The government of the Republic of Zambia established the Local Government Equalisation Fund, to which each year parliament appropriates not less than 5% of the total amount of projected income taxes collected for the republic for that financial year. The purpose of the fund is to provide a source of financing for service delivery.
The goal of this study was to analyse the effects of equalisation funds on service delivery in selected local authorities in Zambia.
The study focused on Lusaka City Council, Luanshya Municipal Council and Chisamba and Luangwa town councils in Zambia.
A concurrent mixed-methods approach was used. The population comprised registered property owners and council officials in the selected districts. The sample was drawn using stratified sampling. Data were collected using questionnaires and analysed by using descriptive statistics and regression analysis using the Statistical Package for Social Sciences (SPSS) version 25. Qualitative data were analysed using a narrative approach.
The expenditure composition of the equalisation funds shows that expenditure on personal emoluments accounts for a greater proportion than capital and service expenditure. There were similarities and differences in the methods of service delivery among local authorities: the use of local government enterprise, contracting out, franchises, volunteers, self-help groups and in-house provision.
There is lack of satisfactory adherence to the guidelines on utilisation of equalisation funds for service delivery as espoused by the central government. The local authorities studied do not adhere to the prescribed guidelines on the utilisation of equalisation funds.
The law and mandate relating to local authorities in Zambia is contained in the
In the performance of their functions, local authorities face daunting constraints, which have been compounded by the increase in expenditure responsibilities and the unfortunate free rider problem for most council services. Undoubtedly, the fiscal situation of councils has been worsened by the erratic disbursement of fiscal grants and the erosion of the resource base through the interplay of various actions by the central government. The current macroeconomic situation has undermined the capacity of the Zambian population to pay for services provided by the local authorities. Consequently, there has been a failure by local authorities to provide essential services at acceptable standards, in addition to perpetual defaults on payments to workers, suppliers and statutory bodies (Lolojih
Central to the fulfilment of the local government mandate are financial resources, yet most of the service users do not pay for the services rendered by the local authorities; currently, municipalities are owed billions of kwacha, and the ratio is climbing. To finance their operations and provide public services, local authorities collect revenue in the form of property taxes, personal levies, rent, fees and charges. Regrettably, government has taken away all the lucrative sources of income from councils such as sales tax, income tax, road tax and water and electricity charges. This has resulted in the creation of a vicious circle of horizontal and vertical fiscal imbalances owing to the differences between the local tax base and the assigned expenditure responsibilities (Martinez-Vazquez, McLure & Vaillancourt
The financial position of local authorities has been worsened by the central government’s issuance of statutory instrument number 55 of 2000 and the enactment of the
The revenue base of local authorities has been diminishing following the government decision to take away most, if not all, of the lucrative sources of income from councils, such as sales tax, income tax, road tax and water and electricity charges. The financial problems worsened in 1992 when the government decided to discontinue funding to councils and scrap the 35% sales tax, as well as in 1997 with the amendment of the Rating Act, which drastically exempted a number of rateable properties. This has resulted in the creation of a vicious circle of horizontal and vertical fiscal imbalances owing to the differences between local tax base and assigned expenditure responsibilities. No doubt, these imbalances have affected service provision.
To redress the imbalance and ignite development, the central government established the Local Government Equalisation Fund. The establishment of the Local Government Equalisation Fund, through the
The aim of this research was to analyse the effects of equalisation funds on service delivery in selected local authorities in Zambia.
What is the expenditure composition of equalisation funds in local authorities?
What methods of service delivery are currently in use by local authorities?
What are the technical, financial and administrative effects of the Local Government Equalisation Fund?
By analysing the effects of the Local Government Equalisation Fund on service delivery in selected local authorities in Zambia, the study has contributed to a better understanding of the causes of poor service delivery by local authorities in Zambia. It has helped development stakeholders and government to understand how local authorities utilise the equalisation fund and better appreciate its technical, financial and administrative effects. It has revealed important information on the state of local authorities and their capacities, which are very useful in informing sound policy.
