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Post by roughrider on Mar 8, 2012 14:09:48 GMT 3
Folks, The CRA has published the revenue allocation formula. I will use this thread to offer my thoughts and comments. Please join me in sharing your critical thoughts. I know we can ultimately send this link to them as part of 'public participation'. For starters, this is how we welcomed their appointment in 2011 (naturally, we could not avoid an argument): jukwaa.proboards.com/index.cgi?board=general&action=display&thread=4661&page=1Back to the present. My most immediate question is why they have placed the cart before the horse. You see, the CRA have the important role of first slicing the revenue cake between National and County governments and then slicing the County piece among the 47 counties using objective criteria. They have presented the latter formula (and we shall comment on that presently). But they have not provided information regarding the formula for dividing the national cake between National and Devolved units. If you want to argue about their role in this, consult Article 216 (1) (b) of Mr. Katiba ya Kenya which gives them this job. How much of the national revenue will go to Counties? Its not an obvious question. So far all we know is ‘not less than 15%’. Trust me; this is very different from simply saying ‘15%’. If it turns out that it will be 15% for 2013, then that position must be accompanied by a written analysis and presented to the national assembly by the CRA for approval. This process must happen every financial year. Back to the revenue allocation formula among counties:  Mmmh. Before we discuss this formula, let us jog our memories: What are the principles of public finance that we agreed on as a country?1. Openness, accountability and public participation in all financial matters 2. Equity 3. Looking out for posterity 4. Prudent and responsible financial stewardship 5. Reporting What are the criteria for sharing revenue?1. The national interest. 2. Paying public debt and other national obligations. 3. The needs of the national government, determined by objective criteria. 4. The need for ensure that county governments are able to perform the functions allocated to them. 5. The need for economic optimization of each county and to provide incentives for each county to optimize its capacity to raise revenue; 6. Economic disparities within and among the counties and the need to remedy them. 7. The fiscal capacity and efficiency of county governments. Continued in next post... I need to pour myself some coffee...  |
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Post by roughrider on Mar 8, 2012 14:31:50 GMT 3
Ahaa sweet kahawa. I should say premium Kenyan coffee...
Now, where were we? The formulae. Before we delve deeply let us discuss an ideological notion. If you are a capitalist, you reward success. Profit is the incentive. So you would be demanding that we allocate money to counties according to the output measured by criteria such as contribution to GDP, the amount of tax generated by the County etc. Critics would argue that the poor would get poorer. We would entrench inequality by rewarding the already rich to be richer. It would be a County eat County country.
If you were a socialist you would want not just a more rigorous allocation based on population but also an assessment of needs using poverty indices, human development measures etc. Critics would argue that such approaches would not encourage production and Counties would just lay back and receive money to our collective socioeconomic detriment.
So what do we have, here? I think it is a mix.
First wealthy Counties will generate revenue through licenses, levies, cess etc... I am yet to see how the Revenue Allocation formula has taken this into account as demanded by Katiba. You see, Nairobi City Council, for example collects billions. Yet this formula will reward Nairobi for her population but ignore the related revenue generation capacity. The framers of our constitution were clear that the capacity of the county to generate revenue would be considered.
The use of population is almost unavoidable. But population is a really fluid measure....
I have to deal with a phone call from a relative up country... it seems this will be a winding oloo-like essay.....yet another harambee. aarrgh@$%&.
See you in the next window.
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Post by roughrider on Mar 8, 2012 15:10:19 GMT 3
I pledged 10k for the harambee... someone is going to College... I have never seen her, but hey. Financing higher education is still convoluted. They will impoverish us with this 'spirit' of Harambee. Naomba serikali iingilie kati!
I was saying that some Counties are wealthy by virtue of their revenue generating capacity. Before he was hounded by Cemetry ghosts, Mayor Majiwa read a budget of 12.6 billion for Nairobi city. Counties will get between 1 and 6 billion according to this formula - with an average of 3billion.
But folks, Nairobi is stealing the race - starting with 12.6B. Ditto Mombasa, Kisumu, Nakuru and Eldoret.
I think the pregnant point has been made. I want to turn my attention to another point.
Poverty as a parameter for revenue allocation
Micah Cheserem has said 12% will be distributed according to poverty. The idea is good but the practical application and implementation may be non nonsensical. Targeting poverty can be perilous. Shouldn't we measure some other development indices rather than poverty? How about Human Development Indices?
But I do not want to argue too fine a point. Perhaps the use of poverty indices will signal to Governors that poverty is a target of their development planning. However, with this, there will be a national tendency to overstate poverty so as to receive a greater revenue share. The CDF distribution has used poverty as a basis for years, to no clear result.
I think that as the years roll on we should de-emphasise the poverty measure and use measures such as urbanisation, proportion of roads tar-marked, density of health and education services... what this does is to focus on development.
Besides our ability to measure poverty is questionable. I have always looked at the national statistics of poverty with a heavy dose of scepticism. Besides, what we call poor in Nairobi is a different concept in Moyale.
But what to do - I think the poverty measure is ok, for now.
