Financial improvement planning in local governments in Southern Africa, with special reference to Zambia

Abstract

Continuing decentralisation in most developing countries increases pressure on local governments to manage more functions and services and larger budgets. In this context, financial improvement planning (FIP) is a strategy that can be used by local governments wishing to improve or 'fine-tune' their financial performance, and especially by those facing serious financial difficulties. This article examines the application of FIP in the town of Kitwe, Zambia, which faces financial difficulties within a national decentralisation framework characterised by several policy and fiscal deficiencies. The article covers how an FIP framework was developed, undertaken and the resultant interventions structured. Implications regarding the role, design and techniques of FIP in local governments within a decentralisation policy framework are elaborated upon. Effective decentralisation in southern African countries requires local governments to undertake sound financial management. In turn, this requires local governments to embrace challenging local policy processes. Development of FIP techniques, and strengthening local capacity and policy to support them in local governments, should be ingredients of any country's decentralisation programme.

The Limits of Decentralisation in Urban Zambia

“…Most councils do not have adequate human resource and institutional capacity to deliver quality services to the people, especially after the compulsory retirement of trained and experienced council staff that had served for at least 22 years (Zambia 2002b(Zambia , 2004(Zambia , 2006. In terms of educational qualifications of council staff, it is argued that the calibre of both some staff and some councillors is too low (Grade Seven as minimum educational qualification) to enable them effectively and efficiently discharge their functions (Mukwena and Lolojih 2002;UNDP 2002;Zambia 2002b;Transparency International Zambia 2003;Dauskardt 2004;Zambia 2006). In the draft constitution, it is proposed that "a person qualifies to be elected as a councillor of a district council if that person has attained a grade nine certificate of education or its equivalent" (Zambia 2005, p. 195).…”

“…Furthermore, a presidential directive to sell council houses to occupying tenants at prices below market value negatively affected both the asset base and the financial status of councils (Mukwena and Lolojih 2002;UNDP 2002;Zambia 2002b;Dauskardt 2004).…”

“…The activities which have undermined the financial position of the councils include the withdrawal of housing unit grants, withdrawal of all government grant funding to local governments in 1992 and the transfer of motor vehicle licensing from local government to the Road Traffic Commission (UNDP 2002;Zambia 2002b;Dauskardt 2004). Councils used to receive commission by performing this latter function on behalf of central government (UNDP 2002;Dauskardt 2004). The privatisation of water and energy utility companies also eroded the revenue base of the councils (UNDP 2002;Zambia 2002b).…”

“…Other measures introduced by central government, which were detrimental to the functioning of councils, included the Rating Act of 1997, which increased the number of properties exempt from paying rates, and the central government's directive to prevent the eviction of rent defaulters occupying council houses (UNDP 2002;Zambia 2002b;Dauskardt 2004). Furthermore, a presidential directive to sell council houses to occupying tenants at prices below market value negatively affected both the asset base and the financial status of councils (Mukwena and Lolojih 2002;UNDP 2002;Zambia 2002b;Dauskardt 2004).…”

“…Until 1972, Zambian local authorities used to receive adequate grants from the central government based on a predetermined formula (Zambia 2000(Zambia , 2002bDauskardt 2004;Zambia 2006). The activities which have undermined the financial position of the councils include the withdrawal of housing unit grants, withdrawal of all government grant funding to local governments in 1992 and the transfer of motor vehicle licensing from local government to the Road Traffic Commission (UNDP 2002;Zambia 2002b;Dauskardt 2004). Councils used to receive commission by performing this latter function on behalf of central government (UNDP 2002;Dauskardt 2004).…”