The government has frozen all hiring and contract renewals across 42 state corporations marked for restructuring, leaving thousands of employees, including CEOs, facing uncertain future.
The move, confirmed through a memo from Chief of Staff Felix Koskei seen by the Star, forms part of President William Ruto’s most aggressive parastatal reforms to date.
The directive enforces a strict moratorium on recruitment, contract extensions, salary adjustments, and new capital projects in affected agencies.
“A moratorium is issued on the recruitment and renewal of contracts for chief executive officers or any other officers serving on contract terms at the lapse of their current tenure,” the memo reads.
Koskei has further halted “any ongoing recruitment processes of staff in any cadre.”
Any implementation or approval of new human resource policies, personnel emoluments and benefits of any kind remains suspended.
Also put to a halt are changes to any salary structures as well as the roll out of new capital projects.
“It is hereby directed that the following measures shall be undertaken in the state corporations identified,” Koskei said.
This follows a Cabinet decision in January to consolidate 42 state corporations into 20 entities, dissolve 25 others, and declassify 13 professional bodies.
Among the high-profile mergers are the Kenya Urban and Rural Roads Authorities and Kenya Rural Roads Authority, which will combine into a single roads management body, while three separate water regulators will merge into one authority.
They are the Water Services Regulatory Board, the Water Regulatory Authority, and the Regional Centre on Groundwater Resources, Education, Training and Research.
The Uwezo Fund, Women Enterprise Fund and Youth Enterprise Fund will also be consolidated into a single financing entity.
Kenya National Trading Corporation and National Cereals and Produce Board were also merged.
In the Cabinet declaration, 25 state corporations were dissolved and their functions returned to ministries and agencies.
Some six agencies were to be restructured to align their mandates, while four funds were reverted to their parent ministries, and 13 professional bodies listed as state corporations were declassified.
With the latest memo, contracted staff, among the 3,100 employees at the state corporations, which are tipped for restructuring, stand affected.
Most government staffers currently serve on contract, following a policy adopted about five years ago to improve performance and manage budgets prudently.
About 520 employees, among them CEOs and board chairpersons, are from nine state agencies that are set for dissolution.
Another 2,600 are at agencies that Cabinet resolved were offering services that can be provided by the private sector.
As such, many public sector employees face difficult decisions about their future employment.
The government plans to offer affected employees voluntary early retirement packages as part of the transition process.
Treasury Cabinet Secretary John Mbadi revealed details of the impending changes in notes accompanying the 2025-26 budget estimates.
"Once Cabinet approval is obtained for the implementation of the reforms, the government will allocate budgetary resources to fund voluntary early retirement for employees who choose not to be redeployed," Mbadi said.
However, not all affected workers will necessarily lose their jobs. Some could be reassigned to new positions within the restructured entities.
Already, a team tasked by the Cabinet to execute the reforms is evaluating staff complements and competencies.
Strategic placement or deployment of affected personnel is also underway, the disclosures show.
“This process ensures that individuals are effectively reassigned to pertinent entities or allocated to other MDAs,” the Treasury report read.
Mbadi indicated that the process was expected to be completed by the end of the financial year 2024-25.
A team which was formed to execute the reforms as sanctioned by Cabinet is already on the move.
The committee comprising the Office of the President, the state corporations advisory committee, the public service department, the Attorney General, and the inspectorate of state corporations representatives is also listing assets and liabilities of the affected entities.
CEOs and staff of the University Fund and the Higher Education Loans Board face the sack. The two entities are to be merged.
Also affected are staff of Kenya Tourism Board and Tourism Research Institute, Export Processing Zones Authority, as well as Special Economic Zones Authority.
CEOs and staffers of Anti-Counterfeit Authority and Kenya Industrial Property Institute, which are also earmarked for merger, will be affected.
Cabinet also approved the merger of Kenya Copyright Board, Kenya Industrial Research and Development Institute, and Kenya Industrial Estates.
Agricultural Finance Corporation and Commodities Fund are also set to be merged into one, affecting the staffers.
“It is notified that Cabinet considered the reforms…and sanctioned varied reforms for implementation within the current financial year,” Koskei said.
Also to be affected are officers at the Kenya Forest Service and Kenya Water Towers Agency.
Cabinet also approved the merger of Agricultural Development Corporation and Kenya Animal Genetic Resource Centre.
National Irrigation Authority and National Water Harvesting and Storage Authority were also merged.
Kenya Law Reform Commission was merged with National Council for Law Reporting while Tourism Promotion Fund was merged with Tourism Fund.
Commission for University Education, Technical and Vocational Education Training Authority, and Kenya National Qualifications Authority are also to birth one entity.
Also to be affected are CEOs and staffers of Kenya Fish Marketing Authority, CEMASTEA, Nuclear Power and Energy Agency, Lapsset Corridor Development Authority, Kenya Film Classification Board, Naconek, Presidents Award-Kenya among others.
The multi-agency team looking at the merger has analysed laws governing the affected agencies and has drawn a new legislative plan to facilitate the reforms.
“The objective is to facilitate a seamless transition for all staff while mitigating the risk of job losses,” Treasury said in a brief to MPs.
The mergers are part of broader public sector reforms that have been under discussion for several years.
The government pumped about Sh106 billion last financial year, hence could save up to Sh53 billion with the proposed merger.
The 2025 Budget Policy Statement says state corporations are the major sources of contingent liabilities to the government.
