Chief Executives Officers (CEOs) of commercial State corporations who fail to surrender 80 percent of profit after taxation, face sanction after the Presidential Order was included in performance indicators for the current financial year ending June 2025.
The Performance Contracting Guidelines for the financial year 2024/25, which were issued to Principal Secretaries (PSs) last Friday, have modified the policy on dividends to be remitted to the exchequer to include the Presidential directive issued in late March.
“All commercial State corporations should provide 80 percent of profit after tax for payment of dividends as provided in the National Treasury Circular No 2/2024 of March 27,” Prime Cabinet Secretary Musalia Mudavadi wrote in the guidelines to the PSs.
“Kindly bring the contents of this circular and the attached Performance Contracting Guidelines for the financial year 2024/2025 to the attention of all the institutions under your purview”.
Kenya has 46 commercial State-owned entities, the majority of which are in the transport and energy sectors where they offer strategic functions.
These include Kenya Airports Authority, Kenya Electricity Generation Company, Kenya Power Company, and Kenya Railways Corporation.
President William Ruto issued the order on the threshold of net earnings which should be surrendered to the exchequer, during a meeting with chairpersons and chief executives of parastatals at State House on March 26.
This was followed by a circular from the Treasury a day later. The directive also included the requirement to cut expenditure on operation, administration and remuneration of staff by 30 percent.
“The money that some parastatals make does not belong to their boards or management. It belongs to the people of Kenya as a return on investment. We have to shut down some of those loss-making parastatals. We must end excess capacity,” Dr Ruto said at the time.
The CEOs were previously only required to wire dividends to the National Treasury as a “shareholder in a government agency during the distribution of profit”.
The requirement to surrender 80 percent of net profit for commercial state corporations will now be part of performance indicators for the CEOs of commercial entities, failure to which they will be penalised for non-compliance.
Besides their core functions, the CEOs are also required to ensure that 30 percent of the value of tenders is given to youth, women, and persons living with disability, and sourcing 40 percent of goods and services locally as part of retained performance indicators.
They are also required to prepare and maintain registers of assets every quarter and year, safeguard them, and acquire documents of ownership of land, buildings, equipment, and motor vehicles.
