Rural counties defeat 'giants' in own revenue collection race

Controller of Budget Margaret Nyakang’o /FILE

Counties long dismissed as rural backwaters are turning the tables on the ‘giants’ in the race to raise their own source revenue.

The revelation exposes inefficiencies and weaknesses in some of the country’s most resource-endowed devolved units.

A new report by Controller of Budget Margaret Nyakang’o reveals a striking trend where smaller counties with modest economic bases are outperforming city and urban counties in OSR.

The trend, captured in the County Governments Budget Implementation Review Report for the first half of the financial year, has triggered questions about management, systems and accountability in OSR collection in the big counties.

According to the report, counties such as Homa Bay, Nyeri, Makueni, Laikipia, Embu and Kitui posted impressive revenue figures, eclipsing established urban economies like Kisumu and Uasin Gishu.

Kisumu, one of the oldest cities, collected Sh383.45 million against an ambitious annual target of Sh3.54 billion.

Uasin Gishu, home to the newly elevated Eldoret City, generated Sh277.41 million against a target of Sh1.3 billion.

In contrast, Homa Bay — largely rural and with fewer conventional revenue streams — collected Sh625.26 million over the same period.

The county outperformed Kisumu by Sh239.81 million and Uasin Gishu by Sh347.38 million.

Nyeri also posted strong numbers, collecting Sh633.51 million, while Kisii got Sh676.77 million, further widening the gap between rural performers and urban laggards.

Embu, despite its small size and limited asset base, raised Sh419.55 million, comfortably beating both Kisumu and Uasin Gishu.

Kitui collected Sh389.60 million, while Murang’a generated Sh506 million, reinforcing the trend of rural dominance.

Even counties neighbouring major cities are struggling to keep pace.

Kajiado, which borders Nairobi and benefits from proximity to the capital’s economic activity, collected just Sh360.27 million.

Bungoma, another county with a large urban population, also posted underwhelming returns.

The report attributes this paradox to systemic inefficiencies rather than a lack of opportunity.

Under Article 209(3) of the Constitution, counties are empowered to raise revenue through property rates, business permits, parking fees, health services, market charges, liquor licensing and other streams.

Urban counties, with their dense populations, thriving businesses and extensive infrastructure, are theoretically better positioned to maximise these sources.

Yet, the data shows otherwise.

“Even the big counties you hear about, as much as they are collecting more, their systems are still not optimal,” Commission on Revenue Allocation (CRA) chairperson Mary Chebukati told senators last month.

She cited weak systems, overreliance on manual processes and lack of integration across revenue streams as key factors undermining performance.

“These gaps create opportunities for pilferage and inefficiency,” she said.

The CRA estimates that counties could collectively generate up to Sh261 billion annually from their own sources. However, current collections remain far below this potential.

In the six months under review, all 47 counties raised a combined Sh26.94 billion against an annual target of Sh99.73 billion — less than a third of the expected figure.

Nairobi, the country’s economic hub, emerged as the top collector but still fell short of expectations.

The city raised Sh5.22 billion against a target of Sh21.17 billion, underscoring the scale of the challenge even in the most resource-rich county.

Narok delivered one of the most remarkable performances, collecting Sh2.55 billion — beating major counties such as Nakuru (Sh1.38 billion), Mombasa (Sh2.04 billion), Kiambu (Sh1.76 billion) and Machakos (Sh1.21 billion).

However, Narok’s strong showing is largely attributed to tourism revenues from the Maasai Mara Game Reserve, highlighting the role of unique local assets in boosting collections.

Elsewhere, disparities remain stark.

Kilifi collected Sh746.87 million, significantly outperforming its coastal neighbour Kwale, which managed only Sh180.73 million.

Kericho, despite its vast tea plantations and expanding urban centres, raised just Sh231.1 million.

Migori, often compared to Homa Bay, collected Sh261.52 million, while Kirinyaga generated Sh328.36 million.

The report also highlights performance variations relative to targets.

Samburu led in this category, achieving 79 per cent of its OSR target, driven largely by tourism revenues.

Garissa followed at 71 per cent, boosted by strong performance in Facility Improvement Financing (FIF), which exceeded its target.

West Pokot posted a 54 per cent performance rate, also supported by solid FIF collections.

At the other end of the spectrum, several counties recorded dismal performance.

Turkana achieved just eight per cent of its target, while Siaya (10 per cent), Kisumu (11 per cent), Kericho (14 per cent), Kiambu (18 per cent) and Kwale (20 per cent).

According to the CRA, some counties are spending up to Sh8 to collect Sh3, a situation that underscores inefficiency and poor revenue management.

“This leads to budget deficits, negatively affecting implementation of planned activities and contributing to the accumulation of pending bills,” the commission warned.

The findings paint a picture of counties struggling not with a lack of revenue sources, but with how to effectively harness them.

Nyakang’o has urged county governments to adopt innovative approaches to revenue collection and strengthen administrative systems.

“They are encouraged to adopt innovative strategies to expand the revenue base and recover outstanding revenue arrears,” she said.

Outstanding arrears stood at Sh143.04 billion as of December 31, 2025, pointing to a massive pool of uncollected revenue.

The CRA has also challenged counties to rethink their approach by broadening revenue bases instead of increasing tax rates, which often burden residents without necessarily improving collection efficiency.

Property rates, in particular, remain largely untapped due to outdated valuation rolls, making it difficult for counties to accurately assess and collect dues.

As the numbers reveal, the narrative that cities naturally outperform rural counties is rapidly unravelling. Instead, the emerging reality is that efficiency, innovation and accountability — rather than size or economic endowment — are increasingly determining success in revenue collection.

INSTANT ANALYSIS

Rural counties are outperforming major urban centres in own source revenue collection, exposing inefficiencies in city counties despite their larger economic base. A report by Controller of Budget Margaret Nyakang’o shows counties like Homa Bay, Nyeri and Embu surpassing Kisumu and Uasin Gishu. Experts, including CRA chairperson Mary Chebukati, blame weak systems, manual processes and unrealistic targets. Counties collected Sh26.94 billion against a Sh99.73 billion target, far below the estimated Sh261 billion potential, highlighting massive untapped revenue capacity.