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Constitution of Kenya Review Commission |
By Njeru Kirira, Global Economic Investments & Financial Consultancy (GEIFIC) Ltd.
March 25th – 26th, 2002 Presented at the CKRC LEGISLATIVE REFORMS SEMINAR At Silver Springs Hotel
This Paper is mainly a summary of a more comprehensive study, on Constitutional and Legal Aspects of Public Finance, commissioned by the Institute of Economic Affairs, for submission to CKRC as part of IEA support. The Study includes an Appendix on cross-country analysis on management of public finance. Introduction
In Kenya the Legislature has three critical functions with regard to Public Finance. These are;
(1) Revenue mobilization (imposition of taxes and borrowing)
(2) Allocation of resources
(3) Supervisory function.
Under the Constitution, Exchequer and Audit Act, and respective tax laws, only Parliament can impose taxes and authorize public borrowing. However, in practice there are serious Constitutional restrictions on parliamentary ability to act, especially as provided under Article 48. Parliament is further inhibited by other factors such as budgetary traditions and practices which allow for delegation of powers on taxation with very limited reporting. Besides, the current institutional arrangements lead to tax and debt administration matters being conducted by the executive branch with the role of Parliament relegated to post action audit reports which are subject to long administrative delays. Other factors inhibiting the role of Parliament include lack of technical capacity to quickly scrutinize finance data, conduct analysis and make pertinent conclusions.
The result is that once Parliament passes the tax law, the only time it ever gets involved again is when the Audit Report is filed, which can be as long as three years later. The debt situation is even worse since Parliament does not get involved at all in scrutinizing domestic borrowing. Indeed, there is no Constitutional or legal requirement for the local debt to finance approved expenditures or any expenditures. There is also no limit on how much the minister can borrow locally. It is up to the minister to decide how much to borrow, at what terms and for what purpose.
On external borrowing, there are only two soft conditions. First, there is a ceiling on how much government can borrow, which is a flat amount, and second, the external funds should be used to finance approved expenditures. However, here too there is no requirement to ensure productive investments or cost effectiveness in external borrowing. Indeed, as the law stands, the minister can borrow and spend before seeking Parliamentary approval as long as he submits supplementary estimates later. Under Article 100, 101, 102, 103 and, 104, Parliament is empowered to authorize spending public funds to meet various public purposes. However, under Article 100, the minister is authorized to make alterations after Parliamentary approval. This authority has significant implications on how and where public money is used. This article is widely used together with section 5(2) of Exchequer and Audit Act, making Parliamentary Authority on resource allocation mainly proactive. As regards supervisory function, this is performed on the basis of audits and reports of the Controller and Auditor General and Auditor General State Corporation. Looking at the records of deliberations of PAC and PIC, it is obvious that the supervisory role is limited to linking Parliamentary approval to release of funds. It does not relate to quality of expenditure or realization of results. In other words, the audits simply answer the question whether or not
* the money was spent for the purposes approved by Parliament, and * the necessary procedures were followed in release and spending of funds.
As long as these two conditions are fulfilled, the expenditure is considered to be in order, whether the money could have been better used to e.g buy medical supplies instead of buying Mercedes Benz cars for the executive. Besides, as long as the tendering procedures are followed, it is okay even when it means spending more than the economic value. These critical omissions were noted in 1997 when the Public Expenditure Review Report noted that “Government investments may not generate a commensurate level of GDP growth because the cost of acquiring capital is far greater than the value of the capital created”. Unfortunately, there is no on-going implementation monitoring, or post-execution value-for-money audit. As a result, the whole process of public finance management has not been managed in a manner which can enhance the public good.
1. Enhancing the role of Parliament in Public Finance
Parliament is one of the three branches of government, which include the executives and the Judiciary. Of these three, only Parliament is empowered to impose taxes or allocate public resources. Ideally, Parliament should be the custodian of public interest with the authority to protect and preserve public property. All other persons and institutions with powers to collect taxes or spend public money, do so on basis of delegated authority. In exercise of such powers, if there is abuse or inept application of the law, Parliament should reserve the right to take corrective action, especially on mobilization and allocation of resources, to ensure that fiscal policies are not used indiscriminatively and that they are efficiently implemented.
To achieve national objectives, tax policies and tax administration should not serve partisan or vested interests. Yes, fiscal policies can target specific activities of problem areas which need to be addressed, but not individuals or communities unless that is the agreed policy. It is for these reasons that over the years, writers on public finance have advocated for observations of principles of (1) efficiency (2) equity (3) stability (4) neutrality and (5) predictability, in matters of taxation and public expenditure. These principles are necessary to enable the public assess effectiveness of fiscal policies and also encourage managers of public affairs to be accountable, for what they do, how they do it, and finally ensure that they conduct public affairs transparently. Unfortunately, this is not the case with fiscal policies in Kenya, neither accountable nor transparent.
2. Factors Parliamentary effectiveness in management of public funds
Management of public affairs can be significantly influenced by:
1) institutional arrangements between the three branches of government
2) demarcation of functions and responsibilities between the three branches
3) capacity of each of the three branches to act as checks and balances on each other
4) quality of management within the executing agencies 5) ability of Parliament to enforce accountability and demand transparency on other branches.
3. Institutional arrangements
Right from independence, Kenya got into a situation which was analogous to an (elected) absolute monarchy which led to accumulation of powers under office of the president such that the life of the nation revolved around the occupant of that office. Soon, there was no distinction between the personal and official life of the chief executive. The president appointed permanent secretaries, ministers, judges, PCs and DCs, all of them single-handed. As a result, the functions of all public offices revolved around his wishes, wisdom and vision. His word and wishes became law with powers to give directives without due regard to the law. Thus the traditional concept of checks and balances that were expected to be in place fizzled away.
