2019/2020 was a rough year for County Governments because of the prolonged stalemate between the National Treasury and the Senate over how much the counties should get from the equitable share. The stalemate took until almost the second quarter of the year to resolve, and by then it had wreaked havoc for the counties.
There is a Swahili saying that goes “When elephants fight it is the grass that suffers”.
The first victims of this revenue stalemate were the county staff who rely on the equitable share for their salaries. Already living off small salaries, sustaining 2-3 months of no pay, while still having rent and school fees to pay is unjust. The second victims were county operations which stalled. Data from the Controller of Budget shows that development expenditures dropped by 35 percent compared to the same period in the previous year. The third victims were the suppliers, who were not paid on time, resulting in an even larger pending bills backlog, that may need another national bail out.
And now, just as we are lamenting those tough days, it looks like we are right back where we started. On 27th January 2020, the National Treasury has stated that it will not honor the 20/21 proposal from the CRA. Slashing it from Ksh. 321.7 billion to Ksh. 317.8 billion – a difference of 1.21%. Looking at the data, the CRA has slowly lowered its proposal to meet Treasury’s level, but has started widening the gap with budgets. This means the Counties continue to suffer fiscal deficits as own source revenues continue to falter in governance, leaving the rest up to conditional grants to cover.
CRA Recommendation has slowly buckled to Treasury pressure
Source: Budget Policy Statements, CRA’s recommendation reports, County Allocation of Revenue Act and Office of the Controller of Budget
In South Africa, the Financial and Fiscal Commission’s (FFC) recommendation is effectively the final word on the sharing between governments. Similarly, in our previous blog, we maintain that while the details can be discussed between the Intergovernmental Budget and Economic Council, the final word on the revenue share should be with the CRA.
We held that belief then and we still hold it now.