“The strategic developmental prominence of South African cities, in particular metropolitan municipalities, within the local sphere of government and certainly nationally is emphasised by a dominant role in the country’s economy reflected by their contribution to the national gross value added and net job creation, higher concentrations of people residing in cities and the resultant scale of their social and economic challenges and infrastructure delivery needs (SACN 2011; Department of Cooperative Governance 2014). This trend is in fact global as cities become important centres and drivers of economic growth, job creation and social integration (World Bank 2013; UN-Habitat 2015; City of Tshwane 2015). However, there is in fact a widening gap between the availability of financial resources and escalating municipal spending needs driven by increasing demands for expanding and maintaining public services and infrastructures to keep with the growth and character of urban populations (SACN 2015; UN-Habitat 2015).” (SACN & JICA, 2015)
In our context of developmental local government and increasing functional decentralization, cities’ expanding local mandate has brought into starker focus this question of the sustainability of our current model of municipal financing. There have been arguments about whether cities, for example, receive a sufficient share of the national revenue (inter-governmental transfers) to meet their mandates, and yet others about whether they are making enough fiscal effort given their relatively stronger ability to generate own revenue through rates and property taxes. There are also advocacies made for making greater municipal use of other approaches to capital financing, for example PPPs, borrowing, access to the bond market or even land value capture. In light of the pressure facing cities to drive economic growth and spatial transformation, it is imperative that the financing approaches be closely linked to the economic and investment logic required to deliver on these big expectations.1
As various role players (the National Treasury, the Dept. of Cooperative Governance, the Fiscal & Financial Commission, SALGA, SACN, cities themselves, and various other development partners) continue to examine options and possible fiscal reforms, the Infrastructure Dialogues have invited a few of these actors to discuss some of these in our multi-stakeholder forum. A lead presentation will be made on behalf of the Alternative [Metropolitan] Municipal Financing Models initiative, an international expert panel-based initiative which has been established to explore potential city financing approaches that could address the escalating gap and tension between fiscal space and development priorities. Emerging ideas or options from this initiative will then be the subject of response by the panel of respondents who will provide their respective insights on key issues, challenges and opportunities towards achieving sustainable municipal financing that can enable the achievement of infrastructure and societal development objectives in South Africa.
As always, the Dialogue’s goal is to use shared information and facilitated discussion to achieve: an improved climate for policy and decision-making; strengthened cooperation within the infrastructure sector; and specifically, ideas that participants may be able to take forward or apply through their respective areas of responsibility and influence.
The Infrastructure Dialogues are hosted jointly by the Development Bank of Southern Africa, the South African Cities Network, the National Business Initiative, the Performance Monitoring and Evaluation Department in the Presidency, and the Department of Economic Development, with the Engineering News as Media Sponsor. This will be the 37th Dialogue held since 2009.
State of City Finances 2015, South African Cities Network