2011/11/07

Mbabane Financing infrastructure in Introduction / perspective African cities

Our cities need to be managed by strong city governments (population growth and economic development)
National governments need to strengthen their city governments (expenditure responsibilities and revenue powers)
City governments need to improve their own performance (especially on revenue and investing)
Visited SADC municipalities 2008 – 2010
14 x financial overviews
10 x shadow credit assessments

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Blantyre City populations Arusha + (Vertical position = size of city economies US$b) + Dar es Salaam 11.0 10.0 Dar es Salaam 9.0 9.1 3.0 8.0 Ndola + Lilongwe + Port Louis + Nampula 6.1 Lusaka + Blantyre + 7.0 0.2 Windhoek 6.0 Lusaka 4.4 5.6 Gaborone 0.3 1.5 Port Louis + 5.0 3.6 0.2 Windhoek + 4.0 Gaborone + Mbabane 3.0 + Maputo Maputo + + Manzini 2.0 2.0 Arusha LilongweBlantrye 1.2 + 1.0 1.0 Ndola 0.9 0.8 0.4 0.3 0.7 Maseru 0.8 - 0.5 -1.0

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Maputo Dar es Salaam What does the city need? City government roles - nature & scale

Built environment services • Roads and storm-water drainage • Refuse collection and disposal; street sweeping Social services • Water & sanitation (sewerage) Minimal Moderate Full • Supply of electricity and gas • Dar es Traffic lights and street lights Lusaka Minimal Salaam • Emergency services (ambulances, fire) Ndola • Cemeteries, parks and sports facilities Arusha • Public transport services Built Lilongwe • environ- Blantyre Bus and taxi ranks; markets Moderate Maputo • Town planning and building control ment Gaborone • Municipal policing (by-law enforcement) services Port Louis • Environmental health services
Social services Full Windhoek • Health care (primary/ clinics/ vaccinations etc) • Education (pre-, primary, secondary school) • Social welfare (centres for orphans etc) • Rental housing

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Gaborone Maseru City government expenditure What can the city governments do? City government staff

City Total city City
City government is usually a relatively weak and Total city spending spending staff/100 staff per person small actor /provider in respect of city needs (US$ m) 000 people (US$ m)  Result of long-term disempowerment trend Dar es Salaam 147 15 419 514 49
National agencies are often the key actors Port Louis 20 2 500 1 667 136  Water, sanitation, electricity, major roads Lusaka 18 1 882 129 12

Often impossible to get an overall quantified Windhoek 160 1 755 532 484 view of built environment needs Gaborone 35 3 000 1 266 148  Such a view is not the priority of anyone Maputo 27 2 325 187 21 Arusha 13 3 000 750 33 Lilongwe 9 1 900 271 12 Blantyre 9 2 000 250 11 Ndola 11 670 135 21

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Lilongwe Lusaka Billing & spending as % of city GDP Own revenues as % of city revenues

3.0% 160 120% City spending % Capital grants City billing % 140 Operating grants 2.5% Own revenues 100% 120 Own revenues % 2.0% 80% 100 1.5% 80 60%

1.0% 60 40% 0.5% 40 20% 20 0.0% 0 0%

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Arusha Windhoek City government finance: Issues 1 City government finance: Issues 2

Under-empowered & under-resourced
Under-performing revenue administration • Trend has been to strip powers from city • Despite the overwhelming shortage of governments resources • Decentralisation by name, centralisation in • Much of the tax base escapes being billed/ practise invoiced • Limited built environment mandate • Debtors balances outstanding are often high • City governments operate at a small scale and • Weak revenue relationship with residents and spend very little businesses
Limited decision-making authority
Significant human resource capacity constraints • Senior staff appointments are often lengthy • Skills shortage is universally acknowledged as national processes serious/critical (especially key technical areas) • Tax and tariff increases; new valuation rolls; • Long period `acting’ appointments are similarly universal
Very limited infrastructure financing • Yet little serious effort (possibility) to address • If it happens on scale it is grant or donor funded the gap?

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Port Louis Nampula City financial strategies - 1 City financial strategies - 2

All city governments can improve their own
Internal reform programme financial performance • Administrative, financial & revenue reforms • •
Strategic planning & budgeting Through a `city financial strategy’
OftenRevenue a serious administration change (sometimes management policy exercise also) • Often amounts to a `turnaround plan’ •
ObjectivesExpenditure and controls targets, and `waraccounting room’, • Internal reform initiatives
accountabilityManagement accountability for performance, and performance etc • External reform initiatives
External reform programme
Requires city leadership • Improve effectiveness of relationship with •
To obtain additional revenue powers Stature and maturity
nationalTo obtain government additional grant funds • • Dedicated management team
AddressTo improve aspects timeliness of the of inter-governmentalgrant payments • Political & administrative insight & courage
fiscalTo obtain relations support for city strategy

Customised capacity building for senior management • Targeted at programme objectives

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Lilongwe Lusaka Approach to capacity building e.g. Self-funding of city infrastructure

Change management intervention aimed at 1. Introduction to financial management and senior city management creditworthiness
Specific operational as well as capacity-building 2. Shadow credit assessment objectives 3. Medium- and long-term capital
Programme of workshops investment planning • Each building on the next • Each with substantial supporting work 4. Funding the capital investment plan • Each requiring management team to take 5. Launching the reform agenda responsibility for tasks between workshops 6. Preparing to approach funders (capital
Planned outcomes market or government or donors) • Achievement of operational objectives 7. Finalising a funding agreement and • Enhancement of management team capacity managing the funds • Strengthening of change momentum

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Manzini

Prioritised capital investment plan Shadow credit rating – internal & external reforms

1 Sanitation Master plan 20 64% 56% 2 Solid Waste Rehabilitation of waste disposal site 200 51% 54% 49% 48% 44% 3 Solid Waste New equipment 105 39% 43% 4 Public amenities Market - Zone 1 30 25% 5 Public amenities Market - Zone 2 30

6 Public amenities Market - Zone 3 30

7 Public amenities Market - City Centre 30

8 Roads & Storm water Rehab of surfaced roads - Zone 2 750

9 Public amenities Bus stations - Zone 1 100

10 Public amenities Bus stations - Zone 2 100

11 Public amenities Bus stations - Zone 3 100

12 Public amenities Bus terminal - City Centre 500

13 Roads & storm water Rehab of surfaced roads - City Centre 750 14 Roads & storm water Rehab of un-surfaced roads 3 000 Internal reform agenda External reform agenda 15 Sanitation Primary school toilets 55

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Vicious spiral of performance decline Virtuous spiral of performance improvement

Low tariffs & low collections Improved city government and city performance Budget pressure Tax payers more willing to pay Maintenance postponed Invest extra cash in more Service infrastructure deteriorates service delivery improvement Cash flow improves Service deteriorates Taxpayers even less willing to pay Invest extra cash in more service Tax payers more willing to pay delivery improvement Increased reliance upon govt grants Make revenue administration City less accountable to taxpayers Start to confront the local improvements Grants often come later revenue relationship Demonstrate token service Continued cash pressure delivery improvement Managers leave or lose interest or Obtain funding for turnaround plan stop trying Build stakeholder support for plan City cannot pay staff or suppliers Develop turnaround plan Infrastructure degraded Assess reasons for fiscal stress Crisis & huge Fiscal stress rehabilitation costs

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Financing of infrastructure in African cities

Roland Hunter Hunter van Ryneveld (Pty) Ltd [email protected] 25th May 2011

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