COUNTIES AND THE INCREASE IN TAXES

By the time you are reading this, almost all the counties will have seen demonstrations protesting increase in taxes and all manner of levies. So lets as try and get to the bottom of this mess.

Almost all counties have increased levies from market fees, cess, business permits to the comical like in Kakamega where the government there is proposing to levy a fee of sh 200 for every person viewing a body at funerals. Granted, the governments need resources to offer services and the " development" the governors had promised during election campaigns. My biggest grouse with with the governors is the manner in which they are seeking to raise revenue.

Lets take a step back to the Kibaki presidency and see what an on about. Kibaki's government went on a campaign to raise the amount of taxes netted not through raising the tax rates but by simply having the KRA collect all the money that it was supposed to collect and it did this in a number of innovative ways;
1. The government first started by closing all loopholes that were being used to evade and avoid paying taxes     through legislation and retraining its officers.
2. The government went on a campaign to sensitize the populace on the importance of paying taxes.                   Remember the slogan " kulipa ushuru ni kujitegemea".

These and other efforts ensured that the government expenditure trippled without having to borrow heavily, even at on point the government was able to fund 95% of its budget from taxes.

This i believe is the way that county governments should go, instead of doubling permits, licences and levies, the governments should first make sure that they have collected all that is due under the old rates. This my friends will not only ensure there are no protests but will also make investing in the counties cheaper. Remember immediately the governors came to office, they were falling over themselves in organising investor conferences and promising all manner of concessions, but this time around they are competing on who will kick out investors.

Murang'a County To Have Its Own TV Station?

The ink in previous blog on the challenges that will face county governors in this new era is yet to dry and the manifestation of the same is coming to the fore. I will not dwell to much on other counties but rather, i will try and focus on the challenges facing my home county of Murang'a.

My first shot is on the announcement yesterday by the Governor that he will make the establishment of a TV station by the county a priority. He backed this with an explanation that the county needed to market itself and disseminate information to both investors and residents through a channel that it controls. My grouse with this line of reasoning, which i had expounded in my previous post, is that the government has place on the business table because while you would think that you are creating employment in this manner, you are actually stiffing it. The government is only supposed to create an enabling environment through policies that are business friendly so as to attract private enterprise to come in.

On the matter of government involvement in media, there are countless examples of flops in this. In the USA, the government there has a station C-SPAN and VOA which very few Americans bother watching since the private media does a better job of informing the populace in an entertaining manner. In Kenya, we have KBC which is funded by the taxpayers but which is not very popular. My point in all this is that for you to effectively inform the public, you look for the medium which is preffered by a majority and used it to get the message across, besides, if the urge is to use local stations which are in touch which the residents, we have Mururi and Kangema FM stations for that.

While the Governor was announcing this " Loft Dream" for Murang'a, Citizen TV had a feature on alcoholism in the county and the fact that we have the highest mean age in the whole country. So Mr. Governor, here you have something that you can sink your teeth into; fight alcohol abuse in the county and find means of attracting the young people of Murang'a back home to develop it. One thing am sure about, having " their own" TV station is not one of them.

While other Governors such as Dr. Alfred Mutua are busy organising investor conferences, we are thinking of a Tv stations

COUNTY GOVERNORS

I had promised myself that I would not write until the elections were over in their entirety considering the amount of vitriol and tribal hate that had/has pervaded the social media. But now the elections are over and I would like to share my two cents worth on observations, which will revolve around the personalities that contested the presidency, which will came at a later date, but rather, on the devolved centers of authority otherwise known as counties.

But before I delve into the counties, I would like to congratulate both Raila Odinga and Uhuru Kenyatta for the strong and spirited campaigns that had the country riveted for months on end, which I will also write about at a later date as they were both great studies in management and marketing. I would also like to congratulate them individually with the now President-elect Uhuru Kenyatta for emerging victorious against many odds and to PM Raila Odinga for choosing to addressing his grievances with the election through the Supreme Court and for accepting the verdict of the court.

Now to the address the post-election period and what we expect from the incoming governments. The constitution has devolved some responsibilities, duties and functions away from the National Government to the County Governments but left others such as national security, foreign relations, education, agricultural policy, health policy and most of the revenue collection in the hands of the hands of the National Government.

After the County Governments have settled down after their honey moon, they will soon realize that what was devolved to them merely leaves them with duties akin to those of village heads. Why do I reason this? Let’s take a look carefully.

