Inside struggling Kenya state-owned companies, entities

President William Ruto, chairs a Cabinet Meeting at State House, Nairobi on 29/4/2025.[PCS Several government parastatals are struggling to continue with their operations after the government earmarked them for dissolution, merging or privatization and has since starved them of funds. The Pyrethrum Processing Company of Kenya (PPCK) is among 49 companies whose operations are hanging on by a thread and has been forced to survive without government funding for the last two years. The withdrawal of the funding was followed by the Cabinet approving the company's dissolution, among 49 parastatals set to be dissolved, merged, or privatised. The company is operating at a negative capital of over Sh400 million, it owes farmers and pensioners over Sh2 billion, and has numerous cases that threaten to liquidate it. Speaking to The Standard, acting Chief Executive Officer Carolyne Imbwaga admitted that the company has been facing financial issues. She rallied the government to offer support. "We need financial assistance to run this company. There are accumulated debts, and the company is also not meeting its potential of producing pyrethrum from a 70,000-acre land. We now produce from a 5,000-acre," she said. Imbwaga said that another challenge facing the company is asset management. She noted that some of the properties have no title deeds and are prone to grabbing. "We are also fast-tracking the process of ensuring that properties without title deeds are processed in a bid to discourage and mitigate land grabbing," she said. Another issue that has affected the company is the fire to flowers stored at the silos because of their flammable characteristics. The same has affected the flower quality. Last week, the company made its first purchase after a year of waiting. Imbwaga attributed the same to a lack of raw materials. She said the company aims to process each day for nine months of the year. "The remaining three months can be used to maintain machines and reset," she said. The company possesses assets estimated to be worth over Sh5 billion, including land and houses spread across 18 pyrethrum growing counties. The company also owns machinery and motor vehicles. Despite passing its dissolution, on May 23, however, President William Ruto appointed former Taita Taveta Governor Granton Samboja as the chair of the PPCK board of directors. The appointment has breathed new life into the company, with the hope that it will regain its previous status, where it was internationally recognized. Another sorry state parastatal is the National Cereals and Produce Board (NCPB) with an accumulated commercial loan of over Sh4.4 billion. The cabinet approved the NCPB merger with the Kenya National Trading Corporation (KNTC). On May 12, wheat farmers protested outside the Nakuru depot over delayed payment, despite delivering over 321,000 bags of wheat at the depot a month earlier. Sources informed the Standard that the depot was unable to sell wheat, and hundreds of bags remained stored. "The wheat has remained in the store since last year, leading to substantial storage costs and declining quality. The reduced standards make it difficult for customers to buy," said the source. NCPB manager Antony Tanui said the payment issue was above his pay grade and held the national government responsible. State-owned Postal Corporation of Kenya (Posta) plans to lay off over 600 employees due to financial constraints and fierce competition from other efficient, digitized courier providers. The CEO, John Tonui, in his announcement on a five-year plan to revive it, noted that the company owes the Kenya Revenue Authority (KRA) over Sh1 billion in tax accumulation. "The company also owes over Sh826 million in loan deductions. We are looking for strategic partners," he said. According to Tonui, Posta was restructuring to clear salary arrears. He said the same would include firing over 600 'extra' employees. Posta has over 2,000 employees, out of which 145 senior managers would lose their jobs. "We need to attain a lean and productive workforce and manage the staff cost to achieve a 50 percent wage bill ratio and get rid of excess employees," he said. The agency only delivered 1.2 million letters in 2023, down from 11.8 million in 2019. Competing couriers have blown the company out of the water with improved technology and efficiency. Posta lost its glory with the entrance of telecommunication companies, including Safaricom. The use of phone calls, social media, and email has dealt a blow to the corporation. To save the company, the government plans to pay Posta over Sh1.6 billion in accrued debt and also by launching new products, e-commerce, to help Posta generate its revenue. Parastatals have also stopped hiring new staff as the government froze contract renewals across 42 state corporations amid restructuring plans. On May 22, Chief of Staff Felix Koskei announced the stoppage of recruitment, contract extensions, salary reviews, and capital projects in the 42 agencies. His announcement has put the jobs of hundreds of workers, including top executives, in uncertainty. "A moratorium is issued on the recruitment and renewal of contracts for chief executive officers or any other officers serving on contract terms at the lapse of their current tenure," the memo read. The parastatals' struggles have been attributed to the government's interference in the running and its hand in top management appointments. Professor Gitile Naituli said that the government rewards unqualified people with top positions in the parastatals, killing the state-owned companies. He said the government rewards friends, relatives, tribemates and allies in a bid to ensure the companies have their proxies to push their agendas. "We do not have competent managers in these sectors, and qualified Kenyans are not given a chance to lead the companies. If the same were allowed, these companies would be revived," said Naituli. He said even with the merging, the parastatals would not be run well unless the government leaves it to independent, qualified hands. On May 23, the Court of Appeal upheld the suspension of the CEOs of Moi Teaching and Referral Hospital, Kenya Broadcasting Corporation, Athi Water Works Development Agency, and Kenya National Shipping Line Limited. The appointments of the four were challenged by Nakuru Surgeon Dr Magare Gikenyi and six others, who submitted that the process was opaque and unlawful. They said it was wrong for the state corporations to seek the concurrence of their appointments with Koskei (Chief of Staff). "We challenge the skewed and ethnic based appointments of the CEO and other staff at MTRH because it is against constitutionalism and the rule of law," the petitioners deposed. Treasury data show that in the year ending June 2024, state corporations made losses, with Kenya Railways reporting the highest net loss of Sh50.4 billion. Defunct National Health Insurance Fund reported a Sh3.4 billion loss. New Kenya Cooperative Creameries posted a Sh2.4 billion loss. The data showed that the Agricultural Development Corporation posted a loss of Sh955 million and Kalro made a loss of Sh1.3 billion. The Treasury collected Sh32.94 billion from parastatal surpluses in the year ending June 2024. However, projections show a drop to Sh20 billion in the year ending 2025. To curb the losses, the government activated spending cuts at state corporations to tame extravagance, including travel, training, legal expenses, and overtime, among others. Auditor General Nancy Gathungu has on many occasions flagged extra expenditure on boards of directors in meetings beyond the recommended threshold. Out of the over 270 parastatals in Kenya, only the Communication Authority of Kenya, Kenya Power, Kenya Ports Authority, Kenya Pipeline Corporation, and KenGen made profits. The four posted a profit of Sh6.7 billion, Sh30.8 billion, Sh12.9 billion, and Sh6.9 and Sh6.8 billion, respectively. Treasury Cabinet Secretary John Mbadi said the profits were attributed to technological advancement. "The Government Investments Management Information System (Gimis) has enhanced efficiency, transparency, and completeness of state corporations' financial, operational performance and fiscal risk analysis," said Mbadi. The government has also frozen new projects by state corporations with immediate effect, with agencies ordered to seek new approvals in the event of any for the next fiscal year.

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