THE WAGE BILL DEBATE; LEGAL SOLUTIONS TO THE BLOATED GOVERNMENT WAGE BILL
Stephen W. Makau
Adjunct Researcher, The Mediterranean Programme for International Environmental Law and Negotiation (MEPIELAN CENTRE), Panteion University, Athens Greece - Remote
TABLE OF CONTENTS
EFFECTS OF THE BLOATED GOVERNMENT WAGE BILL.............................................. 23
STRATEGIES TO TRIM THE HIGH GOVERNMENT WAGE BILL.................................... 26
Stop Government purchase of expensive Cars that are Costly to maintain 30
INTRODUCTION
Definition of a Wage Bill
There are many definitions of the term “wage”. The employment Act1 defines a wage to include a remuneration of any kind. Longman English business English dictionary2 defines the term as the total amount of money that a company or an organization pays to its employees. Also, the Cambridge Business English Dictionary3 defines wages as the total amount that an organization pays its employees during a particular period, for example if the organization has 130 members of staff, and the wage bill is $4.3million. Merriam Webster4 defines the term wage bill as the total amount paid in wages by a business establishment or industry usually figured on an annual basis. The National Institute of Statistics and Economic Studies5 defines wage as the total sum of gross wages of an establishment (excluding employer’s contributions). Therefore a wage is monetary compensation (or remuneration, personnel expenses, labor) paid by an employer to an employee in exchange for work done.
Definition of terms
Minimum Wage
The Employment Act6 defines the term minimum wage as the lowest wages which may be paid to an employee. Oxford dictionary 4th edition7 defines the term minimum wage as the lowest wage payable to an employee in general or to designated employees as fixed by law or by union agreement. Merriam Webster8 defines the term as an amount of money that is
1 Employment Act Cap 226 No.11 2007 section 17. 2 Longman English Business Dictionary 5th edition 3 Cambridge Business English Dictionary.
4 Wage Bill Merriam Webster.com web.15august2016. 5 National Institute of Statistics and Economic Studies 6 Ibid. 1.
7 Oxford Dictionary 4th edition.
8 Minimum wage Merriam Webster.com web.15august2016.
the least amount of money per hour that workers must be paid according to the law. In general, minimum wage connotes the lowest remuneration that employers may legally pay to workers.
Employer
The Employment Act 9defines the term employer as any person or public body or any firm, corporation, a company, who or which has entered into a contract of service to employ any individual and includes the agent, foreman, manager or factor of such person, public body, firm, corporation or company. The Black’s law dictionary10 defines an employer as one who employs the services of others; one for whom employees work and pays their wages or salaries. Employer means any entity or individual who engages a person to perform work or services for which compensation is given in periodic payments or otherwise.
Employee
The Employment Act11 defines the term employee to mean an individual employed for wages or salary and includes an apprentice and indentured learner. An employee is a person employed by another usually for wages or salary.
Recurrent Expenditure
Recurrent expenditure in a government are all payments other than for capital assets, including on goods and services, (wages and salaries, employer contributions), interest payments, subsidies and transfers.
9 Supra n. 1 section 2
10 Black’s law Dictionary 9th edition
11 Supra n. 1 section 2
Eurobond
The Financial Dictionary12 defines the term Eurobond as a bond denominated in a currency not native to the issuer's home country. Eurobonds are commonly issued by governments, corporations, and international organizations.
Syndicated Loans
Syndicated loans are large loans made by two or more lenders and administered by a common agent using similar terms and conditions and common documentation13
12 Financial Dictionary.
13 https://definitions.uslegal.com/s/syndicated-loans/> At 18 August 2016
HISTORY OF THE KENYAS SOARING WAGE BILL
Introduction
Before I venture into the various causes of the huge bloated government wage bill, it is vital that i shed light on where we as a nation have come from in terms of the wage bill that is almost collapsing this country. The modern wage law traces back in the medieval period. In 1347, a decree king by the name King Edward 111 set a maximum wage to labourers in the medieval England to work on his land. In 1348, the Black plague reached England and destroyed the population. As a result of this, there was no labor which led to soaring of wages encouraging the King to set a wage ceiling. Amendments in the 1348 ordinance which was replaced by the 1351 Statute of laborers increased the penalties for paying a wage above the set rates.
19TH CENTURY.
By this time, the statute of labourers was repealed as increasingly capitalistic and thus England adopted an economic system in which their transactions were free from government interference such as regulations, privileges, tariffs, and subsidies (laissez faire). As trade unions were decriminalized, attempts to control wages through collective agreement were made and thus uniform minimum wage was possible. In 1948, a scholar by the name John Stuart Mill argued that because of collective action problems that workers faced in their organizations, it was a justified departure from laissez faire.14
KENYA’S HISTORY OF WAGE BILL
Immediately after Kenya attained independence, in 1963, 1964, these periods were evidenced by growth in Kenya’s economy and development whereby wages were set very high. During this period, Kenya’s wage policy was designated in the 1964-197014 Janie Buckley, Minimum Wage, see, https://prezi.com/xluwqlmmufif/minimum-wageat>At 17 August 2015.
Development plan. According to the plan, the country’s wage policy was designated to
--sector wage employment to absorb the growing labor force. There was also the 1966-1970 Development plan which engineered the inclusivity of labor regulations in relation to the establishment of minimum wages to be maintained to ensure good working conditions and protection of workers against unfair labour practices. The development plan during this period was also established as a tool to steer economic growth in the country. In 1973-2010, this period was characterized by promotion of employees while keeping under control the wage increases and keeping both public and private sector wages under close control. The country’s wage policy was designed to protect employees against restrictive and unfair labor practices. There was a push to substitute all white collar job holders mostly the colonial masters and their perceived friendly locals, with native Kenyan which saw both the qualified and the unqualified get plum government jobs in the civil service. This was followed by subsequent efforts to reform the country’s civil service between the 1980’s and 1990’s, under the structural reform program initiated by the Breton Wood’s institutions. The Government thereafter realized a shortfall in revenue and subsequently froze direct hiring of fresh graduates and reduced the retirement age limit further the government embarked on a strategy to maintain a leaner number of civil servants, with emphasis being placed on efficiency and productivity. Despite these efforts, the public sector wage bill still continued to increase.15
15 Steve L. Lelegwe, PhD Student, University of Nairobi, Kenya, Dissecting the Kenya’s Wage Bill Dilemma: What Is the Missing Link and Which Way to Go? International Journal of Economics, Commerce and Management United KingdomVol.III.At 16 August 2016.