The Zambian Parliamentary Committee on Local Government Accounts of 2019 acknowledges that local authorities are key in socio-economic development as their operations are meant to promote the interests of the local community and ultimately transform the living standards of the people. They are viewed as agents of the government at the grass-root level and are uniquely positioned to enhance and sustain national development. In order to ensure effective service delivery, there is a need for local authorities to have adequate and diversified sources of revenue. This is in addition to other sources of revenue for local authorities provided for in the constitution, such as levies and local taxes. However, Pest (
The assignment of functions to various spheres of government is fundamental to effective and efficient public service delivery. It is the precondition for good local governance. Assignment of functions to local authorities normally focuses on three basic typologies: administrative functions, political functions and fiscal functions. In deciding which functions to relinquish, countries are guided by several principles, such as economies of scale, externalities, equity and heterogeneity of demands (Von Hagen & Hepp
Chernick (
The continued presence of heaps of uncollected garbage, unkempt burial sites, irregular statutory inspections in market stalls, restaurants and butcheries and poorly maintained local roads manifests the tragedy of inadequacies of local authorities to deliver services. According to Lolojih (
Bell (
Most local authorities, especially cities in developing countries, face the challenges of availability of financial resources and service provision demands (Borge
Similarly, the Policy Monitoring and Research Centre (
Stauss (
According to Turley et al. (
In terms of horizontal fiscal imbalances, ‘some Local Authorities, because of the nature of their socio-economic profile and demographic characteristics, have greater expenditure needs or less revenue capacities, or both’ (Herczyński
The literature body on equalisation funds has established that equalisation funds seek to redress inequities that exist along two dimensions of vertical and horizontal fiscal imbalance. The reviewed literature on equalisation transfers and service provision exhibited gaps, which provided rationale for this study; in particular, Martinez-Vazquez et al. (
In spite of the documented significance of local authorities in national development, there has not been adequate empirical investigation on the effect of equalisation funds on service delivery. However, works by Dafflon (
The theoretical framework of this study is based on the cost of service theory of taxation, benefit theory and efficiency service theory. The selected theories helped to explain the problem of inadequate service delivery and inherent challenges in the fiscal architecture of local authorities in Zambia.
This theory implies that the government should tax the citizens according to the cost of service rendered. The government renders certain services to citizens, and the cost of such services should be collectively met by the citizens. The tax an individual should bear must be equal to the cost of benefit they receive (Samuelson
This theory postulates that the main purpose of local government is to provide services to the people on the ground, – and it is the most efficient agent for providing those services that are essentially local. Proponents argue that the efficient delivery of some local services is so compelling that, if local government does not exist, something else will have to be created in its place, implying that local government is indispensable (Ebel &Yilmaz
This research used a concurrent mixed-methods approach to collect, collate, analyse and integrate quantitative and qualitative data. By mixing qualitative and quantitative methods, the research drew interpretations based on the combined strengths of both sets of data in order to understand the research problem under study.
The population comprised registered property owners within the political boundaries of Lusaka, Luanshya, Chisamba and Luangwa local authorities and council officials, as demonstrated in
Sample size and strata.
Council | No. of registered property owners | No. of residential property owners | No. of business owners | No. of council officials | No. of councillors |
---|---|---|---|---|---|
Lusaka | 63 319 | 105 | 79 | 31 | 5 |
Luanshya | 30 150 | 88 | 61 | 9 | 3 |
Chisamba | 544 | 61 | 41 | 9 | 2 |
Luangwa | 1250 | 79 | 51 | 10 | 2 |
The Cochran formula was used to calculate an ideal sample size given a desired level of precision, desired confidence level and an estimated proportion of the attribute present in the population (Robson
where,
The
The research used both primary and secondary sources of data. Primary data were collected from the field through questionnaires. The data were analysed both qualitatively and quantitatively. A narrative approach within qualitative data was used in order to ‘tell a story’. Regression analysis was conducted using the Statistical Package for Social Sciences (SPSS) version 25 and Excel package when determining the effects and trends in service provision and the fiscal capacities of local authorities.
In determining the expenditure composition of the equalisation funds in local authorities,
Capital expenditure for2016 fiscal year in nominal terms (ZMW/million).
