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Sustainable Futures: Municipal Finance Paper

Sustainable Futures: Municipal Finance Paper

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Sustainable Futures Papers and Presentations (A Collaborative Compilation by Industry Leaders) produced by the Sustainability Institute, 2008/9
Sustainable Futures Papers and Presentations (A Collaborative Compilation by Industry Leaders) produced by the Sustainability Institute, 2008/9

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Published by: Sustainable Neighbourhoods Network on Nov 30, 2010
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Municipal Finances, Service Delivery and Prospects for Sustainable ResourceUse in Cape Town
Professor Mark Swilling and Dr. Martin de Wit.School of Public Management and Planning, Stellenbosch University
July, 2008Introduction
Like all post-Apartheid cities, after 1994 Cape Town has faced the twin challenge ofovercoming the spatial divisions created during the colonial/apartheid era andaddressing the endemic poverty that these divisions reproduced for over threecenturies. In 1993 the City of Cape Town was governed by 61 municipalities andmanaged by 17 separate administrations. In 1995-1996, the first democratic localgovernment elections took place in integrated municipal areas. Initially, Cape Townestablished 7 local government authorities from the former 61 municipalities in orderto strive for more autonomy. The 2000 Municipal Structures Act (GovernmentGazette No. 19614; Volume 402. 1998) outlined new systems of metropolitangovernment leading to the establishment of the Cape Town Unicity – a single-tieredform of metropolitan government. This so-called “Unicity” structure secured a singlemetropolitan tax base in an attempt to address development disparities. This processof municipal restructuring and its impact on service provision has been welldocumented (Jaglin, 2004, McDonald and Smith, 2002, Khosa, 2000, Parnell andPieterse, 2007, Van Donk et al., 2008). Formerly segregated white local authorities(WLA’s) and black local authorities (BLA’s) were amalgamated in an attempt toensure greater equity between rich and poor communities, and to help standardizeservice delivery. This was achieved in particularly interesting ways in Cape Town,especially with respect to particularly progressive municipal finance policies thatremained consistent despite regular party political changeovers.This highly complex process of transforming and deracialising political governancewas underpinned by the ‘new public management’ approach to institutional reformand the decentralization of some national government functions to local governmentlevel. Privatization/corporatization of state owned enterprises, the formulation ofpublic-private partnerships, greater emphasis on service delivery on a cost recoverybasis and the implementation of performance management systems were also part ofthe process of institutional reform, albeit only partially implemented in the Cape Towncontext (Wilkinson, 2004, Watson, 2002). Despite references to neo-liberalapproaches to service delivery in the Cape Town context (Miraftab, 2004, Smith,2004, Smith and Hanson, 2003), the fact of the matter was that by 2008 all municipalservices in Cape Town were still delivered either directly or through sub-contractorsvia the City of Cape Town’s (CCT) integrated public service.The restructuring process was far more arduous than initially anticipated. Localgovernment authorities struggled to implement complex administrative changes andto deliver promised services in an unpredictable political environment. Former WLA’sand BLA’s, with different organizational structures battled to implement complex newsystems post integration in financially viable ways.There are nearly 800 000 households in Cape Town, with a rapidly expandingpopulation of around 3,5 million people. Below is a table that represents the class
 
structure of these households, with just over 50% classifiable as poor and workinghouseholds, 16% comprise the wealthy elite, with a relatively small middle classcomprising 31% of households.
Table 1: Household class structure in CapeTown
Despite the many political changeovers in Cape Town’s municipal government since1994, a constant theme of successive administrations has been the need to addressthe service backlogs in the poorer areas of the city. This has had major implicationsfor capital and operating expenditures in the energy, waste, water and sanitation(EWWS) sectors which together account for the nearly half of expenditure by theCCT. As will be demonstrated below, R9.3 billion or 47% of its budget was spent oncapital and operational expenditures for EWWS services for 2007/8. This equates to8% of the Gross Geographic Product (GGP) of the Cape Town metropolitaneconomy. Given the magnitude of this expenditure and related incomes, it isimperative that researchers pay more attention to how this money is spent, whobenefits, what the long-term impacts will be on the space economy, social structureand eco-systems, and what the alternative approaches may be.The core challenge that has faced officials since 1994 has been to find fiscally viableways to expand the EWWS services into poorer areas while maintaining and
Cluster Group % of suburbs No of households % of total households 
Elite suburbs 14 54 630 7Upper middle class 19 68 129 9
Sub-total 
 
