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Who will generate money allocated to counties?

By | May 1st 2012 | 3 min read

By XN Iraki

The Constitution provision that provides for equitable sharing of national revenue is among the most popular.

There is a belief that rural areas and far-flung regions will now catch up with the rest of the country, notably Nairobi. The formula for revenue sharing has been fixed, we know the money each county will get.

The next theatre of activity is going to be what to do with the money. Traditionally, most of our revenues have gone to salaries and wages. It is unlikely that that trend will suddenly end.

Reserving much of our revenues for salaries is politically popular, but penalises long-term economic growth.

Politicians can get more votes by flaunting the number of people they gave jobs. That is why it should not be a surprise that an audit report showed over employment in the city council.

Economists would quickly point this over employment and poor service delivery as a classic case of the law of diminishing returns. The only problem with this employment is that salaries are rarely that high and workers are left with little to invest.

The focus of money received by counties should be increasing the productive capacity of the counties.

Economic growth rides on improvement in productivity so that we can produce more with less. This improvement goes beyond use of machines, it involves the change in our attitude towards work and ourselves. For example, corruption is about attitudes, misplaced belief that you can get something out of nothing. We need to institutionalise the love of work, something akin to America’s protestant work ethics.

Interestingly, our view of productivity is from the machine point of view. This is popular with politicians and businessmen because of visibility. Yet, in service delivery, the "peopleware" matters too.

Imbibing policy makers at the grassroots level, the counties with new thinking on productivity should be our starting point in unlocking the economic potential of the rural areas.

Unfortunately, counties may start by destroying jobs before creating new ones. Example, using parking meters instead of yellow-coated attendants may appear like destroying jobs, but the money saved could be put into more productive uses.

Sharing of revenue might have the unintended consequence of creating dependency with counties waiting for largess from the Central government. While we must give credit where it is due like adding a factor in fiscal prudence in sharing revenues, we need to go beyond that.

National cake

Why not add another criterion in revenue sharing, the county’s ability to raise the revenues. Should we not reward those counties that raise more revenues? This will serve as an incentive for counties to raise more revenues, and becoming attractive to investors, cutting down on costs and ensuring there is minimal revenue leakage.

It would be interesting to see an objective list of monies raised by each county, their contribution to the national cake.

Already politicians are up in arms against the proposed allocation formula. That is not unexpected. Each MP would want as much as possible for his or her constituency. That is why the focus should shift to revenue generation. We need to know and reward those who generate wealth in this country; those who toil and sweat every day. Shouldn’t the cow feeder not get more milk that anyone else?

By focusing on revenues and not how it is raised, we kill the goose that lays the golden egg. It is time we refocused our energy on revenue generation, on entrepreneurship and productivity improvement. That has been the missing link in our quest for economic growth.

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