Premium

How President Uhuru Kenyatta's moneymen balanced books

 

Former Treasury CS Henry Rotich and the current CS Ukur Yatani.

 

On July 24, 2019, just 42 days after Henry Rotich had read his seventh Budget Speech as the National Treasury Cabinet Secretary, President Uhuru Kenyatta replaced him with Ukur Yatani.

Rotich had been accused of flouting procurement procedures in awarding a contract worth  over Sh51 billion for the construction of two dams in Elgeyo Marakwet to a bankrupt Italian company CMC de Ravenna.

So came an uneventful end to the career of a technocrat who shaped President Kenyatta’s economic policies in his first term — replaced by an administrator-cum-politician who tried to give President Kenyatta’s legacy a fine finishing as his final term ends.

This is Yatani’s third, and perhaps, last Budget statement since he replaced Rotich as the man in charge of the country’s coffers.

With the constant being President Uhuru Kenyatta’s big spending on roads, dams, railways, ports and bridges, there has not been marked differences between the two Cabinet Secretaries.

Wahoro Ndoho, a former head of the Public Debt Management Department at the National Treasury, reckons that it doesn’t matter who is at the helm of National Treasury.

“What matters is the quality of instructions that come to you,” said Ndoho. “Whether Rotich or Yatani, there is no urgency.”

According to Churchill Ogutu, an economist at IC Group, “the National Treasury CS post is a poisoned chalice.”

Punitive taxes

Just like during Rotich’s era, there are lamentations over punitive taxes which have led to high cost of living.

The country’s debt keeps on rising, hitting Sh8.2 trillion by end of December last year, according to data from the Central Bank of Kenya (CBK).

The Controller of Budget, and even Yatani himself, said that the government had at some point used debt on recurrent expenditure, illegality according to the Public Finance Management Act, 2012. 

Like Rotich, Yatani squabbled with governors over delayed disbursement of funds to the devolved governments and pending bills continued piling, denying contractors critical liquidity.  

Yes, Yatani, has come off as one who has teeth, raiding regulatory bodies for their surplus cash and threatening Ministries, Departments and Agencies (MDAs) and even counties, of dire consequences, shouldn't they pay their arrears. 

He has also made it clear that MDAs should tighten their belts, as he is intent on trimming the extra fat by suppressing unnecessary spending on travel, hospitality, training, advertisements and other operation and maintenance costs. 

It has been all talk, and little action. 

Yatani, like Rotich, has proposed some far-reaching tax measures including hitting cooking gas with the 16 per cent value-added tax (VAT).

True, he inherited quite some punitive tax measures. This includes the controversial eight per cent VAT on petroleum products that came with the Finance Bill of 2018.

Of course, Yatani increased excise duty on airtime and internet services to 20 per cent from 15 per cent.

But it is Rotich who, for the first time, introduced 10 per cent excise duty, popularly known as ‘sin tax’ on airtime and financial transactions in the Financial Year 2015-16.

Yes, calling, browsing, and sending money was, for the first time, a sin.

Rotich would then push up the excise duty on airtime and financial transactions from 10 per cent to 15 per cent in the Financial Year 2018-19.

Yatani could not resist the allure of such an easy-to-tax item, and so in his first Budget, he pushed up the tax to 20 per cent.

Yatani’s tenure is also unfortunate to have been disrupted by the Covid-19 pandemic — a period when governments all over the world went on a borrowing spree to forestall an economic crisis with a lot of businesses shutting down due to the stringent containment measures.

In his three statements from June 2020, Yatani’s budgets included borrowing of Sh3.6 trillion.

Indeed, for the first time in Financial Year 2021-22, the country borrowed over Sh1 trillion as the government fought the health and economic effects of the Covid-19 pandemic.

In six years, however, Rotich had borrowed only Sh3.3 trillion.

Yatani’s debt mix, however, included a big chunk of cheap loans from the World Bank and the International Monetary Fund (IMF) as well as domestic loans.

These are loans with very low-interest rates, longer grace periods and tenors. They also tend to come with a big component of grants. 

This is unlike Rotich who had more expensive commercial loans, including syndicated loans from banks and Eurobond loans.

These loans are very expensive, with an interest of as much as 10 per cent. 

Since Jubilee Party came to power, interest payments have risen sharply from Sh121 billion in Financial Year 2014/15 to Sh688 billion in the next Financial Year starting this July.

Because interest payments are paid directly from taxes — and is not usually refinanced or rolled over — it competes with other critical public services for the limited revenues collected by the Kenya Revenue Authority (KRA). 

Economics background

Both Rotich and Yatani have an Economics background — Yatani has a Sociology background as well which means he was at home at the Labour ministry.

He has a Masters of Public Administration and Public Policy from the University of York in the UK.

Rotich is a dyed-in-the-wool Economics man. He holds a Master’s degree in Public Administration from the Harvard Kennedy School -- Harvard University in the US.

He also holds a Master’s degree in Economics and a Bachelor of Arts degree in Economics and Sociology

President Kenyatta picked Rotich from the National Treasury where the two had worked together when the former was the Finance Minister.

Rotich had also had a stint at the Central Bank of Kenya (CBK) and the International Monetary Fund (IMF) before that.

He oversaw Jubilee’s first era, a period that was characterised by large infrastructure projects, which were funded by massive borrowing.

He read the Budget seven times and introduced a number of tax measures, including the controversial eight per cent VAT on fuel which did not go well with the public.

It is also during this period that Kenya — which had been categorised as a low middle-income country after the structure of its economy had been reviewed — took up expansive debts such as syndicated loans and Eurobonds.

These loans manifested themselves in high-interest payment payments, with the  IMF in 2018 calamitously ending a precautionary facility it had with the government after Kenya reneged on some of the conditions.

Yatani was once an administrator, having served as the District Commissioner.

Rotich’s mess

Later, he was elected as the governor for Marsabit in 2013.

He lost the seat in the 2017 elections and President Kenyatta appointed him the CS for Labour.

After Rotich had been kicked out, Yatani’s work was well cut out: To clean up Rotich’s mess by reducing debt.

For long, it looked as though he would avoid Rotich’s curse of expensive commercial loans.

But, even he too, could not resist the allure of the Eurobond loans, and in June 17, 2021, he borrowed one billion dollars (Sh115 billion).

There were rumours that Yatani, whose Upya Party has thrown its weight behind former Prime Minister Raila Odinga, would be going for the governor’s seat again.

But when the time came for people with political ambitions to resign, Yatani and the CS for Agriculture Peter Munya, stayed put.

Some have whispered that, perhaps, should Raila form the next government, Yatani might just stay on as the man in charge of the country's purse. 

On the other hand, not much has been heard about Rotich, except for the occasional court appearances over a case in which he, and his former deputy Dr Kamau Thugge, were accused of attempting to defraud the State. 

No one knows, as yet, if he has any political ambitions.

Posters of him have been circulating on social media platforms that he wants to be the next Uasin Gishu Governor on Deputy President William Ruto's United Democratic Alliance party ticket.

By Frankline Sunday 55 minutes ago
Business
Reprieve for borrowers as Fuliza costs down by half
By Brian Ngugi 5 hours ago
Business
Premium Loan defaulters face blacklisting as Uhuru CRB freeze ends
By Jacob Ngetich 5 hours ago
Business
Kenya seeks bigger piece of UK fresh produce market
Business
Safaricom, NCBA, KCB tasked to form loan scheme for SMEs with interest rates below 10pc daily