Government should revive reform of State corporations to save investments

By: JAINDI KISERO

I want to urge President Uhuru Kenyatta to give fresh momentum to his big plans to reform and change the running of commercial State enterprises.

If I were the president, I would immediately summon Abdikadir Mohammed and Isaac Awuondo to an urgent meeting and command them to go back and complete the work they started and to deliver on the job before the next elections.

The truth of the matter is that the process is more or less dead in the water.

For instance, the committee created to implement the recommendations of the Abdikadir-led task force seems to have sunk without trace.

The committee does not appear to have met for several months.

The joint secretaries who were retained to do technical work appear to have dispersed to the four corners of the wind many moons ago.

Worse still, in the current financial year, the budget for reforming State corporations that, among others things, funded the work of the implementation committee, was slashed to zero, bringing the reforms train to a screeching halt.

GOVERNMENT INVESTMENT CORPORATION

As we all know, the centrepiece of the recommendations of the Abdikadir-led task force was the creation of the proposed government investment corporation (GIC).

This was the entity that was supposed to exercise shareholder rights on behalf of the government in commercial state corporations, acting more or less as an investment banker, structuring deals and moving in and out of position as investments mature — with the sole objective of maximising returns.

The government owns shares worth billions of shillings in mature investments, which it is not able to deploy more productively.

Were the proposed government investment corporation in place, some of its mature investments could have been liquidated and re-invested to maximise returns for the benefit of the economy. Truth be told, the government does not have the capacity in the area of structuring complex deals.

INEPT MANAGEMENT

You just have to look at the inept manner in which the rescue of Kenya Airways is being handled to appreciate my point.

At Mumias Sugar, they merely threw money borrowed from the Sugar Development Levy at the company, but fell short of forcing a funded balance sheet restructuring process that would have brought the troubled company back to solvency.

How I pity Mr Errol Johnson, who was managing director in the company’s heyday and who has been parachuted in all the way from Australia to western Kenya and handed the impossible task of piloting a sinking ship.

After much posturing and grandstanding about reviving the Webuye-based Panpaper Mills, the fate of the firm has now been left to the whims of well-connected players angling not only to acquire State assets on the cheap, but also to grab timber harvesting concessions from government forests through the back door.

INTER-CONTINENTAL OWNERSHIP

Away from the limelight, unconfirmed reports are emerging about complex transactions around the ownership of the Nairobi Inter-Continental Hotel, where the government did not realise the full value of its investments.

Although the evidence is still anecdotal, the manner in which the transaction was conducted shows how public interest can be jeopardised when the government fails to take up its rights.

Why should the government refuse to take up its rights when it is clear that failing to do so would lead to loss of value of its investment in the commercial enterprise?

This question is especially pertinent because rumours doing the rounds about the Inter-Continental Hotel transaction are that the decision by the government not to participate in the rights issue was made against the backdrop of heavy political undercurrents. Clearly, a properly constituted GIC would have structured a better deal on behalf of the taxpayer.

I tried to contact several people to give details of the transaction, but neither the chief executive of the Privatisation Commission (PIC), Mr Solomon Kitungu, the chief executive of the Kenya Tourist Development Corporation, Ms Marianne Jordan, nor the outgoing members of the board of the PIC who were involved in the transaction, were willing to speak. It is all shrouded in secrecy.

SOURCE: DAILY NATION