Is Kenya going broke?...Top officials’ pay push economy to brink

[Ab-Titchaz]

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Top officials' pay push economy to brink

President Uhuru Kenyatta (centre), Salaries and Remuneration Commission (SRC) vice chairperson David Ogutu (left), and SRC Chairperson Sarah Serem during a debate on the National Wage Bill held at KICC in Nairobi on March 10, 2014. Together with pensions for retired public workers, the government's salary bill now stands at Sh543.7 billion, or 54 per cent of all government revenues.

In Summary

• An eight-year season of generous payrises to public workers and a hiring spree have brought the economy to the brink of ruin.
• Together with pensions for retired public workers, the government's salary bill now stands at Sh543.7 billion, or 54 per cent of all government revenues.
• At a productivity of only 30 per cent, it takes three Kenyan civil servants to do the job of one person.

The Kenyan salary saga would have been an uproarious farce, if it weren't so tragic.

An eight-year season of generous payrises to public workers and a hiring spree have brought the economy to the brink of ruin.

As a result, the salaries bill has been increasing by an average 21 per cent over the last three years.

Last financial year, it grew by a staggering 34 per cent.

So now there is little money for anything else.

Together with pensions for retired public workers, the government's salary bill now stands at Sh543.7 billion, or 54 per cent of all government revenues.

Given that the government also spends more than Sh200 billion paying foreign debt, not to mention what goes to pay local debts, the money left over for roads, schools and hospitals is small indeed.

Bizarrely, all that money is being spent on workers who do little.

At a productivity of only 30 per cent, it takes three Kenyan civil servants to do the job of one person.

But the money is going to a select few, not everyone. The best paid public official in Kenya earns 120 times what the poorest paid is earning, creating one of the most unequal labour forces on earth.

In other words, a small cadre of government workers are earning fantastical sums of money for an amount of work which, by all measures, is a national scandal.

On average, the a public sector worker makes more money than one in the private sector, though averages are poor measures of reality.

Kenya spends more money on salaries, 7.8 per cent of Gross Domestic Product than Tanzania (6.3), Uganda (3.9) and Rwanda (3.9).

The only country doing worse is Burundi (11.3) which appears to have committed all its resources to the payment of salaries.

As a result, money for development is tight. The proportion of government funded development projects is down to five per cent of GDP, down from 6.5 per cent.

The government is forced to borrow to fill the holes in its books.

This is inflationary, raising the cost of living and creating demands for higher salaries, weakens the shilling, raising the cost of imported raw materials and upsetting the economic apple cart even more.

Thirdly, there is less money available to pay debt, raising the danger of Greek-type meltdown.

A country which is this devastated is not competitive and cannot grow, which breeds a new cycle of doom.

Discuss crisis

Yesterday, the Salaries and Remuneration Commission hosted a meeting to discuss crisis and what to do about it.

Speakers, including Cabinet secretaries, painted a picture which the government is gradually regressing to appoint where it will soon run out of money for operations and maintenance: purchasing medical supplies, fuel for police cars and maintenance of roads.

According the statistics, the wage bill has mounted to a level of 13 per cent of the Gross Domestic Product.

In simpler terms, this means that 13 per cent of the wealth created in the economy goes in paying civil servants and state officers.

According to Cabinet Secretary for National Treasury Henry Rotich, the worrisome trend has been caused by salary awards to sections of the Civil Service and a rapidly expanding public sector - and a proliferation of institutions created by the new constitution.

Mr Rotich warned that a high wage bill could lead to higher deficit which will negatively affect debt dynamics and put the country at risk of debt distress.

Mr Rotich said that Kenya's domestic debt has doubled over the past five years from Sh518.5 billion to Sh1.05 trillion.

"The large increase in the stock of public debt have also resulted in concomitant increases in interest payments on domestic debt which increased from Kshs 45.9 billion in 2008 to Kshs 110.1 billion in 2013," he said.

He added that large increases in interest payments on public debt reduce government discretionary spending in subsequent years as increased resources go into servicing debt.

Mr Rotich said he had constituted a team to look at the issues of interest rates and will soon release its report.

He said that the government is also doing everything possible to deal with corruption and wastages as well as remove ghost workers from the government payroll.

Top officials’ pay push economy to brink - News - nation.co.ke

 

[Ab-Titchaz]

The bean counters should take heed: You cannot shrink into prosperity

By Jaindi Kisero

[h=3]In Summary[/h]

• Kenya has profound economic problems that can only be addressed through massive renewal of production and high spending on infrastructure.
• The more rapidly the economy grows, the more you are able to deal with the ballooning wages.

If you asked me to comment on the difference between the economic strategies of former presidents Moi and Kibaki, I would say the following:

First, economic management under Moi, especially towards the end of his rule, was carried out by an elite who approached strategy with the mentality of accountants.

With the support and patronage of the International Monetary Fund and the World Bank, and stewarded by the then Head of Public Service, Dr Richard Leakey, President Moi implemented the most comprehensive civil service retrenchment programme in the history of this country.

When you approach economic management with the mentality of an accountant, your obsession is on making income and expenditure balance out.

You are obsessed with fiscal discipline and with maintaining macroeconomic stability – keeping inflation low, a stable exchange rate and delivering market-determined interest rates.

"FORCED TO LEND"

In the case of companies, what you will observe is that where a firm finds it difficult to deliver on growth, the bean counters will propose job cuts and postponement of capex (capital expenditures).

But is it really possible to shrink into greatness? As we all know, the economic strategies followed by the Moi regime did not deliver growth.

Simply put, Kibaki's approach was about growing the economy at all costs. He borrowed massively and almost tripled the budget for roads, primary education and energy in his very first budget.

READ: Uhuru orders 20 pc pay cut for parastatal chiefs

And, one of the most dramatic decisions made by the Kibaki administration in the very early stages through Finance minister David Mwiraria, was to reduce the cash ratio by a massive margin.

