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Kenya Power won’t renew Manitoba expats’ contract

Discussion in 'Kenyan News and Politics' started by BAK, Apr 14, 2008.

  1. BAK

    BAK JF-Expert Member

    Apr 14, 2008
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    Kenya Power won’t renew Manitoba expats’ contract


    The decision by the Kenyan government not to renew an expatriate management contract for the Kenya Power & Lighting Company could lead to a review of the practice across the region, coming as it does two years after the collapse of a similar arrangement at Tanzania’s power utility, Tanesco.

    The KPLC management contract, which commenced in July 2006, was part of the conditionalities imposed on the company by the World Bank before it released a $152 million financial assistance package for the upgrading of its power distribution network.

    Critics of management contracts ,however, say that they are often too costly, and usually erode the management base of the institutions they are meant to benefit.

    “They have a poor record in the energy sector,” says a report titled Energy Privatisation and Reform in East Africa, commissioned by Public Services International, an international study group. “In six countries studied (excluding Kenya), there have been two terminations, one disputed attempt to terminate and significant problems in the other cases.”

    The Canadian company Manitoba Hydro International was awarded the KPLC contract in bidding against the Irish company ESBI and the Spanish company Union Fenosa. The contract was to run from July 2006 to June 30 this year, with a possible one-year extension.

    The Kenyan government has however written to the expatriate managers saying that it will not sanction the extension beyond one month, during which the managers should hand over.

    The government and the three expatriates, led by KPLC general manager Don Priestman, have in the past one year been haggling over the pay package, and in particular a Ksh30 million ($450,000) bonus pegged on performance targets. The Canadian expatriates have been negotiating for the bonus package for nearly a year now.

    The government is reportedly sceptical about whether the performance target set at the beginning of the contract have been achieved and whether they have been achieved with the help of the expatriates. Government scepticism centres on the fact that KPLC had in any case been on an upward growth path even before the signing of the management contract, having reported a 40 per cent growth in profits by mid-2006 due to a 20 per cent increase in sales.

    Among the key performance targets set for the expatriate managers at KPLC were the connection of 400,000 new users to the national grid, reducing systems losses by 14.5 per cent; and a reduction of monthly outages from a high of about 12,000 to 3,000.

    Others were reducing the number of days the company is owed money from an average of 90 to 60 days, reducing the response time to breakdowns to one hour and generally improving customer service and corporate governance.

    The government decision to terminate the management contract was also influenced by the fact that with the conclusion of the initial two-year period, KPLC will have to shoulder the cost of paying the expatriates without financial support from the World Bank.

    This is unlikely, given that during their two-year tenure, the three Canadian contractors have had an icy relationship with the top hierarchy at the Energy Ministry as well as within the management ranks of the power firm.

    Significantly, the Kenyan government’s refusal to allow the extension of the Manitoba management contract mirrors the breakdown of a similar arrangement between Tanzania’s power utility, Tanesco, and expatriate managers from South Africa’s Net Group in 2006.

    The Tanesco contract was awarded to Net Group Solutions of South Africa a private consultancy, in 2002. In September 2004, under pressure from the World Bank, the contract was extended for a further two years, despite criticism of the high salaries paid to the Net Group managers.

    But in 2006, the Tanzanian government decided not to renew the contract because of poor performance.

    According to a report appearing in a Tanzanian daily, “Tanzania was dissatisfied with the quality of management provided by Net Group Solutions and the government was obliged to listen to the views of the public following complaints about the quality of service being offered by Tanesco.”

    Apart from Tanzania, countries where management contracts have failed include Namibia, Mozambique and Madagascar.

    In Madagascar, an expatriate chief executive was sacked for not being “sufficiently specialised to lead (the local electricity company) out of its deep financial waters into recovery,” according to the report.