Report: Why State firms are poorly run

What you need to know:

  • In November 2013, President Uhuru Kenyatta agreed to reduce the number of State corporations from 262 to 187, following a recommendation by the Presidential Taskforce on Parastatal Reforms led by Mr Abdikadir Mohammed and Mr Isaac Awuondo.
  • The PSC, on the other hand, says the delays are costly to the taxpayer and is suggesting the passage of laws that would avoid future delays in appointing board members.
  • While it lists procurement delays and other technical problems for this under spending, it observes that some corporations could not make decisions because either there was no board or the CEO had not been appointed.

Delayed implementation of reforms in State corporations and appointment of board members is contributing to poor financial management in the institutions.

The Public Service Commission says in its latest report on compliance with governance values that at least 32 parastatals have remained without functional boards, making it difficult to implement financial decisions.

“Performance of their roles was always in jeopardy since boards exercise critical responsibilities in the entities.

“That prolonged absence of functional boards may lead to adverse consequences,” the PSC says in the report titled “Public Service Compliance with Values and Principles in Articles 10 and 232 of the Constitution”.

Even where the rate of noncompliance to good governance environment may appear as low (such as the 15 per cent of State corporations without functional boards), the implications on public financial management can be far-reaching, says the report.

In November 2013, President Uhuru Kenyatta agreed to reduce the number of State corporations from 262 to 187, following a recommendation by the Presidential Taskforce on Parastatal Reforms led by Mr Abdikadir Mohammed and Mr Isaac Awuondo.

But to implement the proposals, the government had to pass two laws: The Government Owned Entities Bill and the National Sovereign Wealth Fund Bill.

The former was to guide State corporations on adopting efficient structures by either shutting some, merging others or simply reducing the wage bill but promote revenue generation.

The Wealth Fund law was to guide on management of stakes the government holds in listed companies as well as establish a wealth fund.

Those Bills are yet to be formally published although the Commission on the Implementation of the Constitution has since invited the public to give views on the initial draft.

The PSC, on the other hand, says the delays are costly to the taxpayer and is suggesting the passage of laws that would avoid future delays in appointing board members.

“Appointing authorities should avoid leaving a leadership vacuum in State corporations for long periods,” says the PSC, adding that the maximum period within which the State corporations can remain without substantive leadership should be capped by law.

PSC observed that the total development expenditure budget for ministries and departments and State corporations was Sh463.6 billion for 2014. However, only half of this amount was spent.

While it lists procurement delays and other technical problems for this under spending, it observes that some corporations could not make decisions because either there was no board or the CEO had not been appointed.