Comprehensive Public Expenditure Review

Comprehensive Public Expenditure Review
EYE on BUDGET
Spending for Results
2013
MINISTRY OF DEVOLUTION AND PLANNING
REPUBLIC OF KENYA
REPUBLIC OF KENYA
COMPREHENSIVE PUBLIC EXPENDITURE REVIEW

EYE on BUDGET Spending for Results
MinistrY oF Devolution And PlAnninG

October 2013
MonitorinG And EvAluAtion DirectorAte
Published by the Government of Kenya in September, 2013 Government of the Republic of Kenya Ministry of Devolution and Planning
TABLE OF CONTENTS
ACRONYMS AND ABBREVIATIONS FOREWORD ACKNOWLEDGEMENTS EXECUTIVE SUMMARY ChApter 1: MACRO-FISCAL PERFORMANCE AND FISCAL FRAMEWORK 1.1 Introduction 1.2 Macroeconomic Performance 1.3 Fiscal Performance 1.4 Deficit and debt dynamics 1.5 Economic outlook 1.6 Conclusion ChApter 2: PUBLIC FINANCE MANAGEMENT 2.1 Introduction 2.2 Budget credibility 2.3 Openness and compreHensiveness 2.4 Accounting and reporting 2.5 External audit and oversigHt 2.6 New rules of tHe game: PFM arcHitecture in tHe 2010 Constitution 2.7 Priorities, risks and cHallenges 2.8 Conclusion i iv vi vii 1 1 1 7 20 24 32 33 33 34 42 43 45 47 53 56 59 59 60 62 72 78 88 91 91 94 96 100 100 101 108 117 120 125 127 128 133 139 144 147 151 151 151 160 168 173 173 177 177 178 180 188 193 195 195 196 201 216 222 224 225 226 228 229
ChApter 3: EDUCATION 3.1 Introduction 3.2 Policy, legal and institutional framework 3.3 Performance review 3.4 Public expenditure review (2009/10 to 2011/12) 3.5 Policy outlook: constitution 2010 and devolution 3.6 Overall assessment and recommendations ChApter 4: HEALTH 4.1 Introduction 4.2 Policy, legal and institutional framework 4.3 Performance review 4.4 Public expenditure review (2009/10 to 2011/12) 4.5 Progress review from 2010 per 4.6 Public expenditure analysis and key trends 4.7 Sub-central per capita spending and county-level performance 4.8 Sub-national efficiency in HealtH sector spending 4.9 Public expenditure outlook (2012/13 to 2014/15) ChApter 5: THE AGRICULTURE AND RURAL DEVELOPMENT SECTOR 5.1 Policy and performance overview 5.2 Policy, legal and institutional framework 5.3 Performance review 5.4 Public expenditure review (2009/10 to 2011/12) 5.5 Policy outlook, constitution 2010 and devolution 5.6 Overall assessment and recommendations ChApter 6: WATER, SANITATION AND IRRIGATION 6.1 Introduction 6.2 Policy and performance overview 6.3 Public expenditure review (2009/10 to 2011/12) 6.4 Policy outlook: Constitution 2010 and devolution 6.5 Public expenditure outlook (2013/14 to 2015/16) 6.6 Overall assessment and recommendations ChApter 7: INFRASTRUCTURE 7.1 Introduction 7.2 Policy, legal and institutional framework 7.3 Performance review 7.4 Expenditures in pHysical infrastructure 7.5 Sector recommendations and conclusion ChApter 8: SOCIAL PROTECTION 8.1 Introduction 8.2 Policy, legal and institutional framework 8.3 Performance review 8.4 Public expenditure review 8.5 Kenya Constitution 2010 and devolution 8.6 Public expenditure outlook (2012/13 to 2014/15) 8.7 Overall assessment and cHallenges 8.8 Recommendations and lessons learnt REFERENCES ANNEXES
COMPREHENSIVE PUBLIC EXPENDITURE REVIEW 2013 EYE on BUDGET: Spending for Results
LIST OF FIGURES
GDP growtH for Kenya, Sub-SaHaran Africa and tHe world Sectoral contribution to growtH 2007/11 (percentage points compounded) Figure 1.3: GDP growtH rates, 2008-2012 Figure 1.4: Sectoral contribution to growtH Figure 1.5: External sector performance Figure 1.6: Gross investment and savings in Kenya Figure 1.7: Narrowing gap in recurrent and development spending Figure 1.8: Widening gap between revenue and expenditure Figure 1.9: Trends in revenue performance Figure 1.10: Performance of various revenue sources Figure 1.11: Deviations between actual and targeted revenue collections Figure 1.12: RelationsHip between tax revenue types and tHeir respective tax bases Figure 1.13: RelationsHip between VAT and private consumption Figure 1.14: Approximation of tHe VAT potential Figure 1.15: Kenyas spending Has increased to reacH 30 percent of GDP in 2011 Figure 1.16: Economic composition of expenditures, percent of GDP Figure 1.17: Infrastructure, energy and ICT and education sectors receives tHe lions sHare of tHe budget Figure 1.18: Sectors accounting for tHe least sHares of tHe budget Figure 1.19: Human development sector accounts for tHe HigHest execution rate Figure 1.20: Budget deficit averaged 4 percent of GDP during tHe fiscal stimulus increasing debt by 4 percent points Figure 1.21: Public debt Has reacHed 1.4 trillion but it still sustainable below 45 percent of GDP Figure 1.22: Composition of domestic debt Figure 1.23: National and counties sHare of budget allocation in tHe medium term Figure 1.24: Using CRA formula - HeatH spending: Allocation per capita (KSH.) Figure 1.25: Spending on HealtH and infrastructure at subnational level can catalyse growtH Figure 2.1: SHare of development and recurrent funds allocation Figure 2.2: Outer year proJections and budgets for 2009/10 Figure 2.3: Trend of deviations witHin tHe recurrent and development budgets, 2002/03 to 2011/12 Figure 2.4: Trend of pending bills, 2002/03 to 2010/11 vs. execution rates Figure 2.5: Budget execution 2002/10 Figure 2.6: Average budget execution, 2009/10 to 2011/12 Figure 2.7: Development allocation compared to execution rate Figure 2.8: A comparison of PEFA results for Kenya, Uganda and TanZania Figure 2.9: Comparison of 2006, 2008 and 2012 accounting, recording and reporting PEFA results for Kenya Figure 2.10: Comparison of 2006, 2008 and 2012 external scrutiny and audit PEFA results for Kenya Figure 2.11: Budget timeline at tHe national and county levels Figure 3.1: Flow of funds in tHe education sector Figure 3.2: Secondary scHool NER (average public and private) by county, 2009 66 Figure 3.3: Gender parity index in public secondary scHools, by county, 2011 Figure 3.4: SoutHern and SACMEQ combined reading competency level eigHt Figure 3.5: Percentage of pupils wHo can perform up to standard two in numeracy test Figure 3.6: Trends in KCSE examination results 2006-2010 Figure 3.7: Mean grade of students in secondary exams, 2001-2010 Figure 3.8: University enrolment, academic year 2004/05 to 2010/11 Figure 3.9: Percentage sHare of spending on education to GDP Figure 3.10: Free primary education transfers to primary scHools Figure 3.11: Free day secondary education transfers to secondary scHools Figure 3.12: County literacy rates, 2005/06 Figure 3.13: Gender parity index in public scHools by county, 2011 Figure 3.14: Primary pupil-teacHer ratio by county, 2011 Figure 3.15: Per capita spending and percentage passing primary scHool exams, 2009/10 Figure 3.16: Per capita spending and NER-primary, 2009 Figure 3.17: Per capita spending and percentage of exam passes, primary, 2010 Figure 3.18: Spending per capita and number of exam passes in secondary level, 2009/10 Figure 3.19: Spending per capita and NERsecondary, 2009 Figure 3.20: Spending per capita and percentage of passers at secondary level, 2012 Figure 3.21: Primary scHool siZe, public scHools only Figure 3.22: Secondary scHool siZe, public scHools only Figure 4.1: Flow of funding in tHe HealtH sector Figure 4.2: Life expectancy in Kenya Figure 4.3: Infant mortality per 1,000 birtHs, by province Figure 4.4: CHild mortality (under five years) per 1,000 birtHs, by province Figure 4.5: Beds per 10,000 population Figure 4.6: Nurses per 10,000 population Figure 4.7: GDP per capita and government HealtH spending, Kenya and otHer countries, 2009 Figure 1.1: Figure 1.2: 2 3 3 4 6 6 8 8 10 12 13 14 14 16 18 18 19 19 21 21 22 23 29 30 31 35 35 37 38 39 40 40 44 44 47 50 62 67 68 68 69 70 71 73 75 76 80 81 82 84 85 85 86 87 87 88 88 95 97 97 98 98 99 102
Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure
4.8: Government HealtH expenditure as a percentage of total government budget 4.9: Total public HealtH expenditures by level of government, constant 2003/04 prices 4.10: Development partners HealtH funding, 2009/10 4.11: HealtH sector absorption rate by function 4.12: Government HealtH spending by economic classification 4.13: CHildren under five years delivered in a medical facility, by county 4.14: Deliveries in HealtH facility, access to qualified personnel at birtH, and poverty, by county 4.15: Fully immunised cHildren (1223 montHs) by county 4.16: Number of HIV+ cases receiving ARV treatment, 2012 4.17: County access to water 4.18: Estimates of county government HealtH expenditures per capita, 2010/11 4.19: HealtH personnel per 100,000 population, by county 4.20: County per capita spending and availability of HealtH services 4.21: Per capita expenditures and immunisation coverage 4.22: Per capita expenditure and deliveries in a medical facility 4.23: Burden of disease and HealtH sector performance by county 4.24: Efficiency scores, by county 4.25: Efficiency scores and fully immunised cHildren by county 4.26: Efficiency scores and cHildren delivered in a HealtH facility, by county 4.27: Efficiency scores and per capita total expenditure, by county 4.28: Efficiency scores and poverty rates, by county 5.1: Percentage cHange in GDP growtH for sub-sectors in agriculture 2006 to 2010 5.2: RelationsHip between Inputs, outputs and outcomes in agriculture 6.1: Average composition of expenditure in water and sanitation sector, 2009/10 to 2011/12 6.2: Funding trend to tHe pro-poor basket 7.1: Kenya relies mainly on Hydro-power 7.2: Roads and energy account for 80 percent of tHe total infrastructure spending 7.3: Investment in roads is mainly towards development 7.4: Investment in energy sub-sector is mainly towards national electrification 7.5: SHare of energy spending by economic classification 7.6: Sub-sector sHares as percent of total infrastructure budget 7.7: PHysical infrastructure budget execution rates 8.1: OP-CTP beneficiaries by county as at June 2012 8.2: PWSD beneficiaries by county as at June 2012 8.3: WEF beneficiaries by county as at June 2012 8.4: Government allocations to YEDF 8.5: Social protection expenditures as percent of total government outlays; 2009/10 to 2010/11 8.6: Total social protection expenditures by sub-sector 8.7: Analysis of recurrent expenditures, 2011/12 8.8: Budget execution by sub-sector (recurrent and development) 8.9: Division of tHe sector expenditures, 2010/11 8.10: Resource distribution to counties, nortHern Kenya and arid lands sub-sector, 2011/12 8.11: Resource distribution to counties, YoutH Affairs and Sports sub-sector, 2011/12 8.12: Resource distribution to counties, Gender, CHildren and Social Development sub-sector, 2011/12
103 103 104 106 106 109 109 110 110 111 112 113 114 115 115 116 117 118 118 119 119 136 145 165 172 185 189 190 190 191 192 192 203 204 205 210 217 217 219 220 221 222 222 223
LIST OF TABLES
Table 1.1: Table 1.2: Table 1.3: Table 1.3: Table 1.4: Table 1.5: Table 1.6: Table 1.7: Table 2.1: Table 2.2: Table 2.3: Table 2.4: Table 2.5: Table 3.1: Table 3.2: Table 3.3: Table 3.4: Table 3.5: Table 3.6: Table 4.1: Selected economic indicators, 2008-2012 Budget outturn 2009/10 to 2012/13 Comparison between VAT Act Cap 476 and VAT Bill 2012 Sectoral budget allocation and expenditure (KSH. million) Composition public debt and publicly guaranteed debt (KSH. billion) Debt sustainability indicators Macroeconomic proJections for 2013-2015 Medium term fiscal outlook 2012/13 to 2014/15 Aggregate budget outturn indicators 2008/09 to 2010/11 Budget execution PEFA scores comparison Open budget index for Kenya, 2010 National and county PFM institutions Timelines for budget submission to legislatures across tHe world Trends in key indicators of education in Kenya Key education indicators in selected countries, 2009 Admission to public universities and TVET institutions, 2004/05 to 2010/11 Education expenditures, 2003/04 to 2010/11 (KSH. billion) Expenditure by economic classification (KSH. billion) Education expenditure by functional classification and per capita spending HealtH outcomes indicators for Kenya and otHer countries 5 9 15 20 23 24 26 27 37 39 42 49 51 64 66 71 72 75 77 96
Table 4.2: Table 4.3: Table 4.4: Table 4.5: Table 4.6: Table 5.1: Table 5.2: Table 6.3: Table 5.4: Table 5.5: Table 5.6: Table 5.7: Table 5.8: Table 5.9: Table 5.10: Table 5.11: Table 6.1: Table 6.2: Table 6.3: Table 6.4: Table 6.5: Table 6.6: Table 6.7: Table 6.8: Table 6.9: Table 6.10: Table 6.11: Table 6.12: Table 6.13: Table 6.14: Table 6.15: Table 6.16: Table 6.17: Table 6.18: Table 6.19: Table 6.20: Table 6.21: Table 7.1: Table 7 2: Table 7.3: Table 7.4: Table 7.5: Table 7.6: Table 7.7: Table 8.1: Table 8.2: Table 8.3: Table 8.5: Table 8.7: Table 8.8: Table 8.9: Table 8.10: Table 8.11: Table 8.12: Table 8.13: Table 8.14: Table 8.15: Table 8.16:
Breakdown of key registered HealtH personnel, Kenya Trends in HealtH expenditure (KSH.) 2001/02 to 2009/10 Sector actual expenditure (net in KSH. billion), 2009/10 to 2011/12 SAGAs internally generated funds, KSH. (000) Sector requirement for botH recurrent and development expenditure (KSH. million) 2012/13 to 2015/16 Human resource deployment in tHe agriculture sector ministries in Kenya, 2012 Total value (KSH. billion) of key commodities Top five counties by annual productivity for selected commodities Top five counties by livestock type Volume of fisH production (metric tonnes), 2007-2010 Trends in total recurrent expenditure (KSH. million) Trends in total development expenditure (KSH. million) Total expenditure (Recurrent and development) (KSH. million) Trends in expenditure by programmes (KSH. million) Trends in externally funded programmes (KSH. million) Sector resource requirements versus allocation (KSH. million) Water sector institutions and tHeir functions First MTP outcomes MoWI intended and acHieved outputs (2009/10 to 2011/12) Findings on water availability based on tHe draft (NWMP) BencHmarking Kenyas water and sanitation indicators, 2009 Progress on PER 2010 recommendations Water sector public spending relative to GDP and total public expenditure Net water sector financial flows from public sources (KSH. million) Trends of expenditure for MoWI, 2008/09 to 2011/12 (KSH. million) Analysis of expenditures by economic classification (KSH. million) Expenditure analysis by programmes (KSH. million) Total expenditure on water and sanitation by local autHorities Sources of finances (KSH. million) Analysis of externally funded programmes Analysis of pending bills Investment cost per capita: water supply (2009/10 to 2011/12) Water purification points (WPP) and boreHoles (BHs) drilled 2008/09 to 2012/13 Summary of resource requirement versus allocation for county devolved (KSH. million) Counties key strategic interventions and resource allocation in 2013/14 (KSH. million) Allocations to counties in 2011/12 Summary of resource allocation between national and county government (KSH. million) Roads sub-sector performance 2009/10 to 2011/12 Road network in Kenya by type and classification 2009-2012 Transmission and distribution lines, circuit lengtH in km as at June 2012 Demand and consumer statistics Infrastructure sector expenditure (KSH. million) Analysis of externally funded programmes (KSH. million) Sub-sector development budget execution rate (percent) Number of HouseHolds financed and districts covered (2008/09 to 2011/12) Distribution of casH transfer beneficiaries by programme Beneficiaries of WEF Total YEDF loan disbursements from 2007-2012 National Social Security Fund (NSSF) performance over tHe years Civil servants scHeme spending trends Analysis of expenditure by sub-sector (recurrent and development) Civil service pension expenditure and net-lending (2009/10 to 2011/12*) Analysis of expenditures by economic classification (KSH. million) Analysis ofexpenditures on transfers by sub-sector (KSH. million) Budget performance for casH transfer programmes Recurrent pending bills (KSH. million) Recurrent pending bills (KSH. million) Approved estimates proJections (2012/13 to 2015/16)
99 101 105 107 121 133 138 139 140 140 141 142 142 143 144 147 154 155 156 157 159 160 161 161 162 163 163 164 165 165 166 166 167 169 170 171 172 182 183 185 186 189 193 194 202 204 204 211 215 216 216 218 218 218 219 220 221 225
LIST OF BOXES
Box Box Box Box Box Box Box Box 2.1: 2.2: 2.3: 3.1: 3.2: 3.3: 4.1: 7.1: Bottlenecks in tHe procurement process Budget execution reforms THe constitutional principles of public finance Education sector targets Investing in young cHildren: evidence of early cHildHood development impact SoutHern and SACMEQ reading and matHematics competency levels Outcome targets of tHe HealtH sector for tHe year 2012 under tHe Vision 2030 strategy Governments commitment to energy sector reforms 41 41 48 60 65 69 93 180
ACRONYMS AND ABBREVIATIONS

ACA Anti-Counterfeit Agency ADB African Development Bank AG Attorney General AIDS Acquired Immune Deficiency Syndrome AMS Agricultural Mechanization Stations ASALs Arid and Semi Arid Lands ASCU Agriculture Sector Coordination Unit ATC Agricultural Training Centres BPO Business Process Outsourcing BSPS Business Sector Program Support CDF Constituency Development Fund CEDAW Convention on Elimination of all forms of Discrimination Against Women CIDC Constituency Industrial Development Centre CMEC Constituency Monitoring and Evaluation Committees COE Centre of Excellence COMESA Common Market for East and Southern Africa CPFM Comprehensive Public Financial Management CPI Consumer Price Index CRC Convention of the Rights of the Child CSO Civil Society Organizations DFZ Disease Free Zones DIT Directorate of Industrial Training DMECs District Monitoring and Evaluation Committees DRSRS Department of Resource Survey and Remote Sensing EAC East Africa Community ECDE Early Childhood Development Education EEZ Economic Exclusive Zones EFA Education For All EMCA Environmental Management and Coordination Act EPC Export Promotion Council EPZ Export Processing Zones ERC Electricity Regulation Commission ERS Economic Recovery Strategy ESP Economic Stimulus Programme EU European Union FOSA Front Office Savings Account FY Financial Year GDP Gross Domestic Product GER Gross Enrolment Rate GIS Geographical Information System GJLOS Governance, Justice, Law and Order Sector GoK Government of Kenya GPS Global Positioning System GRB Gender Responsive Budgeting HIV Human Immunodeficiency Virus HMIS Health Management Information Systems HRD Human Resource Development ICT Information Communication Technology IDP Internally Displaced Persons IFMIS Integrated Financial Management Information Systems
Acronyms and Abbreviations
IIBRC Interim independent Boundary Review Commission IIEC Interim independent Electoral Commission ILO International Labour Organization IMF International Monetary Fund IMIS Integrated Meteorological Information System IPPD Integrated Payroll Personnel Database IPPs Independent Power Products KAA Kenya Airports Authority KDHS Kenya Demographic and Health Survey KEBS Kenya Bureau of Standards KEMSA Kenya Medical Supplies Agency KENAO Kenya National Audit Office KeNHA Kenya National Highway Authority KeRRA Kenya Rural Roads Authority KESSP Kenya Education Sector Support Programme KFA Kenya Farmers Association KIBHT Kenya Institute of Highways and Building Technology KIE Kenya Institute of Education KIRDI Kenya Industrial Research and Development Institute KISE Kenya Institute of Special Education KKV Kazi Kwa Vijana KLRC Kenya Law Reform Commission KNBS Kenya National Bureau of Statistics KNEC Kenya National Examination Council KPA Kenya Ports Authority KPCU Kenya Planters Cooperative Union KRA Kenya Revenue Authority KURA Kenya Urban Roads Authority LSK Law Society of Kenya M&E Monitoring and Evaluation MAMER Ministerial Annual Monitoring and Evaluation Report MAPSKID Master Plan for Kenya Industrial Development MDA Ministries, Departments and other Government Agencies MDG Millennium Development Goals MED Monitoring and Evaluation Directorate MMR Maternal Mortality Rate MoE Ministry of Education MoMS Ministry of Medical Services MoPHS Ministry of Public Health and Sanitation MoT Ministry of Trade MSE Micro and Small Enterprises MSMI Micro Small and Medium Industries MTP Medium Term Plan NAAIAP National Accelerated Agriculture Input Access Program NACADAA National Campaign Against Drug Abuse Authority NACOSH National Council for Occupational Safety and Health NALEAP National Legal Aid Programme NCAPD National Coordinating Agency for Population and Development NCCRS National Climate Change Responsive Strategy NCPB National Cereals and Produce Board NCPWD National Council for Persons with Disability NEMA National Environment Management Authority NER Net Enrolment Rate
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Acronyms and Abbreviations
NESC National Economic and Social Council NFE Non Formal Education NHIF National Hospital Insurance Fund NIMES National Integrated Monitoring and Evaluation System NSE Nairobi Stock Exchange NSSF National Social Security Fund OVC Orphans and Vulnerable Children PER Public Expenditure Review PFM Public Financial Management PGH Provincial General Hospital PLWHAs People Living With HIV and AIDS PMIS Pensions Management Information Systems PPOA Public Procurement Oversight Authority PPP Public Private Partnership PSC Parliamentary Service Commission PWDs Persons With Disabilities RBBA Risk Based Audit Approach RSIP Road Sector Investment Plan SACCO Savings and Credit Cooperatives Organization SAGA Semi Autonomous Government Agency SDCP Small Holder Dairy Commercialization Program SEZ Special Economic Zones SP Strategic Plan STI Science Technology and Innovations TB Tuberculosis TIVET Technical, Industrial, Vocational and Entrepreneurship Training TJRC Truth, Justice and Reconciliation Commission TSC Teachers Service Commission UMR Under Five Mortality Rate UN United Nations VDS Vision Delivery Secretariat WEF Women Enterprise Fund YEF Youth Enterprise Fund
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FOREWORD
his is the second comprehensive Public Expenditure Review Report to be produced after the government and development partners agreed on a three year well researched Report to replace the annual reviews. The Report comes at a time when the country is embarking on major changes in the financial management system that includes the devolution process and other changes that resulted from the enactment of the Constitution of Kenya 2010. It therefore provides the basis to anchor the financial transformation in the national and devolved levels of government in the next three years. Government expenditure during the past three years has seen remarkable increase both in the development and recurrent vote. This Report thus looks at the expenditures of the government organs to utilize the allocated funds. In some cases, county level expenditures are analysed to indicate the per capita public expenditure and efficiency in different counties. More so, the Report highlights the recent policies developed to improve public financial management and develop organizational structures that create efficiency in financial utilization. The Report highlights the expenditures of selected MTEF sectors based on contribution to economic development and the social wellbeing of communities. The Report lays emphasis on composition of expenditures in the selected sectors and the effectiveness of the mix towards the contribution of the sector to economic performance. Sector budget has been increasing overtime especially the development vote. The Report links expenditure and achievements while taking cognizance of cost of achieving the results. The Report comes at a time when the country is embarking on the second Medium Term Plan of the Kenya Vision 2030. Looking back on the expenditures and achievements of the first Medium Term Plan (MTP) will provide information that can be used in the budget process to come up with financial allocation that will spur and maintain the targeted annual economic growth of 10 percent. The Report will be handy in evaluating the achievements of the Vision 2030 at the end of the first MTP. Preparation of the PER is always a consultative process that involves all stakeholders in both the government and development partners including the public. In the next three years, the government will embark on participatory research review and analysis in various sectors as a way of preparing the next
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three year document. The government is aware that enormous support from development partners does not pass through the annual budget. We will therefore work with all partners to capture all the expenditure to the public and ascertain costs of gains and the efficiency of the allocated funds.
Anne WAiGuru, OGW Cabinet Secretary Ministry of Devolution and Planning
ACKNOWLEDGEMENTS
he 2013 Public Expenditure Review presents research done over the last three years on expenditures and achievements of different sectors of the economy. The Report was prepared through participation of line ministries, consultation with development partners and comments from stakeholders who participate in both the budget process and the implementation of programmes. The team that prepared this Report worked with commitment to provide the required information and analysis to ensure quality and accuracy of the information contained in the document. I would like to express my personal and institutional gratitude to all of the stakeholders, public and private, development partners and all the experts who actively participated and contributed to the preparation of the 2013 Comprehensive Public Expenditure Review (CPER). The PER provides insights on how to get better value for taxpayers money and ensure that all Kenyans benefit from their taxes. Special recognition goes to all the technical officers from line Ministries who provided data and information that went into the Report through the Ministerial Public Expenditure Reviews (MPER). I would also like to register my appreciation of the effort and active participation of the Public Expenditure Review Committee that was responsible for the overall overseeing of preparation of this Report. Let me also appreciate both the World Bank and GIZ for their support.
Special recognition goes to the Economic Planning Secretary, Mr. Stephen Wainaina, and the Director of the Monitoring and Evaluation Directorate, Mr. Samson Machuka, under whose leadership and supervision this assignment was undertaken. I would like also to recognize the efforts of Ms. Jane Kiringai and Ms. Tracey Lane (World Bank), Mr. Kristin Rosbach (GIZ) who provided technical advice to the team. Special thanks go to Mr. Francis Muteti and Mr. Kenneth Mwirigi, who coordinated the compilation, editing and finalization of the Report. I would also like to further extend my appreciation to all our development partners, NGOs, CSOs for contributing and working with the Ministry I thank you all and I look forward to your continued collaboration and support.
EnG Peter MAnGiti Principal Secretary Ministry of Devolution and Planning
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EXECUTIVE SUMMARY
he Public Expenditure Review (PER) provides an assessment of the extent to which expenditure addresses national priorities in an effort to strengthen the link between government policies, planning and budgeting. The Comprehensive Public Expenditure Review Report of 2013 is prepared to provide a critical assessment of public spending, challenges, weaknesses and successes in the past three years (2009/10 to 2011/12). The Report subsequently informs current and future expenditure through policies that influence budget decisions. It links public expenditure to performance of key sectors in the economy for the three year period; while giving policy and performance outlook focusing on the implementation of the Constitution of Kenya 2010 in general and devolution in particular. This Report gives an outline on sector performance of programmes and reviews expenditures for the period. It provides recommendations to improve implementation of the budget in terms of efficiency, effectiveness, timeliness and target for better service delivery. There are eight chapters out of which six represents sectors with large budget allocation focused on the improvement of the welfare of Kenyans. Two other chapters contain crosscutting issues of MacroFiscal Performance and Fiscal Framework, and Public Financial Management which are important as an outcome and inputs of public expenditure analysis. The six sectors covered in this Report include; Education; Health; Agriculture and Rural Development; Water, Sanitation and Irrigation; infrastructure and Social Protection. The Macro-Fiscal Performance and Fiscal Framework chapter provide Kenyas macroeconomic policy that has been pursued through monetary and fiscal policies. Kenyas economy shows an average growth of 3.9 percent in the period 2008 to 2012 compared to 5.3 percent in 2003 to 2007. The governments budget has risen to about 30 percent of GDP, equivalent to KSh. 1.15 trillion in 2012/13 financial year. The budget outlook in medium term policy commitment is to increase resources for development spending to invest in the capital stock, especially roads, and energy, in line with the Vision 2030 goals for laying the foundations for future economic growth. The Report looks at the budget financing that is largely through tax revenue which is 24 percent of GDP. The Education chapter reviews both the Basic and Higher Education sub-sectors public expenditure over the three financial years. The sector experienced massive expansion in enrolment and number of institutions at all levels. The expansion led to increase of expenditure by 53.0 percent from KSh. 141.6 billion in 2008 to KSh. 216.6 billion in 2011 which was an average of about 20 percent of the total public expenditure during that period. The percentage share of expenditure on education to GDP averaged 6.5 percent in the last five years. This level is above the sub-Saharan African region which had an average of 3.8 percent in 2009.
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Executive Summary
Following the implementation of Free Primary and Day Secondary Education Programmes, net enrolment rates increased from 80.4 percent in 2003 to 95.7 percent in 2011 for primary and from 24.2 percent in 2007 to 32.7 percent in 2011 for secondary levels. During the three year period, most learners met the basic requirement for secondary school enrolment but faced challenge in finding a place in the available secondary schools. However, the percentage of children transiting from primary to secondary rose from 59.9 percent to 73.3 percent during the same period. The Health Chapter presents an analysis of the health sector revenue and spending; sector performance review and achievements for the period 2009/10 to 2011/12 financial years. It is evident that despite the challenges, the health sector achieved considerable progress on the outcomes that included reduction in under five mortality rate from 115 per 1,000 live births in 2003 to 74 per 1,000 in 2008/09, and infant mortality from 77 per 1000 live births to 52 per 1000 in the same period. The sector has also seen increased immunization coverage for under 1 year olds from 71 percent in 2008 to 77 percent in 2011. However, Maternal Mortality Ratio has deteriorated from 414 in 2003 to 488 deaths per 100,000 live births in 2008/09. Public spending per capita currently stands at US$19.2 and in general, health spending per capita still remains low at US$42 compared to the WHO recommendation of US$54 per capita. Total Government spending on health increased considerably over the years from KSh. 38 billion in 2009/10 to KSh. 59 billion in 2011/12. Development budget increased significantly from 13 billion in 2009/10 to 28 billion in 2011/12 indicating the governments commitment to spending on investments. Agriculture Sector is the key component of Kenyas economy and remains the main source of livelihood for majority of Kenyans. Through various reforms, the sector has continued to ensure food security and improved nutritional status. However, expenditure growth in the sector has been slow and is estimated at 4.3 percent against the Maputo Declaration of 10 percent of national expenditure. In spite of the low level of funding, the sector directly contributed 24.5 percent of the GDP valued at KSh. 741 billion in 2011. It indirectly contributes approximately 27 percent to the GDP through linkages with manufacturing, distribution and other service related sectors. The sector further accounts for about 65 percent of Kenyas total exports. The sector targets to achieve an average growth rate of 7 percent per year over the next 5 years. This is through focus on innovative, commercially oriented and modern agricultural practices to achieve the Kenya Vision 2030 target of 10 percent economic growth rate. Under the Infrastructure Sector, there has been a general shift of expenditure towards increased development related investments. Sector allocation accounted for 10 percent of the GDP on average in the period 2009/10 to 2011/12. Infrastructure spending is mainly directed towards roads and energy sub-sectors which account for 80 percent of the total sector allocation. Roads receives the largest share of the infrastructure budget which is in line with the government
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Executive Summary
initiative of rehabilitating and expanding the existing roads, opening new roads especially along the northern corridor and sustaining the already developed roads in good standards. Equally, the energy sub-sector has seen noticeable increment in budget allocation in the last three years. This is as a result of heavy investment in renewable and clean energy especially geothermal and wind powered energy, construction of high voltage power lines and the on-going oil exploration programme. Spending on water sub-sector is principally made up of capital expenditure, which accounts for 75 percent of the total sector allocations. Central government spending on water and sanitation is, however a small share of the national income (3.1 percent). Funds are allocated to Semi Autonomous Government Agencies (SAGAs), which are regional-based and not county-based. Access to safe water supply was 60 percent in urban areas and 45 percent in rural areas with national water access coverage of 51 percent. This is far below the target of 72 percent -urban and 59 percent -rural as envisaged in the Vision 2030 goal for 2012. National sanitation coverage stood at nearly 70 percent with urban sanitation coverage being 73 percent and rural sanitation coverage approximately 67 percent. The cumulative productive land under irrigation and reclamation at the end of the review period comprised a total of 156,851 ha of irrigated land and 32,733 ha of drained land. This was achieved through development of new schemes and rehabilitation and expansion of existing public schemes. The Social Protection Sector provides an insight of expenditures on improvement of livelihood of people in Kenya especially the vulnerable and marginalised. The Sector has a responsibility to coordinate disaster management, address social and economic issues affecting vulnerable groups, empower women, persons with disabilities and youth, and also address the unique challenges facing northern Kenya and other semi-arid lands. Key among the Sectors achievements is the finalisation and operationalization of several policies to strengthen the capacity of various structures to conform to the Constitution of Kenya 2010. The Sector realised significant increase in budget over the last three years from KSh. 30 billion in FY 2009/10 to KSh. 36 billion in 2011/12. This led to an increase in allocation to the social protection programmes that included cash transfer programme to persons with severe disabilities and urban poor, scaling up of cash transfer programme to orphans and vulnerable children (OVCs) and elderly persons. Generally, this Report accentuates the institutional reforms underpinned in the Constitution of Kenya 2010 and explores the opportunities to catalyze Kenyas growth as envisaged in the economic blue print, the Kenya Vision 2030. The devolved governments will form the catalyst for economic growth as more than 15 percent of national revenue will be spent at county level. If well spent by reducing the administrative share of the budget, it can spur growth through improvements in human capital and infrastructure. Generally, implementation in the sector programmes over the period under review has increasingly received financial support.
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Macro Fiscal Performance and Fiscal
Chapter 1
MAcro-FiscAl PerFormAnce And FiscAl FRAMEWORK
1.1 INTRODUCTION
enyas macroeconomic policy has been pursued along two fronts, the first being the monetary policy of the Central Bank of Kenya (CBK) and the second, the fiscal policy of the Ministry of Finance (now the National Treasury). The monetary policy has been premised on the need to contain inflationary pressures on the economy due to a number of factors emanating from high fuel prices and the international financial crisis. The Monetary Police Committee (MPC) of CBK undertook various initiatives to rein in the rising cost of living and the depreciating foreign exchange rate through tightening of monetary policy, raising the Central Bank Rate (CBR) from 8.75 percent in 2007 to 18 percent in 2011. On the other hand, the Treasury continued to tighten the fiscal policy in order to contain the fiscal deficit while ensuring that public debt was restrained within acceptable levels. The government also undertook measures aimed at strengthening revenue mobilisation, containing unproductive expenditures and leakages during the period under review. This chapter reviews the macroeconomic and fiscal context for the preparation of the 2013/14 budget and medium term outlook.
1.2 MACROECONOMIC PERFORMANCE
1.2.1 Overall economic performance
enyas growth averaged 3.9 percent during the last administration (20082012) compared to 5.3 percent during the previous one (2003-2007). After slumping to 1.6 percent in 2008, growth rebound and increased to 5.6 percent in 2010 but moderated to about 4.5 percent in 2011 and 2012. The robust growth recorded during 2003-2007 can be attributed to the global boom which increased the demand for Kenyan exports, as well as to the reforms implemented
Macro Fiscal Performance and Fiscal Framework
by the NARC government. The situation reversed during 2008-2012 due to global turbulence, the negative electoral shocks and severe drought conditions, which curtailed Kenyas growth potential. However, the economic stimulus programme implemented in 2009/10 cushioned the economy from a complete recession, resulting in growth rates above the world average but below Sub-Saharan Africa (SSA). Growth impetus is expected to continue gradually and surpass the SSA average in the medium term, following the peaceful election and a smooth handover. Figure 1.1 compares the average growth rates for Kenya, Sub-Saharan Africa and the world over three periods: 2003-2007, 2008-2012 and the mediumterm projections, 2013-2015.
Figure 1.1: GDP growth for Kenya, Sub-Saharan Africa and the world
7 6 5 Percent 4 3 2 1 0
2003-2007 Sub-Saharan Africa
2008-2012 Kenya World
2013-2015
Source: World Bank Growth Economic Prospects
The transport and communication sub-sector made the highest contribution to growth between 2007 and 2011 (see Figure 1.2). Transport and communication is a small share of the economy (14 percent of GDP) but the sub-sector made the largest contribution to growth of 0.84 percent, between 2007 and 2011. Wholesale and retail trade, another small sub-sector (14 percent of GDP) contributed 0.73 percent to growth; industry came third contributing 0.37 percent. Agriculture which is a quarter of Kenyas economy (24 percent of GDP) contributed a meagre 0.16 to average growth during the period. This low contribution to growth reflects the low productivity of the agriculture sector; indeed even the contribution by industry reflects a sector performing below per. 2010 was a good year, growth doubled from 2009. The annual growth rates for 2008 to 2012 are presented in Figure 1.3.
Figure 1.2: Sectoral contribution to growth 2007/11 (percentage points compounded)

Transport and communication Wholesale and retail trade Manufacturing Financial intermediation Education Construction Other services Real estate, renting, business services Agriculture and forestry Hotels and restaurants Electricty and water 0 0.27 0.26 0.25 0.19 0.18 0.16 0.12 0.08 0.2 0.4 0.6 Percent 0.8 1.0 0.37 0.73
0.84
Source: KNBS Economic Survey, 2012
In 2010, growth rebounded across all sectors. Rainfall exceeded the average for a normal year as the country enjoyed a bumper harvest and low food prices. The drought in 2011 dampened the performance of the agriculture sector and the supply of hydro power, with spillover effects to industry and other sectors of the economy. Nevertheless the economy still recorded an average performance of 4.4 percent in 2011 and a similar performance in 2012. The sectoral contribution to growth is presented in Figure 1.4.
Figure 1.3: GDP growth rates, 2008-2012
6 GDP growth rates, 2008 5.6
5 4 Percent 3 2.6 2 1.6 1 0 2008 2009 2010
4.4
4.6
2011
2012
Source: KNBS Economic Survey, Various Issues
Figure 1.4: Sectoral contribution to growth

Sectoral contribution to growth 6 5 4 3 2 1 0 2008 2009 Services Source: KNBS Economic Survey, 2012 2010 Industry 2011 Agriculture 2012 1.6 2.6 5.6 4.4 4.6
In terms of sectoral contribution to GDP, agriculture and forestry had the highest contribution with a level of 24 percent in 2011. Within the agriculture sector, the largest share of this contribution is from the growing of crops and horticulture at 18.1 percent while farming of animals had a paltry 4.8 percent. Wholesale and retail trade, and transport and communication had the second highest contribution with an average of 10 percent in the review period. Manufacturing has declined in recent years from 11 percent of GDP to an average of 9 percent in the three years. Except for agriculture and financial intermediation, the contribution of all the sectors showed a slight decline in 2011 as compared to 2010. 1.2.2 Recent macroeconomic developments Following the economic slowdown in 2008 the government implemented an economic stimulus programme in an attempt to shore up growth. The stimulus implemented in 2009/10 increased spending by almost 2.6 percent of GDP and the primary deficit increased from 2.1 percent of GDP in the previous year to 3.8 percent of GDP by 2010/11. Growth gained momentum in the second half of the fiscal year 2009/10 as public spending accelerated and the real GDP growth rate was 4.1 percent. The general government sector contributed 22 percent of the value added and cushioned the economy from recession. The impact of fiscal response is reflected in government contribution to GDP. Since 2008, growth in government consumption surpassed growth in private consumption. In 2007, for instance, private consumption expanded by 7.3
Percent
percent and government consumption by 4.4 percent. However, from 2009 to 2011 the average growth in private consumption was 2 percent compared with an average growth rate of 4.3 percent for government consumption, see Table 1.1 for details.
Table 1.1: Selected economic indicators, 2008-2012 2008 Growth rates percent Real GDP growth Private consumption Government consumption Gross fixed investment Exports, GNFS Imports, GNFS Other indicators Annual inflation rate* Exchange rate KSh./US$ Interest rate (T-bill) Current account balance percent of GDP Import cover (months) Population (million) Nominal GDP (billion)
Source: KNBS, and IMF projections: **Estimates
2009 2.7 5 3.8 2.8 -9.3 2.8 10.5 77.3 7.4 3 39.4 2,366
2010 5.8 7.2 9.2 7.7 17.7 6.1 4.1 79.5 3.6 4 40.4 2,549
2011 4.4 2.8 10.6 12.5 6.7 15.6 14.0 88.7 8.7 3 41.4 3,024
2012** 4.3 3.9 4.3 9.5 6.7 6.7 9.6 84.7 12 3 42.4 3,566
1.5 -1.3 2.5 9.5 7.2 6.6 16.2 69.8 7.7 3 38.3 2,107
Expansionary fiscal policy was complemented by an accommodative monetary policy which saw a reduction in interest rates, leading to a lending boom. Growth rebounded in 2010, driven at first by fiscal stimulus and an accommodative monetary policy, and then by private sector response through a significant increase in credit to private sector and households. Credit supply revived domestic demand which was met through additional imports, reflected in the widening current account deficit which reached double digits in 2011. The current account deficit increased from US$ 2.2 billion in 2010 to US$ 3.3 billion in 2011 and further to US$ 4.5 billion in 2012. The deficit emanates from the merchandise accountfrom a deficit of US$ 7.2 billion, to US$ 9.0 billion and further to US$ 10.1 from 2010 through to 2012. The poor show in goods trade reflects lack of competitiveness in the global market. Rising oil prices increased the pressure from the external account leading to macroeconomic instability. In 2011 oil imports accounted for 27 percent of the import bill. The shilling exchange depreciated from 85 to 107 and inflation peaked at 19 percent. The expansionary policies, both fiscal and monetary, were reversed at the end of 2012 to restore macroeconomic stability. Figure
1.5 shows the trends in balance of payments which triggered macroeconomic instability in 2011.
Figure 1.5: External sector performance
Performance of the external account (2005-2012)
8,000 6,000 4,000 US$ (Million) 2,000 0 Dec-05 -2,000 -4,000 -6,000
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Current account Source: Central Bank of Kenya
Capital and financial account
Overall balance
Kenyas external imbalances reflect a country that is living beyond its means, as seen in the gap between investments and savings. Trends in gross savings and investment ratios are shown in Figure 1.6. Investment has been in the range of 20 percent of GDP while the savings rate has remained below 15 percent of GDP. The gap is met through savings from abroad. Gross investment rose from KSh. 590,434 million or 19.8 percent of GDP in 2010 to KSh. 632,519 million or 20.9 percent of GDP in 2011. Most of this expansion has been due to investments in
Figure 1.6: Gross investment and savings in Kenya
25 19.0 19.2 15.9 15 13.9 12.9 13.2 11.3 19.9 19.8 20.9 19.4
20 Percent of GDP
14.8
10
2007
2008
2009 Investment
2010 Savings
2011
2012
Source: KNBS Economic survey, 2012
other machinery and equipment which grew by 25 percent, cultivated assets (which grew by 22 percent), and gross fixed capital formation (which grew by 15 percent). Gross savings increased by 40 percent from KSh. 287,758 in 2010 to KSh. 400,660 in 2011. However, the rate of savings has stagnated and remains far below the medium term targets. For all the years, investment has stayed above savings, generating a resource gap averaging 6.3 percent between 2007 and 2011. Macroeconomic instability experienced in 2011 has now been contained. The average overall inflation for 2012 was 9.6 percent as compared to 14.0 percent recorded in 2011. This reflects a drop in food inflation, a dividend of the favourable weather conditions with adequate rainfall, thereby raising food supplies. The exchange rate has stabilised from an average of 88.9 percent in 2011 to 84.6 percent average in 2012. Central Banks stance to continue relaxing the tight monetary policy initiated in 2011 has seen the CBR decline from a high of 18 percent in 2011 to 9.5 percent in January 2013. Stability in international oil prices and prudent fiscal and monetary policies are expected to yield single digit inflation levels of about 5 percent in the medium term. Improved food production and favourable weather conditions are crucial for any future overall price stability since food commodities account for a big share in the consumer price index.
1.3 FISCAL PERFORMANCE

he governments expenditure and net lending quadrupled in the last ten years from KSh. 303 billion in 2004/05 to KSh. 1,263 billion in 2012/13 financial years. Total revenue expanded from KSh. 290 billion to KSh. 955 billion in the same period. The deficit remained high over the period except for the financial years 2004/05 and 2007/08 where there was a surplus. Both recurrent expenditure and development and net lending increased significantly with development expenditure doubling in the period 2005-2011 (see Figure 1.7). Most of the increase under the development budget is a result of the increase in infrastructure budget, mainly financed through domestic and external public borrowing. The government has sustained recurrent expenditure at an average of 20 percent of GDP in the last decade and it is projected at the same level in the medium term. 1.3.1 Fiscal aggregates During the period 2009/10 to 2012/13, Kenyas total revenue averaged 24 percent of GDP while government spending stood at 30 percent of GDP. In 2012/13, the estimated total revenue collection is KSh. 955 billion while government expenditure is estimated at KSh. 1,258 billion (Table 1.2). Deficit including grants
Figure 1.7: Narrowing gap in recurrent and development spending

Expenditure (Percent of GDP) 25 Recurrent 20
Percent
1.0
10
Development
2 /1 11 20
/9
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98
99
00
01
02
03
04
05
06
07
08
09
10
19
19
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20
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20
20
20
20
20
20
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20
Source: The National Treasury Data
amounted to 5.6 percent of GDP in 2011/12. While revenue and expenditure is projected to remain at the same level (24 percent and 30 percent of GDP respectively) in the medium term, the country could face various budgetary pressures which could constrain the existing fiscal space. Some of the various sources of budgetary pressure include pressure from the implementation of the Constitution of Kenya 2010; current devolved system of government which creates additional administrative structures and new constitutional offices; and rising public sector wage bill. Table 1.2 and Figure 1.8 summarise the fiscal performance for the period 2009/2010 to 2012/13 fiscal years.
Figure 1.8: Widening gap between revenue and expenditure
Revenue and expenditure trends 34 32 Percent of GDP 30 28 26 24 22 20 1998/99 2001/02 2004/05 2007/08 2010/11 Debt financing
Total revenue and grants
Expenditure and net lending
Source: QBER various reports, IMF and WDI 2012 fiscal results
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/1
Table 1.2: Budget outturn 2009/10 to 2012/13 2009/10 Total revenue Expenditure and net lending Recurrent expenditure Development and net lending Deficit (cash basis including grants) Financing Net foreign financing Net domestic financing Of which domestic borrowing Other (including privatisation) Nominal GDP (KSh. million) Total debt (public + private external) (US$ billion) Gross domestic product, current prices (US$ billion) GDP growth rate*** Population growth rate*** GDP per capita (US$)*** Shares of GDP (percent) Revenue Expenditure Deficit Total Debt (public + private external)
Source: QBER various reports, IMF and WDI 2012
2010/11 668 812 592 219 (126) 119 28 90 90 2,787 17 34 6 3 795 24 29 (5) 49
2011/12* 748 948 647 301 (184) 172 99 73 73 3,306 17 41 4 3 808 23 29 (6) 42
2012/13**
586 725 511 215 (108) 174 23 151 117 34 2,458 14 32 3 3 775 24 30 (4) 45
955 1,258 803 456 (252) 251 144 107 107 3,867 20 46 5 * * 25 33 (7) 43
1.3.2 Revenue performance Revenue performance in Kenya has remained strong (tax in proportion to GDP) and is among the highest in low-income Africa.1 Kenyas self-reliance in revenue performance stems strongly from the challenges of low access to development partner financial support since 1990s. Combined income tax and value added tax have been above 12 percent of GDP since 2000/01 while total domestic revenues finance more than 80 percent of the annual budget. This leaves Kenya in a good position to use fiscal policy for both short and long-term growth objectives and to position the State as a key provider of public services.2
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We find the usual positive correlation between GDP per capita and government expenditure in proportion to the economy, denoting that wealthier countries in general have larger public sectors, which holds for Africa as well as most regions (although the extent to which the government sector increases with development depends in large part on the social preference of the population to have the state provide social services, especially social protection and health care, which is considerably more the case in Europe than it is in Asia). Kenyas net official development assistance (ODA) as percent of gross national income (GNI) is about 6 percent compared to more than double that for the other countries in the EAC. Burundi is even more aid dependent with ODA to GNI at 42 percent. All data is from WDI 2009.
Total revenue significantly increased between 2004 and 2011, increasing from KSh. 207,563 million in 2004 to KSh. 669,442 million in 2011. Total revenue significantly increased between 2004 and 2011, rising from KSh. 207,563 million in 2004 to KSh. 669,442 million in 2011 (Figure 1.9). This growth can largely be attributed to significant increases in income tax, which increased from KSh. 88,361 million in 2004 to KSh. 284,360 million in 2011, equivalent to 7.0 and 9.5 percent of GDP respectively (Figure 1.9). There were also steady increases in all the other taxes except import duties, which stagnated following the commencement of the East African Community treaty in 2000, but gradually increased since 2005. For all the taxes, there were sharp rises in 2004 after the Kenya Revenue Authority offered an amnesty which waived interest on all tax arrears. This, in addition to the principle of self-assessment, led to significant increases in tax collections.
Figure 1.9: Trends in revenue performance
Sources of revenue (percent of GDP) 12 10 8 Percent 6 4 Excise duty 2 Import duty 0 1998/99 Source: KRA data 2001/02 2004/05 2007/08 2010/11 VAT Income tax
VAT collections also increased steadily despite a reduction in the standard VAT rate from 18 percent to 16 percent in 2003/04. Excise tax revenues have also steadily increased over the ten year period. Taxation of major excisable products has mainly been shifting between an ad valorem regime (an optimal excise tax rate as a percentage of the price of the commodity) and a specific regime (specific value per unit of excisable commodity). Experience has shown that ad valorem taxes are more buoyant than specific taxes and would therefore lead to higher tax revenues. In addition, ad valorem rates adjust automatically to inflation, as compared to specific taxes which have to be adjusted periodically to keep up with inflation. Looking at excise tax rates, there has been a shift towards specific rates, especially for beer and cigarettes. These shifts in taxation
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regime have not resulted in significant changes in excise tax revenue collections. Looking at the proportion of particular taxes in total tax revenue, the proportion of income tax has been stable, accounting for 42.6 percent in 2004, which reduced to 38.7 in 2005 and 2006, and later increased to 42.5 percent in 2011 (Figure 1.10). The improved performance of income taxes can largely be attributed to higher tax compliance after the tax amnesty and the use of the personal identification number (PIN) for purposes of tax assessment. The share of Value Added Tax (VAT) on the other hand declined from 18 percent in 2004 to 15.4 percent in 2011. The poor performance of VAT can be attributed to lower tax compliance, especially in the use of the electronic tax registers (ETRs). After introduction of the ETR system, a compliance rate of 90 percent was targeted (KRA, 2012). A survey done by KRA in 2009/10 found that whereas installation rates were high at 98 percent, the utilisation (compliance) rate was in the range of 60 to 65 percent. There are also many small and medium-sized entities that do not file VAT because they fall below the VAT threshold. Thus, attempts to impose a turnover tax on smaller entities will greatly complement VAT revenue collections. The proportion of excise taxes in total taxes has also gradually declined since 2003/04. This can largely be attributed to a shift from ad valorem to specific taxation regime in 2003/04, especially for beer and spirits which account for the largest share of excise tax revenue. This provides evidence of the superiority of ad valorem rates over specific rates in relation to their tax buoyancy. In order to maximise excise tax revenue collections, there is need to consider reverting back to the ad valorem taxation regime. The proportion of VAT on imports and import duties have also declined gradually which is in line with the regional integration efforts aimed at reducing tax rates on imports. Overall, the increasing share of income taxes in total tax revenue and the declining share of VAT are not in line with the governments deliberate policy of shifting reliance from direct taxes towards indirect taxes to finance the budget, which is a way of reducing the burden on income taxation in order to stimulate savings and investment. Figure 1.11 shows actual tax collections vis--vis targeted revenue collections. Statistics indicate that only Pay As You Earn (PAYE) taxes have exceeded the target between 2006/07 to 2011/12. The corporate, VAT and excise tax collections have fallen below target, with the gap between actual and targeted revenue collection widening over time. One can attribute the impressive performance of PAYE on their administrative ease. In addition, as earlier indicated, income taxes have largely performed well because of use of the personal identification number and also the self-assessment tax payment system.
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Figure 1.10: Performance of various revenue sources

800 700 600 KES million KES million 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2009 2009 2010 2010 2010 2011 2011 2011 80 60 40 Total revenue 120 100 VAT, local
Year 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Income tax 100 90 80 70 KSh. million 60 50 40 30 20 10 0 2000 2001 2002 2003
Year VAT, imports
KSh. million
2004
2005
2006 2006
2007 2007
Year 100 90 80 70 KSh. million 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 KSh. million Excise duties 60 50 40 30 20 10 0 2000 2001 2002 2003
Year Import duties
2004
2005
Year Source: Kenya Revenue Authority
Year
12
2008
2008
Figure 1.11: Deviations between actual and targeted revenue collections

16 14 12 KSh. million KSh. million 10 8 6 4 2 0 -2 -4 PAYE 8 6 4 2 0 -2 -4 -6 -8 Corporate tax
05 /0 6
06 /0 7
07 /0 8
08 /0 9
09 /1 0
10 /1 1
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5 0 -5 KSh. million -10 -15 -20 -25 -30 -35
VAT
0 -1 -2 KSh. million -3 -4 -5 -6
Excise tax
/0
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/0
/1
/1 10 20
05
06
07
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09
10
11
05
06
07
08
09
20
20
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-8
20
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20
Source: Kenya Revenue Authority
Figure 1.12 shows the relationship between tax revenue collections by type and the respective tax bases. For income tax, we use Gross Domestic Product (GDP) as the tax base, while private final consumption is a proxy for excise taxes and VAT. From the graph, we can deduce that income tax revenue increased at a faster rate than its tax base (GDP). This implies that there has been potential for increasing income tax revenue mainly through increased compliance, which has been achieved through the system of self-assessment. On the contrary, VAT has grown at a slower pace than the tax base (private final consumption) except between 2003 and 2005 and also in 2011. This is mainly because of two reasons. First, not all goods and services consumed attract VAT, given that some goods and services are exempt or zero rated. Thus improving VAT performance would require a review of what proportion of private consumption of goods and services is taxable. Secondly, VAT compliance has been low. From the graph, we can see that the gap between VAT and its tax base significantly narrowed between 2004 and 2005, which can be attributed to increased compliance resulting from the tax amnesty granted to taxpayers in 2004. Thus, measures to improve tax compliance would lead to higher VAT collections. A look at the performance of excise taxes shows that the growth in excise taxes has largely
20
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Figure 1.12: Relationship between tax revenue types and their respective tax bases
Nominal growth in income tax and GDP 25 20 Percent 15 10 5 0
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Income tax growth rate Source: KRA data and CBK
GDP growth rate
mirrored the growth in private final consumption even though excise taxes grew faster than private consumption between 2000 and 2003, which could be due to the ad valorem taxation that was being applied at that time. When VAT was introduced in Kenya in 1990, it replaced the sales tax and was charged on taxable goods or services made or provided in Kenya, and on taxable goods or services imported into Kenya. Under the current VAT Act Cap 476, there are three different classes of goods and services: designated, zerorated and exempt. Designated goods and services are those that are deemed
Figure 1.13: Relationship between VAT and private consumption
Nominal growth in VAT and private consumption 30 25 20 Percent 15 10 5 0
20 /1 20 10 /1 1
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VAT growth rate Source: KRA data and CBK
Growth in final consumption
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taxable at other than the zero rate. Goods and services that are zero-rated are deemed taxable but at the rate of 0 percent, while exempt goods and services are not taxable. The Value Added Tax is largely regarded as being highly regressive. This implies that the tax places a greater tax burden on the poor as compared to the rich, mainly because low-income individuals spend a higher percentage of their income on consumption compared to higher-income individuals. Worldwide, countries have put in place several measures to reduce the huge burden of VAT on the poor by (i) exempting or zero rating food and social necessities, and (ii) taxing luxuries at high rates and necessities at lower rates. While the VAT Act Cap 476 makes considerable provisions to exempt basic necessities to make the VAT less regressive, the VAT Bill 2012 proposed several changes, which effectively reduces the number of items that are zero-rated. Table 1.3 summarises the key changes between VAT Act Cap 476 and VAT Bill 2012 in terms of goods and services that are zero rated and exempt.
Table 1.3: Comparison between VAT Act Cap 476 and VAT Bill 2012 Exempt goods and services under VAT Act Cap 476 Exempt goods and services Goods: Poultry, livestock (unprocessed meat and dairy), fresh fish & other sea foods, fresh (unprocessed) agricultural foods, petroleum products, currency, charcoal, military weapons, sanitary towels, raw skin and hides, cinematographic film, cereals and cereal flours. Services: Exempt supplies include financial services, insurance, public education and training services, health (including veterinary) services, sanitary services, agricultural services, transport, burial and cremation, renting and leasing of land and housing, postal services, and social welfare services. Zero rated goods and services Goods: Milk, rice, maize flour, agricultural inputs, medicines and medical equipment, kerosene and gas, insecticides, newspapers and journals, agricultural machinery and parts, generators, textile machinery and equipment including parts, ambulances, educational materials, purchase of public transport vehicles. Services: Exports, services in transit, supply of coffee and tea for export, supply of domestic electricity consumption (<200KW), airport services to transit aircraft, water drilling.
Source: Compiled from VAT Act Cap 476 and VAT Bill 2012
Exempt goods and services under VAT Bill 2012 Goods: Agricultural inputs, petroleum products, laboratory products, live animals, unprocessed milk, eggs, meat, fruits and nuts, machinery, cereals except corn, wheat, barley and rye, petroleum products.
Services: Exempt supplies include financial services, insurance, public education and training services, health (including veterinary) services, sanitary services, agricultural services, transport, burial and cremation, renting and leasing of land and housing, postal services, and social welfare services. Goods: Medicines and medical supplies.
Services: Exports, international air transport, export processing zone supplies, treatment and supply of water, supply of coffee and tea for auction.
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We can deduce that: a. It is expected that the VAT Bill 2012 if implemented will make the VAT more regressive given that it introduces a standard rate of taxation on basic necessities that are largely consumed by the poor. b. It is also expected that more revenue will be collected as envisaged, given that the Bill proposes measures that considerably increase the VAT base. Currently, the base is narrow because of exempting and zero-rating some goods and services. Also, the VAT threshold currently pegged at KSh. 5 million effectively reduces the tax base as many small traders are exempted from registering for VAT due to lower annual turnover. However, from current administrative measures, these small traders will fall under turnover tax. Figure 1.14 below shows a comparison between the VAT collections and the VAT potential. The VAT potential is derived by assuming that all goods and services are taxable at the standard rate of 16 percent, which implies that there are no goods and services exempt or zero rated. The VAT potential is then derived as the tax rate (in this case the standard tax rate of 16 percent) multiplied by the tax base (which is private final consumption). Thus, the VAT potential is the maximum amount of VAT that can be collected given the current level of private final consumption. We see a clear disparity between the VAT collections and the VAT potential, which is expected to narrow through an increase in VAT collections when the VAT tax base is expanded, mainly through reducing the number of goods and services that are exempt and zero rated as proposed in the VAT Bill 2012.
Figure 1.14: Approximation of the VAT potential
400 350 300 KSh. million 250 200 150 100 50 0 2000 2001 2002 2003 2004 VAT, local Source: KRA data 2005 2006 2007 2008 2009 2010 2011
Potential VAT
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Current tax administration measures The performance of the turnover tax has been below target, with revenue in 2010/11 being KSh. 130 billion against a target of KSh. 147 billion. The Budget Policy Statement 2012 envisaged a rapid growth in ordinary revenue, which Kenya Revenue Authority (KRA) hopes to achieve through a number of initiatives. This is meant to target tax collection in sectors with low tax compliance and scaling up taxation of the SME sector in order to enhance tax collection. The initiatives being undertaken by KRA are the use of the Electronic Cargo Tracking System (ECTS) on all the goods subject to customs control and those domestically excisable, use of cargo scanners at the port and major airports, and adopting the Block Management system (BMS) for physical location of taxpayers. In addition to revamping the turnover tax, a Medium Tax Office (MTO) was set up to cater for taxpayers who have an annual turnover between KSh. 300 million and KSh. 750 million. The review of the Turnover Tax (ToT) regime and establishment of the MTO office gives KRA an opportunity to penetrate the informal sector and exploit revenue potential among the medium taxpayers, respectively. 1.3.3 Sectoral spending, shares and trends Spending has increased by more than 5 percent of GDP since 2006 and the approved budget exceeded KSh. 1 trillion for the first time in 2011/12. The budget has doubled in real terms from KSh. 300 billion in 2002/03, and pushed the size of the government sector to one third of the economy. Not only has the size of the pie increased, but the share of the budget that is discretionary, i.e. not already committed to debt and pension payments, has also increased from 65 percent to 89 percent of the budget. The increased budget permitted a shift in composition toward physical infrastructure investment. Figure 1.15 shows that spending has increased significantly with very marginal increase in revenues compared to neighbouring countries; this expenditure envelope remains highest. Composition of expenditures has already undergone a significant shift toward development spending. This has doubled since 2005 and reached 9 percent of GDP in 2011/12 mainly for infrastructure, particularly roads and energy, which account for 75 percent of the budget in the sector. The education sector accounts for 30 percent of the total recurrent budget equivalent to 6.4 percent of GDP. This sector receives over 20 percent of the budget on average and 70 percent is spent on salaries. Smarter spending in the human resources development sector is required, particularly education, since public investments in this sector need to look beyond the objective of getting children into school and providing inputs; there needs to be a focus on the quality of service delivery.
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Figure 1.15: Kenyas spending has increased to reach 30 percent of GDP in 2011
28 26 Revenue, percent of GDP 24 22 20 18 16 14 12 10 Ethiopia, 2008-2011 Kenya, 2002-2007 Uganda, 2002-2007 Expenditure and revenue, percent of GDP (2002/11) South Africa, 2002-2007 South Africa, 2008-2011 Kenya, 2008-2011
Uganda, 2008-2011 Ethiopia, 2002-2007
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23
25
27
29
31
Expenditure, percent of GDP

