Transcript Slide 1 - SA Cities Network

The financing of city services in
Southern Africa
25th May 2011
The financing of city services in Southern Africa
• Background
– Purpose and objectives
– Participating cities
– Approaches & methods
• Roles
– Expenditure responsibilities
– Revenue powers
– Staff numbers
• Financials
– Revenues (own, operating
grants, capital grants)
– Expenditures (personnel,
capital, other)
– Operating surpluses
– Year-end cash balances
• Issues
– Functions & powers
– Revenue effort
– Human resource capacity
Background
Project objectives
•
•
•
•
To promote sustainable city government
finances for infrastructure development
in Southern Africa;
To promote more effective planning and
management of financial activities,
including better credit ratings and the
ability to access finance for investment
purposes from banks or capital markets;
To provide credit assessment and credit
enhancement services to city
governments;
To provide capacity building targeted at
improving city government financial
management and creditworthiness.
Project outputs
•
•
•
•
•
Shadow credit assessments of city
governments in Southern Africa;
Capacity building programme to improve
financial management and credit
worthiness at one city government;
`Knowledge product’ on the financial
position of Southern African cities;
Knowledge-sharing workshop;
`Knowledge product’ and update report
on the state of South African city
finances
City selection criteria
•
•
Criteria included scale; SADC coverage;
and potential for creditworthiness and
borrowing.
Subject to budget , logistical and time
constraints
Cities in Southern Africa
+ Kinshasa
Kigali +
Bujumbara +
+ Nairobi
Arusha +
+ Mombasa
+ Dar es Salaam
+ Luanda
Lumbumbashi +
Kitwe +
Ndola + Lilongwe +
Lusaka + Blantyre +
Harare +
Bulawayo +
+ Beira
Windhoek +
Gaborone +
Tshwane
+
+ Maputo
Mbabane
++ Manzini
Johannesburg
+ + Ekurhuleni
Mangaung +
Cape Town +
+ Msunduzi
+
+ eThekwini
Maseru
+ Buffalo City
+ Nelson Mandela Bay
+ Nampula
+ Antananarivo
Port Louis +
Participating cities
Arusha +
+ Dar es Salaam
Ndola + Lilongwe +
Lusaka + Blantyre +
Port Louis +
Windhoek +
Gaborone +
+ Maputo
Approach and methodology
Approach to collection of information
• Reliance upon financial data provided
by the city governments;
• Actual financial results - preferably
audited - not budget information;
• City visits to interview City Manager,
Head of Finance, Head of Engineering;
• Structured questionnaire to
systematically collect information
across ten categories;
• Captured data into IFRS format and
credit assessment tool;
• Generated assessments & prepared
reports.
Assessment categories
• Financial & credit management
• Management quality & capacity
• Operational performance
• Strategic planning & internal
transformation
• Human resources & private
contracting
• Customer relations
• Support from government
• Autonomy & accountability
• External risks
• Economic base.
International comparative city finance
City finances are dependent upon
• the national constitutional and legal
framework;
• Assigned expenditure responsibilities
(mandates) (functions)
• Assigned revenue sources (powers)
• City revenue administration
(performance) (effort)
• Government grants – operational and
capital (sufficiency & timeliness)
• City operational (expenditure)
efficiency, effectiveness & economy
• City finance decision-making and
approval processes (tariffs; valuation
rolls; staff appointments; etc)
Analytical framework
• City government functions & powers
–
•
Expenditure scale and composition
–
–
–
–
•
Own revenues
Government operating grants
Government capital grants
Operational surpluses
–
•
Spending per person
Staff costs
Other operating costs
Capital spending
Revenue scale and composition
–
–
–
•
What are the city governments expected
to do, and how are they expected to
finance these activities?
Because this must finance capital
investment and any expansion of services
Year-end cash position
Data considerations
City financial data
• Actual domestic currency values (no
budget data; sourced directly from
cities; rigorous accounting analysis)
• Time series data – presented in
domestic currency values.
