Board members to lose jobs in radical reforms to save taxpayers money

What you need to know:

  • The State-owned companies will now be governed through a new, business-oriented code of conduct christened Mwongozo, which President Kenyatta is expected to launch as soon as the new structures come into play.
  • To chair the GIC, an individual will require a master’s degree, at least five years serving as a board member and no less than 10 years in senior management among other qualifications.
  • He said the idea was taken from the practice in China, Singapore, South Africa, Malaysia and other places where it has been used to ensure efficiency in government-owned entities.

Hundreds of board members in State corporations could lose their jobs as the Jubilee government moves to implement radical reforms calculated to save the taxpayer billions of shillings.

The anticipated changes are also likely to affect managing directors and hundreds of lower cadre workers when loss-making and irrelevant parastatals are axed or merged, according to new details on the plans. Staff could either lose jobs or be transferred.

The proposed radical reforms, which are expected to save the taxpayer Sh3.5 billion, were launched by President Uhuru Kenyatta in July 2013, with the appointment of a 10-member team co-chaired by Mr Abdikadir Mohamed and Commercial Bank of Africa CEO Isaac Awuondo.

Little has been heard since of the efforts, but strategy documents seen by the Sunday Nation indicate that board members serving in State corporations currently are not expected to stay beyond three months after the new laws are put in place if they fail to meet the new stringent qualifications that have now been finalised.

Chief executives of parastatals to be merged will serve in the new entities as heads of directorates for a maximum of six months; then exit packages prepared for those whose terms will not have expired, the proposals say.

Staff members will be absorbed into those new directorates.

Jubilee intends to merge some of the corporations or transfer of some functions of State corporations to counties, ultimately trimming their number from 262 to 187.

BUSINESS ORIENTED CODE

The State-owned companies will now be governed through a new, business-oriented code of conduct christened Mwongozo, which President Kenyatta is expected to launch as soon as the new structures come into play.

“We need to implement Mwongozo in order to increase efficiency and accountability in the use and deployment of scarce public resources,” President Kenyatta notes in the official documents.

Yesterday, Mr Mohammed told the Sunday Nation the changes were aimed at maximum efficiency and returns to the taxpayer.

“There are companies like Safaricom, which was once fully government owned, and which now pays huge taxes, employs many Kenyans and supports many other businesses. This is the kind of efficiency that we would like to see,” Mr Mohammed said.

In the measures that are set to be presented to Parliament for consideration, the powers to appoint board members will shift from Cabinet Secretaries to a new outfit to be known as the Government Investment Corporation (GIC) that will have sweeping powers to hire and fire parastatal chiefs.

“We realised that a lot of inefficiency occurs because Cabinet secretaries do not have enough time to oversee operations in parastatals,” Mr Mohammed said.

He said the idea was taken from the practice in China, Singapore, South Africa, Malaysia and other places where it has been used to ensure efficiency in government-owned entities.

The GIC will be placed under the Office of the President and will have powers to appoint board members to all State corporations.

“The President himself is leading the reform of State corporations and we are fully on course. Many of the parastatals affected by the restructuring were themselves formed by Acts of Parliament and we had to prepare merger documents to ensure that we are within the law,” Mr Abdikadir said.
The chairman and members of the GIC shall be appointed by the President and shall include the PS to the Treasury.

To chair the GIC, an individual will require a master’s degree, at least five years serving as a board member and no less than 10 years in senior management among other qualifications.

GIC board members will require a bachelor’s degree and service in a senior management position for at least six years and should be a member of the Institute of Directors.

For the purely commercial State Corporations, the chairmen and members of the board shall be appointed by the GIC and shall not include any representation from the government. The PS to the Treasury and the relevant ministry will, however, sit on boards of strategic State companies, the proposals say.

EXTERNAL INTERESTS
“Historical evidence shows that there is something amiss with the present system where commercial institutions are housed under the National Treasury and line ministries,” says a government brief seen by the Sunday Nation. The GIC has apparently been placed under the presidency for stature and to insulate it from “external interests”.

In the proposed dispensation, a parastatal board chairman will be appointed by the President, as is the current case, but will require a minimum of a master’s degree and experience as a board member in the public or private sector for at least five years.

Parastatal chairmen will also be required to have at least 10 years serving in top management of a private or public entity and not have served in the same organisation as an employee for at least the previous five years.

Board members in parastatals will be required to hold a bachelor’s degree and be members of a professional body. They will also be required to have served in a senior management position for at least six years prior to appointment and will serve out a probation period of six months after which they will be certified.

The Public Service Commission in its latest report on compliance with governance values said the more than 32 parastatals lacked functional boards, a situation which has made it difficult to implement financial decisions. It is understood that the government has left the positions vacant so that appointments do not unnecessarily overlap with the reform plan.

“Many current board members terms have expired and some are serving in an acting capacity,” Mr Mohammed said.

The move is a radical departure from the current system, which has been practiced since Independence when most board members in parastatals are only required to have political connections.

The new move is expected to professionalise the State corporations and move them from money sinking behemoths that most are into efficient units that report profit to the taxpayers.

Board members who do not meet the current requirements are expected to serve for three months after the new laws and systems come into place to allow room for new appointments.

Unlike the current situation where the number of board members to a State corporation is unlimited, the maximum number will be capped at nine in the proposed changes.

“We found a situation where a parastatal had 25 board members and 38 members of staff. These are the situations we want to correct,” Mr Mohammed said.

The board members whose corporations will be dissolved will lose their positions automatically while staff and chief executives will be moved to new entities working in directorates, Mr Mohammed told the Sunday Nation.

“It is a sink-or-swim strategy with a pure business sense that we are adopting. Parastatals will have to be efficient and competitive, even competitive enough to match what similar organisations in the private sector are doing.

There will be no room for failure,” Mr Mohammed told the Sunday Nation.

In line with the new standards, chief executive officers will be required to hold the relevant bachelor’s and master’s degrees in the field in the line of work they seek and have at least 10 years’ experience in the same field.

President Kenyatta also intends to put paid to the era where political failures are rewarded by the government of the day after failing in elections, said Mr Mohammed.