Municipal Contracts. Catherine Farvacque-Vitkovic The World Bank - AFTU2
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1 Municipal Contracts Catherine Farvacque-Vitkovic The World Bank - AFTU2 1
2 Urban Challenges Facing Africa Growing urbanization and subsequent increasing demand on services and infrastructure: in West Africa alone, 63 percent of the population will be city dwellers in 2020 (270 million out of 430 million). Within ten years, the urban population of West Africa will have increased by 43 million. The traditional image of an essentially rural Africa is increasingly out of touch with reality. Emergence of local governments: The wave of decentralization is upon most African countries and the World Bank has supported this process through a number of projects/programs aiming at addressing the priority needs of local beneficiaries. However, the main challenge ahead is to sustain improvement of city governance and management, which are plagued by both poor financial situation and weak technical management capabilities. 2
3 Urban Challenges Facing Africa (cont d) Reconcile the dual challenge of economic growth of cities and poverty reduction: A major challenge is to make cities function better and create an enabling environment for trade and economic activities. Investments in primary infrastructure are still a necessity. Yet, at the same time, targeted poverty programs through neighborhood upgrading and income generation activities are needed. 3
4 What Progress Have We Made? 1. A lot of progress has been made on the programming of municipal investments; on helping municipalities to select and provide priority services and infrastructure; focusing on pertinent choice of what should be financed, where it should take place, and on integrating economic activities in municipal programs. 2. Tools and instruments: - City Development strategies (CDS) - Municipal Contracts - Adressage 3. Provide windows of financing and channeling funds to LGs. However, investments per capita are still low and financing gaps are huge. Africa would need investment rates on the order of 30% of GDP. 4
5 An Overview of Experiences 13 countries: Mali, Mauritania, Niger, Senegal, Guinea, Chad, Cote d Ivoire, Cameroon, Madagascar, Rwanda and more recently Benin, Gabon and Burkina Faso. About 160 municipalities have signed 1 or more municipal contracts in the last 10 years. About 20 million people have been affected. The volume of municipal contracts have totaled US$770 million (90% physical investments and 10% adjustment measures). 5
6 Municipal Contracts in Sub-Saharan Africa No. of Cities Affected Population Total MC Average MC $ / inhabit. Benin NA NA NA NA NA Burkina Faso 6 1,959, , , Cameroon 10 5,445, , , Cote d'ivoire 21 1,039, , , Guinea 6 468, , Madagascar NA NA NA NA NA Mali 9 2,264, , , Mauritania , , , Niger 9 1,218, Rwanda 6 913, , , Senegal 67 4,705, , Total ,991, , ,
7 Municipal contract The process Urban Audit Financial and organizational audit Municipal Contract Priority Investment Program (PIP) Maintenance Program Municipal Adjustment Program (MAP) 7
8 A Highly Participatory Process: Illustration - Senegal Urban Development and Decentralization Program Population Town Council ADM MOD (AGETIP) Consultant Predetermination of amount of MC Private operators Selection of Local Consultants Urban Audit Financial and Organizational Audit Needs and Priorities -Institutional bottlenecks -Budgetary constraints - -Size of investments potential 1 Investment Program 2 Maintenance Program 3 Municipal Adjustment Program Municipal Contract Delegated Contract Mgmt. Execution 8
9 URBAN AUDIT Objective: Get baseline information on existing level of infrastructure and services, patterns of urbanization, pockets of poverty, community group representation. Urban Audit (municipal level): Draws a diagnosis of the city s needs in terms of infrastructure and services, identifies and quantifies gaps, and defines a coherent set of priority sub-projects that fits the demand as expressed at the local level, the value of which corresponds to the budget envelop determined by the Financial Audit: PIP and PEP. 9
10 FINANCIAL AND ORGANIZATIONAL AUDIT OBJECTIVE: To assess the city s financial health and its management structure and to identify specific actions to improve mobilization of local resources and management capacity. Financial Audit (municipal level): It reviews municipal budgets (revenues and expenditures) as well as the existing organization and structure of the municipal administration. It determines the city s financial capacity, and therefore, the value of investments to which it can aspire as well as the adjustment measures the city is willing to take to improve its management and finances: MAP. 10
11 MUNICIPAL CONTRACTS Objective: To reach a consensual and contractual agreement on a 3-year program. The results of the audits (Priority Investment programs, Maintenance programs and Municipal Adjustment programs) are confined in a Municipal Contract, a binding agreement between the municipality, the central government, the funding agency and the executing agency. It provides a clear and well-defined program of (a) new investments; (b) maintenance activities; and (c) adjustment measures. 11
12 The Urban Audit 12
13 Maps Report Tables 13
14 14
15 15
16 Inventory and Scoring of Municipal Infrastructure and Service (tool developed by G8) Population Land Occupancy Access to facilities Access to Infrastructure 16
17 17
18 The Financial and Organizational Audit 18
19 19
20 20
21 21
22 Basic data for sizing the priority Investment Program Sizing the priority Investment Program 22
