WHAT LESSON CAN WE LEARN FROM KENYA !

President Uhuru Kenyatta (centre), Salaries and Remuneration Commission (SRC) vice chairperson David Ogutu (left), and SRC Chairperson Sarah Serem during a debate on the National Wage Bill held at KICC in Nairobi on March 10, 2014. Together with pensions for retired public workers, the government’s salary bill now stands at Sh543.7 billion, or 54 per cent of all government revenues.

President Uhuru Kenyatta (centre), Salaries and Remuneration Commission (SRC) vice chairperson David Ogutu (left), and SRC Chairperson Sarah Serem during a debate on the National Wage Bill held at KICC in Nairobi on March 10, 2014. Together with pensions for retired public workers, the government’s salary bill now stands at Sh543.7 billion, or 54 per cent of all government revenues. Kenyan salary saga would have been an uproarious farce, if it weren’t so tragic.An eight-year season of generous payrises to public workers and a hiring spree have Brought the economy to the brink of ruin. As a result, the salaries bill has been increasing by an average 21 per cent over the last three years.Last financial year, it grew by a staggering 34 per cent.So now there is little money for anything else.Together with pensions for retired public workers, the government’s salary bill now stands at Sh543.7 billion, or 54 per cent of all government revenues. 

Given that the government also spends more than Sh200 billion paying foreign debt, not to mention what goes to pay local debts, the money left over for roads, schools and hospitals is small indeed. Bizarrely, all that money is being spent on workers who do little.At a productivity of only 30 per cent, it takes three Kenyan civil servants to do the job of one person.But the money is going to a select few, not everyone. The best paid public official in Kenya earns 120 times what the poorest paid is earning, creating one of the most unequal labour forces on earth.

In other words, a small cadre of government workers are earning fantastical sums of money for an amount of work which, by all measures, is a national scandal. On average, the a public sector worker makes more money than one in the private sector, though averages are poor measures of reality. Kenya spends more money on salaries, 7.8 per cent of Gross Domestic Product than Tanzania (6.3), Uganda (3.9) and Rwanda (3.9).

The only country doing worse is Burindi (11.3) which appears to have committed all its resources to the payment of salaries. As a result, money for development is tight. The proportion of government funded development projects is down to five per cent of GDP, down from 6.5 per cent. The government is forced to borrow to fill the holes in its books. This is inflationary, raising the cost of living and creating demands for higher salaries, weakens the shilling, raising the cost of imported raw materials and upsetting the economic apple cart even more. Thirdly, there is less money available to pay debt, raising the danger of Greek-type meltdown. A country which is this devastated is not competitive and cannot grow, which breeds a new cycle of doom.

Discuss crisis

Yesterday, the Salaries and Remuneration Commission hosted a meeting to discuss crisis and what to do about it. Speakers, including Cabinet secretaries, painted a picture which the government is gradually regressing to appoint where it will soon run out of money for operations and maintenance: purchasing medical supplies, fuel for police cars and maintenance of roads. According the statistics, the wage bill  has mounted to a level of 13 per cent of the Gross Domestic Product. In simpler terms, this means that 13 per cent of  the wealth created in the economy goes in paying  civil servants  and state officers. According to Cabinet Secretary for National Treasury Henry Rotich, the worrisome trend has been caused by salary awards to sections of the Civil Service and a rapidly expanding  public sector — and a proliferation of institutions created by the new  constitution.

Mr Rotich warned that a high wage bill could lead to higher deficit which will negatively affect debt dynamics and put the country at risk of debt distress. Mr Rotich said that Kenya’s domestic debt has doubled over the past five years from Sh518.5 billion to Sh1.05 trillion. “The large increase in the stock of public debt have also resulted in concomitant increases in interest payments on domestic debt which increased from Kshs 45.9 billion in 2008 to Kshs 110.1 billion in 2013,” he said. He added that large increases in interest payments on public debt reduce government discretionary spending in subsequent years as increased resources go into servicing debt. Mr Rotich said he had constituted a team to look at the issues of interest rates and will soon release its report. He said that the government is also doing everything possible to deal with corruption and wastages as well as remove ghost workers from the government payroll.

At the launch of the national debate on the public wage bill sustainability organized by the Salaries and Remuneration Commission, there was a flood of statistics poured out by government officials as well as private sector players. Some were grim, but it's not all doom and gloom.