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 ital national debate. Let me at the outset make it clear my go ernment!s iew regarding the si"e of our public sector wage bill. #y Go ernment is con inced the recent growth in public sector wage bill is unsustainable and unacceptable. In the current financial year, for e$ample, we estimate that total remuneration to the public ser ice will account for %%& of our ta$ re enue, and '(& of the national cake or what economists call gross domestic income. If we maintain this trend we would be dedicating an e er larger share of the wealth we produce as a country to the remuneration of public ser ants. )es, it is good to pay our people well but this must be done in a manner conduci e to our de elopment agenda. Ladies and Gentlemen, It is nice to recei e e er larger slices of our national cake. *ut collecti ely, as a country, we ha e other priorities+ we must fund our pledges to the arious capital in estments laid out in the current ,-(- #edium .erm /lan and the 0ubilee #anifesto. 1e need, as an e$ample, to de elop our roads and re amp our health facilities. .he standard gauge railway, initially from #ombasa to 2airobi, must be paid for. 3o must we implement the 3outh 3udan and 4thiopia .ransit corridor that will open up all of the 2orthern Kenya to new in estment and economic opportunities. 1e must also in est in the million5acre irrigation programme in Galana, in order to achie e our food security goal. *ut the slice of our national cake de oted to de elopment e$penditure would continue to dwindle if we do not contain pressure of wages. Indeed, in a contest between e$penditure on public

ser ants! wages and e$penditure on capital in estments that benefit e ery Kenyan, including future generations, there can be only one winner, Kenya. Ladies and Gentlemen, I ha e cited a few of the programmes that will help achie e our 6ision ,-(objecti es. .hat is the path to the free and prosperous country we are confident to become. *ut, we must admit our current wage bill is an obstacle, standing s7uarely in that path. .he monster threatens not just our future, but our present too, since it compromises the stability of our present economic framework. 1e ha e consistently worked hard to tame inflationary pressure, so alle iating the secondary effects of wage demands. 8ur success in containing inflation also relies hea ily on our ability to maintain a reasonable le el of fiscal deficit. 9owe er, this success cannot be sustained if we allow a large and rising fiscal deficit to stoke inflation, e$change rate depreciation and more e$pensi e debt ser icing. 3o far Kenya has managed to maintain its fiscal deficits at fairly sustainable le els and in conse7uence our macroeconomic situation has remained relati ely stable. *y any estimates, our core inflation has remained low, and our e$change rate stable. :nd our debt to GD/ ratio is sustainable, e en by the most e$acting of I#F standards. .hese are the fruits of prudent fiscal management o er the last decade, which we can no longer take for granted. .hat is why the threat of the burgeoning wage bill must be contained. It is time to put the monster to rest and we wish to lead by e$ample. 8nly last week my deputy and I resol ed to take a ,-& pay cut. 1e were joined by members of our cabinet as well as the /rincipal 3ecretaries, who agreed to match our effort with a '-& pay cut. 1e 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 ha e been some informal discussions proposing arious measures to tackle this problem of wage bill. 3ome of the solutions proposed will not work while others will yield results, if implemented. .here ha e been, for instance, suggestions to raise ta$es to co er the wage bill. I say we should resist this enticement. 1hy do I say so; *ecause our ease of doing business would suffer, with disastrous conse7uences for youth unemployment. .he 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 pro oke your thoughts.

First, though it is true that public sector a erage wages may compare fa ourably with the pri ate sector, when we add the huge sums the go ernment pays out in allowances and other benefits, public sector wages actually out5perform the pri ate sector. 1e should, therefore, ask whether the go ernment would do better to adopt a consolidated pay package policy that co ers all allowances, or whether it can retain the present system with stricter safeguards to stop abuses. 3econd, whene er real wages fall on account of inflation, we e$perience a secondary response, through agitation for salary rises. 1e will need to decide how we should adjust public sector wages to protect it from erosion by inflation, a policy which se eral countries ha e e$perimented. .hird, we ha e e ident disparities in remuneration in our public ser ice at both national and county le els+ employees with identical skills and e$perience are paid differently by agencies in the same go ernment without regard to performance and producti ity. :t the cabinet retreat from which I ha e just returned, these discrepancies aroused the interest of my cabinet secretaries. I am informed that, in a recent report by the :uditor General, some of the employees inherited from the defunct local authorities earned more than the national go ernment employees, despite ha ing similar 7ualifications. .he same audit found counties paying new employees different wages for the same skills and same job e$perience. 1e need to streamline the management of salaries at all le els of Go ernment. :lthough the 3alaries and <emuneration =ommission, and the /ublic 3er ice =ommission will take the lead in creating rules and principles for containing the disparities, I would urge e ery Kenyan to make their iews heard on this matter. Fourth, as you are aware, the Go ernment is now auditing its payroll to ensure that only legally5hired employees are paid a salary. Ghost workers must go. In this conte$t, I urge you all to gi e ma$imum cooperation to the #inistry of De olution and /lanning, which is carrying out this e$ercise. *ut more importantly, we need your suggestions on ways of reforming our pay system to make it sustainable and compatible with our long5run de elopment agenda objecti es. :nd Fifth, as you are aware, we ha e already carried out the most comprehensi e re iew of parastatals, with recommendations of far5reaching reforms. <apid implementation of those recommendations will help raise efficiency, sa e billions of shillings lost, reduce project slippages and deal a

blow to open theft. Ladies and Gentlemen, I ha e raised matters of gra e national concern. *ut, I would like to make it clear that this national debate on our wage bill is not an e$ercise meant to shame our ci il ser ants. Let me remind Kenyans that our public ser ice remains among the most competent and capable in all of :frica. .hese are de oted, patriotic Kenyans, many of them with world>class 7ualifications, who ser e Kenyans with efficiency, dignity and dedication e ery day. :nd, gi en the new inno ations in I=., which my go ernment is introducing > like 9uduma =entres, IF#I3 and so on > their ser ice can only impro e. .herefore, e en as we weed out those who do not li e up to the e$pected high standards, we must praise and reward the good work of those who e$cel. Ladies and Gentlemen, In conclusion, I wish to note that Kenyans ha e in the past demonstrated their capacity to debate national policy rationally, with a minimum of acrimony, and a ma$imum of will to reach a new understanding on such topical issues for the good of our belo ed country. 1e 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. 1ith those many remarks, it is my ery great pleasure to declare the ?2ational Debate on 1age *ill 3ustainability@, officially launched. Tha ! Y"#.