Power and initiative have moved to the grassroots

The small scale businessman and contractor living in the countryside hopes that  the new dispensation will lead to more work and, therefore, more money in his pockets.

After all, the share of national resources going to the counties  has grown significantly. With 15 per cent of taxes collected by the central government going to counties, and  an equalisation fund created to finance projects in marginal areas-the question is how that money will trickle to the ordinary rural person.

Power and initiative has moved to the grassroots. Indeed, the decentralised fiscal regime being introduced by the new constitution is going to strengthen the existing devolved funds — Constituency Development Fund and the Local Authorities Transfer Fund — in many ways.

The new constitution puts emphasis on equitable sharing of resources. Although the document  does not explicitly say so, the spirit of the chapter on public procurement envisages arrangements where local businesses will be given preferences in allocation of public contracts.

It says details on affirmative action in allocation of resources will be provided by legislation. Clearly, the framers of the new constitution figured that devolution would not be feasible without a significant assault on the powers of the Nairobi-based civil service bureaucracy.

Past attempts at dispersing budget allocation powers to the grassroots failed mainly due to resistance by the Nairobi based bureaucracy. Students of decentralisation in Kenya will remember the District Focus for Rural Development Strategy of 1983. Championed by the former head of Civil Service, Mr Simeon Nyachae, it was abandoned after it failed to make a difference.

Critics said it failed to decentralise power. That the system merely parachuted the centralised administration to the grassroots without changing the mindset of bureaucrats. It failed to significantly disburse money to the grassroots.  Granted, there were several innovations — creation of district treasuries, introduction of District Development Officers and prioritisation of projects  at the grassroots level.

But decisions on transfer of funds  for rural programmes remained a monopoly of the centre. The district was not granted fiscal autonomy. The Rural Development Fund (RDF) of 1990 was another important attempt at taking power and resources to the grassroots. This was a special fund created to  provide money to finance gaps in rural programmes.

The donors, especially the Scandinavian governments of Denmark, Norway and Sweden loved the RDF. At that time, it was touted as the largest devolved fund. The RDF did not make much of an impact mainly because central bureaucracy proved reluctant to cede control over such a large fund to the grasstroots.

The bureaucrats sitting in Nairobi made sure that authority to incur expenditure was kept at centre with funds for discretionary use at the district level kept to the minimum. The RDF had to be abandoned in 1995. The Scandinavians took off after and an audit revealed massive corruption.

The next major attempt at fiscal devolution did not come until the introduction of the  Local Authorities Transfer Fund (LATF) in 1998. Under the new system, the central government is obligated to allocate  an amount equivalent  to 5 per cent of the national income tax collection of the  preceding financial year to the country’s 175 local authorities. It is basically a system of formula-based block grants.

Still, the largest and most important devolved fund is the CDF. Introduced by an act of parliament in 2003, it obliges the government to commit 2.5 per cent of ordinary revenues to parliamentary constituencies. What then is the point of departure? How has the new dispensation  dealt with possible resistance of fiscal devolution?

First, the powers of the main pillar of the centralised system—the Treasury—has been dispersed and its stranglehold on matters of finance dismantled. Contrary to the current arrangement the chapter on public finance in the new constitution  does not give the institution of the Treasury a specific role in matters to do with finance.

It merely states that the role of this key pillar of the old regime would be determined by ordinary statute. Two new significant institutions have been brought into the picture.  First, by borrowing a leaf from the South African constitution, the new dispensation has created the Office of the Commissioner  for Revenue Allocation.

This new constitutional office will have powers to determine the sharing of revenues between the central government and the devolved administration. The new commission’s powers are not limited to allocating revenues. The constitution also gives this new body powers ‘to define and enhance revenue sources’ of the county and national government and, even more significantly, to encourage ‘fiscal responsibility’.

In short, the new body will have powers to make decisions on how taxes are raised and how the money is spent. Sitting on the commission will be eight members, mainly appointees of political parties represented in parliament and the senate. The reasoning behind  introduction of this new body is simple: if you deny the civil service bureaucracy both the powers to raise taxes and to allocate resources, you will have left it with no levers nor means to resist devolution.

The other important innovation in the chapter on public finance is the introduction of the Office of the Controller of the Budget with the responsibility of overseeing ‘implementation of the national and county government’. He will also have powers to ‘authorise withdrawals of funds from the Consolidated Fund, the Equalisation Fund and  County Governments Fund.

This is a major point of departure because under the present arrangement, money from the Consolidated Fund can only be withdrawn by the authority of the Controller and Auditor General. The question that immediately comes to mind is:  If you transfer revenue allocations and implementation of the budget to  these two new constitutional offices, what is left for the Nairobi-based civil service bureaucracy?