The Citizen Alternative Budget

May 2016

INSIDE

2016 Issue

1. Introduction 2. Taxation Proposals 3. Sector Proposals

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1.0 INTRODUCTION



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The Institute of Economic Affairs (IEA-Kenya) is pleased to present the Citizen’s Alternative Budget 2016/17. The Citizen’s Alternative Budget contains budget proposals from the public and private sector stakeholders, who attended the IEA annual pre-budget hearings that took place on 3rd and 4th February, 2016. The proposals submitted were consolidated and synthesized by the IEA according to the various Medium Terms Expenditure Framework (MTEF) sectors, largely based on their feasibility, whether they make economic sense and whether they are in line with the national priorities of the government. Furthermore, this alternative budget takes cognizance of the draft budget policy statement 2016/17 as a pre-budget statement that sets the macroeconomic framework through which the government will prepare the forthcoming budget and the National Treasury notices on the guidelines’ on budget proposal submissions for the fiscal budget for the financial year 2016/17. The Alternative Budget seeks to influence government decisions and help civil society develop viable alternatives to government policy. Equally, it provides a complementary avenue for deepening participatory budgeting, given the legal basis for public participation in government planning and budgeting processes. As the country embrace devolved system of government, it is envisaged that, through the IEA pre-budget hearings and Citizen Alternative Budget, there is likely to be an increased civil society engagement in county government planning and budgeting.

1.1 Background

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The Budget Policy Statement (BPS) 2016 indicates that the economy grew by 5.3 percent in 2014, and is projected to expand by 5.6 percent in 2015, 6 percent in 2016 and 6.5

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4. Conclusion 5. Annexes

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BUDGET PROPOSAL HIGHLIGHTS 2016/17

By Institute of Economic Affairs

1.11 Macroeconomic Framework

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3.

Education Sector

Increasing the number of quality assurance officers under Education Standards and Quality Assurance Council (ESQAC) Zero-rate VAT on textbooks – KICD approved books Operationalize alternative Provision of Basic Education and Training (APBET) Registration Guidelines. Establishment and operationalisation of National Integrated Education Management Information System (NEMIS) Land and Housing Sub Sector

The national government should work towards enacting a Slum Upgrading Policy in Kenya. The National Treasury should allocate funds towards the establishment of a central data base of the most updated information on the land and housing sub-sector in Kenya. This should be open data to benefit the government, contractors and land property developers in effective decision-making.. The national government should work towards enacting a Slum Upgrading Policy in Kenya. Financial Sector

Enhancements to liquidity management: This is because as a major source of liquidity in the economy, the government spending rates have a considerable impact on the banking system and influence the interest rates on deposits, loans and inter-bank transactions. Put sufficient measures towards regulating mobile transfer services so as to ensure fair competition. Interest rate controls: Encourage banks to offer realistic interest rates that match the prevailing economic conditions. Also helps in mitigating high lending rates Art and Culture

Provide for up to 30 per cent in funding for foreign film crews and offer other incentives such as licence fees waivers as well as government scouting hosting for location prospectors . A section of the law should compel advertisers to remit royalties in a timely fashion to rights holders and artistes with consequences thereof upon failure. Provide for funding for the planned Ultra-Modern National theatre Complex and establish branches of the Kenya Cultural Centre in cooperating the Kenya National Theatre in every County Headquarter in the country

Research,Informed InformedDebate Debate& &Policy PolicyInnovation Innovation Research,

Alternative Budget 2016/2017 percent in the medium term. This level of growth is attributed to performance of major sectors of the economy, including the agriculture sector, mining, continued investment in quality infrastructure and lower energy prices. Real GDP growth rate is projected to expand by 5.5% in the 2014/15 and 5.8% in the 2015/16, 6.1% in 2016/17 and 6.5% in by 2018/19. To maintain this level of growth, the government will need to put the necessary fiscal strategy by maintaining strong revenue measures while at the same time increasing agricultural productivity on account of favourable weather conditions, completion of public infrastructural project, recovery of the Tourism sector deepening regional integration and enhanced consumption. The challenge of maintaining a stable macroeconomic environment can be addressed by fixing factors such as structural inefficiencies in the sectors, product diversification and improving business environment for the investors. Behind the wage bill debate lies a broader fiscal reform agenda. High and unsustainable spending on public wages crowds out resources and poses serious risks to macroeconomic stability.

1.1.2. Assessment of Budget Implementation so far......

spent by the end of the year. This therefore reinforces the need for the national government to focus on the actual expenditure and not allocation. It is the actual expenditure that impacts the lives of the citizen and not allocation (allocation threshold is easily met). •

Absorption capacity: Over the last three years, security has been the most efficient spender and Infrastructure + energy has been constantly underperforming. Water and regional development MDAs have also been low on spending over the period. The key thing is to ensure they gaps affecting absorption in this sectors are resolved to avoid allocating more funds at the risk of not spending the funds. For example, the infrastructure + energy sector has a significant increase in funding although it has consistently had low absorption. Are we sure that the sector will spend most if not all of the funds allocated to it?

It is commendable that the government established the electronic Project Monitoring System (E-promis) intended to promote transparency and accountability on the flow of resources to projects and also to improve budget utilization especially capital budget.

Budget implementation for the FY 2015/16 was characterized by revenue shortfall, delay in disbursement of fund as well as underperformance in the domestic security market particularly in the first quarter. As at end of December 2015, cumulative revenue collection, inclusive of Appropriation in Aid (AiA), fell short of a target of Ksh 642.9 billion by Ksh 67.7 billion with ordinary revenue recording kshs 47.6 billion and AIA Kshs 20 billion. This shortfall was attributed to shortfall in PAYE (Ksh 26.0 billion) and VAT import tax (Ksh 15.9 billion). On the expenditure front, against a target of Ksh 2,000.6 billion budget for the FY 2015/16, the fiscal framework was revised to Ksh 1,901.8 billion. The revision of the estimates downward was based on the on account of revised macroeconomic projections and delay in the enactment of the Excise Duty Act 2015.The revision of the expenditure downward necessitated the government to institute measures including curbing non priority expenditure to free resources for more productive purposes as well as expenditure cuts on slow and delayed projects. Additional emerging issues regarding implementation of Budget 2015/16 include; •

Adherence to Fiscal Responsibility Principles: Allocation of minimum 30% of the budget towards development expenditure (PFM Act 2012 15 (2), (5)).

It is expected that the development budget will take up 37.4% (BPS’16) and 38.4% (BROP ’15) compared to the 39.4% (Revised budget 2015) of the national budget. No justification has been given for the variation in the BROP’15 and BPS’16 figures. However sec 26 (1)(f ) of the PFM regulations 2015 provides that the national expenditure on development shall be at least 30 %. Going by the CoB FY 2014/15 report, out of the resources that were allocated to development budget only 19.9% was

Source: COB Annual Budget Implementation and Review Reports 2011/12-2013/14

Based on Controller of Budget (CoB) Implementation reports, actual spending on development investment was 30% of total MDA budget in 2011/12 and 2013/14 but below that (24%) in 2012/13. This raises the question of whether actual spending should instead be used as the more appropriate measure or benchmark of meeting the aforementioned fiscal policy goal that is also reflected as part of fiscal responsibility principles. •

Compensation of employees(benefits + allowances) not to exceed 35% of the total national government’s equitable share of the revenue raised nationally plus other revenues generated by the national government (regulation sec 26(1)(a)

The government allocated 33.9%, 31.7% and 28.1% (BROP’15) & 29.7% (BPS’16) of its budget towards compensation of employees in FY 2014/15, 2015/16 and 2016/17 respectively. In as much as the allocation is within the requirement (of not more than 35%) there is need to reduce it further down so as to free more resources for development. This can be achieved by implementing the report on the outcome job harmonization + Rationalization.

