Small countries live on trade. Data on trade as a percentage of GDP suggest so. Small countries make for their small sizes with more trade. Our counties are smaller and should do the same starting with inter-county trade. But there is scant data on inter-country commerce or trade. This is best espoused by cess-points, road blocks where mostly lorries carrying raw foodstuffs pay some money. Small scale traders move goods and services from one county to another but that is not in statistics. Through trade the country’s foreign exchange and budgetary support.
A Study by the Kenya Devolution Civil Society Working Group (KDCWG) dubbed Devolution @ 10 report (2023) and more recent data from the government indicate most counties can’t cover their costs like wages and salaries. They mostly rely on the national government to fund them. Funds often come late because revenue sharing with the national government is politicized. The sharing formula by Commission for revenue allocation (CRA) is contested annually leading to further delays in funds release to counties. Revenue allocation is a thorny issue with counties wanting more from central government. The question is why can’t they generate the money. The KDCWG Study on Devolution @ 10 in 2023 found that the effectiveness of own Source Revenue (OSR) mobilization varies across counties, with many respondents expressing moderate satisfaction but highlighting significant challenges. Lack of full automation in revenue collection, leading to pilferage and corruption; reliance on a narrow range of revenue streams; and a weak link between revenue collection and service delivery are key hurdles.
While over half of respondents perceive some improvement in market quality and safety under the current county governments, significant challenges remain. Outdated infrastructure, poor hygiene, inadequate management, lack of stakeholder engagement, and inefficient waste management are key concerns for citizens and traders.
Trade is the low-lying fruit
Trade has closed the funding gap in small countries. Singapore had a budget deficit of 1.60 percent of GDP in 2023. Kenya had 5.30 percent same year. The problem is how to stop the national government from “baby sitting “counties when their funding is unconditional as per the constitution. Further, the taxing powers of the counties are limited compared with the national government.
Countries that trade, make enough to even give aid or donations to other countries including Kenya. Why is trade neglected in counties? Do counties factor trade in their budgets? How can we turn things around?
Great trading nations hug the shores. That made transport and logistics the lifeline of trade. Think of Netherlands, UK, China or Japan. They have been sea faring, trading long before the onset of industrialization. They have just built on their past successes. The Kenyan counties on waterways should be more dependent on trade than those inland, a hallmark of blue economy. Think of Kisumu, Siaya, Kilifi, Mombasa, Nakuru or even Turkana. Waterways have remained strategic despite shift to roads, rail and air. These counties should leverage on what they have before roads or rail.
Why can’t I transport my goods by the sea as Vasco Da Gama did 500 years ago from Mombasa to Malindi? Mombasa is a national port, famous for external trade not internal trade. What percentage of goods through Mombasa are from one county to another? Why do we drive around Lake Naivasha? Why no “ports” beyond fish landing sites?
Trade flourish when we have markets for goods and services. Logistics and transport systems allow access to such markets. We already have 55 million customers in Kenya. But most investors and entrepreneurs think of export market, ignoring a small but nascent local market. Covid -19 clearly demonstrated the importance of this local market in tourism. Can trade learn from domestic tourism? Inter-county trade would be the seedbed of global or inter-country trade. Charity begins at home.
European Union is the best example of charity starting at home. 62 percent of the trade is within EU (Statistica, 2024). With our export / import mentality, we could find it hard to believe so much trade is within EU or USA. Counties should see each other as trading partner’s not political rivals. County borders are for administrative conveniences; economics know no borders.
Counties bordering other countries like Wajir or Migori should be thriving in trade because of access to bigger markets, not illicit trade or magendo.
The way we treat traders reduce inter-county trade. Are traders treated like foreign, investors with red carpets? Do we give them incentives like foreign investors? Even our school curriculum neglects such trade. Check school curriculum. Let’s think outside the box. Could tariffs proposed by Donald Trump give local trade the impetus it needs? What of Economic Partnership Agreement with European Union. Are counties ready to exploit this market with reduced tariffs?
Increased urbanization, and death of commercial agriculture, that was best espoused by plantations could give trade a new life line. Trade should not be let to grow organically or wait for a crisis. We can catalyze its growth and reap the economic dividends. How?
Building infrastructure that connect traders. We could borrow from China’s old Silk Road, now dubbed, one belt, one road. Every community in Kenya had trade routes. Can you recall Chief Kivoi from Kitui? Can we rediscover our ancient trade routes? Can we revitalize them with roads, rails and ports? Can we build roads and other infrastructure based on their potential to generate trade not political dividends (votes)?
Can we think of Kenya as an open economy like EU; why does cess exist?
Data on inter-county commerce would be a starting point in catalyzing inter-county commerce. Counties should focus on what they are good at like states in the USA or EU countries.
Trade has another advantage, it will allow counties to gain economic freedom, make money and address the local needs as was envisaged in the 2010 constitution. Trade will unleash the economic potential of individuals and the county. The County Investment Authorities with strategic plans initiated in counties such as Kirinyaga and Kajiado with support from the Kenya Devolution Programme are expected to impact on trade and create jobs, something to watch in the next few years.
Let’s be factual, most Kenyans will never leave their counties. That is their home. Let’s make the best out of their lives through trade. We need to make legislative and regulatory changes to make trade the fulcrum of counties’ economic growth. The KCDWG report noted that the ease of doing business varies across county governments, with most respondents indicating some considerable progress in streamlining business registration and licensing but significant challenges like high taxes, complex bureaucratic procedures, harassment from officials and cartels, and lack of significant financial support. These issues need to be addressed for trade to prevail in counties.
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XN Iraki is a Professor, Faculty of Business and Management Sciences, University of Nairobi.
@Kenya Devolution Program, Act Change Transform 2024