• Comparative currency calculations –
done using exchange rate applicable
at the end of the last month of
applicable financial year.
• Monthly exchange rate data from
oanda.com
Economic and demographic data
• GDP estimates are for 2008,
expressed in 2005 US$ (PPP basis);
• Population data is for 2008 as far as
possible
• Source data is from World Bank’s
Africa Development Indicators (ADI)
online database data.worldbank.org
• Detailed estimates (eg 40-sector) of
the size of city economies do not
appear to exist, so these are rough
project estimates and subject to
correction.
90
City populations
80
(Vertical
Johannesburg
position = size of city economies US$b)
70
Cape Town
60
eThekwini
50
Tshwane
40
Ekurhuleni
30
Nelson Mandela Bay
20
10
0
-10
Port Louis
Windhoek
Gaborone
Arusha
Lusaka
Mangaung Buffalo City
Msunduzi
Ndola
Lilongwe
Blantrye
Maputo
Dar es Salaam
11.0
Populations of Southern African cities
10.0
(Vertical
position = size of city economies US$b)
Dar es Salaam
9.1
3.0
9.0
8.0
7.0
6.0
5.0
Port Louis
6.1
0.2
Lusaka
5.6
1.5
Windhoek
4.4
Gaborone
0.3
3.6
0.2
4.0
3.0
2.0
1.0
-1.0
Arusha
1.0
0.4
Ndola
0.3
0.5
Lilongwe Blantrye
0.9
0.8
0.7
0.8
Maputo
2.0
1.2
Populations of Southern African cities
11.0
10.0
(Vertical
Dar es Salaam
9.1
3.0
position = size of city economies US$b)
9.0
8.0
7.0
6.0
5.0
Port Louis
6.1
0.2
Lusaka
5.6
1.5
Windhoek
4.4
0.3
Gaborone
3.6
0.2
Maputo
2.0
1.2
4.0
3.0
2.0
1.0
-1.0
Arusha
1.0
0.4
Ndola
0.3
0.5
Lilongwe
0.9
0.7
Blantrye
0.8
0.8
City population & city GDP
Dar es
Salaam
City GDP (US$ m)
Population (m)
Port Louis
Lusaka
Windhoek Gaborone
Maputo
Arusha
Lilongwe
Blantyre
Ndola
11 591
7 793
7 072
5 598
4 557
2 480
1 242
1 101
964
435
3.0
0.2
1.5
0.3
0.2
1.2
0.4
0.7
0.8
0.5
The financing of city services in Southern Africa
• Background
– Purpose and objectives
– Participating cities
– Approaches & methods
• Roles
– Expenditure responsibilities
– Revenue powers
– Staff numbers
• Financials
– Revenues (own, operating
grants, capital grants)
– Expenditures (personnel,
capital, other)
– Operating surpluses
– Year-end cash balances
• Issues
– Functions & powers
– Revenue effort
– Human resource capacity
City government roles: expenditure responsibilities
Lusaka
Built
Minimal
Social
services
Ndola
environment
Dar es Salaam
services
– Civil administration (registration of
–
–
–
–
–
–
–
Arusha
births, deaths and marriages)
Health care services (primary/ clinics/
vaccinationsModerate
etc)
Maputo
Educational services (pre-school)
Lilongwe
Educational services (primary
school)
Blantyre
Educational services (secondary
school)
Gaborone
Housing rental
Port Louis
Social welfare (centres for orphans etc)
Business registration and licensing
Windhoek
Full
Built environment
services
Social services
– Town planning and building control
Minimal
Moderate
Full
– Municipal policing (by-law enforcement)
– Supply of waterLusaka
Maputo
Dar es Salaam
– Sanitation (sewerage)
Windhoek
Ndola
Arusha
– Roads and storm-water
Lilongwe drainage
– Traffic lights and
street lights
Blantyre
– Refuse collection
and disposal; street
Gaborone
sweeping
Port Louis
– Environmental health services
– Emergency services (ambulances, fire)
– Supply of electricity and gas
– Cemeteries, parks and sports facilities
– Bus and taxi ranks; markets
– Public transport services
Nature & scale of city government roles
Social services
Minimal
Built
environment
services
Moderate
Full
Minimal
Lusaka
Ndola
Dar es Salaam
Arusha
Moderate
Maputo
Lilongwe
Blantyre
Gaborone
Port Louis
Full
Windhoek
City expenditure mandates
11.0
10.0
Social
Dar es Salaam
services - built environment
full S,
minimal BE
9.0
8.0
7.0
6.0
Port Louis
moderate S,
moderate BE
Lusaka
Windhoek
5.0
Gaborone
4.0
3.0
moderate S,
minimal BE
minimal S
full BE
moderate S,
moderate BE
Maputo
2.0
Arusha
1.0
full S
minimal BE
-1.0
Lilongwe Blantrye
Ndola
moderate S
minimal BE
moderate S
moderate BE
Minimal S,
moderate BE
City government staff and spending
Dar es
Salaam
Total city spending (US$ m)
Total city staff
City staff/100 000 people
City spending per person (US$ m)
Port Louis
Lusaka
Windhoek Gaborone Maputo
Arusha
Lilongwe Blantyre
Ndola
147
20
18
160
35
27
13
9
9
11
15 419
2 500
1 882
1 755
3 000
2 325
3 000
1 900
2 000
670
514
1 667
129
532
1 266
187
750
271
250
135
49
136
12
484
148
21
33
12
11
21
1,800
City staff
(vertical
1,600
moderate S
moderate BE
position = staff/ 100 000)
Port Louis
1,712
2,500
1,400
moderate S
moderate BE
1,200
Gaborone
1,266
3,000
1,000
800
600
400
200
minimal S
full BE
Ndola
135
670
Lusaka
129
1,882
moderate S, minimal BE
-
Arusha
full S,
750
minimal BE
3,000
Windhoek
532
1,755
Lilongwe
271
1,900
Blantyre
250
2,000
moderate S
moderate BE
Minimal S,
moderate BE
Dar es Salaam
514
15,419
full S,
minimal BE
Maputo
187
2,325
Sources of operating revenues
•
•
•
•
Property taxes - universal
Business taxes, licences & fees – universal
Government operating grants – universal except Windhoek
Fees for use of bus stations, markets & other social
amenities; outdoor advertising – widespread
• Personal levies – Lusaka, Ndola, Maputo
• Commercial undertakings – Windhoek, Lilongwe, Blantyre
• Services charges – only significant for cities with significant
services - Windhoek
Sources of capital finance
• Reserves and annual operating surpluses
– universal for small capex
– seldom geared by borrowing (except Windhoek)
• Government capital grants - universal (except Windhoek)
• International donors – Lilongwe, Blantyre, Maputo
• Township development – only Windhoek
City spending & billing as % of city GDP
3.0%
City spending %
City billing %
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Dar es
Salaam
Port Louis
Lusaka
Windhoek Gaborone Maputo
Arusha
Lilongwe
Blantrye
Ndola
City spending & billing as % of city GDP
13.0%
City spending %
City billing %
12.0%
11.0%
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Johannesburg Cape Town eThekwini
Tshwane
EkurhuleniNelson MandelaMsunduzi Buffalo City Mangaung
City spending & billing as % of city GDP
13.0%
City spending %
City billing %
12.0%
11.0%
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Dar es
Salaam
Port Louis
Lusaka
Windhoek Gaborone Maputo
Arusha
Lilongwe
Blantrye
Ndola
City comparisons
Dar es
Port Louis
Salaam
Lusaka Windhoek Gaborone Maputo
Arusha
Lilongwe Blantyre
Ndola
11 591
7 793
7 072
5 598
4 557
2 480
1 242
1 101
964
435
Population (m)
3.0
0.2
1.5
0.3
0.2
1.2
0.4
0.7
0.8
0.5
Total city spending (US$ m)
147
20
18
160
35
27
13
9
9
11
15 419
2 500
1 882
1 755
3 000
2 325
3 000
1 900
2 000
670
514
1 667
129
532
1 266
187
750
271
250
135
City spending per person (US$ m)
49
136
12
484
148
21
33
12
11
21
City billing (US$ m)
22
8
18
139
8
11
3
8
9
7
0.2%
0.1%
0.3%
2.5%
0.2%
0.5%
0.2%
0.7%
0.9%
1.7%
City GDP (US$ m)
Total city staff
City staff/100 000 people
City billing as share of city GDP (%)
The financing of city services in Southern Africa
• Background
– Purpose and objectives
– Participating cities
– Approaches & methods
• Roles
– Expenditure responsibilities
– Revenue powers
– Staff numbers
• Financials
– Expenditures (personnel,
other opex, capital)
– Revenues (own, operating
grants, capital grants)
– Operating surpluses/deficits
– Year-end cash balances
• Issues
– Functions & powers
– Revenue effort
– Human resource capacity
City spending in 2009 (US$ m)
180
Capex
Other opex
Staff costs
160
140
120
100
80
60
40
20
-
Dar es SalamPort Louis
Lusaka
Windhoek Gaborone Maputo
Arusha
Lilongwe
Blantyre
Ndola
City spending in 2009 (US$ m)
(excluding Dar es Salaam & Windhoek)
40
Capex
Other opex
Staff costs
35
30
25
20
15
10
5
Port Louis
Lusaka
Gaborone
Maputo
Arusha
Lilongwe
Blantyre
Ndola
City revenues 2009 (US$ m)
160
Capital grants
Operating grants
Own revenues
140
120
100
80
60
40
20
Dar es
Salam
Port Louis
Lusaka
Windhoek Gaborone
Maputo
Arusha
Lilongwe
Blantyre
Ndola
City revenues 2009 (US$ m)
(excluding Dar es Salaam & Windhoek)
30
Capital grants
Operating grants
Own revenues
25
20
15
10
5
Port Louis
Lusaka
Gaborone
Maputo
Arusha
Lilongwe
Blantyre
Ndola
Own revenues as % of total revenues
160
Capital grants
Operating grants
Own revenues
Own revenues %
140
120
120%
100%
80%
100
80
60%
60
40%
40
20%
20
0
0%
Windhoek
Ndola
Lusaka
Blantyre Lilongwe Port Louis Maputo Gaborone
Arusha
Dar es
Salam
Own revenues as % of total revenues
160
Capital grants
Operating grants
Own revenues
Own revenues %
140
120
120%
100%
80%
100
80
60%
60
40%
40
20%
20
0
0%
Windhoek
Ndola
Lusaka
Blantyre Lilongwe Port Louis Maputo Gaborone
Arusha
Dar es
Salam
Spending per person and share of spending supported by
own revenues
110%
100%
90%
80%
70%
Blantrye
102%
11
Lusaka
100%
12
Lilongwe
89%
12
Windhoek
87%
484
Ndola
70%
21
60%
50%
40%
30%
20%
10%
0%
Maputo
43%
21
Arusha
21%
33
Gaborone
23%
148
Dar es Salaam
15%
49
Port Louis
40%
140
Operating surpluses (deficits)
Dar es Salaam
Port Louis
1.0
20%
0.5
0%
-0.5
2007
2008
2009
2010
-20%
-40%
-1.0
-1.5
-60%
0.8
4%
1.5
15%
0.6
3%
1.0
10%
0.4
2%
0.5
5%
0.2
1%
-
-0.2
2006
Windhoek
2%
2005
2006
2007
-15
2008
2009
2008
-
0%
-2
-2%
-4
-4%
-6
-6%
-8
-8%
-10
-5
-10
2007
0%
-0.5
-1%
-1.0
Gaborone
5
2004
Lusaka
0%
2006
2007
2008
2009
2010
-10%
-20%
-30%
-40%
0%
2005
2006
2007
2008
2009
-5%
-10%
Operating surpluses (deficits)
Arusha
Lilongwe
1.0
15%
Blantyre
15
10%
0.5
5%
-
0%
2006
2007
2008
2009
-0.5
-5%
-10%
-1.0
10
5
2006
-15%
Maputo
25%
3.0
20%
15%
2.0
10%
1.0
5%
2007
2008
2009
40%
60%
3.0
30%
40%
2.0
20%
20%
1.0
10%
0%
-
2010
6
2009
40%
20%
2
0%
2006
-2
2007
2008
2009
0%
2006
60%
4
0%
2006
2008
4.0
Ndola
4.0
2005
2007
80%
-20%
-40%
2007
2008
2009
2010
Debtors days
450
400
350
300
250
200
150
100
50
-
Dar es
Salam
Port Louis
Lusaka Windhoek Gaborone Maputo
Arusha
Lilongwe Blantyre
Ndola
Year-end cash balances – months of expenditure
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-0.5
Dar es
Salam
Port Louis
Lusaka Windhoek Gaborone Maputo
Arusha
Lilongwe Blantyre
Ndola