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Alternative Budget Highlights 2016/2017 Government should fast track roll out of IFMIS and adoption of Treasury Single Accounts (TSA) to complement cash flow planning to curb unnecessary costly short-term borrowing: In order to curb unanticipated short term borrowings used to meet temporary cash shortfalls and in turn facilitate smooth budget implementation, Treasury should ensure effective cash planning and management on the premise of fast tracked roll out of a fully functional IFMIS to those MDAs that are not connected as well as adoption of TSA.

Oil and Gas (O&G) sector to the rate applicable to other Industries of 5%. The current high rate will result in reduced Mergers and Acquisition (M&A) activity in the sector, Kenya being less attractive as an investment destination and reduced funds for investment into the sector. By reducing the rate to 5% Kenya will be putting in place a fiscal environment that will attract appropriate foreign investment and skill set required in the various stages of the oil & gas cycle.

Austerity measures; A number of things including funds towards financing elections budget, public, service salary increase demands from teachers, medical personnel and other expenditure towards security operation along Somalia border, expansion of social safety network, government expenditure on food and other commodities imports among others is exerting demand for additional spending.

The current definition of allowable costs refers to “acquisition cost”. This could be interpreted restrictively to exclude incidental costs and post acquisition costs. Through the investment phase, the industry expends considerable sums on its activities which are capitalised. These too, together with incidental costs of purchase and disposal should be allowed when computing the net gain subject to tax. Otherwise a true “net gain” may not be taxed resulting in a much higher value being subject to tax.

Impact of revenue shortfall: The anticipated sluggish and volatile output and domestic risk in economic growth is likely to impact to a large extent revenue shortfall and it is not clear the measures that government has put in place in terms of plugging this, especially given the slow uptake in Treasury bills and bonds. Besides there is need to review tax incentive and tax exemption regimes in terms of whether they are meeting their intended objectives and at the same time undertaking research to find innovative ways to broaden tax base.

1.1.3 Revenue Projections

The BPS 2016 gives information relating to the overall size of the national budget (revenue, expenditure and deficit) and the sector distribution of the budget. For the year 2016/17 the projected revenue is Kshs.1.5 trillion compared to Kshs 1.36 trillion in 2015/16. This represents 14% projected increment. Ordinary revenue collection is expected to amount to Kshs 1.38trillion compared to Kshs 1.25 trillion in 2015/16. On the other hand, the government targets to collect Ksh 116.2 billion in A-i-A as opposed to the Kshs 103.2 billion in 2015/16. An analysis of revenue collection for the past three years indicate that on average, out of the projected revenue only 96.7% of the target is realized. It is therefore expected that only Kshs 1496.92 billion would be realized. Therefore, one would expect the 2016/17 projections to be either closer to or less than Ksh 1496.92 billion. The performance is underpinned on ongoing reforms in tax policy and revenue administration and some unspecified measures to expand revenue base and eliminate tax leakages to be initiated by KRA. However, based on revenue performance so far, there are a number of questions and issues that the IEA notes with regard to fiscal policy and budget framework that will guide Budget 2016/17.

Capital Gains Tax (CGT) – Oil and Gas Industry Tax on disposals- Rate The Finance Act 2014 introduced a tax on disposal (“Capital Gains Tax” (CGT)) at the rate of 30% / 37.5% for Kenyan companies and branches of foreign companies respectively. This rate is very high when compared to the general rate applied to the other Industries in Kenya of 5%. The Finance Bill 2016 should amend the rate applied to the

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Tax on disposals: Cost Basis

The definition of cost for direct and indirect disposals should be expanded to include all expenditure relating to the disposal. The current Schedule 8 provisions could be used as a base for this. Uncertainty on whether all allowable costs would be taken into consideration when computing a net gain would adversely impact M & A activity as buyers and sellers require economic certainty in order to proceed with transactions.

Tax on disposals: Tax neutral transactions There are many transactions that take place within the industry that are tax neutral such as intra-group transfers of assets or shares or company reorganisations. There is no provision in the current legislation to exclude these from tax. This is available for other industries in Kenya except oil & gas. Provisions should be included in the Finance Bill 2016 to exempt transactions that are neutral for tax purposes i.e. should not give rise to a taxable charge as there is no third party disposal. The current rules will make it difficult for companies and the industry generally to engage in normal organisation and reorganisation practices and would lead to uncertainty for companies who may wish to enter the sector in Kenya as post transaction they may wish to reorganise their holdings.

Tax on disposals: Indexation relief Given the long life cycle of the sector and the considerable sums required for investment the cost base should be protected against inflation. This is available for other industries in Kenya except oil & gas. Other countries also have similar provisions e.g. South Africa, Ethiopia, UK and others. Finance Bill 2016 should introduce indexation allowance for past costs and allow for the rebasing of a company’s cost base Indexation protects the base investment from the impact of inflation over time and therefore results in fair computation of net gain. Introduction of indexation allowance would give economic reality and certainty to transactions and promote the Kenyan fiscal regime and Kenya itself as a place to do business.

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Alternative Budget 2016/2017

Tax on disposals: Reinvestment relief Where a disposal has taken place it is usual for the funds realised through that disposal to be reinvested in the existing or new assets in country in order to facilitate exploration and development projects. Taxing those proceeds reduced available funds and will slow down activity. CGT policy should encourage reinvestment by providing relief on reinvestment. This is currently not in Kenyan Law but is available in other jurisdictions e.g Uganda & Mozambique. Finance Bill 2016 should introduce reinvestment relief for disposal proceeds where those proceeds are ploughed back into existing or new Kenyan assets within the sector. M&A activity is generally linked to reducing risk, introducing new partners with technical and financial capacity and making cash available to the disposing company to reinvest back into the project. Where the disposal proceeds are reinvested taxing them reduces available cash flow and it’s therefore counter-productive to the long term goals of the project. The introduction of reinvestment relief will assist the industry and be conducive to attracting M&A activity. This is particularly important in the current state of the industry where there is intense competition for funds internationally.

Notification of change in ownership Finance Act 2014 introduced notification of change of interest provisions with the threshold for reporting being 10%. Most O&G companies are traded on world stock exchanges where considerable volume of their shares can be traded on a daily basis. It is also unclear from the legislation whether Kenya is seeking to tax quoted share transactions. Finance Bill 2016 should revise the reporting requirement to changes of control over 50%Provisions should also be included to exempt transactions in quoted shares of O&G companies. The current regime will result in a considerable compliance and administration burden on the sector and uncertainty for investors where their shares are traded on stock exchanges.

