Institutions, Decentralization and Structural Transformation in Eastern Africa

94 Pages·2017·1.71 MB·English

Institutions, Decentralization
and Structural Transformation
in Eastern Africa
Institutions, Decentralization
and Structural Transformation
in Eastern Africa
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Table of Contents
Abbreviations ................................................................................................................................................ v
Acknowledgements ....................................................................................................................................vi
Executive summary ....................................................................................................................................vii
Chapter I: Introduction .................................................................................................................................1
A. Background ........................................................................................................................................................................................ 1
B. Aims and objectives of the study .......................................................................................................................................... 2
C. Methodology ..................................................................................................................................................................................... 2
D. Review of the socioeconomic environment in Eastern Africa ............................................................................ 3
E. Defnition of key concepts ........................................................................................................................................................ 6
F. Theoretical perspectives and conceptual framework .............................................................................................. 6
G. Summary .............................................................................................................................................................................................. 8
H. Outline of the report ..................................................................................................................................................................... 8
Chapter II: Decentralization and fscal federalism ..................................................................................9
A. Introduction ........................................................................................................................................................................................ 9
B. Tracing decentralization in selected Eastern Africa countries ............................................................................14
C. Analysis of decentralization in selected East African countries ........................................................................17
D. Fiscal decentralization and federalism ............................................................................................................................. 22
E. Findings from case studies in Eastern Africa ................................................................................................................27
F. Key messages ...................................................................................................................................................................................29
G. Recommendations .......................................................................................................................................................................29
Chapter III: Social dimension within the context of decentralization ...............................................30
A. Introduction ......................................................................................................................................................................................30
B. Governance and leadership ....................................................................................................................................................30
C. Situating public participation within the decentralization process ................................................................33
D. Decentralization and structural transformation ..........................................................................................................33
E. Constitutional and legal provisions for public participation ...............................................................................35
F. Conclusion .........................................................................................................................................................................................39
G. Key messages ...................................................................................................................................................................................39
H. Recommendations .......................................................................................................................................................................39
Chapter IV: Service delivery within the context of decentralization .................................................41
A. Introduction .....................................................................................................................................................................................41
B. Decentralization and service delivery ...............................................................................................................................41
C. Objectives of decentralization in Eastern Africa ..........................................................................................................45
D. Distribution of functions and institutions between various levels of Government ..............................47
E. Has decentralization improved public service delivery in Eastern Africa? ...................................................49
F. Challenges faced in service delivery within decentralization .............................................................................51
G. An informed civil society and public that will demand better service .........................................................51
H. Conclusion .........................................................................................................................................................................................51
I. Key messages ...................................................................................................................................................................................52
J. Recommendations .......................................................................................................................................................................52
Institutions, Decentralization and Structural Transformation in Eastern Africa iii
Chapter V: The quality of policy, institutions and economic performance ......................................53
A. Introduction .....................................................................................................................................................................................53
B. Quality of policy design in Eastern Africa .......................................................................................................................53
C. Institutions and decentralization in Eastern Africa ...................................................................................................55
D. Economic performance and structural transformation in Eastern Africa .................................................. 60
E. Summary and key messages ................................................................................................................................................ 64
Chapter VI: Conclusions and policy recommendations .......................................................................65
A. Introduction ......................................................................................................................................................................................65
B. Conclusions .......................................................................................................................................................................................65
C. Policy recommendations ..........................................................................................................................................................70
References.....................................................................................................................................................73
iL st of iF ug res
Figure 1: Gross domestic product based on purchasing power parity valuation (USD) in 2014 ......................... 4
Figure 2: Gross domestic product per capita purchasing power parity valuation (USD) in 2014 ....................... 4
Figure 3: Annual real growth in gross domestic product (average over 2006-2014) .................................................. 5
Figure 4: Conceptual model for the study ........................................................................................................................................... 7
Figure 5: Extent of decentralization in select African countries in 2002 ..........................................................................20
