Dev. and Decentr. in SA

8/13/2019 Dev. and Decentr. in SA

1/17

Development and Decentralization

in Republic of South Africa

Economic Policy and Decision Analysis

What people know about Republic of South Africa generally (TOP 5):

Cape Town, Johannesburg, Nelson Mandela, 2010 FIFA World Cup, Safari.

MSc in Applied Management

Pcs, 18.12.2013

kos Englner

Feng Yang

Tams Uher


2/17

Introduction

The introduction of a constitutional democracy in 1996 inaugurated a decentralized system of

governance in South Africa. The system of local government is brought into the spotlight asthe Constitution of South Africa (Act 108 of 1996) calls upon local government to takeresponsibility for addressing years of service delivery backlogs created by apartheid. Thelegislative obligations of local government are rigorous: it must be effective, efficient andresponsive in carrying out its constitutionally mandated functions. It must organize itsadministration to manage, plan and finance its undertakings. Local government has to providedemocratic and accountable government for local communities; to ensure the provision ofservices to communities in a sustainable manner; to promote social and economicdevelopment; to promote a safe and healthy environment; and to encourage the involvementof communities and community organizations in matters of local government.

This constitutional mandate is no easy feat for a newly established autonomous sphere ofgovernment which has been assigned a heavy legislative burden. Besides the above, localgovernment is responsible for the provision of a wide range of services such as water supply;sewage collection and disposal; refuse removal; electricity and gas supply; municipal healthservices; municipal roads and storm water drainage; street lighting; and municipal parks andrecreation. The Constitution requires that local government must be an autonomous andfinancially self-sufficient sphere of government, which is also responsible for creating its owneconomic development path. This thesis will show that the constitutional obligations are posing a number of challenges to local government, especially with regard to delivering basicservices such as water, sanitation and electricity.

The national government is proud to announce that access to potable water has improved from62% of the population in 1996 to 91.8% in 2009; basic sanitation from 52% to 77%; and basic

electricity from 58% to 73% mostly in what were previously referred to as township areas. Since 2004, despite the impressive progress towards the eradication of service delivery backlogs, South Africa has experienced numerous protests and demonstrations across anumber of municipalities. Charles Nqakula (then Minister of Safety and Security), reportedthat there had been approximately 6000 protests during the 2004/2005 financial year alone.

Residents across South Africa are demanding better quality services from their localauthorities. For example, 3000 residents of Diepsloot (Gauteng province) took to the streets

demanding basic services. In Durban (KwaZulu-Natal province), 5000 people from informal


3/17

settlements marched through the city center demanding houses and services. In MitchellsPlain (Western Cape province) barricades were erected and tyres were burned, excrement andrubbish were dumped onto the streets. In a protest in Harrismith (Free State province) a boywas killed during a brawl with police. A typhoid outbreak in Delmas (Mphumalanga, NorthWest provinces) led to protesters demanding the resignation of the municipal manager. PortElizabeth (Eastern Cape province) suffered weeks of protest by thousands of people frominformal settlements. Angry residents complained about dirty water, frequent electricityoutages, faulty street lights and overflowing sanitation infrastructure.

Media reports, departmental reports and independent research organizations have revealedthat many municipalities are finding it difficult to meet their service delivery obligations. TheDepartment of Cooperative Governance and Traditional Affairs identified a number of persistent local political, administrative and financial problems that impact on municipalitiesability to deliver sustainable basic services. Problems such as: inadequate interaction betweenlocal councilors and local communities; eradicating the remaining service delivery backlogs;insufficient administrative and financial management; as well as mismanagement, corruptionand fraud.Many municipalities are experiencing serious financial stress brought on by problems such asthe non-payment of services leading to municipal debt. The National Treasury stated that

municipalities lack proper credit control and debt collection methods, resulting in municipaldebt increasing rapidly. By the end of 2007, the national municipal debt was around R32 billion, a figure which is estimated to be growing at R3.2 billion a year. The Auditor- Generalnoted that municipalities were inept at financial management, and stated that only 197 (of atotal of 283) municipalities submitted financial statements in 2009, of which only 19%received clean audit reports.What is the Significance of Political and Institutional Dynamics for processes of