23 The Municipal Contract 23
24 RESULTS OF AUDITS: The Case of Senegal UDDP 2% 1% 8% 23% 43% Infrastructures E scolaires et sanitaires E administratifs E socio-collectifs E marchands Projets environnementaux Patrimoine historique 11% 12% PAC 1 et 2 PAC 3 TOTAL Type d'équipements Dollars % Dollars % Dollars % Infrastructures 20,494, ,108, ,603, E scolaires et sanitaires 6,692, ,852, ,544, E administratifs 4,687, ,938, ,626, E socio-collectifs 4,692, , ,484, E marchands 14,985, , ,946, Projets environnementaux 1,679, ,679, Patrimoine historique 753, , ,986, ,653, ,639,
25 THE RESULTS: The Case of Senegal All 67 municipalities have signed a MC representing a volume of US$90 million (FCFA 46 billion) 421 investment projects were carried out under the MC including city halls, markets, bus stations, schools, healthcare centers, roads, drainage, street lighting, sanitation, and environmental projects. The range of sub-projects has been as varied as drainage in Tambacounda, integrated land development in Ngor, to the rehabilitation of historic sites in Goree. Percentage of current municipal revenues for maintenance programs (PEP) has ranged between 3 to 9% of total budgets. Municipal savings have been improved by 12% over the life of the project. Municipal current revenues have increased by 22% from FCFA 20 billion in 1997 to FCFA 32 billion in Street addressing has been implemented in 15 major municipalities. 25
26 THE RESULTS: The Case of Senegal A municipal financial data guidebook (guide des ratios financiers) is being produced on a regular basis and distributed to all local governments and relevant institutions. A manual on the preparation of municipal budgets has been produced and widely used municipal agents have been trained on technical and financial matters. Reform has been passed on the simplification of local taxation. Work is underway on the reform of inter-governmental transfers (FECL). 26
27 SENEGAL: COSTS OF AUDITS (FCFA) MUNICIPAL CONTRACTS POPULATION DISTANCE FROM DAKAR COST OF AUDITS COST PER INHABITANT AVERAGE COST 500,000 DAKAR 823,986 76,100, ,100, à PIKINE 494, ,850,000 GUEDIAWAYE 473, ,393,229 TRIES 233, ,000,000 KAOLACK 207, ,950,000 TOTAL 2,232, ,193, ,298, à ZIGUINCHOR 178, ,700,000 RUFISQUE 142, ,725,000 ST LOUIS 138, ,625,000 MBOUR ,200,420 TOTAL 579, ,250, ,812, et DIOURBEL 98, LOUGA 72, TAM BACOUNDA 58, ,600,000 RICHARD TOLL 55, ,766,000 MBACKE 54, ,333,333 KOLDA , TOTAL 389,418 61,824, ,456, et ,0 0 0 Moins de ,
28 SOME LESSONS Municipal contracts have been largely accepted and internalized by all parties involved; (even municipal adjustment programs) Clear rules of the game, formatted audits and precise contractual agreements are essential and should be applied and monitored. These, when well designed and properly monitored, greatly improve accountability and results on the ground. Municipal contracts have taken a life of their own, beyond the numerous changes in elected officials. The articulation, complementarity and leverage between investments (PIP) and adjustment (MAP) is an essential ingredient. Counterpart funding at the local level has been accepted as fair, and many municipalities have demonstrated improvements in local resource mobilization very few municipalities are experiencing arrears (due to monthly installments and right sizing of the financial capacity of LGs). 28
29 The information and knowledge base at the municipal level has been significantly strengthened. Although the screening process of sub-projects included in the PIP is rigorous, site availability has proved in a few cases to be a problem mechanisms are being refined. Requirements on maintenance will be strengthened and more demanding in the next generation of municipal contracts. 29
30 Perspectives for the Future Strategic vision of the city and metropolitan issues More attention should be paid to the urban fabric and in the case of metropolitan areas, to infrastructure which have an inter-municipality impact rather than a neighborhood impact complementarity with CDs Dakar: moving to a contrat d agglomeration (PRECOL) Harmonization of financing windows The issue here is to prevent as much as possible having several windows of financing with competing or conflicting rules of the game. It is not feasible to have a program such as the Senegal UDDP involving constraints" and adjustments and in parallel, to also have free money with no strings attached. The objective of MC is to create a common platform or program accessible to C.G., L.G. and other donors. Economic development The urban audit can gain from refining the section on economic activities and improving the diagnosis/assessment of the economic profile of municipalities. The PIP could also open to a wider range of LED-related interventions beyond the traditional interventions on revenue earning facilities (markets, bus stations..) 30
31 To learn more: The future of African Cities Challenges and Priorities for Urban Development (World Bank publication) Decentralization and Municipal Development The Municipal Contract (World Bank publication in progress) An explanation of the context and environment which brought about the need for such contractual agreements. A clear roadmap (methodology) for municipal audits and municipal contracts with a clear explanation of the data collection sequencing and their interpretation A clear statement of do s and don ts Some operational lessons anchored in auditing practices and examples. World Bank project documents: Implementation Completion Report of Senegal UDDP and Guinea Urban 3. Findings Africa Region N
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