1.       The responsibility of security provision was left entirely with the national government and as we all know too well, most of the problems affecting the counties have their genesis in security, of lack thereof. Most governors have promised to eradicate insecurity and provide jobs to the millions of youths wondering aimlessly and hopelessly in our trading centers. To achieve this in meaningful numbers, they must attract investors in good numbers to set up enterprises that can create these jobs and as we all know, any serious investor rates the security of his enterprise at the top and so the governors have to tackle insecurity as their first priority. Now here is the problem, security is the sole responsibility of the national government through the police service and the provincial authority. Now, we all know that these two bodies are part of the problem in terms of insecurity and couple that with the sense of resentment they surely feel towards this “new guy” who has come to replace them and deprive them of access to the gravy train and you get the idea of the problem the governor has.

2.       All governors have promised to uplift the education standards in their counties. Friends, the only education the governor can improve are where the constitution empowers him to, and these are, drum roll please, nursery schools and village polytechnics. Primary schools and secondary schools don’t fall under his influence but are the responsibility of the cabinet secretary for education for the policy formulation and implementation and the successor to the Teachers Service Commission (TSC). Unless the governors want to establish independent schools like happened in the period before independence, then they will just have to sit twiddling they thumbs as they wait and hope that Senators and MPs will push the national government to focus on education in a much more meaningful way then previous governments have. But considering the propensity of politicians to be concerned with matters that benefit them directly, I wouldn’t burn the mid night oil waiting for them to act on this as their first priority.

3.       Health is where the governors have influence since apart from referral and level 5 hospitals and the national health policy, everything to do with provision of primary health care was devolved. Before you pop the champagne bottle, take a step back and just remember the many battles the outgoing government had been involved in with unions representing healthcare workers and in fact, nurses are still technically on strike. Negotiating with these unions is the responsibility of the Salaries and Remuneration Commission and whatever compromise they arrive at, the county governments have to abide by them and pay them accordingly. Oh, before we are done with health care provision, keep in mind that the bureaucratic, monolithic and inefficient entity called KEMSA which supplies all government hospitals from the dispensary to the referral hospitals with all supplies from drugs, bandages, beds, cabinets to stationery is a parastatal controlled by performing, while it has no competition in supplies to government hospitals, it has been running costly advertisements in print and electronic media while hospitals have been dispensing pain killers for all ailments.

4.       Most counties are dependent on agriculture and the governors during their campaigns fell over each other promising all manner of incentives and subsidies. We have a problem here my friends;

i)                    To provide subsidy basically means cushioning the farmer from high costs of agricultural inputs from seeds to fertilizer. The world prices are currently on an upward trend due to the pace at which the economies and population of China, India, Indonesia and Brazil are growing. What this means is that the county governments will be digging deeper into their coffers to subsidize the price of a product they have no control over.

ii)                   The governors have also promised improved market access to farm produce. This means they will have to construct new and modern markets and improve access roads, which means more money being expended.

iii)                 The governors have promised to kick out middle men from the chain. At first glance this sound good, and for the most part it is. However, this needs to be handled with a lot of care as these middle men are businessmen exploiting a gap that already exists. They offer established processors competition and hence keep farm gate prices high and for some produce, they are the only buyers.

5.       Governors have also in their enthusiasm and sometimes ignorance, been promising to build factories for things such as fish processing, coffee processing, leather tanning, abattoirs, milk processing, maize milling and animal feed production. This all sounds good and noble, but remember the problems we are having with quasi-commercial parastatals. Most of them are struggling and some virtually dead surviving on bailouts from the government. The best way to handle this would be for the county governments in partnership with the national government to provide an enabling environment for private enterprise to establish this. But this will have to be initiated by the governors as the national government will not initiate this as the same officers who have been on the ground will still be the ones there and as we all know, with them calling the shots previously, nothing much has happened.

6.       Road infrastructure is another area where the county governors have a problem. They went around promising to fix all roads from some promising to build miles of new tarmac roads to making all weather roads in all areas. This is all good as the counties cannot grow without communication and connection with the markets for what they will produce. Road construction in Kenya is very costly affair and coupled with all manner of promises that have been given, frustration will creep in when the pace of construction does not match the expectations.

