Uhuru’s parastatal salaries cut order faces legal hurdles

President Uhuru Kenyatta’s ultimatum to parastatal chiefs to take a 20 per cent pay cut or leave is set for implementation hurdles revolving around whether State corporation workers are public officers.

The order by President Kenyatta Monday appeared to contradict an opinion given last year by Attorney-General Githu Muigai who said that parastatal employees are not public officers.

“A person who is an employee of a State corporation or a member of the board or council of a State corporation cannot be considered to be employed in the public service because a State corporation is not a State organ by virtue of not having been established under the Constitution,” Prof Muigai said in a letter to the Secretary of the State Corporations Advisory Committee.

The President Monday ordered all heads of parastatals to take a pay cut or seek alternative employment in an unprecedented my-way-or-the highway approach to containing the wage bill that has ballooned to Sh448 billion.  

“Today I say this; parastatal chiefs will conform to what the Executive has done and we expect that they will take an equivalent 20 per cent pay cut,” said President Kenyatta during the start of a National wage Bill Dialogue at the Kenyatta International Convention Center in Nairobi.

Cost cutting

The wage bill, which is about 13 per cent of the country’s GDP, has seen the government resort to unprecedented cost-cutting measures, the latest being the wage cuts for top officials.

President Kenyatta announced last week that he and his deputy William Ruto, and Cabinet and principal secretaries would have their salaries slashed by 20 per cent and 10 per cent respectively. The executive wage cuts would amount to a saving of Sh4.87 million per month.

READ: Uhuru, Ruto to take 20pc pay cut in bid to tame huge wage bill

The Salaries and Remuneration Commission chairperson Sarah Serem, however, said the executive pay cuts were a bold step towards taming the “unsustainable” wage. She announced that she would take a 15 per cent cut on sitting allowances.

The voluntary pay cuts have turned attention to the rank and file, teachers, lecturers, national and county governments who have reacted variously to the prospects of their salaries being reduced.

The order on parastatals could also be ambiguous given that there are three classes of parastatals that are funded differently.

Parastatals like the Communications Commission of Kenya (CCK), the National Hospital Insurance Fund (NHIF) and the Energy Regulatory Commission (ERC) do not draw any money directly from the Consolidated Fund.

They finance themselves – including paying employees and boards of directors — through fees chargeable on the public.

Parastatals like Kenya Power, Kenya Ports Authority and Kenya Cooperative Creameries finance themselves from their operations and the revenue they accumulate, without any support from government.

Others like Kenyatta and Moi referral hospitals and public universities rely on funds from the government to finance their operations. The President’s decree, however, seems to imply that all these administrators are supposed to have a downward review of their pay.

A presidential taskforce instituted last year to advise on parastatal reforms noted that not all of them relied on the Treasury for their upkeep.

 “Out of about 188 State corporations that responded, 92 pay salaries from internally generated funds while 96 pay salaries from funds allocated by the Treasury,” the taskforce’s report released last November states.

However, even parastatals that are self-sustaining are supposed to be run prudently, returning a profit for the Treasury, which has invested in them.

The report showed that State corporations contributed11.64 per cent of GDP 2011based on internally generated income but their contribution to job creation was declining.

Despite the potential hurdles, President Kenyatta appeared keen to push through with the cuts.

“Failure to do so [take the pay cut], I assure you there are many Kenyans willing to take up those jobs at a lower rate,” Mr Kenyatta said. “And those who resist can go to court, even if they are awarded, it is cheaper for us to pay them off and get other people.”

Free maternity

The government has persistently described the wage bill as unsustainable given other capital-intensive projects like the free maternity care and billions of shillings needed to complete key infrastructure projects.

The government has announced a freeze on all salary adjustments in the civil service and restricted official travel by ministers to economy class.

Public staff records are also being audited to get rid of ghost workers starting next year. Up to 100,000 heads are targeted in a retrenchment that will cost Sh2 billion.

Devolution and Planning Secretary Anne Waiguru said yesterday salaries of all cadres of civil servants would be tied to performance, not inflation, as is the norm. The shift would mean that civil servants do not get automatic annual pay reviews.

“We have seen a lot of money go to training civil servants and statistics show that this has yielded little results,” said Mrs Waiguru. “We need to either rethink this spending or restructure our training programmes.”

Official data mentioned at the forum showed that productivity in the civil service was at 30 per cent, suggesting that 70 per cent of the wage bill or Sh315 billion goes down the drain.

Analysts have proposed that the government rationalises its operations and starts leasing and outsourcing non-essential services like office space and vehicle fleets to the private sector, releasing money for priority investments.

While some public officials have supported the President’s move, and pledged to also take salary cuts, unions like the Kenya National Union of Teachers (Knut) said their members would not countenance the move.

“We are not ready to take a pay cut,” said William Sossion, the Knut secretary-general. “If anything teachers shall be asking for a pay rise.”