In the process, Kenyans created a president who, many people still consider to be above the law. To preserve this image, any person who questioned the presidency was swiftly dealt with and removed. Against the presidency, even Parliamentary immunity had no meaning as MPs were arrested and detained from precincts of Parliament. As the presidency became stronger, other institutions became weaker, leading to a point where Parliament was reduced to a feeble voice mostly supporting the executives.
Using the provisions of Articles 16 and 19 of the Constitution, the presidency secured full influence over Parliament by appointing a large number of ministers and assistant ministers to facilitate passing motions introduced and defeat of motions tabled by government. The president powers over Parliament were enormously increased by the ability to nominate extra twelve MPs, who until 1992, could be replaced if they did not support government position on any matter. Even as late as in the 7th Parliament, a nominated MP had to vacate his seat to create room for somebody else, a situation which in other countries would be unthinkable. This flexibility in the use of executive powers has serious negative implications to public/national interests.
As regards the rest of the executive branch, the presidency appoints permanent secretaries, heads and directors of public enterprises, commissioner of police, and heads of army, and is the chancellor of every public university. He wields powers to hire and fire any person in the public sector without reference to anybody else. As regards the oversight agencies, the Controller and Auditor General, and Auditor General State Corporations, these are appointed singly by the president. All Parliament can do is criticize but cannot remove those it is dissatisfied with. Similarly, the president appoints the Chief Justice, Judges of the High Court and Court of Appeal with Parliament playing no part. In some cases, individuals who have been openly criticized by Parliament have been appointed to key positions in the judiciary and the cabinet. Therefore, the president has the capacity to reward those who are supportive and leave those he considers not, in the cold. Consequently, Kenyans know which of the three branches can give bread and butter and which cannot. They also know that Parliament can criticize and even pass motions, but it cannot fire. In terms of balance of power and influence, it is the executive which calls the shots. This feeling is reinforced by article 25 of the Constitution which provides that “every person who holds office in the service of the Republic of Kenya shall hold that office during the pleasure of the president”. The reality is that even the private sector has shown unwillingness to hire anybody singled out as giving the presidency displeasure. Therefore in all fairness, Parliament is a junior partner to the Presidency while the judiciary is perceived as part of the presidency.
Unless the existing weak institutional arrangement is corrected, Parliament cannot play its part, effectively, in the management of public finance. This situation is not only deleterious to Parliament but also to the judiciary and the executive. The responsibility to make appointment of all senior holders of positions in the public sector exposes the presidency to undue pressure by vested interests, a situation which can lead to corruption by those who pose as middlemen or agents, sometimes by pretending to be kingmakers. Some have even been arrested extorting money from senior public officers. It is critical that a neutral system of appointing senior members of the executive and judiciary branches is instituted with final approval by Parliament. Finally, holding of public office should not be at the pleasure of the president or Parliament. It ought to be in public interest, so that it does not generate partisan interests to anyone branch. Of vital importance is the need to ensure the institution of Parliament is not and cannot be controlled by any other branch or, individual. To achieve this, it is necessary that, the ratio of ministers and assistant ministers does not exceed 25% of Parliament.
4. Demarcation of functions and responsibilities
Under the current system, Parliament is responsible for imposition of taxes, levies and other charges, and also authorizing expenditures from Consolidated Fund. However, over the years, Parliament has delegated a lot of powers, both with regard to taxation and expenditures, to other government agents. This delegation has been done without adequate requirements on reporting and monitoring. The result is that, when there is abuse of delegated powers, there is no ready mechanism for identifying the problem and taking corrective action. A short survey of demarcation of functions shows the following:
(i) Taxation and other charges
Under all imposition laws, whether for taxes, levies or other common charges, Parliament has delegated powers to exempt and sometimes to vary the rate to finance minister, revenue departments etc. In all cases, there are provisions which require that these powers be exercised in public interest. Consequently, if these powers are exercised to foster public interest, it should be in the best interest, of both the government and the public, to make interests served by exemptions, variations and abandonment or revenues, known. However, this is not how it works as will be recalled from recent public complaints by the Minister for Agriculture in connection with importation of milk powder.
As will be appreciated, these powers can be very useful when responsibly managed, but they can be very detrimental to the economy when abused. For example, the minister can vary the existing rate of duty and VAT, in force, by up to 30 percentage points without going back to Parliament. Suppose two millers ordered cereals which have a rate of 35% and one miller pays duty at 35% and takes delivery of his cereals but, influences the finance minister to vary the existing duty upwards by 30%, before his competitor clears his consignment. If the minister agrees he could increase the duty to 45.5%. With this type of influences, it is possible for one person to use his connection to ruin his competitor financially, especially where the minister may have his financial interests at stake. Similarly any Kenyan can form a charitable organization, purportedly to alleviate suffering, whether from disease, injury or famine. Such an organization can import a wide range of goods and get duty exemption, which may confer substantial financial benefits, running into millions of shillings, which may be as high as Ksh.10 million in one waiver. If Government cannot spend such amounts of money without seeking approval from Parliament, would it not be of interest to know how a similar amount given away benefits the government or national interests? Fundamentally, it is critical that such exemptions are not given to businesses to enable them undercut their competitors. Besides, such a variation makes Kenyan taxes unpredictable and so discourages private investments, particularly since it is done quietly outside public view.
Parliament imposes taxes and allocates money to benefit the public. If the tax is paid and the money spent but the desired results are not achieved, the responsibility should be on Parliament to find out why. This is because if no taxes are imposed there would be no resources to divert. Therefore, Parliament has to ensure proper collection of taxes and spending of public funds. It is therefore incumbent on Parliament to require that budget execution be monitored and performance audits conducted to assess achievement of results. On this matter, Parliament should face no hindrances.
