STUDENT NAME:

STUDENT #
STUDENT GROUP:
LECTURER:

A REPORT ON MITIGATING
THE DEBT CRISIS OF
OKAHANDJA MUNICIPALITY
1.0 Introduction

Socio-economic and development needs of local populace. Over the years, it has been observed
that massive rural-urban migration and over congestion are heating up lives in the cities. Others
have contended that Local Governments are docile in terms of aggressive revenue collection to
augment allocations from the federation account which they get on monthly basis. In Namibia,
several municipalities have large debts to suppliers because of unpaid customer bills. Often, the
largest debtor of a local authority is the public sector which includes schools, hospitals,
government offices, etc. whose water bills ought to be settled by relevant line ministries
(MRLGH, 1998).

2.0 Preventing debt accumulation and how to improve revenue in the Okahandja
Municipality

In many cities and towns, the negative effects of the municipal debt problem are becoming
progressively more visible. Local infrastructure deteriorates as public buildings for instance
schools, roads and parks are not well maintained anymore. Public libraries and swimming pools
are closed down, subsidies for local sports clubs and adult education centres are cut back or
eliminated, and public administrative staff is let off to save costs to name just a few examples.
All in all the quality of life is in decline (Egonmwan,1984).

2.1 Preventing debt accumulation

The following are recommendations on how the Okahandja Municipality can use to prevent
debt accumulation:

 Coordinating debt management in particular, the choice of form and manner, and
determining the amount and structure of debt with long-term financial and investment
planning. Each local government should be asked to develop a long term debt
management strategy in the form of a document that sets out the issues related to a
given local government’s presence on the capital market and the circumstances
justifying the incurring of the debt (Tonwe, 2007).

1
  Creating separate units or positions devoted to debt management within the
organizational structures of those local government municipal offices for which the
capital market is a significant source of finance (Egonmwan,1984).
 Setting up information banks that contain good codes of practice and examples of debt
management, disseminating credible information on current market developments, and
defining tools to aid debt management (Tonwe, 2007).

2.2 How to improve revenue

The Okahandja Municipality can increase through the following ways

 1. Inter-municipal Cooperation is an alternative for improved public service delivery

especially for small-sized local government units. You could find literature on
metropolitan governance related to this issue (Tonwe, 2007);

2. Public-Private partnerships for certain local public services (such as local public lighting) could
be an option as well (Egonmwan,1984).l;

3. Increasing public transfers from central governments to assure better equalization systems;

 4. Strengthening local tax collection system and eliminating free-riding effects from
neighboring municipalities (Tonwe, 2007).

3.0 Conclusion and summary

3.1 Conclusion

Source of finance has been one of the major problems of Local municipalities in Namibia,
mainly because they rely on internally generated revenues which are hardly sufficient to meet
their needs. This leads to the slow pace of development in Local Government Areas, especially
in the rural areas.

3.2 SUMMARY

In order for the Okahandja Municipality to prevent debt accumulation they should try to
implement measures such as; Coordinating debt management in particular, the choice of form

2
and manner, and determining the amount and structure of debt with long-term financial and
investment planning, Creating separate units or positions devoted to debt management within
the organizational structures of those local government municipal offices for which the capital
market is a significant source of finance and Setting up information banks that contain good
codes of practice and examples of debt management, disseminating credible information on
current market developments, and defining tools to aid debt management.

In terms improving revenue the Okahandje Municipality should try and implement these
recommendations; Inter-municipal Cooperation is an alternative for improved public service
delivery especially for small-sized local government units. You could find literature on
metropolitan governance related to this issue; Public-Private partnerships for certain local
public services (such as local public lighting) could be an option as well; Increasing public
transfers from central governments to assure better equalization systems; Strengthening local
tax collection system and eliminating free-riding effects from neighboring municipalities.

3
 References

Tonwe, D.A (2007). Aspects of the Theory of Local Government. Benin City: Trust Publications.

Ministry of Regional and Local Government and Housing (MRLGH). (1998, April).
Decentralization in Namibia. Situation analysis. Windhoek: MRLGH.

Egonmwan, P. (1984). Principles and Practice of Local Government in Nigeria. Benin City:
S.M.O. Aka & Brothers Press.