As it turned out, the impact of the massive reduction in the Cash Ratio was a dramatic fall in the Treasury Bill rate. At one point, this rate tumbled to below one per cent.

Commercial banks suddenly found themselves in a position where they could no longer profitably buy Treasury Bills.

Banks were forced to learn to lend money to the common man. For the first time, commercial banks started hawking loans to the people.

Kibakinomics was about low interest rates and maintaining high public spending on infrastructure. The economy grew rapidly, hitting the level of seven per cent in 2007.

As I saw Finance minister Henry Rotich and his Devolution counterpart Anne Waiguru reel out statistics about the rising wage bill during the conference on the subject on Monday, I smelt the return of bean counters to the helm of economic policy-making.

Without doubt, the public wage bill has grown unsustainably. We are in the middle of a recurrent costs crisis, with the wage bill beginning to crowd out essential government services.

MASSIVE RETRENCHMENT

But where I disagree is when I heard speakers at the Monday conference trying to present massive retrenchment in the civil service as the economic game-changer for the medium term.

Kenya has profound economic problems that can only be addressed through massive renewal of production and high spending on infrastructure.

Indeed, if we can keep the economy growing at the 10 per cent of GDP level set in Vision 2030, we would not be whining so much about the wage bill.

That Monday conference was more or less a campaign to prepare the public to the inevitability of future jobs cuts in the civil service.

The more rapidly the economy grows, the more you are able to deal with the ballooning wages. The worrisome thing is that the momentum to roll-out of the major investments in infrastructure appears to be waning.

These days, you hardly hear about Konza digital city. Which of the Lapsset projects is being rolled out? Where are the major investments in security we have been planning?

How far way is the Greenfields airport project? What happened to the Grand falls hydro-electric project on River Tana?

Yes, the wage bill doesn't look pretty. But we must consistently put the focus on growing the top line.

It is not possible to shrink into prosperity.

jkisero@ke.nationmedia.com

The bean counters should take heed: You cannot shrink into prosperity - Opinion - nation.co.ke

 

[Geza Ulole]

Ab-Titchaz u r amazing Kenyan in this forum one of its kind the only person i can discuss stuffs without partisan cum nationalistic feeling interfering with common reasoning! Kudos and i wait for likes of waltham, lawmaina78, mwathai and Dhuks to smell the coffee! Just to assure you guys if your economy can not grow over 6% forget about those over ambitiously projects like LAPSSET, Konza etc your media hype about will remain on paper without forgetting Kenya is not food sufficient every year hunger is pervasive in that country so a choice is yours eating or infrastructure!

 

[Ndahani]

I respect these guys for being open. They have decided to face the challenge the way it supposed to be!

 

[Logikos]

This should act as an indicator to Tanzanian as well. Wapenda Posho /Politicians are milking their fellow citizens dry.., and they should know the money is coming from somewhere. Politics should not be a business or money making program but rather helping the mass.

 

[Dhuks]

Kenya is not broke but with the current wage bill we can push the economy to unsustainable levels, Geza you need to understand between expenditures to expand the economy and recurrent expenditure; once you understand then you can engage Ab-Titchaz on topical issues.

 

[waltham]

Ab-Titchaz u r amazing Kenyan in this forum one of its kind the only person i can discuss stuffs without partisan cum nationalistic feeling interfering with common reasoning! Kudos and i wait for likes of waltham, lawmaina78, mwathai and Dhuks to smell the coffee! Just to assure you guys if your economy can not grow over 6% forget about those over ambitious projects like LAPSSET, Konza etc your media hype about will remain on paper without forgetting Kenya is not food sufficient every year hunger is pervasive in that country so a choice is yours eating or infrastructure!

i realize now you don know you are very sick.macho ya wenzako yaugua kweli ili hali yako yatokota na uzaa na huoni.what is happening in dodoma kuhusu katiba, deni la nchi, umeme etc.mwone daktakiri bwana.

Revealed: Who got paid the Sh201bn escrow cash

Permanent secretary in the ministry of Energy and Minerals, Mr Eliakim Maswi'

By The Citizen Investigation Team

Posted Monday, March 10 2014 at 10:04

In Summary

• This revelation comes at a time when Standard Chartered Bank, Hong Kong (SCB – HK), through its lawyers, has given Tanzania Electric Supply Company (Tanesco) a 30-day ultimatum to re-deposit the money into the account or else face legal consequences.

The $122 million (Sh201 billion), which was at the escrow account held at Bank of Tanzania (BoT), was transferred to Pan Africa Power Solutions (Tanzania) Ltd (PAP) account between November 28 and December 8, last year, The Citizen can reveal today.

This revelation comes at a time when Standard Chartered Bank, Hong Kong (SCB – HK), through its lawyers, has given Tanzania Electric Supply Company (Tanesco) a 30-day ultimatum to re-deposit the money into the account or else face legal consequences.

An escrow account is a financial instrument held by a third party on behalf of other two parties in a transaction. The funds are held by this kind of account until it receives the appropriate written or oral instructions or until obligations have been fulfilled.

Contrary to claims by the ministry of Energy and Minerals that the escrow monies were paid to Independent Power Tanzania Ltd (IPTL), The Citizen has reliably established that the $122 million was actually paid to PAP.

PAP is the company that has acquired IPTL by using the escrow funds in a deal that has been queried by some legal experts, who are wondering how a once liquidated company became the assignee, and assigned its shares to a new investor

aliye na macho haambiwi tazama....the money is already eaten

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Mkuya: Sh480bn isn't stolen

Ms Mkuya said that there were only discrepancies and the ministry had settled them.PHOTO|FILE

By Katare Mbashiru ,The Citizen Reporter

Posted Thursday, March 6 2014 at 00:00

In Summary
Ms Mkuya was speaking on the sidelines of a ceremony to sign an agreement between the government and the European Investment Bank (EIB).


