How elements of ‘deep state’ are embedded in the parastatal sector

Police officers keep vigil at Kenya Railways station in Nairobi. The presidential taskforce on parastatal reforms found that the Kenya Railways Corporation was a shell of its former self. [Photo: File, Standard]

It is an open secret that state corporations are a crucial form of patronage, a conduit through which votes are bought, political support marshalled, tenders given, and ‘entrepreneurs’ built up in this country.

The recently launched Standard Gauge Railway (SGR) heralded the final, last breath of the 100-year old metre gauge railway, which had been slowly dying for decades.

One of the first orders of business when Uhuru Kenyatta took office in 2013 was to set up a presidential taskforce on parastatal reforms. The Kenya Railways Corporation (KRC), a shell of its former self, was, and still is, the archetype of this much-needed reform.

That presidential taskforce report described the woes of Kenya Railways delicately: “The lack of strategic vision of what this entity could and should do has led to selection of sub-optimal choices that have cascaded negative effects into the wider economy, beyond the railways itself.”

Kenya has 187 parastatals, the data shows. These comprise 55 commercial state corporations, 62 executive agencies, 25 independent regulatory agencies and 45 higher education, research and/or training institutions.

State corporations are huge employers, making up almost half of the mainstream civil service, according to a 2016 report by the National Cohesion and Integration Commission (NCIC).

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As of last year, Kenya Power was the biggest employer among parastatals with over 10,000 employees. Kenya Ports Authority, Kenya Forest Service, Kenya Wildlife Service, Kenyatta National Hospital and the Kenya Revenue Authority are also huge organisations with over 4,000 employees each.

Still, there are some state corporations that have very few employees. The Policy Holders Compensation Fund has only four employees, the NCIC report found. Others include the Industrial Property Tribunal, the Kenya National Assurance and the Nairobi Centre for International Arbitration that have seven employees or less.

The taskforce found numerous overlapping functions, conflicting laws and duplicated provisions that have led to confusion in interpretation and application.

For example, just in the tourism sector alone, there is the Tourism Fund, Tourism Regulatory Authority, Kenya Tourist Board, Tourism Research Institute, Kenya Tourist Finance Corporation, Kenya Utalii College and Brand Kenya Board.

Dissolution

The report recommended the merging and dissolution of most of these organisations, in tourism for example with the research functions going to Kenya Utalii College and investment, promotion and marketing all under a single, cross-sector investment authority, which they proposed to be named the Kenya Investment Corporation.

They also recommended the dissolution of most, if not all, agricultural produce boards such as the Tea Board of Kenya, Coffee Board of Kenya, Coffee Development Authority, Kenya Sugar Board, Pyrethrum Regulatory Authority and Kenya Coconut Development Authority, whose functions ought to either be transferred to the counties under devolution, or merged under one body named the Agriculture, Fisheries and Food Authority.

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Some merging and consolidation has been done; in 2014, 38 agencies were consolidated into 14 ones, in a move intended to reduce the government wage bill.

But the political function of parastatals cannot be understated. It is an open secret that state corporations are a crucial form of patronage, a conduit through which votes are bought, political support marshalled, tenders given, and ‘entrepreneurs’ built up in this country.

It is worth noting that during President Uhuru Kenyatta’s Jubilee campaign fundraiser last week held at Safari Park hotel, some of the attendees were chairs of various parastatal boards and state agencies – a clear conflict of interest. The dinner collected anything between Sh500 million and Sh1 billion that night, going by media reports.

The technical committee for the re-election fundraising, operating under the umbrella of the Friends of Jubilee Foundation reportedly includes Commissioner-General of Kenya Revenue Authority John Njiraini, Energy Principal Secretary Joseph Njoroge, and Kenya Leather Council Development board chair Titus Ibui. Even dinner emcees Caroline Mutoko and Julie Gichuru serve on parastatal boards.

Ms Mutoko is on the board of Kenya Institute of Mass Communication, and Ms Gichuru on the Brand Kenya board. The two were appointed to the respective boards by the President in 2015.

