With Ruto’s burgeoning ambition, Uhuru’s parastatal reform plan is dead

System of politico-ethnic patronage and contradictory policy frameworks snuffed the life out of one of the President’s most ambitious economic reform agenda

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The proposed reforms would have saved Treasury billions annually.
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NLM Writer

Just three months after he was sworn into office for his first term, President Uhuru Kenyatta appointed a task force whose principal recommendation was the merger of State agencies.

It was among the first policy initiatives by President Kenyatta after his election in March 2013.

Membership of the Presidential Taskforce on Parastatal Reforms (PTPR) was drawn from both the public and private sector with Senior Advisor on Constitutional and Legislative Affairs in the Office of the President, Abdikadir Mohamed, and Group Managing Director Commercial Bank of Africa, Isaac Awuondo, as co-chairs.

Other members of the task force include Dr Kamau Thugge (PS National Treasury), Mugo Kibati (then director general of Vision 2030), Korir Sing’oei (Deputy President’s Office), Stella Kilonzo (private sector), Angalie Mediratta (private sector), Nelson Kuria (CEO CIC Group), Carole Kariuki (CEO Kenya Private Sector Alliance) and Edward Burbidge (CEO Burbidge Capital Ltd).

The merger, amongst other reforms, the task force stated, “will facilitate the repositioning, rationalisation, and consolidation of Government Owned Entities (GOE) in a manner that will ensure that they are aligned to the national development agenda.”

The task force’s report was eventually submitted to the president in October 2013, three months after the team was appointed.

The report itself was comprehensive and it states that the task force “benefitted from a review of reform initiatives conducted in diverse jurisdictions including South Africa, Australia, New Zealand, Singapore, Malaysia, China, Nigeria and the United Kingdom amongst others.”

On receiving the 229-page report, an ambitious President Kenyatta even put a three-month time limit within which to fully implement its recommendations.

“The sector will be rationalised to remove overlaps, duplication and redundancies thereby trimming the current number of State Corporations from 262 to 187, as recommended by the task force,” the President said.

Talk about mergers left thousands of staff of the State corporations sweating about their jobs while the chief executives of parastatals were not willing to commit on major capital projects, fearing they could be out of job anytime.

In reality, the report was populist expression which would soon hit headwinds from which it has never recovered from, even as more promises of piecemeal parastatal mergers are being announced.

In January 2018, Head of Public Service Joseph Kinyua announced that six State-owned financial corporations – Kenya Industrial Estates, Uwezo Fund, Youth Enterprise Development Fund, Women Enterprise Development Fund, Development Bank of Kenya and IDB Capital Limited – would be merged into one mega bank.

Well-intentioned as the merger proposal was, the biggest headwind the implementation of the task force’s recommendations has met is the culture of political patronage.

With an eye on the 2017 elections, the challenge for President Kenyatta and Deputy President William Ruto was how they would implement the report in full without upsetting their bases and other regions because of the ultimate job losses.

“More often than not, these positions in State corporations are given on the basis of political considerations first and foremost. Merit comes a distant third or fourth after tribe and other consideration. Now, imagine a president who was facing a tough re-election battle upsetting this arrangement by relieving hundreds or even thousands of people of jobs and then the next day going to solicit for votes from the same people. I think we were too ambitious and did not consider the political consequences of our recommendations,” a person who served in the task force as a co-opted member of the secretariat told the Nairobi Law Monthly.

As well as that, and similar to the current situation, in building their coalition Kenyatta and Ruto had promised many people jobs.

With limited slots available in the cabinet and mainstream civil service, focus shifted to the parastatals to absorb the scores of others who could not land either cabinet, principal secretary or ambassadorial positions. Majority of them landed parastatal board positions.

And so, given the country’s deeply entrenched political and ethnic patronage system, moves towards actualising the ambitious recommendations of the PTPR have grown silent except for pronouncements like that of Kinyua.

Even the Government Owned Entities Bill, 2015 and the National Sovereign Wealth Fund Bill, 2015 which would have kick-started the envisaged reforms seem to have been forgotten.

In essence, there is no legal or regulatory framework for the mergers and it is becoming clear that the millions that was spent by the PTPR may have gone into waste. Without the enabling legislation, even the establishment of Government Investment Corporation (GIC) and the National Oversight Office (NOO) which were to precede the reforms have not been done.

With Mr Ruto having started making alliances with various constituencies ahead of his 2022 presidential run, prospects of implementing the taskforce’s report appears bleaker, as he too would not want to antagonise any section of the country.

Besides the exogenous political considerations in implementing the report, the report has been criticized as inherently weak and contradictory.

For instance, while calling for mergers for effective and efficient management of the GOEs, the same report at one section acknowledges that the State corporations have been recently doing well in terms of revenue generation and better wage earnings.

“Available data shows that the output of State Corporations to GDP in nominal terms has been increasing from 9.54 per cent in 2008/2009 to 11.64 per cent in 2010/2011, based on internally generated income,” the report stated.

In reference to growth in internally generated revenues and level of wage earnings, the task force added that “This is anecdotal evidence as to why, apart from the clear efficiency and effectiveness arguments, there is a demand for establishment of more State Corporations.”

So, ‘if it ain’t broken, why fix it?’ has been asked by some leading economic experts including Dr David Ndii who in May 2015 opinion in the Saturday Nation noted, “The report does not provide compelling reasons. Much to the contrary, it acknowledges that their performance has improved considerably in the recent past. Commercial ones were making good profits and paying dividends to the Treasury, while other self-financing ones, the regulatory agencies ‘managed to generate funds at fairly sustainable levels’.”

With no real political will to implement the envisaged reforms, even the little that has been done since the publication of the task force report like merger road maps by State corporations that had been earmarked for mergers continue to gather dust on shelves. ^

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