Dar es Salaam: Finance minister Saada Mkuya has finally broken silence on the whereabouts of $300 million (Sh480 billion) reportedly went missing at the Treasury.

Ms Mkuya said in Dar es Salaam yesterday that not a single cent was lost or stolen as it was claimed by the Public Accounts Committee (PAC) led by Kigoma North legislator Zitto Kabwe.

"It isn't true that the said billions were pocketed by unscrupulous officials in the Treasury. In fact we were highly shocked by reports in the media that the whereabouts of the money were not known,'' she said.

==============================================================================


Revealed: Seven Tanzanian tycoons with offshore accounts

Tanzanian Attorney General Fredrick Werema headed a government team to trace infamous Swiss billions stashed away by citizens but which came up empty. Seven Tanzanians have about $40 million (TSh64 billion) stashed in offshore accounts in British Virgin Islands and Jersey, The Citizen can reveal today. The revelation comes in the wake of reports that the committee set up by the Tanzanian government to trace the owners of the $196.87 million allegedly kept in Swiss banks has failed to come up with adequate evidence.

According to leaked offshore data obtained by the UK's Guardian newspaper in collaboration with the International Consortium for Investigative Journalists (ICJ) and analysed by over 110 journalists worldwide, seven Tanzanians operate offshore accounts. The ICIJ's exploration of offshore secrets began when a computer hard drive packed with corporate data arrived in the post. Gerard Ryle, the ICIJ's director, obtained the small black box as a result of his three-year investigation of Australia's Firepower scandal, a case involving offshore havens and corporate fraud. The hard drive contained more than 260 gigabytes, the equivalent of half a million books.

Its files included two million emails and four large databases.

... Read the full, comprehensive news article and discuss at Africa Review Kenya

In a letter of January 27 , signed by the PAC chairman, the committee claimed that the sum allocated over two financial years (2012/13 and 2013/14) had been spent but not accounted for.

"The issue of unaccounted for billions from the Treasury was raised in my consultations with some development partners," Mr Kabwe wrote. "They call it a ‘discrepancy' but a thorough audit should be conducted by your office," read part of the letter sent to the Controller and Auditor General (CAG).

It was, however, unclear whether the $300 million unaccounted for was from local revenue sources or from donors, who injected Sh842 billion into the general budget support in the 2012/13 financial year.

The CAG's audit reports have highlighted billions of mismanaged public funds annually in ministries and local authorities.

The PAC is concerned about "discrepancies" in the use of financial resources at a time when the government cannot fund its own budget.

The government also has had budget deficits. Tanzania's total budget for 2013/14 is Sh18.2 trillion.

Ms Mkuya was speaking on the sidelines of a ceremony to sign an agreement between the government and the European Investment Bank (EIB).

Under the deal, the European bank will grant euros 105 million to improve the provision of clean water and sanitation services.

EIB vice president Pim van Ballekom said the money would be spent on a water infrastructure project around the southern shores of Lake Victoria

 

[Geza Ulole]

i realize now you don know you are very sick.macho ya wenzako yaugua kweli ili hali yako yatokota na uzaa na huoni.what is happening in dodoma kuhusu katiba, deni la nchi, umeme etc.mwone daktakiri bwana.

But economy grew over 7.1% 2013 how much did Kenya's grow? -3% ama?

 

[waltham]

But economy grew over 7.1% 2013 how much did Kenya's grow? -3% ama?

go show that 7% paper growth of yours to the dirt poor in the villages and slums. due to mismanagement and theft by the govt.that economy you are talking about is for the fat cats.period

Experts: Dar faces new debt dilemma

Bank of Tanzania (BoT) governor Benno Ndulu.PHOTO|FILE

By The Citizen Reporter

Posted Sunday, January 26 2014 at 11:56

In Summary
"At the current rate and the way borrowing is being done, it is possible and likely the national debt will swell to Sh30 billion by next year and that won't augur well for the economy and efforts to fight poverty," Mr Mwakagenda told The Citizen on Sunday last week.



Dar es Salaam: Tanzania faces a new debt crisis unless the government moves fast to contain its current borrowing appetite, which has seen national liabilities more than double in less than 10 years, economists and development experts have warned.

The last crisis in the late 1990s and early last decade cost the country and the national economy dearly with its severe consequences still being felt today. Resources which the government would have used to fund development projects and invest in improving delivery of basic services went into repaying debts.

Up until around 2006, the public debt as a percentage of national output (GDP) was almost 70 per cent. Debt forgiveness brought that ratio down to about 21 per cent the following year but since then it has been growing and at an alarming rate.

While some experts put the current ratio at a conservative rate of around 40 per cent of GDP, others say it is already above 50 per cent. Tanzania's gross domestic product (GDP) is estimated to be about Sh50 trillion at the moment while the public debt had reached some Sh26 trillion in October last year.

The recommended debt to GDP ratio for low-income countries is 50 per cent. The government and international assessments say the debt is still sustainable. Bank of Tanzania (BoT) governor Benno Ndulu said on Friday that what this means is that it is not growing faster than the economy and the government is still in a position to pay it without having to accumulate arrears.

The experts agree but are concerned by the rate at which the government is incurring new debts with some putting it at some Sh3 trillion a year. That is almost similar to the amount of the government budget that the Controller and Auditor General (CAG) said mid last year that it is lost through corruption.

"The national debt as a percentage of GDP is now about 38 per cent. That is a manageable debt ratio," said Prof Richard Mshomba, a Tanzanian economist based in the US. "However, what is alarming is that that ratio has been steadily growing and at the current trend, Tanzania could find itself in a debt crisis, reminiscent of its situation in the late 1990s and early 2000s."

