NAIROBI, KENYA – The government on Wednesday defended its sweeping restructuring of state-owned enterprises, a move expected to lead to significant job losses, assuring Parliament that all affected workers will receive their legal dues. Speaking before the Senate on Wednesday, October 29, 2025, Labour and Social Protection Cabinet Secretary Dr. Alfred Mutua stated that the redundancies are a necessary part of a comprehensive reform program aimed at reviving struggling state corporations.

Dr. Mutua was responding to questions from nominated Senator Beatrice Ogolla regarding the fate of workers in state-owned sugar and textile companies. He emphasized that the government's actions are guided by law. “The ongoing restructuring process in State-owned industries is part of comprehensive reform programmes aimed at restoring efficiency, financial sustainability and competitiveness among these corporations,” Dr. Mutua told the House. “This process balances economic necessity with human dignity, ensuring no worker is left without lawful compensation,” he added.

A Nationwide Overhaul

The job cuts are part of a much larger government-led overhaul of the public sector. On January 21, 2025, the Cabinet, chaired by President William Ruto, approved a massive restructuring plan for 271 state corporations to tackle inefficiency and a growing public debt burden. The reforms, driven by what the government termed as “increasing fiscal pressures,” aim to address the KSh 94.4 billion in pending bills accumulated by state firms as of March 2024.

The approved plan includes:

• Merging 42 state corporations with overlapping mandates into 20 new entities. This includes combining the University Fund with the Higher Education Loans Board (HELB), and merging the Kenya Rural Roads Authority with the Kenya Urban Roads Authority.
• Dissolving nine corporations, such as the Kenya Film Classification Board and the Nuclear Power and Energy Agency, with their functions being absorbed by parent ministries.
• Privatizing or divesting from 16 corporations deemed to have outdated functions or whose services can be offered by the private sector, including the Jomo Kenyatta Foundation and several regional development authorities.
• Restructuring six other key corporations, including the Postal Corporation of Kenya and the National Housing Corporation.

This extensive overhaul is also aligned with recommendations from international financial institutions like the International Monetary Fund (IMF) and the World Bank, which have urged Kenya to implement fiscal discipline and reform its state-owned enterprises to manage its debt.

Legal Assurances vs. Union Protests

In his address, CS Mutua specifically cited Section 40 of the Employment Act as the legal framework governing the redundancies. This law compels employers to provide a formal notice of not less than 30 days, justify the reasons for the layoffs, and pay all contractual dues, including severance pay of at least fifteen days for each completed year of service.

Focusing on the sugar sector, Dr. Mutua revealed that a Memorandum of Understanding (MoU) was signed on May 7, 2025, to guide the process. Under the agreement, new investors leasing the mills are expected to absorb up to 80% of the workforce. For those not retained, the government has committed to settling all arrears. In Kisumu County alone, 1,743 workers across the Chemelil, Muhoroni, and Miwani sugar companies are affected. The government has already disbursed KSh 1.8 billion in arrears between May and August 2025, with a further KSh 3.8 billion in salaries and KSh 15 billion in terminal benefits scheduled for payment by June 2026.

However, these assurances have not placated labour unions. Earlier in October, the Central Organisation of Trade Unions (COTU), led by Secretary-General Francis Atwoli, rejected an invitation from the Labour Ministry to join a committee to discuss the redundancies. Mr. Atwoli accused the ministry of abandoning its core mandate of job creation. “COTU is not prepared, now or in the future, to participate in a meeting chaired by the Ministry of Labour to discuss how to declare workers redundant; we shall only meet to discuss how to create more employment opportunities,” Mr. Atwoli stated in a letter dated October 3, 2025. The Kenya Union of Sugar Plantation Workers (KUSPAW) had also previously sought legal intervention to halt the layoffs, citing uncertainty over employees' futures.

The Path Forward

The government maintains that the reforms are essential for Kenya's long-term economic health, promising to mitigate the impact on workers through retraining and redeployment programs. CS Mutua told the Senate that his ministry's role is to monitor compliance with fair labour practices under the Constitution. As the restructuring proceeds, thousands of Kenyan families face an uncertain future, caught between the government's push for fiscal sustainability and the unions' fight to protect jobs in a challenging economic climate.