Can commercialisation address consumer debt in local government? A case study of South African metropolitan municipalities

ABSTRACT

Consumer debt continues to challenge local government financial sustainability. There is a debate in the literature on whether developing countries should consider commercialising local service delivery. Using data from South African metropolitan municipalities, this study examines the impact of commercialising service delivery on consumer debt. Fixed effects modelling is adopted, and results show that commercialising sanitation increased consumer debt by 22.5 per cent, commercialising solid waste collection reduced consumer debt by 11.9 per cent, while commercialising electricity had no significant impact on consumer debt. These results imply that policymakers should consider the type and nature of public service when deciding its commercialisation.

RÉSUMÉ

La dette des consommateurs reste un défi pour la viabilité financière des gouvernements locaux. Il existe dans la littérature sur le sujet un débat quant aux décisions à prendre par les pays en développement vis-à-vis d’une commercialisation de la prestation locale des services. Dans cet article, nous utilisons des données venant des municipalités métropolitaines Sud-africaines afin d’examiner l’impact de la commercialisation de la prestation des services sur la dette des consommateurs. Nous y présentons un modèle à effets fixes, dont les résultats démontrent que la commercialisation des services sanitaires a augmenté la dette des consommateurs de 22.5%, que la commercialisation de la collecte des déchets solides l’a réduite de 11.9%, et que la commercialisation de l’électricité n’a pas eu d’impact majeur sur elle. Ces résultats suggèrent que les décideurs politiques devraient considérer le type et la nature des services publics lorsqu’ils prennent des décisions quant à leur commercialisation.

KEYWORDS:

• Commercialisation
• developing countries
• local government debt
• municipal consumer debt
• municipalisation

Data availability statement

The authors undertake to provide the data used in this study if requested to do so.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 As of 27 March 2022, US$1 = R14.58.

2 South African municipalities are categorised into metropolitan (A), district (C) and local (B) municipalities. Detailed discussions on these municipal categories are given in the literature (Murwirapachena et al. 2019).

3 The National Treasury data is available at http://mfma.treasury.gov.za/Media_Releases/s71/Pages/default.aspx, while the Statistics South Africa data is available at http://www.statssa.gov.za/?page_id=1859.

4 This was done using the tesparm i.year STATA command.

Additional information

Notes on contributors

Genius Murwirapachena

Genius Murwirapachena received a PhD in Economics from the Nelson Mandela University (South Africa). He is currently a Senior Lecturer in Economics at the Durban University of Technology, ML Sultan campus. His research interests are in the areas of public service delivery, environmental economics, and efficiency analysis. His recent publications include papers in Development Southern Africa, the Environmental Economics and Policy Studies, the Water Policy, and the Sustainable Water Resources Management journals.

Martin M. Kabange

Martin M. Kabange received a PhD in Economics from the University of KwaZulu-Natal (South Africa). He is currently a Lecturer in Economics at the Durban University of Technology, Riverside campus. His research interests are in the areas of public service delivery, monitoring and evaluation, and econometric modelling. His recent publications include papers in Development Southern Africa, and the International Journal of Entrepreneurship and Business Development.