Estimating a poverty line: An application to free basic municipal services in South Africa

One of the key interventions aimed at improving the welfare of South African households has been local government's provision of a package of free basic municipal services to poor households. It is, however, not completely clear how different municipalities identify households that are eligible for these services. Evidence suggests that many municipalities currently provide services to all households with a monthly income of less than R1500 a month. This ‘free basic services poverty line’ is, however, low in comparison with a number of unofficial poverty lines used by policymakers and researchers in South Africa. This paper considers the impact of increasing the value of the free basic services line, in terms of the additional share and number of households eligible for support and the additional financial cost. We find that urban municipalities would face the steepest increases in their free basic services budgets with any potential increase in the free basic services poverty line.     

An integrated planning model for investment in urban infrastructure and pricing municipal services

This viewpoint proposes an iterative, cyclical and incremental model for preparing and pricing a capital investment programme and budget for municipal infrastructure services. South African towns and cities are used as case‐studies. The model links capital investment, operation and maintenance (supply) to the prices offered or paid by the beneficiaries (demand). Ignoring the conventional framework for the development of an area, this viewpoint concentrates on how capital investment for municipal infrastructure services could be planned and programmed and prices or tariffs determined. Given that socio‐economic trends in most municipalities in South Africa are unpredictable, short‐ to medium‐term capital investment planning is emphasised.     

Public‐private partnerships for waste management: Challenges for policies and procedures

Recently, all essential services in South Africa have been the focus of major efforts to ensure equitable access. This focus is quickly intensifying at all levels of government, as greater attention is directed at global environmental issues and at removing the imbalances in the socio‐economic conditions of the past. Unfortunately for solid waste management, unlike other essential services, this is happening at a time of declining financial resources, fewer national programmes and increasing regulation. Many municipalities in South Africa are turning to public‐private partnerships (PPPs) as a way of addressing the growing municipal solid waste management problem, especially with regard to extending services to previously disadvantaged, low‐income communities. This article seeks to define relevant issues, clarify the use of PPPs and generally suggest a way forward for local municipalities committed to meeting the challenges of maintaining and expanding solid waste management services.     

Local municipality productive efficiency and its determinants in South Africa

This paper assesses the technical efficiency of 231 local municipalities in South Africa for 2007 and investigates the potential determinants of efficiency gaps using the non-parametric data envelopment analysis technique. Efficiency scores are explained in a second-stage regression model using a Tobit regression model. To the best of our knowledge, this is the first attempt, using such a technique, to assess technical efficiency at the local government level in the African context. The results show that, on average, B1 and B3 municipalities could have theoretically achieved the same level of basic services with about 16% and 80% fewer resources respectively. Furthermore, fiscal autonomy and the number and skill levels of the top management of a municipality's administration were found to influence the productive efficiency of municipalities in South Africa. Perhaps most importantly, the results depict a bleak picture of the democratic behaviour at the local level in South Africa. It appears that higher income and highly educated households do not feel the incentive to be active participants in public decision-making processes. The paper findings raise concerns over the future of local municipalities in the country, especially about their capability to efficiently deliver expected outcomes on a sustainable basis.     

Quantifying Inefficient Expenditure in Local Government: A Free Disposable Hull Analysis of a Sample of South African Municipalities

Municipalities in South Africa play a pivotal role in the provision of basic services to communities. However, local government as a sphere in the country is notorious for its spending inefficiency, which is cited as a major factor in service delivery failure. This paper quantifies inefficient expenditure at the local government level by estimating efficiency scores for a sample of 129 municipalities in South Africa from the 2005/2006 to the 2009/2010 municipal financial years. In essence, this paper examines the technical efficiency of municipalities by using the nonparametric free disposable hull approach and finds that 10 municipalities are constantly efficient over the period. On average, input efficiency scores range from 42% to 46%, suggesting that, in general, municipalities can achieve the same output levels with over 50% less resources. Quantitatively for the 2009/2010 financial year, this amounts to a total of R80 billion being spent inefficiently, which equates to R220 million being “wasted” per day.     

Municipal bonds as alternatives to PPPs: Facilitating direct municipal access to private capital

The advantages of using municipal bonds to finance urban infrastructure are becoming increasingly evident to policy makers in emerging economies, many of whom are making efforts to accelerate the development of municipal bond markets in their countries. Municipal bonds are sometimes viewed as a less expensive way of financing infrastructure than by public‐private partnerships (PPPs), or methods that maintain greater public control over projects and service provision. The objective of this article is to place current efforts by the South African government to promote municipal bond market development in an international context. This is done by briefly reviewing the advantages local governments experience by issuing municipal bonds to finance infrastructure; discussing some experiences of other countries in trying to accelerate the development of municipal bond markets; and reviewing the need and prospects for an active municipal debt market in South Africa. The article also examines the extent to which municipal bonds should be thought of as alternatives to PPPs in an emerging economy context.     

