Kenya’s county governments must aggressively boost their own-source revenue to reduce crippling dependence on delayed national disbursements, which have triggered salary arrears for health workers like doctors in Nairobi and threatened essential services across the devolved units.
As of January 2026, delays in equitable share transfers from the National Treasury (totaling billions, including reports of up to Ksh 68 billion or more in accumulated shortfalls) have left many counties struggling to meet payroll and operational costs. In Nairobi, prolonged delays contributed to ongoing doctor strikes and arrears, with public hospitals facing paralysis as medics demanded immediate payment of outstanding salaries. Similar issues have prompted warnings from governors of potential county shutdowns, underscoring how reliance on national funds exposes counties to fiscal instability when disbursements lag due to budgetary constraints, parliamentary delays or revenue shortfalls at the national level.
Article 209 (3) of the Kenyan Constitution mandates counties to generate own-source revenue (OSR) by imposing property taxes, entertainment taxes, service charges and other levies through the County Government Act of 2012. Yet counties collectively collect far below potential. Studies by the Commission on Revenue Allocation (CRA) and partners like the World Bank estimate untapped OSR could reach Ksh 130 billion to Ksh 260 billion annually if fully exploited; compared to current collections often hovering around Ksh 50-60 billion. In recent years, OSR has funded only about 10-14% of county budgets, with equitable shares dominating at over 90% in some periods.
Overreliance perpetuates vulnerability. Delayed national funds disrupt service delivery, accumulate pending bills and fuel public discontent, as seen in health sector disputes. Proactive OSR enhancement would provide a stable, predictable local revenue base for salaries, infrastructure and devolved functions like health and agriculture.
Counties have proven pathways to increase OSR without overburdening residents. Key strategies include:
- Digitize revenue collection systems. Implementing electronic payment platforms, e-tax registers, GIS mapping for property valuation and automated systems reduces leakages, improves efficiency and boosts compliance. Counties adopting these have seen significant gains in streams like parking fees and business permits.
- Broaden and formalize the tax base. Target untapped sources such as property rates (often the highest-potential stream) by updating valuation rolls, exempting low-value properties where needed and enforcing collection. Expand single business permits, liquor licenses, advertising fees and market charges through better registration of informal businesses.
- Streamline and enforce existing streams. Focus on top performers like trading licenses, hospital fees (without compromising access), parking, market fees and natural resource transportation charges. CRA’s Revenue Enhancement Action Plans (REAPs), rolled out with World Bank support in counties like Machakos, Murang’a and others, help prioritize reforms and close tax gaps identified in deterministic frontier analyses.
- Explore innovative and new streams. Introduce or optimize environmental levies, public-private partnerships for parking or waste management, and targeted fees for tourism or conservancies in resource-rich areas. Avoid regressive or duplicative charges like excessive cesses that burden trade.
- Build institutional capacity. Professionalize revenue departments, establish semi-autonomous revenue authorities insulated from interference, train staff and enhance taxpayer education to build trust and compliance. Public participation in budgeting fosters accountability.
- Strengthen legal and policy frameworks. Enact county-specific finance acts, align with national guidelines and conduct regular revenue mapping to identify economic strengths.
Shifting to self-reliance demands political will and investment in administration, but the returns are clear: reduced dependency, timely salary payments, improved services and fiscal autonomy. With CRA estimating massive unrealized potential in streams like property rates and licenses, counties that act decisively can break the cycle of delays and arrears. The national government should support this pivot through technical assistance and incentives, but ultimate responsibility lies with governors and assemblies to harness local resources for sustainable devolution.