7.       Revenue collection will certainly be the most problematic areas for a good number of governors. The national government has retained most of the sources of collection and apart from the allocation to county governments of at least 15% of the national budget, which when you think about is not much, the county governments are left with cess, market fees, business licenses and entertainment taxes and even then, they cannot just wake up and impose new fees without the input of the Revenue and Allocation Commission. Now good people, these are the same revenue streams that now abolished local authorities had and they had less to do compares to the county governments and most of them could not offer services. This was partly because of non collection of amounts due to them and diversion (a polite alternative to corruption). The governors have therefore no option than to go on aggressive revenue collection by making sure all defaulters, dodgers and evaders are brought into the net. This is the only way but it will not be popular as unfortunately a lot of people do not like paying for their fair share but are always keen to accrue to themselves the most benefits especially when the government is involved.

All of these seem to point to the governor’s job as being an impossible one, but it need not be. We have all been pointing out that the governor’s job is purely managerial, I hold the firm belief that it’s also political because with all the juggling he will have to do, he must have the skills to get the MPs and Senators to do their bidding at the National Assembly and The Senate and to have the County Reps. to play ball and support their programmes. But all said and done, I don’t see a lot of the governors being reelected in 2017.

CORD MANIFESTO- MY THOUGHTS

Yesterday the CORD Alliance launched its manifesto at KICC to great pomp and glamour. I got a chance to go through the manifesto and though i feel its a nice document for campaigning, i feel it has some shortcomings which i will hilight as under.

Poverty and Cost of living:

Point three states that Cord will promote investment over consumption with measures favoring a combination of high- profit taxes and low interest rates. ( Emphasis mine)

This in my opinion is that CORD is seeking to increase taxes on corporates/companies and individuals with high profits/incomes. This will lead to reduced investments in the economy and lead to fewer companies setting up localy and hence no job creation. With the coming into force of regional markets with free movement of goods and labour, what will prevent  a company from setting up shop just across the border in Arusha and export finished goods to Kenya so as to avoid the high taxes.

The world over, no economy has ever developed through a regime of high taxes as this reduces the amount of disposable income thereby reducing investment and consumption which are the drivers of a growing economy. France recently increased taxes on high net worth individuals to 75% and this has seen the emigration of lots of people to countries with low tax rates.

Instead of raising taxes, CORD should focus on widening the tax base by roping in more companies and individuals who are evading and avoiding paying taxes by giving more teeth to the KRA, education on the importance of paying taxes and making tax evasion punitive.

Control Exchange Rates

While the aim of this policy is laudable ie. reducing the cost of imported goods, the method is flawed as active government intervention in exchange rates has seen the counties suffer from massive shocks as was seen in the Asian financial crisis when speculators crashed the financial markets of the Asian tigers.

To control the cost of imports, the government should endeavor to improve the quality of locally manufactured goods through empowering the Kenya Bureau Of Standards, giving incentives for local manufacturing, linkages of our universities and polytechnics with industries so as to produce graduates who are market ready and as for energy, promote the exploration of renewable energy and fast tracking of oil production and extraction so that they come online sooner.

Social Equality.

Design tax policies for redistribution of income and wealth by focusing on counties with limited capacity.

This point looks harmless but when taken together with other policy statements in the manifesto, it comes out that the CORD intends to use the poverty index of the counties to target tax increases that will hit some counties harder than others. The reason why i say this is that the constitution through the revenue allocation authority already has an equalisation fund and anything else is clearly meant to punish counties such as Kiambu for being rich.

I would also like the CORD alliance to define the methodology in everluating the richness/poverty of a county.

All in all, the CORD manifesto has a heavy socialist lean to it and will transform our country into a welfare state. While this is not entirely bad, they have not shown us how they intend to finance all the freebies and handouts apart from increasing taxes on the wealthy.

KCPE RESULTS-MURANG'A

The results for the 2012 KCPE  were released today by the Minister and my home county has improved marginally from position 41 in 2011 to 36. While this improvement is commendable, i believe that alot can be achieved in Murang'a and here's why.

1. While poverty is a reality in many parts of this county, it is not as pervarsive as other counties and with a poverty index that is better than the national average. What this means is that our children are able to go to school, have a meal at lunch and get basic learning materials including books.

2. In the 1980s, Murang'a embarked through harambees the task of building more schools both Primary and Secondary for our children and therefore i believe that no child has to walk for long a distance to attend school. This ensures that our children are not undully tired when they arrive in school.

