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Kenya government sets out to review roles of parastatals

By Stephen Makabila | Published Sun, August 4th 2013 at 00:00, Updated August 3rd 2013 at 22:48 GMT +3

By Stephen Makabila         

After the collapsing of ministries from 44 to 18, spotlight turns on President Uhuru Kenyatta’s administration as it embarks on a review of paratatals.

Uhuru recently unveiled a 10-member team to review parastatal policies, identify challenges and propose a new policy direction for State firms.

There are dozens of parastatals spread in various sectors such as agriculture, education, processing, export, insurance, industrialisation, transport and communication, research and the energy sector among others.

By 1995 for example, there were 240 parastatals. Of these, 51 were under direct Government ownership; 36 had majority shares held by the State and 153 were owned by the Government through State holding firms.  

Mars Group Chief Executive Officer Mwalimu Mati says given the poor performance of most parastatals over the years due to corruption and mismanagement, expectations remain high and remain a challenge.

“What is important is for the team to decide whether it’s viable and in public interest for the Government to continue investing in some of these parastatals,” says Mati. Mati says mismanagement partly due to the Executive’s absolute discretion on who should be appointed to head State firms remains a challenge.

Kitui Central MP Makali Mulu, who has in the past been involved in developing strategic plans for the public and private sectors, says what is important is to ensure State firms to be retained are in line with the country’s developmental plans and needs.

Parastatals play a major role in most economies through the provision of public services and in Kenya’s case, they have over the years been established to foster wider development goals.

But despite these important socio-economic roles, most of the parastatals in Kenya, as pointed out by Mati, are characterised by inefficiency.

Quietly during the 2010 constitutional referendum, its believed more than 100 parastatal bosses were given time off to go and campaign for the then Proposed Constitution (currently the new Constitution).

Against the background of mismanagement, international organisations such as the International Monetary Fund (IMF) and the World Bank proposed the privatisation of Kenyan parastatals in 1994.

State involvement

The Structural Adjustment Programmes (SAP) were aimed at reducing Government participation in the economic sector and to increase the productivity of parastatals. Since then, this intervention has led to the popularization of privatization as a solution to the problems of parastatals even though the exercise did not bring the much coveted efficiency gains.

And as the Uhuru appointed taskforce embark on its mission in the next six weeks, what is equally evident is that roles of some parastatals overlap, necessitating the need to scrap or merge some.

The taskforce, which according to the Head of State would be transformational, will deliver its report within six weeks, but in any event not later than September 15.

Those appointed are former Mandera Central MP Abdikadir Mohamed (Executive Office of the President), Kamau Thugge (National Treasury), Mugo Kibati (Vision 2030), Korir Sing’oei (Deputy President’s Office), Stella Kilonzo (private sector), Angalie Mediratta (private sector), Isaac Awuondo (Commercial Bank of Africa), Nelson Kuria (CIC Group), Carole Kariuki (Kepsa) and Edward Burbidge (Burbidge Capital Ltd).

While the sectors that may be affected remain the secret of the taskforce, Mati singles out the large number of parastatals in the agricultural sector, noting they should be merged.

“There are almost 70 parastatals in the agricultural sector alone. How can a Principal Secretary in that ministry sit on the boards of 70 parastatals? Most end up delegating these roles to their juniors and that contributes to mismanagement,” says Mati.

Parastatals in the Ministry of Agriculture include the National Cereals and Produce Board, which has of late been on the spot over its assets. Farmers want the Government to make NCPB autonomous. This, they say will make the board sustain its operations and end overreliance on State funding.

While some of the parastatals had been earmarked for privatisation, there has been resistance in the name of protecting interests of the local communities.

Fear of ‘outsiders’

In Bungoma County, cane farmers and the political leadership has been against privatisation of Nzoia Sugar Company, claiming outsiders may take a controlling stake against local farmers, who are not financially ready to buy shares.

The National Social Security Fund (NSSF) whose mission is to provide basic social security services and welfare support to all workers in Kenya, has also been facing leadership problems in recent weeks.

If ran smoothly, NSSF’s role includes providing workers with financial security in retirement, as well as providing them with basic security against contingencies such as employment injury, illness and/or disability and death.