Mounting bond maturities that hit Sh1.4 trillion by close of 2017, should be the source of big headache.
Bill collector is at my door, what can you do for me? Hey, no romance without finance.” So goes the introduction of Gwen Guthrie’s 1986 popular hit, “Ain’t nothing going on but the rent”. Now, while the song was about motivating guys into being responsible about financial stability, its message does have a wider twist.
In my own spin, the song reminds me of the cold reality facing the Kenyan government – mounting bond maturities.
By the close of 2017, about Sh1.4 trillion worth of Treasury bonds maturing in less than six years (or 66 per cent of the total outstanding government domestic debt) remained outstanding.
So, in the spirit of the song, perhaps it’s time to let go of “broke” State-owned enterprises (SOEs) in order to pay bills. It’s time to stabilise the mother ship. It’s time to privatise.
For starters, throughout the world, governments have adopted privatisation as a way to balance budgets. Governments are increasingly turning over to private managers’ control of everything from telecommunication to utilities. From railroads to education and much more.
Off-loading, particularly of loss-making entities, has long been an enduring priority for most struggling governments.
In light of this, the recent intention by the Privatisation Commission to dispose of sugar companies - Nzoia, South Nyanza, Chemilil, Muhoroni and Miwani sugar companies – goes a long way to ease the permanent burden on taxpayers.
The idea to shed a majority stake (51 per cent) in each of these firms to reputable strategic partners with another 24 per cent stake set aside for out-growers and employees is a well-informed move.
The recent announcement by the Treasury to appropriate 45 per cent of ordinary revenues towards debt service shows a government in dire straits.
Progress this year is, therefore, crucial. The speed to privatise has to pick up. To achieve this, the commission has to side-step the pitfalls that stalled its progress in the first place.
In my mind, there are several reasons for its past slow progress but the most disturbing has been the bureaucratic delay.
Disagreements between the central and county governments and delayed appointments to the commission have seen little sold since the approval of the privatisation plan three years ago.
The other powerful reason has to be the evidential deficit—there is no credible evidence that privatised companies eventually do better than government run ones – which critics tend to use.
Reams of evidence from decades of privatisations around the world suggest that the “profit-motive-makes-things-run-better” belief is utterly misleading.
Furthermore, assuming the private system does reduce costs, there is no guarantee that companies would turn a profit or stop their “rent seeking” habits. The simple transfer of ownership from public to private hands does not necessarily make these enterprises better.
But that said, for our current state, privatisation is a sure-fire winner to ease up on our pressing challenge; debt repayment burden. In fact, the longer it waits, the less attractive some SOEs get and that equals less money.
The government needs to sell. There is simply no “romance” without finance. Life is just toooooo!!! serious.
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Note: The results are not exact but very close to the actual.