Figure 6: Index rankings on closeness to the people and decentralization (2014) ....................................................21
Figure 7: Governance perception in the Eastern Africa subregion .....................................................................................31
Figure 8: Arnstein’s ladder of participation: a conceptual representation .....................................................................33
Figure 9: How public participation transforms policy outcomes ....................................................................................... 34
Figure 10: Arguments for and against decentralization .............................................................................................................35
Figure 11: Decentralization power paths by form of decentralization .............................................................................42
Figure 12: Country ranking of institutions ..........................................................................................................................................59
Figure 13: Income comparison and classifcation of countries in the region ................................................................62
Figure 14: Regional composition of gross domestic product in 2014 ...............................................................................63
iL st of Talb es
Table 1: Principles of good practice in decentralization ............................................................................................................14
Table 2: Analysis of the status of decentralization in selected East African countries .............................................18
Table 3: Forms of decentralization in selected Eastern African countries ...................................................................... 22
Table 4: Control over corruption and Corruption Perception Index (CPI) in Eastern Africa ..................................32
Table 5: Constitutional and legal provisions for public participation .................................................................................36
Table 6: Levels of participation in diferent domains in Rwanda ..........................................................................................38
Table 7: Poverty and indicators of income distribution in Eastern Africa .......................................................................41
Table 8: Basic education indicators in Eastern Africa region ...................................................................................................43
Table 9: Access to services (electricity, water supply and sanitation) ................................................................................ 44
Table 10: Basic health indicators in Eastern Africa .........................................................................................................................45
Table 11: Distribution of functions in Ethiopia .................................................................................................................................47
Table 12: Distribution of functions in Kenya ......................................................................................................................................47
Table 13: Distribution of functions in Rwanda ................................................................................................................................ 48
Table 14: Distribution of functions in Uganda ................................................................................................................................ 48
Table 15: Challenges faced in decentralization and service delivery..................................................................................50
iv Institutions, Decentralization and Structural Transformation in Eastern Africa
Abbreviations
AEO Africa Economic Outlook
AfDB African Development Bank
AU African Union
CAAPD Comprehensive Africa Agriculture Development Programme
CBI Central Bank Independence
CIC Commission for the Implementation of the Constitution
CoG Council of Governors
DRC Democratic Republic of the Congo
EA Eastern Africa
EAC East African Community
ECA Economic Commission for Africa
EU European Union
FDI Foreign Direct Investment
GCI Global Competitiveness Index
GDP Gross domestic product
GNI Gross national income
GVA Gross value added
ICE Intergovernmental Committee of Experts
IGRTC Intergovernmental Relations Technical Committee
IMF International Monetary Fund
MDG Millennium Development Goal
NESC National Economic and Social Council
OECD Organization for Economic Cooperation and Development
SRO-EA Sub-Regional Ofce for Eastern Africa
SSA Sub-Saharan Africa
UNCDF United Nations Capital Development Fund
UNDESA United Nations Department of Economic and Social Afairs
UNDP United Nations Development Programme
USD United States dollar
Institutions, Decentralization and Structural Transformation in Eastern Africa v
Acknowledgements
his study was prepared as a key input to Martins and Daya Bragante at SRO-EA, including
the discussions of the Sub-Regional Ofce suggestions by the participants at the conference
Tfor Eastern Africa (SRO-EA) of the Economic of the Twentieth Inter-Governmental Committee
Commission for Africa (ECA) Twentieth Inter-Gov- of Experts and inputs by experts in a validation
ernmental Committee of Experts on Institutions, workshop.
Decentralization and Structural Transformation in
Eastern Africa, which was held on 8-11 February The preparation of this report required that some
2016, in Nairobi. The study was carried out by the of the secondary data be complemented and
National Economic and Social Council (NESC) of corroborated by evidence from primary sources
Kenya under the guidance of Antonio M.A. Pedro, in countries that were selected for the purposes
Director of SRO-EA. In pursuit of objectivity and of this study. During these country visits the team
quality, NESC engaged a team of subject experts accessed a selected group of experts and leaders
to collect and analyse the data as well as to write who provided invaluable inputs for this report.
and edit the report. Comparator information was also obtained from
Mauritius.
A number of individuals were involved in carrying
out the study. The Secretary of NESC, Julius Muia, Considerable efort has been made to obtain the
and Director for Social Sector, Elizabeth Kimulu, most recent credible secondary data for as many
provided overall direction and management of variables as possible in order to infuse objectivity
the project. The team of experts comprised Peter and quantitative parameters in this report. To this
M. Lewa, Kemoli Sagala and Patrick Kasyula. A vital end, this background study has beneftted sub-
link that helped in coordinating various aspects of stantially from, and relied heavily on, data pub-
the report, including organising country missions, lished by various agencies of the United Nations,
was provided by Geofrey Manyara, Economic national Governments and researchers.
Afairs Ofcer - Tourism at SRO-EA. This report
incorporates comments received from Pedro
iv Institutions, Decentralization and Structural Transformation in Eastern Africa
Executive summary
his background report on Institutions, largest sector in terms of its contribution to gross
Decentralization and Structural Transfor- national product, employment and exports, while
Tmation was prepared for discussion during the contribution of manufacturing and high-tech-
the Twentieth Session of the Intergovernmental nology sectors has remained small.
Committee of Experts (ICE) held on 8-11 February
2016 in Nairobi. The overall objective was to pro- Notwithstanding the high level of performance
vide an understanding of the role of “institutions” of Eastern Africa, most indicators of wellness con-
and “decentralization” in structural transforma- tinue to show that the region scores low in the
tion through an evidence-based approach. This global league and in most cases dominates the
involved examining structural transformation in lowest ranks. For instance, 12 of the 14 countries
Eastern Africa and identifying strategies that could in the Eastern Africa region (with the exception of
bridge the gap between the current impressive Kenya and Seychelles) are classifed as least devel-
economic growth rates witnessed by most coun- oped countries on account of low levels of gross
tries in the subregion and the low achievement in national per capita income, among other indica-
socioeconomic indicators, particularly in poverty tors. Most countries in the region – apart from
alleviation. Rwanda, Kenya and Seychelles – score poorly in
the indices of global competitiveness and ease of
The study took cognizance of the prevalent policy doing business. Other pointers to poor socioeco-
reforms of the last 20 years through which gov- nomic outcomes include low ranking in a poverty
ernments in the region have embarked on decen- index and low literacy rates. The ability of Gov-
tralization and institutional reforms, and examined ernments to drive transformation through public
the link between institutions and decentralization expenditure is constrained by low government
on the one hand, and socioeconomic outcomes resources in the face of high needs to provide
represented largely by indicators of well-being basic services such as health and education. This
on the other hand. In the hypothesized concep- is complicated by unfavourable environmental
tual framework, the channels for transmitting factors such as population pressure, political insta-
decentralization were identifed to include: policy bility and inequality.
