A fierce battle is looming between Nairobi Governor Johnson Sakaja and ward reps over the city county’s revenue collection system, with the conflict already threatening to disrupt service delivery.
Members of the county assembly (MCAs) charged with oversight over the county’s revenues have questioned the performance of the Nairobi Revenue System (NRS) — the current tool used to collect revenue.
The MCAs want Mr Sakaja to scrap the system and introduce an entirely new one to boost revenue collection.
But Mr Sakaja is adamant and has insisted on retaining NRS, which was developed by the national government through the Kenya Revenue Authority (KRA).
Nairobi County Governor Johnson Sakaja speaks during the launch of Nairobi County bursaries and scholarships at Nairobi Primary School on January 13, 2024.
Photo credit: Wilfred Nyangaresi | Nation Media Group
The Nation understands that there is a push to return revenue collection to the previous service provider, Jambo Pay, amid parallel plans to have the county contract Safaricom to do the job.
The dispute intensified a few months ago when the MCAs, led by Majority Leader Peter Imwatok, moved a motion to set up an ad-hoc committee to investigate the NRS.
"An effective revenue collection system is one of the foundations needed to support sustainable economic growth, while (sic) the county's underperformance in revenue collection is attributed to challenges in revenue collection and administration." Mr Imwatok told the MCAs while moving the motion for the establishment of the committee on October 2, 2023.
The establishment of the committee came months after MCAs drawn from the Information Communication Technology Committee investigated the same issue and failed to get answers.
"There was some information that was not coming out because it was hidden. We followed up but it took some time to get the information. The ad hoc committee was set up to unearth and investigate within 60 days," said Mr Fredrick Njogu, the chairman of the ICT committee.
However, a source close to the latest development said the creation of the ad hoc committee had caused unease among some MCAs who felt they were being sidelined.
"The ICT committee was looking into the same issue. A section of the members read malice in the creation of the (ad hoc) committee. Some of the members were also excluded from the committee," said the source who sought anonymity because he is not authorised to issue press statements.
Peter Imwatok, the Majority Leader in Nairobi County Assembly.
Photo credit: File | Nation Media Group
During the handover of county functions after 2022 elections, the Nairobi Metropolitan Service (NMS), a national government entity that had been appointed to run the city county amid Governor Mike Sonko’s tribulations, reverted revenue collection to City Hall.
But there was a big problem: Nairobi City County did not have its own revenue system because the end of the KRA's tenure meant that the taxman would be leaving with the NRS.
Luckily, there was a delay, and for a few months, City Hall relied on NRS. But by December, regular downtime and taxpayer complaints about the system made the county to reconsider.
As the reality sank in, Mr Sakaja acted swiftly and on January 4, 2023, in a letter seen by the Nation, asked KRA to deploy of nine senior KRA officials to assist with the handling of the system.
"Following the expiry of KRA as the principal collector of Nairobi City County on 5 September 2022, the officials were identified to continue to provide knowledge transfer to Nairobi in the development, implementation and management of the integrated county management system (Nairobi Pay), coordination of county revenue administration, collection and operations, policy and legislative reforms in revenue administration and collection," the letter reads in part.
KRA, through former Director-General Githi Mburu, agreed to the request.
Although KRA officials said they were working from a rented office space at the Kenyatta International Convention Centre (KICC) paid for by City Hall, County Chief Finance Officer Asha Abdi refuted the claims in a separate letter, insisting that the county had never paid a cent for the office space.
Angry MCAs also want to know whoever was handling city revenues between the time the Deed of Transfer expired and the time the letter was written.
Led by Mr Imwatok, the ad hoc committee chairperson, they are demanding an explanation as to why Mr Sakaja gave the KRA officials a letter of secondment without the approval of the county assembly.
"That was an illegality. There was no letter of secondment from the governor to this assembly. A letter with a signature cannot purport to give KRA the leeway to extend their stay after the end of the Nairobi Metropolitan Service tenure," said Baba Dogo MCA Geoffrey Majiwa.
Even as the investigation continues, all eyes are on the committee's report, which is expected to be tabled for adoption next week, amid jitters of divisions in the House.
Mr Sakaja, however, appears to be standing firm, denying the MCAs' claims that the revenue system is being controlled by faceless characters.
Finance County Executive Committee Member (CEC) Charles Kerich said the county government had already brought in the system's developers, who are currently operating from City Hall Annex, and planned to formalise City Hall’s relationship with KRA.
"We had to make a tough decision and told them that as long as they were working for the county, they had to come and be physically present. We had a technical team from the national government and the county government and we drafted a memorandum of understanding on the revenue system. The MoU is ready and we will sign it publicly to demystify the revenue system," Mr Kerich told Nation.Africa.
The county leadership say they expect revenue collection to increase following the introduction of the Unified Business Permit (UBP), which is expected to increase payment compliance among traders.
In the last six months ending December 2023, the county collected Sh3.6 billion compared to Sh2.6 billion in the 2022/2023 financial year.
The battle at City Hall over revenue control and management is not new, given the county's huge potential and the concentration of economic activity in Kenya's capital.
A source familiar with ongoing developments at City Hall told the Nation that Mr Sakaja’s administration received more than 50 proposals for a revenue collection management system as soon as it took office.
During a public hearing of the ad hoc committee, Safaricom, through its consultant Omingo Magara, made a presentation promising to revolutionise revenue collection at City Hall if given the opportunity.
"Our system has the capacity to map every taxpayer in the county and make the payment of taxes cashless. It has worked in other counties like Kisumu," Mr Magara told the committee on December 18, 2023 at Charter Hall.
Although Sakaja's administration insists it is increasing the county's revenue collection, the Commission on Revenue Allocation (CRA) says the county is punching below its weight.
According to the CRA, Nairobi has the potential to collect Sh67 billion every financial year, although the county has currently set its target at Sh19 billion.
City Hall has consistently missed its revenue targets since its inception in 2013. The highest amount of own-source revenue collected was in 2015-2016 during the Kidero era. The county collected Sh11.7 billion against a target of Sh15.3 billion.
There have been reports of revenue diversion, with the EACC recently uncovering a parking scandal in which revenue officials manipulate the system to show that a customer has paid only to ask the client to transfer the money to the tax collectors’ personal bank accounts.
Dr Kidero also faced a serious challenge after investigators questioned a contract the county government signed with service provider WebTribe Ltd, the parent company of JamboPay.
Dr Kidero, who took office in 2013, kicked out another company, Hausraum Limited, to pave the way for JamboPay.
JamboPay was paid a 4.5 per cent commission on revenue collected. Hausraum Ltd later went to court seeking Sh1.3 billion for breach of contract.
In 2019, shortly after former Nairobi governor Gideon Mbuvi Sonko took office, a bitter dispute with JamboPay resulted in the latter terminating its contract with the county government.
Mr Sonko later signed a revenue collection deal with the National Bank of Kenya (NBK) before NMS took over in 2020.
