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Public Sector Has Corporate Governance Challenges Too

John asked his wife, “Where do you want to go for our anniversary?”
She said, “Somewhere I have never been!”
He told her, “How about the kitchen?”

And then the fight started.

The 2011 court case titled “Republic versus the Attorney General and two others ex-parte Consumers Federation of Kenya (COFEK)”  brought to fore the volatility of power dynamics in the triangular axis between the board of a parastatal, the chief executive officer (CEO) and the parent ministry. In that case, the Director General of the Communications Commission of Kenya or CCK (now renamed to the Communications Authority) was appointed to his office for a three year term with effect from July 2008 to expire in July 2011.

Following two and a half years of the ubiquitous board and management two step tango, the end of the Director General’s term loomed. In December 2010, an appropriate six months before the expiry of the employment contract, he wrote to the Chairman asking for renewal of his appointment for a further term. However, the Board was not trying to get back on the dance floor with the gentleman and in March 2011, the Chairman of the Board wrote to the parent Ministry, specifically to the Minister of Information and Communication, to advise against the Director General’s renewal of contract. And then the fight started.

In a gazette notice dated 20th July 2011, the Minister reappointed the Director General against the wishes of the Board. COFEK, in keeping with its public interest mandate, went ahead to challenge the appointment in the above mentioned suit with a key question for determination being whether the Minister’s action was abuse of power. A key point of departure between public and private sector governance is that depending on the instrument that was used to create the parastatal – an act of parliament, legal notice or company incorporation – the appointment of directors is often the sole preserve of the line minister, while the appointment of the chairperson, in some instruments, is left to the President.

Due to drafting oversight on the part of legislative drafters, the appointment of the CEO of some parastatals is left to the Minister yet the board is the entity charged with oversight and responsibility over the institution’s financial and operational mandates. As the CEO of a parastatal is the accounting officer for the finances and operations of the institution, it is beyond governance comprehension how anybody other than the board of that institution – who have fiduciary responsibilities drawn from their oversight role – can be responsible for the appointment and removal of that officer.

The Court in the CCK case reviewed the relevant administrative framework that guides the governance of parastatals including a circular issued by the Head of Public Service, dated 23rd November 2010, where the Board was made the appointing authority in the appointment of the chief executive officer of a state corporation. The Court also looked at the State Corporations (Performance Contracting) Regulations 2004, which also gave the board of a state corporation the responsibility of recruiting all staff including the chief executive officer.

The Court then concluded that the Minister was required to exercise administrative power reasonably, rationally and within the confines of the law. Thus the power to appoint a Director General should follow a decision of the Board and only in exceptional circumstances should the Minister go against the decision of the Board and share his reasons in writing. In such a situation, the Minister still has to refer the issue back to the Board for a decision and, in the current circumstances, he had failed to do so. The Minister was therefore found to have acted unreasonably and therefore unlawfully.

From a governance perspective, it is imperative to note that the unholy trinity is susceptible to the vagaries of humanity. A board can go rogue. A CEO can go rogue. A Cabinet Secretary can go rogue. In the above example, if the Board had gone rogue and was trying to remove an effective CEO while the Minister was trying to correct such wrong, then a travesty was committed and a precedent set. However, if the Minister was rogue and in cahoots with the CEO, then justice was served. Whether there are enough checks and balances to ensure that the wrongs of one of the three are corrected is a matter of jurisprudential application.  It is noteworthy, though, that a court will only be limited to the procedural application of the appointments, rather than any underlying governance rot that an institution may be enduring. Such rot is invariably a matter for shareholders to handle.

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Twitter: @carolmusyoka

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Sun Kissed Beaches Do not belong to Kenyans

[vc_row][vc_column width=”2/3″][vc_column_text]Serendipity is defined as the occurrence and development of events by chance in a happy or beneficial way. Hang on to that thought, as I will get back to this definition further ahead in this column. Last week two seemingly unrelated items appeared on the Daily Nation’s Wednesday December 9th 2015 edition. A seemingly nondescript story titled “Villagers ordered out of Kilifi’s 3,000 acres” hugged the top left side of page 3 innocuously. Last Saturday December 5th 2015, villagers invaded and started subdividing private property belonging to a private company, Kilifi Plantations Ltd. Of course, in typical Kenyan fashion, we never quite get to be told what caused the villagers to arise from unknown heavens and majestically swoop down to lay a stake on an ill gotten prize. Further down the same newspaper’s pages, a quarter page advertisement caught my eye. The Ministry of Land, Housing and Urban Development placed a Public Notice signed by Mariamu El Maawy, the Principal Secretary. In the notice she informs Kenyans that the ministerial technical team that was appointed by the Cabinet Secretary (she doesn’t say which one, but one is left to assume that it is the Cabinet Secretary who she reports into, who would be the one in charge of Land) to plan, survey and issue title deeds to the occupiers of the land commonly known as Waitiki Farm in Likoni has commenced its work.