1.1.4 Expenditure Forecasts

Overall expenditure and net lending is projected at Ksh 1,880.8 billion, about 28.8% of GDP in 2015/16; up from Ksh 1,669.0 billion, which represent 29.2% of GDP in 2014/15 budget. About Ksh 627.1 billion is expected to be dedicated to development expenditure in 2015/16, accounting for 33.3% of the overall projected expenditure while the pension expenditure will account for 0.9% of GDP in FY 2015/2016. Despite the commendable measures outlined in the BPS that aim at striking an appropriate balance between fiscal consolidation and supporting the devolved system of government, there are a number of things that are a cause of policy concerns. Overall too, adherence to fiscal responsibility principles is something that the government will need to watch out for.

2.0 Taxation Proposals 2.1 Alcoholic Taxation 2.1.1 Alcoholic Product Taxation

Excise taxes contribute a significant share of all revenues that constitute public spending in Kenya. Analysis by the IEAKenya reveals that, the nominal quantum of the excise taxes on alcohol has maintained an upward trend. Table also reveals that excise taxes on beer consumed in Kenya comprise about 85% of the total excise revenues, confirming that alcohol taxes are predominantly dependent on Kenya’s beer market. At the same time, the trend shows that the proportion of excise taxes that come from beer have reduced by about five percentage points towards the low 80s. This change is accounted for by the fact that the nominal growth in excise taxes from wines and spirits has grown by a higher proportion over the five years represented in the data. This is explained by a policy change in 2012 that raised excise taxes on wines and spirits, ensuring that a higher share of excise taxes are derived from wines and spirits. What this proves is that the policy change has led to a faster growth in tax yield from wines and spirits though the contribution of beer remains dominant. The IEA analysis finds that the taxation of alcohol beverages differs by the product or brand and not by the concentration of the ethanol in the product. The effect of policy is that relative to the concentration of alcohol, the beer consumers bear a larger tax burden than either the consumer of spirits or wines. Thus the consumer of alcohol subsidizes the consumer of wines and spirits because of the disproportionate taxation of ethanol content in beer.

Proposal: In the interest of ensuring neutrality of taxes across the products, the excise taxes should be equalized for the ethanol content of beer, wines and spirits. Taxation that takes cognizance of the differences in alcohol concentration would ensure that revenue objectives are aligned to the public health objectives that informed the enactment of the Alcoholic Drinks Control Act 2012.

2.1.2 Balancing revenue incentives with public health objectives of alcohol regulation

Available data and studies confirm that alcohol is a normal good whose demand increases with income. Overall affordability in Kenya seems to be increasing together with the rise in youthful population that is most likely to start consumption of the products. Alcohol has benefits for its consumers and their interests must be borne in mind against that of the society. That stated, it is essential to understand that excessively stringent regulations would not only restrict consumption but

Table: Excise Taxes from Alcohol from 2010-2014 (Kshs. Billion) Beverage Beer Wines And Spirits Total Beer Share (%)

2010 14.70154 2.16338 16.86492 87.17%

2011 14.45604 2.83784 17.29388 83.59%

2012 16.54452 2.4134 18.95792 87.27%

2013 16.88617 3.03686 19.92303 84.76%

2014 18.9968 4.63832 23.63512 80.38%

Source: Economic Survey 2015

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Alternative Budget Highlights 2016/2017 possibly lead to loss of the excise taxes that government has been dependent upon. At the same time, there is evidence of substantial effects of alcohol consumption patterns in Kenya. It is therefore necessary to consider a taxation structure that ensures that excessive consumption is reduced.

Proposal: Consider an alcoholic taxation structure that ensures reduction in excessive consumption of alcohol.

2.2 Extractive industries Taxation 2.2.1 Income Tax 2.2.1.1 Withholding Tax on Natural Resource Income (NRI)

sistence provided in remote locations from PAYE.

O&G activities are carried out in remote locations, with limited or no amenities except those provided by the O&G Company. The provision of meals and other subsistence is therefore a basic necessity given to employees who are located on-site for the exclusive purpose of conducting O&G activities. The employees are generally on site on a rotational basis to provide these 24 hours, 7 days week coverage required by the nature of the activities conducted under current legislation, there is no exemption of subsistence provided to staff located in remote onshore and offshore locations from being treated at benefits in kind for PAYE purposes.

Proposal

The Finance Act 2014 introduced WHT on NRI at 5% &20% for residents and non-residents respectively. From the wording of the legislation, it is unclear what type of transactions NRI is designed to tax and could be construed to refer to sale of hydrocarbons and/or transfer of interest in a licence. From consultation with National Treasury and KRA, the sector’s understanding is that NRI is applicable to deferred consideration / overriding royalty type transaction.

Exempt meals and other subsistence provided to staff working remotely from PAYE.This principle is already recognized in legislation as reimbursement of expenditure incurred by an employee on subsistence is exempt from PAYE.This is also in line with international practice. Given the nature of operation, subsistence provided to staff located remotely should be considered a benefit by is a necessary part of performance of their duties.

Proposal

2.2.1.4 WHT on reimbursements of costs incurred by sub-contractors and mobilisation / demobilisation costs.

The definition of NRI in the legislation should be clearly stated so that it is not ambiguous and can be clearly applied. The current definition of NRI is unclear and it could be construed as double taxation on income that is already taxed by other sections of the Act. This results in investment uncertainty in respect to ongoing operations and potential M&A activity.

2.2.1.2 WHT on deemed interest on noninterest bearing loans

Pre-development activities will normally be financed via quasi-equity as third party debt funding is unavailable because activities are considered too risky. This takes the form of interest free loans from group companies. WHT on deemed interest reduces the funds available to invest in operations. The Finance Act 2014 has removed exclusion of reimbursements and mobilisation and demobilisation costs to WHT. It is common industry practice for suppliers of Exploration and Production companies to subcontract out specific activities. This is a key enabler for Kenyan companies to take part in the industry. Such costs are passed to the E&P Company at cost as a reimbursement. It is unusual for reimbursement of costs to be subject to WHT .This principle is internationally accepted, and is acknowledged under Kenya tax law for VAT purposes. Reimbursement has usually already been subject to WHT, and these provisions result in an imposition of double taxation.

Proposal Funding for pre-development activities should be specifically exempted from the deemed interest provisions. WHT on deemed interest is a direct tax on investment. This adds to costs and reduces revenue available for investment.

2.2.1.3 Exemption of meals and other sub5

The Finance Act 2014 removed exclusion of reimbursements and mobilisation and demobilisation costs to WHT. It is common industry practice for suppliers of E&P companies to subcontract out specific activities. This is a key enabler for Kenyan companies to take part in the industry. Such costs are passed to the E&P Company at cost as a reimbursement. It is unusual for reimbursement of costs to be subject to WHT. This principle is internationally accepted, and is acknowledged under Kenya tax law for VAT purposes. Reimbursement have usually already been subject to WHT, and these provisions result in an imposition of double taxation.