Some see that happening as early as next year when they say the debt will hit Sh30 trillion, which would be about three times what it was when the current government assumed power in December 2005. They warn that the crisis would derail economic prospects in the wake of huge gas discoveries and undermine efforts to alleviate poverty.

"Borrowing is not bad at all especially when it is done for spurring development. It is detrimental when done for recurrent spending like it has been happening in Tanzania," warned the executive director of NGO Tanzania Coalition on Debt and Development, Mr Hebron Mwakagenda. According to him, the risk of a new debt crisis is also posed by the increasing tendency to borrow from domestic commercial sources that charge high interest rates and lend on a short-term basis.

"At the current rate and the way borrowing is being done, it is possible and likely the national debt will swell to Sh30 billion by next year and that won't augur well for the economy and efforts to fight poverty," Mr Mwakagenda told The Citizen on Sunday last week.

If that happens, it will be an increase of some Sh20 trillion in just 10 years at an average borrowing rate of Sh2 trillion annually. According to BoT figures, the national debt ballooned by nearly Sh5 trillion between January and October last year from about Sh22.36 trillion ($13,875 million) to around Sh26.86 trillion ($16,788 million). The national debt stock (external and domestic) at the end of December 2005 was $9,383.9 million (about Sh10.3 trillion at the then exchange rate of Sh1,100 a dollar). It surged by about Sh16 trillion between December 2005 and October 2013 with most of it being external debt.

"Looking ahead, clearly Tanzania needs to manage its debt prudently to maintain a sustainable debt outlook. But given the role played by public investment to remove bottlenecks to growth, some further borrowing is probably unavoidable to finance public investment," the resident representative of the IMF in the country, Mr Thomas Baunsgaard, told this newspaper last year.

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[Koborer]

But economy grew over 7.1% 2013 how much did Kenya's grow? -3% ama?

I think 4.5% and in real terms that is bigger than the 7.1% for Tanzania owing to the sizes of the two countries economies. Don't be fooled.

 

[Koborer]

Ab-Titchaz u r amazing Kenyan in this forum one of its kind the only person i can discuss stuffs without partisan cum nationalistic feeling interfering with common reasoning! Kudos and i wait for likes of waltham, lawmaina78, mwathai and Dhuks to smell the coffee! Just to assure you guys if your economy can not grow over 6% forget about those over ambitious projects like LAPSSET, Konza etc your media hype about will remain on paper without forgetting Kenya is not food sufficient every year hunger is pervasive in that country so a choice is yours eating or infrastructure!

At least we acknowledge our problem and are doing something about it. This is as it should be, we cannot bury our heads in the sand and assume all is well.

 

[Geza Ulole]

I think 4.5% and in real terms that is bigger than the 7.1% for Tanzania owing to the sizes of the two countries economies. Don't be fooled.

Do the math and you will find the conversion does not say so! BTW Kenya grew between 2% to 3%!

 

[Ab-Titchaz]

Gentlemen,

First off lemmie say thanks to all for keeping this forum vibrant regardless of your position. Asanteni.

Secondly, my intention of starting this thread was to discuss the wage bill in KE viz-a-viz the promises
made by the Jubilee government and how tenable they are. It's becoming clearer by the day that the
government kinda bit more than they could chew and this wage bill is becoming a nightmare necessitating
the President and his deputy to take 'pay-cuts'...whatever that means.

So can we please discuss economics and the ramifications of this bloated wage bill na tupunguze ushabiki maana
hii si ligi eti wakuu.

My personal take on this matter is that with the new Constitution and the coming of these county governments
and a bloated August house is our undoing. I don't see the need for 47 counties with Governors and local assemblies
to boot. All these folks gotta get paid by the central government somehow. Why don't we revert to the old 8 (or was it
7 provinnces) to be led by elected Governors? Then also that August House and the Cabinet need to be shrunk to
save the Jamhuri some much needed cash...and make them Mpigs pay taxes too.

Over to you.

Pamoja.

 

[Ab-Titchaz]

Kenyans' outcry against high public salaries is a bark up the wrong tree

Potholes on Outer Ring road at Doonholm, Nairobi in January, 2014.

By Charles Onyango-Obbo

Kenyans are up in arms over what they see as outrageous expenditure on the public sector pay. There have been demonstrations, most colourfully and famously against MPs (complete with pig blood sprinkled infront of Parliament).

President Uhuru Kenyatta agrees, and a few days ago announced that drastic action would be taken. He offered to take a pay-cut to demonstrate his seriousness.

In addition, there is now a sense that corruption has got out of hand in the year-old Jubilee Government.

The salaries of big men and women tend to be an emotional and catchy issue for the public, but I have never believed that high public pay is a big problem.

At the very basic level, we are all hypocritical and self-serving when it comes to pay. We tend to think that we deserve big salaries, but the rest of the people don't.

Apart from corruption, the bigger problem with pay in Kenya today is that the people earning those big cheques are not giving us value for money in return.

For example, those potholes in Nairobi that went away during the presidency of the good old Mwai Kibaki, are back. I am reminded of them every day when I hit the entrance to Kimathi Street.

So the real demand should be for service delivery, and less energy should be invested in denouncing the size of public officials' pay slips. The South Africans have taken that route.

Secondly, and most importantly, to deal with the problem of the public wage, we need to understand the source of the problem. It is most definitely not greed.

For that we need to go nearly 30 years back when the wave of political, economic, and market liberalisation and reforms started to sweep the continent.

DISTRIBUTOR OF WEALTH

We liberalised our economies, privatised state-owned companies, ended foreign exchange controls, and so on. Soon, stock exchanges were being established, and existing ones like Nairobi's, booming.

A lot of new wealth was created. However, we learnt that while liberalisation was good at creating wealth, it was not a fair distributor of that wealth.

So the wealth became concentrated in a few hands, while the rest of the people were, to use a popular Ugandan expression, left "grassing".

