The law and politics of the third basis for revenue sharing

The law and politics of the third basis for revenue sharing

By Kibe Mungai

Under Article 217 of the Constitution, the Senate is required to determine, by resolution, the basis for allocating among the counties the share of national revenue that is annually allocated to the devolved units. In November 2012, the first formula was approved by the Tenth Parliament and formed the basis for sharing Sh956, 736 million for the financial years 2013/14 to 2016/17. The second formula was approved by the Eleventh Parliament in June, 2016 and used to share revenue for financial years 2017/18 to 2019/20 amounting to Sh932, 500 million. It is now the sum of the Twelfth Parliament to determine the third basis that will apply over the next five financial years. By all indications, the Senate has set out to perform its constitutional duty in a rather messy and escapist way and things are bound to get muddled-up by the time the Senate’s resolution is presented to the National Assembly for approval in accordance with Article 217(5) and (6) of the Constitution.

Keen observers of Kenyan law and politics will note that the first and second basis for revenue sharing were conspicuous by the absence of high stakes politicking and ethnic polarization, although I remember representing Kiambu Senator Kimani Wamatangi in a case challenging the second basis for revenue sharing. In my view, in order to understand the deepening controversy over the determination of the third basis, we need to bear in mind five things.

For starters, when the Tenth Parliament determined the first basis for revenue allocation, in November 2012, the MPs’ terms had virtually expired and the campaign season for the March, 2013 general election had commenced in earnest. Moreover the senior politicians, aka community spokesmen, were too pre-occupied with the Presidential Election to care much about the implications of the revenue sharing formula adopted. In this scheme of things, only politicians from Northern Kenya were truly pre-occupied with the details of the first formula. Moreover, given the presidential election criteria requiring, among other things, that the winning candidate must receive at least twenty-five per cent of the votes cast in each of the more than half of the counties, the first revenue formula was quietly dished out as political concession to a Northern Kenya constituency that rightly treated it as an existential issue in the new constitutional dispensation.

Secondly, the Eleventh Parliament decided the second revenue formula in June, 2016 when political positioning for the 2017 general election was just starting. By then, it had becoming obvious that revenue sharing was a consequential matter and generally populated counties in Central and Western Kenya had been disadvantaged by the first formula. However, only lower level politicians, like Senator Wamatangi, took up the issue whilst their counterparts from Western Kenya found it easier to support the cause of Northern marginalization in the hope that Northern Kenya would reward Raila Odinga with the presidency for sacrificing the financial interests of Western Kenyan counties. In retrospect, the results of the 2017 presidential election do not show that Northern Kenya returned the favour to Raila supporters for the simple reason that pastoral communities seem to understand that in national politics it is wiser to cast your lot with the most probable winner whether or not they actually like him.

Thirdly, for the financial years 2013/2014 to 2019/20, during which nationally raised revenue has been shared among counties, it has become apparent to rational people that the revenue sharing formula is a consequential thing with far-reaching socio-economic implications. For example, during this seven-year period, Bungoma, with a population of 1,670,570 according to the 2019 census, received Sh55.4 billion whilst Wajir, with a population of 781,263 received Sh51.7 billion. Similarly, Migori and Machakos, with populations of 1,116,436 and 1,421,932 respectively received Sh41.4 billion and Sh48.4 billion, while Kilifi and Mandera with 1,453,787 and 867,457 people received Sh58.6 billion and Sh63 billion respectively. Bearing in mind that in all these counties over 70 per cent of the people can be categorized as poor, it is not easy to justify a retention of the existing revenue sharing formula.

Fourthly, seven years after devolved governments were rolled out, a consensus is emerging among major political actors that sooner or later the county governments’ share of revenue raised by national government will have to be doubled or tripled from the current minimum of 15 per cent. This means that by the 2021/22 financial year, the amount of revenue being shared among the counties might increase from the current Sh320 billion to Sh600 billion-plus. Therefore, any county that has been served a raw deal over the last seven years is bound to become more miserable unless the fundamental injustices of the existing formula are addressed here and now. 

