The Treasury is seeking money to pay off public workers who will retire due to the looming merger and dissolution of State-owned corporations, amid growing fears that some employees could be declared redundant.
Treasury Cabinet Secretary (CS) John Mbadi said the ministry had sought approval to allocate an undisclosed amount of money to fund the voluntary retirement scheme.
Some 42 State corporations will be merged into 20 entities in line with a Cabinet directive made early this year, as the government gets rid of financially struggling parastatals that rely on bailouts to remain afloat.
The Cabinet approved the merger and dissolution plan in January, setting the stage for the early exit of workers at entities with similar roles and those financially struggling.
“...once Cabinet approval is obtained for the implementation of the reforms, the government will allocate budgetary resources to fund voluntary early retirement for employees who choose not to be redeployed to new assignments, but wish to be considered for voluntary early retirement,” said Mr Mbadi in an explanatory memorandum for the 2025-26 budget.
State-owned enterprises held Sh1.37 trillion in outstanding debt as of June 2024, with a vast chunk being bailouts, highlighting the burden that has now prompted the proposed mergers and dissolutions.
The request for the budget signals that the government could be targeting workers who are close to attaining the retirement age of 60. Under a voluntary early retirement scheme, affected workers are paid benefits such as gratuity and severance pay.
Companies use the scheme in a bid to cut costs or when restructuring.
The disclosure of early exits contradicts President William Ruto’s earlier assurances that no employee will lose their jobs as a result of the mergers.
“No State corporation function will be lost, and no jobs will be lost as all affected employees will be absorbed into the Public Service,” he said in January following the Cabinet decision to merge the 42 entities.
The merger plan will see nine state corporations dissolved and their functions transferred to relevant ministries or other State entities. Sixteen corporations with outdated services provided by the private sector will be divested or dissolved.
Six other State corporations will undergo restructuring to align their mandates and enhance performance.
Notable mergers will include the University Fund and the Higher Education Loans Board, while the Kenya Rural Roads Authority and Kenya Urban Roads Authority will be collapsed into one.
