Planned merger of parastatals in top gear to save taxpayers billions

The government plans to merge parastatals in a ratio that will see up to 10 collapsed into one in far-reaching proposals to cut extra fat and save taxpayers billions of shillings.

Speaking at the SMEs Conference and Expo when he revealed a raft of measures aimed at supporting small businesses, Treasury CS Ukur Yattani said Kenya has close to 400 State agencies, half of them being regulatory bodies.

“There are a number of parastatals doing regulatory work, some play duplicating roles. We are now trying to look for ways to harmonise all laws so that some of the parastatals will either come under one or be reduced. In some cases, 10 of them can comfortably be put under one,” he said.

Mr Yattani was one of a record eight Cabinet secretaries who graced the conference organised by Nation Media Group and the Kenya National Chamber of Commerce and Industry.

Others were Dr Fred Matiang’i (Interior), Ms Sicily Kariuki (outgoing Health), Mr Joe Mucheru (ICT), Ms Betty Maina (Industrialisation), Mr Peter Munya (Agriculture). Simon Chelugui (Labour), Monica Juma (Defence).

Other senior government officials in attendance included Ms Esther Koimett (PS broadcasting), Mr Nzioka Waita (Chief Of Staff, Office of The President), Mr Charles Hinga (PS, Housing) Julius Korir (ICT) and Francis Owino (Industrialisation).

In a rare moment, Mr Yattani, Ms Kariuki, Mr Munya, Mr Mucheru and PS Hinga joined KNCC Chairman Richard Natia and Dr Wilfred Kiboro (NMG Board chairman) on a panel to address issues affecting SMEs and Kenyans in general.

Dr Matiang’i had, while addressing SME representatives on the first day of the conference on Monday, pledged to invite his Cabinet colleagues to respond to issues raised.

Citing Executive Order Number One, which gives him the mandate to chair the National Development Implementation and Communication Cabinet Committee, Dr Matiang’i promised to convene the panel.

The CSs and PSs fielded questions from conference participants in a two-hour session aired on NTV.

Hundreds of SME representatives and other Kenyans attended the forum, which also saw 80 firms exhibiting their goods and services.

Participants raised concerns that are dragging them down, and various CSs gave commitments to address the issues, which included access to loans, duplicity of taxes and the high cost of doing business in Kenya.

Others were corruption, unnecessary roadblocks by county governments and pending bills nightmare.

Mr Yattani said the State has now weaponised and personalised the fight against pending bills at all levels of government in efforts to clear the debt backlog that is hurting suppliers.

He said officials who fail to co-operate are going to be held personally responsible for disobeying government directives on the matter.

 “At Treasury, we have gone beyond dealing with the ministry or department or a county. We have personalised the fight against pending bills …,” said the CS.

“If it is a governor, we tell him it’s not about the county, rather about him. If it is accounting officers in the ministries, we will deal with them. We are no longer dealing with a ministry. The officers must be responsible,” he said.

The CS said due to this pressure, ministries have reduced the pending bills from Sh14.5 billion by the end of the last financial year in June to Sh2 billion in December.

He said counties had about Sh85 billion in pending bills, out of which Sh35 billion has been paid from the Sh55 billion that has been verified.

The CS added that the government is cutting down on its expenditure to reduce unnecessary borrowing, which is putting its spending plans under pressure.

“There has been deliberate steps to reign in on fiscal discipline. Borrowing is not free. We want to borrow sustainably and modestly,” Mr Yattani said.

He said the government is also going to harmonise fees such as Cess, which has raised the cost of doing business in counties. Traders will now be required to pay the fee only once at the point of exit and will not be charged again as they transport goods across counties.

At the expo, SMEs raised concerns over the introduction of new taxes that are making it hard for them to do any meaningful business.

The latest tax is the controversial three per cent Turnover Tax (TOT) targeting 2.5 million businesses in the informal sector.

TOT is a tax charged on total sales and does not factor in other costs associated with running the business. It is one of the easiest taxes for any tax authority to levy given that only one calculation is required to know how much one must pay.

Mr Yattani said the government must tax its citizens proportionately, and that SMEs should be the last segment to be taxed.

“If they must be taxed, it should be comfortable, affordable and within their reach. Because our role is to make sure that the private sector grows, and the SME grows,” Mr Yattani said.

The CS said SMEs and the private sector by extension are the engine of growth and development. “The role of government is to provide the necessary environment for businesses to thrive,” he said.

Mr Munya said although the government is looking at resolving the tax burden on SMEs, the biggest problem is the multiple licenses paid to numerous agencies both at the national and county government levels, which are hurting the sector most.

“The biggest challenge for SMEs is not the traditional taxes even though that is also being looked into. It is the multiple licenses and fees that they pay,” Munya said.

“They may not reflect in the traditional licenses but the taxes that you pay in piecemeal to county governments and other agencies is what makes the burden very heavy for SMEs,” he added.

The CS said the new SME policy would help deal with most of the challenges facing the sector.

One of the initiatives already in the pipeline is ‘buy Kenya build Kenya’ initiative that will see more local players benefit from government tenders.

DN body text: Mr Munya said a list of products that are supposed to be exclusively sourced locally has already been finalised and adopted by Cabinet.

What is left is just the gazettement of the process. He said there are about 169 products on the list and that more will be added.

Ms Kariuki took the opportunity to assure citizens that the country now has the capacity to test and detect coronavirus.

She noted that none of the suspected cases have tested positive so far and asked Kenyans not to panic.

On the plight of about 100 Kenyans stranded in Wuhan, China, Ms Kariuki said it is safer for them to remain there. She, however, said the Kenyans are in constant touch with the Kenya Embassy and are receiving supplies and psychosocial support.