Proposal Retain the old position where reimbursement of expenditure on mobilisation, demobilisation costs and reimbursement of costs was specifically excluded from the service fee subject to withholding tax. The introduction of WHT in its current form will increase costs, administration and likely result in multiple cross border disputes over taxing rights and credit relief. Retaining the old position will release funds for investment in operations.

2.2.2 Value Added Tax (VAT) 2.2.2.1 Zero rating of supplies for the O&G sector

O&G companies do not qualify for VAT registration preproduction and any VAT charged is a cost borne by the industry either directly or indirectly .Pre VAT Act, 2013 supplies to O &G companies were subject to remission and treated as zerorated. The VAT Act, 2013 introduced exemption only for goods. No VAT exemption provided for Services. This means that E&P companies are liable for VAT as follows:

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Alternative Budget 2016/2017 • •

On purchase of goods, indirect VAT passed on by vendors On purchase of services, 16% VAT

Under stabilisation clauses in the PSCs where economic benefits of a party are substantially affected by changes in law parties are required to make necessary adjustments in order to ensure no economic loss for either party.

Proposal Relief should be extended to services. Services account for approx 90% of the cost base of the Industry. At 16% VAT, this leads to an increase in costs of approx. 15% This significantly affects project economics and causes economic loss to E&P companies.VAT is also a tax on investment (which goes against the principles of VAT) and makes Kenya a more costly jurisdiction for O&G. Given intense completion for international funds, this is likely to result in reduced investment in Kenya.

2.2.2.2 VAT Administration provisions

The current remission administrative procedures for VAT is convoluted, involves multiple Government agencies, takes significant time to obtain and given the nature and volume of supplies is not fit for purpose.

Proposal Administrative procedures should be reviewed in order to serve the requirements of the industry while at the same time providing the Government with appropriate safeguards against abuse. The current regime significantly increases costs and administration for both the sector and Government causing delays to projects. A new fully auditable streamlined system will reduce admin cost and delays to projects.

2.2.3 Customs and Excise 2.2.3.1 Exemption to Railway Development Levy (RDL)

The Finance Act 2013 introduced RDL at 1.5% of the CIF value of all imported goods for home use. The industry is exempt under the terms of its Production Sharing Contracts (PSC’s) signed with the Government of Kenya from all Customs Duties. The industry currently pays under protest; given the high level of expenditure and volume of imports required as O&G equipment is not available in country this becomes a significant cost on investment reducing available funds for exploration, appraisal and development activities.

Proposal The Finance Bill 2016 should specifically exempt the sector from the imposition of RDL on its goods and equipment thereby bringing the legislation into line with the terms of the PSC’s. The imposition of the fee is contrary to the specific terms of the PSC’s signed by the Government of Kenya; it increases the investment costs of projects as it is a direct tax on investment and by not standing by the terms of its contracts the Government sends out an unfavourable message to the international investment community.

2.2.3.2 Transfers between O&G companies

There are many oil companies currently active in Kenya, there are occasions where surplus stock or rigs or other equipment can be transferred from one company to another. This reduces cost of export / import and speeds up projects.

Proposal Regulations should be introduced governing the transfer of equipment and materials between companies where already imported under exemption. The introduction of regulations to govern transfers will reduce uncertainty on customs treatment, reduce costs and speed up projects.

3.0 SECTOR PROPOSALS 3.1 Manufacturing Secor Tobacco Taxes: A Win- Win Strategy for Public Health and Government Revenue: Background Tobacco use impedes sustainable development due to its contribution to poverty, inequity, agriculture &food production, organized crime, environmental degradation, ill health and other negative social- economic factors. Tobacco control indirectly touches on most of the SDGs, with one of seventeen goals relating directly to Health; one of nine health targets relating to NCDs and one of four means of implementation targets relating to implementation of the World Health Organization Framework Convention on Tobacco Control (WHO- FCTC). Kenya Health Policy 2013- 2030 seeks to halt and reverse the rising burden of NCDs through reducing exposure to risk factors such as tobacco smoke; while the National Strategy for the prevention and control of NCDs 2015-2020 provides a roadmap for the implementation of the Kenya Health policy objectives that touch on NCDs towards reducing preventable morbidity and mortality due to NCDs. It recognizes that tobacco use is a major risk factor for many Non- Communicable Diseases (NCDs); including cancer, diabetes, cardiovascular and respiratory diseases and a plays a role in some infectious diseases such as tuberculosis (TB). Tax and price measures have been found to be one of the most effective tobacco control strategy due to their potential to discourage initiation and encourage quitting of tobacco use. They also have the potential of generating much needed revenue for governments. Article 6 of the FCTC acknowledges that price and tax measures are an effective and important means of reducing tobacco consumption by various segments of the population, in particular young persons and individuals with low incomes and purchasing power. Parties to the FCTC are required to implement tax policies and, where appropriate, price measures on tobacco products so as to contribute to the health objectives by reducing tobacco consumption. In Kenya, section 12 of the Tobacco Control Act of 2007 requires the minister of Finance to Implement tax and price policies on Tobacco and tobacco products so as to contribute to the objectives of the Act.

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Alternative Budget Highlights 2016/2017

Policy Reforms and fiscal proposals for tobacco Taxation In line with the current status of tobacco taxation in Kenya, the following are some specific recommendations for tobacco tax policy reforms and fiscal proposals for the tobacco taxation; 1. The government needs to protect the gains in the Excise Duty Act, 2015. In particular: •

• • •

Tobacco excise duty should be kept simple and specific to facilitate easy administration, projection and collection of revenues due and monitoring of compliance. All types and brands of tobacco products should be taxed at a flat rate to avoid down- switching between brands. Excise tax for tobacco products should be regularly adjusted for inflation to preserve the impact in price and affordability. The tobacco taxation provisions in the Excise Duty Act, 2015 should be fully implemented in order to protect public health and revenue goals.

2. The government should strive towards progressive increase of tobacco tax rates towards the WHO recommendations of at least 70% of retail price. This will enhance the achievement of public health objectives by reducing affordability and initiation; while at the same time increase quit rates and generating more revenues. 3. Strengthen tobacco tax administration, monitoring and evaluation of impact by: • •



Building capacity for revenue authority and enforcement officers Ratification of the WHO/ FCTC protocol for the elimination of illicit trade in tobacco products (ITP). In addition, the Kenya Revenue Authority (KRA) should implement a complete roll out of Track and trace mechanism that will enhance the monitoring of the tobacco products supply chain, reduce instances of illicit trade and enhance tax policy implementation The Government should use a portion of revenues from tobacco taxes to support tobacco control and other health program

3.2 Education Sector Contextual Assessment of the Budget Policy Statement 2016/7 The 2016/7 BPS shows no significant shift in expenditure priorities for the education sector. The focus is still on the previous MTEF II headline programmes. Certainly, as we inch closer to the end of MTP II, it is needful to retrospect on the milestones that have been realised in the sector as we consolidate these gains and move into MTP III.

FY 2015/16 (Printed FY 2016/17 (Project– Ksh, billions) ed Ksh, billions) Recurrent

299.59

310.41

Development

36.65

37.31

Total

336.25

347.73

The above notwithstanding, there are a number of emergent and existent issues which need to be addressed through expenditure and regulatory proposals in the next financial year.

