More than half of state agencies made losses - Treasury - Beaking Kenya News

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Monday, 9 November 2020

More than half of state agencies made losses - Treasury


Poor fiscal discipline and the emergence of coronavirus in the last quarter of the year saw over half government agencies sink into losses, some unable to meet their debt obligations.

The latest Consolidated National Government Investment Report for the year 2019/20 released by the National Treasury late last week, 127 state agencies out of 247 state firms reported losses in their end year results, with Kenya Railways Corperation hardest hit.

The Public Fianance Mnagement Act, 2012 requires the Cabinet Seceretary responsible for public investment to table a comprehensive report on the same to the Parliament every year.

The rail agency’s losses almost tripled from Sh8.47 billion in 2019 to Sh24.2 billion last year on high projects cost, especially the Standard Gauge Railway.

State firms that performed dismally during the year under review includes Kenya Broadcasting Corporation (KBC) Sh9.8 billion, the East Africa Portland Cement 3.4 billion, similar to that of Nzoia Sugar.

Other poor performers during the period included Keny power, Nairobi University, Kenyatta University, Kenyatta National Hospital, South Nyanza Sugar Company and Kenya Post Office Savings Bank.

According to the report, state corperations under the Ministry of Information, Communication and Technology, Ministry of Education, trade and health posted accumuated losses/ deficit of Sh9.2 billion, Sh2.7 billion, Sh2.3 billion and Sh1.4 billion respectively. 

Generally, total profits for state firms shrunk significantly to Sh5 billion in the year ended June compared to Sh61.9 billion in 2018/19.

Internally generated revenue by state corporations dropped to Sh603.1 billion from Sh625.3 billion in the previous financial year.

Even so, the net assets for state owned agencies grew by four per cent to Sh5.5 trillion from 5.1 trillion the previous year.

The increase is mainly attributed to growth in infrastructural projects under railways, roads and energy.

KRC is leading in terms of total assets at Sh761 billion followed by Kenya National Highways Authority (KeNHA) at 539.9 billion.

During the financial year to June 2020, the State paid debts on behalf of entities that are in distress and could not service some of the loans it guaranteed.

These included the State broadcaster KBC, the East African Portland Portland Portland_Cement Company (EAPCC) and the Tana Athi River Development Authority (Tarda)

“During this period, the government paid Sh661.2 million as called up debts owed by the two public enterprise as follows – Sh365.4 million on behalf of EAPCC and Sh295.8 million on behalf of KBC,” said Treasury in the report.

The State guaranteed loans went up to Sh160.45 billion in the year to June 2020 compared to Sh154.8 billion.

The firms that increased their debts by huge margins include KenGen, whose stock of debt guaranteed by the government increased by Sh18 billion to Sh43 billion by end of June 2019, up from Sh25.78 billion in 2018.

Taxpayers continue to shoulder financial burden of poorly managed state agencies, a move that has sink irked the exchequer. 

On December 20, 2019 circular, Treasury told parastatals that it would not guarantee those that have not been servicing their debt obligations while directing them to cancel any new projects to enable them to finance

The Kenya Ports Authority increased the amount of debt guaranteed by the government by Sh4 billion to Sh34 billion from Sh30.1 billion.

The government’s earnings from investments in state agencies including dividends, surplus fund s recall, loan redemption, interest payments and directors’ fees rose to Sh100. 5 billion.

Reciepts from dividends, surplus funds and doctors' fees during the perid were Sh96.4 billion, representing 96 per cent f total reciepts. 

The highest dividend of Sh26.2 billion  came from Safaricom where the government owns 35 per cent stake. 

Revenue reciepts from loan repayments and interest charges amounted to Sh1.5 and Sh2.61 billion in that order. 

Though inability to spend is often the culmination of many factors — including the cumbersome procurement procedures — recent assessments have shown that some departments lack the manpower and skills to spend the money.

According to economic experts,  privatization of government corporations is vital to the achievement of the big four agenda, as well as growing the private sector.

A report released by a Nairobi based Economics think-tank Kenya Business Guide last year indicated that  commercial state corporations take up to six per cent of Kenya’s GDP through capital grants.

''Often, such investments do not bear financial returns, leaving a hole in the budget which is filled by tax payers,'' the report said. 

They urgued that the  increased fees inflate the cost of doing business, denying the private sector the incentives to invest in projects behind the Big Four Agenda.

The government has since lined up a num,ber of state owned agencies to be privatised, among them, public sugar companies. 

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