Tuesday, November 14, 2006

Up for Grabs

going by what the minister said yesterday, one would be forgiven to think that the country was up for grabs , literaly. after selling rights to the railway for at least 25 years, the minister is proposing concessioning the road network. meaning that private business men will be allowed to man the roads and charge tolls. this is after the govt has taken almost 50% from the price of a litre of fuel as road maintenance levy. on top of that the govt will sell more kengen, kplc, mumias, kenya re , telkom, safaricom, nairobi city council, KRA, KPA, pipeline , Kenyatta national hospital etc. the country is on auction. at this rate i guess even the administration of the republic will be auctioned. it sends me to the fundamentals, what is the duty of the govt?

one would then starting going to things like provision of security, infrastructure, health services,leadership etc. in short govts are social service providers. it started with commercialization of abolution blocks in the city, then water services, then health and the list went on, now when roads become private property, then we could as well wind up the nation and go private, problem is the weak will become weaker and die. but then darwin will only be too happy in his grave!

elsewhere, brokers have adamantly refused to move with the times, my brokers website has been under construction for ages, they have one email account which they told me they 'download' every morning but my email orders dont get actioned, the fax line doesnt go through and the phones are unanswered. the funny part is that they have employed very able suppport staff and when you go to the office personlly you get very good service and your orders are done almost immediately. so that keeps me going there just the same way you go to the same barber who has nice stories and good workmanship but pathetic barber shop!

eveready is on but i just dont feel it (thats teenspeak) i dont know whether it feels me but things dont seem right, owners are dumping it. strong guys like icdc and merali . why? dont know but battery manufacture may not have a very good future, its time for paradigm shift but these guys havent said anything like that. however the kenyan public will gain since its cast on stone that IPOs will be oversubscribed. another offer is for family finance, if i had an account there, i would have taken that. otherwise, kenya re and mumias are far much better. however going by the direction of the nse index, guys are liquidating the buy eveready.

odegle tip of the day -- in a perfect market, there are no transaction costs, no taxes, no commisions and no secrets. everybody has the same information and so on. in short a perfect market is utopia.


  1. The business of business is business.

    We can't let the gov't grow to what it was coz in Kenya it is a disaster in the making.

    As for the poor, this is a difficult situation but Kenyans need to decide what to do without involving the government.

    I am GLAD that KR was privatised. It would have been better to have gone the KQ way i.e. find a strategic investor who provides technical support while maintaining an ownership (not control) stake.

    The only successful sugar millers are the private firms (Mumias & West Kenya).

    KPLC & KenGen would be much stronger firms had they been privatised earlier. Why? KenGen would have invested into new plants & dams while KPLC would have a reliable network.

    KPLC was used as cashcow by kanu in 1997.

    KPA could be much more efficient but political interests are the order of the day. Brown Ondego was kicked out for political reasons!

    NCC - WTF... they are the WORST... A private NCC could be far better than the fools we have now! 140/- for parking to "hire" more workers! That is to buy votes.

    Toll Roads work since the "owners" want to create a product that LASTS. They would build QUALITY since a washed out road does not make money!

  2. I agree with coldtuske.
    As the American Declaration of Independence states, governments are instituted among men to secure the rights Life, Liberty and the pursuit of Happiness. If these rights are best secured through privatisation, with the government performing an oversight role, then I am quite happy.

    Personally, I believe that the government has no business doing that which individual citizens (corporate or otherwise) can do themselves either for profit or charitably.

  3. The government has got no business in commercial activities, except for safeguarding private property. Government owned businesses are nothing but cash cows for bureaucrats, politicians, and well connected individuals. They are also drainage holes for tax payers’ money. Companies like Kenya Airways, Mumias, and KPLC used to get government funds every budget year, but their services and profitability deteriorated until they were partially privatized. Their story is completely different today. KQ is among the most respected companies in East Africa and one of Africa’s best Airlines. Mumias is even expanding to Tana River and also producing electricity.

    Companies that were left at government’s hands are all struggling. Just look at NSSF, Telkom Kenya, Kenya Pipeline Company, Nzoia Sugar, Kenya Railways, Uchumi, and Nyayo Tea Zones. They are all crying for help.

    I find privatization of state corporations as a way of letting entrepreneurs run businesses and bureaucrats craft bureaucracy.

  4. KQ is the BEST airline in Sub-Saharan Africa...

    SAA is government owned & is finally getting out of the hole.
    Ethiopian is also govt owned & has suffered some setbacks recently.

    Uchumi was substantially private but suffered due to the excessive influence of kirubi & ICDC.

    KPC is profitable because its a monopoly. The ROA is low when compared to private firms.

    KPA is profitable thanks to Brown's reforms. The ROA could be much better. The inefficiency is a drag on the economy.

    Telkom has done much better under Kirui but is generally a disaster. It has a fighting chance IF privatised.

  5. You’re right coldtusker. Government corporations would do better if privatized. This is because they would be subjected to market forces, where those offering superior services prosper and those providing poor services perish. That's the only way we can unleash the potential of state firms.

