Kenya: Revenue Debate - Cash Crisis to Persist as MPs Urged to Step in

Parliament in session (file photo).
25 August 2020

The cash crisis in counties could get worse after Attorney-General Paul Kihara said Treasury cannot disburse the equitable share revenue without the approval of the National Assembly.

Mr Kihara told MPs on Monday to step in and resolve the stalemate on the Division of Revenue in the Senate pending enactment of the County Allocation Revenue Act (Cara).

In an advisory opinion, the AG said Treasury Cabinet Secretary Ukur Yatani cannot release 50 per cent of the total equitable share to counties without the approval of the National Assembly because the stalemate is not about the Division of Revenue Bill but Cara.

Division of Revenue Bill defines how money is split between the two levels of government while Cara states how funds allocated to devolved units are shared among specific counties. In an advisory opinion prompted by the Council of Governors last year, the Supreme Court said the National Assembly would be required to authorise the withdrawal of money from the Consolidated Fund in the event an impasse occurs between it and the Senate over the Division of Revenue Bill.

The apex court said the move would safeguard county governments while affording Parliament an opportunity to resolve the deadlock through mediation.

Supreme Court opinion

However, the AG clarified that the Supreme Court opinion referred to an impasse around passage of the Division of Revenue Bill but noted that in the current situation, the deadlock revolves around the enactment of Cara for the 2020/2021 financial year.

The AG argued that any appropriation from the Consolidated Fund in the financial year, except supplementary appropriation, has to be authorised by Parliament.

Meanwhile, the Commission on Revenue Allocation (CRA) has maintained that the proposed third basis formula is the best. Ms Kiringai said the formula is a win-win for all parties, adding that counties that would lose in equitable share would be cushioned by the Equalisation Fund.

"We need to be alive to that fact and even after we update the formula with the current census data, you will see significant changes in the county allocations. So, these counties should be cushioned by setting aside an Equalisation Fund of at least 15 per cent of the total revenue," Ms Kiringai told the Nation. Laikipia Governor Ndiritu Muriithi said the proposal sought to streamline the procedure used to allocate funds to counties.

"Whereas most of us agree that there are some historical imbalances to be addressed, it cannot be realistic to argue that a solution can only be achieved through taking away resources from those counties which are seen to have benefited from development in the past. This will create the basis for further conflict," he said.

On Monday, a lobby group urged senators to shelve their personal differences and unlock the revenue impasse. The Institute for Social Accountability said the debate has been turned into a political contest.

"The debate risks dividing the country right down the middle by pitting perceived losing and winning counties against each other," the lobby said in a statement.

Nationwide strike

At the same time, the Union of Kenya Civil Servants has threatened a nationwide strike by county employees over unpaid salaries.

The Union of Kenya Civil Servants (UKCS) yesterday gave county governments seven days to pay June and July salaries. Secretary General Tom Odege said they have resorted to the action because talks with County governments have been unsuccessful.

Mr Odege, who is also the Nyatike MP, said he regretted resorting to industrial action during a pandemic, but blamed counties for ignoring diplomacy.

"The delayed salaries are impacting negatively on the lives of civil servants and their families. It can only be attributed to mismanagement and lack of prudent financial skills by the county governments," Mr Odege said.

He complained that, despite the national government setting aside funds for allowances of health workers, most counties were yet to pay. He also protested the failure to promote employees.

Additional reporting by James Murimi and Reginah Kinogu

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