Kenya: Revenue Collection Badly Hit By Covid-19 Restrictions

16 October 2020

The dusk-to-dawn curfew, closure of businesses and other restrictions meant to curb the spread of coronavirus saw revenue collection in counties dip significantly in the last quarter of the 2019/20 financial year.

A report by the Controller of Budget shows the 47 county governments made Sh35.77 billion, against a target of Sh54.9 billion, from April to June 30.

The devolved governments collected Sh40.30 billion in a similar period during the 2018/19 financial year.

The government came up with a raft of measures to contain the spread of the deadly virus when Kenya reported its first case on March 13.

The measures, which included a ban on movement into and out of some counties and closure of bars, markets and hotels greatly reduced business activities across the country.

County governments generate income through market and trade licensing, parking, land, liquor licensing, park, beaches and burial fees.

Economic disruptions

"The underperformance of own source revenue collection was partly as a result of the economic disruptions occasioned by actions taken to contain the pandemic," Controller of Budget Margaret Nyakang'o says in the new report.

Even with this, some devolved governments exceeded their targets.

Homa Bay collected Sh274 million, Taita Taveta (Sh296 million), Machakos (Sh1.3 billion), Lamu (Sh108 million) and Bomet (Sh201 million). Others, however, made less than 50 per cent of their targets.

These were Meru which collected Sh383 million, Nandi (Sh283 million), Busia (Sh225 million), Siaya (Sh179 million), Wajir (Sh60 million), Kajiado (Sh616 million) and Kisii (Sh333 million).

Nairobi county government generated the highest amount at Sh8.72 billion, followed by Mombasa and Nakuru at Sh3.26 billion and Sh2.55 billion respectively.

County governments that generated the lowest amount were West Pokot (Sh107.18 million), Tana River (Sh64.47 million) and Wajir which made Sh60.42 million.

Dr Nyakang'o also attributed the low generation of cash to increased pending bills, which stood at Sh113.85 billion by the end of June.

The bills put devolved governments at risk of tough actions by suppliers, contractors and lenders, she added.

The cumulative debt is now more than three times the Sh30 billion used on the expansion of the 42-kilometre Thika superhighway.

Delayed public payments affect private-sector liquidity, profits and ultimately economic growth, the Budget Controller said.

Delayed payments

Banks have also complained about delayed payments for contractors and suppliers, saying the business of lending to small and medium enterprises has been severely hit.

Dr Nyakang'o recommended a special examination of county government debts by the Auditor-General to verify the authenticity of the bills.

"County governments should ensure pending bills are a first charge in the budget implementation cycle for the 2020/21 financial year before embarking on new commitments," Dr Nyakang'o says in the report.

Nairobi County has the highest pending bills at Sh78.7 billion. This represents 69.1 per cent of the outstanding county governments' bills.

Isiolo, Kirinyaga, Marsabit, Mombasa and West Pokot did not submit information on their pending bills.

"The bills may be attributed to delays in releasing funding by the National Treasury, underperformance of own source revenue collection, among other reasons," the report says.

It criticises devolved units for using a lot of money on personal emoluments despite the law limiting expenditure on wages and benefits at 35 per cent of total revenue.

Sh171.83 billion

The county governments spent Sh171.83 billion on personnel emoluments, accounting for 44.8 per cent of their expenditure. They used Sh162.77 billion on the same vote for the 2018/19 financial year.

Only Mandera, Kwale, Nakuru, Lamu, Narok, Tana River, Uasin Gishu, Kilifi, Nyandarua, Marsabit and Kericho reported personnel emolument expenditure within the maximum allowed limit.

Murang'a, Isiolo, Mandera and Marsabit attained the highest absorption rate of 85.7, 79.7, 79.7 and 79 per cent in development expenditure in the three months respectively.

Laikipia, Nandi, Nakuru and Nairobi reported the lowest absorption rate with regard to their development budget at 39.3, 39, 37.4 and 6.9 per cent respectively.

County assemblies spent Sh2.17 billion on sitting allowances against an approved budget of Sh2.65 billion.

This translates to 82 per cent of the approved sitting allowance budget, and a decrease from Sh2.2 billion spent in 2018/19 financial year .

During the reporting period, county governments incurred expenditure of Sh104.51 billion, representing an absorption rate of 55.6 per cent of the cumulative annual development expenditure of Sh187.98 billion.

This performance was a decline from an absorption rate of 57.8 per cent, reported in the 2018/19 financial year when development was Sh107.44 billion.

The Public Finance Management Act 2012 provides that over the medium term, a minimum of 30 per cent of the county governments budget shall be on development.

"The Controller of Budget recommends that counties prioritise implementation of development projects in order to improve the standard of living for citizens," Dr Nyakang'o says.

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