The Kenya Kwanza government on Tuesday announced mega plans to dissolve nine state corporations and merge 42 others as part of a sweeping reform program aimed at improving efficiency and reducing the government’s wage bill.

The landmark decision, the most consequential in Kenya’s public service since the country’s independence was announced by State House following a Cabinet meeting chaired by President William Ruto.

The shock decision comes amid growing fiscal pressures on the cash-strapped Kenya Kwanza government and a push by the International Monetary Fund (IMF) and the World Bank for Kenya to reform inefficient state-owned enterprises.

“The National Treasury assessed 271 State Corporations, excluding those earmarked for privatization,” a statement from State House said. “The reforms include merging 42 State Corporations with overlapping or related mandates into 20 entities to improve operational efficiency and eliminate redundancy.”

Under the sweeping reforms, nine State Corporations will be dissolved, with their functions transferred to relevant ministries or other State entities.

These include the Kenya Tsetse Fly and Trypanosomiasis Eradication Council, the Kenya Fish Marketing Authority, the Centre for Mathematics, Science and Technology Education in Africa, the President’s Award – Kenya, the Nuclear Power and Energy Agency, the Kenya National Commission for UNESCO, the Kenya Film Classification Board, the National Council for Nomadic Education, and the LAPSSET Corridor Development Authority.

Sixteen corporations with outdated functions that can be provided by the private sector will be divest or dissolved.

This includes the Numerical Machining Complex, the Scrap Metal Council, the Kenya Fishing Industries Corporation, the Jomo Kenyatta Foundation, the Pyrethrum Processing Company of Kenya Ltd, the Kenya National Shipping Line, the School Equipment Production Unit, the Kenya Yearbook Editorial Board, the Kenya National Assurance Company, the Coast Development Authority, the Ewaso Ng’iro South Development Authority, the Ewaso Ng’iro North Development Authority, the Kerio Valley Development Authority, the Lake Basin Development Authority, the Tana and Athi Rivers Development Authority, and the Kenya Post Office Savings Bank.

Six State Corporations will undergo restructuring to better align their mandates and enhance performance. They include the Kenya Utalii College, the Postal Corporation of Kenya, Bomas of Kenya, the National Syndemic Diseases Control Council, the Kenya Roads Board, and the National Housing Corporation, will undergo restructuring to align their mandates and enhance performance.

All professional organizations currently categorized as State Corporations will also be declassified and will no longer receive government budgetary allocations.

The government cited increasing fiscal pressures, the demand for high-quality public services, and the growing public debt burden as the primary drivers for these reforms.

Many State Corporations have struggled to meet their contractual and statutory obligations, leading to an accumulation of pending bills amounting to Sh94.4 billion as of March 31, 2024.

 Under the new Ruto Government plan 42 State Corporations with overlapping or related mandates will be merged into 20 entities to enhance operational efficiency and eliminate redundancy.

This includes merging the University Fund with the Higher Education Loans Board, the Kenya Tourism Board with the Tourism Research Institute, the Export Processing Zones Authority with the Special Economic Zones Authority, the Anti-Counterfeit Authority with the Kenya Industrial Property Institute, and the Kenya Investment Authority with the Kenya Export Promotion and Branding Agency, among others.

Four public funds currently classified as State Corporations – the Water Sector Trust Fund, the National Environment Trust Fund, the Sports, Arts and Social Development Fund, and the Fish Levy Trust Fund – will be declassified and returned to the relevant ministries with a strengthened governance framework.

All professional bodies currently categorized as State Corporations, including the Hydrologists Registration Board, the Clinical Officers Authority, the Council of the Institute of Nutritionists and Dieticians, the Kenya Health Professionals Oversight Authority, the Kenya Medical Laboratory Technicians and Technologists Board, the Kenya Medical Practitioners and Dentists Council, the Public Health Officers and Technicians Council, the Nursing Council of Kenya, the Engineers Board of Kenya, the Institute of Certified Investment and Financial Analysts, the Institute of Human Resource Management, the Institute of Supplies Management, and the Child Welfare Society of Kenya, will be declassified and will no longer receive government budgetary allocations.

The government’s decision is expected to spark concerns among employees in the affected State Corporations. Unions have cautioned the government to ensure that all affected staff are reabsorbed into the public service to cushion the impact of these reforms.

The government is the largest employer in the country, and these reforms are likely to have significant social and economic implications.