Some ideas from South Africa

Philip van Ryneveld

For the MENA Region Stakeholders “Developing the New Regional Urban Agenda; Focus On Municipal Finance”

MARCH 18-19, 2013 – RABAT, MOROCCO

South Africa showing main urban areas Institutional frameworks for running cities • The institutional frameworks we operate in are defined by our history • Occasionally we have the chance to re-write the rules – South Africa in the early 1990’s – MENA region currently • Because Constitutions get written in response to national crises they prioritise national issues – Often the needs of cities are not addressed well – More chance of success if the crisis is driven by local service delivery failures • although there is danger that national solutions to local problems will be prioritised Racial separation under apartheid Townships & suburbs

http://en.wikipedia.org/wiki/File:Joburg.iss.400pix.jpg 5

Khayelitsha, Cape Town

Mandela and De Klerk lead negotiations Constitution is constructed around Spheres… National Provincial

Local Not tiers

National

Provincial

Local Map showing provinces Local governments

8 Metropolitan 226 Local 44 District Key features of the South African model of city finance 1. Widely drawn boundaries to facilitate redistribution within cities 2. Incremental process of devolving ‘built environment related’ functions to larger cities 3. Substantial own revenues 4. Grants from national government by means of predictable, transparent mechanisms 5. Encouragement of borrowing to finance capital expenditure 6. No national guarantees for local loans 7. Provinces play monitoring role but have almost no power over cities 1. Widely drawn boundaries to facilitate redistribution within cities 2. Incremental process of devolving ‘built environment related’ functions to larger cities

– Driven by slogan “One City – One Tax Base” during anti-apartheid campaigning – Boundaries encompass urban functional area – Facilitates addressing ‘built environment related functions’ – If agglomeration economies are the rationale for cities….then enhancing access is the essence of city governance • Requires integrated management of the built environment related functions

3. Substantial own revenues

Share of each revenue sources (%) across government (Taxes are 26% of GDP) National Income Tax (personal) 37.3 Income tax (company) 11.2 VAT 23.3 Fuel levy 6.4 Excise 4.2 Provincial Gambling 0.2 Motor vehicle licenses 0.7 Hospital and other fees 0.4 Local Property rates 4.4 Share of fuel levy 1.7 Electricity/Water (user charges) 10.3 Expenditure by sphere 2009/10 (Rand million) and location of revenue generation Proportion R million Expenditure Revenue

National departments 346 103 42% 82% Provinces 306 255 38% 1% Local governments 163 177 20% 16% TOTAL 815 535 100% 100% Tax & tariff structure

Governance & accountability

Revenue Service administration delivery Well implemented IT systems are key

Spectrum of tax localisation

grant formula based General

Purelocal tax

formula based origin Grant with ratevariation localallowing Nationaltax

National tax distributed by means of grants to municipalities Local tax Key features of the South African model of city finance 1. Widely drawn boundaries to facilitate redistribution within cities 2. Incremental process of devolving ‘built environment related’ functions to larger cities 3. Substantial own revenues 4. Grants from national government by means of predictable, transparent mechanisms 5. Encouragement of borrowing to finance capital expenditure 6. No national guarantees for local loans 7. Provinces play monitoring role but have almost no power over cities World Cup 2010: a project implemented by City governments