The financing of city services in Southern Africa

1. The financing of city services in Southern Africa

2. Strategic planning & financing implementation • What does the city need? • What can the city government provide? • What is the financial capacity of the city government? • How can additional resources can be obtained? • How does investment connect to strategic decision-making? • In which areas are investments most frequent? • Are spending & debt management schemes part of the strategies? • Do cities go directly to the market to raise funding? • The most critical questions for city creditworthiness in Africa? • How can financial sustainability be ensured? City treasurer`s perspective Key questions

3. Maputo What does the city need? • Built environment services • Roads and storm-water drainage • Refuse collection and disposal; street sweeping • Water & sanitation (sewerage) • Supply of electricity and gas • Traffic lights and street lights • Emergency services (ambulances, fire) • Cemeteries, parks and sports facilities • Public transport services • Bus and taxi ranks; markets • Town planning and building control • Municipal policing (by-law enforcement) • Environmental health services • Social services • Health care (primary/ clinics/ vaccinations etc) • Education (pre-, primary, secondary school) • Social welfare (centres for orphans etc) • Rental housing

4. Dar es Salaam City government roles - nature & scale

5. Blantyre City populations(Vertical position = size of city economies US$b)

6. Maseru City government expenditure City government staff

7. Arusha City government finance: Issues 1 • Under-empowered & under-resourced • Trend has been to strip powers from city governments • Decentralisation by name, centralisation in practise • Limited built environment mandate • City governments operate at a small scale and spend very little • Limited decision-making authority • Senior staff appointments are often lengthy national processes • Tax and tariff increases; new valuation rolls; similarly • Limited infrastructure financing • If it happens on scale it is grant or donor funded

8. Windhoek City government finance: Issues 2 • Under-performing revenue administration • Despite the overwhelming shortage of resources • Much of the tax base escapes being billed/ invoiced • Debtors balances outstanding are often high • Weak revenue relationship with residents and businesses • Significant human resource capacity constraints • Skills shortage is universally acknowledged as serious/critical (especially key technical areas) • Long period `acting’ appointments are universal • Yet little serious effort (possibility) to address the gap?

9. Port Louis • City financial strategies - 1 • All city governments can improve their own financial performance • Through a `city financial strategy’ • Often amounts to a `turnaround plan’ • Internal reform initiatives • External reform initiatives • Objective: to put the city government onto a sound financial footing • systematic and determined plan & effort • must make operational surpluses, because the city government must invest • Requires city leadership with stature & maturity • Dedicated management team • Political & administrative insight & courage • Should be part of a city development strategy

10. Nampula City financial strategies - 2 • Internal reform programme • Administrative, financial & revenue reforms • Often a serious change management exercise • Objectives and targets, `war room’, accountability for performance, etc • External reform programme • Improve effectiveness of relationship with national government • Address aspects of the inter-governmental fiscal relations • Customised capacity building for senior management • Targeted at programme objectives • Strategic planning & budgeting • Revenue administration (sometimes policy also) • Expenditure controls and accounting • Management capacity, accountability, performance • To obtain additional revenue powers • To obtain additional grant funds • To improve timeliness of grant payments • To obtain support for city strategy

11. Lilongwe Approach to capacity building • Change management intervention aimed at senior city management • Specific operational as well as capacity-building objectives • Programme of workshops • Each building on the next • Each with substantial supporting work • Each requiring management team to take responsibility for tasks between workshops • Planned outcomes • Achievement of operational objectives • Enhancement of management team capacity • Strengthening of change momentum

12. Mbabane • Shadow credit assessment

13. Lusaka • Financial capacity assessment 1 Some capacity to finance city infrastructure New valuation rolls in 2012 and 2017 Annual inflation of 7% Tax rate increases of 10% in 2012 and 2017 only Projected average annual cash flows : +US$ 0.7 m

14. Manzini • Financial capacity assessment 3 No capacity to finance city infrastructure New valuation rolls in 2012 only Annual inflation of 7% Tax rate increases of 10% in 2012 only Projected average annual cash flows : -US$ 0.9 m

15. Gaborone Conclusion • City governments are often a relatively weak and small actor provider in respect of city needs • National agencies are often the key actors for water, sanitation, electricity, major roads • Often impossible to get an overall quantified view of built environment needs • Such a view is not the priority of anyone • Investments should take place in term of a capital investment plan • drawn up through a process of strategic decision-making • Critical questions for city creditworthiness: • in Africa are governance and accountability; strategic direction; revenue administration, economic base

16. The financing of city services in Southern Africa Roland Hunter Hunter van Ryneveld (Pty) Ltd roland@caj.co.za 25th May 2011