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Professionalism verses Politics, which is the way to go?

Parastatals are government owned enti- ties. these institutions play a major role in any economy, with governments the world  over  using  them  as  one  of the

key policy instruments in supporting national development.

However in Kenya today, the state of these Government Owned entities warrants con- cern. most of them are saddled with immense amounts of debt and tremendous problems in governance.

For some time now, the country has been constantly  injecting  millions  of  shillings  into these agencies.

On average, parastatals spend up to sh400 billion annually from state funds but repeatedly; they have failed to make a substantial contribu- tion towards our economic growth. Indeed, para- statals are dealing

with a wide array of difficulties; in this regard, lack of professionalism has largely been men- tioned as the major reason for the underperfor- mance of state-owned firms.

 

Poor  management

For a long time, there were no specific laws gov- erning the recruitment and appointment proce- dures, which led to conflicting provisions and lack of transparency.

Consequently, this undermined the operational effectiveness of the parastatals.

to put this topic into perspec- tive, when the government chang- es  after  an  election,   nearly   half of state-owned corporation chiefs exit. Unfortunately this  new  hope is quickly crushed as you realise a peculiar reincarnation of old hab- its. the successive administration swiftly fills these top positions with friends, relatives and politically cor- rect individuals.

Consequently, such important work has been  made  to  look  like a trivial ‘side job’ that could be dropped when an election is on the corner. even with performance con- tracts being incorporated, the results are still uninspiring.

It is therefore comes as no   sur-

prise that majority of these enter- struggle to meet the   private

 

It is in light of this situation that president Uhuru Kenyatta, in 2013, commissioned a state house based taskforce on parastatal reforms to find ways to increase their efficiency and effectiveness.

In their subsequent report, the taskforce found poor governance and ineffectiveness of boards and chief

executive officers to be one of the core challenges facing parastatals. the lack of strategic vision in para- statals was mentioned as having led to selection of sub-optimal choices that brought about negative effects into the wider economy.

 

Mismanagement of parastatals this mismanagement of state cor- porations has led to Kenya losing opportunities to other countries in the region and in the world. this has

sector’s performance levels and potential  profits  remain unrealized.

the private sector in the country is well developed and vibrant. In an array of services from education to healthcare, from providing security to preserving the environment; the public sector has failed time and again while the private sector has been left to bridge the gap.

In some economies such as south Africa, Australia, New Zealand, singapore, malaysia, China, Nigeria and the United Kingdom, the private sector and the parastatals comple- ment  each  other.  these  are  some of the countries where government owned entities have and continue to play significant and strategic roles in promoting the social and economic transformation of their  countries.

I believe one of the things that these countries have in common, is their lack of compromise when it comes to the leadership and manage- ment of their parastatals. We can’t succeed if locally our parastatals are viewed as institutes of rewarding friends and allies.

It is in light of this situation that president Uhuru Kenyatta, in 2013, commissioned a state house based taskforce on parastatal reforms to find ways to increase their efficiency and effectiveness.

In their subsequent report, the taskforce found poor governance and ineffectiveness of boards and chief

executive officers to be one of the core challenges facing parastatals. the lack of strategic vision in para- statals was mentioned as having led to selection of sub-optimal choices that brought about negative effects into the wider economy.

 

Mismanagement of parastatals this mismanagement of state cor- porations has led to Kenya losing opportunities to other countries in the region and in the world. this has worked to the detriment of the

 

economy in terms of lost wealth-creation opportunities.

sadly, only a few of these para- statals are meeting their targets and creating a profile of investment.

the Kenya power Company is  an excellent example of a parastatal that has made significant growth while simultaneously turning in a profit. In the last three years alone; power generation increased by 33 per cent, access rate by 60 per cent with 17, 875 primary schools receiv- ing electricity.

the company is also attracting foreign investors; just this month, Kenya power announced plans to give market advice to a Chinese  firm that is planning on building a factory in Kenya for prepaid meters to supply power utility firms in east Africa.

Another   success   story   Kenya Commercial     bank     (KCb),    who

recently reported a 14.1 per cent rise in the first half of 2016 thus cat- apulting their net profit to Ksh10.5 billion. It also gave a positive report regarding its regional branches in tanzania, rwanda and Uganda, who turned in a profit for the period.

Of noteworthy is the Kenya revenue Authority,  whose  efforts to transform the national revenue collection system using information technology solutions saw it earn a coveted global award this July. KrA was selected from a, pool of more than 219 nominations and won in the ‘Highly Commended Winner, best in Class treasury solution in Africa’ category; in the Adam smith Awards 2016.

the Kenya pipeline Company, which in the past was on the spot following reports of corruption, mis- appropriation of funds and abuse of office is now making positive steps towards recovery.

many have however been on a loss-making streak. For instance, in 2013, at the time of the report, close to eight parastatals had an out.

standing loan of Kes47billion and   currently   more   is still

swimming in debt.

According to the Kenya National bureau of statistics, there are five leading economic indicators: agricul- tural sector, energy, manufacturing, building and construction, tourism and transport. perhaps to give this issue a more critical perspective, it is important we analyse the perfor- mance of the parastatals that have performed dismally in some of these sectors.

 

Agricultural sector

the agricultural sector in Kenya, which also constitutes livestock and fisheries, is the key driving force of the economy. It is the largest contributor to Kenya’s GDp with horticultural produce and tea being the main growth sectors and the two most valuable of all Kenya’s export. thus,  it  is  essential  that  parastatals in these sectors perform opti- mally and it is a shame to witness the opposite. A good example is the Kenya meat Commission, which has been faulted for failing to transform the livestock industry in Kenya.

