History's accolades and brickbats

There are over three hundred parastatals in Kenya. Almost one-quarter were established after 2013. The economic rationale for their establishment was never established but their political value is incalculable. Mwai Kibaki's rising tide didn't have to seriously contend with the value-for-money proposition of parastatals so he did nothing. Uhuru Kenyatta's sinking boat most definitely did, so he appointed a task force to advise on the necessary reforms. It is now common knowledge that among the recommendations of the task force was the merger of some and the winding up of others. Uhuru Kenyatta binned the report and went on a parastatal-making spree.

It is now William Ruto's turn at the wheel. He has committed himself to reforming parastatals by, among other things, winding up the loss-makers and other redundant parastatals. It will be a testament to his ability to play hopscotch in the political arena if he shuts down any without eliciting a political rebellion in all his backyards.

So far, the signs are not promising. You only have to look at the chequered attempts to off-load state-owned sugar manufacturers, and President Ruto's part in them, to see that the hot potato in his hands can cause damage. The economic value in state-owned sugar manufacturers dissipated the moment sugar-producing zones were saddled with more factories than they could economically support. Private factories have undermined the economic value of the state-owned ones for decades now. Any viable reform programme would entail selling the state-owned laggards to the private upstarts, and consolidate sugar-producing zones in the hands of three or four players. But the elected parliamentarians who make hay by promising jobs for their constituents in the factories and outgrow farms will not let the president sell the factories without a fight. And they fight dirty.

The National Treasury is in an unenviable position. In order for it to successfully reform parastatals, it must have a free hand to pick winners and dump losers. That free hand comes with enormous political power; by picking winners, the National Treasury guarantees political glory for the parliamentarian in whose constituency the winner is found. By offloading loss-makers, the National Treasury dooms a parliamentarian to election catastrophe for failing to keep jobs and secure livelihoods for his constituents. The economic argument for keeping one parastatal and dumping another is irrelevant in the sharp-elbowed political environment Prof. Njuguna Ndung'u and Dr. Chris Kiptoo have been dumped into by the president. They will need the president's political instincts if they are to succeed where Uhuru Kenyatta flamed out so spectacularly.

The debt treadmill on which Uhuru Kenyatta deposited the government is a key reason why the Government is keen to release resources that are tied up in loss-making capital assets. The massive public debt, for which we keep borrowing even more to offset, has wrecked public investment in critical public services, including healthcare, basic education, public transport, water distribution, and environmental conservation. Unless the President can successfully demonstrate that the short-term pain of divestment will translate to greater public investment in these areas and, crucially, that such investment will lower Kenyans' cost of living, the divestment programme will not succeed. He has two presidential blueprints for economic transformation to compare his plans against: Mwai Kibaki (2003 to 2008) and Uhuru Kenyatta (2014 to 2018). History will judge whether he will receive glowing accolades à la Kibaki or savage brickbats à la Kenyatta.