Parastatals face shake up to stem corruption and public funds wastage

Parastatals face shake up to stem corruption and public funds wastage



Updated Saturday, August 17th 2013 at 23:18 GMT +3

Stemming fund mismanagement Photo: Courtesy

By Stephen Makabila
Kenya, Close to 300 parastatals will soon face a major shake up to stem corruption and wanton wastage of public funds. Up to half of them rely on the Treasury to pay salaries and manage their operations, a situation President Uhuru Kenyatta wants reversed. This comes even as an audit report by Government revealed gross financial mismanagement at the Kenya Meat Commission.

With minimal returns, parastatals gobble Sh400 billion annually from State coffers. That amount is a quarter of the Sh1.6 trillion national budget and nearly double the money allocated to county governments by the Commission for Revenue Allocation.
Cash crunch
Faced with a cash crunch and a huge wage bill the Jubilee coalition’s Government can no longer afford the luxury of running the quasi-government institutions that have for many years been used as cash cows by politicians.
“It is true they have been misused in the past and some have been poorly run and mismanaged that is why we will be recommending to the Government how they will be reformed,” said former Mandera Central MP Mohammed Abdikadir, the chair of a Presidential task-force reviewing a new policy direction for the firms. President Uhuru Kenyatta wants urgent action taken because “half of the parastatals rely on the National Treasury for salaries and operations,” a situation he warns is unsustainable.
The committee will recommend how the Government will drastically reduce the number of parastatals and also reduce the wage bill shouldered by the taxpayer.
Uhuru has urged the taskforce to make recommendations that will transform State corporations and give them the momentum to achieve their huge potential.
Yesterday, Mohamed told The Standard On Sunday that despite the heavy funding, Treasury continues to write-off huge debts incurred by parastatals thus draining the economy without generating returns.
“The wage bill alone for all the parastatals stands at Sh150 billion annually, an amount that is more than what Treasury pays teachers,” said Abdikadir. Most of the parastatals have over the years been established to foster wider developmental goals and generate income for the Government but that has not been the case. The Kenya Meat Commission (KMC) was for example operating at approximately 25 percent of its capacity as at March 9th 2013 with a working capital of Sh220,842,438 against a debt portfolio of Sh1 billion, including a loan of Sh600 million.
A special management audit of KMC unmasked claims of massive corruption in a report that was presented to Deputy President William Ruto (see separate story). It has also emerged that the exact number of parastatals in the country is not clear because of the conflicting numbers given to the committee by different government agencies.
From the information gathered so far, it is estimated that they could be in the range of between 200 to 300 although some are moribund and do not have permanent and disposable assets are not fully operational due to lack of funds and mismanagement.

“We have talked to the Auditor General and the Statutory Advisory Committee on Parastatals among others and the total figures of the parastatals we have in the country are varying, but could be in the range of 200-300 in number,” said Mohammed.
After collapsing of ministries from 44 to 18 in April, President Uhuru unveiled a 10-member team to review parastatal policies over two weeks ago. They are supposed to identify challenges and propose a new policy direction for State firms.

Key in its mandate is to audit qualification and capabilities of people at the boards and senior management levels, signaling an end to a tradition that has seen State corporations used to accommodate politically connected individuals. “President Kenyatta expects that the taskforce will have a transformational impact in infusing efficiency and innovation in the operations of parastatals,” said the statement.
Abdikadir, who as chairman of the Parliamentary Select Committee on Constitutional Review for the Tenth Parliament helped to shepherd the Constitution 2010 to fruition, heads the team. The Jubilee Government attempted to reduce the number of parastatals when it released the re-organised Government structure in May.
The number of the money-guzzling institutions was reduced. The ministry of Agriculture remains with 39, Education 44, Environment, Water and National Resources 22, Devolution 26, and Industrialisation with 20 parastatals.
Abdikadir says the task force was seeking to categorize and harmonise functions of all parastatals, ranging from those serving commercial interests, educational interests like universities and regulatory interests among others. He was optimistic that the committee will be through with the review within two months, after which they will compile a report that will help the current Government to streamline parastatals. Apart from Abdikadir (Executive Office of the President), others in the committee are Kamau Thugge (National Treasury), Mugo Kibati (Vision 2030), Korir Sing’oei (Deputy President’s Office), Stella Kilonzo (Private Sector), Angalie Mediratta (Private Sector), Isaac Awuondo (Commercial Bank of Africa), Nelson Kuria (CIC Group), Carole Kariuki (KEPSA) and Edward Burbidge (Burbidge Capital Ltd).
Yesterday, Kitui Central MP Makali Mulu, who has carried out consultancy work on Strategic Management, said the taskforce should first define roles and mandates, then come-up with clear governance structures, clear targets and ensure those retained are ran professionally.
The MP who has in the past done strategic planning for the former Kenya Anti- Corruption Commission, Kenya Bureau of Standards and the National Council for Administration of Justice says the task force should only retain parastatals that are critical and add value to the country.
“The task force should ensure 70 per cent of the budget in parastatals goes to development while 30 per cent to recurrent expenditure if these bodies have to be of economic value,” added Mr Mulu.
Mars Group Chief Executive Officer, Mwalimu Mati, had earlier said given the poor performance of most parastatals over the years due to corruption and mismanagement, expectations are high and that solutions must come from the task force.
According to Mati, mismanagement partly due to the executive’s absolute discretion on who should be appointed to head state firms remains a challenge that should be addressed.