economy.

By the fact that we have decided to eat the assets we have built which were part of the Kenya Vision 2030, it means the current government is taking us back to the dark days of Kanu where Privatization was done to fatten those in office at the expense of the Kenyans who remained jobless and incomeless.

What is wrong with Privatization? While, privatization is not in itself a bad thing neither is it new in Kenya since Safaricom, KenGen, Kenya Commercial Bank, Kenya Railway among others were privatized. It could be the timing, the government of the day and the perceived intention behind the privatization that could be causing jitters in the country.

Let us note that in Africa, privatization was encouraged during serious economic distress. In fact, one never sells personal property when they are thriving economically. When you see one hawking their home, house or car, unless they are upgrading, know that they are either after no good or they are in serious economic turmoil.

In a family context, one of the partners can liquidate a property in a looming divorce. I don’t think whether the threats from Raila Odinga to Ruto to depart state house for him in their election tussle could be the reason why the President is auctioning Kenya’s prime assets like Kenya Pipeline, Kenya Ports Authority among other strategic assets of the country.

Does it mean that the president believes that Kenya’s future is so bleak and that he doesn’t know how to turnaround the economy that can only be salvaged by auctioning its strategic assets. To move away from Kenyan emotive topic, lets see the trend in Africa.

In many countries in Africa, privatization was launched at a time when their economies were at their lowest ebb. Today, there is renewed and well-founded hope in Africa. First, for two years in a row (l995/96), economic growth has outstripped the 2.6% population growth:3·4 % in l995; 5·0 % in l996; and 31 of 48 countries in Sub-Saharan Africa registered positive growth per capita.

Second, countries are opening up politically – with greater participation of civil society. The opening up of civil society and greater participation of ordinary people in the development process augurs well for the future, and their participation in economic decisions will bring social legitimacy to many of the tough choices involved in promoting national growth.

Third, there is evidence of a much greater role of African leaders in solving their own conflicts and problems (Liberia, Great Lakes) but also in mastering their economic destinies.

And, fourth, many countries have embraced modern market economics and are deepening their reforms to make the private sector the engine of growth.

This creates a room for privatization especially if it takes the model of local and foreign investors coming together to professionalize the running of the privatized firms. In this context, State-owned enterprises privatization would be beneficial. Moreover, with an improved Legal and regulatory frameworks and complementary investments in human resources, privatization could spur economic growth in a nation.

However, in the context of privatization in Kenya, these are not the reason making these openings fragile. In fact the challenge that Africa faces is enormous: Today 583 million Africans (10% of the world’s population) produce only 1% of its GDP, while 262 million Africans, or 45% of the population, live on less than $1 a day. About 200 million are without access to proper health services, and 47% without access to safe water.

What then is the role of Privatization?

Today, there is widespread agreement that the primary engine that can pull the African economies to these levels is the private sector – both domestic and foreign direct investment. And that there must be a public-private partnership.

This is where privatization comes in. It is not an end in itself, but it is a key tool for improving the efficient allocation of resources, for mobilizing investment, and for stimulating private sector development. Privatization does this because it: brings into the open the inefficiency of state-run businesses; makes investment opportunities available; highlights the need and becomes the catalyst for capital market development; and contributes towards openness by forcing government dialogue with the public.

In conclusion, it is easy to determine that there are strategic assets that cannot be privatized such us Public Universities which are public goods and should not be run because of efficiency but for a functional State.

It is also a threat to National Security to Privatize a Port since it controls what comes in and what goes out of a country and Kenyans should be careful with this move. Lastly, efficiency from the private sector can lead to a situation where there can be market failure in solving social problems and that is why the government need not privatize such assets.

As Operation Linda Ugatuzi, we call upon the president shelve the Privatization process and put in Privatization law, not jus the act which provides room for manipulation and which gave the citizens room for public participation.

Since Kenya’s Privatization Legistlation and and Institutional framework is too weak, this privatization process wont be free of Interests that can divert its benefits. Our suspicion is either that the president has lost confidence is the economic prosperity of the country or has been misadvised by those with ill intention to derail Kenya’s Vision 2030 which is the enomic blue print for the country. We call upon the President to call the Civil Society under its Umbrella body, Operation Linda Ugatuzi and also resurrent the economic and social council that birthed the vision 2030 to deliberate.

Prof. Fred Ogola- Leader Operation Linda Ugatuzi

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