The private sector could have helped government use Sh2 trillion better

In Summary

• This arrangement builds the capacity of existing non-state institutions to compete and provide these services on behalf of the State.
• Judging from the published assessments of student performance, teachers, arguably, appropriate most of this spending through wages and a very easy working environment.
• I could also dedicate the “laptop” money to a savings account for each child throughout the schooling years.

By KWAME OWINO
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Any commentary on the budget proposals and the policy statement issued to Parliament a fortnight ago, it would seem, is stale news.

After another year of expanded spending, the proper question to ask is how else the Sh2.25 trillion could have been spent, so I describe here how I would allocate the same amount that Parliament approved.

There exists an impression that the budget allocations were not tightly distributed. In my opinion, the Cabinet secretary succumbed to political pressure to distribute slices of the spending to too many programmes and activities.

The alternative would have been to hand over any programme or project costing less than Sh10 billion to a private firm to execute, after being chosen through a competitive process.

For example, Parliament approved Sh9 billion for orphans and vulnerable children to be run through State departments and ministries. Such a task would be best accomplished by a financial institution that would manage the payments, verify the identity of recipients and present reports and audits for verification.

To ensure efficient management, I would simply issue the criteria and list of existing recipients and impose a maximum administration cost for the facility.

This arrangement builds the capacity of existing non-state institutions to compete and provide these services on behalf of the State.

This imagined Cabinet secretary would then confront the admitted problem of ghost workers and the rising wage bill.

Analysis conducted by the Institute of Economic Affairs shows the Executive arm of government will spend 65 per cent of all allocated spending.

During the financial year that is about to end, a census in the Public Service revealed that the exact number of workers in the public service is not known. A substantial amount of public money is lost through payment of salaries for more than ten thousand non-existent workers.

This means that the overall payroll of the public sector has not been thoroughly audited. One way for doing this is to privatise the payroll by allowing an external firm to manage the payroll on the government’s behalf.

Stopping payment for ghost workers would save substantial funds that may be dedicated to other important purposes.

Publicly-funded education, another relevant policy area, has benefited considerably from government resources. Judging from the published assessments of student performance, teachers, arguably, appropriate most of this spending through wages and a very easy working environment.

This leads to the view that public education in primary and secondary schools is an efficient mechanism for rewarding teachers, with students damned to poor quality instruction. This model should change.

In an alternative model, the modest increments that have been allocated to free primary and secondary education subsidies would be handed to the students by an electronic voucher, with every pupil’s registration number embedded in it.

Schools would have to convince the guardians of these children that they are worthy of that payment. Granted, this would not immediately make results improve, but the schools would have to convince guardians that they provide good value for the funds and teachers that they receive.

This would shake up schools from the demand side, as opposed to the supply side of teachers and head teachers.

Keeping with the spending on education, while it seems the “laptop per child” policy has been evolving, it is not necessarily now a good idea. I remain convinced that it will prove to be an expensive mistake that will be difficult to unwind.

So the imagined Cabinet secretary would provide a choice to parents to either receive that grant in cash form and spend it on an item related to the child’s education, or for nutrition for the child.

My rough calculation is that it would come to close to Sh2,000 per primary school child per year.

Continuing with the theme of harnessing the role of markets in achieving improvement in welfare and preserving citizen choice, I could also dedicate the “laptop” money to a savings account for each child throughout the schooling years.

This modest amount would be saved in the name of each student with the provision that they may collect it together with the compounded interest upon completion of high school.

The student might use it to support their education at tertiary level or for other legitimate spending, and it would also form an important incentive for a student to stay in school in anticipation of the reward.

Despite the fact that public spending in Kenya has moved rapidly from hundreds of billions into trillions within four years, its greatest weakness is the absence of policy creativity in allocating it.

These ideas present changes that would ensure public spending supports real private sector growth and development, and economic competition.

Kwame Owino is the Chief Executive Officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwam