The Kenyan government is all set to privatize 26 companies in a bid to supplement the National Budget deficit of 579.9 billion shillings.
The move, which is aimed primarily at reducing the government expenditure and bringing in private capital could see thousands of employees lose their jobs before the transitions all fall into place.
While the intention is for a good cause, the idea has a number of consequences to the economy as well, and it isn’t only the employees that will get affected. Commodity prices could spike in the process.
Some of the companies identified for sale include the National Bank of Kenya, the Eldoret Container Terminal, which belongs to the Kenya Ports Authority, KenGen, Kenya Pipeline Company (KPC), East African Portland Cement, Consolidated Bank of Kenya, Kenya Meat Commission, Development Bank of Kenya, and Chemelil, Sony, Nzoia, Miwani and Muhoroni sugar millers among others.
The deal is part of a long-term initiative to reduce the total state-owned entities, from the current 262 to 187. Among the objectives laid down by the Privatization Commission of Kenya include the improvement in governance, enhancing the growth of the companies, as well as guaranteeing the continued existence of these entities.
Some of these firms, which have been struggling to stay afloat have been marred with cases of corruption, mismanagement as well as other operational inefficiencies. Although privatization often enables a company to turn around operations for the better, the question is, will it serve the public interest?
The government believes that the initiative will boost the efficiency and quality of remaining government activities, reduce the financial strain, and shrinking the size of government. But again, it could make life hard for the common citizen.
The intended investors looking to acquire the greatly undervalued firms, on the other hand, are at an advantage as they have the potential to make huge profits after restructuring the companies.
A state notice on the privatization of the New KCC noted that the sale of the company is the solution to future governance and sustainability of its functions. Currently, the firm pays farmers 35 shillings a liter for milk deliveries and its brands are among the cheapest in Kenyan supermarkets. The pricing could change due to the sale of the company.
Other companies up for grabs include several hotels like Kenya Safari Lodges and Hotels Ltd, Mt Elgon Lodge Ltd, Kabarnet Hotel, and Golf Hotel Ltd, Sunset Hotel Ltd; Numerical Machining Complex, Agrochemical and Food Corporation, and Isolated Power stations.
The Kenya Tourism Development Corporation-associated companies are also among the targeted companies.
The sale of these companies, especially the key government entities, follows a mixture of reactions, both positive and negative. On the downside, it is a cause for concern after the realization that the move will raise the cost of living. Moreover, after the sale of the companies, they might still need government intervention for certain sectors to perform.
Private sector managers may have no compunction about how to adopt or formulate profit-making plans and budgets or policies that make essential services unaffordable or unavailable to large segments of the population.
After privatization, some of these companies may choose not to involve the citizens to further develop and improve their living standards as a state-owned corporation would.
But then again, companies like the troubled sugar millers could fail to ever get back on track if left at the mercy of the government. So far, the majority of the farmers remain unpaid and the companies are still wallowing in pools of unpaid debts.
Whichever the case, the sale of these companies should ensure that the companies make tremendous and positive changes while at the same time ensuring that the common citizen is protected from economic consequences.
Meanwhile, the Privatisation Commission of Kenya will oversee the sale of these state-owned entities. It hasn’t confirmed yet how much the sale will raise towards settling the deficits.