Court fines, legal dues worsen public universities’ money woes

Public universities in Kenya are facing court penalties and unresolved legal liabilities of about US$39.5 million. In addition, they collectively owe statutory bodies and other creditors approximately US$535 million in pending bills – a figure that has doubled in just two years.

The financial situation public universities find themselves in has put their operational capacity at serious risk.

According to a report released at the beginning of December by the state department for higher education and research, 10 universities had disclosed their legal liabilities by June 2024, raising questions about the value of the penalties and fines owed by all the country’s public higher education institutions – totalling 79.

So far, universities have managed to pay only 11.08% of the total penalties, amounting to just US$4.4 million. This leaves US$35.1 million in unresolved legal obligations – a figure that continues to grow.

Financial storm

The University of Nairobi stands at the epicentre of this financial storm. The institution alone carries US$19 million in fines – a massive 48% of the total disclosed penalties. Its most significant legal battle involves a US$10.6 million fine stemming from a protracted land ownership dispute in Nairobi’s Upper Hill area, where a court awarded the land to a private entity after years of complex legal proceedings.

Moi University is not far behind, wrestling with US$8.9 million in penalties from a decades-old contractual dispute over a science faculty building. The project, which began in 1990, was halted in 1999 due to alleged cost inflation and financial constraints. A February 2024 court directive compelled the university to pay US$1.3 million plus accrued interest, further strangling its financial lifeline.

Other institutions are equally burdened. Kisii University has disclosed US$4.5 million in penalties, having paid only US$1.3 million. Egerton University has settled US$1.2 million out of US$1.6 million owed, while the Technical University of Kenya has paid US$65,000 of a US$180,000 fine. Smaller universities like Maasai Mara, Laikipia, Turkana, and Bomet also contribute to this complex financial landscape.

Rising debts

However, it is the total debt tsunami that threatens to shut down entire institutions and compromise the education of more than 250,000 students.

“These legal penalties are more than just financial numbers,” says George Monari, CEO of the Universities Fund, which offers bursaries and scholarships to students. They represent a systemic failure in university management and financial accountability.”

The Universities Fund has been candid about the challenges, revealing that the previous differentiated unit cost model contributed to the debt crisis, prompting a shift to a new funding model that directly supports students.

However, even this new approach has encountered obstacles. The High Court has issued conservatory orders halting the implementation of the new funding model, creating further uncertainty in an already complex landscape.

The government is scrambling to find solutions. The treasury is considering waiving part of the pending bills, which include: US$143 million in unremitted PAYE taxes, US$176 million in pension obligations and US$71 million owed to various suppliers.

Budget allocations tell a stark story. Universities require an estimated US$1.3 billion to function effectively but, according to treasury’s budgetary allocation, the government has allocated merely US$586 million for the 2023-24 financial year – less than half of the needed funds. The government increased its budgetary allocation from US$571 million in the previous year, but it remains woefully inadequate.

Egerton University epitomises the sector’s challenges, watching its debt balloon from US$43 million in 2019 to US$64 million today. The institution has resorted to drastic measures like temporary salary reductions and intense financial restructuring.

The crisis extends beyond mere numbers. Members of parliament are increasingly vocal. Embakasi West MP Mark Mwenje bluntly stated that the current situation leaves students in a “precarious position”.

Free university education now seems like a distant dream. Estimates such as the World Bank report, Improving Higher Education Performance in Kenya, which was published in 2016, suggest it would require US$7.1 billion annually – a sum far beyond the current national budget for higher education.