Jobs to go in radical State firms reform

Radical changes in the management of State corporations are to be introduced, a government report exclusively obtained by the Nation reveals.

The new framework has caused panic across different parastatals that are to be scrapped or merged with others, since the fate of staff and their CEOs depend on the boards of the new parastatals.

Job losses and clipping of powers of senior officers in the scrapped parastatals are inevitable.

Parastatals that have stashed money in fixed deposit accounts in commercial banks will have the money reverted to Treasury. They will now be allocated cash on a need basis.

A recent survey by a Treasury consultant revealed that State firms had billions in commercial banks.

IDLE MONEY

Sunday, Treasury Cabinet Secretary Henry Rotich told the Nation: “The preliminary report was only meant to know how much is in bank accounts. The next step is to separate the different cases. We have State firms that normally get money from other activities and others given money by Treasury. We are after those that just keep the money idle,” Mr Rotich said.

The drastic changes enshrined in a new code dubbed “Mwongozo, Code of Governance for State Corporations (‘the Code’)” also sets the limit of management boards to no more than nine members. The Code will become effective as soon as it is launched by President Kenyatta later this month.

“This Code will be implemented on a “comply or explain” basis. This approach recognises that at the implementation of Mwongozo, State firms will be at different levels of compliance with corporate governance norms,” the framework reads.

More powers have been given to the State Corporations Advisory Committee (SCAC) which will be overseeing all State corporations.
President Kenyatta’s constitutional adviser Abdikadir Mohammed, who chaired the task force of parastatal reforms, yesterday said the reforms will be implemented soon.

BOTTOM LINE GUIDE

“We became slower than we thought, but we are not going back. We have two Bills in Parliament that will be part of the reforms because you need to amend the law for the policy to be actualised. We have completed the whole process of drafting the Bills. The government-owned Entity Bill will replace the State Corporation Bill and the Sovereign Wealth Fund Bill,” Mr Mohammed said.

He said corporations would be guided by the bottom line — making money. Institutions such as sugar industries will work just like private entities because the bottom line will be making money.

“What is needed is clear political leadership and commitment to change. For instance, a high level of political affiliation and insufficient competence in Boards of State Corporations is a result of an opaque appointment process.

A professional and independent board is more likely to safeguard a State corporation from political interference, lead to more efficient operations through well-defined strategy and ultimately result in increased value-for-money to the shareholders, that is, the public,” the report says.

According to the report, the new boards will be selected based on a competitive process which will lead to professional boards which will have regular performance reports, board assessments and well defined skill-set.

“The reduction in the size of the boards and the increase in the number of independent board members is therefore a game changer in boardroom affairs. More importantly, Mwongozo will ensure that sustainability, performance and excellence will become the hallmark of our State Corporations,” the Mwongozo report says.

According to the framework, it will be mandatory for all boards to have at least one financial expert, meaning that he or she has the necessary qualifications and expertise in financial management or accounting and is a member of a professional body regulating the accountancy profession, and in good standing.