BAILOUT

92% of Covid funds in Kenya went to big corporations – report

The FTC report also warns of lack of transparency of the recovery funds.

In Summary

•In the countries surveyed, only two per cent of funds went to support workers in the informal sector, even though they often make most of the workforce.

•The report from the Financial Transparency Coalition (FTC) and partners analysed data from nine countries:Kenya, South Africa, Sierra Leone, Bangladesh, India, Nepal, Honduras, Guatemala, and El Salvador.

The National Treasury building
The National Treasury building
Image: FILE

The majority of Covid-19 recovery funds in Kenya have gone to big corporations instead of towards social welfare, small firms, or the informal economy, a report has indicated.

This are findings in the first major analysis of the pandemic’s public bailout funds of its kind:Towards a People’s Recovery: Tracking Fiscal and Social Protection Responses to Covid-19 in the Global South.

It reveals that 92 per cent of Covid-19-related bailout funds in Kenya went to big corporations, rather than to those facing poverty.

This came with measures to cushion households and corporates from the impact of the pandemic, which made Kenya’s corporate tax rate the lowest in East Africa, fuelling tax competition.

In the countries surveyed, only two per cent of funds went to support workers in the informal sector, even though they often make most of the workforce.

There are a whole host of reasons, however, why they did not direct resources to social services, and these ranged from the inadequate capacity of governments to identify vulnerable populations in their respective countries to lobbying by the private sector for policy change in their favour
Chenai Mukumba, Policy Research and Advocacy Manager at Tax Justice Network Africa (TJNA)

South Africa is among the countries that did not allocate any funds for these workers.

The report from the Financial Transparency Coalition (FTC) and partners analysed data from nine countries:Kenya, South Africa, Sierra Leone, Bangladesh, India, Nepal, Honduras, Guatemala, and El Salvador.

It found that 63 per cent of Covid-19 relief funds went, on average, to big businesses in eight of the nine surveyed countries, while only a quarter of the funds went to social protection, all in lack of transparency and accountability.

According to Chenai Mukumba, Policy Research and Advocacy Manager at Tax Justice Network Africa (TJNA), most countries in the Global South were able to determine where to direct their public Covid-19 bailout funds.

“There are a whole host of reasons, however, why they did not direct resources to social services, and these ranged from the inadequate capacity of governments to identify vulnerable populations in their respective countries to lobbying by the private sector for policy change in their favour,” Mukumba said.

The FTC’s new report also warns about a lack of transparency of the recovery funds.

In Kenya, for instance, the World Bank provided $50 million (Sh5.4billion) in immediate funding to support the country’s emergency response, which is now unaccounted for according to the report.

This opacity is partly due to most international monitoring systems looking at initial funding announcements rather than tracking the actual disbursement of funds, it says.

“These findings indicate that there is a need for civil societies such as TJNA and its members to advocate for governments to prioritise social protection measures as well as support towards small businesses and workers in the informal sector,” Mukumba noted in a statement on Friday.

To address the dangerous imbalance in existing Covid-19 relief funds, the FTC recommends a minimum corporate tax rate of at least 25 per cent, in line with the proposal from the United Nations Financial Accountability, Transparency and Integrity (FACTI) Panel.

States may also adopt or raise taxes on the wealthy and corporations to ensure those who can afford to pay would shoulder the lion share of the cost.

“It is essential to implement public beneficial ownership registries to know who benefits from recovery spending and profits made during the pandemic,” the report reads in part.