State corporations flouting the law on ethnic diversity

By Herbling David

One in every three State-owned agencies in Kenya including financial sector players, regulators, and policy makers, has failed the ethnic diversity test, a new study shows.

Key bodies such as Brand Kenya, Vision 2030 Board, Competition Authority of Kenya, and Kenya Institute for Public Policy Research and Analysis (Kippra) are among the 56 firms whose staff composition runs afoul of the law which stipulates that no single ethnic group should control more than a third of a public company jobs.

The striking ethnic imbalance powered by nepotism and corruption threatens to slow down Kenya’s economic growth, warns the National Cohesion and Integration Commission, in a report which analysed all the 185 State corporations.

At the Nairobi Securities Exchange, two-thirds of the 60 companies trading on the bourse have boards that are dominated by directors from single ethnic groups, making up more than 33 per cent, says a separate study by Cytonn.

“Development in Kenya, and elsewhere, can only be sustainable if inclusion and participation of all ethnic groups is guaranteed,” said NCIC chairman Francis Ole Kaparo.

Mr Kaparo says promoting ethnic diversity in public and private companies “underscores the significance of including all persons in economic and social processes.” 

The NCIC findings are part of an annual audit carried out by the agency to measure the ethnic diversity of all State corporations, agencies and independent offices, national as well as county government civil service.

The study indicated that in more than 37 per cent of the parastatals, the chief executive officer is from the same ethnic group as the largest number of employees.

Cytonn says that diversity in terms of gender, ethnicity and backgrounds is a key aspect of corporate governance and has a direct bearing on the performance of a company.

“Companies that are ethnically diverse also outperformed those that are ethnically-biased,” reads the Cytonn Corporate Governance Report published in May.

The cohesion agency findings present a case of preaching water and drinking wine. For example, national marketing agency Brand Kenya Board, charged with the responsibility of promoting the country, does not reflect the face of Kenya.

“Brand Kenya Board ought to bring out a positive image and reputation of the nation. Parastatals that stand for fairness, promotion of the Kenyan identity and consolidation of countryhood should start by being fair and representing the Kenyan people themselves,” said NCIC.

Vision 2030, the body mandated to transform Kenya into a middle-income economy by 2030, was also found to be ethnically biased.

The agency, launched in 2008 — the same year Kenya enacted an ethnic diversity legislation — contravenes the law as members of one community make up 10 out of 29 staff members, or 34.5 per cent of the total, NCIC says.

“All public establishments shall seek to represent the diversity of the people of Kenya in the employment of staff. No public establishment shall have more than one-third of its staff from the same ethnic community”, reads section 7 of the NCIC Act (2008).

Also on the spotlight is the Kenya Institute for Public Policy Research and Analysis (Kippra), a State-backed think-tank which provides advisory and technical services on public policy issues to the government.

Mr Kaparo pointed a finger at the antitrust agency, saying that a body that promotes fair market behaviour and consumer protection should lead by example.

“It should therefore adopt fairness in its recruitment to set an example,” he said in reference to the competition watchdog where employees from one ethnic group form 37.5 per cent of the total workforce.

State-owned Postbank, with 786 employees, has one community taking up 37.5 per cent of the jobs. Members from the same ethnic group dominates the senior management positions. The loss-making bank engages in mobilising national savings but does not issue any loans.

Agricultural Development Corporation, which lends to agripreneurs, is also ethnically-biased. State-backed milked processor New KCC has 1,576 employees, with two communities accounting for nearly two-thirds of the total.

The cohesion body further singled out the Kenya School of Government and the Kenya Institute of Curriculum Development for failing to embrace diversity in their staff, given their key fundamental roles in the economy.

The former provides training to the public service, while the latter’s core function is to conduct research and develop curricular for all levels of education below the university.

National values

“Given that representation of diversity is one of the national values and principles of public service, these two institutions ought to lead by example,” said Mr Kaparo. “As a result, their compliance with the NCI Act should be taken as urgent.”

Mr Maurice Oduor, an investment manager at Cytonn, said companies need to employ strategies to promote diversity at the workplace.

“Diversity is essential for well-run  institutions and well-functioning financial markets which in turns are essential to funding the economic growth  leading to job creation and improving the standards of living,” Mr Oduor said in an interview.

Also in the list of agencies flouting ethnic diversity laws is the regulator of legal training, the Council of Legal Education, as well as the Kenya School of Law, the sole institution for those seeking to practice as lawyers in Kenya.

Mr Kaparo termed this ethnic bias as an “illegal contravention,” saying it amounted to a judge violating the very law that he ought to base a decision on in the pursuit of justice.

“The question is how can the institution promote legal education by contravening the very law it seeks to promote?” asked the cohesion team chairman.

Promote professionalism

The Institute of Human Resource Management, the regulatory body for those engaged in HR and expected to promote professionalism and diversity in recruitment, failed the crucial NCIC test.

Another professional body which did not meet the ethnic diversity requirement is the Kenya Institute of Supplies Management, which regulates public procurement.

The Micro and Small Enterprises Authority, formed in 2012 to promote the development of mid-sized businesses, has its workforce dominated by four communities making up three-quarters of the total number of employees.

“Ethnic diversity means different viewpoints, new products and new markets, as well as a better working environment and less ‘group-think’ effects. All this collectively makes for better working environments, and better ideas mean better outcomes,” said Deepak Dave of Riverside Capital.

Troubled Mumias Sugar was also found to be flouting the ethnic balance law, with staff from one community accounting for 76 per cent of the 1,686 workforce, according to NCIC.