CORPORATE GOVERNANCE

State bodies struggling due to poor governance- Raila

In Summary

•Raila said struggling institutions were all suffering from “serious mismanagement”

•He said individuals chosen to spearhead state bodies should be put through rigorous checks and held up to standard before taking the top positions

ODM leader Raila Odinga says incompetent individuals are being recruited to manage complex state institutions leading to their ultimate shut down.

Speaking at the third annual Corporate Governance Conference by Institute of Directors Kenya, Raila said individuals being chosen to spearhead state bodies should be put through rigorous checks and held up to standard before taking the top positions.

“As we talk today, our sugar industries are all on death beds, several state corporations are only managing because of the money being pumped in by the Treasury year in –year out,” he said.

Raila said all these struggling institutions were all suffering from “serious mismanagement”.

Over the years we have witnessed a number of institutions whose majority shareholder is the state, being run down, including Kenya Power, East African Portland Cement Company, National Bank of Kenya, Mumias Sugar Company and Uchumi Supermarkets.

This, at the expense of the taxpayers whose coffers have been continuously used to salvage the flailing entities.

“We cannot grow and build a responsible corporate culture when people have to pay a bribe to start a business in order to get a tax compliance clearance,”

KCB Group placed Mumias Sugar Company under administration after the miller defaulted on loans amounting to Sh12.5 billion. 

Mumias’ loans stood at Sh12.5 billion at the end of June 2018. It owed KCB Sh545 million, Ecobank Kenya (Sh2 billion), French development finance institution Proparco (Sh1.9 billion) and Commercial Bank of Africa (Sh401 million).

Other creditors are the Treasury (Sh3.1 billion) and Kenya Sugar Board (Sh1.6 billion). Mumias was also operating on bank overdrafts worth Sh2.7 billion from various lenders.

He urged members of the National assembly to push for the enactment of the Institute of Directors Bill, 2019 currently undergoing its third reading adding that leaders of public bodies needed to be held to certain standards to ensure maximum productivity.

The Bill aimed at establishing the Institute of Directors of Kenya to issue certificates of registration to its members annually as a form of quality assurance to the public bodies, entities, enterprises, and companies whose boards its members serve on.

Speaking at the conference, Institute of Directors-Kenya chairman Duncan Watta said the rate at which firms were closing shop as a result of mismanagement was shameful.

“The problem is that the directors do not have the knowledge of what of what they are charged with in their responsibility as directors,” Watta said. 

The President of the Institute of Directors Ghana Rockson Kwesi said local service providers are stuck due to mismanagement of state entities which results in delayed payments.

He added failure in public governance is trickling down to the private sector and disrupting the country’s economic activity.

“We are in a situation where directors are not able to place national interest above there own personal interests,” Kwesi said.