DETERMINANTS OF CAPITAL EXPENDITURES BY COUNTY GOVERNMENTS IN KENYA FOR FINANCIAL YEAR 2013/2014

ELVIS NEWTON KILINGA

Abstract


County government refers to all levels of government lower than the National Government. The Constitution of Kenya, 2010 introduced devolved system of governance comprising of a national government and forty seven county governments as a way to bring public services closer to the people. However, county governments have static and narrow local revenue bases, high wage bill and poverty rates that limit their abilities to effectively mobilize adequate resources to finance capital programmes. The objective of this study was to investigate determinants of capital expenditures by county governments in Kenya. The dependent variable in this study was county capital expenditure while the independent variables were local revenue performance and wage bill. Relevant literature and theories such as Leviathan Theory and Peacock and Wiseman Theory were reviewed. The study employed a cross-sectional research design to describe the relationship between the selected independent variables and the dependent variable. The target population for the study was the forty seven county governments. The study used secondary data collected from reports by the Controller of Budget, World Bank and Kenya National Bureau of Statistics. A simple regression analysis was used to determine the relationship between independent variables and the dependent variable. Data was analyzed using Eviews and results presented using tables, charts and graphs.  The findings of this study indicated that wage bill had a negative statistically significant relationship with capital expenditure. The findings also indicated that local revenue performance had a positive and significant relationship with capital expenditure. A unit increase in local revenue performance caused a variation of 3.550541 units in capital expenditure. Based on the findings of this study, it was concluded that wage bill and local revenue performance, were key determinants of capital expenditure by county governments in Kenya. This study recommended that county should keep the wage bill at sustainable level to create more resources for capital programmes. Counties also should invest in integrated revenue collection and management systems to seal revenue leakages. County government should also improve administrative procedures of tax collection and invest in untapped sources to improve local revenue collection.

Key Words: Capital Expenditure, County Governments


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