Truth behind delay in parastatal reforms, months after President Uhuru Kenyatta’s directive

President Uhuru at a meeting with members of the Implementation Committee on Parastatal reforms at Harambee House Office during delivery of a progress report  (PHOTO: Courtesy)
NAIROBI, KENYA: The much-hyped public sector restructuring process is being held back by the delayed enactment of critical laws.

Little progress has been made eight months after President Uhuru Kenyatta demanded the swift implementation of the recommendations of a task force he appointed to review the operations of parastatals in a bid to eliminate wastage of public funds, enhance efficiency and bolster productivity.

The Presidential Task Force on Parastatal Reforms — co-chaired by Mr Abdikadir Mohammed, the Government’s constitutional and legal affairs advisor, and Mr Isaac Awuondo, the group managing director at Commercial Bank of Africa — proposed mergers and dissolution of various parastatals that would reduce their number to 187 from the current 262.

But a member of the team has expressed fears that two Bills meant to manage the parastatal reforms may face stiff opposition in Parliament.

STRONG RESISTANCE

Critics read the delay as indicative of strong resistance from powerful parastatal chiefs who see the exercise as threatening their livelihood. They said the Government must boldly push through the reforms that promise to drastically reduce ballooning recurrent expenditures. The prolonged delay, they added, may see the exercise never take off.

But the authorities maintain that the passing of the two Bills — Government Owned Entities Bill 2014 (GOE) and the National Sovereign Wealth Fund Bill 2014 — are the reason for the delay.

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The GOE Bill is meant to ensure parastatals adopt a leaner and more efficient structure, meaning some State firms will have to be shut down or merged with others to avoid a duplication of roles.

The National Sovereign Wealth Fund Bill revamps how the Government manages its shareholding in listed companies like KCB, National Bank and others. It also considers how Kenya’s new-found mineral wealth will be managed and seeks to establish a wealth fund.

Both Bills have been published and are awaiting parliamentary debate.

“The process has so far been well undertaken by the pool of professionals and technocrats engaged. As per now, we cannot say we have encountered any major challenges, but we expect the politics to intensify when the two Bills meant to legalise the process are presented to Parliament for discussion,” the task force source, who spoke on condition of anonymity for fear of reprisal from MPs, said.

Strong opposition to the Bills is expected because the merger and dissolution of parastatals will lead to job losses and jostling for appointments.

Once the GOE legislation commences, Cabinet secretaries shall operationalise the merger of entities under their mandate, as well as appoint new boards of directors for the newly formed corporations.

According to a progress report by the Parastatal Reform Implementation Committee (PRIC) presented to the President in May but only just made available to the public, the GOE was scheduled to be in place by June 30, 2014.

The report, however, singles out key outstanding issues with respect to this proposed legislation, including a lack of public and stakeholder consultations.

Among those yet to be consulted include the Commission on the Implementation of the Constitution (CIC), Commission on Revenue Allocation (CRA), Salaries and Remuneration Commission (SRC), Council of Governors (CoG) and Parliament.

MERGERS AND DISSOLUTIONS

“We are still looking at the proposed law, which needs to be amended to effect the reforms; that is still being finalised. Once the law is passed, it will set the stage for all the mergers and dissolutions,” said National Treasury Cabinet Secretary Henry Rotich, adding that he expects the new law to be in place soon but did not commit to a timeline.

But even before issues around the task force’s report have been resolved to enable it begin to be implemented, the Government last week announced it would begin an audit of the public service in November.

According to Devolution Cabinet Secretary Anne Waiguru, Sh2 billion has been sought from the National Treasury for the rationalisation programme.

The Government will hire a private consultant to audit all estimated 700,000 civil service employees, including those in parastatals and counties, with a view to ascertaining the skills level and staff numbers required to run public offices efficiently.

The audit is to be finalised before July 2015, which is when the current financial year ends.

“The current dispensation has made it imperative to realign structures, processes, programmed, institutions and staffing to core mandates of the governments at the national and county levels so as to ensure a responsive public service that meets the expectations of Kenyans,” Ms Waiguru said.

The trouble with this exercise is that the Uhuru-appointed team’s recommendations, which propose radical changes in State agencies, may not have been implemented by November. The audit may, therefore, go over ground already covered and duplicate recommendations.

Among the parastatals proposed for dissolution are the Kenya Yearbook Editorial Board, National Social Security Assistance Authority, Privatisation Commission, Kenya Rural Roads Authority, Kenya Urban Roads Authority, Canning Crops Board, Tourism Research Institute, Kenya Coconut Development Authority, Cereals and Sugar Finance Corporation, Coffee Development Fund and Cotton Development Fund.

Others are the Pyrethrum Board of Kenya (now Pyrethrum Regulatory Authority), Sisal Board of Kenya, Tea Board of Kenya, Coffee Board of Kenya. Kenya Sugar Board, Horticultural Crops Development Authority and Rural Electrification Authority.

Among those earmarked for mergers are the Kenya Industrial Estate, Kenya Tourist Finance Corporation, Brand Kenya, Export Promotion Council, Youth Enterprise Development Fund, Kenya Investment Authority, Insurance Regulatory Authority, Capital Markets Authority, Retirement Benefits Authority, Sacco Societies Regulatory Authority and Kenya Wildlife Service.

And as the implementation of these reforms continues to be delayed, executives in some State corporations are reportedly getting jittery and holding off making any major decisions or investments as uncertainty plagues their firms’ futures.

LOW PRODUCTIVITY

A chief executive who spoke to Business Beat on condition of anonymity, because of the sensitivity of the matter, added that the situation has also contributed to low productivity in several Government agencies.

“Most of the workers are not sure of their future in the institutions. They are no longer enthusiastic in executing their duties as they are not sure whether they will be sacked or redeployed, even though the Government has assured them that there be no job losses.”

However, Deputy President William Ruto last year said the Government planned to send home more than 100,000 civil servants to reduce the “unsustainable” public wage bill that currently stands at more than Sh500 billion a year.

Market analysts said that although the reforms are expected to enhance efficiency in Government operations, this may not be achieved if the process is mishandled.

A CEO in charge of a parastatal within the ministry of East African Affairs, Commerce and Tourism said the proposed reforms have the potential to greatly improve service delivery.

“The current system allows for exploitation, low productivity and is vulnerable to corruption, among other malpractices. I subscribe to the process as it will eradicate poor service delivery to Kenyans. Amalgamating the State agencies will inculcate new thinking in Government, guaranteeing optimal performance.”

According to the PRIC progress report, a merger framework has been approved and 13 parastatals out of 36 have already been merged, pending operationalisation of the Bill. However, the mergers were based on the Agriculture, Fisheries, and Food Authority (AFFA) Act of 2013, operationalised in January this year.

RIGHTFUL DUES

The State agencies merged shall become directorates under the new corporation, and their CEOs made heads of directorates.

However, they will only be allowed to serve their unexpired term for a maximum period of six months, thereafter, their contracts shall be reviewed. But no new contract of service will be offered to a CEO who has served in the same agency for two terms,.

All other staff shall be presumed to be employees of the new GOE, though those found not fitting in the new establishment may be redeployed elsewhere in the public service or retrenched and paid their rightful dues.

The presidential task force also recommended a holding company, the Government Investment Corporation (GIC), be formed to manage the reforms.

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Presidential Task Force on Parastatal Reforms Anne Waiguru Government Owned Entities Bill 2014