(ii) Expenditures Under the current Constitution Parliament can only reactive finance bills submitted by the presidency. Under article 48, Parliament cannot introduce or amend finance bills to increase taxes, budgetary allocations, or to forgive debt. It cannot even correct known cases of misallocation or under-allocations. Under article 100, the government can spend more money on selected budget items, introduce new budget items and spend money before informing Parliament provided it subsequently submits Supplementary Estimates. These powers are reinforced by section 5 (2) of the Exchequer and Audit Act, which allows the finance minister to suspend government budget, in part or wholly, without reference to either other ministers or Parliament. These are the powers give the executive authority to divert public goods and services to preferred areas and tell people openly that only those who support the ruling party will get development.
These provisions have several undesirable implications, first, other ministers and their officers need not be consulted before their budgets are cut or suspended, since without assurance of funds flows, it is difficult for them to plan their work programmes. For the private sector, these provisions make the budget unpredictable, making it difficult to decide on their investments on the basis of the public Budget. In this respect, the Kenyan budget suffers from one of the most critical elements of public finance; lack of predictability. For Parliament, these powers undermine its authority to allocate financial resources, making the actual allocation dependent, solely, on the finance minister. Besides, these provisions allow the budget to be used as an instrument of political power play. In fact, they make the executive the real power to decide who gets what benefits and who pays for them, a condition which undermines tax administration. Parliament plays the ceremonial role of getting the money out of the Consolidated Funds, but how and where money is used, depends entirely on the executive. Once again, this undermines the balance of power between the three branches and makes allocation of public money dependent on politics not on economic returns. More fundamentally, this excessive discretion promotes a culture of dishonesty and insecurity amongst elected leaders.
There is little doubt that poor budget allocation and implementation contribute to bad economic governance as well poor economic performance. To correct the situation requires that the budget process be changed to give Parliament greater say to ensure proper tax administration, resource allocation, adequate monitoring, transparency and accountability. Public resources, in our view, should be budgeted for results hence, implementation should be made firm. Where the executive does not deliver on budgeted results, those responsible should be required to account for their actions. 5. Quality of management
A good constitution, good laws and appropriate institutional arrangements on their own, cannot lead to proper management of Public Finance. They need good and competent managers to execute public programmes. It is therefore incumbent on Parliament to ensure that qualified managers, competent, and persons of integrity, are hired to man key areas of public sector. Their concerns should include, senior management in executive, judiciary and public enterprises who should be required to demonstrate value for money. In management of public finance, two institutions are critical, namely, the Central Bank (CBK) and yet Kenya Revenue Authority (KRA). They have critical roles to play in resource mobilization and have great potential for abuse. Any slippage in the two, especially the Central Bank, can cause serious damage to the economy. It is therefore proposed that appointments to senior positions of these two organizations be based on proved and pre-determined qualification, integrity and competence. For these reason it is important that Parliament approves appointments of the chief executives, their deputies, and directors of these institutions. Once appointed, they should have tenure of office and the executive should not be in a position to fire them. As regards the civil service, there should be complete protection of officers to avoid victimization. In many instances, officers have been victimized simply because the executive expressed displeasure with them, a subject matter, a situation which creates insecurity.
Unless public officers are protected, it is impossible to achieve proper use of public money. Firing public officers without proper cause makes them seek ways to please the executive at the expense of the other branches and in particular the public interest. Officers need to have confidence to say no to diversion of public resources without fear of being sacked. One way to stop arbitrary sacking of officers is to require the Public Service Commission to file annual reports of its activities and in particular:
* details of officers sacked or retired before their age
* reasons for sacking or early retirement, (not voluntary early retirement)
* if sacked for irregularities, the ministry concerned should advise the PSC what action has been taken to avoid recurrence of such irregularities
* where officers are victimized, the PSC should order reinstatement and, the accounting officer should be required to account for the wrong-doing
* give public officers a fast track appeals system to avoid long court delays.
6. Ability of Parliament to enforce accountability and transparency Over the years Parliament has demonstrated its ability to identity areas and individuals involved in abuse of office. In 1975, it was able to pin point individuals who were suspected to be associated with disappearance and subsequent murder of one of the MPs. Subsequently, many more incidents have come to light, but Parliament has not demonstrated the capacity to enforce accountability on such public officers. In some cases, it has not even had the capacity to access information on critical issues of public interest. These omissions need to be corrected and Parliament enabled to access and assess all information necessary to fulfill its mandate as protector of public interests. To be effective, Parliament should have the capacity to cause removal of any public officer, whether at political or technical level, if it feels the presence of such an officer, in service, is prejudicial to public interests.
To achieve this goal requires that Parliament have both legal and technical capacity to understand matters of public finance. It also ought to have the capacity to access technical skills from outside government where and when need arises. It should be in a position to order or commission special investigations into any matter, along the lines of those of Watergarte, Lewinski’s Affair, or more recently, the ENRON scandal in the USA. In the three USA cases, the issue was not so much public money but ethics in conduct of public affairs, which is critical to proper and accountable management of a country.
7. Delegated functions
Among the delegated functions, there are some which are more critical than others. Looking at management of public affairs, it is obvious that the following functions have been overdelegated and need to be corrected:
* matters of public debt; external and domestic * external relations, with development partners
* extra budget funds ie earmarked funds, and financing of regulatory agencies
* public enterprises.
It cannot be overemphasized that where Parliament delegates any function, it must retain the capacity to follow up on implementation, demand accountability and transparency together with value for money. In particular it must retain the power to demand reports on the delegated functions.
8. Public debt
The legal provisions on matters of public debt are scanty, offering very little room for effective Parliamentary supervision. The requirements on external borrowing appear inappropriate and inadequate, with the basic requirements confined to:
* allowing the minister for finance to borrow on such terms and conditions as he may think fit
* external debt proceeds to finance approved expenditure * minister to file details to Parliament as soon as it is practicable but with no time limit
* minister to report the amount of indebtedness through the annual accounts
* the minister or any other officer authorized by him, in wring may execute the debt instrument.
