The President’s speech during the launch of the wage bill debate.

SPEECH BY HIS EXCELLENCY HON. UHURU KENYATTA, C.G.H., PRESIDENT AND COMMANDER IN CHIEF OF THE DEFENCE FORCES OF THE REPUBLIC OF KENYA DURING THE OFFICIAL LAUNCH OF THE NATIONAL DEBATE ON PUBLIC WAGE BILL SUSTAINABILITY, KENYATTA
INTERNATIONAL CONFERENCE CENTRE, NAIROBI, 10TH MARCH, 2014.

Fellow Kenyans,

Distinguished Guests,

Ladies and Gentlemen,

I am pleased and humbled to see so many distinguished Kenyans at the opening of
this important forum. I thank you for joining us to participate in this vital national debate. Let me at the outset make it clear my government’s view
regarding the size of our public sector wage bill. My Government is convinced the recent growth in public sector wage bill is unsustainable and unacceptable. In the current financial year, for example, we estimate that total remuneration to the public service will account for 55% of
our tax revenue, and 13% of the national cake or what economists call gross
domestic income. If we maintain this trend we would be dedicating an ever larger share of the wealth we produce as
a country to the remuneration of public servants. Yes, it is good to pay our people well but this must be done in a manner
conducive to our development agenda.

Ladies and Gentlemen,

It is nice to receive ever larger slices of our national cake. But collectively, as a country, we have other priorities: we
must fund our pledges to the various capital investments laid out in the current 2030 Medium Term Plan and the Jubilee
Manifesto.
We need, as an example, to develop our roads and revamp our health facilities. The standard gauge railway, initially from Mombasa to Nairobi, must be paid for. So must we implement the South Sudan and
Ethiopia Transit corridor that will open up all of the Northern Kenya to new investment and economic opportunities.
We must also invest in the million-acre irrigation programme in Galana, in order
to achieve our food security goal.
But the slice of our national cake devoted to development expenditure would continue to dwindle if we do not contain
pressure of wages. Indeed, in a contest between expenditure on public servants’ wages and expenditure on capital investments that benefit every Kenyan, including future generations, there can be only one winner, Kenya.

Ladies and Gentlemen,

I have cited a few of the programmes that will help achieve our Vision 2030 objectives. That is the path to the free and prosperous country we are confident to become. But, we must admit our current wage bill is an obstacle, standing squarely in that path. The monster threatens not just our future, but our present too, since it compromises the
stability of our present economic
framework. We have consistently worked hard to tame inflationary pressure, so
alleviating the secondary effects of wage demands. Our success in containing inflation also relies heavily on our ability to maintain a reasonable level of fiscal deficit. However,
this success cannot be sustained if we allow a large and rising fiscal deficit to stoke inflation, exchange rate depreciation and more expensive debt servicing.
So far Kenya has managed to maintain its fiscal deficits at fairly sustainable levels and in consequence our macroeconomic
situation has remained relatively stable. By any estimates, our core inflation has
remained low, and our exchange rate stable. And our debt to GDP ratio is sustainable, even by the most exacting of IMF standards. These are the fruits of
prudent fiscal management over the last decade, which we can no longer take for granted.
That is why the threat of the burgeoning wage bill must be contained. It is time to
put the monster to rest and we wish to lead by example. Only last week my deputy and I resolved to take a 20% pay cut. We were joined by members of our cabinet as well as the Principal Secretaries, who agreed to match our effort with a 10% pay cut. We meet here
today to see what more we, all of us together, can do to carry out that effort forward.

Ladies and Gentlemen,

I know there have been some informal discussions proposing various measures to tackle this problem of wage bill. Some
of the solutions proposed will not work while others will yield results, if implemented. There have been, for instance, suggestions to raise taxes to
cover the wage bill. I say we should resist this enticement. Why do I say so? Because
our ease of doing business would suffer, with disastrous consequences for youth
unemployment. The better course is to clearly set out a number of the issues the
nation must face, and to see what consensus we can reach. Let me provoke your thoughts.

First, though it is true that public sector average wages may compare favourably with the private sector, when we add the
huge sums the government pays out in allowances and other benefits, public sector wages actually out-perform the
private sector. We should therefore, ask whether the government would do better to adopt a consolidated pay package
policy that covers all allowances, or whether it can retain the present system with stricter safeguards to stop abuses.

Second, whenever real wages fall on account of inflation, we experience a secondary response, through agitation for
salary rises. We will need to decide how we should adjust public sector wages to
protect it from erosion by inflation, a policy which several countries have experimented.

Third, we have evident disparities in
remuneration in our public service at both national and county levels: employees with identical skills and experience are paid differently by agencies in the same government without
regard to performance and productivity.
At the cabinet retreat from which I have just returned, these discrepancies aroused the interest of my cabinet secretaries. I am informed that, in a recent report by the Auditor General, some of the employees inherited from the defunct local authorities earned more than the national government employees, despite
having similar qualifications. The same audit found counties paying new employees different wages for the same skills and same job experience. We need to streamline the management of salaries at all levels of Government. Although the Salaries and Remuneration
Commission, and the Public Service Commission will take the lead in creating rules and principles for containing the
disparities, I would urge every Kenyan to make their views heard on this matter.

Fourth, as you are aware, the
Government is now auditing its payroll to ensure that only legally-hired employees
are paid a salary. Ghost workers must go. In this context, I urge you all to give maximum cooperation to the Ministry of
Devolution and Planning, which is
carrying out this exercise. But more importantly, we need your suggestions on ways of reforming our pay system to
make it sustainable and compatible with our long-run development agenda objectives.

And Fifth, as you are aware, we have already carried out the most comprehensive review of parastatals, with recommendations of far-reaching reforms. Rapid implementation of those
recommendations will help raise
efficiency, save billions of shillings lost, reduce project slippages and deal a blow
to open theft.

Ladies and Gentlemen,

I have raised matters of grave national concern. But, I would like to make it clear that this national debate on our wage bill
is not an exercise meant to shame our civil servants. Let me remind Kenyans that our public service remains among the
most competent and capable in all of Africa. These are devoted, patriotic Kenyans, many of them with world–class qualifications, who serve Kenyans with efficiency, dignity and dedication every day.
And, given the new innovations in ICT, which my government is introducing – like Huduma Centres, IFMIS and so on –
their service can only improve. Therefore, even as we weed out those who do not live up to the expected high standards, we
must praise and reward the good work of those who excel.

Ladies and Gentlemen,

In conclusion, I wish to note that Kenyans have in the past demonstrated their capacity to debate national policy rationally, with a minimum of acrimony,
and a maximum of will to reach a new understanding on such topical issues for the good of our beloved country. We owe
our children a better Kenya which they can inherit. I, therefore, urge all present to let that promise in nation building,
guide you in this debate. With those many remarks, it is my very great pleasure to declare the “National Debate on Wage Bill Sustainability”, officially launched.

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