Stage set for government banks' merger as parastatal reforms begin

The stage is set for merger of State-owned commercial banks into a mega lender in the ongoing parastatal reforms. The Government is also merging about forty parastatals into about nine agencies, that could see thousands of jobs rendered redundant.

This could see National Bank of Kenya, where the Government holds 22.5 per cent stake and National Social Security Fund (NSSF) — a State agency — with a 48 per cent stake, merged with Consolidated Bank of Kenya and Development Bank of Kenya. Consolidated Bank is wholly owned by the Government while in Development Bank of Kenya, the State holds 89.3 per cent stake through the Industrial and Commercial Development Corporation (ICDC), with TransCentury owning the remaining 10.7 per cent.

A quarterly progress report on parastatal reforms published Friday in The Standard said consultations are ongoing to consolidate State-owned commercial banks in a bid to give policy leadership to increase size, scale and effectiveness. The implementation committee, which is chaired by Mr Joseph Kinyua, the chief of staff and the head of the public service, notes that consolidation of the banks will allow them have the capacity to participate in flagship projects like the Vision 2030.

“The committee has examined all the state owned banks, undertaken reviews and come up with options for consolidation of government banks,” the report published in the dailies Friday reads in part. Other members of the committee include Mr Abdikadir Mohamed, a co-chair, Commercial Bank of Africa Managing Director Isaac Awuondo (co-chair) and Ms Jane Mugambi (secretary).

Mega financial institution

In a recent exclusive interview with The Standard, National Treasury Cabinet Secretary Henry Rotich said the Government is merging National Bank of Kenya (NBK) with other State-owned credit providers. This is why, he said, NBK’s plan to raise much-needed additional capital through a rights issue has been delayed for close to two years.

“In the context of the ongoing parastatal reforms, we may require to merge NBK with other banks before doing a rights issue — we do not want to take other steps before [concluding on the reforms legislation],” Mr Rotich said.

The Friday update noted that the Government is also merging ICDC), the Kenya Tourism Development Corporation, Finance Corporation and the IDB Capital into a mega financial institution to be known as the Kenya Development Bank (KDB).

In the agricultural sector, the Government has concluded making two new look corporations.

Also, in the update, the Government said it’s merging institutions in the forestry and wildlife sector including the Kenya Wildlife Service, Kenya Forestry Service, Nyayo Tea Zones Development Corporation and the Kenya Water Towers Agency under the Kenya Forestry and Wildlife Service (KFWS).

A new State corporation to be known as Biashara Kenya will now house the Kenya Industrial Estates, Women Enterprise Development Fund, Youth Enterprise Development Fund, Uwezo Fund and the Micro and Small Enterprises Authority.

The Kenya Tourism Board, Brand Kenya, Export Promotion Council, Kenya Year Book and Keinvest will be combined to form the Kenya Investment Corporation (KIC).

Another key State agency to emerge in the shakeup will be known as the Intellectual Property Office of Kenya (IPOK). On its part, IPOK will have the Kenya Industrial Property Institute, Anti-Counterfeit Agency and the Kenya Copyright Board.

The Government is also merging financial services regulators into Financial Service Authority (FSA), which will combine the Insurance Regulatory Authority, the Retirement Benefits Authority, the SACCO Societies Regulatory Authority and the Capital Markets Authority.

The Kenya Plant Health Inspectorate Service and the National Biosafety Authority will be merged to form the Kenya Plant Health and Biosafety Service (KEPHABS).

The concluded mergers in the agricultural sector are the Kenya Agriculture, Food and Fisheries Authority (AFFA) and Kenya Agriculture and Livestock Research Organization (KALRO). AFFA and KALRO were created from the merger of 12 Government-owned entities.

AFFA will now house the Kenya Sugar Board, Tea Board of Kenya, Coffee Board of Kenya, Pyrethrum Board of Kenya and the Cotton Development Authority. Others merged under AFFA are the Coconut Development Authority, the Sisal Board of Kenya and the Horticultural Crop Development Authority.

KALRO will swallow the Kenya Agricultural Research Institute, Kenya Sugar Research Foundation and Coffee Research Foundation. The report says that those affected include the Crops Development and Promotion Agency, Fisheries Development and Promotion Agency, Livestock Development and Promotion Agency, the Health Services Regulatory Authority and the Mining Regulatory Services.

The Government also plans to establish an investment company to run all commercial state corporations in a move that will free up Treasury from directly managing billions of investments on behalf of the taxpayer.

According to the progress report on parastatal reforms, the Government will establish the Government Investment Corporation (GIC), an investment holding company to exercise ownership and management oversight on behalf of the National Treasury. A new entity, the National and County Agencies Oversight Office (NACADO) to exercise oversight on all Government owned entities.

Relevant law

President Uhuru Kenyatta appointed the parastatal reforms taskforce in July 2013. The report published Friday says that three entities have also had their functions transferred back to the relevant State departments. These are the South-South Centre, National Council for Children’s Services and the Kenya Tsetse and Trypanosomiasis Eradication Council.

A similar transfer of four other government entities is awaiting for the relevant law to be enacted. The report further says that consultations are ongoing between the national and county governments on how to deal with institutions that fully or partially perform devolved functions. The institutions under consultations include the regional development authorities, water boards, LAPFund and LAPTrust.