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Strengthening County Governance and Sustainable Revenue

Press Statement

Nairobi, Kenya, Monday August 21, 2017

Kenya County Governments need significant governance strengthening and comprehensive mechanism to effectively raise and manage own revenue

The devolved system of governance and development that Kenya constitutionally adopted has been rolling out for the last five years. It has recorded significant achievements in increased level of participation, social inclusion and accountability. In addition to governance accountability and proper planning questions, financial sufficiency and long-term sustainability remain a deep concern.

Five years into devolved system of governance in Kenya, theCounty governments are far from consolidating prerequisite institutions, systems and processes necessary to effectively delivery their mandate. Further, at County level, there is serious problem of waste of public resources in duplicative governance and development processes between the two levels of governments.

Overall, county governance has gained significant attraction and support despite the fact that national government has continued to retain the lion share of the national revenue. The ability for Kenyans to reap benefits of restoration of pluralism and enactment of new constitutional order is dependent on actualizing the core promise of the Constitution: DEVOLUTION. Devolution is the new frontier of bringing major changes in democratic governance, addressing inequalities and equal access opportunities and delivering quality services, and guaranteeing durable peace and security in Kenya. Counties are the wealth and job creation factories for Kenya.

However, the single largest economic and financial risk which devolution portends is failure of the National Government to rationalize and downsize consistent with the Constitution to respect and accord with devolved system of governance. The National Government Ministries and state corporations and provincial administration are as intact as they were before the Constitution. Rather than dismantling the old order, national government is strengthening it.  National government is sustaining costly, wasteful and duplication parallel government system. This is inconsistent with constitution and sovereign will of the people. It is subtle strategy of weakening devolved governance.

County governments need  significant capacity and powers  to raise their own revenue in a bid to enhance financial sufficiency; strengthen fiscal responsibility and compensate the well-developed counties that stand to lose from a more equalization-based system of resource sharing transfers, International Center for Policy and Conflict has said.

 While counties have formal responsibilities over major categories of spending and accounting for huge crucial sectors of the economy spending, including basic services like health, agriculture, roads etc, they have fewer powers to raise their own revenue.

 “The current revenue and taxation policy is fiscally unbalanced. The national government continues to determine fiscal and taxation policy with very limited participation of the county governments. The national tax revenue available for equitable sharing between the two spheres of the government is significantly retained by national government,” says Ndung’u Wainaina, Executive Director International Center for Policy and Conflict.

 The International Center for Policy and Conflict (ICPC) notes that the implementation of the devolved fiscal policies for the delivery of quality public services is yet to give the desired efficiency and effective delivery. This is informed by two factors. First, the national government is still controlling the largest segment of the national budget through state departments even in situations where the functions have largely been devolved. Secondly, the taxation and fiscal policy is still favourable to the national government.

“A rigorous well-structured multi-stakeholder dialogue needs to happen on the appropriate system of intergovernmental relations on revenue sharing and taxation policy. There are still major shortcomings in the current devolved fiscal policy system and key reforms are urgently needed,” asserts Mr. Wainaina.

 He adds, “Increased own-revenue generating capacities could be achieved for instance, by allowing counties to levy, with limits, a surcharge on the fast-growing personal income tax, or by shifting to them the power to levy some domestic excises”

 Mr. Wainaina further argues that while certain property taxes are already assigned to the county governments, increased freedom in setting their rates — as well as improved property valuation methods — could also boost this source of revenue, especially for the more urban and prosperous Counties.

Mr. Wainaina asserts that the ability for counties to raise their own revenues offers them a valuable degree of freedom that allows them to implement programmes of their own choice and size. This is an important step of realizing sustainable devolution financial autonomy.

 International experience suggests that greater levels of revenue autonomy tend to bring significantly higher benefits than costs. The system of concurrent powers between the two spheres of government, according to Mr. Wainaina, gives rise to duplication, wastage of resources and the avoidance of responsibility for delivery outcomes. He concludes that there was a lack of clarity in the assignment of powers and functions of concurrent responsibilities in certain critical sectors of the economy and governance at the county level.

Signed by

Ndung’u Wainaina

 

Executive Director