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MUNICIPAL SIZE AND PERFOMANCE

IMFO CONFERENCE

Capetown, 12-13 September 2011

Landiwe Mahlangu Chairperson: Municipal Demarcation Board

Outline for the presentation

Determinants of size and performance

Arguments for large and small municipalities

Size and local democracy

Economies of scale

Municipal performance

Impact on boundary changes on perfomance

Critical policy questions

Towards optimal municipal size ?2

Role and Mandate of MDB

Tenure and Members ofMDB

Key Functions

Key Milestones

Determinants of size

Population numbers Geographic size: Land mass Economics Size Number of Councillors

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What do we mean by perfomance

Municipalities performance of functions Average backlog of services Gross value added Various composite indexes Audit opin

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What do we mean by Performance

The following slides reflect a range of municipal performance indicators used by government

Performance on these indicators is compared with the socio-geographic status of a municipality, which is a combination of: – Average backlog for basic services– Gross Value Added (GVA)– Percentage households in urban areas

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Bigger is Better’ – Some of the arguments for Territorial Consolidation

Most local government services are characterised to some extent by economies of scale.

Larger local governments can internalise the externalities associated with their activities.

Larger local governments can provide more services, which in turn may lead to more public interest and participation.

Larger local governments provide more space for interest groups, thereby encouraging the development of a pluralist society.

Larger local governments can better foster economic growth and development.

Ultimately, most citizens are more interested in the cost and quality of services than in idealistic visions of local communities.

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‘Small is Beautiful’ – Some of the arguments for Territorial Fragmentation

Small local governments engender closer contact between local politicians and residents, fostering social trust.

In small local governments citizens have a greater incentive to participate in decision-making, as their vote will weigh more.

Small local governments are more homogeneous, making it easier for service provision to respond to local needs and preferences.

Small local government is less bureaucratic.

Small local governments can achieve economies of scale by working together cooperatively, but without losing their individual identities.

Local government is supposed to be about genuinely local communities governing themselves.

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Size and Local Democracy

Size and Local Democracy Local government also has representative

and accountability responsibilities Larger local governments run the risk of

becoming remote from their constituents The concern about size is the major reason

why some countries have not amalgamated their local governments

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Potential effects of size on performance

HOW DID THE BOARD DEAL WITH THE ISSUE OF MUNICIPALITIES SIZE

Guiding Principles for Rationalization Geographical contiguity

– Nearest – neighbor principles– Geographically coherent

Capacity– Minimum critical mass capacity i.t.o. staff, assets, finances

– Allowing access to capital market Resource sharing– Fiscal sustainability through pairing ‘weaker’ with stronger areas

Manageable size– Category A (Metros) Cornubation-large– Category B (Local Municipalities) 3500 Km² ;20 to 80000 persons– Category C (District Municipalities) 100 000 Persons; 50 -100 km

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RSA Constitution 1996

Category A. Metropolitan Municipalities

Category B. Local Municipalities

Category C. District Municipalities

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Metropolitan Municipalities

Section 2 of the Municipal Structures Act defines a metropolitan area(a) a conurbation featuring :- (i) areas of high population density: (ii) an intensive movement of people, goods, and services; (iii) extensive development; and (iv) multiple business districts and industrial areas;(b ) a centre of economic activity with a complex and diverse

economy;(c) a single area for which integrated development is desirable;

and(d) having strong interdependent social and economic linkages

between its constituent units.

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Metropolitan Municipalities (contd)

Wider conceptualisation of metropolitan government municipalities -includes cities, suburbs, townships, rural areas and informal settlements

6 Metropolitan Municipalities created

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District Municipalities

Little guidance in legislation MDB suggested 4 principles

– Functional linkages showing a coherent social and economic base eg spending patterns, sectors of economic activity

– Districts should not be too large-radius of 50-100 km

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District Municipalities (contd)

– For economies of scale it was felt that districts should have a population of at least 100 000 persons

– There should be coherence to the economic and social base

46 Districts generally contain 3-7 local municipalities ( Now 44)

Extremely large in geographical size

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Local Municipalities

The MDB decided on the following principles based on Sections 24 and 25 of the Demarcation Act