Decentralization reform, the Development of Local Government Systems and their Ability toContribute to Local Development/MDGs?Decentralization has been adopted in many developing countries, and it is a major focus of theconsiderable support that development partners provide for public sector reform. Yet itsrecord is mixed at best in terms of effective implementation. The record is also unclearregarding the realization of many of the reform objectives (such as enabling more efficientservice delivery, advancing democratic reform, and promoting economic development and

poverty reduction) typically outlined in official policies.


4/17

Insufficient correspondence between official policy goals (also supported by some countryactors and development partners) and the goals of various political and bureaucratic actorscommonly results in a failure to meet stated reform objectives, and produces unintendedconsequences. The situation is complicated by the internal fragmentation of centralgovernments; the goals and behaviors of the diverse central actors and their relative ability toshape policy often vary considerably. Development partners can influence reforms, but theyalso face diverse incentives and pursue priorities that may differ from those of governmentactors or other donors. Their behavior may serve to reinforce conflicts and exacerbateinconsistencies in decentralization reforms.Substantial attention has been devoted to defining the institutional, fiscal and technicalrequirements for meeting common normative decentralization objectives. Much lessconsideration, however, has been given to identifying the political and institutional incentivesthat drive reform, or to assessing how these incentives shift over time. Shapingdecentralization requires appreciating its fundamental paradox:What motivates the central government to give up powers and resources to subnationalgovernments?The underlying premise of this session is that systematic analysis and a more nuancedunderstanding of political economy issues can productively complement the technical

diagnostic work and normatively guided actions carried out by governments and development partners as they undertake decentralization reforms and support the development localgovernment systems. A deeper understanding of the motives that drive politicians and bureaucrats to support or oppose reform and its practical implications will allow policymakersto take them into consideration when designing reform to empower local governments anddevising inelegant approaches for its implementation. It is equally important to understandhow the incentives of key actors may weaken, strengthen, or shift in response to

circumstances that arise after reform begins.

1.General informations about decentralisation

Types of decentralisation

There is political decentralisation, with legislative functions being vested in regional or local

bodies. In the literature it is often assumed that these are democratically constituted, but as wewill note below, perhaps the most radical experiments in decentralising legislative


5/17

competence occurred in South Africa - to undemocratic bantustan governments. Types of political decentralisation can be further distinguished according to whether the decentralised bodies have a single function (such as the school boards in the USA) or multiple functions asis the case with the typical city council. Bureaucratic or administrative decentralisation occursin virtually every system. Differences occur to the extent to which the regional offices ofnational line departments have flexibility in carrying out their mandates. Furthermore in somesystems there is regional coordination between line departments, while in other systems theysimply operate parallel to each other. Indeed there are examples where different linedepartments define their regions very differently from each other. Finally there is fiscal

decentralisation. In this case decentralisation can occur in relation to expenditures or revenueraising (or both).

Democracy

There are certain themes that run through the arguments for decentralisation. One of the mostimportant ones is associated with democratisation. It can be encapsulated in the idea thatdecentralisation brings government closer to the people. There are a number of connectedstrands within this line of argument. Firstly, it is argued that local government is more likely

to be accountable its constituency. It is assumed that information are better within ageographically more concerned area, so that people will be able to see much quicker whetherthe local authority is attending to the needs of its constituents. Linked to this is the idea thatlocal government is less subject to capture by special interest groups.

- Secondly, additional levels of government may increase the opportunities for peopleto become directly involved in government decision-making. Clearly regional andlocal government bodies do introduce additional layers of councillors and full-time

politicians. This, of course, need not be an unambiguous good. It raises the cost ofgovernance, particularly if some of these positions become merely sinecures for loyal party servants.