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Post by roughrider on Mar 8, 2012 19:21:18 GMT 3
Fiscal discipline will account for 2% - my guess is that the auditor general will be asked to rank counties based on audits and then his ranks used to distribute this portion of the cake. Obviously it will not be possible for the first round of disbursements. So it will not apply in Year 1. The idea is to provide incentives for governors to be more prudent and efficient in the use of resources: No cost overruns, no unplanned expenditures, no unused balances and balancing budgets etc will become very important. So I think it is a sensible measure. Wananchi can use this to kick out elected leaders. But it seems a very little amount is in question and might be insufficient motivation. Juxtaposed against the fact that governors have been given, basically, a blank cheque to use money as they wish: this then becomes really important parameter. Have governors been given a blank cheque? Read this report: www.businessdailyafrica.com/Governors+get+a+blank+cheque+in+county+revenue+sharing+plan/-/539546/1355842/-/l3jym3z/-/index.htmlBasically in some countries Governors started mis-applying funds and they had to walk back the policy. There will be some teething problems but we shall overcome. But this parameter raises some interesting questions:1. Deficit financing is not always a bad thing. So to what extent are county governments allowed to raise debt? 2. How can/will inter-county projects be developed, managed and arbitrated (I am yet to read the new laws that have been proposed),. In many cases these can be mutually beneficial for participating counties. 3. Wouldn't it be great if we developed a rating system such as those used by Standard and Poor's or Moody's for ranking Counties - in my ideal system they would be allowed some limited leeway to enter into debt and other financial transactions. I know it could be a can of worms but hey - we are daring to dream. |
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Post by justfacts on Mar 11, 2012 11:15:27 GMT 3
RR,
I read somewhere Nairobi forms 60% of our economy. This has been aided by government policy of locating all HQ in the area and managing the rest of Kenya from here. This is something not to be proud about, akin to putting your eggs in one basket and adds fuel to the talk of marginalization of outlying areas in favour of Nairobi and its satellite areas.
As an example, a peasant farmer whose land lies in the margins of Thika road project got his net-worth severally multiplied even before rising out of bed courtesy of the highway. Same probably goes for areas of Kajiado, Kitengela and Athi River and the current mad rush for Konza.
Other land owners across Kenya do not get the same benefit and pay the same tax and have a right to ask why goverment projects dont fall in their neighbourhood. This could inform the urge to vote in a prezzo coming nearest to one's home.
I have always wished we spread our economy like South Africa or even Nigeria to a lesser extent. The formula you quote will only entrench Nairobi status and is akin to cosmetic devolution.
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Post by nereah on Mar 11, 2012 20:23:10 GMT 3
rr,
excellent takes.
we have a disputed national census,obviously tinkered with and regional disparities(from those contested constituency economic surveys to complex demographics-take the somali community in migori and nairobi, nubians in baringo or second generation italians in malindi). then there are tiny enclaves like the migingo island with its motley residents.they generate millions.
personally i see no reason why some regions that have historically been marginalized through systematic destruction or neglect by subsequent regimes-from colonial to current,should be treated the same with rest when allocations are done.
but aren't kenyans integrating so rapidly to the extend that demographics in rural places like molo,nyando,kikuyu and malindi are rapidly changing so much so that we may have to relook at the parameters away from ethnic and regional(numeracy and location)
my peni mbili
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Post by roughrider on Mar 12, 2012 9:52:42 GMT 3
RR, I read somewhere Nairobi forms 60% of our economy. This has been aided by government policy of locating all HQ in the area and managing the rest of Kenya from here. This is something not to be proud about, akin to putting your eggs in one basket and adds fuel to the talk of marginalization of outlying areas in favour of Nairobi and its satellite areas. As an example, a peasant farmer whose land lies in the margins of Thika road project got his net-worth severally multiplied even before rising out of bed courtesy of the highway. Same probably goes for areas of Kajiado, Kitengela and Athi River and the current mad rush for Konza. Other land owners across Kenya do not get the same benefit and pay the same tax and have a right to ask why goverment projects dont fall in their neighbourhood. This could inform the urge to vote in a prezzo coming nearest to one's home. I have always wished we spread our economy like South Africa or even Nigeria to a lesser extent. The formula you quote will only entrench Nairobi status and is akin to cosmetic devolution. Justfacts; I agree. I have been an advocate of decentralising government services and institutions. Why cant the judiciary be HQ'ed in Kisumu, and Parliament be HQ'ed in Mombasa? This will shift the centre of gravity away from Nairobi. Land prices, rents, wages and other factors of production are more expensive the closer you are to Nairobi. Those who own and control these factors benefit. A young man who inherits half an acre from his father in Kinoo, Kikuyu and another who inherits the same acreage in Kendu Bay start life miles apart. Millions of shillings separate them. This is why I thought the so called 'Nairobi Metropolitan Development' was misplaced and nonsensical. We should be developing other cities - not wasting time on expanding Nairobi. |
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Post by roughrider on Mar 12, 2012 10:04:49 GMT 3
rr,
excellent takes.
we have a disputed national census,obviously tinkered with and regional disparities(from those contested constituency economic surveys to complex demographics-take the somali community in migori and nairobi, nubians in baringo or second generation italians in malindi). then there are tiny enclaves like the migingo island with its motley residents.they generate millions.Yes Nereah, to think that we shall distribute the national cake according to figures that appear concocted is worrisome. Yet, the CRA appears to have no choice. I think that the definition of marginalised lands will have to be flexible to include minority areas like Migingo. There is a tendency to think that only ASALS are marginalised. Within Counties, like Migori, Governors will have to say specifically what they will do for the enclaves, islands, minority peoples etc. I think, that with time, our formula will become more complex but even more targeted at the real needs. Yes. There is an equalization fund and the CRA has its fair share of advocates for affirmative allocation. The lady Fatuma Abdikadir, for examople, was running an ASAL program for many years. Excellent point - there is just too much dynamism and fluidity in demographics. We only conduct census after 10 years. So much could change within 10 years. People could migrate into successful counties. How do we solve this? I think we need to bring KNBS on the table and task them with continuous monitoring of demographic dynamics. There are debates as to whether we should give more money to areas with higher or lower dependency rates, greater or lower industrial density, etc... Then there is the question of how to handle and integrate 'devolved funds' - LATF, CDF etc with the new system The debate continues.... |
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