PUBLIC WAGE BILL AND ECONOMIC GROWTH
The country’s Gross Domestic Product has kept on rising in the previous years. The rise in the GDP is an indication of a steady and rapid economic growth country wide. When the GDP is high, this indicates that the country is heading in the right direction economy wise. This narrows down to the population who are the beneficiaries of the said economic growth and the country at large. Comparing the GDP against the wage bill is very crucial because economic growth cannot be realized with huge debts, but with growth in real terms. Over the years however, the country has continued to report increased growth in wage bill. As a percentage of the Gross Domestic product, the wage bill stands at 12% of which 7.8% represents the civil service wage, projected to a rise to 14.6% with the civil service taking 9.3%16The Public Finance Management Act, 2012 requires a provision of 30% of the total national budget for development expenditure. The current situation is that recurrent budget takes up to 74% of the total governments expenditure leaving only 26% for development! The national government has spent sh673 billion on recurrent expenditure, compared only to sh122 billion on development according to the last audit report. It also shows that 85% of the government spending has been directed to recurrent expenditures, which include servicing loans. Only 15% has been channeled to development which is against the 70:30 ratio that the current ruling coalition seeks to achieve before the end of their five year term. According to the office of the Controller of budget, Agnes Odhiambo, at least 32% of Kenya’s 2015/2016 budget was used to offset debts. This shows that out of the sh795 billion spent up to the end of January this year, sh673 billion went to recurrent expenditure, of which sh258 billion was spent on public debt. According to the most recent statistics,16 Deputy President William Samoei Kipchirchir Arap Ruto,“A High Wage Bill Can Undermine Economic Growth and Job Creation by Causing High Aggregate Demand Which Results in Inflation; A Higher Wage Bill is a Perfect Recipe for Economic Implosion; It Will Lead, Inevitably, to Reduction of Expenditure in Vital Social Areas Like Education and Health! Therefore, Managing the Wage Bill at Sustainable Levels is Key to Unlocking National Resources for Purposes of Development Expenditure, Improving Productivity, Service Delivery and Overall Economic Growth!”Hard Talk Kenya 22 July 2013.At 17 August 2016.
Kenya’s public sector wage bill has mounted to a level of 13% of the GDP. As of now, there are 700,000 public workers being paid by the government. Also the huge cost of Devolution which was introduced by the 2010 constitution has had led to the increase of government wage bill to sh630 billion17. The chart below is a comparison of the GDP growth and the wage bill from 2004/2005 financial year up to 2014/2015 financial year18.
The following chart shows the country’s current wage bill status as adapted from the Treasury Cabinet Secretary, Henry Rotich on wage bill sustainability 10th march 2014
17Kenya’s soaring wage bill needs a better approach than just salary cutbacks
<https://www.kenyaforum.net/2014/03/14/kenyas-soaring-wage-bill-needs-better-approach-than-just-salary- cutbacks>at 17 August 2016.
18Supra n. 15.
CAUSES OF THE HUGE WAGE BILL IN KENYA
Introduction
The public sector wage bill is comprised of regular payroll expenditures which include basic salaries, house allowances, and so on. The current government wage bill started soaring in 2008 following the coming into place of the grant coalition government headed by Mwai Kibaki as the head of state and Raila Odinga as the prime minister, there was increase in employment of public service officials. There has been an increase in the public sector wage bill from sh239.9 billion in 2008/2009 financial year to sh464 billion in the year 2012/2013. From this age and time came the 2013 general elections which were seen as an implementation of the new constitution. The constitution of Kenya 2010 which was overwhelmingly voted for by the Kenyan, has established so many offices which were not there in the former regime while still bringing the government closer to the people. However, five years down the line, there exists a worried nation, whereby the Kenyan citizen start thinking whether the constitution was passed only for some to enjoy the fruits and others to regret for its coming into force. To begin with, the constitution establishes a bicameral form of Parliament composed of the National Assembly and the Senate. The National Assembly is composed of 349 members and the senate which is composed of 68 members. The constitution enables the National Assembly to increase by more than half from 222 seats of elected House members to 349 seats. This has also been reflected in the creation of nomination position for women in the senate in order to abide by the constitutional requirement of the 2/3 gender rule. These positions although satisfy the constitutional requirements require the National, government to allocate more recurrent expenditure in the payment of this nominated members of parliament, which in turn translates to an increase in the governments wage bill.
New Government Structure
The 2010 constitution created two levels of government;19 The National Government and the County Governments. This has led to an increase in the size of parliament as well as other increased slots for example those of governors, senators and county representatives all these people are salaried by the government, also there has been deployment of staff from the national government to the county government which increases the size of the county government hence quest for more funds to pay them and ensure that at least everybody has a smile on their face at the end of the day. This endeavors to increase the already high wage bill.
The constitution of Kenya 2010 establishes the forty seven county governments.20 A county government is composed of a county executive and a county assembly.21 The county executive is composed of the governor, deputy governor and ten executive members. The county assembly is composed of members elected from each ward in the county and the speaker who is an ex- official member meaning that he is a member by virtue of his office. Now, this is a very new structure that was never before not until after the general elections. All this members of a county government are yarning for huge salaries and remunerations and also hefty allowances. It appears that what used to happen in the centralized form of government is now happening in the counties. Seems like we are moving from a frying pan to the fire itself. Also there is additional staff like the County Commissioners who represent the national government at the county level.
