We visited Privatisation Inc. and all we got was this lousy T-shirt

Let us stay, if you will indulge me, and as promised, on the topic of funding government and its work. The problem, put simply, is that government doesn’t have enough money to pay its bills. To solve this problem requires an increase in revenue and/or a reduction in expenditure.
While there have been moves to cut non-essential expenditure, such as foreign travel, these have been half-hearted; there is no serious and sustained effort to reduce the size of government and, therefore, recurrent expenditure.
The real effort has been put on increasing revenue. As widely noted, some of the efforts, such as taxing social media channels, smacks of desperation. Others, like the sharp increase in external and domestic debt, are a ticking time bomb.
There are many clever ideas that one can think of on both the revenue generation and expenditure management sides of the argument – and many have been made over the years – but we are fast approaching the point at which we have to deal with the underlying causes, not merely the symptoms of the problem.
The first of at least two major considerations, which we shall look at today, is the role of the State, beyond its minimalist traditional role of exercising a monopoly on the legitimate use of coercive force. Post-colonial African governments, including in Uganda, saw the State as a key agent in the nation-building project, from forging common identities to driving the economy through State-owned and run agencies.
It is accepted conventional wisdom that this was an unmitigated disaster and that the liberalisation reforms that followed the end of the Cold War and the collapse of the Soviet Union, were the catalysts for the economic growth over the past three decades in sub-Saharan Africa.
But it is also now clear that while some of the reforms were necessary and even useful, in some cases the medicine was worse than the disease. Take, for example, privatisation: In post-conflict countries like Uganda where government did not have money to invest in revamping industries, it made sense to bring in foreign capital and give it assurances that it could carry its profit out of the door. But what role were the natives to play?
Let’s look at how Kenya did it. In 1988, the government sold 20 per cent of its stake in Kenya Commercial Bank by listing it on the Nairobi Securities Exchange (NSE). This remaining stake has been whittled down over the years and now stands at 17.5 per cent, but having government shareholding does not appear to have undermined KCB’s growth into the biggest bank in the region by assets, or its profitability; in each of the last two years, the Government of Kenya (GoK) has pocketed about $15m in dividends.

That we are now struggling to breathe life into the bankrupt Uganda Telecoms Limited isn’t evidence that governments can’t do business, but of our own corruption and incompetence. We did a back-door deal with the Libyans and are now throwing good money after bad; GoK brought part of its stake in Safaricom to the NSE and, with Vodafone’s technical and financial inputs, saw it become the biggest and most profitable company in the region.
GoK has received about $235m in dividends from its 35 per cent stake in Safaricom in the last two years – over and above capital gains as well as the taxes and jobs the company creates.
GoK is happy, Vodafone is happy, and so are the thousands of Kenyans who use Safaricom and own a part of it, or are employed by it.
It is frequently argued, with some thinly disguised racist undertones, that Africans can’t replicate the Chinese government-backed enterprise model, or its lite version in South Korea, Vietnam, Japan and elsewhere. I think Kenya’s model, as imperfect as it is, offers evidence that it is possible to have a hybrid model that allows the State to drive strategic sectors of the economy, provides for markets to punish those vehicles that allow patronage to seep through, while allowing individual and institutional investors to get skin in the game.
It is the last point that really matters. On its website, the NSE notes that between 1963 and 1970, the Kenyan government “adopted a new policy with the primary goal of transferring economic and social control to citizens”.
This is a very political statement and, as we shall argue next week, the difference between States evolving from our current patrimonial state to one of clientelism. Put simply, it is the difference between giving voters in Rukungiri motorcycles and giving them cheap credit to set up a motorcycle assembly plant.

Mr Kalinaki is a journalist and a poor man’s freedom fighter. [email protected]
Twitter: @Kalinaki.