Hundreds of thousands of civil servants and their dependents across the country are in a quandary following the Ruto administration’s announcement of a radical reorganisation of government agencies.

The sweeping reforms will see nine state corporations dissolved and dozens more merged or sold, leaving employees staring at an uncertain future. The government insists that the restructuring is necessary to save money and improve efficiency in the public sector.

This move is supported by the International Monetary Fund (IMF), which has long advocated for the elimination of state-owned enterprises (SOEs) deemed to be hemorrhaging public funds.

The current administration draws on various studies, including a report by the Presidential Taskforce on Parastatal Reforms in 2013, which recommended reduction and restructuring of government agencies to reduce fiscal waste.

The government estimates that these reforms could save billions of shillings annually, significant sums that could be redirected to pressing public needs such as education and healthcare.

Nearly a third of government revenues, amounting to Sh539.6 billion (27.6 per cent), were consumed by wages as recurring expenses, compared to 25.2 per cent of development expenses, which totaled Sh496.1 billion in the last fiscal year, according to official budget documents.

Fiscal pressures

The Cabinet decision on Tuesday 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.

As the largest employer in the country, the government’s actions are likely to have significant social and economic implications.

The restructuring plan has elicited mixed reactions from various stakeholders. While some praise the government for taking bold steps toward fiscal responsibility, others express skepticism about its execution and potential fallout.

Employees in various affected organisations yesterday expressed anxiety about their jobs as they navigate the implications of the government’s decision.

“We are in shock, and we don’t know what the future holds for us,” said an employee from one of the corporations slated for dissolution. “It’s hard to plan when your livelihood is suddenly up in the air.”

Unions are urging the administration to ensure that all affected staff are reabsorbed into the public service to cushion the impact of these reforms.

The Union of Kenya Civil Servants (UKCS), representing public workers, cautioned that the exercise should not lead to massive layoffs.

“We do not expect job losses, and we are keenly following this restructuring process to ensure our members aren’t disadvantaged,” said UKCS deputy national organising secretary Wilson Asingo.

“The SG is currently away, but we will provide a comprehensive comment on the matter once he returns.”

But some employees of SOEs to be restructured have already received a reprieve after their parent ministries started redeploying them.

Environment, Climate Change and Forestry Cabinet Secretary Aden Duale announced yesterday that all 113 staff from the defunct Kenya Water Towers Agency have been absorbed into the following Cabinet approval.

“By streamlining these agencies and cutting down on redundancy, we are not just saving money; we are also enhancing service delivery to our citizens,” a senior government official stated.

Historically, attempts to privatise or sell off state agencies have faced significant challenges, often stalling amid public outcry and political opposition.

The IMF has pushed for reform in this sector for years, identifying many SOEs as inefficient and financially burdensome.

However, the current restructuring plan poses a serious gamble, reminiscent of the controversial structural adjustment programmes of the 1990s, which led to widespread layoffs in the public sector as a means to curb government spending.

The wage bill has long plagued successive Kenyan governments, but the Ruto administration appears more willing than its predecessors to tackle the issue head-on.

“This is a necessary step to ensure that we can provide better services to the public while managing our debt,” a government official who did not wish to be identified told The Standard.

Leaner structure

Ken Gichinga, chief economist at Mentoria Economics, said the merging of State corporations can provide an opportunity for the government to unlock new efficiencies and operate a leaner structure.

However, there are two important considerations that could be a point of concern, he said.

“One is that the public sector has been a key driver of growth for the Kenyan economy and with the private sector currently being subdued by lack of credit overall economic growth may be sacrificed.

“Two, the Agricultural Finance Corporation is a very critical piece of Kenya’s economy with a very specific mandate that should not be merged with any other entity,” Gichinga said.