1. 1 MUNICIPAL SIZE AND PERFOMANCE IMFO CONFERENCE Capetown, 12-13 September 2011 Landiwe Mahlangu Chairperson: Municipal Demarcation Board

2. Outline for the presentation Determinants of size and performance Arguments for large and small municipalities Size and local democracy Economies of scale Municipal performance Impact on boundary changes on perfomance Critical policy questions Towards optimal municipal size ? 2

3. Role and Mandate of MDB Established in 1999 as independent constitutional body. Juristic Person that can sue and be sued Perform its function without fear,favour or Prejudice Funded by Parliament via a Government Department Mandate and Status Members are selected by an independent Panel Headed by two Judges, and appointed by the President Currently comprise of 10 members of which only the Chairperson is full time, Administration Headed by CEO and staff of 25 Answerable directly to Parliament by way of annual reports and meetings. Members are expected to have knowledge; experience; and qualification in local government generally and in the following discipline; Development economics; Integrated development planning; Municipal finance and administration; GIS ; Transport planning etc. Selection and Accountabilit y

4. Tenure and Members ofMDB Board members have a term of 5 years. The first Board was appointed by the President on 1 Feb 1999, the second one on 1 Feb 2004 and the present one on 20 Feb 2009. The third and current Board comprise of the following members: Tenure Mr. Landiwe Mahlangu (Chairperson) Ms. Nondumiso Gwayi (Deputy Chair) Khosi Tshililo Jeffrey Ramovha Prof. Nico Steytler Me. Wendy Ovens Mr. Ashraf Adam Mr. LD Tsotetsi Me. Lynelle John Me. Grace Castle Member s

5. Key Functions Determination / redetermination Outer Boundaries Delimitation of Inner or Ward Boundaries Technical Adjustment /Alignment Categorisation of Municipalities ( Section 2 Structures Act) Declaration/Withdrawal of declaration of DMA Municipal Boundarie s Annual Assessment of Municipal Capacity to perform functions as laid out in Schedule 4 b and 5 b of Constitution Recommends allocations and adjustment between Cat. B and C Municipalities. Sec 84 and 85 of Structures Act. Capacity Assessme nt Alignment of service delivery boundaries Study to determine the abolishment of cross boundary municipalities Advisory Work and Function

6. Key Milestones Rationalising the total number of municipalities During the period 1999/2000 the Board successfully rationalised the total number of municipalities for 843 to 284. Six metropolitan municipalities, 47 district municipalities and 231 local municipalities were demarcated within a period of some 15 months. Ward delimitation Successful local elections were held in 2000 and 2006 within ward delimited by the Board. For the 2000 elections 3754 wards were delimited, and for the 2006 elections 3895 Capacity assessments Annual capacity assessments by the Board empower the MECs responsible for local government to adjust powers and functions between district and local municipalities to enhance service delivery. District management areas The Board was instrumental in cleaning up local government structures by the withdrawal of all declarations of district management areas over the period 2005 – 2008. Ending the era of cross- boundary municipalities As a result of the disestablishment of cross-boundary municipalities, the number of district municipalities was reduced from 47 to 46 in 2005. Creating more metropolitan municipalitie s Special investigations were conducted in 2008 which led to the re- categorisation of 2 category B municipalities into Category a municipalities. As from the date of the next local elections in 2011 South Africa will have 2 additional metropolitan municipalities namely Mangaung in the Free State and Buffalo City in the Eastern Cape. Creating credible boundaries for traditional areas The Board initiated, in conjunction with the Department of Land Affairs, the Department of Water Affairs and the Department of Provincial and Local Government, a process to create credible TA boundaries. This project is in an advanced stage.

7. Determinants of size Population numbers Geographic size: Land mass Economics Size Number of Councillors 7

8. What do we mean by perfomance Municipalities performance of functions Average backlog of services Gross value added Various composite indexes Audit opin 8

9. What do we mean by Performance The following slides reflect a range of municipal performance indicators used by government Performance on these indicators is compared with the socio-geographic status of a municipality, which is a combination of: – Average backlog for basic services – Gross Value Added (GVA) – Percentage households in urban areas 9

10. 10 Bigger is Better’ – Some of the arguments for Territorial Consolidation Most local government services are characterised to some extent by economies of scale. Larger local governments can internalise the externalities associated with their activities. Larger local governments can provide more services, which in turn may lead to more public interest and participation. Larger local governments provide more space for interest groups, thereby encouraging the development of a pluralist society. Larger local governments can better foster economic growth and development. Ultimately, most citizens are more interested in the cost and quality of services than in idealistic visions of local communities.

11. 11 ‘Small is Beautiful’ – Some of the arguments for Territorial Fragmentation Small local governments engender closer contact between local politicians and residents, fostering social trust. In small local governments citizens have a greater incentive to participate in decision-making, as their vote will weigh more. Small local governments are more homogeneous, making it easier for service provision to respond to local needs and preferences. Small local government is less bureaucratic. Small local governments can achieve economies of scale by working together cooperatively, but without losing their individual identities. Local government is supposed to be about genuinely local communities governing themselves.

