Decentralization would boost development, leaders told in Addis

U.N. Secretary-General Ban Ki-moon addresses the Financing for Development conference in Addis Ababa, 13 July. (United Nations)

ADDIS ABABA — With an eye to the major United Nations summit in September that will symbolically see the end of the Millennium Development Goals (MDGs), to be replaced for the next 15 years by the Sustainable Development Goals (SDGs), advocates at a major U. N. summit are warning that only empowered local governments will be able to meet the world’s far-reaching new development priorities.

The discussion comes as global leaders are gathered in Addis Ababa for a landmark conference on how to finance the SDGs and other development strategies. The Financing for Development conference, known as FFD3, is meeting in the Ethiopian capital 13-16 July.

A declaration organized by the Global Taskforce of Local and Regional Governments for the Post-2015 Development Agenda, an umbrella group, criticizes the FFD process for not having created a formal engagement mechanism with local authorities. The Global Taskforce delivered also a formal statement during a civil society event ahead of the negotiations.

“The lack of a specific track of consultation and engagement for local and regional governments indicates a failure to acknowledge an adequate role for this group,” the declaration states. “[T]he gaps in access to basic services and infrastructures, as well as slum expansion, have increased in many urban areas and territories over the last decade, particularly in the least developed countries, weakening the achievement of the MDGs.”

The Global Taskforce points particularly to part of “The Future We Want”, the outcome document from the Rio+20 conference, the 2012 summit that prompted the creation of the SDGs. Paragraph 42 specially reaffirms “the key role of all levels of government and legislative bodies in promoting sustainable development”. It also acknowledges “efforts and progress made at the local and subnational levels, and recognize the important role that such authorities and communities can play in implementing sustainable development”.

However the taskforce does commend the FFD conference for its explicit recognition of the need to support local governments in their efforts to mobilize revenues, calling such elements “significant progress”.

These references are included particularly in Paragraph 34 of the Addis Ababa negotiating text. That section acknowledges that “expenditures and investments in sustainable development are being devolved to the subnational level, which often lacks adequate technical and technological capacity, financing and support,” and therefore commits global leaders to “scaling up international cooperation to strengthen capacities of municipalities and other local authorities.”

The text also pledges national governments to “support cities and local authorities of developing countries, particularly in least developed countries and small island developing States, in implementing resilient and environmentally sound infrastructure, including energy, transport, water and sanitation, and sustainable and resilient buildings using local materials.”

The powers that will sign the Addis accord also promise to “strive to support local governments in their efforts to mobilize revenues as appropriate.”

Dakar model?

Such potentially watershed pledges notwithstanding, experts gathered at the FFD proceedings in Addis suggest that progress on devolution has actually gone backward in recent years in certain regions. Especially in West Asia and Africa, many countries have been slow or even regressed with regard to giving autonomy to local government and cities. (Opposite trends, meanwhile, have been seen in many parts of Europe and Latin America.)

Still, one African city has been highlighted here as a positive example. Dakar, the coastal capital city of Senegal, has required its 19 districts to have mayors, effectively creating the concept of cities within the city.

Khady Dia Sarr, the director of the Dakar Municipal Programme at the mayor’s office, says the objective is to tap in to the capital city’s markets. In 2010, the city launched a process, supported by a USD 5 million grant from the Bill and Melinda Gates Foundation, to empower local districts. The initiative officially began in January 2012 and became fully operational earlier this year.

“Dakar was ahead on this programme in planning tools and mechanisms, and today [we’re] having a say in the SDGs,” said Sarr. Since 2009, she noted, strong leadership in the city has been using other innovative tools to finance infrastructure development. This attempt, she cautioned, first had to overcome significant scepticism in order to show that cities can develop without a centralized approach.

The empowerment of Dakar and its districts has meant that the city has been able to borrow financing without resorting directly to the central government. Instead, the capital itself has been able to borrow more than USD 25 million from bilateral and multilateral development institutions.

