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Parastatals put further strain on State coffers with Sh15b unpaid loans

By Frankline Sunday | February 22nd 2017
Kenya Meat Commission factory in Athi River. It is one of the biggest debtors with a Sh940 million unpaid loan. [PHOTO: FILE]

The State has lost Sh15 billion in non-performing loans lent out to parastatals and Government agencies, some of which have since become defunct.

According to financial reports of State corporations over the last financial year released by Treasury, a total of 35 State organs ranging from sugar firms to local authorities owe the Government a collective Sh15.4 billion in non-performing loans.

The Local Government Loans Authority carries the biggest chunk of the debt at Sh7.5 billion. According to treasury documents, the authority repaid only Sh94 million out of the principal of Sh7.9 billion it borrowed from Treasury.

The National Water Conservation and Pipeline Corporation owes Sh2.4 billion while the Eldoret Municipal Council, which became defunct and fell under Uasin Gishu County, owes Treasury Sh1 billion.

A majority of the parastatals that owe Treasury are in the agricultural sector and are unable to clear their debts stretching back decades.

The Kenya Meat Commission (KMC) is the largest debtor with Sh940 million in non-performing loans.

The parastatal was brought to its knees in the late 90s before being revived by the Mwai Kibaki administration in 2003.

An audit into the company by the Inspectorate of State Corporations found a Sh1.2 billion hole in the firm's accounts, which saw almost its entire board sent packing.

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The firm is currently implementing a turnaround strategy the Government hopes will improve its appeal to investors in readiness for privatisation.

South Nyanza Sugar Company and Nzoia Sugar Company, on the other hand, owe the Government Sh199 million and Sh168 million respectively while the defunct Miwani Sugar Mills and Miwani Sugar Company owe Sh78 million and Sh16 million respectively.

The plan to privatise the millers has failed to take off despite operating at below capacity owing to ageing infrastructure and cane shortages.

The Pyrethrum Board of Kenya, which regulated Kenya's vibrant pyrethrum sector in the 70s and 80s, has fallen from grace in the past two decades and now owes Treasury a staggering Sh863 million.

The State agency was rebranded to Pyrethrum Processing Company of Kenya (PPCK) as part of efforts to breathe new life into the State corporation.

However, allegations of corruption still dog the firm, with senior management last year accused of awarding themselves generous travel allowances. Other parastatals in the agricultural sector that owe the taxpayer hundreds of millions of shillings include the Kenya Industrial Estates (Sh423 million), Coffee Board of Kenya (Sh752 million) and the Water Resources Management Authority (Sh362 million).

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