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6.3.2 Core or Operational Funding for Local Government

Local government needs an ongoing source of revenue to pay salaries of officials and other administrative costs.

Existing sources include:

  • transfers from central and provincial government; and

  • taxes, levies and licence fees on local businesses.

There is probably not much that can, or need to be done to change the above system, other than to look at possible ways of improving efficiency of collection and administration of revenues, and ensuring that revenues raised locally remain in municipal hands.

6.3.3 Bridging Finance/Development Capital for Infrastructure Construction Possible options (alone, or in combination) include:

Direct cost recovery through "sale" of concessions to developers. Every concession would then be apportioned a "land value" which would have to be paid by the developer up-front as a contribution to bulk and link infrastructure for the whole area. For internal services (roads, water, sewerage, etc. within the boundaries of c o n c e s s i o n ) t h e d e v e l o p e r c o u l d r e m a i n r e s p o n s i b l e a s i s n o w t h e c a s e , o r t h e

Development Agency could







recoverable from the developer over time (say 5 - 15 years) or as individual units are "sold" by the developer.

  • Loans to local government (from central government or Development Banks) used to pre-finance infrastructure development which are then recovered through a general tax on urban residential, commercial and industrial land in the area.

Considering the general inability of the local population to be burdened with a land tax, and the lack of capacity to administer such a tax, the first option where developers are directly charged on a project-by-project base is probably the most practical, realistic and equitable.

6.4 Funding for Operation and Maintenance of Infrastructure and Services There are three aspects to the above:


Maintenance of capital infrastructure) municipal roads, bulk water supply, municipal sewage works, etc.)

Developers (concessionaires), residents and business should contribute to a levy according to the "land value" of concessions, the turnover of businesses, and perhaps a flat rate for residents. This levy could be collected and administered by the proposed Development Agency on behalf of the local authority and under its control and supervision.

  • 2.

    Provision and maintenance of public facilities and amenities (parks, clinics, libraries, tourism information and marketing, etc.). The funding for this should also come from the levy mentioned in 1. above, supplemented by direct charges for some of the services where possible.

  • 3.

    Cost of municipal services (water consumption, sewage disposal, solid waste disposal, cleaning services, etc.). Local government can either provide these itself and charge consumers directly on a cost-recovery basis or outsource some or all of it to local private contractors and then collect a royalty amount on the sale of all such services. This could also be managed for local government by the proposed Development Agency.


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