Kenya, Tanzania renew push to sell loss-making state firms
Kenya and Tanzania have renewed the push for sale of inefficient and loss-making parastatals, part of a plan to dodge a drain on the exchequer and tame revenue leakages.
These plans have been backed by the International Monetary Fund (IMF, which has raised concerns over underperforming state corporations.
Tanzania is pushing for performance in its business and service parastatals, with a plan to restructure institutions that have failed to achieve profit.
Treasury Registrar Nehemia Mchechu last week directed heads of public institutions to re-assess their performance and formulate succession plans that would help the government realise returns on its huge investments.
Mchechu issued the directive on the second day of his meeting with board chairpersons and CEOs of public agencies, institutions and other statutory corporations held in Dar es Salaam.
Inefficiencies
The latest move is informed by the inefficiencies and low contribution of public institutions to Tanzania’s GDP.
The Tanzania government owns 298 commercial and service provision parastatals worth Tsh70 trillion ($30 billion in investment.
The Treasury Registrar’s office is set to establish a national investment advisory board to advise the government on how best to invest then transform the management of public institutions and parastatals.
Tanzania had targeted to increase non-tax revenues from its business entities from Tsh637.64 billion ($271 million to Tsh1.2 trillion ($509 million by 2025.
Statistics show that between 2019 and 2021, a total of 236 entities contributed Tsh696 billion ($296 million.
The government has invested in 298 institutions, 248 of which are public agencies and the remaining 50 are operating through public-private partnerships.
Law changes
Kenya has amended its law to give powers to the National Treasury to carry out privatisation without approval of Parliament.
The new law gives the Cabinet Secretary for the National Treasury powers, in consultation with the Privatisation Authority, to determine which state assets are to be sold and the process.
On April 12, Kenya’s Prime Cabinet Secretary Musalia Mudavadi reiterated calls to restructure and where possible merge non-performing state corporations, raising fears of job losses among civil servants.
The Kenya government noted that of the 349 state enterprises, only five percent were remitting revenues to the exchequer yet 79 were supposed to be commercial enterprises.
Mudavadi said a majority of the enterprises were relying on funding from the state, which was “unacceptable”.
In October 2022 President William Ruto said at least 10 state-owned enterprises would be listed on the Nairobi Securities Exchange in the next 12 months to reinvigorate activities on the bourse.
Dissolution and merger
A Presidential Task Force on Parastatal Reforms had in October 2013 recommended the dissolution and merger of 75 state corporations, reducing their number to 187 from 262.
Former President Uhuru Kenyatta had directed that the recommendations be implemented in three months since only 51 state corporations were self-sustaining.
However, the programme hit a dead end, with sources hinting at lack of political will.
Last year, IMF recommended drastic reforms at Kenya’s financially-troubled state-owned enterprises, including Kenya Power and Kenya Airways.
Rwandan President Paul Kagame has also been pushing for sale of inefficient state enterprises following the creation of the Ministry of Public Investments and Privatisation. He has urged the new ministry to urgently work towards putting some of state corporations into private hands.
In Uganda, a Cabinet meeting chaired by President Yoweri Museveni in September 2018 agreed to dissolve some parastatals and merge others in reforms aimed at preventing duplication of roles and wastage of public resources.
Reporting by James Anyanzwa and Apolinari Tairo
