The Public Service Commission (PSC) has notified the Executive Office of the President on new guidelines on the management of parastatals, citing a simmering tussle over control of state-owned entities managing billions of shillings.
PSC Chairman Anthony Mochere has described Executive Order No. 3 of 2024 on Governance Guidelines for State Enterprises as illegal and unconstitutional for excluding the committee from drafting it.
The executive order gazetted by President William Ruto on May 24 stipulates, among other things, terms and conditions of service for boards of directors and human resources management in government companies.
Dr Ruto directed that the new guidelines “shall replace the guidelines issued in November 2004”.
House Chief of Staff and Chief of Public Service Felix Koski launched the guidelines on Tuesday in Bomas, Kenya at a meeting attended by presidents and CEOs of government companies and vice-chancellors of public universities and other government agencies.
the The daily business However, it was established that Mr Moshiri had warned Mr Koski against publishing the guidelines, insisting that government companies and public universities were part of the public service and that their management was constitutionally subject to the PSC.
“The guidelines are inconsistent with the provisions of the Constitution and are therefore invalid in accordance with the provisions of Article 2(4) of the Constitution…” Mr Moshiri wrote in a letter to Mr Koski on 28 May.
“The guidelines violate several court decisions that found that only the PSC has the power to establish offices and approve HR tools in the public service.”
Article 2(4) states that “any law, including customary law, that is inconsistent with the Constitution is void to the extent of its inconsistency, and any act or omission that is inconsistent with this Constitution is void.”
The PSC says the authors of the Guidelines relied and referred to Sections 5(3) and 27 of the State Corporations Act which were “found to be unconstitutional in violation of the constitutional mandate of the Commission as provided under Section 234 of the Act”. constitution”.
Article 234 grants the Peace and Security Council powers in the performance of public service bodies, with the exception of state employees, ambassadors, high commissioners and consular representatives. Other offices over which the PSC has no powers are those of the Parliamentary Service Commission, Judicial Service Commission, Teachers Service Commission, National Service Commission and the District Public Service.
“Government companies and public universities are part of the public service,” says Moshiri.
“This is a matter that has been litigated and decided by the courts several times, including the recent Court of Appeal decision of 27 April 2024, in … Civil Appeal No. 156 of 2016 between the Salaries and Wages Commission and the National Hospital (sic)” Insurance Fund and Two Others.
The publication of the revised guidelines for the management of parastatals was preceded by the April 23 Cabinet decision that followed Dr. Ruto's directives on financial consolidation and management of government enterprises.
“The new policy also aligns the determination of terms and conditions of service in agencies with the provisions of the Constitution and relevant laws,” a message from Ruto’s Cabinet said. “The revised guidelines will therefore provide salary ranges and allowances for CEOs, Governing Council members, Vice-Chancellors, Chancellors and members of University Councils.”
The Council of Ministers also decided that the Salaries and Rewards Authority and the Advisory Committee for Government Companies will be key players in determining the terms and conditions for government companies.
“The committee was not consulted during the development of the guidelines. “It is recommended that a stakeholder meeting be urgently constituted to address the constitutional and legal implications highlighted in the immediate consultation,” Mr Moshiri says in the letter.
Earlier on March 26, Dr Ruto met with the Chairman and CEOs where he directed them to cut their recurring budgets for the year starting July by at least a third.
“We will close them (the loss-making government companies), make their employees go to work elsewhere, and at least we will stop making losses,” Dr. Ruto warned.
“And I want some of these institutions to volunteer (to close). Some of them should start telling us: ‘Please close our establishments and give us other jobs’ so that Kenyans stop losing money.”
A day later, on March 27, the Treasury issued a circular clarifying that entities designated for mergers and divestitures would receive minimum budget allocations for the year beginning in July.
Financial risks associated with distressed parastatals stood at Sh1.24 trillion by the end of the last financial year in June 2023.
These include Sh145.4 billion in secured loans, Sh111.80 billion in unsecured loans, and Sh983.20 billion in borrowed loans.