By CPA John Andele
Privatization refers to transferring industry, business, and services from public ownership to private control. It can either be a full or a partial transfer of the Government’s responsibility to the private investors or sector. Various governments worldwide have privatized most of their recently owned corporations to help curb the bureaucracies that exist when they take up core functions in state institutions. These institutions provide jobs to their citizens in an environment highly laden with creaking bureaucracy. This is what has been making most of the Educated professionals in Africa leave domestic jobs, not because they have not been helped but because their country has perpetually floundered in a seemingly never-ending corruption cycle, poverty, and diseases. The bureaucracy of state-owned corporations highly catalyzes this situation.
Kenyan National Government plans to put some of the state corporations in private investors’ hands due to these parastatals’ poor performance. However, bottlenecks such as a prioritized bureaucracy make it a tall order for the Privatization Act (2005) to materialize effectively. Selling 26 poorly performing parastatals was a core reason for enacting this act. Selling them to competent and risk appetite strategic investors could reduce the dwindling performance. This would also help reduce these parastatals’ overreliance on the exchequer. The aftermath would be channeling these funds into development agendas that have stalled due to lack of funds.
It is noteworthy to posit that most state enterprises or government parastatals are highly marred with corruption and incompetency cases. As a result, suggestion would therefore be put across to hand over these parastatals to the hands of private investors would do the taxpayers justice. Mentioning some, KEMSA is an emblematic one where the tender was awarded to individuals who did not even qualify. The KPA has been in turmoil since the DPP discovered irregularities of close to Khs244 million. As if this was not enough, the EACC unearthed tenders that had been irregularly awarded by the SOE of an amount close to 40 million. This is a tender given to a mother of a clerical officer at the KPA, something which threw most of the citizens to frenzy.
Institutional corruption is not the only thing affecting these institutions. There exists very deep-rooted nepotism in these institutions. Therefore, it could be suggested that the private investors, with the central aim of exemplary performance and making the best of these institutions, be contracted. The corporations discussed herein have flouted most of the procurement regulations they bend to fit their never-ending greed and make the most fortune at the taxpayers’ expense. Therefore, A question would be, should stringent procurement rules be followed for the latter? Is a cure to this never-ending sickness only by transferring these corporations to the investors? Individuals in these institutions have a very well-crafted scheme to embezzle public funds, and coming up with more acts to nip their acts in the bud would be futile. After all, the laws are always meant to be broken.
Privatization does not only come as a shell or in a vacuum. It is only the State-Owned Enterprise (SOE) that is presenting an abysmal performance that needs to be restructured. Mwaura (2007) argues that it is the non-performing SOEs that need to be privatized since this will enable the Government to limit the disbursement of funds as the investor expands the economy by running these corporations. Privatizing the SOEs also has a principal aim of reducing the Government’s deficit and using the funds in some other profit generating projects. By doing so, the performance of the SOEs will be improved as there will be proper management of the SOEs that is quite essential for a positive outcome compared to when these corporations are left in the hands of the Government.
In most instances, the idea of privatizing SOEs has been generated by internal and external sources. The aspect of privatization in most developing African countries has been externally generated. As a result of this process, it is highly conspicuous that the substandard performance of the SOEs has been continuously occasioned by the subsidies that the states offer to these institutions that are coupled with planned economies.
External forces privatization prescribes privatizing the SOEs, which is majorly to toss out the SOEs and work on the essential services that the state needs to offer. In other instances, the external forces pushing the state to privatize the SOEs enable a country to open up its economy by removing controls such as import and price controls. This is majorly to minimize the state’s involvement in the commercial sectors. Most private investors who take up the SOEs will have a significant role in most state economic activities, thus helping to set up a market economy rather than a mixed economy that often suffers government interference at the citizens’ expense businesses in the market.
Moyo (2009) elucidates this from another perspective; in the IMF Enhanced Structural Adjustment Facilities, poor governments were to receive cash in the form of budgetary support. These governments, as a result, would agree to embrace a free-market solution to development, and one of these would include a privatizing previously nationalized industry. This would mean that trade would be liberalized, and the civil service would be dramatically reduced. The central aspect of this is to restructure the SOEs that are posing poor performance and enable economic expansion due to good management.
Moyo (2009) elucidates this in another perspective; in the IMF Enhanced Structural Adjustment Facilities, poor governments were to receive cash in the form of budgetary support. These governments, as a result, would agree to embrace a free-market solution to development, and one of these would include a privatizing previously nationalized industry. This would mean that trade would be liberalized, and the civil service would also be dramatically reduced. The central aspect of this is making the SOEs that had been posing poor performance be restructured and enable the economic expansion due to good management.
During this period of the IMF and World Bank Structural adjustment, some African countries were seen shedding more than 10 percent of their civil service workforce. This included Benin, the Central African Republic, Guinea, Madagascar, Uganda, and Mali. The fact that the African SOEs were being privatized across all sectors, including energy, mining, trade, transport, tourism, electricity, and communications, brought about a positive result. The Government was only to have a stake of 10% in these corporations for six years. The aftermath of this was free markets being enabled and giving most African economies an exceptionally splendid opportunity to succeed. A few failed, but most of them succeeded.
Time is imminent, and privatization of the State-Owned Corporations is a long-overdue plan by the Kenyan Government. Moving with speed by the Privatization Commission to implement the Privatization Act (2005) will help prevent any embezzlement funds in these institutions.
A delay in the sale of the parastatals has highly promoted mismanagement and poor performance of these institutions. Being that the privatization process is not quite an easy process when it comes to legal formalities and requirements, the Government, including the National Treasury, the Cabinet, and the National Assembly, should therefore approve the major privatization requirements pronto to help save the taxpayers and also the economy of Kenya.
CPA John Andele is a practicing Accountant at Qzone IPM Ltd.
Email: johnasetoandele@gmail.com
