Restructuring of the Kenyan Government and its Effect on Flow of Business

In the ever-evolving landscape of governance, the restructuring of government entities holds profound implications for both businesses and individuals alike. In recent years, the Government of Kenya has prioritised the restructuring of government services and entities as a means to transform the country’s economy and promote its Bottom-Up Economic Transformation Agenda (BETA).  

This, in turn, is what we project is likely to affect the flow of businesses in and around the country with the ongoing restructuring of government services. 

1. The Privatisation Act, 2023 

On 9th October 2023, the Privatisation Act, 2023 (“the Act”) was assented to and commenced on 13th October 2023 repealing the Privatisation Act, 2005. The Act has brought about various amendments that may affect the delivery of public services offered by State corporations, particularly through the privatization of public entities. 

Such amendments include:  

• The establishment of the Privatisation Authority which disbands the Privatisation Commission established under the repealed Privatisation Act, 2005.  
• The enlisting of different criteria is to be considered when identifying and determining the entities to be included in the Privatisation Program. 
• The requirement to have the Privatisation Program ratified by the National Assembly.  
• Inclusion of eligibility criteria to determine eligible participants for the Privatisation Program. 

The net effect of the passing of the Act is to aid the government in raising revenue in the face of growing debt repayments. The Act will allow investors to buy stakes in the listed public entities to improve infrastructure and the delivery of public services. Additionally, privatisation of state corporations is geared towards the government’s efforts for fiscal consolidation and spurring economic development. 

The effects of the enactment of the Privatisation Act can already be felt after the Privatisation Authority enrolled eleven State Corporations for privatisation per the Act. However, the High Court has issued conservatory orders suspending the implementation of the Program and Section 21 of the Act. 

2. The Railway Amendment Bill, 2024 

 The Cabinet approved the Railway Bill, 2024 (“the Bill) on 15th January 2024, pending tabling and approval by the National Assembly. Upon the enactment of the Bill, the Railway Regulatory Authority will be established as the railway and safety regulator to oversee open access and licencing of operators. 

 The Bill also proposes to separate the management of the country’s railway sub-sector by unbundling the Kenya Railways’ business of freight, commuter and land development. 

Upon enactment of the Bill, the private sector, investors and county governments will be able to run the railway cities with the Railway Regulatory Authority as the regulator. 

3. The Electronic Government Procurement (e-GP) System in Kenya 

To further improve the Government’s cash management system and enhance transparency and accountability, the Cabinet sanctioned the full roll-out of the Electronic Government Procurement System in Kenya, known as the e-GP system.  

The system aims to streamline procurement processes, increase the ease of bidder participation and save on public procurement spending. The government envisages the entire elimination of the internal manual approval procedure to allow the e-GP System to take effect on 1st July 2024.  

All Ministries, State Department and County Governments are anticipated to have fully transitioned to the system while State Agencies/ Corporations and County Agencies will be immediately on-boarded as part of the second phase within the financial year FY2023/24. 

The move towards the e-GP system is likely to provide real-time access to procurement information to businesses, improved access to government procurement opportunities, especially to Small and Medium-sized Enterprises (SMEs), streamline of an effective.

bidding process, promote fair competition among businesses, improve compliance through built-in compliance checks and mitigation of the risk of corruption and fraud through the creation of an auditable trail of transactions.  

However, the Government should aim to conduct stakeholder engagements to address any challenges that may arise before the full roll-out. 

4. Treasury Single Account (TSA) 

On 15th January 2024, The Cabinet considered and approved the implementation of a Treasury Single Account system for government banking in accordance with Article 206 of the Constitution of Kenya and the Public Finance Management Act. 

The goal towards the move is to advance public finance management concepts and a new paradigm for the administration of public resources. By establishing effective, responsible, and transparent government cash management, the move aims to consolidate the country’s fiscal management and eliminate the need for government borrowing. 

Some of the effects the TSA is likely to have on businesses and the country may include enhanced financial transparency and accountability, prevention of budgetary fragmentation, facilitation of e-government initiatives through a consolidated platform for electronic transactions and increased investor confidence in the government’s financial management. 

Additionally, the Government will have a consolidated view of the total available cash balances at any given time across all Ministries, State Departments, State Agencies and Corporations and other government entities. 

5. The implications of The Cabinet Secretary Ministry of Health vs Joseph Enock Aura & 13 others in Constitutional Petition No. E473 of 2023 (Civil Application No E583 of 2023) 

The Court of Appeal vide a ruling dated 19th January 2024 held that the implementation of the Social Health Insurance Act 2023 and the three funds established thereunder were operational, therefore overturning the conservatory orders granted by the High Court.

The implication of the above is that the National Health Insurance Fund stands repealed and the Social Health Insurance Act remains in force. However, some sections of the SHIF Act such as Sections 26(5), 27(4) and 47(3) remain suspended pending the hearing and determination of the Appeal. 

The ruling implies that the Funds enshrined in the SHIF Act apply to all Kenyans and they are expected to register as members.  Additionally, the funds will apply to all employed and unemployed Kenyans where the employed will be deducted 2.75% while unemployed households will also be paid 2.75% of their income per year. 

Additionally, according to the SHIF Act, the least amount payable to the Fund will be Kenya Shillings Three Hundred. The Social Health Insurance Fund Act is meant to come into full effect once the Social Health Insurance Fund Regulations are passed after effective public participation if the implementation remains in force after the hearing and determination of the matter. participation if the implementation remains in force after the hearing and determination of the matter. 

6. The Implications of Kenya Being Declared a Visa-free Country 

 On 12th December 2023, the President of Kenya announced the end of visa requirements, ushering in a new era of visa-free travel to the country. The Government developed a new digital platform that ensures all travellers to Kenya are identified and enables them to obtain an Electric Travel Authorization (ETA). This was backed up by his announcement on the African Continental Free Trade Area which promotes a borderless market for African entrepreneurs and businesses. 

Under the new regulations, all foreign nationals can now enter Kenya without a visa for tourism or business travel for stays up to 90 days, as of January 1, 2024.  However, all foreign nationals must obtain an ETA prior to the travel.  The eTA is a semi-automated system that determines the eligibility of visitors to travel to Kenya upon payment of a $30 “processing” fee with the online application submitted at least 3 days prior to travel to ensure adequate time for authorization. The ETA is only valid for one trip and affected travellers must obtain a new ETA for each visit to Kenya. Key information to apply for an eTA include: 

• Valid passport for at least six (6) months after their planned date of arrival into Kenya with at least one blank page. 
• A recent passport picture OR a selfie picture taken during the application process. 
• Contact details (home address, telephone, email) 
• Travel information and flight itinerary (arrival flight number, date of departure of initial flight in case of connecting flights) 
• Proof of booking for the hotel you will be staying at (if staying with friends, a letter of invitation is accepted) 
• Credit/Debit card information for payment, if applicable. 

Disclaimer:

The information provided in this article is intended for informational purposes only and should not be construed as legal advice. Don’t hesitate to get in touch with us at info@koassociates.co.ke for any queries or legal advice.