The fifth observation relates to the Fourth Schedule, which assigns to the county governments the functions of agriculture, health, county transport and commerce.  Besides education which is assigned to the National Government, the four functions relate to the day-to-day concerns of ordinary citizens. Therefore, even if the national government were to discharge its functions with maximum efficiency, it would amount to very little unless a given county has the means to deliver on its people-based mandate. In other words, Wanjiku and Atieno would be better off with a capable county government than with a more capable national government. This observation partly explains why President Uhuru Kenyatta gets minimal applause for the major public investment projects like SGR, ports, highways and pipeline developments because the impact of such projects to ordinary poor is minimal, indirect and often remote.

Viewed against this background, it bears emphasis that the Senate of the Twelfth Parliament is not permitted by the Constitution to abdicate the responsibility to determine the third generation revenue formula merely because the outcomes of the recommendation of the Commission on Revenue Allocation (CRA) are not politically palatable or offend historical prejudices. It is not available to the Senate, for instance, to discard the recommendation of the CRA and replace it with an arbitrary arrangement that guarantees palatable outcomes precisely because Chapter 12 on Public Finance and particularly Articles 215 to 219 on revenue allocation exists to prevent such arbitrariness in sharing of financial resources.

It is critical to note that the Constitution does not give Senate absolute powers to determine the revenue sharing basis hence the requirements first for consideration of CRA recommendations and public consultations, and secondly the requirement for approval of its Resolution by the National Assembly. In the current controversy over the third generation revenue sharing formula, it should help to remember that the thrust of the CRA Report is that the second generation formula was fundamentally defective and therefore resulted into unjust outcomes. Remembering also that the second generation formula has already expired, it should be clear to all that Senate would be acting with diminished responsibility and mental lethargy in trying to apply the second generation formula to 50 or 70 per cent of the counties’ revenue and the CRA recommended formula to the remainder.

When all is said and done, however, I believe the reason behind the current controversy is more political than it is technical from legal and economic perspectives. Truth be told, the ghosts of Sessional Paper No. 10 of 1965 have been woken to justify a revolt against Article 217 of the Constitution because it has seemingly failed to yield a formula that gives Kakamega, Kisumu and Elgeyo Marakwet Counties additional funds without giving more money to the “rich” counties of Central Kenya. This is the elephant in the room that we must confront in order to resolve the controversy with more objectivity, less elite hypocrisy, minus philistine patriotism.

To my mind we need to understand the illusions, fears, mind-sets and motivations of the four major elite groups in the struggle for national resources from historical and future standpoints. In volume IIB of its Report, the Truth, Justice and Reconciliation Commission identified North Eastern (including Upper Eastern), Nyanza, North Rift, Coast and Western as the provinces or parts thereof that have suffered economic marginalization since Kenya became independent. Besides the tribalism of President Kenyatta, the TJRC Report explains that Sessional Paper No. 10 was the main instrument of this economic marginalization that enriched central Kenya as it impoverished the rest of the country.

Besides the fact that the analysis on economic marginalization and violation of socio economic rights in the TJRC Report is rather pedestrian, simplistic and jaundiced, three things should be noted about Kenya‘s socio-economic landscape since independence.  The first is that in a free-market capitalist society, the economic fortunes of individuals and communities are not primarily determined by public policy or preferential access to public resources both of which can only help a handful of people or tiny section of a community to get ahead as it were. To remain ahead would certainly require personal efforts of the privileged individuals or tiny section of the community. In retrospect, this observation was the basis of the fatal remark by Nyandarua North MP J. M. Kariuki that by the early 1970s Kenya had become a country of 10 millionaires and 10 million beggars!

The second point concerns fidelity to truth and facts. On a normal day, we seem to have a general consensus that Kenya is a poor country and statistics seem to say as much. To my mind, Kenya is a poor country precisely because the majority of its citizens are poor and we have do Dubais and Silicon Valleys within our shores. If all this is true, we must reasonably assume that the notion of rich counties and communities within a poor county is nonsense on stilts. To be sure, the USA is rich precisely because its Jewish and Anglo-Saxon communities are definitely affluent notwithstanding the manifest poverty of African-Americans, Latinos and Red-Indian communities. No doubt, in Kenya some people and communities are poorer than others but differences in degrees of impoverisization do not justify to describe the less poor individual or community as rich.