The municipal infrastructure investment unit: The government's PPP‐enabling strategy

The South African government is committed to helping local governments make full use of service delivery ‘partnerships’ in improving the quality of essential urban services for its citizens, as so many other governments are now doing worldwide. A key part in this effort is being played by the Municipal Infrastructure Investment Unit (MIIU), a not‐for‐profit company established in 1998 for the purpose of using grant funding and technical help to guide the process of preparing and negotiating concession contracts and other forms of municipal service partnerships at the local level across South Africa. This article covers the MIIU's operations and rationale in an effort to describe one important way in which the government is responding to the challenges associated with extending basic municipal service provision to all of its citizens.     

Gross municipal product in economic management (through the Example of the Komi Republic)

The article forms the methodological rationale for the use of gross municipal product (GMP) in municipal economic management; a brief analysis of the dynamics of aggregate GMP of the region (the Komi Republic) and its territorial-sectoral and institutional structures has been conducted, the spatial differentiation has been identified, and the classification of municipalities based on the differences in GMP production has been proposed.     

Regulation and facilitation of public‐private partnerships: The MSP policy framework

This article describes the Municipal Services Partnership (MSP) Policy developed by the Department of Constitutional Development (DCD) of the Ministry for Provincial Affairs and Constitutional Development of South Africa to help local authorities respond to the great demand for improvement of municipal services. The MSP policy was developed by the DCD, utilising consultative policy making. It defines municipal services partnerships and typical contractual forms of MSPs, and also identifies gaps and constraints in existing South African law that can make implementation of MSPs unnecessarily difficult or more costly for local authorities and service consumers. The policy creates a framework for competitive procurement of MSP contracts and, finally, it describes the capacity needs of local authorities to deal effectively with MSP planning, procurement and implementation, and identifies new and expanded institutional roles at the local and national levels to support local authorities that wish to engage in MSPs     

South Africa's infrastructure service delivery needs: The role and challenge for public‐private partnerships

South Africa's development challenges include over R100 billion needed in investment in infrastructure over the next ten years. Municipalities lack the institutional and financial capacity to address this alone and have to raise private sector finance to supplement their own resources and government grants. The borrowing of capital requires a well‐run administration that is able to raise sufficient revenue to meet all running costs, including loan redemption. Municipalities are showing increasing interest in municipal service partnerships (MSPs), including public‐private partnerships (PPPs), as a way of improving efficiency and accessing capital markets. This raises a number of challenges that include understanding and dealing with the continuing negative perceptions of the role of the private sector; clarifying the roles of the private sector and the government, especially local government; and addressing those issues necessary to produce effective and efficient MSPs in South Africa.     

The impact of basic and social infrastructure investment on South African economic growth and development

Basic and social infrastructure investment can assist in addressing widespread inequality and divided societies by promoting economic growth and social development. The aim of this study is to determine whether basic and social infrastructure investment differently affect economic growth and social development indicators of urban and rural municipalities. We used a balanced panel dataset containing infrastructure, economic, demographic and social indicators for rural and urban municipalities for the period from 1996 to 2012. Principal component analysis was used to construct synthetic indices of basic and social infrastructure. Restricted within least squares dummy variable estimation techniques are used to evaluate the differences between urban and rural municipalities. The elasticities of basic and social infrastructure investment generally are more pronounced for economic growth and social development indicators in rural municipalities. These findings could potentially influence policy decisions in terms of infrastructure investment in favour of rural municipalities to increase economic growth and social development.     

Financing municipal BOOTs in South Africa: The lenders' perspective

South Africa's first build‐own‐operate‐transfer (BOOT) project for municipal services was signed in late December 1998 by the city of Durban and a private project company associated with French conglomerate Vivendi. The project will treat waste water for sale to industrial customers who would otherwise use more expensive potable water in their manufacturing processes. The project structure, with its multiple contracts and supporting agreements, guarantees and complex shareholding relationships, represents a sophisticated analytical challenge for lenders, whose financing will ultimately be at risk in the deal. Development finance institutions, such as the Development Bank of Southern Africa (DBSA), must review such projects in even greater detail because of their mandate to promote sustainable infrastructure development in the region. This article presents the DBSA ‘s analytical perspective on the Durban BOOT project in an effort to capture the complex, innovative and strongly developmental character of what, for South Africa, is a ground‐breaking public‐private partnership project.     

Nelspruit and Dolphin Coast: Lessons from the first concession contracts

South Africa's first two long‐term concession contracts for water and sanitation were signed in early 1999. These complex public‐private partnerships (PPPs) in Nelspruit and Dolphin Coast will use private sector management expertise, as well as huge amounts of private capital investment, to address service delivery challenges in both areas. Especially important will be the extension of essential services to previously disadvantaged residents of both municipalities. The processes of preparing and negotiating these deals have been long and difficult. Councillors and officials have had to overcome a series of obstacles on their way to closing the deal, including fundamental misunderstandings about how such projects work on the part of unions, the general public, other government officials and even some members of South Africa's financial services community. This article provides an account of how and why these PPP projects were developed, and offers some of the key lessons learned regarding how to improve the process in the future.     

