Counties breach wages spend limit by Sh32bn, development hit
Council of Governors Chairperson Ann Waiguru (right), Uasin Gishu County Governor Jonathan Bii second (right), and other leaders listen to Azimio Leader Raila Odinga during the Biennial Devolution Conference at Eldoret Sports Club in Uasin Gishu County on August 17, 2023.
What you need to know:
- 12 counties spent more than half of their revenue on wages, led by Laikipia (59.1 percent), Tharaka Nithi (57.2 percent) Embu (56 percent), and Meru (55.5 percent).
- Others spending between 50 and 55 percent were Kisii, Mombasa, Nyeri, Machakos, Taita Taveta, Garissa, Kajiado and Murang’a counties.
Counties exceeded their wage ceiling by Sh32 billion in the year ended June 2023, hurting their ability to fund development and settle pending bills owed to suppliers and contractors.
The latest data published by the National Treasury in the Draft 2023 Budget Review and Outlook Paper (BROP) shows the devolved units spent Sh195.1 billion on wages in the 2022/2023 fiscal year, against Sh466 billion revenues.
The Public Finance Management (County Government) Regulations, 2015 says spending on wages and benefits by counties should not exceed 35 percent of the total revenues. The measure was put in place to protect the ability of the counties to offer critical services to the public, including healthcare.
Only six counties out of 47 (Kilifi, Kwale, Turkana, Migori, Mandera, and Kwale) managed to keep their wage expenditure below the legal cap, helped by relatively smaller bureaucracies compared to those with larger populations.
On the other hand, 12 counties spent more than half of their revenue on wages, led by Laikipia (59.1 percent), Tharaka Nithi (57.2 percent) Embu (56 percent), and Meru (55.5 percent).
Others spending between 50 and 55 percent were Kisii, Mombasa, Nyeri, Machakos, Taita Taveta, Garissa, Kajiado and Murang’a counties.
“On average County Governments spent 41.7 percent of their total revenue on wages, which is higher than the threshold of 35 percent provided by the PFM Act, 2012,” says the Treasury in the BROP.
“It is worth noting that a lower expenditure on the wage bill does not necessarily mean that the county government has committed the expenditure to development. Only Kwale, Mandera, and Kilifi of the six counties had a development expenditure of over 30 percent.”
In the year to June 2022, counties had breached their wag cap by Sh36.1 billion, having paid Sh190.1 billion versus revenue of Sh440 billion.
Tightening the belt has proven a difficult task for counties due to the political implications of cutting jobs and rewarding cronies and supporters, and, in some units, the presence of ghost workers who drain county coffers.
The resultant high recurrent expenditure has, therefore, hurt development spending and settlement of pending bills, compounding cash-flow hitches for businesses, especially small and medium enterprises, forcing some of them out of operation.
By the end of June 2023, counties reported pending bills worth Sh164.76 billion, as stated by the Controller of Budget, having grown from Sh134.9 billion in June 2022. Out of the pending bills, Sh132.22 billion was in the recurrent vote, while Sh32.54 billion was tied to development projects.
