This article assesses performance differentials between Kenya’s top performing counties and the lowest performing counties over two separate five-year periods, taking the six lowest and six top performing counties.
The Kenya National Bureau of Statistics does a sterling job with statistics, taking the pulse of the nation. On Devolution, the latest 2024 GCP Report (2019-2023) scopes the last five-year period. It carries interesting insights compared to the first five-year GCP Report (2013-2017) issued in 2019.
We now have two periods for comparisons over 10 years. They offer insights on how to get serious about equitable growth? The 2013-2017 period is a good proxy for the start of the era of allocating substantial resources to disadvantaged counties under the equitable revenue sharing formula to support their catch-up with the rest of the economy.
Indicators help track interim economic performance because county GCP estimates when summed up are consistent with the published national GDP. County indicators help measure economic progress against equity, testing the effectiveness of allocations by the Commission on Revenue Allocations (CRA) and the Equalisation Fund to marginalised areas.
Are Kenya’s objectives or those of the CRA on track?
Contributions to GDP and the Sectors: A pattern emerges. Some counties are the economic powerhouses of Kenya for both periods, nationally, and in the sectors. The majority of counties (33) still contribute less than 2 percent each to Kenya’s GDP while 14 counties contribute above 2 percent each, and up to 27.5 percent for Nairobi.
Remarkably little has changed during the two five-year periods. Virtually the same low-performing members receive high revenue allocations from both domestic revenues and external borrowing (covering deficits taxpayers must repay) while high performing counties receive much lower allocations.
First, the dynamics of low performing counties. Almost zero changes have taken place in shares over the two periods. The lowest contributing counties to GDP shares, working population etc., are Samburu, Lamu, Is iolo, Tana River, Marsabit, Mandera, Wajir, Garissa, Taita Taveta, and Turkana.
Contributions of Isiolo, Samburu, Lamu, Marsabit, Tana River, and Mandera to Kenya’s GDP have remained uniformly in the 0.1 to 0.5 percent range, save for Marsabit which improved its contributions marginally from 0.5 percent to 0.6 percent. Lamu ’s contribution regressed from 0.4 percent to 0.3 percent.
Virtually the same counties remain negligible contributors to the key sectors that need to grow as keys to Kenya’s self-supply and food security to reduce dependence on food imports. The low performers are virtually negligible players in agriculture forestry and fishing.
The pattern repeats itself in manufacturing with some 23 counties doing near-zero manufacturing (between 0.1 percent and 0.5 percent).
The bottom six counties also do near-zero shares in the secondary sectors that include mining and quarrying activities, electricity, gas, steam, and air conditioning supply activities, water supply, sewage, waste management and remediation activities, and construction.
Lead counties in Kenya’s secondary sector are Nairobi, Kiambu, Nakuru, Mombasa. Machakos and Embu.
High Performers: High performing counties have their own idiosyncrasies. Nairobi has led in contributions to GDP by far. It increased its share from 21.7 to 27.5 percent over the two periods.
During 2019-23, they are Kiambu, Nakuru, Mombasa, Meru and Machakos. Between 2013-17 and 2019-23, average performance showed Nakuru ceded second place to Kiambu (though Nakuru was growing fast in recent years).
Its average declined from 6.1 to a 5.2 percent contribution. Kiambu moved its average contribution from 5.5 to 5.6 percent. Similarly, Machakos ceded fifth place to Meru, which moved from 3.2 to 3.4 percent by the end of the second period, 2019-23.
The puzzles of inter-county performance: The KNBS GCP 2019-23 Report exposes quandaries. The same low GDP and sector contributing counties feature among those with the highest per capita revenue allocations.
This dilemma is easily demonstrated by comparing county contributions to GDP and the revenue allocations from CRA.
Lamu for its pains of contributing only 0.3 percent to Kenya GDP receives revenue allocations in excess of Sh21,000 per citizen. Samburu for the same effort receives over Sh18,000 per citizen. At the other end, Kiambu and Nakuru for contributing 5.7 and 4.9 percent to Kenya's GDP receive allocations of about Sh4,000 and Sh6,000 per citizen.
The disparity, taken with GDP and sector performance, demonstrates the dependence of low-performing counties on output and revenues from high performing counties.
The re-allocation of resources has implications for Kenya’s rate of GDP growth. Paradoxically, the GCP report shows marginal contributors to GDP growing at higher rates than the national average growth rate of 4.6 percent for all counties eg, Marsabit, Isiolo, Samburu, and Lamu.
But in promoting growth, incentives and competition, marginal contributions mean exactly that- marginal.
Other examples of the dilemma are growth rates among counties that spent zero on CRA-allocated development spending over 2019-23, for instance Nairobi, Lamu, and Kajiado, (6.1, 5,9 and 6.3 percent, respectively. If counties grow despite leaving development allocations untouched, it informs that private sector-led investments as the sources of any growth not revenue allocations.
County governments spent Sh55.68 billion in Q1 of FY2024/25 and only Sh6.71 billion of the total expenditure in CRA development allocations, a mere 3 percent absorption rate of the annual development budget. The situation displays a rooted lack of complementarity between investment in private and public goods.
Unfortunately, KNBS does not compile the fiscal revenue impact county contributors to GDP. Nevertheless, the disparities already paint devolution essentially as a tool for counties to access counties’ recurrent spending rather than economic progress and economic catch-up.
Even large contributors to Kenya GDP (with the notable exception of Nairobi) achieved growth rates well below the national average.
This leaves wide open the question of fairness in revenue allocations calculated by the CRA, with favourable allocations defended so dearly by low GDP contributing counties. The disparities allow some counties favoured by revenue allocations to enjoy better fiscal endowments than others, a condition akin to dependency since output effects are minimal.
Where do revenue allocations go?
More concerning, revenue allocations are being pocketed by venal county officials in corruption and poor governance. Ahmesiad Mohamed writing for the Daily Nation on April 18, 2024 provided a helicopter view of how decentralisation and the dream of devolution to apply equalisation funding to scale up development has been destroyed in the last decade.
Allocated spending is littered with mismanagement, patronage that squashes competences, and opaque spending. Allocated funds are applied not to pressing county activities but to cutthroat indulgent usages where positive development impacts are hard to trace, even for the Auditor- General.
Delivery of basic services has failed widely with delivery regressing notably in agriculture, education, and health. The Controller of Budget (CoB) untiringly flags alarming financial reporting (or lack of it) and the fault-lines or forays by county political leaders in spending.
The writer is a former acting chairman of Central Bank of Kenya (CBK) and senior economic advisor, Executive Office of the President