These County Commissioners clearly carry out functions that ought to be done by the Governors and their county governments. This connotes duplication of roles, they also need
19 Constitution of Kenya 2010 Article 1(4).
20 Supra n. 19 Article 6(1).
21 Supra n. 19Article 176(1).
to be paid, and given allowances as the other members of the County Government. The government has to spend more on paying the staff than of development.
Independent Commissions
The constitution of Kenya created independent Commissions and Offices.22 These
independent Commissions and Offices were in turn to improve service delivery to the people around Kenya. These commissions, although constitutionally established have proved to have overlapping roles. To begin with, the constitution created the Teachers Service Commission (TSC), Public Service Commission, (PSC), Judicial Service Commission (JSC) and Parliamentary Service Commission (PSC) in order for these commissions to perform various functions. However, it has turned out that these commissions serve employees who also work under the central government this is clearly an overlap of roles. For example, teachers and doctors are employees of the National Government, why should commissions be established to deal with their issues; hence this can easily be done by the Central Government? These commissions, although independent, have of late not been able to clearly set salaries for their employees respective. Due to this the Salaries and Remuneration Commission (SRC) was established only to determine their salaries! Also the Commission of Revenue Allocation (CRA) and the Controller of National Budget (CNB) functions can be left to either of the commission. These are commissions which perform functions which could only be performed by four or at most five commissions, unfortunately this is not the case as heads and staffs of these commissions continue to receive huge salaries and hefty allowances which raise the wage bill to unsustainable level.
22 Supra n, 19 Article 248(2).
Size of the Government
In the grand coalition government, the cabinet was composed of 44 ministers and 44 assistant ministers; the largest cabinet ever in Kenya’s history. The constitution of Kenya provides that the Cabinet shall be composed of not fewer than 14 and not more than 22 Cabinet Secretaries23. The current Kenya’s cabinet composition stands at 20 following appointment of Eugene Wamalwa to head the Water and Irrigation docket forming the 20th ministry. This was well done for the ministries but the worry or rather my concern is that the directorates in each ministry remained unaltered, this has led to duplication of roles by both authorities. For example, during the grand coalition government, there used to be Principal Secretaries under each ministry. This has also been reflected in the current government where the constitution establishes the positions of Principal Secretaries24. Also, some other offices were established under the constitution which appear to be of less importance. For example, the office of the Digital Media and Diaspora performs functions which can clearly be performed by the Ministry of Foreign Affairs, hence at the end of the day the government pays these people salaries and allowances which push the wage bill to unsustainable levels, such offices need be abolished. Also, with regard to counties, some offices have more staff carrying out the same roles which leads to government spending more in paying their salaries as divorced from development.
Ghost Employee
A ghost employee is someone recorded on the payroll system, but who does not work for the business. The ghost can be a real person who knowingly or not is placed on the payroll, or a fictitious person invented by the dishonest employee these people will
receive payment or salaries for work not done. This occurs either when the said people
23 Supra n. 19Article 152(1)(d).
24 Supra n. 19 Article 155(1).
are of age and cannot perform well or they have been stripped off their roles of the author under which they were working in has been abolished or declared redundant. The government continues to pay this people although they are not working. Ghost workers can be found either in the national government or even county government. In 2014 the government of Kenya embarked on an audit led by the Cabinet Secretary for Devolution and Planning, Miss Ann Waiguru in bid to establish the ghost workers in the government.
Corruption
Corruption Scandals in Kenya
Anglo-Leasing Scandal
The Anglo-leasing scandal which started way back before the year 2002, involved state contacts worth hundreds of millions being awarded to nonexistent firms, shadowy foreign companies for services ranging from forgery proof passports to naval ships and forensic laboratories which never materialized. It involved 18 contracts signed between the government and several local and foreign companies for equipment and services amounting to sh78billion.25 In 2014, His Excellency the president Uhuru Kenyatta was forced to authorize payment of $16.4 to two companies which had secured a court order in Geneva and London requiring the government of Kenya to settle unpaid debts even though they had not delivered on the ground contracted services26The president also paid sh1.43billion to a company by the name First Mercantile Securities Corporation and also to Universal Sale pace Corporation on supplies and finances of
25 Vincent Agoya, Kamanis ‘were to pocket Sh86bn’ in Anglo Leasing. See, https://www.businessdailyafrica.com/Kamanis--were-to-pocket-Sh86bn--in-Anglo-Leasing/539546-3305142- xoyy2sz/index.htmlAccessed At 19 August 2016.
26 Mwalimu Mati, ANGLO LEASING: THE REAL STORY. See, https://www.the- star.co.ke/news/2014/11/08/anglo- leasing-the-real-story_c1033994At 10 August 2016.
Navy ship. The contracts were overpriced.27 Mr. Deepack Kimani and nine other suspects including former Finance Minister, David Mwiraria, Mr. Mwangi and former Permanent Secretary in the Ministry of Finance, Joseph Magari are still on trial for conspiring to defraud the government billions of shillings through false and fishy financing agreements. A former accountant at the Ministry of Finance narrated how Joseph Magari signed agreements and authorized payments of 18 government security projects amounting to sh56.3billion without following the due process. They are also charged of inflating the prices of the Kenya Prisons Security, The Telecommunications project and the Kenya Airway project. Mr. Deepack Kamani’s family was to pocket sh86 billion28 Since 2002, we have no successful prosecution of the culprits who are well known to the public. The government pays a lot of money to these dubious contracts, living very little for development. This money could have been channeled to development hence it’s directed to the recurrent expenditure.
