Counties still struggling to meet revenue targets a decade later

The underperformance implies that some planned activities may not be implemented in the financial year due to lack of funds and may therefore lead to the accumulation of pending bills.

Counties mostly rely on the national government for funding.

In April this year, Commission on Revenue Allocation vice chairperson Koitamet ole Kina said none of the 47 counties had been able to meet its revenue targets since the advent of devolution.

CRA challenged counties to improve and fully automate their revenue collection systems to meet targets and reduce loss of cash.

Koitamet noted that, according to a revenue potential survey they had conducted, no county government had achieved its revenue collection targets

A county like Nairobi, he noted, has the potential to collect Sh68 billion revenue annually. In May this year, governors threatened to shut down counties over delay in funding.

The governors said they were not able to run counties and had no option but to suspend operations.

Ken Gichinga, the Chief Economist of Mentoria Economics, said revenue collection should form part of the discussion by counties during the devolution conference.

The Council of Governors (CoG) will hold the Eighth Devolution Conference from August 15 to August 19 in Eldoret, Uasin Gishu County

The theme of the conference is '10 Years of Devolution: The Present and the Future' and the sub-theme: Driving Transformation from the Local Level: County Governments as the Centre of Economic Development.

The conference seeks to reflect on the last ten years of devolution and explore locally and internationally recognised methodologies for strengthening systems to enhance transformational service delivery in Counties.

Out of date

Gichinga said land rates are the most crucial in raising revenue, but most valuation rolls are out of date.

He said urban counties, including Nairobi, Mombasa, Nakuru, Kisumu, and Eldoret, should not be getting any allocation from the government as they are able to collect much revenue from land rates.

He noted that the waiver on land rates had affected revenue collection by the counties.

"It is quite important counties first do a renewed valuation roll, collect revenue and plow it back," he said.

The valuation roll review has to be subjected to public participation in areas to be affected to avoid a legal battle as witnessed in Kisumu a year ago.

A Kisumu resident moved to court to challenge a decision by Governor Anyang' Nyongo's administration to increase land rates multiple times without conducting a public participation in preparation of the Draft Valuation Roll 2017.

Justice Anthony Ombwayo noted in his judgment that public participation was not done and that the devolved unit failed to confirm if sensitisation, as advised by the Ministry of Lands.

In Kajiado County, Governor Joseph ole Lenku said last month that his government is targeting to raise Sh1.5 billion mainly from land rates on freehold titles.

He said most plot owners in key urban centres would be slapped with arrears for the last eight years.

The business community has already ready petitioned the area assembly over the move targetting freehold titles.

Transparency on collection and expenditure of the revenue collected, he said is also important and will make people comply with payment, adding that counties should digitize revenue collection.

He said counties with a big urban presence ought to have been independent by funding their operations.

"Counties with a big urban presence should have graduated by now and running their own healthcare, education among others because they have a big surplus in terms of what they can collect," he said.

He added: "The devolution conference should be a wakeup call to the counties of Nairobi, Mombasa, Kisumu, Nakuru and Eldoret. They should have graduated, and be independent to allow the national government to focus on the marginalised counties," he said.

The County Government Budget Implementation Review report for the financial year 2015/2016 by the Controller of Budget revealed of the targeted Sh50.5 billion, counties managed to raise Sh35.02 billion.

The collection was, however, an increase of 3.5 per cent from the Sh33.85 billion generated in 2014-15.

In the 2019/2020 Financial year, county governments generated Sh35.7 billion, which represents 65.2 per cent of their set annual target of Sh54.9 billion. A big decrease compared to the Sh40.30 billion the devolved units generated in 2018-19.

Most counties attributed the sharp decline in revenue collection to the Covid-19 pandemic, which they claimed messed up their key revenue sources like trade licensing and parking fees.

Highest performance

In the Financial Year 2021/2022, county governments generated a total of Sh34.44 billion, which was 64.2 per cent of the annual target of Sh53.66 billion. This was a decrease compared to Kshs.35.77 billion generated in FY 2019-20.

An audit by the Controller of Budget for the first nine months of the Financial Year 2022-2023 revealed that county governments generated a total of Sh28.77 billion from their own source revenue, which was 46.4 per cent of the annual target of Sh62.10 billion.

This was a decline compared to Sh27.09 billion generated in a similar in the previous financial year.

Analysis of own source revenue as a proportion of the annual revenue target indicates that Kitui, Kirinyaga and Vihiga counties achieved the highest performance of 84.6 per cent, 80 per cent and 77.2 per cent, respectively.

Conversely, 22 counties recorded below 50 per cent performance, namely Kwale, Embu, Kisumu, Kakamega, Taita-Taveta, Tharaka-Nithi, Busia, Nairobi City, Garissa, Tana River, Nandi, Mandera, Wajir, Makueni, Homa Bay, Kisii, Kajiado, Nakuru, Murang'a, Kericho, Vihiga, and Nyamira.