This archive report was first published on 17 October 2019.
Published on October 17, 2019, economists have been pushing for the privatization of state corporations to boost the economy and achieve the Big Four agenda.
According to Kenya Business Guide, a Nairobi-based economics think-tank, commercial state corporations take up to 6% of Kenya's GDP through capital grants. However, these investments often do not yield financial returns, leaving a hole in the budget that is filled by taxpayers.
The increased fees from these grants inflate the cost of doing business, denying the private sector the incentives to invest in projects behind the Big Four Agenda. In 2018, state corporations took as much as KSh 345 billion from the exchequer and brought in minimal returns from the investment, a significant increase from KSh 169 billion in FY 2013/2014.
Privatization would provide a shot at better management, increase the capacity of the government corporations to provide economic returns, and improve operations and efficiency in the companies. Additionally, privatization would help reduce and eventually eliminate the need for capital grants, which are increasingly denting Kenya's budget.
While privatization is not a guarantee to end corruption, the private sector has a better track record at handling graft. The government can opt to either fully privatize or give up majority control, with the state pumping resources from the sale to support the Big Four agenda or channeling dividends earned toward development projects.
Some parastatals are pivotal to a sector, and therefore, legislators should approach policies around them with tact, weighing implications of privatization on employment, economic growth, and provision of services. This entails an understanding that while privatization would propel the performance of some parastatals, its application should follow a keen analysis on a case-to-case basis.