- Thirdly, these additional positions may be a worthwhile training ground for nationalleadership. However, while there may be politicians who work their way up from localor regional positions,)

- Fourthly, local government may contribute to the creation of checks and balances

within the system.. A federation may be the most viable organisational form in suchcircumstances. Such dispersal of power impedes the possibility of large scale


6/17


7/17

Decentralisation in South Africa before 1994

The major elements of South Africas system of decentralisation can be traced to twoelements:

- Firstly, the creation of the Union of South Africa out of four separate settler colonies;and secondly the process of subjugation, incorporation and control of the variousindigenous polities.

- The second element in particular led to the attempt to partition South Africa intoindependent states, which can be seen as a particularly radical form ofdecentralisation.Given the way in which apartheid structured the South African spacealong racial lines, this discussion will be organised in the same way. We will start withwhat was defined as White South Africa.

Decentralisation under the democratic state

The transformation process:

1. The National Party and the representatives of other minority groups were categoricallyopposed to a strong unitary state, on the assumption that in such a state previouslyobtained concessions and guarantees would not be easily enforced.

2. The townships and peri-urban areas had be brought into one system of urbanadministration

3. The bantustans had to be reincorporated into the fabric of the country,but their

bureaucracies also sought employment guarantees

The challenge facing South Africa is how to ensure that the reforms that have been introducedthus far create interests that will ensure that these reforms are carried through to the end. Wehave noted that there are many positive signs. The social service benefits are certainly morewidely distributed than ever before. The equitable share formula, despite possible misgivingsabout the accuracy of the data, is certainly reaching many more poor areas than would have

been the case under other dispensations. A system of legal and financial checks and balancesis being created. Nevertheless there is also some evidence of a centralising drift. Some of this


8/17

is driven by technocratic and efficiency concerns. Some of it, however, seems motivated by adistrust of policy experiments emanating from sources outside the centre.There are undoubtedly cases where central intervention was required in order to stop large-scale abuses. However, if the benefits of decentralisation are to be achieved, then it isessential that a dynamic is created where local interests can play some of that policingfunction. Currently national government is embarking on a process of reviewing the equitableshare formulae. Making these formulae more simple and transparent, and providing moreeffective information to local communities may be one important step in that direction

Decentralization index of South Africa compare to other African countries.

Development in South Africa

The UNs Human Development Index is an attempt to quantify quality of life. Three measuresare used to create a single human development score: health (life expectancy), education(adult literacy) and wealth (GDP per capita).Using only three variables makes comparison possible, but it does mean that the HDI is prettycrude.The latest report (with data for 2007)has just been released. Norway comes out on topfollowed closely by Australia.
http://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://en.wikipedia.org/wiki/Human_Development_Indexhttp://hdr.undp.org/en/humandev/http://hdr.undp.org/en/humandev/http://en.wikipedia.org/wiki/Human_Development_Index


9/17

South Africa comes in at 129th of the 183 countries (some really bad places like Somalia andZimbabwe dont have enough da ta to be on the list at all).(http://www.southafrica.info/business/economy/globalsurveys.htm#.UrSnafTuIaU)

I was particularly interested in the trends over time. South Africa has gained ground since1980 but has fallen off since a peak in 1990.

Looking at each of the components in HDI it becomes clear that life expectancy is hurtingSouth Africas HDI score. AIDS is really holding them back. GDP per capita has also been pretty flat.(http://countryeconomy.com/hdi/south-africa)

The Global Competitiveness Index (GCI) is a comprehensive tool that measures the

microeconomic and macroeconomic foundations of national competitiveness. It is composedof 12 "pillars", or categories. Competitiveness is the set of institutions, factors and policiesthat determine the level of productivity of a country taking into account its level ofdevelopment.

