‘Rushed’ county firms bad idea, State warns

Newly elected Council of Governors (COG) officials led by Vice-Chairman Mwangi wa Iria (4th left) and Chairman Wycliffe Oparanya (5th left) at Movenpick Hotel, Westlands in Nairobi. [Boniface Okendo/Standard]

The government is spoiling for another round of war with the counties over the formation of county corporations.

The national government insists the firms cannot support their operations and are nothing but a drain on the devolved units’ finances.

The establishment of county corporations is the latest in the growing list of concerns by the national government against the countries, with whom it has had long-running wrangles over revenue allocation.

The county-owned firms are fashioned after State corporations.

Among the concerns that the government has with the companies is their impact on county wage bills.

The National Treasury notes that while the Public Finance Management (PFM) Act allows counties to set up such corporations, they should be self-sustaining and not dependent on county governments.

In its Draft 2020 Budget Policy Statement (BPS), the Treasury noted that the county-owned companies threaten to increase the wage bill within the devolved units, with returns not being commensurate with expenditure.

“Section 182 of the PFM Act allows county governments to create county corporations for investment purposes or to take care of county government interests. However, some county governments have created, or have proposed to create, multiple corporations which cannot financially sustain themselves leaving them to depend on the county revenues to run their operations,” said Treasury in the BPS. According to the PFM Act, a county can create such firms to meet existing gaps in the market.

These include microfinance institutions, dairies and generally institutions that will champion economic development.

The State itself has several corporations that are in financial distress and are in constant need of bailouts.

In the financial year to June 2019, it paid Sh1.37 billion to repay debt guaranteed to three State-owned enterprises experiencing financial difficulties.