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The Nairobian

Counties miss targets as they raise Sh34b in own revenue targets

Business

By Nicole Njuguna | Jul 10, 2024

**Controller of Budget Margaret Nyakang'o.** [File, Standard]

Counties raised Sh34.4 billion from their own sources in the 2020/21 financial year against a target of Sh54.3 billion, according to the latest Office of the Controller of Budget (OCOB), Annual Budget Implementation Report.

While this was a 65 per cent increase in revenue generation compared to the previous financial year, the report notes, there is room for substantial improvement.

A June 2022 analysis from the National Treasury in collaboration with the World Bank to the Commission on Revenue Allocation (CRA) points to a total annual revenue potential of around Sh93 billion across the 47 devolved units.

Over the financial years 2017-18, 2019-19, and 2019-20, the counties raised Sh38 billion annually, a Sh55 billion shortfall from the projected revenue potential.

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According to OCOB data, Narok, Tana River, Laikipia and Samburu counties were the best performing in own source revenue generation, owing to their games reserves and their expansive size.

Nairobi County collected an average of Sh9.5 billion over the three financial years, against a potential of about Sh25 billion, considering the size of its economy.

Kiambu, Nakuru and Mombasa counties followed closely, generating Sh5.2 billion, Sh4.5 billion and Sh4.4 billion annually respectively.

Meru, with a potential of collecting Sh3.2 billion annually, only collects 20 per cent of this amount.

To increase revenue collection, the study suggests a clear and simple framework for defining own source revenue and reporting on actual collections to avoid discrepancies between the elements grouped under different cross-county categories.

It also calls for the collaboration of CRA and county governments as well as a multi-sectoral approach from the key stakeholders in adopting a consistent own source revenue reporting and monitoring mechanism.

"This will not only lead to enhancing the current practices, arriving at a harmonised reporting system but also empower counties to comprehend their potential and identify improvement areas," says the report.

"Investments driven towards improving the existing County revenue management system and the infrastructure that collects and analyses data on revenue collection is vital in enhancing the performance OSR generation across counties."