Along with economic liberalisation, came political opening. One-party rule ended, and in came a second era of multiparty politics and regular elections. Multipartyism did not necessarily usher in a fresh age of democracy.

Incumbents, for example, steal most elections in Africa. But whether elections were free or not, winning office became more expensive. In the 1970s and most of the 1980s, an African president didn't have to advertise during elections.

Today, because of the liberalisation of the media market, and the fact that soaps, reality shows, and football are competing for voters' attention, a politician has to fight a hundred times harder to put his image before the voter.

The liberalisation of the economy and its unequal outcomes, and competitive politics, came together in strange ways. Governments felt the need to create new bodies which deliver services the private sector couldn't, partly to prevent voter revolt.

NEW PATRONAGE AVENUES

Since they couldn't grow traditional government, they did it through creating executive quasi-government agencies.

In came revenue authorities, urban road authorities, rural road authorities, salary commissions, water boards, benefits authorities, civil aviation authorities – the list is endless. Devolution was also a way of managing this problem.

In addition, because politics was now more competitive, presidents needed new patronage avenues to keep their key supporters happy so they could pitch in at the next election. So they got the juicy jobs in mushrooming executive agencies.

All these forces led to what cleverer people than your columnist call "state capture" by that small group of fellows who grew rich and from the 1980s and 1990s (and early 2000) reforms, whose money is now more essential than ever for any politician who wants to come to power.

But because not all of them could become CEOs of executive agencies, other avenues like inflated tenders were availed to them. You can see why a pay-cut can only go so far in solving this problem.

Only more political and economic reform will change things. Unfortunately, that doesn't happen overnight.

cobbo@ke.nationmedia.com & Twitter: cobbo3


Kenyans’ outcry against high public salaries is a bark up the wrong tree - Opinion - nation.co.ke

 

[Ab-Titchaz]

Here is the President's speech on this matter:

We're committed to reducing public sector wage bill

Posted by Opinion Leaders on March 10, 2014

BY UHURU KENYATTA

Fellow Kenyans,
Distinguished Guests,
Ladies and Gentlemen,

I am pleased and humbled to see so many distinguished Kenyans at the opening of this important forum. I thank you for joining us to participate in this vital national debate. Let me at the outset make it clear my government's view regarding the size of our public sector wage bill. My Government is convinced the recent growth in public sector wage bill is unsustainable and unacceptable.

In the current financial year, for example, we estimate that total remuneration to the public service will account for 55% of our tax revenue, and 13% of the national cake or what economists call gross domestic income. If we maintain this trend we would be dedicating an ever larger share of the wealth we produce as a country to the remuneration of public servants. Yes, it is good to pay our people well but this must be done in a manner conducive to our development agenda.

Ladies and Gentlemen,

It is nice to receive ever larger slices of our national cake. But collectively, as a country, we have other priorities: we must fund our pledges to the various capital investments laid out in the current 2030 Medium Term Plan and the Jubilee Manifesto.

We need, as an example, to develop our roads and revamp our health facilities. The standard gauge railway, initially from Mombasa to Nairobi, must be paid for. So must we implement the South Sudan and Ethiopia Transit corridor that will open up all of the Northern Kenya to new investment and economic opportunities. We must also invest in the million-acre irrigation programme in Galana, in order to achieve our food security goal.

But the slice of our national cake devoted to development expenditure would continue to dwindle if we do not contain pressure of wages. Indeed, in a contest between expenditure on public servants' wages and expenditure on capital investments that benefit every Kenyan, including future generations, there can be only one winner, Kenya.

Ladies and Gentlemen,

I have cited a few of the programmes that will help achieve our Vision 2030 objectives. That is the path to the free and prosperous country we are confident to become. But, we must admit our current wage bill is an obstacle, standing squarely in that path. The monster threatens not just our future, but our present too, since it compromises the stability of our present economic framework. We have consistently worked hard to tame inflationary pressure, so alleviating the secondary effects of wage demands.

Our success in containing inflation also relies heavily on our ability to maintain a reasonable level of fiscal deficit. However, this success cannot be sustained if we allow a large and rising fiscal deficit to stoke inflation, exchange rate depreciation and more expensive debt servicing.

So far Kenya has managed to maintain its fiscal deficits at fairly sustainable levels and in consequence our macroeconomic situation has remained relatively stable. By any estimates, our core inflation has remained low, and our exchange rate stable. And our debt to GDP ratio is sustainable, even by the most exacting of IMF standards. These are the fruits of prudent fiscal management over the last decade, which we can no longer take for granted.

That is why the threat of the burgeoning wage bill must be contained. It is time to put the monster to rest and we wish to lead by example. Only last week my deputy and I resolved to take a 20% pay cut. We were joined by members of our cabinet as well as the Principal Secretaries, who agreed to match our effort with a 10% pay cut. We meet here today to see what more we, all of us together, can do to carry out that effort forward.

Ladies and Gentlemen,

I know there have been some informal discussions proposing various measures to tackle this problem of wage bill. Some of the solutions proposed will not work while others will yield results, if implemented.

There have been, for instance, suggestions to raise taxes to cover the wage bill. I say we should resist this enticement. Why do I say so? Because our ease of doing business would suffer, with disastrous consequences for youth unemployment. The better course is to clearly set out a number of the issues the nation must face, and to see what consensus we can reach. Let me provoke your thoughts.

First, though it is true that public sector average wages may compare favourably with the private sector, when we add the huge sums the government pays out in allowances and other benefits, public sector wages actually out-perform the private sector. We should, therefore, ask whether the government would do better to adopt a consolidated pay package policy that covers all allowances, or whether it can retain the present system with stricter safeguards to stop abuses.

Second, whenever real wages fall on account of inflation, we experience a secondary response, through agitation for salary rises. We will need to decide how we should adjust public sector wages to protect it from erosion by inflation, a policy which several countries have experimented.

