Pandemic calls for sovereign wealth fund

Corporate philanthropy makes business sense. In the Coronavirus Emergency Fund, the business community, our philanthropists and the donor community, are being called upon to contribute and support the government to prevent our economy from falling into stagnation and deep recession. The Sh2 billion so called corruption dividend cheque Director of Public Prosecutions Noordin Haji handed to Treasury Secretary Ukur Yatani the other day was a good start.

But what is going to make a difference are contributions from businesses and from philanthropists and our own rich families as is happening in South Africa.

It is that Sh 100 million contribution from the Co-operative Bank of Kenya that should set the pace for other large corporates. The Devki Steel Mills Group has offered an equivalent of Sh 100 million in kind.

At stake is a project that goes beyond the ordinary CSR programme where corporates are content with token contributions. We want to see the hand of enlightened enterprise -of corporates and rich families committed to social good and willing to put people and planet before profit.

I like the way this fund has been structured. It is anchored in law. Secondly, the board has not been filled with cronies of the political elite.

How and when the money can be spent, the powers of the board, and auditing of the funds is also anchored in the law. This governance structure should give some of our bilateral donors- even international DFIs- the comfort and confidence to contribute. Still, controlling the pandemic will need much, much, more resources than corporate philanthropy will able to provide.

What you will observe when you look at the way other governments have responded is that what is likely to make a difference are countries with strong institutions.

For instance, if the government decides today to roll out a big project to support small and medium enterprises (SMEs) during the pandemic period, do we-really- have a strong and consolidated and single SME agency with a register of all SMEs in the country.

I read that in the United States, all support to SMEs in the period of the pandemic will be channeled through the Small Business Administration (SBA).

The UK also has a similar institution. What happened to our plans of setting up Biashara Bank- the proposed and much-touted single and consolidated SME agency that was supposed to bring together the myriad institutions operating in this space?

I read somewhere that Kuwait has decided to turn to its sovereign wealth fund for money to tackle difficulties brough about by the pandemic. Norway’s $950 billion sovereign wealth fund, the world’s biggest, is preparing to liquidate assets to cover government expenses from the pandemic.

What happened to our plans to set up our own sovereign wealth fund? More than five years ago, the presidential task force on parastatal reforms recommended the establishment of a sovereign wealth fund. Indeed, President Uhuru Kenyatta formally accepted the recommendations in November 2013. The recommendations came complete with a Kenya Sovereign Wealth Fund Bill.To date, no progress has been achieved.

In a crisis like we are in at the moment, it does not make sense to create new vessels. Instead, you leverage on existing institutions. When Air Malaysia fell into problems a few years ago.

The bail out money came from their sovereign wealth fund. How I pray that things will not deteriorate so bad as to force the government to start bailing out companies.

In the West, one principle has been set that only companies that pay taxes can be allowed to access bailout money.

You are chosen to access tax payer money on the basis of records from tax return filings and audits While I don’t wish that the pandemic will worsen to a point where we will be called upon to bail out private companies with taxpayer money, I keep hoping that there will come a time when we will get a clearer picture of companies that don’t pay full taxes.

As American investor Warren Buffett once said, ‘only when the tides goes out do you see who was swimming naked’. The other day, the Kenya Bankers Association(KBA) published a study on corporation taxes paid by banks.

Conducted by financial advisory services firm, Pricewaterhouse Coopers, the study found that the banking sector accounted for 25 percent of corporation taxes.

Which begs the question: where are the other corporation taxpayers, considering that the banking sector only contributes a smaller proportion of GDP. In terms of tax categories, evasion of corporation tax is a national sport in this country.