12. 12 Size and Local Democracy Local government also has representative and accountability responsibilities Larger local governments run the risk of becoming remote from their constituents The concern about size is the major reason why some countries have not amalgamated their local governments

13. 13 Potential effects of size on performance

14. HOW DID THE BOARD DEAL WITH THE ISSUE OF MUNICIPALITIES SIZE Guiding Principles for Rationalization Geographical contiguity – Nearest – neighbor principles – Geographically coherent Capacity – Minimum critical mass capacity i.t.o. staff, assets, finances – Allowing access to capital market Resource sharing – Fiscal sustainability through pairing ‘weaker’ with stronger areas Manageable size – Category A (Metros) Cornubation-large – Category B (Local Municipalities) 3500 Km² ;20 to 80000 persons – Category C (District Municipalities) 100 000 Persons; 50 -100 km Radius 14

15. 15 RSA Constitution 1996 Category A. Metropolitan Municipalities Category B. Local Municipalities Category C. District Municipalities

16. 16 Metropolitan Municipalities Section 2 of the Municipal Structures Act defines a metropolitan area (a) a conurbation featuring :- (i) areas of high population density: (ii) an intensive movement of people, goods, and services; (iii) extensive development; and (iv) multiple business districts and industrial areas; (b ) a centre of economic activity with a complex and diverse economy; (c) a single area for which integrated development is desirable; and (d) having strong interdependent social and economic linkages between its constituent units.

17. 17 Metropolitan Municipalities (contd) Wider conceptualisation of metropolitan government municipalities -includes cities, suburbs, townships, rural areas and informal settlements 6 Metropolitan Municipalities created

18. 18 District Municipalities Little guidance in legislation MDB suggested 4 principles – Functional linkages showing a coherent social and economic base eg spending patterns, sectors of economic activity – Districts should not be too large-radius of 50-100 km

19. 19 District Municipalities (contd) – For economies of scale it was felt that districts should have a population of at least 100 000 persons – There should be coherence to the economic and social base 46 Districts generally contain 3-7 local municipalities ( Now 44) Extremely large in geographical size

20. 20 Local Municipalities The MDB decided on the following principles based on Sections 24 and 25 of the Demarcation Act Capacity Assessment Objective was to develop a critical mass of municipal capacity (staff, assets, finances)

21. 21 Local Municipalities (contd) Resource Sharing Combine stronger and poorer areas as to achieve a sharing of resources Manageable Size Indicators of 3500 square kilometres and 80 000 people were suggested as norm Functionality Alignment of transport routes and physical features

22. 22 Local Municipalities (contd) The MDB used minimum area sizes of 3500 square kilometres as guidelines Created 232 (now 231) local municipalities Included poor blacks from rural areas from rural areas and bantustans in towns Created large Local Governments- average size is larger than Europe, North America, Asia-Pacific, Latin America and Africa

23. 23 Performance of Municipalities Post- 2000 COGTA-2009 report. Much of local government in stress-includes huge service delivery challenges, poor community and accountability relationships with communities, service delivery protests, insufficient municipal capacity due to a lack of scarce skills

24. 24 Impact of Boundaries on Performance To what extent have wide boundaries played a role in these factors? MDB had emphasis on Economies of scale rather than local democracy Metropolitan Government Report for Presidency (Cameron, 2010) found that metro government boundaries made for coordinated management and planning

25. 25 Impact of Boundaries on Performance District Municipalities- Based on Economies of Scale but in practice provide limited services Question of span of control. Some districts contain 2-3 local municipalities while others contain 6-7 In 2011 MDB decided that district must have minimum of 3 local munics

26. 26 Impact of Boundaries on Performance Local Municipalities boundaries Problems of B3 and B4 municipalities Twinning of richer and poorer municipalities has not always worked Size of Municipalities Too big to service hinterlands?

27. Grant dependency 27 Economic size rather than population size affects grant dependency

28. Households to Staff Ratio 28 Small and big population municipalities have similar staffing profiles, except most starkly for B4 municipalities who have a significantly higher number of households per staff member

29. Expenditure per Household 29 Expenditure per household aligns to economic strength rather than size Many small municipalities spending more per household than the curve suggests

30. Audit Opinion 2009/10 30 There appears to be little correlation between type of municipality and its audit outcome Aside from As which are a small sample, B2s record the highest proportion of unqualified audits (<70%), followed by B4s.

31. Audit opinions 2009/10 31 Similarly there is little correlation with socio-economic strength and population size in terms of audit outcomes.

32. Public Participation 32 Democratic Outcomes is an index of perceived success of the ward participatory system from a survey of almost 8000 ward committee members This picture shows that small municipalities i.e. those with fewer wards are likely to have a more effective ward participatory system

33. 33 CRITICAL ISSUES Metropolitan Municipalities Need to create A1 and A2 metropolitan authorities? Limited district functions in B1s Secondary Cities should become A2s?

34. 34 CRITICAL ISSUES Local Municipalities Should B3s and B4s become municipalities with basic functions and powers? Should rural areas be expunged and become separate rural municipalities? Should ‘wall to wall’ local municipalities be taken as given? Should non-viable local municipalities be amalgamated? Should number of municipalities be increased/decreased/maintained?

35. 35 CRITICAL ISSUES District Municipalities Future of District Municipalities being investigated May be abolished Mix and match system? Could help with problem of non-viable local municipalities

36. TOWARDS OPTIMAL SIZE OF MUNICIPALITIES “The relationship between population and performance is a complex Mosaic of insignificant, positive, negative and non- linear effects. This means that size effect as a general rule cannot be ignored in the decision to re-organize local government” Communities and Local Government, Research Report on population size and Authority performance. “Looking for an optimal size of local jurisdictions, resembles the search for the “Philosophers Stone” and leads to different results. There is correlation between size and performance is mixed. There is relationship between economic size and performance There will always a trade-off between “democratic deficit” and “functional effectiveness” 36

37. CONCLUSION 37 Size may be a necessary, but not sufficient condition for effectiveness. South Africa has large municipalities, asymmetric and differentiated approach may be needed Most non performing municipality happen to be those that are relatively small and from former Bantustan. Inter-municipal collaboration will need to intensified to compensate for size and scale effects. Boundary is merely an enabler for the municipality

38. 38 CONCLUSION Thank You Questions