The Goldenberg Scandal
Goldenberg scandal involved a company known as, Goldenberg International, which was owned by Kamlesh Manskuhlal Pattni and former spy Chief James Kanyotu. The company would export gold and diamond jewelry and receive compensation from the government for earning foreign exchange. However, it later turned out that the company was not exporting any gold and diamond jewelry and that their claims were false. It was ran for three years without been noticed by the government. Torrance Ryan, an economics professor, estimated that it would take three generations for Kenya to fully recover from the effects of the scandal since the country had lost upto sh100billion
27 Ibid. 26
28 Ibid. 25
through twisted transactions by individuals29His Excellence the president Mwai Kibaki in 2003 appointed a commission of inquiry to inquire into the scandal which was headed by the then High Court judge, Justice Samuel Bosire commonly known as ‘THE BOSIRE COMMISSION’. Various personalities were implicated in the scam including former president Daniel Arap Moi, his two sons and daughter, Mr Joseph Magari, Hon. Prof George Saitoti, Mr Joshua Kulei, Mr. Kamlesh Manskuhlal Pattni, Mr. Charles Mbindyo, Mr. Tom Kilalya, Mr. Elphis Riungu, Mr. Michael Wanjiha among others.30 Mr. Kamlesh has since been born again but the charges against him are yet to be withdrawn even after he offered to return the multibillion Grand Regency hotel to the taxpayers as a way of restitution.31 No, other person has convicted twenty years down the line as the persecutions were terminated as they were considered too selective as aiming at some few individuals32
Billions Unaccounted For In Ministries
The Auditor General in the financial year 2013-2014 declared that sh66.7billion in 17 ministries and also State departments including parastatals was uncounted for. The head ministries were not able to produce any documents to show how that money was spent in that particular period of time. For example, the Ministry of Health could not account for sh22.5billion, the Ministry of Education could not explain the whereabouts of sh12billion same to the Ministry of Foreign Affairs could not account for sh1.4billion. Also, the
29 Sunday Nation Reporter, How Goldenberg scandal was hatched and executed. See, https://www.nation.co.ke/news/How-Goldenberg-scandal-was-hatched-and-executed-/1056- 1628532-
8k2yos/index.htmlAt on 13 August 2016.
30 Ibid. 29.
31 Ibid. 29.
32 The Goldenberg scandal-the end of a sorry saga? see, https://www.kenyaforum.net/2013/04/25/the-goldenberg- scandal-%E2%80%93-the-end-of-a-sorry-saga/At 16 August 2016.
Attorney General could not account for sh27billion, Ministry of Agriculture could not also account for sh1.2billion among other ministries.33
38 Billion Medical Import Irregular Leasing
The central government in importing the medial equipment which was later to be leased out to the county government was barred by the law as there is no provision in the procurement laws that guarantees leasing out such a medical equipment to the counties and the county governors were not informed of the equipment but rather they signed it out of pressure from the central government.
100million‘Hustlers’Jet
During the period of the crimes against humanity facing the ‘Ocampo 6’, The Deputy president His Excellency, William Ruto hired a private jet which could enable him to tour Gabon, Congo, Nigeria and Algeria to petition his case in International Criminal court. It was to cost the taxpayers a whooping sh24.14billion every month he was on tour. This was a total wastage of government resources as the parliament did not approve the same and there was no budget allocated for such a luxury jet. However the Public Accounts Committee later on cleared him out.34
60billion Failed Oil Drill Well
In the year 2014, the Geothermal Development Company received sh60billion from the central government to add 440MW to the National grid through 120steam wells. Those
33 Isaac Ongiri, Auditor puts ministries on the spot over missing documents for Sh66.7bn deals. See,https://www.nation.co.ke/news/Use-of-Sh67-billion-queried-by-auditor/1056-2812504-wusqdp/index.html At 16 August 2016.
34 Sunday Nation Reporter,Ruto’s luxury jethire cost sh100m. see,http//www.nation.co.ke/news/politics/rutos- luxury-jet-hire-to-cost-sh1m/1064-1856688-hgw42d/index.html. At August 2016.
involved failed to hit the target and drilled only 130MW on 25wells at the same cost of sh60billion! Indicating corruption on those entrusted to carry out the job.
The National Youth Service Scandal
The scandal came to light in June 2015 when it was discovered that sh800million was irregularly transferred from the National Youth Service Integrated Finance Management System accounts to a supplies company called Farm Home Builders for procurement of building materials. The money was then transferred to different accounts belonging to a number of companies, law firms and also individuals. Ms Ann Waiguru, the Cabinet Secretary in the Ministry of Devolution and Planning together with the Principal Secretary stepped aside to pave way for investigations but nothing much has yielded since then.
Turkwel Dam Scandal
In 1987-1990 Turkwel Dam was constructed at three times the estimated construction price by those who were tasked in construction of the dam35
Grand Regency Scandal
The Central Bank of Kenya in June 2008 was alleged to have secretly sold a luxury hotel in Nairobi to an unidentified group of Libyan investors for a sum of more than sh4billion below the estimated market value.36
15Billion Close Circuit Television
In November 2014, Safaricom Limited won a sh30billion 4year tender to establish National surveillance in Nairobi and Mombasa. Huawei and ZTE Companies had also gone for the
35 Muhatia,Top Corruption Scandals In Kenya since 1990. See,http//biznews.co.ke/2016/2/16/top-corruption- scandals-in-Kenya-199. At August 2015
36 Supra n. 28.
tender but ZTE was deported back to their country. Huawei was to provide infrastructure support estimated at sh15billion but Safaricom ltd Managing Director, Bob Collymore claimed that the tender was single sourced on Safaricom ltd only. This meant that a whooping sh30billion was stolen from Kenyans on a false project that Huawei carried out with a total of sh15billion, adding to the sh30billion would total to sh45billion. This means that sh30billion could not be accounted for by the Safaricom Limited37
Galana kulalu Irrigation Scheme Scandal
The Galana Kulalu irrigation project is one of the key major projects of the ruling coalition. However it is not without problems. For example in year 2015 the central government channeled sh7billion to the irrigation scheme but the harvest was wanting and Members of parliament want the million acre project suspended until issues of corruption facing the scheme are resolved.38
7 Million Nyamira County Government Hospital Gate
Nyamira County, one of the 47 Counties in Kenya came to light when it built a gate worth sh7million. This evidenced corruption in the entire County government in that the Nyamira hospital even lacks medicine and the sick patients are always referred to other hospitals according to the confession of one of the regular patient in the hospital39
37 Xnyakundi, ksh. 30 billion safaricom cctv scandal exposed #safaricomgatescandal. see, https://xnyaundi.blogspot.co.ke/2016/03/ksh-30-billion-safaricom-cctv-scandal.html At18 August 2016.