Ms. El Maawy urges all persons who may have purchased parcels therein to urgently present their claims before the said technical team. The claim should be accompanied by supporting documents such as a national identity card, a sale agreement, witnesses and any other document of proof of ownership. Now unless you’ve been hibernating under a rock, you must know the abhorrent saga of Evanson Kamau Waitiki, the Kenyan who bought 960 acres of land in Likoni in 1975, when Kenya was still one country. Twenty-two years later, politicians reminded us that Kenya was actually a fragmented hodgepodge of tribal enclaves and instigated “youth” to evict Mr. Waitiki from the land that he had industriously converted into a viable economic enterprise that was employing tens of locals through various farming activities. Somewhere along the line, the real “owners” of the land, whose ownership stemmed from their tribal bloodline rather than any cash consideration, moved into the 960 acres and a new village was created. A not-so-subtle message was sent to anyone who couldn’t trace their biological roots to the sandy soils and tropical climes of Mombasa’s coastline: “You are temporary residents here living and working at the behest of our generous spirit. Your land ownership claims, regardless of whatever pieces of paper you might have, are as transient as the waves that beat upon the sun kissed beaches of our forefathers.” That message was given one hundred percent endorsement by the highest office in the land in mid November this year, when it was reported that the President had personally brokered an agreement, and I quote: “The government has signed a framework agreement with Mr. Waitiki which establishes a road map of adjudication and titling of all the land to the current occupants.” Waitiki gets his money as compensation for the loss of the land, and the locals get the land. Kwisha maneno everybody can go home now.

Look, I get it. I get that the President had to bring this sordid saga to a mutually beneficial end, the kind of ending where everyone wins, right? Well the only winners were the ones on the mahogany wood State House table: Evanson Waitiki on the one hand and the myriads of new landed gentry in Likoni on the other. Which is why I chuckled when I read Ms. El Maawy’s point about providing proof of ownership. How does one provide legal proof of ownership over something that was acquired illegally? How does one legitimize illegitimacy ab initio? Anyone can draft a sale agreement and then scrape it on a cement floor to give it an aged look. But basic rules of sale dictate that there are two sides to any agreement and consideration has to pass from the buyer to the seller in order for the contract to be extinguished. Where such consideration can be as miniscule as a gnat’s toe, but is consideration nonetheless. There was no consideration given by anyone for the undisputed and unequivocal ownership rights of Evanson Waitiki.

Now to the point of serendipity, which – once again – is defined as the occurrence and development of events by chance in a happy or beneficial way. Serendipity has landed upon the villagers of a section of the county of Kilifi, slapped them sideways and awoken them from slumber. Serendipity has galvanized these villagers into a metamorphic catatonia from hitherto economic serfs into potential landed gentry within the land owned by Kilifi Plantations Ltd. Serendipity has a long name: “Government pays Evanson Waitiki and legitimizes Likoni squatters.” Serendipity has an address: Ardhi House. Serendipity has an expiry date: On or before 2017 elections.

What we have seen in Kilifi is a taste of things to come, because good things come to those who wait. Invade land, wait eighteen years and get clean, crisp titles issued by your government. In other efficient markets, any company that had titles to thousands of acres of productive land used for generating their core product would see their share price fall after such an event since a clear operational and legal risk has been defined by none other than the central government under which that company operates. The warning signs have already started from the county governments of Murang’a with Del Monte land and the county governments of Nandi and Kericho with the vast tea estates held by Finlay and Williamson. The government may have won the political premier league at the coast with the Waitiki land settlement, but it has just midwifed into birth a bigger problem for large-scale private and corporate landowners in Kenya.

