SHARING NATIONAL CAKE

Revenue sharing formula: Give money to people, not land

In determining the third generation formula, it’s important that functions be properly cost to ensure optimisation of service delivery to mwananchi.

In Summary

• There have been contestations about how funds have been shared among counties for the last five or so years, especially if you consider provisions of articles 203 and 217 of the Constitution.

• This is so because of the need to affirm marginalised counties, while at the same time balancing between rural and urban populations.

Sharing the national cake
Sharing the national cake
Image: STAR ILLUSTRATED

A special sitting of the Senate was called by Speaker Ken Lusaka last Tuesday to discuss the basis for the third generation formula, which would determine how monies shall be shared amongst counties for the next five years. Thee matter wasn’t concluded.

There have been contestations about how funds have been shared among counties for the last five or so years, especially if you consider provisions of articles 203 and 217 of the Constitution.

This is so because of the need to affirm marginalised counties, while at the same time balancing between rural and urban populations. A cursory look at the per capita allocation among counties reveal huge disparities, with those hat produce the most revenue — which happen to be the most populous —  get the least.

This is against the provisions of Article 201 (b) (i), which requires that the burden of taxation be shared fairly. Lamu, for instance, has a per capita share of 19,000 compared to Kiambu with 3,800. Both counties have 143,000 and 2.4 million persons respectively.

There is need, therefore, to ensure urban marginalisation and poverty isn’t relegated to the periphery. I, for example, have been visiting homes of vulnerable people within the Nairobi Metropolitan Area and I have been shocked by the abject poverty and depravity I have witnessed.

With a combined night population of more than seven million residents, this area is in dire need for services. Take for example Margaret, who has 10 children, one of whom has a disability. They all live in a two-roomed rented house on the first floor. The husband is injured, having fallen from the second floor when working at a construction site.

Allocations to this area need to be increased exponentially since the majority of Kenyans are increasingly living in urban areas as they look for opportunities. Such dwellings need roads, water, lighting, mass public transport system and sewerage services. The latter is critical as poor hygiene accounts for most diseases.

There have been contestations about how to allocate resources, and the contestation has always been between land and population. The northern counties have been pushing for land to be a key determinant of the formula.

While this is a factor, the population of the whole of Northeastern counties is 2.5 million persons compared to Kiambu's 2.4 million people. Further, when it comes to fiscal responsibility (the amount of revenue that each county collects), these counties contribute the least to the national kitty.

Interestingly, some of their funds have been proven to have been misappropriated and divested back to Nairobi, especially the Eastleigh economy. This defeats the logic of devolution, in that instead of funds benefiting those that they are intended for, they end up being re-invested where they were sourced from as private properties/ventures. This not only depriving needy persons of the much needed services that potentially would reduce urban migration and ensure more even development, but the new taxes generated from such investment still benefit the host counties.

It is important to note that even in ancient Greece, the phenomenon of having cities as mini states was the practice as epitomised by the city states of Sparta and Athens. In modern times, the mega city of London is an economy, some kind of a small country in itself, thus its economic indicators have always been bullish for almost a decade now, even as other parts of the UK have slackened economic growth.

In determining the third generation formula, it’s important that functions be properly cost to ensure optimisation of service delivery to mwananchi. Further, resources should always follow functions to ensure the burden of service delivery is well factored.

This should be coupled with the principle of subsidiarity in that budgeting should be done at the lowest level ie. at the wards, considering the felt need on the ground and the special circumstances that each area presents. Financial prudence as a principle of resource allocation under this formula is critical, as there is no need of allocating huge sums of money for Wanjiku, only for them to be embezzled.

To reduce over-reliance on funds from the Consolidated Fund, counties have a greater potential to spur economic growth by taking loans that are guaranteed by the national government for mega projects and innovations within the knowledge economy, towards the fourth industrial revolution.

Projects such as the high grand falls hydro –electricity power plant in Kitui county, or the granite industry in Kakamega can be funded through loan guarantee by the national government. Further, counties need to move from the 18th Century physiocratic economic outlooks to lip-frog their economies. The world has moved on!

Ultimately, the decision of how the funds are allocated amongst counties shall be political, and we need to be careful not to create new forms of marginalisation, as we resolve the historical one.