Simon Bland, Head of DFID Kenya looks at what is meant by good governance, then explores the importance of state-citizen accountability and how taxation can help build this. In addition, he briefly examines how one can tackle a culture of “arrogance and extravagance of power” or the “Big-Man” culture before concluding with the importance of effective and timely communication.

Kenya is among one of the heaviest taxed countries in Africa.  Whenever I talk to people from the private sector and ask what the main constraints to doing business in this country are, I get the repeated messages that outline security, infrastructure, better governance and less interference in the markets (Parastatals and over-regulation).  These constraints are clearly interdependent.The poor infrastructure means people spend a disproportionate amount of time in traffic. The lack of street lighting leads to greater insecurity at night. As a result, businesses close early and lose business opportunities.  Inconsistent regulations with scope for wide interpretation and discression allow abuses of power.  Government waste leads to poor infrastructure and service.  Low wages to the security forces provide an underpinning incentive to supplement their salaries.

All these constraints need to be tackled because the private sector is so crucial to Kenya’s development.  It is the engine of growth.  Donor support is tint in comparison to private sector funds. This is what taxpayers want in return for their tax Shilling. For my taxes I expect to be secure, I expect good standards of infrastructure; I expect services to be delivered to acceptable standards and be given the opportunity to complain and be heard.  Why isn’t the private sector demanding improvement? Many private sector operators have become comfortable with the rules-of-the –game and are able to function adequately despite regressive taxation (bribe and unofficial payments). Changing these systems takes time and has risks.   

Giving up short-term, reasonably predictable, individual (company) gains for long-term, less certain and shared benefits take some courage.  I saw this clearly in Indonesia following Soeharto’s departure, and the effects of this again in Russia following Yeltsin’s election. Collective voice has power, individual voice usually does not.  Getting the climate right for investment (domestic and foreign) and private sector growth are essential ingredients economic recovery, growth and poverty reduction. 

In the developing world, pregnancy and childbirth kill a woman every minute. They die with no trained midwife or doctor to help. Over her lifetime a woman in Kenya is something like 130 times more likely to die as a result of pregnancy or childbirth than a woman in the UK. Having a child in the UK is a joyous experience.  But in the developing world women often have no choice. Every year, more than 10 million children under the age of five die, 159,000 of them in Kenya.  Forty percent die as small babies in the first four weeks of their short lives.  Dirty water and inadequate sanitation kill 6,000 children each day.  Each year, malaria kills one million people, tuberculosis 2 million and AIDS 3 million.  These people die because of poverty.  Of the children who survive, over 100 million of them are not in school.  They can’t go because it costs too much, or because they have work or because they are orphans.  In Africa alone, 12 million children have been orphaned (over 1.7 million in Kenya ) and if something isn’t done this will increase by 50% by 2010.  Government revenue-taxes, should tackle these issues in Kenya.

The Kenya Revenue Authority (KRA) is doing a good job in collecting taxes.  In 2004.2005 it collected Ksh 274.25 billion (43.51 billion) which was 20% of GDP (third highest in Africa – 3 times Rwanda, 2 times Uganda and 1.5 times Tanzania) and accounts for 94% of Government of Kenya Revenue.  The performance in terms of broadening the tax base increasing compliance is improving but, and this needs to be checked for out of every 100 people liable for tax, only 40 of them are paying. Citizens have a right to know why they are paying taxes; how much they have to pay; what to expect; and what to do if their expectations are not met. 

 Good Governance

We talk a lot about good governance.  It was clear focus in the commission for Africa Report last year and featured heavily in the G8 discussions in Gleneagles.  But what is it?  On discussing leadership a few months ago I heard a phrase that stuck: You know it when you see it; you miss it when you don’t.  Is good governance like this, largely subjective? It is clearly complex.  One way of looking at it would be to argue, and many do, that it is first and foremost about governments accounting to their people.

How does governance improve? It is hard to influence from the outside and our history of conditionality shows this clearly.  Donors turning the tap on and off has seldom had the desired effect.  What I do think, and what my organization thinks is that the direction of travel is important (is governance getting better or is it getting worse).  We also believe that the role of procurement and public financial management is fundamental.  But can taxation be one way in which governance improves? Good governance matters for economic development and poverty reduction.   

Measuring governance is tricky.  Indicators are numerous (electoral systems, corruption, human rights, public service delivery, expenditure management, political freedoms, civil liberties, and rule of law for example. The most comprehensive source of governance indicators is probably the World Bank’s periodic survey “Governance Matters” of around 200 countries by Kaufmann, Kray and others, done in 1996,1998,2000,2002 and 2004.  These gather perceptions based indicators and condense them to six measures: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and corruption.  A second source is again from the Bank – the CPIA – Courtly Political and Institutional Assessment which surveys around 80 countries assessing a range of public sector management and institutional factors along with five other economic and social indicators to indicate how well a country can make effective use of aid.

And to make the point, reckon that if I asked Kenyans to rate their governance, there would be a pretty broad spectrum of opinion.  Certainly if I asked someone in the UK to comment on Kenya’s governance, it would inevitably get a very low score indeed.  Why is this and what can Kenya do about it?

State Citizen Accountability

Let me begin, on this theme by explaining a little about DFID (or Difid as we are often known). DFID is the British Government Department responsible for our international development efforts.  We are not the High Commission, we are not the Foreign Office we are a government department with a secretary of state, Hilary Benn in the cabinet. I am the Accountable Officer for all DIFD work in Kenya.  We work under an act of parliament that directs all our efforts towards poverty reduction.  We measure this against progress towards millennium Development Goals – a set of eight internationally agreed development targets around poverty reduction, education and gender balance, under five and maternal mortality, tackling HIV/AIDS and malaria and better environmental management.