Source: IMF data
Infrastructure, energy & ICT; education; governance, justice, law & order; and public administration, are the top four sectors accounting for over 65 percent of the total sectoral budget (Figure 1.17). The health sector received only 8.5 percent of the total budget allocation in 2011/12 which is far below the Abuja declaration3 target of 15 percent (Figure 1.18). Total health expenditure has remained at a constant 5 percent of GDP since 2001/02. While low government spending on healthcare remains an important
Figure 1.16: Economic composition of expenditures, percent of GDP
Economic composition of expendirure, percent of GDP
30 25 20 Percent 15 10 5 0 2007
Source: IMF data
3
1.6 2.3 3.2 3.3 4.6
0.8 2.3 3.3 3.6 7.7
Benefits Interest Payments Use of Goods & Other Expenses Grants
9.0
7.9
Compensation of
2008
2009
2010
2011
In April 2001, African Union countries meeting in Abuja, Nigeria, pledged to increase government funding for health to at least 15 percent, and urged donor countries to scale up support.
18
Figure 1.17: Infrastructure, energy and ICT and education sectors receives the lions share of the budget
30
Percent of total sectoral budget
25 20 15 10 5 0 2009/10 Energy, Infrastructure and ICT Governance, Justice, Law and Order 2010/11 Education Public Administration and International Relations 2011/12
Source: MTEF Sector reports 2013/14 to 2015/16
concern, the sector also faces other systemic challenges including available resources not being optimally used due to inequitable resource allocation (favouring hospitals and curative care), inefficiencies in the public health system that adversely affect the poor, and huge out-of-pocket expenditure. Health, agriculture and rural development, water and environment, and social protection account for an average of 24 percent of the total sectoral budget in 2009/10 to 2011/12, equivalent to the total education sector budget in 2010/11. Table 2.3 provides detailed sector budget allocation and actual expenditure.
Figure 1.18: Sectors accounting for the least shares of the budget
Budget allocation, share of total sectoral budget 28 23 18 13 8 3 Health
Percent
2009/10
2010/11 Environmental and Water
2011/12 Social Protection*
Agriculture and Rural Development
Source: MTEF Sector reports 2013/14 to 2015/16
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Table 1.3: Sectoral budget allocation and expenditure (KSh. million) MTEF sector Agriculture and rural development Social protection, culture and recreation Health Public administration and international relations Education Governance, justice, law and order Environmental protection, water and housing Energy, infrastructure and information communications technology General economic, commercial and labour affairs National security Budget allocation 2009/10 40,651 32,849 45,852 73,998 129,102 77,806 36,304 146,296 2010/11 55,949 32,785 63,831 76,059 193,109 90,293 47,419 165,030 2011/12 55,575 37,104 81,035 98,103 213,877 105,476 46,438 217,476 Actual expenditure 2009/10 35,382 29,600 43,887 62,571 126,060 73,086 29,066 118,356 2010/11 45,937 30,697 48,654 61,406 182,436 77,846 36,461 133,551 2011/12 48,595 35,402 67,187 87,706 203,052 93,045 39,335 183,601
14,664 58,644
18,417 56,686
17,263 78,560
13,438 -
16,050 -
15,591 -
Source: MTEF sector reports 2013/14 to 2015/16, BROP 2012 and BOPA 2011
1.3.4 Budget execution Budget execution has improved in recent years, particularly development, though it still lags. From a low rate of 55 percent in 2004/05, it has improved to about 70 percent in 2010/11. Execution of recurrent budget remains broadly on track with an execution rate of about 95 percent. However, overall execution rates mask the underlying sectoral differences. A comparison of execution rates by MTEF sectors shows that execution is highest in the human development sectors and it is basically education that returns the high execution levels (Figure 1.19). The infrastructure sector records the lowest budget execution rate, though this has improved remarkably in the last decade.
1.4 DEFICITS AND DEBT DYNAMICS
1.4.1 Budget deficit he evolution of public sector debt can be traced through the budget deficit and the way it is financed. Figure 1.20 shows the budget deficit and the sources of financing, domestic and external. The negative bars show net repayment and these are the years when the government retired debt, the period of fiscal consolidation. The retrenchment turned to stimulus with a budget deficit averaging 4.0 percent between 2008 and 2011, after economic growth slumped in 2008/09. During the stimulus period government debt doubled and increased from 39 percent to 43 percent of GDP (See Figure 1.21).
20
Figure 1.19: Human development sector accounts for the highest execution rate
100 95 90 Percent 85 80 75 70 95.7 93.1 89.5 85.5 84.9 84.9 82.1 80.6 Average budget execution, 2009/10 to 2011/12
Pr So ot c ec ia tio l n* G Ju ov e an stic rn d e, an O La ce rd w , er
A D an gric ev d u el R ltu op ur re m al en t
Source: MTEF sector reports 2013/14 2015/16, BROP 2012 & BOPA 2011
1.4.2 Public sector debt Kenyas public sector debt has doubled between 2007 and 2012, increasing from KSh. 700 billion in 2007 to KSh. 1.4 trillion at the end of 2012. During the period 2000/01 to 2007/08 fiscal policy aimed to bring the debt position down and the debt-to-GDP ratio fell from 63 percent to 37 percent. This reduction was achieved as a result of strong economic growth and fiscal consolidation. The fiscal headroom created by the debt retirement permitted the implementation of the fiscal stimulus programme between 2009 and 2011. The government
Figure 1.20: Budget deficit averaged 4 percent of GDP during the fiscal stimulus increasing debt by 4 percent points
8 7 6 5 Percent 4 3 2 1 0 -1 -2 1999 2001 2003 2005 2007 2009 2011 2013 Net repayment New debt Evolution of public debt (percent of GDP)
Foreign financing Source: The National Treasury and IMF data
Domestic financing
In E fra ne an str rgy d uc , IC tu T re En vi an ro d nm W e at nt er al
al th
tio
dm Pu in bli ist c ra tio
Ed uc a
He
21
issued more debt to stimulate growth and avert a recession. Consequently, debt as a proportion of GDP has now increased by about 4 percentage points from 39 percent in 2007 to 43 percent at the end of 2012 but it is still below the policy target of 45 percent. Figure 1.21 shows the total debt stock split between domestic and external debt (KSh. billion), and total debt as a share of GDP.
Figure 1.21: Public debt has reached 1.4 trillion but it still sustainable below 45 percent of GDP
1,600 1,400 1,200 KSh. billion 1,000 800 600 400 200 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 External debt Source: The National Treasury and IMF data Domestic Percent of GDP 35 45 55 Evolution of public debt 60
40
The debt dynamics reflect three important fiscal developments worth highlighting. First, it reflects the commitment to finance the ambitious infrastructure development programme outlined in vision 2030, linking budgets with plans. Second, it reflects the capacity to mobilise resources domestically and externally which previous constrained budget implementation. Third, it reflects the enhanced counter-cyclical role of the budget through the economic stimulus programme in 2009/11 to avert a potential economic recession. Kenyas debt management history has earned it a B+ credit rating from Standard and Poors, and it has never been in the highly indebted category of countries.4 1.4.3 External debt The debt is evenly split between domestic and external sources at 20 and 23 percent of GDP respectively. By the end of 2012 Kenyas external debt stood at KSh. 782 billion5, (23 percent of GDP), while domestic debt stock was KSh. 708 billion (20 percent of GDP) totalling KSh. 1.4 trillion (43 percent of GDP). Multilateral donors are the main creditors, accounting for 60 percent of Kenyas debt, bilateral creditors are second at 32 percent and the balance is split between commercial lenders and export credits (see Table 1.4).
4 5
Since November 2010, when it was raised from a B. B+ is four steps below investment grade. There is a different between this figure and the one in the table mainly because they come from different sources.
22
Percent of GDP
50
Table 1.4: Composition public debt and publicly guaranteed debt KSh. billion 2008 Bilateral Multilateral Commercial banks External Total Domestic Bank Non-bank Domestic Total Grand Total 228.48 202.13 430.61 845.16 290.78 227.73 518.51 1,022.96 401.79 258.47 660.27 1,189.06 424.33 339.89 764.22 1,441.14 459.25 399.58 858.83 1,633.38 127.79 268.22 18.54 414.55 2009 152.99 327.63 23.84 504.46 2010 159.69 348.65 20.46 528.79 2011 215.04 436.84 25.04 676.91 2012 246.24 462.96 65.35 774.56
Source: MTEF sector reports 2013/14 to 2015/16, BROP 2012 & BOPA 2011
1.4.4 Domestic debt At the beginning of the decade (2002) treasury bills financed 49 percent of the budget deficit, today this share has declined to 19 percent as government intensified borrowing through long-term bonds (Figure 1.22). The trend reflects the achievement of a policy target of 25:75 ratio of treasury bills to bonds. Thus, through the issuance of bonds, the government can now finance development projects with long maturity periods without heavy reliance on external financing. The capacity to mobilise domestic resources has seen a gradual reduction in the significance of external financing in the budget.
Figure 1.22: Composition of domestic debt
Domestic debt composition 100 90 80 70 Percent 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: CBK data Treasury Bills Treasury Bonds
23
1.4.5 Debt sustainability The debt is still within sustainable limits and within fiscal targets. Kenya has identified debt-as-share-of-GDP as the fiscal anchor with a benchmark target at 45 percent of GDP. The standard indicators for domestic debt sustainability are: debt as a share of GDP, debt service as a share of revenue, and debt service share in total spending. These indicators are presented in Table 1.5. External debt is also sustainable. The last debt suitability analysis by the IMF and World Bank showed that Kenyas debt is within debt suitability based on all sustainability indicators. a. The present value of external debt as a share of exports is projected at 80 percent in the medium term, which is well below the 150 percent threshold. b. The ratio of debt service to revenue is projected at 6 percent in the medium term compared to the 20 percent sustainability threshold. c. The debt-to-GDP ratio is projected to decline to 40 percent in the medium term, which is below the governments fiscal benchmark of 45 percent. Overall the Debt Sustainability Analysis concluded that the downside risk to debt suitability is low GDP growth rates.
Table 1.5: Debt sustainability indicators (percent) External debt Debt to GDP Debt to exports Debt to revenue Debt service to exports Debt service to revenue Domestic debt Debt to GDP Debt to revenue Debt service to revenue
Source: The National Treasury
2013 20 84 83 6 6 26 105 9
2014 19 83 78 10 9 25 101 8
2015 19 86 77 5 4 23 95 8
Threshold 40 150 250 20 20
1.5 ECONOMIC OUTLOOK
E
6
1.5.1 Economic growth
conomic growth is projected at 6 percent in the medium term. The economy is projected to grow at 5.1 percent, 6.0 percent and 7.1 percent in 2013, 2014 and 2015 respectively. This outlook is consistent with projections by the World Bank and IMF. The government budget outlook also provides growth projections within this range.6 The projections are based on the assessment that;
The Kenya Economic Update Projections, The IMF Revised Programme and the Budget Review Outlook Paper launched in January 2012.
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a. public investment in the roads and energy sectors will continue to increase capital stock, thus lowering the costs to businesses and improving their profitability, b. favourable weather conditions will continue to sustain the recent improvements in agricultural output, c. favourable international environment and effective implementation of the medium term policy agenda in the second medium term plan (2013-2017) will prevail, and d. international oil prices will remain stable. After the peaceful elections and smooth transition to a new administration, the implementation of the Constitution forms the major assumption for the medium term growth prospects. The governance agenda in the new Constitution and the envisaged institutional reforms underpin the medium term growth projections. The medium term plan (MTP) and the Vision 2030 targets are that the real GDP growth will pick up and increase steadily to 10 percent as from 2015 onwards. Implementation of flagship projects is expected to continue, and the new investments in roads and energy will reduce domestic transaction costs, making businesses more profitable. Growth in government expenditure, consumption and investment are projected at about 7 percent and 11 percent respectively. The high investment is predicated on the continuation of construction activities, especially on infrastructure and energy, as implementation of the planned development programmes as contained in the medium term expenditure framework gain momentum. Private consumption is projected to moderate at about 8 percent and growth in exports will pick up from 6 percent in 2013 increasing to 9 percent in reducing the trade deficit. Table 1.6 summarises the key macroeconomic variables for the years 2010, 2011, 2012 and three-year forecasts (2013-2015). The tourism sector is expected to stabilise and continue to grow at an annual average of 12 percent. This growth is expected to be supported by vigorous marketing of Kenya as a leading tourist destination and both political and economic stability at home. This is expected to boost exports in the medium term and support economic growth outcomes. Imports are expected to expand with the economic growth. The projected positive growth for Sub-Saharan Africa given at 5.7 percent for 2013 and 5.8 percent for 2015 is expected to provide an impetus to private investments for the recovery process, and increase demand for Kenyas exports. The import volume growth will be occasioned by need to complement domestic production, purchase of intermediate and capital goods and purchase of oil and oil-related products.
25
Table 1.6: Macroeconomic projections for 2013-2015 (percent) Actual 2010 GDP growth Inflation (overall) Short-term interest rate Private consumption Private investment Government consumption Government investment Exports G&S Imports G&S Current account balance Fiscal deficit Public expenditure (% GDP)
Source: KIPPRA-Treasury Macro Model (KTMM)
Estimate 2011 4.4 14.0 8.7 2.8 4 10.6 9 6.7 15.6 -8 -5 33 2012 4.5 9.6 13.6 7 7 8 9 5 11 -4.8 -4 31.8 2013 5.1 5 8.0 7 7 6 8 6 9 -5.3 -3 30.4
Projections 2014 6.0 5 8.0 7 11 7 11 7 10 -5.3 -3 29.6 2015 7.1 5 8.0 8 11 8 11 9 11 -5.7 -3 28.8
5.8 4 3.6 7.2 4 9.2 5 17.7 6.1 -6 -6 33.4
The external environment is expected to improve as global food and fuel prices decline and growth in Africa picks up. It is anticipated that exchange rates will remain stable and favourable to promote exports and tourism so that Kenya can leverage the improvements in the external environment. The IMF projects a 4.4 percent global growth rate for 2015. Kenyas main trading partners (in terms of value of goods traded) are Uganda and Tanzania regionally, and UK and Netherlands. The outlook for Africa in 2015 shows increased real GDP growth of 5.8 percent while in the Euro area real GDP growth is only expected to be 1.6 percent, implying some downside risk to Kenyas export growth projections.7 The vulnerability of the large trading economies such as the United States and Europe leaves the global outlook uncertain. The United States is experiencing low growth with lack of a credible medium term fiscal plan to reduce its debt, while the European Union is facing financial strain from the sovereign debt crisis.8 This could also impact on remittances (although thus far remittances have been pro-cyclical), since remittances mostly come from North America (49 percent) and the Eurozone (29 percent). 1.5.2 Medium term fiscal framework 2013-2015 The medium term budget framework targets a gradual continuation of the fiscal consolidation. Revenue mobilisation is expected to continue which will see revenue as a share of GDP increase to 25 percent, an increase of about 500 basis
7 8
World Economic Outlook September, 2011 Several Eurozone countries were downgraded by Standard and Poors in 2011.The outlooks on the longterm ratings on Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain are negative, indicating that there is at least a one-in-three chance that their rating will be lowered in 2012 or 2013. www.standardandpoors.com
26
points. This calls for efficiency in revenue administration and widening of the tax base to capture a wider number of tax payers as already discussed in section 1.3.2. Spending will moderate marginally from 31 percent to about 30 percent of GDP in light of emerging fiscal pressures to cater for devolved government units and sustain infrastructure investments. The budget deficit will decline from -4.8 to -3.3 by 2015 which will see the gradual reduction of debt as a share of GDP from 43 percent to 41 percent. The medium term fiscal framework is presented in Table 1.7.
Table 1.7: Medium term fiscal outlook 2012/13 to 2014/15 (percent of GDP) IMF projections 2010/11 Revenue Tax revenue Non-tax revenue Grants Expenditure and net lending Recurrent expenditure Development and net lending Fiscal balance ( incl. grant) Financing Net foreign Net domestic Total public debt
Source: The National Treasury
2011/12 24.5 20.1 4.4 1.3 30.5 20.3 10.1 -4.7 4.7 1.4 3.3 44.7
2012/13 24.8 20.5 11.7 1.3 30.9 19.8 10.7 -4.8 4.8 3.0 1.8 43.4
2013/14 25.0 19.4 4.2 1.9 30.5 19.7 10.5 -4.0 4.0 2.3 1.7 42.5
2014/15 25.0 20.8 8.3 1.5 29.8 19.4 10.2 -3.3 3.3 2.4 0.9 40.6
24.0 20.1 4.0 0.7 29.2 20.8 7.9 -4.5 4.3 1.0 3.3 45.9
The 2012/13 proposed fiscal policy stance supports CBK efforts to bring inflation down and avoid fuelling excess demand in the economy.9 Success in this effort has allowed the inflation target to remain at single digit level, where the medium term expenditure framework targets stabilising average inflation at 6.0 percent by 2013/14. The assumptions underlying the fiscal framework are consistent with the current Budget Policy Statement and adjustments undertaken to reflect actual budget implementation. 1.5.3 Emerging fiscal pressures Significant fiscal pressure is projected in the medium term. As the implementation of the Constitution is rolled out, there will be significant pressure to expand the fiscal envelope. Significant new spending commitments are planned in 2012/13 and beyond, related to implementing the Constitution, specifically introducing devolution to 47 new to-be-established county governments, pressure to increase
9
Furthermore, structural policies are also needed, since the rise in domestic prices in Kenya exceeds that elsewhere in the region, due to protective policies for domestic food producers (World Bank, Kenya Economic Update 6th Edition (June 2012)
27
salaries, pressure to equalise access to government services (particularly in underserved regions) and more recently pressure to implement the promises in the Jubilee manifesto. Fiscal pressure will emanate from setting up the administrative infrastructure for county governments. The medium term framework estimates the cost of county infrastructure at about KSh. 10 billion. However, even as the county governments take office it is expected that additional recruitments will see an increase in the wage bill. Pressure from the rising public sector wage bill. In 2013 industrial strike by several cadres of the public service resulted in additional wages awards of KSh. 30 billion. The wage increases has reversed the declining trend of public sector wage bill from 6.8 percent of GDP and it is now estimated at about 8 percent. Members of Parliament are also contesting the wage levels that have been set by the Salaries and Remuneration Commission (SRC). Pressure to equalise access to public services in lagging region regions. Improving the equity of public spending is embedded in the Constitution, which provides for a share of at least 15 percent of revenue for sub-national governments. The Commission on Revenue Allocation10 has set out the criteria for sharing the 15 percent. The CRA formula proposes five parameters (population, basic equal share, poverty level, land area and fiscal discipline) with unequal weights to determine the countys share. However, the initial costing of devolved functions shows that the 15 percent share could be inadequate to provide services at the current levels. Indeed even the medium term framework currently provides a share in excess of 15 percent, estimated at about 20 percent of revenue (see Figure 1.23). Secondly, there will be counties that, based on the formula, will receive less than their current budget allocation (see Figure 1.24). It is not yet clear how the counties will finance the deficit emanating from the CRA formula but this is likely to be another source of budgetary pressure. A good example is the health sector, where some counties will receive less (in per capita terms) than they are currently spending. 1.5.4 Getting to two-digit growth rates: Opportunities and challenges Kenyas economic capacity is currently estimated in the range of 5 percent which is below Vision 2030 growth targets. Vision 2030 and the Jubilee manifesto have set a target growth rate of 10 percent by 2015. The new administration
10 The Constitution of Kenya Articles 201(b) and 203(1)
28
Figure 1.23: National and counties share of budget allocation in the medium term
100 90 80 70 Percent 60 50 40 30 20 10 0 2012/2013* 2013/14** Counties (All sectors)
Source: Budget Policy Statement, 2013
0.2
0.2
0.2
0.2
0.8
0.8
0.8
0.8
2014/15** National (All sectors)
2015/16**
has undertaken to achieve this target within the next two years i.e. by 2015. However, our analysis shows that Kenyas economic capacity is in the range of 5 percent, an increase from about 3 percent prior to 2004. The recent increase reflects the investments made since 2005. The double-digit growth targets mean that Kenya has to double the growth rate in the next two years from an average growth rate of 4 percent during the decade. This is not easy and the timelines have to be realistic. However there are opportunities and low-hanging fruits that Kenya can exploit to make the leap. For the country to achieve the high growth rates projected in planning documents and the current governments manifesto, further investments will be required to increase the productive capacity of the economy. The investments will need to be complemented by stable macroeconomic conditions plus a commitment to deepen structural reforms and strengthen governance at all levels of government as envisaged in the Constitution. This will provide a good background for the high and stable levels of economic growth and creation of employment, while at the same time minimising the inequality which can be a drag on growth. 1.5.5 Opportunities Subnational spending Institutional reforms underpinned in the 2010 Constitution present a great opportunity to catalyse Kenyas growth. The constitutional reforms were driven by the need to improve access to public services, reduce inequality and catalyse growth, and improve the welfare of all Kenyans. Consequently, 20 percent of national revenue will be spent at county level. If well spent, reducing
29
Figure 1.24: Using CRA formula - Heath spending: Allocation per capita
Baringo Kiambu Nyeri Elgeyo Marakwet Kisii Meru Machakos Nyandarua Kirinyaga Nakuru Kericho Homa Bay Taita Taveta Murang'a Laikipia Nairobi Kisumu Embu Bungoma Uasin Gishu Busia Makueni Nandi Kilifi Kitui Mombasa Trans Nzoia Narok Kakamega Kajiado Kwale Vihiga Siaya Migori Wajir Marsabit Nyamira Isiolo Bomet West Pokot Tharaka Samburu Mandera Garissa Lamu Turkana Tana River -600 -400 -200 200 400 600 800 1,000 These counties will receive less than their current level of spending
Source: CRA data
30
the administrative share of the budget, it can spur growth through improvements in human capital and infrastructure. Figure 1.25 shows the sectoral division of expenditure at central and subnational levels of government. The largest shares of devolved spending (within each sector) are in health and infrastructure, at 50 and 27 percent respectively. The effectiveness of this spending will require a good oversight mechanism to ensure resources are spent for intended purposes.
Figure 1.25 Spending on health and infrastructure at subnational level can catalyse growth
Sectoral budget allocation: Central and sub national (KSh. billion) Infrastructure Education Public Admin Governance Health Security Environment & Water Agriculture Social protection Economic Services 0 100 82.8 75.5 74.1 61.9 50 100 150 Percent County Central Source: Budget Policy Statement, 2013 Note: The number inside the bars represent the National budget share (percent) 200 250 300 17.2 24.5 25.9 38.1 81.2 99.6 49.2 99.6 73.2 26.8 County share (percent) 0.4 18.8 0.4 50.8
Trade in the EAC Boosting trade in the EAC region is a low-hanging fruit which Kenya can exploit by leading the way in the removal of the remaining non-tariff barrier (NTB) to trade. Of particular interest is the removal of NTBs, particularly in the food sector where Kenya has a deficit in maize production while other countries in the region have a surplus. Free flow of food in the region will ease the spike in food inflation which is oftentimes a threat to macroeconomic stability. In addition, increased trade with the EAC market can address Kenyas persistent current account deficit which is a threat to exchange rate stability and also a source of external vulnerability. Natural resources: oil is a great opportunity but a risk as well The recent discovery of oil in Kenya can be a blessing or a problem depending on how the oil revenues are managed. Nigeria provides a good case study of what not to do but there are good case studies that Kenya can replicate to ensure that oil revenues lead to sustainable growth. As an opportunity, oil
31
revenues would provide reprieve to the current account deficit and improve the government revenue position. However, oil revenues also pose significant risks to the rest of the economy; one major risk is so-called Dutch disease which can lead to jobless growth, as witnessed in the Arab uprising. Jobless growth: Dutch disease is the phenomenon where negative consequences arise from large increases in a countrys income, e.g. oil revenues lead to a very strong currency, such that other sectors of the economy cannot export their output. In such cases it is the job-creating sectors such as manufacturing and agriculture that collapse with the jobs. Care should be taken so that the oil sector does not undermine other sectors. Trade with emerging markets The recent global slowdown in Europe and America impacted Kenyas tourism and horticulture sectors, which are Kenyas main foreign exchange earners. Analysis by the World Bank shows that Kenya could export more than she currently does, particularly to the BRICs.11 Kenya can leverage the high growth rates in these economies to diversify her export markets and products, and avoid over reliance on a narrow basket of goods.
1.6 CONCLUSION
he chapter has documented the macroeconomic performance of the Kenya economy. Of importance are the stable macroeconomic policies witnessed during the period under review. The Central Bank continued to relax the tight monetary policy initiated in 2011. Stability in international oil prices and prudent fiscal and monetary policies are expected to yield single digit inflation levels of about 5 percent in the medium term. Significant fiscal pressure is projected in the medium term to emanate from the implementation of the Constitution, setting up the administrative infrastructure for county governments, the rising public sector wage bill and pressure to equalise access to public services in lagging regions. Boosting trade in the EAC region, managing the oil revenues, and the global performance in Europe and America may impact Kenyas tourism and horticulture sectors positively, thereby giving the economy the impetus required for sustainable growth.
11
The newly-industrialised economies of Brazil, Russia, India and China.

32
Chapter 2
Public FinAnce MAnAGement
2.1 INTRODUCTION
sound public finance management system is a fundamental foundation for an efficient provision of public services. A functioning public finance management (PFM) system ensures that a shilling collected in tax revenue is well spent in service delivery and the provision of public goods. If the flow of funds is not working properly and there are loopholes for corruption and mismanagement, other sectors such as education, health and agriculture cannot perform despite their governance structure. In the PER 2010, it was estimated that 40 percent of the national budget is lost due to leakages, estimated at about KSh. 400 to 500 billion, that could be spent in development projects across the country. Therefore it is crucial that PFM reforms continue, to ensure good financial governance for the benefit of all Kenyans. Kenya has a long history of public financial management reforms, with an agenda that started in the 1990s. Under the last PFM reform strategy 2006-2011 there were notable improvements in public financial management which can be confirmed by comparing the last two Public Expenditure and Financial Accountability (PEFA) reports of 2008 and 2012. The reports show improvements in areas such as overall budget credibility, revenue forecasting, taxpayer registration and assessments, multi-year planning, payroll controls, and both internal and external audit. During the implementation of the 2006-2011 PFMR strategy many reforms were put in place that led to a number of successes. Some of the remarkable achievements include a new chart of accounts aligned with IMFs Government Finance Statistics Manual 2001 introduced in 2005, a new procurement law enacted in 2005 that came into force in 2007, a shadow programme-based budget that has been produced since 2008 and a Medium Term Debt Management strategy adopted
33
Public Finance Management
in 2008. Several PFM systems such as the automated Integrated Personnel and Payroll Database (IPPD) and a Pension Management Information System (PMIS) were put in place at this time. Parliamentary oversight functions were also improved in 2009, and the back-log of external audits has been cleared. The Constitution is a de jour game changer. After a decade of sluggish performance, the 2010 Constitution provided fresh impetus to PFM reforms. The Constitution now anchors crucial PFM reforms in the law and has opened up legislative space for the enactment of new laws and regulations and brought wholesome changes and improvement to PFM such as institutional arrangements affecting revenue raising, custody, allocation, and utilisation, auditing and reporting. It has also created new institutions to strengthen audit and oversight. This chapter reviews progress in PFM reforms and the implications of the 2010 Constitution. The performance review is based on five standard criteria: budget credibility, openness and comprehensiveness, budget execution, accounting and reporting, and external audit and oversight. This chapter is structured around these thematic areas.
2.2 BUDGET CREDIBILITY
Linking planning and budgeting here has been an effort to link the priorities in the Medium Term Plan (MTP) and the budget. The Medium Term Expenditure Framework (MTEF) was adopted with a view to establishing an explicit link between annual budget processes and agreed national priorities. This particular reform has had mixed results: on one hand the share of development funds in the total budget has increased steadily over the last few years from 4 percent to 9 percent of GDP (one third of the total budget) though it is still lower than the recurrent funds as depicted in the Figure 2.1. The increase in development budget has financed flagship infrastructure projects in roads and energy in line with Vision 2030. The introduction of social safety nets in the budget is also in line with the social pillar of Vision 2030 (the details are provided in the Social Protection chapter). However, the medium term perspective of the budget has not been achieved; the estimates of the outer years do not significantly guide the subsequent annual budgets. The budget is presented with a multi-year perspective, showing two outer years of the proposed budget, but the outer years are reasonable predictors of approved aggregate expenditures by the time of the budget, particularly for recurrent spending. Reviewing the 2008/09 and 2009/10 actual budgets against their forecasts in previous budget documents shows that as new
34
Figure 2.1: Share of development and recurrent funds allocation

100 90 80 Share (Percent) 70 60 50 40 30 20 10 0 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Recurrent 2008/09 2009/10 2010/11
Development Source: Kenya National Audit Office
fiscal space emerges over time there is a tendency to increase spending, mostly under the development budget. The first projection for the gross expenditure in FY 2009/10 (of about KSh. 458 billion) was made in the budget 2007/08 as second outer year, and the 2008/09 budget as the next fiscal year. As can be seen in Figure 2.2 between 2007/08 and 2008/9 there was a 32 percent increase in aggregate expenditures, and between 2008/09 and the actual budget for 2009/10 a 13 percent increase. The sum of the increase from the 2007/08 budget prediction for 2009/10 and the approved 2009/10 budget is 56 percent, which is slightly better than the difference of 60 percent for 2008/09.
Figure 2.2: Outer year projections and budgets for 2009/10
Approved expenditures 2009/10 +2% Estimated expenditures 2009/10 +13% Outer year I for 2009/10 +32% Outer year II for 2009/10
200
400 KES millions
600
800
Recurrent expenditures Source: Kenya National Audit Office
Development expenditures
35
Furthermore, the quality of costing and prioritisation is still poor, leading to unrealistic budget figures and frequent requests for additional funding. While Kenya has employed a good practice through implementing the sector-based budget mechanism, the definition of sectors between planning and budgeting is not consistent hence it is difficult to allocate resources to strategic sectors. Moreover, there seems to be limited attention to properly cost the full needs for adequate service provision to the nation so that over time progressive attainment thereof becomes a possibility, as is the case of the health sector. This might partly be due to the faulty cooperation and coordination among the various departments and divisions involved in policy planning and budgeting at the ministries. Additionally, the MTEF process is often disrupted by the in-year supplementary budgets. Budget planning and execution One of the PFM reforms aimed to increase budget credibility through more accurate forecasting, particularly economic growth, which underpins the revenue forecast. Financial Programming Framework has been developed in-house to carry out macroeconomic projections. The macroeconomic assumptions are generally consistent with IMF Article IV and World Bank projections for Kenya. The Kenya Revenue Authority in cooperation with the National Treasury (Economic Affairs Department) develops revenue forecasts and submits them to the Treasury Macro Working Group. The macroeconomic framework drives the expenditure and fiscal targets such that there is consistency with the debt management strategy over the medium term, and the IMF framework.1 Budget ceilings are determined on the basis of the macroeconomic working groups assessment of available resources; by reviewing the likely tax and non-tax revenue collection, governments stated policy is to contain fiscal risks and reduce exposure to contingent liabilities. Despite a good budget preparation process, the deviation of outturn to budget has widened as a result of changes to the administration in 2007/08 and the macroeconomic vulnerabilities of the last two years. The deviation of the primary expenditure outturn from the budget shows considerable variation and has a 10 percent to 15 percent deviation on average. The disruptions to the economy caused by the election at the end of 2007 (mid fiscal year 2007/08) and the impact of the financial crisis and drought have made the predictability of the economic outturn harder, and a sudden increase in the number of ministries from approximately 20 to 42 in the 2007/08 fiscal year make this year in particular exceptional. The deviation rates for the last three years are given in Table 2.1.
Treasury plans to develop a new macroeconomic model for medium term forecasting.
36
Table 2.1: Aggregate budget outturn indicators 2008/09 to 2010/11 2008/09 Revenues (outturn as percent of budget) Ordinary revenues (outturn as percent of budget) Expenditures and net lending (outturn as percent of budget) Primary expenditures2 (outturn as percent of budget) PEFA 2012 indicative deviations of primary expenditures percent 114 116 104 95 -5 2009/10 120 97 83 122 -7.5 2010/11 100 99 92 n/a -12.1
Source: Budget data in KSh. based on budget estimates and actual outturn, based on audit reports for 2008/09 and 2009/10 and on estimated outturn as reported in the 2011/12 budget for 2010/11
There is need to improve predictability of resources in Kenya, particularly for the development budget. Figure 2.3 below indicates that the government budget has had marked deviations between the appropriated and executed development budget, with the worst deviations occurring during the financial year 2010/11. This may be due to the slow process of transferring funds and/ or administrative processes within ministerial departments and agencies which hinder the ministries ability to spend funds within set timelines. Nevertheless, there have been some improvements in budget performance, as reflected in declining pending bills, which started in 2011/12 (see Figure 2.4). The figure shows those periods which had lower execution rates tended to have higher pending bills, and vice-versa.
Figure 2.3: Trend of deviations within the recurrent and development budgets, 2002/03 to 2011/12
20 0 -20 KSh. billions -40 -60 -80 -100 -120 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 Recurrent Source: 2003-2009 (KENAO); 2010-2012 (BPS 2013) Development
The non-adherence to the detailed monthly cash flow forecast (weekly for the first month) has affected the budget execution. This has been brought about by the uncertainties in projected financial resource receipts due to domestic
2 Primary expenditures are defined here as total expenditure less debt service payments less donor-funded Appropriations in Aid (AiA).
37
Figure 2.4: Trend of pending bills, 2002/03 to 2010/11 vs. execution rates
18 16 14 KSh. millions 12 10 8 6 4 2 0 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Pending bills Source: 2003-2009 (KENAO); 2010/12 (BPS 2013) Execution rate 100 98 96 94 Percent 92 90 88 86 84 82
treasury bills falling short of projections. This very useful exercise requires line ministries to prepare detailed monthly cash flow forecasts for the first six months of the year (as per the Vote-on-Account period based on the annual work plans and procurement plans. It is important as it facilitates orderly budget execution with ministries receiving funds when they need them, and is contained in the Treasury Circular issued in June 2009/10 on cash flow forecasting and in Budget Implementation Circulars issued every July. This has been compounded due to the Treasurys inability to consolidate the government cash balances. Though the Treasury has daily knowledge of the balances on its accounts and the balances of line ministries held in CBK, it has no access to disaggregated information on the balances held by district offices of line ministries in commercial banks and on the balances held by the semi-autonomous government agencies (SAGAs), donor projects and local authorities in commercial banks. Until recently when the PFM Act was legislated, the Exchequer Account did not have the authority to switch balances from the Treasurys other accounts and from line ministry accounts on a daily basis but this will be possible through TSA in the future. This will be aided by a banking system-wide IT project, known as T-24 (24 hour banking), which will provide for a complete on-line electronic banking system covering all bank accounts, including GoK-held accounts in the Central Bank of Kenya. Recurrent Budget execution has improved. The recurrent vote has been increasing significantly over the years (Figure 2.5) and execution rate has normally been high with the exception of the last few years. This could be attributed to the
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Table 2.2: Budget execution PEFA scores comparison Indicator PI-16/MI PI-17/MI PI-18/MI (ii) Predictability and control in budget execution Predictability in the availability of funds for commitment of expenditures Recording and management of cash balances, debt and guarantees Effectiveness of payroll controls 2006 B+ B D+ 2008 B+ B C+ 2012 B B B+
Source: 2012 PEFA Report
exchequer releases causing the day-to-day running activities of government to be delayed. The development budget execution requires to be improved if the increased allocations are to realise their intended benefits. This is despite the slight improvement shown in Figure 2.5 below. The delays in releases from the exchequer could be attributed to slow implementation of the development projects.
Figure 2.5: Budget execution 2002-2010
Budget execution, 2002 to 2010 500 450 Allocation, KSh. billions 400 350 300 250 200 150 100 50 65 Average, 2002-2006 70 75 80 85 90 95 100 Development Average, 2007-2010 Average, 2002-2006 Recurrent
Average, 2007-2010
Execution rate (Percent) Source: 2003-2009 (KENAO Reports); 2010/12 (BPS 2013 Report)
On closer scrutiny of the development expenditure, the execution rates have been low in the last three years which coincides with significant increase in allocation. This could be attributed to the problems both of capturing proposed spending in the budget and accurately accounting for actual disbursements. A further look shows that the Research, Innovation and Technology Sector has the highest execution rate of the development budget. This is even higher than the sectors execution rate for its recurrent budget (see Figure 2.6).
39
Figure 2.6: Average budget execution, 2009/10 to 2011/12

120 100 80 Percent 60 45.2 40 20 12.5 0
N a Se tio cu na tir l y ev R H el eso um op u a m rc n en e er na t La nc w e an , J En d ust O ic vi ro rd e, nm er an e d nt, Irr W ig a at te Ru A io r ra g n l D ric ev ult el ure op m and en t ra Ph st ys ru ic ct a ur l e, e To ur ism In a du n Re st d se ry ar an ch d , In Te n ch ov no ati lo on gy Tr ad og S ra pe m cia m l es ist Pub ra lic tio n
98.4 84.4
91.7
93.2
88.4
86.3 74.9 66.6 65.8
88.2 67.3
86.1 71.2
86.3 85.0
45.7
45.9
49.8
A dm
in
Development
G ov
Recurrent
Source: Quarterly Economic and Budgetary Review Reports (2009/10, 2010/11 and 2011/12)
Low budget execution rates can also be explained by the weak procurement institutional framework, procurement capacity, the functioning of the procurement market in terms of private sector participation, the enforcement and follow-up on external audit recommendations as well as public access to procurement information. Most of the standard tender documents also still need to be aligned to the act. The box below summarises the bottlenecks in the procurement process in Kenya. Some of the reforms that led to the improvements in budget execution are highlighted in Box 2.1.
Figure 2.7: Development allocation compared to execution rate
Development expenditure 90 80 70 60 50 40 30 20 10 0 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Estimates Source: 2003-2009 (KENAO); 2010/12 (BPS 2013) Execution Rate Percent
350 300 250

KES billions
200 150 100 50 0
40
In f
Pr
Box 2.1: Bottlenecks in the procurement process Major bottlenecks:
Budgeting (85 percent): Delayed budgetary disbursements due to lack of operational links
between budgeting and procurement planning that would ensure effective and well-aligned procurement.
Lack of procurement planning (80 percent): In most cases there is no procurement planning or
the procurement departments are not involve.
Delayed payments to suppliers (59 percent) from central government generate frequent and
critical payment delays. This also links to the budgetary and funding issue above. Minor bottlenecks:
Solicitation, specification and evaluation: Departments usually lack knowledge and capacity
regarding the procurement process.
Lack of contract administration facilities: The procurement departments lack facilities for contract
administration; roles and responsibilities are often unclear.
Supplier market often limited: Suppliers lack capacity and capital to access public market; and
price fluctuations can be extreme.
Source: Public Procurement Devolution UNOPSTreasury Joint Needs Assessment, 2012
However, there is still need for automation of the old pension data that was manual and the payroll will require cleansing so that all data can be on PMIS in electronic form. The IPPD also needs to be integrated with IFMIS as currently it is a distributed system with each ministry or agency having its own database.
Box 2.2: Budget execution reforms
The elimination of cheques for direct payments to service providers through the introduction
of Integrated Financial Management Information System (IFMIS) and the electronic payments (G-Pay) greatly contributed to close loopholes for mismanagement of public resources.
The development of single chart of accounts has been completed and cash transfers from the
Exchequer to ministries have also improved due to Electronic Funds Transfer (EFT).
The introduction of a procurement manual and guidelines for framework contracts is anticipated
to improve the procurement process.
Development and implementation of the Pension Management Information System (PMIS)

reduced the number of days it took to process a pension payment claim and transmit information to pensioners from 90 days in 2006/07 to 45 days in 2008/09 and later to 28 days in 2010/11.
Payroll control has improved with the introduction of the Integrated Payroll and Personnel
Database (IPPD) which is important considering the wage bill stood at 30 percent of government expenditure in 2009/2010.
Source: PFMR, 2013-2018 Strategy
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2.3 OPENNESS AND COMPREHENSIVENESS

he budget process starts with a top-down consideration of the available resources consistent with the macroeconomic framework. The Medium Term Expenditure Framework process provides a top-down (budget ceilings) and bottom-up approach (resource prioritisation within sectors). Currently, the budget process and calendar are guided by annual Treasury circulars, which can be opaque to outsiders, but this will be taken up in new financial management regulations to the PFM Act 2012 by setting the budget preparation calendar in general. In 2011, the Treasury published the MTEF manual which makes KSh. the process much more transparent. In terms of transparency of the budget preparation and its documentation, the Open Budget Index (OBI) shows the following pictures over the last years:
Table 2.3: Open budget index for Kenya, 2010 2006 Overall index 2010 Pre-budget statement Executives budget proposal Enacted budget Citizens budget
Source: Open Budget Index, 2010/12
2008 58 100 62 100 0
2010 49 100 55 67 0
2012 49 100 55 33 33
48 42 100 85 0
Although the detailed budget estimates are comprehensive, they lack transparency and are not easily comprehensible to citizens due to the huge amounts of tabular detail provided with no accompanying narrative. The budgets of the semi-autonomous government agencies (SAGAs) also do not disclose the potential contingent liabilities of GoK, except for debt guaranteed by it. Although these institutions submit their reports to the Auditor General, their reports in terms of actual revenues and spending have not been satisfactory. Fiscal risk assessment and oversight of public enterprises has also not been part of the PFM reforms to date, and current practices are not clear. Kenya performs lowest compared to other East African countries PEFA scores on comprehensiveness and transparency of the budget. Off-budget expenditure and in-year budget reallocations still hamper effective use of resources. Owing to the challenges in accounting and reporting, the use of country systems by development partners has deteriorated with most aid programmes and grants remaining off budget. In addition there is insufficient donor harmonisation with most donors preferring the government projects/
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programmes they are funding to use their own accounting, disbursement, procurement and financial reporting standards. This often creates confusion, delays and further undermines government efforts to improve the systems. Moreover, ring-fenced donor funds may reduce the incentive for ministries and their departments for progressive, development-oriented budgeting as this task is taken over by donor-funded mechanisms. If donor funds were to stop, significant reallocations of national revenues would have to be made to still meet the needs of the poor, as national revenues are currently mainly destined to finance national hospitals and services in urban areas. But there is renewed commitment by donors to use government systems. The Development Partnership Forum that was started at the end of 2009 produces high level statement of commitments to action between the government of Kenya and development partners. Forum commitments on public financial management stemmed not only from the assessment of the last PEFA (2009) scores but also from the analysis of public financial management in the governments 2010 Public Expenditure Review (PER). The reports highlighted the underutilisation of the Integrated Financial Management Information System as a major weakness which resulted in low budget execution and control, reporting and accounting. As a result the government launched a new strategy to fully implement and roll out the IFMIS in February 2011 and since then four new modules were integrated into the system and are up and running. In the last two years the government has made progress in bringing aid on budget with a review of current development partner projects and the introduction of a new Project Management Information System (e-ProMIS). However, the e-ProMIS has not yet been fully operationalised in government and by development partners though there was an attempt in the last Budget Policy Statement to tie funding to uploading the project in the information system.
2.4 ACCOUNTING AND REPORTING
ccording to the 2012 Public Expenditure Financial Assessment (PEFA) reports, accounting and reporting still remains one of the top two areas where the country performs worse than all its East African peers (see Figure 2.8). Since 2009 to date, the Internal Audit Department (IAD) has undergone further strengthening and empowering, and its mandate has been expanded. The department has adopted the Risk Based Audit Approach, spearheaded development of the Institutional Risk Management Policy Framework (IRMPF) in the public sector, adopted internal audit standards and best practices as promulgated by the
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Figure 2.8: A comparison of PEFA results for Kenya, Uganda and Tanzania
4.0 3.5 3.0 PEFA scores 2.5 2.0 1.5 1.0 0.5 0 Uganda Tanzania Kenya Source: PEFA Assessment Reports for Kenya (2012), Uganda (2009) and Tanzania (2010) 2.7 3.8
2.5
Institute of Internal Auditors, enhanced governance through establishment of ministerial audit and risk management committees, introduced IT-supported audits and roll-out of Audit Management Systems (Teammate), as well as adopted Value for Money Audits/Performance Audits. All ministries and state corporations have adopted the Institutional Risk Management Policy Framework. Figure 2.9 shows an analysis of the PEFA assessment reports for 2006, 2008 and 2012. This shows deterioration in the countrys average scores from 2.3 to 1.5 with the worst performance being in timeliness and regularity of accounts reconciliation.
Figure 2.9: Comparison of 2006, 2008 and 2012 accounting, recording and reporting PEFA results for Kenya
2.5 2.0
Average scores
2.3 1.9 1.5
1.5 1.0 0.5 0 2006 2008
2012
Source: Kenya 2006, 2008, 2012 PEFA assessment reports
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The adoption of IRMPF is envisioned to enhance risk identification and management by GoK ministries, departments, and agencies and provides a policy framework for risk-based auditing for the GoKs internal audit. However, the above systems have not been uniformly introduced or supported by the various public entities and for the most part exist on paper rather than in practice. Additionally, the financial and performance reports by government entities are also not adequately accessible and understandable. The audit reports are also difficult to understand and do not prioritise recommendations. However, MoF has managed to control and record the government debt exceptionally well. In fact Kenya continues to be one of the few countries to be included in the World Bank Quarterly External Debt Statistics report. Domestic debt management and reporting has been incorporated into the Commonwealth Secretariat Debt Reporting and Management System (CSDRMS), which is managed by the Debt Management Department. Though it has yet to be linked to IFMIS, interfacing is on-going as part of the IFMIS re-engineering strategy.
2.5 EXTERNAL AUDIT AND OVERSIGHT

here has been some progress which includes the strengthening of the oversight role of the Legislature and thus strengthened accountability of the executive arm of government. Successful implementation of the Fiscal Management Act 2009 (now repealed) and the Public Audit Act 2003 enhanced the role of Parliament and the Auditor General in their oversight roles. The PEFA 2012 report notes that while KENAO policy is to operate within materiality limits and in accordance with INTOSAI and KENAO standards, it is not evident in their reports on the final accounts how material or fundamental matters have been determined in relation to each account examined. All 61 recurrent votes and all 60 development votes are given an opinion that is either unqualified or no opinion (disclaimer of opinion). Those receiving an unqualified opinion are listed on schedule (A) and those excluded on schedule (B). Individual reasons for exclusion are not given and it is not clear from the individual reports on each vote what the reason for exclusion is. Neither does the Annual Auditor report include recommendations on how to deal with identified shortcomings. Subsequently the Parliamentary Audit Committee has to read through the voluminous report to make recommendations on which remedial actions should be taken. From 2008/09, the audit of central government spending agencies was at 100 percent and with no significant backlog. The audit coverage of local authorities and SAGAs had also significantly improved at 70 percent and 90 percent respectively.
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Progress towards International Public Sector Accounting Standards (IPSAS) adoption in Kenya has been slow. The Office of the Accountant General in 2009 issued a circular requiring GoK donor-funded projects to prepare their financial reports in compliance with IPSAS (cash basis). However, there have been delays in the adoption of IPSAS throughout the public sector. A full set of consolidated annual financial statements is not prepared; only appropriation accounts are submitted for audit. The adoption of and implementation of IPSAS in Kenya requires additional efforts by the various stakeholders who support the improvement of financial management and reporting in the public sector. The Accounting Standards Board when established as envisaged in the PFM Act is expected to drive this process. During the year 2010/11, various ministries and departments submitted for audit Recurrent and Development Appropriation Accounts which were inaccurate. As in 2009/10, many such Appropriation Accounts had errors and reflected balances which did not reconcile with those shown in the respective ledgers. In other instances expenditure incurred under various items in the accounts was not supported with the relevant documents and as a result, the propriety of such expenditure could not be ascertained. In other respects, significant expenditure relating to other items was altogether excluded from the accounts. The effect of such omission was that the total expenditure recorded under the respective accounts was understated by equivalent amounts. The most profound progress over the years is in the area of external scrutiny and audit. Notable performance improvement has been in legislative scrutiny of the annual budget and external audit reports. Overall the detailed performance indicators suggest moderate to significant fiduciary risks3 in the PFM system with the PEFA ratings declining from C+ in 2008 to C in 2012. Despite these major improvements in external scrutiny and audit, following up on recommendations and sanctions remain weak; some audit issues continue to recur year in year out. The current Parliament has an opportunity to make use of the provisions of the Constitution and the Public Financial Management Act to ensure audit reports inform the decisions on the budget, as the Parliamentary Budget Committee is fully and legally entrenched in the budget process. The Public Accounts Committee of Parliament has also been active in the review of the Auditor Generals report but it could play a stronger role.
3
A general principle in relating the PEFA ratings with the various aspects of the PFM system is that a high PEFA score (e.g. A=4) indicates low fiduciary risk and conversely, a low PEFA score (e.g. D=1) indicates high fiduciary risk.
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Figure 2.10: Comparison of 2006, 2008 and 2012 external scrutiny and audit PEFA results for Kenya
2.5 2.2 2.0 1.5 1.8
Average scores
1.5
1.0
0.5
0 2006 2008 2012
Source: Kenya 2006, 2008 and 2012 PEFA Assessment Reports
2.6 NEW RULES OF THE GAME: PFM ARCHITECTURE IN THE 2010 CONSTITUTION
he 2010 constitution has changed the FPM game, the players, the rules and even the referees. The 2010 Constitutional dispensation has significantly altered the public finance landscape of this country. The roles and powers of the Executive and the Legislature have been significantly delineated with the latter having additional responsibilities over public finance management. It has been rightfully argued that the power of the purse has shifted from the Executive to the Legislature in Kenya. Several laws have been enacted and new institutions created which have changed the PFM architecture. Some of the reforms difficult to implement are now underpinned in the Constitution and are expected to improve how public resources shall be generated, allocated and utilised. These principles will foster vertical equity between two levels of government (national and county), horizontal equity between and within counties as well as between the current and future generation. The principles of public finance enshrined in the constitution are shown in Box 2.3. The public finance architecture will significantly change as outlined in the Constitution, necessitating a reorganisation of some oversight institutions and the creation of new PFM constitutional institutions. Harmonious interaction of the various PFM institutions will be critical in achieving efficiency and effectiveness in meeting the objectives of devolution. Further it is the interaction of these players
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Box 2.3: The constitutional principles of public finance
There shall be openness and accountability, including public participation in all financial matters; The public finance system shall promote an equitable society and in particular
a). The burden of taxation shall be shared fairly; b). Revenue raised nationally shall be shared equitably among national and county governments; and c). Expenditure shall promote the equitable development of the country, including by making special provision for marginalised groups and areas.
The burdens and benefits of the use of resources and public borrowing shall be shared equitably
between present and future generations;
Public money shall be used in a prudent and responsible way; and Financial management shall be responsible and fiscal reporting shall be clear.
Source: Kenya Constitution 2010, Article 201 on Public Finance
and public participation that will determine whether decision making in resource allocation will promote an equitable society. Apart from promoting good financial management at the national and county government level, another objective of the PFM Act 2012 is to comply with the constitutional requirement to enact legislations on public finance listed in the 5th Schedule and also mentioned in Chapter 12. This would in turn facilitate effective and efficient use of limited resources. The enactment of this act repealed the 2009 Financial Management Act thus ensuring that there is an overarching legislation that is applied to both levels of governments. Table 2.4 summarises the national and county institutions whereas Box 2.4 provides a summary of the 2012 PFM Act. The Constitution created two other institutions that will be critical in public financial management, the Commission on Revenue Allocation (CRA) and the Commission for the Implementation of the Constitution (CIC). The Commission on Revenue Allocation plays a pivotal role by making recommendations concerning the basis for the equitable sharing of revenue between the national and county governments, amongst the county governments and accordance with the policy developed on identification of marginalised areas.4 The CRA must also be consulted on any other matters concerning the financing of or financial management by national and county governments, the revenue enhancement plans and fiscal discipline. However, for the CRA to perform its role in both the transition period and over time, a longer term capacity-building effort must be sustained. The public must also be provided with information regarding this process as well as a chance to participate in the decision-making process that directly affects finances to their county governments. This will necessitate the establishment of new fiscal decentralisation structures to facilitate the intergovernmental fiscal coordination strategies.
4
The recommendations by CRA are taken into consideration when developing and approving the annual division of revenue bills and the three year county allocation bills by the National Treasury and Parliament, respectively.
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Table 2.4: National and county PFM institutions National Parliament: National Assembly/Senate/ Parliamentary Budget Office Cabinet National Treasury Cabinet Secretary for Finance Accounting Officers for National Government Receivers and collectors of revenue for national government Public Debt Management Office (PDMO) Accounting Standards Board (ASB) Controller of Budget (CoB) Auditor-General Commission on Revenue Allocation
Source: 2010 Constitution, the PFM Act 2012
County County assemblies County Executive Committee County treasuries County Executive Member for Finance Accounting Officers for county governments Receivers and collectors of revenue for county government County Budget and Economic Forum
The CIC roles include to (i) monitor, facilitate and oversee the development of legislation and administrative procedures required to implement the 2010 Constitution; (ii) coordinate with the Attorney General and the Kenya Law Reform Commission in preparing for tabling in Parliament the legislation required to implement this constitution; (iii) report regularly to the Constitutional Implementation Oversight Committee on progress made and impediments faced; and (iv) work with each constitutional commission to ensure that the letter and spirit of the Constitution is respected. Policy development and budget preparation The budget process has also changed to involve multiple budgets centres due to devolution that make PFM much more complicated and demanding. Through fiscal decentralisation the constitutional introduces significant changes in policy development and budget preparation. At present the budget calendar is adjusting to the requirements of the Constitution, and the budget should be submitted before Parliament by the end of April. Since the MTEF was introduced, the budget process has improved and become more comprehensive. The current budget cycle will be determined by the Constitution and the PFM ACT 2012 as shown by Figure 2.11. Section 207 of the PFM Act, 2012 requires development of regulations to prescribe further guidelines for public participation in public financial management. The PFM Act 2012 expressly provides for public participation in the following processes.
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Figure 2.11: Budget timeline at the national and county levels
50
JULY AUGUST Circular from the County Executive Member for finance to counties. AUGUST National Treasury releases a circular to all government agencies starting the process, and setting out guidelines for public participation. SEPTEMBER APRIL County executive is to table a development plan by September 1 st. Submit County Budget Review and Outlook Paper to cunty executive by 30 th . Issuing of budget guidelines by the National Treasury. Budget estimates should be available to the public mid July. JUNE Passing of both the Appropriations Bill and the Finance Bill, or alternatively the Vote -on -Account. Assentment of the Budget. SEPTEMBER Initiation of public participation and other stakeholders in the budget process. May include county visits by Treasury and sector hearings. OCTOBER - NOVEMBER A County Budget Review and Outlook Paper should be tabled and made available. MAY OCTOBER - NOVEMBER Formulation of the macro -fiscal framework by mid -October and tabling of the Budget Review and Outlook Paper (BROP) Submission of comments of the National Treasury on the budgets proposed by the PSC, the Chief registrar for the Judiciary to the national Assembly. DECEMBER (a) End of developing budget proposals by line ministries and sector working groups. JANUARY FEBRUARY 15
th
JUNE (a) County provision of cash flow projection, by June 15 (b) Approval of estimates by June 30 . (c) County Finance Bill to be tabled in the County Assembly
APRIL Submission of county budget estimates to the County Assembly by April 30
Submission of estimates of revenue and expenditure of the national government, judiciary and parliament to the National Assembly.
MAY Submission of comments of the National Treasury on the budgets proposed by the PSC, the Chief registrar for the Judiciary to the national Assembly
FEBRUARY - MARCH
(a) County Fiscal Strategy Paper (CFSP) debt management strategy paper to be tabled in the County Assembly by February 28.
(b) 7 days to make this paper available to the public. The County Assembly has 14 days to approve it. Tabling in the National Assembly of the Budget Policy Statement (BPS)and receipt of the report on the governments debt management strategy.
(b) Sector hearings and preparation of sector reports. (c) Publishing of an implementation report on the first quarter of budget implementation from July September no later than 45 days after the end of the quarter.
(a) Development and approval of the BPS and the Division of Revenue Bill. (b) CRA to submit its recommendations for the division of revenue between national and county governments, and among the counties, to the rest of government.
Source: PFM Act 2012 and www.internationalbudget.org
The Legislature has a role to apportion the resources vertically through the annual division of revenue and horizontally through the county allocation of revenue (among the 47 counties). This traditionally was a role played by the Executive, in particular by a few officials within the Treasury. This will happen throughout the annual Division of Revenue Bill to divide revenue raised nationally between the national government and the county level of government, as well as sharing revenue among the counties through the County Allocation of Revenue Bill (Article 218). This departure from the past should enhance transparency and also ensure that there is increased predictability of resources particularly to the county governments. The challenge to this, however, will be how Parliament will maintain fiscal discipline and adhere to the fiscal responsibilities outlined in our Constitution (Article 201). The Legislatures influence on the budget proposal is also determined by the time allocated to consider budget proposals. It is true that a Legislature with little time to examine budget proposals is at a disadvantage since the time available to carry out analysis and review proposals is critical in determining the level of amendments that the Legislature can make. The 2010 Constitution provided for submission of the budget to Parliament at least two months before the end of the financial year. This is limited time compared to other international practice. For example the USA has the longest lead time as the period spans nine months. For other countries, the period ranges between three months to a few weeks. Table 2.5 shows a summary of budget submission to the Legislature for various countries.
Table 2.5: Timelines for budget submission to legislatures across the world Country Kenya Japan France Korea Mexico Netherlands Sweden United Kingdom United States Start of fiscal year 1st July 1 April
st
Deadline for submission 30th April During January First Tuesday of October 2nd October 8th September Third Tuesday of September No later than 20th September None (at the discretion of HM Treasury) First Monday in February
Budget analysis 2 months More than 3 months About 3 months About 3 months About 4 months More than 3 months More than 3 months -
Source Constitution Public Financial Law Organic Budget Law Constitution Law Constitution Law/act of Parliament -
1st January 1st January 1st January 1st January 1st January 1st April
1st October
About 9 months
Law (Budget and Accounting Act)
Source: Parliamentary Budget Office
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If successfully implemented, fiscal decentralisation would see a closer matching of needs and resources at the county level. The nationally collected revenue will be distributed between national and county governments and there will be a four-fold increase in the share of resources to be managed outside of the central administration. The devolution to newly-established counties therefore is a significant shift away from the current structure where funds and services are predominantly centrally planned, budgeted for and executed, and it is expected to improve the link between planning and budgeting, particularly at the county level. The resources to be managed by county governments will include ownsource revenues (e.g. from property taxes), a minimum 15 percent transfer from national government of ordinary revenues, and a share of the newly-introduced equalisation grant (0.5 percent). The new Public Financial Management Act 2012 provides a catalyst for additional reforms and consolidates a number of existing laws. The PFM Act thus provides a framework for PFM in the new devolved system of government and for the first time in Kenya there will be a single PFM legal framework for all levels of government. Further, the act seeks to promote good financial management and comply with constitutional requirement to enact legislations on public finance listed in the 5th Schedule and also mentioned in Chapter 12. The act introduces a Treasury Single Account (TSA) for the central government (and a TSA for each of the 47 county governments), and a harmonised unitary chart of accounts which will also be used by county governments. The PFM Act is expected to improve the cash management practices through the TSAs as it will reduce idle cash balances, estimated to be KSh. 16 billion or 3 percent of government spending. There will be limited scope for additional expenditure mid-stream. The act has also brought about some critical changes in the budget execution whereby an increase in one appropriation must be offset by a reduction in another, and any savings from reduction in expenditure will go to reduce the deficit (Section 39 of the PFM Act, 2012). The Contingencies Fund will be used only for urgent and unforeseen expenditure, set for KSh. 10 billion at the national government, while the county emergency fund is set at 2 percent of county government revenue. The act has also introduced the establishment of a new accounting standards board that will ensure best practices in accounting standards are adopted. The other notable change brought out by the PFM Act is the adoption of programmebased budgeting to performance targets as from the next fiscal year. The act also
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envisages a greater role for Parliament in scrutinising the budget and a change in the budget calendar (with earlier submission of the executive proposals) to allow it to do so. With regard to county governments there will be need to have a workable relationship between the national and county governments, and among county governments, such that the principles of public finance management can be adhered to. Towards this end the PFM Act provides for the establishment of the Intergovernmental Budget and Economic Council and County Budget and Economic Forum. The strategy for implementation of fiscal decentralisation will be mindful of the limited capacity at national and sub-national levels and the need to make sure that it is addressed as the Constitution is implemented. In addition, the PFM Act and regulations have strengthened the Audit committees. All MDAs and county governments will have an Audit Committee that is partly constituted by outsiders (non-government members). The Audit Committees will be taking up recommendations from KENAO and PAC as well as from Internal Audit to advise the senior management of respective institutions on their implementation. The Internal Audit Department in Treasury is the main driver of this reform. The 2010 Constitution has brought in the role of Parliament in monitoring the implementation of the budget, by providing expressly that Parliament can allow the Cabinet Secretary in charge of finance to withhold funds from any agency reported to have misappropriated resources. In order to do this Parliament will have to get various reports to support the withholding of funds. The Legislative oversight in Kenya is no longer restricted to budget approval and the review of audit findings. It now includes continuous oversight. Budgeting is a process rather than an event, and budget cycles are ongoing and interconnected. To keep track of all relevant issues, legislators have to follow and be intimately connected with the entire process as it unfolds. Finally, in order to do this, Parliament has to have access to sufficient timely, accurate and useful information on the budget and a well-resourced technical unit to crunch the numbers and summarise them into palatable, useable information.
2.7 PRIORITIES, RISKS AND CHALLENGES

