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The firms are raking in millions in one off payment for the setting up of the systems as well as commissions for every shilling collected
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In most counties, the fintechs are charging between four and 15 per cent for every shilling collected
Image: FILE
Details have emerged on how private financial technology firms (fintechs) are making minting from counties during revenue collection.
The Star has established that more than 33 counties have splashed millions of shillings in contracting the fintechs to set up systems and collect revenues for the counties.
The firms are raking in millions in one off payment for the setting up of the systems as well as commissions for every shilling collected.
In most counties, the fintechs are charging between four and 15 per cent for every shilling collected.
Worse, some counties end up spending more on the firms than the actual revenue they collect.
“The cost of these systems is a source of concern. The cost differentiation of the systems with same capabilities from the same vendors across the counties is disturbing,” said Commission on Revenue Allocation chairperson Mary Chebukati.
She called for verification of the costs of the systems from the point of contractual agreement to the time of implementation.
Chebukati spoke when she appeared before the Senate ICT committee inquiring into the status of automation of revenue collection in the devolved units.
Shockingly, the firms have only automated collections for a small percentage of revenue streams, with the rest of streams still being handled manually.
“The current focus on collection is narrow in scope and needs to be expanded to incorporate the entire range of revenue administration,” Chebukati said.
In Nairobi, revenue collection system was implemented by JamboPay, an online payment gateway owned by WebTribe.
The firm implemented the revenue collection system known as e-JijiPay for the county government.
The firm set up the system at the cost of Sh23 million. This is besides a 6.2 per cent commission the firm earned – for support and maintenance – for every penny collected through the system.
“As at the time of writing this report, approximately 200 of the cash office personnel were under suspension. Consequently, JamboPay personnel are the one’s manning the revenue offices,” Chebukati said.
She tabled the report before the ICT Committee chaired by Trans Nzoia Senator Allan Chesang.
The report revealed ‘opaqueness’ in the flow of money collected through the electronic system as the funds collected are first deposited in a Trust Fund before being remitted to the county revenue account with the vendor’s fees already deducted.
“It must be noted that this arrangement runs contrary to the provisions of the Public Finance Management Act,” the CRA boss said.
Automated revenue streams in Nairobi are single business permits royalties, cess, market fees and slaughter, auction fees and parking.
In Kakamega, the county spent Sh7 million contracting the Public-Sector Revenue Management system to automate revenue collections.
“Lack of requisite infrastructure at the subcounty level continues to undermine the system rollout and that poses a major challenge,” Chebukati said in the report.
In Turkana, the county spent Sh35.93 million to contract Sense Networks to set up and automate revenue collections.
The firm charged five per cent, 10 per cent and 15 per cent of every penny collected in the first three years.
However, CRA said the county may not have benefited from the system owing to network coverage challenges, insecurity, power challenges and weak enforcement.
In Trans Nzoia, the county spent Sh79.11 million on JamboPay to set up the system.
The vendor earned a commission of 5.2 per cent of every shilling collected through the system.
“Value for money is evidently not being realised given the cost of the system versus observed. So far, it is apparent that the county has spent more on revenue collection than it is getting back in form of returns,” the report states.
Murang’a spent Sh20 million to hire River Bank to set up a revenue collection system.
Siaya on the other hand spent Sh20 million to set up revenue collection system.
Vihiga spent Sh20 million to set up its revenue collection system and Kisumu speent Sh31 million.
“Counties are adopting systems off-the shelf without conducting proper needs assessment resulting to having systems that do not meet their specific revenue enhancement needs,” CRA said.
The commission recommended that the devolved units actively engage all the stakeholders in the needs assessment, acquisition and implementation of the systems.
“It is needless to say that counties need to standardise their systems and processes by adhering to CRA and National Treasury County revenue automation guidelines and the procurement laws.