Financial modelling of municipal services in South African towns

One of the challenges facing South Africa is to provide municipal services to all urban dwellers, both now and in years to come. There are large backlogs in many towns, and existing infrastructure often needs replacing. However, in the current tight fiscal environment the affordability, both nationally and locally, of providing infrastructure with high capital and recurrent costs requires careful consideration. Recognising this, the Development Bank of Southern Africa appointed the Palmer Development Group to adapt and develop financial planning models for the five major services provided by local authorities, namely water, sanitation, electricity, solid waste disposal, and roads and stormwater drainage. The models were used to estimate the capital and recurrent costs of alternative investment programmes for a number of South African towns. This article presents the results of the study. Two scenarios were run for each town, one in which every household was provided with a full level of service and the other in which services were provided at levels more in line with the town's household income distribution profile. It was found that full levels of service would be unqffordable both nationally and locally. To be affordable and sustainable, municipal investment programmes therefore need to be related to the towns’ income profiles.

Notes

Palmer Development Group.