Counties miss revenue targets despite use of technology

Use of new technology to boost revenue collection at the counties has failed to hit initial targets, shows official figures.

Despite the adoption of new technology, the amount of revenue collected by the devolved units is below forecast.

Several counties have since integrated electronic payment mechanisms  and  systems  aimed  at expanding  their  revenue  base  and  increasing  tax  compliance  to  reach  collection  targets.

“There are disparities in revenue collections in the counties that have automated and those which have not automated their processes,” says Commission on Revenue Allocation chairman Micah Cheserem while maintaining that ICT will enable the counties to meet their revenue targets.

Proponents of the e-payment platforms say they have eliminated or reduced corruption and leakages by allowing customers to pay bills without visiting county offices.

Recently Kiambu Governor William Kabogo said that the adoption of Integrated Financial Management Information System (IFMIS), M-Pesa, Airtel Money, Visa and MasterCard payment modes and e-procurement systems was aimed at minimising fraud in procurement.
Kiambu County as at May this year increased its revenue collection to Sh2.3 billion up from Sh1.1 billion in May 2014, however, the figure fell short of the annual target set at Sh3.8 billion.

Nairobi County is among the counties that have also adopted e-payment to bring efficiency and convenience in revenue collection.

In Nairobi, motorists pay for parking space using mobile money, debit cards, over-the counter payments at 29 partner banks and at independent agent stalls spread across the city.

All the digital payment options are linked to the Nairobi County e-wallet that is created on signing up.

The e-payment system in Nairobi County is used for parking fees, single business permit, rent and land rates.

According to Treasury statistics, in the Financial Year 2015/16, County Governments collected an aggregate of Sh35 billion, equivalent to 63.4 per cent of the targeted Sh55.2 billion.

While the Treasury has attributed the performance to several factors, the role of ICT platforms is likely to come into sharp scrutiny.

“Three key observations can be made from this performance. Firstly, counties’ own-source revenue (OSR) is growing significantly slower,” says the Treasury in the 2017 Budget Policy Statement.

The counties’ OSR grew by about Sh7.6 billion (28.9 per cent growth) from Sh26.3 billion in the Financial Year 2013/14 to Sh33.9 billion in the financial year 2014/15. In contrast, between 2014/15 and 2015/16, the increase was 3.2 per cent, equivalent to Sh1.1 billion.
“This underscores the need for counties to apply more fiscal effort, while also improving efficiency in revenue collection,” adds the Treasury.

According to Danson Muchemi, the chief executive of online payment gateway JamboPay, lack of adequate infrastructure in far-flung counties have barred authorities and citizens in such areas from exploiting the full potential of ICTs in optimising revenue collection.

Infrastructure challenges

“The rural counties have infrastructure challenges,” he notes.

According to the Treasury statistics, the actual OSR collection against the targets has dropped from 67.3 per cent in 2014/15 to 63.4 per cent in 2015/16.

Collections in Financial Year 2015/16 remained below the 2014/15 target, which was itself downgraded due to poor performance in the previous year.

The Treasury notes that in general, the escalating misalignment between target and actual collection highlights the difficulty counties face in preparing forecasts.

Relying on one major own-source revenue was exposing the regional governments to fiscal shocks occasioned by a dip in their main revenue source, the Treasury says.

Additionally, the unrealistic own-source revenue projections which results in unrealistic expenditure estimates inevitably generate pending bills and causing general cash flow problems, concludes the assessment.

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