Subindexes

Basic Requirements Efficiency EnhancersInnovation and Sophistication

Factors

Pillars

Institutions Higher Education andTraining Business Sophistication

Infrastructure Goods Market Efficiency InnovationMacroeconomic Environment Labor Market Efficiency
http://www.southafrica.info/business/economy/globalsurveys.htm#.UrSnafTuIaUhttp://countryeconomy.com/hdi/south-africahttp://countryeconomy.com/hdi/south-africahttp://www.southafrica.info/business/economy/globalsurveys.htm#.UrSnafTuIaU


10/17

Health and PrimaryEducation

Financial MarketDevelopment

Technological ReadinessMarket Size

Switzerland is the first one in generally, in this year Germany is the 4. UK is the 10. SouthAfrica is the 53. Unfortunately Hungary is on the rank of 63.(Klaus Schwab, World Economic Forum)

Genuine Progress Indicator (GPI) developed by the World Bank, GPI measures overalleconomic wellbeing sustainability of a country by adjusting GDP for social costs (crime,automobile accidents, commuting, family breakdown, loss of leisure time, underemployment)and environmental costs (household pollution abatement, water pollution, air pollution, noise

pollution, loss of wetlands, loss of farmlands, depletion of non-renewable resources, long-term environmental damage, ozone depletion, and loss of old-growth forests). GPI has not yet been accepted and practiced worldwide (World Bank 2005).We dont have data only forSouth Africa.

The GDP is growing year by year but theGPI getting stagnating and it seems that wont growif sustainability and other factors cant develop.

THE CONSEQUENCE


11/17

About the well-being researches suggest that both comparisons with others and with oneselfover time have important eff ects on satisfaction with life. Individuals who believe themselvesto be in the middle and richestthirds of the national income distribution have signicantl yhigher levels of subjective well-being than those who rank themselves in the poorest third.These average eff ects are also very large; ranking oneself in the middle of the incomedistribution has a similar effect to reporting being in good or excellent health or living in ahouse with a ush toilet (two of the other largest contributors to subjective well-being), whileranking oneself in the richest third has more than double this eff ect.The individuals perceived ranking in the village or suburb had an even larger impact on subjective well-beingthan the individuals ranking in the national distributi on, suggesting that individuals may caremore about their status among people who are in a geographically proximate area.

BRICS

Brazil, Russia, India, China, South AfricaBetween 2005and 2010 the BRICS countries could growth rapidly. During we thought thatthe USA, Japan and EU will downfall, and the world economy will rearrange but the worlddidnt deal with all of the emerging countries are struggling with serious structural problems. Now that the traditionally strong economies climb out of the hole, it seems more clear that theBrazilians, the Russians and other members of the BRICS are in serious troubles.


12/17

South Africa was admitted to the BRICS group in 2010 with an optimistic growth rate. SAs

economy is relatively small in the BRICS and resources are scare.It seemed that the financial crises didnt influence the BRISCS countries but in 2012 things

have changed. However US, Japan and German economy started to recover but the BRICSare still in the crises.(http://www.brics5.co.za/about-brics/, http://www.ghsinitiatives.org/brics-report)

The growth of the GDP in South Africa is slowing down but still will be about 3% which isthe 10 worst in Africa but better than Brazil or Russia. The government has respondedrelatively quickly. The structure of the economy and education began converting and strategicreforms have been announced.(http://www.tradingeconomics.com/south-africa/gdp-growth)

Lessons learned and conclusions

Decentralization offers a new perspective for regional rural development. It allows for aregional approach, which takes into consideration spatial dimensions of development. Locallycompatible solutions can be developed and local government entities can turn into the driving

force for development efforts in their region. This requires that they see themselves asaccountable "downstream" towards their communities, not "upstream" towards a national
http://www.brics5.co.za/about-brics/http://www.ghsinitiatives.org/brics-reporthttp://www.tradingeconomics.com/south-africa/gdp-growthhttp://www.tradingeconomics.com/south-africa/gdp-growthhttp://www.ghsinitiatives.org/brics-reporthttp://www.brics5.co.za/about-brics/


13/17

administration. The experiences suggest that successful regional rural development in thecontext of decentralization can be assessed against the following criteria:

Criterion 1. Local Government vision and regional development plan

A key focus of capacity-building efforts should be to develop in local governments asustainable ability to support community projects. This calls for a broad vision and a planningand strategic framework to fulfill their development mandate. Such a framework is usuallyexpressed in a development plan for the (sub) region. The plan should be the guidance fordirecting institutional and financial resources (resource allocation). Prioritizing resourceallocations for projects should be done against this plan. It is also a communication tool and ithelps to link with national-level or sector objectives. In addition, it can also provide strategiesfor dealing with complex projects across the administrative boundaries (e.g. watershedmanagement).