Third, we have evident disparities in remuneration in our public service at both national and county levels: employees with identical skills and experience are paid differently by agencies in the same government without regard to performance and productivity. At the cabinet retreat from which I have just returned, these discrepancies aroused the interest of my cabinet secretaries.

I am informed that, in a recent report by the Auditor General, some of the employees inherited from the defunct local authorities earned more than the national government employees, despite having similar qualifications. The same audit found counties paying new employees different wages for the same skills and same job experience.

We need to streamline the management of salaries at all levels of Government. Although the Salaries and Remuneration Commission, and the Public Service Commission will take the lead in creating rules and principles for containing the disparities, I would urge every Kenyan to make their views heard on this matter.

Fourth, as you are aware, the Government is now auditing its payroll to ensure that only legally-hired employees are paid a salary. Ghost workers must go. In this context, I urge you all to give maximum cooperation to the Ministry of Devolution and Planning, which is carrying out this exercise. But more importantly, we need your suggestions on ways of reforming our pay system to make it sustainable and compatible with our long-run development agenda objectives.

And Fifth, as you are aware, we have already carried out the most comprehensive review of parastatals, with recommendations of far-reaching reforms. Rapid implementation of those recommendations will help raise efficiency, save billions of shillings lost, reduce project slippages and deal a blow to open theft.

Ladies and Gentlemen,

I have raised matters of grave national concern. But, I would like to make it clear that this national debate on our wage bill is not an exercise meant to shame our civil servants. Let me remind Kenyans that our public service remains among the most competent and capable in all of Africa.

These are devoted, patriotic Kenyans, many of them with world-class qualifications, who serve Kenyans with efficiency, dignity and dedication every day.

And, given the new innovations in ICT, which my government is introducing – like Huduma Centres, IFMIS and so on – their service can only improve. Therefore, even as we weed out those who do not live up to the expected high standards, we must praise and reward the good work of those who excel.

Ladies and Gentlemen,

In conclusion, I wish to note that Kenyans have in the past demonstrated their capacity to debate national policy rationally, with a minimum of acrimony, and a maximum of will to reach a new understanding on such topical issues for the good of our beloved country. We owe our children a better Kenya, which they can inherit. I, therefore, urge all present to let that promise in nation building, guide you in this debate.

With those many remarks, it is my very great pleasure to declare the "National Debate on Wage Bill Sustainability", officially launched.

Thank You.

(This speech was delivered during the official launch of the National Debate on Public Wage Bill Sustainability at the KICC on March 10, 2014)

Capital Blog » We’re committed to reducing public sector wage bill

 

[Ab-Titchaz]

Meanwhile ....

Here's what Kenyans should know about public sector wages

By Kwame Owino

In Summary

• Recently, the Auditor General found that nearly KSh300 billion of public expenditure was unaccounted for.
• The danger is that a majority may be obsessed with reducing the remuneration of legislators.

Public discussion in Kenya this week has been focused on the conference hosted by the Salaries and Remuneration Commission (SRC). The significance of this event was made salient by the unprecedented declaration by the President that he and colleagues in the Cabinet would take a reduction in wages.

While this was a voluntary act and very generous, it raised legitimate views about how the reductions would be brought into effect within the norms of public administration procedure in Kenya. At the same time, it remains unclear whether this strictly adheres to Article 151 of the Constitution, which does not contemplate any reductions in the wages and privileges of either the President or his deputy.


READ: Parliament to form committee on wage bill

READ: Parastatal heads roped in 20pc salary reduction

READ: Editorial: Reduce salaries, yes, but it is not enough


Whether by design or default, President Kenyatta's action has played an invaluable role in bringing the question of the size of government and the burden of public sector wages to the fore. What is noteworthy is that despite the very successful launch of the "national dialogue", many Kenyans are understandably concerned that this conference and follow-up activities are another manifestation of a well-known affinity for talking with no chance that meaningful outcomes will follow. That skepticism is reason to explore how the chances of real policy change could be raised.

HOSTILITY TOWARDS MPs

First, chances of this conference leading to policy change will improve greatly if the public understands that the issue at hand is not about wages of individuals. Admitting that this writer participated in the conference itself and debates about the issue, one has to be concerned with the degree of public hostility towards the legislature generally and the National Assembly in particular.

The most disparaging remarks which have been made regarding the legislature are based on the perception that Members of Parliament make outrageous demands for remuneration.

While these views must be heard, the danger is that a majority may be obsessed with reducing the remuneration of legislators while undermining small but genuine attempts by some legislators to achieve policy reform in the area of wages.

Kenyan taxpayers should recall that the legislature is still a very small body relative to the executive, both in staff numbers and overall expenditure. Wielding a huge sword to reduce the wages of legislators will not yield much in managing the wage bill.

ARBITRARY ALLOWANCES

Secondly, Kenyans have rightly noted that while the specified wages of public sector workers are sensible, there is undesirable flexibility with allowances that are arbitrarily set. Specifically, Kenyans mention the KSh80000 reported as daily sitting allowance for members of the Judicial Service Commission (JSC).

Public disgust at such a disproportionate rate is right but the anger towards the judiciary and its officers should not contaminate the sober discussion around managing both the overall size and growth rate of public wages.

Taken together, the entire budgetary share of the judiciary and the legislature for this financial year is an impressive KSh35billion, which constitutes less than 3 per cent of total public spending. In the circumstances, unrestrained anger against the two arms of government is not apposite while informing wages policy.

The third point that threatens to derail the pursuit of solutions relates to the finding of immense waste in the public sector. Recently, the Auditor General found that nearly KSh300 billion of public expenditure was unaccounted for. Unfortunately, this has created the impression to many Kenyans that overall wastage is the bigger issue, and should be considered before options to reform wage policy.

