How lack of data is standing in the way of State’s policies


A welder at his workshop along Pumwani Road in Nairobi on May 25, 2023.

Photo credit: File | Nation Media Group

What you need to know:

  • In Kenya, the latest publicly available data on job creation is for the quarter ended December 2022. 
  • Lack of a formal register for all businesses in the informal sector presents a huge data gap for the government.

Kenya is putting in place new policies in areas such as taxation, provision of health care and security, and financing of education, but nearly all of them require data that the government does not have, piling pressure on implementers. 

For instance, in a matter of days, United States of America citizens will know how many jobs their economy created last month, but for Kenyans, the latest publicly available data on job creation is for the quarter ended December 2022. 

The gaps in official data go beyond the state of the country’s labour force, despite the many plans by the government that will require a rich database for successful implementation.

Kenya is in the final stages of phasing out the National Health Insurance Fund (NHIF) and replacing it with the Social Health Authority (SHA), which will be running three funds.

The huge promises in this big switch include the provision of emergency health services and chronic and critical illnesses.

The State has already passed a law making it compulsory for adult Kenyans, with few exceptions such as full-time students below 25 years, to contribute to the fund. The idea is to avoid the problem of millions of dormant members as has been under the NHIF.

However, the success of this healthcare plan is heavily hinged on data. While it is going to be straightforward to deduct 2.75 per cent of gross pay for salaried people, the government has a lot of work to do if it is to succeed in getting a fair share of contributions for those outside formal employment.

The lack of a formal register for all businesses in the informal sector and their employees presents a huge data gap for the government, which has been a challenge when it comes to taxing this sector.

First, the government wants to collect data from households for what it calls proxy means testing—an examination into the financial state of a person to determine eligibility for public assistance.

The data will be based on aspects such as housing characteristics, access to basic services, and household composition and characteristics.

This is the data the government hopes to use to estimate the incomes of these households to determine the premiums such households will be expected to contribute. It will also rely on this to know how many households it has to pay for.

“The Authority shall conduct periodic means testing reviews on households whose income is not derived from salaried employment and on households in need of financial assistance,” states the draft Social Health Insurance (General) Regulations, 2024.

While the State has for the longest time been promising the delivery of quality and affordable health care, it has not carried out any assessment on the capacity and preparedness of health facilities to deliver on this.

The State last August conducted the nation’s first-ever health facilities census in the country. The study returned findings that suggested that unless the government builds new facilities, equips existing ones, and hires more personnel, universal health coverage would remain but a dream.

“Availability of emergency services in the country is in a precarious state as indicated by the census. For instance, only 5.8 per cent of all facilities had an accident and emergency unit while 49 per cent of facilities had access to an ambulance,” the study showed.

The State is also caught in a similar situation when it comes to implementing the new model of funding for higher education.

The Mo Ibrahim Foundation, in its report, The Power of Data for Governance: Closing Data Gaps to Accelerate Africa's Transformation, released on January 29, revealed appalling data gaps in African countries, including Kenya. 

“Without data, we are driving blind policies that are misdirected and progress on the road to development is stunted. We must act urgently to close the data gap in Africa if we genuinely want to leave no one behind,” said Mo Ibrahim, the founder and chairman of the foundation.

Kenya’s new model for public universities and technical and vocational education and training institutions has grouped students into four levels of need: vulnerable, extremely needy, needy, and less needy. Vulnerable students will be fully funded by the government. 

The model relies on a means testing instrument, which has been hailed as a reliable scientific method used to determine the student’s level of financial need to ensure they are supported adequately.

The Higher Education Loans Board (Helb) relies on an application programming interface connected to the Integrated Population Registration Services (IPRS), known for generating national identity cards.

The IPRS provides data such as the parents of the students, but Helb has to check further with entities such as the Kenya Revenue Authority (KRA), Kenya National Bureau of Statistics (KNBS), and National Social Security Fund to try and assess the financial situation of learners and their background. Helb is also planning to extend this to telcos. 

The use of different State entities in a bid to collect data for classifying students based on their economic situation points to the price the State has to pay for its segregated data points, with some of the sources having outdated data.

Kenya plans to go big on collecting data, especially in the informal sector for different uses including taxation.

The National Tax Policy now recommends that farmers, businesses and individuals operating in the informal sector have to be registered and assigned dedicated tax agents from KRA.

The government last year said it had noticed the economy is dominated by a large and growing informal sector that has for long stayed under the KRA radar owing to poor recording keeping, cash-based transactions, and limited information due to its unregulated nature.

Agriculture and the informal sector have been identified as among the “hard-to-tax” sectors that will require mandatory registration into associations and cooperatives through which they will be taxed.

The government’s latest agricultural census is for 2019, showing a gap of over four years.

The National Treasury had in the 2023 Draft Budget Policy Statement approximated the potential taxable base of the informal sector at Sh2.8 trillion, painting it as a tax-rich sector in an economy that wants to cut borrowing.

Official data shows the informal sector closed 2022 accounting for 15.96 million or 83.3 per cent of the total jobs in the economy, emboldening the government’s belief that this is a fertile ground to reap taxes.

However, the lack of data beyond these numbers has been a problem when it comes to taxation. Many of the businesses in the informal sector fall into the micro, small, and medium-sized enterprises (MSMEs) category. 

The first comprehensive survey on MSMEs was in 2016 and KNBS is yet to conduct any other such survey nearly a decade later. This means the government may not know how many such entities it needs to go after.

A similar headache has emerged in the digital economy businesses, which KRA is also struggling to find even as the growth in tax collections fails to keep up with budgetary needs.