Some 18 State Corporations are set to be re-registered as public limited companies (PLCs) under the Companies Act, if Parliament approves a proposed law that would shake up the financial and governance structures of the public agencies.
Government proposals tabled in Parliament by Majority Leader Kimani Ichung'wah said that the government-owned entities (GOEs) set to be registered as PLCs include the Kenya Ports Authority, Kenya Railways Corporation, Kenya Literature Bureau, Kenya Airports Authority, Agricultural Finance Corporation, Nyayo Tea Zones Development Corporation, and Commodities Fund.
Other GOEs set for re-registration in PLCs are the Kenya Post Office Savings Bank, Kenya Meat Commission, Kenya Fishing Industries Corporation, National Mining Corporation, Kenya Veterinary Vaccine Production Institute, Kenya Broadcasting Corporation, and National Cereals and Produce Board.
The Kenyatta International Convention Centre and Agricultural Development Corporation are also marked for re-registration as PLCs.
“The respective government-owned enterprises provided in the Second schedule shall, in exercise of the powers conferred by Section 30 of the Interpretation and General Provisions Act, incorporate in their names a public limited liability company under the provisions of the Companies Act,” Mr Ichung'wah said in a Bill to Parliament.
Re-registration as PLCs would unlock avenues for the firms to raise capital. A PLC registration allows the public to buy and sell a company’s shares on a stock exchange, offering limited liability to its shareholders.
This means that their personal assets are separate from the company's debts. A public limited company (PLC) is a type of public company that's allowed to offer its shares to the public.
The proposals by Mr chung'wah further showed that the Treasury and the Cabinet will retain the final say on the creation of new State corporations.
The procedure of creating a State corporation will start with line ministries sending a proposal to the Treasury, accompanied by a business case to justify the creation of a new Government Owned Enterprise (GEO).
“The business case in subsection (3)(a) shall be informed by a feasibility assessment report for the purpose of ascertaining the financial and economic viability of establishing the proposed government-owned entity; whether or not the proposed activity cannot be achieved through an existing government-owned enterprise or through the private sector,” the proposed law partly stated.
The proposal would also include the functions and objectives of the targeted GEO, how it will affect the government’s financial position, and the shareholding of the State. If the Treasury is convinced of the viability of a suggested GEO, it would forward to the proposal to the Cabinet for consideration and approval.
“Upon approval of the establishment of the government-owned enterprise by the Cabinet, the necessary establishment process shall be undertaken by the Cabinet Secretary for the National Treasury,” Mr Ichung'wah said in a Bill to the National Assembly.
All newly created GEOs would be operated as commercial entities with a focus on profits, self-financing, and with accountability to the public through the Treasury.
The proposals through Mr Ichung'wah could, however, fall short of the expectations of the State Corporations Advisory Committee (SCAC), which had been pushing for MPs and Cabinet Secretaries (CSs) to be barred from initiating the creation of new corporations.
The SCAC had last year accused MPs and CSs of abusing laws allowing them to establish State Corporations through Acts of Parliament and the Companies Act, coming up with dozens of corporations that have ended up bleeding public coffers.
The committee, whose main mandate is to recommend required reforms for State Corporations to the President, raises concerns that MPs and CSs are introducing new corporations just for the sake of it and for personal interests, at the expense of taxpayers who end up bearing the burden of the loss-making entities.
Data by SCAC shows that the national government had 349 State corporations by 2024, out of which 230 had been established through Acts of Parliament, 65 had been under the Companies Act, and 54 through legal notices and regulations, also anchored on Acts of Parliament.
