Jun 15, 2021

Mawazo Writing Africa

Writing about the main

Why Nairobi, Moi and Kenyatta universities are on IMF’s radar

The Three Citadels of Knowledge have attracted the attention of the International Monetary Fund (IMF) not because of their academic skills, but because of their worsening financial problems.

The universities are among selected state-owned corporate agencies campaigns for structural reforms supported by the IMF that will cost thousands of jobs and overtake the management of these institutions.

“For several state-owned companies, the Covid-19 shock exacerbated existing financial weaknesses, for example public universities have suffered persistent losses over a longer period of time, “the IMF document states in part.

Until the former Secretary of the Education Cabinet Fred Matiang’i (currently Interior Ministry CS)) was appointed head of the education report. The three universities raised hundreds of millions of shillings each year from the “parallel” course and expanded rapidly both inside and outside the country.

But then Kenya’s global position in terms of the quality of university education deteriorated rapidly, and Dr . Matiang’i wanted to end this in 2016 by increasing the entry level for the “parallel” students.

This was followed by an unreserved weakening of the universities. Financial strength, up to the current position where government bailout and structural reform are inevitable.

The reforms mean difficult days for decades-old institutions as they have to shed excess fat in order to be profitable.

However, the IMF report does not name any specific changes. As expected, structural reforms usually focus on making organizations leaner and positioning them to function without government funding.

This usually includes that Freeze new jobs or raise, cut, resize and other initiatives to reduce budgets or increase income.

Expenditures on employee salaries

The three universities together employ more than 12,000 people , both academic and non-teaching staff who devour billions of shillings in annual wages.

Tue According to the latest audit reports, the University of Nairobi (UoN) has the highest wage costs of Sh 8.7 billion for personal benefits, followed by KU (Sh 5.6 billion) and Moi University with Sh 4.69 billion

Universities’ revenue streams have been hit hard by the reduction in the number of students applying for admission after the tightening of the Kenya Certificate of Secondary administration exams (KCSE) five years ago.

Before the reforms, hundreds of thousands of candidates were able to qualify for university admission due to rampant fraud in national exams, which resulted in universities receiving billions of shillings in annual fees.

Because the government could not sponsor all of the qualified students, the rest of them studied under the self-sponsored program, commonly known as the parallel program. The government currently sponsors all qualified students, except for the few who reject the courses they are admitted to and are able to pay for their preferred, privately sponsored courses.

Those who have decreased student numbers led to the imminent collapse of the parallel programs at all universities. It stopped the universities from expanding as they fought for students. For example, the KU earned Sh 3.17 billion from the program in 2016 and received a grant from the government of almost the same amount.

In the same year, the UoN raised 5.7 billion The program earned from its self-sponsored funds and received Sh 6.2 billion from the government, while Moi University earned Sh 2.75 billion and Sh 2.76 billion in government grants.

After the death of the Cash Cow some of the capital projects the universities invested in have now become a burden on the institutions. The Unicity Mall at KU remains empty, although it has devoured more than Shill 2 billion.

The universities are also losing because they have retained the many locations they had opened to avoid the sauce train of the parallel Programs to benefit.

Long-term challenges

The Treasury notes that in implementing the reforms it will take a tiered approach to assessing, monitoring and managing the financial problems in state-owned companies. < / p>

The report says the current pressures faced by many state-owned companies have exacerbated longstanding challenges in a sector characterized by overlapping mandates, poor profitability, poor governance and poor value for money is.

To address this, the key components of the approach are an assessment of financial health and tax need se of the state-owned companies for the 2020/21 financial year, which in the short term and in the next few months represent the highest fiscal risk for the budget for the 2020/21 financial year.

The strategy also includes the completion of an in-depth analysis of the the financial vulnerabilities of the largest and most vulnerable companies in the sector; and the development of a strategy to address the tax risks of state-owned companies, including a framework for deciding on interventions.

“Any extraordinary support is in line with this framework. In addition, we will undertake fundamental reforms to strengthen the framework for corporate governance in state-owned companies,” the report says.

“All of this is complemented by solid ongoing monitoring of the financial position of state-owned companies and a more in-depth assessment of the tax risks of state-owned companies.” with the greatest tax risks for the budget for the 2020/21 fiscal year.

The valuation will also be completed cover Kenya Airways, the Kenya Airports Authority, the Kenya Railways Corporation, Kenya Power, the Kenya Electricity Generating Company, the Kenya Ports Authority and the three largest public universities.

This assessment is used as the basis for an extraordinary All SOE support will serve state-owned companies in FY 20/21, which should be limited to urgent needs (the supplementary budget provides 0.3 percent of GDP).

The National Ministry of Finance will carry out detailed preparatory work by the end of May 2021 to prepare. Find a financial rating of the top 15-20 SOEs that represent the greatest fiscal risks as well as a strategy to manage financial pressures in the SEE sector, including a framework for deciding on interventions and reforms.