Since the inception of devolution in 2013, most county governments have been grappling with huge wage bills that have hampered development. And the National Treasury's persistent delay in releasing the equitable share of revenue to the devolved units has exacerbated the situation. Some counties in Nyanza have sought the help of former Laikipia Governor Ndiritu Muriithi to increase their own sources of revenue.
Of late you have become a frequent visitor to Homa Bay, Kisumu and Nyamira, what are you up to?
My colleagues (from Laikipia) and I have been advising on resource mobilisation to corporates and county governments. That is why we are coming to this region. We share knowledge on corporate bonds. We are the team that organised a bond at the county level. We were also acclaimed for growing (own source) revenue when we were in Laikipia County.
It is not like that. Individual counties contract us as advisors. We have clients around here, and elsewhere. We are happy to work in all counties that require our services. Currently, we are engaged in Homa Bay, Kisumu and Nyamira. We advise counties not to be dependent on equitable share alone but devise other innovative ways to finance what they are doing.
Yes, we did some work for Homa Bay Governor Gladys Wanga and, on her own admission, the devolved unit has, so far, recorded a tremendous improvement in Own source Revenue (OSR) collection. The OSR for Homa Bay County in the last financial year was Sh700 million. A review of a half-year report on OSR collection for the current financial year shows that it is already past Sh600 million; a full year is most likely going to go beyond the Sh1 billion mark. When Governor Wanga came into office, Homa Bay was collecting about Sh130 million to Sh190 million a year.
Our ideas also worked in Laikipia County when I was the governor. We grew the OSR from Sh400 million to Sh1 billion by the time I left office. Our team helps curb pilferage and corruption during revenue collection.
What is the exact thing that you can pin-point to has helped the counties you work with grow their OSR?
Improving revenue is brought about by a combination of things. It is about People-Processes-Systems. You need a robust system to collect revenue, a cashless one is best. Counties should embrace digital technology that needs to be synchronised with the process that they use to deliver a service which is being paid for. They should have the right people, provide a performance management system and reward performance. Do not shy away from punishing non-performers.
When I was the governor of Laikipia, it was the first county to issue an infrastructure bond. The Constitution contemplates counties borrowing money for infrastructure or development projects. When sub-nationals issue bonds, we typically call them municipal bonds. Around the world, cities, counties and states within a federation are always issuing bonds. So, it is quite practical for counties to issue bonds.
There are some basic requirements like managing the finances well and adhering to the fiscal responsibility principles — don't spend all your monies on recurrent expenditure, payment of salaries and allowances. You must spend at least 30 percent on development projects. Infrastructure bonds are a way to finance larger projects, and I recommend that counties consider it.
The national government is the biggest defaulter in land and property taxes. It owes counties over Sh50 billion in property taxes (contribution in lieu of rates) in the past 11 years. Perhaps counties should look at ways of how to repossess such land. Also, it is a county function to regulate the sale of food, but the national government collects the Catering Levy (now referred to as the Tourism Levy). Counties should look into this to generate more revenue.
Both levels of government have not been achieving their revenue targets because the economic performance has been low. The equitable share revenue from the National Treasury is never enough to finance county functions. Counties should consider rationalising responsibilities to cut down on spending, for instance, eliminating obsolete jobs like that of telephone operators. Counties should invest in knowledge and expertise in the management of their finances.
KRA has expertise in the area of tax. A large portion of county revenue is Facility Improvement Fund finance. KRA has previously worked with some counties. I think counties should get knowledge and expertise to do the job.