The third point is that in a multi-ethnic, semi-democratic and poor society, any president must govern with a national coalition of eating chiefs, however tribalistic he may be. This was true of Jomo Kenyatta, Daniel arap Moi and Mwai Kibaki. It is equally true of Uhuru Kenyatta’s presidency as it will be after 2022 when Raila Odinga or William Ruto ascends to power. To put it more dramatically, during the tenure of a particular president, about 200- 1000 of his allies, cronies and relatives may become millionaires out of State largesse but it would stretch credulity too far to contend that the President’s community became rich within a decade on account of that fact alone.

Hoping against hope that it is now obvious there are no poor and rich counties or poor and rich communities in Kenya, it should help to analyse and understand the fears, mind-sets and motivations of the five protagonist elites: the Western (Luo/Luhya) elite, the Northern Kenya/Coastal elite, the Kalenjin elite, the Central Kenya (Kikuyu), and the nebulous elite of marginalized communities. In this regard we should note that under Articles 260, the term “marginalized community” includes all pastoral persons and communities, meaning that we must accept by law that top lawyer Ahmednasir Abdullahi and Hon Junet Mohamed are marginalized persons.

Let us start with the Northern Kenya elites or more specifically the Degodia community elite of the Somali nation in Kenya who successfully lobbied for the interests of the Northern Kenya counties in the first and second revenue generation formula. On 31st August, 2010 – barely a week after the promulgation of the new Constitution – the then Minister of State for Planning, National Development and Vision 2030 Wycliffe Oparanya released the report of population census conducted in 2009. In the statement releasing the census report, the Minister cancelled the results for eight constituencies/districts namely Lagdera, Mandera East, Mandera Central, Mandera West, Wajir East, Turkana North, Turkana South and Turkana Central and ordered for a repeat of the census in those areas to verify the cause of unusual population patterns and incredible variance of the enumerated results from the projected results. The results of Lagdera Constituency (whose inhabitants are mainly Ogaden Somalis) showed a variance of 37,426 people while Wajir East, Mandera Central, Mandera East and Mandera West that fall within the Degodia belt of former Northern Eastern province showed a total variance of 855,442 people. The three constituencies of Turkana County showed a total variance of 202,943 people.

To prevent a repeat of the census in the said eight constituencies, five persons from the affected areas filed a judicial review application in the High Court at Nairobi to, inter-alia, nullify the Minister’s decision to cancel the fraudulent population results and to prohibit IEBC and other organs of government from using population figures other than the fraudulent ones. Despite the obvious urgency of this case, it was not until February 2012 that Justice Mohamed Warsame delivered a ruling on the matter which granted all the prayers sought in the judicial review application. The government appealed the said decision and, in May 2016, the Court of Appeal allowed the appeal in part by declaring that the government could use and circulate projected population results for the concerned areas. It should be noted, however, that by time the Court of Appeal delivered its judgement, the second revenue generation formula had been dispensed with by the Senate.

When the results for the 2019 census exercise were released, they confirmed that Mandera and Turkana Counties do not have as many people – poor or marginalized – as the fraudulent census of 2009 had shown. The same results also showed that the true headquarters of poverty and marginalization in Kenya oscillate in the areas around Bungoma, Busia, Kisumu and Migori. Tragically, despite all these statistics and chicanery, the Degodia elite has managed to establish a Team Kenya outfit in the Senate to do its bidding for more resources at the expense of the truly poor people of Kenya.

At this juncture, we can turn to the political and professional elite from Western Kenya counties who do not seem to see or acknowledge how their people are being played in the struggle for devolved resources. In popular political discourse, you are wont to hear about Sessional Paper No. 10 of 1965 and narratives of marginalization from Western Kenya elites and commentators rather than the Northern Kenya elite. To be sure, the Northern Kenya elite abhor the tag of poverty and marginalization and they would rather brag about their grand plans to dominate property market and commerce in Nairobi and the East African region.