Specific Budget Proposals for the Education Sector and Justification a. Increasing the number of quality assurance officers under Education Standards and Quality Assurance Council (ESQAC).

Justification: Presently, Kenya has less than 1,500 officers supervising 21,408 public primary schools besides other 6,833 private primary schools which are not given adequate attention. This thin spread on the ground partly accounts for the sub-optimal quality of teaching and learning in schools. There is need to train and employ more officers to strengthen their delivery by meeting the demand. b. Zero-rate VAT on textbooks – KICD approved books

Justification: The Treasury, through the relevant parliamentary committee, should introduce an amendment to the VAT Act (2013) aimed at migrating textbooks back to the zero-rated tax category. Currently, the Pupil to Textbook Ratio (PTR) is as high as 5:1, which is a roll back on the progress that had been made in the initial years after re-introduction of FPE in 2003. The high PTR is a key driver of low learning outcomes in Kenya. c. Operationalize alternative Provision of Basic Education and Training (APBET) Registration Guidelines.

Justification: In January 2016, the Ministry of Education, Science and Technology (MoEST) finally approved the APBET registration guidelines, which provide the regulatory framework for complimentary, low cost private and feeder and mobile schools to register and operate. These are schools mostly found in urban slums and arid and semi-arid lands. Hitherto, it is estimated that these schools cater for over 500,000 pupils. In 2015/6 FY, Treasury should renew funding for the APBET subprogram, which, although allocated Ksh. 32,400,000 in FY 2014/5, got nil allocation, not only in FY 2015/6, but also within the two remaining years of the MTEF II. This will be important fiscal support to enable the government to successfully roll out the approved APBET registration guidelines, especially in preregistration assessments and monitoring for compliance after registration.

Also, the proposed budget for FY 2016/17 shows a marginal increase from the previous year’s allocation. Below is a tabulation of the printed estimates for FY2015/16 and the projected allocation for FY 2016/17.

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Alternative Budget 2016/2017 d. Budget Proposal on School Health, Nutrition and Meals

Justification:

h. Bringing Out of School Children (OOSC) back to the education system

The FY 2015/6 allocations shows that the vote-head on School Health, Nutrition and Meals, which is an important solution to enhancing school attendance for children from poor households, reduced from KSh 2,304,070,927 to KSh 1,475,706,546, representing a 36% reduction. In spite of the fact that this is a component of the County governments, there are complementary roles that the national government should play in further levelling the field for these students. A further analysis of the budgets of county governments, especially in areas with higher incidences of poverty is needful to have evidence-based lobbying that encourages significant fiscal voting for this intervention.

Justification

e. Reinvigorate NEB and NACONEK



Justification: Two key SAGAs include the National Education Board (NEB) and the National Council of Nomadic Education in Kenya (NACONEK). The NEB and NACONEK have pivotal mandates outlined in Article 5(3) and Schedule 6 respectively, of the Basic Education Act (2013). Various critical aspects of the education sector continue to lag behind because of the suboptimal operation of these two agencies. At optimal level of operation of the NEB, the education sector has the potential for increased internal efficiency. f. Establishment and operationalisation of National Integrated Education Management Information System (NEMIS)

Justification: Data sourcing and management is a key driver of the inefficiencies being experienced the sector. Of concern is the pilferage taking place as a result of fiddling with numbers of pupils who are supposed to receive the FPE capitation grant. Although an elaborate framework for establishment of NEMIS has been articulated in the NESP Volume 1, no allocation has been made for it both in FY 15/16 and 16/17. The National Treasury should allocate funds to set up an institutional framework to actualise the goals of enhancing data integrity in the sector. Indeed, greater internal efficiency will be achieved. g. Abolition of Examination Fees through introduction of National Qualification Framework

Justification During FY 15/16 a total of Ksh 2.6b was earmarked for examination fees for students in public primary schools. A further Ksh 2.9b is slated for FY 16/17. A phased abolition of the KCPE examinations with a well thought out introduction of the National Qualification Framework (NQF), in line with Article 68 of the Basic Education Act (2013), which focuses on pupils’ cumulative competencies instead of one-off assessments, should be introduced. This will help save the billions of shillings being set aside to defray the annual examination fees.

Current estimates place the number of OOSC at around 1.5 million – 1.9 million, of those aged between 6 – 13 years. Achievement of this goal depends on the following factors; •



Setting aside capitation grants for private institutions in urban slums and ASALS. This will be in line with the Basic Education Regulations (2015) published by the CS Education. The 9.5 million children targeted for grants in FY 16/17 do not include the OOSC. Expand the financial support for the Department of Children’s Services to enhance their manpower in tracking OOSC within their spheres of operation. Enhanced financial support to the National Safety Net Programme to expand its reach besides advocating for a structured collaboration between the programme and the MoEST to ensure streamlined registration, monitoring & support for OVCs.

Proposal Adopt a multi financial support to bring OOSC back to the education system i. Fast truck Curriculum development reforms

Justification The MoEST’s stated intention to move beyond piecemeal curriculum amendments is a step in the right direction. So far, the Kenya Institute for Curriculum Development (KICD) has taken a number of initial steps towards curriculum reform, including conducting a needs assessment and receipt of submissions from sector players on proposals for reforming both the form and content of the curriculum. Curiously, this process had an allocation of KSh 1.30b in FY 15/16 but is now slated for KSh 1.25b in FY 16/17.

3.3 Land and Housing Sub Sector The Land and Housing sub sectors in Kenya are centrally managed by the Ministry of Land, Housing and Urban Development. There is also the National Land Commission (NLC) and Kenya Institute of Survey and Mapping. The NLC was established in accordance with Article 67(2) of the Constitution of Kenya and the National Land Commission Act, 2012. It was established to manage all public land on behalf of the national and county governments. The NLC has devolved its services to the 47 counties through the County Lands Management Boards (CLMBs).

Specific Budget Proposals for Land and Housing Sub Sector and Justification a. Increase allocation towards the Adjudication and Settlement Services:

Justifications: A review of the national budget shows that the national government allocates sufficient funds to establish and operate

Research, Informed Debate & Policy Innovation

Alternative Budget Highlights 2016/2017 the National Titling Centre while allocating comparable less funding to the Adjudication and Settlement Services Department. In FY 2014/2015, the department was allocated Ksh. 390 Million and Ksh. 457 Million in FY 2015/2016. The national government is projecting to allocate even less fund in FY 2016/2017 (Ksh. 450 Million). Practically land is adjudicated first before surveying and mapping is done. Therefore, it is important that all the prerequisite services are well funded for the national government to achieve her target of issuing 1 million title deeds in 2015/2016 and even in the coming financial years in the medium term.

Turkana had no operational CLMB. c. Strengthen governance through promoting openness and accountability in the two sub-sectors. There is a strong need to create mechanism for prosecuting corrupt officials in the MLHUD. Corruption is one of the biggest challenges in Kenya (public and private sector).

b. The national government should work towards enacting a Slum Upgrading Policy in Kenya.

