The Human Side of Own Source Revenue Growth
By Ndiritu Muriithi
Many county executive committee members, chief officers and directors of county
departments are surprised to find out that the teams they lead are integral to own
source revenue growth. After all, the conventional wisdom is that the key ingredients
to revenue growth are the presence of an independent revenue board and a revenue
system.
The conventional wisdom is, however, misleading. Here is why. Most county revenues
are fees for services, have a major impact on public health and safety, and are directly
impacted by economic activities, which themselves are influenced by the level and
quality of county government services. Let us examine each of these three ideas
briefly.
First, many county revenue streams are a fee for service. For instance, we get paid meat
inspection fees because our meat inspectors inspect every carcass to ensure that meat
is fit for human consumption. When you hear of Kenyans getting ill from eating anthrax
infected meat, it is a failure of this function.
That service attracts a tiny fee, usually no more than a couple of hundred shillings per
carcass. If you then find that the meat inspection revenue line is reading zero, either
there is revenue leakage, or worse, the service is not being provided. In the latter case,
you can expect citizens to occasionally fall sick from consuming diseased meat.
If there is revenue leakage, the chief officer should be taking stern action against errant
staff. Another often recommended step of resolving the problem at the roots is to go
cashless.
This removes the moral hazard involved in handling cash. And, instead of
every chief officer organizing how her department is going cashless, this can be
organized centrally, for example, by the county revenue board.
It is of course worse if there is no meat inspection. Citizens will get sick and could die.
Such was the scare at Kimanju hospital in 2020, when 32 members of one clan showed
up suffering severe vomiting after eating an un-inspected cow carcass. It turned out
that the animal was under treatment just days before the incident. Fortunately, they
all recovered.
Ailments
The meat inspection fees are the result of the county providing a crucial
public health service – meat inspection. The service is not provided by the revenue board nor revenue collectors, and most definitely not the revenue system. Rather, it
is provided by meat inspectors – staff of the livestock department!
Consider the sale of food to the public. All food handlers must have a public health
certificate. Premises in which food is sold to the public must be hygienic.
Obviously if food handlers are sickly, they will pass that sickness to you. When the premises are dirty or unhygienic, they contaminate the food sold therein. Unhygienic food is the
source of many ailments such as diarrhea.
While Governor of Laikipia, I found out that treating diarrhea was costing us 72 million
shillings per year. Most interesting, we cut this number by half by increasing our public
health and sanitation expenditure by 15 million shillings and focusing on the diarrhea
hot spots in Nanyuki and Nyahururu. What did we do? Encourage better hygiene in
food kiosks and among street food vendors, improve water supply and refuse
collection, and, clean the streets and drainages.
Secondly, county services have a direct impact on public health and safety.
Consider building plans. They are reviewed and approved to ensure that structures can support the human activities or the habitation proposed. You will have seen or heard about
buildings collapsing often enough to know that this function is not working as well as
it should in many parts of the republic. Collapses have occurred more frequently in
peri-urban areas such as Ruaka. Building completion and occupation certificates are
to ensure that the completed building is fit for human habitation. In a properly
functioning system, the utilities, like water and electricity, would not be connected to
buildings until such certification has been done.
Each of these services – review and approval of building plans, building inspection, fire
inspection and so on, attracts a fee, not a tax. And, the services are vital to ensure safe
buildings.
Thirdly, the demand for all county services, including the ones described above,
responds directly to the health of the county economy. When it is doing poorly, the
demand for services is low. And it is easy to see why. When citizens are having a tough
time economically, the demand for meat, and therefore meat inspection services will
be low. When the citizens are struggling financially, there will be less construction, so
demand for building plan approvals will be less.
Homa Bay
Yet economic activity is itself directly influenced by county services! Counties with high
quality, streamlined services are more likely to attract investments. Today, Homa Bay
is getting attention nationally and beyond. A recent investment conference attracted
global interest. As business activity picks up, so do the fees from single business
permits. With more revenue, the county government is able to do more, which results
in even higher business activity. This vicious cycle also works in reverse.
When Laikipia halted investments in the smart towns, the rapid growth in the business
register slowed down, as fewer businesses were seeking licensing. The slow down
meant less fees from the single business permits. With less money, refuse collection
in the main commercial centers deteriorated as garbage trucks stayed parked for
weeks without fuel, itself now more expensive from a weak shilling among other
reasons.
Counties can of course take active measures to stimulate their economies, both
individually or collectively. A well-documented case is the Laikipia Economic Stimulus
program that leveraged commercial finance from leading banks to provide affordable
credit to micro and small businesses. Broader but not so well known, is the effort by
the Central Region Economic Block (CEREB) to remove double charges for single
business permits for micro and small businesses that trade across county lines.
To get more fees from the citizens, you must give more, and better services.
@NdirituMuriithi is an economist and Managing Partner Ecocapp Capital