Criterion 2. Community initiative and response by local government

Project should be identified by community members. Although there is usually an untapped

innovation capacity and intimate knowledge of local potentials within the communities, thecommunities generally require support to turn ideas for local development into concreteaction and to request the necessary services. Local governments in turn must see the need to"respond" to such community initiatives. In addition, local government has the obligation tooffer technical and organizational innovations to the communities to inspire and catalyze localcapacity. Local government must not see themselves solely as "representing" communitiesand administering to residents. This often requires substantial change of attitude among local

representatives. But only with such an attitudinal change can local development efforts besuccessful. Several community participation tools are known, but they have to prove theireffectiveness; not towards isolated project measures, but in the context of a bargaining process between various actors at regional and local level.

Criterion 3. Rural poverty targeting

Support measures should be designed in such a way, that a majority of the rural poor are

likely to benefit directly or indirectly. Local governments must follow a more holisticapproach towards poverty alleviation, which, apart form household income includes access to


14/17

services in education, health care and housing. Resource allocations should focus on servicesaimed at basic needs and review previous allocation patterns whose benefits are not clear.

Criterion 4. Reform of service public provision

Efforts to streamline provision of public services should be supported. Service delivery caninclude mixed arrangements, such as public-community partnerships (e.g. contractingcommunities for specific services), public-private partnerships (e.g. service contracts, jointventures), or horizontal co-operation between districts (e.g. to exploit economies of scale,secure watersheds, which go beyond administrative boundaries). All of these usually requireimproved capacities to manage such service deliveries. This includes that the role of thedifferent players in the change process needs to be clearly defined and understood. For linedepartments, it is generally required for their national offices to deconcentrate their functions.It is very difficult for local government to coordinate local offices of line departments if theseoperate in a very centralized fashion. In any case, it must be made mandatory for lower levelentities of these line departments to co-ordinate their sectoral activities with LocalGovernment.

Criterion 5. Channeling of fiscal flows

Appropriate level of fiscal resources should be available at lower levels. Too often, thedevolution of functions to local governments is not accompanied by the financial capacityrequired to sustain them. Funding is still mainly allocated not to local government, but linedepartments. This bypassing of local government can severely undermine their credibility.Inter-governmental transfer of nationally raised revenue towards local government is almost

always required for rural areas, but rarely is it properly organized on the basis of legalstipulations (positive exception Ghana). Although local governments own revenue base isoften very limited in rural areas and should be strengthened, it should be avoided that thisrevenue raising power is used in counter-productive ways (e.g. consideration fees for businessapplications in Zambia). Donor-funded projects are often tempted to pre-finance capitalexpenditures for local governments. This can only be a temporary measure of "bridging"resource gaps until intergovernmental fiscal transfer systems are functioning and own revenue

raising schemes are identified.


15/17

Criterion 6. Financial management

Budgeting, accounting, financial monitoring and financial management are generally deficientin newly established local government entities. Even an extremely precarious financial position is not recognized, downward trends not detected and corrective action missing.Forecasting of current revenues and expenditures are a prerequisite for long-term capital budgets. Budgetary processes need to be open and transparent and constituencies must have asay in approving decision. These are key areas for capacity-building measures.

Criterion 7. Regional flexibility

Common natural and economic characteristics within the region, as well as communal socio-cultural conditions provide a variety of opportunities to develop regional specific solutions.Such region-specific solutions should be promoted, not package approaches developed bysector departments. The regions chosen for regional rural development support should besufficiently small to facilitate community participation and avoid very heterogeneousconditions but large enough to allow a broader impact. If local government areas are verylarge or heterogeneous, regional development planning should be carried out for sub-regions.The typical size for developing region-specific solutions while maintaining broader impact isfrom approximately 50,000 to 500,000 inhabitants.

