Revenue tussle: Raila and Uhuru seal formula deal

President Uhuru Kenyatta has received the backing of ODM chief Raila Odinga for a new county revenue-sharing formula after a stalement that had threatened the handshake.

However, Deputy President William Ruto urged Parliament to come up with what he termed a “win-win formula that is sensitive to proposals made without hurting any county”.

The proposed revenue formula will hit hard the underdeveloped sparsely populated counties – the marginalised areas especially in North Eastern and at the Coast. Those are areas Ruto is eyeing for votes in 2022 presidential bid. And Raila’s vote base as well.

It will benefit the more densely populated counties in Central region, Uhuru’s backyard where 10 counties will gain by about Sh300 million.

They have been clamouring for more funds, saying it’s unfair to allocate more to lesser populated areas. It will also benefit Western and Rift Valley counties.

The Star has established Uhuru personally reached out to Raila and Wiper boss Kalonzo Musyoka to support the proposed revenue-sharing formula.

Raila supported a reduction of funding to his support base – but a gradual, less painful one. He also gains support in Mt Kenya.

The President's decision to reach out to the two political allies followed a protracted deadlock in the Senate over the Commission on Revenue Allocation's third basis for sharing of funds among the counties.

However, in the new deal, senators will revert to the proposed by the Commission on Revenue Allocation and discard a divisive proposal currently before the Senate.

“The leaders had productive engagements over the weekend and found amicable ground to break the revenue impasse,” a senior Jubilee official seeking anonymity said.

The CRA proposal is popular because while at least 20 counties would lose Sh12.3 billion in allocations, it recommends a phasing-in of the formula to avoid disruption of services and development programmes.

The commission said, “The proposed approach is to set aside 15 per cent of the equitable share increment to cushion counties, which would see a reduction in their equitable share in a quantum in excess of five per cent. This is in line with the provisions of Article 203(d) and (j) of the Constitution.”

Under the proposed formula by the Senate Finance and Budget Committee, 19 counties would lose as much as Sh17 billion.

However, the committee does not provide for how the poorer counties losing funds would be supported to make the adjustment.

The committee chaired by Kirinyaga Senator Charles Kibiru, however, suggests that the formula be applied in the 2021-22 financial year.

This approach, the panel said, aims to avoid disruption of services as most counties had already passed their budgets.

On Monday, Jubilee senators led by Majority Whip Irungu Kang'ata met at a Nairobi Hotel to find common ground ahead of the debate on the CRA report.

On Tuesday, the President has convened a Senate Jubilee Party Parliamentary Group meeting at State House, Nairobi, to build consensus among his troops.

The standoff had threatened the future of the Handshake and by extension the Building Bridges Initiative after Raila's allies initially rejected the proposed new revenue-sharing formula.

Johannes Mwaruma (Taita Taveta) and Mutula Kilonzo Jnr (Makueni) whose counties are losing, told the Star they will stand their ground and reject any formula that costs their counties much-needed funding.

“We will not relent, otherwise, devolution is at stake in this country. We cannot accept our counties to continue being marginalised,” Mutual, who is the minority chief whip, said.

Narok Senator Ledama Kina said they will support a formula that saves counties from any losses.

“We are supporting the formula by Nairobi Senator Johnson Sakaja that ensures no county loses. Otherwise, there will be cessation in this country. Let the losers have their own country. If Baba wants CRA, then the rider that 15 per cent be set aside to cushion these counties, must be factored in.”

The fears that at least 19 marginalised counties – Raila’s traditional support base – would lose as much as Sh17 billion had caused jitters among the ODM leaders’ allies.

The money would be taken up by highly populated counties in Central, Western and Rift Valley.

After days of haggling that threatened the Building Bridges Initiative, Raila and Kalonzo on Monday threw their support behind CRA's proposal, signalling an end to the stalemate.

Raila and Kalonzo on Monday released separate statements to rally their troops to support the proposed revenue formula. The ODM leader said the debate had assumed ethnic undertones.

The ODM leader said given that senators have failed to agree on their own amendments to the CRA report, they should revert to the original report and approve it to save the country from paralysis.

“Under the circumstances, the country and our people would be better served if we adopted the recommendation of the CRA for the next five years,” Raila said.

Raila said given that both the CRA and the Senate committee on Finance had agreed that the allocation must be based on population as the central principle, senators should adopt the commission's report.

The ODM boss said the CRA recommendation was built on lessons from a comprehensive review of the second basis, a comparative analysis of financing transfer systems from other countries.

cccccRaila's move to back the CRA recommendations and not the Finance committee proposals, is seen as a strategy to consolidate his support in populous Mt Kenya region.

According to the CRA recommendations, the population index had been allocated 18 per cent while the land index was allotted eight per cent.

However, the committee recommended the population index be reviewed down to 16 per cent while the land parameter would lose three points five per cent, triggering protests from leaders.

The downward review of the population parameter by the committee had seen a lot of resistance from Mt Kenya leaders who have maintained a one-vote-one-shilling approach in resources allocation.

If adopted, the President would be the biggest winner in the CRA proposal with counties within his Mt Kenya backyard set to gain dramatically.

However, most of the counties from marginalised regions of Coast and the North Eastern would lose if the committee report is adopted.

“The one-shilling-one vote push has been at the heart of the President and we have seen leaders from his home turf say as much. This has put the President in a tight corner,” said Cabinet minister Franklin Bett said.

The ex-State House comptroller said the clamour for more resources has a major bearing on the 2022 presidential campaigns.

“No serious contender would want to shun the debate. Those seen pushing for more resources would get a upper hand,” he told the Star.

The DP, who has been pushed to the periphery by the Uhuru-Raila camaraderie, said on Monday county should lose any money in the revenue-sharing battle.

Ruto termed the revenue formula debate “unnecessarily divisive”, saying the Constitution envisages “fair and equitable sharing of all our resources”.

“The Legislature must, as per its mandate, structure a win-win formula sensitive to proposals made without hurting any county. Inawezekana (It's all possible),” the DP twitted suggesting he is opposed to the new formula.

The DP's position is at cross-purposes with the President's support for allocation formula that would see some marginalised counties suffer huge allocation cuts.

The massive cuts in marginalised and less populous counties could hurt both Raila and Ruto who are eyeing the regions’ votes ahead of 2022.

Presidential candidates have traditionally anchored their campaigns on more resources allocation to counties to address marginalisation, with any cuts likely to reduce their support.

The DP, whose counties from Rift Valley are gaining under the new formula, is seen to be standing in solidarity with losing counties at the Coast and North Eastern as a strategy to appease them ahead of 2022.

For instance, the DP who is targeting the Mt Kenya East vote bloc in 2022, is concerned that Tharaka Nithi county is losing as much as to Sh367 million in the proposed method.