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Twitter: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]

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Early birds catch the government worms

[vc_row][vc_column width=”2/3″][vc_column_text]Juma was retired and had started a second career. However, he just couldn’t seem to get to work on time. Every day he was at least 30 minutes late. However, he was a good and clever worker, so the owner was in a quandary about how to deal with it. Finally, he called Juma into the office for a talk.
‘Juma, I have to tell you, I like your work ethic, you do a top class job, but your being late so often is quite a worry.’
‘Yes, I realize that, sir, and I am working on it.’ replied Juma.
‘I’m pleased to hear that,” said the owner. “It’s odd though, you’re coming in late when I know you retired from the Army. What did they say if you came in late there?’ Juma replied, ‘They said, Good morning, General!’

Sometime in 2006, I had the good fortune to attend a Rwanda Investment Conference organized by the Rwandan Government to showcase and set the scene for foreign investment in the country. My colleague and I arrived at the venue at about 8:15 a.m. having been warned to get there early as the doors would be closed once President Kagame entered the conference centre for the opening ceremony at 9 a.m. We patiently lined up through the security checks and I was pleasantly surprised to find the entire cabinet as well as their permanent secretaries had taken their seats on the front rows. My colleague, who had done business in Rwanda before, said that this was the opportunity to meet the Ministers and set up any meetings that one required. Conference attendees mixed freely with the Ministers and lots of business cards were exchanged and meetings set up as I watched. At 8:58 a.m. President Kagame strode in onto the podium and, on cue, the Rwandan national anthem began to play. At 9:00 a.m. on the dot, President Kagame sat down and the function began. For a time Nazi like me, it took every ounce of self-control not to stand up and give the man a hi five.

A year later found me in Jinja, Uganda where construction for the Bujagali Hydroelectric Power Station was being commissioned. The project was a joint venture between the Investment Promotion Services, a division of the Aga Khan Fund for Economic Development and an American energy company Sithe Global Power. The government of Uganda is a minority shareholder in the venture as well. Due to it being a critical pillar of Uganda’s infrastructure, President Museveni would be the guest of honor. His Highness the Aga Khan was also present due to the size and the importance of the project. Now if anyone has been around a function with His Highness the Aga Khan you will know that he is accorded protocols equal to a head of state so you can imagine the level of security at the venue. My colleague John and I arrived at the venue at least an hour earlier than the slated official start time of 10 a.m. to ensure we got good seats. John had a whole bunch of magazines in the back seat of his car as we left Kampala. “You need to have plenty of reading material at a presidential function in Uganda,” was his response to my quizzical expression. I shortly got to see why.

As soon as we got to Bujagali, our mobile phones stopped working due to the signal jamming devices that are used at any Ugandan presidential function. His Highness the Aga Khan was already on site and meeting guests in a separate holding tent that had been set aside for him. At 10 a.m. guests were still milling about and I asked John why we weren’t being asked to take our seats. He chuckled and handed me a couple of magazines. “Brace yourself,” were John’s ominous words. President Museveni arrived at the venue at 2 p.m. or exactly four hours late, with absolutely no apologies for keeping any of the guests waiting including His Highness. As soon as the national anthem was sung, he sat down and promptly closed his eyes in a peaceful repose. They only flew open when he was called to make his speech about 45 minutes later.

We were hot, hungry and extremely frazzled by the time we left the venue. The President had demonstrated, quite succinctly, what he thought of foreign investors on his home soil. On Thursday last week I was having lunch with some colleagues at a popular Westlands restaurant frequented by leading business executives and government officials. It was the last day of the Pre-Global Entrepreneurship Summit events at the Kenyatta International Conference Centre (KICC). Some of my colleagues had attended the opening ceremony earlier in the week and noted with disappointment that none of the Cabinet Secretaries had remained behind after the President left shortly after opening the event. The disappointment stemmed from the fact that the quality of exhibitions and panel discussions were so high that they warranted a level of engagement from senior government officials if they were indeed committed to showcasing the Kenyan entrepreneurial talent that had an enviable global spotlight. Present at the restaurant was a Cabinet Secretary who was in the printed agenda as being the lead government official for the closing ceremony that was slated for 3 p.m. The Cabinet Secretary comfortably sat sipping a glass of wine even as I left the restaurant at 3:15 p.m. It can’t be said that the official flag on the Cabinet Secretary’s flag would magically transform into wings and fly the government official to KICC at least 5 kilometres away.

But the conference participants at KICC could afford to wait for a leisurely lunch to end. After all they had nothing but time to wait. For wine to be sipped. At this time of global attention on Kenya’s biggest showcase events. Mentally, I doffed my hat to the Cabinet Secretary as I left the restaurant, “Good afternoon, General.”

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Twitter: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]