Dr David speak about revenue sharing formula


Public statement on the revenue sharing formula stand-off in the Senate

As public finance advisor to the Committee of Experts (COE), I was the
principal author of the “layman’s draft” of Chapter 12 of the Constitution of
Kenya 2010.

On the matter of revenue sharing, the CoK2010 uses the language of “basis”
as opposed to “formula.” There is in fact no reference to “formula” anywhere
in the articles on revenue sharing. This is on purpose. The reason is as
follows. There are two basic models of fiscal equalization, namely formula and
institution model. Systems that use formulae do not have standing institutions
such as Commision for Revenue Allocation (CRA). The formulae are
developed by ad hoc technical teams and passed into law until it is due for
revision, then another ad hoc team is constituted to do so. Formulas are
problematic for the very reason that are playing out now. Once enacted, they
put the country in a straight jacket that it is forced to live with until the next
revision is due.

We were alive to the fact that the history of inequitable “sharing of the national
cake” as we call it, is a highly emotive and divisive issue, and indeed one of
the core grievances identified in the Agenda 4 items of the National Accord.
We recognized that the country would be on a learning curve fora
considerable period, and anticipating that the allocation process had the
potential for exercabating instead of healing ethnic divisions, we felt that we
needed a credible authoritative team of honest brokers” to navigate the
country through the transition.The “original sin” of the current stand-off is that
the CRA adopted the very formula that it was envisaged as an alternative to.

The current dispute centres on whether to put more weight on population or
geography in the formula. This dispute, as far as the spirit and letter of the
Constitution is concerned, is completely misplaced.

The overarching principle to be used as a basis for revenue allocation is stated
in spelled out in the Principles of Public Finance (Article 201) specifically
201(b) the public finance system shall promote an equitable society” and
201(b) (ii) “expenditure shall promote the equitable development of the
country, including by making special provisions for marginalized groups and
areas (emphasis mine).

Equitable sOciety and equitable development are defined by outcomes such
asIncome per peSOn, E EXpectdncY, Scnool enrolment and educanon
outcomes, access to healthcare etc. Put diferently, this part of the “social

pursue development convergence across the country. While development

alspariues may persist ror aerent reasons, no communiy or part or Kenya IS
e ore developinen a ine ouer using pu oney. y
distribuion ot public resources which portends to reintorce these disparities, or
creating new ones, is unconstitutional.

We envisaged that the basis of set five year development convergence targets
and then estimating the resource distribution required to meet those targets.
lo Ilustrate according to the last DHS Survey (2014) the national under
mortailiyWas 200u, lowest In entral at z100U ana nignest in nyanza
2000, North astern was 440o, lghtlyabove Central. Nyanza and
Central are equally populous. It is evident that neither population nor

es Teuired lo Dring

Nyanza’s child survival to the national average

Similary We know that Northern Kenya is grossly underserved in terms or
intrastructure. Marsabit county 5,UUO km, Pop 460,000) is 45 times larger
than Kirinyaga (1500 km2, Pop 610,000). What would be the rationale of

allocating infrastructure money beween Marsabit and Kininyaga based on
popui lauo

At 16.000 km the amount of land classfied as of high agricultural potential
T000mm ralntall p.a) in Marsabit is one Uira Digger uan ue TIve counties or
une old entral FroVinde (12,000 Km). his potental is underexploited, Wnile

that of Central is more or less exhausted. Where then, should more
agricultural development money go?

We envisaged the CRA as a think tank that would provide technical support of

this nature to the senate and also tacilitiating Duildinga consensus not just
wni er n Dut ey e, TsWEver esno
recuuee processigueis nornue s ecnicl oois Du e
final product tabled in the Senate for adoption should be a consensus
document. This must necessarnily begin with objectives that is, what we are

mortality of 40/1000, then it follows that the gap between the baseline and the

target should be the basis for revenue allocation. If we are not agreed on the
destination, then is IS doubtrul that we can agree on the route.

his cnsis then, provides an opportunity tor the senate to abandon the tormula
SudignyCKet vve OW veseve years o aia o e cosOproviding
Services n aerent pars or une country. vve also have good enougn sOCio-
Bconomic data to evaluate progress on equitable development.

The politics of “one man, one shling is a complete reversal of this principle. It
S an artep to rerun the country to tne triCKIe aown paraaigm oSessional.

the development of areas having abudant natural resources, good land
and raintain, transport and power faciities, and pe0pie recepuve to, an
2cuve ooveropien (ny empnasis)

We have seen the National Government spend over Sh30b on a transmission
line to evacuate wind power rom Marsabit to serve tese S0 called nign
potential areas and people. he people or Marsabit get nothing tor their wind
resources, Dut when t comes TO Sharing revenue, ne contiDuuon or thne wina
resource to tme revenue counis Tor notnlng. vve nave seen tne nationa

when it

Comes to revenue allocation, the investment the oil has brouaht into the
COuntry counts for nothing. vve have seen the national government pour

Tunction, but when it comes to revenue shanng, the contribution of lana River
people’s land and water resources to national tood secunty counts for nothing.

es u uEpeT|pnery Tor the

benefit of the centre is called colonialismm

Sinoe assuming oce in z013, unuru enyata nas aone everyning that he

pusyd uue su u pss
retrogressive security laws. He has led the impunity of disobeying court orders.

He has bankrupted the country hrough recKIess borroWing in the quest to


medical eauioment scheme mega-corruption racket that we now know was
executed and controlled from State House. Pronouncements by both Kenyatta
and Odinga camps on this conlict have revealed that the BBI IS a Iroan horse
Tor tnis neranous agenda. t is tns iKuyu suprenacistideoio9y and
hegemonic agenda that brought Kenya to the brink in 2007/8. Uhuru Kenyata
has tempted tate once. He seems to have learmed nothing

At the core of our constitutional dispensation is a covenant to uphold the
lgnity or Every ciizen, Every comimuniY, every eglon. Tne Overarening


principle of public finance, namely an equitable society, enunciated in Article
201 and also enshrined in Social and Economic Rights (Article 43) represent
the consummation of this covenant

More fundamentally, it is the political bargain underpinning Kenya as a unitary
state. If Kenyatta and his Kikuyu supremacist cabal feel it is intolerable, there
is always the alternative of a full federal system. Mombasa and Lamu get too
keep their ports. Turkana gets to develop its oil resources. Marsabit gets to
charge for its wind resources. The Tsavo National Park reverts to Taita-Taveta

Tyranny of numbers, domination of the weak by the strong, and ethnic
superiority complexes, this is not an option. Without a commitment to equitable
development, there is no social contract, which is to say, sooner or later, there
there will be no Kenya.

Divorce is also an option.

17 July 2020

Economists Dr ndii

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