So with this advantages and may more, why do our schools continue to perform dismally and what can we do to remedy the situation?

a) Security: Security in the county is poor this is affecting the students in terms of their parents not being able to invest and improve their lives economically. The solution to this i believe is to bolster security patrols by the police and establishment of active security intelligence networks. Though the duty of security provision is vested in the National government, the elected leaders in the county must lobby the government to take the matter seriously.

b) Alcoholism: The major social problem in the county is alcoholism. Alcohol has contributed to low investment in the school going child by parents who contribute neither money or time in the development of their children. Its a proven fact that children whose parents take an active role in their lives generally perform better all round. So the solution to this is to encourage parents to go easy on alcohol and help bring up the next generation of leaders.

c) Attitude: Alot of parents nowadays think that since the government is taking care of education through " free primary and day secondary education" that they don't have anything else to do. This is a big mistake. A casual observation of schools both private and public that perform well indicates that the parents participation in the school is high. Participation includes follow ups on how the child is faring in school and discussing progress and remedy with the teachers, ensuring that the child completes and does their homework and provision of incentives to the teachers.

I believe the leaders who will come into office must ensure that education is a priority and the county education office will be staffed with dedicated educationists who have passion for child development.

NOMINATIONS AFTERMATH

Its now one week after the nominations debacle presided over by the two dominant coalitions in Kenya and almost everyone is foaming at the mouth looking for the apt adjective to describe them. For me, i would describe them as an apt lesson for all of us, i will get back to that in a while.

Alot of the favorites went through and there were surprises here and there but all in all they conformed to expectations given that in every election about 70% of incumbents always get thrown out.

So what lessons can we take from all this?
a) The IEBC needs to be super prepared since its evident the turnout will be massive and the people will not accept shoddy work. The voters are really passionate about who they want to serve them and in many areas, they were still waiting to vote as late as mid night and nerves will get freyed when people are tired. So enough polling stations will have to be provided at each centre. Any thing out of the ordinary will be seen as an attempt to manipulate the out come and the masses have shown their willingness to protest at times violently.

b) Political parties/coalitions must realise that the peoples say overides the "leaders" wishes and they are not shy about forcing it. Both sides of the devide have shown their total disregard of the will of the people, the Jubilee side atleast later realised their folly and back tracked but the Cord side seems to be stuck in the 90s KANU way of doing things and for all intents and purposes, they are more KANU than KANU itself. The upshot of this is that where the party has defied the wishes of the voters, i foresee voter apathy of sorts and this may hurt the dorminant party there.

c) Politicians need to realise that their every move is closely monitored by the voters. A carefull analysis of the fallen will show you that the voters dont like arrogance and most of the arrogant types have been rejected. From the likes of Midiwo, Anyang, to Githae and Nguyai, while the humble are embraced. The politicians/aspirants who are painting themselves as high mnded are being swept aside, Wanjiuku wants some body who can explain to her issues in a language she understands not jurgon. Case in point, Waititu Vs Mbaru.

d) All of us need to get involed in the affairs of our parties as alot of policies and procedures are being formulated now at this level and their effects may be huge. Case in point is the ODM debacle regarding the choice of their ticket holder for Nairobi Senator. Though its abhorrent what the party has done to Elizabeth Ongoro in denying her the chance to vie and handed it to Margaret Wanjiru, a carefull scrutiny on the party constitution reveals that they are withing their right to do so and every member of the party has signed to these absurd rules. This same rule has been used to hand certificates to the likes of Kajwang, Nyong'o, Midiwo etc.

These elections need to be approached with a sober mind and we need to scrutinise and interogate all pronouncements by politicians and quiz them accordingly. When they say that they will build 100 dams in two years, get them to tell you where the funds will come from and the details of it all. All in all, if we ask tham the tough questions, they will atleast not make empty promises.

In the end, please remind your polician friend the recall clause becomes active after two years and if they don't deliver, we will not wait for two years but we will instead through them out early.

TNA Nominations Postponed

Buy this time i guess you know that due to logistical hitches, the TNA has been forced to postpone its primary elections for 24 hrs.

So what does this mean? For starters, most of the nomination centres will not be available due to the simple fact that most of them are in public schools and the though the ministry of education had been gracious enough to grant them Thursday, i hardly think they will extend the courtesy for a second day given the chaotic school calendar they are facing what with the delayed 2012 exams and an election in the middle of a school term. Secondly, alot of voters are simply angry and frustrated and may not bother to show up again, third, alot of doubts are being expressed about their ability to organize themselves given that they knew all along that they would hold the primaries but just couldn't deliver, fourth, with the apathy, expect alot of the thuggish contenders to go through and all of these factors may end up hurting the party at the general elections of 4th March 2013.

So how can the party control the damage? The party supremos should as a matter of urgency come out and publicly re-assure their supporters that nothing under handed is afoot and that all is well and the intagrity of the process is still in place