Why Coast counties are struggling to raise revenue

Despite recording improvement in revenue collection, most county governments at the Coast are struggling to meet their targets.

As a result, they are relying on allocations from the National Treasury to finance major operations.

Experts have urged the county authorities to be more innovative in raising funds and seal loopholes in revenue collection to stop being “perennial beggars” from the national government.

In Mombasa County, officials reported that revenue collection gradually grew from Sh1.3 billion at inception in the 2013/2014 financial year to Sh2.9 billion in the 2015/2016 financial year.

“We have more than doubled our local revenue since inception after embracing direct payments through commercial banks, use of M-Pesa and a shift from manual to automated platforms,” said Mombasa County Secretary Francis Thoya.

Mr Thoya noted that the county government has potential to raise up to Sh5 billion annually with improved financial management systems and decentralised revenue collection to sub-counties.

At inception, Mombasa County set the local revenue target at Sh6.7 billion but collected a paltry Sh1.3 billion while in the 2014/2015 it missed its Sh5 billion target after getting only Sh1.7 billion.

The county government relied on the equitable share to finance its huge budget of nearly Sh10 billion over the years. For instance, in the 2015/2016 financial year, the county was allocated about Sh5.1 billion and Sh5.6 billion in the 2016/2017 financial year.

Governor Hassan Joho said although revenue collection has gone up since his administration took office, a cartel was siphoning millions of shillings from various sources thereby sabotaging development.

For instance, Mr Joho said revenue at Kongowea Market has grown from Sh200,000 a day in 2013 to Sh800,000. “I am aware there is a cartel of unscrupulous county workers collecting revenue and pocketing it,” he said.

Kilifi County has been struggling to raise the 2013/2014 financial year revenue target of Sh1.5 billion.

County executive committee member for Finance John Kombe attributed this to failure to enact the Rating Bill 2016 but said the same has been passed by the Assembly and was awaiting Governor Amason Kingi’s assent.

“Kilifi County Government has been unable to meet the targeted local revenue collections for the last three financial years due to lack of the rating law that could guide us in the specific areas of generating the revenue,” he explained.

A recent study on tax justice by ActionAid Kenya showed that investors in the hotel industry evaded paying taxes to the Kilifi County Government by using their hotels as private villas and cottages though they offer full services to guests as hotels.

The NGO also said tax evasion was rampant in the mining sector.

Governor Kingi admitted that his administration has not been able to collect about Sh1 .5 billion revenue due to corrupt investors who use their hotels as private villas and collages to pay lesser taxes.

Low investment

“We have some investors in the hotel industry who have been paying tax to operate villas and cottages while the reality is that they offer full hotel class services including accommodation and safaris,” he said.

Low investment in key sectors has also been blamed for poor revenue generation. For instance, agriculture sector was allocated a paltry Sh289,937,310 against projection of Sh 1 billion out of the total budget of Sh9.1 billion for recurrent and development expenditures in the 2015/2016 financial year.

Chief Officer in charge of Agriculture Baha Nguma said the sector has potential to produce enough food for local consumption and sale and called for more funds.

“Kilifi is a sleeping giant as far as food and cash crop production is concerned. The county administration is unable to tap the huge potential in this sector due to low budgetary allocation,” said Mr Nguma.

Funding from the national government for Kilifi County Government stood at Sh7.4 billion in the 2015/2016 and Sh8 billion in the 2016/2017 financial year.

Taita Taveta County Government has also failed to meet revenue collection targets since the inception of devolution.

In the financial year 2013/2014, the county administration collected Sh137 million revenue falling below the target of Sh244 million. In the financial year 2014/2015, a total of Sh217 million was collected against the target of Sh483 million. In the last financial year 2015/2016 a total of Sh172 million was collected against the  target of Sh352 million.

County chief officer in-charge of Finance and Planning Vincent Masawi and revenue officials blamed this on organisational challenges in the department and lack of sufficient laws to boost revenue collection.

The finance officials said the long-standing dispute between investors and Kishushe Ranching Cooperative Society over the ownership of Wanjala mining fields rich in Iron Ore had also contributed to the low revenue collection. “We have been collecting more than Sh20 million annually from mining investors but Iron ore extraction has since stopped due to controversy over the ownership of the mining field hence adversely affecting revenue collection,” said Dr Masawi.

The finance officials said the county government was also unable to collect cess from Brookside Dairy Limited which collects milk from local farmers but pays taxes to the Kenya Dairy Board.

Taita Taveta equitable share stood at Sh3.3 billion in the 2015/2016 financial year and Sh3.5 billion in the 2016/2017 financial year.

In Lamu, Governor Issa Timamy said although the county government met revenue targets, it lacked lucrative sources like industries while its traditional source – tourism – has been at its lowest due to travel advisories issued by western countries in the last five years.

“We have been struggling against odds to raise local revenue because we lack strong sources of revenue. We do not have a single factory and tourism and fishing have been down for years now,” Mr Timamy said.

According to the governor, annual revenue stood at only Sh12 million at the start of devolution but rose to Sh23 million in the 2013/2014 financial year, Sh61 million in 2014/2015 and Sh63 million in the last financial year after the administration “tied the loose ends”. The county targets to raise Sh100 million.

Lamu County was allocated Sh2 billion in the 2015/2016 financial and Sh2.2 billion in the 2016/2017 financial year from the equitable share.

Pwani University lecturer, Prof Halimu Shauri said despite being endowed with resources, Coast counties were “begging” from the Treasury because they failed to attract investments and streamline revenue collection.

“Our six counties in Coast region have failed to offer better services to the people and initiate development projects as they lacked funds due to poor collection of targeted revenue by the administrations. Success of the county governments will come when they raise more funds locally and not just spending what is allocated by the national government. The counties should stop behaving like beggars and parasites,” he said.

He pointed out that there was huge revenue potential in land rates, agriculture cess and fishing but the sources are not properly tapped as county governments lacked capacity.

However, Technical University of Mombasa lecturer and head of Jumuiya Ya Kaunti Za Pwani (JKP) secretariat William Kingi said they have come up with a draft blueprint that has earmarked sectors for joint investment by the counties to benefit from economies of scale.

Dr Kingi said once the document is ratified, JKP would convene an investment conference to woo investors to partner with the six counties to develop capital projects that would grow economies and raise revenue.

“There will be bankable projects such as a fish port, farming and abattoirs that will grow the economies of the Coast region,” he said.

- Reports by Patrick Beja, Renson Mnyamwezi and Joseph Masha