WAGES AND TAXES

The concern is correct but this line of argument is wrong-headed because the Salaries and Remuneration Commission (SRC) has an immutable responsibility to review and set wages and benefits of state officers. By initiating this conversation, it is merely performing its work without prejudice to another institution that may be required to ensure that wastage is reduced.

Finally, the public understanding of reasons for moderating public sector wages would be aided by creating a direct connection to the tax burden. Granted, the Salaries and Remuneration Commission (SRC) has crafted a slogan intended for Kenyans to link high wage bill to comparatively high taxes with the effect of squeezing out the provision of public services.

The success of the national dialogue hinges delicately on this connection because Kenyans are also concerned about high unemployment rates hence reluctant to accept structured retrenchment as one option for keeping public finances in the black.

Kwame Owino is the Chief executive Officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwame

Here's what Kenyans should know about public sector wages - dot9 - nation.co.ke

 

[Ab-Titchaz]

Ab-Titchaz u r amazing Kenyan in this forum one of its kind the only person i can discuss stuffs without partisan cum nationalistic feeling interfering with common reasoning! Kudos and i wait for likes of waltham, lawmaina78, mwathai and Dhuks to smell the coffee! Just to assure you guys if your economy can not grow over 6% forget about those over ambitiously projects like LAPSSET, Konza etc your media hype about will remain on paper without forgetting Kenya is not food sufficient every year hunger is pervasive in that country so a choice is yours eating or infrastructure!

...mbwembwe nyingi ankal. Miradi kibao lakini fweza kidogo nd'o tatizo.

Kibaki projects face greatest test of time as regime changes

PHOTO | FILE An artist's impression of the Konza Technology City.

In Summary

• Construction of a water dam project at Rukenya village in Gichugu constituency, which is an integral part of the expanded scheme, is yet to take place.
• The creation of an independent customs department was to prepare Kenya for the establishment of the Customs Territory as envisioned in the East African Community Common Market Protocol.
• The 96km² dam was proposed under then President Kibaki's administration and was to border Tharaka-Nithi, Kitui, and Tana-River counties at Kivuka along the Tana River.

When President Mwai Kibaki was handing over the reins of power, he said his regime had laid the foundation for future growth.

This included numerous infrastructure projects that had been proposed and others that were ongoing. The assumption was that the Jubilee government would accelerate these projects as key drivers of economic growth.

But a year down the line, most of the big projects initiated under the Kibaki regime are suffering from what experts term as lack of leadership and commitment from the government to push them to completion. Some have stalled amid accusations of corruption while others have been affected by shifting priorities.

KONZA TECHNO CITY

Then President Mwai Kibaki commissioned the planned Konza Technopolis on 23 January, 2013. In the months following the pomp of the ground-breaking ceremony, Konza has remained dormant.
With Mr Kibaki and his technology point man, Dr Bitange Ndemo, out of office, Konza seemed to lose steam. 2013 closed without the promised construction taking off as key legislation stalled.

At a forum last month, Makueni Governor Kivutha Kibwana complained that the allocations made in the Jubilee government's first budget barely scratched the surface of what is needed to be done. In the 2013/2014 budget, Konza was allocated Sh793 million.

The project is expected to cost Sh800 billion over two decades. Most of this will come from the private sector partners but the government is expected to invest heavily in basic infrastructure.

Prof Kibwana called on President Kenyatta to take a more proactive role in steering its development.

While Konza has stalled, Machakos Governor Alfred Mutua is forging ahead with his own techno city, which some stakeholders see as rivalling Konza.

President Kenyatta has supported this project, having presided over its launch in November last year. In the early months of 2014, the government seems to be regaining interest in Konza. National Environmental Management Authority approval was granted in February while the University of Nairobi has been commissioned to carry out a survey to pave the way for construction.

KRA's PROPOSED SPLIT

Nearly two years after the government first announced plans to establish an independent customs unit, the plan is yet to take shape.

In his first, and last, budget speech in 2012, former Finance minister Njeru Githae said the government would hive off customs from the Kenya Revenue Authority (KRA).

The creation of an independent customs department was to prepare Kenya for the establishment of the Customs Territory as envisioned in the East African Community Common Market Protocol.

In June 2013, Treasury Cabinet Secretary Henry Rotich reiterated the statements. The envisioned Customs Services Department was to be given the "primary mandate of trade facilitation and effective border control".

However, in an interview last month, Mr Rotich said Treasury was still grappling with an ideal model for the new customs unit.

Further, the Treasury is considering retaining collection of duty at ports of entry with KRA.

MAVOKO HOUSING UNITS

Then President Kibaki launched a housing scheme of 30,000 units, expressing confidence that construction would commence in a few months.

"It is commendable that the National Social Security Fund (NSSF) will shortly embark on developing (the housing scheme)," said Mr Kibaki at the fund's first annual general meeting in 47 years.

But the project that he said would include infrastructure to transform Mavoko Municipality into a city-within-a-city is yet to take off. The project was to be funded by NSSF and was touted as one the flagship initiatives under the Vision 2030 blueprint.

The project has experienced difficulties due to the goings-on at the pension fund, first with Cabinet secretary Kazungu Kambi suspending all projects to pave the way for an audit amid corruption claims. The latest information has it that the time extension was meant to attract investors with the required funds. "We did not get the right investors and because it is a public-private partnership, we had to extend the period," said

communications manager Christopher Khisa. The houses, which were to be built on a 960-acre piece of land, would be the fund's largest real estate project.

HIGH GRAND FALL DAM

The 96km² dam was proposed under then President Kibaki's administration and was to border Tharaka-Nithi, Kitui, and Tana-River counties at Kivuka along the Tana River.

Construction was approved in 2009 as part of an ambitious effort to build 1,000 water reservoirs across the country to revolutionise irrigation-based farming.

