Documents menu

World Bank Pushes Kenya to Privatise Power Companies

By Kevin J. Kelley, The East African (Nairobi), 30 August 2000

Nairobi - A World Bank team is expected in Nairobi in about two weeks to urge Kenyan officials to set a specific timetable for the privatisation of the Kenya Power and Lighting Company (KPLC) and the Kenya Electricity Generating Company as part of a new initiative to increase energy-related aid to Kenya.

The privatisation will set up regional power distribution bodies to be responsible for billing customers in their jurisdiction. The entities will tap power from the national grid and supply it to local companies, which will then be obliged to expand the distribution network under an arrangement similar to the current rural electrification programme.

Analysts, however, warn that privatising the two power companies before the World Bank demonstrates its ability to prevail on the government to make the process transparent may lead the country from the frying pan into the fire - as seems to be happening in the telecommunications sector, where the new ownership is said to revolve around politically connected firms and personalities. Few past privatisations have brought tangible benefit to either consumers or the country.

The World Bank's proposal would have seen about two thirds of KPLC's workforce of 6,983 laid off, according to sources, but discussions are still going on.

A World Bank mission that was in Nairobi in June to appraise the proposed $75 million emergency power-supply project recommended that an independent consultant be hired to review KPLC's organisational structure.

Already, donors have established that KPLC can operate more efficiently by contracting out meter reading, billing and collection as well as transport services.

The World Bank team will come soon after an International Monetary Fund mission that arrives in Nairobi this Monday completes its assessment of the amount of new aid Kenya requires as a result of increased government spending to alleviate the effects of drought.

The IMF mission will be listening sympathetically to Kenyan officials' appeals for additional help, because the drought and the consequent threat of famine have significantly strained the national budget.

The IMF senior advisor for Africa, Mr. Jose Fajgenbaum, told The EastAfrican that there will most likely be a modification of the programme approved by the Fund a month ago. The IMF agreed in late July to provide Kenya with $198 million in poverty-reduction aid over a three-year period.

Soon after that, the World Bank announced its approval of a $150 million loan for Kenya. Mr. Fajgenbaum would not be drawn into estimating the amount of new drought-related assistance that might be forthcoming from the Fund.

He said the assessment team would make such a determination following talks with Kenyan officials. The team would then forward a specific recommendation to the IMF's executive board, which would, hopefully, reach a decision in the second half of October.

The Fund will not be the only source of help in counteracting the effects of the drought. A portion of the budgetary assistance needed by Kenya was expected to come from the Paris Club of donors, Mr. Fajgenbaum said. He also noted that the World Bank would be financing new power projects soon. The Bank is considering a $75 million loan to Kenya for the expansion of electrical generating capacity.

Mr. Fajgenbaum, however, insisted that the IMF would not be setting any conditions for additional aid to Kenya and defended the terms of the $198 million poverty-reduction loan approved by the Fund in late July. Complaints that the loan conditions infringed on Kenya's sovereignty were an exaggeration, Mr. Fajgenbaum said, adding that the reporting requirements attached to the aid package were normal. They were the same as had been expected of Kenya as part of previous IMF aid programmes, he added.

The only two new benchmarks in the current package have been added as part of the Kenya government's anti-corruption efforts, Mr. Fajgenbaum added. The government agreed to publish the Economic Crimes Bill, an action taken last week and to add certain amendments to the Code of Ethics, an initiative that remains to be completed, mainly because of the legal issues involved.