Five years on, State bodies yet to merge

Mugo Kibati who was a member of the Task Force on Parastatal Reforms says said he cannot speculate on the reasons for the sluggish implementation of the report. PHOTO | FILE | NATION MEDIA GROUP

What you need to know:

  • International Budget Partnership country manager for Kenya Abraham Rugo attributes the sluggish pace to a lack of political will.
  • Only parastatals in agriculture have been merged through creation of Agriculture and Food Authority

  • The Cabinet also approved the merger of Industrial and Commercial Development Corporation, IDB Capital Ltd and Tourism Finance Corporation to create the Kenya Development Bank Ltd. 

Had President Uhuru Kenyatta stuck to the timelines he gave for the merger of State agencies, the architecture of their management and service delivery would have been radically different.

But almost five years down the line, the envisaged merger is still being discussed in futuristic terms when in fact it would have been completed within the three months set by President Kenyatta in October 2013, after the Presidential Task Force on Parastatal Reforms (PTPR) submitted its report.

When he received the report, President Kenyatta said: “The sector will be rationalised to remove overlaps, duplication and redundancies, thereby trimming the current number of State Corporations from 262 to 187, as recommended by the task force.”

DIRECTORATES

But the government has only managed to merge parastatals in agriculture, by establishing the Agriculture and Food Authority (AFA).

Agencies that were collapsed under AFA were Coffee Board of Kenya, Kenya Sugar Board, Tea Board of Kenya, Coconut Development Authority, Cotton Development Authority, Sisal Board of Kenya, Pyrethrum Board of Kenya, and Horticultural Crops Development Authority. These are now directorates under AFA.

Just a month ago, a memo following a Cabinet meeting held on May 15 indicated that it is only now that the government is moving ahead with the proposed Public Finance Management (Biashara Kenya Fund) Regulations, 2018 “to guide the operations of the proposed Biashara Kenya Fund, which will be established after the proposed merger of Uwezo Fund, Youth Enterprise Development Fund, Women Enterprise Development Fund and Micro and Small Enterprise Authority (MSEA).”

Also, the Cabinet approved the merger of three financial institutions — Industrial and Commercial Development Corporation (ICDC), IDB Capital Ltd and Tourism Finance Corporation — to create the Kenya Development Bank Ltd. 

POLITICAL SPACE

“The purpose of the merger is to create a single cross-sector development finance institution with sufficient scale, scope and resources to play a catalytic role in Kenya’s economic development,” the Cabinet said in the brief.

International Budget Partnership country manager for Kenya Abraham Rugo attributes the sluggish pace of implementing the PTPR recommendations mainly to a lack of political will.

“State corporations have played a role that is beyond service delivery. They play a political holding role and they are also mechanisms of distributing the limited State jobs. In the kind of contested political space we have, I do not see that (full implementation of the report) being possible,” said Mr Rugo.

Moreover, he says, the fact that it is almost five years down the line since the requisite Acts establishing the parastatals earmarked for mergers, speaks volumes.

“Parastatals are largely established by the State Corporations Act, and that entails that merging and splitting was going to be a legal process. The reason some were able to merge is because a law was passed, the AFA Act. But the other proposals that the task force made requisite laws on, have not been reviewed, to the best of my knowledge,” he added.

RECOMMENDATIONS

There had been the Government Owned Entities Bill, 2015, and the National Sovereign Wealth Fund Bill, 2015, which were to facilitate the mergers but which have not been enacted.

Membership of PTPR that came up with the recommendations for merging some of the agencies was drawn from both the public and private sector, with former Senior Advisor on Constitutional and Legislative Affairs in the Office of the President, Mr Abdikadir Mohamed, and group managing director of Commercial Bank of Africa, Mr Isaac Awuondo as co-chairs.

Other members included National Treasury Principal Secretary Kamau Thugge, then director general of Vision 2030 Secretariat Mugo Kibati, Dr Korir Sing’oei, who is a legal advisor in the Office of the Deputy President, Ms Stella Kilonzo (private sector), Ms Angalie Mediratta (private sector), then CIC Group CEO Nelson Kuria, CEO of Kenya Private Sector Alliance Carole Kariuki and CEO of Burbidge Capital Edward Burbidge.

On the proposed mergers, the task force optimistically stated: “They will facilitate the repositioning, rationalisation, and consolidation of Government Owned Entities (GOE) in a manner that will ensure that they are aligned to the national development agenda.”

SELF-CONTRADICTORY

When contacted, President Kenyatta’s Chief of Staff Nzioka Waita referred us to the cabinet secretary for National Treasury, Mr Henry Rotich, whom he said could give “a proper brief on the issue.” But attempts to reach Mr Rotich did not bear fruit as we could not reach him on his mobile phone.

On his part, Mr Kibati, who was a member of the task force, said he could not speculate on the reasons for the sluggish implementation of the report.

“I am not privy to what happened after we finished our work and handed over our report, because there was an implementation committee that was formed,” he said.

Besides delay in implementing the report, critics have claimed that the report was self-contradictory.

At one point, the report found that the government-owned entities were doing fairly well, generating own revenues and paying dividends to the government. Yet in the same report, there is a recommendation for the corporations to be merged.

SELF-EXPLANATORY

“Available data shows that the output of state corporations to GDP in nominal terms has been increasing from 9.54 per cent in 2008/2009 to 11.64 per cent in 2010/2011, based on internally generated income,” the report stated.

This contradiction in 2015 prompted economic expert Dr David Ndii to ask, “If it ain’t broken, why fix it?”

However, Mr Kibati said the criticisms were general in nature. “The report itself is self-explanatory; it is very detailed and clear on the specific mergers that were proposed,” he said.

Whether the government will fully implement the PTPR report and when that will be remains the question.