Devolution: A make or break for Kenya

At midnight following the next General Election, Kenya will usher in a new system of government: 47 “mini states” in the name of counties.

These “states” will replace Nairobi as the centre of command, presenting every region of the country with an equal opportunity for success or failure.

“Kenya’s constitutionally mandated devolution is one of the most ambitious in the world,” a report released by the World Bank last week says.

It is not that Kenya will be the most devolved government in the world. No. It is that the pace at which the decentralisation reforms will be implemented is truly ambitious.

Then there is the bigger risk of high expectations built in Kenyans’ minds during the campaign to adopt the new law.

“Kenyans have embraced devolution with the hope that it will solve three enduring governance bottlenecks — monopolistic use of State power to the benefit of certain groups and regions, widespread corruption and inefficient administration, and a desire by most of the population for more equitable distribution of resources,” the World Bank report notes.

Most countries transform gradually from central-run governments to devolved ones, but Kenya will be the first country in the world to transition from a central-run government to a devolved one a second after midnight on election day.

By then, the country’s mindset is expected to switch, ushering in both hope and anxiety on what the new governance structure holds.

“How it will be executed will have a lot of impact on the direction the growth of the economy will take,” says Mr Wolfgang Fengler, a lead economist for the World Bank’s Kenya programme.

The bank forecasts a brighter future for the country’s economy in 2012, projecting a 5.5 per cent growth in GDP, though still a far cry from the needed 10 per cent growth to push the country to a middle income one by 2030.

However, this is pegged on the devolved government structures which, according to Mr Fengler, are key to achieving further economic growth in the Constitution.

The Constitution provides for the creation of 47 counties, which will devolve power previously concentrated in the central government. Around 32,000 local authority employees and up to 50,000 national public servants are likely to move to county governments.

This has offered hope that with services near the grassroots, wealth redistribution or the trickle-down effect will be more pronounced, hence spreading wealth to more people than does the current system, which is blamed for creating a few rich people and leaving over half of the population unable to have three meals a day.

Under the devolved structure, there will be division of national resources on two levels; national and county.

This means that the national government will be left with the responsibility of handling national projects and services, such as infrastructure, education, and energy, while the county governments will develop the respective counties.

Stakeholders have expressed optimism that this structure will boost development, but economic analysts warn of adverse consequences should the devolution not be well executed.

“We are assuming a situation where government expenditure increases while other components of the GDP remain constant. It would be easy to say that a devolved government structure will not have a major impact on economic growth but this is not necessarily what will happen, hence the need to look at the flip side,” says Mr Renaldo D’Souza, a research analyst at Genghis Capital.

Setting up county governments largely depends on the next General Election, whose date is an ongoing debate. And therein lies one of the biggest threats to the county’s prosperity. Analysis by the World Bank shows that in times of General Election, the first casualty is usually wealth creation. 

“Kenya has experienced low growth in two thirds of the election years over the past 30 years. Over the past six elections, three were followed by low growth, especially in 2008, when post-election violence put an abrupt end to the achievements of previous years,” the report reads.

Indeed, during electioneering time, the government almost shuts down its activities while the private sector adopts a wait-and-see attitude.

Notably, as the World Bank report explains, almost all polls are followed swiftly by changes in policy. And with increased uncertainty on what shape the country will take, the hold back, analysts predict, could be pronounced before and after the 2012 General Election.   

 “Among the economic risks posed by a devolved government is loss of investment as a result of lack of confidence in county governments,” said Mr John Kamunyu, a senior research analyst at Dyer and Blair.

“As much as the system presents great opportunities for the economy in the long term, there is a need to build systems that ensure that investors are confident in the government structure.”

This may dash the hopes of many Kenyans of a quick fix, especially to wealth redistribution and service delivery.

The hope for an equitable society is based on the new Constitution, which provides that a minimum 15 per cent of national revenue be shared out among the 47 counties.

This, according to the World Bank, calls for a high level of accountability which, if abused, will water down the benefits of the devolved system.

It is not yet decided what parameters will be used in sharing out revenue among the 47 counties, but among those in consideration include population, poverty index, geographical area, and level of infrastructure.

“We are yet to decide what is to be considered in allocating money to the counties,” said Mr Micah Cheserem, chairman of the Commission on Revenue Allocation. The commission was set up to oversee the sharing of revenue between the national and the county governments.

Among its mandate is to define and enhance revenue sources for county governments. Enter the county and exit the local government. This will be another moment of anxiety.  

“Effective coordination of the transition at both national and county levels will be crucial. Urban services will be particularly vulnerable, since the existing institutions in charge of urban services will be abolished.

This will require a clear decision on who is in charge of coordination and an agreement on the strategy for implementation,” the report noted.

Another economic risk in the devolved government is corruption. The World Bank warns that increased control over resources by county governments will not automatically translate into expenditure that prioritises service delivery.

Mr Gerishon Ikiara, a senior lecturer at the University of Nairobi’s Institute of Diplomacy and International Studies, is optimistic that devolution will help introduce healthy competition among counties, which will culminate in increased economic growth.

But he warns that the system may give rise to a cycle of corruption. “Accountability issues will need to be addressed,” he says.