designs, leadership, public participation and ser-
vice delivery. Structural Adjustment Programmes among mem-
ber States in Eastern Africa have been followed
Secondary data was supplemented by key-in- by the development of nationwide home-grown
formant interviews that were carried out in Ethio- policies as part of reform strategies to support
pia, Kenya, Rwanda and Uganda. Additional com- manufacturing and grow exports. Another
parative data was obtained in Mauritius, which reform agenda has been the notable focus on
has performed well and neighbours the region. A structural change and transformation, with the
validation workshop, held in Nairobi in June 2016, aim of achieving substantial and sustainable
provided further inputs to the report. development. Part of these reform eforts have
led to the development and implementation of
Africa’s “growth miracle” began around the year varying types of decentralization, supported by a
2000, coinciding with intensifed globalization combination of policies, constitutional, legislative
marked by the opening-up of the largest devel- and regulatory instruments. Empirical evidence
oping country in the world – China. Eastern Africa shows that country-specifc issues have informed
economies have also performed better in terms the extent that the central power has held back
of economic growth than the rest of Africa in the on handing over authority in various forms of
last 15 years. However, agriculture remains the decentralization. These issues include: delegation
Institutions, Decentralization and Structural Transformation in Eastern Africa iv i
1
in Rwanda and Uganda; devolution in Kenya; and weaknesses. A developmental State , with its
federalism in Ethiopia. access to an array of resources (political, legis-
lative, fnancial and organizational), is perhaps
In the majority of countries in the subregion it was the only institution with this capacity and
found that decentralization (political, administra- ability. Furthermore, decentralization (polit-
tive and fscal) has, to some extent, enabled the ical, administrative and fscal) can be a solid
shifting of resources and people to desired sec- vehicle for building strong institutions.
tors such as manufacturing and high technology,
and facilitated the provision of public services and Ÿ Each country’s context, with respect to geog-
spurred growth in other sectors away from the raphy, politics and the social dimension, afects
traditional sectors, especially agriculture. Moreo- the form, timing and vigour of decentraliza-
ver, it was noted that the policy focus on structural tion. This elevates contextual considerations
change and transformation has created the nec- to an important level as countries attempt
essary impetus to strengthen and support appro- to increase governance, accountability and
priate institutions that make and implement deci- participation in the decentralized subnational
sions focusing on the developmental challenges units. In turn, these country-specifc issues
in the region, including job creation, reduction in will infuence the pace and path of transfor-
poverty and tackling inequalities. A key ingredient mation. Political support is very critical to the
of this transformation is accelerated growth that success of decentralization.
is premised on improved productivity, especially
in agriculture. Ÿ The existing relationships between the
national government and various stakehold-
The quest for decentralization remains alive in East- ers, as well as the policy, legislative and regula-
ern Africa. Increasingly, the motivations behind tory frameworks, are important infuencers of
the decentralization agenda have stretched from a country’s structural transformation process.
political interests to seeking to improve govern- In addition to the central government the
ance and delivery of public services. Analyses of other stakeholders in this process are: sub-
regional data suggest a variety of constitutional national units, power centres, media and civil
and legal frameworks and mechanisms for cit- society.
izens to participate and be involved in making
decisions, planning and evaluation within Eastern Ÿ The availability and quality of a skilled work-
Africa. To a large extent, these mechanisms have force has a huge impact on the success of
transformed the relationship between decision decentralization, the quality of institutions
makers and the public. In Kenya, for instance, and structural transformation of a country.
recent legal frameworks have empowered citi- Evidence from the countries where key-in-
zens considerably and given them more voice formant interviews were carried out showed
and say in public matters, thereby deepening citi- that lack of appropriate human resources at
zen participation and, to some extent, promoting the subnational level heavily constrained the
accountability. adoption of decentralization, the efective-
ness of institutions in service delivery and the
Certain key lessons can be identifed from the achievement of structural transformation. It
fndings of the study: is therefore necessary urgently to design and
implement comprehensive capacity-building
Ÿ Institutions can play an important role in programmes for the efcient and efective
promoting structural transformation and ena- functioning of decentralized units in every
bling growth. Consequently, member States country in order to accelerate and boost
should ensure that they design and imple- structural transformation.
ment appropriate national and subnational
1 A developmental State refers to the phenomenon of State-led
policies and strategies to address institutional macroeconomic planning in East Asia.
iv ii Institutions, Decentralization and Structural Transformation in Eastern Africa