3.4 Health Sector

Justifications: The need for transparency and accountability cut-across all sectors in Kenyan economy. Very little can be achieved where funds meant for public services are stolen by public officials.

Background

Justifications: Government policies provide useful guidelines on how to implement the slum upgrading programmes in Kenya. The national government and all 47 counties should formulate and enact public participation frameworks and legislations to facilitate inclusiveness in decision making on public policies.

Justifications: In Kenya, there is no public participation framework to guide this important activity at both national and county levels. It is a high time for the national government to allocate funds towards the formation of such policy. a. The National Treasury should allocate funds towards the establishment of a central data base of the most updated information on the land and housing sub-sector in Kenya. This should be open data to benefit the government, contractors and land property developers in effective decision-making.

Justifications: The national and county governments are well placed to create and maintain an updated database on land and housing. Why the government? First, there are financial reasons why the Kenyan government should establish a single and accurate database. It can be used for operational management and optimization; informed policy making and resource allocations. Secondly, the government has a natural monopoly in collecting data in land sector. The resulting data will be used for wider economic and social benefit. For instance, information of land ownership and proof of titles has great economic benefits for businesses, individual land buyers and government. This is why the government is well placed to collect data and make it accessible to the public. b.The National Land Commission (NLC) should operationalise all the CLMBs all the 47 counties.

Justifications: By the end of calendar year 2015, there were some CLMBs which had not been operationalized. According to The Progress Report (March 2013 - January 2014) published by the National Land Commission (NLC) the hiring process for secretaries and board members for CLMBs commenced on September, 2013 when vacancies were advertised for all the 47 counties. It is a great shame that some of the CLMBs have not been operationalized since then. For instance, by Sep 2015

Health remains one of the key sectors in every economy. The Health sector goal is to attain equitable, affordable, accessible and quality health care for all as provided for in the various government policies. In addition, adopting a ‘Health in all Policies’ approach, which ensures it interacts with and influences design implementation and monitoring processes in all health related sector actions. The global shortage of health workers is estimated at more than four million, assuming that all countries attain an average worker density of 2.5 per 1,000 population (counting only doctors, nurses, and midwives). According to the World Health Organization’s World Health Report 2006, based on data in the Global Atlas of the Health Workforce for 193 member states, there are currently 57 countries including Kenya with critical shortages. The 2016 Draft Budget Policy states that Recruitment of more health workers and strengthening health research for improved quality of health is their priority. The expectation is to see proper HRH policy together with conditional grants for HRH going to the counties.

Specific Budget Proposals for Health Sector and Justification • Support to National Programs:

Justification Deworming in schools and Free Maternity (including Family planning) should receive adequate and timely support (Last year FP got 50 million only against a need of 1.4 billion from the ministries costed plan. First disbursement came in quarter two. MoH- Capacity building for Health workers on management and quantification) • Accelerate Managed Equipment Services (MES):

Justification in 2014/2015 FY, Government equipped 6 hospitals Under the Managed Equipment Services (MES), 5 hospitals were installed with Theatre equipment, 4 hospitals were equipped with Central Sterile Supply Department (CSSD) e.t.c. (Kapsabet hospital funds i.e 800 million were received this February). We need a more accelerated model if the national has to realize benefts of investing in health. The population is

Research, Informed Debate & Policy Innovation

Alternative Budget 2016/2017 • Economic stimulus package

Justification Invest in health workers through the national health budget to help improve health indicators (2015/16 allocation to absorb staff was reduced from 12.5 to 4.5 billion) • Conditional grants

Justification The 2016 draft BPS. has an allocation Ksh 0.9 billion as conditional grant to compensate county health facilities for user fees forgone and KSh 3.6 billion as conditional grant for level-5 hospitals (Need to support national MoH to do functions costing)

as a loophole to victimize dissenting voices in the banking industry. Further, the Government has shown its commitment to ensure accessibility to affordable credit facilities by requiring banks to use the Kenya Bankers Reference Rate (KBRR) as a basis for pricing credit. However, interest rate control regime might give advantage to the bigger banks that are able to mobiles cheap deposits hence lend the same at lower rates. This move has been seen to be a disadvantage to the smaller banks which also serves majority of the Kenyan population. The bottom line is that the common citizen ends up suffering. Key challenges facing the banking industry in Kenya. •

• Hardship allowance

Justification Currently distributed under the equalization fund in all counties as per the revenue allocation parameters. ‘Burden of counties’ was not considered as a parameter. (Return it only to the 14 counties and select areas) • Ring fencing Health Levies





Justification; Licensing, regulatory registration funds etc need to be reinvested in health



• Tax: Schedule 4 places trade licensing to counties (except regulation of professionals)

Justification Private Health facilities are now required to pay to the professional bodies and then to the county governments for trade licensing (and counties having no clear licensing regulations are changing the charges annually). National government should ensure the constitution is followed and stop the double licensing of health workers.

3.5 Financial Sector Reforms In order to enhance the stability of financial institutions, banks are expected to raise their core capital requirement from current Kshs.1B to Kshs. 5B by December 2018. While this might be seen as a positive move to strengthen the banking sector, it poses a great threat to the small banks which might not meet this requirement. Such banks might be forced to merge, or exit the arena. The bottom line is that different banks targets different clientele hence forcing them out of the arena might adversely affect our economy. Following the adoption of a risk-based supervisory model, the requirement for annual licensing of banks has been scrapped. The Central Bank of Kenya will monitor and carry-out risk assessments on banks and retain the power to withdraw the perpetual license upon breach of any of the conditions. This is a welcome move for the banks as it reduces some of the administrative burdens that were part of the annual banking license renewal process. However, this could also be used



The requirement by central bank to raise core capital from 1billion to 5billion by December 2018 is a major challenge to the smaller banks. Such banks have been forced to shop for investors who are willing to inject more capital investment into the business. Anti-money laundering act has made both local and international trade rigid through the tough measures put in place. This negatively impacts on business performance as it has sometimes led to delay in executing transactions. The soaring interest rate margins have made the cost of acquiring credit expensive and eventually slowing down development. Most businesses avoid borrowing as a result of high interest rates. Local mobile money transfer services like Mpesa and Airtel money have brought in a lot of competition to banks. Since their introduction, many people are finding it easier to save and transfer money through these mobile money transfer services as opposed to banks. But how safe and regulated is the mobile money transfer services. Central Bank of Kenya recently suspended indefinitely licensing of new banks. This has literally blocked out new entrants who might enhance

Financial sector Budget proposals • • • •

• •



Improve fiscal cash flow management, in order to increase market liquidity. Improving confidence and reducing the cost of deposits in smaller banks through an extension of the deposit guarantee scheme. Interest rate controls: Encourage banks to offer realistic interest rates that match the prevailing economic conditions. Also helps in mitigating high lending rates Enhancements to liquidity management: This is because as a major source of liquidity in the economy, the government spending rates have a considerable impact on the banking system and influence the interest rates on deposits, loans and inter-bank transactions Put up realistic anti money laundering measures in order to support both local and international trade Improve the structure of the interbank market. Banks should work with the CBK as it attempts to improve the interbank market, and should take advantage of improvements by increasing interbank lending to smaller banks. Improving the ability of borrowers to switch between banks. Part of this will involve removing any internal