“Dakar has control over our finances. The decentralization form we have in Senegal gives us the right to be independent financially,” said Sarr. While the city is still fiscally dependent on the central government, she said, Dakar is continuing to experiment with alternative financial strategies to pay for its own development.

Further, Sarr says the decentralization of the city’s power structures has not created new imbalances between the richer and poorer areas of Dakar. She putts this down to an inherent motivation for cooperation between the different district “mayors”.

“Inter-mayoral cooperation ensures investment is throughout the areas, be it poorer or richer,” Sarr said. “A result of [this] cooperation is a combination of politics and activity to fill out the gaps throughout the city.”

While Dakar’s financial independence is pioneering in many ways for African cities, advocates in Addis are arguing that more such local-level empowerment will be critical for attaining new development aims. Greater devolution brings more accountability of elected officials by their citizens, they say, while also alleviating corruption.

None of this can happen, however, without both political will and a clear assignment of functions between local-level authorities and central governments. Whether this week’s FFD negotiations will be able to put in place the beginnings of such changes remains to be seen.

Devolution plus finance

Joan Clos, the executive director of UN-Habitat and the head of next year’s Habitat III conference on cities, agrees that financial autonomy is an essential prerequisite if cities are to reach their development potential. In a recent blog post, he wrote that municipal finance is “critical for the implementation of planned growth strategies”.

In particular, he said in Addis, in today’s context of looming dangers from climate change, cities need the authority to tap into financial pools such as the Green Climate Fund (GCF). This is the mechanism by which rich countries have pledged to mobilize some USD 100 billion each year for climate adaptation and mitigation initiatives in developing countries.

“Fiscal transfer is one way to deal with the costs of urbanization,” Clos said, “as places that are growing every year will have the autonomy with this to issue revenue from assets, as well as borrowing bonds.”

For instance, Johannesburg, South Africa’s largest city, has a USD 5.2 billion annual budget and a population of at least 4.2 million — and inward migration of some 120,000 each year. The city is also highlighted as one that is innovating financially even while it remains a key partner of the central government.

Geoffrey Makhubo is a member of the Johannesburg mayoral committee and vice president of the FMDV, the Global Fund for Cities Development. He says the city has found ways of bringing services to its people while ensuring a return on its investments through green finance.

“We were the first city to issue a green bond in South Africa and were even approached by several countries in Europe on how” to do so, Makhubo said. As an energy- and water-strapped country, South Africa is currently working on a climate-friendly public-private partnership in the management of water resources for Johannesburg’s ever-increasing population.

“We have to decentralize but at the same time innovate to make the quality of life of our citizens better — not out of choice but out of necessity,” Makhubo said.

While Johannesburg was mentioned as a pioneer in decentralization, at the other end of the spectrum was the vice mayor of the strife-torn Somalia capital, Mogadishu. While Iman Nur said his country is hoping to make use of its long coastline to eventually emulate model cities like Johannesburg, he offered a stark warning on the promise of devolution: “Decentralization without adequate investment [is] a recipe for failure,” he said.

Indeed, many conference participants here in Addis agree that decentralization simply cannot work without adequate financing. Indeed, they expressed concern that the Rio+20 outcome document insufficiently dealt with the fact that some two-thirds of humanity will live in urban areas by the middle of this century.

A new position paper from the Global Taskforce suggests that areas dedicated to urban areas must triple over the next two decades in order to fill this gap. The paper also says that sustainable municipal finance can become a reality only following the creation of an integrated financing system that creates incentives for stronger local governments to borrow and access financial markets. In particular, such a system will need to enable weaker local governments to improve their capacities and begin to borrow financing.

In return, national governments must adopt fiscal decentralization frameworks to empower and support local authorities to ensure they meet their obligations in local development, the paper states. In other words investment and decentralization are complementary and interdependent — the failure of the one directly impacting on the other.

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Elias Gebreselassie

Elias Gebreselassie is an Addis Ababa-based journalist reporting on economic and social issues.