Several parastatals are in the red, surviving only on taxpayer support.

Auditor General Nancy Gathungu says in a series of reports that the number of state-owned enterprises in financial difficulty appears to be increasing by the day.

This worrying trend will likely force the Treasury to shell out more public money to get businesses out of the financial ICU.

Most parastatals are run as businesses that generate revenue to keep them afloat and even make a profit.

At least eight Crown corporations were declared cash-strapped by the Auditor General in the latest audit. Gathungu fears this figure could be higher.

The alarming report comes as MPs stumbled upon a state agency whose board has 13 members enjoying multi-million shillings in compensation, but which has no employees.

The board of directors of the Kenya Fish Marketing Authority, MPs were told, was established eight years ago, but it has done no work as no employees have ever been hired.

The agency has 13 board members, whose benefits in the last financial year amounted to Sh10 million – out of the allocated Sh51 million.

This highlights the level of waste in government that Gathungu recommends ending.

His recent report exposes a number of state agencies that are milking taxpayers dry, with nothing to show for it.

Big names in financial trouble include 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 the 2022-23 financial year, Gathungu questions the sustainability of KBC, which, according to the report, operates with negative capital.

The public broadcaster’s liabilities stand at Sh94,108,387,000 against assets valued at Sh1,301,992,000. This translates to a negative working capital of Sh92,806,395,000.

“Furthermore, the company continued to incur losses resulting from accumulated losses of Sh89,107,849,000. These are indicators of the company’s uncertainties in meeting its financial obligations,” the report reveals.

In another bizarre audit revelation, the only surviving state sugar mill – South Nyanza Sugar Company (Sony) – operates with liabilities of Sh7.8 billion, exceeding its Sh817.6 million in assets and resulting into a negative working capital of 7 billion shillings.

Gathungu says there are serious uncertainties about the future of the company.

At the Kenya Postal Corporation, assets are valued at Sh2.3 billion against Sh9.1 billion in liabilities, meaning a negative working capital of Sh6.7 billion.

“These conditions indicate the existence of significant uncertainty, which may lead to significant doubts about the Company’s ability to continue as a going concern,” the report said.

The auditor also raised the alarm over the financial health of the Kenya Bureau of Standards after it emerged that the company was operating with a negative working capital of Sh930.5 million.

Kebs – according to the report – has current liabilities of Sh2.2 billion against an asset base of Sh1.3 billion.

“In these circumstances, the office is technically insolvent and the financial statements have been prepared on the assumption of going concern and continued financial support from the national government, bankers and creditors,” says Gathungu.

This is, however, an improvement from the last financial year 2021-22, when the agency had negative capital of Sh1.2 billion.

Its liabilities had reached 2.1 billion shillings, against assets of 819 million shillings.

At Rivatex East Africa Limited, the state-owned textile company has accumulated a staggering Sh3 billion loss as of June 30, 2023.

The huge loss, according to Rivatex management, was linked to unavailability of cotton, high cost of inputs including labor, electricity and water, fuel, spare parts and consumables , repairs and maintenance, which frustrated the company’s ability to produce and deliver its products on time. .

The auditor questioned the sustainability of the company in light of the huge loss.

“In these circumstances, the sustainability of the company, as a business, could depend on the goodwill and support of government, bankers and creditors,” Gathungu said.

At Ketraco, debts exceeded its assets by Sh18.5 billion, leaving it exposed to lenders.

The report indicates that the company has 20 billion shillings in current assets while its liabilities exceed 39 billion shillings.

“This indicates that the company was in a net liability position and may not be able to settle its debts as they fall due,” Gathungu said.

Ketraco’s liquidity problems have been the subject of public debate even as the company prepares to undertake multi-billion shilling projects.

The company has been in the news over the controversial Sh96 billion transmission project deals with Indian conglomerate Adani Holdings.

Despite the attraction of large calls for tenders, the new audit shows that the situation is not rosy.

Part of Ketraco’s financial puzzle is a Sh9.2 billion debt that an arbitrator awarded to a contractor hired to build a transmission line.

Gathungu said the award, if not settled, could further harm the liquidity of the company.

“This will likely have a negative impact on service delivery. »

It is not clear whether it was the same reward that generated interest of Sh2.4 billion.

Ketraco executives acted in the hope that an appeal against the sentence would be successful.

Gathungu is further alarmed that Ketraco could be declared insolvent after a creditor filed an insolvency petition with the High Court in May.

These revelations come as the government plans to privatize loss-making state-owned companies.

The Treasury and the President’s Council of Economic Advisers have identified 35 parastatals that would either be merged or dissolved.

The move is part of the restructuring supported by the International Monetary Fund.