evolution will also introduce new challenges to public financial management, as are discussed in this section.
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The management of debt and contingent liabilities associated with sub-national borrowing. County governments will also have the capacity to borrow, with a national guarantee, requiring a new public financial management challenge to be addressed. Analysis of local authorities finances shows there are large arrears accumulated at the sub-national level, arising in part from some local authorities who did not have an adequate own-revenue base to finance their functions, but for the most part the debts and payment arrears relate to larger local authorities with good revenue-bases but poor financial management. The public financial management reforms need to define new fiscal rules and practices for dealing with sub-national borrowing and maintaining fiscal discipline and sustainability. There is a risk of duplication and overlap of mandates between national and county governments. While Parliament has enacted the Transition to Devolved Government Act 2012 to provide a framework for transitional processes leading to the establishment and operationalisation of county governments, key policy and operational decisions have yet to be mapped out and agreed upon between the Transition Authority and the relevant ministries and departments. There is also an urgent need to clarify roles and responsibilities, coordination mechanisms and structures for engagement between inter-government fiscal relations players in order to avoid conflict, duplicity and ambiguity in PFM bodies discharging their various mandates. The Transition Authority has a key role in identifying these issues and coordinating their resolution. This will facilitate harmony in interaction of these bodies and fast track implementation of the Constitution. Budgetary independence could undermine key principles of PFM and strategic prioritisation. Both the Judiciary and Parliament will continue to have budgetary independence, and the budget estimates will be submitted for approval without consolidation by National Treasury (Articles 173(3), 127(6) and 221(1) respectively). This will introduce new challenges for the Treasury in ensuring the basic principles of fiscal discipline (spending within means) and optimal expenditure allocations, ensuring funds are directed to policy priorities. Time allocated for preparation and approval of the budget is short, not allowing for adequate interrogation of the budget. This may lead to quick approval of budgets that have not been well scrutinised. It is challenging to conclude the level of financing required for counties to be fiscally viable. The roles and responsibilities for the introduction of county governments, sub-county governments and ward level administrative units, and the future of the existing central government districts and devolved funds
54
(notably CDF), remain undecided. The current organisation of service delivery at the local level is overly complicated and devolution provides an opportunity for introducing simplification and streamlining of functional assignments. Not only do the current local authorities, districts and constituencies have overlapping functional assignments but also overlapping administrative boundaries.5 (The district administration is even more complex given the proliferation of district offices since Independence: from 40 at the time of Independence to 158 at the time of the last census). PFM Outlook: Priorities for 2013-2015 The following are the top priorities for public financial management for improved fiscal performance: Building sub-national PFM capacity and managing inter-governmental fiscal relations. Of importance will be how the flow of funds to county governments will work under the new legal framework and ensuring there is predictability in the timing and size of the transfers throughout the fiscal year. Roll out IFMIS in the county system. Considering that larger sums of public funds will be expended outside of central government to the counties, there is need for a system of generating more reliable financial management in order to ensure fiscal discipline and expenditure efficiency. Budget presentation. The citizen budget introduced in 2011 was a great step forward, being able to synthesize the budget in way that is understandable to the public. However, with the introduction of a new chart of accounts, the presentation of a programme-based budget in FY 2012/13 should be accompanied by documentation to explain the changes and how to undertake a comparison with previous budget presentations. Performance targets and monitoring and evaluation. The performance targets of the budget, policy and performance contract processes should be aligned and simplified. Putting aid on budget. There is need for development partners to publish more regular and consistent information on their development projects, which should be harmonised and systematised to capture regular information on project
5
There are currently 175 local authorities providing largely urban services, which have their own administrative boundaries established under the Local Government Act Regulation in 1963, comprising the City Council of Nairobi, 62 town councils, 67 county councils and 45 municipal councils. There are eight provincial offices which coordinate 285 districts (de-concentrated central government offices) which currently deliver most public services, education, health, rural electrification etc. There are 210 constituencies, with local committees established to spend constituency development funds (CDF) on local projects (education and health infrastructure mostly). CDF was introduced in 2003 to channel resources to address regional inequities through members of Parliament (MPs).
55
management and results (e-PROMIS). The aid inflows should then be put on Treasury systems and IFMIS for financial monitoring and accounting. Monitoring and managing fiscal risks. This was initially introduced in the 2011 Budget Policy Statement and needs to be enhanced, given the introduction of county governments with potential for borrowing, setting up public private partnerships and running commercial operations. Transfer of fiscal powers and county budgets. Following the decision to transfer functions to counties in the transition period as required under Section 23 of the Transition to Devolved Government Act, 2012, the quantum of county budgets to be transferred needs to be determined.
2.8 CONCLUSION
Recommendations here is need to conduct a PFM capacity assessment in the new counties as well as assist with their capacity development. The devolution of responsibilities to county assemblies gives a four-fold increase in the share of resources to be managed outside of the central administration. Given the past experience with the poor management and results of devolved funds noted in several audit reports, there is need for in-depth assessment of the PFM capacity of new counties to handle funds. GoK needs to develop and roll out as soon as possible a long-term programmatic approach to systematically supporting capacity development in the counties. This may require phasing-in the transfer of PFM and other functions to counties over time, following predefined capacity benchmarks.
Managing and sustaining the implementation of the re-engineered IFMIS to full completion and usage across national and county governments is a priority PFM reform. The full implementation of IFIMIS will enable the integration of planning, budgeting, accounting, financial reporting, and procurement functions of government. IFMIS is to be launched in ministries and counties and thus it is important that its institutionalisation should take centre stage in the new PFM reform strategy under preparation. Establishment of the IFMIS Academy is a good step considering the enormous need for training across governments. Implementation of IFMIS should therefore receive the political, technical and financial support required, though there is need to manage the cost of implementation and multiple vendors/ consultants. To get the maximum benefit from IFMIS it is also important that complementary PFM reforms such as adoption of IPSAS are carried out by both central and county governments.
56
Programme-based budget The publication of a programme-based budget this fiscal year 2012/13 and the links between budget allocations and indicators of performance provide an opportunity to improve resource alignment to strategic priorities. Clarification by regulation on reporting formats/requirements together with reduction of the number of targets and increasing alignment can assist in shifting the focus of attention from performance indicator measurement towards performance. The use of performance indicators in the budget process needs to be well aligned with other performance-related initiatives. The foundation of performance budgeting is the demand for, and access to, reliable and relevant information and the development of those information systems to underpin the budget cycle. However, with several initiatives to improve performance being introduced, there is a need to coordinate performance indicators and be efficient in the requirements for reliable and relevant information. In addition to the programme-based budget, performance is monitored by the former Ministry of Planning (Ministerial Public Expenditure Reviews, Annual Progress Report) and the former Office of the Prime Minister (Performance Contracting) through different initiatives. The budget documents focus on presenting financial information but do not report on performance. The Annual Performance Report of the former Ministry of Planning reports against several output indicators, but it is not easy to match the resources against performance in these documents. The Public Financial Management Act includes the following provisions on reporting that will improve the information made available to the public. The introduction of a programmebased budget to be presented to Parliament is also useful in make reporting clearer on whether resources are aligned to priorities and whether or not the spending programmes they are aligned to are in fact achieving results. Nevertheless, there is scope for improvement. For example the accounting officer is not required to include in the end-of-year financial statements the actual expenditures by programme, only by vote. In a number of clauses there are financial reports to be prepared, but they are not required to be laid before Parliament (National Assembly or Senate), or to be published and made publicly available.
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58
PUBLIC EXPENDITURE REVIEW | EYE on BUDGET: Spending for Results
Chapter 3
educAtion
3.1 INTRODUCTION
his chapter reviews education sector public expenditure over the three financial years from 2009/10 to 2011/12. It provides a policy and performance overview of the sector, a review of progress since the 2010 public expenditure review, various public expenditure analyses for the three-year period, before concluding with a nuanced sector-level public financial management snapshot. A forward-looking policy perspective, which focuses on the implications of the 2010 constitution in general and devolution in particular, follows. The chapter then presents an outlook on education sector public expenditure for the 20132015 period before concluding with an overall assessment and set of policy recommendations based on the overall findings and analysis. 3.1.1 Sector profile The education sector aims at empowering Kenyans with the necessary skills that will facilitate transforming the country into a globally competitive economy because Kenyas main potential lies with its peopletheir creativity, education and entrepreneurial skills. The government is committed to providing quality education and training as well as research and innovation in line with the Constitution, national objectives and globalisation trends. To achieve this aim, the sector has articulated policies and institutional and legal frameworks that effectively address stakeholders needs and aspirations as well as social economic dynamics. 3.1.2 Policy goals and performance targets Sector development objectives As stipulated in Sessional Paper No. 14 of 2012, the emphasis of the national goal of the education sector shifts from knowledge reproduction to knowledge
59
Education
production. The sector aims at providing globally competitive quality education, training and research. To achieve this aim, the sector has endorsed Vision 2030 and will focus education and training towards achieving the goals of the Vision and the provisions of the Constitution. Box 3.1 spells out goals and sector targets.
Box 3.1: Education sector targets Basic education targets The overall basic education goal is to reduce illiteracy by increasing access to education, improving the transition rate from primary to secondary schools, and raising the quality and relevance of education. Specific objectives:
Integrate early childhood development and education (ECDE) into basic education. Establish, maintain and manage professional teaching service for all public pre-primary, primary,
secondary and tertiary institutions. Higher education sector targets
Enhance access, equity and quality at all levels of technical education and training by 2013. Improve technical education and training quality through enhanced funding. Provide bursaries to students, especially girls from poor families, in technical institutions. Improve the quality and relevance of teaching, learning and research at universities and technical, vocational, entrepreneurship and training (TVET) institutions by 2012.
Promote and popularise ICT as well as science and technology education by 2013; Promote and popularise research and technology at all levels by 2013. Improve the quality and relevance of teaching, learning and research at TVET institutions by
2013.
Increase the proportion of women in teaching, administration and research at all levels of higher
institutions by 2013.
Introduce new modes of operation that will provide links between all higher education and
training institutions with communities by 2013;
Promote and popularise open and distance learning at all levels of education and training by
2012.
Increase transition from secondary to university with special emphasis on bridging the gender
gap in all programmes.
Promote links and collaboration between industry and institutions of higher learning. Promote innovativeness and research in tertiary colleges and universities.
Source: GoK 2012, Ministry of Education 2012 and Ministry of Higher Education, 2012
3.2 POLICY, LEGAL AND INSTITUTIONAL FRAMEWORK
T
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3.2.1 Policy, legal and strategic framework he education sector is largely guided by the Constitution; the Basic Education Act of 2013, the TVET Act of 2013, the Universities Act No. 42 of 2012, the KNEC Act of 2012, Vision 2030 and Sessional Paper No. 14 of 2012. According to the Bill of Rights of the Constitution, basic education is a fundamental human right. The Constitution guarantees every child free and compulsory basic education.
Education
It further provides for access to affordable tertiary education, training and skills development. This access is consistent with the international education commitments and other international conventions to which Kenya is a signatory. For example, the African Charter on Human and Peoples Rights, Article 17, provides that every individual shall have a right to education; the African Charter on the Rights and Welfare of the Child, Article 11, articulates detailed provisions on the right to free and compulsory basic education for the child and the states obligation towards that right; the United Nations International Convention on Social and Economic Rights, Article 13, declares the recognition of the right of all to education and the objectives thereof. The Convention on the Rights of the Child, Articles 28, 29 and 30, secure the rights of a child to free and compulsory basic education. Kenya is also a signatory to the Jomtien Protocols (1990), the Dakar Declaration of 2000, and the Accra Accord of 2002, which established the Millennium Development Goals. 3.2.2 Institutional framework and organisational structure Under the Constitution, the education sector in Kenya is governed and managed by a two-tier government, the national government and the county governments. The education sector is structured as basic education, technical, vocational, entrepreneurship and training (TVET) and university education. Basic education covers two years of pre-school (age 45 years), eight years of primary (age 613 years) and four years of secondary education (age 1418 years). Tertiary education comprises TVET, teacher training and higher education. TVET, constituting technical, vocational education and training, is offered at all levels from basic to university education. University education is a minimum of four years leading to the award of a university degree. 3.2.3 Flow of funds framework The largest flow of public funds in the basic education sector is from the Ministry of Finance to the Teachers Service Commission (TSC) for providing teachers for public pre-primary, primary, secondary schools, teachers training colleges and technical training institutions (Figure 3.1). Second, the free primary education(FPE) and free day secondary education (FDSE) capitation grants are funds sent direct to schools on the basis of their enrolment numbers, and the secondary school bursary fund is sent to the school for bursary recipients identified by the Constituency Bursary Fund Committee.1 There are also sub-national education programmes. About half of the funds allocated to the Constituency Development Fund via the Ministry of Planning are for the education sector. Third, they are mostly spent on school infrastructure projects but some are for bursaries, which flow direct to schools once the Constituency Development
1
Capitation grants have been provided to primary schools since 2003 and secondary schools since 2008.
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Education
Figure 3.1: Flow of funds in the education sector

Tax Payers Development Partners: Bilateral, Multilateral
Ministry of Finance
MoLG
MoP
MoHEST
MoE
TSC
MoY
Local Authorities
Constituency (CDF and SSB)
RSTI
SAGAs
Provincial HQ
Teachers (Salaries)
TSC HQ
Universities
TIVETs
District HQ
Students
Private Schools (ECD, primary and secondary
Public Schools (ECD, primary and secondary
Youth Polytechnic
Households
Private Sector Companies /individuals/NGOs/FBOs
Development Partners
Source: MoE
Fund Bursary Committee has identified beneficiaries. Fourth, central government funds are transferred to the local authorities, where they mingle with own-source revenues and about 10 percent are spent on the sector.2 With the introduction of county government education programmes the flow of funds is about to get even more complex. It would be useful to initiate a review of the effectiveness of local authority and Constituency Development Fund (CDF) projects and ensure that county governments coordinate the sub-national spending programmes that are going forward. FPE and FDSE capitation grants are expected to enhance access to education for poor children. Several specific grant and bursary programmes have also been introduced to improve access to vulnerable children. Other initiatives include establishment of mobile schools in nomadic areas; provision of additional support to low-cost boarding schools in arid and semi-arid lands (ASALs); special capitation grants for special needs education; provision of support to non-formal education institutions offering primary school curriculum in slum areas; and improvement of school health and nutrition in collaboration with the Ministry of Health.
3.3 PERFORMANCE REVIEW
K
2
3.3.1 Historical performance trend
enyas education landscape has changed rapidly since independence in 1963. At that time, most adult Kenyans had received no formal education. But by 1980 the number of Kenyans with primary education had exceeded those
They include the former ministries of Local Government and Planning and the present Ministry of Education, Ministry of Higher Education, Science and Technology (MoHEST), TSC, the Ministry of Youth.
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Education
with no education; just over a decade later, those with secondary education also exceeded those with none. Today, a majority of Kenyans have had the benefit of attaining basic education, and almost all children are going to school, except in marginalised areas such as informal settlements and ASALs. But the most rapid increase has been in secondary education. In 2000, fewer than four million people in Kenya had secondary education. By 2012, seven million had this level of education, and the number is expected to triple to 20 million by 2035. Higher education is also picking up from a low base; the number of Kenyans with a university degree is expected to exceed the number without formal education. 3.3.2 Recent performance indicators of outcomes and outputs The education sector in Kenya has over time experienced a massive expansion in enrolment and number of institutions. The number of public and private primary schools increased from 6,058 in 1963 to 28,567 in 2011, while the number of secondary schools has increased from 151 to 7,297 over the same period. The number of universities has also increased, from 1 in 1963 to 22 chartered public universities, 10 public university colleges, 17 private universities with full charter and 10 with interim authority, five constituent colleges of private universities and a number of tertiary institutions. The accelerated reforms undertaken within the sector education and the introduction of FPE in 2003 and FDSE in 2008 have led to massive expansion of the sector at all levels. Table 3.1 shows the performance of selected indicators. 3.3.3 Early childhood education The pre-primary curriculum is guided by the Early Childhood Development Policy of 2006: which emphasises the principle of holistic development. The years 2007 to 2011 have witnessed increased enrolment in pre-primary school by 40 percent, with an addition of 679,000 children. The net enrolment rate increased from 42.1 percent to 52.4 percent over the same period, and there is near gender parity in enrolments. In practice, however, public pre-primary schools do not have welldeveloped early childhood services for children under the age of three years. Teaching is focused on literacy and numeracy skills meant for early primary education centres, partly due to pressure from parents, who view ECD as early schooling. Child-centered pedagogical methods, which would provide a better basis for learning, exist in only a few private centres in urban areas. Although global empirical evidence indicates the importance of early childhood learning, the quality of early childhood care in Kenyan public schools does not take into account the need for early stimulation and better nutrition (see Box 3.2). Counties with good pre-primary access now have the opportunity to improve the quality of early childhood care and better focus on the pedagogical methods that have a lasting impact.
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Education
Table 3.1: Trends in key indicators of education in Kenya Unit

ECD Total enrolment (000) GER (percent) NER (percent) GPI (percent) Primary Total enrolment public (000) Total enrolment private (000) GER (percent) NER (percent) GPI (percent) Pupil completion rate % Primary to secondary transition rate % Secondary Total enrolment (000)* GER (percent) NER (percent) GPI (percent) Higher education National polytechnics total enrolment (000) Kisumu Polytechnic Eldoret Polytechnic TVET institutions total enrolment (000) Technical training institutes Institutes of technology Universities total enrolment (000) Public universities Private accredited Private unaccredited 102,172 20,157 975 106,422 21,164 1,034 149,555 29,028 6,151 145,970 31,327 6,520 166,119 33,439 6,905 20,335 9,814 22,008 10,575 22,437 10,733 22,878 10,893 2,9974 1,8786 2,313 2,752 2,790 2,983 3,748 3,252 2,579 3,621 2,926 5,277 No. 1,180.27 38.0 24.2 0.85 1,335.9 42.5 28.9 0.85 1,472.6 45.3 35.8 0.86 1,653.4 47.8 32.0 0.86 1,767.7 48.8 32.7 0.87 No. No. 7,441.0 372.0 108.9 91.6 0.95 81.0 59.9 7,640 889.0 109.8 92.5 0.96 79.8 64.1 7,853.0 924.0 110.0 92.9 0.96 83.2 66.9 8,283.4 1,097.8 109.8 91.4 0.97 76.8 72.5 8,706.2 1,153.8 115.0 95.7 0.98 74.6 73.3 No. 1,691.1 59.0 42.1 0.93 1,720.2 59.8 43.0 0.94 1,914.2 60.6 49.0 0.98 2,193.1 60.9 50.0 0.99 2,370.1 65.6 52.4 0.98
2007
2008
2009
2010
2011
Sources: Economic Survey; Ministry of Education; World Bank 2012 Notes: GER gross enrolment rate; GPI gender parity index: ratio of the number of females to the number of males enrolled; NER net enrolment rate. * Data are for both public and private schools. Egerton, Jomo Kenyatta (JKUAT), Kenyatta, Maseno, Masinde Muliro, Moi, Nairobi, Technical University of Kenya (formerly Kenya Polytechnic University College), Technical University of Mombasa (formerly Mombasa Polytechnic University College).
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Education
Box 3.2: Investing in young children: evidence of early childhood development impact Evidence is emerging internationally of the high returns to investments in early childhood education. Delays in childrens cognitive and overall development can lead to future costs in public health and education sectors, because deprived children lose out on the opportunity for significant brain development in the first yearsincluding before birth. The greatest window of opportunity for brain development is mostly from the last trimester through to four years of age and is dependent on sufficient nutrition and early sensory and cognitive stimulation. Children who start behind, tend to stay behind (Schulman and Barnett 2005), and the ability to change brain function decreases over time (Levitt 2009). Empirical evidence points to the strong cross-sectoral links between education, health and social protection. For example: (i) for children to be prepared to learn and to stay in school, they need to be nourished, free of worms and healthy; (ii) brain development and cognitive ability are critically affected by nutrition and early stimulation, especially during the prenatal to two-year growth period; and (iii) poor families often need interventions such as cash transfers to access basic education and health facilities. Facilitating such interventions will require county governments to coordinate closely with national social protection schemes such as the orphans and vulnerable children cash transfer scheme, and with the county primary health programmes.
Source: Ministry of Education
3.3.4 Primary education Following the implementation of FPE policy, the net enrolment rates increased from 80.4 percent in 2003 to 95.7 percent in 2011. Gender parity in access also improved at primary level, increasing from 0.95 in 2007 to 0.98 in 2011. While completion rate increased from 77.6 percent in 2005 to 83.2 percent in 2009, it dropped to 76.3 percent in 2010 as a result of an increase in drop-out rates particularly in standard eight and particularly for boys in that year (see Table 3.2). Kenyas primary net enrolment rate in 2009 was 92.7 percent and 95.7 percent in 2011slightly higher than in Uganda (92.2 percent), South Africa (84.7 percent) and Ghana (76.2 percent). The Sub-Saharan African average was 75.1 percent. Kenya has a more educated youth population than does its peersin 2009, its youth literacy rates were higher than those of South Africa, Ghana, Uganda and Tanzania. Kenya, however, needs to work hard in other aspects of education to catch up with its peers in increasing the ratio of girls enrolment and reducing the percentage of learners who fail to complete primary education. 3.3.5 Secondary education Kenyas secondary school enrolment rates are above those of other countries in East Africa. Access to secondary school education has increased in general though there are low levels of enrolment in some counties. Net enrolment rates increased from 24.2 percent in 2007 to 32.7 percent in 2011 (see Figures 3.2). The percentage of children transiting from primary to secondary rose from 59.9 percent to 73.3 percent during this same period.
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Education
Table 3.2: Key education indicators in selected countries, 2009 High Income: OECD Egypt Indicator Ghana Sub-Saharan Africa Mauritius South Africa Kenya Tanzania 77.4 102.3 100.0 78.4 2.4 Uganda 87.0 72.8 101.3 83.7 11.7 92.2 3.2
Literacy rate, youth total (Percent of people ages 15-24) Primary completion rate, total (percent of relevant age group) Ratio of female to male primary enrollment (percent) Ratio of female to male secondary enrollment (percent) Repeaters, primary, total (percent of total enrollment) School enrollment, primary (percent net) Public spending on education, total (percent of GDP) 96.0
80.1
99.7
92.7
96.5
88.7
71.9
82.7
98.4
83.2
89.4
93.2
66.9
95.8
99.0
100.0
97.7
100.1
96.0
91.6
96.5
88.6
99.8
90.4
102.5
104.9
79.3
3.3
6.5
0.4
3.7
8.0
10.9
95.4
76.2
95.6
92.9 6.4
94.0 3.2
84.7 5.4
75.1
96.4 3.6
Sources: World Development Indicator, UN Millennium Development Goals and government sources
Most learners meet the basic requirement for enrolling in secondary school but are faced with the challenge of finding a place in the schools currently available. Since it takes both the public and private sector to cater for the increased numbers in primary school, there is generally a higher attainment level of private
Figure 3.2: Secondary school NER (average public and private) by county, 2009
60 Secondary NER, 2009 50 40 30 20 10 0 Kiambu Nairobi Nyeri Nyamira Murang'a Kirinyaga Kisii Nyandarua Embu Laikipia Mombasa Nakuru Machakos Kisumu Tharaka Nithi Makueni Kajiado Uasin Gishu Vihiga National Homa Bay Taita Taveta Meru Kericho Trans Nzoia Bomet Siaya E. Marakwet Kakamega Migori Nandi Baringo Bungoma Kitui Isiolo Lamu Busia Narok Kilifi Marsabit Kwale Mandera Samburu Tana River Wajir Garissa West Pokot Turkana Source: MoE-EMIS, based on 2009 census data
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Education
Figure 3.3: Gender parity index in public secondary schools, by county, 2011
1.4 1.2
Secondary GPI, 2011
3 4
1.0 0.8 0.6 0.4 0.2 0

E. Marakwet Kirinyaga Uasin Gishu Murang'a Meru Nyeri Nandi Vihiga Kitui Kiambu Baringo Nyandarua Kakamega Machakos Taita Taveta Embu Kwale Nakuru Bungoma Makueni Kisii Migori Trans Nzoia Narok Kisumu Kericho Bomet Nyamira Mombasa Nairobi Busia Laikipia Lamu Siaya Kilifi Tana River Tharaka Nithi Isiolo Homa Bay Marsabit Kajiado Wajir Turkana Samburu Garissa West Pokot Mandera
Source: Teacher Service Commission 2012
school graduates competing for secondary school places, causing contention between public and private school students.3 3.3.6 Comparative benchmarking The quality of Kenyan schools also appears to be better than that in most of subSaharan Africa; students perform well on comparable standard competency tests. The results from the Southern and Eastern Africa Consortium for Monitoring Educational Quality (SACMEQ) III survey in 2010 reveal that Kenyan learners in standard six (aged 11 years) generally perform well on both reading and mathematics tests compared with their counterparts in 15 countries in subSaharan Africa.4 For instance, Kenya is ranked fourth after Seychelles, Mauritius and South Africa on standard six pupils reading competency level eight and second after Mauritius on standard six pupils mathematics competency level eight (Figure 3.4). (See Box 3.3 for detailed description of competency level eight in reading and mathematics.) The Uwezo East African survey (2011) also finds the Kenya school system performs better than Uganda and Tanzaniaa higher number of standard three, four and five pupils in Kenya can perform up to standard two numeracy testbetter than their counterparts in Uganda and Tanzania (Figure 3.5). That said, this should not imply complacency, since overall educational attainment is often not sufficient for the student to go on for higher education. Exam performance at secondary level is disappointing: three-quarters of the
The public school system expanded its capacity to cater for an additional 0.5 million, 1 million and 0.8 million students in pre-primary, primary and secondary schools between 2005 and 2010; enrolments in private primary schools quadrupled from about 0.3 million to 1.1 million pupils over this period. South Africa, Swaziland, Tanzania, Uganda, Zambia, Zanzibar and Zimbabwe.
SACMEQ member countries are Botswana, Kenya, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles,
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Education
Figure 3.4: Southern and Eastern Africa Consortium for Monitoring Educational Quality (SACMEQ) combined reading competency level eight
Seychelles Mauritius South Africa Kenya Tanzania Botswana Zimbabwe Zanzibar Namibia Swaziland Zambia Uganda Lesotho Mozambique Malawi 0 0.5 0.5 0.4 0.3 0.0 2 4 6 8 10 12 Percent of pupils with reading competency level 8 14 16 18 1.8 2.5 3.0 4.5 5.8 6.6 6.4 6.2 15.4 16.2
Source: SAQMEQ, 2010
candidates do not achieve the minimum grades considered desirable for admission to university or other middle level colleges (C+ and above for university education and C for middle level colleges) (Figure 3.6). Over the last five years, improvement in the national mean score on secondary level exams has not been significant. A number of quality assessments and studies point to problems with learning achievements.5 According to the Uwezo survey (2011), Kenya, the country with the best performance in numeracy and English tests, 12 percent and 14 percent of pupils in standard seven failed to reach standard two level numeracy and English tests respectively (Figure 3.7).
Figure 3.5: Percentage of pupils who can perform up to standard two in numeracy test
80 70 Percent of children who perform up to Standard 2 level 60 50 40 30 20 10 0 36 25 18 55 44 33 70 59 46
Standard 3 Kenya
Standard 4 Uganda Tanzania
Standard 5
Source: Uwezo, 2011

5
Nzomo et al, 2001; Onsomu et al, 2004; Uwezo, 2011.

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Box 3.3: Southern and SACMEQ reading and mathematics competency levels Level eightReading competency: reading for meaning Skills: Locate information in a longer text (narrative, document or expository) by reading on and reading back to combine information from various parts of the text so as to infer and evaluate what the writer has assumed about the topic and the characteristics of the readersuch as age, knowledge and personal beliefs (value systems, prejudices and/or biases). Example test items: Use text structure and organisation to identify an authors assumption and purpose; identify an authors motives, biases and beliefs to understand the main theme; link text to establish multiple meanings including analogy and allegory. Level eightMathematics competency: abstract problem solving Skills: Identify the nature of an unstated mathematical problem embedded within verbal or graphic information and then translate it into symbolic, algebraic or equation form to solve the problem. Example test Items: Identify the nature of a problem, translate the information given into a mathematical approach, and then identify the correct mathematical strategies needed to obtain a solution.
Source: SACMEQ, 2010
3.3.7 Tertiary education Access to tertiary education has been on the rise, and recent expansion in both public and private sectors has provided new opportunities for Kenyans seeking higher education. Kenyas university gross enrolment rate (GER) was estimated at 5 percent in 2009, lower than the sub-Saharan African and South African averages of 5.9 percent and 15 percent respectively. Enrolment in public universities grew by approximately 63 percent between 2007 and 2011 but there are still not enough placesover 70 percent of secondary graduates with the
Figure 3.6: Trends in KCSE examination results 2006-2010
400 350 Number of candidates ('000) 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 # of Candidates: Scoring C and below Source: KNEC, 2011 # of Candidates: Scoring C+ and above 62.9 74.3 72.6 81.1 97.0 178.4 196.0 228.3 252.8 257.1
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Education
Figure 3.7: Mean grade of students in secondary exams, 2001-2010

5.3 5.2 5.1
Mean grade
5.2 5.1 5.1 5.1
5.1 5.0 5.0
4.9 4.9 4.8 4.7 4.6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 4.9 4.8 4.9
Source: KNEC, 2011
minimum university entry grade of C+ do not get places in public universities, Some join either public or private universities as6 self-sponsored students. Currently, there are 22 public and 17 private universities Enrolment in private universities increased from 21,032 to 40,344 between 2007 and 2011 (Figure 3.8). University education faces various challenges that include a mismatch between what universities teach and the demands of industry; maintaining good standards in all universities; a high enrolment of students in the module 2 degree programme 7 that has overstretched the capacity of staff to deliver on teaching and learning programmes; part-time teaching in universities due to shortage of lecturers and tutors, which compromises the quality of education. Substantial disparities in access to university education exist across counties. County GER ranges from 17 percent in Nairobi to 0.4 percent in Tana River County. Technical and vocational education institutions absorb a big percentage of the graduates who do not proceed for university education, either publicly or privately sponsored. VET institutions are national polytechnics, institutes of technology, technical training institutes and youth polytechnics (which absorb mainly primary graduates). Growth in enrolments in TVET institutions has been marginal because two leading national polytechnics, Kenya and Mombasa polytechnics have been converted into universities. According to a study by Onsomu et al. (2009), the TVET sector in Kenya faces various challenges. Among them are fragmented programmes, limited integration into the formal education system, weak linkage with labour markets, insufficient financing, inadequate
6
Enrolment in public universities increased from 81,677 in 2005 to 143,130 in 2010; and in private universities from 10,639 to 37,847 between 2005-2010. Module 2 takes self sponsored student.
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Figure 3.8: University enrolment, academic year 2004/05 to 2010/11

160 140 120 Total enrolment 000 100 80 60 40 20 0 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11
Public universities Source: Economic Survey, 2012
Private universities
monitoring, poor wage employment opportunities for its graduates, and limited alignment with technological innovation in local and global markets. These issues need to be addressed, given the importance of TVET institutions in national development. The number of pre-primary and primary teacher training colleges is on the rise, estimated at 105 and 89 respectively. Enforcing the quality and standards for these private teacher training colleges must be given priority. Emphasis should be placed not only on the quantity of tertiary education but on its quality as well. According to the African Competitiveness Report (2011), highquality tertiary education programmes that are focused on science, engineering and technology, and entrepreneurship have a high effect on sustainable development. The positive effect is attained through new knowledge creation and ability to adapt new technologies.
Table 3.3: Admission to public universities and TVET institutions, 2004/05 to 2010/11 Academic year Total form 4 enrolment Grade C+ and above (percent) Admitted to university (percent) Grade C+ and above admitted to university (percent) 20.5 18.9 25.3 24.2 24.8 28.9 23.3 Admitted to TVET (percent) Admitted to technical college
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
207,730 222,676 241,643 271,691 301,400 333,816 356,015
24.0 26.2 26.2 25.9 24.1 23.1 27.3
4.9 4.9 6.6 6.3 6.0 6.7 6.4
10.9 10.6 9.8 9.4 9.4 8.9 7.8
4.5 4.4 4.1 3.8 3.1 2.7 2.8
Source: Statistical abstract and joint admission board
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3.4 PUBLIC EXPENDITURE REVIEW (2009/10 TO 2011/12)

ublic expenditure on education and training in Kenya has historically remained high. Despite erratic performance of the economy, the government has continued to devote a significant share of budgetary resources to the sector relative to national wealth, and public spending on education has been growing in real terms over the years. 3.4.1 Spending for results: historical trends Overall expenditure trends Public expenditure on education is defined to include spending on education from the Local Authorities and Constituency Development Fund of the Ministry of Higher Education, Science and Technology. As indicated in Table 3.4, Kenya spends a significant amount on the education sector relative to total public spending. Education expenditure rose by 53.0 percent from KSh. 141.6 billion in 2008 to KSh. 216.6 billion in 2011, representing a 20 percent share of total public spending on average. The increase in spending on education should continue to grow in line with the overall budget growth to sustain education reforms and improve education achievements in Kenya. The sector aims at attaining universal primary education by 2015 and continues to expand access to secondary and higher education.
Table 3.4: Education expenditures, 2003/04 to 2010/11 (KSh. billion) 2009/100 2010/11 estimate 201.1 194.1 7.0 106.6 102.9 3.7 7.2 20.0 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2011/12 budget 216.6 208.1 8.5 109.4 105.1 4.3 6.6 22.1
Education expenditures, of which: Central government Devolved (CDF and LATF) Education expenditures (2003/04 prices), of which: Central government Devolved (CDF and LATF) Total education expenditure of GDP (percent) Total education exp, percent of govt. spending
74.6 74.1 0.6 74.6 74.1 0.6 6.2 19.8
83.4 81.0 2.4 77.9 75.7 2.2 6.2 22.0
96.2 92.6 3.5 85.6 82.4 3.2 6.3 22.2
108.6 103.8 4.8 89.6 85.7 4.0 6.3 21.3
126.2 121.3 4.9 99.1 95.3 3.9 6.4 19.0
141.6 137.0 4.6 98.3 95.2 3.2 6.3 20.4
166.1 161.9 4.2 98.6 96.1 2.5 6.8 20.6
Sources: Economic Surveys, Various; KENAO appropriation accounts; CDF and LATF reports; Ministry of Finance Budget Review and Outlook Paper, December 2011. Notes: CDF Constituency Development Fund; LATF Local Authority Transfer Fund.
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The share of expenditure on education averaged 6.5 percent of GDP in the last five years, a level that is comparable to the average in developed economies (Figure 3.9). This demonstrates the commitment of the government in providing quality education and training to Kenyans. Compared with other countries in the sub-Saharan African region, Kenyas public spending is well above average, which was 3.8 percent in 2009, and is higher than that of South Africa, Uganda and Tanzania.
Figure 3.9: Percentage share of spending on education to GDP
Public spending, total (percent of GDP) 2008 8 7 6 5 4 3 2 1 0 Tanzania Kenya South Africa Sub-Saharan Africa Uganda Egypt Mauritius 3.8 3.8 3.8 3.3 6.8 6.3 5.1
Source: World Development indicators, 2011
3.4.2 Recent public expenditure trends Overall expenditure trends Within the sector, budget resources have shifted towards secondary and higher education. The biggest increases in the last two years have been spending on teachers through TSC; spending on secondary education as a result of grants transferred directly to schools through the Free Day Secondary Education policy. Spending on higher education has also increased with doubling of the development budget allocated to public universities and tertiary institutions. Spending on early childhood and primary education has declined slightly in constant price terms. 3.4.3 Expenditure by composition: recurrent vs development It is important to note a greater percentage of the education budget is made up of recurrent expenditure, accounting for 95 percent of total public spending on education. The spending is mainly on salaries for teaching and non-teaching staff at all levels, teaching and learning materials, operational costs, student
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bursaries, scholarships and loans. Actual recurrent spending rose by 11.5 percent from KSh. 152.8 billion in 2009/2010 to KSh. 170.3 billion in 2011/2012. The increase is mainly attributed to implementation of negotiated salary awards for teaching and non-teaching staff for all levels and absorption of contract teachers into the system. As the country marches towards attaining universal primary education and continues to expand in secondary, tertiary and university levels, recurrent expenditure will continue to rise. For the last three years, development spending has accounted for only 4 to 5 percent of the total spending on education. 3.4.4 Expenditure by functional classification Within the sector, budget resources have shifted towards secondary and higher education. The biggest increases in the last two years have been spending on teachers through TSC and spending on secondary education as a result of grants transferred directly to schools through the FDSE policy. Spending has also increased on higher education with a doubling of the development budget of the Ministry of Higher Education, Science and Technology (MoHEST). Spending on early childhood and primary education has in fact declined slightly in constant price terms. 3.4.5 Expenditure by economic classification As elsewhere, employee compensation accounts for the largest share of public education spending (Table 3.5). Total staff compensation (including wages and salaries, allowances and benefits) increased from KSh. 71 billion in 2006/07 to KSh. 115 billion in 2011/12 and it is expected to reach KSh. 148 billion by 2014/15. The increase has been brought about following the governments decision in 2011 to put 18,000 contract teachers on permanent terms and conditions. In the teaching wage bill, primary education accounts for 56.5 percent of the total wage bill, while secondary and university levels account for 20 percent and 16 percent respectively. Despite the large share of spending on salaries of teaching staff, a shortage of teachers still exists at various levels. Transfers such as grants and subsidies account for 30 percent of spending and have increased as a result of the implementation of FDSE policy (Figures 3.10 and 3.11). The total amount spent on the FDSE grant has increased from KSh. 15 billion in 2008/09 to KSh. 18 billion in 2011/12, as enrolments increased. Per student spending decreased from KSh. 14,400 to KSh. 12,500 (compared with the policy of KSh. 10,250), implying potential efficiency gains in administering the grant programme. At secondary education, the government subsidy is to both public day and public boarding secondary schools to cover instructional materials, schools repairs and maintenance, local transport and travel, administration,
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Table 3.5: Expenditure by economic classification (KSh. billion) 2006 /07 Compensation to employers Use of goods and services Grants, transfers, subsidies Aquisition of non-financial assets 70.9 2.4 22.3 0.3 96.0 2007 /08 70.9 3.8 34.4 4.1 121.3 2008 /09 84.3 7.0 43.8 4.9 139.9 2009 /10 93.5 6.9 46.2 7.9 154.4 2010 /11 106.2 7.8 61.2 9.4 184.6 2011 /12 115.4 9.9 73.3 3.7 202.3 2012 /13 145.9 16.6 97.9 5.3 265.8 2013 /14 144.8 18.3 107.3 5.8 276.2 2014 /15x 147.2 18.5 122.8 6.4 294.9
Sources: MoE and MoHEST MPERs 2009/10, Sector report, 2012
activity fees, personnel emoluments for non-teaching staff, and basic medical costs. Allocations to the FPE transfer fell from KSh. 10.4 billion in 2006/07 to KSh. 9.6 billion in 2009/10 and were budgeted to reduce to KSh. 8 billion in 2011/12 as enrolments fell. Similarly, a reduction in the effective per capita amount from KSh. 1,179 to KSh. 1,049 compared with the stated policy of KSh. 1,020 signals efficiency gains in grant administration. 3.4.6 Expenditure on key programmes The ministrys expenditure by programme and sub-programme is as indicated in Table 3.6. It is evident that allocation to university and technical education programmes has in the recent past increased at a higher rate than for the other programmes. This is because all the public universities and technical institutions are covered under the programme. These semi-autonomous government agencies account for over 80 percent of the ministrys financial resources. The Recurrent Expenditure for University and Tertiary Education Programme has an
Figure 3.10: Free primary education transfers to primary schools
16 14 12 KSh. billions 10.4 10 8 6 4 2 0 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 13.9 12.0 9.6 8.2 8.0
Source: KENAO appropriation accounts, 2012
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Figure 3.11: Free day secondary education transfers to secondary schools

20 18 16 14 KSh. billions 12 10 8 6 4 2 0 2008/09 2009/10 2010/11 2011/12 14.9 15.3 17.4 17.9
Source: KENAO appropriation accounts, 2012
upward trend, increasing from KSh. 19 billion in 2008/09 to 23.2 billion in 2009/10 and again to KSh. 41 billion in the 2010/11 financial year. This is mainly explained by establishment of new university colleges, the recruitment exercise that the ministry has been carrying out to fill most of the vacant posts in the establishment and to a smaller extent by the normal annual salary increase and the increased operations by the technical departments under this programme. 3.4.7 Budget execution and pending bills The funds absorption rate for the recurrent expenditure under the university and technical education programme has remained averagely above 99 percent, indicating proper use of the allocated funds. The same applies to the other two programmes. The absorption rate for the development expenditure has also been reasonably high. Priority areas pursued by the ministry are classified into four programmes: General Administration and Support Services; Basic Education; Secondary and Tertiary Education; and Quality Assurance and Standards. The programmes cut across all the sub-sectors and encompass the following sub-programmes among others: FPE; support to ECDE; grants to support nonformal schools; school feeding programme; health/nutrition and de-worming programmes; grants for special needs education; grants to low-cost boarding primary schools; adult basic education; secondary school bursaries; supply of science laboratory equipment in schools; grants to ASAL secondary schools; grants to support secondary schools in pockets of poverty; FDSE programme; grants to support HIV and AIDS orphans; grants to support community empowerment programmes through adult education; and grants to mobile schools in ASALs.
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Table 3.6: Education expenditure by functional classification and per capita spending 2003/04 0.39 42.65 16.27 1.18 0.35 0.18 7.94 5.11 0.39 42.65 16.27 1.18 0.35 0.18 7.94 5.11 4,945.00 20,112.00 18,283.00 98,317.00 5,812.00 20,071.00 20,501.00 105,326.00 5.19 9.54 11.03 8.96 6,251.00 20,783.00 24,651.00 113,867.00 0.20 0.17 0.24 0.28 1.62 1.79 16.66 15.87 14.56 2.32 0.16 0.29 12.37 7.95 6,862.00 24,937.00 32,302.00 143,353.00 42.17 44.25 48.04 0.02 0.05 0.04 5.56 10.07 9.63 11.95 0.05 49.64 21.92 3.30 0.35 0.33 10.43 9.39 7,463.00 29,623.00 43,474.00 138,417.00 10.22 12.40 14.99 13.27 0.21 0.19 0.35 0.42 0.26 0.32 0.19 0.44 1.73 2.01 2.82 4.20 6.63 0.39 0.59 16.96 10.11 0.17 47.83 23.64 4.61 0.27 0.41 11.78 7.02 7,831.00 29,411.00 53,565.00 137,707.00 17.85 17.83 17.64 27.90 34.02 45.18 49.72 58.19 63.19 68.85 0.02 0.06 0.05 0.06 0.25 0.25 74.81 38.49 7.58 0.27 0.21 18.08 20.78 0.15 44.42 22.85 4.50 0.16 0.13 10.74 12.34 8,306.00 33,207.00 64,436.00 106,975.00 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11* 0.45 76.54 51.25 10.36 0.30 0.55 41.30 17.35 0.24 40.58 27.17 5.49 0.16 0.29 21.90 9.20 8,537.00 32,507.00 69,505.00 187,391.00
Education
Total spending-nominal terms (KSh. billion)
Early childhood education
Primary education
Secondary education
Technical education
Teacher education
Special education
University education
General administration and planning
Real spending 2003/04 (KSh. billion)
Early childhood education
Primary education
Secondary education
Technical education
Teacher education
Special education
University education
General administration and planning
Per capita spending (KSh.), 2003/04 constant prices
Primary
Secondary
Technical
University
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Source: KENAO audited appropriation accounts. * Estimates.
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3.4.8 Spending in relation to resultsefficiency of public spending on education Pupil-teacher ratio (PTR), school size and class size can be used to measure efficiency in use of resources and quality of service delivery. Use of primary teachers has been improving, recording a PTR of 41:1 in 2005 and 46:1 in 2009. The national average primary PTR increased from 42 in 2005 to 46 in 2009, according to MoE, but went back to 40 in 2011 according to TSC.
3.5 POLICY OUTLOOK: CONSTITUTION 2010 AND DEVOLUTION
3.5.1 The bill of rights he 2010 Constitution embodies a Bill of Rights that affirms the right of all Kenyans to education. Article 21 recognises the fundamental duty of the state and every state organ to observe, respect, protect, promote and fulfil the rights and fundamental freedoms outlined in the Bill of Rights. The right to education includes both duties and obligations that are to be realised immediately and those that are subject to progressive realisation. The obligation to ensure free and compulsory primary education and the prohibition of discrimination in education are, for instance, immediate obligations. These are also qualified as minimum core obligations, which apply regardless of available resources. On the other hand, most of the obligations relating to the right to education are to be realised progressively according to the maximum available resources of a state. The provisions of the Constitution have implications on the education sector as they grant consumers the right to goods and services of reasonable quality and to information necessary for them to gain full benefit from goods and services. Education as a service, therefore, must meet minimum quality standards, which suggest there will be an increase in pressure for improved services, with comparison of indicators and results between counties. 3.5.2 Devolution With effect from 2013, county governments will take over responsibility for providing early childhood education and running village polytechnics. The county governments will be responsible for: pre-primary education (or ECD), village polytechnics, home craft centres and childcare facilities. The national government will retain responsibility for education policy, standards, curricula, examinations and the granting of university charters, and for providing basic education (primary, secondary and special schools), public universities, tertiary educational institutions, and other institutions of research and higher learning. At present most pre-primary schools are co-located with primary schools, which implies at the very least coordination challenges of having pre-primary schools
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reporting to county governments and primary reporting to district offices. District offices should closely coordinate with counties; as co-location would likely reduce administration costs. The government will need to deal with various governances issues in the sector. The sector is highly centrally managed with ministry headquarters playing the main management role and little management oversight from the bottom, in particular from grassroots communities. The sector has had public financial management concerns, and an internal audit review in 2010 found significant sums of public and donor resources did not make it to the intended beneficiaries. International Development Association (IDA) financing for the Kenya Education Sector Support Programme was active for only about 30 months of the 45 month duration of the credit. Due to emerging evidence of fraud and corruption, IDA replenishments were effectively suspended from July 2009 through to December 2010 when the credit closed. A report by Transparency International (2010), notes that most governance risks in the sector are petty but systemic and entrenched. While more resources are being devolved to the school for direct management, there is no explicit provision for auditing finances in primary and secondary schools. Also, the manner in which new school facilities are being built funded through devolved funds and the community, without proper planning, continues to put a strain on the available inputs, especially teachers, posing another governance challenge. Further, communication between learning institutions is weak on use of capitation grants with relevant organs, mainly district education offices and parents. 3.5.3 Education management information system Several stand-alone management and information systems exist for managing basic education data, but there is no reliable information system capable of providing policy-makers or school managers with the school level information they require on financial flows and school performance. MoE has an education management information system (EMIS) that includes data on enrolments, teachers and facilities. It is populated with data received in hard copy from the schools via the district offices. However, quality assurance of the data is minimal, there is a backlog in inputting the data (2009 is the most recent), data providers are given little or no incentive to produce the required reports, and EMIS access is limited to a small number of individuals in the ministry, and certainly is not available to school managers. TSC also has a management information system, and TSC and MoE have started to coordinate efforts to have one system accessible to both parties and also to incorporate the National Examinations Council exam results. As of now, data in the sector are still being pulled together across multiple
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reporting agencies, including within the ministry itself and the Kenya National Bureau of Statistics, making it costly to accumulate and challenging to analyse.8 3.5.4 Selected socio-economic and budget analyses Literacy by county According to the 2009 census, 74 percent of the population has at least a primary education. However, this national level educational attainment is not true in most counties situated in ASALs. The gap in educational attainment between rural and urban areas is sizeable: 83 percent of the urban population has a primary education or higher compared with 70 percent in the rural areas. But the national gender gap is small: 75 percent of men and 72 percent of women have at least a primary education. More significant, though, is the difference between the north-eastern region, where only three out of 10 rural women have ever attended school, and the rest of Kenya. Female literacy rates were below 10 percent in Mandera; Turkana and Wajir districts (Figure 3.12). Given the empirical evidence on the importance of female literacy and education for development, this is a critical dimension that will require both county and national education policymakers attention. In absolute numbers, rural Rift Valley Province accounts for the largest share (23 percent) of the total population without schooling.
Figure 3.12: County literacy rates, 2005/06
100 90
Literacy level (2005/06)
80 70 60 50 40 30 20 10 0
Source: Kenya National Bureau of Statistics data, 2005/06
This chapter pulls together the available information from TSC, KNEC, MoHEST and MoE and new county level
estimates have been produced based on the underlying data. The problem of how recent the data are comes up frequently, and the need for a more systematic, preferably automated data collection system is evident.
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Nairobi Uasin Gishu Nyeri Kiambu Kisumu Nyamira Machakos Mombasa Embu Kericho Bomet Nandi Bungoma Vihiga Kisii Nyandarua Makueni Kakamega Migori E. Marakwet Kirinyaga Murang'a Nakuru Homa Bay Meru Baringo Trans Nzoia Kitui Siaya Taita Taveta Busia Laikipia Kajiado Tharaka Nithi Lamu Narok Kilifi Kwale West Pokot Isiolo Tana River Garissa Samburu Marsabit Wajir Turkana Mandera Female literacy Male literacy
Education
Early childhood education However, county governments in areas that have low pre-primary enrolments face challenges in building capacity to focus on early childhood awareness and development in areas such as nutrition and early sensory stimulation for 0-3 yearolds; physical, cognitive, linguistic and socio-emotional development of young children 4-5 years old; and school health and nutrition programmes. High NER levels are observed in counties such as Nyeri, Kiambu, Kisumu and Nairobi. On the other hand, low NER, of less than 10 percent, is typical of northern Kenya, including Garissa, Mandera and Wajir counties. With the responsibility of running early childhood and day care centres, the county governments in these regions will need to consider whether increasing access make sense. Furthermore, parent education will be needed as an essential strategy for enhancing the care and education of younger children, along with specific training for ECD teachers. Primary education Also, Kenya needs to focus on narrowing internal regional variations in education outcomesfor instance, female literacy rates were below 10 percent in northern countiesMandera, Turkana and Wajirbut as high as 90 percent in Nairobi and Uasin Gishu counties (as per the KIHBS data of 2005/06) (Figure 3.13).
Figure 3.13: Gender parity index in public schools by county, 2011
1.2 1.0 Primary GPI, 2011 0.8 0.6 0.4 0.2 0 Nairobi Meru Vihiga Mombasa Kakamega Tharaka Nithi Busia Trans Nzoia E. Marakwet Bungoma Embu Kisii Uasin Gishu Kirinyaga Kiambu Nyandarua Bomet Nandi Siaya Kericho Nakuru Baringo Kisumu Taita Taveta Nyeri Makueni Kitui Machakos Murang'a Migori Nyamira Homa Bay Kilifi Lamu Kwale Laikipia Isiolo Narok Kajiado West Pokot Marsabit Tana River Turkana Samburu Wajir Garissa Mandera Source: TSC, 2012
Secondary education County enrolment rates range from 5 to 10 percent in the north and some parts of the coast to around 50 percent in Kiambu and Nairobi. There is also a wider gender gap between boys and girls at secondary school; the gender parity
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index was 0.86 in 2011with no improvement over the last five years. Girls are much less likely to go on to secondary school in counties from the northern part of Kenya (Garissa, Mandera, Samburu, Turkana, Wajir, and West Pokot). Efficiency of public spending on education Pupil-teacher ratio (PTR), school size and class size can be used to measure efficiency in use of resources and quality of service delivery. Teacher use at primary level has been improving, with a ratio of 41:1 in 2005 and 46:1 in 2009. The national average primary Pupil-teacher ratio increased from 42 in 2005 to 46 in 2009 (according to MoE) and came back to 40 in 2011 (according to TSC). Whereas primary Pupil-teacher ratio is an indication of improved efficiency in teacher use nationally, regional disparities exit with some counties recording high Pupil-teacher ratio well below the expected norm of 40:1. Figure 3.14 shows distribution of the ratio in all counties. Close scrutiny shows that in some counties the expansion in primary enrolments has not been matched by an increase in infrastructure and staff, implying that there are overcrowded classes and insufficient teachers.
Figure 3.14: Primary pupil-teacher ratio by county, 2011
Teacher pupil ratio in public school, 2011
9
70 60 50 40 30 20 10 0 Bungoma Mandera Kericho Turkana Kilifi Kwale Siaya Narok Trans Nzoia Nairobi Garissa Homa Bay Nakuru Kakamega Mombasa Nyeri Samburu Busia Vihiga Wajir National Kajiado Marsabit Kisii Migori Uasin Gishu Kitui Nyandarua Makueni Machakos Meru Kirinyaga Taita Taveta Nandi Murang'a Kiambu Isiolo Tharaka Nithi Embu Lamu E. Marakwet Bomet Kisumu Tana River West Pokot Baringo Nyamira Laikipia
Source: TSC, 2012
As the government endeavours to improve efficiency in use of teachers in public institutions for better outcomes, more attention needs to be focused on teacher absenteeism, which is a major concern affecting the sector. Recent estimates indicate 11 percent and 13 percent of primary and secondary school teachers were absent9 during an unannounced visit to schools. Worse still, some proportion
See Afrobarometer 2010, and Public Expenditure Tracking Survey: Vulnerable Child Grants and Bursaries, 2012 forthcoming.
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of those teachers in school were not in classrooms teaching even though they were expected to be in class. It is important to ensure that teachers are actually in their classrooms teaching. Doing so will guarantee better learning outcomes. Devolving responsibility of managing school inputs at the school level as well as use of local contract teachers is likely to improve efficiency. Local teachers are likely to be more committed to the school and the region than national-hire teaching staff. County per capita spending As the map and the charts show, per capita spending tends to be low for northern and coastal counties and the PTR higher, implying a shortage of teachers in these regions. Counties in these areas also tend to have lower net enrolment rates. But several counties, such as Turkana and West Pokot, report remarkable performance in exams, placing them on the frontier of translating per capita spending into exam performance measured in terms of the percentage of children passing the Kenya Certificate of Primary Education (KCPE) (Figures 3.15 to 3.17). The per capita spending in secondary level shows the reverse: unit costs are higher in the more remote areas in the northern and coastal regions. This fact is explained by the much lower enrolment rates in these regions and lower pupil-teacher ratio (Figures 3.18 to 3.20). The counties in these regions also show the challenge of being efficient with the resources. These counties are much more likely to be well below the frontier in terms of exam performance. Counties such as Kiambu, Nairobi and Nyeri where enrolments and school performance are relatively high are the most cost effective at this level. The counties far from the frontier at primary level such as Garissa, Kwale, Laikipia and Nyamira are not cost effective.
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Figure 3.15: Per capita spending and percentage passing primary school exams, 2009/10
Turkana Marsabit
Mandera
Wajir West Pokot Elgeyo Marakwet Trans Nzoia Kakamega Busia Siaya Homa Bay Kisii Migori Narok Bungoma Baringo Uasin Gishu Nandi Kisumu Kericho Bomet Laikipia Meru NyandaruaKirinyaga Nyeri Tharaka Nithi Nakuru Embu Muranga Kiambu Nairobi Machakos Kitui Makueni Kajiado Tana River Lamu Garissa Samburu
Isiolo
Taita Taveta
Kilifi
KCPE Results Spending

