Wednesday, September 05, 2012

Government Interference - Case #1 - Kenya Airways

"Raila orders KQ to suspend layoffs" reads the headline. And click on the link provided to read more.

I am no apologist for KQ's Board of Directors & Management - which in my view decimated KQ's shareholders' value - and my views can be found here (FY 2011-12 results), here (Corporate Governance) & here (Irregular Commission Payments).

So back to our task at hand. Remember the elections are around the corner & the blabbermouths are out in force!

"Prime Minister Raila Odinga has directed Kenya Airways to suspend the planned retrenchment of its employees expected to see between 650 to 1500 employees lose their jobs."

The government owns about 30% of KQ. The other 70% is NOT owned by GoK. Unlike GoK, the other 70% expects KQ to make a profit. A decent profit. If the PM, Raila Odinga, wants KQ to 'suspend' the retrenchment, then by all means provide KQ with one or all of the following to help it recoup its potential losses:

  1. Reduce the tax on fuel used by the planes when they fill up in Kenya.
  2. Reduce the taxes on plane tickets purchased in Kenya.
  3. Reduce the charges levied by 100% GoK owned airports including JKIA.
  4. Reduce the taxes on spare parts & consumables like tyres imported by KQ.
  5. Reduce the bureaucracy that impedes businesses & increases costs.

"It is not clear where the prime minister was drawing his powers, given that the airline said it was implementing a decision reached by its board of directors, in which the government is represented."

These 'roadside declarations' made famous in daniel moi's days should not be gussied up & made to look anything but. They are not what Kenya needs. Kenya needs structures & governance that lasts after a politician is long dead & buried/cremated/interred.

"Naikuni said the exercise started on August 1, 2012 owing to the large increase in headcount in 2011/12, significant annual staff salary increments, and costly decisions driven by the Collective Bargaining Agreements (CBA) negotiations with the staff unions driving labour costs to unsustainable levels."

Many employees, including senior Management, in Kenya do not want a stake in firm. They want a salary. Simple. Yet they want benefits of 'capital' without investing a dime. KQ's staff won good concessions from KQ but failed to see it could kill the airline. And KQ's Management is to blame too. They agreed to those concessions.

Bottomline: There is no free lunch. Someone always has to pay the piper. Politicians need to let businesses do their thing. If there is an illegality, then let the police & courts do their work.


Anonymous said...

Very well put, this are the kind of comments from politicians that scare away investors. Reminds me of rumours about people being told not to pay rent to their landlords sometime back. Leave business alone!!

Anonymous said...

I see where your coming from but didn't the unions raise some legitimate concerns re how its only lower grade employees seem to get there staff rationalizations folk being sacked via text for being pregnant and so on? Rent Seeking aside govt as the largest individual share holder does have the power to get these things looked at.

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