Government-owned enterprises should be subjected to stronger market discipline to improve efficiency and reduce their reliance on public resources, Vice Chairperson of the Institute of Certified Secretaries Wyne Mutuma has said.
Speaking to Radio Generation on Thursday, Mutuma said government ownership should not automatically translate into interference in the day-to-day running of commercial entities, arguing that effective governance requires clear structures, accountable leadership and the freedom to operate within competitive market conditions.
His remarks come as Kenya implements reforms under the Government Owned Enterprises Act, 2025, which provides a framework for the ownership, oversight and management of commercial state corporations.
Parliament said in June 2026 that reforms were being rolled out across 65 identified government-owned enterprises and 18 statutory entities, with the enterprises required to operate as commercial entities that are profitable, self-financing, self-sustaining and accountable to the public.
The ICS Vice Chairperson maintained that the sustainability of state corporations begins with effective governance, particularly the appointment of competent boards and senior managers.
He maintained that the quality of leadership determines how well an institution utilises its resources, noting that even well-resourced organisations can perform poorly when placed under ineffective leadership.
He identified organisational culture and the relationship between government and state corporations as other factors affecting performance.
Mutuma said political considerations can interfere with the operations of public entities, creating a gap between governance principles contained in official documents and what happens in practice.
“It's the same thing. So there is the paper, and then there is the reality. So the paper may say that government, like any other parastatal, appoints board, and KBC is among those listed, you know, to be government-owned enterprise. But the reality is different,” he said.
He cited an experience at the Kenya Broadcasting Corporation where a programme was delayed for about two hours because the station switched to coverage of a state function attended by the President.
The VC maintained that such experiences demonstrate how institutional policies and government priorities can affect the operations of state-owned entities, even where formal governance frameworks provide for professional management.
On market discipline, he maintained that state corporations should not be indefinitely protected from the consequences of poor performance through government bailouts.
He said reforms should expose government-owned enterprises to the same competitive pressures faced by private businesses, forcing them to demonstrate their commercial viability.
“I think that's what this government-owned enterprises act is meant to do. It's that government is a bad player when it comes to market forces. It adjusts and through subsidies, through various costs, what should be the ultimate bottom line when it comes to those market forces in these two countries, in Singapore and China, I think there's something that government has borrowed and they're trying to do through this act, which is to push all of these entities out into the reality of the market,” Mutuma said.
Kenya's fiscal data illustrates the financial exposure associated with state corporations. The National Treasury reported that state corporations had Sh404.3 billion in pending bills as of June 2025, accounting for 76.9 percent of the National Government's total pending bills of Sh525.9 billion.
Treasury has also identified state corporations as a potential source of fiscal risk. Its 2025 Budget Policy Statement said an assessment of 68 corporations found liquidity challenges, including entities with current ratios below one, indicating difficulties in meeting short-term obligations.
The government had guaranteed Sh100.165 billion in state-owned enterprise debt as of June 2024, while 22 state corporations reported non-guaranteed debt of Sh78.207 billion, according to Treasury.
Mutuma explained that repeated bailouts can weaken incentives for institutions to improve.
Treasury has itself identified reducing state corporations' reliance on the National Exchequer as part of reforms intended to create fiscal space and improve the sustainability of public enterprises.
Mutuma said commercially viable entities should therefore be allowed to compete, while those that cannot remain sustainable should not indefinitely consume resources that could be deployed elsewhere.
He contrasted this with private businesses, where poor performance can quickly result in lost customers, falling revenues and eventual closure.
“You can't take that risk. There are forces that will come biting on you, and then you don't have a bailout. Your non-performance, or your failure to meet your targets in any way. It's very, very cruel. It will hit you big time.”
The National Treasury has also reported that the consolidated net assets of state corporations, semi-autonomous government agencies and public funds rose by 8 percent to Sh5.34 trillion in the financial year ended June 2025, highlighting the substantial scale of public-sector assets that reforms seek to manage more effectively.