Ideas & Debate

Deal with the parastatal elephant in the room

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Treasury secretary confirmed to Parliament that “things are elephant” on matters economic and fiscal. FILE | FOTOSEARCH

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Summary

  • There is no audit, evaluation or implementation review around what has and has not worked with the constitution. And we have no clue how much this enterprise has cost in both public money and time.

Let’s see if I have the right storyline. Two national leaders (the principals) shook hands in an early 2018 political ceasefire moment in order to foster peace after a fractious double presidential election the previous year.

A government Task Force was formed to “build bridges to unity” (BBI). It collated public views and reported “findings and recommendations” on nine themes. Its report was launched in 2019.

The Task Force then became a committee which translated these recommendations into policy, administrative, statutory and constitutional proposals.

After the Covid-19 “half time break”, a second report was launched a couple of months ago. At this point, BBI was a constitutional moment. By this time, hardline stances were evident across our politics; while the people looked on like “movie extras”.

Wait! The constitutional amendment bill that was part of the “un-amendable” second report was then amended, but not quite enough.

Suddenly, a referendum looms, with policy, administrative and statutory proposals long forgotten. There is no audit, evaluation or implementation review around what has and has not worked with the constitution. And we have no clue how much this enterprise has cost in both public money and time.

Now it’s signature collection time; “private equals popular”. Meanwhile, our courts have some pretty heavy questions to decide upon. More twists and turns? The plot thickens.

Back on Planet Kenya, our Treasury secretary confirmed to Parliament this week that “things are elephant” on matters economic and fiscal. Two related points here. The National Treasury has argued in the past that our constitution is costly.

With BBI, the country has a new debate between “yes, democracy is expensive” and “no, Kenya and Kenyans simply can’t afford any more today”. It is said that “an elephant is a mouse built to government specifications”. The court of public opinion will decide.

There’s context too. This Covid-19 moment reflects currently abnormal times in which we cannot act normally, while our public debt moment reflects earlier abnormal actions in normal times.

Fortunately, the Bretton Woods and BBI development enterprises agree on one thing: serious parastatal reform. For BBI, this means that parastatals that are doing county work should cease to exist.

In the meantime, IMF’s comments on this subject following its recent virtual mission to Kenya are telling. First, “the (Covid-19) shock has… exposed weaknesses in some state-owned enterprises (SOEs)”. Then “(a future program) would…address weaknesses in some SOEs that have been exacerbated by the Covid-19 shock”. Finally “There is broad agreement on… a Fund-supported program. Remaining issues to firm up include the scope of SOE weaknesses…”.

Underpinning this, and wider, IMF messaging in this statement is the need for Kenya to make hard choices.

Governance and structural reform is the wording, not BBI. Addressing “pressure points” in the current year’s budget is a real need, not those referendum plans. But the new attention to SOEs, basically what we loosely refer to as parastatals (or state corporations) should call us to order.

Here are a couple of very quick perspectives to get you thinking.

Let’s start with mundane stuff like pending bills. According to the National Treasury, pending bills at the end of June 2020 totalled almost Sh450 billion. Here’s the high-level breakdown. National government Sh334 billion; counties Sh113billion. Here’s the kicker.

From the national government total, ministries, departments and agencies (MDAs) accounted for Sh48 billion, and STATE CORPORATIONS Sh286 billion!! And here we were thinking it is government ministries alone who are sitting on business cash!

Here’s another perspective. From the Consolidated Government Investment Report for the 2019/20 (most recent) financial year, we learn that 127 out of 247 state corporations were loss-making. Like Kenya Railways Sh24 billion or KBC Sh10 billion. Like East African Portland Cement, Kenya Power, Nzoia Sugar each Sh3 billion plus. Against profits for KenGen Sh10 billion, KPA 4 billion, Kenya Pipeline Sh6 billion, Geothermal Development Company Sh1.6 billion.

Across all 247 corporations, internally generated revenues were Sh603 billion, additional government grants/subventions Sh532 billion and profit closed at Sh5 billion? I am still goggling at these numbers. Especially when Treasury celebrates Sh100 billion in “investment returns” in which a quarter was Safaricom’s dividend payment, and much of the rest was the “surplus cash mop-ups” that year. There is something rotten in our state corporation space - the invisible elephant in our fiscal-economic room.

So, let’s keep the final perspective the shortest. If what I just shared is part of the current state of play, whatever happened to that 2013 report by the Presidential Task Force on Parastatal Reform?

Did I just read that, in the Parliament meeting this week, the National Treasury confirmed the report as “ready for implementation”? In 2020? Are there no candidates right now for transactions at the Nairobi Securities Exchange? And others that must die? Or do we need more diagnostics yet again? Kenya is a storyline.