Job losses loom in new parastatal merger plan

Job losses are looming in State plans to merge parastatals, a move that will see upto ten parastatals collapsed into one in far reaching proposals that will cut extra fat and save taxpayers billions of shillings.

Speaking at the SMEs Conference and Expo in Nairobi yesterday where he revealed a raft of measures aimed at supporting small businesses, Treasury Secretary Ukur Yatani said Kenya has close to 400 State agencies, half of them being regulatory bodies.

“There are a number of parastatals doing regulatory work, some play duplicating roles. We are now trying to look for ways on how to harmonise all these laws so that all of them will either come under one or reduced, in some cases ten of them can comfortably be put under one,” Mr Yatani said.

This could lead to some jobs being declared redundant in a plan aimed at increasing efficiency and reducing the public sector wage bill.

Official data show Kenya had 134, 200 workers employed by State-backed firms in 2018, down from 157, 000 in 2017.

The parastatal workers’ wage bill stood at Sh154.7 billion in 2018, accounting for a quarter of the public sector wage bill at Sh604 billion.

The two-day exhibition, which was convened by the Nation Media Group (NMG) and the Kenya National Chamber of Commerce and Industry (KNCCI) with more than 80 SMEs in attendance, ended Tuesday.

SMEs raised various concerns that are dragging them down and various Cabinet secretaries present gave commitments on how they would be addressed. Some of the running complaints included access to finance, duplicity of taxes and the high costs of doing business in Kenya.

Others were corruption, unnecessary roadblocks by county governments and the pending bills nightmare.

Mr Yatani said the government has now weaponised and personalised the fight against pending bills at all levels of government in efforts to clear the debt backlog that is hurting suppliers.

He said officials who will not co-operate are now going to be personally responsible for disobeying government directives on the matter.

“At Treasury, we have gone beyond dealing with the ministry or dealing with the department or the county. We have weaponised the fight against pending bills and we have actually personalised it,” Mr Yatani said.

Pending bills

“If it is the governor, we tell him this is not about the county but about you. If it is the various accounting officers in the ministries, we are no longer dealing with the ministry. We are dealing with that accounting officer who must have a responsibility,” he said.

The Treasury CS said due to this pressure ministries had reduced the pending bills from Sh14.5 billion in ministries by at end of the last financial year in June to Sh2 billion in December.

He said counties had about Sh85 billion in pending bills out of which Sh35 billion has been paid from the Sh55 billion that has been verified.

He also said the government is cutting down on its expenditure to reduce unnecessary borrowing, which is putting its expenditure plans under pressure.

“There have been deliberate steps to rein in on fiscal indiscipline. Borrowing is not free. We want to borrow sustainably and modestly,” Mr Yatani said.

He said the government will harmonise fees such as cess that have raised the cost of doing business across the counties so that a trader only pays once at the point of exit and is not charged again as they transport the goods across counties.

At the expo, SMEs raised concerns over the introduction of new taxes that were making it hard for them to do any meaningful business.

The latest tax is the controversial three percent Turnover Tax (TOT) targeting 2.5 million businesses in the informal sector. It kicked in on January 1, 2020. A turnover tax is charged on total sales and does not factor in other costs associated with running a business.

It is one of the easiest taxes for any tax authority to levy given that only one calculation is required to know how much tax one must pay.

Tax burden

On the question of taxes, Mr Yatani said the government must tax its citizens proportionately and SMEs should be the last segment that is taxed.

“If they must be taxed, it should be comfortable, affordable and must be within their reach. Because our role is to make sure that the private sector grows, the SME grows,” he said.

Mr Yatani said SMEs and the private sector by extension are the engine of growth and development.

“The role of government is to provide the necessary environment for businesses to thrive,” he said.

On his part, Agriculture Secretary Peter Munya said though the government was looking at resolving the tax burden on SMEs, the biggest problem was the multiple licences paid to numerous agencies both at the national and the county governments that were hurting the sector most.

“The biggest challenge for SMEs is not the traditional taxes even though that is also being looked into. It is the multiple licences and fees that they pay,” Mr Munya said.

“They may not reflect in the traditional licences but the taxes that you pay in piecemeal to county governments and other agencies is what makes the burden very heavy for SMEs,” he noted.

He added that the new SME policy would help deal with most of the challenges facing the sector.

One of the initiatives already in the pipeline is buy Kenya build Kenya initiative that will see more local players benefit from government tenders.

Mr Munya said a list of products that are supposed to be exclusively sourced locally has already been finalised and adopted by cabinet. He said what is left is just the gazzettment process.

He said there are about 169 products already on the list and more products will come up.