It was also to generate between 500MW and 700MW to feed the proposed Lamu resort city and port. All indications were that the government had secured funding from the Chinese government and the only thing that was subject to discussion was the make of the turbines for the power generation part of the project.

While the ministry insisted on getting German-made turbines - which are widely used - China demanded use of Chinese turbines.

Mid last year, Deputy President William Ruto reversed all this by halting the project on grounds that a cartel had over-estimated the actual construction cost and that the government stood to lose a lot of money.

A fresh technical evaluation was ordered, the report of which was handed in on January 8, 2014.

THE MISSING ROADS

Two major road expansion projects meant to ease movement of traffic in Nairobi are yet to take off despite the fact that the government has secured funds from donors.

Nairobi's first double-decker highway, which is to cover the traffic bottleneck stretch between the Nyayo Stadium roundabout and Westlands and funded through a Sh25.5 billion loan from the World Bank, is yet to start. The government is expected to provide Sh9.5 billion.

It includes expansion of Waiyaki Way that begins at the Westlands roundabout to create an extra lane for commuter buses up to Rironi.

The double-decker road project is expected to ease the gridlock on the Northern Corridor that passes through Nairobi while facilitating faster movement of traffic from the suburbs.

Those expected to benefit include travellers heading to Jomo Kenyatta International Airport.

Heavy traffic on the road slows movement of vehicles, inconveniencing both local and international travellers. The government had said the road would be completed by 2016.

Expansion of Ngong Road into a dual carriageway received funding of £20 million (Sh1.7 billion) from the Japan International Cooperation Agency (JICA) in June 2012 but the construction is yet to begin.

During the signing of the funding agreement on the road upgrade, the government said the work was expected to commence in a few months, with a projected completion date of February 2015.

The road, which leads to Nairobi's central business district and the south-west suburb of Karen, is a constant gridlock for city motorists, particularly the stretch between the Adams Arcade roundabout and the Kenyatta Avenue crossroad.

Completion of the road project was expected to lead to a significant decrease in congestion.

It is estimated that Kenya loses over $500,000 (Sh42.5 million) a day due to traffic congestion in the greater Nairobi area, primarily due to non-productive time spent on the road, a recent study by IBM Corporation shows.

According to the Kenya National Highways Authority director general Meshack Kidenda, the new road will transform Nairobi's infrastructure setup to that of a modern city with service lanes, allowing rapid movement of commuter buses and connections with other transport services like railways and airports.

IRRIGATION SCHEME THAT FAILED TO GROW RICE

In 2008, the Grand Coalition Government of Mwai Kibaki and Raila Odinga had a dream of expanding the Mwea Irrigation Scheme by another 16,000 hectares. Six years later, the Sh12 billion ambitious project remains just that - a dream.

The people of Kirinyaga County have learnt to suppress bouts of hope as the relocation process hits a snag, year after year.

The matter is further exacerbated by the fact that the Jubilee government no longer counts it as a key project.

Here is the irony: It was Mr Uhuru Kenyatta who penned the deal with Japan in 2010 to facilitate expansion of the irrigation scheme when he was Finance minister. The Mwea Irrigation Scheme has 30,350 acres, out of which 16,000 are under paddy production every year.

Construction of a water dam project at Rukenya village in Gichugu constituency, which is an integral part of the expanded scheme, is yet to take place.

The board facilitated with the process is still holding talks with landowners who have refused to surrender their farms because of "unreasonable" compensation.

The expansion is meant to unlock production of about 300,000 tonnes of rice annually against the current 80,000 tonnes.

Kibaki projects face greatest test of time as regime changes - Smart_Company - nation.co.ke

 

[Idimi]

At least we acknowledge our problem and are doing something about it. This is as it should be, we cannot bury our heads in the sand and assume all is well.

Sure, better speak up and work for solutions as early as you can manage.

 

[Geza Ulole]

...mbwembwe nyingi ankal. Miradi kibao lakini fweza kidogo nd'o tatizo.

Ni kweli kibaya zaidi hamna financial institutes ambazo ziko tayari kutoa over US$ 29 billion kujenga infrastructure inayotegemea South Sudan (ambayo ipo tayari kwenye machafuko kuelekea vita), Ethiopia (imeweka uzito kutumia Djibouti port) and Uganda (ambayo haijulikani miaka 10 ijayo itakuwa wapi mambo kama sheria za ushoga zilizopitishwa zinaiharibia sana Uganda huko WB na IMF na taasisi zote za fedha za Kimagharibi hazikosi seniors (decision makers) ambao ni mashoga sasa hebu fikiria wanaichukulia vipi life sentence punishment ambayo kiukweli ni kwa muuaji na si kwa kosa kama lile).

 

[Ab-Titchaz]

Ni kweli kibaya zaidi hamna financial institutes ambazo ziko tayari kutoa over US$ 29 billion kujenga infrastructure inayotegemea South Sudan (ambayo ipo tayari kwenye machafuko kuelekea vita), Ethiopia (imeweka uzito kutumia Djibouti port) and Uganda (ambayo haijulikani miaka 10 ijayo itakuwa wapi mambo kama sheria za ushoga zilizopitishwa zinaiharibia sana Uganda huko WB na IMF na taasisi zote za fedha za Kimagharibi hazikosi seniors (decision makers) ambao ni mashoga sasa hebu fikiria wanaichukulia vipi life sentence punishment ambayo kiukweli ni kwa muuaji na si kwa kosa kama lile).

Umegonga ndipo na hio zegere ya SS maana so long as kuna mchafuko basi yale mafanikio ya Lapset ndo basi tena.
Afu pia wa-China si watu wa kuwaamini hata senti tano. Sijui hii serikali ya Jubilee imeona nini huko maana ni uchawi
mtupu. Wakawaulize watu wa Zambia nd'o watajua hii mijitu haifai.