DOWNWARD SPIRAL

Figures paint grim picture of city revenue collection

Kenya's seat of power has failed to meet targets revenue collection since the inception of devolution.

In Summary

•Nairobi has failed to meet its target since 2014.

• The low performance said to be a result of unreliable rates, low collection from single business permits and inefficient collection of parking fees.

Nairobi Governor Mike Sonko.
Nairobi Governor Mike Sonko.
Image: COURTESY

Nairobi has failed to meet its revenue targets since 2014, with its performance on a downward spiral since achieving a high of Sh11.7 billion in 2015-16.

Revenue collection has faced constraints. In 2013-14, the total collection was Sh9.33 billion against a target of Sh12.13 billion. The low performance was said to be a result of unreliable rates, low collection from single business permits and inefficient collection of parking fees.

This underperformance necessitated downward revision of the approved estimates passed by the county assembly in February 2014 in the form of a supplementary budget.

In 2014-15, the collection was Sh11.6 billion against a revised budget of Sh13.2 billion. The shortfall in internal revenue was much lower at 14 per cent compared to the preceding year’s 23.1 per cent. Delayed passing of the Finance Act, 2013, was blamed for the shortfall. It was the period City Hall, steered by then-Governor Evans Kidero, contracted tech firm JamboPay to collect revenue on its behalf.

Sh11.71 billion was collected the following year ( 2015-16 ) against a target of Sh15.3 billion. This, however, was a slight increase of about Sh126 million from the previous year. The shortfall of revenue was blamed on the underperformance of revenue streams such as rates, single business permits, building permits, billboard and adverts, and liquor licences.

In 2016-17, revenue dropped as City Hall collected Sh10.93 billion against a target of Sh19.57 billion. This was the last year before Mike Sonko took charge. In 2017-18, the first year under Sonko’s tenure, Sh10.11 billion was collected, against a target of Sh17.23 billion.

The deficit was largely due to the underperformance of own-source revenue, which fell below the Sh17.2 billion target by more than Sh7.2 billion. The county administration blamed it on the longstanding post-election stalemate.

The 2018-19 financial year was no better. Revenue still fell short as Sh10.17 billion was collected against a target of Sh15. 29 billion. Once again, the underperformance was blamed to own-source revenue, which created a deficit of about Sh 5.3 billion.

On June 7 this year, City Hall parted ways with Jambopay after a near five-year partnership. During its contract, JamboPay digitised more than 130 of the 138 revenue streams, collecting more than Sh40 billion in the process. The county announced it would go it alone in revenue collection and a  new e-payment system called Internal Revenue Management System (IRMS) was introduced. It required residents to pay services using USSD code *235#.

In the three months that followed, City Hall posted a deficit of Sh336 million. In total, the county collected Sh1.539 billion in the three months from over 130 revenue streams, compared to Sh1.875 billion collected in a similar period last year.

 

Poor performance on own-source revenue

Over the past five financial years, poor results have been blamed on the weak performance of the top five own revenue sources. Rates, which have been the best performing stream, drew Sh2.3 billion in 2013-14 against a target of Sh3.1 billion.

In 2014-15, Sh2.6 was collected against a target of Sh2.8. And the following year, Sh3.2 billion was collected against Sh3.8 billion. Subsequently in 2016-17, the sector performed poorly. Sh2.3 billion was collected against the Sh5.5 billion target.

Sh1.9 billion was collected in 2017-18 against a target of Sh2.8 billion. Last year, Sh2 billion was collected against Sh3.6 billion that was targeted.

Also cited for underperformance are poor rates records, enforcement challenges and poor collection mechanisms. Parking Fees has also failed to meet its target, with Sh1.5 billion collected against Sh1.8 billion in 2013-14.

In 2014-15, Sh2 billion against a target of Sh2.8 billion was collected, while in 2015-16, Sh2 billion was collected against Sh2.6 billion. The revenue declined in 2016-17, with Sh2 billion collected against Sh3.5 billion.

In 2017-18, Sh1.9 billion was collected against Sh3.2 billion while last year Sh 1.9 billion was collected against Sh 3 billion.

For single business permits in 2013-14, the city collected Sh1.5 billion against a target of Sh1.6 billion, while in 2014-15, Sh1.8 billion was collected against Sh2.2 billion. In 2015-16, Sh1.8 billion was collected against Sh2.8 billion, while the following year, Sh1.8 billion was collected against Sh3.6 billion.

In 2017-18, Sh1.8 billion was collected against Sh3.2 billion, and last year, Sh2 billion was collected, creating a shortfall of Sh600 million. Underperformance was due to poor enforcement, invasion of unscrupulous traders and inaccuracy of records on business establishments.

In 2013-2014, Sh760 million against a target of Sh 2.2 billion was collected for Building Permits. The following year, the county generated Sh1.3 billion and in 2015-16, Sh1.2 billion was collected against Sh1.7 billion.

In 2016-17, Sh843 million was collected against Sh1.7 billion, while in 2017-18, Sh239 million was collected against the Sh1.5 billion target. Last year, Sh1 billion was collected against Sh1.5 billion. The decline and continued low out-turns in this stream can still be attributed to nondisclosure and nonadherence to buildings regulations. 

For billboards and adverts, Sh693 million was collected in 2013-14 against Sh520 million, while in 2014-15, Sh676 million was collected against the targeted Sh700 million. The county generated Sh663 million in 2015-16 against Sh800 million, while Sh720 million against the targeted Sh1.2 billion was collected in 2016-17.

The following year, Sh829 million was collected against a target of Sh1.1 billion, while in 2018-19, Sh797 million was collected against Sh1 billion targeted.