Reasons for these patterns?
• Constitutional allocations of expenditure responsibilities and
revenue powers
• Political economy of city revenue policy and administration
• Expenditure-side pressures
• National fiscal conditions and pressures
• International financial crisis
• Management and organisational capacity
• Other
The financing of city services in Southern Africa
• Background
– Purpose and objectives
– Participating cities
– Approaches & methods
• Roles
– Expenditure responsibilities
– Revenue powers
– Staff numbers
• Financials
– Revenues (own, operating
grants, capital grants)
– Expenditures (personnel,
capital, other)
– Operating surpluses
– Year-end cash balances
• Issues
– Functions & powers
– Revenue effort
– Human resource capacity
Issues in city government finances
• 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
Issues in city government finances
• 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 in key technical areas
Long period `acting’ appointments are universal
Yet little serious effort (possibility) to address the gap?
Concluding propositions (1)
• Cities require effective urban services to fulfil their role as critical
sites/drivers of social and economic development;
• City governments should have clear and substantial built
environment mandates;
• City governments should be able to finance much of their built
environment services through appropriate local revenue resources,
provided they have sufficient local revenue powers;
• City governments need to develop and maintain a social contract
with city households and businesses;
Concluding propositions (2)
• City governments need an adequately funded capital investment
plan, ideally from own-revenue sources
• Intergovernmental fiscal arrangements should provide strong
incentives to maintain capital assets.
• Good financial management and creditworthiness can together
improve access to capital infrastructure funding.
• City government administration and service delivery, together with
an effective city social contract, should be able to create the correct
environment and platform for social development and economic
growth.
City financial strategies
• All cities can take steps to improve their financial performance, such
as through a city financial strategy.
•
•
City leadership with political stature and maturity
Dedicated management team
• Internal reform programme
•
•
Administrative and financial and revenue reforms
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
The financing of city services in
Southern Africa
25th May 2011
Approach to capacity building
Approach & methodology
•
•
•
•
•
Change management intervention
aimed at senior city management
Specific operational as well as
capacity-building objectives
Programme of workshops , with
substantial supporting work
Management team takes
responsibility for tasks between
workshops
Outcomes:
• operational objectives achieved
• Capacity of management team
enhanced
• change momentum strengthened
Seven-step programme
1.
2.
3.
4.
5.
6.
7.
Introduction to financial
management and creditworthiness
Shadow credit assessment
Medium- and long-term capital
investment planning
Funding the capital investment plan
Launching the reform agenda
Preparing to approach the capital
market
Finalising a loan agreement and
managing the loan