Criterion 8. Cross-sectoral approach

Linkages between sectors issues need to be addressed in integrated planning approaches.Therefore the planning cannot be restricted to particular sectoral authorities. Localgovernment needs to set up its own, planning system and planning unit. These planners play akey role in regional rural development. They should be wholly accountable to and preferablecontracted by local government, not national planning bodies. Apart from carrying out

regional rural development planning for local government, they are typically also involved insetting criteria for assessing community requests in line with the integrated development plans. A cross-sectoral planning perspective does not preclude that implementation ofindividual projects may well be under the responsibility of organizations with specific sectoralresponsibilities. Coordination mechanisms, however, remain with local government entities.The choice of sectors must largely be determined through community involvement. In thecontext of regional rural development, a cross-sectoral approach means the coordinated

identification and planning, beyond sectoral boundaries, of problem-solving measures while


16/17

the projects involved are subsequently) implemented in their own focal areas on a sectorallyseparate basis.

Reference list

Department of Cooperative Governance and Traditional Affairs. (2009). State of LocalGovernment in South Africa. Page 32. See Buhlungu, S., Daniel, J., Southall, R. andLutchmann, J. (Eds.). (2007).

State of the Nation: South Africa 2007. Pp.54-65. Pretoria: Human Sciences Research CouncilPublishers. And Langer, M.Government Probes Causes of Service delivery Protests. In Mailand Guardian. 24 July 2009. And Tau, P and Maphumulo, S. More Service Protests on theCards in The Star. 24 July 2008.

Alderman, Harold et al., Combining census and survey data to construct a poverty map ofSouth Africa, in Statistics South Africa, ed., Measuring poverty in South Africa, Pretoria:Statistics South Africa, 2000.

Bardhan, Pranab, Decentralization of Governance and Development, Journal of Economic Perspectives, 2002, 16 (4), 185 205.

Bahl, Roy, Implementation Rules for Fiscal Decentralization, Working Paper 99-1, International Studies Program, School of Policy Studies, Georgia State University

Buhlungu, S., Daniel, J., Southall, R. and Lutchmann, J. (Eds.). (2007). State of the Nation:South Africa 2007. Pretoria: Human Sciences Research Council Publishers. Page58. Buhlungu, S., Daniel, J., Southall, R. and Lutchmann, J. (Eds.). (2007).

State of the Nation: South Africa 2007. Pp. 54-58. Pretoria: Human Sciences ResearchCouncil Publishers. SACities Network. (2007). State of Cities Finance Report. AndDepartment of Cooperative Governance and Traditional Affairs. (2009).

State of Local Government in South Africa. And National Treasury (2009) Local GovernmentBudgets and Expenditure Review 2003/04-2009/10. And Financial and Fiscal Commission.(2009). Annual Submission for the Division of Revenue. And Ndaba, D. (2009).

Minister Sexwale Maps Out A 'Beyond Housing' Vision . In Engineering News. 24 July 2009.

Klaus Schwab, World Economic Forum: The Global Competitiveness Report 2012 2013http://www.southafrica.info/business/economy/globalsurveys.htm#.UrSnafTuIaU

http://countryeconomy.com/hdi/south-africahttp://www.brics5.co.za/about-brics/
http://www.southafrica.info/business/economy/globalsurveys.htm#.UrSnafTuIaUhttp://countryeconomy.com/hdi/south-africahttp://www.brics5.co.za/about-brics/http://www.brics5.co.za/about-brics/http://countryeconomy.com/hdi/south-africahttp://www.southafrica.info/business/economy/globalsurveys.htm#.UrSnafTuIaU


17/17

http://www.ghsinitiatives.org/brics-report(http://www.tradingeconomics.com/south-africa/gdp-growth
http://www.ghsinitiatives.org/brics-reporthttp://www.tradingeconomics.com/south-africa/gdp-growthhttp://www.tradingeconomics.com/south-africa/gdp-growthhttp://www.ghsinitiatives.org/brics-report

Documents

Dev. and Decentr. in SA