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First 35 parastatals to be merged, axed revealed

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The Treasury and President William Ruto’s Council of Economic Advisors have identified an initial set of 35 parastatals that will be merged or wound up under the International Monetary Fund (IMF)-backed restructuring that could see at least 20 chief executives lose their plum jobs.

The restructuring will largely lead to mergers of State corporations with duplicating functions as well as winding up of struggling entities and transferring their functions to others, resulting in 15 “well-resourced” agencies.

The Treasury team led by Principal Secretary Chris Kiptoo and presidential economic advisory council, chaired by David Ndii, firmed up recommendations for the planned restructuring Thursday last week, according to an official document seen by the Business Daily.

The planned IMF-backed reforms come on the back of a financial evaluation for 50 State-owned enterprises (SOEs) which the Treasury said it was undertaking based on audited financial statements for the year ended June 2023.

The Treasury had in the 2024 Budget Policy Statement (BPS) pledged to report the outcome of the evaluation to the Fiscal Risks Committee by the end of this financial year on June 30.

The Business Daily has learnt that the Treasury and the presidential economic advisory council teams have from Monday been holding consultative meetings with the managements of the targeted parastatals together with principal secretaries for State Departments under which the entities fall. The meetings will end on Friday.

“As you are aware, the government is undertaking State corporations reforms to remove duplications, enhance synergy & effectiveness and ensure efficient use of public resources. You are invited together with chief executive officers and management of relevant departments of respective State corporations identified for consultative meeting,” Dr Kiptoo wrote in the letter inviting the PSs, copied to parastatal chiefs on May 9.

“Respective CEOs are requested to bring along the requested information. Please note, due to the short time given to complete the reforms, the consultative meetings are back-to-back. You are, therefore, requested to adhere to the scheduled time.”

Chief executives of the targeted parastatals have been asked to provide information on the relevance of the mandate of the respective entities in “today’s economic” environment and state whether or not the core functions are similar or being done by other agencies.

The parastatal chiefs are also being asked to highlight challenges in implementing their mandate and future plans to make the organisations self-sustaining.

They are also required to give details of outstanding statutory obligations, including the status of all borrowings such as loans, overdrafts and letters of commitment, and highlight any challenges in honouring the obligations. Information being sought includes details of ongoing and stalled projects as well as titles of ownership.

The planned restructuring is part of far-reaching reforms aimed at mitigating the risks they present to the taxpayer, including Sh145.4 billion guaranteed loans, Sh111.80 billion mom-guaranteed loans and Sh983.20 billion on-loan by June 2023.

President Ruto told a meeting of heads of parastatals on March 26 at State House that some entities had become a “drain on the Exchequer” following years of losses.

“We cannot continue accumulating debt. Borrowing will only lead us down the cliff. We must get it right. We must do what is right. This is the time,” Dr Ruto said. “It is illogical [to continue funding loss-making firms with duplicated and overlapping roles]. We have to shut down some of these loss-making parastatals. We must end excess capacity.”

Under the recommendations, Postal Corporation of Kenya will take over the functions of Kenya National Shipping Line and partner with private investors who will bring in capital and expertise for cargo shipment, clearing and forwarding and last mile destination.

The restructuring team has proposed the merger of Kenya National Qualifications Authority and the Commission for University Education into a new regulator for quality education and qualifications.

Export Processing Zones Authority will be merged with Special Economic Zones Authority, Kenya Academy of Sports with Sports Kenya, Kenya Industrial Property Institute with Kenya Copyrights Board, while 9.

The Agricultural Finance Corporation and the Commodities Fund will be collapsed into one entity.