One of the notable characteristics of the various support mechanisms for PPP development is that they focus on one service sector (e.g., water and sanitation, or solid waste). No doubt due to the very different characteristics of different sectors, publications and capacity building forums tend to focus on private sector participation in one sector or another.3 Yet this approach is far removed from the reality of how towns are managed. In practice, in any one day or electoral cycle municipalities must address the operation, maintenance and (frequently) the replacement of infrastructure for a range of physical services. They must respond to endemic problems and emergencies and address city-wide economic growth as well as targeted poverty reduction. In so doing, many are constantly relying on the revenue of one service sector to subsidise the shortfall in another or to fund activities in a non-earning sector. This is the reality of municipal management when human and financial resources are limited.
Urban management is a complex and multifaceted endeavour. Typically, it includes the planning, management and often the delivery (including operation and maintenance) of a wide range of services to urban residents, businesses and industry. From the perspective of an urban manager, these functions can be disaggregated into:
• basic services with a large public-health impact (e.g. water supply, sanitation, solid waste removal, drainage, health services);
• city-wide non-basic services required to promote and maintain economic growth and productivity (e.g. electricity, transportation, civic infrastructure, economic development activities);
• poverty reduction activities focused on the poorest groups in the city (education, income generation, micro-credit and savings services);
• other social services needed for social development and promoting equity (emergency services, women's development activities, youth development activities); and
• recreation services (sports facilities, parks and gardens, cultural and entertainment facilities).
With limited resources, municipalities aim to balance all these needs and perform all these functions to keep political, institutional and social forces in check. In the pursuit of efficiency and effective management practices, it is considered good practice for municipalities to 'ringfence' the accounts for each municipal service. This enables financial reporting to show all the costs - including those (such as staff costs or vehicle repair) that are often hidden in normal municipal accounting procedures, informs municipal decision-making and creates a transparent process through which cross-subsidisation takes place. However, isolating water and sanitation services or solid waste into freestanding cost centres or partnerships does have significant implications for the overall management of the city. Given their sheer size within municipal budgets and operations and their capital-intensive nature, the isolation of these services can place much greater strain on other sectors. It can also lead to an unintended prioritisation of these sectors over others (because the private firm has to be paid). More often, municipalities subsidise welfare activities from the water account on an ad hoc basis and the separation of water and sanitation activities into a freestanding partnership entity will require them to adopt more strategic and transparent systems.
In relation to the poor, one of the primary concerns of isolating physical service provision in discrete partnerships is the separation of important physical activities from multisectoral poverty reduction programmes. The lessons of earlier poverty reduction responses draw attention to the importance of integrated approaches (see the detailed discussion in Chapter 5). Yet a hard fact of life is that much of the capital put into poverty reduction programmes is required for construction activities, and this core investment facilitates many of the economic, social and human development activities undertaken in poor areas. In well-considered initiatives, these were carefully programmed in relation to each other to bring about maximum benefit. Yet typically, and even in those instances in which municipalities micro-managed private sector activity, the introduction of private sector participation in service delivery has diminished the municipality's concern for integrating activities.
A primary issue to be addressed in the development of service partnerships is how the proven benefits of integrated urban management can be reconciled with the benefits of separating services for specific partnership initiatives. Municipalities need support to work through a service planning stage, to effectively programme related activities and to take on a central coordinating role - one made all the more difficult because the processes of delivery are many and varied.
Partnerships also require a municipality to play a significantly more considered, strategic role than they had to when they could improvise on their own. Involving other stakeholders and introducing long-term commitments demand more strategic planning, and better understanding of the linkages and implications of each and every service as a part of an integral package. In South Africa, the development of the integrated development planning (IDP) approach (see Boxes 4.3 and 4.4) attempts to create a strategic and participatory planning process within municipalities, one that effectively locates municipal service partnerships and links them to all other inputs and outcomes. The fundamental difference between the IDP and previous planning tools is that it encourages municipal government to integrate its planning, budgeting and monitoring, and create a holistic rather than a piecemeal process. The IDP now ensures, for instance, that engineering departments do not prepare plans for infrastructure in isolation from housing or social development departments. This kind of strategic planning is also reflected in the innovative approaches taken by the Kerala State Government in India under the People's Planning Campaign.
Effective service planning also requires the municipality to engage in effective monitoring, feedback and revision. While all stakeholders engage in the rhetoric of monitoring, most have little experience of it, are unaware of what is required and have not usually engaged in meaningful feedback. Few initiatives provide examples of revision processes that have effectively reoriented activities to ensure optimum targeting and impact. If partnership options are pursued, municipalities can build in capacity building for effective monitoring to ensure that the process is achieving the required focus.
