In collaboration with the Financing for Development Office of the United Nations Department of Economic and Social Affairs and the Government of Tanzania, UNCDF launched a global series of expert group consultations on municipal finance in Dar es Salaam, Tanzania on 29 February – 1 March 2016.
The meeting brought together a unique set of practitioners, local government representatives, academics, policy makers and the private sector from African countries, as well as UN entities and other development partners. In an interactive format, experts exchanged their experiences and suggested policy measures on how municipal governments especially in the Least Developed Countries can access long-term finance to implement the ambitious 2030 Agenda for Sustainable Development.
“According to figures from the United Nations, 1.2 billion people live in over 650 secondary cities in developing countries. Yet most government finance and development aid is directed to central government agencies whilst private finance often avoids local governments”, said David Jackson, Director of Local Development Finance at UNCDF. The Africa expert consultation is the first in a series of regional consultations that aim to pave the way for increased and more effective international cooperation on subnational finance as called for Addis Abba Action Agenda and reaffirmed in the preparation of the Habitat III Conference later this year.
The discussion delved deep into lessons learned from fiscal, political and administrative decentralization experiences across African LDCs, many involving UNCDF support. There was a consensus view that enabling and empowering local authorities to unlock resources for long-term finances requires a holistic approach to municipal finance. Sound financial management and improved internal revenue generation including through effective property taxes, user fees, and land value capture can pave the way for better access to private and public domestic finance. “Collaboration between banks and local government in Africa has to step up. Both actors have to meet in a middle area called trust where they share strategy, ambitions and solutions” said Ms. Zienzi Musamirapamwe, Head of Public Sector, Corporate and Investment at Barclays South Africa. Central government support and a conducive governance environment are equally important and intergovernmental fiscal transfers will remain a key source of local government finance.
Participants noted that many municipalities in Africa have come a long way in getting their finances in order while promoting affordable access to essential services for all. Experts discussed the positive experiences of an increasing number of African cities such as Dakar and Kampala City, both of which have received investment grade ratings from well-known regional rating agencies. The progress of secondary African cities has also been reviewed and noted.
According to Khady Dia Sarr, Program Director, Dakar Municipal Finance Program, development is primarily local; and finance is one of the keys to development. “We have to strengthen local authorities in Africa to tap into capital markets to respond to the needs of populations.”
“Decentralization is essential, especially fiscal decentralization” said Youssouf Séga Konaté, Technical Adviser, Ministry of Decentralization of Mali. Experts also agreed that successful decentralization hinges on a carefully sequenced series of policy measures. It is a process that requires continuous assessment of what works and what doesn’t and policies can change down the road. The discussion also featured lively exchanges between local authorities and central government representatives, including on the appropriate level and types of fiscal transfers and the authority for municipalities to borrow. Participants agreed that good communication and buy-in from all stakeholders are crucial factors for success.
Mr. Shomary Mukhandi, Director, Regional Administration and Local Government - President’s Office in Tanzania, gathered from the discussions that there is a need to consider other feasible ways of financing local government infrastructure development projects to meet and reduce the fiscal gap between actual needs and available resources. “We have learnt some valuable lessons from participating in this key meeting. Pertinent issues have been raised in improving municipal finance that can be applied by local governments in Tanzania to stimulate and improve local economic growth.”
The consultation will result in a publication that summarizes major findings and provide some general guidelines for policy makers at the international, national and local levels of the Least Developed Countries around world. In addition, the published results will feed into the discussions leading to the Habitat III conference this year, which should focus on how to implement the global agenda through cities.
UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries (LDCs). With its capital mandate and instruments, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. This last mile is where available resources for development are scarcest; where market failures are most pronounced; and where benefits from national growth tend to leave people excluded.
UNCDF’s financing models work through two channels: savings-led financial inclusion that expands the opportunities for individuals, households, and small businesses to participate in the local economy, providing them with the tools they need to climb out of poverty and manage their financial lives; and by showing how localized investments -- through fiscal decentralization, innovative municipal finance, and structured project finance -- can drive public and private funding that underpins local economic expansion and sustainable development. UNCDF financing models are applied in thematic areas where addressing barriers to finance at the local level can have a transformational effect for poor and excluded people and communities.
By strengthening how finance works for poor people at the household, small enterprise, and local infrastructure levels, UNCDF contributes to SDG 1 on eradicating poverty with a focus on reaching the last mile and addressing exclusion and inequalities of access. At the same time, UNCDF deploys its capital finance mandate in line with SDG 17 on the means of implementation, to unlock public and private finance for the poor at the local level. By identifying those market segments where innovative financing models can have transformational impact in helping to reach the last mile, UNCDF contributes to a number of different SDGs and currently to 28 of 169 targets.