Thus between the seasons of determining the revenue sharing formula, the Western Kenya elite carry the banners of poverty, marginalization and the infamous sessional paper but immediately the CRA hands over its Report on revenue sharing to the Senate, they hand over those banners to the Northern Kenya/ Coastal elites. I should be forgiven for declaring here that I consider it foolish for anyone to keep shouting about Sessional Paper No. 10 of 1965 in political rallies and funeral ceremonies and the day he is invited to the dining table to share the cake of marginalization, he forfeits his rights to representatives of other marginalized communities. I further confess that the current controversy would end immediately the Western Kenya elite demanded to be handed back the flags and banners of poverty and marginalization being flown in the Senate by their Northern Kenya and Coastal counterparts.

The way I see it, this country suffers from acute deficit of honesty. To my mind, poverty in Kenya is actually too conspicuous and humiliating to deserve a lot of statistical proof.  In fact, given that statistics are prone to manipulation, quite often I find it easier to verify statistics against the evidence of my eyes and ears. For instance, poor people do not go to Nairobi and Aga Khan Hospitals for medical services and you are unlikely to meet them in the business lounges of major banks. Further we know where poor people live in Nairobi, Mombasa, Nakuru and other cosmopolitan towns in Kenya. We also know the occupations of poor people and economic activities they engage in. Similarly, we know who we the property and business owners in Kenya. 

Factoring all these matters, I cannot countenance for a fleeting minute, the notion that the Somali are less poor than the Luhya and Luo communities. In fact the Masai, as a community, are significantly less poor than the Luo and Luhya although majority of the latter assumes the contrary is true. Therefore one could not help but marvel when Bungoma Senator Moses Wetangula offered to surrender some of the revenue allocation to his county under the CRA formula to Wajir County. Curiously, barely a week after Wetangula made his offer, I read newspaper reports to the effect that a famous sports ground in Bungoma County is so dilapidated that its unfit for a village-level football competition! 

Let me now turn to the Central Kenya, particularly the Kikuyu, elite. This elite is conscious of the dangers of the State falling into the hands of hostile political competitors but they also know that in a poor, semi democratic, multi-ethnic country there is a limit to what the national government can achieve for the president’s kinsmen. In this era of devolution and post-Corona world, the Kikuyu elite know that the major undertaking of the national government and post-2022 president will be to mobilize Kenyans to pay the national debt. In the foreseeable future, the national government will not have much discretional resources and it is highly unlikely Kenya’s sovereign credit rating will attract a significant amount of loans. In short, the county revenue cake is likely to constitute the bulk of development funds meaningful from a citizens’ perspective.

The fourth grouping is the nebulous elite of marginalized communities created in the narratives of the TJRC Report about Kenya being a project that has served the economic interest of the Kikuyu and given everybody else a raw deal. This elite is blind to the glaring poverty that exists side by side with villas, swimming pools and castles in Central Kenya. The fact that devolved funds are not meant to provide extension services, medicine and investment funds to Chris Kirubi and company is not sufficient for this elite to empathize with the plight of the hoi polloi of Central Kenya. This elite counts as its honorary members professionals such as David Ndii and Jill Cottrell Ghai. To Dr Ndii, anyone who has a problem with the fraudulent allocation of resources to Northern Kenya is a Kikuyu supremacist who ought to know “there is always the alternative of a full federal system. To Prof Jill Ghai, the one-man-one-vote-one-shilling clamour is paradoxical now that there “was never much enthusiasm for devolution among central province politicians. If you believe you have some God-given right to rule, you are less willing to reduce the scope of your powers.”

Finally, the Kalenjin elite is happy to hunt with the wolves and run with the hares when it comes to the third generation revenue formula. To his credit, Dr. William Ruto has adopted a strategy where he stands to win whatever the outcome of the vote on the third generation revenue formula. If the CRA proposals carry the day, the major beneficiary would be Ruto supporting counties and the anger of the “losers” will be vented against his handshake nemeses Uhuru and Raila. Similarly, if team Kenya and its patrons win, Ruto has already issued enough direct and indirect statements to demonstrate his moral support for the cause of the more strategic poor and marginalized from Northern Kenya. Again a win for Team Kenya constitutes a big loss for the Handshake proponents. In short Kenya is in the throes of a Machiavellian moment. Let us see who is smarter now. Enjoy the game while it lasts!

The writer is a constitutional lawyer (

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