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Why State must privatise, outsource services more

Maurice Aron

Sometime in February 1995, an International Monetary Fund (IMF) delegation was due to visit Kenya. Years of economic decline due to corruption and mismanagement and the effects of the quest for the second liberation had the country teetering on the edges.

Kenya needed money to run the government—more or less similar conditions like now though to some extent  different or similar causes.

One of the preconditions by the IMF team was that telecommunications sector be liberalised.  Kenya agreed—options were running thin.

The task of dismantling the corrupt, inefficient and outdated Kenya Post and Telecommunication Corporation (KPTC) began.

Fast forward to July 10, 1999 —at the peak of economic liberalisation – which included privatisation, deregularisation of price, interest rates and exchange controls, the last bit of the KPTC was done. Out of it came three independent entities namely Telkom Kenya Ltd, Safaricom and Postal Corporation of Kenya.

Had the privatisation not happened, KPTC would have collapsed with Safaricom, M-Pesa, Telkom and all the economic benefits that have come with the institutions, figuratively speaking of course.

But it is not the story of the privatisation that is the gist here. it is the findings once the process started that are more important.

The audit of the operations of KPTC revealed what many had feared. More than half of the employees were guards, cooks, messengers, drivers, cleaners, caterers, secretaries and those providing such related services.

Role duplication was the order of the day at a far greater cost to the taxpayer and in the most inefficient of ways. KPTC expenses were reduced by a third on outsourcing of some of the above mentioned services. This is while keeping in mind that at the time of privatisation, KPTC controlled 67 per cent of public investments in Kenya.

KPTC was also one of the biggest employers in the country—in the league of Kenya Ports, Kenya Power and Kenya Railways among others. The KPTC story is one replicated in a number of government corporations, departments, agencies and even mainstream offices.

Walk into any government office and chances are high you will meet a messenger with a file running up the stairs or squeezing into the lift. Probably next to you in the lift will be a secretary coming back from an extended lunch.

The government has a huge labour force composed of very low cadre workers. This cadre of workers provide services in the most inefficient of ways at a very high cost to the taxpayer.

It is not unusual for members of the public to complain at the slow pace of service delivery in government offices despite the activation of the rapid results initiative. At this critical juncture where expenditures are stretched and tax revenues are down, it is possibly a good idea to consider outsourcing some of the services in the government ministries to the private sector.

If the tendering process is not tainted by corruption and figures inflated, outsourcing of some government functions will result in a more cost effective and efficient service delivery.

The government can go a little further and do away with monopolies that ensure such corporations, agencies exist in the first place. The removal of monopolies will level the playing field and let each service provider find the best way to cut costs and deliver services more efficiently. The government can embrace technology.

Bottom line is the government usually is the most inefficient service provider. Its role is not in service provision but in levelling playing field for service providers. – The writer is an economic researcher. Contact: [email protected]

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