Capacity Assessment

Objective was to develop a critical mass of municipal capacity (staff, assets, finances)

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Local Municipalities (contd)

Resource Sharing

Combine stronger and poorer areas as to achieve a sharing of resources

Manageable Size

Indicators of 3500 square kilometres and

80 000 people were suggested as norm Functionality

Alignment of transport routes and physical features

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Local Municipalities (contd)

The MDB used minimum area sizes of 3500 square kilometres as guidelines

Created 232 (now 231) local municipalities Included poor blacks from rural areas from

rural areas and bantustans in towns Created large Local Governments- average

size is larger than Europe, North America, Asia-Pacific, Latin America and Africa

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Performance of Municipalities Post-2000

COGTA-2009 report. Much of local government in stress-includes huge service delivery challenges, poor community and accountability relationships with communities, service delivery protests, insufficient municipal capacity due to a lack of scarce skills

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Impact of Boundaries on Performance

To what extent have wide boundaries played a role in these factors?

MDB had emphasis on Economies of scale rather than local democracy

Metropolitan Government Report for Presidency (Cameron, 2010) found that metro government boundaries made for coordinated management and planning

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Impact of Boundaries on Performance

District Municipalities- Based on Economies of Scale but in practice

provide limited services Question of span of control. Some districts

contain 2-3 local municipalities while others contain 6-7

In 2011 MDB decided that district must have minimum of 3 local munics

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Impact of Boundaries on Performance

Local Municipalities boundaries Problems of B3 and B4 municipalities Twinning of richer and poorer municipalities

has not always worked Size of Municipalities Too big to service

hinterlands?

Grant dependency

27 Economic size rather than population size affects grant dependency

Households to Staff Ratio

28Small and big population municipalities have similar staffing profiles , except most starkly for B4 municipalities who have a significantly higher number of households per staff member

Expenditure per Household

29Expenditure per household aligns to economic strength rather than sizeMany small municipalities spending more per household than the curve suggests

Audit Opinion 2009/10

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There appears to be little correlation between type of municipality and its audit outcomeAside from As which are a small sample, B2s record the highest proportion of unqualified audits (<70%), followed by B4s.

Audit opinions 2009/10

31Similarly there is little correlation with socio-economic strength and population size in terms of audit outcomes.

Public Participation

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Democratic Outcomes is an index of perceived success of the ward participatory system from a survey of almost 8000 ward committee membersThis picture shows that small municipalities i.e. those with fewer wards are likely to have a more effective ward participatory system

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CRITICAL ISSUES

Metropolitan Municipalities Need to create A1 and A2 metropolitan

authorities? Limited district functions in B1s Secondary Cities should become A2s?

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CRITICAL ISSUES

Local Municipalities Should B3s and B4s become municipalities with

basic functions and powers? Should rural areas be expunged and become

separate rural municipalities? Should ‘wall to wall’ local municipalities be taken as

given? Should non-viable local municipalities be

amalgamated? Should number of municipalities be

increased/decreased/maintained?

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CRITICAL ISSUES

District Municipalities Future of District Municipalities being

investigated May be abolished Mix and match system? Could help with problem of non-viable local

municipalities

TOWARDS OPTIMAL SIZE OF MUNICIPALITIES

“The relationship between population and performance is a complex Mosaic of insignificant, positive, negative and non-linear effects. This means that size effect as a general rule cannot be ignored in the decision to re-organize local government” Communities and Local Government, Research Report on population size and Authority performance.

“Looking for an optimal size of local jurisdictions, resembles the search for the “Philosophers Stone” and leads to different results.

There is correlation between size and performance is mixed. There is relationship between economic size and performance

There will always a trade-off between “democratic deficit” and “functional effectiveness”36

CONCLUSION

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• Size may be a necessary, but not sufficient condition for effectiveness.

• South Africa has large municipalities, asymmetric and differentiated approach may be needed

• Most non performing municipality happen to be those that are relatively small and from former Bantustan.

• Inter-municipal collaboration will need to intensified to compensate for size and scale effects.

• Boundary is merely an enabler for the municipality

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CONCLUSION

Thank You Questions