Expanding municipal finance key for fostering resilient, inclusive, and sustainable cities in Africa

Naivasha, Kenya 10 December 2024 (ECA) - Expanding municipal finance for cities in Africa is vital for fostering resilient, inclusive, and sustainable cities in Africa, say experts attending an Experts Group Meeting this week to review and validate the Financial Performance Assessment Report of Nairobi City in Naivasha, Kenya.

According to the experts deliberating the Review of Nairobi City's Financial Performance Assessment Report, ensuring municipalities have the financial resources they need is key to tackling issues like rapid population growth, climate change, and economic disparities effectively, and driving local development. The meeting has been organized in collaboration with UN-Habitat, UN Capital Development Fund (UNCDF) and Nairobi City County and is geared towards validating and enriching the financial assessment report of the City of Nairobi.

The review is part of an ongoing project known, in UN parlance as the Development Account, which seeks to accompany six selected cities in cities in Africa - Addis Ababa, Dar Es Salam, Kigali, Lusaka, Nairobi, and Yaoundé - and assess their fiscal space limitations due increased to challenges of meeting development needs, including infrastructure and housing, healthcare and education in the post-Covid era. These reviews help to bring to the fore, to new and innovative solutions for the fiscal space challenge and the complexities facing African cities.

In his opening remarks, James Muchiri, Deputy Governor -Nairobi City County said, "To address issues like rapid population growth, climate change, and economic disparities that cities are experiencing, there is a need for partnerships and sustainable resource management."

He emphasized the need to find alternative financing methods that are sustainable and can support long-term services like the school feeding program for the 350,000 learners being implemented by the Nairobi City Council. He also highlighted the central role of local government in delivering services to citizens and the need for expanded municipal finances and emphasized the importance of knowledge sharing among cities to improve urban management.

Mr. Muchiri acknowledged the contributions of various stakeholders including implementing partners, member states, government institutions, think tanks, academia and others in achieving a successful urban development process.

"Cities need to focus on ensuring improved transport infrastructure such as bus transit systems to alleviate congestion and promote reliable public transport," he said. "The importance of public participation, efficient revenue collection and transparent financial management to ensure accountability and sustainability," he added.

Atkeyelsh Persson, Chief of Urbanization and Development at the ECA stressed the need for expanded and diversified municipal finance as urban populations continue to rise.

Ms. Persson explained that the fiscal autonomy of local governments is key in local financing, "particularly in a post-COVID-19 and global recession environment, with shifts to the financial landscape."

"It is important to link research and practice for disseminating lessons to counties and other institutions," she added.

She also highlighted the challenges faced by local governments in providing services due to limited fiscal space, the impact of Covid-19 pandemic and the high informality in the economy.

Jenifer Wakhungu, Deputy Director, Local Transformative Finance, UNCDF highlighted the need to look into untapped resources in institutions that could be used to finance economic infrastructure, "particularly in the context of the rapidly urbanizing cities facing gaps in housing, water and sanitation."

She noted the need for collective action to mobilize these resources to address challenges that cities are facing.

Financially robust municipalities, she said, can be more proactive in planning for growth, building resilient infrastructure, and ensuring social equity.

Detailing how cities are implementing the UN Development Account Project Tadele Agaje who works on urbanization and development at the ECA said over a period of 3 years, the project will have been implemented in four target cities in 2024- Addis, Nairobi, Kigali, and Lusaka and two more cities -Dar es Salaam and Yaoundé.

"A combination of criteria relevant to fiscal space performance at national and local levels as well as opportunities for effective collaboration were identified and used to select these cities," said Mr. Agaje.

He said the project is looking at the financial pillar across five indicators, namely liquidity, autonomy, operating surplus, collective efficiency, and solvency, all of which help to define financial performance and, in turn, fiscal space to fulfil city government mandates while responding to shocks such as COVID-19, climate change and conflicts.

Benjamin Kimolo, of Nairobi City County said the Development Account project is relevant for Nairobi City Council's adjustment to fiscal policy, particularly with regard to modernizing taxation in the context of transforming businesses and expanding fiscal space.

"The project is timely, and the inclusion of sister cities, locally and globally, is an added benefit due to the relevance of the regional economic discussion on the role of cities in sustainable development and the need for peer learning," he said.

Ms. Atkeyelsh Persson, Chief of Urbanization and Development at the UN Economic Commission for Africa (ECA) said such reviews are important because despite the role cities play in the pursuit of sustainable development goals, they are increasingly confounded by rapid population growth, climate change impacts and economic disparities all which strain their ability to respond to these challenges effectively,"

About the UN Development Account (DA-15)

In 1997, the General Assembly through its resolution 52/12B established the United Nations Development Account (DA) to enhance the capacities of Member States in the priority areas of the United Nations Development Agenda. It serves as a mechanism to fund capacity development projects that are designed to contribute to the implementation of long-term programs of the United Nations Secretariat.

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