The first and second phases of devolution have revealed the economic benefits Kenyans have accrued but has also highlighted key problems arising from the governance model.
Benefits include the devolution of financing to locations outside of major cities in the country, Kenyan professionals leaving big cities to work on county development and the creation of several devolved centre-points for economic development strategy formulation and implementation.
However, key challenges have emerged.
These include the devolution of corruption, poor fiscal accountability by county governments and deterioration in the business environment in many counties.
This article will focus on the last two points and how they can be addressed.
As mentioned, a key problem with devolution has been the notably weak county fiscal performance; most counties are not adhering to the Public Finance Management Act. A report by the International Budget Partnership (IBP) shows that average transparency, as determined by the availability of key fiscal and budget-related documents, was 42 per cent in September last year.
The figure was 25 per cent in 2017.
Further, during physical checks conducted by IBP on whether required budget documents are physically available in county offices only two of the 15 counties assessed were found compliant.
This performance is informed by two factors: capacity and corruption. Technical capacity deficiencies exist and compromise the ability of county governments to develop, disseminate and implement fiscal documents. On the other hand, there are no consequences for poor fiscal accountability, which create a breeding ground for corruption to run rife in counties particularly on the expenditure side.
A second problem with devolution has been how many county governments are making the business environment very difficult.
In my conversations with both large and small business the issues of CESS and county government levies/taxes has been raised numerous times. County governments are arbitrarily raising the cost of fees of doing business in areas under their jurisdiction; one county is said to have increased land rates by 600 per cent.
There are multiple charges of CESS and the creation of new permits such as the onerously expensive distribution permits which are levied even at the sub-county level.
In addition, businesses are harassed at the county level where, for example, vehicles are unfairly impounded and bribes demanded for release.
Part of such actions by county governments are due to pressure to generate own revenue but some of it is plain corruption. Many county government actions are harming business activities and thus employment and wealth creation in their counties and thus Kenya as a whole.
What can be done to address these issues? Ranking. Rank counties on their fiscal transparency and business environment. Kenyans and other interested parties should come together and create two ranking systems that highlight the best and worst performers on both fiscal and business environment issues. Perhaps then, there will an impetus beyond individual county government values, that make them more fiscally accountable and work to improve their business environment.