Let the counties maximise their limited resources through leasing

As Covid-19 morphs into an economic crisis, county governments should help small and micro enterprises to weather this storm.

Their 2020/2021 budgets should reflect a paradigm shift from infrastructural to economic recovery projects. They should allocate more funds to revamping SMEs and increasing agricultural production for food security.

While this could be the ultimate solution for economic recovery, counties still have to address the resultant effects of low infrastructure improvement.

LEASING EQUIPMENT

Equipment leasing is the solution, especially for cash-strapped counties or an entrepreneur who does not want to tie a lot of funds in assets. In business process outsourcing, an organisation can sub-contract some processes to third-party vendors. And last October, Laikipia became the first county government to lease vehicles and road construction equipment.

The core mandate of governments is to provide social security that enables citizens create their own economic wellbeing. In Laikipia’s case, a third party took up fleet management.

Since it relinquished the non-core function, the county can now focus on effective, efficient, economical and result-oriented service delivery. Officers do not have to involve themselves in the rigorous and rigid procedures.

Before, vehicles meant for security operations would be grounded for months due to simple mechanical breakdowns or lack of simple accessories like a battery. The scenario would be replicated across many police stations in the country.

Broken-down vehicles and machinery litter the parking lots of many government offices at the national and county levels. Most of them cannot be repaired or disposed of due to bureaucratic red tape and stringent public procurement rules.

LIMITED FUNDS

Since most counties cannot afford to purchase all the costly road construction equipment or other vehicles, leasing enables them to acquire them despite their limited funds. This allows a balanced growth of the county’s economy as resources can be allocated more evenly to all the sectors as opposed to a situation where a large portion of the budget would have gone into purchases in one sector.

Laikipia adopted leasing to maximise output. This has been key in overcoming the risk of obsolescence. As the lessee, the county has always obtained brand new and high-end equipment or machinery with the latest technology in the market, leading to a high level of efficiency.

Leasing allows acquisition of assets with minimal initial expenditure and without significantly affecting cash flow as downpayment is rarely needed.

But to succeed in leasing, an organization needs to have a positive credit rating.

Prudent financial management, including proper utilisation of grants and donations, should be the catch-phrase.

Paul Njenga, Chief Officer, Finance, Economic Planning and County Development, Laikipia County.