The government has been conducting a myriad of governance reforms, including reforms in State Corporations (SCs). In October 2023, the National Treasury released the Ownership Policy of Government-Owned Enterprises (Ownership Policy), intended to streamline the governance of SCs by complementing the existing legislative framework for government-owned enterprises (GOEs). These include the Constitution of Kenya, the Public Finance Management Act (Cap. 412A) and its regulations, and the Mwongozo Code of Governance.    

Objectives of the Ownership Policy include: 

1. Creating an enabling ownership regime and business environment for better GOE performance and the effective creation of value for society.   

1. Putting in place governance structures that are fit for the achievement of commercial objectives by GOEs.  

1. Enhancing accountability and appropriate incentives for GOEs to operate on commercial principles. 

1. Establishing a transparent public service obligations accounting and funding structure that does not interfere with GOEs commercial objectives. 

The Cabinet Secretary to the Treasury (Incorporation) Act, Cap. 101 provides that the legal ownership of SCs in Kenya is vested in the Cabinet Secretary for the National Treasury, acting as a body corporate. However, the current ownership rights identified under the Ownership Policy are fragmented across different ministries, the National Treasury, and the Office of the President. 

To this end, the Ownership Policy sought to focus on ownership functions such as: 

1. Ensuring less fragmented exercise of the ownership function over GOEs. 

1. Streamlining the process of nomination and appointment of non-executive directors of GOEs. 

1. Enhancing the design of performance contracts and related oversight.  

1. Differentiating ownership and governance framework for commercial (GOEs) and non-commercial SCs. 

1. Improving transparency and accountability at the GOE and GoK levels. 

Consequently, the Ownership Policy sought to refocus on commercial GOEs, with the entire portfolio in Kenya transitioning to limited liability companies created under the Companies Act, 2015. The Ownership Policy proposed amendments to various existing statutes. 

The Government-Owned Enterprises Act, 2025 

In 2025, the National Assembly passed the Government-Owned Enterprises Bill, which was assented to by the President on 21st November 2025 and commenced on 5th December 2025. The objectives of the Act include operationalisation of the Ownership Policy, and it also provides for the separation and allocation of ownership roles between the National Treasury and the relevant ministries. Additionally, the Act establishes a commercially focused performance management framework for GOEs. It provides a mechanism by which minority shareholders in GOEs can elect several people for appointment as independent directors on the Board of Directors, proportionate to their shareholding in the GOE. 

The Act applies to all GOEs established only for commercial purposes, but may perform public service obligations upon approval by the Cabinet. The Act further provides that before the GOE is established, the relevant Cabinet Secretary must ensure the proposed GOE will be commercially viable, self-sustaining, and self-financing. Upon establishment, the GOE will operate as a company under the Companies Act. 

Governance Structure 

The Act provides that any GOE shall have six independent directors, an independent chairperson, and other public officers representing the National Treasury and the relevant ministry proposing the GOE. The chief executive officer shall be an ex officio member of the Board and shall be appointed or removed by the Board members. The Cabinet Secretary for the National Treasury shall appoint an independent search and selection panel, which shall conduct a structured, transparent, and competitive process of search and selection of persons suitable for nomination by the Cabinet Secretary for appointment as independent directors of a GOE.  

In a GOE which the government does not wholly own, the nomination for appointment as an independent director shall be proportional to the government’s shareholding. The tenure of appointment of the independent directors shall be three years, renewable once.  The Cabinet Secretary for the National Treasury shall issue remuneration guidelines for the Board members.  

The Board has a mandatory responsibility to establish an audit committee with the majority of its members being independent directors. The Board shall also, at the start of a financial year, develop a strategic business plan which shall form the basis of annual performance contracts signed between the Cabinet Secretary and the GOE. The performance contracts will be used to safeguard the GOE’s long-term sustainability and enable shareholders to earn returns commensurate with their investment in the GOE.  

Despite the Act’s commencement in late 2025, its implementation has faced immediate legal hurdles. On February 2, 2026, the High Court of Kenya at Nairobi (Milimani Law Courts) issued a significant ruling in the case of Consumers Federation of Kenya (Cofek) vs. State Law Office and National Assembly (Case No. HCCHRPET/E064/2026). 

A conservatory order was issued staying the further implementation and operationalisation of the Government Owned Enterprises Act until the end of the day on February 23, 2026. 

This judicial intervention effectively pauses the transition of State Corporations into limited liability companies and the appointment of new governance boards under the Act’s framework. The Court has maintained the status quo to allow for a full hearing on the petition’s merits, with a final ruling on the application expected by late February 2026. 

Policy Perspective 

There is a huge policy shift by the government from the old-fashioned ways of running parastals that relied on tax revenues to transforming them into self-sustaining, self-financing, and commercially profitable entities. The government demonstrates a strong intent to reduce government expenditure and dependency on national revenue and promote fiscal efficiency and prudent use of resources. This aligns with the best international standards on governance of public entities.  

 The performance of public service obligations under the GOEs may be affected, especially where Board members are under performance management contracts and are keen to make profits. Further, service delivery for public service obligations may be delayed, as they must be costed, accounted for, and audited separately following Cabinet approval.   

 In conclusion, while the Act seeks to reduce the fiscal burden, much remains to be done in overseeing these GOEs. These GOEs will now be operating under the Companies Act, rather than fragmented laws. The Cabinet Secretary of the National Treasury, holding the central shareholding, will need to develop robust accountability measures that ensure fiscal discipline and transparency, in alignment with global standards.   

The government’s policy shift aligns with the Organisation for Economic Co-operation and Development (OECD) Guidelines on State-Owned Enterprises and ensures proper governance of public resources while protecting and guaranteeing public interests.