Why Kenya's proposed Infrastructure Fund fails the constitutional test

The drafters of our Constitution, by design, placed many safeguards on the management of public resources in Chapter 12. As they say, once beaten, twice shy.

The excesses of the one-party rule in handling public money had left a bitter taste among taxpayers.

For those familiar with our Public Financial Management laws, it is not difficult to notice a consistent pattern to remove any ambiguity or leave no window for imagination and interpretation.

To that extent, Articles 206 and 207 exclusively demand that all public funds must first flow into the Consolidated Fund/Exchequer for the national government and the respective County Revenue Funds for each of the 47 counties.

Exceptions are only allowable in cases of reasonably excluded funds by an Act of Parliament that sets aside such monies for a specific purpose. A good example here is the Facility Improvement Financing Act of 2023, which allocates and retains monies collected by healthcare facilities for use at the facility level where they are collected.

The other circumstance under which public monies can be used at source by a public agency is when they are retained to defray expenditures of that entity, mainly for Semi-Autonomous Government Agencies (SAGAs) that do not receive funding, or receive only a small proportion of their funding, from the Exchequer.

In such cases, the Acts that have established and mandated the entities to collect such levies, fees, or other charges also appropriate such monies for use within the entity for the specified expenditures.

Other special cases arise where a public fund has been established under the Constitution, such as the Equalization Fund, which targets historically marginalised counties to fast-track identified infrastructure towards equity with other regions.

Whichever the case, any public spending must be preceded by an Appropriation Act approved by the National Assembly for the national government and County Assemblies for the counties. Only in special circumstances contemplated under Articles 222 and 223 can public monies be spent before appropriation by the legislature.

Even then, the Treasury must submit an appropriation Bill or supplementary allocation within two months after such funds are withdrawn, or within two weeks if Parliament was in recess at the time the withdrawal was made.

Constitutional protection

The Controller of Budget (CoB) was strategically placed and granted constitutional protection to approve any withdrawals from the Exchequer to limit potential excesses of the Treasury.

However, it is the provision of Article 223 that has been highly abused to perpetuate unconstitutional drawing of public funds for purposes not contemplated by the Constitution.

For example, the CoB has consistently questioned billions of shillings withdrawn each year under this clause and not regularised within the stipulated timelines. The most recent is an estimated Sh43 billion withdrawn in the current fiscal year.

Appearing before Parliament this week, the National Treasury Cabinet Secretary and his team appeared to justify the fund, implying it takes the form of a limited liability company exclusively owned by the CS. This trail of argument seeks to romanticise the fund, similar to the underlying Singapore dream that the fund is said to accelerate. However, no amount of romantic jargon can cure the fund of the constitutional hurdles ahead of it in its current structure.

There are important questions that must be answered before the fund can meet the requirements of Article 201 on openness, accountability, transparency, and public participation.

Question one relates to the implied source of monies earmarked for the fund. The government argues that the fund seeks to shield monies raised from the disposal of strategic public assets, mainly targeting ongoing government divestiture from state enterprises.

Legally and conceptually, there is nothing peculiar in the disposal of public assets by the government to raise revenues. Divestitures and the sale of public assets are among the sources available to the government to raise revenues in public finance, similar to taxes, penalties and fines, levies, and public debt, among others.

In any case, we have several restricted funds at collection, like the Road Maintenance Levy, Railway Levy, and training levies, that have been created and appropriated by Acts of Parliament. What makes the so-called Infrastructure Fund so unique and urgent as to warrant only a Cabinet nod to set up? Is it not similar to any other source of revenue to the government?

Question two relates to the constitutional principle of separation of powers and governance structures. Establishing the fund through a Cabinet Memo usurps the powers of Parliament, and by extension the people, to oversee the executive arm of government. Even if the funds were to be first channelled through the Exchequer, as the CS tried to allude, the Fund implies a loop where billions of public money are deposited into and placed under a Board appointed by the executive that does not require appropriation by Parliament before spending.

Constitutionally defective

The Constitution does not contemplate any such scenario where public monies can be exclusively spent at the behest of the executive. In all the other exceptions provided in the Constitution, the enabling Acts of Parliament exclusively appropriate the funds to be spent by the collecting agency. For funds like the Equalization Fund, Appropriation Acts are required before any withdrawals can be made from the fund.

Question three relates to a historical trust deficit on the part of government and administrative costs. Information is already emerging that the government is spending at least Sh3 billion in legal and transaction advisory fees for the Safaricom deal.

Similar extravagant preliminary spending, like the Social Health Authority (SHA) Sh104 billion Enterprise Resource Planning System, has not faded in the memory of taxpayers. The Treasury has never been able to explain the ownership and beneficiaries of the multi-billion e-Citizen system. The Auditor General has clearly found these systems constitutionally defective, leading to her adverse opinion over them.

These reports have been subject to heated confrontations between the Treasury and the Auditor General before Parliamentary Oversight Committee proceedings. Why, then, should the citizenry magically trust this company exclusively owned by the CS?

How many more billions will be spent to set up its structures and on benchmarking tours around the globe by its officials? What would be the net return on investment to “Wanjiku” for her loss of ownership rights in Safaricom?

In theory, exploring innovative options to accelerate strategic infrastructure is fine. Based on limited public information, ours seems to follow Indonesia’s IIGF model, which offers government guarantees for private investors in PPP arrangements.

CS Mbadi said the fund will prioritise commercially viable projects, not general infrastructure, yet recent PPP deals bypassed the competitive bidding process required under the Public Procurement and Asset Disposal Act, 2015.

They originated from the Privately Initiated Proposals method under the PPP Act of 2021, giving powerful cartels exclusive access and control over multi-billion-shilling infrastructure projects.

The costs and terms of existing PPPs have been questioned and found extremely wanting on key constitutional requirements. With this in mind, we now use proceeds from disposed strategic public assets to sweeten deals for the very same cartels bleeding the nation.

Cry, my beloved Wanjiku.