33 
 
122 759 
 
16 
 Middle suburbia 20 77 380 10Inner city 1.5 17 564 2Semi/skilled labour pool 9.5 42 404 6New bonded areas 13.5 101 638 13
Sub-total 
 
44.5 
 
238 986 
 
31
 Traditional townships 4.5 80 980 11Dense run-down high-rise 13 170 752 22Urban and working poor 2 26 108 3Below the poverty line(mainly informal)3 111 770 15
Sub-total 
 
22.5 
 
389 610 
 
51
 
Total 100 751 355 100 
 
operating the EWWS services for the city as a whole. At the same time, since 2006there has been a growing realisation that development strategies need to addressthe question of sustainable resource use. This has been recognised in the CCT’spolicy documents (City of Cape Town, 2008), and in the policy documents of theWestern Cape Provincial Government (Republic of South Africa. Western CapeProvincial Government, 2007). The academic literature has also started to reflectsimilar arguments (Clark et al., 2007, Petrie and Ocran, 2007, Sustainability Institute,2007, Swilling, 2006, Swilling and Annecke, 2006, Crane and Swilling, 2008). Thecore argument in these emerging policy documents and the academic literature isthat service delivery will not be able to address the needs of the poor if theseservices depend on traditional technologies and systems that are seen to be highlyinefficient and ecologically unsustainable. This has resulted in repeated calls forgreater integration of service delivery and integrated planning to support an approachinformed by a sustainable resource use perspective.Sustainable resource use simply refers to living in a manner which isintrinsicallycompatible with the natural resource base and available eco-systems. Morespecifically, it means ensuring thatresource consumption will not jeopardise theearth's life-support systems now and in the future. Over the last two centuries,although many nations have experienced unprecedented increases in livingstandards, the global stock of natural resources has dramatically declined withincreasingly negative consequences for the approximately two billion people who livein poverty (World Wildlife Fund et al., 2006; see also Special Issue of the journalEnvironmental and Resource Economics, 2007, United Nations, 2005, Hurrell andWoods, 1995). Global warming and its negative consequences for the poorest peoplein the world currently tops the agendas of the most important global meetings(Intergovernmental Panel on Climate Change, 2007, Stern, 2006). Currently, thepromotion of ‘sustainable growth’ and ‘sustainable resource use’ are concepts widelyaccepted in theoretical and political discourses worldwide (Pezzoli, 1997, Mebratu,1998, Behrens et al., 2007, Fischer-Kowalski and Haberl, 2007). However, a generalconsensus on the practical implications of sustainable resource use for municipalfinance and service delivery is still required (Swilling, 2004).It will be argued that in response to the severe fiscal constraints within which officialshave to work to extend EWWS services to areas with limited cost recovery capacitywhile maintaining and operating these services on a city-wide basis, there has beena move away from a uniform approach (‘one-size-fits-all’) to a recognition that uniqueresponses are required for specific contexts (‘horses-for-courses’). There is,therefore, growing acceptance of the need for innovation and experimentation. Whilefor some this is evidence of an anti-poor “neo-liberal” response, there is nonecessary reason why a break from standardized uniform service via a centralizedpublic service will automatically result in worse or more expensive services for thepoor. From a sustainable resource use perspective, much about service delivery andthe financing thereof will need to change. A sustainable resource use approach withpro-poor results will need to makes provision for new technologies and systems thatcould substantially decouple rising consumption from resource use on a city-widebasis. It is unlikely that this will happen if a traditional conception of public sectorservice delivery is maintained. For example, a 10% saving on a R9.3 billionexpenditure on EWWS services is R9.3 billion which is more than twice the size ofthe housing subsidy grant that Cape Town will receive from National/ProvincialGovernment in 2007/2008. Imagine if this saving could be captured and redirectedinto pro-poor development? The stakes, therefore, are high. Although this shift canhappen on a piece-meal basis in pioneer (‘EcoVillage’) projects, it will also need to bedeveloped at a city-wide level. For this to happen, integrated planning approacheswill be required that go beyond the current
multi- 
disciplinary approach (where the

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