The country has over 450 parastatals or State-Owned Entities (SoEs), out of which are commercial and others are non-commercial. Parastatals are necessary for effective performance by the government because they are responsible for certain elements of public service and delivery. To illustrate the power of parastatals and SoEs, their share in the top 500 global firms has tripled in the last two decades, and they are strategically positioned in sectors like energy, mining, essential infrastructure, Technology and finance. The public sector has invested heavily in the SoE’s and parastatals where at the end of 2022, it had invested over 11 percent of the global market capitalization of listed SoE’s, amounting to over $10.6 trillion, with some cases where the public sector has invested over 30 percent in listed firms’ equity. They play many roles including ensuring a level playing ground in the global markets, meeting national sustainability goals and therefore SoE’s play important economic development functions.
It has been reported that government has spent over Ksh. 3.7 trillion to loss-making SoE’s, and got a paltry 5 billion, signifying lots of wastage and lack of strategic leadership in some of these entities. This trend should be reversed because of five reasons. First, it advances the parastatal reforms report, which highlighted the need to merge some state-owned entities to make them more viable economically and functionally. Secondly, most of the parastatals have duplicating functions or are not living up to their mandates/functions leading to mismanagement, misappropriation of funds and over- emphasis on ancillary services at the expense of their core mandate. Thirdly, many parastatals have not keenly followed good corporate governance, forward thinking leadership and embracing the Key Performance Indicators (KPI’s) to increase ability to effectively offer public services, provide good societal outcomes (innovation, creation of jobs and high contribution to GDP). Fourthly, parastatals should be at the forefront of utilizing locally available resources, including finances and talents through strategic investments including adoption of Public Private Partnerships (PPPs).
Fifth, parastatals are influential growth sources, and hence are vital for future economic freedoms of any country. World Bank examined over 76,000 state owned entities in over 91 countries globally and found out that their contribution to these countries Gross Domestic Product (GDP) averaged 17 percent of GDP on average. The 2023 Economic Survey 2023 showed that our GDP grew by 4.8 percent in 2022, and if our SoE’s could even add a 7 percentage GDP growth, we would hit 11.48 percent, hence pass the Kenya Vision 2030 GDP target per year of 10 percent. Dr. Mutegi Giti, Urban management, Public Private Partnerships (PPPs) & Environment Specialist. mutegigiti@gmail.com, @danielgiti.
Dr. Daniel Mutegi Giti 