Implement parastatal reforms report – Business Daily

I am still scratching my head about the significance and implications of the recent presidential executive order whose centrepiece is the establishment of a new entity called the Kenya Transport and Logistics Network plus a new and powerful super agency created by expanding the existing Industrial Commercial Development Corporation (ICDC) and which will be headed by investment banker John Ngumi.

The network brings together the Kenya Ports Authority, the Kenya Railways Corporation, and the Kenya Pipeline Company. My initial reaction is that we are trying to replicate South Africa’s Transnet — the country’s giant rail, port and pipeline company.

It is not a bad idea. Like the South African experience has shown, it makes sense to have a single institution that provides a common and shared strategic direction to your key commercial corporations. Whether what has worked in South Africa will necessarily work here remains to be seen.

The reason Transnet is successful is because it runs like a proper holding company that wields powers over the assets under it by exercising ownership rights like any other holding company in the private sector does under the Company’s Act. In our case, we have introduced entities whose powers are limited to co-ordination.

The statement from State House made it clear that the responsibility of the super ICDC under Mr Ngumi will be to co-ordinate the operations of the network.

There were other salient points in the statement from State House. All these new entities will be domiciled at the Treasury. In order not to disrupt the existing legal basis governing relationships among parastatals, the proposed system has been introduced without amending existing laws.

All these changes are in line with the recommendations of the presidential task force on parastatal reforms of 2014. I choose not to be negative because the practice of modern corporate governance in the parastatal sector in this country continues to be in a total mess.

If we can successfully introduce and implement such major changes within such a short time frame, and if the intention is to make a positive difference in the running of these key commercial parastatals, we must allow Mr Ngumi and his team to put their show on the road

It seems to me that in creating the super ICDC, the intention is to strengthen the portfolio management function within the Treasury.

Indeed, the agenda for reform in this space were comprehensively dealt with and spelt out by the presidential task force on parastatal reforms. It was suggested that what we need first is corporatisation of these commercial corporations under the Company’s Act, ownership and portfolio management by an investment holding company, and finally taking these companies to the market like has been done with Dubai Ports, Singapore Ports and Canada Rail.

We want to see portfolio management taken to a level where the government regularly gets out of mature investments and uses the money for development in other areas. Why are we still holding onto shares in hotels such as the InterContinental and Hilton Hotels? Introducing radical changes by presidential executive orders may have its own advantages. But we must go back to applying the law.

We must not forget that the key piece of legislation that was supposed to put the recommendations of the presidential task force, namely, the Government Enterprises Bill (GOE Bill) remains in abeyance having been published many months ago.

We were supposed to have implemented the proposed Government Investment Corporation in the image of Tamasek holding company of Singapore or Khazana of Malaysia.

Indeed, this super ICDC we are creating now would not have been necessary had we implemented the recommendations of the task force on parastatal reforms.