As you wrap your head around the Sh25.7 billion loss incurred by Kenya Airways in FY2014/15, consider this: KQ has been a spectacle of successful state capitalism in Africa for long. Why would it suddenly morph into the symbolism of grandiose ineptitude and waste of public resources we are witnessing? Could there be a bigger picture? Here are a few pointers to engage your intuition.
Point number one: – the Jubilee government set off a reform framework spearheaded by President Kenyatta aimed at reviewing and improving corporate governance and efficiency in the management of state owned corporations also known as parastatals.
The result was the proposal of The Government Owned Entities Bill, 2014 seeking among other things to merge state corporations from 47 to about 8 and to centralize management and oversight of all parastatals at a new state institution hosted by Treasury called Government Investments Corporation. The corporation is intended to be largely run by a board and an oversight office called the National and County Agencies Oversight Office all linked in their appointment and reporting structure to The Presidency and Treasury.
Essentially this would transfer and centralize power over management of state corporations from â€˜parent ministriesâ€™ as it is currently to the epicenter of Jubilee government power – Treasury and â€˜The Presidencyâ€™ by proxy. Surely, if the intention of the reforms is to enhance efficiency, productivity and management of state corporations, why wouldnâ€™t the taskforce consider instituting the Government Investments Corporation and the National and County Agencies Oversight Office together as an independent commission? This would free it of pressure and susceptibility to manipulation from the executive and allow it the space and authority to function optimally.
Point number two: – there is the conversation around privatization of state corporations, especially those that have not been performing well in the recent past in terms of management and economic returns. For example the six cane millers in the sugarbelt region in Western Kenya â€“ Muhoroni, Chemelil, Miwani, Nzoia, Mumias and Sony sugar factories. Word is that the government intends to sell about 51% of the stake in each of them to strategic private investors with a â€˜track recordâ€™. Only about 24% of the stake is intended to be sold to employees of the factories and farmers who grow cane on contract for the mills through outgrower cooperative societies. Now consider that there are cabals of wealthy billionaires who have been angling to buyout such stake, some of them with tight connections to high echelons of both the Jubilee and previous Kibaki governments.
Point number three: – if you wanted to be phony about acquiring lucrative state corporations, what would you do? Commonsense would be to push for legislative or regulatory reform to have them privatized or managed within an entity that you could easily deal with or manipulate. You would also need to find ways of driving down their value so that when you bid to buy them out (read privatization) you would find them cheap. How would you do that? Invent inefficiencies and turbulence in their management, like whatâ€™s happening at KQ, which would plummet their value and make them cheap gold mines that you can transform into lucrative enterprises overnight.
If you put together the three points above, it is plausible to imagine or argue that the ineptitude at KQ and other state corporations is artificial. You could also argue that it is perhaps more than coincidence that the losses at KQ are happening at a time when government is focused on reforming the framework for management of state owned corporations that could include their sellout.