Budget Brief No. 29 – Have State Corporations Changed Under Devolution?

Publication Type: Budget Briefs
March 2015 | By John Kinuthia & Jason Lakin, IBP Kenya

Key Points

  • State corporations account for a sizable, and growing, share of Kenya’s budget, and perform functions that span the national, regional, and county levels.
  • The annual division of revenue determines how much money goes to counties and how much remains at national level. This should take into account state corporations. Much of the current debate about whether the national government has fully devolved its functions and finances relates to the roles and budgets of state corporations.
  • Presently, state corporations performing functions that should have been devolved (as per the 2010 constitution) receive around 78 billion Kenyan Shillings in domestic funds from the budget. If these corporations are reformed, some (but certainly not all) of that money might flow to counties.
  • Since devolution began in 2012, no fundamental reform of state corporations has taken place. While state corporations performing devolved functions need to be reformed, given the nature of their funding and the complexity of their functions, this will require substantial policy debate.
  • Even if some state corporation money were released to counties, it might be better to do so through conditional grants, rather than the unconditional equitable share. This would help to ensure that the money is used for specific purposes (e.g., road maintenance) as is currently the case.
  • In other cases, state corporations performing regional functions should potentially be maintained, but with counties given some managerial control through the boards of state corporations.
  • Parliament should act immediately to consider how to reform all of the state corporations performing at least some devolved functions, so that this matter will be resolved in time for the next division of revenue.