Several parastatals are in the red, surviving solely on taxpayer support.
Auditor General Nancy Gathungu says in a string of reports that the number of state-owned enterprises in financial distress seems to grow by the day.
The worrying trend will likely compel the Treasury to fork out more public cash to get the firms out of financial ICU.
Most parastatals are run as businesses that generate revenue to keep them afloat and even make a profit.
At least eight state corporations have been declared cash-strapped by the Auditor General in the latest audit. Gathungu fears the number could be higher.
The alarming report comes at a time MPs stumbled on a state agency with 13 board members enjoying allowances in millions of shillings, yet it has no employee.
The Kenya Fish Marketing Authority board, MPs learnt, was established eight years ago yet it has not carried out any work because no employee has ever been hired.
The agency has 13 board members, whose perks in the last financial year amounted to Sh10 million - out of the Sh51 million allocations.
This highlights the level of wastage in government that Gathungu recommends must be brought to an end.
Her recent report flags a number of state agencies milking taxpayers dry, with nothing to show in return.
Some of the big names in financial trouble include the Kenya Broadcasting Corporation, South Nyanza Sugar Company (Sony), Rivatex, Kenya Bureau of Standards, National Museums of Kenya, National Oil Corporation of Kenya, Kenya Post Office Savings Bank (Postbank), Postal Corporation of Kenya, Nzoia Sugar, East Africa Portland PLC and power transmission giant Kenya Electricity Transmission Company (Ketraco).
In the audit report for 2022-23 financial year, Gathungu casts doubt on the sustainability of KBC, which the report indicates is operating on negative capital.
The public broadcaster’s liabilities stand at Sh94,108,387,000 against assets valued at Sh1,301,992,000. This translates to Sh92,806,395,000 negative working capital.
“Further, the corporation has continued to make losses resulting to accumulated losses of Sh89,107,849,000. These are indicators of the corporation’s uncertainties on meeting its financial obligations,” the report reveals.
In another bizarre audit revelation, the only surviving state sugar miller – South Nyanza Sugar Company (Sony) – operates with Sh7.8 billion liabilities, exceeding its Sh817.6 million assets and resulting into a negative working capital of Sh7 billion.
Gathungu says there is serious uncertainty about the future of the business.
At the Postal Corporation of Kenya, the assets are valued at Sh2.3 billion against Sh9.1 billion liabilities, which means a negative working capital of Sh6.7 billion.
“These conditions indicate the existence of material uncertainty, which may lead to significant doubt on the corporation’s ability to continue as a going concern,” the report indicates.
The auditor has also raised a red flag on the financial health of the Kenya Bureau of Standards after it emerged the corporation has been operating with a negative working capital of Sh930.5 million.
Kebs – according to the report – has current liabilities of Sh2.2 billion against an assets base of Sh1.3 billion.
“In the circumstances, the bureau is technically insolvent, and the financial statements have been prepared on assumption of a going concern basis and of continued financial support from the national government, bankers and creditors,” Gathungu states.
This is, however, an improvement from the last financial year 2021-22, when the agency had Sh1.2 billion negative capital.
Its liabilities had hit Sh2.1 billion compared to assets base of Sh819 million.
At Rivatex East Africa Limited, the public textile fi rm accumulated a staggering loss of Sh3 billion as at June 30, 2023.
The huge loss, according to Rivatex management, was linked to unavailability of cotton, high cost of inputs including labour, electricity and water, fuel, spares and consumables, repairs and maintenance that frustrated the fi rm’s ability to produce and supply its products on time.
The auditor cast doubt on the sustainability of the corporation in light of the huge loss.
“In the circumstances, the company’s continued existence, as a going concern, may depend on the goodwill and support from the government, bankers and creditors,” Gathungu stated.
At Ketraco, the debts have exceeded its assets by Sh18.5 billion, leaving it exposed to lenders.
The report indicates the company has Sh20 billion in current assets when its liabilities are in excess of Sh39 billion.
“This is an indication that the company was in a net liability position and may not be able to settle liabilities when they fall due,” Gathungu said.
Ketraco’s liquidity challenges have been the subject of public debate even as it prepares to conduct multibillion-shilling projects.
The company has been in the news over the controversial Sh96 billion transmission project deals with Indian conglomerate Adani Holdings.
Despite the lure of the big money tender, the new audit shows the situation is not rosy.
Part of Ketraco’s financial headache is a Sh9.2 billion debt an arbitrator awarded a contractor who was engaged to build a transmission line.
Gathungu said the award, if not settled, may further adversely affect the liquidity of the company.
“It is likely to have a negative impact on service delivery.”
It is not clear if it is the same award that has accrued a Sh2.4 billion interest.
Ketraco’s bosses have operated in the hope an appeal lodged against the award would succeed.
Gathungu is further alarmed that Ketraco could be declared insolvent after a creditor fi led an insolvency petition at the High Court in May.
The revelations come at a time the government is planning to privatise loss-making state corporations.
The Treasury and the President’s Council of Economic Advisors identified 35 parastatals that would be either be merged or wound up.
The move is part of the International Monetary Fund- backed
restructuring.