Want to pay Kenya’s Sh10 trillion debt? Sell all these parastatals now

The government has no business being a butcher by owning the Kenya Meat Commission, selling sugar by owning Nzoia Sugar Company, Chemili and Mumias, and a banker with stakes in Consolidated, Development Bank of Kenya and KCB and NBK.

Similarly, it shouldn’t be a retailor by owning supermarkets such as the collapsed Uchumi, a trader dealing in salt and cooking oil (KNTC) and an owner in a host of over 200 other State-owned enterprises (SOEs), including Kenya Pipeline, KPC, Kenya Power and KenGen.

It seems the Kenyan government has a foothold in every economic sector, including higher education through the bankrupt public universities.

According to the Auditor-General reports, these SOEs are all run very inefficiently, most are loss-making and a drain on the taxpayer, that is you and me.

The total net worth of the top 10 SOEs is well over Sh11 trillion, according to reports by the Auditor-General, leave alone the remaining over 200. This value can be unlocked through privatisation by both local and global investment banks such as Dyer & Blair, Standard Investment Bank, Faida, Goldman Sachs and JP Morgan Chase.

If that were to happen, we would not be having the current endless debate of how to pay off sovereign debt without taxing our people to death.

A conservative valuation estimate shows the Kenya Ports Authority (KPA) is worth Sh4 trillion, the Kenya Airports Authority (KAA) over Sh1 trillion and Kenya Pipeline Company (KPC) over Sh1 trillion.

If properly privatised through the Nairobi Stock Exchange, LSE or NYSE by cross listing, this will easily pay off the Sh10 trillion debt that we are always told about by our Treasury mandarins.

The key thing, however, is transparency, and a proper accounting of the National Assets Registrar through the office of the Auditor-General.

What the country lacks is boldness and vision at the implementation stage. The sale of 10 SOEs, as directed by President William Ruto, must be fast tracked.

Any bureaucrat dragging their feet must be shown the door. The President was spot on when he made this promise, and the Head of Civil Service must ensure this is done. No ifs, ands, or buts.

Make the bold move to privatise the KPA, KPC, KPLC, KenGen, sell off State holdings in private companies like KCB, Safaricom and all remaining government shares in other profitable corporations. We need to stop this culture of “jobs for the boys”.

We must let the government do what it does best: govern, tax and set up a Sovereign Wealth Fund modelled on the Singapore or the Norwegian Sovereign Wealth Fund.

The government must not waste time attempting to run businesses. It also needs to let Kenya Airways die a natural death by selling it lock, stock and barrel to a profitable global Airline. The current over S100 billion in bailout to a quasi-private company does not make a good business case to taxpayers at all.

One shudders to imagine the US Cabinet, arguably the home of Capitalism, with President Biden as Chair, wasting time being briefed on how many Cows were slaughtered by Omaha Nebraska Meat packing companies, the private equivalent to the KMC.

Or debating the fate of Sugar Companies in Hawaii, selling Petroleum products or being revived like NOCK. Indeed, best practice demands that a Cabinet be concerned with policies that create a “proper environment for private sector to thrive: Ministers should not waste time on HR functions of appointing MDs/CEO of SOES because they should not exist in the first place in 2023. Perhaps in 1963 to 1980. But not currently in this day and age.

How America dealt with its quasi–National Carrier is a case in point. When Pan American Airlines started to make losses the USA Government allowed the market forces to operate, as a result the USA does not have a National Carrier and yet its Aviation industry accommodates thousands of Airlines both large and small in a policy environment that allows the private sector to grow.

Delta Airlines, United Airlines have no government representative on their Board of Directors unlike Kenya Airways. Neither in major banks unlike KCB in Kenya. Indeed, even during the Global Financial Crisis bailout, the US National Treasurer had a clear bailout and exit plan through Treasury warrants.

Instruments that would be instantly cashed at a profit for the USA Tax payer when the crisis was over and the private sector back on its feet.

That is how Capitalism and meritocracy works not Crony Capitalism works sustained by guaranteed debts by Ministry of Finance / National Treasury.

Our bold Capitalism reforms should also not spare the CBK . On top of price stability and ensuring close to a full employment economy, it is failing on both. The Regulatory arm on the industry is stifling financial sector deepening of products and services.

Who said that it must be owned by the Government? It is certainly not the case in the USA Since the 1913 Federal Reserve Act establishing it or rather setting the policy to operationalize it. Our policy makers and indeed our civil service mandarins need to wake up and provide solutions Now. Not classical economic theories.

Indeed, if one was to look to the State-owned University of Nairobi, a state-owned Enterprises, that can hardly meet it solvency requirements, Moi University, barely solvent, it is beyond belief. The University of Nairobi Seats on the most prime real estate in the Africa if not the world. It offers courses that are not even geared to the 21st Century Hi Tech economy and trends. The leadership and CEO skills sets belong to the lecture room and not the Board room.

A simple conversation with an Investment Banker can unlock its prime real estate through collaborative partnerships based on leading world Universities. Establishment of Endowment Funds, Securitizations of its Research and indeed Intellectual Capital and once again Prime Real estate. However, both the cry from the Civil Service education mandarins is we are waiting for money from the Treasury. Yet the solution to our higher Education crisis in State owned Enterprises is, lack of bold leadership and ideas. It is not enough to be a professor with a string of degrees to ensure that Universities become centers of excellence with relevance and deep pocket Endowments Funds.

Ask Columbia University, if retired President Eisenhower Needed a PH. D to be its CEO after WW2 and what tradition he left that is still felt today.

The writer is an aviation analyst and a former vice-chairman of the Public Relations Society of Kenya.