The role of secondary cities in managing urbanisation in South Africa

Following on from earlier work dealing with the role of metropolitan municipalities in managing urbanisation, this article assesses the role played by secondary cities in this regard. Although secondary cities have largely provided adequate infrastructure in line with the demands of population growth, three differences between metropolitan municipalities and secondary cities should be noted. First, on most indicators, secondary cities have more outliers than do metropolitan municipalities. Second, household incomes in secondary cities remain lower than those in metropolitan municipalities. Third, the ability of secondary cities to provide basic infrastructure does not differ much from that of metropolitan municipalities. In fact, there is evidence to suggest that, in terms of certain indicators, secondary cities have managed to deliver these faster than their metropolitan counterparts. We argue that the progress made in secondary cities during the period under consideration cannot be separated from the fact that the economic growth in more than 50% of secondary cities has been linked either to mining or to another dominant economic driver.     

Development planning and citizenship in Cape Town

This article argues that there is a dialectical relationship between development planning and citizenship in so far as planners, as institutional decision-makers, ensure a meaningful everyday lived experience for ordinary people. In post-apartheid South Africa, however, the statistical record signals a disjuncture and structural hiatus between what should be the basic rights of ordinary people and the role of local government in promoting citizen-driven development planning at the grassroots level. This article deals specifically with the Wallacedene community, who took the planning authorities to court to have their constitutional right of access to adequate housing and related services enforced. The implications of this court case vis-à-vis development planning are considered and recommendations are proffered.     

Node selection for the Integrated Sustainable Rural Development Programme in South Africa

Various programmes and strategies in South Africa aim to reduce poverty. The Integrated Sustainable Rural Development Programme (ISRDP) is a sustained campaign against rural poverty and underdevelopment, implemented in 13 nodes selected on account of their poverty, lack of infrastructure and capacity, and provincial representivity. Using a hierarchy of development regions, data from the 2001 Census and a core-periphery model, this paper evaluates the location of the 13 nodes to determine whether the municipalities in these nodes have high levels of poverty and are in need of development. The findings are that although most of these municipalities have high poverty levels, the nodes also include municipalities with relatively high levels of development. There are also 17 municipalities in South Africa with very low levels of development that are not included as nodes in the ISRDP. Policy-makers need to take cognisance of the macro pattern of spatial economic development.     

ECONOMIC INFRASTRUCTURE: A REVIEW OF DEFINITIONS, THEORY AND EMPIRICS

Infrastructure investment, especially in South Africa, is currently at the forefront of policy and public debate. But the term ‘infrastructure’ has a variety of definitions and interpretations; the reason for the various definitions is related to infrastructure's various impacts and incidence. Three levels of infrastructure are identified: local, national and transnational. Infrastructure at all three levels are subject to certain market failures which require some form of government intervention. Furthermore, theory postulates a number of benefits from infrastructure, both on economic growth and equity. Both the quantity (access to infrastructure) and quality (reliability of infrastructure or accompanying services) are important. Finally, empirical analysis tests whether these theoretical benefits are indeed realised. However, it seems as though infrastructure empirics are subject to a number of serious limitations.     

Institutional change,property rights and economic performance in post‐apartheid in South Africa

This article examines redistributive institutional change in South Africa within the theoretical framework provided by North (1979; 1981; 1991) and Eggertsson (1990). By drawing a distinction between the productive potential of an economy and institutionally feasible production possibilities, we can develop an analytical structure for evaluating how alternative systems of property rights can affect productive activity in South Africa. Although this exercise cannot predict actual outcomes in South Africa, it does accord property rights a central role in a specific theory of institutional change, and accordingly may assist in determining how certain forms of institutional change can influence economic performance in a transitional democracy.     

Mainstreaming sustainable adaptation to climate change into municipal planning: An analysis from the Eastern Cape,South Africa

Municipalities are well positioned to support adaptation of vulnerable people to climate change; however, they seldom integrate climate change into their planning for social development. The building of adaptive capacity for sustainable adaptation requires that municipalities understand and mainstream climate change into their plans, and develop context-specific adaptation strategies that address existing social development issues. A desktop analysis was conducted to compare the planning landscape in six District Municipalities in the Eastern Cape, South Africa, focusing on Municipal Integrated Development Plans (IDPs). A scoring system was developed for comparing the IDPs of the municipalities, based on levels of context-specific information about climate change, mainstreaming of climate change with other development concerns, and vertical integration across district and local municipalities, amongst other themes. Overall, the mainstreaming of climate change in municipal IDPs in the Eastern Cape remains weak, and requires critical attention if sustainable adaptation is to be achieved.     

The impact of trade facilitation factors on South Africa's exports to a selection of African countries

Economic growth can be enhanced through increased trade among countries, provided the correct institutional structures are in place. A country's trade is dependent not only on its own trade facilitation reforms but also on those of the trading partners. This paper, using an augmented gravity model, examines trade facilitation factors that impact on South Africa's exports to other selected African countries. The results of the estimation reveal the following. An improvement in the customs environment within the importing country provides the largest gain in terms of increasing trade flows, followed by the regulatory environment and domestic infrastructure. Furthermore, adjacency and common language impact positively on South African exports, while distance between countries impacts negatively on it. Being part of the Southern African Development Community is also enhancing exports from South Africa, compared with being part of the East African Community.