Although Kenya has the poten- tial to meet her domestic demand for meat and realise a surplus for export, local producers continue to face problems of poor marketing outlets that limit their production.

A more recent example is the New Kenya Cooperative Creameries (New KCC), who last year lost its position as Kenya’s second-biggest dairy firm by market share to Githunguri Dairy Farmers Cooperative, processor of the Fresha milk brand.

Following the collapse of KCC in the past due to poor leadership, there was hope that the New KCC would reassert its position in the market and heightens competition with the two existing private milk processors; brookside and Githunguri Dairy Farmers Cooperative.

However, as production increased in response, it did not expand its processing capacity to match its peers.plans to privatise the New KCC are now underway.the National Cereals and produce board’s (NCpb) also fol- lows in the same trend. In the year ending June 2015, its cumulative debt hit Ksh8 billion. the manage- ment has also been faulted with failure to settle long-standing liabil- ities, some of which have remained unpaid for over 16years.

the state of this parastatal is worrying considering that presently; the country is experiencing a short- age of maize, which has resulted to the rising cost of maize meal.

 

Manufacturing  sector

the manufacturing industry currently contributes about 10 per cent to the  GDp. this  sector  has the potential to grow, increase its contribution to GDp, and serve as a source of gainful employment, if only properly managed.

sadly, some of the  parastatals  in this sector are not living up to their potential. Case in point is the mumias sugar Company board, which in April this year received its second bailout of sh. 1.1 billion from the treasury after receiving the same amount last year.

the management claimed that the money would be used in the restructuring of the firm as well as settle outstanding debts to farmers and financial institutions.

Other government owned sugar companies that are worth a men- tion include Nzoia, south Nyanza, Chemelil, muhoroni and miwani; whose debts had to either be restruc- tured or written off to clear excess debts from their books. their cumu- lative debt of Ksh39.7 billion was written-off  by  the  government   as part of the on-going privatisation of the companies.

 

Tourism and transport sector

It is not news that the tourism indus- try in Kenya has in the recent past taken a hit from the travel advisories by european nations due to terror- ism attacks. However, the industry has recently been regaining its lost glory due to the president’s efforts. since these two sectors go hand in hand, the transport sector is expect- ed to step-up to meet the tourism industry  halfway.

As it is now, one of the major challenges to the tourism sector is the state of the transport system in the country.

Of significant mention is the Kenya  Airways,  which  has   been in  a   financial   landmine,   posting a Ksh26.2 billion loss last year. reports show that the quality of service has been dwindling and that the airline has been dealing with a demoralised and underpaid staff.

KQ has been borrowing funds extensively in an effort to keep afloat and in July this year; it received a Ksh10 billion soft loan from the treasury to implement its comeback plan. However, the poor  state  of  the airline has been blamed on the previous management owing to their ambitious fleet plans and over-bor- rowing.

 

Energy sector

In the country, energy is categorized as one of the infrastructural enablers of the three pillars of vision 2030, with an expected increase in energy use within the commercial sector on the road to 2030.

the  National Oil  Corporation of Kenya  is  a  relevant  example  of a company that has been failing to offer superior services in the sector. In the past, this parastatal has been in the limelight for irregular procure- ment procedures and abuse of office involving some of its senior manag-

 

ers. It is riddled with controversies and has been accused for failing to stabilize fuel prizes at the expense of petroleum consumers.

 

Remedying the situation Interestingly, the taskforce found that the output of state corpora- tions to GDp in nominal terms has been increasing, albeit slowly, based on internally generated income. this begs the question; what economic heights would Kenya reach if these firms were under capable leader- ship? the possibilities are infinite.

to correct the situation, one of their chief recommendations was to set new standards for directorship in state-owned firms; thus applying academic qualifications on director- ships for the very first time.

For instance, they proposed that all chairmen of state corporation boards must have a master’s degree and up to 10 years experience in a relevant field.

What I loved most about the report was that it stressed on the importance of professionalism and good corporate governance practices as the first step towards    salvaging

the agencies.

though the government has taken some slow but positive steps towards bringing sanity to these parastatals, more needs to be done to make them self-sufficient and increase productivity. I firmly believe that if the recommendations of the report were fully implemented, the state of parastatals would be revo- lutionized.

the mwongozo, a code of gov- ernance for Government Owned entities developed by the taskforce will come in handy to help rehabili- tate these parastatals and see to the dawn of a new era in the way these institutions are run. parastatals are tasked to perform diverse functions, key among them being to promote economic growth and national devel- opment. For this reason we should be shrewd about whom we assign such important tasks.

If properly managed, parastatals can be vital instruments in improv- ing the delivery of public services, creation of good and widespread employment opportunities and building of targeted and judicious international partnerships.

If we keep looking away and pretending nothing is wrong, we will slow down our national progress and continue this bad trend of funding debt-ridden under-performing cor- porations. this situation should be remedied if the parastatals are ever to perform optimally.

I urge all of us to fight the status quo and stop accepting bad perfor- mance from state bodies as the norm. We have lost years in which fruitful action and systematic reform could have achieved wonders.

However, all is not lost if our state corporations are put under superb leadership and ring-fenced from partisan politics and narrow interests. It is important to have the right people in key positions before the country can realistically demand productivity.