The Social Dimension of ROI and why only the government should engage in provision of some services

(Osano Kute, Leadership and Strategy Advisor)

Dear Ramah Nyang, in finance, return on investment (ROI), can be defined as the ratio of money gained or lost on an investment relative to the amount of money invested. The actual amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. While the actual money invested may be referred to as the asset, capital, principal, or the cost basis of the investment. In finance, ROI is usually expressed as a percentage.

In my opinion and what is not considered by many people, there is the social dimension of ROI which unfortunately may be difficult to expressed as a percentage as in the case of finance but can generally be expressed in terms of the general feeling of a people in a nation or the general state of a people in terms of their prosperity, welfare, security etc.

The social dimension of ROI may be defined as the ratio of social capital gained or lost (raise/decline in standard of living of the people through high/low level of prosperity, welfare and security/insecurity of the people) on a government’s investment (say military intervention in Somalia to bring normalcy and peace in the country so that the citizens can do business in peace, or building of one new Girls’ National School and one new Boys’ National School in every constituency in the country to ensure that there is equity in provision of education to the people or building of a dam in the middle of nowhere to conserve water or the environment) relative to the amount of money, human capital, military hardware, efforts of a people etc invested by the government. In this case, the social capital gained or lost may be referred to as social interest, social profit/loss, social gain/loss, or social net income/loss. The money invested or effort made in the intervention may be referred to as the social asset, social capital, social principal, or the social cost basis of the government social investment.

Take the following two examples to see why I say that in public management, we cannot look at everything from a financial perspective only since social capital is also a very important aspect to be considered. My two examples are on cost of national water provision for domestic consumption and irrigation for the people which the private sector would find prohibitive particularly in the context of the rural population and the cost of going to war to protect property which nobody in the private sector can dare do but the government would even if it is one inch of the country as follows:

(1)          Whereas, it would cost the government a lot of money to build dams for environmental conservation and water provision for irrigation and domestic use by the people, availability of clean water for domestic use by the people leads to reduction of waterborne diseases and other ailments associated with lack of water, availability of water in abundance also leads to increase in agricultural activities (even if it is in small scale) in the country and this further leads to the people including children being well fed and led vulnerable to disease attack which further leads to the budget/cost of health provision going down and leads to the people being able to concentrate in their work while the children are able to concentrate in class and get better education, better understanding of national needs and be more skilled and knowledgeable as a workforce which leads to better ways of working hence a developed nation.  My experience in consultancy in the water sector tells me that all the Water Service Boards are finding it difficult to provide water to the people without government financial intervention and the private sector is only willing to invest in water provision in urban areas where people are able to pay for water but the government is for everybody including those in the rural areas.

(2)          Whereas the private sector may have title deeds to signify their ownership of land/property, if the land whose title you have along the boarder is invaded by foreign forces, a simple calculation of ROI of going to war would make a good businessman in the private sector run away and not go to war but the government will even if it is the rock called Migingo (ROI?).

I therefore still insist that some projects and capital investments are better left to the government and these include but not limited to: provision of water, security, education, mass movement of people and goods, development of major infrastructure like roads etc. I personally would not trust the private sector with these services.

In fact look at what the private sector has done and continue doing with fuel pumps and fuel prices, price of sugar and other essential commodities after the Kenya National Trading Corporation (KNTC) was killed by corrupt people in this country. Look at the what happens to the tea farmer in Muranga or Nandi who gets KShs. 40 per Kg of their produce and when the same product, reaches Mombasa in the hands of the private sector, it fetches Kshs. 280. Look at the high prices of fertilizer in the country yet in our national books, KENREN was supposed to have been built in the seventies.

The fact that some people who are currently supper rich in Kenya, engaged in corruption to swindle the people does not mean that the government cannot be made to be effective and efficient.

Please give me a chance to run this country as it CEO and you will see what I can do to make government efficient and effective. Thanks