38 Alphonce Shiundu, MPs want ‘bungled’ Galana irrigation project suspended. See, https://www.standardmedia.co.ke/m/?articleID=2000184394&story_title=mps-want-bungled-galana- irrigation-project-suspended&pageNo=2At16 August 2016.
39 This county hospital gate cost Ksh.7 million to construct (do you think it’s worth it?). see, https://www.kenya- today.com/news/this-county-hospital-gate-cost-ksh-7-million-to-construct-do-you-think- its-worth-itAt 15 August
2015.
The Bungoma County Wheelbarrow Saga
In Bungoma County, 10 wheelbarrows were bought at a cost of sh109,320 each!. An Audit report revealed that sh1,093,200 was spent in acquisition of the said wheelbarrows. This clearly shows the high levels of corruption in the County. A wheelbarrow that costs sh3,000 to 5,000 cost sh109,320.
Conclusion
All these scandals facing the government of Kenya result in the government spending too many resources on recurrent expenditure hence a lot of resources meant for development are lost and the government will find other means to steer development which includes borrowing contributing to the soaring wage bill.
Budget Allocations by both National and County Government
There are various expenses which are contributing to the current governments huge wage bill. For example, the government of Kenya has been allocating huge sums of money to buying luxurious vehicles, normally known as fuel guzzlers and also numerous foreign trips and workshop and also retreats by members of the senate and national assembly. Early this year, some Members of National Assembly went to Israel to learn how best the ‘mandazi’ in the parliament cafeteria can best be cooked. This is a total wastage of resources in terms of travelling, allowances while in those trips and also charges in the five star hotels hotel which they love the most. The executive in 2015 held a weeklong- meeting at a five star hotel to take stock of the achievement of the last one year since ascending to power. In economical terms the executive would have saved resources by holding the said meeting at state lodges or Harambee House where such meetings are supposed to be held. This was a total waste of resources. With this practice you do not
expect the huge wage bill to drop any time soon. The new offices created have managed to get the wage bill rise from sh.241 billion in2008/2009 to sh.418 billion in 2013/2014. In essence, the wage bill in the country has been increasing by an average 21%over the last three years. In the last financial year, the wage bill grew by a staggering 34% leaving very little amount of resources for development which the country needs to grow its economy40. In addition, the pensions for retired workers, the government wage bill is estimated at sh.534.7million translating to 54% of all government revenue raised nationally and 13% of the country’s GDP. In other words, it means that 13% of the wealth created in the country goes towards the payment of civil servants’ salary.41 The government also spends more than sh200 billion on foreign debts; this sucks the development expenditure to a very small amount which cannot even steer development throughout the country. The proportion of government-funded development projects is estimated at paltry 6.5% of the budget.
Increased Workers in both National and County Government
There has been a rise in workers who have been recruited by the both the national and county governments including health workers and teachers to some parts like Mandera which lack these professionals. Most of the governments revenue is spent on paying these newly employed staff hence less money is left for development as a result the government will now result in borrowing in order to fund its development agendas. An example is the Eurobond, syndicate loan, which was evident in the grant coalition government and also M- Akiba. The current state of Government expenditure is an indication that the much talked vision 2030 will be just an illusion. Today people around the globe are demanding for better goods and service from the government in exchange of the taxes they pay to the same
40 Ibid. 15
41 Ibid. 15
government, this include jobs in the government, social amenities which include infrastructure and also health facilities. My concern however is on the provision of jobs in the country that everyone is so mad about. The State wishes to employ the best brains for delivery of quality services to the public, but at the same time it needs to ensure that in doing so, it does not push recurrent expenditure to levels that cannot be sustained or rather spend most of its revenue on paying these people instead of steering development in the country. Also, it’s noteworthy to say that there is a difference both in the private and public sector on payment of salaries. With regard to the private sector the highly skilled workers or rather employees tend to receive much more in terms of wages than the lowly skilled labourers. In the public sector, it doesn’t matter whether you are skilled or not, what carries the day is that you are either from the tribe of the ruling coalition or you sometimes in the past worked with some big people in government or you campaigned for the ruling coalition to ascend into power. For example, during the government Cabinet appointments, the President and his Deputy appointed Dr. Hassan Wario who holds a Doctorate in Anthropology. How does Anthropology relate to sports? The president then moved on to appoint Professor Jacob Kaimenyi, who holds a PHD in Dentistry from the University of Nairobi to head the Education docket. He has always been at the centre of disputes in the Ministry of Education. He should have been a dentist. As if that was not enough, the President moved to appoint James Macharia who owns a Masters degree in Commerce from Henley Management College in United Kingdom to head the Health docket unlike Joseph Nkaissery who is the Cabinet Secretary for Internal Security, the others are not that skilled in their fields of work, surely this people are in no way specialised in the fields they are called for work, they receive salaries, huge allowances as their counterparts who are much more qualified to work and develop our economy by double digits. Also it has come to my notice that there has been long serving civil servants in the public sector who need to
be replace by new employees. This will cost the government extra money to cater for the newly employed workers. Furthermore, the retiring civil servants will require retirement packages and pensions; the wage bill will have to go up in the process of paying the new employees and also cater for pensions of the retiring civil servants.
Salary and Wage Increase
In the recent past, there has been pressure on the Salaries and Remuneration Commission (SRC), headed by Sarah Serem to increase salaries for various departments in government and state officials which has seen the wage bill rise to unsustainable levels. Her role came under sharp scrutiny during the four weeks early this year in which public school teachers had been on strike prompting the closure of schools if the government did not meet their demands of increasing their salaries by 50-60% as awarded to them by the Employment and Labour Relations Court.
