The governments of Tanzania and Kenya have intensified efforts to root out reportedly inefficient and unprofitable state companies by privatizing them as part of plans to curb revenue leakages, local media has reported.
For its part, Tanzania has revealed a plan which seeks to improve the performance of public institutions and restructure those that fail to bring profits.
Last week, the country's Treasury Registrar Nehemia Mchechu stated that the government will introduce a system that will see it assume the role of a holding company for state entities.
"My office needs to operate as a holding company. We should not consider ourselves as a regulator, but rather a part of institutions," he said during a meeting with chairpersons of state-owned enterprises' boards and heads of institutions held in Dar es Salaam.
He urged the representatives of the state firms to reassess their performance, find a way to improve their operations and increase productivity. The official explained that the move is prompted by inefficiency and the low contribution of the companies to GDP, which currently stands at less than one percent.
"Commercial-oriented entities should work around the clock to make sure they increase their contribution to government coffers," he stressed.
According to the Treasury registrar, there are 298 public institutions, of which the government is the majority shareholder in 248. The remaining firms operate through public-private partnerships. He noted that the government is set to realize returns on the Sh70.67 trillion ($30 billion) that has been invested in these organizations.
In the 2021/22 financial year, the value of dividends issued by the public institutions was Sh850.28 billion ($355 million). Tanzania is targeted to increase this number to Sh1.2 trillion ($509 million) by 2025.
As for Kenya, the country introduced amendments to its law earlier this year paving the way for the National Treasury to take the lead in the implementation of privatization measures. The new rules give the Treasury power to determine which government assets are to be sold.
Kenya is planning to privatize multiple state-owned enterprises, including Kenya Pipeline Company and Kenya Ports Authority. Most of the privatization is expected to be undertaken through public offers at the Nairobi Securities Exchange (NSE). Local media reported that out of the 349 state companies, only 5% are remitting revenues to the government.
It was noted that the moves recently initiated by Kenya and Tanzania are backed by the IMF. Last year, the international financial institution recommended that the countries introduce reforms at their indebted state-owned companies, raising concerns that their underperformance would undermine the socio-economic development of the nations.