Lost in translation: Kenya's endless dance with parastatals and the IMF expectations

Eyes always light up and the national pulse beats harder when the government deigns to broach the sensitive subject of parastatal reform, and last week’s brief from this administration’s first Cabinet meeting of the year – unusually titled “Cabinet News” – was clearly no exception.

Don’t forget we have a long-standing “jobs for the boys (and girls)” tradition with state corporations (SCs); they are job allocation as job creation machines first, and technically, commercial and financially viable enterprises second. Think political reward, then economic and financial logic.

It follows that much of the ensuing hullaballoo, especially in the media, was about potential job losses at a time when many are struggling to survive a difficult economy.

Subsequent palliative noises from State House sought to calm matters – nobody will lose their job, everybody will be absorbed into main government. In question the timing of the reform announcement, keen observers were quick to refer to the structural benchmarks that keep us on an International Monetary Fund (IMF) programme (and IMF money).  The current programme ending in April 2025 has a few we must deliver on.

Beyond restructuring Kenya Airways as a special case, there’s an updated inventory and new classification of SCs; a new SCs ownership policy; financial evaluation of 50 SCs for the 2022/23 fiscal year; and most “bigly” (to use Trump language), “a comprehensive assessment of the national government’s continued involvement or investment in, or funding of, SCs and government-linked corporations, including specific recommendations for privatisation and/or divestment, as well as for mergers, liquidations or dissolutions, transfers to counties and reversions to government departments…proposed solutions for the main legal and operational challenges and bottlenecks to implement the recommendations, and… a time-bound action plan for execution”. 

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Once we digest this word salad spiced with technical jargon, the short story from the announcement seems to say we are headed into another IMF programme after April.

Of course, by then all we will have is an action plan, not action, and it is more than likely that our current factory settings of broad-based government are inconsistent with serious parastatal reform before 2027. Indeed, this administration has been particularly muddled on this subject, but let’s sip our morning coffee, put our data hats on and play with some broad numbers today.

To begin, we are told that Treasury assessed 271 SCs, excluding those earmarked for privatisation. Since we also know that 25 SCs are to be privatised, that makes the total 296.

In specifics, 42 SCs will  be merged into 20, 9 will be dissolved, 16 of private sector orientation will be divested from or dissolved, six will be restructured and four funds, 12 professional bodies and one welfare society will be declassified. Does declassified mean defunded?

What about the other 181 SCs? This is where we have trouble with incomplete information. To repeat for the umpteenth time, where is the holistic public enterprise reform and privatisation framework that covers all SCs? Isn’t this precisely what we effectively committed to the IMF as a benchmark?

More intriguingly, there appears to have been a change in thinking since the last time we had a parastatal reform announcement. In April/May 2024, we had a slightly different reform menu. 42 SCs would be merged, 25 would be dissolved, 25 would be privatised and 158 were classified as strategic. Except that last year, we were only talking about a total of 249 SCs.  What has changed?

The maze

Unfortunately, it is this incoherence that points to a lack of political will regarding parastatal reform.

If we recall, this administration promised an initial list of 35, then 100 SC candidates for privatisation. Then a list of 11 was published, but this was replaced by the current list of 25.  In case we missed it, the previous administration closed with a privatisation candidate list of 26.

Space doesn’t allow a detailed examination of these lists, so let’s stick with the broad numbers.

When we go back in history, the common reference is often the previous administration’s 2013 Presidential Task Force Report on Parastatal Reforms. Let’s go back further to the 1992/1998 Policy Paper on Public Enterprise Reform and Privatisation.

This paper split the 240 SCs at the time into 33 strategic SCs in which government ownership would be retained and reformed (with five selected for deep restructuring), and 207 non-strategic SCs were candidates for privatisation. 45 of the 207 non-strategic SCs were selected for the first privatisation phase; the other 162 were targeted for “performance improvement” prior to subsequent privatisation.  The records tell us that roughly 160 SCs were privatized between 1992 and 2002, and 6 were privatised between 2002 and 2008. This would suggest that we were left with 70-80 SCs right?

Well, by the time of the 2013 report, we had 262 SCs. The proposal was to reduce them to 187 in four new classifications: 55 SCs split between 34 purely commercial and 21 commercial, but strategic; and 132 state agencies comprising 62 executive agencies, 25 independent regulatory bodies and 45 research institutions, public universities and tertiary education institutions.  That report remained on the shelves, neither translated into policy or strategy, nor actioned. 

Why can’t we keep count of SCs? A 2021 World Bank Review identified the same 262 SCs; which they classified as 247 majority-owned SCs and 15 SCs in which government holds minority interests. One department in the National Treasury reports on 247 SCs and 14 minority interests (for a total of 261), while another reports on 199 SCs and semi-autonomous government agencies and 72 universities and other learning institutions (total - 271).  In the same 2021, Treasury’s statement of fiscal risks spoke to “248 state corporations - 46 commercial enterprises, 201 non-commercial entities” (and one more?). It gets better with IMF estimates.

Little observed by many, the IMF has over the years sought to develop some semblance of a public sector balance sheet for Kenya. 

In a 2016 Fiscal Transparency Evaluation, using 2012/13 data, they counted 216 out of 419 public institutional units at the time. 

In a subsequent 2020 evaluation, using 2016/17 data, the count was up to 353 out of 519 units at the time.  Most recently in 2024 using 2023 data the count was 475 out of 661 units.  So the mystery deepens!

Their work isn’t about counting units, it’s about our negative net worth public sector balance sheet. One point the IMF makes in its latest balance sheet work is our debt might be understated.

While we ponder these numbers and even tear them apart, it’s worth pondering whether we really want to own our parastatal reform agenda, or if we are happy ticking IMF boxes.

It is difficult to envisage the necessary will for this effort when the fact that basic numbers don’t even add up suggests that we either cannot, will not or do not want to count our government units!