Ms Serem said that the increase would require a similar increase across the civil service given that the constitution envisages equity under the constitution42, costing the government of Kenya an extra sh118 billion which is equivalent to $1.112 billion per year43. Also, when Ms Serem protested against the Members of Parliament move to increase their salaries, the legislators threatened to throw her out of office and slash the SRCS budget allocation, remembering that the constitution gives parliament powers to alter its budget. The Salaries and Remuneration Commission is an independent office established under the constitution to always ensure equity remuneration of salaries and benefits to state and public officers, but has of late not been happening as the orders of the office at most times are usually ignored.
42 Ibid. 19 Article 27.
43 Jeff Otieno, Kenya: Government at crossroads over ballooning Wage Bill, see https://allafrica.com/stories/201510050458.html,The East Africa. At 17 August 201
EFFECTS OF THE BLOATED GOVERNMENT WAGE BILL
Introduction
The bloated government wage bill will have a negative impact on sustainability of the country’s economic growth if the government does not move fast and tame it. The following can be cited as the long term effects of the bloated government wage bill.
High Standards Of Living
To begin with the lowest paid Kenyan as per the Kenya gazette in urban areas excluding allowances is between sh12,136 to sh15,357. This is very little even after the Head of State announced the wage increase by 12% in the last Labour Day celebrations sometime last year44. Now the government has moved on to increase taxes on basic commodities that can only be acquired by Kenyans in this bracket. This has seen the cost of living go high and forced most Kenyans to dig deep in their pockets to acquire basic commodities.
Economic Crisis
In the financial year 2012/2013, Kenya’s public wage bill stood at sh458.7 billion equivalent to $5.3 billion against a revenue collection of sh800 billion equivalent to $9.2 billion as per Sarah Serem. This indicates that wages take almost half or even more of the revenue collected nationally by the government which is very dangerous. What will be the need if a government operates only for payment of its officers rather than realising development? This has to stop or else the country will someday collapse.
Rise in Poverty Levels
The government of Kenya is tainted by corrupt officials, although the head of State seems to be fighting this vice he seems to have lost the fight living the innocent Kenyans to think
44 Edwin Mbuthia, Kenya’s statutory minimum Wage raised 12 percent, see https://www.businessdailyafrica.com/Kenya-raises-minimum-wage-12-per-cent/539546-2703210- ljrtemz/index.html Business Daily At 10 August 2016.
that the country is beyond redemption. The corrupt and unashamed officials take the very little that poor Kenyans have worked so hard to get given the hard economic times the country in addition to the fact that the poverty levels in the country are very high. If the bloated government wage bill is anything to go by, the Kenyans will be forced to contribute towards its reduction every financial year through taxes hence increasing the poverty levels in the country.
High Rates of Unemployment in the Country
As the government tries the much it can to reduce the high wage bill in the country, then you don’t expect job creation to take place, rather it will be the other flipside of the coin; lack of jobs. This is the situation because the more the government employs the more it is forced to spend most of its revenue on recurrent expenditure rather than development. So you can understand when the government is silent on the question of provision and creation of jobs for the young people normally known as “Kazi kwa vijana”.
Vision 2030 Projects
The bloated government wage bill has a significant effect on the projects that the government of Kenya seeks to achieve. This vision will only come true if the government moves faster and ensure that the soaring wage bill is kept under control. If the government does not contain the high huge wage bill then we can as well forget the much talked about double-digit economic growth and the vision 2030.
Inequality
The salaries of the members of parliament are quite outrageous. The highest paid civil servant in Kenya earns close to sh1.5 million inclusive of allowances as compared to the least paid Kenyan45. Now even if we are talking about the soaring wage bill and how it has
45Proposed Remuneration Structure for State Offices in Kenya. see, https://www.standardmedia.co.ke/salaries/at
destabilized this nation, this civil servant is not event feeling the heat that other lowly paid Kenyans are feeling, the reason is that he has more than enough; why worry about the wage bill? The ordinary Kenyan is the one who is always hit and used as a leverage to pay government debts when they fall due. It is not even a surprise that the members of the National Assembly passed the Income Tax Amendment Bill 2016 in April 2016 that now exempts them from paying taxes on their allowances46. This occurred barely two months in June 2016 after Justice Henry Adonyo of the Commercial Court ordered that MPs' allowances, including mileage and constituency allowances, sitting allowances for committee sessions, town running allowances, basic pay and car purchase allowances, among others be taxed. This is unheard of. This brings inequality across the country as some are enjoying while others are suffering.
At17 August 2016.
