Rich county, poor county: The coming challenges of devolution
The World Bank’s most recent Kenya Economic Update, along with the Commission on Revenue Allocation’s County Fact Sheets, have garnered substantial media attention.
Since Kenya is undertaking the most radical decentralisation reform in the region in 2012, East Africans in general would do well to reflect on these matters.
For example, they are as relevant for Tanzania’s pending constitutional reform, and rethinking its constituency development fund, as they are for Kenya.
Perhaps the most important thing that these reports make clear is that Kenya has recent experience with devolution and with devolved funds.
This may seem obvious, but there has actually been almost no discussion about what the experience with local authorities, Local Authority Service Delivery Plans (LASDAP), LATF or CDF means for how devolution should (and should not) be implemented.
One exception to this is a recent report by the Institute for Social Accountability (TISA) that tries to offer lessons from the past 10 years or so on citizen participation in planning and budgeting. For example, a case study of the LASDAP process in Malindi reveals a reasonably successful model for bringing citizens into the planning and budgeting process.
One core lesson from that experience is that for participation to work in a large geographical area, there should be sub-structures reaching down to the lowest levels.
The Bank’s Navigating the storm, delivering the promise builds on the TISA report by interrogating a range of issues around finances, planning and budgeting at local authority level.
They point out that LATF accountability has suffered due to a lack of transparent reporting and insufficiently vibrant participation in the development of LASDAPs. Both the TISA report and the Bank suggest that citizen participation at local level be facilitated by civil servants, rather than mediated by politicians.
This is a key lesson from the CDF experience in Kenya, where the introduction of fund managers has helped to curb some of the excesses of an MP-led process.
It is critical to discuss these lessons now, because the financial management legislation and other Bills to be passed by parliament early this year impact directly on these issues.
The latest draft of the PFM Bill contains a structure at county level known as a County Budget and Economic Forum, to be composed of the governor and county executive committee, as well as representatives formally nominated by interest groups, including civil society.
The structure is to “provide a means for consultation” on the budget.
The question is whether this Forum is appropriately designed. Does it ensure transparency and broad, vibrant participation? Is it going to be driven by civil servants or by politicians? Will representatives be independent or, as is the case with CDF committees, clients of the governor (MP)? How powerful will its recommendations be?
Another important issue is about what local governments must do, and how much money they need to do it. Local authorities already provide certain services, and the Constitution gives them still further powers.
But what will it cost to provide these services? According to the World Bank’s estimates, counties will be responsible for functions that cost about 30 per cent of total revenues, or more than double what they are guaranteed by the Constitution.
Some of the gap will be filled by revenues raised directly by counties themselves. However, many counties will struggle to fund themselves. Again looking at Local Authorities as reference points, there is at least a tenfold difference in what Nairobi and Mombasa can collect compared with the counties of the northeast.
Although the Constitution is detailed, it does not fully resolve the matter of which functions will be taken up by which level of government, and it leaves open the question of how funds will be transferred to counties beyond the 15 per cent.
For example, the Constitution says that counties may be additionally funded through conditional or unconditional grants. Which of these is more likely to breed transparent and responsible county financial management?
There is an urgent need to define further the responsibilities that counties will have within specific sectors, and then to think through appropriate and fair mechanisms for sharing resources across counties to meet these responsibilities.
Dr Jason Lakin is a programme officer and research fellow at the International Budget Partnership. [email protected]