Public interest concerns usually and dramatically take centre stage in an election year as candidates exert themselves to demonstrate their intent and ability to “serve the people”, cultivating the seed of legitimacy to reap the fruit of re/election. Beyond the electoral-political reasons for the cumulative 33 per cent presidential price cut directive, offered on the 12th of December 2021, it was a welcome diversion from the seasonal empty rhetoric. A reduction in the cost of power would offer much needed inflationary relief to the majority, dealing with the COVID-19-catalysed economic fall-out.
Parallel to these public interest considerations, the cost reduction is aligned to the broader ease of doing business policy agenda, the manufacturing pillar of the Big Four medium term-plan and the overarching national development blueprint of Vision 2030. Lowering the cost of electricity is conspicuously coherent with the public interest and inter-temporal policy agenda of economic growth and development. Coherence however, is a multi-pronged concept that involves alignment between regulatory intent, design and effect. The gap between policy intent, implementation design, and effect is exemplified in the false start of the proposed price directive.
The power winks out (as it has every three hours) and I decide to take a break, stretch my legs and have a glass of sugarcane juice at the local grocery market. I find Sammy, of Sammy Sugarcane Juice, overwhelmed by orders as his miniature generator rumbles and chokes, drawing a crowd of customers. On cue, KPLC, the government and the constant disruptive power outages become the fervent topic of discussion. Reminiscent of a trauma survivors circle, the traders and customers animatedly recount the damages suffered from fluctuating electrical currents, surges, malfunctioning transformers and predatory KPLC agents. One trader laments her inability to quantify losses of electronics, perishable food products and customers, an angry tide of mutterings rising in support of her ire. As Sammy’s generator finally vibrates to a stop dispersing the grumbling crowd, it is clear that there is a surging collective contempt directed at the government, bubbling to the surface every time there is a power outage.
The clarifying cauldron of the COVID-19 pandemic re-affirmed electricity an essential service and the bedrock of Kenya’s post-pandemic recovery strategy. Fully aware of the centrality of reliable and cost-effective energy to societal functioning, the spectacular manifestation of KPLC’s energy inefficiencies during a pandemic and at the cusp of an economic slump is reverberating at the frequency of already simmering anti-government sentiments. Simply, people are beyond tired; they are disgusted at KPLC’s inability to provide the singular service for which it exists. The prevalent and intensifying energy inefficiencies hit harder on the ropes of the knowledge that Kenya has an excess of power generation capacity in the same vein as a frustrated, underserved population.
This inexplicable status quo means that the executive (GOK) is haemorrhaging legitimacy in the most competitive election yet. There is a compelling salience to the energy inefficiencies at KPLC that are causing the political mobilization of households and businesses. Now, every time the lights flicker, the generators of the rich rumble and the curses of the poor ring out, the government is the focus for our collective frustration. The reality of the government’s inability to regulate its subsidiaries is an important instruction on how the gap between regulatory intent and design can undermine the government and the public interest.
The implosion of the price directive is a blunt reminder that even on the rare occasion that the executive and public interest are aligned, not taking into account the distortionary effect of corruption leads to regulatory failure. The directive did not deliver the desired result, ultimately because of a weak regulatory design. Firstly, just as the crowd at Sammy’s Sugarcane Juice failed to make the distinction between KPLC and the executive, the executive took for granted that it’s interests and those of KPLC were allied. KPLC, which in theory is subject to the executive, has operated in an environment diffuse of responsibility, developing an operational baseline that is separate and self-interested. A moral hazard has arisen between the executive and the electricity distributor. Because of the natural monopoly it commands, KPLC will continue to act in its own interest until the incentives provided to it by the government change. Therefore, the first design flaw of the directive was the treatment of KPLC as an internal component of the executive rather than a regulatory target.
Secondly, a history of previous resistance to structural, policy and institutional reforms at KPLC did not inform the government’s regulatory approach. The choice of regulatory tool should have maximized the coercive power available to the government in order motivate KPLC into compliance. The emboldened resistance that KPLC has demonstrated towards previous reforms is indicative that KPLC should be treated as a seriously disengaged regulatory target. KPLC is motivated not to comply with the presidential directive through the sticky state of rational-self-interest. If this is taken into consideration, the process of “unsticking” KPLC from its non-compliance would entail maximizing the government’s coercive power to apply escalated sanctions and criminal prosecution. Apprehensive of the above, the second design flaw of the directive was an under-estimation of the regulatory expenditure and coercive force needed to motivate compliance from KPLC.
Because of the natural monopoly it commands, KPLC will continue to act in its own interest until the incentives provided to it by the government change.
Thirdly, perverse incentive structures from the prevalence of corruption mean that self-interested behaviour by institutions is rewarded with the proceeds of corruption. In the case of KPLC, the broader incentive structure favours non-compliance. Simply put, the lack of a simple, robust and coherent anti-corruption regulatory framework means that policy makers at KPLC have no credible threat against their non-compliance. Even if top managers are sent on a “60-day compulsory leave” and are charged with economic crimes, those who take their place are still subject to the same incentive structures that reward corrupt behaviour.
The clearest index towards the same economically destructive behaviour persisting at KPLC is the recent intensification of sabotage of KPLC infrastructure (allegedly by KPLC staff). The malignant cartel culture of corruption has created and sustained a regulatory lacuna that is now able to undermine the executive. As exemplified by the case of KPLC, without a considered incentive structure around corruption, the executive’s regulatory impotence will intensify. The final and perhaps most significant design flaw of the directive, is that the government has allowed a perverse incentive structure that rewards corrupt behaviour to dictate behavioural motivations in the public sector.
The observation that the 15 per cent presidential price directive is aligned to the public interest and would act as an infrastructural enabler to socio-economic development and legitimize the incumbent government, could not insulate the directive from a failure to launch. I attribute the directive’s false start to regulatory design flaws in the treatment of KPLC and the broader public service incentive structure. The failed price cut and the now frantic efforts of the executive in mitigating the Energy Inefficiencies at KPLC signal the onset of a corruption critical mass, the point at which the executive is incapacitated by the malignancy of cartel corruption. The next election cycle belongs to the executive that can keep its house in order. As the triple threat of the pandemic, it’s economic fallout and political uncertainty mobilize the electorate, the coherence of regulatory intent, design and effect will gain a political premium in this year’s election. The electoral candidates that can regulate within the context of corruption to achieve the public interest, will reward the public with competent regulation and provide themselves with security of tenure.