16,000 Pass Fail 4870.0 - 6245.0 6245.1 - 7535.0 7535.1 - 8621.0 8621.1 - 10173.0 10173.1 - 12637.0
0 35 70 Kilometers 140 210 280
Kwale
Mombasa
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Figure 3.16: Per capita spending and NER-primary, 2009

100 Primary net enrolments (2009) Nyeri Murang'a Kirinyaga Kiambu Vihiga Makueni Kericho Bomet Nakuru Nairobi Siaya Elgeyo Marakwet Bungoma Homa Bay Meru Kisumu Kitui Nandi Trans Nzoia Mombasa Narok Kilifi 60 Marsabit 40 Mandera Samburu Garissa 20 4,000 Source: Ministry of Education Turkana 6,000 8,000 10,000 12,000 Wajir Kajiado Lamu
Nyamira Laikipia Baringo
80
Isiolo Tana River West Pokot
Per capita spending based on enrolments (TSC 2011)
Figure 3.17: Per capita spending and percentage of exam passes, primary, 2010
Percent of passers: 250 marks and above, 2010
100 West Pokot 90 Elgeyo Marakwet Nandi Kirinyaga Vihiga Siaya Makueni Kisumu Busia Turkana Kakamega Uasin Gishu Bungoma Kajiado Homa Bay Samburu Migori Tharaka Nithi Kericho Nairobi Embu Narok Machakos Nyeri Bomet Mandera Marsabit Isiolo Kilifi Mombasa Meru Wajir Taita Taveta Nakuru Murang'a Kitui Nyandarua Tana River Kisii Lamu Kiambu Kwale Garissa 4,000 6,000 8,000 10,000
Baringo
80
Laikipia Nyamira
70
60
2,000
Per capita spending based on enrolments (TSC 2011) Source: Ministry of Education
School size There is also room for making better use of small public schools, particularly at secondary level. The optimal school size is 400 pupils for primary and 450 for secondary. As of 2007, the average size of a public primary school was 487 and secondary 219; as the primary school NERs are now high in most counties (Figures 3.21 and 3.22). With the demographic shift, the total number of children
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Figure 3.18: Spending per capita and number of exam passes in secondary level, 2009/10
T urkana Mars abit
Mandera
Wajir Wes t Pokot T rans Nzoia E lgeyo Marakwet Bungoma Busia Nandi S iaya Baringo Laikipia Uas in Gishu Kis umu Kericho Nyandarua Nakuru Bomet Migori Narok Kiambu Nairobi Muranga Machakos Kitui Tana R iver Meru Nyeri T haraka Nithi E mbu Garis s a Is iolo S amburu
Kajiado
Makueni
Lamu
Taita Taveta
Kilifi
K CS E S cores Per capita s pending 2,100 A B C 0.0 - 28664 28665 - 33977 33978 - 40973 40974 - 50970 50971 - 65600
0 40 80 Kilometers 160 240 320
Mombas a Kwale
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Education
Figure 3.19: Spending per capita and NERsecondary, 2009

50 Nyeri Secondary net enrolments, 2009 40 Nyamira Murang'a Kirinyaga Nyandarua Mombasa Machakos Kisumu Makueni Kajiado Uasin Gishu Vihiga Homa Bay Meru Taita Taveta Kericho Siaya Trans Nzoia Nandi Baringo Lamu Bungoma Kitui Busia Kisii Kwale Kilifi Narok Kiambu
Nairobi
30
Laikipia
20
Isiolo Marsabit
10
Mandera Tana River Samburu Garissa West Pokot Turkana 60,000
0 20,000 30,000 40,000 50,000 Per capita spending based on enrolments (TSC 2011) 70,000
Figure 3.20: Spending per capita and percentage of passers at secondary level, 2012
Siaya Elgeyo Marakwet West Pokot Nandi Kisumu Uasin Gishu Embu Bomet Kericho Vihiga Nakuru Homa Bay Nairobi BungomaKakamega Laikipia Kitui Busia Samburu Murang'a Kiambu Tharaka Nithi Taita Taveta Kajiado Kisii Nyamira Machakos Mombasa Kwale Kilifi Narok Garissa Lamu Mandera Marsabit
Percent of passers: C+ and above (2010)
40
30
20
10
Isiolo Wajir Tana River
0 20,000 30,000 40,000 50,000 60,000 70,000 Per capita spending based on enrolments (TSC 2011)
enrolled in primary school is in decline. New public primary school construction and expansion will be required only in specific cases. About one-third of public primary schools (8,600 schools) in 2007 were below the target school size of 400 and about 59 percent of public secondary schools (3,677 schools) had a population of fewer than 200 students. Counties with the problem of small primary schools tend to be in counties with particularly challenging geography such as Garissa, Kajiado, Tharaka Nithi and Wajir. In Busia, Kakamega, Kwale, Nakuru and Vihiga, the converse problem of large schools implies the need for more
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Figure 3.21: Primary school size, public schools only

10,000 9,000 8,000 Number of schools 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Below 400 Source: Ministry of Education 400-800 801-1600 247 Over 1600 2,368 6,873 8,638
Figure 3.22: Secondary school size, public schools only

3,000 2,807
2,500
Number of schools
2,000
1,500 1,225 1,000
500
414 192 76 Over 800
0 Below 200 Source: Ministry of Education 200-400 401-600 601-800
school construction and better allocation procedures within counties, shifting children from large schools to less populated schools.
T
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3.6 OVERALL ASSESSMENT AND RECOMMENDATIONS

his chapter has identified challenges that can be addressed through a set of priorities:
Improving education quality: a. Building capacity (including with private public partnerships where needed) to focus on early childhood awareness and development, particularly in the
Education
areas of: physical, cognitive, linguistic and socio-emotional development of young children four to five years of age; school health and nutrition programmes should be continued throughout formal schooling. b. Focusing on core service delivery activities in primary and secondary schools to retain students and increase learning levelsachieved by regular attendance and performance of teachers; sufficient books that focus on age-appropriate learning tasks, including early grade reading; sufficient time spent on learning tasks; review of learning outcomes for relevancy; and sequencing across grade levels and cycles. c. Setting standards for pre-service teacher training, in-service teacher training, career development for teachers, evaluation and employment regulations for teachers. d. Developing quality assurance framework for multiple service providers to deliver relevant skills training in learning institutions. Increase education efficiency (in the context of education decentralisation): a. Ensuring that school infrastructure expansion is well planned and coordinated. The MoE should work together with county governments to coordinate the construction of new schools, ensuring that this is done in a way that gradually reduces overcrowding and avoids the tendency to create small schools, like those constructed through CDF funds, which are inefficient and unsustainable. b. Improving primary school access by targeting regions that are far behind, dedicating more resources to these counties. c. Linking spending with outcomes. To improve the link between all sources of spending and education outcomes, efforts should be initiated to capture all on-budget and off-budget education spending on programmes and facilities. Clear expenditure roles for county and national government should be developed to ensure appropriate resource mobilisation. Education spending should be linked to resource needs (both human and capital development) at both sub-national and facility levels. Address governance challenges in the sector: a. Strengthening school leadership for instructional support to teachers, working more closely with parents and community, and mobilising resources. b. Strengthening monitoring and evaluation in the education sector. With the development of county structures, the ministry or ministries in charge of education should develop a clear and objective instrument for monitoring school and county education performance in relation to national targets. c. Reforming the planning and budgeting processes in education. Annual plans and budget of the education sector should undergo a two-way bottom-
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up synchronised process with the district and county education offices and respective county governments developing the education budget and plans locally on the basis of standard funding formulas and per capita unit costs. These county plans and budgets should then be used to prepare the national education budget and the associated implementation framework and plans. d. Developing an effective public financial management system at county and institutional levels. A strong and effective public financial management system should be developed at county and district level. The framework should cover strategic areas of effective regulatory framework; planning and budgeting; financial management; procurement; effective reporting, archiving and sharing of financial records; internal and external audit; resource management; and appropriate monitoring and evaluation. A user-friendly and education-efficient financial management information system like the IFMIS should be institutionalised in learning institutions, education agencies and departments, districts and counties. This system should capture both onand off-budget revenues and expenditures in learning institutions. The system should also be linked with the EMIS, which should be strengthened to capture regular and up-to-date education indicators at facility, district, county and national levels. Increase competitiveness of the Kenyan labour force: a. Ensuring higher qualification of school graduates by increasing enrolments in secondary education, while also improving the quality and relevance of the curriculum and the teaching. b. Promoting lifelong learning for specific workplace qualifications, qualifications update, and new qualifications for career change. c. Increasing the relevance and attractiveness of TVET. d. Facilitating expansion of higher education while providing appropriate environment for private sector participation and ensuring efficiencies in sector management.
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Chapter 4
HeAlth
4.1 INTRODUCTION
his chapter reviews health sector public expenditure over the three financial years from 2009/10 to 2011/12. It provides a policy and performance overview of the sector, a review of progress since the 2010 Public Expenditure Review and various public expenditure analyses for the three-year period. A policy and performance outlook, which focuses on the implications of the 2010 Constitution in general and devolution in particular, follows. The chapter then presents an outlook on health sector public expenditure for the 2013-2015 period before concluding with an overall assessment and set of policy recommendations based on the analysis. Executive summary The health sector has the overall goal of providing equitable and affordable health care to Kenyans at the highest affordable standards. The health chapter presents an analysis of health sector revenue and spending, sector performance review and achievements for the financial years 2009/10 and 2011/12 . Despite the challenges, the health sector has achieved considerable progress on outcomes, as per its mandate. The sector realised a reduction in the underfive mortality rate from 115 per 1,000 live births in 2003 to 74 per 1,000 live births in 2008/09, and in the infant mortality rate from 77 per 1,000 live births to 52 per 1,000 live births in the same period. The sector also saw increased immunization coverage for infants under one year of age from 71 percent in 2008 to 77 percent in 2011. However, the maternal mortality rate has deteriorated from 414 per 100,000 live births in 2003 to 488 deaths per 100,000 live births in 2008/09. Births attended
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by skilled health personnel declined from 51 percent in 2007 to 43 percent in 2010/11 despite considerable funding for the programmes. Even with increasing allocation to the sector, public spending per capita currently stands at US$ 19.20 and in general, health spending per capita still remains low at US$ 42 compared to the WHO recommendation of US$ 54 per capita. Expenditure analysis Total government spending on health has increased considerably over the years from KSh. 38 billion in 2009/10 to KSh. 59 billion in 2011/12. Donor spending has also remained high, compensating for reduced spending by households. The health sector continues to face challenges in the prioritisation and absorption of health funds. During the period under review, the sector saw increased expenditure from KSh. 37.8 billion in 2009/10 and KSh. 42.2 billion in 2010/11, to KSh. 58.9 billion in 2011/12. The sector absorption capacity of the approved budget was 87.3 percent, 81.8 percent and 87.1 percent in 2009/10, 2010/11 and 2011/12 respectively. The low absorption capacity was mainly due to lack of reporting on A-in-A by development partners. The recurrent allocations and expenditures generally dominate overall ministry allocations and expenditures. The recurrent approved budget stood at 70.2 percent, 72 percent and 59.2 percent in 2009/10, 2010/11 and 2011/12 respectively. However, analysing the change in both recurrent and development expenditure, it is clear that the approved development budget increased significantly from KSh. 13 billion in 2009/10 to KSh. 28 billion in 2011/12, indicating the Governments commitment to spending on investments. The health sector had a total of KSh. 1,442.4 million in pending bills for both recurrent and development expenditure for the period under review. Policy and performance overview The national health goals are laudable, and enshrined in the Constitution of Kenya 2010 as basic economic and social rights, but with governments health budget at less than 2 percent of GDP the challenge will be how to prioritise health objectives, finance them sustainably and direct the resources where health needs are greatest. Under the Constitution, Kenyans have the right to life and the highest attainable standard of health, which includes the right to quality healthcare services, reproductive health, emergency care, clean, safe
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and adequate water, reasonable standards of sanitation, food of acceptable quality and a clean, healthy environment.1 The Governments long-term development strategy (Kenya Vision 2030), on the other hand, stresses provision of efficient integrated, high quality, equitable and affordable health care for citizens (see Box 4.1 for outcome indicators) and the current healthcare strategy emphasises promotive healthcare policies, such as public education programs to encourage Kenyans to change their life style, preventive care, rather than more costly curative treatment and care in hospitals, and restructuring healthcare delivery systems to make them more efficient. The health strategy has yet to consider how the constitutional basic rights can be afforded and expenditures prioritised to meet the constitutional goals.
Box 4.1: Outcome targets of the health sector for the year 2012 under the Vision 2030 strategy
Reduce under-five mortality rate to 33 per 1,000 live births Reduce infant mortality rate to 25 per 1,000 live births Reduce maternal mortality rate to 147 per 100,000 live births Increase proportion of birth deliveries by skilled attendants to 90 percent Increase immunisation coverage for children under 1 year to 95 percent Reduce TB cases to 444 per 100,000 persons Reduce inpatient malaria fatality rates to 3 percent Reduce HIV prevalence rates to less than 4 percent Increase life expectancy at birth to 60 years Improve access to safe water to 70 percent for rural areas and 90 percent for urban areas Improve sanitation to 65 percent for rural areas and 70 percent for urban areas
The health sector has adopted the following policy objectives with the aim of realising the health sector2 vision: a. Eliminate communicable disease conditions. This is to be achieved through reducing the burden of communicable diseases until they are not of major public health concern. b. Halt and reverse the rising burden of non-communicable conditions. This is to be achieved by ensuring clear strategies for implementation to address all the identified non-communicable conditions in the country. c. Reduce the burden of violence and injuries. This is to be achieved by putting in place specific strategies in collaboration with stakeholders in other sectors that address each of the causes of injuries and violence at the time. d. Provide essential health care. This shall be provided through medical services that are affordable, equitable, accessible and responsive to client needs.
1
2
The Draft National Health Sector Strategic Plan III (2013-2017).
Both the Kenya Vision 2030 and the Constitution of Kenya 2010 Article 43.
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e. Minimise exposure to health risk factors. This aims at strengthening healthpromoting interventions, which address risk factors to health, plus facilitating the use of products and services that lead to healthy behaviour in the population. f. Strengthen collaboration with other sectors. This aims to adopt a health in all policies approach, which ensures the health sector interacts with and influences design implementation and monitoring processes in all health sector-related actions. The contribution of the health sector to GDP is 2.5 percent. As a share of public expenditure, the sector accounted for about 7.8 percent in 2011/12, up from 6.2 percent in 2010/11. According to the National Health Accounts (NHA) 2009/10, total health expenditures amount to about KSh. 120 billion, of which the public sector accounts for 28.8 percent, private sector 36.7 percent and development partners 34.5 percent.
4.2 PolicY, leGAl And institutionAl FrAmework

he national health strategy was drafted prior to the Constitution of Kenya 2010 and is yet to reflect the challenge of addressing the issues of basic economic and social rights in the health sector or the introduction of devolved responsibility to county governments. The National Health Sector Strategic Plan II (2005-2010), the ministries of health strategic plans (2008-2012) and the Kenya Vision 2030 all pre-date the Constitution and all focus on the themes of access, effectiveness and affordability.3 The National Health Policy Framework (2012-2030) aims to provide comprehensive support for six distinct phases of the human life cycle, mainly through scaling up community-based care and expanding the role of grassroots level health workersbut this framework is not yet aligned to the roles and responsibilities of national and county level governments.4
The provider of health services in Kenya is largely the state. Currently, there are about 8,000 health facilities in the country with 55 percent owned and managed by the government.5 The for-profit private sector, which plays a critical role in providing specialised clinical services and primary care mainly in urban areas, owns about 31 percent of health facilities while the remaining 14 percent is owned by the not-for-profit sector. NGO and faith-based health facilities are
3
See the Kenya Health Policy Framework (KHPF 19942010 and KHPF 2012-2030), the National Health Sector Strategic Plan I covering the period 2000/01 to 2004/05 and the National Health Sector Strategic Plan II (NHSSP II) covering the period 2005/06 to 2009/10, which provide the foundation for sector policy. Other sector policy documents include the MoMS strategic plan (2008-2012), the MoPHS strategic plan (2008-2012) and the Vision 2030 Sector Plan for Health (2008-2012). The six life cycles include: life cycle (i) pregnancy, delivery and the newborn child, life cycle (ii) early childhood, life cycle (iii) late childhood, life cycle (iv) adolescence, life cycle (v) all life cycle cohorts/ adulthood and life cycle (vi) the elderly. e-health master facilities list 2012.
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predominant in underserved areas (such as the arid and semi-arid regions) across the country. Looking into the future role of county governments, it is going to be an important function of counties to coordinate and potentially also to regulate public services within their jurisdiction with all the other actors in the sector. Supply of essential medicine and medical supplies (EMMS) is undertaken by a statutory authority, which receives a budgetary transfer through the Ministry of Health. The Kenya Medical Supplies Agency (KEMSA) supplies EMMS to health facilities across Kenya. It serves public health facilities using a combination of pull and push systems. The pull system requires the individual facilities to generate and submit orders to KEMSA based on requirements and available stock reconciled with available funding while the push system provides a standard health kit to health facilities. Facilities draw EMMS from KEMSA as allocated in the drawing rights.6 The National Hospital Insurance Fund (NHIF) is the mandatory health insurance (MHI) in Kenya for all salaried employees. NHIF generates its revenue from premiums from both formal-and informal-sector employees. Contributions for salaried employees are automatically deducted through the payroll, but informal-sector members remit their premiums directly to the fund. For members in the formal sector, contributions are calculated on a graduated scale based on income with a majority contributing between KSh. 30 to KSh. 320 per month, while membership contributions by the informal sector are a fixed premium of KSh. 160 per month. (Plans to revise the rates have been a contentious issue in recent times). In 2012, NHIF introduced a comprehensive inpatient and outpatient cover
Figure 4.1: Flow of funding in the health sector7
FINANCING SOURCES FINANCING AGENTS
Ministry of Health University and Teaching Organizations (inc. Ministry of Education Social Health Insurance Organizations Other Ministries and Public Organizations Private Firms Insurance Schemes- Private and semi-public Private firms Donors Households Households*
*Dashed arrow represents expenditures that were transferred DIRECTLY to providers from source
PROVIDERS
Ministry of Finance
MoH Facilities University and Teaching Facilities Other Ministry and Public Facilities Private Facilities Pharmacies Donor/NGO Facilities
Public Firms (parastatals)
Donors
Source: Ministry of Health KEMSA Task Force Report, 2008. 7 Adapted from NHA, 2004 and updated.
6
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package for civil servants, teachers and police. Its also important to note that the total numbers of members plus dependants covered through NHIF increased from 4 million in 2006/07 to 12.3 million 2011/12. The flow of funds in the health sector involves three sets of players. These are (i) financing institutions, also sources of funding, (ii) intermediary institutions and (iii) beneficiaries, who are also users of funds. Households remain the largest contributors of health funds for the sector.
4.3 PerFormAnce review

he Kenya health outcome indicators, including life expectancy, child mortality rates and HIV prevalence, have improved and Kenya is at par with the East Africa Community (EAC) region on health indicators. Life expectancy has continued to rise over the last decade with that of females remaining higher than their male counterparts (Figure 4.2). As shown in Table 4.1 under-five mortality is the lowest in the region at 74 per 1,000 births (compared to 76, 99 and 91 in Tanzania, Uganda and Rwanda respectively). The proportion of births assisted by medically-trained personnel has marginally increased from 42 percent in 2003 to 44 percent in 2008, while facility-based deliveries have increased from 40 percent in 2003 to 43 percent in 2008.8
Table 4.1: Health outcomes indicators for Kenya and other countries Kenya Life expectancy, years (2009) Infant mortality per 1,000 births (2010) Under-five mortality per 1,000 births (2010) Incidence of tuberculosis per 100,000 people (2010) Prevalence of HIV, population aged 1549 ( percent of total) (2009) 56 52.0* 74.0* Tanzania 57 50.0 75.8 Uganda 53 63.0 98.9 Rwanda 55 59.1 91.1 South Africa 52 40.7 56.6 Ghana 63 50.0 74.4 Egypt 73 18.6 21.8
298.0
177.0
209.0
106.0
981.0
86.0
18.0
6.3
5.6
6.5
2.9
17.8
1.8
0.1
Source: WDI 2011, KDHS 2008/09; *Figures based on KDHS 2008/09
Large improvements in infant survival have taken place in recent years with recent research pointing to the effectiveness of insecticide-treated bed-nets (ITN) in bringing about this improvement. Nationally, infant mortality and under-five mortality fell significantly between 2003 and 2008 in North Eastern and Nyanza in
8
KDHS, 2003-2008.
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Figure 4.2: Life expectancy in Kenya

58 57 Life expectancy at birth, (years) 56 55 54 53 52 51 50 49 48 2000 Source: WDI 2011 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Female
Male
particular (Figure 4.3 and Figure 4.4). According to the demographic and health survey results, the rate of post-neonatal deaths per 1,000 live births fell by more than half, dropping from 47 to 22 over the period 2003-2008. Among the possible causes of the decline are various targeted new public health initiatives, such as improved access to water and sanitation, and overall improvements in living conditions as a result of economic growth. Recent analysis finds that increased ownership of ITN in endemic malaria zones explains 39 percent of the decline in post-neonatal mortality and 58 percent of the decline in infant mortality.9
Figure 4.3: Infant mortality per 1,000 births, by province
140 Infant mortality (0 - 1 year), per 1,000 120 100 80 60 40 20 0 Kenya Nairobi Central Coast Eastern 2003 Source: KDHS 2003-2008 Nyanza 2008 Rift Valley Western North Eastern
Demombynes and Trommlerov (Forthcoming)
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Figure 4.4: Child mortality (under five years) per 1,000 births, by province
Child mortality (<5 years), per 1,000 births
250
200
150
100
50
0 Kenya Nairobi Central Coast 2003 Source: KDHS, 2003 and 2008 Eastern 2008 Nyanza Rift Valley Western North Eastern
There has also been an expansion and improvement of government health facilities; however, a shortage of medical staff remains a problem. In 2011, there were on average 13 beds per 10,000 population compared to 9 beds per 10,000 in 2010, and Kenya is again within the average for the region although it lags behind middle-income African nations (Figure 4.5). The health sector still suffers from a shortage of health workers with only 8 nurses per 10,000 population in 2011 compared to Ghanas 11 nurses per 10,000 population in 2009 (Figure 4.6). Kenya has an average of 19 doctors and 83 nurses per 100,000 population, compared to WHO-recommended minimum staffing levels of 36 and 356 doctors and nurses respectively (see Table 4.2).
Figure 4.5: Beds per 10,000 population
45 Hospital beds per 10,000 population 40 35 30 25 20 15 10 5 0 Uganda Ghana Kenya 2010 Kenya 2011 Egypt Tunisia Namibia Seychelles 4 9 9 13 17 21 27 39
Source: WHO Health Database, 2012 and AOP VI, 2010: Note: Other countries figures are for 2009
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Figure 4.6: Nurses per 10,000 population

18 16
10,000 population
16.1
14 12 10 8 6 4 2 0 1.4 1.7 2.7 2.7 2.8 3.4 4.2 5.5 5.7 8.3 8.4 10.5
-B iss au G A m bi a Ke ny a* *
Su da n
on e
ha na * G
go
iq ue
al aw
ig e
ne g
er
Lib
Le
ab
Se
Sie
Source: WHO health database, 2012 and Economic Survey, 2012 (*Ghana figures are for 2009; **Kenya figures are for 2011; all other countries figures are for 2008)
Lessons and challenges Despite these impressive achievements the sector is faced with various challenges. These include: expansion of health facilities and the provision of health services remains uneven and the sector continues to face a challenge in geographical distribution; many health facilities are not adequately equipped according to best practice norms and standards; inadequate financing of the sector for infrastructure, human resources and health commodities; existence of regional disparities in the distribution of existing health workers and high staff attrition; high prevalence of communicable and rising incidence of non-communicable diseases; lack of social health protection for poor and vulnerable groups; lack of sustained funding for health research; inadequate translation of research findings into policy and industry; and heavy dependence on donors for research and development.
Table 4.2: Breakdown of key registered health personnel, Kenya Health personnel Doctors Dentists Pharmacists Pharmaceutical technologists Nursing officers Enrolled nurses Clinical officers
Source: Economic Survey, 2012
ui
ne a
rra
oz
2007 6,271 931 2,775 1,680 12,198 31,917 5,797
2008 6,623 974 2,860 1,815 14,073 31,917 5,035
2010 7,129 898 3,097 2,233 29,678 34,282 8,598
2011 7,549 930 3,205 2,409 32,941 34,576 9,793
No. per 100,000 pop. (2011) 19 2 8 6 83 87 25
ig e
To
ria
ia
al
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4.4 Public Expenditure Review (2009-2010 to 2011-2012)

he public health sector is largely financed out of central government revenues, although user fees are applied too. General tax revenues mainly finance public facilities. These resources are channelled through the line ministries of health down to the service providers, with a centrally-maintained payroll of medical personnel by both line ministries. Public health facilities operate a cost-sharing policy where patients are expected to pay part of the cost for their treatment. A fee waiver and exemptions system is in place to cater for the poor, although targeting remains a challenge. Most development partner resources for the healthcare sector do not pass through government systems, and largely support the non-state health providers. According to the National Health Accounts (NHA), the contribution of development partners to the health sector accounted for about 34 percent of total health spending in 2009/10.10 Faith-based and non-governmental health clinics are financed by user fees and development partner grants and in some cases by the government with seconded staff and provision of medical commodities.
4.5 ProGress review From 2010 PER

verall, there has been creditable progress in expanding access to primary healthcare facilities. Despite the expansion of health facilities, however, the provision of health services remains uneven and both the public health and sanitation and medical services sub-sectors face challenges in geographical distribution. Moreover, many health facilities are inadequately equipped according to best practice norms and standards. Financial barriers to accessing health services still persist. The poorest segment of society continues to face the biggest obstacles in accessing health care and considerable regional inequalities still exist. Despite notable improvements in GoK-financed expenditures on health, total health spending remains below the Abuja Declaration of at least 15 percent of total budget. The most inadequately financed inputs are infrastructure, human resource and health commodities. Regional disparities in the distribution of existing health workers and high staff attrition continue to beleaguer the sector. The formulae relating to resource allocation between districts need urgent review in order to re-weight allocations
10
Kenya National Health Accounts, 2009/10.
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on a population and poverty basis and reverse the historic endowment of facilities noted in the previous PER. In the recent past there has been notable improvement in the reporting of offbudget funds through Development Partners in Health, Kenya (DPH-K). However, the sector needs to promote more regular reporting by tertiary-level institutions and semiautonomous and autonomous agencies to the line ministries. On the other hand, the problem of pending bills in the recurrent vote and low execution rates of the development budget persist. In this regard, various initiatives are underway to address the problems, including the following that are proposed or have been taken up: a. Transfer of procurement of all medical commodities and supplies to KEMSA b. Decentralisation of the payment of electricity and utility bills c. Introduction of prepaid telephone lines to health facilities d. Disconnection of illegal water connections, e.g. to staff quarters in health facilities e. Continued efforts to ensure that Treasury finances 100 percent of the approved budget
4.6 Public expenditure AnAlYsis And keY trends

otal health expenditures have increased by KSh. 40 billion in the last 10 years. Development partners account for most of the increase. As shown in Table 4.3, the total health expenditure accounting to the National Health Accounts has increased significantly between 2001/02 and 2009/10. The share of the development partners in total health expenditure has more than doubled while the share of private out-of-pocket spending has decreased. The total amount
Table 4.3: Trends in health expenditure (KSh.) 2001/02 to 2009/10 Indicators GDP at current prices (KSh. trillion) Total health expenditure (THE) (KSh. billion) Of which Public sector percent Private percent Development partners percent THE per capita (KSh.) THE ( percent of GDP) Government health expenditure ( percent of total government expenditure)
Source: National Health Accounts, 2009/10
2001/02 1.6 80
2005/06 2.2 100
2009/10 2.3 120
29.6 54.0 16.4 2,636 5.1 8.0
29.3 39.3 31.0 2,861 4.8 5.2
28.8 36.7 34.5 3,203 5.4 4.6
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spent on healthcare, including private payments and development partner contributions, was around KSh. 3,203 per person in 2009/10, an increase of 20 percent over 2001/02 (Table 4.3). According to the NHA, private expenditure on health remained at about KSh. 45 billion in 2009/10, out of which 80.5 percent was out-of-pocket expenditure. In the public sector, cost-sharing revenue increased from KSh. 2.1 billion in 2009/10 to KSh. 3.5 billion in 2011/12.11 Overall, budget resources fell in proportion to GDP from 2 percent to 1.5 percent between 1995 and 2009, which is low compared to other countries at a similar level of development. This is explained by the large proportion of off-budget health spending by the development partner community in Kenya compared to Tanzania and Uganda. When government and development partner spending is combined, the total is 4 percent of GDP, which is comparable to other countries such as Tanzania (Figure 4.7).
Figure 4.7: GDP per capita and government health spending, Kenya and other countries, 2009
1000 900 GDP per capita (current US$) 800 700 600 500 400 300 200 100 0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Kenya Mauritania Benin Chad Tanzania Madagascar Rwanda Mozambique Lesotho
Guinea Eritrea Siera Leone
Guinea-Bissau Togo Uganda Ethiopia
Public health expenditure (percent of GDP) Source: WDI, 2011
As a share of total government spending, the proportion of health spending has increased from a base of 4.3 percent in 2007/08 (prior to the establishment of the two ministries), to 4.6 percent in 2009/10 and later to 6.2 percent and 7.8 percent in 2010/11 and 2011/12 respectively (Figure 4.8). Health public spending remains largely centralised through the national budget. The devolved expenditures through the Constituency Development Fund (CDF) and Local Authorities expenditures comprise of only 0.1 percent and 0.02 percent of government resources respectively (Figure 4.9).
11
The private for-profit sector is financed entirely from private sources by households, either directly as user fees or indirectly from medical insurance schemes.
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Figure 4.8: Government health expenditure as a percentage of total government budget

9 8 7 6 Percent 5 4 3 2 1 0 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 Source: KENAO appropriation accounts, NHA, MoHMTEF 2010/12 5.0 4.6 5.0 5.2 5.4 4.3 4.6 4.6 6.2 7.8
Off-budget development partner financing in the health sector has created enormous challenges for the government in mobilising, sustaining and directing resources towards national priorities and results. The two health ministries had developed a shadow health budget in order to better capture the full resources for the sector, though this budget is not released as part of the governments budget documentation. As noted in the 2010 Public Expenditure Review, the composition of health spending in the shadow budget shows a very different view from the governments own budget as a result of donors predominantly financing commodities and
Figure 4.9: Total public health expenditures by level of government, constant 2003/04 prices
30 25 KSh. billions (Central) 20 15 10 5 0 2002/03 2003/04 2004/05 2005/06 2006/07 CDF 2007/08 LATF 2008/09 2009/10 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 KSh. billions (CDF and LATF)
Central
Source: KENAO appropriation accounts; CDF and LATF reports
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primary health care. In 2009/10 over 80 percent of development partner support to the human resources sector went to health projects, including HIV/AIDS projects. USAID, DFID, EU and World Food Program (WFP) resources are for the non-governmental sector, and are therefore not on-budget (Figure 4.10).
Figure 4.10: Development partners health funding, 2009/10
UNFPA GIZ French Embassy Netherlands WFP EU UNICEF Danish Embassy KfW (GDC) Japan World Bank Global Fund DFID Clinton Foundation USAID 0 10,000 20,000 30,000 40,000 15 22 45 393 452 504 866 937 1,124 1,200 2,116 3,593 3,800 6,900 45,700 50,000
KSh. millions Source: Development Partners Assistance to Kenya, 2011
In terms of composition, actual recurrent expenditure now accounts for less than its historical level of around 70 percent of total expenditure. Recent trends indicate a decline from 79.3 percent in 2009/10 to 67.9 percent in 2011/12 (Table 4.4). The reduction is reflected as an increase in the development expenditure share from 20.7 percent in 2009/10 to 32.1 percent in 2011/12. This trend is expected to continue following the devolution of health services. Both recurrent and development expenditures for the health sector have increased during the period under review. Actual recurrent expenditures for the health sector increased over the period under review from KSh. 30 billion in 2009/10 to KSh. 40 billion in 2011/12. During the same period, actual development expenditures, that mainly focused on improving facilities, increased by 142 percent from KSh. 7.8 billion in 2009/10 to KSh. 18.9 billion in 2011/12. An initial analysis of spending shows that, in general, central government funds health workers and hospital operations, CDF and local authority contributions support capital investments, and donors finance clinics and medical supplies. In practice, however, more than 50 percent of donor funding supports personnel emoluments, while little funding from any source is used to support research and
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Table 4.4: Sector actual expenditure (net in KSh. billion), 2009/10 to 2011/12 RECURRENT VOTE MoMS MoPHS Total recurrent As percent of TOTAL MoMS MoPHS Development As percent of TOTAL TOTAL Printed estimates 2009/ 10 21.2 6.9 28.1 64.3 6.3 9.3 16.0 35.7 43.7 2010/ 11 25.6 9.5 35.2 70.4 7.0 7.8 14.8 29.6 50.0 2011/ 12 31.5 10.7 42.2 71.4 3.9 13.0 16.9 28.6 59.1 Approved estimates 2009/ 10 23.1 7.3 30.4 70.2 4.5 8.4 12.9 29.8 43.3 2010/ 11 27.1 10.1 37.1 72.0 4.5 10.0 14.4 28.0 51.6 2011/ 12 31.5 12.3 43.8 60.2 3.9 25.0 28.9 39.8 72.8 Actual expenditure 2009/ 10 23.1 6.9 30.0 79.3 3.7 4.1 7.8 20.7 37.8 2010/ 11 23.1 10.0 33.1 78.5 2.0 7.0 9.1 21.5 42.2 2011/ 12 276 12.4 40.0 67.9 1.7 17.1 18.9 32.1 58.9
Source: Budget estimates books, appropriation accounts
development (R&D). There is need for the government to increase funding for R&D in order to address critical health needs affecting the population. The absorption capacity of the sector remains above 80 percent. During the review period, absorption of the approved budget was recorded at 87.3 percent, 81.8 percent and 87.1 percent in 2009/10, 2010/11and 2011/12 respectively. Absorption shortfalls are mainly explained by lack of reporting on A-in-A by development partners (Figure 4.11). Pending bills remain a concern in the sector, as represented by a total of KSh. 1,442.4 million due at the end of 2011/12, and covering both recurrent and development expenditure. Those bills that arose due to a lack of liquidity (i.e. bills arising because the approved budget was either not fully financed or experienced a cash flow mismatch) accounted for 99.7 percent of the total, while those due to lack of provision (i.e. unplanned, unbudgeted or underbudgeted expenditures) represented the balance. When analysed by economic classification, compensation to employees accounts for the greatest proportion of the health spending, at roughly 40 percent of total. Despite this, the health sector suffers from a severe shortage of doctors and nurses. Given the budget shares between government and development partners, it is also likely that a not-insignificant proportion of external funding is applied to compensation and the use of goods and services, rather than the acquisition of assets.
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Figure 4.11: Health sector absorption rate by function

110 100 90 Percent 80 70 60 50 40 60.8 63.0 65.3 98.5 87.3 89.1 81.8 91.3 81.0
2009/10 Recurrent
2010/11 Development Total
2011/12
Source: Budget estimates books, appropriation accounts
A number of semi-autonomous agencies raise their own funds from user fees, which they retain to finance their operations, and so the total resources for the health sector need to also include the out-of-pocket resources. For example, the Kenyatta National Hospital (KNH) receives KSh. 3.7 billion a year as a transfer from the central government budget and raises an additional KSh. 3.8 billion from other sources, inclusive of user fees (Table 4.5). There has been an increase in revenues at the hospital as a result of more efficient collection methods, computerisation of patient registration and billing, and the establishment of a debt management unit. Moi Teaching and Referral Hospital collects around KSh. 1.9 billion
Figure 4.12: Government health spending by economic classification
45 40 35 30 Percent 25 20 15 10 5 0 2009/10 Compensation to employees Grants, transfers and subsidies Source: Budget estimates books, appropriation accounts 2010/11 2011/12 Use of goods and services Acquisition of non-financial assets 22 15 23 19 20 21 26 19 14 39 40 41
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(exclusive of other internally generated funds) in user fees compared to the budgetary transfer of KSh. 1.3 billion, which means the budgetary transfers are not even the predominant source of financing for these facilities. Similarly, NHIF collects revenue up to KSh. 6.9 billion.
Table 4.5: SAGAs internally generated funds (KSh. thousand) Name of Institution Kenya Medical Supplies Agency Kenya Medical Training College Kenyatta National Hospital Medical Practitioners and Dentist Board Moi Teaching and Referral Hospital National Hospital Insurance Fund Pharmacy and Poisons Board Kenya Medical Research Institute
Source: MoPHS and MoMS
2008/09 43,959 1,069,639 2,235,161 53,801 742,468 5,199,097 185,647 197,060
2009/10 128,298 1,077,251 2,490,487 54,538 2,129,843 6,017,001 233,389 202,476
2010/11 29,000 1,058,738 2,680,701 78,146 2,227,133 6,501,429 287,060 390,853
2011/12 50,000 1,070,930 3,887,260 75,262 2,405,717 6,865,711 463,320 252,895
The constitution of Kenya 2010 and devolution The Constitution of Kenya provides for a devolved structure of government. The post-2013-election transition requires that primary healthcare provision will become the responsibility of the county governments, and there is now a reunited single Ministry of Health. The proposed structure of the new county health services is to organise delivery around three levels of health care, i.e.: (i) community level, (ii) primary care, and (iii) primary referral services.12 Communitylevel care refers to organising appropriate demand for health services, while primary care and referral services refer to service provision through dispensaries, health centres and maternity homes.13 According to the proposed structure, the existing district hospitals within county boundaries will become county referral hospitals. Given the requirement of the Constitution to limit the number of cabinet posts, the Ministry of Medical Services and Ministry of Public Health and Sanitation have been combined to form a single Ministry of Health, as was the case before 2008. The role of the Kenya Medical Supplies Agency (KEMSA)the national drug procurement and distribution agency remains unchanged in the devolved system.
12 13
Implementation of the Constitution in the health sector, 2011. There are three types of health facilities: hospitals, health centres and dispensaries (including mobile clinics), with the latter being largely the first contact for people seeking medical care. The rural poor rarely use hospitals and depend largely on health centres, dispensaries and mission facilities though hospitals also serve as primary healthcare institutions for many in the respective catchment areas (See Republic of Kenya, 2006)
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In the Constitution, health service delivery is a two-tier system whereby the central government will be responsible for developing nationwide health policies and operating tertiary and national referral hospitals,14 capacity building and technical assistance to counties. On the other hand, the county health services will focus on county health facilities and pharmacies, ambulance services, promotion of primary health care, licensing and controlling sale of food in public places, veterinary services, cemeteries, funeral parlours and crematoria, refuse removal, and refuse dumps and solid waste. This scenario will need concerted effort in restructuring organisational arrangement in relation to human resource management, infrastructure development and maintenance, health financing, donor funding and partnerships, to mention just a few. The new Constitution has brought issues that need to be addressed. These include: a. Define legal, policy and operational imperatives of the constitutional right to health b. Define new roles and responsibilities for ministries of health and county health management teams c. Plan for institutional restructuring of central MoH d. Plan for and begin building capacity of county health management teams. Consequently relevant health sector laws, legislation, policies and regulations have to be formulated to guide the devolution of health services.
4.7 Sub-centrAl per cApitA spendinG And countY-level perFormAnce
eographically, access to health services remains largely unequal. The regional distribution of health facilities varies from government to private facilities and is presented in Annex 3. The regional disparity in provision of health care also shows up in regional disparities in demand for or access to health care, such as for the birth of a child, with the ASAL region predominantly without birth attendants. Skilled assistance during birth occurs in only about 5 percent of cases in Wajir, compared to 88 percent in Kirinyaga (Figure 4.13). Counties with the highest poverty rates have the fewest deliveries in a health facility and lower access to qualified medical assistance, including from birth (Figure 4.14). This includes counties such as Wajir, Mandera, Turkana, West Pokot, and Kilifi, which are underserved in social services including health facilities, medical supplies, personnel and where the nearest health facility of any type is over 50 km away. Kirinyaga, Nyeri, Nairobi, Kiambu, Meru, Mombasa, and Nyandarua are among the best-performing counties (Figure 4.15).
14
They constitute the national referral system for healthcare delivery, given the national nature of their functions (training, internship, and specialized care).
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Figure 4.13: Children under five years delivered in a medical facility, by county
100 90 80 70 Percent
Percent
60 50 40 30 20 10 0 Wajir Mandera Turkana Makueni West Pokot Kilifi Marsabit Bungoma Samburu Kwale Narok Garissa Trans Nzoia Tana River Kitui Nandi Busia Kakamega Isiolo Machakos Vihiga Tharaka Nithi Lamu Migori Uasin Gishu Bomet Baringo E. Marakwet Homa Bay Kajiado Laikipia Kisumu Taita Taveta Siaya Kericho Murang'a Nakuru Kisii Embu Nyamira Mombasa Nyandarua Meru Kiambu Nairobi Nyeri Kirinyaga
Source: KIHBS, 2005/06
The percentage of HIV-positive cases with access to anti-retroviral drugs is highest in Nyanza province, the region with the highest HIV prevalence (Figure 4.16). Access to ARV treatment is an important factor in prolonging life expectancy of the patient and reducing HIV transmission, especially from mother to child. At county level, the number of HIV+ cases receiving ARVs is highest in Nairobi, recording over 50,000 cases, followed by counties in Nyanza province: Kisumu, Siaya, HomaBay and Migori. As expected, counties in North-Eastern province have the least share since the region has the lowest HIV prevalence.
Figure 4.14: Deliveries in health facility, access to qualified personnel at birth, and poverty, by county
100 90 80 70 60 50 40 30 20 10 0
Wajir Turkana Mandera West Pokot Kilifi Bungoma Marsabit Makueni Samburu Narok Kwale Garissa Trans Nzoia Tana River Busia Kitui Vihiga Isiolo Kakamega Lamu Tharaka Nithi Machakos Uasin Gishu Migori Elgeyo Baringo Homa Bay Bomet Kajiado Kisumu Laikipia Kericho Taita Taveta Siaya Nandi Nakuru Murang'a Kisii Nyamira Embu Nyandarua Mombasa Meru Kiambu Nairobi Nyeri Kirinyaga
Delivered in medical facility
Deliveries assisted by a qualified medical personnel
Poverty Rate
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Figure 4.15: Fully immunised children (1223 months) by county

100 90 80 70 Percent 60 50 40 30 20 10 0 Mandera Garissa Wajir West Pokot Turkana Migori Isiolo Narok Meru Tharaka Nithi Kisii Kisumu Homa Bay Kilifi Nandi Siaya Trans Nzoia Kitui Marsabit Kakamega Nairobi Uasin Gishu Nakuru Taita Taveta Kajiado Laikipia Murang'a Lamu E. Marakwet Bungoma Makueni Kiambu Vihiga Baringo Tana River Kwale Kirinyaga Nyamira Kericho Bomet Embu Samburu Machakos Mombasa Nyandarua Busia Nyeri
Water and sanitation are important aspects of health and the majority of Kenyans fall below the Millennium Development Goals in terms of access to an improved water source. In 2005, about 40 percent of Kenyas rural population and 60 percent of urban residents had access to clean water.15 According to Vision 2030, the target for access to safe and reliable water is 90 percent and 70 percent in urban and rural households respectively while the improved sanitation target is 70 percent and 65 percent for urban and rural households respectively. From the population census (2009) about 66 percent of Kenyas households have
Figure 4.16: Number of HIV+ cases receiving ARV treatment, 2012
90 80 70 60 Percent
15
50 40 30 20 10 0 Mandera Wajir Samburu Tana River Lamu Marsabit Garissa West Pokot Isiolo E. Marakwet Laikipia Kajiado Taita Taveta Turkana Baringo Narok Kwale Bomet Tharaka Nithi Embu Nandi Nyandarua Kirinyaga Trans Nzoia Vihiga Murang'a Makueni Nyamira Nyeri Meru Machakos Kericho Kitui Kilifi Bungoma Kisii Nakuru Uasin Gishu Busia Kakamega Kiambu Migori Mombasa Kisumu Siaya Homa Bay Nairobi
Source: MoPHS, NASCOP, 2012
Kenya Vision 2030.

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access to improved water (compared to the MDG target of 86 percent). Access to improved water also varies across counties (Figure 4.17).
Figure 4.17: County access to water
112 98 Households (percent) 84 70 56 42 28 14 Lamu Bungoma Uasin Gishu Isiolo Nairobi Busia Kiambu Marsabit Trans Nzoia Vihiga Kakamega Kilifi Garissa Mombasa Turkana Wajir Kajiado Taita Taveta Nyeri Nyamira Nyandarua Kisii Samburu Kenya Average Nakuru Kwale Meru Laikipia Embu Kisumu Machakos Makueni Kirinyaga Nandi Kericho Tana River Mandera Murang'a Kitui Migori Siaya Elgeyo Bomet Tharaka Nithi Homa Bay West Pokot Baringo Narok Improved Un-Improved 0 MDG Target: Improved water access 86 percent
Source: KNBS, 2010
4.7.1 Per capita expenditures by counties The most endowed county spends nine times more than the least endowed one on a per capita basis. While only a partial view of health spending per capita at sub-national level can be determined, the wide variation in spending is apparent. The county spending the most per person on health is spending nine times more than the lowest-spending county (see Figure 4.18). Given the fragmentation of health spending, as discussed in the previous section, it has not been possible to provide a comprehensive view of per capita spending on health at a sub-national level over any time period. Therefore, for one fiscal year central government spending was disaggregated based on the geographic allocation of health workers (to district offices)which is most of central healthcare spendingand their associated costs. In addition, the geographic expenditures of the drug procurement agency KEMSA were available, along with the spending under vertical funds for specific health interventions. Since the small amount of Health Sector Services Fund (HSSF) and health spending by the CDF and local authorities is also available by district this was also included in the estimates.16 The total amount of government spending that was able to be disaggregated totalled around KSh. 38 billion of the KSh. 50 billion general government spending for the year 2010/11. Spending by development partners on health in the regions, however, was not available,
16
HSSF funds refer to the pilot of the direct transfers from central government to frontline service providers such as dispensaries and health clinics.
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Figure 4.18: Estimates of county government health expenditures per capita, 2010/11
Total per capita health spending (KES) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Isiolo Nyeri Lamu Embu Taita Taveta Nairobi Kisumu E. Marakwet Baringo Mombasa Busia Nyandarua Nakuru Laikipia Kirinyaga Kiambu Samburu Marsabit Tana River Meru Machakos Kericho Kenya average Garissa Migori Wajir Trans Nzoia Murang'a Makueni Nandi Kakamega Kitui Uasin Gishu Kisii West Pokot Kilifi Kwale Vihiga Kajiado Nyamira Bungoma Siaya Homa Bay Narok Bomet Turkana Tharaka Nithi Mandera
Source: Ministry of Health
which is why the results are an indication of per capita government health spending only. County estimates of per capita spending were then produced using the 2009 census and the National Bureau of Statistics bridging table of districts to counties. Although a partial picture, there is a startling variation in the amount of resources per person between the best county, Isiolo, at KSh. 1,800 per person, and the worst county, Mandera, at only KSh. 200 per person (Figure 4.18). Since wages and salaries are the largest component of health spending, the difference in per capita spending is largely explained by the geographic difference in the distribution of health staff. Health workers per head of population vary significantly, with rural areas in particular being much lower than urban areas. Counties in the northern parts of Kenya and the coast (excluding Mombasa) have the lowest numbers of health personnel, as shown in Figure 4.19. This will clearly be a challenge for the budgeting of devolved counties for healthcare provision. Since people tend to prefer to live in urban areas with good services, it is difficult to attract professional workers to remote and challenging regions. To do so, counties will need to consider providing incentives to work in these areas while also considering other options of raising resources for health. 4.7.2 Analysis of performance some variables in the health sector There is some evidence of a positive relationship between per capita spending and indicators of health system performance, such as immunisation coverage or access to a medical facility for delivery (Figure 4.20). When comparing Isiolo and
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Figure 4.19: Health personnel per 100,000 population, by county

Health personnel per 100,000 people 300 250 200 150 100 50 0 Uasin Gishu Nyeri Nyandarua Busia Migori Kirinyaga Siaya Embu Samburu Laikipia Kisumu Mombasa Makueni Murang'a Kericho Kiambu Meru Machakos Kitui Baringo Garissa Nyamira Narok Nandi Taita Taveta Kwale Bungoma Marsabit Nakuru Homa Bay Kakamega Trans Nzoia Nairobi Isiolo Bomet El. Marakwet West Pokot Tharaka Nithi Wajir Kisii Vihiga Kilifi Kajiado Mandera Turkana Lamu Tana River Source: AOP VI, 2010/11
Mandera on the basis of immunisation coverage, for example, Isiolo has more than double the coverage rate, which might be expected given the higher percapita health spending. As shown in Figure 4.21, counties with higher per capita health expenditures tend to have better immunisation coverage. The chart also indicates that there is a substantial variation in the immunisation coverage rate attained for a county, even when the per capita spending is the same. For example, Bomet had an immunisation coverage rate in excess of 80 percent, while per capita spending is less than West Pokot with a coverage rate of less than 40 percent. There are several counties that are below the frontier, such as Wajir and Garissa, located in the ASAL regionscounties that face challenges of predominantly rural and disparate populations which may lead to higher unit costs. In terms of delivery at a medical facility, there is a slightly stronger correlation between per capita health spending and the extent to which babies are delivered in a medical facility. The wealthiest counties also tend to have more babies delivered in a medical facility, regardless of the per capita spending (Figure 4.22). The data need to be treated with caution and the analysis is illustrative only, pending more regular and reliable collection of health data for county governments. First of all, there is a time consistency problem, since data are not readily available for every year; the data here compare current spending with the previous years outcomes, so this clearly should not be interpreted as cause and effect. Going forward, regular data collection at county level should be encouraged if more reliable analysis of these relationships is to be undertaken.
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Figure 4.20: County per capita spending and availability of health services
Turkana Marsabit
Mandera
Wajir West Pokot Elgeyo Marakwet Trans Nzoia Baringo Laikipia Busia Siaya Vihiga Kisumu Kisii Nandi Uasin Gishu Nyandarua Kericho Bomet Migori Narok Nakuru Meru Tharaka Nithi Nyeri Embu Garissa
Bungoma
Samburu
Isiolo
Kiambu Nairobi Machakos Kitui Makueni Kajiado Lamu
Tana River
Kilifi Taita Taveta
Kwale
Per Capita Spending Outcome

28.1 - 109.1 109.2 - 190.1 190.2 - 271.1 271.2 - 352.1 352.2 - 433.1 433.2 - 514.1 50 Immunized Children Delivery at Health Facility
0 25 50 Kilometers 100 150 200
Source: Ministry of Health based on KIHBS 2005/06, MoMS and MoPHS data
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Figure 4.21: Per capita expenditures and immunisation coverage

120 100 80 60 40 20 Mandera 0 0 200 400 600 800 1000 1200 1400 1600 1800 2000 Per-capita spending, KSh. Source: Ministry of Health Note: Per capita spending is for 2010/11; immunisation coverage is based on KIHBS 2005/06 Bomet Nyeri Embu Lamu Taita Taveta Kisumu Turkana West Pokot Migori Wajir Garrisa Isiolo
Immunization Rates, 2005/06
Nairobi
The regional variation in the health sectors performance is not well matched with the regional variation in the incidence of health concerns, as discussed in the previous section. As shown in Figure 4.23, areas with more significant health problems (dark on Figure 4.23) often have the worst indicators of health outputs, as shown by the small size of the circle. Using a composite index of reported fever/ malaria prevalence (KIHBS 2005/06), malnutrition (KIHBS 2005/06), HIV+ antenatal care clients and cases of tuberculosis, a disease prevalence score was accorded to counties and mapped, showing that the biggest health problems occur in the darker-shaded counties.
Figure 4.22: Per capita expenditure and deliveries in a medical facility
% Children delivered in a health facility, 2005/06 100 90 80 70 60 50 40 30 20 10 0 0 200 400 600 Tharaka Nithi Mandera Lamu Isiolo Nyamira Kirinyaga Nyeri Nairobi Embu
Turkana
Wajir 800 1000 1200 1400 1600 1800 2000
Per capita spending, KSh. Source: Ministry of Health and KIHBS, 2005/06
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Figure 4.23: Burden of disease and health sector performance by county
Turkana Marsabit
Mandera
West Pokot Samburu Trans Nzoia Elgeyo Marakwet Bungoma Baringo Uasin Gishu Laikipia Meru Isiolo
Wajir
Busia
Kakamega Nandi Siaya Vihiga Kisumu
Kericho Nakuru Homa BayNyamira Kisii Bomet Migori Narok
Tharaka Nithi Nyandarua NyeriKirinyaga Embu Muranga Kiambu Nairobi Machakos Kitui Tana River
Garissa
Makueni Kajiado
Lamu
Kilifi Taita Taveta
Health Sector
Disease Prevalence Health Sector Performance
Best Good Average Poor Worst Very Poor Poor Fairly Poor Good Very Good
0 40 80
Kwale
Mombasa
Kilometers 160
240
320
Source: Ministry of Health based on KIHBS, 2005/06 and AOP, 2010 data
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Using a composite index of the performance of the health sector measured in terms of the following outputs: immunisation coverage, delivery in a medical facility and access to ARV drugs, the size of the circle on Figure 4.23 shows where the output indicators were favourable (larger means better). In this case, counties in the western part of Kenya tend to have significant health concerns, as we already noted, in terms of HIV prevalence and cases of tuberculosis, but the health output indicators are mostly favourable, with the exception of Migori County. For the ASAL regions, upper Rift Valley and parts of the Coast the health problems are still considerable but the health output indicators show considerable need for targeted improvement. In the Central part of Kenya, health problems are less severe and the output indicators are good.
4.8 Sub-nAtionAl eFFiciencY in heAlth sector spendinG
ata Envelopment Analysis (DEA) is one of the techniques that can be used in different sectors to estimate efficiency, especially at sub-national level. DEA is a non-parametric technique that considers each county as a decisionmaking unit (DMU) using inputs to produce outputs.17 In the DEA model, technical efficiency is defined as the relative ability of each DMU (for example, county) to produce outputs. The term relative means that each unit is compared with any other homogeneous unit. The choice of a set of weights that combine several outputs and several inputs is the core of DEA analysis. The efficiency score ranges between 0:1the units that obtained a score equal to 1 are efficient, while the inefficiency of the other units (counties) is calculated through the distance from the efficient frontier. Nevertheless, the focus here is efficiency and not performance. In this case, there could be a unit (county) that has good
Figure 4.24: Efficiency scores, by county
100 80 60 40 20 0 Garissa West Pokot Wajir Migori Narok Kisumu Nandi Trans Nzoia Kilifi Kitui Homa Bay Lamu Kakamega Nakuru Laikipia Isiolo Uasin Gishu E. Marakwet Kajiado Taita Taveta Murang'a Bungoma Meru Siaya Makueni Baringo Nairobi Vihiga Embu Kiambu Kericho Mombasa Machakos Marsabit Bomet Busia Kirinyaga Kisii Kwale Mandera Nyamira Nyandarua Nyeri Samburu Tana River Tharaka Nithi Turkana Source: Ministry of Health
17
Efficiency scores (percent)
Cooper et al., 2006
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Figure 4.25: Efficiency scores and fully immunised children by county

