The national government is finally set to transfer a fresh set of levies and functions to counties, pointing to additional strands of cash flow that would boost the devolved units.
From mineral royalties to revenues from court fines on contravened county legislations, the devolved units look set for a funds windfall.
Perhaps the biggest lift for the counties will be the billions of shilling in mineral royalties to be shared with the national government.
The National Treasury and the Ministry of Mining, Blue Economy, and Maritime Affairs are set to unlock an estimated Sh7.5 billion in shared revenue for the two-tier governments and communities hosting the extraction sites.
“In this regard, the Cabinet secretary Ministry of Mining, Blue Economy and Maritime Affairs has already constituted a task force to develop the regulations that will unlock the disbursement of revenue from mineral royalties to the communities as envisaged by the Mining Act 2016,” said the Treasury in the latest update on its budget plan for 2023
“In addition, the National Treasury is proposing for the allocation and disbursement of mineral royalties due to the county governments to be provided through the County Governments Additional Allocations Act as an unconditional grant.”
The Mining Act 2016 provides for the sharing of revenues arising from mineral royalties amongst the national government, beneficiary counties, and communities.
Whereas a framework for sharing the mineral royalty revenue among the national government, county governments, and communities were developed, Attorney General Justin Muturi’s office in December advised the development of subsidiary regulations to the Mining Act to provide the mechanism for the transfer of these mineral royalties to the communities.
The framework, which was forwarded to the AG’s office for gazettement, was developed in consultation with the Ministry of Petroleum and Mining, the Ministry of Industrialisation, Trade and Enterprise Development, the Commission on Revenue Allocation, the State Law Office, and the Council of Governors.
Section 183 of the Mining Act, 2016 provides that any holder of a mineral right shall pay royalties to the State in respect of the various mineral classes won under the mineral right.
Official data shows that by June 2022, at least Sh7.5 billion had been collected from mineral royalties.
This means that the Treasury is holding Sh1.5 billion million for the counties and Sh750.39 million for the communities where minerals were exploited.
The balance of Sh5.25 billion (70 per cent) is the share of the national government.
Besides the mineral royalties, the counties are set for a boost as the National Treasury surrenders collections from court fines for contraventions to laws in the devolved units following deliberations with the intergovernmental budget and economic council (IBEC).
During the 17th ordinary session held on May 31, 2022, the IBEC adopted a report and a framework for sharing funds arising from the contravention of county government legislation.
The report showed that funds raised from contravention of county legislation are retained by the Judiciary and transferred to the National Treasury.
The county governments had proposed the sharing of fines and penalties collected by the courts as own source revenue for the county governments.
Fines and penalties
It is against this backdrop that the IBEC legal committee was tasked with the responsibility of developing a framework to enable the transfer of funds emanating from court fines relating to county legislation from the exchequer to the County Revenue Funds.
Following the adoption of the framework, the Treasury wrote to the Attorney-General requesting for gazettement of the approved legislation from the national to the county governments.
The Attorney-General in his part advised that what the framework envisages to be achieved can only be done by way of appropriation or by the enactment of an Act of Parliament specifically excluding the fines and penalties raised from contravention of the county governments’ legislation from consolidated fund and payable to the county revenue fund.
“In this regard, the National Treasury is proposing to exclude the court fines emanating from contravention of county government legislation from the consolidated fund using the County Government Additional Allocations Act,” the Treasury said in an update on its budget plans for 2023.
“If this proposal is adopted by Parliament, Sh108.7million emanating from contravention of county government legislation will be transferred to 10 county governments whose laws were contravened in the financial year 2023/24” it added.
This amount consists of court fines raised in the financial years 2019/20,2020/21 and 2021/22. Further, the counties are primed to generate millions in revenues as the national government transferred library services to them.
The national government has allocated Sh425 million to counties to cater to the transfer of library services to the devolved units.
Library services are a devolved function under the fourth schedule of the Constitution but have not yet been transferred to the county governments.
The national government has now moved to properly transfer the function to counties and will now be allocating resources for library services as equitable share in a phased approach starting with the 2023/24 financial year.
For the first three financial years, this amount will be included in the equitable share allocation for the 33 county governments that have national libraries starting from the financial year 2023/24.
This will be 100 per cent for the financial year 2023/24, 75 per cent for 2024/25 (balance of 25 per cent to be shared as equitable share), and 25 per cent for the fiscal year 2025/26 (balance of 75 per cent to be shared as equitable share).
“However, after the three financial years, the 33 county governments will be required to integrate the salaries of these staff into their payroll, after which the entire Sh425 million will be available for sharing as equitable share among the 47 county governments,” said the Treasury in the 2023 Budget Policy Statement.
“This is in line with the constitutional principle of transferring resources to devolved functions.”
The Treasury said the transfer is part of government plans to enhance devolution by ensuring the transfer of functions earmarked for counties in six months.
The Kenya National Library Services generates more than Sh600 million in revenue annually going by its 2018 audited books.