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September 25, 2018

Into The Abyss: Time For Massive Retrenchment

The MCA (Member of County Assembly) will finally be put in his place following this declaration by the president and the deputy-president that they will each absorb a 20 per cent pay cut for good of man and the Kenyan nation.

Actually the real reason given was that it was the beginning of the effort to curb the runaway public wage bill the government faces even as the levels of government services to the people touch new all-time lows.

The MCAs, whose notoriety has been on the rise lately, can now be talked out of the madness of throwing out governors and speakers at will, demanding salary increases, mortgages and car loans and generally holding county finances hostage.

For if this wage cut issue is to cascade downwards, this is opportune time to rectify some things; like the fact that an MCA is not a national official. The nation has no business setting his salary for he makes no laws that affect the nation, only the county.

It follows then, that he should be paid county-level salaries, dependent on the ability of the county for which he makes laws and within the confines of the 30 per cent rule that all county wages including the MCAs’ should not exceed a third of the county purse for the year.

So we need not have in addition to teachers and lecturers’ strikes, MCA forums demanding this and that from the SRC – like councillors before them, let MCAs be paid according to their county’s ability and this will also make them more vigilant of other spending measures that have the potential to squeeze their pay. But that is not panacea for the current wage problem this country has; merely an extension of the argument for these 'cosmetic' wage cuts.

Far more drastic measures need to be taken and for these we do not need the IMF to come in like we have needlessly been entertaining them the last three or so budget cycles. It is very clear that to reduce this unsustainable wage bill we need to cut our labour force drastically.

This is not a subject for political debate. Where we are headed is economic abyss unless we magically begin to export crude at significant levels tomorrow. Since this is not happening, I see three measures that must be taken going forward.

We must retrench public officials from our bloated civil service while simultaneously putting in place a plan for reducing the retirement age to 55 down from the current 60.

Concurrently, we must identify shared services in government where certain government functions can be serviced from one pool of resources rather than duplicating departments in each entity.

Lastly, government must get out of non-core activities and outsource. The case for the last two is easy enough to make but for critics of retrenchment, it helps to remember how we got to this mess.

We set up a grand coalition government in 2008. With it, we created new ministries that led to an expanded 44-member cabinet and bureaucracies to match. Some of these came completely from scratch and had to be staffed and equipped afresh e.g. the Prime Minister’s Office, Nairobi Metropolitan and so on.

We then raised the retirement age for civil servants from 55 years to 60 years old as it became apparent we would be unable to pay impending pensions.

We also went created numerous commissions, some temporary others permanent that also employ staff even as we passed a new constitution which set up even more commissions from Salaries and Revenue to Commission on Revenue Allocation to Commission on Administrative Justice, and so on.

The clincher of course was the added offices with county governments and the addition of the senate chamber to parliament. So much so that just last year alone, the wage bill shot up by 31 per cent.

With so many people to pay, it is no wonder Kenyans are being taxed at every opportunity and we are barely keeping up with this wage bill. Given such conditions, the budget for development projects is bound to keep shrinking unless the government keeps borrowing despite the dangerously high levels of public debt we are witnessing. And that’s not even the bad news.

The reality is that we are headed for worse times unless we act now. For starters, those 55-year olds who postponed retirement nearly five years ago have now reached 60 years and will retire. Like it or not, the money for their pension has to be found.

Two, massive development projects proposed by the government such as Lapsset, one million acres irrigation project, standard gauge railway and so on are likely to pile on massive debts on the country’s books that we Kenyans have to bear. This will likely mean high interests rates that are not conducive to the growth of the private sector.

Third, a number of big loans that the previous administration took to put up projects such as Thika Road, Northern Corridor roads all the way up to Malaba and Moyale, energy and water projects, e-government etc, were funded by concessionary loans.

These loans either from the World Bank, Africa Development Bank, China and so on typically came with a 10-year grace period after which we begin to pay.

It is very likely repayment of these loans will kick in this year and next and continue into the foreseeable future. For most of them the repayment period is 40 years.

With these kind of scenarios we cannot then afford to pay 30 accountants in one ministry that resulted from the merger of three ministries e.g. EAC, Commerce and Tourism. Likewise there is no need for a pool of drivers inherited from what were the ministries of Transport, Roads and Public Works respectively. We need to rationalize the staff in all these ministries and other public bodies to ensure we are only paying for staff that we need.

For other services such as back office systems, government offices should share services:- there is no need for the Ministry of Energy to buy expensive servers for its records only to use a 10th of the space and yet eight more ministries could use that same space.

Likewise, there is no sense in the Ministry of Roads negotiating way leaves for its highways only for Ketraco or the Water Services boards to come negotiating for the same later on, let this service be shared.

Finally, let us identify non-core services that government offers and outsource them. They could even be outsourced to those who will be retrenched since they are already doing that work anyway.

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