Salvage dying state corporations
Postbank headquarters in Nairobi. It seems to me that we still don’t know what to do with state corporations like Consolidated Bank of Kenya, Postbank, Development Bank of Kenya and Tourist Finance Corporation of Kenya.
As we enter 2023, I find myself reflecting on what I describe as the forgotten parastatals. Fresh and bold thinking action is needed to restore the financial viability, especially, of big entities with hundreds of employees in their workforce.
It seems to me that we still don’t know what to do with state corporations like Consolidated Bank of Kenya, Postbank, Development Bank of Kenya and Tourist Finance Corporation of Kenya. Today, nearly all regional development authorities are zombies that are teetering towards insolvency. And the reason they are in financial dire straits is a lack of foresight and ill-thought-out and arbitrary decisions.
Here are examples. In June last year, we woke one morning to hear that the National Treasury had written to the state-owned Tourist Finance Corporation (TFC)—formerly Kenya Tourist Development Corporation (KTDC)—directing it to immediately freeze its operations.
The parastatal was also ordered to immediately suspend all payments, including the disbursement of loans to clients.
It begs the question: Is it proper to cease operations of a parastatal that sits on, and manages, huge public assets in such an arbitrary and whimsical manner?
Even fishier, the cessation of operations order was made without the involvement of the Privatisation Commission—the constitutionally mandated body to oversee the transfer of ownership of public assets to private hands. Was it a mere coincidence that TFC was being ordered to cease operations in the middle of a controversy over the ownership of two of the biggest assets under its control—namely, Hotel InterContinental and Hilton Hotel?
TFC owns prime assets, including a 33.8 per cent stake in Hotel InterContinental Nairobi and 40 per cent in Hilton Nairobi, which, sadly, closed its doors at the turn of this year. Other hotels it owns include Mombasa Beach Hotel on the North Coast, Voi Safari Lodge in Tsavo East, Ngulia Safari Lodge in Tsavo West, Kakamega Golf Hotel, Sunset Hotel in Kisumu, Mt Elgon Hotel, Kabarnet Hotel and Bomas of Kenya.
Another good example of a parastatal that has been abandoned and left to die is the Postal Corporation of Kenya (PCK).
Monopoly
On paper, the government will explain it all away and tell you to attribute its fall to the death of the monopoly it enjoyed before and to competition from nimbler and low-cost competitors. That it should have been privatised a long time ago.
They will tell you that PCK follows a broken business model that puts emphasis on mail services despite the fact that this has been disrupted by the internet. They say that the postal service faces a crisis of obsolescence.
I have my own theory. The political elite has all along wanted PCK to die so that they can grab its land. Indeed, the corporation used to be one of the biggest property owners in the country with land and buildings literally in every urban area.
From my archives, I find Kenya Gazette notice Number 156 of June 1999 by the Minister for Finance, headlined: “Transfer and vesting of assets of the Kenya Postal Corporation.” If you want to appreciate the extent of land belonging to the corporation that has been grabbed, this is the place to start.
I’ve also seen several letters by successive postmasters-general to both the Ethics and Anti-Corruption Commission (EACC) and the Ministry of Lands, seeking assistance in their efforts to recover PCK land that had been grabbed by influential individuals.
Benign neglect and the exploits of corrupt elites—not technological disruption—are the reasons why PCK is insolvent today.
When you look at the rest of the world, how many postal corporations are still state-owned? Very many. How many of them have lost their monopoly status? Several. How many have survived technological disruption by the internet? Many.
So, what have other countries done that we cannot? When we dismantled Kenya Posts and Telecommunications Corporation (KP&TC) to create PCK in 1998, our government did not come out with a clear strategy for guiding this critical corporation through changes in technology.
We needed to make profound alterations to the business model and think through how to invest proper money in expanding its product portfolio beyond mail and the post office box.
As our government slept on the job, other countries were rebuilding profitable mail businesses to enable them to raise the money to invest in new platforms—such as full-scale e-commerce offerings, fully-fledged banking services and air cargo and freight business—besides providing government services.
Other postal corporations have diversified through mergers and acquisitions. Here, the government has failed to achieve something as simple as merging the operations of PCK and Postbank to create one entity. The South African Post Office Bank, for instance, ranks among the top 10 credit institutions in that country.
