4 April 2014

Kenya's Public Wage Bill Needs Cuts

analysis

Critics say far-reaching audit is needed to streamline a system that employs some 700,000 people.

As the Kenyan president makes plans to cut the pay of some senior government officials, economists warn that this will do little to reduce the budget deficit. They say that in addition, the roles of staff across the country's civil service need to be reviewed.

Last month, President Uhuru Kenyatta announced that he and his deputy, William Ruto, were to take a 20 per cent cut in pay, and government department headswould accept a ten per cent reduction.

The president said the move would "significantly reduce the public sector's wage bill to manageable levels".

Kenya's budget deficit currently stands at around 350 billion shillings (four billion US dollars).

But experts say there are only limited benefits to be gained by reducing top-level salaries.

Ndung'u Wainaina, executive director of International Centre for Policy and Conflict (ICPC), a Nairobi think-tank, called for a review of staffing levels and wages across the civil service.

"The only way to effectively and substantially reduce the cost of government is to first rationalise its structure and function," Wainaina said following Kenyatta's announcement.

The total public-sector wage bill continues to climb each year as employee numbers increase and average wages rise. The public sector employs about 700,000 people.

In its annual review last year, the Salaries and Remuneration Commission, a public body tasked with helping government manage the national budget, stated that "the huge wage bill has strained the government's budget and denied the economy the much-needed resources for infrastructure and social services like health and education".

In January, Kenyatta said the state might be spending as much as 1.8 billion shillings a year on "ghost employees". The revelation followed an audit of eight government ministries which showed that 70 million shillings was being lost each month on salaries still being paid to individuals who had left, retired or died.

Analysts also highlight the importance of restructuring the civil service to suit the newly-introduced system of devolved government.

Under Kenya's new constitution which came into force in 2010, aspects of governance such as agriculture, healthcare and public transport have been devolved to 47 counties. Since last March's elections, each county has had its own administrative structure which includes a governor and a deputy governor.

However, the government has been accused of mishandling the transfer of powers from national to county level. Many staff who worked under the previous provincial-level administrations were absorbed into the new county structures without a new post being officially formulated or budgeted for.

For example, those who previously served as provincial commissioners were redeployed as county commissioners, but their functions and roles were never clearly defined.

The commissioners are appointed by the president and are responsible for implementing the functions of national government at county level. Since last year's devolution, they have been involved in protracted disputes with the county governors over where their respective responsibilities begin and end.

Justin Biketi, a former accounts manager for a large courier firm in East Africa, told IWPR, "We have seen a mass of parallel appointments and deployment of staff at both the national and county government.

"It's a waste of resources, for example when a deployed district officer is doing the same work being undertaken by a sub-county administrator."

Nelson Korir, an economic analyst in Nairobi, told IWPR that the government should undertake an audit of all national and local government staff. Only those who fit into the formal governance structure should be retained, he said.

"Meaningful change will result in staff rationalisation and exits, to get rid of staff that were rewarded through ad hoc arrangements," Korir said.

According to reports in the Kenyan media, the chairman of the body overseeing the devolution process, Kinuthia Wamwangi, has said he will conduct a stock-taking exercise later this month to assess staffing levels within all 47 counties.

While such a review might help cut costs, analysts also point out that the high public wage bill is by no means the only reason for the budget deficit. Other factors such as inflated public contracts, generous allowances and luxurious foreign trips for senior officials all contribute significantly to the overspend.

"Cutting the wage bill alone will not solve the afflictions the government is facing over its efforts to narrow a budgetary deficit," Allan Egesa, an economic analyst, told IWPR. "Much more wastage in government is due to corruption, ghost workers... and the ever growing thirst for more perks by the legislators."

According to the the Salaries and Remuneration Commission, the public sector wage bill in June 2013 was about 12 per cent of gross domestic product calculated for the same month. The government's target is to get that figure down to eight per cent.

Another area of expenditure where the government is being urged to make cutbacks is the tendering process for public contracts.

Mwalimu Mati of Mars Group, a public watchdog in Nairobi, said that state funds were being "wasted through artificially inflated prices of goods and services supplied to the government".

A contract worth 327 billion shillings (3.8 billion dollars) with a Chinese firm to build a new railway line between Nairobi and the coastal city of Mombasa is currently being investigated, because it was not put out to competitive tender. President Kenyatta has said this was a condition for securing Chinese loans to fund the project.

In a separate government scheme to supply laptops to schoolchildren across Kenya, the Public Procurement Administrative Review Board found that the education ministry awarded the contract to a company at an inflated cost of 1.4 billion shillings. The tender is currently under review after two rival firms challenged the outcome.

After the 2013-14 budget was announced last year, the Institute of Certified Accountants of Kenya revealed that 30 per cent of the running costs of central government went on workshops and foreign trips.

Other commentators have noted that while the president advocates a cut in basic pay, he and other senior government officials will still pocket hefty allowances that will remain untouched.

A 2013 report by the Salaries and Remuneration Commissionidentified a total of 208 different allowances, which it describes as "a major cause of disparity and uncontrolled increase to the wage bill".

According to the report, the most senior civil servants enjoy a monthly entertainment allowance of up to 104,000 shillings (1,000 dollars) as well as a housing allowance in the region of 100,000 shillings.

"The president and his deputy may have good intentions [about] trying to set a good example. Unfortunately, their efforts are bound to fail unless they bravely choose to confront the huge wastage of resources in the ministries and departments under their two offices," Egesa said.

This article was produced as part of a media development programme implemented by IWPR and Wayamo Communication Foundation.

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