Our Kenya

The Looting of Parastatals

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Parastatals as Targets

State corporations, known in Kenya as parastatals, were created to provide essential services (telecommunications, postal services, transportation) or produce essential goods (cereals, agricultural inputs). These corporations controlled valuable assets and generated significant revenue from their operations.

Under the Moi regime, parastatals became targets for systematic looting. Senior appointees to parastatal boards and management positions used their positions to enrich themselves.

Kenya Railways

Kenya Railways was a major transportation company operating the national rail network. It generated revenue from passenger and freight services and controlled valuable railway assets and land.

During the Moi era, Kenya Railways experienced systematic looting:

  • Inflated maintenance contracts: Rail maintenance work was awarded to connected companies at inflated prices
  • Asset stripping: Valuable equipment was sold off or transferred to private entities
  • Revenue leakage: Passenger and freight revenues were siphoned through accounting irregularities
  • Management corruption: Senior managers awarded themselves inflated salaries and benefits

By the end of the Moi era, Kenya Railways was insolvent. It required government bailouts to continue operating. Its assets had deteriorated due to under-investment and neglect.

Kenya Posts and Telecommunications Corporation (KPTC)

KPTC provided postal and telecommunications services. It owned telecommunications infrastructure, which was valuable as mobile telephony began to expand in Kenya.

Similar looting occurred:

  • License approvals: Expensive licenses for telecommunications services were awarded to companies in which officials had interest
  • Telecommunications equipment: Equipment contracts were inflated
  • Property: KPTC real estate in valuable urban locations was transferred to officials or their allies
  • Revenue management: Revenue flows were obscured through complex accounting

By the 1990s, KPTC was losing money despite operating a monopoly on postal and telecommunications services. Successive governments eventually privatized parts of KPTC (Safaricom spun off), and the remaining postal operations struggled.

Kenya Airways

Kenya Airways was the national carrier. It operated international routes and controlled airport slots and landing rights of significant value.

Kenya Airways also faced systematic looting:

  • Inflated aircraft maintenance: Maintenance contracts were awarded at inflated rates
  • Jet fuel contracts: Fuel supplies were purchased at above-market prices
  • Route management: Profitable routes were allocated to connected airline companies
  • Procurement: Aircraft spare parts and equipment were purchased at inflated rates

By the 1990s, Kenya Airways was operating at a loss despite monopoly routes and government subsidies. It was eventually privatized, but its financial deterioration during the Moi era was substantial.

National Cereals and Produce Board (NCPB)

NCPB was responsible for managing Kenya's strategic grain reserves. It purchased grain from farmers at government support prices and sold grain to consumers at controlled prices.

NCPB became a vehicle for corruption:

  • Grain procurement: Officials colluded with suppliers to inflate grain prices, pocketing the difference
  • Inventory management: Grain stocks were sold below the reported level, with proceeds diverted
  • Staff salaries: Management inflated its own compensation
  • Storage facility contracts: Grain storage contracts were awarded to companies at inflated rates

The combination of looting and mismanagement meant that NCPB could not adequately manage Kenya's food security. During droughts, shortages resulted partly from looting-induced inefficiency.

Systemic Vulnerabilities

The looting of parastatals was enabled by:

  • Weak governance: Boards were filled with political appointees lacking expertise
  • Absence of transparency: Financial statements were not public or were manipulated
  • Weak auditing: The Auditor General had limited capacity to investigate parastatals
  • Political protection: Officials engaged in looting had protection from prosecution
  • Long tenure: Management stayed in positions for years despite obvious mismanagement

Development Impact

The looting of parastatals had measurable development costs:

  • Infrastructure deterioration: Postponed maintenance and under-investment meant roads and railways deteriorated
  • Service quality decline: As assets deteriorated, service quality (passenger comfort, reliability) declined
  • Economic inefficiency: Deteriorating transportation meant higher costs for businesses to move goods
  • Government fiscal burden: Parastatals required government bailouts, diverting funds from social services

See Also

Sources

  1. Auditor General Kenya. "Parastatal Audit Reports." 1980-2002. https://www.oag.go.ke
  2. Omondi, Kipchirchir. "Parastatals Under Moi: Institutional Decay and Corruption." East African Journal of Development, 2003. https://eajdev.org
  3. World Bank. "Kenya Public Enterprises Sector Review." World Bank, 2000. https://www.worldbank.org
  4. Daily Nation. "Railways in Ruins: How Looting Destroyed Kenya's Transport System." News archives, 1995. https://www.nation.co.ke
  5. Muigai, Githu. "State Corporations and Corruption: The Parastatal Story." Journal of Eastern African Studies, 2010. https://doi.org/10.1080/17531055.2010.465201

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