At least seven parastatals have joined a growing list of more than 16 cash-strapped State-owned corporations that have been declared insolvent by the Auditor General this year, adding to the burden of keeping the once profitable entities afloat.
The Kenya Bureau of Standards (Kebs) is the latest to join the list of entities in the red, after it sank into a Sh1.5 billion budget deficit in the year ended June 2021.
Kebs now joins the ranks of the National Museums of Kenya (NMK), the National Oil Corporation of Kenya, the Kenya Post Office Savings Bank (Postbank), the Postal Corporation of Kenya, Nzoia Sugar and the National Environment Management Authority, among others.
This is set to reignite the debate on the need for government to get out of business even as pressure mounts from the International Monetary Fund to implement far-reaching reforms targeting State-owned entities.
In a report on audited accounts tabled in Parliament a fortnight ago, Auditor-General Nancy Gathungu said NMK’s liabilities for 2020/21 outweighed assets at Sh276.85 million against Sh137.68 million respectively. This translated to a negative working capital of Sh139.17 million.
National Oil, which was declared insolvent last week, increased its losses to Sh4.03 billion during the financial year to June 2021, up from Sh3.06 billion booked in the previous year.
In the same period, its current liabilities of Sh8.95 billion exceeded the current assets of Sh2.65 billion.
“The corporation is, therefore, technically insolvent and its continued existence is dependent upon the financial support of the government, bankers, and its creditors unless the management improves its performance to reduce reliance on financial support from the shareholders,” said Ms Gathungu.
Postbank was flagged in November after it emerged that customer savings and deposits of Sh21.8 million exceeded the lender’s total assets of Sh14.5 billion while PCK’s red alert came out in April.
Nzoia Sugar’s piling debt which hit Sh53.2 billion as of July exceeded the company’s asset base of Sh1.6 billion prompting Ms Gathungu to declare that the firm’s acute financial liabilities cannot be redeemed.
In February, the Auditor-General reported that Nema was operating at a Sh63 million loss in a situation that increased the agency’s budget shortfall to Sh78 million.
The Authority’s current liabilities at the time were valued at Sh1.28 billion against current assets of Sh1.07 billion.
“This indicates that the authority is technically insolvent. In the circumstance, sustainability of the authority’s operations is dependent upon the financial support of the government and creditors,” declared Ms Gathungu.
Last year, the auditor flagged another batch of State agencies that included the Pyrethrum Processing Company of Kenya, Jomo Kenyatta University of Agriculture and Technology Enterprises Limited, Moi University, Kenyatta University and Kenya Power.
Others that have been on the auditor’s radar in recent years are Portland Cement, Kenya Meat Commission, University of Nairobi, Kenya Wildlife Service and Kenya Broadcasting Corporation.
The deterioration in financial performance and operational efficiency of State corporations has in the recent past weighed heavily on public finances through increased reliance on budgetary support from the government.
This comes in the form of grants, subsidies, loans and debt guarantees.
A presidential task force in 2013 recommended the scrapping or merging of poorly performing State-owned enterprises to ease the burden on taxpayers but the government has been reluctant to push through the reforms.
In its report, the Presidential Taskforce on Parastatal Reforms (PTPRs) recommended that parastatals be reduced from 262 to 187 of which a total of 42 – mostly in the agricultural sector – would be dissolved, 28 merged and 22 others have their roles transferred.
Some 21 agencies were to be reclassified as professional bodies.
In June 2019, former Auditor General Edward Ouko revealed that Kenyan taxpayers could lose more than Ksh30 billion in suspicious loans borrowed by State corporations and reported differently in official government records.
