Salary crisis in Kenya

By STANDARD TEAM

KENYA: Hundreds of thousands of civil servants began the new month Thursday without pay, in the midst of an unprecedented government cash flow crisis blamed on devolution.

As at yesterday, more than 450,000 civil servants had not received their pay as doctors, teachers and the police threatened to go on strike if the problem persists.

On Thursday, the MPs captured the full scale of the problem when they refused to debate the VAT Bill and threatened to scuttle plans to go on recess until they are paid their July salaries and their car grants are disbursed.

Usually, MPs are paid between the 25th and 30th of every month, and according to Njoro MP Joseph Kiuna, who also served in the 10th Parliament, this has never happened before.

“We suspect either sabotage or the government does not want to admit that its coffers are dry,” he said in a telephone interview.

“From the look of things, all is not well in Treasury.”

The cash crunch is the first major crisis facing National Treasury Cabinet Secretary Henry Rotich since he took office.

Civil servants are usually paid between 20th and 30th of every month. However, by the time of going to press, yesterday, only account holders in Equity Bank and Co-operative Bank had received their pay.

“These banks have a special arrangement with the civil servants. They pay them on specified dates even before their employers credit their accounts,” a source at the ministry of Lands said.

The Union of Kenya Civil Servants said the delay has caused panic among its members.

 All the major ministries, including Health, Agriculture, Public Works, Office of the President were among those affected, said Secretary General Tom Odenge.

“The Government should state clearly what is happening. The excuses they have given so far are not convincing,” Odenge told The Standard Thursday.

The Union said its workers have been paid on the 25th of each month for the last 10 years without fail.

“First they said that they needed a week to have funds that had been channeled to counties to pay health workers, among others, returned to the National Government. Later they changed tune blaming the delay on collapsing of ministries which in my view doesn’t hold because the payment details are intact.”

Odenge explained throughout the 10-year tenure of the last Government they never experienced delays in processing of salaries.

And in what is pointer to a crippling cash flow crisis in Government, several ministry operations are also gradually grinding to a halt.

“We only report to office to pass time. We were supposed to be in the field but we cannot fuel our vehicles,” the source said.

To date, the Government has not sent any money to ministries. This is despite the fact that it has been collecting taxes for the last 32 days.

Administration police officers too have not received their July salaries even as their colleagues from regular police got their pay.

Deputy Inspector General of Police Samuel Arachi attributed the delay to the change of system in paying the APs as they are being moved from the provincial administration payroll to the police service.

Contractors are also complaining that they cannot commence their projects as the government has stopped any payment, which has also affected suppliers who are demanding unpaid dues.

“We have firms that were awarded tenders in June, but cannot take off since the government is yet to release the down payment of 10 per cent according to procurement rules,” a contractor whose form won a multi-million tender lamented yesterday.

The Government has, however, sought to downplay the crisis blaming it on what it called the ‘inevitable’ transition hitch.

A joint statement by the Cabinet Secretaries of Devolution and Planning, National Treasury and Health said the delay had occurred in the process of re-configuring systems, votes and personnel details.

“Treasury will disburse funds to ministries to cater for the July payroll following authorisation of the Office of the Controller of Budget,” read part of the statement.

In a last minute attempt to stave-off a potential crisis precipitated by the standoff between the Central Government and County Governments, the statement also said it would include processing of salaries of all civil servants whose personal emolument budgets are factored under County Government budgets.

The County Governments will then refund salaries paid on their behalf for devolved functions.

The National Government had already allocated funds to County Governments to cater for some civil servants’ pay such as those in the health sector. However, they cannot make any payments, as they have neither the capacity nor defined mechanisms to do so.

The problem has been escalated by the fact that if the National Government makes the payment, there is a danger it may not recover the funds from the County Governments.

There has been tension between the National and County Governments over the size of the budget. Indeed, Governors are now pushing for a referendum that seeks to up their allocations from 15 per cent to 40 per cent.

Amidst all these slipups, critics are saying the Government could actually be broke.

“Clearly, the Government is facing a near term cash crunch. The revenue estimates are 22 per cent more over the last financial year. This is as ambitious as the Government’s plans,” said an independent analyst Aly-Khan Satchu.

The Economic Secretary at Treasury Geoffrey Mwau, however, has discounted fears that the Government could be experiencing a cashflow mess.

“The Treasury has in fact only drawn Sh3 billion from the overdraft at the Central Bank of Kenya. Its borrowing program is on course,” said Dr Mwau.

The problem, according to him, has been occasioned by the change of regime, which saw the number of ministries cut from 44 to 18.

For instance, the ministry of Devolution and Planning is made up of seven former ministries. They are: Planning and Vision 203, Local Government, Public Service, Youth Affairs, Gender, Northern Kenya and Special Programmes.

Also, with the new constitutional dispensation, significant reorganisations were carried out. “We have civil servants who are supposed to be paid at the county level while others are to be paid at the National level. We have to streamline the IT system that manages the payroll,” he said.

But this has not gone down well with labour unions that have threatened to go on strike. Doctors, for instance, have vowed to disrupt services in public hospitals next week.

In further indications of a possible liquidity crunch, The Standard has established that the Government is yet to release requisite free cash to public schools. Head teachers say the delay has overstretched resources.

The Kenya Primary School Heads Association National Chairman Joseph Karuga said while the State is required to remit Sh150 per child, only Sh59 had been provided.

“A lot of activities have been suspended and we hope that the Government sends the money as soon as possible,” Karuga said.

Reports indicate secondary schools had been told that Sh2 billion would be released once Parliament approved the estimates.

That the State appears to have reneged on a deal with university lecturers barely two months after committing to pay them Sh3.9 billion, raises questions.