100 Mandera Nyeri Machakos Mombasa Nairobi Vihiga Makueni Siaya Taita Meru Taveta Kajiado Isiolo Kakamega Homa Bay Trans Nzoia Nandi Kisumu Tharaka Nithi Kisii Marsabit Tana River
Turkana
Efficiency Scores (percent)
80
60
40
Narok Wajir Migori West Pokot Garissa
20 0 Source: Ministry of Health 20 40 60 80 100 All vaccinations (2005/06)
performance although it is inefficient; conversely, a low-performing unit (county) can be efficient anyway. DEA analysis proved difficult in this sector due to data challenges. Comprehensive sub-national data on health spending could not be obtained while a huge amount of donor health expenditure is for off-budget systems. Therefore, while various health outputs are available from the KIHBS (2005/06) at sub-national level the unit cost for producing such outputs could not be fully determined but a partial efficiency analysis (with about 50 percent health-spending data at the sub-national level) using the DEA methodology is presented below.
Figure 4.26: Efficiency scores and children delivered in a health facility, by county
100 Mandera Turkana Busia Nyeri Machakos Mombasa Kiambu Embu Nairobi Baringo Makueni Siaya Meru Kajiado Isiolo Laikipia Lamu Homa Bay Tharaka Nithi Kisii Marsabit Trans Nzoia Kisumu Wajir 40 Garissa 20 0 20 40 60 80 100 All vaccinations (2005/06) Source: Ministry of Health Narok Migori West Pokot
80
60
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Figure 4.27: Efficiency scores and per capita total expenditure, by county
100
Mandera
Efficiency score (percent)
80
60
Kirinyaga Nyandarua Mombasa Kiambu Embu Vihiga Nairobi Makueni Baringo Siaya Murang'a Bungoma Meru Kajiado IsioloUasin Gishu Nakuru Kakamega Homa Bay Kitui Kilifi Trans Nzoia Kisumu Nandi Kericho Kisii Narok West Pokot Garissa Migori
Kwale Bomet Marsabit Machakos
Wajir
40
20 0 20 40 Fitted values Source: Ministry of Health 60 Efficiency score (percent) 80 Children delivered in a health facility 2005/06 (percent)
This analysis uses two outputs, i.e. per capita deliveries in health facility (2005/06) and per capita fully-immunised children under one year, and two inputs, namely, county per capita expenditures and anti-poverty ratesbased on 2005/06 KIHBS poverty data. The per capita expenditure is computed based on CDF (2009/10), LATF (2009/10), HSSF disbursements to health centres and district health management boards (DHMB) (2010/11), and personnel data from both MoMS and MoPHS (2012). The population figures used in computation refer to the 2009 population census.
Figure 4.28: Efficiency scores and poverty rates, by county
100
Nyeri Kiambu Nairobi Meru Siaya
Bomet Kericho Vihiga
Kisii Busia Machakos
Kwale Mandera Marsabit
80
Kajiado
60
Baringo Makueni Taita Taveta Isiolo Nakuru Kakamega Lamu Homa Bay Kitui Kilifi Trans Nzoia Kisumu Narok
Migori Garissa
40
West Pokot
Wajir
20 20 40 Fitted values Source: Ministry of Health 60 Poverty 80 100
Efficiency score (percent)
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Using the DEA methodology, the per capita measure was used to compare efficiency across counties. Only 18 of the 47 counties were very efficient, with over 90 percent efficiency scores, while four counties (Garissa, West Pokot, Wajir and Migori) were less efficient with efficiency scores of less than 50 percent (Figure 4.24). Most of the countiesabout 53 percent of the totalhad efficiency scores ranging from 51 percent to 89 percent. Using the per capita measures, it is possible to compare the allocative and technical efficiency measures across counties. We compare the outcome indicator, i.e. the efficiency score, with the characteristics of the region such as ease of accessibility to health facilities, access to clean water and other health indicators such as availability of health services.
4.9 Public expenditure outlook (2012-2013 to 2014-2015)
n order to meet the strategic goals and objectives and to ensure that the poor have access to quality healthcare, the sector continues to emphasise the importance of allocating more resources to health promotion and prevention, while at the same time strengthening hospitals so that they can adequately serve as referral centres for the primary health services. Table 4.6 shows sector resource requirements for both recurrent and development expenditure for FY 2013/2014 as KSh. 174,677 million, comprising of preventive care, curative care, and research and development. Overall assessment and recommendations 4.9.1 Suggestions to improve health performance The three most important inputs to a healthcare system are infrastructure (beds, health facilities), human resources, and drugs and medical supplies. This section reviews how the government can improve equity in the sector by translating the resources into a more equal distribution of inputs, and efficiency. The challenges to increasing the number of healthcare workers in underserved regions are similar to the education sector and, in addition, there is an overall shortage of trained health workers in the public sector. Kenya is regarded by the WHO as one of 57 countries in crisis on this account based on the required ratio of 2.3 health workers per 1,000 population. Despite the crisis, the country has a relatively high number of health workers compared to other countries in the SubSaharan Africa region (1.69 health workers per 1,000 population).
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Table 4.6: Sector requirement for both recurrent and development expenditure (KSh. million) 2012/13 to 2015/16 Vote Recurrent Preventive and promotive health care services Curative health care services Research and development Total recurrent Development Preventive and promotive health care services Curative health care services Research and development Total development Total
Source: Expenditure estimates
Estimates 2012/13
Requirement
Allocation
Projections 2014/15 2015/16
2013/14
14,674 37,010 1,213 53,183
25,992 79,857 4,322 110,171
15,338 43,812 1,259 60,409
28,171 92,159 4,529 124,859
30,406 106,361 4,642 141,409
26,152 4,546 292 37,653 90,836
41,093 15,934 7,479 64,506 174,677
27,526 4,874.00 340 32,740 93,149
76,640 15,686 7,649 99,975 224,834
150,554 16,445 7,824 174,823 316,232
Prospects for improving the ratios of population to healthcare professionals in those counties falling well behind the national average will largely depend on financial incentives to attract staff to these regions. With decentralised responsibility for primary health care, the option of a centrally managed system for allocating and rotating health workers to hardship areas is no longer an option. This poses a significant challenge for the counties, as the very counties in need of more services will have to incur higher unit costs of providing them. Counties will need to consider how to allocate scarce public resources to improve overall sector performance, and this will also require a user fee policy. Certain types of facilities are typically more costly to run than others. The cost of obtaining medical care from a hospital is about 7.7 times the cost of a primary healthcare facility, while a visit to a referral hospital costs 13 times as much as a visit to a county hospital, when comparing standard treatments such as general outpatient consultation, ante-natal care, post-natal care and immunisation programmes.18 A county will be able to improve efficiency in the sector if more standard services are provided by the lower-level facilities. One option could be the introduction of higher user fees to discourage use of more expensive facilities for standard treatments that should be provided at health centres. Counties need to tailor their health interventions to their health problems to improve efficiency. A good example is provided by the review of the per capita
18
Demery and Gaddis, 2009.
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spending on malaria programmes and correlation with malaria prevalence. Some counties, such as Wajir, Garissa and Siaya, Meru, and Bungoma, have a low per capita expenditure on malaria, despite a high malaria burden. At the same time, regions with low malaria incidence are potentially spending more than necessary. Although expenditures on health have increased substantially since 2001/02, aggregate spending is still below the Abuja Declaration of 15 percent of total government expenditure. There is a need to allocate more resources to the health sector if higher efficiency is to be achieved. The problem of low budgetary absorption can be overcome by ensuring the prompt release of funding to finance the intended activities. There are significant regional disparities in per capita public health spending, translating into inequalities in service provision across regions. Public health spending at the county level tends to favour richer counties and those with high population densities thus excluding counties with low population densities, which in most cases tend to be poor and without alternative means to raise incomes. Despite the low aggregate spending on health, Kenya can still achieve major improvements within the current spending envelope if resources are distributed more evenly across counties and income groups. It is important to determine an equitable resource allocation formula before substantially increasing health spending. The delivery of improved health care at the local level will be one of the biggest challenges facing the county governments. There will be high expectations on the part of communities, given the basic rights enshrined in the Constitution, and yet higher challenges to attract and retain the staff needed to deliver better health services in the areas that require it most. There are several advantages and disadvantages to devolving responsibility for health care to the county governments that should be taken into consideration if the county governments are going to be able to deliver on these high expectations. First, the county governments should draw upon the existing information to prioritise expenditures to certain types of health intervention tailored to the problems of each county. To do this, counties will need to undertake a mapping of disease burden (main causes of morbidity and mortality), which may be possible using the latest KDHS data. Counties also need to have a good understanding of services available and the level and coverage of these
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servicesfor example, the services availability and mapping exercise (SARAM) which is currently underway. This information for decision-making is likely to lead to a better allocation of resources within the sector. Going forward, it is important that counties have access to and regularly monitor county-level health data. While there has been a lot of progress with the development of the master facilities list and the e-health systems for the central line ministries, it is critically important that the county governments maintain the supply of data to these systems and have real-time access to the data. Prospects for a more equitable resource allocation for counties are positive, with the new CRA formula. However, as human resources are likely to make up a large proportion of this spending, the ratios of healthcare staff to population size will likely require additional financial rewards or incentives to attract and retain qualified staff. The county governments should collaborate on a policy for ensuring that staffs are well distributed by agreeing on the parameters for health staff remuneration and standard incentive packages for hardship posts. With decentralised responsibility for primary health care, the option of a centrallymanaged system of allocating and rotating health workers to hardship areas is unlikely to be an option. The central government needs to address the overall problem of insufficient health care workers. This will require further work to determine whether the shortage is a result of lack of supply (not enough trained nurses oreven further down the education chainnot enough literate primary school students or science-educated secondary school students, for example) or a greater demand elsewhere with higher wage offers that is causing medical staff to migrate. Cost efficiency and effectiveness should drive health expenditure allocations. Certain types of facilities are typically more costly to run than others. Increased costs are to be expected in hard-to-reach areas of the country. In addition, knowing that the cost of obtaining medical care from a hospital is about 7.7 times the cost of a primary healthcare facility, while a visit to a referral hospital costs 13 times as much as a visit to a county hospital, a county will be able to improve efficiency in the sector if more standard services are provided by the lower-level facilities. The implementation of a referral strategy will be important in this process. Counties should also consider sharing regional facilities where the economies of scale make higher-level care facilities too costly for remote communities; this will involve sharing access rights across county boundaries. A conditional health grant could be considered (from the national level) to address some of the poor health indicators in certain counties that are also
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suffering from a higher burden of disease while also being the counties with the greatest levels of poverty and capacity constraints. Such a grant could conceivably come from the marginalised grant provision or national-level allocation, and would provide an earmarked health grant to counties falling into this category. It is critical to enhance monitoring and evaluation of planned activities. This could be achieved through a continuous data collection process to inform the sector. There is need to invest in purifying and piping water. Access to clean drinking water and facilities for waste disposal are critical for good health and as a time-saving device, especially for women who often spend several hours a day fetching water from distant sites. Educational campaigns on proper sewage disposal and use should be initiated. The resources are disproportionately devoted to recurrent spending. If plans to address these initiatives are put in place, preventable and opportunistic diseases will only be addressed through curative treatment, hence keeping recurrent expenditures high. There is a mismatch between policy and resource allocation especially in regard to allocations for preventive and curative health care.
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Chapter 5
AGriculture And RurAl Development
Executive summary
griculture Sector is a key component of Kenyas economy and remains the main source of livelihood for majority of Kenyan people. Through various reforms, the sector has continued to ensure food security and improved nutrition status. Expenditure growth in the sector has been slow and is estimated at 4.3 percent of total spending against the Maputo Declaration of 10 percent of national expenditure. In spite of the low level of funding, the sector directly contributed 24.5 percent of the GDP valued at KSh. 741 billion (Economic Survey, 2012) in 2011. It also indirectly contributes approximately 27 percent to GDP through linkages with manufacturing, distribution and other service related sectors. The sector further accounts for about 65 percent of Kenyas total exports. The sector targets to achieve an average growth rate of 7 percent per year over the next 5 years through focus on innovative, commercially oriented and modern agricultural practices to achieve the Kenya Vision 2030 target of 10 percent economic growth rate.
The total allocation and expenditure to the sector shows a steady rise from KSh. 33 billion in 2009/10 to KSh. 47.1 billion in 2011/12, an increase of 43 percent. Performance in actual expenditure indicate that the sector had an average overall absorption rate of 84.6 percent though there was a mixed trend of a decline and increase from 85.8 percent to 80.6 percent and 87.5 percent in 2009/10, 2010/11 and 2011/12 financial years respectively. The high increase in the allocation was due to the Economic Stimulus Programme which supported some sub-sectors.
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The sector is affected by numerous exogenous factors that include climate change, variable weather and changes in terms of trade, making it difficult to link trends in overall agricultural growth to total public expenditures. Agricultural output may decrease following a drought even if there was an increase in public expenditure, due to expenditures incurred for famine relieffood imports, thus show a negative relationship between spending and agricultural growth. In Kenya like in many parts of the world, poverty is highly related to either poor access or inadequate factors of production, the main one being land. Land is the foundation of all human activities and is crucial for the attainment of economic growth, poverty reduction and gender equity. The Kenya Constitution 2010 addressed the flaws that existed in the previous constitution that were blamed for widespread imbalances in land ownership and distribution. Issues addressed by the Kenya Constitution 2010 include: classification of land, land holding by non-citizens, regulation of land use and property, national land commission and legislation on land all to be developed under the land policy. The Kenya Constitution 2010 provides for creation of two levels of governments, the National and the county governments. In order to realize the sectors goals and objectives, various functions will be discharged at both levels. According the Constitution fourth schedule, National Government functions shall essentially be policy related; like agricultural and veterinary policy, capacity building, finance and technical assistance while the functions assigned to county governments shall include; crop and animal husbandry, livestock sale yards, abattoirs, plant and animal disease control, fisheries and cooperative societies. The key messages of the sector include; a. Productivity levels for many crops are below potential and for some agricultural produce yield and value over a 5-year period have either remained constant or are on the decline. Similarly, the production level for most fish and livestock products is below potential. Forest cover and tree productivity have been on the decline while population growth has led to increased humanwildlife conflict. b. Land in the high- and medium-potential areas as well as in arid and semi-arid lands (ASALs) remains under-exploited for agricultural production. Much of the available cropland remains under-used with smallholders using only 60 percent of their land for agricultural production. c. The productivity of the agricultural sector is constrained by inefficiencies in the supply chain resulting from limited storage capacity, lack of post-harvest services and poor access to input markets. Vision 2030 calls for proactive
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efforts to maintain existing markets and create new ones to increase Kenyas bargaining power in global agricultural markets. d. In agriculture, value addition determines the competitiveness of the countrys produce in world markets. However, Kenyan farmers export semi-processed, low-value produce, which accounts for 91 percent of total agriculture-related exports. The limited ability to add value to agricultural produce coupled with high production costs make exports less competitive. Introduction This chapter reviews public expenditure in the agriculture and rural development sector over the three financial years from 2009/10 to 2011/12. It provides a policy and performance overview of the sector, a review of progress since the 2010 Public Expenditure Review, various public expenditure analyses for the three year period, before concluding with a nuanced, sector-level Public Financial Management snapshot. A forward looking policy perspective, which focuses on the implications of the 2010 constitution in general and devolution in particular, follows. The chapter then presents an outlook on agricultural sector public expenditure for the 20132015 period before concluding with an overall assessment and set of policy recommendations based on the overall findings and analysis.
5.1 POLICY AND PERFORMANCE OVERVIEW
5.1.1 Sector profile
griculture is identified as one of the sectors that will contribute immensely to the realization of the Kenya Vision 2030 through the implementation of the sector flag-ship projects and earmarked programmes. It is recognized that national economic performance has a direct bearing not only on farm incomes but also on food security and nutrition status. The sector has a crucial role in ensuring food security, job creation and income generation, foreign exchange earnings and linkages with other sectors especially the micro and small enterprises (MSEs), construction industry (via wages for unskilled workers) and informal sector businesses. The sector is a key driver of economic growth in Kenya and remains the main source of livelihood for the majority of the Kenyan people. It has also been identified as one of the six sectors critical in delivering the 10 percent economic growth rate under the Vision 2030. In 2011, the sector directly contributed 24.5 percent of the GDP valued at KSh. 741 billion (Economic Survey, 2012). It also indirectly contributes approximately 27 percent to GDP through linkages with
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manufacturing, distribution and other service related sectors. It further accounts for about 65 percent of Kenyas total exports, 18 percent and 60 percent of the formal and total employment respectively. The sector is the leading source of employment in the rural areas accounting for an estimated 75 percent of the labour force. It has a direct value added of KSh. 307 billion and indirect value added of KSh. 385 billion through linkages with manufacturing, distribution and other service related sector (KNBS, 2011). 5.1.2 Sector composition The Agricultural and Rural Development (ARD) Sector comprises of five subsectors which include Agriculture (Crops); Livestock Development; Cooperative Development and Marketing; Lands; and Fisheries Development. The Research and Development institutions in the sector are; Kenya Agricultural Research Institute (KARI), Tea Research Foundation (TRF), Coffee Research Foundation (CRF), Kenya Sugar Research Foundation (KSREF), and Kenya Marine and Fisheries Research Institute (KMFRI). In addition the National Land Commission is also one of the key constitutional commissions in this sector.
5.2.1 Policy, legal and strategic framework he Economic Recovery Strategy 2003-2007 set the stage for the revival of the agricultural sector and thereafter an elaborate Strategy for Revitalizing Agriculture (SRA), 2004-2014 was drawn which informs the framework for reforms and formulation of programmes. The country adopted the Strategy (SRA) in March 2004 with an aim of transforming Kenyas agriculture into a profitable, commercially-oriented and internationally and regionally competitive economic activity that provides high-quality, gainful employment to Kenyans. Most of the goals set out in the SRA have been achieved and lessons learnt. The formation of a Grand Coalition government in 2008 and the launch of Vision 2030 increased the need to position the agricultural sector as one of the key drivers for delivering the 10 percent annual economic growth rate envisaged under the economic pillar of Vision 2030. Consequently, the Agriculture Sector Development Strategy (ASDS) 2010-2020 was developed to guide growth and transformation of the sector. The ASDS has two broad strategic thrusts to ensure overall growth and development of the sector; these are (i) increase productivity, commercialization and competitiveness of the sector, and (ii) Develop and manage factors of production for sustainable agricultural sector growth. In addition, the ASDS takes into account the ongoing institutional and policy reforms, key regional and international initiatives.
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Government effort has been consistent with international commitments and declarations to end hunger and extreme poverty, including at the World Food Summit of 1996, the United Nations Millennium Development Goals (MDGs), and the Comprehensive Africa Agriculture Development Programme (CAADP). 5.2.2 Sector policy/strategy The new Agricultural Sector Development Strategy (ASDS) is intended to build further on the gains made by the SRA. It is intended to provide a guide for public and private sectors efforts in overcoming the outstanding challenges facing the agricultural sector in Kenya. Besides ensuring food and nutritional security for all Kenyans, the strategy aims at generating higher incomes as well as employment, especially in the rural areas. Moreover, it is expected to position the agricultural sector as a key driver in achieving the 10 percent annual economic growth rate envisaged under the economic pillar of Vision 2030. Under the ASDS, agricultural sector ministries are expected to ensure that farmers, producers, processors and marketers of agricultural produce employ the most contemporary methods and technologies. This will require that all agricultural enterprises be highly productive, commercial in nature and competitive at all levels. The strategy also underscores the need to develop and prudently manage our factors of production such as land, water, inputs, and financial resources so that the cost of production is within international standards. The overall goal of the agricultural sector is to achieve an average growth rate of 7 percent per year over the next 5 years. Given the critical strategic issues that need to be addressed, the strategic mission for the sector is: An innovative, commercially oriented and modern agriculture. 5.2.3 Key institutional and policy issues in ARD sub-sectors Crops sub-sector To provide enabling environment for agricultural growth and development, a consolidated Agriculture policy and legal framework and other appropriate policy were developed. Three Consolidation Bills {Agriculture, Livestock, Fisheries, and Food Authority (ALFFA) Bill 2012, Crops Bill 2012, and Kenya Agricultural Research Bill 2012} were debated, passed by parliament and assented to by the President in December, 2012. Other key policies in agriculture include the National Agricultural Sector Extension Policy, Food and Nutrition Security Policy (2011); Horticulture Policy, National Agribusiness Strategy and National Agricultural Research Systems Policy are some of the policies that were developed.
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Agriculture has various institutions catering for crops development under Financial Corporations (Agricultural Finance Corporation and Coffee Development Fund) and Commercial/Manufacturing corporations including Kenya Seeds Company, Nyayo Tea Zones Development Corporation, Pyrethrum Board of Kenya, National Cereals and Produce Board, Sugar Companies (Chemilil, SONY, Nzoia, Miwani and Muhoroni), Agrochemical and Food Company and Agricultural Development Corporation. Regulatory Corporations includes the Coffee Board of Kenya, Tea Board of Kenya, HCDA, Kenya Sisal Board, Kenya Sugar Board, KEPHIS, PCPB and Kenya Coconut Development Authority. There are also Training institution (Bukura Agricultural College) and statutory boards including Central Agricultural Board and Agricultural Information and Resource Centre. Livestock sub-sector To achieve its mandate, Ministry of Livestock Development concentrated on facilitating increased access to local and international markets for livestock and livestock products, improved livestock productivity, promotion of value addition through local processing of animal products, and wealth and employment creation through livestock-based enterprises. The ministry finalized the national livestock policy and has been implementing it in the period under review. Further, the ministry finalized the development of the poultry and dairy policies. In addition, the animal feedstuff draft bill, animal breeding draft policy and bill, national veterinary drugs bill, veterinary surgeons and paraprofessionals Act 2011 and bee keeping policy are in the final draft stages. Currently, the ministry organization structure comprises of Department of Veterinary Services (DVS), Department of Livestock Production, and affiliated institutions which include Kenya Veterinary Board, Kenya Dairy Board, Kenya Veterinary Vaccines Production Institute, Kenya Meat Commission (KMC), Kenya Animal Genetic Resource Centre, and Narok and Griftu Pastoral Training Centres (PTCs) It is envisaged that the affiliated PTCs will be transformed into certificate offering institutions specializing in range management and animal health. Other institutions, namely; the national beekeeping station, Animal Health Training Institutes and Meat Training Institute will be upgraded to offer diploma courses. Other institutions that are also enhancing achievement of the Ministrys mandate include, Kenya Livestock Marketing Board, Kenya Leather Development Council and Kenya Tsetse Fly and Trypanosomiasis Eradication Council. However, these institutions will require additional capacity for them to achieve their targets as outlined in the ministry strategic plan.
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Fisheries sub-sector The sub-sector finalized several policies towards fisheries development. These include National Oceans and Fisheries Policy; and Aquaculture Policy. Aquaculture Strategy and Development Plan & Beach Management Unit Regulation 2007 were developed while the Fisheries Act, Cap 378 was reviewed. Cooperatives Currently all co-operatives are governed by the Co-operative Societies Act (amended 2004). The Act in its current form does not effectively cater for all categories of co-operatives and emerging challenges associated with the first growth of the co-operative sub-sector. A new SACCO Act 2008 has been enacted, to administer and streamline the development and management of SACCO societies that are not effectively covered by the main Co-operative Societies Act. The SACCO Act aims to create a SACCO Regulatory Authority to oversee SACCOs operations and to be the custodian of prudential standards. There are various institutions in place on development of cooperatives. These include Training (Cooperative College of Kenya), Regulatory Institution (SASRA), Commercial (New Kenya Cooperative Creameries), and Statutory Board (Ethics Commission for Cooperatives). Lands sub-sector Land is a critical resource for the socio-economic and political transformations as spelt out in the Kenya Vision 2030. Equally important is the respect for property rights to land, whether owned by communities, individuals or institutions as the driver of rapid economic transformation. It is in this context that the subsector has consolidated over 70 pieces of legislation on land into four (4) Acts in tandem with Constitution of Kenya 2010 (fifth schedule). These include; Environment and Land Court Act, Land Act, Land Registration Act and National Land Commission Act. Formulation of a National Land Use Policy which forms the basis for future land use planning for various purposes and encourages a multisectoral approach to land use planning by creating an enabling environment for investment, agriculture, livestock development and the exploitation of natural resources was also initiated. Establishment of National Spatial Data Infrastructure is crucial in transforming land sub-sector. This will involve development of an infrastructure framework for storage and sharing of spatial data obtained from various sources for instance agriculture, tourism, environment and water. This will therefore develop an integrated platform for purposes of making spatial data available for various users.
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Lands sub-sector has two institutions catering for land administration and management under regulatory and training institutions namely National Land Commission and Kenya Institute of Surveying and Mapping respectively. National Land Commission will among other functions manage public land on behalf of the national and county governments. 5.2.4 Institutional framework and organizational structure Sector organization and management The structure and organization of the agriculture sector constitutes of ministries, departments and agencies (MDAs) that exist through vertical and horizontal coordination mechanisms. Sector ministries are organized hierarchically as follows: (i) head office (ii) technical departments (iii) county offices who report to technical departmental heads (iv) sub county offices who report to county heads on performance. Planning and budgetary decisions are made and reported to the headquarters. Vertical coordination within each ministry includes a number of directorates and semi-autonomous government agencies (SAGAs). For instance, the Ministry of Agriculture houses thirty five (35) agencies in addition to its five directorates, running operations up to sub-location level country-wide. Although the ministry often involves its agencies in the planning phase, the extent to which identified linkages are taken on board in implementation may be limited by among other constraints such as available resources (personnel, finances and equipment) and operational capacity. At the national level, horizontal coordination is done through the Medium Term Expenditure Framework (MTEF), sector planning and budgetary stage (the link between Ministry of Planning and National Development, Ministry of Finance and the sector Ministries). The Agriculture Sector Coordination Unit (ASCU), the National Integrated Monitoring and Evaluation Unit (NIMES) and the Vision Delivery Secretariat (VDS) enhances coordination of the sector with other supporting ministries and departments e.g. those in charge of infrastructure (rural roads, education and irrigation). The need for coordination and sector wide planning becomes even more imperative given the frequent splitting and merging of sector ministries which often seems to be guided by political rather than economic expediency. Table 5.1 shows the staffing levels for the all subsectors in the Agriculture and Rural Development Sector. Staffing levels especially for technical departments fall far short of the recommended levels. The MLD has the highest deficiency of
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technical staff of about 66 and 60 percent for veterinary services and livestock production respectively.
Table 5.1: Human resource deployment in the agriculture sector ministries in Kenya, 2012 Ministry MOA Department Support staff Technical MLD Support staff Veterinary Services Livestock Production MCD & M Support staff Cooperative Dept MOL Support staff Technical staff MOFD Support staff Technical staff
Source: Sub-sector MPERs, 2012
Authorized 2, 272 5,316 388 9,830 5531 935 681 1,756 4,992 766 2,349
In-Post 1, 736 2, 298 245 4,222 2634 626 476 441 3,371 406 677
Variance (percent) 23.6 36.8 36.9 57.1 54.3 33.0 30.1 74.9 32.5 47.0 71.2
MOA takes the bulk of the sectors budget; and has been considered the main player in crop production within the sector. There has been a general low staffing with the staff to farmer ratio of 1:978 compared to Food and Agricultural Organization recommended of 1:400 (MOA; MPER, 2009). The low staffing levels becomes more critical in view of the increased administrative units in the country. With the devolution and county governments this challenge is going to be more evident. Recruitment has not matched the creation of more administrative units in the past. As an initial stop-gap measure, the government will seek public private partnerships to assist in providing extension services. And at the same time encourage the County, sub-county and divisions to tap into devolved funds and seek partnerships to facilitate the provision of public services.

he following are some of the key milestones that were achieved while implementing the SRA.
a. Establishing the Agricultural Sector Coordination Unit (ASCU): The establishment of ASCU was well articulated in the SRA and it was fully established in the year 2006. Recruitment of key staff, which comprised seconded staff, went on until 2008. The unit is now well established and playing a key role in coordinating issues that cut across ministries. It also serves as a one-stop shop for the entire agricultural sector.
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b. Revival of agricultural institutions: One of the pledges of the NARC Government was to revive all public institutions that provide services to citizens. Within the agricultural sector, the institutions that were on the verge of collapse and have since been revived include Kenya Meat Commission, Kenya Cooperative Creameries (KCC), Kenya Seed Company, Agricultural Finance Corporation, and the Agricultural Development Corporation. Institutions that were considered moribund and dysfunctional, such as research and extension services with their sub centres, training centres and tractor hire are now vibrant and providing services to farmers. Even institutions that were running into losses, such as the sugar factories, have been revived are reporting profits and are on the verge of being privatized. c. Increased Agricultural Productivity: Despite the vagaries of the weather, the impact of climate change and external factors such as high cost of inputs, crop yields on smallholder farms have increased significantly over the last 5 years. For example, the average yield of maize has increased from 1.5 to 3 tonnes per hectare. This is attributed to better technology transfer and extension services. Furthermore, the yield for medium-and large-scale farmers has increased by a higher margin due to use of high-yielding varieties and better agronomic practices. d. Developed policies and legislation: In the last 5 years, over 15 policies and 6 pieces of legislation have been developed and are being implemented. Among these are the Seed Policy, Food Security and Nutrition Policy, National Dairy Development Policy, National Agricultural Sector Extension Policy, Cotton Act 2006 and the Cooperatives Policy. This success is attributed to restructuring ministries by creating directorates and units that are coordinating policy development. e. Increased Agricultural Growth: The SRA set the target for agricultural growth at an average of 3.1 percent by 2003, to reach 5 percent by 2007. This target was achieved: growth reached an average of 5.2 percent by 2007 with the highest being 6.2 percent in 2006. This growth path was interrupted in 2008 by external factors. However, the sector has great potential to return to its previous growth path. f. Reducing food insecurity and poverty: The ERS had set a target of reducing food insecurity by 23.5 percent by 2008 and poverty by 26 percent by 2010. By 2007 food insecurity had been reduced by 12 percent from 48.5 to 36.5 percent, while poverty had been reduced by 10 percent from 56 to 46 percent.
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5.3.1 Recent outcomes and outputs Agricultural programmes and projects performance During the period under review, Agriculture and Rural Development sector expenditure focused on implementing Vision 2030 first Medium Term Plan (2008-2012). The sector goal was in line with the Vision 2030 is an innovative, commercially oriented and modern agriculture and rural development sector and is guided by the Agriculture Sector Development Strategy (2010-2020) which emanated from a revision of the Strategy for Revitalizing Agriculture (2004-2014) to reflect the aspirations of the Vision 2030. The key policy goals that guided the sectors spending include: raising agricultural productivity through generation and promotion of technologies and increased resource allocations; exploiting irrigation potential; increased commercialization of agriculture; undertaking a comprehensive review of the legal and policy framework for the sector; improving governance of sector institutions; land development; and promotion of sustainable management of fisheries. The sector identified and focused on nine programmes for implementation by the various subsectors and six other programmes under Research and development. The key sectors programmes include: Policy Regulation and Coordination, Strategy and Management of Agriculture; Crop Development and Management; Agribusiness and Information Management; Fisheries Development; Cooperative Development and Management; Cooperative Marketing; Land Policy and Planning: Livestock Resources Management and Development; and Research and Development. The six projects on Research & Development included, Agricultural Research; Coffee Research; Tea Research; Marine and Fisheries Research; and Sugar Research. During the review period Agriculture, Livestock and Fisheries sub-sectors successfully implemented Economic Stimulus Projects countrywide. The project focused on development of sector infrastructure, farmers and pastoralists capacities to improve food security situation, building fisher folk, environmental conservation and poverty reduction. Individual sub-sectors continued to implement Vision 2030 flagship projects with significant success. Cooperatives sub-sector established Ethics Commission to improve governance in cooperatives and decentralized tribunal services that led to reduction of backlog cases by 77 percent.
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Under Lands subsector, eight projects were initiated and are at advanced stage. These projects include land reforms, National Spatial Plan, Resort Cities, National Land Use Policy, Special Economic Zones, Konza Techno City Development Plan and Land Cover & Land Use Mapping. This has led to improved collection of revenue to a tune of KSh. 9.6 billion in 2012 compared to KSh. 800 million in 2007, an increase of 1,200 percent in a span of five year period. In addition to the above, sector ministries continued to provide services in extension and regulation. Under research and development basic & applied research for various commodities, services were on-going. 5.3.2 Performance indicators Figure 5.1 show the percentage change in GDP growth for the different subsector in the agriculture and it is evident that the post-election violence of 2007/08 affected all the subsectors except farming of animals. Nonetheless there seems to be a general recovery trend since then in the sector.
Figure 5.1: Percentage change in GDP growth for sub-sectors in agriculture 2006 to 2010
Percentage change in GDP growth rates 10 5 0 -5 -10 -15
2006
2007
2008
2009 Farming of animals Forestry and logging
2010
Growing of crops and horticulture Agricultural and animal husbandry services Fishing Source: KNBS, 2011
In addition implementation of Agriculture Sector Development Strategy (ASDS) has contributed to improved performance of the sector. Through the ASDS, the government aims at transforming the agricultural sector into a profitable economic activity capable of attracting private investment and providing gainful employment for the people.
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Following food crisis that has been facing the country over the years, the Government responded to this crisis through three major policy interventions based on Supply, prices and income: a. Supply related policies included: Subsidy on farm inputs, especially fertilizers, through involvement of the Government National Cereals and Produce Board (NCPB) in importing and distributing the inputs; improvement of research and extension services and improving their linkages; provision of rural credit for farming (e.g. the Kilimo Biashara Initiative); improvement in rural infrastructure, especially road network; development of rural agricultural markets and agribusiness skills; improvement of the management and use of natural resources, especially water for irrigation and private sector initiative to mobilize citizens to contribute to the food relief kitty. b. Price related policies in place included: involvement of the NCPB in the purchase of maize from farmers at prices higher than market prices to provide incentive to producers; raising the levels of the strategic food reserves to about 8 million bags (90 kg) held by the NCPB in order to stabilize the maize prices and providing a fund to purchase livestock from the drought stricken areas. c. Income related policies include: governments enhanced efforts to contribute to the costs of social amenities through programmes in other sectors that include free education programme and reduced costs of health at public health facilities. This enables the population especially the poor to have more disposal income to spend on food; government transfer funds for development to the grassroots, especially the Constituency Development Fund (CDF) and Local Authorities Transfer Fund (LATF), helps the local communities meet their development need while creating employment at the rural areas for those people who can provide specialized skills and labour. 5.3.3 Agricultural production The Agricultural value added per worker in Kenya has been declining since the economy was liberalized in the mid-1980s under Structural Adjustment Programmes. Nonetheless, it is still higher than the average for developing countries in Sub-Saharan Africa and low income countries. Nationally the productivity for industrial crops such as coffee and tea has remained relatively the same over the last two decades. Pulses (beans, pea, grams, etc) have shown an increase (beans) while others have decreased (green grams) (2.46 Tonnes/Ha to 0.4 Tonnes/Ha). Root crop productivity (e.g. cassava, arrow roots,) has almost doubled over the last five years from 5.7 Tones/ Ha to 10.4 Tonnes/Ha. The key drivers of this change are the increased fertilizer use and good husbandry as promoted by the public extension service.
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Table 5.2: Total value (KSh. billion) of key commodities Product Maize Wheat Rice Coffee Tea Horticulture Milk Beef
Source: Sub-sector MPERs, 2012
2008 65.8 11.2 2.8 9.0 62.2 -------
2009 71.0 8.7 3.2 10.7 69.6 143.8 84.0 88.2
2010 75.0 15.3 8.3 16.1 97.7 186.3 101 76.5
2011 87.8 8.1 5.7 22 109.4 205.2 93 81
Access to inputs has also improved during the period this has been made possible by the increased density of input stockists in farming areas resulting in reduced transaction costs. Overall, horticultural production has shown increases over the last two decades although intermittently mainly due to the changing market demand and weather patterns. 5.3.4 Livestock production Livestock population A comprehensive livestock census was last done 1969. However, a livestock module was included in 2009 national population census to help in estimating the livestock population in the country. Annex 13 and Table 5.3 shows that, a large population of the total livestock is found in ASAL counties. It also indicated that shoat and cattle are the major livestock types in Kenya. Turkana, Tharaka-Nithi, Wajir and Mandera have a larger number of livestock populations across most of the categories. Nonetheless more statistics and information on breeds, numbers, mortality rate, production systems and the management skills of stockowners, breeders and producers is needed. Milk production and milk products In the period under review milk annual production has substantially increased from 4.2 billion litres in 2009/10 to 5.2 billion litres in 2012. In 2010, there was substantial surplus in milk production causing farmer distress due to the limited a capacity to handle milk glut. In 2000, the annual per capita milk consumption was 78 litres whereas production was 70 litres. According KNBS 2011, there has been an increase in production to 92 litres whereas the average annual per capita consumption of milk stood at 87 litres.
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Table 5.3: Top five counties by annual productivity for selected commodities Commodity Maize Wheat Rice Beans Irish Potatoes Tomatoes Cabbage Kale Banana Avocado Passion fruit Mangoes Cassava Sorghum Millet
Source: MoA, 2012
Rank 1 Trans Nzoia Kericho Kirinyaga Kajiado Transnzoia Bomet Nyandarua Uasin Gishu ElgeyoMarakwet Kirinyaga ElgeyoMarakwet Laikipia Tana River Bomet Kirinyaga 2 Uasin Gishu ElgeyoMarakwet Kisumu ElgeyoMarakwet Nyandarua Embu Meru ElgeyoMarakwet Kirinyaga Nyeri Embu Elgeyo Marakwet Kericho Homa Bay Homa Bay 3 Nakuru Meru HomaBay Taita/Taveta Bomet Uasin Gishu Kiambu Bungoma Tharaka Nithi Kericho Meru Kirinyaga ElgeyoMarakwet Nandi Kisii Narok Uasin Gishu Migori Nyamira Baringo Kajiado Elgyo Marakwet Kisii Kajiado West Pokot Uasin Gishu Kwale Kitui Uasin Gishu Siaya 4 5 Kericho Nakuru Siaya Kirinyaga Kisii Nyeri Bomet Kiambu Meru Murang'a Taita Taveta Taita Taveta Trans Nzoia Turkana Kisumu
5.3.5 Fishery production Fish farming has a potential to contribute 50 percent of total fishery output up from its current contribution of 2.5 percent. Table 5.4 indicates that harvest from inland fisheries (from lakes) has decreased from about 128,000 metric tonnes in 2007 to about 123,000 MT in 2010, a 3.9 percent decrease in five year period. Fish farming on the other hand has increased from 4,000 in 2007 to 12,153 in 2010 due to the Economic Stimulus programme that focused on construction of fish ponds in most counties with high fish farming potential. The government through the programme invested KSh. 1.12 billion to promote aquaculture (fish farming) during the period under review.
5.4 PUBLIC EXPENDITURE REVIEW (2009/10 TO 2011/12)

he Maputo Declaration by Heads of Government called for increased resource allocation to the agricultural sector to 10 percent of national expenditure by the year 2010. Kenyas progress towards that target has been slow and is estimated
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Table 5.4: Top five counties by livestock type Breed Cattle Sheep Goats Camels Donkeys Pigs Chicken Beehives
Source: KNBS, 2011
Rank 1 Turkana Turkana Wajir Wajir Turkana Vihiga Tharaka-Nithi Tharaka-Nithi Narok Narok Turkana Mandera Wajir Busia Vihiga Bomet 2 3 Mandera Mandera Tharaka-Nithi Turkana Tharaka-Nithi Tharaka-Nithi Kiambu Kitui Vihiga Wajir Mandera Garissa Mandera Kiambu Kakamega Baringo 4 5 Garissa Garissa Tana River Tharaka-Nithi Kitui Kakamega Migori Isiolo
at 4.3 percent. In recent years, allocations for development expenditure have increased considerably. In some years, due to drought, there has been frequent budget recall from various ministries to meet emergency food security expenses. 5.4.1 Recent public expenditure trends The total allocation and expenditure to the sector shows a steady rise during the period under review. In 2009/10 allocation was KSh. 33 billion and rose to KSh. 47.1 billion in 2011/12, an increase of 43 percent as shown in Table 5.8. In terms of actual expenditure the sector performance is fair as the overall absorption of the allocated funds averaged 84.6 percent though it had a mixed trend of a decline and increase from 85.8 percent to 80.6 percent and 87.5 percent in 2009/10, 2010/11 and 2011/12 financial years respectively. The high increase in the allocation was due to the Economic Stimulus Programme which supported some sub-sectors. The sector recurrent allocation in 2011/12 was KSh. 20.4 billion compared to KSh. 19.6 billion in 2010/11. This was an increase of KSh. 0.8 billion from 2010/11. In terms of expenditure, the money spent was below the approved estimates throughout the period under review. In 2011/12 the allocation was KSh. 20.4 billion against actual expenditure of KSh. 19.7 billion representing a 96.2 percent absorption level.
Table 5.5: Volume of fish production (metric tonnes), 2007/10 Year 2007 2008 2009 2010 Fish farming 4,245 4,452 4,897 12,153 Inland fisheries 128,888 126,672 136,529 123,631 Marine fisheries 6,355 7,561 7,811 7,600
Source: Ministry of Fisheries Development, 2010
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Table 5.6: Trends in total recurrent expenditure (KSh. million) Sub-sector Agriculture Cooperatives Fisheries Lands Livestock KARI KMFRI KESREF TRFK CRF TOTAL Approved budget estimates 2009/10 8,098 951 732 1,735 4,691 1,806 419 290 162.8 467 19,352 2010/11 8,570 1,059 654 2,062 3,686 1,984 468 326 189.3 555 19,553 2011/12 8,668 1,129 873 2,211 4,042 2,002 474 496 34 554 20,483 Actual expenditure 2009/10 7,918 876 672 1,613 4,112 1,806 461 284 158.2 436 18,336 2010/11 8,328 1,011 635 1,994 3612 1,993 519 305 161.5 475 19,034 2011/12 8,840 1,004 675 2,148 3468 2,159 548 358 34 486 19,720
Source: Sector report, 2013
Expenditure by economic classification It is evident that in the last three years the focus on this sector has changed to development allocation. Approved allocation to the sector more than doubled increasing by 102.8 percent in a span of one year from KSh. 13.6 billion to KSh. 27.6 billion in 2009/10 and 2010/11 financial years respectively. The high increase was as a result of economic stimulus programmes that were implemented in some of the subsectors. In spite of the increased allocation in the development vote, absorption rate still fall below that of the recurrent at an average of 74 percent compared to 96.1 percent in the recurrent vote. Notable low absorption rate was realised in 2010/11 financial year when only 68.7 percent of the funds were utilised. The high recorded absorption in the recurrent vote is attributed to the nature of expenditures that focus on personnel emolument, operation and maintenance and general administration. On average, annually a large proportion of recurrent public expenditures are used to for compensation of salaries, the Ministry of Agriculture has the highest wage bill when compared to the other sector ministries. Ministry of livestock spends 50 percent of its budget on wages, while co-operatives sub-sector spends 47 percent. Expenditure review on key programmes During the period of review the sector implemented 10 programmes in the areas of sectoral policy, food production and research. A total of KSh. 41.2 billion was budgeted for in 2011/12 against an expenditure of KSh. 39.3 billion, giving an absorption rate of 95 percent.
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Table 5.7: Trends in total development expenditure (KSh. million) Sub-sector Agriculture Cooperatives Fisheries Lands Livestock KARI KMFRI KESREF TRFK CRF TOTAL Approved budget estimates 2009/10 7,208 186 1221 2,133 1,668 805 104 175 77 20 13,597 2010/11 14,458 146 3143 3,441 4,109 1,659 389 165 30 39 27,579 2011/12 12,212 218 2276 3,821 3,778 1,797 628 303 30 63 25,126 Actual expenditure 2009/10 4,834 152 1112 1,995 987 684.29 42 111 1 14 9,932 2010/11 8,989 149 2400 2,998 2876 1,258 68 136 10 57 18,941 2011/12 9,013 198 1651 3,725 3548 1,623 112 218 25 55 20,168
Source: Sector report, 2013
Crop development management and Livestock development programmes received the largest share of allocation and expenditure over the period under review. However, Fisheries and Lands programmes had the highest promotional increase in both allocation and expenditure over the same period. Expenditure by source of finance In the period under review, the sector external funding increased from KSh. 8.1 billion in 2009/10 to KSh. 12.4 billion in 2011/12. The actual expenditure has been rising steadily throughout the period. The subsectors of Agriculture, Livestock and KARI received the bulk of the financial allocations over the three year period under review. The three main spenders had an allocation of an average of 80 percent over the period, though declining from 84.6 to 76.6 percent in 2009-2011 and 2011/12 financial years respectively. The three also control expenditure of the external funding with an average of 76.7 percent over the three year period. On average, the donor funds absorption was 80 percent over the three year
Table 5.8: Total expenditure (Recurrent and development) (KSh. million) Vote Recurrent Development TOTAL Approved budget estimates 2009/10 19,352 13,597 32,949 2010/11 19,553 27,579 47,132 2011/12 20,483 25,126 45,609 Actual expenditure 2009/10 18,336 9,932 28,268 2010/11 19,034 18,941 37,975 2011/12 19,720 20,168 31,048
Source; Sector report, 2013
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Table 5.9: Trends in expenditure by programmes (KSh. million) Sub-sector Agriculture Policy, Strategy and Management of Agriculture Crop Development Management Agribusiness and Information Management Sub-total Cooperative Development General administration and Support services Cooperative development and management Commodity Value Addition/ Market Access Sub-total Fisheries Development Lands Livestock Development KARI KMFRI KESREF TRFK CRF TOTAL
Approved budget estimates 2009/10 2010/11 2011/12
Actual expenditure 2009/10 2010/11 2011/12
2,703 9,816 586 13,105
2,578 12,207 668 15,453
2,309 8,469 4,642 15,420
2,887 8,619 397 11,903
2,551 13,449 217 16,217
2,029 13,961 203 16,193
220 894 23 1,137 1,785 3,868 6,442 2,611 523 465 240 488 31,417
211 980 14 1,205 3,035 5,503 7,794 3,643 857 491 219 594 39,706
319 1007 21 1,347. 3,149 6,032 7,820 3.799 1,101 799 234 549 41,247
212 793 22 1,027 1,784 3,608 5,099 3,030 504 395 159 450 28,712
208 940 12 1,1560 3,035 4,992 6,488 3,251 587 441 171 531 37,785
279 912 11 1,202 2,326 5,873 7,016 3,782 660 576 211 486 39,322
period. However, of main ministries absorption has been high at an average of 84.7 percent compared to that of the research institutions that has been at an average of 56 percent over the review period. 5.4.2 Efficiency and equity in public spending Review of public expenditure in agriculture is complicated and requires systematic collection of key variables. Agricultural projects vary in how they are implemented and how resources, financial and physical resources, flow between various government departments. Consistent sector outcome data at county level is not readily available though data on production and value is available.
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Table 5.10: Trends in externally funded programmes (KSh. million) Sub-sector Agriculture Cooperatives Fisheries Lands Livestock KARI KMFRI KESREF TRFK CRF TOTAL Approved budget estimates 2009/10 5,240 282 808 565 60 143 7,098 2010/11 7,292 225 733 1,383 349 45 194 10,221 2011/12 7,329 177 632 1,501 590 68 98 10,395 Actual expenditure 2009/10 4,760 137 476 423 20 143 5,959 2010/11 6,774 18 403 715 8 198 8,116 2011/12 6,256 10 402 1,107 74 12 96 7,957
The sector is affected by numerous exogenous factors that include climate change, variable weather and changes in terms of trade, making it difficult to link trends in overall agricultural growth to total public expenditures. Agricultural output may decrease following a drought even if there was an increase in public expenditure, due to expenditures incurred for famine relieffood imports, thus show a negative relationship between spending and agricultural growth. To improve efficiency in the agricultural sector, inputs should result in higher output and which in turn become outcomes. There is a time lag in agricultural production which provides the challenge of linking specific inputs to the outcomes as shown in Figure 5.2.
5.5 POLICY OUTLOOK, CONSTITUTION 2010 AND DEVOLUTION
5.5.1 Provisions in the Kenya Constitution 2010
n the Kenya Constitution 2010, the provision related to the right to food is of particular importance. Indeed, article 43 (1) (c) explicitly states that every person has a right to be free from hunger, and to have adequate food of acceptable quality in the context of economic, social and cultural rights that are essential for people to live in dignity. In Kenya like in many parts of the world, poverty is highly related to either in access or inadequate factors of production, the main one being land. Land is the foundation of all human activities and is crucial for the attainment of economic growth, poverty reduction and gender equity. Land has been and is still one of
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Figure 5.2; Relationship between Inputs, outputs and outcomes in agriculture

FINANCIAL Households contributions
Government funds
Donor funds
Private traders, NGOs and other funds
INPUTS
TANGIBLE
Inputs
Vaccine
Capital/Finance
Service (advisory etc.)
OUTPUTS
Increased Inputs
Healthier cattle
Improved access to inputs and finance
OUTCOMES
Increased agriculture productivity increase farm income Reduced poverty
Source: Adapted from World Bank, 2010
the most sensitive factors and the most important in the countrys economic development. The Kenya Constitution 2010 has largely sealed flaws that existed in the previous constitution that were blamed for widespread imbalances in land ownership and distribution. The land equation in the countrys economic development is particularly critical because of the role agriculture and land ownership plays in the countrys economy. Chapter Five of the Kenya Constitution 2010 Part 1 clearly sets out the principles of land policy which for decades has dodged the previous governments operating under the old constitution. Other issues addressed by the constitution include: classification of land, land holding by non-citizens, regulation of land use and property, national land commission and legislation on land. The constitution goes on to document that the principles shall be implemented through a national land policy developed and reviewed regularly by the national government through legislation, a situation that has been virtually non-existent since independence and which set in a myriad of other flaws and imbalances that have been a major setback to economic development in many parts of the country. It also clearly classifies land in the country as public, community or private not only giving their operative definitions that is expected to stimulate increased local investments in land, but also stipulates the allowance which gives foreigners a 99 year leasehold period on land in any part of the country, that could act as a critical incentive to attract foreign investment.
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The other critical issue that the constitution addresses is gender equality in land ownership in Kenya, where the mainstay of most communities is agriculture and livestock production, women contribute up to 80 percent of the workforce yet their access to and ownership of land is substantially limited. This has impacted negatively on poverty whose rate is estimated at 46 percent in the country; with women bearing a larger burden. According to 2009 national housing and population census, Women constitute more than 52 percent of the Kenyan population. The other critical areas touching on land is where for years, indigenous community lands, genetic resources and biological diversity have been exploited by influential people in government and foreign investors who have worked together and dispossessed the communities from their ancestral lands to pave way for mining and other commercial activities without compensating them. This is going to be a thing of the past since it is clearly tackled in the constitution. 5.5.2 Devolution The Kenya Constitution 2010 provides for creation of two levels of governments, the National and the county governments. In order to realize the sectors goals and objectives, various functions will be discharged both at these levels. According the Kenya Constitution 2010 fourth schedule, National Government functions shall essentially be policy related; like agricultural and veterinary policy, capacity building, finance and technical assistance while the functions assigned to county governments shall include; crop and animal husbandry, livestock sale yards, abattoirs, plant and animal disease control, fisheries and cooperative societies. In addition, implementation of specific national government policies on natural resources and environmental conservation, including soil and water conservation will also be handled at county governments. In addition the process of reorganizing and rationalizing national government departments to ensure efficient delivery of services in a decentralized system is going on. Also, the pace of undertaking reforms in the legal, policy and regulatory frameworks across the sector will have to be hastened. 5.5.3 Public expenditure outlook (2013/14 to 2015/16) The sector aims at raising agricultural productivity, exploiting irrigation potential, increasing commercialization and competiveness of agriculture, improving the legal and policy framework for agriculture, improving governance of agricultural institutions and promotion of sustainable management of land and fisheries. The sector however faces a number of challenges which include inadequate
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funding; unfavourable climatic changes; poor planning and inadequate early warning systems; agricultural land sub-division and increased urbanization; low production and productivity; high poverty levels; high incidence of HIV/AIDS, malaria and other diseases; poor marketing strategy and infrastructure, low value addition and competitiveness; inadequate physical infrastructure; unfavourable legal and policy frameworks; low access to financial services and affordable credit and human-wildlife conflict. Initial indicative estimates (2013/14 to 2015/16) To address these challenges, in 2012/13 a total of KSh. 51,098 million was set aside for the sector. In the 2013/14 Financial Year however, the total resource requirement for the sector was KSh. 103,690 million against an actual resource allocation of KSh. 54,410 million as indicated in Table 5.11. These funds will be utilized on various programmes and sub-programmes in the sector which are key in contributing to economic growth, employment and poverty reduction.
Table 5.11: Sector resource requirements versus allocation (KSh. million) Printed Estimates 2012/13 24,471 26,628 51,099 2013/14 Resource requirements 41,085 62,605 103,690 Resource allocation 26,300 28,110 54,410 Projected estimates 2014/15 29,013 28,330 57,344 2015/16 29,556 28,672 58,229
Expenditure Classification
Recurrent Expenditure Capital Expenditure Total
Source: MTEF ARD sector report, 2012/13
5.6.1 Assessment and recommendations roductivity: Productivity levels for many crops are below potential and for some agricultural produce yield and value over a 5-year period have either remained constant or are on the decline. Similarly, the production level for most fish and livestock products is below potential. Forest cover and tree productivity have been on the decline while population growth has led to increased human wildlife conflict. Land use: Land in the high- and medium-potential areas as well as in arid and semi-arid lands (ASALs) remains under-exploited for agricultural production. Much of the available cropland remains under-used with smallholders using only 60 percent of their land for agricultural production.
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Markets: The productivity of the agricultural sector is constrained by inefficiencies in the supply chain resulting from limited storage capacity, lack of post-harvest services and poor access to input markets. Vision 2030 calls for proactive efforts to maintain existing markets and create new ones to increase Kenyas bargaining power in global agricultural markets. Value addition: In agriculture, value addition determines the competitiveness of the countrys produce in world markets. However, Kenyan farmers export semiprocessed, low-value produce, which accounts for 91 percent of total agriculturerelated exports. The limited ability to add value to agricultural produce coupled with high production costs make exports less competitive. Contribution to development: The ARD sector is one of the major sectors that contribute significantly to the economic development of the country. The sector contributes to the countrys food and nutrition security, income generation and poverty reduction, conservation of natural resources, marketing and value addition, generation of agricultural technologies and innovation. Increased financing: The National Treasury will need to ensure adequate funding for Vision 2030 flagship projects is provided within the allocation of the sector ceiling. Treasury to consider the proposals by MDAs when allocating financial resources rather than basing it on historical figures. Dependence on development partners affects the pace of project implementation, especially when their funding priorities change. In this respect, financing to the sector should be increased in line with Maputo declaration Climate change: A clean, secure and healthy environment is a prerequisite for sustainable development. The government needs to integrate the principles of sustainable development into the countrys policies and programmes in order to reverse the loss of environmental resources. There is need to embrace aspects of climate change mitigation and adaptation in projects/programmes under the sector and link this to Kenya Climate Change Response Strategy Action Plan. Due to changing weather patterns, Kenya needs to seriously consider increasing investment in irrigation projects and reduce over-dependence on rain-fed agriculture. Technology adaptation: Farmers are willing to adopt new technologies, especially if they are profitable and are a source of alternative income. Similarly, the private sector is ready and willing to partner with or take over government initiatives, more so if this improves their livelihood. Sector ministries should foster
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closer collaboration between sub-sectors and other stakeholders to ensure availability of subsidized agricultural inputs, credit, increased productivity, value addition and marketing. Cheaper inputs: The initiative to support farmers/stakeholders with subsidized inputs has the potential to increase agricultural production and subsequently achieving food security. There is need for a formal policy on provision of agriculture inputs at subsidized rates. Harmonize laws: There is need to fast track harmonization of various laws governing various sectors to reduce ambiguity. For instance Land subsector need to fast track implementation of the National Land policy and Constitution. Market Infrastructure: Improvement of markets infrastructure has a big impact on production and marketing of agricultural produce thus reducing post-harvest losses and increasing income to farmers. Line Ministries need to fast track legal reforms in the sector in line with the letter and spirit of the Constitution. They should also develop/rehabilitate necessary infrastructure at National and County levels for improved service delivery and undertake staff recruitment and rationalization to seal staffing gaps. 5.6.2 Conclusion Though aggregate public spending has increased the total budget share of total government expenditure has stagnated at an estimated 4 percent. Most of the ministries are able to absorb their recurrent budgets. However, there is increasing concerns about the inability to absorb the development budgets. Most of the programs and projects focus on food security and nutrition, improved access to farm inputs, agricultural advisory and extension services, improving market access, improved natural resources management and capacity building. Currently the sector organizational set is complex and has not performed the functions envisaged. The Agricultural Sector Coordination Unit (ASCU) was established to facilitate coordination of the sector ministries while the agricultural sector programmes are carried out by more ministries than are accounted for in the present agriculture and rural development sector. As a result, it is important that the Agriculture Sector Coordination Unit (ASCU), the National Monitoring and Evaluation Unit (NIMES) and the Integrated Financial Management Information System (IFMIS) be strengthened and institutionalized. Under the devolved government structure it may be important to define the roles and mandates of these institutions so as to ensure a smooth transition and ensure continued effective service delivery.
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PUBLIC EXPENDITURE REVIEW | EYE on BUDGET: Spending for Results
Chapter 6
WATER, SANITATION AND IRRIGATION
6.1 INTRODUCTION
his chapter reviews public expenditure in the water, sanitation and irrigation sector over the financial period 2009/10 to 2011/12. It provides a policy and performance overview of the sector, a review of progress since the 2010 Public Expenditure Review, public expenditure analyses for the three year period and a nuanced, sector-level public financial management snapshot. What follows is a forward looking policy perspective that focuses on the implications of the 2010 Constitution with specific regard to devolution. The chapter then presents an outlook of the sectors public expenditure for the 2013/15 period. Following this, the conclusion presents an overall assessment and a set of policy recommendations based on the overall findings and analysis.
6.2 POLICY AND PERFORMANCE OVERVIEW
Sector profile
t is important to reiterate the importance of the Water, Sanitation and Irrigation sector. The central role of water reliability in the performance of key sectors on the economy highlights its crucial function in poverty reduction, social stability and development objectives. The water supply contribution to GDP was 0.7 percent in 2011 whilst total public spending on water has remained small (3 percent of government total budget). Irrigation (though not fully exploited) directly contributes between 10 percent and 15 percent of the total GDP and this in turn provides the bulk of the value for all agricultural produce. The water sector is heavily donor dependent with approximately 40 percent of annual capital investment coming from the donor community while the government provides most of the balance and the private sector plays a negligible role. This illustrates key sector vulnerability and emphasizes the need for mobilising domestic private funds.
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Water, Sanitation and Irrigation
Policy goals and performance targets The Water, Sanitation and Irrigation sector policies and development objectives are concentrated on the conservation and management of water resources. They are also focused on the development of water storage, the provision of water and sewerage services, the development of irrigation and drainage, the reclamation of wastelands, and capacity building for the water institutions. The following are the six specific focus areas; a. Preserving, conserving and protecting available water resources and allocating water in a sustainable, rational and economical way b. Supplying sufficient water of good quality to meet the various water needs, including poverty alleviation, in addition to ensuring safe disposal of wastewater and environmental protection c. Establishing an efficient and effective institutional framework to achieve the systematic development and management of the water sector d. Developing a sound and sustainable financing system for effective water resources management, water supply and sanitation development e. Developing and providing sustainable water for irrigation and food production f. Reclaiming and developing underutilised land to productive purpose 6.2.1 Policy, institutional and legal framework Policy, legal and strategic framework The framework for the current water sector reform process was established with the gazettement of Sessional Paper No. 1 of 1999 which reviewed the national policy on water resource management and development. The key shifts in policy were: the separation of functions (water resource management, water service delivery, policy, regulation, financing); decentralisation (devolution of decision making to the regional and local levels); commercialisation (water to be treated as an economic and social good) and stakeholder involvement through community and private sector participation. In March 2003, the Water Act 2002 came into effect. The Water Act 2002 provides the legal framework in line with the new policy changes. New institutions with separate functions were established, and decentralised decision making is now reflected in autonomous and regional bodies as a result of this. Since the adoption of the new Constitution in 2010, the sectors policy framework is being reviewed and aligned to comply with its provisions. The National Irrigation Board (NIB) is currently legalised under Cap 347 in accordance to the Irrigation Act 1966. It is mandated to be in charge of the
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development, operation and management of the national irrigation schemes, examples of these being Mwea, Hola and Pekerra. The Constitution has not made any provisions that have a direct bearing on irrigation development in the sector with regard to devolution. The functions can therefore be allocated between the national and devolved levels to reduce complexity and promote effectiveness. The national government will be allocated the functions of development and management of large state schemes, while the responsibility for the development of smallholder/community schemes, can be left to the county governments. Institutional framework and organisational structure The commencement of the water sector reforms through enactment of the Water Act 2002 saw substantial functions in the sector decentralised from national to regional and local levels. At the local level, water sector services are provided by water services providers (water and sewerage companies), which are independent entities. At the constituency level, the CDF also support some services in the water sector. There are 15 semi-autonomous government agencies falling under the Ministry of Water and Irrigation (MoWI). The water sector in Kenya has been restructured since 2002 to provide definite institutional roles and responsibilities, as presented in Table 6.1 Water Service Providers are commercial organisations with the sole mandate of operating and maintaining water and sewerage services as prescribed in the Service Provision Agreement (SPA) initiated between Water Service Boards and WSPs. Most of the current WSPs are owned by local authorities, though setup as independent entities registered under the Companies Act, Cap 486 of the Laws of Kenya. 6.2.2 Performance review The water sub-sector During the period under review, the sector has undertaken significant measures to ensure increased access to safe and adequate water country-wide. Improved access to safe water: the current total population with access to safe water is 21.4 million out of 41.7 million people. Access to safe water supply was 60 percent in urban areas and 45 percent in rural areas with national water access coverage of 51 percent1. This fell below the target of 72 percent urban and 59 percent rural as envisaged in the Vision 2030 goal for 2012.
1
MoWI Annual Water Sector Review, 2011/12.
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Table 6.1: Water sector institutions and their functions Institution Ministry of Water and Irrigation (MoWI) Water Services Regulatory Board (WASREB) 8 regional Water Services Boards (WSBs) Roles and responsibilities Development of legislation, policy and strategy formulation, sector coordination and guidance, monitoring and evaluation Overall sector investments planning and resource mobilisation Regulation of water and sewerage services provision including issuing of licenses, setting service standards and guidelines for tariffs and prices
Ensuring efficient and economical provision of water and sewerage services, contracting water services providers (WSPs), Developing water and sewerage facilities, regulating water services and tariffs in their board areas and procuring and leasing water and sewerage Provision of water and sanitation services Ensuring good customer relations and sensitisation Maintaining of assets while reaching a performance level set by regulation Financing the provision of water and sanitation to disadvantaged groups (pro-poor) as water poverty fund Arbitration of water-related disputes between institutions and organisations Construction of dams and rehabilitation of flood canals drilling and of conflicts boreholes,
Water Service Providers (WSPs) Water Services Trust Fund (WSTF) The Water Appeals Board (WAB) National Water Conservation and Pipeline Corporation (NWCPC) Water Resources Management Authority (WRMA) Kenya Water Institute (KEWI) National Irrigation Board (NIB) Catchment Area Advisory Committees (CAACs) Water Resource Users Associations (WRUAs)
Water catchment and source protection Training and research Development and management of the national irrigation schemes in Kenya Advising WRMA on water resources issues at catchment level
Involvement in decision-making process to identify and register water users Water allocation and catchment management Assisting in water monitoring and information gathering Conflict resolution and co-operative management of water resources
Source: Ministry of Water and Irrigation
Increased water storage and harvesting capacity: The country has about 3000 small dams and water pans, and 26 large dams, with a total water storage capacity of 124 million m3 which is a per capita storage of around 5.3 m3. This is far below the required threshold of 3.4 billion m3 of storage. This deficit suggests that the nations storage capacity should be increased by almost 30 times. Thus the dam construction programme which started in the first MTP period will continue to be implemented to completion. During the period, 731 boreholes were drilled, equipped, rehabilitated and operationalised against a target of 700. A total of 399 small dams/pans have been constructed since 2008 against a target of 356,
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Table 6.2: First MTP outcomes Medium term plan outcome Outcome indicator and unit Urban households with access to piped water (percent) Rural households with access to water from a protected source (percent) Water storage per capita (cubic metres) Urban households with individual or shared access to toilet facilities (percent) Rural households with individual or shared access to toilet facilities (percent) 2009/10 Target 65 Actual 58 2010/11 Target 68 Actual 70.5 2011/12 Target 72 Actual 60
Improved access to safe water
48
49
52
49.2
56
45
Increased water storage and harvesting capacity
13
4.6
15
4.6
16
5.3
40
31
45
32
50
21
Increased access to sanitation
6.5
Source: MoWI annual performance reviews, 2011/12
creating and additional storage of 15 million m3. The inadequate water storage capacity has been mainly attributed to the lack of a clear agenda on water storage to guide investments and generally coordinate approaches. Sanitation: Data analysed by the end of 2011/12 indicated national sanitation coverage to be nearly 70 percent, with urban sanitation coverage was at about 73 percent and rural sanitation coverage approximately 67 percent. An additional 2.78 million people were brought under sanitation coverage from 2009/10 to 2011/12. Sewerage: Sewerage2 coverage was noted to be concentrated in urban areas, except for Athi and Lake Victoria South WSBs which have some of their rural customers connected to sewerage systems. The national sewerage coverage as reported at the end of 2011/12 was about 9 percent.Urban sewerage coverage was about 21 percent whereas total rural sewerage coverage was less than 1 percent of the total rural population. However, despite the poor overall statistics, there was a slight increase in sewerage coverage of approximately 1 percent of the total population during the period under review. The key challenge is insufficient budget targeting that has seen sewerage coverage almost stagnate.
2
Sewerage: the removal and disposal of sewage and surface water by a system of drains or sewer.
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Irrigation and land reclamation: The cumulative productive land at the end of the review period comprised a total of 156,851 ha of irrigated land and 32,733 ha of drained land. Compared with the Vision 2030 mid-term goals that aim to increase land under irrigation and drainage to 210,000 ha and 90,000 ha respectively, there is still a shortfall. During the period under review, 32,000 ha of land were developed for irrigation. This was achieved through development of new schemes and rehabilitation and expansion of existing public schemes
Table 6.3: MoWI intended and achieved outputs (2009/10 to 2011/12) Programme/Sub Programme (SP) Intended output Achieved output Remarks
Programme 1: Water Supply Services Outcome: Increased access to adequate water supplies SP 1.1 : Urban water supply SP 1.2 : Rural water supply Expand urban water supplies in 18 medium-sized towns Construct 540 water and sanitation projects in rural areas Drill and equip 300 new boreholes Programme 2: Sewerage Services Outcome: Increase access to sanitation services SP 2 : Sewerage services Construct 99 sewerage schemes 94 sewerage schemes constructed Low capacity of implementing agencies and low funds absorption 15 medium-sized towns urban water supply infrastructure under expansion 631 new water and sanitation projects constructed in rural areas 277 new boreholes drilled equipped Target not met: To be completed in 2012/13 Target met: through WSTF interventions
There is progress in achieving the target
Programme 3: Water Resources Management and Water Storage Outcome: Increased availability of sustainable water resources SP 3.1: Water resources management Rehabilitate 600 hydro-meteorological stations by 2012/13 562 Hydrometeorological stations have been rehabilitated and are working 3 medium-sized dams completed and 198 small dams and water pans constructed Target met: Also established water resources monitoring stations for water quality and pollution control There is progress and the remaining dams to be completed in 2012/13
SP 3.2: Water storage and flood control
Construct 16 mediumsized dams (complete 5 dams in 2012/13) and 195 small dams and water pans
Programme 4: Irrigation and Land Reclamation Outcome: Increased utilisation of land through irrigation, drainage and land reclamation SP 4.1: Irrigation and drainage infrastructure SP 4.2: Land reclamation Put 40,000 ha of land under irrigation 32,000 ha of land put under irrigation Target not met due to low capacity of implementing agencies Target met: through community mechanism services
Reclaim 35,000 ha of land
35,000 ha of land reclaimed
Source: MTEF-Enviroment,Water and Housing sector, 2012
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namely Bura, Hola, Mwea, Ahero, South West Kano, Pekerra and Bunyala. A total of 35,000 ha of land were reclaimed in the seven arid and semi-arid (ASAL) counties. This was done through construction of 9,187 water conservation and rain water harvesting structures in these regions. The financial budget of the sector is executed under the following programmes: a. Water Policy and Management b. Water Supply Services c. Sewerage Services d. Water Resources Management and Water Storage e. Irrigation and Land Reclamation Renewable fresh water resources: The renewable water resources for the country are 76,610 million m3 (MCM) per year consisting of 20,637 MCM/year of surface water and 55,973 MCM/year ground water recharge. This ground water recharge is expected to be 55,580 MCM/year in 2030 and 56,874 MCM/year in 2050 indicates minimal changes in the next few decades. Adopting a 10 percent safe ground water yield, the available ground water that can be used is 5,558 MCM/year by 2030. The current water demand (water use) for domestic use, industrial irrigation, livestock, wildlife and inland fisheries is projected to rise from 3,136 MCM/ year in 2010 to 5,911 in 2017 but growing to 11,105 MCM/year in 2030 with the major growth in demand coming from irrigation followed by industrial use (see annex 19). The current developed water infrastructure is often inadequate for industrial, commercial, domestic as well as livestock and wildlife use. This scarcity
Table 6.4: Findings on water availability based on the draft (NWMP) Item Surface water (SW) Renewable (BCM/yr) Ground water(GW- recharge) Total Population projected (million) Per capita renewable water resources (m/yr/capita) Safe yield of GW (10 percent of recharge sustainable yield) SW (perennial rivers) NWMP 1992 renewable (BCM/yr)
Source: MoWI, 2011/12
Year 2010 20.6 56.0 76.6 38.5 1990 5.6 21.7 0.6 22.3
Year 2030 24.9 55.6 80.5 67.8 1,187 5.6
GW (abstractions) Total
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has intensified competition among various users and often results in conflicts. Involvement of local communities in the management of water resources through the formation of water resource users associations (WRUAs) has resulted in reduced illegal abstractions, reduced catchments encroachment, rehabilitation of catchments areas and river bank protection. Access to water supply and sanitation services is measured against distance, cost, quality and quantity parameters. The thresholds for these access parameters vary such that data from different sources give different impressions of access levels to water and sanitation. Without a common standard it is difficult to compare performance levels across regions. The definition of access, for instance, varies depending on the standards set by various bodies such as the Kenya National Bureau of Statistics (KNBS), MoWI, WASREB and the UNs Joint Monitoring Programme (JMP). Similarly, the other parameters used to measure access to water and sanitation services are not uniform. The challenges caused by the lack of harmonised definitions and frameworks for data capture and spatial disaggregation are a setback to a comprehensive analysis of performance levels. This sector review has addressed the issue by adopting one standard for access to improved water and sanitation services, based on the 2009 Kenya Population and Housing Census data. Comparative benchmarking The performance of Kenya on key water and sanitation indicators by the year 2009 as compared to other countries is shown in Table 6.5. Despite major institutional reforms promoting good corporate governance, the sector still faces key challenges in addressing distribution losses. These losses were recently estimated at 40 percent compared to 33 percent for other low-income African countries. Another key challenge is the under-pricing of water services, a stark irony given that Kenya is a water-scarce country. Overall, the sector incurs huge hidden costs through under-pricing and unaccounted-for water.3 It has been estimated that during 2009/10 for instance, non-revenue water (NRW) was about 162 MCM, an equivalent to KSh. 8.6 billion (assuming KSh. 53 per m3). This is a cause of concern given that the huge figure accounted for approximately a third of the annual water sector development budget for 2009/10 and a potential access for additional 4.6 million people.4 Despite almost doubling the rate of access to piped water compared to other lowincome African countries, Kenyas rate of access to stand posts and boreholes/
3 4
AICD, 2010. WASREB, 2010.

