- “We will have to decide which State corporations justify their existence.”
- Recording a profit for a State corporation is seen as a sign of efficient utilisation of public funds.
The government will do away with unprofitable State corporations, Prime Cabinet Secretary Musalia Mudavadi has said.
Mudavadi said the government intends to sell State-Owned Enterprises which have become a burden to the taxpayer.
“We have not been doing well in the restructuring of public enterprises,” the Prime Cabinet Secretary regretted.
Addressing the media at his office in Nairobi, Mudavadi added that some State corporations may have to be shut down because they are totally reliant on government funding for their operations.
“We will have to decide which State corporations justify their existence. Hard decisions are on the way,” he stated.
Unprofitable State Corporations pose high fiscal risks to the government owing to their large debts and the associated repayment risks as well as unsustainable pending bills.
Over the years, the financial performance and operational efficiency of many State enterprises have been deteriorating, weighing heavily on public finances by increasingly relying on budgetary support from the National Treasury.
In 2021, few State corporations made profits. They included Kenya Ports Authority (KPA), Kenya Pipeline Company Ltd, Kenya Airports Authority and the Kenya Electricity Generating Company.
The enterprises regularly pay dividends and taxes and are the main revenue earners in the State-Owned Enterprises sector.
While State corporations are not, and should not be, profit-making enterprises they are expected to have a surplus at the end of the financial year.
Recording a profit for a State corporation is seen as a sign of efficient utilisation of public funds.
In 2020, a new report by the National Treasury tabled at the National Assembly showed that slightly over half of the parastatals run into losses or deficits.
The Consolidated National Government Investment Report for the 2019-20 financial year showed that out of 247 State corporations, 127 made either losses or deficits.
The biggest loss-maker during the period was Kenya Railways Corporation (KRC), whose losses almost tripled from Sh8.47 billion in 2019 to Sh24.2 billion last year.
Other State firms that did not perform well during the period include Kenya Broadcasting Corporation (KBC), which made a deficit of Sh9.8 billion.
It was followed by Nzoia Sugar with loss of Sh3.48 billion.