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close this bookFinancing Cities for Sustainable Development (HABITAT - UNDESA, 67 p.)
View the document(introduction...)
View the documentAbbreviations
View the documentForeword
View the document1. Introduction
View the document2. Main Sources of Municipal Revenue
View the document3. Property Tax
View the document4. Income Tax
View the document5. Charging for Urban Services
View the document6. Tax on Provision of Goods and Services (Business Licences and Fees)
View the document7. Income-Generating Enterprises
View the document8. Borrowing
View the document9. Central Government Allocations
View the document10. Summary of Main Findings, Conclusions and Recommendations
View the documentReferences


Living and working conditions within most cities and towns in East Africa have been deteriorating over the last decade or so. This is manifested in the growing numbers of urban residents living in sub-standard housing within informal settlements and slums with little or no basic services. Within most cities and towns, manifestations of this deterioration include excessively pot-holed roads, poor storm drainage, mounting garbage heaps and unreliable electricity and water supplies.

A wide range of factors accounts for this state of affairs. Firstly, the revenue bases of most urban local authorities in the sub-region are inadequate to cater for their rapidly expanding populations. Secondly, existing revenue collection mechanisms are generally ineffective and what little is collected tends, in some cases, to be mismanaged. Thirdly, because the municipalities are generally financially weak, they have to rely on substantial assistance from the central governments, which often undermines their independent decision-making and operational autonomy. Fourthly, physical maintenance of the limited urban infrastructure that is available has been seriously neglected, further exacerbating the problem of access.

The challenge facing governments and urban local authorities today is the reorientation of policies, strategies and instruments of municipal management in order to improve efficiency and social equity in the delivery of services. Meeting this challenge partly entails the institutionalization of an enabling framework that will permit community-based organizations (CBOs), non-governmental organizations (NGOs), individual households and the private sector (both formal and informal) to contribute towards the provision and maintenance of urban services. This also entails strengthening the public sector's capacity to safeguard standards and protect the public from the negative consequences of private provision of infrastructure and services.

In exploring for innovative solutions to the foregoing problems, UNCHS (Habitat), with financial assistance from the Ford Foundation, embarked on a research project on Privatization and Financing of Municipalities in a Decentralized Environment: A Governance Approach to Human Settlements Management. The objective of the project was to provide information and options to policy makers on designing effective institutional and regulatory frameworks for policy reforms that promote good governance through greater devolution of power and responsibilities for local authorities, better mobilization and management of financial resources and building of partnerships with the private and community sectors.

A regional workshop to review the preliminary results of the research project was held at the Lake Naivasha Country Club, Naivasha, Kenya. The Workshop critically discussed the draft report of the project, paying particular attention to the conceptual and contextual legitimacy, as well as the practical relevance, of the project's results. The workshop also came up with some realistic policy recommendations.

This research project responds to and reflects the concerns, objectives and goals of both Agenda 21 and the Habitat Agenda, particularly the second theme of the Habitat II Conference, namely, 'Sustainable Human Settlements Development in an Urbanizing World'.

This publication presents the results of the research on the financing of cities in Eastern Africa, while the results on privatization of urban services are presented in a twin publication to the present one. The results of the Naivasha regional workshop are also presented in a separate volume. It is my hope that the ideas presented in this volume will assist the three East African countries to formulate and implement more effective urban governance policies and strategies so as to enable them to deal with the new realities of an increasingly urbanizing sub-region.

I wish to thank the Ford Foundation, Office for Eastern Africa, for its financial support to the research project. I also wish to thank the national consultants who carried out the research on which this publication is based: Ms. Margaret Oriaro and Mr. Stephen Wainaina (Kenya); Mr. Sylvester Wenkere-Kisembo (Uganda); and Professor Lusugga Kironde (United Republic of Tanzania). Finally, I wish to thank Naison Mutizwa-Mangiza, who synthesized the results of the research and produced this report, and Don Okpala, the overall supervisor of the research project.

Dr. Klaus Topfer
Under Secretary-General,
Acting Executive Director,
UNCHS (Habitat)