Under the External Loans and Credit Act (Cap 422) the minister is not required to:
* file the terms and conditions of the loan in Parliament before signature
* finance development costs only, which means debt proceeds can finance consumption
* ensure the country has capacity to sustain the debt before contracting it
* ensure debt procuring is cost effective.
As will be recalled, under Article 100 of the Constitution the minister can introduce new expenditure items after the Budget is approved by Parliament, he can also spend more money on items of his choice and seek Parliamentary approval, retrospectively. This means that the requirement to finance approved expenditures is not effective at all. On domestic debt, the minister is free to borrow “in Kenya currency sums of money in such amounts on such terms and conditions” as the minister may think fit and also use the money as he wishes. This is the case because under the Internal Loans Act, Cap 420, there is no restriction on use of such debt proceeds. The minister is not even required to report the local indebtedness at any time. In our view, the excessive delegation of borrowing powers has encouraged excessive and unsustainable borrowing, going hand in hand with very poor investments. As of December 2001, external debt amounted to 44.6% of GDP, representing a slight decline, while domestic debt rose from 24.6% to 25.8% of GDP, an increase of Ksh.16.2 billion in six months, June to December 2001. Going by this current rate, domestic debt can be expected to increase by at least Ksh.32.4 billion, during the fiscal year 2001/2002. This is happening at a time when the Government has released a Poverty Reduction Strategy Paper and a Development Plan, both of which indicate that Government will not engage in net increase in domestic borrowing. Under the circumstances, it appears that the government’s left and right hands work at cross-purposes. The critical question is whether the Government has any commitments or firm policy strategies. One could be excused if he/she concluded, that the two documents are intended for public consumption only and not for operational purposes.
In addition to formal debt, there is a growing problem of pending bills. These are principally, obligations which are contracted without money to pay. According to independent auditors, hired to scrutinize this debt in 1998, there was clear evidence of gross irregularities in contracting pending bills. The announcement by the finance minister that these bills increased from about Ksh.13 billion in June 2001 to Ksh.19 billion by December, 2001, suggests this potentially explosive situation is getting worse. To address the problem of public debt, it is urgent and critical that Parliament gets on top of all issues of debt, policy on debt contracting, and use of debt resources. Towards this end, Parliament needs to set very clear performance and monitoring benchmarks. As a first step, the stock of public debt both local and external, should be strictly related to the country’s capacity to service it, i.e as a ratio of either GDP or public revenues. Already, the level of debt is way in excess of what is sustainable, and is already diverting credit from the productive sectors of the economy to Government. Besides, most of the recent debt financed projects have stalled adding to poor economic performance at a time when the old debts are maturing and increasing the cost of debt service.
9. External relations
Over the last decade or so, Kenya has lost substantial ground and credibility on the external front. The country has not been able to deliver, wholly, on its commitments on any agreement with development partners. Every time an agreement is reached, and signed, it seems the government runs out of steam to implement the agreement. As a result, external receipts have dried up, causing a major problem for Fiscal year 2001/2002 Budget, when Government expected over Ksh.23 billion from external sources, which will not be realized. Consequently, there has been an accelerated programme of local domestic borrowing which will derail social sector expenditures. The diversion of funds from essential services to debt servicing adds to poverty, as government is unable to provide pro-poor services such as health and education together with the basic infrastructure.
In a globalized world economy, no country can survive with such a dented image as Kenya has and still cope with the soaring public debt. The multilateral institutions such as IMF and World Bank have become pace setters for foreign direct investments. Now it is either Kenya agrees with Bretton Wood Institutions or investors go elsewhere. This has been happening for over ten years, with private investments declining to almost zero and poverty levels rising. To salvage Kenya’s reputation, Parliament needs to step in and insist on being fully involvement in any external agreements. Once an agreement is approved by Parliament, it should be easier to implement it in total. If for any reason, there are issues which the house cannot peruse, a special committee of Parliament should be set up and after taking oath of secrecy, scrutinize issues on behalf of Parliament and make recommendations. In any case, time has also come when Kenyan leadership must stop experimenting with the country. It is from this background that it is proposed that the following changes be made to the Constitution.
10. Legislative changes to protect institutional arrangements
Amendment to Articles 16, 19, 20, 22, 23, 24, 25, 39, 48, 58, 59, 99, 100, 102, 103, 106, 108, 109, 110
10.1 Article 16 and 19: Appointment of Ministers
The two articles give the president powers to appoint ministers and assistant ministers. To protect the institution of Parliament and ensure only qualified people of integrity are appointed ministers, it is proposed that these two articles be amended to ensure: -
* the total number of ministers will not exceed 25% of Parliament
* ministers will be appointed by the president and approved by Parliament
* no minister will assume office until and unless Parliament has approved the appointment. If the president wishes to appoint a minister when the House is in recess, it must be recalled or the person does not assume office until cleared
* that to increase the number of ministers to exceed 25% of Parliament will require approval by at least 50% of Parliament.
These provisions are necessary to avoid excessive appointments into the cabinet and also ensure individuals who have already been cited by Parliament for irregularities are not appointed into public positions. Such changes would also keep the cost of running the government down.
10.2 Article 20: Appointment of Vice-President
It is recommended that this article be amended to provide for Parliamentary approval of the person appointed as Vice-President.
10.3 Article 22: Appointment of Permanent Secretaries (PSs)
This article provides for the following, with regard to appointment of Permanent Secretaries:
* appointment of permanent secretaries by the president
* determination of the number of permanent secretaries
* placement of government departments under more than one PS.
