KMC which has been in state bailout. [Photo|standardmedia.co.ke]
State-funded bailouts are turning into economic burdens to taxpayers as billions of shillings set aside to take care of “terminally ill” institutions worsen Kenya’s Sh2.6 trillion debt burden.
Close to Sh44.4 billion will be forked to five institutions that the government has so far committed to rescuing. Analysts, however, say that if it were for purely economic considerations, some firms should either be closed or privatized, and their management made to account for financial impropriety.
Kenya Airways has also been calling out for a Sh42 billion rescue package as it seeks recovery from the effects of Ebola in its key West African route, a global economic downturn, the decline in tourism and increased competition.
John Kirimi, Sterling Investment Bank’s chief executive says all firms being considered for bailout must be looked at holistically.
“It requires proper thought process from the beginning to the end in a bid to know what their problems are. However, let management be made to account,” he said.
Pyrethrum Board of Kenya, Mumias Sugar, Rivatex and Kenya Meat Commission (KMC) are examples of firms that have in the past enjoyed several bailouts over the years but have never come out of the woods.
“The most notorious is in the agriculture sector, especially in coffee, sugar, and pyrethrum who are basically taking advantage of political considerations,” said John Mutua, a researcher at Institute of Economic Affairs (IEA).
"Pragmatically, it is unfair, because people will lose jobs. But because there is usually no serious follow up on the people who bring down these institutions, this will continue,” says Mutua, adding that Kenya should borrow a leaf from Rwanda because some of these companies should have been closed down a long time ago to save taxpayers.
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