Prior to the 1980s, governments around the world increased the scope and magnitude of their activities, taking on a variety of tasks that the private sector previously had performed.
Then in the 1980s, the tide of public sector expansion began to turn in many parts of the world.
In the United States, the Reagan administration issued new marching orders: “Don’t just stand there, undo something.”
A central tenet of the “undoing” has been the privatisation of government assets and services. Privatisation of public agencies is not a new venture. It has been effected before and still remains an option with desired benefits and obverse.
In Kenya, the privatisation process is governed by the Privatisation Act, No. 2 of 2015. There is, however, a proposed Privatisation Bill, 2023.
The desired benefits of privatisation are, among others — (i) the improvement of infrastructure and the delivery of public services by the involvement of private capital and expertise; (ii) the reduction of the demand for government resources; (iii) the generation of additional government revenues by receiving compensation for privatisation.
A newfound faith in privatisation has spread to become the global economic phenomenon of recent times.
Developing countries have been quick to jump on the privatisation bandwagon, sometimes as a matter of political and economic ideology, other times simply to raise revenue.
In the late 1980s, a wave of public company buyouts swept across the previously insulated world of publicly traded corporations, prompted in large part by the failure of internal monitoring and control processes in these companies.
These buyouts provide an important and useful analogy to privatisation. In particular, Michael C. Jensen’s analysis of these buyouts makes it clear that privatisation alone is not enough to guarantee that providers of important services will act in the public interest.
The privatisation of government assets and services has similar potential.
The public seeks both monetary and non-monetary value, including equal access to services and adherence to performance standards.
Privatisation, in whichever method, works best when it aligns with and serves the public interest. It should also be conducted in an open, competitive and accountable way with a view to ensuring that the compensation received represents the fair value of what is sought to be privatised.
The writer is a Legal Counsel and a Certified Public Private Partnerships (CP3P) Professional. [email protected]
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