“When a man blasphemes what do we do? Do we go and stop his mouth? No. We put our fingers into our ears to stop us hearing.” Ibo Proverb

Last week this newspaper reported on the outcomes of the Global Competitiveness Report 2012-2013. Kenya’s ranking as the most competitive economy moved from position 102 last year to position 106 this year out of 144 countries surveyed. The reasons given for the fall are several, but one is particularly pertinent for this column: Strength of Investor Protection (actually in our case, it is lack thereof). Two news items in the previous week provide classic cases of the clear and present danger that lurks within the investment environment in Kenya.

Exhibit A: “In this regard and in the public interest, the Rt.Hon. Prime Minister has directed that the planned retrenchment of Kenya Airways workers be suspended pending consultations within governments and among management and staff at Kenya Airways” Statement from the Prime Minister’s office 31st August 2012. Dear Mr. Prime Minister, the last time I checked, Kenya Airways was a publicly listed company. A publicly listed company is defined as a company that has issued shares, which are traded on the open market on a stock exchange. Individual and institutional shareholders constitute the owners of a publicly listed company in proportion to the amount of shares that they own as a percentage of all outstanding shares. Therefore shareholders have the final say in all decisions taken by a publicly listed company and its managers, especially through its annual general meeting. So, unlike a parastatal that swishes and sways to the moves of its line ministry puppet masters, a publicly listed company dances to the tune of its executive management who are responsible to only ONE entity: the shareholders of the company. The only “directive” that the company can receive from an external party would either be through the regulator of the Capital Markets Authority for breach of CMA regulations or from a court of law after an aggrieved party against the company has taken a dispute there for adjudication which already occurred when the airline workers union rightly took the matter to court.
Any other party would really have no locus standi in the matter. What the Prime Minister did, other than playing to the gallery as per chapter one of every politician’s play book, was to send a shiver down the spine of any potential foreign investor who might be thinking of laying roots in this here our great country. The government, which is a 29.8% shareholder, has two representatives on the Board of Kenya Airways. The Permanent Secretary in the Treasury and the Permanent Secretary in the Ministry of Transport. Assuming that proper corporate governance was followed and the board of directors of the airline was duly informed of the impending retrenchment, it goes without saying that there was tacit approval from the largest shareholder (Government of Kenya) and any ‘directives’ or such like utterances by a member of the same government that go against the grain of an existing decision makes the government look messy, unprofessional and completely at odds with itself. More importantly, it sends the wrong signals to foreign investors: come invest in Kenya, do whatever needs to be done but if you even think of touching workers in an election year, we will stick our noses into your private business even though you have used all legal routes to undertake the same. (But please note that all bets are off in non-election years!)

Exhibit B: Finance minister Njeru Githae has asked Parliament to decide whether it will censure Central Bank Governor Njuguna Ndung’u over his failure to reopen Charterhouse Bank” September 6 2012. Entering into the fray was the House Speaker Kenneth Marende who shortly thereafter said that Parliament may take unspecified actions against the Central Bank of Kenya Governor Njuguna Ndung’u if he fails to implement recommendations of a parliamentary committee that Charter House Bank be reopened. Marende ruled that though CBK as per the new constitution is independent, it is obligated to implement the resolutions of Parliament.

The last time I checked, our regulators, be they the Central Bank, the Capital Markets Authority or the Insurance Regulatory Authority were independent actors who are appointed to oversee their respective dominions. Within these regulatory bodies are professionally trained experts who supervise, monitor and govern the activities of their licensees. It cannot be that a body charged with making laws can go beyond its mandate and try and execute the very laws it has made. No. Separation of powers dictates that lawmakers are clear distinct and separate from law enforcers. It’s great that Parliament has the time to sniff around and look for trouble in the form of regulatory malfeasance, but it is a travesty when Parliament shrugs upon itself a cloak of authority to do the regulator’s job for them. The result: you scare the living daylights out of foreign investor who starts to think that a mischievous parliamentary committee can stick its reasonably philanthropic fingers into its business regardless of the presence of a legally constituted regulator. It shows that a regulator’s word is not considered final and can be overruled by Parliament. Hmm. That creates a legal conundrum of fine proportions.

Conundrums aside, these two mutually exclusive events are more damaging than they are entertaining. They demonstrate executive and legislative offices that are willing to bend the rules to suit their political needs. They depict an economic environment where an attempt can be made to mold the situation to suit the needs of the ruling elite at the expense of the genuine investor. It demonstrates that the bodies duly charged with regulating their respective dominions can be interfered with purportedly within the letter of the very shaky law. These are economically blasphemous statements coming from the people entrusted to provide leadership in this country. We can only put our fingers into our ears to stop us from hearing.

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Twitter: @carolmusyoka