Can't pay, won't pay— the startling numbers about Kenya's teachers' strike, and surprise, it's all in the tax

It's a stalemate: the president says taxes would have to go up to foot the bill, but the data shows the key is better, not more, tax.

JUST 10 years after former US president Bill Clinton said Mwai Kibaki was the one person he would love to meet, due to the then Kenyan president’s decision to provide free and compulsory primary education and which saw over a million kids turn up to school, those children are now out of class.

A strike by Kenyan teachers over pay is now in its third week on Monday, as their union vowed to stay out of class until their demands were met. 

On August 24, Kenya’s supreme court ordered the state to pay teachers increases of as much as 60%, which would add an estimated 155 billion shillings ($1.45 billion) to its payroll, according to the East African country’s Treasury.

The government says it has no money to pay the teachers, and has ordered them back to work, citing the strike as a violation of the constitution. President Uhuru Kenyatta last week said if the increment is implemented, taxes would have to be raised making a fast-growing economy uncompetitive.

The numbers would appear to support the can’t pay-won’t pay stand by government. The country has some 293,000 teachers employed in public service—excluding those hired by among others private schools and NGOs. This is already the largest cohort of its civil servants, yet another 300,000 are on its books but are unemployed, according to their employer, the Teachers Service Commission. 

READ: The continent’s teachers skip school because they are so poorly paid: Yes, and no

Teachers also account for the highest wage bill, at 2.9% of GDP, which is also the dominant fraction of the country’s total public sector wage bill, which is 9.9% of GDP. The money-men argue that the sub-Saharan average is 6.5% of GDP.

According to the most recent World Bank figures, of the 39 African countries reporting, in 2010, Kenya was already one of the highest spenders on education, which accounted for 5.5% of its gross domestic product—which includes salaries. 

This figure captured both current expenditure such as salaries, capital spending such as on building new schools, and transfers, which is money from donors. With implementation of an earlier pay award to teachers, the current fraction that their pay takes from total government spending on the sector will likely be even sharper.

When government expenditure on education is narrowed down to that of a percentage of total spending on all sectors including health, social services and education, the country is among only a clutch of African countries that spend a fifth or more of their expenditure on education.

The highest spender of the 39 reporting countries is Ghana, which spent 30.8% on education in 2011—the most recent year for which its data is available. In the same year Kenya spent 20.6%; in June 2015 it announced a budget that has education accounting 26.7% of spending. 

South Africa, the country’s richest economy, spent 19.2% on education in 2013, its most up to date figure, while fast-improving Rwanda spent 16.6% in the same year. 

By this trend, it is quickly apparent that the increase in Kenyan government spending on education has been one of the most rapid on the continent.

When its expenses are looked at, which are cash payments for the operating activities of the government in providing goods and services—money which among other things pays salaries of its employees, the country retains a mid-point position of the 32 African countries for which World Bank data is available.

As a percentage of its GDP, government expenses were 19.6% in 2012, when the most recent figures are available. Admittedly, this is not a direct measure because teachers are only one category of the payroll, and costs as diverse as subsidies, social benefits and even rents and dividends all fall under this category. But it is indicative because teachers’ pay is the government’s single biggest category under its recurrent expenditure.

But because Kenyatta has suggested taxes would go up to cover the increase—Treasury says VAT would have to be raised from 16% to 21% to cater for the pay rise—a possibility that is anathema to many Kenyans who see few returns on current levies, we had a look at the most recent figures on tax revenue as a percentage of GDP. 

This measure essentially refers to compulsory transfers of funds to the central government for public purposes. The World Bank excludes some types of mandatory transfers such as fines, penalties and social security contributions, while allowing for tax refunds.

Under this, Kenya is again mid-way of the 32 African countries for which data is available. Tax revenue formed 15.9% of its GDP in 2012, about half of the African country that best collects its taxes, Seychelles, at 28.4%. 

Of note is that the countries with the highest tax revenues as a fraction of their GDP tend to be among the richest—Botswana, South Africa, Morocco and Tunisia all rank highest. Those that have the least collection are either in conflict or struggling with governance—Nigeria, Africa’s largest economy, for example is bottom of the list, with a paltry 1.6% of its GDP coming from tax revenue. In close company is the DR Congo, and the Central African Republic.

In other words the key for increasing government revenue to cater for more expenses appears to be better, not more tax. 

There is precedence in Uganda. Last month, the Uganda Revenue Authority booked the largest surplus in its history, months after a new commissioner general took over. The year before, the taxman had reported a deficit.

According to the URA’s annual report, the majority of the growth came from domestic taxes, lifted by among others a raft of reforms, increased efficiency in administration, and an expansion of the tax register, which captured thousands previously in the informal sector.

Unfortunately for teachers, while Kenya’s economy is expected to come in on at least 6.5% this year and even more next, the necessary reforms for increasing tax receipts take time.

The problem for the authorities in Kenya in making this case to them would appear a moral one—officials and legislators continue to regularly pocket big money and allowances, while Kenyans have also seen corruption and wastage increase monstrously, as even the country’s recently devolved units clamber onto the gravy train.

As the two giants size each other up—including in the courts— in the hope one will flinch before the other, Kenyan children continue to cool their heels at home—just weeks before major national examinations.

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