Everything we do must have poverty reduction at its heart.  It is illegal for me to approve anything that doesn’t.  I do not and cannot consider UK commercial interests. All our aid is untied – it is not linked to the provision of UK goods and services. All our bilateral aid is in form of grants not loans. Last year we spent $60 million in Kenya. Where did this money come from?  From the taxpayers.

When I travel back to the UK and I end up talking about what I do, I am quizzed and challenged about what I do with the underlying assumption that I am wasting taxpayers’ money.  They understand charity but the development argument is a difficult one.  When Kenya hits the international press, as it does with some frequency, the media, parliament and the taxpayer pick up on it immediately. I am providing answers to UK parliamentary Questions and Ministerial Correspondence about Kenya long before the Kenyan Government is explaining to its parliament  and tax payers.

The Role of Taxation

Effective states and governments make much more effective partners in fighting poverty.  So why is DFID interested in taxation? Traditionally we have supported tax reform but this has been largely technical support on hardware and software around specific tax functions.  Recent research clearly indicates that there is a strong link between taxpaying and better government accountability to taxpayers for services and performance.

What impact does aid have on the incentives for developing countries to generate their own revenues? If taxation does matter for good governance and state building, what should donors do?  This is particularly important in this unprecedented period of increasing aid (possibly and extra $50 billion per year by 2010). By 2010, 17 African countries will be individually aid dependent to the tune of between 13% and 63% oda /GDP.

High levels of aid raise serious questions about disconnections between governments and their citizens.  Aid flows are between 6 and 40 times more volatile than fiscal revenues raising important long-term issues of institutional sustainability, if and when aid volumes decline.  According to the IMF, the overall impact of aid on domestic revenue collection is negative or at best insignificant. Is the attention paid by governments to donors, displacing attention from improving domestic revenue collections? 

In 2004 and 2005, a lot of media attention centered around governance and corruption issues.  Much of this attention focused on what the donors are doing.  There were some famous speeches. The Kenyan Government spent more time dealing with donors than it did to its people.  So this year, we (donor community) have been a little quieter.  Not that we don’t care, but we think it is crucial that the accountability link is between the state and its citizens.  There is still a risk that donors will prioritise accountability to their parliaments and taxpayers for the use of aid, and that this displaces efforts to strengthen accountability between developing country governments and their citizens.  We are making the arguments in the UK that yes we need to protect our money but also how important it is that we build rather than distort state-citizen accountability. People frequently approach and ask me for help.  What can DFID do for them? They should ask their government to help. Almost every Kenyan – even the very poor people pay some taxes (if only VAT). 

Unearned aid flows can result in the same effects as some concentrated natural resource revenues – the resource curse! Indeed the exploration for oil resources off the Northern coast of Kenya raise some serious concerns that, if found they will distort the developing relationship between taxpayer and the state.Access to such resources limits the incentives to develop electoral, representative and legislative institutions through which they might bargain with groups of citizens over revenue and policy.  We are talking with the Government to encourage it to sign up to the principles of the Extractive Industries Transparency Initiative, a voluntary initiative that seeks to create the missing transparency and accountability around what companies pay governments and the revenues that governments receive from the resource extraction.

The Arrogance and Extravagance of power 

This is quite a loaded and perhaps melodramatic expression but it captures a significant problem (not only in Kenya but in many countries going through political transition).  We hear a lot of corruption cases in Kenya. Anglo Leasing, Goldenberg, Ndungu and Githongo for example dominate the national and international press.  Tackling corruption is difficult and drawn out.  Corruption is not an African phenomenon (we see cases in Europe and North America with regularity) but we have institutions, systems and laws that help tackle it.  Tackling corruption means addressing political accountability, independent investigatory capacity, appropriate legislation, options for truth, justice and restitution, strengthening financial management and procurement systems and empowering the citizenry to shout and demand accountability.

But mismanagement and waste in government is equally if not more disturbing.  There may be progress in building systems around public sector reform (Rapid Results Initiatives, Results Based Management, Performance Contracts and Citizens’ Report Cards for example). And this is good news. But what is very difficult to defend (paradoxically internationally more than nationally) is the perceived callousness of the political classes (KACC expression).

The promulgation of the ministerial code last November could be the beginning of a change in the behavior of the political elite in Kenya.  The ten principles of selflessness, integrity, objectivity, accountability, transparency, honesty, prudence, political impartiality, collective responsibility and leadership could provide a foundation for change and increased accountability and provide some reference against which to hold ministers to account.  We may have seen this over the last few months with Ministers resigning and stepping aside in response to public pressure.  This is an enormous step forward but the step is not irreversible so continued pressure to hold politicians to account is needed.

Communications

In any accountability, good communication is essential.  The Kenya government is a poor communicator. At a recent event I was at with Nick Gowing (BBC World News Anchor) he coined the phrase “ the tyranny or real time”. You’ve all seen this.  The twenty four  seven newscast.  The newsmen and women filling in and repeating endlessly to fill the gap until new information arrives.  It means we have to work harder and faster to get our story out.  Bad news sells- good news doesn’t.  In the time it takes to get a press line ou,t the damage can be done. I need to be much more proactive in developing press lines and communicating clearly why we have made the decisions we have.  We talk now about 15 minute deadlines. If we aren’t prepared, the rumors spread.  A news retraction a day or two after the headline has no effect.  So, as part of accounting, a government must be prepared to communicate quickly and clearly with the electorate.

And what of Minister Kagwe’s new plans for better public relations across various overseas missions? Do taxpayers think this is good use of their money?  I would argue that it makes sense.  But I also agree entirely with the sentiments that the best PR is clear actions and results.  Combine the two and Kenya’s international image may change for the better.

Simon Bland 
Head of DFID Kenya