Want devolution to work? There must be incentivesKenya: One of the most interesting events I took part in when I was younger and more innocent was hunting antelopes and rabbits. It was not poaching because the animals were everywhere. It was fun running after the graceful animals through the open plains, with dogs joining in the chase. Beyond computer games, one wonders what modern youngsters will be nostalgic about when they grow old. In the hunting expeditions, there was a golden rule; the owner of the dog that caught the prey always got the liver, which happens to be the softest and juiciest part. The rest shared the animal in predetermined ways. Getting the liver made each of us train and feed his dog well. Having your dog catch the prey was always a moment of pride. Hunting and devolution What’s the connection between hunting and devolution?In both cases, there is a prey to catch. In devolution it is the taxpayers’ money that, like the prey, must be shared out. The only problem with devolution is that the liver factor is left out. We share out the money among counties without considering who generated it. I’m yet to see data on which counties generate which part of Kenya’s tax revenue. Conventional wisdom would put Nairobi County in the lead. What incentives do we give to counties to generate revenue? Everyone is complaining about levies going up in each county as governments try to generate revenue to add to what they receive from the central government. Higher levies lead to more fraud and evasion. Sharing money, not generating it, is what made devolution so popular with both the hoi polloi and politicians. That is very human; we all learn how to spend money before we learn to earn it. The truth is that county governments, and even the central government, rarely invest; they get their money from taxes generated by our hard work as employees or entrepreneurs. Yet for devolution to work, we must give liver to those who catch the prey — the counties and, by extension, the individuals who work hard to keep the economy humming. At county level, we need to match the revenue generated. For example, if County X raises Sh100 million, the central government can match that by, say, three and give the county Sh300 million. That means that counties will have no choice but to nurture start ups and attract investors. There will be lots of competition as counties start improving the business environment, the same way we trained our dogs and kept them well fed. Counties will soon realise that raising levies too much will reduce their revenues in the long run. See Laffer’s Curve above. Currently, entrepreneurs and employees are not treated as liver owners. While county and central government officers will want to find out if you have all the licences, none ever asks you the problems you go through to get money for the licences or profits to pay taxes. Counties are advertising in the media informing entrepreneurs on where to pay levies and licences. Why not advertise where they can get help to do better? Do county and central governments give discounts to those who pay taxes regularly? Incentives work wonders — that is why Kenyans work 24 hours, because they know the returns for their hard work. That is why students enroll for CPAs and other professional exams; there are incentives for passing such exams. That is why our athletes win global races. Missing links One of the missing links in the Constitution and Vision 2030 is the incentive system. The Constitution and legal systems just focus on penalties like jail terms and fines, but give no incentives for those who keep law and order. Vision 2030 sets the grand objectives of our becoming a middle-income nation by 2030. What are the incentives for those who will make it happen? Incentives do not need to be monetary. Don’t we have an employee of the year or month?Some have argued that one of the major differences between developed and developing countries is the incentive system. The same difference is common in private and public sectors. The truth is that most of our national problems are economic in nature. To resolve them, we need an economic solution — incentivisation, so that the main drivers of our economy, you and me, can work hard assured of reward. We must design our incentive systems from the top to the bottom, from State House to our houses. A good incentive system motivates workers, leading to higher productivity and, by extension, economic growth. For devolution to work, the hard workers and their counties must be given incentives, the liver. If we fail to do that, we shall only share the fallen prey instead of looking for more meat. Sadly, most of the new county by-laws are about punishment not incentives or rewards. That needs to change.
Posted on: Tue, 25 Mar 2014 17:11:46 +0000
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