Box 4.3 Integrated Development Planning South Africa | |
Following the national and local democratic elections in South Africa in 1994-95, local government became a primary vehicle for promoting equity in the reconstruction and development of the country. During the apartheid regime, local government in South Africa created and perpetuated separation and inequity, because the principal legislation that instituted spatial separation was applied at the local level. Recent developments in policy and legislation on the role of local government in South Africa are therefore driven not only by the need to bring the government closer to the people, but also by the need to reverse the policy and planning of the past and redefine the nature and objectives of local government. | |
The White Paper on Local Government (WPLG) creates the policy framework for municipal governance to promote local government; it specifies social development and economic growth should be prioritised, as should the promotion of the role of community in the design and delivery of municipal programmes. It also stresses the need for services to be affordable and integrated with other forms of service and housing provision. It explicitly recommends that municipalities look at alternatives for accelerating the delivery of basic services, and cites public-public, public-private and community partnerships as options for consideration. | |
Decisions about the mechanisms and actors that should be involved in service delivery are implemented through an integrated development plan (IDP) and the integral Municipal Infrastructure Investment Plan (MIIP), which sets out how the municipality will achieve service delivery targets. The IDP is the primary tool for local government planning in local, strategic and holistic development interventions, i.e. for municipal councils to instigate participatory planning processes with civil society and private sector stakeholders to articulate their short-, medium- and long-term goals. As such, through the IDP municipalities develop a strategy to achieve their development objectives, including the mobilisation of resources and capacity and the desired approach to service delivery (and partnerships for services). | |
The IDP process establishes the specific development programme, sets a budget to enable the programme to be implemented, monitors and evaluates how well it is implemented, and allows for an ongoing process of change and improvement. Several important activities make up the IDP process: | |
• assessing the current situation in the municipal area; • assessing the needs of the community; • prioritising these needs in order of urgency and importance; • setting goals to meet these needs; • devising strategies to achieve the goals within a set timeframe; • developing and implementing projects and programmes to achieve key objectives; • setting targets so that performance can be measured; • budgeting effectively with limited resources; and • monitoring and reassessing the development programme. | |
The key process requirement in the IDP is participation. In all local government activities, participation is a key aspect of the democratic process and is seen as the key to all aspects of developmental local government - it is the link that ties it together. It is particularly important, especially in public-private partnerships, that municipalities ensure that new arrangements for the delivery of services and the creation of infrastructure do not sacrifice the principles of governance, participation and poverty eradication that are at the heart of our post-apartheid local governance system. | |
The optimal use of funding for infrastructure requires careful long-term planning. Within the IDP, municipalities in South Africa are advised to develop infrastructure investment plans that take account of all sources of funding. An infrastructure investment plan helps to plan for long-term financial sustainability, and to ensure that service levels are affordable. Although the choice about the level of service remains with the municipality concerned, the Consolidated Municipal Infrastructure Programme developed at the national level recommends that levels of service be matched to household income to ensure affordability in the long term. The infrastructure investment plan also assists with prioritising potential projects. It indicates and programmes future infrastructure needs to ensure systematic development in the area. Based on current and projected indicators of need and growth, it aims to synchronise infrastructure and housing delivery. | |
The process envisaged therefore facilitates an integrated approach to municipal management - one that has the potential to bring public-private partnerships under the same umbrella as local economic development. In practice, the incorporation of public-private partnerships has not been developed to any significant extent, but policy presents clear opportunities for coordinating environmental and social interventions and for linking formal, informal, large- and small-scale enterprises in the development of service partnerships. | |
Box 4.4 PSP as Part of a Wider Restructuring Process Johannesburg, South Africa | |
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The metropolitan government of Johannesburg embarked on a comprehensive restructuring process to recover from a dire crisis in the late 1990s. The initiative, known as Igoli 2002, contains many aspects that reflect the key ingredients of partnership with actors outside the municipality. It shows the role of external pressures (the financial crisis), the importance of forward planning, the need to engage key stakeholders, and the range of options that can be utilised to support effective service delivery. Private sector partnerships form just one aspect of this approach. Most importantly, the authority embarked upon a process of integrated reform through which a system of change could be established, and links made between key functions. | |
The city's financial predicament made headlines in 1997-98. Following rent and service charge boycotts against apartheid in the 80s and early 90s, a culture of non-payment developed in Johannesburg, and in the context of continued urban poverty non- payment for rates and services is a problem. This led to cash shortfalls and the need to delay and negotiate extended payment terms to major suppliers of services like electricity and water. Funds and reserves were increasingly used to finance debt, leading to a reliance on loans and cash generated by operating activities to sustain the municipality. Small but persistent overspending on the budget further drained its cash liquidity. | |
Attempts to relieve the pressure through foreign borrowing were blocked by the national Department of Finance in 1998. Financing was then obtained from the Development Bank of Southern Africa to sustain operating cash flows and to prevent defaults on loans from major creditors. The bank demanded that corrective action be taken to ensure that future financial distress would be avoided. A committee of councillors and external consultants took action to control expenditure and instil budgetary discipline. | |
Longer-term planning was clearly necessary, and the different municipalities within the metropolitan area were involved in drafting Igoli 2002, which was finalised in November 1998. The plan represents a fundamental departure from the conventional, bureaucratic, municipal management paradigm in Johannesburg, aiming to build delivery partnerships with the private sector, reduce the functional scope of the metropolitan area's activities and draw a clear distinction between service delivery and regulatory functions across the administration. | |
The key elements of the plan include: | |
• creating public utilities for water, sanitation and electricity. The utilities will raise capital funding, introduce new management practices and improve performance and efficiencies. With the council as the shareholder and regulator, the utilities will focus on service delivery, and will be able to make contracts with private service providers. • Creating agencies to manage roads and stormwater, drainage, parks and cemeteries, and introducing business principles and efficient management practices into the management of these services. The agencies operate as contractors, which allows for greater accountability and the introduction of performance incentives. Legally they are able to engage in partnerships with private and non-governmental service agencies. • Privatising a small number of assets not considered to be core business, including stadiums, Metro Gas and the Rand Airport. • Corporatising certain functions such as the zoo, the civic theatre, the bus service and council-owned farms. These facilities thus remain under council control, but are managed as separate corporate agencies. • The core administration of the council is split into a central administration, which performs the 'client' function, and a regional administration, which performs the 'contractor' function. It thus performs an important regulatory role. • A labour relations plan and a change management programme has been developed, to form the basis for introducing changes and negotiating with stakeholders, especially within the municipal structure. | |
The creation of the utilities has taken major effort involving a range of legal and institutional challenges. By 2000-01, the cash position of Johannesburg had improved substantially and it was anticipating a budget surplus. | |
Sources: Chris Heymans; DBSA, 2000 | |