  6. its true that a number of former state cooporations had done better after privatization, but question is, should it be this way? why cant the govt function as well as the private sector. why is it that the same person who excels in the private sector performs so dismally in a parastatal? again another question, if a govt is so inept, why pay taxes. eg am wondering whether fuel levy will be removed once the roads are handed over to private entities to run. i also maintain that we cannot auction everything, govts must provide a social aspect to developement. remember that businesses look for profit and dont bother about pples welfare, future generations or equitability of service provision.

    incidentaly , how come south africa has such great infrasructure yet its government run. how come their systems work so well?

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  9. Odegle - S.Africa has a huge private sector. The LARGEST firms have been privatised for many years e.g. the Gold Mines (AngloGold), De Beers, etc.

    The govt owned SAA is moderately successful thanks to the SIZE of the S.African market but on financial metrics, KQ is far better.

    There are glaring inequalities between the former "White" & "Black" areas which led to skewed development.

    We might hate the idea but Kenya had relatvely better infrastructure (vs other developing countires) in 1963 than 2006. Basically, we have gone backwards. It seems the "corruption" was less severe in the pre-kenyatta days.
    Could that be the same for S.Africa i.e. they inherited a relatively efficient civil service from the Boers/Afrikaners?

    I can't say for sure.

    When zuma goes scot-free (& might even be the new prez) in spite of numerous abuses of power & corruption... will S.Africa go down the same path as other African countries?

    I hope not! Botswana is a fine example of a well-run government.

    The state should have minimum involvement in MICRO-ECONOMIC matters.

  10. Capitalism is NOT the best system but most of the others have failed!

    Read Animal Farm... very insightful!

  11. Odegle. Managers of State Owned Enterprises (SOE) perform poorly not because they are incompetent, but because their boss (the state) compromises professionalism. Politicians, with their political or populist ideals, do not let managers make important business decisions. For instance, the Telkom Kenya CEO knows it is necessary to lay off extra workers. But he can’t dare fire a single employee, lest he loose his own job.

    Public sector Boards of Directors are virtually powerless; some can’t even hire/fire their CEOs. Some directors are political appointees who use their positions not so serve the company, but to serve other people’s political ends.

    It is therefore hard for SOEs to operate as profit maximizing entities.

    On Privatizating Roads:
    Regarding privatization of the county’s road network, it will be up to the government and infrastructure operators to decide on the fate of fuel levy tax. The government has provided (bad) road network for too long. As a result, most Kenyans cannot imagine road services being provided by private firms.

    On Businesses Vs. Wananchi’s Welfare:
    A business that ignores people’s welfare cannot make profits; it makes losses and finally closes down. Actually, businesses care more compared to the state. Remember that companies get paid by consumers (public) for meeting needs. Safaricom, for instance, took care of people’s communication needs and was “awarded” with Kshs 12 billion in profits. Kenya Breweries cared about drinkers’ thirst and was awarded with huge profits.

    On South Africa’s Government Infrastructure:
    South Africa could be having sweet times with state operated infrastructure, enterprises, and wealth redistribution programs (such as the Black Economic Empowerment), but that’s not long lasting. United States, Britain, France, and other social democracies were at that point once. They finally backtracked and privatized everything. Those who failed to go private like France are facing economic crisis, whereas those who privatized (like the US during Regan and the UK during Thatcher) are enjoying fruits of liberalism. Japan’s steady walk from a decade of economic downturn is partly aided by the privatization of state corporations. Sweden, the queen of social democracies, just replaced her government with a market friendly one. Kenya should go straight to relying on the private sector rather than the government.

    On Capitalism:
    Coldtusker nailed it, “Capitalism is NOT the best system but most of the others have failed!” Winston Churchill called Capitalism “the worst possible system except for all the others.” It is clear which way Kenya should look.

  12. wow! I must say that the comments i have recieved in this last post are the most balanced, informed, rational and intellectualy satisfying i have read in a long long time! i wonder where you all have been all this time apart from Coldi.

    However, what am insinuating is that we as citizens must begin to demand equal or better performance from SOE as we get from private enterprises. look at what Gakuo is doing for the city (or is it Wathika) is it rocket science? no, the man is simply doing his job and look at the achievments in such a short time. yet he is a civil servant. why cant all the rest do that?

  13. One reason why SOE's may not work as well as private sector (apart from politicians etc..) is that they function under different rules of engagement, that may hinder flexibility and response to the market. When one is a creature of government and the law, there are certain rules that one must follow, rules that constrain ones behavior and business practices, rules that the private sector may not have to adhere to.

    SOE's can function effectively if given the opportunity and the oversight is effective.

    However, the most important impediment to effectiveness is lack of competition. For too long SOE's have been monopolies, introduce some competition and things shall change.

    If SOE's are privatized, again the government shall need to open up what ever market that SOE was in. Monopolies, whether public or private, tend to be ineffcient.

    But I do agree with the overwhelming sentiment that the government that governs least, governs best.

  14. I agree with all those who have said before me that a Govt that governs least, governs best.

  15. Actually,another reason-appart from all of the above is shareholders and results. As a private entity, you have to announce your results every year-if they are good, your share price goes up and down if v.v. so there is quick repurcussions of underperfomance. Most govts go to their electorate every 5 or more years!


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