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Table 6.5: Benchmarking Kenyas water and sanitation indicators, 2009 Unit Access to piped water Access to stand posts Access to boreholes/wells Access to surface water Access to septic tanks Access to improved latrines Access to traditional latrines Open defecation Domestic water consumption Urban water assets in need of rehabilitation Revenue collection Distribution losses Cost recovery Total hidden costs as percent of revenue % pop % pop % pop % pop % pop % pop % pop % pop Litre/capita/day % % sales % production % total costs % Lowincome countries 10.1 16.1 38.3 33.8 5.3 9.3 47.9 37.1 72.4 35.5 96.0 33.0 56.0 130.0 Kenya 17.9 9.4 21.6 46.4 9.0 8.0 64.3 18.3 63.0 42.0 95.0 40.0 58.0 173.9 Middleincome countries 56.4 20.4 6.3 13.9 44.0 0.9 33.0 15.8 NA 25.0 99.2 23.1 80.6 84.9
Source: Africa Infrastructure Country Diagnostic (AICD) Report, 2010
wells is about half the level realised in these low-income countries. The share of reliance on surface water is growing beyond 50 percent, a disturbing trend, especially compared to about a third in other low-income African countries. MDG Status: The MDG target is to halve the proportion of people without sustainable access to safe drinking water and basic sanitation by 2015. The indicators for monitoring progress are the percentage of the population using an improved drinking water source, and the proportion of the population using an improved sanitation facility. The section of the population that has gained access to safe water since 1995 was 26 percent while the figure for sanitation was 14 percent. National access to improved water and sanitation: The 2009 Kenya Population and Housing Census data provides a basis for the discussion on access to water and sanitation at the regional level. Based on this data, the national water access coverage was 48.5 percent. Only 27.9 percent of the population had access to piped water while 37.2 percent obtained their water from springs, wells or boreholes that were either improved or unimproved. Generally, where the principal source of water is a stream, access to improved water sources is considered low. Over 29 percent received their water supply from sources like streams, lakes, ponds and others considered as unsafe. A paltry 5.9 percent received their water from water vendors.
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6.3 PUBLIC EXPENDITURE REVIEW 2009/10 TO 2011/12

his section gives the analysis of sector expenditure, both development and recurrent, by comparing the approved estimates and the actual expenditure for 2009/10 to 2011/12. 6.3.1 Progress review from 2010 PER The following was the progress made on select PER 2010 recommendations.
Table 6.6: Progress on PER 2010 recommendations PER 2010 recommendation Build a competitive and private sectorfriendly regularity framework to encourage and support the roles of non-governmental agencies in the sector Revise the current expenditure sub-vote, head and item categories related to MoWI (i.e. Vote 20) as they do not reflect the reformed sectors three main policy objectives Improve coordination and implementation of the sectors investment programme to complement the sectors national strategies Align and harmonise budget and off-budget resources, and harmonise funding from different development partners Need for detailed and continuous consumer demand assessments Progress made The Ministry launched the SWAP, as a move towards enhancing stakeholder alignment, mutual accountability and joint planning and monitoring A committee had been formed to review the sub-vote, head and item categories
Developed a results-oriented sector financing strategy; development of Kenya Water Sector Investment Programme (KWSIP) is ongoing SWAP has been carried out within the policy, funding, and planning and monitoring frameworks Development of consumer engagement guidelines as one of WASREBs regulatory instruments; scaled up the Water Action Groups Developed a concept paper on overview of capacity building
A revamped staffing and capacity development plan

Source: MoWI
6.3.2 Recent public expenditure trends Overall expenditure trends Water sector public spending relative to GDP and total public expenditure: The water sectors budget remains below 5 percent of government total expenditure, and less than 1 percent of GDP (Table 6.7). Central governments financial flows to the water sector are channelled primarily through MoWI with contributions from local authorities and CDF. In total, an estimated KSh. 39 billion was spent on the sector from these three sources in 2011/12. There are still more resources provided to the sector not recorded in the budget of MoWI, mainly through the different NGOs. In this regard, the development partners providing such funds to NGOs need to inform MoWI regularly. The trends in the total expenditure during the period are summarised in Table 6.8.
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Table 6.7: Water sector public spending relative to GDP and total public expenditure (KSh. million) 2009/10 Total budget MoWI Total government expenditure (TGE) Water as percent TGE GDP current prices Water supply as percent GDP
Source: MoWI
2010/11 38,613 922,563 4.2 2,549,825 0.7
2011/12 36,215 1,165,532 3.1 3,024,782 0.7
27,789 789,361 3.5 2,366,984 0.6
The total resource allocation to the water sector decreased to KSh. 36.2 billion in FY2011/12, from KSh. 38.6 billion in FY2010/11 (Annex 24). This was a reduction of 6 percent mainly in the development budget, due to completion of some donor-funded projects during the period under review. The absorption rate of 78.3 percent in 2009/10 declined to 74.1 percent in 2010/11. The low absorption in 2010/11 was due to late release of African Development Bank funds amounting to KSh. 4 billion, issued only at the beginning of 2011/12 financial year. Generally, the absorption rate was affected by slow disbursement of donor funds. In addition budget reviews often led to budget cuts, resulting in released funds being lower than the approved. Moreover, lengthy procurement processes leading to slow implementation of projects, litigation leading to delayed implementation of projects, and challenges associated to IFMIS administration, were all culprits in the reduction of absorption rates. 6.3.3 Expenditure by composition: recurrent and development The approved recurrent expenditure consistently rose from KSh. 4,536 million in 2009/10 to KSh. 6,130 million in 2011/12. The actual expenditures also rose from KSh. 4,012 million to KSh. 5,769 million in the same period as illustrated by Table 6.9. The sector recurrent budget absorption rate improved over the period from an average of 88.4 percent in 2009/10 to the 92.6 percent in FY2011/12. However, KSh. 61 million was unspent in FY2011/12 due to low disbursement, the under collection of AIA, an unexpected IFMIS closure, non-release or late release of the exchequer, among other difficulties.
Table 6.8: Net water sector financial flows from public sources (KSh. million) Sources Water and irrigation Local government CDF TOTAL Water supply as percent GDP
Source: MoWI
Current and capital expenditure 2009/10 21,748 6,109 1,299 28,156 0.6 2010/11 28,601 7,034 972 36,607 0.7 2011/12 30,343 8,053 939 39,335 0.7
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The development budget allocation to the sector increased from KSh. 23,253 million in 2009/10 to KSh. 30,085 million in FY2011/12 (Table 6.9). Development budget absorption rate was 76.3 percent in 2009/10; it declined to 70.2 percent in 2010/11 and improved to 81.7 percent in 2011/12. The reasons for the underexpenditure include under issue of exchequer, lengthy procurement processes, and stringent donor conditionality.
Table 6.9: Trends of expenditure for MoWI, 2008/09 to 2011/12 (KSh. million) Approved estimates 2009/10 Recurrent Development Total Recurrent as percent of total expenditure Development as percent of total expenditure 4,536 23,253 27,789 16.3 83.7 2010/11 5,830 32,783 38,613 15.1 84.9 2011/12 6,130 30,085 36,215 16.9 83.1 Actual expenditure 2009/10 4,012 17,736 21,748 18.4 81.6 2010/11 5,400 23,201 28,601 18.9 81.1 2011/12 5,769 24,574 30,343 19.0 81
Source: (MTEF)-Enviroment,Water and Housing Sector report, 2012
The ratios of the development budget to the recurrent budget were 5:1 while the actual expenditure in development to recurrent was 13:3 during 2011/12. The increase in the development budget is mainly due to the emphasis on expansion of water infrastructure and subsequent increase in donor funding. 6.3.4 Expenditure by economic classification On expenditures by economic classification, notable increases were realised on items in both current expenditure and capital expenditure, as shown in the Table 6.10. Under the current expenditure, a nominal increase was noted on the compensation of employees. This was mainly due to salary increases for officers promoted to various job groups, and increases in commuter allowance for all officers in Job Groups A to Q. The decrease in use of goods and services was the result of transfers of these increments to water sector institutions. This in turn led to a notable increase in grants and other transfers. 6.3.5 Expenditure on key programmes There has been substantial increase in funding for the water and irrigation sector during the period. These funds are targeted towards major water supply and sewerage infrastructure works, irrigation expansion and dam construction. Specifically, the highest expenditures were realised in water supply and sewerage
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Table 6.10: Analysis of expenditures by economic classification (KSh. million) Approved estimates 2009/10 Current Expenditure Compensation of employees Use of goods and services Grants and other transfers Other recurrent Capital expenditure Acquisition of non-financial assets Capital transfer to govt agencies Other development Water sub-sector total
Source: MPER, 2011
Actual expenditure 2009/10 4,012.1 1,542.9 863.8 1,380.4 225 17,530.6 14,063.1 3,467.5 21,747.6 2010/11 5,399.4 1,684.8 868.1 2,573 273.5 21,830.1 16,885.3 4,944.8 28,600.1 2011/12 6,021 1,789 1,059 2,391 781 24,322 17,188.0 5,368 2 30,343
2010/11 7,408.8 1,879.6 2,403.4 2,619.4 506.4 31,204.8 24,489.6 6,715.2 38,613.6
2011/12 6,609 1,808 1,165 2,757 789 29,606 23,530 6,073 3 36,215
4,815.5 1,573.7 1,164.4 1,797.6 279.8 22,973.5 17,188.0 5,785.5 27,789.0
programmes. However, the water supply programme is highly dependent on donor funding for its investment, and cannot therefore fully control its expenditure patterns. The sporadic nature of these expenditure patterns can be partially explained by the uncertainty surrounding donor funding. The other programmes are dependent on GoK funding. 6.3.6 Central vs sub-national expenditure During 2011/12, the total actual expenditure by sector institutions was KSh. 22,260.6 million of which government funding was KSh. 7,375.5 million. Donor funds amounted to KSh. 11,849. 1 million and the rest was AIA. Overall financing by state corporations through internally-generated funds /AIA was 13.7 percent of total funding to institutions in 2011/12. The sector institutions have steadily
Table 6.11: Expenditure analysis by programmes (KSh. million) Approved estimates Programme 2009/10 278 14,896 2,784 6008 2010/11 276 25,931 3,744 4,746 2011/12 416 23,213 3,654 4,266 % of Share in 2011/12 1.1 64.1 10.1 11.8 Actual expenditure 2009/10 265 9,621 2,606 5,973 2010/11 246 17,428 3,479 4,551 2011/12 372 18,895 3,136 4,088
Water policy and management Water supply services Sewerage services Water resources management and water storage Irrigation and land reclamation Total expenditures
3,8234 27,789
3,916 38,613
4,666 36,215
12.9 100
3,283 21,748
2,899 28,600
3,852 30,343
Source: (MTEF)-Enviroment, Water and Housing sector Report, 2012
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increased the amount of funds generated internally, while funding received from the government has steadily decreasedthis is a good indication of increase in sustainability of the institutions (see Annex 22). Self financing by sector institutions that include state corporations was 13.7 percent of the total funding received by institutions in 2011/12. It is important to note that the true level of sustainability of the institutions is distorted due to WSI-seconded staff still appearing on the MoWI payroll. However staff transfers is on-going as a result of the established pension scheme for SI staff. Four institutions have delinked so far, namely AWSB, WSTF, WASREB and WRMA. Slightly less than 21 percent of total expenditure by municipal, town and county councils go to water and sanitation (see Table 6.12). This is attributed to the sector reforms which moved water services from local authorities to water service providers (WSPs). Most of the current WSPs are owned by local authorities, although setup as independent entities.
Table 6.12: Total expenditure on water and sanitation by local authorities 2009/10 Total expenditure on main services Municipal Town and county council Sanitary services Water undertakings Sanitary services Water undertakings 29,036 1008.26 4012.5 482.58 602.57 6,105.91 2010/11 33,317 1121.46 4724.26 546.78 639.87 7,032.37 2011/12 38,500 1348.91 5345.78 623.69 734.11 8,052.49
Total expenditure on water and sanitation

Source: Statistical Abstract, 2012 (KNBS)
6.3.7 Expenditure by source of finance Table 6.13 and Figure 6.1 shows how the budget has been financed during the period under review. As illustrated in Table 6.13, from the KSh. 13,795.3 million received by the water sector as donor funds in 2011/12, KSh. 11,849.1 million was channelled to sector institutions and the remaining KSh. 1,946.2 million to the following projects and programmes managed by the Ministry. 6.3.8 Budget execution and pending bills Budget execution The capacity to implement the budget is low. There is a huge difference between the execution of internal (GoK) and external (donor) resources. A comparison
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Table 6.13: Sources of finances (KSh. million) Approved estimates 2009/10 GoK Donors Total
Source: MoWI
Actual expenditures 2011/12 18,299.3 17,915.7 36,215.0 2009/10 16,967.3 4,780.4 21,747.6 2010/11 16,784.80 11,815.30 28,600.1 2011/12 16,548.7 13,795.3 30,343.0
2010/11 17,975.60 20,638.00 38,613.6
19,070.8 8,468.2 27,789.0
Figure 6.1: Average composition of expenditure in water and sanitation sector, 2009/10 to 2011/12
Current expenditure 25%
Capital expenditure 75% Source: MoWI
over the period shows that disbursements of external funds have been low. Over the last three years, donors have increased funding but actual receipts have remained low. Pending bills The pending bills as at the end of 2011/12 were KSh. 610 million, of which KSh. 90 million (14.8 percent) were under the recurrent vote and KSh. 520 million (85.2
Table 6.14: Analysis of externally funded programmes Project Mount Kenya East Pilot Project (IFAD) Kenya Water and Sanitation Programme (SIDA) Natural Resources Management Project (IDA) Water Sector Reform Programme (GIZ) Water and Sanitation Hygiene Programme (UNICEF) Small Holder Irrigation Services Project (KfW) Seven Towers Project (BADEA) Kenya Italy Debt Development Programme (PMU) ITALY
Source: MoWI Annual Water Sector Review, 2011/12
KSh. million 105.5 231.7 472.1 220 664.7 317.3 24.8 319.7
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percent) under the development vote. Out of this, pending bills of KSh. 136 million were caused by lack of liquidity. The bills totalling KSh. 474 million under the development vote are for the National Water Conservation and Pipeline Corporation (NWCPC) and were brought forward from 2010/11. They are the result of missing documentation to support payments, believed to have been destroyed in a 2009 fire. The process of clearing the bills is ongoing as the creditors avail the supporting paperwork required.
Table 6.15: Analysis of pending bills Due to lack of liquidity (KSh. million) Description Recurrent Development 2009/10 2010/11 40 2011/12 90 46 Due to lack of provision (KSh. million) 2009/10 2010/11 559 2011/12 474
Source: (MTEF)-Enviroment,Water and Housing sector report, 2012
6.3.9 Spending for results The cost per capita of water supply for the period 2009/11 shows a great efficiency in the access to water. The high number of facilities constructed highlights a low cost per capita when expenditure on water supply is compared to the greater number of people served. It is important to note that Table 6.16 takes into account only the population served by MoWI (59 percent). Investment costs per capita for rural areas vary widely between KSh. 100 to KSh. 3,000 and the low O&M cost recovery levels of 15 percent to 40 percent also raise sustainability concerns. The Water Point Mapping pilot in Pokot revealed a rarity of fee collection (1 percent of all water points) and, by implication, cost recovery.
Table 6.16: Investment cost per capita: water supply (2009/10 to 2011/12) Expenditure (KSh. billion) 2009/10 2010/11 2011/12
Source: MoWI
Population served (million) 2.2 2.9 2.6
Cost per capita (KSh.) 4,373 6,010 7,267
9,621 17,428 18,895
Comparison of expenditure to the number of water points constructed The capacity for actualised investments expressed in terms of facilities built over the period 2009/11 is considerable. Additionally, facilities built have increased continuously year by year for the period under review. Performance in terms of physical achievements has improved relative to the increase in financial
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resources, indicating a correlation between the number of facilities constructed and the rise in budgetary expenditures to the sector for the period. The geographical distribution of these points indicates equity in line with the regional distribution of population.
Table 6.17: Water purification points (WPP) and boreholes (BHs) drilled 2008/09 to 2012/13 Province Central Coast Eastern North Eastern Nyanza Rift Valley Western Nairobi TOTAL
Source: Economic Survey, 2012
2008/09 WPP 38 8 29 7 34 43 33 192 BH 7 5 32 14 8 34 0 15 115
2009/10 WPP 38 8 31 7 34 45 35 198 BH 5 11 29 17 6 26 3 97
2010/11 WPP 8 31 7 35 40 BH 5 28 18 10 8 WPP 41 8 31 7 36 46 40 209 41 3
2011/12 BH 9 1 32 13 13 18 6 3 95
46 23
208 95
Efficiency in drilling of boreholes By the end of 2011/12, a total of 95 boreholes had been drilled against a target of 89. This has enhanced water availability and accessibility to the tune of 14,024 m3 per day, serving 350,600 people at a budgeted cost of KSh. 451 million. The positive variance is attributed to efficiency in the drilling of boreholes, with some of the cost savings realised being utilised to drill more boreholes. Functionality of facilities Although the breakdown rate of facilities remains high, which indicates low effectiveness of public expenditure in the sector, other aspects seem to show a remarkable efficiency. An analysis of collected data for 378 improved water sources in Pokot highlighted the following: a. Average functionality rates of 73 percent for all improved water sources were recorded. b. Further analysis of shallow well/borehole functionality revealed that only 62 percent5 of all (152) water points equipped with hand pumps are operational. c. Technical breakdowns were noted as the main reason for non-functional status. d. The findings underline the importance of strengthening supply chains for spare parts and O&M services, selection of appropriate water source type(s), proper setting of wells/boreholes and a coordinated approach (decentralised SWAP).
5
Similar to estimates from the Rural Water Supply Network, showing that only two out of three installed hand-pumps (67 percent) in 21 countries in sub-Saharan Africa function at any given time.
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e. A thorough assessment of the existing supply chains for spare parts and O&M services will reveal, for example, why private sector and/or NGOs have not seized the opportunity to service and rehabilitate 30-50 currently nonfunctional hand pumps. f. NGOs and faith-based organisations (FBOs) make valuable contributions to the sectorNGOs/FBOs funded 66 percent of all improved water sources with a higher functionality rate (70 percent on average) compared to government institutions (62 percent on average) and multi-/bilateral programmes (59 percent on average).
6.4 POLICY OUTLOOK: CONSTITUTION 2010 AND DEVOLUTION

he Constitution of Kenya 2010 has stipulated the provision of clean and safe water in adequate quantities as a basic economic and human right for all Kenyans. In addition, adequate sanitation for all households has been enshrined as a right to be enjoyed by all. Also under article 56(e), the State shall put in place affirmative action programmes to ensure that minorities and marginalised groups have reasonable access to water, health services and infrastructure. This has necessitated the review and alignment of all legal and institutional frameworks in the water sector to the Constitution. 6.4.1 Devolution The Constitution also provides for a devolved government with counties designed to undertake provision of services. The national government will undertake the following activities as per Constitution of Kenya schedule 4: the use of international waters and water resources; development of pipelines; water protection; securing sufficient residual water; hydraulic engineering and safety of dams; disaster management; national public works; public investments; and capacity building and technical assistance to the counties. The county governments in turn will undertake the implementation of national government policies on water conservation, and provision of water and sanitation services. Towards this end, a taskforce has been appointed to review the Water Act 2002, the draft irrigation policy and bill as well as the land reclamation policy documents. The task also involves provision of transitional support to the counties as relates to human resources needed for the effective implementation of their mandates. Sector reforms The reform agenda for the water sector has been under implementation for the last decade, further reinforced by the new Constitution. Since its promulgation, the
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water sector has been working to align its legal and institutional framework to the new provisions, to ensure that citizens economic and social rights are progressively achieved as envisaged in the Constitution. These involve the finalisation of the Water Policy and Bill, Irrigation Policy and Bill, the Land Reclamation Policy and Bill, and the development of a Groundwater Management Policy for managing the resources. The draft policies and bills are at different stages: a. Both the Water Policy 2012 and Water Bill 2012 draft documents were finalised and submitted to KLRC/AG (awaiting comments from the AG). b. The final draft Irrigation Policy and Bill have been completed. c. The Irrigation Policy and Bill have been finalised. These draft bills have yet to be tabled in Parliament thus the sector is still legally operating under the Water Act 2002. Key issues on the transition to county governments The responsibility to manage water resources is retained by national government, with water and sanitation services provision allocated to county government. (The function of public investment is allocated to national government but at the same time county government has the responsibility for public works {Schedule 4}). 6.4.2 County-devolved resource requirement versus allocation Based on the existing level of services, the total requirement cost of funding the devolved functions in the sector is estimated at KSh. 9.8 billion in the financial year 2013/14. The funding is required for projects geared toward addressing concerns raised by county residents. The water sub-sector has allocated about KSh. 5 billion for devolved county functions in 2013/14 (Table 6.18). This represents 10.6 percent of the sub-sectors total allocation in 2013/14 financial year.
Table 6.18: Summary of resource requirement versus allocation for county devolved (KSh. million) Printed estimates 2012/13 County allocation
Source: MoWI
Resource allocation for period 2013/14 to 2015/16 2013/14 4,971 2014/15 5,199 2015/16 5,301
4,646
6.4.3 Key strategic interventions in counties Table 6.19 shows the county key issues and strategic inventions with associated programmes and budgetary allocation for FY 2013/14.
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Table 6.19: Counties key strategic interventions and resource allocation in 2013/14 (KSh. million) Key issues Inadequate access to clean and safe water Management and protection of water resources and sharing Inadequate irrigation infrastructure Poor sanitation and sewerage system Programmes Water Supply Services Water Resources Management and Storage Irrigation and Land Reclamation Sewerage Services Allocation 2013/14 3,581 698 610 203
Source: (MTEF)-Enviroment,Water and Housing Sector Report, 2012
6.4.4 Spending at regional level The Ministry of Water and Irrigation allocates funds to SAGAs, which are regionalbased (not district-based) agencies. Kenya characterises a vast spatial disparity in access to water and sanitation. In terms of access to improved water sources, there is a real need to prioritise the deprived regionsrural areas in particular. 6.4.5 Rural versus urban expenditures During 2011/12 the total expenditure in urban areas amounted to KSh. 13,584.5 million through construction of urban water supply and sewerage, compared to expenditure in rural areas which amounted to KSh. 7,263.7 million. Out of this amount, KSh. 3,562.6 million was spent on the construction of dams and water pans and KSh. 1,306.6 million on irrigation development. Construction of rural water supplies was KSh. 1,849 million and drilling of boreholes was KSh. 349.3 million. The rest of the expenditure went to the Mount Kenya East Pilot Project at KSh. 125.8 million and land reclamation activities at KSh. 70.3 million. MoWIs spending is slightly biased in favour of urban water sector schemes. In the 2011/12 period, 44.9 percent of the Ministrys total spending (more than 13.6 billion) benefited urban schemes, with rural schemes receiving 24.1 percent. Most of the expenditure for urban water infrastructure is channelled through WSBs (donor funds) while rural schemes receive funding through district water officers (DWOsGoK funding). There was funding to the sectors pro-poor basket (poor un-served areas including informal settlements), WSTF. During the year under review the major source of funding to the WSTF was donors. The GoK contributed 19 percent, while 1.2 percent of the funds were internally generated. Compared to the previous year, donor funding increased by 53 percent, while internally-generated funds increased by about three times.
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Table 6.20: Allocations to counties in 2011/12 S/No County Amount (KSh. million) 209.8 119.5 105.8 155 131.1 138.6 218.4 104.6 129.4 141.4 139.9 107.7 168.9 106.2 83.2 133.4 152.1 170 78.6 180 82.6 180 158 156 S/No 25. 26. County Marsabit Meru Amount (KSh. million) 157 155 110 92.9 109 74.1 160 97.7 131 73.8 120.1 135.9 134.6 107.1 127.8 121.3 101.5 102.2 176.8 105.5 103.9 155.1 481.6 6,484.2
1. Baringo 2. 3. 4. 5. 6. 7. Bomet Bungoma Busia Elgeyo/Marakwet Embu Garissa
27. Migori 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 43. 45. 46. Mombasa Muranga Nairobi Nakuru Nandi Narok Nyamira Nyandarua Nyeri Samburu Siaya Taita-Taveta Tana River Tharaka Nithii Turkana Vihiga Wajir Totals
8. Homabay 9. Isiolo
10. Kajiado 11. Kakamega 12. Kericho 13. Kiambu 14. Kilifi 15. Kirinyaga 16. Kisii 17. Kisumu 18. Kitui 19. Kwale 20. Laikipia 21. Lamu 22. 23. 24. Machakos Makueni Mandera
42. Trans-Nzoia 44. UasinGishu
47. West Pokot
Source: MoWI
During 2011/12, the provision of water facilities by WSTF was undertaken through the already-developed mechanism of the Community Project Cycle (CPC window) for projects in rural areas, Urban Project Cycle (UPC window) for urban water supplies and WDC for water resources development projects. The interventions included the building of water kiosks and yard taps, development of water supply pipeline systems, sewer lines and installation of water tanks to store water. Under the UPC window, 30 water projects and 3 sanitation projects were completed serving an additional 283,964 people in urban areas. Under the CPC window, 30 water projects and 30 sanitation projects have been completed
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Figure: 6.2: Funding trend to the pro-poor basket Pro-poor funding

1,200 1,000 800 600 400 200 0 2009/10 Source: MoWI 2010/11 2011/12
serving an additional 208,064 people in rural areas. During 2011/12, WSTF mobilised and disbursed KSh. 729.7 million to fund 290 water and sanitation projects targeting to serve an additional 334,175 people when completed.
6.5 PUBLIC EXPENDITURE OUTLOOK 2013/14 TO 2015/16
n the period 2013/14 to 2015/16, the sectors key policy priorities in the medium term have been prioritised and ranked according to issues emanating from the county strategic interventions priorities, based on county consultations in October/November 2011, basic requirements in the Constitution and the overall objectives of Kenyas Vision 2030. Initial indicative estimates (2013/14 to 2015/16) The sector requires KSh. 114.8 billion in the FY 2013/14 to achieve its objectives and expected outputs. However, the sectors ceiling allocation for the FY 2013/14 is KSh. 57.9 billion.
Table 6.21: Summary of resource allocation between national and county government (KSh. million) Printed estimates 2012/13 MoWI Of which: County allocation
Source: MoWI
KSh. millions
Resource allocation for period 2013/14 to 2015/16 2013/14 43,807 4,971 2014/15 45,499 5,199 2015/16 46,399 5,301
41,911 4,646
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6.6.1 Lessons and challenges
enyas water, sanitation and irrigation sector has realised major policy changes and restructuring, geared towards ensuring proper regulations and adequate service delivery. Inadequate data and non-uniform standards, however, still pose key challenges to ensuring harmony and comparability of services at the local level. The definitions of urban and rural are one example urgently in need of standardisation, in terms of character and population density. Expenditure analysis by administrative units is also hampered by the dearth of disaggregated data on the mode of allocation of funds from the central government, which are dispatched to catchment-based government agencies and not administrative districts. This review shows that the study of access to water supply and sanitation needs a more rigorous technical approach than is currently the case. Time-related factors and how they affect sustainability of the services need to be captured in the sector surveys. Equally important is the mapping of spatial variations in service levels. There is a wide rural-urban divide in access to water and sanitation, with urban areas scoring higher access levels. This is further testimony to the fact that higher population density tends to favour urban areas in the provision of infrastructure and economic services.
Community disputes have resulted in delays in key project programme implementation. Some of these include Umaa dam, the construction of Nzoia dam and the construction of the 54 km Rahole canal. The lengthy and bureaucratic procurement procedures in government have constrained the completion of projects through unwarranted delays. The stringent donor conditions have also caused delays in project implementation. Delays in exchequer releases and other issues caused by unpredicted revenue streams, compounded by the unexpected closure of IFMIS, has resulted in the delays in processing of payments in various programmes. This has delayed project implementation. Inadequate resource allocation has negatively impacted implementation of activities in the sector. Data collection, storage, retrieval and dissemination on the environment, water and housing is not in tandem with the fast-evolving technology. In addition, limited data for decision making has constrained sector wide initiatives to inform evidence-based planning.
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The mushrooming of slums and proliferation of unplanned settlements, particularly in urban areas, constrains access to adequate water, sewerage and waste management services. Inadequate policies in water, irrigation and land reclamation have constrained guidance and investment in the sector. 6.6.2 Recommendations The following recommended actions are proposed: a. Standards of reference for measuring access to water supply and sanitation need to be updated and harmonised for country-wide urban and rural assessment of service levels. b. Bodies responsible for the planning and delivery of water and sanitation services in counties under the Constitution of Kenya 2010 will need to place greater emphasis on rural access. This calls for innovative measures that utilise local endowments such as labour abundance, cheap building materials and vast spaces that can accommodate improved communal water and sanitation infrastructure. c. Given the low proportion (20 percent) of funding from the government, public-private partnerships should be encouraged through mechanisms and instruments such as tax incentives, an enabling regulatory environment that is friendly to participation by private sector and development partners, and financing models with policies that facilitate concessions and ownership. d. The sector is to establish a budget/financial monitoring and reporting mechanism for all programmes, in close collaboration with development partners, the National Treasury and implementing agencies. e. Develop a comprehensive water investment plan to aid in prioritisation and financing of sector programmes.
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Chapter 7
INFRASTRUCTURE
7.1 INTRODUCTION
enya aims to provide a cost-effective physical infrastructure and ICT facilities and services that are efficient, affordable and reliable, supporting sustainable economic growth through the construction, modernisation, rehabilitation and effective management of infrastructure facilities. Vision 2030 acknowledges the Energy, Infrastructure and Information Communication Technology (ICT) sector as an enabler to sustainable development that plays a facilitative role in the realisation of targets set under the Vision. During the three-year period under review, the strategy being pursued by the sector has been to improve on the operations supporting development of infrastructure initiatives around flagship projects, and strengthening the policy, regulatory and institutional framework for infrastructural development. Infrastructure is one of the critical factors for sustainable growth. Kenya is challenged by a huge infrastructural deficit and unequal access to infrastructural services between regions and income groups. In an effort to reduce major constraints to Kenyas growth, the government has stepped up investments in infrastructure over the last decade.1 The first Medium Term Plan 2008-2012 for Kenya Vision 2030 set strategies and measures to support the development of the infrastructure sector. These include supporting development initiatives, strengthening institutional frameworks, enhancing efficiency and quality, and increasing the pace at which projects are completed. In the last three years, the government has committed more financial resources for infrastructural development both on recurrent and development expenditures. In recurrent, the sector budget increased from KSh. 39.5 billion in 2009/10 to KSh.
1
World Bank, 2011
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55.6 billion in 2011/12. Development expenditure increased from KSh. 106.8 billion in 2009/10 to KSh. 161.9 billion in 2011/12. Actual expenditures increased from KSh. 80.6 billion in 2009/10 to KSh. 128.7 billion in 2011/2012. The increase in expenditure allocation is in line with the governments commitment and recognition that the countrys infrastructure is the foundation for achieving the targets of Vision 2030. This chapter describes the sectors performance, policy and planning. It further analyses sector expenditure, sources of financing, and reviews sector budget execution before concluding with a set of policy recommendations based on the analyses.

he Kenya Constitution 2010 and the Kenya Vision 2030 inform the guiding principles of the Energy, Infrastructure and ICT sector. The promulgation of the Kenya Constitution 2010 saw most of the sectors draft policies and sessional papers being aligned to the new dispensation. Each sub-sector is guided by various legislations that provide the guidelines to achieving targets important in the realisation of Vision 2030. 7.2.1 Roads sub-sector The roads sub-sector is largely guided by the Sessional Paper No. 5 of 2006 which spelt out policies to be pursued by the government in the medium term for sustained growth, and provided the legal and institutional framework for the management of roads. The reforms under this sessional paper realised the four building blocks necessary for effective roads management, i.e. ownership, clarified responsibility, stable financing and commercialised management. In 2007, the Kenya Roads Act was enacted. The act established three roads authorities with clearly defined mandates on the management of respective sub-networks: a. The Kenya National Highways Authority (KeNHA): responsible for the development and maintenance of class A, B and C roads. It also provides advisory on technical issues such as standards, axle load, research development, and creates regions of operations countrywide. b. The Kenya Rural Roads Authority (KeRRA): responsible for all rural and small town roads of class D and below including forest roads, special purpose roads and unclassified roads, currently under county councils and town councils. c. Kenya Urban Roads Authority (KURA): responsible for management and maintenance of all roads within cities and major municipalities. The KRB Act was further amended to provide for a new formula for allocation of the road maintenance funds managed by the Kenya Roads Board.
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7.2.2 Energy sub-sector Kenyas Energy Policy (2006) is designed to provide adequate, quality, reliable and affordable energy to stimulate high and sustained economic growth. In the medium term the policy intends to facilitate development of and access to modern, efficient and reliable energy sources for all sectors of the countrys economy. The government has committed to major reforms in the energy sector (see Box 7.1). The sector constitutes the following major institutions: a. Kenya Power Limited (KPL): responsible for electricity transmission and distribution. b. Energy Regulatory Commission (ERC): responsible for regulation of the entire energy sector and protecting the interests of stakeholders. c. Rural Electrification Authority (REA): responsible for accelerating rural electrification at a pace consistent with government policy and the Kenya Vision 2030. d. Energy Tribunal: responsible for arbitration of disputes between ERC and aggrieved stakeholders in the energy sector. e. Kenya Pipeline Company (KPC): responsible for operation of the oil pipeline system for the transportation and storage of petroleum products. f. National Oil Corporation of Kenya (National Oil): responsible for petroleum exploration and fuel marketing. g. Kenya Electricity Generating Company (KenGen): responsible for the main electricity generation, accounting for 87 percent of the total installed capacity. h. Kenya Petroleum Refineries Ltd (KPRL): responsible for crude oil refining in the country. i. Geothermal Development Company (GDC): responsible for development of geo-thermal resources. j. Kenya Electricity Transmission Company (KETRACO): responsible for construction and operation of power transmission lines. 7.2.3 Transport sub-sector The country has witnessed improved infrastructure and services geared towards promoting efficiency and safety in the transport system. The Sessional Paper No. 2 of 2012 on Integrated National Transport Policy, developed and presented to Parliament, has made various improvements in this sub-sector. Road transport safety has improved with the establishment of the National Safety Authority, approval of the Traffic Amendment Bill, 2012, and the National Transport and Safety Bill, 2012; the development of Legal Notices to oversee PSVs operating under SACCOs/companies; and the posting of licensing officers to various stations across the country. The National Transport Policy has also led to the
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Box 7.1: Governments commitment to energy sector reforms The government has committed to pursue structural, policy and institutional reforms in the energy sector including:
Increasing installed power generation, enhancing access to electricity, putting in place a strong
energy sector regulatory framework, and improving the operational efficiency of power utilities,
Gazettement of regulations developed by the Energy Regulatory Commission, Formation of Nuclear Electricity Project (NEP) Committee in November 2010 to spearhead and
fast track the development of nuclear electricity generation,
Establishment of independent power producers (IPPs) to generate power and supply electricity
in bulk to KPLC for distribution though the national grid: IPPs have been allowed to participate in power generation in order to have competitive tariffs,
Installation of solar electricity generators (photovoltaic PVs) in public institutions including

market centres, secondary schools, boarding primary schools, health centres and dispensaries which are in off-grid areas in ASAL districts, hence uneconomical to connect to the national grid,
Development of the Feed-in Tariffs policy whose main objective is to promote power generation
from renewable energy sources,
Drafting of new National Energy Policy to review Sessional Paper No. 4 of 2004 on energy, aligning
it to the constitution and in tandem with Vision 2030,
Drafting new Energy Act to amend and consolidate the law relating to energy, providing for
national and county government functions and the establishment of energy sector entities,
Merchant mode refinery: The gazette Legal Notice No. 24 of April 10, 2012 sets migration of KPRL
from a tolling to merchant arrangement thereby easing the burden of crude processing at KPRL. However, oil marketing companies (OMCs) will be required to lift petroleum products from KPRL.
Other policy instruments developed to attract private investments in the energy sector e.g.
continued promotion of renewable energy, development of regulations to promote installation of solar in new buildings, continued efforts to develop standards and regulations for biomass, biogas and small hydro power generation.
improvement of marine transport services management through the training of 22 Kenya seafarers, with the programme surpassing the target of 17 officers due to the support of the government of Turkey who trained 5 more officers; a modern rescue centre equipped with search and rescue equipment in Mombasa and Kisumu; and the review of the Merchant Shipping Act, Marine Insurance Bill, Kenya Ferries Services Bill and the Kenya Ports Authority (KPA) Act.
O
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7.3.1 Outputs and outcomes ver the last decade, Kenya has made remarkable progress in investment in infrastructure especially towards achieving its goals in the Vision 2030 blueprint. This progress is reflected in the shift towards development spending, which has increased from 4 percent of GDP in 2005 to 10 percent of GDP in 2011/12. This has seen increased spending especially in infrastructural
Infrastructure
development across the country. This section provides a review of performance in the infrastructure sector. 7.3.2 Roads sub-sector The sub-sector is responsible for development, rehabilitation and maintenance of the road network in the country (classified, urban and rural roads as well as roads in national parks and reserves). This mandate has been classified as of highest priority in the sector and reflected in the budgetary allocations for the sub-sector. The sub-sectors objective is to expand, rehabilitate and maintain the road network in addition to building capacity for road construction. This is to be achieved through the Road Development, Maintenance and Management Programme, whose overall goal is efficient and economical road transport. Effort has been made towards measuring the achievement of this outcome by use of the following indicators in the period 2009/10 to 2011/12 (Table 7.1). The above performance was realised on the basis of continued financial allocation, following the 2010 PER which highlighted the need to increase funding for the sub-sector to meet the rehabilitation backlog as well as the overall goal of infrastructure development stipulated in Vision 2030. The road network condition has greatly improved due to the enhanced funding allocated for construction and maintenance works in various parts of the country (Table 7.2). The improved sub-sector performance is made possible by its ability to secure increased allocation from the Consolidated Fund and winning the confidence of development partners who have continued to offer the requisite support in the implementation of capital projects. An efficient and reliable road network system has played a critical role in facilitating economic activities in the country leading directly to employment and income generation opportunities, agricultural growth and stimulation of industrial and commercial activities. Roads remain the major mode of transport for both passenger and goods, accounting for 56 percent of the total value of transport in the country. Traffic jams are a frequent occurrence in most of the cities and large towns. The country has had a rapid increase in the number of vehicles in recent years, from 450,137 in 2008 to 598,622 vehicles in 2011, an increase of 33 percent in the four year period. The traffic snarls along Nairobis Mombasa road have persisted despite the introduction of the Syokimau commuter train under the rapid urban transport programme and the opening of the eastern and northern bypasses that aimed to reduce the number of vehicles using the road.
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Table 7.1: Roads sub-sector performance 2009/10 to 2011/12 Planned output 2010/11 (km) Cumulative target (km) 221 5 5 3 7 8 12 105 359.4 312 385.91 875 1,130 129 Achieved output 2010/11 (km) Planned output 2011/12 (km) Achieved output 2011/12 (km) Cumulative output achievement (km) Percent AchieveRemarks ment Timely release of funds and facilitation led to completion of the projects hence target surpassed 149 158 349.35 373.2 449.9 801 1,190 388 523.37 800 820.82 1,423 1,671 117 66,964 58,508.4 66,855 71,689.86 178,819 149,435 84 percent 685 548.99 465.1 115.6 4,150 1,551 37 percent Under achievement in routine maintenance not achieved due to delays in procurement process, especially under constituency roads and delayed disbursement of funds Target met 14 14 100 percent
Infrastructure
Indicator
Planned output 2009/10 (km)
Achieved output 2009/10 (km)
Number of km of roads constructed
342
385
Bridges
Number of km of roads reconstructed and rehabilitated
270
390.9
Number of km of roads put under periodic maintenance
235
327
Number of km of roads put under routine maintenance
45,000
19,237
Number of km of roads maintained under Roads 2000 Strategy
3,000
886
Design of roads and bridges
Source: EI & ICT Sector report, 2012
Infrastructure
Table 7 2: Road network in Kenya by type and classification 2009-2012 2009 Category A-International trunk roads B-National trunk roads C-Primary roads D-Secondary roads E-Minor roads F-Special purpose roads Total
Source: Statistical abstract 2012
2010 Earth/ gravel 816 1,156 5,164 9,483 26,071 10,376 53,066 Bitumen 2,772 1,489 2,693 1,238 577 110 8,879 Earth/ gravel 824 1,156 5,164 9,483 26,064 10,376 53,067
2011 Bitumen 2,920 1,490 2,540 1,240 580 110 8,880 Earth/ gravel 824 1,160 5,164 9,480 26,070 10,376 53,074
Bitumen 2,772 1,489 2,693 1,238 577 110 8,879
Composed of several sub-sectors with different institutional and legal requirements, the sector was able to embark on a series of reforms to strengthen the performance of institutions and create an environment for developing an efficient infrastructural network. A National Transport and Safety Act, 2012, and Traffic Amendment Act, 2012, have been approved and passed by Parliament. Under the same Acts, a National Transport Safety Authority has been created to enhance transport safety in the country. 7.3.3 Transport Jomo Kenyatta International Airport remains the hub of air transport in the country, and the largest aviation facility and busiest airport in East Africa. The airport handled 98,000 aircraft movement in 2011, up from 80,000 in 2009. Passengers increased from 4.7 million in 2008 to 6.3 million in 2011, an increase of 23.9 percent. Since 2009 the airport has been undergoing expansion to increase handling capacity of both passengers and cargo to keep pace with its position in the region. There have been construction works on terminal four to increase the traffic handling in the airport. Together with Moi International Airport in Mombasa, the two facilities handle tremendous traffic with connection all over the world. The country has wide-ranging tourist attractions that call for expansion of the airports to contain the heavy traffic and handle long-haul international flights. Expansion of Kisumu airport and its elevation to international standard has also opened up the lake region, especially in local transport for both passengers and cargo. Mombasa port is the major gateway to East and Central Africa serving Kenya, Uganda, Northern Tanzania, Democratic Republic of Congo and Southern
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Sudan. The port is stretched beyond its capacity, causing delays in offloading cargo and a shortfall in storage. Efforts to decongest the port of Mombasa has seen the expansion of facilities, including dredging of port berths to a depth of 15metres to allow larger ships to use the port. The port handled 770,804 containers in 2011 which is an increase from 618,816 containers in 2009. This is in spite of the decreased number of ships from 1,748 to 1,684 in 2009 and 2011 respectively. Access to Mombasa Island from the south coast has improved with the commissioning of two ferries to decongest the Likoni Channelthe entry point to the port. 7.3.4 Energy sub-sector There has been much improvement in the quality and quantity of energy infrastructure from the period 2009 to 2012. The existing transmission network comprises 1,331 km of 220 kV and 2,343 km of 132 kV lines, interconnected with Uganda through a 132 kV double circuit line. There was a 425 km, 132 kV electricity transmission network constructed during this period. During the same period, eight generation substations with a transformation capacity of 1,846 MVA and 45 transmission substations with a capacity of 2,976 MVA were constructed. Electricity remains the most sought-after energy source by Kenyan society and its access is normally associated with high quality of life. As at June 2012 electricity contributed 9 percent of total energy needs, biomass 68 percent and petroleum 22 percent. The electricity consumption was 148 kilowatt hours (KWh) per capita and national connectivity was 29 percent, both of which are below the average per capita consumption of 1,169 KWh and connectivity of 32 percent for developing countries. Total electricity generation increased by 4 percent in 2012 to record 7,851 GWh compared to 7,560 GWh in 2011, mainly driven by hydro-generation (Figure 7.1). Kenya mainly depends on hydro-power which is vulnerable to drought and this has led to persistent power shortages, further constraining growth and creating the need to explore geothermal energy. Recurrent drought poses a strain on hydroelectric capacity, prompting the government to put stop-gap measures in place to prevent load-shedding by seeking emergency power supply. In 2012, the total emergency generation capacity stood at 309 GWh, mainly from independent power generators. The cost of power from emergency units is higher than from other units, making electricity costly for the poor while increasing the cost of production of goods and services in the country. The electricity sector in Kenya has for a long time been beset with challenges of inadequate generation capacity, constrained supply, and limited transmission
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Figure 7.1: Kenya relies mainly on hydro-power

9,000 8,000 7,000 6,000 GWh 5,000 4,000 3,000 2,000 1,000 0 2009 Wind Source: Economic Survey, 2013 2010 Co-generation Geo-thermal 2011 Thermal oil Hydro 2012
and distribution capacity, leading to high losses in the transmission and distribution network as highlighted in the 2010 PER. To redress this situation new high voltage (132 kV and above) electricity transmission infrastructure, which forms the backbone of the national transmission grid, is being developed. In 2012, 1,331 km of 220 kV and 2,343 km of 132 kV were installed (Table 7.3). The government of Kenya has identified high voltage transmission as a big challenge by virtue of the huge capital outlay required to put up the infrastructure, noting that adequate resources had not been dedicated to expand and reinforce the system.
Table 7.3: Transmission and distribution lines, circuit length in km as at June 2012 Voltage (kV) 220 132 66 40 33 11 TOTAL Percent increase P.A 2007 1,323 2,085 632 29 11,163 21,918 37,149 22.2 2008 1,323 2,085 632 29 12,633 23,573 40,274 8.4 2009 1,331 2,112 649 29 13,031 24,334 41,486 3.0 2010 1,331 2,112 655 0 13,812 25,485 43,494 4.8 2011 1,331 2,343 655 0 15,271 26,250 45,850 5.4 2012 1,331 2,343 758 0 15,384 27,219 47,035 2.6
Source: KPLC Annual Report and Financial Statements, 2012
Demand for electricity has shown an upward trend since the year 2004 due to accelerated economic growth. In 2011, 28.9 percent of the population was connected to electricity compared to only 15 percent in 2004. Historical records indicate a consistent annual increase in electricity demand (estimated at 8
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percent per annum) (see Table 7.4). Although there is sustained increase in the demand for electricity; the capacity available to meet this demand cannot be maintained.
Table 7.4: Demand and consumer statistics 2004/05 Energy generated (GWh) Energy sold (GWh) Peak demand (MW) Number of consumers 5,347 4,379 899 735,144 2005/06 5,697 4,580 920 802,249 2006/07 6,169 5,065 987 924,329 2007/08 6,385 5,322 1,044 1,060,383 2008/09 6,489 5,432 1,072 1,267,198 2009/10 6,692 5,624 1,107 1,463,639 2010/11 7,303 6,123 1,194 1,753,348 2011/12 7,670 6,341 1,236 2,038,625
Source: KPLC annual report and financial statements, 2012
Up until recently, Kenya had no known commercial reserves of petroleum. However, in January 2012, international oil Exploration Company Tullow Oil struck oil at Ngamia I well located in the Lokichar basin, Turkana County. By May 2012, Tullow had discovered crude oil with a total pay zone of 100 metres between depths of 850 metres to 1,515 metres. According to Tullow, the API gravity of the oil is estimated at between 300 and 350, indicating high quality oil. Drilling at the well is ongoing and expected to reach a maximum depth of 2,700 metres. Further petroleum exploration is being undertaken both onshore and offshore in the countrys four major sedimentary basins with a view to discovering commercially viable deposits. The discovery will reduce reliance on imported crude oil and other related products. The country has also seen the exploration and discovery of 400 million metric tons of coal at the Mui basin in Kitui County. The basin has been sub-divided into four blocks, A, B, C and D for mining and development of the coal through public-private-partnerships; a concessionaire has been identified for development of the coal in two blocks. An oil pipeline remains the most efficient, safe and cost-effective way of transporting fuel to various parts of the country. Areas connected to the pipeline enjoy cheaper fuel compared to those that rely on roads for fuel transport. The country enhanced the Mombasa - Nairobi oil pipeline (line 1) pumping capacity from 440,000 to 830,000 litres/hr in the last three years. The Kenya Pipeline Company also completed the construction of a parallel 14-inch-diameter oil pipeline from Nairobi to Eldoret, with a pumping capacity of 375,000 litres/hr. Supplies of LPG have increased after construction of a 6,000-tonne commonuser LPG import handling, storage and distribution facility in Mombasa.
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The government also continues to implement several renewable energy electricity generation projects (wind, small hydro, biomass, solar etc.) through the feed-in tariff (Fit) policy. This will make a large contribution in scaling-up access to electricity for Kenyans. Solar PV installations increased significantly from 124 institutions to 272 institutions in 2011/12. Total installed capacity doubled from 260.54 kWp (kilowatt-peak) in 2009/10 to 522.61 kWp in 2011/12. Renewable energy accounts for 69 percent of the countrys overall energy mix while petroleum accounts for about 22 percent and electricity 9 percent. Of the electricity component 67.5 percent is generated from renewable energy sources, and the remaining 32.5 percent from fossil fuels. Biomass fuels are the most important source of primary energy in Kenya with wood-fuel (firewood and charcoal) accounting for over 68 percent of the total primary energy consumption. About 55 percent of this is derived from farmlands in the form of woody biomass as well as crop residue and animal waste, while the remaining 45 percent is derived from forests. 7.3.5 Local government The sub-sector contributed greatly to the expansion and quality of infrastructure in the country as a way of promoting trade and commerce. In this respect, a total of 154 markets (5 hubs, 7 wholesale, 19 retail and 123 Economic Stimulus Programmes (ESP) were constructed during the review period. Their operations will improve trade by opening up new areas and providing marketing outlets for merchandise and farm produce. In addition, 10 km out of the planned 14 km of storm water drainage were constructed. This will help reduce the perennial flooding problem in major towns. In the period under review, 88.5 km of access roads in urban areas, and eight bus parks, were constructed/ reconstructed to bituminous standard thus improving access for traders. Physical and social infrastructure in five informal settlements was upgraded to improve the livelihood of the residents, especially with easier access to water, transport and housing. However, more needs to be done as flooding had been a major concern in nearly all urban areas during rainy seasons. This would contribute to reduced waterborne diseases, improved businesses, and lower incidences of injury and fatality occasioned by uncontrolled storm water. Disaster management in local authorities has not improved even as urban centres and markets in most of the counties continue to grow. In recent times, there has been loss of life and destruction of property as a result of fire in various parts of the country. The sub-sector had planned to provide five fire engines to five local
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authorities within the last three years. Three fire engines out of the planned five were procured and handed over to three local authorities. Disaster management that includes prevention, preparedness, mitigation and emergency recovery are the main areas of focus in future.
7.4 EXPENDITURE IN PHYSICAL INFRASTRUCTURE
7.4.1 Overall expenditure trends ost of the infrastructure remains a public good whose development and maintenance relies heavily on public allocation and management. The government identified infrastructure as an important component supporting all the other pillars towards achievement of Kenya Vision 2030, prompting increased allocation of resources across all sub-sectors. This is the only sector where development allocated is almost three times the recurrent budget. The increase budget allocation during the period 2009/10 to 2011/12 was in line with governments commitment and recognition of the countrys infrastructureincluding roads, energy generation and supply, airports, ports, and telecommunications as being the foundation of Kenya Vision 2030. Total infrastructure budget increased from KSh. 146.3 billion in 2009/10 to KSh. 217.5 billion in 2011/12 (Table 7.5). The development budget increased from KSh. 106.8 billion to KSh. 161.9 billion. Total Infrastructure spending averaged 10 percent of GDP during this period, with roads and energy sub-sectors accounting for 80 percent of the total infrastructure budget (Figure 7.2).
Figure 7.2: Roads and energy account for 80 percent of the total infrastructure spending
60 53.5 Percent of total infrastructure 50 40 30 20 10 0 Roads and Public Works Source: EI&ICT sector report Energy Local Government Transport ICT 10.5 5.1 3.3 1.2 Nairobi Metropolitan Average expenditure, 2009/10 to 2011/12
26.4
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Table 7.5: Infrastructure sector expenditure (KSh. million) Approved estimates 2009/10 Recurrent Local Government Roads & Public Works Transport Energy Nairobi Metropolitan ICT Total Development Local Government Roads & Public Works Transport Energy Nairobi Metropolitan ICT Total Total infrastructure
Source: EI&ICT Sector report
Actual expenditure 2009/10 10,285 22,201 3,286 362 175 1,425 37,734 2010/11 11,330 25,327 3,431 2,055 118 1,493 43,754 2011/12 18,209 28,593 3,822 2,261 220 1,799 54,904
2010/11 11,348 25,776 3,568 2,283 118 1,497 44,590
2011/12 18,464 28,814 3,968 2,279 227 1,799 55,551
10,547 23,523 3,389 409 176 1,447 39,491
2,375 62,462 5,792 33,118 1,759 1,299 106,805 146,296
4,556 71,088 6,828 32,623 1,060 4,285 120,440 165,030
3,760 82,072 13,906 55,180 2,044 4,963 161,925 217,476
2,056 39,584 3,548 32,510 1,580 1,344 80,622 118,356
1,988 52,056 3,472 27,534 1,060 3,687 89,797 133,551
2,146 63,824 4,178 51,647 1,939 4,963 128,697 183,601
The roads sector receives the lions share of the total infrastructure budget both recurrent and development (Table 7.5). This is in line with the government initiative of rehabilitating and expanding the existing roads, opening new roads especially along the northern corridor, and maintaining the already developed roads in good standard. During the review period, there were major roads under construction including the expansion of Thika Road, rehabilitation of JKIA junctionSultan Hamud road, Maai-MahiuNarok road, NakuruTimboroa road, Mau SummitKericho-Kisumu, Nairobi Eastern and Northern Bypasses, Athi River Namanga and Isiolo Merile road, among others. Equally, the energy sub-sector has seen noticeable increment in budget allocation in the last three years. This is as a result of heavy investment in renewable and clean energy, especially geothermal and wind energy, construction of high voltage power lines and the on-going oil exploration programme. 7.4.2 Roads sub-sector Investment in this sub-sector increased by 29 percent from KSh. 86 billion in 2009/10 to KSh. 110.9 billion in 2011/12 (Figure 7.3). Total development and recurrent budget averaged 40 percent and 15 percent of the total infrastructure envelope respectively during this period.
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Figure 7.3: Investment in roads is mainly towards development

