Does Kenya’s tea-rich Kericho county get ‘nothing’ for its green gold?

Claim

Kenya’s government gets billions of dollars from Kericho’s tea but the county receives nothing.

Source: Kericho governor Paul Chepkwony (September 2018)

incorrect

Verdict

Explainer: Kericho has received levies and taxes from tea.

  • Kericho governor Paul Chepkwony said the county received no revenue from its tea industry, which earned the national government billions of shillings.
  • Kericho has received almost KSh80 million from tea levies in recent years, in addition to levying taxes on tea transporters.
  • The county also gets a share of the taxes collected by the national government, which includes taxes on the tea industry. Its share in 2017/2018 was KSh5.2 billion.


How resources are shared can be a source of friction between Kenya’s central government and its 47 new counties. Established by the 2010 constitution, the counties came into operation in 2013.

Their governments often want a larger share of the resources in their territories. Paul Chepkwony, the governor of the tea-rich county of Kericho, recently demanded a bigger slice of revenues from tea exports.

He based his demand on developments in another county. The discovery of oil in the northern Turkana county led to sometimes very public fallouts between governor Josphat Nanok and President Uhuru Kenyatta.

“Whereas Turkana county gets 30% of the revenue from petroleum, the government gets billions of dollars from our tea but we receive nothing,” Chepkwony was reported as saying in September 2018.

Tea is grown in at least 19 counties and was Kenya’s leading export in 2017, so the governor’s demand is likely to be closely watched. We examined his claim.

‘We just want to benefit like Turkana’

Chepkwony told Africa Check that the 30% figure was derived from a 2014 bill setting out how revenue earned from the country’s natural resources should be shared.

The bill proposes that 20% of these funds go into a sovereign wealth fund. Out of the remaining 80%, the national government would get 60% (48% of the total) and counties 40%, or 32% of the total.

In May 2018, after a deal was struck on the petroleum bill of 2017, Turkana was allocated 20% of oil revenues, with the local community to get 5% and the central government 75%.

(Note: The law on petroleum exploration, on which the revenue-sharing formula between the central government and Turkana is based, is still pending in the senate.)

“We just want to benefit the way Turkana has,” Chepkwony told Africa Check.

But Turkana has not yet exported any oil and so hasn’t received any money for it, Rosemary Nchinyei, the county’s director of communication, told Africa Check.

A pilot scheme was launched in June 2018 to truck oil from the county to the port of Mombasa for storage in preparation for early exports in 2019.

Does Kericho ‘get nothing’ from tea?

Kericho county has received close to KSh80 million from tea cess in recent years. “Cess” is defined as a “a levy on tradable agricultural produce”:

The national government collected the ad valorem levy from the county’s tea exporters at a rate of 10% of the tea’s value, the agriculture authority’s interim director, Anthony Muriithi, told Africa Check. The levy was scrapped in 2016.

The KSh6.96 million received in 2016/17 was arrears collected in 2012 under a law that has since been repealed, he said.

“Currently, the national government does not collect or levy any cess from tea,” Muriithi said. “But the constitution allows county governments to impose taxes, including cess, in their jurisdiction so long as they enact the necessary legislations.”  

Since 2014, Kericho has been levying agricultural cess on transporters of tea, but Africa Check has been unable to verify the amount collected so far. (Note: The county collected KSh253.4 million as own revenue in the financial year 2016/17.)

The county also published a tea bill in September 2016 that would give it power to collect further levies on tea when it becomes law.

National taxes are shared with counties

Kericho county has also indirectly earned revenue from its tea growers and processors.

“The national government, as of now, taxes the profits made by the corporations and companies that produce and process tea in Kericho,” Dr Amenya Nyakundi, an adviser on natural resources at the Commission on Revenue Allocation, told Africa Check.

The  commission makes proposals on how revenues should be shared between the national government and the counties.

Taxes collected by the national government do make their way back to the counties in an “equitable share”. Kericho received KSh5.2 billion of these taxes in the 2017/2018 financial year.

The Kericho governor had “a right to make and justify a petition to the national government to get a share of that tax revenue before it is consolidated with tax revenues from elsewhere”, Nyakundi said.

But if this were granted, other counties might also demand a share of their resources – leading to “serious national revenue sharing challenges”.

Conclusion: Kericho county has received levies and taxes from tea production.

The governor of Kericho, an important tea-growing area, said Kenya’s national government earned “billions of dollars” from the county’s tea production but the county itself got nothing.

He demanded that Kericho should benefit from tea in the way Turkana country benefited from oil. Turkana is however yet to pocket any money for its oil.

But Kericho’s government has received money from its tea industry. First, it has earned close to KSh80 million in levies on tea in recent years.

Second, the national government taxes Kericho’s tea growers and processors. Part of this money finds its way back to Kericho in the “equitable share” of taxes that the national government distributes to counties.

Kericho received KSh5.2 billion in the equitable tax share in the 2017/2018 financial year.

We therefore rate the governor’s claim as incorrect.

Edited by Lee Mwiti


Further reading:

 

© Copyright Africa Check 2018. You may reproduce this piece or content from it for the purpose of reporting and/or discussing news and current events. This is subject to: Crediting Africa Check in the byline, keeping all hyperlinks to the sources used and adding this sentence at the end of your publication: “This report was written by Africa Check, a non-partisan fact-checking organisation. View the original piece on their website", with a link back to this page.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Africa Check encourages frank, open, inclusive discussion of the topics raised on the website. To ensure the discussion meets these aims we have established some simple House Rules for contributions. Any contributions that violate the rules may be removed by the moderator.

Contributions must:

  • Relate to the topic of the report or post
  • Be written mainly in English

Contributions may not:

  • Contain defamatory, obscene, abusive, threatening or harassing language or material;
  • Encourage or constitute conduct which is unlawful;
  • Contain material in respect of which another party holds the rights, where such rights have not be cleared by you;
  • Contain personal information about you or others that might put anyone at risk;
  • Contain unsuitable URLs;
  • Constitute junk mail or unauthorised advertising;
  • Be submitted repeatedly as comments on the same report or post;

By making any contribution you agree that, in addition to these House Rules, you shall be bound by Africa Check's Terms and Conditions of use which can be accessed on the website.

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.