Billow Kerrow
24 July 2008
Nairobi — After two miserable years of inertia by Rift Valley Railways, it has dawned on our leaders that the "marriage" between it and the Government is on the rocks.
All the prenuptial pledges by RVR were nothing more than hot air and the epitome of the seductive prowess of multinational corporates out to grab and strip public entities in Africa.
What went wrong, with all our highly qualified professionals and skilled technocrats in the public service who scrutinise such deals? Or was it the pervasive influence-peddling of our political leaders who now crave to be the chief executives of the dockets they run that blinded them about RVR's capacity?
What role did the World Bank play in pushing the Government into the "rehabilitate-operate-transfer" concession through its private sector arm, the International Finance Corporation who were the transaction's advisers?
The concession was a public-private-partnership that was carried out hastily at the behest of donors and without the involvement of Parliament.
When the Finance minister stated in his 2005 Budget speech that the concession would be finalised by August of the same year, we warned that IFC was driving an unworkable deal.
Clearly, the terms were unacceptable, and we cautioned that RVR was only interested in stripping the assets of the Kenya-Uganda Railways. No significant investment in infrastructure was required of RVR by the concession in the initial five years.
Yet, time and again, it is the failure by the Executive to seek approval of Parliament as mandated by the law that disenfranchises us and makes us regret.
In modern democracies, matters of such economic import are tabled in Parliament through a sessional paper for approval. It is in such scrutiny that weaknesses in the procurement processes, terms of concession or sale, valuation of the enterprises, and other key parameters are subjected to a healthy scrutiny.
However, the impulse to do a quick deal by our custodians and the rent-seeking behaviour of political leaders mitigate against such a transparent and accountable process.
Although passed into law more than two years ago, the Privatisation Act and the Public Procurement and Disposals Act were not operationalised until after the Safaricom IPO, an indication that the Executive does not seek to embrace the rule of law when it is expedient to do so.
The private-public partnerships (PPPs) are not governed by any specific regulatory environment. Draft regulations have been on the cards, four years after the Government first outlined its commitment to PPPs at the Consultative Group Meeting of April 2004.
In 2005, I raised concern about the many risks inherent in our Government's pursuit of PPPs without an appropriate policy and legal environment.
Apart from concerns on the ability of the contracting party to undertake its contractual obligations and potential loss of control, other fundamental issues ought to be addressed to safeguard against situations such as those of RVR.
Foremost is the political commitment to transparency. Is the Government unit dealing with PPPs independent? Does it report to the minister or to Parliament?
Secondly, the Government ought to fast-track the review of all laws inconsistent with PPP policy objectives. Then, there is the preference for local ownership to develop internal skills and build the capacity of our private sector.
However, to avoid compromise on quality, it is imperative to perform due diligence of the contracting private entity before the contract is signed - its financing capacity, experience, technical ability, and ownership.
Who should approve limits for PPP, regarding services to be concessioned? Is it Cabinet or Parliament? Which projects will be entitled to incentives and how will the matter be determined? How should the prices of the services or goods of such a franchise be regulated, especially in a monopolistic environment such as the Kenya Railways?
Clearly, good governance requires that public affairs be managed well, in a participatory and measurable manner. The process of off-loading the burden of public enterprises has been undermined in certain cases by lack of transparency, inadequate disclosure, absence of an appropriate legal environment, and method of sale or transfer.
Let's subject our processes to greater scrutiny to avoid pitfalls and outcries such as we have witnessed in recent weeks. It is an indictment of our Executive's obsession with its righteousness that even landmark documents such as Vision 2030 have never been tabled in Parliament for discussion.
Mr Kerrow is a former shadow Finance minister.
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