What do They do Wrong? “Monopolies” in Kenya

Recent days have seen an upsurge of complaints about the Kenya Power & Lighting Company. From absurd electricity bills to poor customer service. I have never seen a company that blatantly ignores the complaints of consumers as it does.

It’s all online; if you get the chance, you can visit their online platforms. As a natural monopoly in the distribution and retail of electricity in the country, it fails in providing efficient services to consumers. By the end of June 2016, a significant number of citizens had a connection to the National Grid.

That’s a commendable achievement that we had made as a country. To be among the African Nations in the Sub-Sahara, with high connection rates. However, the New Year, 2018, hasn’t been a good start for many Kenyans. Why?

• KPLC announced their plan to recover 8.1 billion, shillings on backdated bills
• Ending of Subsidies for small consumers of power

What is a natural monopoly?
It is an economic term that is descriptive of a situation in which, depending on the conditions of a particular market, it is viable, to have one player, as the sole supplier of service or product. Google, for example, can be considered a natural monopoly as it has the most significant share in search advertising, at 88%.

In the case of Kenya, KPLC acts like one. Well, we are yet to see the implementation of the proposed Energy Bill 2015. It aims at providing consumers with choices of which retailer to pick, who offers you the best service at the lowest price.

It will create room for other players to come in this sector where KPLC operates as a monopoly.

According to the book, Principle of Economics, there are different approaches we can take in regulating a natural monopoly. I won’t get into the technicalities of it all, but in a layman’s language, it includes:

  • Leaving the entity alone and it will keep following its usual way of maximizing profits.
  • Dividing the company, to give room to new firms to compete. This option has its set of problems. One player may surpass the other, and kick out the competition from the market. On the other hand, the players may choose to coordinate their behavior and keep prices high.
  • Introducing a regulator, to control the prices and quantities for production. Under the cost-plus regulation method, pricing for consumers is set by letting the entity cover its average cost and earn a profit at a nominal rate.

Hopefully, with the implementation of the Energy Bill, we may see a change in how KPLC operates and treats the consumers, which are the Kenyan citizens. We already have a regulator in play, i.e., the Energy Regulatory Commission.

In the words of Engineer George Oyier of Wartsila opines, we have the highest tariff around the globe. Electricity will become cheaper when the bill passes. It will be good news for consumers.

A natural monopoly doesn’t imply that there’s one player in the market. In the telecommunications industry, Safaricom Limited had a market share of over 60%, that is going by the figures of the first quarter, sector report by the Kenya Communications Authority, for the fiscal year 2016/2017.

Probably the numbers have reduced since the Resistance Movement started. That which propels me to write this article is to join in the outcry of many Kenyans about the two. They have shared characteristics that vex many, which include:

  • Poor customer services

I was once aided by a “common mwananchi,” just last year, on an issue regarding electricity. I called the KPLC customer service, and whoever picked up the call either didn’t understand my inquiry or just didn’t give a damn. After calling time and again and receiving the same unhelpful response, I gave up.

Lucky for me, I later found out that it was a simple matter that didn’t require a technical expert to guide me. If only, the customer service responder, had told me that, on the first call. Also, how come, some members of their staff in customer service; have no clue about the simplest of issues. What’s the need of having that department after all, if not to guide your clients in the right actions to take?

  • Lack of proper channels for timely communication.

More so, by KPLC on the issue of blackouts. For one, with the high unemployment rates, many people are learning how to find work online.

And we all know, you cannot access the internet, i.e., Wifi, without connection to the grid. It is not every day that you wake up looking forward to the tasks you have on a particular day.

If you work online, then you understand the frustration of not being able to deliver on your promises because there is no power. I mean as a freelancer, clients need an individual who will be available for tasks when required.

Also, to foster stronger relationships with your customers, one needs to be able to inform them beforehand of difficulty or challenge in the delivery of services.

Of what good is informing a person that they won’t have power, on the day that you are working on the issue? Unless it is an emergency, otherwise they should try to provide the needed information in advance. It leads to procrastination and takes away one’s psyche to work on their duties as planned for that day.

We are not just losing the reliance on our ability to deliver by the clients, but we are also losing to competition. It results in loss of revenue remitted in the form of tax. And do I need to add that the purchasing power also decreases, and in turn, people may resort to alternative but steady ways of earning income; maybe why there’s an increase in the number of thievery cases in the Nairobi CBD and other areas?

We cannot argue that almost every service is going online and we either join in the bandwagon or are left out, debating whether Trump was right or wrong in calling African Nations, Shithole countries. Well, if you do shitty business…, I don’t have to finish that for you, do I?

Exploiting Customers
If you have ever used Safaricom Bundles, then you are no stranger to this. For one, they are quite costly as compared to other service providers. Secondly, no one understands how they get depleted. One minute you have 1 Gb of data, and after 20 minutes they are all gone.

It could be one of the reasons why there was a rise in the demand for “bundles mwitu.” They were relatively cheap and had more extended durability than the ones from the service providers, despite employing the same techniques in using them.

Try using the same amount of bundles with another service provider, say, Telkom, their 1 Gb bundle can last you a day or two, and it is very affordable.

Also for KPLC, I never quite understood how their billing system worked. It was later revealed early this year that they were subsidizing prices for small consumers. In that, the charge for electricity that you incur depends on your usage, each month.

 

Now, with this move to eliminate the subsidies, it means that prices will change and most likely on an upward trend.

They say it will come in handy when tracking one’s consumption rates. It is true if one single standard rate applies to all. But, will it be the best rate for consumers, or will it be surcharging us still?

We need to think critically about the issue of monopolies and come up with strategies that benefit both the consumer and service provider.

In addition to that, both companies need to work on how they interact with their clients. Just because you are the “significant” player in a field, doesn’t imply that you can do whatever to whoever. There have to be guidelines and a check on performance. If not, a better condition that allows other entrants into the market.

Join in the conversation and air out your grievances. Well, we can only address it, by speaking about it. What is it that bothers you about monopolies and what can we do about it?

 

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