These provisions make PSs appointees of the president while in fact they are public officers accounting for public funds. To ensure the institution of permanent secretary is responsible for protection of public interest, it is proposed that:
* permanent secretaries be appointed by the president on advice of a revamped Public Service Commission
* the appointment be subject to approval by Parliament
* the number of permanent secretaries be fixed by Parliament through an appropriate law
* each government department be answerable to one PS only.
10.4 Article 23: Use of Executive Authority
This article confers executive powers on the president, with the only condition attached to it being subject to the Constitution. Therefore, the president is not bound to follow the specific laws in exercise of this power. This anomaly has encouraged issuance of directives, which in some cases are contrary to sectoral laws.
To correct this anomaly, it is proposed that the article be amended to provide that:
* the executive authority shall be exercised subject to the Constitution and laws of Kenya
* the president obeys the Constitution and laws of Kenya in exercise of his executive authority
* it is a duty and obligation to uphold the Constitution and laws of Kenya to promote welfare of Kenyans.
These provisions will remove the misconception, which currently exists, to the effect that the president is above the law while he is actually the custodian of the Constitution and laws of the land.
10.5 Article 24: Abolition and constituting of Public Offices
This article gives the president powers to constitute and abolish public offices. The article is misplaced and leads to unnecessary duplication of public agencies. For example we have several agencies dealing with the same matter, e.g. exports and investment promotion, Investment Promotion Centre, Export Processing Zones Authority, Export Promotion Council, and Department of External Trade in the Ministry of Trade and Industry. Similar duplications exist within other sectors, e.g. the financial sector with the CBK, CMA, RBA and Insurance Commission. These duplications are costly and cause confusions to private sector operators who are required to obtain multiple licences for their operations. To avoid duplication, it is proposed that this article be amended to:
* require constitution of new offices and abolition of those already in place, be subject to appraisal by the Public Service Commission and
* require approval by Parliament.
10.6 Article 25: Holding of public office at pleasure of president
The reading of this article is that if the president is displeased, he can get rid of any public office holder. In practice, if the president expresses concern over any individual officer, the officer can be fired, interdicted or retired immediately, without notice. In case of early retirement it is done in public interest. This creates insecurity within the service but of greater concern is the fact that those seeking favours use the name of the president to intimidate public officers. They may also give false information on officers to facilitate their removal. We have witnessed many incidents of people going round collecting money under the guise of being closely connected to powers that be. To remove this source of insecurity in public service it is proposed that the article be amended to provide that:
* holding of public office shall be in public interest
* where public interests conflict with other interests, public interest shall take precedence
* PSC and other Commissions be solely responsible for personnel matters in the public service.
10.7 Article 33: Nominated MPS
This article provides for twelve nominated MPs who are selected according to the strength, i.e number of MPs a political party has in Parliament. In the current Parliament, one nominated MP had to leave to make room for another person, which was a repeat of a similar incident earlier. Whatever good reasons may have occasioned these changes, they open an avenue for abuse and political manipulation, similar changes occur more frequently, with nominated councilors.
In our view, this is an abuse of public institutions. The Constitution requires the nomination be made to represent special interests no special situations. Special interests cannot be synonymous to special situations. Consequently, to avoid abuse expression, the Constitution should be changed to provide that:
* once nominated the MP or councilor should serve the term.
Unless stopped, these nominations can be a source of political corruption.
10.8 Article 39: President power to protect MPs due to vacate seats
Under this article any MP who misses Parliamentary sittings for eight consecutive days, without the speaker’s permission loses his seat, but the president can direct otherwise. In absence of any set criteria on which this authority is to be exercised, it is not possible to see fairness and neutrality in its exercise. In an effort to restore Parliamentary supremacy, this article should be amended to provide neutral criteria, not subject to favours by the executive. The ideal criteria for exemption should include,
“absence from Kenya, sickness or similar just cause”.
This would require proof of physical impediments. 10.9 Article 41: Appointment and removal of members of the electoral commission The responsibility of appointment and removal is conferred on the president subject to tribunal findings. However, the article does not provide for a solution where a member of the commission has misbehaved and deserves to be removed but the president does not appoint a Tribunal. In view of the critical role the Electoral Commission plays in ensuring proper conduct of elections, the Constitution should provide for a way to remove a member even when the president does not appoint a tribunal to investigate him or her. It is therefore proposed that the article be amended to:
* require Parliamentary approval of the chairman and members of the commission
* require that the Parliament, by a motion passed by at least 50% of members, may require removal of a member who deserves to be removed
* require that once the motion is passed, the member be duly removed.
10.10 Article 48: Bills dealing with finance
Under this article, only the president through a Minister can introduce a Finance Bill to parliament. But there is no requirement for the president to comply with any social or economic principles in course of preparing finance bills. To ensure efficient use of scarce financial resources it is proposed that the article be amended to require the president to observe basic principles of efficiency, stability, equity, sustainability and predictability, in preparation of finance bills. Hence it should be amended to ensure that:
* finance bills are submitted to Parliament on the basis of an agreed fiscal strategy
* resources are allocated efficiently to provide identifiable national objectives and, targets to meet public needs
* mobilization and allocation of resources target achievement of economic stability
* the government budget enhances equity
* public expenditure is sustainable especially with regard to debt
* with regard to public debt and investment, the government maintains intergeneration equity.
If these principles are not followed, Parliament may amend the finance bills and make changes, as it deems fit. Parliament should bear no responsibility over bills presented by the executive. Therefore, there should be no linkage between Parliament rejecting a finance bill and seeking re-election.
The role of Parliament when dealing with finance bills should be,
* to consider the bill, and if satisfied, pass it,
* if not satisfied, reject the bill.
In so doing, Parliament should consider whether the bill is in accordance with the agreed macro policies and objectives and whether there is enough capacity to implement polices stipulated in the bill.
