Do we need Privatisation Commission?


A pedestrian walk past the National Treasury building in Nairobi on June 12, 2014. FILE PHOTO | NMG

Do we need the Privatization Commission? That is a question Kenyans should take time to reflect upon. Let’s start with how the idea of a Privatization Commission was conceived.

The drafters of the Privatization Commission law felt it was appropriate to have a body that formulates, manages and implements the government’s privatisation programme away from the Treasury.

Having such a body would create a more successful privatisation programme and also unlock the potential of public enterprises to meet desired national objectives.

So, the commission was established under the Privatization Act, 2005 but began operations in February 2008.

The Kibaki administration had kicked off a number of privatisation deals and it was expected that this commission would be best to drive that privatisation agenda in the medium term. So, there is no doubt that the commission has its place.

Just a month after the commission began operations, Kenya had East Africa’s biggest initial public offering (IPO) — the Safaricom one that was oversubscribed by 532 percent. From the Safaricom success story, many thought the trajectory for a successful privatisation programme had been set. But 13 years later, there is nothing to write home about.

An evaluation of the Privatization Commission’s effective implementation of its mandate shows that the employees are earning salaries with little work to show for it.

First, the last IPO has remained to be Safaricom.

There has been no other State-owned firm that privatised through issuing a public offer. Second, State-owned firms like the sugar millers and Agro-Chemical & Food Company that the commission has been readying for privatisation have been under the process for over seven years.

Third, Kenya Meat Commission was under the process of privatisation for years only to be transferred to the Kenya Defence Forces.

In short, we do not have it on record that any State corporation has been privatised through the commission in more than a decade. So, is the Privatization Commission worth the taxpayer’s money?

The latest Auditor-General’s report shows the commission spent Sh290 million against an approved budget of Sh896 million — an underspending of Sh594 million. Essentially, this means that 66 percent of the commission’s work in that financial year was most likely not done.

The most unfortunate fact about the commission is that it seemed to have been designed to fail. The board has not been fully constituted for years now, limiting the commission on implementing a lot of its programmes.

The 2020 Auditor-General’s report noted that the commission was not able to finalise implementation of the current privatisation programme by 2021 because the board was not fully constituted.

Since the Jubilee government came into office in 2013, it has had a pessimistic attitude towards privatisation. It has largely believed in government controlling sectors through various State corporations.

But this has now caught up with us. Kenya has found itself in a very difficult position after being prevailed upon by the IMF to consider the fate of many State corporations, putting financial strain on the budget.

Had we continued with the privatisation programme as designed from 2008 when the commission commenced its operations, a number of corporations on the chopping board today would have a lifeline in the hands of private players.

The best way forward is a clear privatisation programme from government listing all State corporations intended for privatisation then the commission takes over to lead the process.

We will need to introduce a sunset clause on the commission’s existence, meaning it handles the programme within a specific time frame as compared to what we are seeing now where its taking a decade to privatise some companies.