Counties miss Sh16bn mineral use revenue potential amid shortfalls


County governments collected below one percent of the Sh16 billion they could have raised from natural resource exploitation fees. FILE PHOTO | KEVIN ODIT | NMG

County governments collected below one percent of the Sh16 billion they could have raised from natural resource exploitation fees in the financial year that ended June last year, an analysis by the Parliamentary Budget Office (PBO) shows, highlighting the own-source revenue (OSR) underperformance troubling the devolved units.

During the 2022/23 financial year, the regional administrations jointly raised only Sh84 million from mining fees, a meagre 0.52 per cent of the estimated potential, translating to an underperformance of 99.48 per cent, data from the Commission on Revenue Allocation shows.

This underpins the consistent OSR underperformance in the devolved units, which has always caused an over-reliance on transfers from the national government, which is often delayed as well as below targets.

Since their inception, devolved units have barely raised money beyond 65 per cent of the total targeted OSR, most of which has always been concentrated in just a few counties, with Nairobi raising nearly 26 per cent annually.

Last year, counties managed just Sh38.7 billion from OSR, falling short by 34.1 per cent of the expected Sh57.37 billion. It was, however, a slight improvement from the Sh35.9 billion raised in the 2021/22 financial year.

Curiously, revenues from export of minerals and other natural resources have been rising over the years, begging the questions on why the cash-strapped counties are not tapping into the full revenue potential.

In the same 2022/23 financial year, for instance, Kenya earned a total of Sh36.5 billion from exports of soda ash and titanium ores and concentrates, the country’s main mineral exports.

Other natural resources exploited in Kenya include salt, fluorspar, limestone, salt, niobium, tantalum, and petroleum. At the same time, a survey by the Mining ministry last year revealed that the country has over 900 minerals still unexploited.

Counties also missed revenue potential from several other sources, including trading fees, parking, market centres, property rates, and liquor licencing fees among others.

Parking, for instance, only raised Sh2.6 billion for the devolved units in the 2022/23 financial year, out of the estimated potential of Sh8.5 billion. Similarly, trading licenses, which could have generated Sh23 billion, only raised Sh4.5 billion.

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Note: The results are not exact but very close to the actual.