120 100 80
KSh. billions
60 40 20 0 2009/10 2010/11 Recurrent Development 2011/12
Source: EI&ICT sector report
7.4.3 Energy sub-sector Budget allocation in this sub-sector has increased considerably over the review period. Total allocation increased by over 70 percent to stand at KSh. 57.5 billion in 2011/12 from KSh. 35.5 billion in 2009/10. The development budget accounted for the highest share95 percent on average during this period (Figure 7.4). This was mainly directed to the national electrification spending which reflects the governments commitment to support projects involving the national grid system, geothermal development and rural electrification.
Figure 7.4: Investment in energy sub-sector is mainly towards national electrification
Average spending, 2009/10 to 2011/12 100 90 80 70
Percent
95
60 50 40 30 20 10 0 National electrification 2 3 1
Source: Ministry of Energy
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Acquisition of non-financial assets accounts for the largest share of the total energy sub-sector spending, averaging 49 percent in the period 2009/10 to 2011/12 (Figure 7.5). Compensation for employees, and goods and services, received very little compared to other areas of expenditure. This is explained by the sub-sectors focuses on major capital investment.
Figure 7.5: Share of energy spending by economic classification
60 50 40 Percent 30 20 11.9 10 0 0.6 Compensation to employees Use of goods and services Grant, transfers and subsidies Acquisition of non-financial assets 38.9 Average share, 2009/10 to 2011/12
48.6
Source: Ministry of Energy data
7.4.4 Transport, local government and ICT sub-sectors These sub-sectors account for the remaining 20 percent of the total physical infrastructure budget after the roads and energy sub-sectors (Figure 7.6). Transport spending by the government averaged 7 percent of the total infrastructure budget, while local government and ICT average 10 percent and 3 percent respectively in 2009/10 to 2011/12. The ICT budget more than doubled from KSh. 2.7 billion to KSh. 6.8 billion during this period, mainly directed towards ICT infrastructure. Local government infrastructure budget increased from KSh. 12.9 billion in 2009/10 to KSh. 22.2 billion in 2011/12. 7.4.5 Expenditure by source of finance External funding has been increasing over the period under review from KSh. 36.2 billion in 2009/10 to KSh. 74.1 billion in 2011/12 approved estimates (Table 7.6). The major beneficiaries were the roads and energy sub-sectors which accounted for 40 percent and 49 percent respectively during the 2011/12 financial year. This is attributed to the heavy capital investments in the two sub-sectors, mainly for the improvement of road network and energy projects. The transport sub-sector had an over 270 percent increase in external funding but its performance in utilisation of funds showed a steep declining trend from 23 percent in 2009/10 to 7 percent in 2011/12.
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Figure 7.6: Sub-sector shares as percent of total infrastructure budget

12 10 Average share, 2009/10 to 2011/12
10
8 Percent
Local Government
Transport
ICT
Source: Ministry of Energy data
7.4.6 Budget execution The trend in expenditure analysis indicates that overall absorption of allocated funds increased from 81 percent in 2009/10 to 84 percent in 2011/12 (Figure 7.7). The development budget execution rate averaged 77 percent during this period with the absorption rate for 2011/12 being 79.5 percent. The lowest absorption was in the transport sub-sector which recorded a 30 percent utilisation rate in 2011/12 (Table 7.7). The low absorption of development funds comes from difficulties and technicalities involved in the use of donor fundsthe development vote carries a bigger proportion of donor funding, delayed exchequer releases and
Figure 7.7: Physical infrastructure budget execution rates
85 84 84 83 Percent 82 81 80 79 81 81
2009/10
2010/11
2011/12
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Table 7.6: Analysis of externally funded programmes (KSh. million) Sources of funds Local Government Revenue AIA Subtotal Roads Revenue AIA Subtotal Transport Revenue AIA Subtotal Energy Revenue AIA Subtotal 1,693 6,352 8,045 1,399 11,257 12,656 4,314 27,181 31,495 1,698 6,240 7,938 1,324 12,790 14,114 2,131 25,250 27,381 1,120 1,710 2,830 1,253 2,678 3,931 3,239 7,241 10,480 520 140 660 413 199 612 706 18 724 876 22,828 23,704 781 21,742 22,523 934 24,688 25,622 591 15,813 16,404 607 16,603 17,210 800 21,329 22,129 646 432 1,078 784 655 1,439 2,626 696 3,322 646 432 1,078 784 655 1,439 2,626 696 3,322 Approved estimates 2009/10 2010/11 2011/12 Actual receipts 2009/10 2010/11 2011/12
Information and Communications Revenue AIA Subtotal GRAND TOTAL

495 42 537 36,194
2203 38 2,241 42,790
3131 48 3,179 74,098
495 38 533 26,613
1,540 23 1,563 34,938
2048 11 2,059 55,615
low donor disbursement rate, as well as procurement challenges, especially on infrastructural projects. Development budget absorption against the total infrastructure budget averaged 68 percent in the three year period under review.
7.5 SECTOR RECOMMENDATIONS AND CONCLUSION
nfrastructure projects are expensive with a wide range of benefits to the surrounding environment, thus attracting political interest and interference in their identification, location and implementation. Therefore the key recommendations in this sector include the following: a. Kenya can ensure security of energy supply through competitive processes and long-term power purchase agreements (PPAs). Investments in transmission and distribution infrastructure need to be accompanied by effective enforcement of regulations on service quality to ensure reliable service to consumers.
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Table 7.7: Sub-sector development budget execution rate (percent) Sub-sector Local Government Roads and Public Works Transport Energy Nairobi Metropolitan ICT
2009/10 87 63 61 98 90 103
2010/2011 44 73 51 84 100 86
2011/2012 57 78 30 94 95 100
b. There is need to finalise and adopt a public-private sector partnership framework and issuance of infrastructure bonds to complement government resources, supporting the implementation of projects that require large capital outlay. c. Procurement processes has been cited as delaying most of the projects, leading to upward revision of costs. There should be a review of the Public Procurement and Disposal Act of 2005 to make it more responsive to the implementation of activities. d. There is need to pursue a balanced approach, especially on urban and rural electrification, in order to ensure financial sustainability of supply and affordability by poor consumers. e. Strengthen the monitoring and evaluation system to track and ensure timely implementation of projects and programmes, by strengthening the operation of eProMIS. f. Avoid prolonged project duration or cancellation of contracts, which lead to high project costs. This should be coupled with providing for an O&M share in order to ensure rehabilitation of roads as well as maintaining new projects. g. Enhance manpower, technical capacity, feasibility and research data to develop infrastructure programmes within the sector. For instance, the fragmented transport systems need an integrated transport data system. h. There is need for steps to be put in place to reduce the prevailing traffic congestion and environmental pollution especially in major cities, which is a major challenge in the transport sector.
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Chapter 8
SOCIAL PROTECTION
8.1 INTRODUCTION
he Social Protection sector has a number of key stakeholders that play a big role in building its capacity to carry out programmes/projects and activities. Specifically, the stakeholders contribute in resource mobilisation and technical support in arid lands resources management; flood mitigation; mainstreaming of gender and youth affairs, sports development, social protection, and awareness creation on issues related to HIV and AIDS. The stakeholders include other government ministries, development partners, private sector religious organisations and non-governmental organisations. Sector composition: Current MTEF and CPER 2013 The sector consists of four related sub-sectors, namely (i) Gender, Children and Social Development, (ii) Special Programmes, (iii) Youth Affairs and Sports, and (iv) Development of Northern Kenya and other Arid Lands. The semi-autonomous government agencies (SAGAs) within the sector include the National Council for Children Services (NCCS), Women Enterprise Fund (WEF), National Council for Persons with Disabilities, Youth Enterprise Development Fund (YEDF), Sports Stadia Management Board (SSMB), National AIDS Control Council (NACC), HIV and AIDS Tribunal, National Humanitarian Fund (NHF), Strategic Grain Reserve Fund (SGRF), National Social Security Fund (NSSF) and National Drought Management Authority. The sector is mandated to coordinate disaster management, address social and economic issues affecting vulnerable groups, empower women, persons with disabilities and youth, and also address the unique challenges facing northern Kenya and other semi-arid lands.
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n integrated National Social Protection Policy addressing safety nets and contributory programmes has been passed by Parliament. The policy is an integrated and multi-sectoral document that proposes several strategies and instruments for delivering three broad categories of social protection: social assistance, social security and social health insurance. Through these approaches, the policy seeks to (i) provide a clear institutional framework and coordination mechanism for the sector by establishing a National Social Protection Council (NSPC) by an act of Parliament and (ii) create harmonised, programme-wide delivery systems, including a single registry, targeting methods, monitoring and reporting framework, and payment system. Towards the implementation of the set targets in the first medium term plan of Vision 2030, the sector has made several achievements. It has also contributed significantly towards the achievement of the Millennium Development Goals mainly on goal no. 1 on poverty reduction, goal no. 2 on universal primary education and goal no 3 on gender equality and empowerment of women. The goals of the sector are to: a. Empower and mainstream concerns of vulnerable and marginalised groups/ areas, b. Formulate and implement policy guidelines for economic utilisation of resources in disaster management, response to HIV and AIDS, management of food security and resettlement of IDPs, c. Nurture and empower the youth and sports persons, d. Accelerate economic development in ASAL regions by creating an enabling environment for sustainable growth. 8.2.1 Mandates of the sector Gender, Children and Social Development The key mandates of the sub-sector are to: formulate policies on gender, children and social development; gender mainstreaming into national development; Women Enterprise Fund; promotion and coordination of volunteer services; social welfare for vulnerable groups; community development; and programmes and institutions for childrens care and development. Special Programmes The mandates of the Special Programmes sub-sector include: formulation, coordination and implementation of comprehensive disaster management policies and programmes; facilitation of the establishment of an institutional
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framework for effective disaster management in Kenya; mobilisation of resources for disaster management; coordination of mitigation and resettlement programmes for internally displaced persons (IDPs); management of the National Humanitarian Fund; coordination of the campaign Against HIV and AIDS; and management of Strategic Grain Reserves (SGR). Youth Affairs and Sports The mandates of the Youth Affairs and Sports sub-sector include: promote youth development by designing policies and programmes that build young peoples capacity to resist risk factors and enhance protective factors; develop a National Youth Policy (NYP) to ensure youth participation in the development of the country; facilitate establishment of a National Youth Council (NYC) to popularise the youth agenda; coordinate youth organisations in the country to ensure youth development through structured organisations, collaborations and networking; develop youth resource centres; rehabilitate and expand youth polytechnics and the National Youth Service (NYS); facilitate training and preparation of the youth for nation building; promotion and development of sports and sports facilities, and promote entrepreneurship among the youth in order to enhance self-employment. Development of Northern Kenya and other Arid Lands The mandates of the Development of Northern Kenya and other Arid Lands sub-sector include: infrastructural development; planning and encouragement of townships along main roads; livestock development; natural resources management; mineral resources exploration and development; tourism development; human resources development; irrigation development and tapping of solar and wind energy; prioritisation of programmes and projects for fast tracking by the government; National Drought and Management Authority (NDMA); improvement of livestock marketing systems and implementation of special programmes for arid and semi-arid areas. 8.2.2 Policies and reforms realised The policies, legal framework and institutional reforms realised during the review period include: National policy on children rights The Policy was developed and approved by the Cabinet during the period under review. Its goals are based on the key pillars of child rights as articulated in the UNCRC, 19891. These are: survival rights, development rights, protection
1
United Nations Convention on the Rights of the Child (UNCRC).
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rights and participation rights. The policy aims at creating an environment where all the rights of a child in Kenya will be fulfilled. The Children Law Amendment Bill 2010 has also been developed. National policy on the ageing and elderly The need for a policy on older persons and ageing arose from the government commitment towards addressing the well-being of this vulnerable category of the society. The policy has been finalised and some of the issues that it seeks to address include: facilitating enjoyment of quality life during old age; promoting healthy and active ageing reinforced by access to comprehensive health care for older persons; and recognising and providing assistance to families and communities in support of older persons. National social protection policy Poverty and vulnerability still remain a major challenge, 48 years after independence, with nearly one in two Kenyans trapped in a long-term, chronic and inter-generational cycle of poverty. Health risks that require a household to pay for medical treatment are of special concern to poor households. These health risks tend to be difficult, if not impossible, to predict and affect many people at the same time. The households limited ability to predict when and how often they will be affected and how much these illnesses are likely to cost them generates more uncertainty than many other risks. To address the above challenges, the National Social Protection Policy has been developed, an effort towards reduction of the poverty and the vulnerability of the population to economic, social, and natural shocks and stresses. The policy creates a framework for coordinating social assistance, social health insurance and social security schemes. It seeks to: (i) provide a clear institutional framework and coordination mechanism for the sector through the establishment of a National Social Protection Council (NSPC) by an act of Parliament; and (ii) develop harmonised delivery systems, including a single registry, targeting methods, monitoring and reporting frameworks and payment systems, amongst other actions. Ultimately, the policy provisions provide the foundation for the establishment of a National Social Protection system. Community development policy In Kenya, community development entails mobilisation of communities, groups, households and individuals for socio-economic growth and self-reliance. The Constitution in Chapter 11, Article 174 (d) recognises the right of communities to manage their own affairs and to further their development, as one of the objects of devolved government. Chapter four, Article19 also states that the Bill of Rights is an integral part of Kenyas democratic state and is the framework for social,
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economic and cultural policies; while in the Fourth Schedule Part 2, Section 14 county governments have the responsibility of ensuring and coordinating the participation of communities and assisting them to develop their administrative capacity for the effective exercise of governance at the local level. In order to coordinate and implement programmes targeted at community development, the sector in consultations with the stakeholders developed the National Community Development Policy. National policy on gender and development (NPGAD), 2011 The Constitution of Kenya 2010 guarantees the right to equality and freedom for both men and women. Under Article 27 (2) equality is defined to include the full and equal enjoyment of all rights and fundamental freedoms. Article 27 (3) asserts that women and men have the right to equal treatment, including the right to equal opportunities in political, economic, cultural and social spheres. It is envisaged that the NPGAD 2011 when implemented will promote and institutionalise a process of development in which women and men are equal partners in creating a strong economy and a society where gender equality is a priority. National affirmative action policy on women, 2012 The Kenya Constitution, 2010, interprets affirmative action as that which includes any measure designed to overcome or ameliorate an inequity or the systemic denial or infringement of a right or fundamental freedom(Article 260). Of necessity such measures need to be deliberate and systematic addressing the core causes of inequity, inequality, denial or infringement of womens rights and freedoms. The expected outcome is the transformation of society and societal institutions resulting in equal representation and participation of women across all public and private sectors. The sector in consultation with stakeholders developed the National Affirmative Action Policy on Women (NAAPOW). Its purpose is to have public and private institutions recognise that women have been traditionally disadvantaged and for those institutions to respond in ways that will achieve gender equality. Other policies developed include the affirmative action policy on persons with disabilities (PWDs), which aims to create a framework on representation of PWDs in elective, appointive and employment positions in institutions. National youth policy The formulation of the National Youth Policy formed an important step towards enhancing youth development in the country. The policy spells out the strategic areas that must be addressed in order for Kenyas young people to effectively
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play their role in nation building. A key priority in the second MTP will be to popularise and promote the National Youth Policy and other government policies that directly affect the youth. National Policy for Youth Polytechnics and the Vocational Training Sector Youth Polytechnics (YPs) have for years been unregulated, thus compromising the quality of training in these institutions. To address this, the government developed the draft National Policy for Youth Polytechnics and the Vocational Training Sector (NPYPVS) with the aims of improving governance in these institutions in line with the expectations of the national technical, industrial, vocational, and entrepreneurship training (TIVET) framework. The policy is at the Cabinet level for discussions. Kenya National Sports Policy During the first MTP the government, through the Ministry of Youth and Sports, engaged in the potential review of the already-developed Kenya National Sports Policy 2002, to make it more robust and in tandem with the dynamic expectations of the envisaged competitive Kenya. The eventual review of the Kenya National Sports Policy will be realised during MTP2 that will, among other things, ensure compliance with the Constitution of Kenya and recently enacted Sports Act, 2012. National Youth Council (NYC) Act, 2009 The National Youth Council Act of 2009 seeks to promote the goals and objectives of the National Youth Policy and mainstream, promote, and coordinate youth programmes. The act provided for the establishment of the National Youth Council, which envisages the representation of youth in strategic leadership and in decision making locally, nationally and internationally. Elections to establish the National Youth Policy were held in December 2012 and the elected officials gazetted in the Kenya gazette notice No. 1907 of 21st December 2012. Priority during the MTP2 will be laid on establishing branches of the NYC in the 47 counties in order to mainstream youth issues in decision making processes across all levels of government. The NYC Act in its current state advocates for youth representation along the former provincial and district structures. There is therefore need to align the act to the Constitution. The National Youth Service (NYS) Act The NYS Act was enacted in 1964 for the purpose of establishing the National Youth Service with the mandate to train the youth, employ its members in tasks of national importance, and build a reserve of defence forces during times of war.
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Following the changing institutional context, the NYS Act Cap 208 was reviewed in 2011 and forwarded to the Attorney Generals office for redrafting. Its enactment will ensure that the service undergoes the necessary transformation in line with changes that have taken place since the establishment of the institution and to align its operations with the Constitution. Sports Act 2012 The Sports Act, 2012 was developed to guide the streamlining and management of sports in the country by providing legal and institutional frameworks for regulation of sports associations and arbitration of sports disputes. In particular, the act provides for the establishment of the Kenya Academy of Sports, the Sports Tribunal and Sports Fund. The sports academy will be a centre of excellence in the development of diversified sporting skills with the aim of creating professionalism in sports. The Sports Tribunal will arbitrate in sports disputes, which will eliminate court cases in the area of sports. The Sports Fund will be entrusted with putting in place a sports lottery which will raise funds to enhance funding for major sports federations as well as fund the upcoming sports federations which will diversify sports, giving an opportunity to sportsmen/women to specialise in their areas of talent. 8.2.3 Flow of funds framework The sectoral budget process conforms to the national budget process. The Treasury allocates funds to different sectors within the MTEF process. The sector allocates fund through prioritisation of programmes. Institutions within the sector, such as SAGAs, are represented in the sector working groups during the budget process. Membership of sector working groups is also open to other stakeholders not in government including donors, NGOs and the private sector. The sector working group is responsible for developing sectoral policies and objectives, evaluating ministry/department estimates and submissions and ensuring that the inputs, activities, outputs and outcomes are in line with national objectives. The sector working groups are coordinated by the National Treasury.
ey among the sectors achievements are the finalisation and operationalisation of the National Social Protection policy, the National Internally Displaced Persons (IDPs) Policy, National Disaster Management Policy and the establishment of the National Drought Management Authority. The National Development Fund for Persons with Disabilities, cash transfer programme for person with severe disabilities and the urban food subsidy for urban poor were also established within the review period. The youth sub-sector realised the development of the Sports
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Bill 2012 and the National Youth Council. The Gender and Social Development sub-sector realised significant increase in budget over the last three years from KSh. 5,583.8 million in FY 2009/10 to KSh. 8,651.2 million in 2011/12. This led to an increase in allocation to the social protection programmes within the period. The sub-sector established a cash transfer programme to persons with severe disability and urban poor. There was also a scale-up of the existing cash transfer programme to orphans and vulnerable children (OVCs) and elderly persons. The specific achievements under the various sub-sectors were as follows. 8.3.1 Gender, Children and Social Development Consolidated Social Protection Fund The following were the cash transfer programmes implemented during the period under review under the Consolidated Social Protection Fund. The Orphans and Vulnerable Children Cash Transfer Programme was initiated by government in collaboration with UNICEF on a pilot basis (2005) covering three districts, Nairobi, Garissa and Kwale, targeting 500 orphans for a monthly stipend of KSh. 500 per head. The programme has so far been scaled up and is currently providing KSh. 4,000 every two months as cash transfers to households hosting OVCs in all the 47 counties. By June 2012, 144,933 households were being supported through both government and development partners funding against a target of 120,000 households in the first Medium Term Plan of Vision 2030 as Table 8.1 reflects.
Table 8.1: Number of households financed and districts covered (2008/09 to 2011/12) 2008/09 Total households covered Number of districts covered 45,911 47 2009/10 82,371 47 2010/11 124,991 60 2011/12 144,933 69
Source: Ministry of Gender, Children and Social Development, 2012
The establishment of the fund was in recognition of the fact that orphans and vulnerable children are prone to all forms of abuse including but not limited to disinheritance, trafficking and neglect. The stipend to households hosting OVCs ensures that children are retained within the community and not institutionalised in childrens homes. The programme has seen increases in birth registration, immunisation and school enrolment (KSPSR, June 2012). The Older Persons Cash Transfer Programme (OP-CTP) was established and piloted in 2007/08 financial year in three districts (Busia, Nyando and Thika). Initially, the beneficiaries received KSh. 1,000 monthly and this has since been upscaled to
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KSh. 2,000 per month from 2011/12 after intervention by Parliament. So far the programme has received KSh. 440 million, KSh. 537 million and KSh. 1 billion for 2009/10, 2010/11 and 2011/12 respectively. A total of 36,304 beneficiaries have been enrolled in the programme in the 47 counties against the first MTP target of 33,000 beneficiaries. Figure 8.1 provides the OP-CTP beneficiaries disbursement trends across the counties during the period under review.
Figure 8.1: OP-CTP beneficiaries by county as at June 2012
1,199 1,493 1,508 1,511 1,561 1,567 1,569 1,592 1,951 2,095 Laikipia Lamu Kajiado Trans Nzoia Uasin Gishu Kericho Kirinyaga Nandi Nyandarua Vihiga Nakuru Meru Nyamira Embu Garissa Isiolo Mombasa Tana River West Pokot Samburu Tharaka Nithi Taita Taveta E. Marakwet Kwale Makueni Mandera Narok Turkana Bomet Marsabit Wajir Baringo Bungoma Kitui Machakos Nyeri Kiambu Kisii Kilifi Homa Bay Siaya Murang'a Migori Busia Kisumu Kakamega Nairobi Source: Ministry of Gender, Children and Social Development 46 46 69 69 69 92 92 92 92 92 138 161 280 444 739 750 750 750 750 770 773 779 796 796 796 796 796 796 819 819 819 842 842 842 865 865 926 2,500 2,000 No. of households 1,500 1,000 500 0
The Persons with Severe Disabilities (PWSD) Programme was another social protection initiative started in 2010/11 financial year, reaching 2,100 beneficiaries countrywide (10 beneficiaries per constituency), with each receiving KSh. 1,500 per month. This has since been up-scaled to KSh. 2,000 per month benefiting 14,560 persons with severe disabilities in all the 210 constituencies countrywide. People with severe disabilities are unable to look after themselves and require the constant attention of caregivers. The objective of the programme is to provide the beneficiaries immediate relief from extreme poverty while enhancing their basic rights. Figure 8.2 shows the number of beneficiaries of the PWSD fund across the 47 counties. The Urban Food Subsidy Programme was established on a pilot basis in Mombasa County targeting 2,776 persons in Changamwe, 4,342 persons in Kisauni, 1,738 persons in Likoni and 1,302 persons in Mvita constituencies, together totalling 10,158 beneficiaries who are food insecure. Each beneficiary receives KSh. 2,000 per month. The programme aims to cushion the population from hunger.
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Figure 8.2: PWSD beneficiaries by county as at June 2012

630 630 West Pokot Isiolo Laikipia Lamu Samburu Tharaka Nithi Kajiado Kwale Mandera Narok Nyamira Tana River Transnzoia Uasin Gishu Bomet E. Marakwet Embu Garissa Kericho Kilifi Kirinyaga Marsabit Nandi Nyandarua Taita Taveta Turkana Vihiga Wajir Baringo Bungoma Makueni Migori Mombasa Siaya Busia Homa Bay Kisumu Kitui Machakos Murang'a Nakuru Nyeri Kisii Meru Nairobi Kakamega Kiambu Source: Ministry of Gender, Children and Social Development, 2012 70 140 140 140 140 140 700 600 No. of beneficiaries 500 400 300 200 100 0 350 350 350 350 350 350 420 420 420 420 420 420 420 420 490 490 490
Table 8.2 provides an analysis of levels of disbursements for various cash transfer funds within the period under review.
Table 8.2: Distribution of cash transfer beneficiaries by programme Programme Cash transfer for orphans and vulnerable children Older persons cash transfer Cash transfer to persons with severe disabilities Support to urban poor
Source: Ministry of Gender, Children and Social Development, 2012
210 210 210 210 210 210 210 210 280 280 280 280 280 280 280 280 280 280 280 280 280 280
Beneficiaries 2009/10 82,371 33,000 2010/11 124,991 33,000 2,100 2011/12 144,933 36,304 14,560 10,158
Women Enterprise Fund: Women Enterprise Fund (WEF) was established by the government in August 2007 to promote the economic empowerment of women by providing accessible and affordable credit for women to start and /or expand businesses for wealth and employment creation. The budget allocation to the fund has been on the decrease but due to its revolving funds scheme more outputs have been achieved as indicated in Table 8.3.
Table 8.3: Beneficiaries of WEF 2009/10 Allocation Women entrepreneurs supported Women trained in entrepreneurial skills 440m 98,173 1,875 2010/11 390m 118,068 13,520 2011/12 390m 135,000 73,500
Source: Source: Ministry of Gender, Children and Social Development, WEF, 2012
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In order to improve on delivery of services to women, the fund entered into partnership with Safaricom for women beneficiaries to repay loans through the M-Pesa mobile payment service. This was informed by the many challenges women faced to deposit loan repayments with the Funds bank, Kenya Commercial Bank. Use of M-Pesa for loan repayment has resulted in reduced transport costs, lodging expenses and time wastage by women beneficiaries and has led to an increase in loan repayment rates. The fund has positively transformed the lives of women across the country. There has been improved access to credit, enhanced entrepreneurial skills development, enhanced household incomes and expenditures, higher business sales, increase in household savings, more access to markets and better/decent jobs for self/women owners. The WEF county disbursements are as displayed in Figure 8.3.
Figure 8.3: WEF beneficiaries by county as at June 2012
12,990 14,100 14,820 16,080 16,110 17,310 18,060 19,290 20,100 20,730 20,790 22,290 24,030 24,690 25,710 27,810 29,520
35,000 30,000
No. of beneficiaries
25,000 20,000 15,000 10,000 5,000 0
Source: Ministry of Gender, Children and Social Development, WEF
National Fund for Persons with Disabilities: This fund is established in Part V, Article 32-34 of the Disability Act 2003 and is meant to benefit persons with disabilities in Kenya. Key among the funds programmes are: provision of assistive devices and services, provision of scholarships to needy PWDs, funding infrastructure improvement to institutions providing services to PWDs, and capacity building for disabled persons organisations. Through the fund, 12,000 assistive devices have been provided to PWDs, 1,000 scholarships given to students with disabilities, 205 institutions providing services to PWDs funded, and 1,824 disabled persons organisation members trained in entrepreneurial skills, among others. The sub-sector also developed an affirmative action policy for people living with disabilities. In addition, the following programmes were implemented during the period under review
Mandera Isiolo Tana River West Pokot Samburu Marsabit Lamu Narok Kajiado Garissa Tharaka Nithi E. Marakwet Turkana Laikipia Nyamira Vihiga Bomet Baringo Mombasa Uasin Gishu Kirinyaga Kwale Busia Trans Nzoia Kericho Taita Taveta Nandi Makueni Embu Kisii Meru Wajir Kilifi Machakos Nyandarua Bungoma Homa Bay Siaya Nyeri Kitui Nakuru Nairobi Murang'a Kisumu Kakamega Migori Kiambu
2,100 2,160 2,310 2,760 2,880 2,940 3,360 3,510 4,230 4,470 4,530 4,740 5,130 6,060 6,090 6,630 6,780 7,590 8,070 8,100 8,160 8,580 9,300 9,510 9,810 10,080 10,380 10,530 10,920
12,180
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Gender mainstreaming: Both development theory and practice endorse critical attention to gender equality for a countrys development, through a gender mainstreaming approach. Through gender mainstreaming, the differences in women and mens power, resources, constraints and needs are analysed and used to guide development planning in order to reduce gender inequality. The government during the review period introduced a number of initiatives on gender mainstreaming. This includes the strengthening of the National Gender and Equality Commission and the National Equality and Human Rights Commission by making them constitutional offices. Gender disaggregated data: The absence of sex disaggregated data is a major impediment to the design and implementation of gender-responsive programmes. Without data which are differentiated by sex, planning and social programming can only heighten the inequalities. During the period under review, the sector produced the Kenya Gender Data Sheet 2008, which was later updated in the Kenya Gender Data Sheet 2011. The data sheet provides a general picture on current gender representations across the social, economic, political and health arenas, among others, and is geared to guide intervention among stakeholders dealing with gender concerns. Affirmative Action policy: Affirmative action refers to policies that take certain factors into consideration in seeking to benefit an under-represented group in all areas, usually to counter the effect of a history of discrimination. In the gender field, affirmative action is used to address the current imbalances in gender representation in various spheres of development. The sub-sector has been collecting and documenting data on affirmative action, producing bi-annual reports on its implementation, and sharing the information with key stakeholders. This has seen great improvement in terms of representation at all levels in the public sector. In June 2012, women constituted 38.6 percent of the total workforce in the public sectorup from the same period in 2009 when women made up 30.9 percent. For senior positions, job group P and above, women constituted 25.9 percent in June 2012 compared to 20.3 percent in June 2009. The improvement is greatly attributed to a 2010 presidential directive to ensure women have at least 30 percent in recruitment, appointment and promotion in the public sector. Campaign against gender-based violence and female genital mutilation: Gender-based violence(GBV) is a serious problem in Kenya, where more than one-third of women (39 percent) have suffered from physical violence. Forms
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of GBV include assault, rape, defilement, battery, sexual harassment, emotional abuse, and genital mutilation. The prevalence of GBV within Kenyan society confirms the deep-rooted systematic inequality between women and men, hence the need to address its causes. The anti-female genital mutilation (FGM) policy was developed to provide guidelines to stakeholders involved in FGM programming and the Plan of Action on the Abandonment of FGM was updated to align it with the Kenya Constitution 2010. The sub-sector also contributed and facilitated the Enactment of Prohibition on FGM Act 2011. In an attempt to accelerate efforts to combat the practice at the community level, six public fora for FGM abandonment campaigns were organised in Pokot, Baringo, Tana River, Meru and Kisii counties. This culminated in the signing of declarations by village elders, religious leaders, community-based organisations and the youth as a show of commitment to spearhead abandonment of the practice in their specific regions. The sub-sector also undertook an impact assessment on the public fora held in Meru. The results of the survey indicated that more civil societies and organisations have taken over the campaign against FGM and prevalence has gone down in the larger Meru area. Community mobilisation and development programme: The overall objective of the community mobilisation and development programme is to empower communities for effective participation in sustainable socio-economic development for self-reliance. Community development seeks to empower individuals and groups of people to define their problems and identify solutions or ways to address them. The sub-sector undertook a comprehensive impact assessment in 2009/10 financial year which revealed the improved wellbeing of group members. There was also enhanced employment creation in the rural areas and some critical services brought nearer to the communities, which partly controlled rural-urban migration. The sub-sector also supported 6,737 self-help groups with grants and trained 258 district gender and social development committee members in community project management, leadership and governance. Children rehabilitation programmes: The sub-sector runs 10 rehabilitation schools, 12 childrens remand homes and three childrens rescue centres. These institutions provide a place of safety for children in need of care, protection and those in conflict with the law. The rehabilitation programmes involve vocational skills training, guidance and counselling. In an endeavour to develop skills, the sub-
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sector in collaboration with JICA has introduced marketable skills such as baking, soap making and hairdressing. After successful completion of the courses, the children are awarded certificates by the institutions. Kenya Children Assembly: The sub-sector has facilitated the capacities of children to realise their own needs through, among other ways, the formulation of the Kenya Children Assembly which was launched in April 2012 in line with the child participation principle. This has also been cascaded to the 47 counties (County Children Assembly). The assembly aims at empowering children with knowledge and skills on their rights and responsibilities, and promotes the involvement of children in policy formulation, planning, implementation, monitoring and evaluation. It also provides a forum to promote childrens participation in local, national and international events, and facilitates networking among children and other relevant organisations and institutions. Child protection programmes: During the period under review, the sub-sector commenced the construction of six child protection centres in Malindi, Kisumu, Nairobi, Nakuru, Siaya and Garissa counties. Out of the six centres, the four in Malindi, Nairobi, Nakuru and Garissa have been completed. These provide safe havens for children with various needs. In addition, three child helpline stations (toll-free dial no. 116) were opened in Eldoret, Garissa and Nairobi. UNICEF is the major partner in support of this programme. The National Standards and Regulations for Charitable Children Institutions (CCIs) were finalised, and such institutions have been registered in accordance with the standards. Similarly, the Child Protection Framework, National Standards and Training Manual for CCIs and National Plan of Action (NPA) 2010 to counter trafficking of persons were also developed. Alternative family care services (adoption, foster care and guardianship) The Childrens Act recognises the principle of the best interest of the child and therefore provides for the right of a child to be taken care of within a family or the immediate community. The best interest of the child principle states that institutionalisation of a child should be used as a last resort. However, there are children who, for one reason or another, cannot be taken care of in the natural family setting. In view of this, the sub-sector has facilitated alternative family care services through adoption, foster care, and guardianship. During the period under review, the state developed guidelines to formalise foster care and guardianship.
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8.3.2 Youth and Sports sub-sector The Ministry of Youth Affairs and Sports has the following flagship projects as contained in the first Medium Term Plan (MTP). Youth empowerment centres (YECs): These are one stop shops in every constituency for youth to access information on their empowerment. Youth empowerment centres are being established in every constituency in the country. The purpose of these centres is to creatively engage youth with a view to tapping their talents and creating productive opportunities for them. These centres will further minimise the prevalence of drug and substance use among the youth. So far 130 YECs have been constructed and more than 60 are equipped. Refurbishment/rehabilitation of youth polytechnics: Revitalisation of youth polytechnics (YPs) is an initiative for training youth in quality and appropriate vocational, technical entrepreneurship and life skills for employability and job creation. The training is to enable the youth cope with advances in technology, besides positively moulding their character. In addition, reviewing of the youth polytechnic training curriculum at all levels has enabled the youth acquire demand-driven skills and a positive attitude towards work for national development. Trees for Jobs programme: The programme aimed at increasing forest cover from 1.7 percent to 10 percent. More than 20,000 youths were engaged on casual basis and managed to plant over 8 million trees in the whole country. Subsidised youth polytechnic tuition fee: Over 65,000 youth are benefiting from the subsidised youth polytechnic tuition fee. Regional sports stadia: The Sector has plans to establish 30 regional sports stadia around the country to promote the development of sports within each of the regions as well as tap the immense talent of the youth. So far Mombasa Municipal stadium and Kipchoge Keino are at 48 percent level of rehabilitation. Development and management of sports facilities: A total of 35 community sports grounds were rehabilitated, three regional sports stadia were rehabilitated to 48 percent level of completion and these include Kipchoge Keino, Mombasa Municipal and Kisumu Moi Stadia. Additionally, phase one of Moi International Sports Centre (MISC) upgrading was completed and preliminary design works of the International Sports Academy completed.
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International Academy of Sports: The National Treasury granted a total of KSh. 190 million for an international sports academy in 2009/10 and 2010/11 financial years. This amount was meant for start-up activities of this projectmainly design works. The Sports Stadia Management Board applied for KSh. 600 million towards this project to the National Treasury in the 2011/12 financial year. The academy is expected to be set at Moi International Sports Centre, Kasarani, where land has already been earmarked for development. This will be an institution for advanced training in all areas of sports. It will cater for top level development of the sportsmen and women whose talent is tapped and developed from the grassroots level countrywide. The academy will also train sports administrators, instructors and coaches. Further, it will serve as an international centre for excellence in sports and thus contribute to Kenyas sports tourism. Youth Enterprise Development Fund (YEDF): The Fund was established in 2006 to address youth unemployment. It focuses on enterprise development as a key strategy that will increase economic opportunities for, and participation by, Kenyan youth in nation building. The mandates of the fund are not only to increase access to capital by young entrepreneurs but also to provide business development services, facilitate linkages in supply chains, create market opportunities locally and abroad for products and services of youth enterprises, and facilitate creation of commercial infrastructure to support growth of youth businesses. By the end of 2011/2012 financial year, the government had allocated the Fund KSh. 2.8 billion as shown in Figure 8.4.
Figure 8.4: Government allocations to YEDF
1.2 1.0
1.0
0.8 KSh. billions
0.8
0.6
0.6 0.5
0.6
0.4
0.4
0.2
0 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 Source: Ministry of Youth and Sports, 2012
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The budgetary allocation received in the form of capital grants has largely been committed to lending through financial intermediaries and the Constituency Youth Enterprise Scheme (C-YES). The table below summarises the parastatals' achievements since 2007/12. The loan disbursements include government allocation and the revolving fund from loan repayments.
Table 8.5: Total YEDF loan disbursements from 2007-2012
Activity
Loan disbursement (KSh. billion) Market fairs Youth trained in entrepreneurial skills (Number) Youths facilitated to access jobs abroad (Number)
Source: Ministry of Youth and Sports, 2012
Achieved outputs 2007/08 1.3 N/A N/A 224 2008/09 0.8 N/A 4,067 883 2009/10 1.1 5 9,500 990 2010/11 1.3 9 17,746 2,947 2011/12 2 6 30,874 4,635
The Kenya Private Sector Alliance (KEPSA) is mandated by the government to implement the project on provision of training and internship to approximately 10,000 youth aged between 15 and 29 years in the private sector over the period 2011/14. Through careful monitoring and independent evaluation of component activities, lessons are expected to be developed for guiding future youth employment and skills development policies. The project and its support for work experience and training is aligned with the industrial structure of the national economy. This component is expected to provide work experience and training in the sectors, with priority given to potential growth sub-sectors identified in Vision 2030. A total of 1095 trainees (425 females) attended life skills training out of which 1057 (415 females) successfully completed the training (at least 80 percent attendance of the training). In order to prepare the master craftsmen (MC) to mentor and train the project interns, 341 master craftsmens skills have been enhanced234 in Nairobi and 107 in Mombasa. In addition, 916 interns were successfully placed at the work place. The sub-sector, through the National Youth Service (NYS), recruited 10,296 youth in paramilitary skills and trained 24,272 in various certificate and diploma courses. Through this programme, 65 km of the Hola-Garsen Road were put under allweather status. In addition, 18 barracks for servicemen/women and 28 houses for category E officers were constructed.
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Under the Youth Polytechnic Training Programme, 632 YPs were registered, 298 rehabilitated while 560 were revitalised and equipped with training tools/ equipment. There were also 187,329 trainee beneficiaries out of an enrolment of 190,802 youth. The sub-sector developed a National Vocational Certificate in Education and Training (NVCET) curriculum and an Instructors Guide, 1 trainee workbook on guidance and counselling and training manuals for 12 trade areas and 1 general subject. The piloting of Option 1, level 1 in 31 YPs was completed and 602 YPs were assessed for Quality Assurance and Standards. Four policy guidelines on textbooks, gender, examination and internship were developed and 50 YPs are implementing e-learning programme. Additionally, 2,000 instructors were recruited on contractual basis contracted, 50 YPs each issued with 1 hatchery for agribusiness training and 2 ballgames and athletics championships held at national level during the period under review. Youth development services: The sub-sector constructed 130 youth empowerment centres and equipped 64 of them. A total of 76,873 youth were engaged in the Trees for Jobs programme Kazi Kwa Vijana (KKV) and planted over eight million trees. A total of 627 youth were enrolled in youth talent academies while 139,474 youth were trained in necessary skills for national development. A total of 35 youth exchange programmes were organised, 108 market fairs conducted and 550 youth were engaged in volunteer activities through the National Youth Volunteer Scheme (NYVS). Under the Sports Promotion and support Services, a total of 25,000 youths were trained in various sports skills, 75 national teams participated in international competitions/championships, 135 national championships/competitions conducted and 300 sportsmen/women were provided with cash awards after winning in international competitions. In addition, 30 sports programmes/activities for vulnerable groups were organised and the Sports Bill was developed and passed to Parliament. 8.3.3 Special Programmes sub-sector The special programmes sub-sector undertook the following programmes and projects during the review period. National campaign against HIV/AIDS: Under the National AIDS Control Council (NACC) preventive programmes, a total of 48,547 children and 490,437 adults were put on antiretroviral treatment (ARVs) respectively. Prevention of Mother to Child Therapy (PMTCT) services increased by 69.17 percent in 2012 up from 38 percent in 2009. Voluntary Counselling and Testing (VCT) sites increased from 43
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in 2001 to 5,140 in 2012. The number of HIV-related deaths reduced from 93,000 in 2008 to 62,000 in 2011, and 150 million male condoms were distributed. The scourge prevalence rate hence reduced from 6.5 percent to 6.3 percent during the period under review. Hotspot mapping was undertaken and completed along major highways i.e. Mombasa, Taveta, Kisumu, Busia, and Malaba. Western Kenya Community Driven Development and Flood Mitigation: Through the World Bank sponsored project, Western Kenya Community Driven Development and Flood Mitigation project, assessment of 98 community micro-projects was conducted. Some eight community driven development committees had their capacities built to plan, implement and manage their project. During the same period, daily flood-watch bulletins were produced and disseminated. The established community radio station (Bulala FM) in Budalangi is self-sustaining and continues to inform the community on flood hazards, and airs other educative and entertainment programs. National Food Security: Under the Strategic Grain Reserve (SGR) food security programme, a total of 3 million bags of maize stock were maintained during the period. Relief and rehabilitation programme: The relief and rehabilitation programme undertook to provide relief food to over 4.3 million persons based on the Kenya Food Security Steering Group (KFSSG) across 145 districts in the country. Resettlement and reconstruction: Following the 2007 post-election violence (PEV) that brought about internal displacement, a total of 7,577 internally displaced persons households (IDPs) were settled on land measuring 13,162.42 acres during the period under review. Another 125,950 persons benefited from psychosocial initiatives, and 947 houses destroyed/burnt in Kachibora, Trans Nzoia East were reconstructed. A total of 56,843 IDPs houses were constructed and 20,600 households were provided with farm inputs under African Development Bank and UNDP projects. A total of 167,903 IDP households were paid KSh. 10,000 start-up capital following the skirmishes. During the same period, a total of 297 household forest evictees from Mau, Embobut, Teldet and Kieni were resettled and four district business solutions centres (DBSC) in Nakuru, Eldoret, Kitale and Kisumu were established and equipped. The sub-sector also trained 1,459 women and youth in entrepreneurship and business development skills and constructed 15 fish ponds in Nakuru District, benefiting 300 households. Some 48 dairy cows were distributed to IDP households in Kisumu, Eldoret, Kitale and Nakuru.
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Disaster risk reduction: Under the Disaster Risk Reduction (DRR) programme, 160,000 people were trained across the country, five secondary schools in Nyando District were trained, and IEC materials were translated in Kiswahili language and distributed to communities on disaster management. Hazard mapping was done in Coast, North Eastern, Eastern and Rift Valley provinces and reports were produced. A database for reporting and coordinating disaster management issues across the country was designed and over 1.5 million people assisted to mitigate disasters. During the period under review, the sub-sector procured 30 lorries, 10 water bowsers, 2 wheel loaders, 2 excavators and 5 boats. Also 25,000 blankets, 4,500 iron sheets, 4,500 tarpaulins, 4,500 bar soaps that could assist 25,000 people were procured and stored. The National Disaster Management Policy and a fire policy were developed. 8.3.4 Development of Northern Kenya sub-sector During the review period, the Development of Northern Kenya and other Arid Lands sub-sector undertook the following: Drought, Food Security and Natural Resource Management: In terms of food security, the sub-sector supported 63,006 households through cash transfers, cultivated 31,650 ha of land and irrigated 3,100 ha of land. In respect of drought management and mitigation, the sub-sector produced and disseminated 1,008 drought Early Warning Bulletins. In addition, 28 District Drought Contingency Plans and 12 Risk Assessment Action Plans (RAAPs) were developed and implemented. Under the Natural Resource Management, over a million tree seedlings were distributed to farmers. Arid and semi-arid lands infrastructure development: The sub-sector supported the construction of four learning institutions that included one secondary school and dormitory in Kakuma, and six classrooms in Isiolo, and installed solar power in Alijugur in Garissa. Similarly, 14 water pans, nine boreholes and three dams were completed while seven dams and 12 boreholes are at various stages of implementation. In addition, two irrigation schemes were completed and two are at various stages of implementation. Other notable achievements included the completion of Phase lll of the Wajir Town water and sewerage project implemented to 90 percent, the construction of Malkamari access road up to 70 percent, and two science/computer labs were at various levels of completion by the end of this review period. The subsector also constructed two schools with two more in progress, including the
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Garissa Medical Training College (MTC) which is at 40 percent completion. There were also six schools supplied with ICT equipment and 89 mobile schools supplied with learning kits. 8.3.5 National Social Security Fund (NSSF) The National Social Security Fund is a contributory scheme and provides opportunities for employers and employees to make contributions during their working lives to ensure that they do not fall into poverty and vulnerability in old age. Although NSSF has been accused of inefficiencies, reforms are underway to increase the returns to investment and to expand its coverage. The National Social Security Pension Trust Bill, 2012 was developed to help propel efficiency of the Fund. Table 8.7 provides the NSSF performance levels between 2009 and 2011.
Table 8.7: National Social Security Fund (NSSF) performance over the years Details Registered employers 000 Registered employees 000 Total Annual contribution (KSh. million) Annual benefits paid (KSh. million)
Source: Economic Survey 2012 *Provisional
2009 73 Male Female 2,547 849 3,395 5,341 2,773
2010 73 2,554 849 3,402 5,342 2,773
2011* 84 2,720 945 3,665 5,991 2,357
During the period under review, the number of registered employers increased by 16 percent while that of registered employees increased by 7.7 percent in the year 2011. The period also witnessed an increase in annual contribution and benefits paid by 12.2 percent and 15 percent respectively during the period. 8.3.6 Civil Service Pension The Civil service pension scheme is managed by the Pension Department under the National Treasury. All permanent and pensionable civil servants are members of the scheme, as established under the Pension Act (Cap 189) of the laws of Kenya. The pension is paid to recipients upon their retirement at the age of 60 years, although they can opt for early retirement at 50 years. In its present form, the scheme is financed entirely from the national budget. Its spending over the last 3 years is as indicated in Table 8.8.
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Table 8.8: Civil servants scheme spending trends 2009/10 Expenditure and net lending Recurrent expenditure Pensions Pensions as percent of total spending Pensions as percent of recurrent spending
Note*: Indicates preliminary results comparative benchmarking Source: Economic Survey, 2012
2010/11 725,201 510,516 28,977 3.2 4.3
2011/12* 811,849 592,427 25,724 2.7 4.0
947,776 647,118 26,052 4.0 5.7
8.4 PUBLIC EXPENDITURE OVERVIEW
Overview of the Social Protection expenditures
ontributions to the Social Protection sector in Kenya are dominated by government expenditures mainly from the recurrent budget. Since 2009/10, government allocations to the sector have significantly increased from KSh. 32.7 billion to KSh. 37.1 billion in 2011/2012, representing a 13.5 percent increase. The increase in allocations can be attributed to government policy addressing national food security, disaster operations and social protection programmes. However, as a percent of total government budget, expenditures to this sector have declined from 4.2 percent in 2009/10 to 3.8 percent in 2011/12 (see Table 8.9 and Figure 8.5).
Table 8.9: Analysis of expenditure by sub-sector (recurrent and development) Approved budget estimates 2009/10 Gender, Children and Social Development Special Programmes Youth Affairs and Sports Development of northern Kenya Total 5,583.8 12,031.8 9,353 3,711.3 30,679.9 2010/11 6,134.6 12,580.7 9,250 2,650.2 30,615.5 2011/12 8,651.2 13,991.2 9,111 2,961.1 34,714.5 Actual expenditure 2009/10 5,813 9,968.4 8,693 2,454.7 26,929.1 2010/11 6,131.3 11,079.2 8,874 2,459.6 28,544.1 2011/12 8,651.2 13,490.5 8,742 2,138.8 33,022.5
Source: Social Protection MTEF Sector Report, 2012
8.4.1 Levels and trends in government expenditures Government expenditures to the sector largely come from the recurrent budget. The recurrent budget forms over 3 percent of the budget while the development budgets contribution is less than 0.5 percent. Of the sub-sectors, Special Programmes takes up the largest share while Development of northern Kenya takes the smallest. The remaining sub-sectors share the remainder of the budget equally. Figure 8.6 shows the distribution of the sector budget in 2011/12.
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Figure 8.5: Social protection expenditures as percent of total government outlays; 2009/10 to 2010/11
4.5 Percent of total government outlays 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 2009/10 Recurrent spending 2010/11 Development spending 2011/12 Total social protection spending 0.5 0.2 0.3 2.8 3.0 3.8 4.2 3.4 3.8
Source: Kenya National Bureau of Statistics, Economic Survey, 2013
Most of the government contribution to the sector is through civil service pensions which are entirely financed by the government. Pensions as a percent of total government budget have declined over time from 4.0 percent in 2009/10 to 2.7 percent in 2011/12 (Table 8.10). 8.4.2 Analysis of expenditures by economic classification The ratio of the recurrent budget to the development budget has almost been 1:1 over the years except for 2010/11 where the current budget sharply increased by KSh. 9,830 million, about 62 percent. This results from the huge increase in
Figure 8.6: Total social protection expenditures by sub-sector
Development of Northern Kenya 7%
Gender, Children and Social Development 26%
Youth Affairs and Sports 26%
Special Programs 41%
Source: GoK printed estimates
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Table 8.10: Civil service pension expenditure and net-lending (2009/10 to 2011/12*) 2009/10 Expenditure and net lending Recurrent expenditure Pensions Pensions as percent of total spending Pensions as percent of recurrent spending
Source: Treasury, 2012 Note: * indicate preliminary results
2010/11 811,849 592,427 25,724 3.2 4.3
2011/12* 947,776 647,118 26,052 2.7 4.0
725,201 510,516 28,977 4.0 5.7
expenditures on transfers, wages and goods and services as shown in the Table 8.11. Transfers form the largest percent of the current expenditure, about 47 percent. The Special Programmes sub-sector has had the highest expenditures on transfers which amounted to over half of the total expenditures (see Figure 8.7 and Table 8.12).
Table 8.11: Analysis of expenditures by economic classification (KSh. million) 2008/09 Capital Vehicles Sub-total capital Allowances Goods and services Training Transfers Travel Wages, salaries and contributions Sub-total current Grand Total
Source: KENAO, Appropriation accounts from various years
2009/10 13,981 70 14,051 585 3,876 716 8,099 696 1,857 15,829 29,880
2010/11 15,216 504 15,720 854 8,479 833 11,913 1,033 2,548 25,660 41,379
12,405 100 12,505 577 3,452 581 8,174 611 1,920 15,315 27,820
Table 8.12: Analysis ofexpenditures on transfers by sub-sector (KSh. million) 2009/10 Ministry of Regional Development Ministry of Gender, Children and Social Development Ministry of State for Special Programmes Ministry of Youth Affairs and Sports Ministry of Development of Northern Kenya and other Arid Lands Grand Total
Source: KENAO, Appropriation accounts from various years
2010/11 507 2,401 3,340 1,154 698 8,099
2011/12* 543 3,201 5,833 1,488 847 11,913
472 1,137 5,098 703 763 8,174
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Figure 8.7: Analysis of recurrent expenditures, 2011/12

Wages, Salaries and Contributions 10% Travel 4% Allowances 3%
Goods and Services 33%
Transfers 47%
Training 3% Source: KENAO, Appropriation accounts from various years
8.4.3 Expenditure analysis by programmes/functions Budget execution rates for the sub-sectors have declined over the review period, except for youth affairs and sports. The low absorption in expenditure was attributed to delayed exchequer releases. On the other hand, that of the cash transfer has remained at 100 percent over the same period as is shown in Table 8.13.
Table 8.13: Budget performance for cash transfer programmes Programme Orphans and Vulnerable Children Older Persons Cash Transfer programme Persons With Severe Disabilities programme Urban Food Subsidy programme
Allocation (KSh. million) 2009/10 2,352 441 2010/11 2,785 537 2011/12 3,780 1,007 385 198
Expenditure (KSh. million) 2009/10 2,352 441 2010/11 2,785 537 2011/12 3,780 1,007 385 198
8.4.4 Expenditure by state corporations The National Aids Control Council receives the largest share of government expenditures to the sector. In 2011/12, the council spent 49 percent of the total sector budget. In comparison, the share of the expenditures to the National Council for Children was only 1 percent (see Figure 8.8).
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Figure 8.8: Budget execution by sub-sector (recurrent and development)

110
Execution rate (percent)
100
90
80
70
60
2009/10
2010/11
2011/12 Special Programs Development of Northern Kenya
Gender, Children & Social Development Youth Affairs and Sports
8.4.5 Analysis of pending bills Since 2008/09, the number of pending bills in the sector has drastically increased from KSh. 1,044 million to KSh. 9,584. These arise mainly from the recurrent budget, resulting from lack of provision. Nearly all the pending bills from the recurrent budget come from the Special Programmes sub-sector whereas those from the development budget come from the Ministry of Youth Affairs sub-sector (see Table 8.14).
Table 8.14: Recurrent pending bills (KSh. million) 2008/09 Recurrent pending bills (KSh. million) Development pending bills Total pending bills
Source: Social Protection MTEF Sector report, 2011
2009/10 6,570 36 6,606
2010/11 9,523 61 9,584
905 139 1,044
8.4.6 Analysis of Expenditure allocations to devolved levelscounties/districts Samburu County receives the largest share of the Northern Kenya and Arid Lands sub-sector budget, five times more than what is received by Marsabit County (see Figure 8.9). Tana River County receives the lion share of the Youth Affairs and Sports budget, about KSh. 819 million. This is about 26 times of what Isiolo County receives (see Figure 8.10).
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Table 8.15: Recurrent pending bills (KSh. million) Sub-sector Type/nature National Heritage Gender Special Programmes MOYAS Northern Kenya and other Arid Lands sub-sector Total Development pending bills Sub-sector Type/nature National Heritage Gender Special Programmes MOYAS Northern Kenya and other Arid Lands sub-sector Due to lack of liquidity 2008/09 1.9 126.6 128.5 2009/10 4.3 7.7 12 2010/11 0.54 60.13 60.67 Due to lack of provision 2008/09 10 10 2009/10 24 24 2010/11 0 Due to lack of liquidity 2008/09 16.44 114 130.44 2009/10 29.74 16.64 46.38 2010/11 27.19 85.62 112.81 Due to lack of provision 2008/09 6 768.75 774.75 2009/10 24 6500 6524 2010/11 8.1 9402 9410.1
Source: Social Protection MTEF Sector report, 2011
Figure 8.9: Division of the sector expenditures, 2010/11

