State to shut down 25 entities, privatise others in new reforms

The government is set to shut down 25 State corporations and off-load another 25 to private sector players in a new reform process aimed at reducing the burden that it has to shoulder in bailing out non-performing State firms. 

The National Treasury said it had undertaken a preliminary assessment of the 288 State corporations, with the preliminary results determining that about half or 158 are strategic and would be retained. 

The others will be wound up or privatised while some will be merged.

A few require policy direction to guide how the government will handle them. 

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“The National Treasury has undertaken a preliminary assessment of 288 State corporations to determine their viability and recommend necessary action. The preliminary assessment is still a work in progress,” said the Treasury in budget documents for the 2024/25 financial year. 

It noted that the assessment was aimed at identifying duplications or overlaps in mandates, identifying State corporations with outdated mandates and fiscal risks to the Exchequer and the possibility of fiscal expenditure containment.

Overlapping mandates

Treasury noted that while it was still assessing the different State corporations, the preliminary assessment shows 25 would be wound up as their mandate either overlaps or is outdated. 

Another 25 entities are earmarked for privatisation while 41 State corporations will be merged due to their duplicating or overlapping mandates.

Treasury said another 40 would be restructured while seven will require policy guidance.

The Treasury said it will embark on a stakeholder engagement this month that will then inform the way forward.

“Going forward, stakeholders’ engagement on the reforms will be undertaken in May 2024, following which a report and recommendations will be submitted to the Cabinet for approval and subsequently submitted to the National Assembly by June 30, 2024,” said Treasury.

“Additionally, implementation of privatisation not affected by court suspension is ongoing. The Treasury is monitoring the court cases on privatisation and will submit a detailed status report on privatisation to the National Assembly by June 30, 2024.”

The National Treasury in November last year listed 11 State corporations in which it plans to offload its shareholding to private sector players, which include the Kenya Pipeline Company, New KCC and the Kenyatta International Convention Centre (KICC).

They are among the 35 State firms that President William Ruto said are ready for privatisation. It has this year started the process of selling its stake in different hotels.

In March, the Privatisation Authority restarted the sale of seven State-owned hotels spread across the country.

These include the three hotels under the hotels under the Kenya Safari Lodges and Hotels Ltd (Mombasa Beach Hotel, Ngulia Safari Lodge, and Voi Safari Lodge) that are co-owned by Mt Lodge Ltd and the Kenya Wildlife Service. 

The other hotels are the Golf Hotel, Sunset Hotel, Mt Elgon Lodge and Kabarnet Hotel. In April, it invited bids for the sale of the iconic Hilton Hotel. 

In the budget documents, the Treasury also said the government’s spending for the financial year to June 2025 had been reduced by Sh273 billion owing to the collection of lower-than-expected revenues over the financial year to June this year.

It had earlier planned to spend Sh4.19 trillion as per the Budget Policy Statement (BPS) published earlier this year but this has been reduced to Sh3.91 trillion in the budget estimates for the 2024/25 financial year.

“Following the underperformance of revenues in the 2023/24 financial year, the project revenues in the approved 2024 BPS have been revised accordingly to reflect this reality on the baseline,” said Treasury.

“Further, to remain on a fiscal consolidation path, there is a need to contain borrowing and rationalise expenditures to sustainable levels. In view of the revision of the projected revenues, the 2024/25 financial year budget estimates have been reduced by Sh273.3 billion from the 2024 BPS.”