Research, Informed Debate & Policy Innovation

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Alternative Budget Highlights 2016/2017

• • •

barriers to switching. Put sufficient measures towards regulating mobile transfer services so as to ensure fair competition. Continuous but cautious licensing of new banks to help spur both sector growth & economic development. Sufficient time needs to be given for raising core capital to 5billion

3.6 Art and culture

Problem statement There is a growing demand for the creative products including music, theatre, paintings and videos yet the moneys never seem to reach original owners of copyright – the artistes. The situation has been occasioned by a number of factors including:



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• • •

Situation Analysis • Creative Economy /Industry contributes 5% of Kenya’s GDP (WIPO; 2013) • New legislation on creative industries passed by East Africa Legislative Assembly (EALA; 2015) but need to domesticate it in Kenya. • Kenya’s music market generated direct revenues of Sh 2 Billion in 2012, up from Sh 1.65 Billion in 2008. Annual revenue is forecast to rise to Sh 20.7 Billion in 2015, but fall back to Sh 20.1 Billion in 2017(PwC, Informa Telecoms & Media; 2015). • Digital’s share of total spending on recorded music will rise to 61.1% by 2017. Consumer spending on live music events in Kenya is set to grow, with a CAGR over the next five years of 3.8%. • However, live music is the smallest of the three music sectors and by 2017 will only account for 10% of music revenues. • Retail spending on physical formats has been edging down for the last few years and will continue to fall in the next five years. The retail value of physical sales will total approximately Sh 7.7 Billion in 2017, Sh 10.8 Billion in 2012. • There is a newly refurbished Kenya National Theatre with the state of the art facility but lacking in programmes to generate feasible content. Land reverted by back to the Kenya Cultural Centre and title deed provided. • Advertisers using music sent Sh 122.2 billion in advertising, money paid to radio and TV stations difficulties on effecting remittance (Phat Entertainment Ltd; 2016)





Lack of proper legislation to rein in Content management Organisations (CMOs) who have failed the transparency test in the manner they deal with business (Skiza tunes and general royalties) Failure by Advertisers and broadcasting stations to remit royalties from advertisement (Sh 14 billion in 2015). In 2014, Music Copyright Society of Kenya (MCSK) collected/distributed Sh 31.16 million; which was 0.46% of what was due.So, if there is Compliance on Copyright alone, KES 6.72 billion represents a 200 Times increase to Composers via MCSK.And another Sh 6.72 billion, to be shared between other Rights Holders via Kenya Association of Music Producers(KAMP) and Performing





Rights Society of Kenya (PRISK). Lack of a National Art Council to manage the general creative industry that today contributes up to 5 per cent of the GDP (WIPO). South Africa is taking away Kenya’s films leaving Kenya high and dry (Don Eldon, Westgate and Louis Leakey) Laissez faire entry into the Kenyan market of foreign content (Netflix) The renovated Kenya National Theatre is too expensive;it’s hard to break even with a daily hiring cost of almost Sh 70,000 per day hire, parking fees of Sh 500 per hour for clients among other hidden costs. Legal digital music services face stiff competition from unauthorised services and music that is available free online. Despite the fairly low prices charged by digital services, consumers with limited budgets are choosing to download music free rather than pay for it. Most ISPs take no action to prevent access to free music and lax copyright laws in the country make it difficult for rights holders to take action against illegal downloading. There is gap in capacity and human capital formation in art and culture management as well as film production

Budget proposals • Domesticate the Creative Industry law on creative industry • A section of the law should compel advertisers to remit royalties in a timely fashion to rights holders and artistes with consequences thereof upon failure • Create a log system that is openly available to all players in the industry • Establish an art Council by law with teeth to bite and coordinate the fast growing industry • Establish Consulates in film cities such as Los Angeles and New York with art culture attachés • Provide for up to 30 per cent in funding for foreign film crews and offer other incentives such as licence fees waivers as well as government scouting hosting for location prospectors • Ask Netflix and other digital steaming services to have up to 30 % of their content, Kenyan this way local productions get to have access to high end market and Netflix is still in business (MTV is showing the way with African Magic) • Government must provide seed funding for productions at the newly renovated Kenya National Theatre as is done in other parts of the world where entertainment is a key economic actor • Provide funding for the planned Ultra-Modern National theatre Complex and establish branches of the Kenya Cultural Centre incooperating the Kenya National Theatre in every County Headquarter in the country. • The complex should include the National Film School and Art Management Institute • Empower the Kenya Copyright Board and other content management players to monitor digital theft of Kenyan music. • Communications Authority should have a department specifically to monitor digital theft of intellectual property and investing in research with a view to developing digital solutions to prevent illegal downloads.

Research, Informed Debate & Policy Innovation

Alternative Budget 2016/2017

4.0 CONCLUSION In the health sector, there is an overall shortage of nurses (range of 1.2 to 0.08 per 1,000) in the public sector countrywide complicated by mal-distribution and varying workforce characteristics (for example, age profile) across counties. All stakeholders should support improvements in human resources information systems and help address personnel shortages and mal-distribution if equitable, quality health-care delivery in the counties is to be achieved. In the industry of art culture, there are changes when effected may double the contribution of the creative industry to the GDP from 5 % in 2013 to 10% in 2026.This include Tapping big movies to be shot in Kenya which will significantly increase tourism bookings and save the exchequer substantial amount of money in tourism promotion currently undertaken by Brand Kenya and KTB and also this Changes will significantly create jobs and wealth, reducing the current youth unemployment rates that currently stand at about 50 %. These proposals are therefore intended for consideration by the Treasury with the view that they will contribute to maintaining Kenya in its current economic growth and in contributing to wealth creation and poverty reduction.

5.0 ANNEXES 1.0 SECTOR PROPOSALS – CONTRIBUTORS No

Presentation

Area of Submission Corporate Sector

1.

Mr. Alphonce Omondi Kenya Bankers Association

Financial sector

2.

Ms. Lina Omole Tullow Oil (Rep Kenya Oil & Gas Association)

Energy

3.

Mr. Emmanuel Alenga Kenya Association of Manufacturers

Manufacturing

4.

Emma Wanyonyi Institute of Legislative Affairs

Tobacco Industry Social Sector

1.

Mr. Charles Wafula

Education

2.

Elijah Ambasa Transparency International, Kenya.

GJLOS

3.

Mr. George Orido Tone Theater Productions

Art and Culture

4.

Mr. Peter Ngure Deutsche Stiftung Weltbevoelkerung (DSW)

Health

5.

Geoffrey Kerosi Hakijamii

Land

7.