11% 2% 6% 1% 9% 0%
10%
Women Enterprise Fund (WEF) National Council for Children Services (NCCS) 4% National Council for Persons with Disabilities (NCPWDS) Youth Affairs and Sports Sports Stadia Management Board Youth Enterprise Development Fund 0% State for Special Programmes National Aids Control Council National Museums of Kenya Kenya National Library Services
8%
49% Source: Social Protection MTEF Sector report, 2011
NGO Board
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Figure 8.10: Resource distribution to counties, Northern Kenya and arid lands sub-sector, 2011/12
400 350 300 KSh. millions 250 200 150 100 50 Taita 0 Marsabit Mbeere Isiolo Tharaka Nairobi Kwale Garissa Mandera Moyale Mwingi Makueni Samburu West Pokot Laikipia Lamu Wajir Tana-River 70 Northern Kenya and arid lands 346
Meru-North
Nyeri
Turkana
Trans Mara
Kajiado
Source: Special Programmes MTEF report, 2011
Nairobi City dominates the Gender sub-sector budget receiving KSh. 708 million, an equivalent of 22 percent of the sub-sector budget. This is over 168 times of what Lamu County receives (see Figure 8.11).
Figure 8.11: Resource distribution to counties, Youth Affairs and Sports sub-sector, 2011/12
900 800 700 KSh. millions 600 500 400 300 200 100 0 Isiolo Samburu Trans Nzoia E. Marakwet Tharaka Nithi Vihiga West Pokot Taita Taveta Narok Lamu Kajiado Laikipia Homa Bay Baringo Kericho Nyamira Turkana Kirinyaga Bomet Wajir Kwale Nyandarua Migori Mandera Marsabit Murang'a Kilifi Kisumu Garissa Siaya Nairobi Embu Meru Kakamega Nandi Busia Makueni Kisii Bungoma Nyeri Kiambu Uasin Gishu Mombasa Machakos Nakuru Kitui Tana River Source: Special Programmes MTEF report, 2011 31.5 Youth Affairs and Sports 819.2
8.5 KENYA CONSTITUTION, 2010 AND DEVOLUTION

he Kenya Constitution, 2010 declares equity to be an underlying principle of governance in the country, which is consistent with its provision for devolution. The institutionalisation of equity is welcomed by the previously marginalised communities and vulnerable population. This section provides excerpts within the constitution that addresses social protection issues.
220
Samburu
Malindi
Baringo
Narok
Kitui
Kilifi
Social Protection
Figure 8.12: Resource distribution to counties, Gender, Children and Social Development sub-sector, 2011/12
800 700 600 KSh. millions 500 400 300 200 100 0 Lamu Nandi Vihiga Turkana Samburu Mandera Marsabit Wajir Kwale Kitui Makueni Laikipia Kericho Taita Taveta Uasin Gishu Kajiado Garissa West Pokot Homa Bay Tana River E. Marakwet Machakos Isiolo Nyamira Bungoma Nyandarua Meru Kirinyaga Bomet Migori Kilifi Narok Tharaka Nithi Nakuru Nyeri Baringo Mombasa Siaya Busia Embu Trans Nzoia Kisii Kiambu Muranga Kisumu Kakamega Nairobi Source: Special Programmes MTEF report, 2011 Gender, Children and Social Development
708.0
Article 43 of the Constitution expressly guarantees all Kenyans their economic, social and cultural rights, including basic rights to health, education, food, and decent livelihoods. It explicitly asserts the right of every person to social security and binds the state in Article 43(3) to provide appropriate social security to persons who are unable to support themselves and their dependents. This refers to social protection in its totality, including social assistance, social security, and health insurance. The Constitution pays specific attention to the needs of children, women, older people, people with disabilities, and minority groups. Section 53, for instance, provides for free and compulsory basic education as well as the protection of the best interests of the child. Article 54 focuses on persons with disability, Article 55 on youths, Article 56 on minorities and marginalised groups, and Article 57 on older members of society. The Bill of Rights stipulates that all state organs and public officers have the duty to address the need of vulnerable groups within the society including women, older members of society, persons with disabilities, children, youth, members of minority or marginalised communities, and members of particular ethnic, religious or cultural communities. Chapters 2 and 11 of the Constitution recognise culture as the foundation of the nation and as the cumulative civilisation of the Kenyan people and nation and that the state shall promote all forms of national and cultural expression through literature, the arts, traditional celebrations, science, communication, information, mass media, publications, libraries and other cultural heritage. This implies that funds must be set aside to ensure that the society is well empowered
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and sensitised on different cultural diversities and how they can mutually be interrelated and beneficial to the country as a whole. The objects of the devolution of governments are to protect and promote the interests and rights of minorities and marginalised communities and to ensure equitable sharing of national and local resources throughout Kenya. Gender affirmative action and mainstreaming are promoted in the 2010 Constitutions chapter 11 which states that no more than two-thirds of the members of representative bodies in each county government shall be of the same gender. It proceeds to state that a county assembly shall consist of special seat members necessary to ensure inclusion of marginalised groups, including persons with disabilities and the youth. It is important to note that all aspects of public finance in the republic as stipulated in chapter 12 (201) shall be guided by the principle of (b) promoting an equitable society and in particular (iii) expenditure shall promote the equitable development of the country, including by making special provision for marginalised groups and areas. Similarly, 203{1 (h)} states the need for affirmative action in respect of disadvantaged areas and groups.
8.6 PUBLIC EXPENDITURE OUTLOOK (2012/13 TO 2014/15)
uring the review period, the sector allocation of funds has been inadequate. This has led to non-achievement of some of the planned projects and programmes such as youth empowerment centres, youth polytechnics, and sports facilities; and to support the high number of deserving vulnerable members of the society. Most of the projected funds within the sector will be directed towards scaling up of the cash transfer programmes in terms of the coverage and the number, safeguarding the rights and welfare of children, implementation of youth and women projects and programmes, disaster management and for research, preservation and promotion of national heritage and culture. Table 8.16 shows the approved estimates for FY 2012/13 and the projected estimates for 2013/14, 2014/15 and 2015/16.
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Table 8.16: Approved estimates projections (2012/13 to 2015/16) Recurrent Sub-sectors Gender, Children and Social Development Special Programmes Youth Affairs and Sports Northern Kenya Total Development Gender, Children and Social Development Special Programmes Youth Affairs and Sports Northern Kenya Total 4,618.97 5,093.83 6,045.98 6,167.76 3,646.90 6,372.00 5,500.10 5,720.41 6,690.60 4,113.37 22,024.47 5,936.41 6,162.17 7,025.13 4,319.02 23,442.73 Approved estimates Estimates Estimates 2014/2015 10,160.64 19,705.73 12,468.12 729.00 43,063.49 Estimates 2015/2016 12,107.75 12,942.70 13,091.53 773.00 38,914.98
2012/13 2013/2014 5,243.20 5,368.09 7,102.50 634.47 7,951.47 19,309.79 12,249.20 687.00
18,348.26 40,197.46
1,894.42 3,868.41 16,206.27 21,502.00
Source: GoK: Special Programmes MTEF Sector report 2011
8.7 OVERALL ASSESSMENT AND CHALLENGES
he Kenya Social Protection Sector Review undertaken in 2012 outlines the benefits of social protection interventions which can be categorised into four broad areas: a. Access to services b. Economic empowerment c. Social empowerment d. Improved quality of life with access to basic services
The households capacity to access basic services including education, health, shelter and clothing has increased. On economic empowerment it has been realised that there is more money circulating in the local economy. A culture of savings has also been introduced and has enabled people to engage in small businesses. On social empowerment families no longer hide PWSD, which has reduced stigmatisation in the communities. Beneficiaries have formed support groups that have given them a sense of social cohesion; personal grooming of the beneficiaries has also improved which has had a positive effect on their self-esteem and dignity. The quality of life of beneficiaries has also improved. The fact that there is increased food security, access to health care, access to education, and increased social capital is indicative of this.
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The governments continued effort to support the youth through provision of the Youth Enterprise Development Fund has not only created many job opportunities for them but has also enhanced entrepreneurial culture. However, demand for collateral by microfinance institutions poses a challenge for accessibility of loans by the youth. The major challenges that have been identified in implementing social protection programmes include: a. Insufficient fundingthe sector has been under-funded over the years in spite of it being a key implementer of Kenya Vision 2030 aspirations. There is increased demand for services, with high expectations of society for the sector to assist vulnerable groups, whose numbers keep on growing. b. Inadequate staff and infrastructurethe sector continues to face staff shortages, a situation worsened by the increased number of sub-counties and demand for public services. c. Political interference of sports stadia management leading to frequent changes which affect continuity on sports development issues, which in turn affect the youth and sports sub-sector. d. Low coverage of social protection programmes in relation to needs; fragmented and uncoordinated delivery of programmes (reducing potential impact); low benefit levels (especially in NHIF and NSSF); need for sustainable and long term financing mechanisms. This affects all the sub-sectors. e. Child labour and trafficking has negative consequences on socio-economic development and the quality of the future labour force in the country. f. Inter-clan conflict is a major security issue within the arid lands, which requires awareness creation between clans. g. Lack of an exit policy for the NYS street youth trainees. h. Lack of a scheme of service for instructors and YP managers. i. Inadequate legislative framework that impedes labour export for qualified youth, limited market access for their products and a high loan default; the capital investment in providing non-credit services to youth entrepreneurs is huge vis--vis the actual loans disbursed. j. Limited gender expertise constrains the implementation of gender mainstreaming activities, especially in training and development of genderrelated policies. k. Insufficient disaggregated data on different categories of the vulnerable groups in the country. l. Retrogressive cultures and traditional beliefs such as early marriages and FGM that mainly affect women and children negatively continue to be rooted in some communities.
224
Social Protection
8.8 RECOMMENDATIONS AND LESSONS LEARNT
n view of the challenges experienced, the sector recommends the following measures that will enhance delivery of quality service to the public and allow effective implementation of the flagship projects and other programmes. a. Treasury needs to ensure adequate and timely release of allocated funds for effective and efficient implementation of projects and programmes. The inadequate funding of the sector needs to be addressed. b. Expansion of special programmes and cash transfers to cover more of the poor and vulnerable populations; expansion of NSSF/NHIF coverage and better management of NSSF/NHIF resources to ensure a sustainable financial base; harmonise existing cash transfer programs to ensure efficient delivery and greater impact; provide adequate benefit levels; begin to develop a national social protection system which links the type of programmes within the sub-sector e.g. social assistance with NHIF and NSSF, to ensure more impact for beneficiaries. This could be done progressively, by first harmonising and strengthening the safety assistance sector. c. There is need to construct new vocational training institutions in order to increase capacity for NYS to train the youth. d. There is need for expansion of training facilities for youth with special needs and other vulnerable groups. e. There is need for enhanced staff recruitment and development, and provision of working tools and equipment within the sector. f. MDAs to embrace research and development, which is paramount in improving service delivery. g. There is need for up-scaling the engagement of youth in national development projects, and to introduce the National Youth Volunteerism programme. There is need to carry out a socio-economic impact assessment study on the Youth Enterprise Development Fund and various cash transfer programmes. Similarly, there is need to develop a robust monitoring and evaluation (M&E) framework as well as carry out continuous and regular M&E field visits involving key stakeholders. There is also need to strengthen public-private partnerships to improve sector collaboration and networks and enhance project and programme financing.
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REFERENCES
Beintema N. M. and G. J. Stads. (2006). Agricultural R&D in Sub-Saharan Africa: An era of stagnation. ASTI Background report. Washington, D.C.: International Food Policy Research Institute. BOPA. (2009). Budget Outlook Paper, 2009/10-2011/12. Ministry of Finance. Government of Kenya. Department for International Development/World Bank. (2007). Review of Public Spending to Agriculture: Main Study and Case Studies, accessed on 8 January at http://www1.worldbank.org/ publicsector/pe/pfma07/OPMReview.pdf 2012 Fan S. and Saurkar, A. (2006). Public spending in developing countries: Trends, determination and impact (mimeo)". Freeman H. A. and Omiti, J. M. (2003). "Fertilizer use in semi-arid areas of Kenya: Analysis of smallholder farmers adoption behaviour under liberalized markets", Nutrient Cycling in Agro ecosystems 66, 23-31. GoK and UNDP, "Millennium Development Goals Progress Report for Kenya (2003)". www.ke.undp.org/ MDG percent20Report percent2003.pdf GOK, (2010). "The Constitution of Kenya", Government printers. GOK, 2010. "Public Expenditure Review, Policy for Prosperity". Grebmer, Von K. B. Nestorova, A. Quisumbing, R. Fertziger, H. Fritschel, R. Pandya-Lorch, Y. Yohannes. (2009). Global Hunger Index-The challenge of hunger: focus on financial crisis and gender inequality". International Food Policy Research Institute (IFPRI). KER (2009). Kenya Economics Report. "Building a Globally Competitive Economy". Kenya Institute for Public Policy and Analysis (KIPPRA) ISBN 9966777377. KER (2010). Kenya Economics Report. "Enhancing sectoral contribution towards reducing poverty, unemployment and inequality in Kenya". Kenya Institute for Public Policy and Analysis (KIPPRA) ISBN 9966777601. Kiringai J., West G., (2002). "Budget Reforms and the Medium-Term Expenditure Framework in Kenya", KIPPRA discussion paper No. 7. KNBS (2011). "Economic Survey 2011", Government Printer. Ministry of Agriculture (2012) Economic Review of Agriculture 2010". Government of Kenya. Ministry of Agriculture (2010) Economic Review of Agriculture 2010". Government of Kenya. Ministry of Agriculture (2011) Economic Review of Agriculture, 2011". Government of Kenya. Ministry of Agriculture, "Strategic Plan, 20082012". Government of Kenya. Muyanga, M. and T. S. Jayne. (2008). Private Agricultural Extension System in Kenya: Practice and Policy Lessons. The, 14(2): 111-124. Ongaro, W. A. (2011) A study on budgetary allocation and absorption in agriculture sector-ministries in Kenya TAABCO Research and Development Consultants paper for Eastern Africa Farmers Federation. Republic of Kenya, (2010a). "Agricultural Sector Development Strategy 2010-2020". Ministry of Agriculture. Government Printers, Nairobi.
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ANNEXES
Annex 1: The MTEF institutional setting
The MTEF process in Kenya has an elaborate system of institutions, structures, processes, instruments and rules (details are contained the Kenya MTEF Manual, 2011). The key structures include the following: 1. THE BudgEtaRy SuPPly DEPaRtMENt The department coordinates the implementation of the MTEF process, organises internal capacity building and the training of key stakeholders and participants in this process. 2. The Macroeconomic Working Group (MWG) The MWG is responsible for preparing consistent forecasts for economic development and growth. The group also prepares the expected revenues, the financing strategy of public expenditures and, together with the Sector Working Groups, proposes sectoral resource ceilings. The group is chaired by the Treasury and has members drawn from the relevant departments and agencies of the National Treasury, and Ministry of Planning, National Development and Vision 2030. These include the departments of Economic Affairs, Budgetary Supply, Debt Management and External Resources of the Ministry of Finance, and the Directorate of Macro in the Ministry of Planning, National Development, and Vision 2030. Other agencies involved are the Kenya Institute for Public Policy and Research Analysis (KIPPRA), the Kenya National Bureau of Statistics, the Kenya Revenue Authority (KRA), and the Central Bank. It may also co-opt other specialised institutions as and when the need arises. 3. Sector Working Groups (SWGs) The MTEF sectors are as follows: a. Agriculture and Rural Development b. Health c. Education c. Social Protection, Culture and Recreation d. Public Administration and International Relations e. Environmental Protection, Water and Housing f. Energy, Infrastructure, Information; Communication and Technology g. General Economic, Culture, and Labour Affairs h. Governance, Justice, Law and Order i. National Security j. The Macro Working Group
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The SWGs work closely with line ministries, and are responsible for developing sectoral policies and objectives, evaluating MDAs estimates and submissions and ensuring that the inputs, activities, outputs and outcomes are in line with national objectives. Each sector has a core secretariat based at the National Treasury and which incorporates other ministries and stakeholders when required. 4. The Economic and Budget Steering Committee (EBSC) The EBSC is made up of heads of relevant key departments of the National Treasury and Ministry of Planning, National Development, and Vision 2030. This committee evaluates the macroeconomic and financing strategies recommended by the MWG and how they link to national objectives. It also reviews the status of the budget preparation process and implementation for purposes of guiding the Permanent Secretary, as well as the Minister for Finance on all decisions pertaining to the Budget. The EBSC is chaired by the Economic Secretary. 5. Estimate Working Group (EWG) The EWG is coordinated by the MDAs desk officer (Budgetary Supply OfficerBSO) in the Budgetary Supply Department. The role of this group is to review the itemised budget proposals by MDAs. The group is chaired by the BSO and the MDA team members include heads of department and the technical staff. Key officers from the MDAs include the Chief Finance Officer, the Accounts Controller, the Head of Personnel and the Head of Central Planning and Project Management Unit/Department. In some MDAs, the team is quite large as it also includes the heads of semi-autonomous government agencies (SAGAs) that depend on the exchequer. The chairperson of the EWG presents and defends the proposals at the BPG. 6. Budget Procedure Group (BPG) The Budget Procedure Group is chaired by the Director of Budget. It consists of the Deputy to the Director of Budget, an officer in charge of consolidating the estimates and Parliamentary business, officers from the Budget Policy and Expenditure Management Unit, and a representative from the External Resources Department. This team reviews the proposals from the EWG to ensure that all the guidelines, including policy issues, have been complied with. The BPG oversees the consolidation of the estimates, and prepares a summary statement that is submitted to the EBSC, the Permanent Secretary/Treasury and Minister for Finance for approval. The Minister presents the budget to the Cabinet for consideration and approval before it is submitted to Parliament.
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7. THE ROlE Of PaRlIaMENt IN tHE BudgEt MakINg PROcESS The Legislature approves expenditure and taxation measures in order for them to become effective. It also approves the levels of borrowing and guaranteeing of loans by the national government. This commences with the debate and adoption of the recommendations of the Budget Policy Statement (BPS). The BPS spells out the planned policies, levels of revenue, expenditure, deficit, and financing of the deficit over the medium term. Parliament participates in budget making by reviewing and approving the budget of the three arms of government. The review process entails seeking the views of the public in accordance with Article 221 of the Constitution. Parliament also discusses and makes recommendations on audit reports. The legislative budget process in Kenya is anchored on Chapter 12 of the Constitution of Kenya 2010, which provides the timelines for submission of the Estimates of Revenue and Expenditure to Parliament, sharing of revenue, revenue allocation, Division of Revenue Act, the process of approving the budget, the Vote on Account, Appropriation Act and the Supplementary Estimates Act, as provided for under the Public Finance Management Act. Estimates of expenditures and revenues are detailed in the Appropriation Bill under separate votes and services just as the Financial Act gives details of revenue-raising measures under various tax laws. The Appropriation Bill and Finance Bill are discussed in detail by the whole House of Parliament sitting as the Committee of Supply, and Committee of Ways and Means, and are approved as the Appropriation and Finance Acts, respectively. 8. ROlES Of tHE NatIONal ASSEMbly The National Assembly debates and approves money bills and allocation of national revenue between the two levels of government, among other matters. It appropriates funds for expenditure by the national government and other state organs, provides oversight over the national revenue and expenditure, and approves the division of the national resources. The Constitution provides that Parliament should approve the division of the resources between the National and the County levels and among the Counties. This will be done through introduction of the necessary bills, as provided for in Article 217 and Article 218. The National Assembly will consult the public on the budget, revenue sharing proposal and expenditures as per Article 221.
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Annex 2: Semi-autonomous agency budgets, (KSh. billion)

Institution Recurrent expenditures Kenya Medical Supplies Agency Kenya Medical Training College Kenyatta National Hospital Medical Practitioners and Dentist Board Moi Teaching and Referral Hospital National Hospital Insurance Fund Pharmacy and Poisons Board Kenya Medical Research Institute Development expenditures Kenya Medical Supplies Agency Kenya Medical Training College Kenyatta National Hospital Medical Practitioners and Dentist Board Moi Teaching and Referral Hospital National Hospital Insurance Fund Pharmacy and Poisons Board Kenya Medical Research Institute
Source: Appropriation accounts
2008/09 19.3 2.0 5.9 0.05 1.9 4.9 0.1 1.2
2009/10 24.0 2.2 5.9 0.05 2.1 5.9 0.2 3.9
2010/11 24.3 2.2 6.5 0.05 2.2 6.4 0.2 4.3
2011/12 21.6 2.3 7.6 0.05 2.4 6.8 0.4 4.5
0.03 0.5 0.1 0 0 0 0 3.5
0.03 0.2 0.2 0 0.07 0 0 3.6
0.08 0.7 0.3 0.02 0.07 0 0.08 3.8
0.08 0.4 0.5 0.02 0.07 0.2 0.1 4.0
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Annex 3: Distribution of types of health facilities by county

Tharaka Nithi Lamu Mandera Vihiga Isiolo Trans Nzoia Mombasa Garissa Tana River Nyamira Samburu Taita Taveta Marsabit Busia Wajir Laikipia Kwale Kirinyaga Kajiado Nyandarua West Pokot Embu Kisumu Kilifi Bungoma E. Marakwet Kisii Homa Bay Turkana Uasin Gishu Narok Makueni Kakamega Siaya Bomet Migori Murang'a Nyeri Kericho Machakos Nakuru Nandi Kiambu Meru Baringo Nairobi Kitui 0 50 100 Dispensary Medical Clinic 150 200 250 300 350 400 450
Hospital Health Centre Maternity and Nursing home
Source: e-Government:http://www.ehealth.or.ke/facilities/
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Kenya is a tropical country with a high prevalence of infectious and communicable diseases, as well as a growing non-communicable disease burden from diabetes, heart disease and cancer. In 2011, malaria, pneumonia, HIV/AIDS, cancer and tuberculosis were the leading causes of death in Kenya at 24.5 percent, 20.5 percent, 10.5 percent, 10.3 percent and 10 percent respectively.1 Cases of communicable diseases such as HIV/AIDS, malaria, pneumonia, TB and cholera have been a major concern. Similarly, high reported cases of noncommunicable diseases like cancer, hypertension, heart diseases and diabetes are increasingly becoming a major health problem. In addition, road traffic injuries are also significant causes of death. The contribution of injuries and non-communicable diseases to total morbidity and mortality is projected to increase, placing new challenges on the health system. This high disease burden is complicated by the high cost of medical care and extreme poverty levels in some parts of the country. Malnutrition is a concern in parts of Kenya, especially the arid and semi-arid lands (ASALs) (Annex 4).
Annex 4: Malnutrition among children under five years, 2012
45 40
Nutrition status, 2012
Nutrition status (percent)
35 30 25 20 15 10 5 0
Kenya Baringo Bomet Bungoma Busia E. Marakwet Embu Garissa Homa Bay Isiolo Kajiado Kakamega Kericho Kiambu Kilifi Kirinyaga Kisii Kisumu Kitui Kwale Laikipia Lamu Machakos Makueni Mandera Marsabit Meru Migori Mombasa Muranga Nairobi Nakuru Nandi Narok Nyamira Nyandarua Nyeri Samburu Siaya Taita Taveta Tharaka Nithi Transnzoia Turkana Uasin Gishu Vihiga Wajir West Pokot
Underweight (percent) Stunted (percent)
Source: MoPHS division of nutrition, KNBS - MICS
Department of Civil Registration, 2011.
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In the recent past the country has witnessed potential disease outbreaks like Ebola and the H1N1virus, which call for additional resources allocation for preparation for, response to and containment of such emergencies. Where policies are non-existent there is a need to formulate the same for operational purposes and to establish emergency centres in strategic locations in the country. The pattern of the burden of disease differs greatly by geographic region. Women are more in need of health care than men, both for reproductive reasons and because they are more likely to be ill and have a higher incidence of HIV/ AIDSabout twice that of men. Evidence from the latest household budget survey (2005/06) show women have a higher morbidity rate than men, both at nationally and sub-national levels. In areas where morbidity rates are high the disparity tends to get worseand this also has a regional variation, most likely as a result of the HIV/ AIDS rates and gender prevalent in counties such as Busia, HomaBay, Kisumu, Vihiga and Siaya, as shown in Annex 5. The prevalence of HIV is high in Kenya compared to Tanzania, Uganda and Rwanda but lower than South Africa. In the past 12 years, considerable efforts to fight HIV helped reduce the prevalence in Kenya, though it still remained above all the other countries in the region and only tends to coincide with Uganda towards the y e a r 2009. Distinctively, Nyanza stands out with the highest prevalence for both men and women aged 15 to 49 years, followed by Nairobi and Western regions. The lowest prevalence can be observed in Eastern and North-Eastern. The most probable explanation for Nyanza is the cultural practice of wife inheritance. Research has also shown that
Annex 5: Malaria test positivity rates, 2011
60 50 40 Test positivity rates 30 20 10 0
Laikipia Nyeri Muranga Kirinyaga Nyamira Lamu Bomet Nyandarua Kiambu Kilifi Narok Taita Taveta Kericho Kisii Garissa Mandera Marsabit Makueni Nairobi Kajiado Kwale Nakuru Isiolo Machakos Mombasa Nandi E. Marakwet Baringo Uasin Gishu Tana River Kenya Homa Bay Wajir West Pokot Embu Migori Transnzoia Kisumu Siaya Kakamega Vihiga Kitui Meru Bungoma Turkana Tharaka Nithi Busia
Source: MoPHS, Division of Malaria Control
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Annex 6: Percentage of the population sick, by gender, county estimates, 2005/06

60 50 Population (percent) 40 30 20 10 0
Source: KIHBS 2005/6
20 18 Population (15- 49 years), percent 16 14 12 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Kenya Tanzania Uganda Rwanda South Africa
Source: WDI, 2011
men who are not circumcised are more likely to contract HIV compared to men who are circumcised. Similarly, TB cases are commonly reported in Nyanza where HIV prevalence is also high. Nationally, immunisation coverage has considerably improved, from 57 percent to 83 percent over the period 1998 to 2010. At 83 percent, the immunisation rate compares well with international comparators such as Indonesia (72 percent) and South Africa (81 percent) but unfavourably with Malaysia (95 percent). At sub-national level, immunisation coverage was lowest in North Eastern and Nyanza provinces, with
234
Narok Nyandarua Mandera Kilifi Nyeri West Pokot Wajir Bomet Laikipia Uasin Gishu Kericho Garissa Nakuru E. Marakwet Tana River Marsabit Mombasa Lamu Tharaka Nithi Kiambu Kwale Kirinyaga Kisii Nandi Kitui Nairobi Murang'a Embu Taita Taveta Nyamira Isiolo Samburu Kajiado Meru Baringo Trans Nzoia Migori Makueni Bungoma Machakos Kakamega Siaya Vihiga Kisumu Turkana Homa Bay Busia Morbidity: All Morbidity: Male Morbidity: Female
Annex 7: HIV prevalence in Kenya and other countries, 19902009
Annexes
Annex 8: HIV prevalence among men and women aged 1549 years
18 16 14 HIV prevalence (percent) 12 10 8 6 4 2 0 Nyanza Nairobi Western Kenya Rift Valley Central Coast Eastern North Eastern Women (age 15-49) National Average
Men (age 15-49)
Source: KDHS, 2008-2009
Annex 9: TB cases detected and reported, by county, 2012

18,000
Number of TB cases (all forms)
16,000 14,000 12,000 8,000 6,000 4,000 2,000 0

Tharaka Nithi Embu Tana River E. Marakwet Makueni Samburu Isiolo Baringo Taita Taveta Nandi Laikipia Machakos Marsabit Kitui Garissa Nyandarua Nyamira Wajir West Pokot Vihiga Bomet Transnzoia Kwale Mandera Narok Kirinyaga Busia Nyeri Uasin Gishu Turkana Muranga Kericho Kisii Kajiado Bungoma Meru Kilifi Siaya Migori Kakamega Kisumu Nakuru Homa Bay Kiambu Mombasa Nairobi
Source: MoPHS National TB and Leprosy Programme, 2012
9 percent and 38 percent respectively in 2003, and has since improved in these provinces to 64 percent and 79 percent by 2010 (Annex 10). Looking ahead, with the ongoing demographic and epidemiological transition, Kenya will soon be facing the dual burden of communicable and non-communicable diseases. Increasingly, Kenyans will be exposed to new risks related to changes in social, economic and environmental factors and related changes in individual lifestyles and behaviours. This is already seen with the growing urbanisation and increased ageing of the population, which is also placing new demands on services.
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Annex 10: Trends in full immunisation coverage by province (percent)

Province Nairobi Central Coast Eastern North Eastern Nyanza Rift Valley Western Total KDHS 1998 73 85 72 75 n.s. 47 69 56 65 MICS 2000 64 69 61 68 72* 48 68 45 61 KDHS 2003 63 79 66 65 9 38 56 50 57 KIHBS 2006 67 83 76 67 21 56 67 76 66 KEPI 2007** 78 85 78 78 52 66 70 68 73 KDHS 2008-09 73 86 76 84 48 65 85 73 77 MoH 2010 103 102 87 83 64 79 72 90 83
Notes: not surveyedas well as Samburu and Turkana districts in Rift Valley, Isiolo and Marsabit in Eastern Province, together accounting for less than 4 percent of Kenyas population; * based on relatively small sample drawn from clusters in the urban areas of the districts; ** coverage based on routine reporting. Source: MoH health facts and figures, 2012
With the shift from primarily infectious diseases like pneumonia and diarrhoea to a rise in diabetes, cancer and obesity, especially among urban populations, noncommunicable diseases will become the major contributors of disease burden by 2030 (Annex 11). The challenge for counties is that non-communicable diseases are expensive to treat and further increase out-of-pocket expenditure on health and impoverishment.
Annex 11: Contributors of disease burden
300,000
250,000
Total death
150,000
100,000
50,000
0
2010 2015
Communicable
2020
Non-communicable
2025
Injuries
2030
Source: Comprehensive National Health Policy Framework; Ministry of Medical Services and Ministry of Public Health and Sanitation 2011
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Annexes
Number of livestock (million)
10
12
10
12
Source: MoA, 2012

3.9 3.6
Maize Wheat Beans
Source: MoA, 2012
Pigs
Goats
Annex 12: Annual average productivity (T/Ha) of selected food crops by county, 2009/11
Annex 13: Number of livestock by county, 2009
Sheep
Rice
Cattle
Turkana Narok Mandera Vihiga Garissa Wajir Baringo West Pokot Nakuru Marsabit Kakamega Kajiado Meru Homa Bay Kitui Machakos Migori Bungoma Kericho Nandi Uasin Gishu Siaya Kiambu Makueni Kwale Kisii Nyandarua Kisumu Isiolo E. Marakwet Laikipia Kilifi Nyamira Samburu Transnzoia Busia Embu Kirinyaga Muranga Tharaka Nithi Taita Taveta Bomet Nyeri Lamu Tana River Nairobi Mombasa
3.7 Trans Nzoia 3.5 Uasin Gishu 2.6 Narok 2.5 Nandi 2.4 Bomet 2.4 E. Marakwet 0.8 2.4 Bungoma 2.3 Kericho 2.2 Nyandarua 1.0 2.1 Kakamega 2.1 Nakuru 2.0 Kisii 2.0 Samburu 1.9 West Pokot 1.9 Nyamira Baringo 1.6 Lamu 1.6 0.1 Meru 1.6 Laikipia 1.5 4.5 Migori 1.5 3.5 Tana River 1.4 4.8 Kisumu 1.4 Vihiga 1.4 4.5 Homabay 1.3 Tharaka-Nthi 1.3 Murang'a 1.3 4.5 Siaya 1.3 Nairobi City 1.2 1.9 Busia 1.2 1.2 Kwale 1.1 4.9 Kiambu 1.1 Turkana 1.1 3.8 Kirinyaga 1.1 3.5 Taita Taveta 1.0 Embu 0.9 Kajiado 0.9 Nyeri 0.8 Machakos 0.8 Kilifi 0.8 0.5 Makueni 0.6 Kitui 0.6 Mombasa 0.5 0.3 Isiolo 0.4 4.5 Garissa 0.3 Marsabit 0.2 Wajir 0.2 Mandera 0.1
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Annex 14: Expenditure for projects for the year 2009/10, 2010/11 and 2011/12 by source of funding
Project Name Donor Funds Recurrent Expenditure Drought Management Initiative Dry land Farming Programme Improving the food security situation of vulnerable urban population affected by the food crisis in Kenya Kenya Annual Action Programme 2007 Accompanying measures for Sugar Kenya arid and semi arid land research programme PAN-SPSO: Participation of African nations in sanitary and Phytosanitary Stand Agriculturessetting Organization Promoting Turkana pastoralist livelihoods to mitigate rising food prices Somali Ecosystem Rinderpest Eradication Coordination Unit II (SERECU II) Support to ICIPE: Validation and Initiation of Diffusion of Pro-poor and Poor Environment Tsetse Repellent Technology. Programme for Agriculture and Livelihoods in Western Communities (PALWECO) Food security Rice Promotion Advisor Smallholder Horticulture Empowerment and Promotion Unit Project Irrigation Mt. Kenya Marketing Infrastructure Kenya (Phase 1) Small. irrigation programme Mt. Kenya II National Agriculture and Livestock Extension Programme (NALEP II) Support for Enterprise Development for Rural Families 1KEN06104 Agribusiness II 4KEN05404 Pastoralism GEF/IUCN - 00045695 4KEN08405-Safeguarding Food - 00062560 7KEN08312 Support to the Facil - 00060369 Kenya Agric Productivity and Agribusiness Government of Kenya Funds Recurrent Expenditure Food Security and Mgt Prog. (NMK) Development Expenditures Small Scale Horticulture Development Project 195,011,567 831,182,988 69,486,330 70,890,080 63,189,869 6,700,735 6,090,083 13,100,624 4,199,745 4,391,690 12,371,699 628,930 1,206,383 2009/10 2010/11 2011/12
1,277,276 23,564,532 0
583,837 0 11,973,742
937,457 12,372,248 1,345,040
9,805,864 16,461,671 3,450,801
1,307,025 6,164,357 2,738,980
726,322 0 2,708,851
0 1,709,898 214,110 0 3,071,519 0 9,970,268 37,637,245 0 35,877 23,883 674 765,828 102,208,786
5,984,000 5,891,846 1,106,000 8,611,000 3,264,000 5,700,966 0 146,097,909 3,867,500 3,186,738 2,121,386 59,900 68,024,640 103,367,600
30,128,896 0 564,000 9,757,200 35,509,056 19,503,080 19,062,122 0 1,824,211 473,571 2,333,525 8,902 10,108,925 50,593,284
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Annexes
Horticultural Crop Development Services (SHOMAP) National Agriculture and Livestock Extension Programme Food Security & Mgt Prog. (NMK) Kenya Agricultural Productivity Project (KAPAP) Eastern Africa Agricultural Productivity Project (EAAPP)
Source: MoA budget office and donor database
642,409,791 362,066,793 128,000,000 2,054,422,820 570,698,714
747,805,365 383,372,684 178,000,000 1,823,994,600 721,587,979
239
Annex 15: County recurrent and development expenditures for 2010

Development Expenditures Small Scale Horticulture Development Project NALEP 6,650,417 4,067,238 11,654,088 9,277,033 2,241,340 1,887,016 11,369,619 15,071,443 13,962,412 4,641,180 106,237,761 72,228,365 129,174,429 66,794,902 45,967,625 63,674,929 71,988,399 78,854,255 34,109,999 48,281,729 6,066,143 1,958,457 14,592,488 13,008,782 14,229,212 5,369,006 5,025,990 14,276,815 10,011,476 20,633,318 6,228,016 7,427,686 4,500,000 2,500,000 5,848,000 3,750,000 1,552,000 2,800,000 1,472,000 7,589,600 8,400,000 4,800,000 19,092,488 17,467,238 20,077,212 9,119,006 6,577,990 23,142,959 11,483,476 28,222,918 14,628,016 12,227,686 4,922,084 1,982,096 9,429,641 15,441,224 9,800,000 7,376,032 22,890,490 3,000,000 3,600,000 6,830,000 1,440,000 11,040,000 3,000,000 National Extension Project 9,749,499 Horticultural Crop Development Services Total 19,650,417 4,067,238 31,203,587 16,653,065 40,573,054 16,298,753 14,969,619 21,901,443 15,402,412 20,603,264
240
District Agric Extension Services 60,726,497 18,946,989 94,318,377 55,053,985 55,220,547 112,467,248 42,710,672 55,545,534 22,998,540 48,146,319
Recurrent Expenditures
County
Provincial Agric Extension Services
Baringo
4,101,368
Bomet
1,699,877
Bungoma
6,986,452
Busia
4,619,329
Elgeyo Marakwet
3,898,651
Embu
7,664,854
Garissa
4,387,510
Homa Bay
4,190,635
Isiolo
2,127,394
Kajiado
3,463,068
Kakamega
7,598,271
Kericho
4,838,794
Kiambu
8,449,635
Kilifi
5,051,951
Kirinyaga
3,705,837
Kisii
4,616,882
Kisumu
5,310,832
Kitui
4,951,366
Kwale
3,136,969
Annexes
Laikipia
3,391,167
Lamu 80,217,861 62,182,821 26,204,727 25,300,575 99,861,787 45,492,599 35,439,261 61,263,243 59,267,521 134,849,235 58,914,120 32,149,353 39,382,647 73,739,753 86,838,848 18,529,100 57,560,967 42,020,651 27,663,932 41,773,966 61,908,224 27,603,509 61,815,909 26,619,163 27,447,488 29,746,580 2,161,370 4,329,332 1,778,526 2,499,505 2,386,185 4,425,573 14,648,839 8,767,666 17,399,993 7,298,641 7,479,165 7,648,807 5,009,133 11,436,303 6,657,315 11,133,926 18,385,222 6,812,403 7,749,471 6,159,665 5,674,012 15,230,458 6,399,534 10,560,000 2,620,000 4,200,000 5,560,000 16,480,000 975,620 820,000 4,000,000 2,320,000 9,354,563 5,369,006 9,991,219 7,226,009 9,798,754 9,024,984 12,450,000 5,136,000 2,120,000 4,700,000 4,940,000 3,000,000 5,600,000 5,380,000 3,200,000 4,660,000 8,300,000 7,071,875 3,520,000 7,157,280 3,860,000 4,343,007 11,448,346 1,715,000
2,367,286
20,069,990
18,460,409
2,100,000
20,560,409 17,506,353 11,017,280 10,591,875 21,474,984 22,160,763 12,111,219 10,069,006 14,294,563 7,425,573 22,635,024 11,267,171 24,558,519 10,498,641 16,468,497 15,948,807 5,009,133 21,996,303 9,277,315 15,333,926 26,106,592 6,812,403 24,229,471 7,135,285 6,494,012 19,230,458 8,719,534
Annexes
Machakos
5,396,612
Makueni
4,223,855
Mandera
3,307,340
Marsabit
1,867,246
Meru
6,557,036
Migori
3,588,767
Mombasa
3,178,071
Muranga
4,412,326
Nairobi
8,604,734
Nakuru
8,643,259
Nandi
4,057,384
Narok
2,404,320
Nyamira
3,274,673
Nyandarua
5,236,072
Nyeri
5,985,233
Samburu
1,625,244
Siaya
4,399,332
Taita Taveta
3,609,971
Tana River
2,792,058
Tharaka Nithi
3,234,563
Transnzoia
4,358,212
Turkana
1,897,551
Uasin Gishu
4,373,544
Vihiga
3,062,134
241
Wajir
3,450,251
West Pokot
2,319,657
Source: MoA, Budget office
242
Variable technical effiency 100 10 20 70 30 40 50 60 80 90 0 0.10 1.00 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 0
Source: IFMIS and open data portal
Source: MoA, 2012
Annex 16: Per capita expenditure by county (2010 recurrent and CDF)
Annex 17: Variable technical efficiency by county
Kiambu Laikipia Marakwet Mombasa Nairobi Narok Tana River Tharaka Trans Nzoia Turkana Uasin Gishu Wajir Kirinyaga Kisii Kakamega Nakuru Embu Machakos Nyandarua Kajiado Nandi Migori Bomet Samburu Nyamira Bungoma Kitui Kisumu Meru West Pokot Taita Taveta Kilifi Homa Bay Baringo Siaya Kericho Busia Muranga Mandera Isiolo Marsabit Garissa Makueni Nyeri Kwale Vihiga Lamu
Isiolo Lamu Tana River Baringo Nyeri Samburu Garissa Taita Taveta Kericho Busia Kisumu Vihiga Kirinyaga Kwale Kitui Laikipia Nyandarua Muranga Makueni Marsabit Turkana Kilifi Siaya Bomet Mandera Meru Homa Bay Bungoma Trans Nzoia Tharaka Embu Nyamira Uasin Gishu West Pokot Nandi Machakos Nakuru Migori Wajir Marakwet Kajiado Kakamega Narok Mombasa Kisii Kiambu Nairobi
Annexes
Annexes
Annex 18: Unit cost of extension services by county 2010/11

600 500 Kenya Shilling 400 300 200 100 0
Extension services recurrent expenditure/per capita
Source: MoA, budget office
Source: Interim National Water Master Plan 2030
Laikipia Homa Bay Embu Taita Taveta Kakamega Kilifi Nyeri Nyandarua Kitui Tana River Kiambu Tharaka Nithi Busia Baringo E. Marakwet Machakos Marsabit Kwale Samburu Nakuru Migori Nandi Transnzoia Mandera Meru Kisumu Uasin Gishu Siaya Nyamira Kisii Muranga Makueni West Pokot Bungoma Vihiga Garissa Kericho Wajir Mombasa Narok Isiolo Turkana Kirinyaga Kajiado Bomet Nairobi Lamu
Extension services development expenditure/per capita
Annex 19: Present Water demand by sub-sector

Present water demand by sub sector 0% 11% 22%
Domestic
2%
Industrial Irrigation Livestock Wildlife
65%
Fisheries
243
Annexes
Annex 20: Expenditure trends and budget execution in the MoWI, 2008/09 to 2011/12
45 40 35
KSh. billions Water sector public spending
86 84 82
Percent
Water sector budget execution 83.8 81.1 78.3
Allocation
80 78 76 74 72 70 68
30 25 20 15
2008/09 2009/10
Executed
74.1
2010/11 Year
2011/12 2012/13*
2008/09
2009/10 Year
2010/11
2011/12
Source: Medium Term Expenditure Framework(MTEF)-Enviroment,Water and Housing sector, 2012
Annex 21: Average budget execution by programme, 2009/10 to 2011/12

Average budget execution, 2009/10 to 2011/12 100 90 80 70 60 Percent 50 40 30 20 10 0 91.3 90.8 97.0 80.8 71.1
Water Policy and Management
Water Supply Services
Sewerage Services
Water Resources Irrigation and Land Management and Reclamation Water Storage
Source: MoW
244
Annexes
Annex 22: Spending by water sector state corporations

Sector Institutions Funding (KSh. millions) 32,853 27,557 10,000 9,000 8,000 7,000 6,000 16,784 18,095 5,000 4,000 3,000 7,741 2,000 1,000 0 2007/08 2008/09 2009/10 Year 2010/11 2011/12 2009/10 2010/11 2011/12 Year IGF GoK AiA Vs GoK Funding
Source: MoW
Annex 23: Donor vs GoK actual receipts

Actual receipts of Donor Vs GoK funds 100 90 Percent 80 70 60 50 40 30 20 10 0 2009/10
GoK
49 64
55
51 36
45
2010/11
Donor
2011/12
Source: MoW
245
246
Percent
Percent 100 10 20 30 40 50 60 70 80 90 0
100
10
20
30
40
50
60
70
80
90
County profiling of access to improved water and sanitation The top five counties with highest scores in access to improved water supply included Nairobi (75.7 percent), Taita Taveta (65.5 percent), Nyeri (65.2 percent), Garissa (63.3 percent) and Uasin Gishu (62.8 percent) (Annex 24).
Source: GoK, 2010

53.1% 46.9%
75.7% 65.5% 65.2% 63.3% 62.8% 62.1% 61.5% 61.1% 59.6% 57.1% 56.8% 55.0% 54.4% 54.3% 54.1% 53.9% 52.9% 52.2% 52.1% 51.6% 50.0%
Source: GoK, 2010
85.1% 84.7% 84.3% 82.6% 79.9% 77.0% 75.7% 69.1% 64.8% 62.8% 61.7% 58.4% 57.8% 53.9% 53.5% 53.2%
Average access to improved water source
Household access to water sources by county (Census 2009)
Annex 24: Overall county household access to improved and non-improved water sources, 2009
Annex 25: County urban household access to improved and non-improved water sources, 2009
Urban household access to water sources by county (Census 2009)
Improved water sources
51.5%
48.5%
Non-improved water sources
Average access to non-improved water source
Isiolo Garissa Taita Taveta Meru Nyeri Laikipia Nairobi Embu Kilifi Lamu Uasin Gishu Kirinyaga Tharaka Kiambu Nakuru Tana River Kenya Mombasa Baringo Kajiado Turkana Samburu Muranga Kericho Kwale Kisumu E. Marakwet Makueni Narok Trans Nzoia Nyandarua Homa Bay Siaya Bungoma Kakamega Bomet West Pokot Machakos Busia Kitui Mandera Nandi Marsabit Nyamira Kisii Vihiga Migori Wajir
45.2% 43.9% 43.0% 42.2% 42.0% 41.1% 40.5% 40.2% 40.0% 39.1% 38.9% 37.8% 35.9% 33.9% 33.4% 33.2% 31.8% 30.6% 26.6% 25.4% 24.7% 24.0% 22.4% 21.3% 20.7% 15.0%
52.9% 51.8% 50.1% 46.3% 42.1% 41.3% 41.0% 40.9% 39.6% 39.4% 34.4% 34.4% 31.0% 28.0% 27.3% 26.2% 25.5% 24.6% 23.7% 21.1% 20.0% 18.0% 16.1% 14.9% 14.3% 12.2% 10.5% 8.4% 7.2% 5.9% 2.5%
Nairobi Taita Taveta Nyeri Garissa Uasin Gishu Bungoma Kilifi Meru Isiolo Kiambu Busia Nyandarua Trans Nzoia Kakamega Mombasa Laikipia Nakuru Kirinyaga Embu Grand Total Tharaka Nyamira Vihiga Kisii Kwale Kisumu Wajir Muranga Turkana Mandera Kericho Tana River Makueni Siaya Marsabit Nandi E. Marakwet Samburu Bomet Homa Bay Baringo Kitui West Pokot Machakos Narok Migori
Annexes
Annexes
In the rural category, Bungoma County leads in access to improved water sources with a score of 69.9 percent, followed by Uasin Gishu (63.8 percent), Kiambu (63.4 percent), Nyandarua (61.3 percent), Trans Nzoia (61.3 percent) and Taita Taveta (61.0 percent) in the top six counties (Annex 26). Twenty four counties scored below the average rural access of 45.7 percent. Narok county scored the least in this category with only 19.2 percent of its rural households having access to improved water sources compared to the overall average rural access.
Annex 26: County rural household access to improved and non-improved water sources, 2009
Rural household access to water sources by county (Census 2009) 100 90 80 Percent 70 60 50 40 30 20 10 0
54.3% 45.7%
Source: GoK, 2010
Access to sanitation in the counties Kenya is still far from attaining sub-national equity in access to improved sanitation. Rural areas are especially hard hit, with high prevalence of poor waste management methods. At almost 80 percent, the average access to improved sanitation in Kenyas urban areas was better than the average national access of 65 percent (Annex 27), and far better than the rural average of 56 percent. Connection to the main sewer is dismal at less than 10 percent nationally, about 20 percent for urban households and less than 1 percent for rural households. Connection rate to the main sewer is only concentrated in key urban centres such as Nairobi, Mombasa, Nakuru and Eldoret. This calls for a key policy action to ensure equity in access to improved sanitation nationally and affordable options for improved sanitation rural areas. Overall access to adequate sanitation is lowest in Wajir, Turkana, Mandera, Samburu, Tana River, Marsabit, West Pokot, Garissa and Kwale counties (Annex 27). Access to improved sanitation in each of these counties fell below 35 percent indicating extremely poor access relative to the national average of 65 percent. Only 21 out of the 47 counties as shown in Annex 28 scored above the national average access to improved sanitation. Overall, the top five counties with household connection rate
Bungoma 69.9% Uasin Gishu 63.8% Kiambu 63.4% Nyandarua 61.3% Trans Nzoia 61.3% Taita Taveta 61.0% Busia 60.1% Kajiado 59.9% Nyeri 59.8% Vihiga 59.7% Kilifi 59.6% Kakamega 59.5% Meru 58.5% Garissa 56.0% Lamu 55.1% Kisii 51.4% Nakuru 50.5% Kirinyaga 50.1% Nyamira 49.0% Wajir 47.7% Grand Total Embu 45.5% Mandera 44.4% Laikipia 44.3% Kisumu 42.9% Kwale 42.4% Tharaka 41.0% Muranga 40.0% Marsabit 39.0% Turkana 38.9% Kericho 37.5% Isiolo 37.3% Nandi 36.6% Makueni 36.2% Siaya 34.8% Tana River 34.8% E. Marakwet 30.5% Samburu 27.9% Bomet 27.0% Kitui 25.6% Homa Bay 25.0% Machakos 23.1% West Pokot 22.6% Migori 20.3% Baringo 20.0% Narok 19.2%
Improved water sources Non-improved water sources
247
248
Percent
100 10 20 30 40 50 60 70 80 90 0 Percent
100
10
20
30
40
50
60
70
80
90
Source: GoK, 2012 20.6%
Source: GoK, 2010
Improved sanitation
79.4%
Annex 27: Overall county household access to improved and non-improved sanitation, 2009
Household access to improved sanitation by county (Census 2009)
Annex 28: Urban household access to improved and non-improved sanitation, 2009
Improved sanitation
86.8% 85.6% 83.5% 82.9% 81.2% 80.5% 78.6% 78.1% 76.9% 75.0% 74.3% 74.1% 72.7% 72.3% 71.5% 69.1% 67.8% 67.1% 66.8% 65.8% 65.6%
35.0%
65.0%
Non-improved sanitation
Non-improved sanitation
In the urban household category, much fewer counties, only 14 out of 47 as shown in Annex 28, had access to improved sanitation of above the urban household average of 80 percent. The concentration of urban households in a few urban areas especially Nairobi and Mombasaindicating urban primacy in the country, explains
Nairobi Vihiga Kakamega Kirinyaga Mombasa Kiambu Uasin Gishu Meru Nakuru Trans Nzoia Nyeri Nyandarua Nandi Laikipia Bungoma Muranga Taita Taveta Bomet Nyamira Embu Grand Total Kisii Machakos Kajiado Busia Tharaka Lamu Makueni Kisumu Kitui Migori E. Marakwet Kilifi Siaya Baringo Homa Bay Narok Kwale Garissa West Pokot Marsabit Tana River Samburu Mandera Turkana Wajir
to the main sewer included Nairobi (47.7 percent), Mombasa (13.9 percent), Laikipia (10.1 percent), Uasin Gishu (8.1 percent), and Nakuru (8.0 percent). The connection rate to the main sewer in these counties was above the national average of 7.7 percent (GoK, 2010b).
64.0% 62.7% 61.0% 60.7% 60.6% 57.1% 56.4% 56.2% 54.0% 51.4% 48.4% 48.0% 47.9% 42.1% 41.0% 40.7% 36.7% 34.0% 31.0% 26.8% 25.9% 23.1% 21.6% 16.4% 12.2% 7.5%
Laikipia 94.4% Vihiga 90.5% Meru 89.4% Kakamega 87.2% Nandi 87.0% Kiambu 86.9% Nairobi 86.8% Uasin Gishu 86.1% Trans Nzoia 85.1% Kirinyaga 85.0% Nakuru 82.4% Kajiado 82.0% Bungoma 81.8% Mombasa 81.2% KENYA Kericho 77.6% Busia 77.5% Lamu 77.5% Baringo 77.4% Embu 76.8% Kitui 75.1% Narok 74.8% Nyeri 73.6% Nyamira 73.4% Kilifi 72.6% Kisii 72.1% Taita Taveta 71.5% 70.7% West Pokot 70.7% Bomet 70.4% Tharaka Nithi 69.2% Samburu 68.3% Migori 68.2% Machakos 66.3% Isiolo 65.8% Nyandarua 65.1% Makueni 64.3% Kwale 62.7% Murang'a 62.2% Kisumu 62.1% Siaya 60.1% Garissa 59.5% Homa Bay 58.8% Marsabit 51.8% Tana River 47.7% E. Marakwet 45.5% Mandera 42.1% Turkana Wajir 11.7%
Annexes
Annexes
most part of this skewed outcome. According to the 2009 Census data, the top-four counties in terms of their urban household connection rate to the main sewer were Nairobi at 47.7 percent, Laikipia at 34.9 percent, Uasin Gishu at 16.7 percent, and Nyeri at 16.6 percent. The proportion of urban households connected to the main sewer nationally was only 19.5 percent; Nairobi and Laikipia are therefore the only counties that so far have a connection rate to the main sewer for urban households above the national urban average. The average access rate to adequate sanitation in rural areas in 2009 was at 56 percent, as shown in Annex 29. Among rural households, counties that had the lowest access to improved sanitation (below 30 percent) were Turkana, Wajir, Mandera, Samburu, Marsabit, Tana River, Isiolo, Garissa, West Pokot and Kwale. It can be seen that most of these are located in the underserved Northern Kenya region. Vihiga, Kakamega, Kirinyaga and Meru counties were the top-four counties in terms of rural household access to improved sanitation, each scoring above 76 percent. The top-four counties in terms of their rural household connection rate to the main sewer were Embu (0.54 percent), Taita Taveta (0.49 percent), Nyeri (0.43 percent) and Kiambu (0.42 percent). At below 1 percent, this connection rate is extremely low by any standards, and this is also reflected in the overall proportion, where only 0.18 percent of Kenya rural households are connected to the main sewer.
Annex 29: Rural household access to improved and non-improved sanitation, 2009
100 90 80 70 Percent 60 50 40 30 20 10 0 Vihiga 83.4 Kakamega 82.8 Kirinyaga 82.4 Meru 76.8 Nyandarua 76.3 Nyeri 74.6 Trans Nzoia 71.9 Uasin Gishu 71.7 Nakuru 71.0 Murang'a 70.3 Nandi 70.0 Bungoma 69.3 Kiambu 67.8 Taita Taveta 66.9 Bomet 66.7 Nyamira 65.8 Laikipia 65.3 Embu 62.9 Kisii 61.7 Kericho 58.1 Busia 58.0 Tharaka Nithi 57.4 KENYA Machakos 55.7 Makueni 54.9 Lamu 51.5 Kitui 49.9 Kisumu 49.1 E. Marakwet 48.6 Siaya 46.1 Migori 41.5 Kajiado 39.9 Homa Bay 37.3 Baringo 34.7 Kilifi 34.1 Narok 32.6 Kwale 24.6 West Pokot 22.2 Garissa 21.2 Isiolo 20.9 Tana River 17.3 Marsabit 17.2 Samburu 10.5 Mandera 9.9 Wajir 6.7 Turkana 6.6
Improved sanitation Non-improved sanitation
43.8%
56.2
Source: GoK, 2012
249
Authors And editors oF vArious chApters

Chapter Authors Mr. Jared Ichwara Ms. Jane Kiringai Macro-Fiscal Performance and Fiscal Framework Mr. Benson Kiriga Ms. Catherine Ngumbau Ms. Lucy Njaramba Mr. Jackson Kiprono Mr. Kevin Njuki Public Finance Management Ms. Carolyn Wangusi Mr. Dickson Khainga Mr. Kristian Rosbach Mr. Samuel Nthenge Ms. Margaret Githinji Education Ms. Florence Nelima Ms. Eldah Onsomu Mr. Eric Kiilu Mr. David Njuguna Health Mr. Kenneth Mwirigi Ms. Nancy Nafula Mr. Eliud Manyara Mr. Stephen Njogu Agriculture and Rural Development Mr. Samuel Gicheru Mr. Joel Iluve Mr. Michael Kanyi Mr. Alloys Ratemo Mr. Stephen Mwangi Ms. Maryanne Nduati Water and Irrigation Mr. Goerge Ochieng Ms. Catherine Ngumbau Ms. Lucy Gaithi Ms. Catherine Kathingo Mr. Macharia Warothe Infrastructure Ms. Vivian Simwa Mr. Andrew Welime Ms. Catherine Ngumbau Mr. Baridi Manyasi Mr. William Nzioki Komu Social Protection Ms. Grace Owiti Ms. Truphena Mokaya Mr. Peter Kariuki Njiru Mr. Francis Muteti Coordinating Team Ms. Jane Kiringai Mr. Kristian Rosbach Ms. Tracey Lane Mr. Richard Munyithia Ms. Catherine Ngumbau Mr. Alloys Ratemo and Ms. Maryanne Nduati Mr. Francis Muteti Ms. Nancy Nafula and Ms. Catherine Ngumbau Ms. Eldah Onsomu Ms. Jane Kiringai Mr. Jared Ichwara and Ms. Jane Kiringai Editors
250
MINISTRY OF DEVOLUTION AND PLANNING

P. O. Box 30005 (00100) Nairobi, Kenya Tel: +254-020-2252299 www.devolutionplanning.go.ke

Comprehensive Public Expenditure Review

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Comprehensive Public Expenditure Review

MINISTRY OF DEVOLUTION AND PLANNING

COMPREHENSIVE PUBLIC EXPENDITURE REVIEW

MinistrY oF Devolution And PlAnninG

MonitorinG And EvAluAtion DirectorAte

ACRONYMS AND ABBREVIATIONS

Acronyms and Abbreviations

Acronyms and Abbreviations

Anne WAiGuru, OGW Cabinet Secretary Ministry of Devolution and Planning

EnG Peter MAnGiti Principal Secretary Ministry of Devolution and Planning

Macro Fiscal Performance and Fiscal

MAcro-FiscAl PerFormAnce And FiscAl FRAMEWORK

1.2 MACROECONOMIC PERFORMANCE

1.2.1 Overall economic performance

Macro Fiscal Performance and Fiscal Framework

2003-2007 Sub-Saharan Africa

2008-2012 Kenya World

Source: World Bank Growth Economic Prospects

Macro Fiscal Performance and Fiscal Framework

Figure 1.2: Sectoral contribution to growth 2007/11 (percentage points compounded)

Source: KNBS Economic Survey, 2012

5 4 Percent 3 2.6 2 1.6 1 0 2008 2009 2010

Source: KNBS Economic Survey, Various Issues

Macro Fiscal Performance and Fiscal Framework

Figure 1.4: Sectoral contribution to growth

Macro Fiscal Performance and Fiscal Framework

Macro Fiscal Performance and Fiscal Framework

Current account Source: Central Bank of Kenya

Capital and financial account

Source: KNBS Economic survey, 2012

Macro Fiscal Performance and Fiscal Framework

1.3 FISCAL PERFORMANCE

Macro Fiscal Performance and Fiscal Framework

Figure 1.7: Narrowing gap in recurrent and development spending

Source: The National Treasury Data

Total revenue and grants

Expenditure and net lending

Macro Fiscal Performance and Fiscal Framework

Macro Fiscal Performance and Fiscal Framework

Macro Fiscal Performance and Fiscal Framework

Macro Fiscal Performance and Fiscal Framework

Figure 1.10: Performance of various revenue sources

Year VAT, imports

Year Import duties

Year Source: Kenya Revenue Authority

Macro Fiscal Performance and Fiscal Framework

Figure 1.11: Deviations between actual and targeted revenue collections

5 0 -5 KSh. million -10 -15 -20 -25 -30 -35

Source: Kenya Revenue Authority

Macro Fiscal Performance and Fiscal Framework

Income tax growth rate Source: KRA data and CBK

GDP growth rate

VAT growth rate Source: KRA data and CBK

Growth in final consumption

Macro Fiscal Performance and Fiscal Framework

Macro Fiscal Performance and Fiscal Framework

Macro Fiscal Performance and Fiscal Framework

Macro Fiscal Performance and Fiscal Framework

Uganda, 2008-2011 Ethiopia, 2002-2007

Expenditure, percent of GDP

1.6 2.3 3.2 3.3 4.6

0.8 2.3 3.3 3.6 7.7

Benefits Interest Payments Use of Goods & Other Expenses Grants