Do private sector, civil service and parastatal reforms in 2019

Here is my pick of the issues economic policymakers should focus on in the New Year.

Our leaders persist in the celebratory talk about robust growth of the economy — about green shoots of economy — and about stable macroeconomic conditions, even where the evidence in the real economy points to worrisome trends.

I don’t know when we will accept the reality that this economy has major problems, even with the profitability of companies and businesses.

Yes, debt-financed expenditure has allowed us to keep infrastructure spend at very high levels.

But where is the commensurate impact in recovery of private sector investment? What must be done to stimulate private sector profitability?

PROFIT

You will not see the evidence of sluggish performance of the private sector captured in official statistics.

But the contradictions and signs of anaemic growth in our economy are there for all to see.

The upsurge in the number of listed companies issuing profit warnings is one example.

The fact that the Kenya Revenue Authority is struggling to meet targets set by the Treasury is another.

We are seeing widespread distress among leading supermarkets. As a matter of fact, two leading retail chains — Nakumatt and Uchumi — have collapsed under the weight of mountains of debt.

Today, the government touts an exponential increase in the number of electricity connections as a major achievement.

Yet the statistics from published audited accounts of Kenya Power show this has not come with an increase in electricity consumption by households or industrial consumers.

MARSHALL PLAN

Although the uptake of credit by the private sector is recovering, it remains at a historically low point.

Yes, some of our large commercial banks are returning profits. But a much bigger number are in financial problems.

This is manifested by the high number of banks operating below minimum capital requirements, a good number operating below regulatory liquidity requirements and a significant number have seen non-performing loan portfolios rise unpredictably.

In the New Year, President Uhuru Kenyatta will need to rollout a ‘Marshall Plan’ for dealing with declining profitability levels of private companies.

He must return to his original plan and pet project of deep reforms in the parastatal sector.

I have a list of specific decisions that need to be implemented this year.

REFORMS

Here is the list: Restore the financial health of Kenya Power, complete the plan to merge JKIA with Kenya Airways and complete the privatisation of the second container terminal.

The government should deliver on resolving the problems of the following financial institutions: National Bank, Post Bank, Consolidated Bank of Kenya and Development Bank of Kenya.

Can we go back to the recommendations of the presidential task force on parastatal reforms and cherry-pick some of the good and valuable ideas in this important document?

In my view, the low-hanging fruits in this task force report, which should be implemented this year, include establishing the proposed Government Investment Corporation, creating and setting up a sovereign wealth fund, establishing the proposed Biashara Bank, and establishment of a single SME agency by amalgamating the large number of affirmative action funds.

I think the ongoing anti-corruption crusade has improved the conditions for implementing sound policies.

The reason corruption has been rampant is because the Jubilee administration has gradually degenerated into a patrimonial regime.

PARASTATALS

The civil service bureaucracy and CEO and director positions in parastatals are top-heavy with cronies of powerful Jubilee elites.

All the building blocks for bureaucratic discipline and non-partisan civil service have collapsed.

In the New Year, and as he tackles his last term in office, President Kenyatta must now return to the project of constructing an efficient and non-partisan civil service.

Finally, keep the momentum of the anti-corruption drive consistently high.

Indeed, the significance of the ongoing anti-corruption drive is not so much in the fact that many big fish are facing the frying pan.

GRAFT

It’s greatest impact is in how it has sent the fear of God across the public service, leaving top and well-connected public officials feeling exposed, without political protection.

Today, every large government contractor you come across will tell you how difficult it has become to have large payments processed and released — a state of affairs they attribute to a wave of fear and uncertainty that has swept through the length and breadth of the public service.

Let us not judge the crusade by the number of court convictions only.

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