10.11 Impact of Article 58 and 59 on Parliament Authority
Under article 58 and 59, the President can summon Parliament, prorogue it or dissolve it. These powers give the president enormous influence over Parliament, thus tilting the concept of checks and balances clearly in favour of the president. With such powers, everybody, including members of Parliament, knows who has the superior power. This was demonstrated when in 2001, the president prorogued Parliament despite apposition by majority of MPs who wanted to entrench the Constitutional Commission into law.
To restore supremacy of Parliament it is proposed that:
* Parliament sets its own calendar, when to be in session and when to be on holiday
* Parliament establishes clear timetables to avoid powers of summoning, prorogation and dissolution being used as a political weapon
* the president be provided with authority to recall Parliament when national interests so demand.
11. Chapter IV: Appointments of Chief Justice, Judges of the High Court and Court of Appeal and the Judicial Service Commission
There is a public belief that the presidency has undue influence over the judiciary. This is not good for the separation of powers and functions. However, every time the president expresses his opinion on matters before the court, the final decisions appear to tally with his wishes. This is not good for development of checks and balances or for independence of the judiciary. To enhance the concept of checks and balances, it is proposed, that:
* appointment of members of Judicial Service Commission be done by the president and be approved by Parliament
* to protect judicial officers, the chairman of Judicial Service Commission be an independent person, preferably a former holder of a Constitutional office holder, not the Chief Justice, just as the Head of Public Service is not the Chairperson of PSC.
* appointment of chief Justice and Judges of High Court and Court of Appeal be done by president subject to parliamentary approval
12. Article 100: Preparation of Annual Estimates
The article requires the ministers for finance to prepare annual estimates of revenue and expenditures and to lay them before Parliament. The expenditures are required to be prepared in separate votes. But as regards revenues, the Constitution does not require any form of presentation, as to the source. Therefore it cannot be over-emphasized that budget preparation and execution is solely a responsibility of the executive. Parliamentary role is confined to approval, monitoring, and evaluating results. To ensure proper budgeting:
* the Constitution should ensure Parliament has enough time to consider budget proposals. * correct the current straightjacket arrangement which make complying with the timeframe more important than Parliamentary input into the budget.
12.1 Imposition of taxes and tax waivers
There have been many instances when taxes and other charges are significantly changed through legal notices. For example, recent increases of NSSF contributions and reduction of duties on duties of used clothes. This is unreasonable as it does not afford such changes adequate Parliamentary and public scrutiny which is necessary. Though more detailed requirements are provided in both the Exchequer and Audit Act and the respective tax laws Parliament needs to approve all major changes.
To correct the omission, it is proposed the Constitution be amended to:
* specifically make reference to taxation
* prohibit significant changes of taxes, charges, and levies in excess of, say more than 10%, without an Act of Parliament. In all case, where taxes are varied, the instrument of variation should be laid in the House within 21 days of effectiveness otherwise it should be null and void
* a requirement that to require every person, or agent conferred with authority to waive or vary taxes and charges imposed under the law under his/her responsibility, will report periodically on exercise of such powers
* the Constitution or specific laws, to require that authorised persons make at least quarterly reports on waivers or variations, showing the person for whom the tax is waived, amount waived, reasons for waiver, and details of benefits the government gets from such waivers.
It is essential to note that once the tax is imposed, the amount payable becomes public money. Any person who gives such money away dispenses public funds and needs to be accountable. Besides, the public needs to know the people it assists and the reasons for such assistance.
12.2 Article 100: Estimates of expenditure Under the current Constitution, Parliament does not get any direct information from the government departments. It only receives departmental budgets as approved by Treasury and as included in the annual estimates. This omission denies Parliament critical information on which to assess the soundness of proposals submitted by departments. To enable Parliament to consider the effectiveness of departmental expenditure proposals and to hold such departments responsible for their performance, it is necessary to get the background information. Besides, the type of budget information submitted to Parliament by the Treasury does not afford Parliament opportunity to relate proposals to on-ground operations. To correct the situation it is proposed that:
* annual budget estimates be accompanied by a budget policy statement indicating long-term and medium Government objectives
* budget includes the following information
(i) details of proposals submitted by departments together with the comments and recommendations of finance minister on the proposals
(ii) to enable Parliament scrutinize departmental proposals they should be submitted not later than one and a half to two months before the budget day
* departmental proposals be scrutinized by Parliamentary sectoral committee before Parliament debates on the consolidated annual estimates
* annual estimates be submitted together with necessary economic data and information to justify the estimates and prove their sustainability in the future
* departmental budgets target clearly indicated objectives and targets to facilitate monitoring
* once approved, the budget becomes a firm commitment on the part of government to its people, not to be significantly changed without reference to Parliament
* any change in excess of 2% to 3% of total expenditure, should be considered significant, and referred to Parliament for approval before expenditure starts.
In ideal situations, these details should be incorporated in a Budget Law, but given Government reluctance to institute strict budgetary controls, some of these details may need to be incorporated into the Constitution
13. Article 102: Role of Civil Contingencies Fund (CCF)
The purpose of this fund is to finance unexpected and unforeseen emergencies. However, many accounting officers consider CCF as a reserve fund to be used to meet expenditures which cannot be accommodated under the ministerial ceilings. The tendency is to leave out essential expenditures with the hope that they can be financed from CCF. To avoid misuse of this fund and enhance accountability, it is proposed that:
* the minister be required to report any charges (withdrawals) from this fund, to Parliament within 21 days of such charge. * details provided to include the nature of emergency, the department which was responsible for dealing with it, and the extent of the emergency, ie expected duration
* use of CCF to finance non-emergency activities, be prohibited.
