Thousands of workers are staring at job losses after the Treasury started merging and dissolving parastatals draining public resources by performing similar functions.
Treasury Cabinet Secretary Ukur Yatani has already collapsed three financial State-owned enterprises (SOEs) to form the Kenya Development Corporation Limited (KDC) in a bid to make them lean, efficient and profitable.
Mr Yatani, in a gazette notice dated July 2 and only made public at the weekend, merged Industrial and Commercial Development Corporation (ICDC), Industrial Development Bank (IDB) and the Tourism Finance Corporation (TFC) following the enactment Kenya Development Bank Act, 2020 to from the Sh100-billion behemoth that will primarily lend to medium and large-scale businesses to spur manufacturing.
The reforms are part of the International Monetary Fund’s (IMF) conditions for the Sh256.3 billion ($2.4 billion) three-year the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) to Kenya signed in February.
The merger comes days after the University of Nairobi, one of the public universities earmarked for financial support from the Treasury, started rolling out cost-cutting measures.
The university on Friday scrapped five offices of deputy vice chancellors and replaced them with two positions of associate VCs, and also reduced its colleges from 35 to just 11.
The cost-cutting drive will most likely lead to loss of jobs at Kenya’s top public university, which employs 1,500 teaching and 2,500 non-teaching staff.
However, Mr Yatani allayed fears that staff at the three parastatals being merged to form KDC face job losses, announcing that the workers will be automatically incorporated into the new entity.
“Any person employed by a Development Finance Institution (the three SOEs) on or before the vesting date shall be deemed to be an employee of the Kenya Development Corporation Limited,” Mr Yatani said in the notice.
The CS’s move has effectively put into motion wheels for merger of similar entities playing the same roles and dissolution of others performing obsolete functions.
Treasury said that the purge will be informed by some of the recommendations given by the presidential task force on parastatal reforms in 2013, which have been gathering dust on shelves, alongside the State Corporations Act, 2012, and the 2015 Code of Good Corporate Governance.
The taskforce, which was headed by Public Service boss Joseph Kinyua, recommended consolidating SOEs in sectors that have multiple entities performing similar functions, most notably the financial services sector regulators, development finance institutions (DFIs), investment promotion and marketing agencies, and Small and Medium-sized Enterprises (SMEs) support agencies.
Mr Kinyua’s task force placed the Capital Markets Authority (CMA), Retirement Benefits Authority (RBA), Insurance Regulatory Authority (IRA), Sacco Societies Regulatory Authority (SASRA) on the chopping board of the mergers to pave way for a consolidated regulator for the financial services sector.
It also recommended merger of Kenya Export Promotion and Branding Agency (KEPROBA), Kenya Investment Authority (KenInvest), Kenya Tourism Board (KTB), Vision 2030 Delivery Secretariat (VDS), and Kenya Plant Health Inspectorate Service (Kephis) with the National Biosafety Authority (NBA).
Loss of thousands of jobs
Should Mr Yatani adopt the task force’s proposals, Kenya Film Commission will also be merged with Kenya Film Classification Board KFCB), the Kenya Copyright Board (KECOBO), Kenya Industrial Property Institute (KIPI) and the Anti-Counterfeit Agency (ACA), while the functions of the Kenya Yearbook Editorial Board will be transferred to the National Museums of Kenya.
In total, the recommendations would reduce SOEs from 241 to 187, leading to loss of thousands of jobs.
This comes as the Treasury projects total budgetary disbursements to the SOEs in the current financial year to hit Sh437.7 billion by the end of December, and a total of Sh875.4 billion by the end of June next year, which is 24 per cent of the budget for this year, highlighting their dependency on the Exchequer.
Mr Yatani revealed a government bailout of Sh36.3 billion to the top nine SOEs— including Kenya Airways, Kenya Power, Kenya Airports Authority, Kenya Railways Corporation, KenGen and the Kenya Ports Authority for the just ended financial year.
Other are the three top universities— Nairobi University, Jomo Kenyatta University of Agriculture and Technology, and Moi University.
“Financial pressures are still acute in many SOEs and may have been exacerbated by the recent third wave of Covid-19 infections. These pressures have compounded pre-existing structural weaknesses in the sector, including overlapping mandates, poor financial performance, and weak governance,” Mr Yatani told the IMF.
The CS last week revealed that the top 18 parastatals need at least Sh382 billion over the next five years to stay afloat.
IMF projects that the selected SOEs will require Sh65 billion in this financial year to pay pending bills, service their pile of debt and shoulder losses arising from the pandemic.
