Councils seek Govt bail out

 Almost all councils in the country are financially squeezed to generate revenue to improve public service delivery such as in public hospitals to settle utility bills, The Nation has learnt.

The financial woes, which have also seen some councils embroiled in protracted litigations, are worsened by

 Capital Hill’s failure to honour the transfer of five percent of total revenue to the councils as required by the Decentralisation Policy.

The policy instructs central government to transfer five percent of Net National Revenues (NNR) as General Resource Fund (GRF) or Unconditional Grants to councils.

The situation has prompted the Malawi Local Government Association (Malga) to ask Treasury for a financial bailout package in the 2021/22 National Budget, to enable the councils to clear long-standing debts such as utility bills in public hospitals.

Malga consolidates local governments’ voice to influence policy and promote collective action in engaging central government for improved, sustainable and effective operating environment.

All councils prepare budgets each financial year based on their revenue estimates and ceilings from the central government.

In an interview, Malga acting executive director Hadrod Mkandawire observed that transfers made by government do not match with the councils’ expenditure responsibilities as development budgets of the sectors are retained by respective ministries.

He said: “All councils are currently indebted with huge outstanding arrears for utilities, salaries, pay as you earn (Paye) and suppliers.

“Some of the debt, herein referred, date back 10 years or so, thereby raising doubts of the council’s abilities to clear the same using the yearly funding and local revenues which are already constrained…This, therefore, calls for the need for government to intervene as a matter of urgency.”

On failure by Capital Hill

 to transfer the five percent of total revenue to councils as stipulated in the Decentralisation Policy, Mkandawire said such a requirement is never met.

In the 2020/21 National Budget, the approved budget to the councils was K42.7 billion and as at March 31 2021, the councils had utilised K33.4 billion or 78 percent of the allocation.

However, total domestic revenue projected in the budget is K1.44 trillion and our calculation shows that at K42.7 billion allocation to councils in the 2020/21 Budget, it means that central government has only allocated 2.9 percent of total revenue to the councils.

The breakdown of the K42.7 billion total government transfer

 is as follows: K27.4 billion (sector funds), K7.2 billion (Constituency Development Fund), K5.5 billion (District Development Fund- DDF), K2.7 billion (General Resource Fund), K57 million (Infrastructure Development Fund).

In the same budget, councils projected to collect K6.9 billion and as at March 31 2021, they had collected K4.3 billion, representing 62 percent of the targeted amount.

Of the projected K6.9 billion locally generated revenue, K27 million is from central government property rates, K2.4 billion is income from market establishments, K3.4 billion is from fees and service charges, K1.1 billion is from licences and  permits while K159 million is from other property rates. permits while K159 million

Mkandawire also recommended to Minister of Finance Felix Mlusu to ensure devolution of development budget for the various sectors to the councils starting from the 2021/22 National Budget.

He also requested the central government to increase allocation to the DDF and Infrastructure Development Fund (IDF) so that councils can implement projects contained in their District Development Plans and Urban Development Plans.

Said Mkandawire: “Government should increase IDF for the city councils to transform the cities. Further, municipal councils should also be considered under IDF. Further, central government should consider shifting some tax bases and other revenue sources such as toll gates to local governments.”

On one hand, he said Malga also recommends the removal of duty on official vehicles for mayors and deputy mayors of Blantyre, Lilongwe, Mzuzu and Zomba cities so that the councils should afford them.

In addition, Mkandawire said Malga wants the central government to start buying official vehicles for mayors of small urban councils, namely Luchenza, Mangochi and Kasungu as the three councils cannot afford the vehicles due to their revenue base.

“We also recommend that each ward councillor be entitled to a duty free vehicle once during his or her tenure of office. We further recommend that all controlling officers of local governments be entitled to official vehicles with a buy–out scheme at the end of contract of service. We also recommend that central government should create a special chiefs’ administration budget for the councils.”

In a separate interview, Mulanje District Council director of finance Ellen Kayira, who also chairs a network of directors of finance in councils, decried low revenue base for councils as well as high wage bills and arrears for direct employees which she said is negatively affecting the provision of quality service.

She said this has led to the councils to fail to plough 25 percent of the total revenue collected to the community as required.

While complaining about late payment of property rate fees by the central government, Kayira also lamented about bureaucracy in procurement, which she said also hampers efforts in revenue mobilisation by the councils

“Councils are only given difficult sources of revenues without an enabling environment. Most sources that are easy to collect from are left with the central government.

“In addition, the central government should consider absorbing the key direct employees into the mainstream to free up council resources for service delivery as well as remove the tension from council management so that it focuses on service delivery issues,” she said.