Kenya’s Cabinet recently approved plans to dissolve or merge several state corporations, consequently raising several legal and policy considerations. This action, undertaken pursuant to a budgetary support program with the International Monetary Fund (IMF) and the World Bank, necessitates analysis within the framework of Kenyan law, including the Constitution of Kenya, 2010, the State Corporations Act (Cap. 446), and relevant public service regulations.
The Cabinet noted that some state corporations would be dissolved, some would be merged where there are overlapping functions, while others would be restructured into a far-reaching plan with other state corporations. Of the ones facing dissolution and restructuring, sixteen (16) of these state corporations will either be sold off or face liquidation.
This follows state corporations being in a poor financial health, with their liabilities, including debts, exceeding their assets, and as such, placing Kenya at a high risk of defaulting on its debt. The legality of such divestiture must be examined in light of the State Corporations Act, specifically regarding procedures for dissolution and liquidation, and adherence to principles of fair administrative action as articulated in Article 47 of the Constitution of Kenya.
The restructuring process requires a clearly defined legal framework, outlining timelines, procedures, and criteria for each action. This roadmap must address asset and liability management, employee transition protocols, and measures to minimize service disruptions. Transparency and stakeholder consultation are crucial to ensuring compliance with Article 10 of the Constitution, which enshrines national values and principles of governance, including participation of the people in the making of decisions that affect them.
Furthermore, the potential involvement of the private sector in previously state-run corporations raises complex legal issues, including procurement regulations under the Public Procurement and Asset Disposal Act, 2015. The transfer of assets and liabilities to private entities must be conducted transparently and in accordance with established legal procedures to avoid potential legal risks.
It is important to note that there is a risk for potential service disruptions, as exemplified by the current Social Health Insurance Fund (SHIF) challenges. This highlights the need for robust legal and administrative frameworks governing such transitions. Clear legal guidelines regarding data protection, access to information, and continuity of service delivery are essential to mitigate potential legal risks.
As such, it is worth mentioning that with these reforms, there is a likelihood that a person’s documents and relevant documents may be affected, necessitating application for the new and latest documents. To this end, it is advisable to look out for any documentation that requires replacement and proactively obtain updated versions of these documents as soon as they become available.
The long-term success of this restructuring hinges on addressing the root causes of the parastatals’ financial difficulties, i.e., corruption and inefficiency. Strengthening governance structures, promoting accountability, and enforcing existing anti-corruption legislation are crucial for long-term fiscal sustainability. Ultimately, the restructuring of Kenya’s state corporations represents a significant undertaking with the potential to reshape the country’s economic landscape. Whether this move will lead to a more efficient and sustainable public sector or exacerbate existing challenges remains to be seen.