Wage bill size raises more questions than answers

By JUMA KWAYERA

Kenya unveils its Sh1.7 trillion budget next month, amid serious queries on the proposal to downsize the public workforce.

Questions abound on whether the plan is based on accurate information or kneejerk reaction to underlying systemic rot and inefficiency in the civil service, which the Government appears unable or reluctant to undo.

The decision will be made against the backdrop of concerns that at least a quarter of the national budget is not absorbed annually and a similar amount or roughly Sh300 billion is lost through corruption annually, according to the Treasury reports.

In effect, half the budget is not used to finance intended programmes; be it development projects or recurrent expenditure, according to the Auditor-General.

The proposed downsizing of the civil service and reversing retirement age to 55 years has elicited varying opinions, with analysts of Government spending and state technocrats disagreeing on the state of the economy and what may have precipitated the perceived burgeoning public wage bill.

While the National Budget office estimates the wage bill to be Sh285 billion, Planning Cabinet Secretary Anne Waiguru and Salaries and Remuneration Commission (SRC) boss Sarah Serem claim it stands at Sh460 billion, while in February President Uhuru Kenyatta put the figure at Sh500 billion.

Delicate issue

Serem touched off a national debate over the wage bill and retirement when she raised alarm over the soaring wage bill against flattening revenue base. However, the basis of her assessment of the wage bill has since come under sharp criticism with economic experts accusing SRC of ‘cooking up’ figures and being on “scare-mongering” mission to press the case for pay cuts, civil service restructuring vide retirement and retrenchment of at least 200,000 lower and middle cadre public servants. The government’s workforce stands at 700,000.

Ever since, there have been questions about how the commission arrived at the conclusion, with the President and his deputy William Ruto volunteering 20 per cent pay cuts as the Executive sought to navigate the delicate issue of fiscal prudence.

However, managing director of Africa Economics think-tank, Prof David Ndii, raises doubts about the credibility of  SRC figures, which the Government appears inclined to believe, saying the figures were trumped up.

He doubts the wage bill is unwieldy and questions the basis of the Government’s data, which he says is inconsistent and contradictory in the context of the 2014/15 budget statement policy, which the Treasury hopes Parliament will adopt next month.

Economic and development experts who have been taking a keen look at the figures SRC relies on to argue its case for salary ‘rationalisation’ point out the figures may have been ‘manufactured’ to justify impending retrenchment in the civil service.

At least this is Prof Ndii argument as he posits that the figures are at variance with reality and describes them as having been cooked or a deliberate attempt to hide a scandal.

His argument is informed by the budget statement policy, which shows the wage bill to have risen from Sh274 last year to Sh285 billion at present, with projections for next year estimated to be Sh296 billion.

Bring down

Kenya Institute of Public Policy and Research Analysis (Kippra) Chief Executive, Dr Eric Aligula explains the expansion as necessitated by devolution, but he would not definitively say if it is currently 13 per cent of the Gross Domestic Product (GDP) as SRCclaims.

“National service is made up of the mainstream civil service, state corporations, commissions, security agencies and parliament. At present, there is restructuring and it is not easy to state whether wage bill has overshot Government capacity to finance it. However, with devolution, there is no doubt is has risen because county governments have been hiring staff. The international standard is the wage bill should not be more than seven per cent of the GDP,” explains Aligula.

Kippra is a Government agency that collects and analyses data, which the Government relies on to make decisions. It has been advising SRC, National Budget office and the Treasury on economic policy matters.

Kippra boss defends Government’s plan to cut down staffing, saying: “It should not be the source of employment. It can only facilitate the creation of jobs through provision of attractive investment climate and security. Efficient public service attracts investment, which in turn create employment.”

Some of the ways in which the Government plans to bring down the wage bill include a head count of all in the civil service and parastatals, reining in wastage, eliminating runaway corruption and cleaning up public procurement mechanism among others.

Former Centre for Multiparty Democracy chairman, Prof Larry Gumbe concurs with Ndii, saying the country’s workforce is lean in the context of its economic potential.

Instead, Prof Gumbe argues, it should be expanded for faster delivery of services and reduce the burgeoning dependency ratio spurred by high poverty indices.

Gumbe is referring to the past three years during which nearly a quarter of the money allocated in the national budget is unspent.

According to Treasury reports, which tallies with that of the Auditor-General report over the same period, some Sh264 billion was not absorbed by various ministries.

In the previous, financial year (2011/12), Sh275 billion of the Sh1.1 trillion budget was not utilised.  In the financial year  2010/11, Sh142.5 billion was not absorbed by ministries and government agencies.

Absorption rate

In all the cases, according Controller of Budget Agnes Odhiambo, on average 61 per cent of development funds are not spent. According to Gumbe, the failure to use development funds implies that an economy is not growing.

“What we should be doing at present is to enhance the absorption rate of the money funds meant for economic development. So far, this is low, which is explained by the amount of money that is returned to Treasury because it could be used for the purposes intended,” Prof Gumbe explains.

 He explains that the economy cannot grow if a quarter of the national budget is not absorbed. In his observation, the unworldly wage bill can be contained if the economy is growing and creating more opportunities for investment and employment.

 However, Serem maintains the public wage bill remains exceptionally high. Responding to Ndii’s claims that the SRC and Ministry of Panning ‘cooked’ figures to justify plans to lay off 200,000,  Serem says SRC based its figures on data sourced from the Treasury, the Auditor-General’s office, Kenya National Bureau of Statistics and the National Budget office.

“We based our analysis on trends in the past 10 years.  This is a serious matter that should be addressed with facts and not imaginary figures. We are open to correction and our critics should share with us the figures they have and should be able to demonstrate (in a plausible manner) how they arrived at their calculations. If they are right, we can amend our figures because SRC is not a political office, but a professional body. As things stand now, it is going to be difficult to bring down the ratio of the wage bill to the GDP to 10 per cent, let alone 7 per cent,” she told The Standard on Saturday.

She concedes, though, that mismanagement of the public payroll, a tortuous public procurement and “mali ya umma (public money) wastage mentality have substantially contributed to the current situation.

“We want to clean up the payrolls. The procurement system needs to be streamlined. Although some of the responsibilities are not within our mandate, we know if the people charged with them play their part, we are going to free up resources for development,” she explains.

In Ndii’s opinion, the government, without irrefutable data to back its decisions, is about to repeat the mistake of the 1980s and 1990s that escalated corruption and compromised service delivery instead of reducing the wage bill and infusing efficiency in public service.

The retrenchment and retirement age reduction will, as was the case in the past affect the middle level staff, which Gumbe says will increase the fraction of the unproductive and therefore a dependent population.

Informed decisions

“In Kenya, a majority civil servants acquire doctorate and masters degrees at the average age of 45. Between 50 and 55 years, this is when they have acquired the requisite experience to make informed decisions. These are the categories of engineers, doctors, surveyors, actuarial scientists, economists etc whose expertise is ripe to drive economic growth,” he says.

He adds: “Laying them off would mean you are going to pay a people who are not productive. The Government must address corruption and absorption of development funds because that is where the problem lies.”

He adds that the economies in developed and some industrialising countries are driven by experience.

Retirement age in the US, Britain, China, Japan, India, Germany, South Korea, France, Denmark and many other countries with stronger economies range between 60 and 75 years.

In Kenya, only judges are by law allowed to work up to 70 years.