Govt to Reward Performing Parastatal CEOs, Threatens Shutdown of Underperforming Agencies

The government has threatened to shut down all public organisations that are underperforming, risking thousands of jobs. This follows a cabinet decision to dissolve and merge some parastatals, a decision that is estimated to affect at least 5,000 civil servants.

While addressing the media at Kenya Pipeline Corporation (KPC) headquarters on Friday, Eliud Owalo, the Deputy Chief of Staff in charge of performance and delivery management in the Executive Office of the President, warned the government is not joking.

Owalo said the government will begin awarding best-performing parastatal Chief Executive Officers (CEOs) and employees with more funding, among other things, while those that are underperforming will be allowed to “die a natural death.”

“Everybody, virtually everybody in the public service, is going to be held accountable. Moving forward, we also want to tie performance evaluation or performance contracting to reward management, to the extent that those institutions that excel in performance or exceed in performance the set targets will be rewarded commensurately through the necessary support, including but not limited to additional funding by the exchequer,” asserted Owalo.

He went on to warn, “Those institutions that are not performing will face sanctions, including individuals in those organisations. And organisations that are perpetually non-performers should be allowed to die their natural deaths.”

Owalo was speaking during the ongoing performance evaluation for Ministries, Departments, and Agencies (MDAs) for the 2023-2024 fiscal year at KPC. 

His remarks come as it was revealed KPC remitted Ksh7 billion to the National Treasury for the fiscal year ending June 30, 2024, marking a Ksh2 billion increase from 2023.

KPC Managing Director Joe Sang stated that the corporation registered a 20 per cent growth in profit before tax, rising from Ksh7.6 billion in the previous year to Ksh10.05 billion in the year under review.

“In the year under review, we achieved a 20 per cent growth in profit before tax, reaching Ksh10.05 billion compared to Ksh7.6 billion the previous year. We have been able to pay the National Treasury dividends to the tune of Ksh7 billion,” said Sang.

In March 2024, KPC remitted Ksh5 billion to the Treasury, attributed to increased sales amidst the weakening shilling against major currencies. The profit growth for KPC comes amid a renewed push to streamline the operations in the state corporations to stem the cash bleeding.

Already, the Cabinet on January 21 approved a set of reforms that include the dissolution of nine state corporations and the merger of 42 others into 20 entities.

The government said the reforms targeted state corporations to enhance efficiency and reduce redundancy. However, KPC was among state corporations that were not named in the mergers and dissolutions, and the government says KPC remains the crucial parastatal.

“KPC is an integral player in the Kenyan economy in the energy sector. We view KPC as one of those integral cogs in the delivery of our Bottom-Up Economic Transformation Agenda,” Eliud Owalo said.

Last year, President William Ruto directed state corporations to remit 80 per cent of their profits after tax to the Treasury in a bid to raise more revenues for the government.

President Ruto, in a renewed effort to bolster government revenues, declared, “The time is up for loss-making parastatals.”