Government Warns of Possible Shutdowns for Underperforming State Agencies
The government has issued a stern warning that it will shut down all state agencies that fail to perform, putting thousands of jobs at risk.
This follows a Cabinet decision to either dissolve or merge certain parastatals in an effort to streamline operations and improve efficiency. At least 5,000 civil servants are expected to be affected by this move.
Speaking at the Kenya Pipeline Corporation (KPC) headquarters on Friday, Eliud Owalo, the Deputy Chief of Staff in charge of performance and delivery management at the Executive Office of the President, made it clear that the government is serious about holding public institutions accountable.
Owalo announced that moving forward, parastatal Chief Executive Officers (CEOs) and employees who demonstrate excellent performance will be rewarded with increased funding and other incentives. However, institutions that consistently underperform will face strict consequences, including being shut down.
“Every individual in the public sector will be held accountable. From now on, we will tie performance evaluations and performance contracts directly to rewards.
Institutions that exceed their set targets will receive additional financial support from the government to help them grow and deliver better services,” Owalo stated.
He further warned, “On the other hand, those institutions that consistently fail to meet expectations will face disciplinary actions, and their leadership will be held responsible. If an organization continuously fails to perform, then it should be allowed to collapse.”
Owalo made these remarks during the ongoing performance evaluation for Ministries, Departments, and Agencies (MDAs) for the 2023-2024 financial year, held at KPC.
His comments came at a time when KPC announced that it had remitted Ksh7 billion to the National Treasury for the financial year ending June 30, 2024. This marked a significant increase of Ksh2 billion from the previous year’s remittance.
KPC Managing Director Joe Sang revealed that the corporation had experienced a 20 per cent increase in profit before tax, rising from Ksh7.6 billion in the previous financial year to Ksh10.05 billion in the current review period.
“In the past year, we achieved a 20 per cent growth in profit before tax, reaching Ksh10.05 billion compared to Ksh7.6 billion in the previous year. As a result, we have managed to remit Ksh7 billion in dividends to the National Treasury,” Sang announced.
In March 2024, KPC had already remitted Ksh5 billion to the Treasury, a move attributed to increased sales and the impact of a weakening shilling against major foreign currencies.
The improved financial performance comes amid a government initiative to streamline state corporations and reduce financial losses in non-performing entities.
On January 21, the Cabinet approved reforms targeting state corporations, which include the dissolution of nine entities and the merger of 42 others into 20 organizations. The objective of these reforms is to eliminate inefficiencies and cut redundancy in government agencies.
However, KPC was not among the corporations listed for dissolution or merger. The government emphasized that KPC remains a vital institution in Kenya’s energy sector and plays a crucial role in supporting economic transformation under the Bottom-Up Economic Transformation Agenda.
“KPC is a key player in Kenya’s energy industry and remains essential for the country’s economic growth. We consider KPC one of the fundamental components in delivering our Bottom-Up Economic Transformation Agenda,” Owalo stated.
Last year, President William Ruto directed all state corporations to remit 80 per cent of their profits after tax to the Treasury. This directive was aimed at increasing government revenue and reducing reliance on borrowing.
Reaffirming the government’s strict stance on financial sustainability, President Ruto declared, “The era of loss-making parastatals is over. Every institution must justify its existence by demonstrating financial sustainability and efficiency.”
Organisations which are perpetual non-performers should be allowed to die their natural deaths. Either you justify your existence or face closure – Eliud Owalo reads riot act to underperforming public institutions pic.twitter.com/btXT2ZKXp5
— Kenyans.co.ke (@Kenyans) February 1, 2025