Ms. Gathoni Kimondo Kimbilio Trust

Shelter



Research, Informed Debate & Policy Innovation

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Alternative Budget Highlights 2016/2017

2.0 BUDGET PROPOSAL FOR SHELTERS FOR WOMEN SURVIVORS OF VIOLENCE IN KENYA Introduction Gender-Based Violence is defined by Population Council report as ‘physical, mental or social abuse that is directed against a person because of his or her gender or gender role in a society or culture. It is a definition or term also synonymously used for violence against women, in order to highlight the gender inequality in which most violence is rooted’. According to a domestic violence report by the Kenya Women Federation of Lawyers, ‘Gender Based Violence is violence directed at an individual based on her or his specific gender role in society. While it can affect both females and males, genderbased violence affects women and girls disproportionately. It is violence that establishes or reinforces gender hierarchies and perpetuates gender inequalities’. Sexual and Gender Based Violence in Kenya has been extensively documented with numerous organizations including governmental institutions having carried out research on its prevalence locally.

Background and Prevalence It is against this backdrop that legislation has been enacted to address various forms of Sexual & Gender Based Violence. These laws include the Female Genital Mutilation Act and the Sexual Offenses Act of 2006. Other bills such as the Protection against Domestic Violence are still waiting for enactment. However, despite enactment of legislation, cases of sexual and gender based violence remain high. Comparative statistics from the Kenya Police Annual Crime Reports from 2009 – 2011 indicate a 12% increase in reported sexual and gender based violence crimes between 2009 and 2010 and a 2 % decrease between 2010 and 2011. These high figures could partly be attributed to challenges in the implementation of the Sexual Offences Act particularly in regard to accessibility and provision of services. The Sexual Offences Act, 2006 introduces a multi-sectoral approach in sexual violence prevention and response. In relation to response to sexual violence, the Act requires coordination of a diverse range of actors in the provision of services. These services include legal, medical, psychosocial support and safe houses/shelters. Great in roads have been made in the effort to address service provision for SGBV by different organizations. However, an obvious gap is now evident in that survivors of violence, a large percent of who are women, are left without a place to seek refuge once they are violated. Instructively, the Kenya Police Annual Crime Report for 2011 reported 1072 cases of domestic violence and indicated that domestic violence was on the rise. The report further indicated that the forms of domestic violence range from simple assaults to murder. According to the Kenya Demographic and Health Survey 2008 2009, 39% of women have experienced physical violence with one out of four experiencing the violence less than 12 months before the survey. The same KDHS shows that 37% of women that experience sexual violence report the

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perpetrators being current husbands or partners. Overall, 47 % of the ever-married women have experienced some sort of violence from a spouse or partner. Often victims of domestic violence, who are mainly women, require safe houses/shelters to take them out of the abusive home environments. In many instances prevention of sexual and gender based violence is also hampered since survivors fail to report as they do not have alternative safe environments to move to once the matter has been reported to the police. Currently, organizations dealing with sexual and gender based violence survivors find themselves seeking a safe place for survivors (mainly women and children) even at odd hours of the night to no avail. The available services are limited to regular working hours and those that are open 24 hours provide specific services such as medical i.e. hospitals. Cases of women being killed sometimes with their children are reported in the media daily, a review of the history of these relationships reveals incidences of violence that are recounted by neighbors, family and friends. Women stay in these situations because they have no safe houses/shelters to seek refuge, especially if the spouse is the bread winner. In other situations, especially in the informal settlements, victims sometimes take action against the perpetrator only to have the perpetrator later released and back to the same community. The victim often has to encounter the perpetrator who moves around freely, and in some cases threatens them causing further victimization.

Challenges It is evident that safe shelters/ houses are an essential component of service delivery for survivors of SGBV. It should be understood that safe shelters/ houses facilitate the provision of other services by providing survivors with a much needed safe place where they can stay as they pursue legal, medical and psychosocial services. Ultimately, safe houses also lead to positive justice outcomes for survivors of sexual violence since they can pursue legal redress and prosecution of their cases without fear of the perpetrator. Women shelters in other countries have been shown to have provided safety for women and children and led to zero incidences of violence to the survivors while at the shelter. In Kenya there has been an effort to provide some sort of shelter for survivors especially women. These come in forms of houses in informal settlements which other women in the community provide to survivors, some at a cost. However it is becoming increasingly clear that the available refuge is not enough, and in some cases needs to be more comprehensive to be able to provide the service a survivor would need to go through the process of seeking justice ( if they choose to) or healing so that they can move on with their lives. The above shelters are donor funded. We do not have any government funded shelters at this time yet it is the government responsibility to its citizens. The reason for reluctance in providing shelters by the different stakeholders including relevant actors in government responsible for the welfare of citizens and in some cases the failure for the shelters to survive for those that have attempted to put them up is the issue of sustainability. Should the funding

Research, Informed Debate & Policy Innovation

Alternative Budget 2016/2017 come from donors and they decide to pull out, what then do you do with the survivors who are either being protected or at some stage of the healing/rehabilitations process? However, provision of shelters in Kenya presents an opportunity for public private partnership. An additional challenge in the provision of safe shelters and houses has been the absence of standards and guidelines as the quality of services to be expected of such shelters. There are on-going efforts to develop multi-sectoral standard operating procedures and guidelines for sexual violence response and prevention. Standard operating procedures on safe shelters/ houses have been incorporated in the social sector.

violence and begin to take action towards preventing rather than responding to violence. The shelters will also be able to run public awareness programmes to address cultural norms and promote zero tolerance to the vice. That is the only long term solution to end or significantly reduce the vice of SGBV and to find out the gaps in policy and laws that need to be addressed.

Best Practices in women shelters programs In countries such as South Africa, Guyana and even Rwanda and Uganda there have been success in setting up of women shelters. Other countries in the west such as the United States and United Kingdom have a long history of providing safe houses/shelters to women survivors of violence and we can learn a lot from their experiences while taking into account our local context. Some of these are; 1. 2. 3. 4. 5. 6. 7. 8. 9.

Confidentiality Data collection and record keeping Grievance procedures Follow ups Law enforcement Support groups Children’s’ programs Women economic empowerment programs Advocacy

Justification studies carried out at a women shelter in Florida show that they were for 3 consecutive years able to meet their zero incident performance standards. This is likely to be the truth in other shelters due to the security provided by the survivor being out of the violent environment. Way Forward In addressing the above challenge, various organizations involved in provision of services to survivors of SGBV in partnership with the government must together develop an effective and comprehensive strategy on setting up of safe houses/ shelters. The government must take the lead to ensure sustainability but also from the perspective that provision of services is a government obligation. While costing of sexual and gender based violence has never been done in Kenya, it is expected that the costs of SGBV would be no different from those of other countries where the studies have been conducted. The cost incurred by survivors in man hours and production when they are violated and cannot go to work, in medical expenses seeking treatment, the long term effects on the children of families where there is domestic violence are, point to credible reasons to compel the government to address and take steps to end SGBV. The shelters will provide an environment from which we can carry out studies, research and analysis to see the trend in

Research, Informed Debate & Policy Innovation

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Alternative Budget Highlights 2016/2017

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Research, Informed Debate & Policy Innovation

The Citizen Alternative Budget The Institute of Economic Affairs (IEAKenya) is a civic forum which seeks to promote pluralism of ideas through open, active and informed debate on public policy issues. It is independent of political parties, pressure groups and lobbies, or any other partisan interests

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Submissions for budget 2016/17 Made by different Stakeholders from the corporate and social sector on 3rd and 4th February 2016

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