Geza Ulole
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- Oct 31, 2009
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ll signs point to a Kenya that is broke
Friday March 9 2018
Treasury Cabinet Secretary Henry Rotich speaks during a women's conference at KICC, Nairobi, on March 8, 2018. He insisted that Kenya is not broke. PHOTO | DIANA NGILA | NATION MEDIA GROUP
In Summary
By EDWIN OKOTH
More by this Author
"How can the chief executive of a broke company keep giving money for projects?" Treasury Cabinet Secretary Henry Rotich is quoted as having reacted to news that Kenya was broke.
Kenya’s real financial health has been a concern for many in the face of mounting debt burden and the continued borrowing that saw a second Sh202 billion Eurobond issued recently. Its elephant interest is a story for another day.
However, to understand if Kenya is broke, we need to treat it as a company, with you as the shareholder, Mr Rotich the chief accountant and President Uhuru Kenyatta its fourth chief executive officer since it went public in 1963.
REVENUE TARGETS
Let us now do a light analysis on how it is run.
First, being an old business, it has been through many cycles, including reforms in its corporate governance structures in 2010 that has multiplied its expenses by increasing the number of highly paid mid-level managers.
Its peers in the old days like Malaysia, South Korea and Singapore (that is now paying bonuses to its citizens) have since broken even.
Secondly, this business has been failing to meet its revenue targets for the last five years and is not likely to meet the one set for it this year.
REVENUE COLLECTION
The last one was missed by Sh50 billion and the next is anticipated to fall below revenue by Sh84 billion.
This is despite massive investments already made to boost revenues so the top line is bad.
The bosses on this side of the top line have consistently targeted the easy sales, tax deducted at source and ignored the large pool of businesses running tax-free.
Actually, on closely examining the books, revenue collection has been growing but compared to the way your corporate bosses run the business, revenues cannot keep up with growing expenditure.
During the Annual General Meetings (elections) where you are essentially supposed to have a say, you are told about the austerity measures put in place to tame the runaway expenditure by those you have entrusted to run the business.
FUNDS MISUSE
They are sure you can hardly recall the millions they spent in benchmarking trips abroad, hefty allowances they earned in fruitless meetings and the billions in revenues your independent auditor keep saying they cannot account for.
The AGMs, which you faithfully attend with your single vote and try to elect the bunch of officials to run the business for five years, have been the worst experience for you the poor shareholder.
Very expensive, very divisive and more of an economic setback.
On the balance sheet, the long-term asset base is good, including some oil that was discovered six years ago have emboldened managers to borrow heavily from a newly discovered bank called China.
LOANS
Do you know the interest rates? Are you sure about the possible return on investments from the projects these loans go into?
Do you have any idea where the money gets spent? You are the shareholder. Period.
For a company that is now forced to borrow more to service the loans, a dejected shareholder put under pressure to inject more cash into the business to keep it afloat through taxation plans on fuel and power, it is hard to deny it is broke.
To answer Rotich’s question, I will use another one. How can a CEO of a company which is not broke keep squeezing shareholders and borrowing more to even service debts?
The writer is a journalist studying at the Columbia University. [email protected]
OKOTH: All signs point to a Kenya that is broke
Friday March 9 2018
Treasury Cabinet Secretary Henry Rotich speaks during a women's conference at KICC, Nairobi, on March 8, 2018. He insisted that Kenya is not broke. PHOTO | DIANA NGILA | NATION MEDIA GROUP
In Summary
- This business has been failing to meet its revenue targets for the last five years and is not likely to meet the one set for it this year.
- Revenue collection has been growing but compared to the way your corporate bosses run the business, revenues cannot keep up with growing expenditure.
By EDWIN OKOTH
More by this Author
"How can the chief executive of a broke company keep giving money for projects?" Treasury Cabinet Secretary Henry Rotich is quoted as having reacted to news that Kenya was broke.
Kenya’s real financial health has been a concern for many in the face of mounting debt burden and the continued borrowing that saw a second Sh202 billion Eurobond issued recently. Its elephant interest is a story for another day.
However, to understand if Kenya is broke, we need to treat it as a company, with you as the shareholder, Mr Rotich the chief accountant and President Uhuru Kenyatta its fourth chief executive officer since it went public in 1963.
REVENUE TARGETS
Let us now do a light analysis on how it is run.
First, being an old business, it has been through many cycles, including reforms in its corporate governance structures in 2010 that has multiplied its expenses by increasing the number of highly paid mid-level managers.
Its peers in the old days like Malaysia, South Korea and Singapore (that is now paying bonuses to its citizens) have since broken even.
Secondly, this business has been failing to meet its revenue targets for the last five years and is not likely to meet the one set for it this year.
REVENUE COLLECTION
The last one was missed by Sh50 billion and the next is anticipated to fall below revenue by Sh84 billion.
This is despite massive investments already made to boost revenues so the top line is bad.
The bosses on this side of the top line have consistently targeted the easy sales, tax deducted at source and ignored the large pool of businesses running tax-free.
Actually, on closely examining the books, revenue collection has been growing but compared to the way your corporate bosses run the business, revenues cannot keep up with growing expenditure.
During the Annual General Meetings (elections) where you are essentially supposed to have a say, you are told about the austerity measures put in place to tame the runaway expenditure by those you have entrusted to run the business.
FUNDS MISUSE
They are sure you can hardly recall the millions they spent in benchmarking trips abroad, hefty allowances they earned in fruitless meetings and the billions in revenues your independent auditor keep saying they cannot account for.
The AGMs, which you faithfully attend with your single vote and try to elect the bunch of officials to run the business for five years, have been the worst experience for you the poor shareholder.
Very expensive, very divisive and more of an economic setback.
On the balance sheet, the long-term asset base is good, including some oil that was discovered six years ago have emboldened managers to borrow heavily from a newly discovered bank called China.
LOANS
Do you know the interest rates? Are you sure about the possible return on investments from the projects these loans go into?
Do you have any idea where the money gets spent? You are the shareholder. Period.
For a company that is now forced to borrow more to service the loans, a dejected shareholder put under pressure to inject more cash into the business to keep it afloat through taxation plans on fuel and power, it is hard to deny it is broke.
To answer Rotich’s question, I will use another one. How can a CEO of a company which is not broke keep squeezing shareholders and borrowing more to even service debts?
The writer is a journalist studying at the Columbia University. [email protected]
OKOTH: All signs point to a Kenya that is broke