Commentary 13th – 18th September, 09

In its Medium Term Spending Reform Priorities, the government seeks to change the way councils are financed and this format is likely to be a source of problems. The Green Paper recently released highlighting the 2010- 2012 Medium Term Expenditure Framework and the 2010 Budget, the government will now fund councils according to their population size and poverty levels.

The section on funding councils reads, ‘In support of the National Decentralization Policy and in order to make the provision of grants to local councils more transparent, equitable and predictable, Government will, with effect from 2010, implement formula-driven grant allocation and disbursement procedures. These formulas will be based on population but weighted by poverty and other district deprivation factors so as to assist poorer councils to deliver basic local services’.

The principle behind this new strategy is good as it seeks to support development and equitable growth levels around the country. Some councils are currently lagging behind in terms of social investments as well as private sector investments. As a result, poverty levels have greatly increased in councils closer to rural areas.

In addition, it is unrealistic and inefficient to allocate same resources to all councils without considering the level of demand on social services arising from the size of the population. For example, places like Kafue with a higher urbanized population demanding a deepened level of social services such as water and sewerage services may need a little more money than another district with a smaller population.

But there will be challenges. The first is that determining the formula for 2010 will pose a serious challenge because councils themselves are under pressure to submit realistic and comprehensive budgets in view of the change in the budget cycle. Just three weeks away from the announcement of the 2010 National Budget, some government departments are still on retreats working on submissions to the Ministry of Finance and National Planning.

Second, the strategy will not be easily accepted by councils that receive fewer resources in view of population or poverty levels. Each council has its own demands and those with smaller populations may still seek for higher funding to enable them embark on projects that will create the right environment for private sector investments.

The actual fear is that allocating huge resources to councils with higher population will unnecessarily lead to migration of people from smaller councils to those already over-populated. In other words, even the formula and method of computation to determine who receives what will create unnecessary suspicion. However, this is just a cautionary note for the government. The principle to change the grant formula is long-overdue but should be treated with fairness and transparency.