46 Urn, Mps amend; pass Income Tax Bill to exempt selves from taxes. See<https://www.observer.ug/business/38- business/43707-mps-amend-pass-income-tax-bill-to-exempt-selves-from-taxes At 17 August 2016
STRATEGIES TO TRIM THE HIGH GOVERNMENT WAGE BILL
Introduction
The huge wage bill that is driving the country into the wrong direction ought to be put under control and reduced lest the country will shut down. As the vice-chairperson of the Salaries and Remuneration Commission Mr. Daniel Ogutu once said “Kenya is like a sick patient, does not look sick but going to the doctor, the patient is told that at this rate you are going to collapse. It may be five or ten years, but you will collapse”47. The following are some of the strategies:
Downsize the Government
In bid to cut down the huge government wage bill, the ruling government has invented measures to deal with it. For example in the year 2013, the head of State pronounced government reorganization that would see the number of government parastatals reduced from 262 to 187 in number48. The current number of parastatals stands at 302 as of gazette notice 2015. These parastatals are boards which are established to assist the government deliver its services effectively to the electorate. They are headed by various Chief Executive Officers who in turn employ other staff to work in those boards. Some of these parastatals are served by failed politicians who are been rewarded by been given this jobs normally known as the, “gray haired” jobs rather than appointing the young intelligent minds to these posts. For instance in the recent parastatal reshuffles in March 2016, saw former Cabinet Minister, Henry Kosgey appointed to head the Board of Tourism Fund. You don’t expect these politicians to deliver the same way a graduate would given the same job. For example,
47 Catherine Wambua-Soi, Kenya's government knows it needs to downsize the public service, slash salaries and tame corruption to save itself. See, https://www.aljazeera.com/blogs/africa/2014/03/98646.html. At 17 August 2016
48 Supra n. 17
the Agricultural Development Corporation has got Musa Sirma who was a former Cabinet Minister for East African Community, as the Chief Executive Officer, Susan Akinyi, Joseph Miriti Mwereria, Valeria A. P. Palapala, James Munyinyi Karanja, Janet Kirui, Abdo Mohamed Bahajj, Juliet Wanjiru Karanja, Kipera Issa Athuman, David Mwangi Kuria as the members of the board, for a contractual period of three years. These are not full time jobs. This is the case with all other parastatals. Why should a board be composed of so many staff members? They all expect salaries and allowances at the end of the month they should be reduced and the money to pay them should be diverted to development projects in the country. Also the government should review and do away with the parastatals that are unproductive. For example, why should the government have a Cotton Board, a Coconut Development Board, a Tea Board, a Sisal Board, Cereals and Produce Board, a Coffee Board, Sugar Board, a Sugar Arbitration Board, and a pyrethrum Board49? All these Boards should be managed under one parastatal instead of wasting government resources in the allocation of budgets for each of them if we ever want to reduce the huge government wage bill Furthermore, some of the parastatals have been integrated into the devolved system of government hence cannot be classified to be under the control of the central government for example, the Coast Development Authority headed by Mr William Mushihiri Wa Hare, Ewaso Nyiro Development Authority headed by former Cabinet Minister Hussein Maalim Mohammed50. These parastatals can now be dissolved and their functions performed by the governors and their county governments, but this has not happened and they continue to receive salaries from the government. They contribute to the high wage bill and need to be done away with.
49 Mohammed Wehliye, Five things Uhuru should do to tame the public wage bill. see, https://www.businessdailyafrica.com/Opinion-and-Analysis/Five-things-Uhuru-should-do-to-tame-the-public- wage- bill/539548-1757278-bs0rj5/index.html. At 18 August 2016.
50 Supra n. 31.
Implement the pay cut initiative.
On March 2014, President Uhuru Kenyatta announced that he and his deputy William Ruto shall be taking a 20-percent pay cut on their salaries and the cabinet secretaries salaries will be reduced by 10 percent in a bid to rein in the country’s soaring public wage bill. This will see President Uhuru’s monthly income reduced to about sh989,600, while Ruto’s will be reduced to sh841,500.51 Members of parliament in the year 2013 agreed to accept a 20% salary cut, bringing their monthly pay checks down to around sh532,000 ($6,100, 4,400). Kenya spends almost sh400billion in payment of salaries only to be left with sh200 billion for development. This is unacceptable. Although the pay cut may not be seen as a long-term initiative by the government, it will somehow save the government some cash for development.
Reduction in the Number of Seats in Parliament
The National Assembly is composed of 349 members. The senate on the other hand is composed of 68 members including the speaker52. The parliament enacts laws which if assented to by the president become laws. But the question remains, must all the members of the house be present for a law to be passed? For example, during the 2016 Division of Revenue Bill some members of the senate including the senate minority leader Moses Wetangula were missing, so many laws have been passed without the whole house been present hence some seats should be done away with. In January 2014, Mwingi Central Member of Parliament, Joe Mutambu tabled a bill in parliament to reduce the number of counties from the current 47 to only 25 counties53; this would reduce the number of senators to 25 and the number of National Assembly members from 349 to 180. This will reduce the
51 Patrick Nzioka, Uhuru and Ruto take pay cut: Who is next? See, https://www.nation.co.ke/news/1056- 2235284- ngudusz/index.htmlAt15 August 2016.
52 Supra n, 19 Article 98(1)(a).
53 Ibrahim Oruko, New bill to cut counties from 47 to 25, Woman reps, nominated MPs could also go. See, https://www.the-star.co.ke/news/2015/12/16/new-bill-to-cut-counties-from-47-to-25-woman-reps-nominated- mps- could_c1261047 At 17 August 2016.
recurrent expenditure to the members of parliament and redirect the same to development in bid to tame the government huge wage bill.
Also tied to this point is the issue of striking out the seats for women representatives and those of nominated members of parliament. The senate has 16 nominated women senators, their counterpart; the National Assembly has 47 women representatives and 11 nominated members of parliament. These members do very little hence the government spends a lot of recurrent expenditure in payment of their salaries. Benjamin Langat, Member of Parliament for Ainamoi Constituency introduced a bill in parliament that seeked to bring parliament seats to 337. This would save government costs in the long run and reduce the high wage bill.
Reduce the number of Constitutional Commissions.
As mentioned earlier, the constitution establishes the independent commissions for effective service delivery to the people but these commissions have proved to have overlapping roles hence need to be reduced to only a few which can perform effectively hence saving government resources.
Borrowing
No government can exist without borrowing. Every government in one time or the other will endeavor to borrow in order to deliver its promises to the people. But the government should not borrow funds which cannot even be accounted for. If a government borrows funds, there must be projects on the ground to show how the borrowed money was spent. For example, Cabinet Secretary for Treasury has been finding it hard to account for the Eurobond cash which the National treasury claims that some of the money was used to service a syndicated loan in grand coalition government. Also the government should not keep on borrowing since this contributes to the increase in public wage bill.
Harmonization of Salaries and Allowances
The government should endeavor to ensure that everyone complies with the recommendations of the Salaries and Remuneration Commission on salaries and their allowances. More so the members of parliament have been pushing for a pay increase given that they even are paid more than enough for less work. Also, why should the Members of Parliament be paid allowances for every sitting to perform duties for which they were elected in office to do? And yet at the end of the month they still earn a salary. It is like a receptionalist at an office having a monthly salary, and been paid allowances for every call she answers and every document she types. This is her work. So, these allowances should be scrapped off if the government wishes to trim the public wage bill.
Stop Government purchase of expensive Cars that are Costly to maintain.
