The financing of city services in Southern Africa

Strategic planning & financing implementation 1.What does the city need? 2.What can the city government provide? 3.What is the financial capacity of the city government? 4.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

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

Dar es Salaam Social services MinimalModerateFull Built environ- ment services Minimal Lusaka Ndola Dar es Salaam Arusha ModerateMaputo Lilongwe Blantyre Gaborone Port Louis FullWindhoek City government roles - nature & scale

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

Total city spending (US$ m) Total city staff City staff/ people City spending per person (US$ m) Dar es Salaam Port Louis Lusaka Windhoek Gaborone Maputo Arusha Lilongwe Blantyre Ndola Maseru City government expenditure City government staff City government expenditure City government staff

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

Windhoek  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? City government finance: Issues 2

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

Nampula  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 City financial strategies - 2  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

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

Mbabane Shadow credit assessment

Lusaka Financial capacity assessment 1 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 Some capacity to finance city infrastructure

Manzini Financial capacity assessment 3 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 No capacity to finance city infrastructure

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

The financing of city services in Southern Africa 25 th May 2011 Roland Hunter Hunter van Ryneveld (Pty) Ltd