Kenya Power losses are not sales related

Mercifully, Posta did not pursue the PSV idea. Diversification is risky.  And just as with Posta, Kenya Power’s proposed diversification is a Hail Mary.

You know you don’t have a sales problem when you are a monopoly, selling an indispensable product and you still make losses. You also don’t have a sales problem when you go into business for which you lack the systems, structures and worse, culture for.

This is what I gleaned from the Business Daily: that, “Kenya Power will commercialise its garage and lease out idle land in an attempt to shore up its revenues in the wake of dimming profitability,” said Bernard Ngugi, Managing Director (MD), Kenya Power. The diversification strategy comes at a time when Kenya Power’s starry profits have sustainably dimmed for three straight years now; by 71.8 per cent in 2018 and 92 per cent 2019, with “rising non-fuel costs being the key reason for the poor performance,” the MD said.

I was reminded of Postal Corporation of Kenya, (Posta) who four years ago said they would diversify into public transport. In my view, it was a Hail Mary. This is how the then MD Dr. Enock Kinara put it: “We are starting a Postliner Bus Service that will help improve on our mail circulation quality and, in addition, we shall be able to (sic) get funded to do that by the passenger.” Sounds familiar to Kenya Power’s quest to diversify? At least Posta could ‘blame’ its financial woes on disruption from the Internet and mobile phone and their emergent alternatives (email, social media, texting, WhatsApp), and increasing stiff completion (from private courier services, for instance). What can Kenya Power, a monopoly selling indispensable services, possibly ‘blame’ their losses on? Non-fuel costs? Maybe. Poor sales? Certainly not. Have solar power and batteries become such formidable alternatives? No..

Three years ago, I argued here that Postliner was a bad idea; an analog move on a digital chessboard. “Venturing into public transport is not as simple as acquiring a bus or two. If it was, then the graveyard of ‘bus transport companies’ in Kenya, wouldn’t be thriving. And, no, it’s not just another step from offering courier services. In fact, unchecked, diversification can kill the core business. Diversifying in this manner means taking time to create supporting systems, structures and culture. It means exposing struggling Posta to the vagaries (chaos?) of public transport in Kenya. Posta will be a fish out of water. Posta should evolve, not diversify” Mercifully, Posta did not pursue the idea. Diversification is risky.  The typical lethargy of a parastatal compounds that risk. This applies to Posta much as it does, Kenya Power.

Will Kenya Power’s diversification Hail Mary reverse its financial woes? I don’t think so. It doesn’t help either that the MD sheds darkness on the expected potential. The plans to outsource its garage and lease out idle land were given by Mr Ngugi “without giving their estimated monetary potential.”

I don’t think Kenya Power has a sales problem or diversification need. They just need a competitor. What do you think?

The senior management program MAGNETIC (Retaining today’s promiscuous customer) addresses these challenges; and through case studies, participant-led discussions and debates, and using robust models reveals solutions to them.

You may also want to read, “Are Kenyan banks too big to fail?”

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