These expensive cars, which are purchased with a lot of funds, push the government spend a lot of resources in their maintenance in terms of fuel consumption and also repairs if any. This will require a lot of resource from the government. In June 2013, the government banned buying of expensive limousines by Cabinet Secretaries who defied the orders and went on to buy these vehicles. It’s the government to maintain these vehicles; hence a lot of resources from the government are spent in their maintenance.
Ghost Workers
The government should try as much as possible to identify and send perking the ghost workers who reap where they did not sow if at all the government wishes to reduce the soaring wage bill.
Nepotism
Nepotism has been relevant in the Kenyan employment sector in that most employers employ their close friends and relatives, hence locking out the intellectual minds out of the
job market. These employees are not qualified hence very low output. The government should also seize to employ so many employees who come from the same community rather they should follow what President Moi during his reign as the president of Kenya. The president ensured that his cabinet was not dominated by only Kalenjins, although he himself is a Kalenjin. He also made sure that the Attorney General was not a Kalenjin but a Kikuyu, Sir Charles Njonjo. The current government should follow his footsteps in other words; President Daniel Arap Moi never entertained Nepotism in his government.
Contracts and awarding of Government Tenders.
The argument here is the construction of the standard gauge railway which is costing the taxpayer a whooping sh327 billion but was later increased to sh420 billion allow it source for locomotives and wagons as well it is to be constructed by a Chinese firm known as the China Roads and Bridges Corporation. This tender is under scrutiny as it was not awarded to the highest bidder. Also, the laptop project, the Public Procurement Administrative Review Board found that the ministry of education awarded the contract to a company at an increased price of sh1.4billion. This means that the government will pay more than the original price interfering with development plan.
Tame Corruption
The government has made an effort of sending home corrupt officials but this is not effective since no one among the state officials who were implicated in the corruption scandal was convicted. To surprise Kenyans, the President appointed Francis Kimemia, former Secretary to the Cabinet who was implicated in the corruption scandal early this year to be the new Chief Executive Officer of the Industrial and Commercial Development Corporation which is a state Corporation. Does this now mean that he and all the other state officers implicated in the scam were innocent? Justice should be seen to
be done. For instance, the Nation on average loses sh300 billion on corruption every year. This finds could as well be channeled to development.
Reduce the President’s And Deputy President’s Motorcade
Presidential motorcades were mostly relevant during President Arap Moi’s regime. A typical motorcade accompanying His Excellency Daniel Arap Moi consisted of at least 50 limousines with Cabinet ministers, heads of state corporations, security chiefs and several diplomats who tagged along wherever he went, in an attempt to win the old man's favour54. In the last budget allocation, the treasury allocated sh150 million for the purchase of new motorcycles for president Uhuru’s motorcade55Honorable Joseph Nkaissery’s ministry was allocated Sh9.4 billion, including the motorbikes budget. Do these state officers need such a large motorcade? This is just a waste of resources and the government spends so much recurrent expenditure to buy these vehicles.
Conclusion
Following the arguments above, it is quite clear that the government of Kenya spends more of its revenue collected nationally on recurrent expenditure; in payment of salaries, allowances and other emoluments to its employees hence very little is left for development and therefore it is very hard to achieve vision 2030, create more jobs, and carry out development agendas for its nation. Also as a consequence of the soaring wage bill, the country is likely to be uncompetitive with other states since it imports more than it exports to other countries and also in terms of borrowing.
54 Francis Mureithi, Cut back on your car escort, MP tells Uhuru. See,
<https://www.the-star.co.ke/news/2013/04/25/cut-back-on-your-car-escort-mp-tells-uhuru_c766675> At 18
August 2016.
55 Marikio Muchiri, Uhuru Given Sh150 Million for Motorbikes. See, <https://www.kenyans.co.ke/news/uhuru- given- sh150-million-motorbikes> At 18 August 2011
CONCLUSION AND RECOMMENDATIONS
Conclusion
With regard to the already soaring government wage bill, it’s my view that in addition to the strategies discussed above, the government should also adopt the following measures:
Recommendations
Streamline Job Descriptions
The ruling government should endeavor to clearly outline job descriptions in the public sector order to prevent duplication of duties in these institutions. The government should undertake a thorough review of its departments to identify those which may be performing the same roles and duties in order to cut its expenses on them.
Decline to Salary Increments
The president should not assent to any law that seeks to increase unjustly the salaries of state officers at both levels of government. As this would serve to only increase the wage bill to unsustainable level that the country cannot bear.
Furthermore, on the issue of ghost workers in the public sector, the government has not done enough to weed out these people. Carrying out an audit is not enough. The government should take a step further and identify these people and make them pay for their actions by compensating on the government the much they have been unjustly receiving from the government.
Also on the issue of runaway corruption, the government has only been telling us one side of the story. What happened to our courts? Why are the state officers implicated in the corruption scam not been prosecuted? Furthermore, the Executive and the Legislative arm of
government should reduce the number of trips it makes outside the country as these resources could be diverted to development in the country rather than contributing to the high wage bill. The government should bite the bullet and take measures directed at reducing the inflated wage bill. Also, the issue of allowance more so the sitting allowances by the National Parliament and also the County Assemblies if saved could improve the government’s performance on development. After all they are carrying the duties for which they were elected to do. The following chart shows that if the National Executive reduces on its travel, County government on their sitting allowances, then this can reduce the wage bill by far and these resources instead diverted to developing the country. A report from the Controller of Budget, Ministry of Health whose office is established under the Constitution.56 Shows that, Money spend by the President on travel and hospitality could by 212 mobile clinics.
This diagram shows how the National government’s spending on travel could affect the wage bill Kenya. It’s the high time that the government undertook stern actions to do away with this menace.
56Supra n, 19 Article 248(3)(b)
This diagram below shows how the County Assembly sitting allowance contributes to the increasing wage bill in Kenya.57
57 Vincent Ng’ethe, ‘Wages paid out of the public purse have risen by 68 percent over the last five years’ Daily Nation, At 17 August 2016