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Gainers, losers in county revenue collection race

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An aerial view of Nairobi CBD. FILE PHOTO | NMG

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Summary

  • Controller of Budget (CoB) data for the year ended June shows that some 34 counties collected lower amounts of OSR in the year ended June compared to a similar period to June 2019, 10 posted growth while the collections for three remained flat.
  • Kajiado tops the list of the biggest losers with its OSR falling 42.7 percent to Sh616.8 million from the corresponding period last year followed by Meru whose collections fell 30.3 percent to Sh383.3 million.
  • Narok’s reported a dip of 24.9 percent to Sh2.34 billion, followed by Isiolo at Sh122.08 million reflecting a fall of 24.5 percent.
  • Isiolo managed to raise Sh225.83 million, closing the list of the biggest losers, which was a 22.9 percent fall from a similar period last year.

More than 75 percent of the counties posted declined own-source revenue (OSR) collection in the year ended June compared to last year, underlining their over-reliance on National Treasury transfers to fund operations.

Controller of Budget (CoB) data for the year ended June shows that some 34 counties collected lower amounts of OSR in the year ended June compared to similar period to June 2019, 10 posted growth while the collections for three remained flat.

Kajiado tops the list of the biggest losers with its OSR falling 42.7 percent to Sh616.8 million from the corresponding period last year followed by Meru whose collections fell 30.3 percent to Sh383.3 million.

Narok’s reported a dip of 24.9 percent to Sh2.34 billion, followed by Isiolo at Sh122.08 million reflecting a fall of 24.5 percent.

Isiolo managed to raise Sh225.83 million, closing the list of the biggest losers, which was a 22.9 percent fall from a similar period last year.

Restrictions imposed from March to curb spread of the coronavirus disease hit the OSR collections for the devolved units as businesses cut operating hours and motorists stayed at home leading to a plunge in rates, cess, parking fees and other revenue streams.

Kenya recorded its first Covid-19 case on March 13 prompting the government to suspend international flights, impose a dusk-to-dawn curfew, ban movement into and out of four counties including Nairobi and Mombasa in efforts meant to tame spread of the virus.

“This under-performance of own-source revenue collection was, partly, as a result of economic disruptions occasioned by actions taken by the government to contain the spread of the Covid-19 Pandemic which impacted all sectors of the economy,” CoB Margaret Nyakang’o says in the report.

Nairobi and Mombasa – two of the counties flagged as hotspots of the disease took the most heat from the Covid-19 control measures. They posted declines of 15 percent and 12 percent, respectively.

The State’s decision to freeze movement into and out of the two biggest cities, ban mass gatherings and suspension of international flights forced motorists to stay at home denying the counties parking fees collections.

Tourists remained locked out of the country dealing a blow to smaller businesses in the tourism industry in Nairobi, Mombasa and Narok counties that draw huge collections from the tourism value chain.

The drastic declines in tourist numbers at the Maasai Mara Game Reserve that is under Narok, deprived the county of one of its key revenue streams.

Narok County draws nearly 80 percent of its revenue from the game famous for the wildebeest migration that draws thousands of tourists every year between July and August.

“The decrease was attributed to the Covid-19 pandemic which greatly impacted on revenue collection especially from the tourism sector,” Ms Nyakang’o says in the report.

Some 11 counties, however, withstood the Covid-19 disruptions to post growths of up to 51 percent in OSR collections in the period under review.

Homa Bay posted the highest growth rate of 169.3 percent to hit Sh274.6 million from a similar period last year followed by Kakamega that raised Sh1.18 billion reflecting a 37.6 percent jump over the same period.

Nandi collected Sh283.19 million in the year to June representing a 35.9 percent rise while the Coastal county of Lamu recorded a 33.1 percent growth to hit Sh108.91 million from similar period last year.

Mandera— one of the four counties where the State had banned people from moving into and outside from March to June due to the Covid-19 outbreak closed the list of top five gainers with Sh124.96 million, reflecting a rise of 32.6 percent.

Overall, counties raised Sh35.77 billion in OSR for the period ended June, representing an 11.2 percent decline from Sh40.3 billion a year earlier.

Counties raise OSR from parking fees, land rates, cess, entertainment fees, property rates, park entry fees (Narok County), Single Business Permits, outdoor advertising and court fines among others.

The perennial misses in OSR target has forced the 47 devolved units to rely on transfers of their equitable share from the National Treasury to pay salaries and provide critical services like healthcare and build and maintain roads.

Financial fragility

Any delays in the cash transfers from the National Treasury has often seen service delivery at the counties grind to a halt and employees go on strike due to unpaid salaries, underlining the financial fragility of counties in the face of the missed revenue targets.

Last month, governors threatened to close hospitals and sent employees on forced leave due to delays in release of the Sh316.5 billion equitable share for the year to next June.

A failure in Senate to agree on the formula for sharing the funds lead to a three-month delay in release of funds to counties, making it impossible for them to pay salaries and allowances for health workers amid the Covid-19 pandemic.

Senators passed the formula paving way for signing into law of the County Revenue Allocation Act, 2020 that in turn saw the National Treasury release Sh52.2 billion to the counties last Tuesday.

The cash transfers will cover for July and August meaning that the counties are yet to get cash for last month.

Nearly a decade since start of devolution, counties continue to grapple with weak revenue collection systems, corruption and poor setting of targets that the National Treasury says is not based on well-thought out projections.

“Counties also inherited structures including revenue administration procedures and guidelines, as well as revenue collection personnel,” the National Treasury says in a policy document on enhancing OSR collections for the devolved units.

“In the process, many inefficiencies were also transferred such as weaknesses in the regulatory framework for OSR management --billing, laxity among revenue collectors and poor setting of annual revenue targets.”

Majority of the counties have not updated land valuation rolls contrary to the National Treasury proposal that they review the rolls every 10 years. This has in turn seen them collect less from rates even as land prices soar.

Nairobi County’s valuation roll was last updated in 1982, Machakos in 1983 and Mombasa in 1991. Kisumu updated it roll in 2008, Nyeri (2009) and Kiambu (2014).

The National Treasury is yet to implement the policy recommendations meant to shore up revenue collections for the counties.

It (National Treasury) has also proposed that counties contract the Kenya Revenue Authority to collect their revenues saying that the taxman’s sophisticated technology and trained personnel will help seal the leakages at the devolved units.