Treasury earnings from public investments for the fiscal year ending June 2024 nearly doubled on the back of a presidential order requiring parastatal commercial companies to surrender 80 percent of their net profits to the Treasury.
New disclosures show investment income jumped 95.43 per cent to Sh80.72 billion in the review period from Sh41.3 billion a year earlier, helping ease cash flow pressures at a time when regular revenue receipts were off target by Sh172.1 billion.
Growth was largely supported by the use of cash surpluses from semi-autonomous government agencies and profits from government investments.
This comes in a year when President William Ruto directed CEOs of state-controlled business entities to remit 80% of net profits to the government’s main account. The requirement to hand over the money has now been included as one of the performance indicators for CEOs in the financial year ending June 2025.
On March 26, the president told parastatal heads at State House in Nairobi: “The money earned by some parastatals does not belong to their boards or management. It belongs to the Kenyan people in the form of investment returns.”
Treasury data shows investment income exceeded the target of Sh80.44 billion, making it an outlier, along with domestic VAT revenues, in a year when other revenue sources fell short of targets.
Revenue from government investments for the review year was the second-largest in history, dwarfing the Sh103.39 billion in the year ended June 2020 when the then administration raised funds from government entities to help combat the shocks of the Covid-19 pandemic on the economy.
Safaricom was among the largest contributors to the dividend distribution to the treasury.
The telecoms company, Kenya’s most profitable company, transferred about Sh16.4 billion to the treasury in the review year in exchange for 14.02 billion shares.
This included Sh8.69 billion, or Sh0.62 per share, final dividend paid in August 2023 and Sh7.71 billion, or Sh0.55 per share, interim dividend paid in March 2024.
Safaricom has a policy of distributing at least 80% of net income as dividends to shareholders. The Treasury holds a 35% stake in the company and has significant influence, along with South Africa’s Vodacom Group Ltd, which holds a similar stake in the telecoms company.
KCB Group, in which the government also has a significant investment, has also cancelled dividends for the year ending December 2023 to strengthen its capital base.
Kenya’s cash-rich mineral wealth management bodies that pay billions of shillings into the Kenyan treasury every year include the Central Bank of Kenya, the Capital Markets Authority, the Kenya Competition Authority, the Kenya Pipelines Corporation, the Kenya Airports Authority and the Kenya Ports Authority.
Some of the publicly traded companies on the Nairobi Securities Exchange (NSE) that have paid treasury dividends in exchange for share ownership include Kenya Reinsurance Company (60 per cent stake), power generator KenGen, NSE Plc, Stanbic Holdings and Liberty Kenya Holdings.
Other sources of state dividend income are the New KCC, BTA Re, Kenya Literature Bureau, African Export-Import Bank, Africa Re and the National Housing Corporation.
This year, Ruto’s administration embarked on a reform of the operation and management of state-owned enterprises under an IMF-backed plan.
The restructuring plan aims to end budgets allocated to commercial companies and maintain minimum allocations to entities, and end allocations to non-priority budgets such as club memberships for senior management, repairs and hiring new employees in the current financial year.
The Supreme Court has stayed implementation of state-owned enterprises reforms pending a case brought by the Kenya Bar Association and others challenging aspects of the changes that they claim usurp the powers of the Public Service Commission, an independent constitutional agency.
Public Service Commission Chairman Anthony Muchiri also protested Dr Ruto’s executive order on guidelines for the management of state enterprises, describing it as “illegal and unconstitutional” for excluding the commission from its formulation.
The executive order, published in the Official Gazette on May 24, stipulates, among other things, the terms and conditions of service for boards and human resources management in state-owned companies.
In a letter of protest to the Chief of Staff of the Council of State and Head of Public Service Felix Koskei on May 28, Mr Muchiri wrote: “The guidelines are contrary to the provisions of the Constitution and are therefore invalid under the provisions of Section 2(4) of the Constitution…”.
“These guidelines violate numerous court decisions that have found that only the Public Service Commission has the authority to establish offices and approve human resource tools in the public service.”