COST CUTTING

Major parastatals merger looms as treasury wards-off wastage

CS UKur Yatani says a number of state agencies to be merged or dissolved.

In Summary

•The move is aimed at cutting wastage of taxpayers' money.

•A number of entities are on the radar over governance and financial malpractices, among them the Rural Electricity Authority (REA), Geothermal Development Company, National Cereals and Produce Board and KEMSA.

National Treasury Cabinet Secretary Ukur Yatani
National Treasury Cabinet Secretary Ukur Yatani
Image: FILE

The National Treasury has hinted at a looming restructuring of state agencies that will see a number of them dissolved, in a move to cut wastage on taxpayers' money.

Cabinet Secretary Ukur Yatani has said the government is keen to fold agencies that have remained on the bail-out list of the exchequer year-on-year, with those with duplicating roles being merged to reduce wastage of resources.

There will also be a major restructuring in agencies that have "serious governance issues''.

Some of the ministries with a high number of state agencies include agriculture, transport, tourism, energy, industrialization, trade and enterprise development, and sports, culture and heritage, which could face a major rationalisation.

A huge number of these entities have remained in losses or yielded low dividends for the government, forcing the exchequer to bail them out.

According to the latest Consolidated National Government Investment Report for the year 2019/20, by the National Treasury,127 state agencies out of 247 state firms reported losses in their end year results, with Kenya Railways Corporation hardest hit.

“Some of them have become a burden,” CS Yatani said when he appeared before the National Assembly Committee on Finance and Planning, chaired by Homa Bay Woman Representative Gladys Wanga.

“Some will be merged, some will be dissolved and some will partner. Some we are going to work on structural reforms because, despite their strategic importance, some have serious governance issues, “ the CS said.

Key entities being watched over governance and financial malpractices, and could see restructuring,  include the Rural Electricity Authority (REA), whose failure could derail President Uhuru Kenyatta's ambitious universal connectivity.

Others are  Geothermal Development Company, National Cereals and Produce Board and the Kenya Medical Supplies Authority (KEMSA), according to sources within government.

 

The latest development comes as the government mulls over reducing its wage bill and cut on recurrent expenditure, in the wake of dwindling revenues and swelling debt on a poor performing economy hard hit by the Covid-19 pandemic.

The wage bill is currently at 48.1 per cent of national revenues, which is above the recommended 35 per cent. Of these, 40 per cent goes to allowances.

Government employees consumed Sh322 billion in allowances in the financial year to June 2019, out of the Sh795 billion spent on the country's wage bill for the period–Salaries and Remuneration Commission data.

A reduction in the number of parastatals is expected to come with a revision on salaries and allowances, saving the taxpayer billions of shillings.

It will also reduce pressure on the exchequer who has been pumping billions into bailing out poor performing entities, according to the treasury.

Parastatal reforms, albeit on a slow-motion mainly on political interference, begun in 2015 when Presidential Task Force on Parastatals Reforms presented its report to President Uhuru Kenyatta, highlighting major major reforms on state corporations, including rationalization to remove overlaps, duplication and redundancies.

The task force which was led by the President's former constitutional affairs adviser Abdikadir Mohammed had recommended the trimming of the number of state agencies from 262 to 187.

“Over time we have created so many of them, there is duplication and some of them veer off the core mandate,” Yatani noted.

At least 26 poorly performing state corporations have also been targeted for privatization to cut down government spending, mainly continued capital injection.

They include the Kenya Meat Commission, Development Bank of Kenya and Chemelil, Sony, Nzoia, Miwani and Muhoroni sugar mills.