But more than that, the depth and breadth of Kenya’s parastatal sector suggests that there is a kind of “deep state” that actually makes up the bulk of the Kenyan government apparatus, which is largely not scrutinised by the Parliament or the media.

Hybrid association

A “deep state” is described as a hybrid association of elements of government, finance and industry that is effectively able to govern a country without reference to the consent of the governed as expressed through the formal political process. In Kenya, elements of that “deep state” are embedded in the behemoth that is the parastatal sector.

Public funds that goes to the counties, or to constituencies through the Constituency Development Fund (CDF) is often the subject of investigations, scrutiny and oversight.

But there is a whole other “black hole” of public money that goes to numerous parastatals — that do very little work, even whose mandate, let alone effectiveness, is opaque to the general public.

That presidential taskforce found that as of 2013, state corporations had a wage bill of over Sh131 billion, of which the National Treasury finances nearly half (46 per cent, or Sh60.3 billion).

As a group, 92 corporations pay salaries from internally generated funds while 96 pay salaries from funds allocated by the Treasury. Out of the 187 corporations, only 51 did not receive government budgetary support.

In addition, and especially for the large parastatals, one parastatal chief exercises more influence on job hiring and promotion than a principal secretary does, given that ministries do not actually hire their own employees.

‘White elephant’ projects

The taskforce report described the missed opportunities for many other state-owned corporations, including the Numerical Machining Complex (NMC), previously known as the Nyayo Motor Corporation Limited.

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Founded in 1986 with the University of Nairobi and Kenya Railways as its founding shareholders, the corporation is remembered for producing Kenya’s “first car.”

That prototype, the Nyayo Pioneer, was launched to great fanfare in 1990, but only covered a few metres before sputtering to an undignified stop, thus joining a long list of ‘white elephant’ projects associated with former president Daniel arap Moi.

Now, NMC’s machines lie idle, and it has been unable to meet orders for the machine parts it can manufacture including gear teeth, brake blocks, stone cutter machines and hydraulic presses.

Contrast NMC’s fate to that of a similar corporation set up in Malaysia in 1983, Perusahaan Otomobil Nasional Berhad, known as Proton. Like NMC, the vehicle manufacturer was fully government funded, but was able to collaborate with Mitsubishi Motors of Japan to meet local Malaysian demand for vehicles. By 2012, it was producing 130,000 vehicles a year, accounting for 21 per cent of Malaysia’s local market share for cars. NMC’s annual output? Zero.

Missed opportunity

Kenya Meat Commission is another missed opportunity, the parastatal report found. Kenya’s arid and semi-arid lands account for 80 per cent of the country’s land area, and are dominated by pastoralist communities who hold half of Kenya’s total livestock population, valued at 10 per cent of the national GDP.

The potential is massive, but the livestock economy from the region remains poorly integrated into the market economy, deepening cycles of poverty and exclusion.

In fact, data from the Food and Agricultural Organisation (FAO) shows that despite its “war-torn” reputation, neighbouring Somalia is doing better in managing its livestock economy.Somalia has become a world leader in livestock exports, shipping a record 5 million animals to the Arabian Peninsula in 2014.

The export data compiled by FAO showed that Somalia exported 4.6 million goats and sheep, 340,000 cattle and 77,000 camels in 2014, worth an estimated $360 million and contributing 40 per cent to the country’s GDP.

Still, not all Kenya’s attempts as parastatal reform have been dismal. Safaricom, Kenya Airways and the financial sector regulators represent notable successes, where underperforming government entities were able to attract strategic or anchor investors, who then turned the organisations around and delivered much more value for money – Kenya Airways’ recent woes notwithstanding.

Kenya’s turning around of the fortunes of state corporations will be key in the effort to unlocking shareholder value for the Kenyan public going forward, the taskforce report found. But as politics takes centre state, the results remain to be seen.

The is a writer, journalist and executive editor of data visualiser and explainer site Africapedia.com, and a 2018 Nieman fellow at Harvard University.

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