14. Management of specific purpose funds: Extra Budget Activities
These are extra budget activities set aside to meet specified public goods and services. They range from payroll taxes such as National Social Security Fund (NSSF) and NHIF, to consumer taxes such as dairy industry development levy, road maintenance, rural electrification levies, and sugar development levy etc. One primary objective of these levies is to improve the specified sectors or target services. As a general rule, if the benefits generated by the Fund do not exceed the burden borne by the consumers, the economy and the country are worse off and the Fund should be abolished.
A critical examination of these Funds leaves many Kenyans wondering whether they would not have been better off without many of them. For example, the dairy industry collapsed many years ago while the dairy development levy continues to be levied, despite deteriorating road network, the road maintenance levy continues to be imposed, same as the rural electrification levy, though no rural electrification has taken place in the last three years. However, the greatest disappointment is in sugar development levy which targets development of local sugar industry, yet it collapsed several years ago, but the sugar levy lives on. What should worry Kenyans is the fact that the Kenya Sugar Authority, the agency charged with promoting local sugar production, has on several occasions, been involved in importation of duty-free sugar, to the disadvantage of local sugarcane grower/sugar producers, a behaviour similar to warden turned poacher. Such actions add to the problems of this industry, the principal source of income for many farmers in Western Kenya region. There can be no justification for paying subsidies to sugar traders (through duty and levy free importation), if anything; we should give assistance to local producers. These kinds of inconsistencies occur because there is no adequate supervision over authorities executing specified mandates. It is therefore critical that Parliament reasserts its authority over matters of all taxes and charges of equivalent effect so that if the benefits of the Fund activities do not exceed the burden borne by those who pay the levy, it is economically beneficial to leave the resources in the hands of the private sector and abolish the levy. To achieve this objective it is proposed that:
* Parliament assumes responsibility over budget approval and execution of all public Funds
* Fund budgets be approved through Parliamentary Sectoral Committees * Parliament requires submission of annual budget execution reports on each fund
* Parliament requires regular evaluations to ensure that each Fund remains necessary.
* where a public enterprise is exempted from the provisions of the State Corporations Act, the exemptions should not apply to Parliamentary Budget and Reporting Procedures together with the CAG oversight
* that Parliament ensures appointment of CEO’s is competitively done, * board members are competent to add value to the enterprise, and
* where these conditions are not observed, Parliament on recommendations of the House Sectoral Committee orders their removal through a censure motion.
15. Article 103: Public Debt
With debt burden of about 75% of GDP, Kenya is heavily indebted. A large portion of external debt is currently tied to stalled projects. This means that Kenyan taxpayers are servicing part of public debt which is not providing any benefits to the economy. There are far too many public projects which are poorly selected, planned and executed, leading to many of them stalling. There is also an added problem of contracting liabilities which are not provided in the budget thus leading to accumulation of pending bills. According to a study conducted in 1997, these contracts are entered into without proper protection of public interests giving contractors excuses to escalate charges. The debt problem is exacerbated by lack of limits to domestic borrowing, leaving room for unreasonable and unsustainable borrowing, without due regard to debt carrying capacity of the Government budget.
To address the problem of public debt, it is proposed that:
* the Constitution requires Parliament to enforce debt limits through a specific law to ensure that debt is strictly restricted to affordable level, based on either GDP or revenue performance
* borrowed funds are productively invested to increase economic capacity to service debts
* the ratio of total debt is maintained at a reasonable and sustainable level
* any public officer who commits public funds outside the approved budget, is held personally responsible for the debt
* such an officer be required to make good any loss the government suffers due to unauthorized action
* provision be made, either in the Constitution or in a specific law, that where Parliament has previously cited an individual or department for irregularities, it should require proof that corrective action has been taken before releasing funds to that department
* government should to report all public debts and all contingent liabilities at least once a year and explain the changes.
* that guarantees be approved by Parliament before becoming effective and, where the primary debtor defaults, before charging any public funds to pay for obligations.
To control the level of debt and ensure that debts are properly contracted for productive investments, the Constitution should provide that:
* while an Act of Parliament governs the whole arrangement of debt related issues
(i) terms and conditions of the loan should be laid before Parliament and that the debt
(ii) shall not take effect until and unless approved by a resolution of Parliament
(iii) the government can only borrow to finance approved budget expenditures With regard to public enterprises, the Constitution should provide:
* that terms and conditions shall be laid in the House and approved before the money is released
* these conditions shall apply whether the money is from the Consolidated Fund or from any other public fund.
To afford the taxpayers an opportunity to relate the amount of money spent to expected results, the Government should be required to file a Budget Performance/Outcome Report. This report to be available as follows:
* within four months after the end of fiscal year
* indicate the specific achievement to be sought through of the public outlays
* the report be displayed for public inspection for at least six months.
16. Appointment of Governor Central Bank and Commissioner General Kenya Revenue Authority
16.1 Governor Central Bank (CBK)
The Central Bank is a critical institution for proper management of public finance. There have also been instances in the past when CBK has not acted in the best interest of the country. It should therefore, be entrenched into the Constitution to:
* protect the tenure of office of the Governor, deputy an board members
* have the governor appointed by the president with Parliamentary approval
* provide for an appointment period of five years renewable once * provide for modalities of removal
* provide for an agreed performance evaluation.
As part of protecting the country and its resources, the Constitution should further prohibit the CBK:
* from effecting any transfer or transaction where public money is being paid in contravention of the law.
* hold any person, who effects illegal transfer of public funds personally liable for the and require him/her to make good the loss, whether the person is in office or retired. 16.2 Commissioner General KRA
This is a critical office in revenue mobilization and needs to be protected, therefore, the Commissioner General, his deputy and directors should be appointed with approval of Parliament.
