National Treasury Principal Secretary Chris Kiptoo.
Treasury Principal Secretary Chris Kiptoo says a viability assessment of all State corporations is being undertaken in an exercise that will see some entities merged, dissolved, restructured or privatised.
Dr Kiptoo told the National Assembly’s Budget and Appropriations Committee that the Treasury is undertaking a reform programme on State-Owned Enterprises.
He said the Treasury has undertaken preliminary assessment of 288 State corporations with a view of identifying their viability and recommending necessary action.
Dr Kiptoo said the National Treasury is currently carrying out a detailed financial evaluation of 50 corporations in order to quantify the financial risks emanating from them.
“The assessment, once completed, will provide a basis for policy direction such as retaining the entities, mergers, dissolutions, transfer of functions back to the sector ministries and/or other State corporations, restructuring and privatisation,” Dr Kiptoo said.
“A more detailed or comprehensive assessment is planned to be completed by the end of October 2024.”
288 State corporations
Dr Kiptoo said the viability assessment of the 288 State corporations entailed desktop review to identify duplications or overlaps in mandate, especially with respect to oversight roles among government institutions and the statutes establishing various entities and recommend appropriate way forward aimed at providing clarity and removal of ambiguities and wasteful duplications.
The viability assessment also seeks to establish State corporations with outdated mandates or where there is no vacuum in supply of goods and services especially in areas where the private sector is well established in the sector.
Dr Kiptoo told the committee chaired by Kiharu MP Ndindi Nyoro that the assessment will identify fiscal risks to the national exchequer and possibility of fiscal expenditure containment.
“The outcome of this exercise will go into managing the risks and also identify entities that are good candidates for restructuring, especially operational and balance sheet restructuring,” he said.
“The financial evaluation work is based on audited financial statements of the entities.”
Dr Kiptoo said the reforms, which are ongoing and also planned, in respect of Government-Owned Enterprises, Government Linked Corporations as well as non-commercial entities are aimed at improving governance environment, financial and operational performance of individual entities and minimising fiscal risks to the Exchequer.
He said the Cabinet in November 2023 approved the Ownership Policy, which is a key reforms framework for the parastatals.
Dr Kiptoo said the policy is designed for commercial State corporations commonly referred to as State-Owned Enterprises as defined in section 210 of the Public Finance Management (National Government) Regulations 2015.
The policy is also designed for Government Linked Corporations, these being companies in which the government shareholding is less than 50 percent.
He said the Ownership Policy redefines roles and responsibilities of government institutions in exercising ownership functions over State-Owned Enterprises and Government Linked Corporations such as nomination of non-executive directors of the two entities.
The policy, he said, establishes a new performance management framework for State-Owned Enterprises that focuses the entities on their commercial mandate for better financial performance, better earnings to the shareholder, less reliance of the exchequer, and less fiscal risks such as bailouts from the exchequer.
“The policy provides a framework that governs the process that the government would have to adhere to if it has to assign a non-commercial activity to State-Owned Enterprises,” Dr Kiptoo said.
“The policy aims at converting all State-Owned Enterprises into limited liability companies under the Companies Act,” he added.
In order to refocus them on their commercial mandate and also provide a better legal setting for established corporate governance practices.”
Dr Kiptoo said the National Treasury has drafted a layman’s version of the GOE Bill, 2024 following Cabinet Approval of the Ownership Policy in November 2023.
He said the Bill will be the legal framework that will give effect to the provisions of the Ownership Policy.
“Once fully drafted, the Bill will be subjected to public participation before it is submitted to the Cabinet and subsequently to the National Assembly by end of May, 2024,” Dr Kiptoo said.
