Key New Report from AFRICOG on Kenyan Privatization Ahead of 2012 Election

AFRICOG, the African Centre for Open Government, in Nairobi has released “Deliberate Loopholes” an extensive report on the the privitization/divestiture of Telkom Kenya and Safaricom.  Just as the Safaricom deal went through just before the 2007 election in spite of ODM litigation to block it, new deals are coming with the 2012 election approaching, including likely sale of the Government of Kenya’s stake in 11 more hotels, for example:

“Deliberate Loopholes”describes some of the lapses that occurred in the privatisation of Telkom Kenya and Safaricom: the title refers to the deliberate evasions and subterfuges that created a fertile climate for asset stripping and corruption by senior officials whose identity continues to remain shrouded behind the veil of secrecy provided by international tax havens and off-shore financial centres. The preliminary findings of this study were presented to Parliament’s Public Accounts Committee (PAC), which took the matter to the floor of the House.

AfriCOG’s interest in this area stems from its mandate to build and entrench an anti-corruption culture through informed and determined public action, both in the public and private sectors. Effective privatisation requires a robust regulatory environment. Regulators need to be independent in delivering on their mandate and achieving outcomes that protect the public interest and advance Kenya’s development. However, these bodies face the constant reality or threat of capture by special interests.

Kenya is currently engaged in an extensive series of privatisation exercises, with around 23 majorpublic enterprises slated for or engaged in some sort of privatisation. The unanswered questions surrounding the sale of the Laico Grand Regency Hotel are still fresh in the public’s memory. By providing objective information on the privatisation of Telkom Kenya and Safaricom, AfriCOG aims to promote public knowledge and vigilance on other public divestment ventures. Furthermore, the general public has a huge stake in privatisation considering the significant investments that citizens have made in building these institutions in the first place and the gains that ordinary investors hope to make from their divestiture.

Given the market dominance of the entities involved and the endemic corruption that plagues Kenya, it is perhaps inevitable that many of these exercises have been shrouded in political controversy. From experience, large scale privatisation is a process that can be particularly prone to political corruption, or the theft of public resources to fund elections. Since 2012 portends a particularly hard-fought and conflictual election,
heightened scrutiny against possible abuse of privatisation of state-owned enterprises with the aim of financing politics would be prudent.

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