Cabinet misstep on privatisationFriday March 24 2023
I have been trying to understand the thinking and motives behind this idea by the Cabinet of keeping approval of privatisation transactions away from parliamentary scrutiny.
I only have conspiracy theories. Lately, we have been holding a record number of investor conferences in the capitals of rich Gulf countries and what I gather is that the feedback from these meetings is that many sovereign wealth funds from that region are interested in privatisation deals here.
I am told investors from the rich Gulf States are scared of the long approval procedures and processes that a potential investor interested in a privatisation deal in Kenya has to go through, including the risk of being dragged before Parliament to be interrogated.
It is said that the rich Arabs also have interest in public-private partnership (PPP) deals. Major changes in the PPP framework may happen in the coming months.
Read: What you need to know about Kenya's Privatisation Bill
President William Ruto showed keen interest in the privatisation space right from the beginning of his administration.
During the first bell-ringing ceremony at the Nairobi Securities Exchange that he officiated in January, he publicly chastised the CEO of the Privatisation Commission, John Kosgey, for doing no work.
"You should refund the money we have spent on your salaries," he said, charging that the Commission had not processed any privatisation transaction in the past 13 years.
In my view, we are making a big mistake by seeking to remove parliamentary oversight in the approval of privatisation transactions.
History has taught us that when you move and transfer assets of parastatals without the involvement of constitutionally-mandated oversight bodies, you open the floodgates for the corrupt elite who will always angle to grab public assets on the cheap.
There are many examples but one individual whose exploits best illustrate the point I am making: the late Naushad Merali.
The lack of adequate oversight over privatisation deals is why oligarchs of the era of former President Daniel Arap Moi like the late Merali became instant billionaires from privatisation deals.
In 1994, he made big money purchasing shares belonging to the State-owned Industrial & Commercial Development Corporation (ICDC) in the tyre maker — Firestone East Africa — in a privatisation where the State lost Sh459 million, according to a report by then Auditor-General (Corporations) W. Kemei.
The liberalisation of the telecoms sector in 1999 also opened the door for local oligarchs to make billions from privatisation transactions.
Read: Protect independence of privatisation agency
Teaming up with the French media giant Vivendi in a joint venture in which he owned a 40 percent stake in the envisaged local telco, they clinched the second mobile telephony licence, for KenCell, at $55 million (Sh5.5 billion at current exchange rates).
Did Merali pay the billions for the shares or was it another case of free carried interest (FCI) for the well-connected, as happened in the infamous Mobitelea case?
And what prompted Vivendi to sell KenCell to Celtel after only five years? We may not have the answers, but I recently came across correspondence showing that a French court had investigated transactions between Vivendi, Naushad and shell companies based in Mauritius for money laundering and other suspicious transactions.
The point here is this: if we remove privatisation from parliamentary oversight as is being proposed by the Cabinet, we will have set the stage for corruption and more scandals in the sector.