Thousands of civil servants are staring at months of uncertainty after the Cabinet approved plans to merge or dissolve several state corporations as part of a budgetary support programme Kenya has with the International Monetary Fund (IMF).
In a Cabinet Dispatch released Tuesday evening, the Cabinet noted that nine state corporations will be dissolved, 42 merged and another six restructured in a far-reaching plan reminiscent of the 1990s structural adjustment programs, or SAPs, that pushed by the IMF and its sister Bretton Woods institution the, World Bank.
Thousands of jobs were lost in the implementation of the SAPs as dozens of state corporations were either privatised or dissolved.
State House spokesperson Hussein Mohamed, in a quick rejoinder to the cabinet statement, however said all affected public servants would be redeployed within the civil service, allaying fears of mass layoffs, but also putting into doubt the extent of the expected cost savings.
"No State Corporation function will be lost, and no jobs will be lost as all affected employees will be absorbed into the Public Service," said Mr Mohamed in a statement to Nation.Africa.
"This is in keeping with the commitment to streamline government operations and optimise resource utilisation as part of the ongoing government restructuring aimed at minimising waste and curbing excesses," he added.
In the Tuesday meeting the cabinet approved the dissolution of at least nine state enterprises, while 16 others will be sold off or face outright liquidation, even as it recommended merging 42 state enterprises with overlapping functions into 20 to cut waste in a bold move to reduce government spending.
The move puts the careers of senior several civil servants such as parastatal CEOs in uncertainty, having to possibly take on less glamorous jobs in the mainstream civil service.
“In line with the commitment to streamline government operations, reduce waste, and curb excesses, the Cabinet approved a series of recommendations aimed at reforming State Corporations
“The reforms will address operational and financial inefficiencies, enhance service delivery, and reduce reliance on the exchequer,” read the cabinet dispatch following the first cabinet meeting in the new year held at Kakamega State Lodge yesterday.
Kenya has a multi-year programme with the IMF in which President Ruto’s government has committed to the multilateral financier to cut the size of its budget in order to lift the country from its current state where it is at high risk of defaulting on its debt.
The IMF has warned that several state corporations had poor financial health, with their liabilities including debts exceeding their assets.
“An estimated public sector balance sheet as of end-June 2023, reveals significant imbalance between liabilities and fiscal assets, leaving the Kenyan public sector vulnerable to external shocks,” IMF stated.
Should these fledgling state corporations collapse, the government will be forced to pick up the pieces, adding to its fiscal burden. The government’s spending has continued to balloon even as tax collection has continued to underperform.
On January 21, the Union of Kenya Civil Servants (UKCS) Secretary-General Tom Odege in a swift response cautioned against any retrenchments.
Additionally, four public funds currently classified as State Corporations will be declassified and returned to the relevant ministries with a strengthened governance framework.
“All professional organisations currently categorized as State Corporations will also be declassified and will no longer receive government budgetary allocations. These reforms have been necessitated by increasing fiscal pressures arising from constrained government resources, the demand for high quality public services, and the growing public debt burden,” the Cabinet said.
It explained that many State Corporations have struggled to meet their contractual and statutory obligations, leading to an accumulation of pending bills amounting to KSh94.4 billion as of March 31, 2024.
During the last budget reading by former Treasury Cabinet Secretary Prof Njuguna Ndung’u in June last year, he said those that require huge budgetary allocations for bail outs, and those producing goods and services that would more efficiently be produced by the private sector will be restructured.
“The government is committed to implementing policy changes to ensure government-owned enterprises realize their full potential,” the CS said then.
Plans to merge or dissolve moribund state corporations has been in the works for a long time, having started with the administration of retired President Uhuru Kenyatta who was keen to reduce the government’s wage bill.
Implementing it has, however, proved an uphill task with fears that such a move would inflame political or social tensions around the country.
On Tuesday, the Cabinet sitting in Kakamega also ordered that all professional bodies currently categorised as state corporations should be declassified and should not be financed through budgetary allocations.
The meeting also approved recommendations to enhance the Electronic Travel Authorization (eTA) system to boost efficiency and improve the traveler experience.
“As part of efforts to support open skies policies and tourism growth, a key proposal is to grant eTA exemptions to all African countries— except Somalia and Libya—due to security concerns. This initiative aims to promote regional integration and ease travel across the continent.
“Most African visitors will be allowed a two-month stay, while East African Community (EAC) nationals will continue to enjoy a six-month stay under EAC free movement protocols.”
To improve efficiency, an expedited eTA processing option will be introduced, allowing travelers to receive approval instantly, with processing time capped at 72 hours based on operational capacity.
Additionally, the introduction of an Advanced Passenger Information/Passenger Name Record system will enhance pre[1]screening, strengthen security, and streamline passenger processing at entry points.
“Consequently, the Cabinet Secretaries of National Treasury, Transport, Interior, and Tourism were mandated to review, report, and, within a week, propose guidelines to improve travelers’ experience at all Kenyan airports.”
The meeting also approved the Kenya Cloud Policy, a significant step towards enhancing digital service delivery, improving efficiency, and promoting the adoption of cloud-based technologies in government. The policy addresses challenges associated with traditional data storage, such as high costs and cybersecurity threats.
By prioritising cloud solutions, the policy aims to reduce costs, strengthen cybersecurity, and support data sovereignty, while fostering collaboration and innovation.
It also encourages private sector investment in cloud infrastructure and seeks to attract global data centers, positioning Kenya as a regional digital hub. The Cabinet approved the implementation of the Dual Training Policy to strengthen Technical and Vocational Education and Training in Kenya.
Under the Dual Training model, trainees will spend 50 percent to 70 percent of their training in industry and the rest in institutions, ensuring they acquire relevant, practical skills.
The policy ensures strong collaboration between training institutions and industry, leveraging the latest technologies and expertise to enhance the employability of graduates. Also approved is the revised Kenya Foreign Policy 2024, which proposes institutional changes to strengthen the country’s diplomatic and security posture.
The Cabinet also approved the Public Finance Management (Amendment) Bill, 2024, to enhance efficiency in the management of conditional allocations to county governments by eliminating duplication and streamlining the transfer process.
It also gave green light to the incorporation of the Kenya Credit Guarantee Company to enhance access to affordable credit for micro, small, and medium enterprises (MSMEs).
MSMEs contribute over 30 percent to Kenya’s GDP and employ 16 million people, yet they face significant challenges in accessing affordable financing.
It approved the Plant Protection Bill 2023, a key step in strengthening Kenya’s agricultural productivity and food security.
Additionally, the Cabinet approved the IGAD Protocol on Transhumance, aimed at facilitating the safe and orderly cross-border movement of livestock and herders.
Approval was also given for the restructuring strategy of Rift Valley Textiles (Rivatex) and the onboarding of non-equity strategic partners to revitalize the company as well as Thika and Githunguri Water Supply and Sanitation Improvement Project, Kenya’s Ratification of the Inter-African Coffee Organisation New Treaty and In-service Training Programs in the Public Service.