17. Appointment of Controller & Auditor General (CAG)
The current CAG has been in office for over 30 years. The performance of the office has been lacklustre especially in the 1990s. Inadequate resources and lack of an effective supervision, together with poor institutional arrangements may have been responsible for CAGs poor performance. To correct the situation, it is proposed that:
* a public audit board be put in place to oversee the operations of CAG work,
* appointment of the CAG and the board be made by the president with approval by Parliament
* the CAG be appointed for a period of 5 years, for a maximum of two terms only
* the government should conduct performance, value for money audits and file the report in Parliament * the CAG department as a whole be made a Constitutional office
* the Parliamentary Committee on Finance be empowered to appoint an auditor for CAG.
18. Accountability
Recent experiences show public officers, particularly at political level as very shy on taking responsibility. As will be recalled, in August 1999, a train accident occurred in India killing 200 people. The Railway Minister Nitish Kumar took moral responsibility and resigned. In Kenya, many more people have died under circumstances which suggested negligence, yet nobody takes responsibility. For example, tribal clashes occurred in 1991/92, again in 1997, when several hundred Kenyans died. In 2001, over 100 Kenyan died in Tana River while recently 15 Kenyans died in Kibera and 21 in Kariobangi North, both within a stone throw from both Harambee House and Police Headquarters, but so far nobody has taken responsibility. It is therefore not surprising that even ordinary people can openly say they cannot feel the presence of the government. To restore Government credibility, Parliament needs to enforce full accountability on all those in charge of public offices, especially with regard to public finance. It is therefore proposed that the Constitution be amended to provided the following:
a) On public finance
* make Permanent Secretaries or Accounting Officers and heads of self-accounting organizations, accountable to Parliament for money under their responsibility
* hold any person who uses, directs use of public funds, refrains to collect, or fails to protect public funds, whether at political or technical level, in disregard of the law/procedure or instructions, accountable for any loss which may occur. Such a person should be required to reimburse the government for the loss, whether in office or after retirement
* Parliament should be empowered to monitor all forms and operations on public finance on a continuous basis.
b) To enforce discipline and accountability at political level, the Constitution should be amended to introduce an article empowering Parliament to pass a motion, by a vote of 50% of members of Parliament, for removal of a minister on grounds of:
* incompetence in conduct of his/her duties
* abuse of office or willful abuse of oath of office, or lack of confidence * misconduct or mismanagement
* incapacity, whether physical or mental * the motion of removal be initiated by receipt of a petition signed by at lease 30% of MPs
c) As part of promoting accountability, the Constitution should be amended to * exclude, from The Official Secrets Act, any matters relating to, corruption in public sector,
* misuse, theft and diversion of public funds, directives issued contrary to the law, and procedures on public finance etc.
d) The Constitution should be amended to provide for removal of a member of Parliament where it can be proved that the MP has,
* abused his oath of office
* deliberately acted contrary to the Constitution
* been involved in misconduct, such as promoting hatred, discrimination or other similar cause
* the process be initiated either through a Constitutional court or * a petition signed by 25% of registered voter in his Constituency.
Given the serious problems facing this county, Parliament should spend more time working for the county than the case is now.
19. Article 106: Public Service Commission, Teachers Service Commission etc
To enable the Public Service Commissions perform, it is necessary to appoint competent professionals, to administer these commissions, including: of PSC, TSC, Medical and Dentist Boards etc. Appointments of the chief executives and board members should be made by the president and approved by Parliament. Once appointed, these officers should only be removed if they are incompetent, incapacitated, or for misconduct/misbehaviour. Among the functions of these commissions should be to:
* advise the president on appointment of CEOs and other senior officers
* advise the president on establishment and abolition of public offices
* advise the president on professional matters of their responsibility.
These commissions should operate independently and not be subject to direction by any person. 19.1 Protection of Public Officers
Going hand in hand with protection of public officers, the Code of Conduct for public officers should be entrenched in the Constitution with more details in a specific law.
It is further proposed that the Constitution be amended to protect public officers from:
* victimization and discrimination in promotion/advancement if they perform their duties faithfully
* removal from office/dismissal etc except for a provable cause.
As part of strengthening the public service, the duties and functions of Permanent Secretaries should be spelt out to include
* ensuring efficient and effective management and operation of their departments or ministries
* offering professional advice to ministers and the government
* implementation of policies and programmes of the government
* ensuring efficient management of public funds under their ministries or departments.
20. Article 108: Appointment of Police Commissioner
The police force has come under very critical scrutiny and criticism of late. Besides, the Police force has been assigned duties which undermine its image. They have also been used to restrain Kenyans from exercising of various forms of fundamental rights, leading to loss of public support. To correct the situation, it is proposed that:
* the appointment of the police commissioner be done by the president and approved by parliament
* he be appointed for five years renewable once only
* the Commissioner be accountable for the money allocated to the police force.
21. Article 109: Appointment of Attorney General To ensure an effective institutional arrangement between the three branches of the government it is critical to ensure that the offices of the attorney general and the public prosecutor are held by persons who are qualified, competent and of integrity. It is therefore proposed that:
* appointments of the Attorney General and the Public Prosecutor be done by the president with approval of Parliament
In addition, to avoid misuse of powers of prosecution as a means of targeting individuals, it is proposed the AG be required to file a full report of all prosecutions he starts but withdraws before completion, including details of the persons involved and reasons why cases are withdrawn.
22. Corruption and Protection of Public Property
Corruption and misuse of public property, especially money, causes underdevelopment and rising poverty. These types of instances are well documented in PAC and PIC Reports, where public money and other properties, have been converted into private property. To protect public resources, the Constitution should entrench and institutionalize modalities:
* for fighting corruption
* enjoin every Kenyan citizen to protect and preserve public property, including money,
* enjoin every Kenyan citizen to combat and expose corruption, misuse, theft and waste of public funds and other property
* provide that any transfer of public funds to private ownership which does not follow the law and procedures to be null and void.
If this is done no every Kenyan will have a duty and responsibility to protect public resources and where the situation warrants, go to court without hindrances.
March 18, 2002