Local authority | Total budget | Total LGEF | Expected 20% capital expenditure | Actual expenditure on capital |
---|---|---|---|---|
Lusaka | 372 311 962 | 81 445 203 | 16 289 040 | 21 096 842 |
Chisamba | 12 569 478 | 6 102 321 | 1 220 464 | 1 534 200 |
Luangwa | 12 781 241 | 8 442 073 | 1 688 414 | 1 714 686 |
Luanshya | 65 987 262 | 7 340 172 | 1 464 034 | 2 645 622 |
LGEF, Local Government Equalisation Fund.
Comparatively, expenditure on capital improvements was higher for Lusaka City Council than the other councils. Chisamba and Luangwa councils, however, constructed more schools and clinics and drilled and installed more boreholes and pit latrines than Lusaka and Luanshya councils.
In terms of service provision, Lusaka City Council, Luanshya Municipal Council and Chisamba Town Council spent 0.2%, 18.4% and 0.7% more than the prescribed 21% on service provision, respectively. On the contrary, Luangwa Town Council spent 2% below the prescribed minimum of 21% of the total equalisation fund transfer on service provision in the year 2016. In 2017, Lusaka City Council and Luanshya Municipal Council spent 11% and 8% above the prescribed 21% of equalisation funds on service provision, respectively. However, there was a reduction in real expenditure on service delivery from 2016. Chisamba and Luangwa councils spent 1% and 2% below the prescribed threshold of 21% of the equalisation transfers, respectively. In 2018, Lusaka City Council spent 13% above the minimum percentage of 21% on service provision and significantly increased its expenditure in real terms in comparison to 2017. Similarly, Chisamba, Luangwa and Luanshya Municipal Council spent 0.6%, 0.2% and 0.9% above the minimum threshold, respectively.
To determine the effect of equalisation transfers on service delivery, a regression analysis was conducted. The overall regression model was significant at the 5% level. An analysis of variance test performed using an alpha level of 0.05 yielded
Regarding methods of service delivery in the provision of council services to the public,
Methods of service delivery used.
Council | Method of service delivery |
|||||
---|---|---|---|---|---|---|
In-house | Local government enterprise | Contracting out | Franchise | Volunteers | Self-help | |
Lusaka | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Luanshya | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Chisamba | ✓ | ✓ | - | - | ✓ | ✓ |
Luangwa | ✓ | ✓ | - | - | ✓ | ✓ |
In its quest to determine the technical capacity of councils, the study revealed that Lusaka City Council acquired the most service equipment for road maintenance and construction as well as for erection and maintenance of street lights. Furthermore, the council has a maintenance schedule that they do not adhere to. Similarly, as can be seen in
In determining the fiscal effort by councils following the introduction of equalisation transfers, the study revealed that the fiscal effort by Lusaka City Council has been increasing since 2016; out of its total budget, 78% was internally generated revenue in 2016, whilst in 2017 and 2018, 88% and 88.3% were internally generated revenue, respectively. In the case of Chisamba Town Council, the fiscal effort in 2016 was 51%; this decreased to 44% in 2017 but increased in 2018 to 61%. The internally generated revenue for Luangwa Town Council in 2016 was 33% of the total revenue but decreased to 30.98% in 2017. In 2018, the council improved its efforts to reach 51% of all revenue. Similarly, Luanshya Municipal Council internally generated 88% of all council revenue. However, the fiscal effort declined in 2017 to 76% but rose again in 2018 to 80%.
Administratively, Lusaka City Council has 11 civil engineers, 4 electrical engineers, 3 water engineers, 14 health inspectors, 9 physical planners and 6 socio-economic planners. At least one engineer, health inspector and physical planner service a constituency in Lusaka. Luanshya Municipal Council is serviced by three civil engineers, one water engineer, four health inspectors and three physical planners, with two socio-economic planners. Chisamba and Luangwa town councils are serviced by two civil engineers. There is no electrical engineer, one water engineer, one socio-economic planner and two health inspectors in each town. Chisamba has two physical planners, whilst Luangwa has one (
Equipment for service provision.
Council | Motor grader | Road roller | Excavator | Front loader | Bulldozer | Dump truck | Motorised scaffold | Trencher |
---|---|---|---|---|---|---|---|---|
Lusaka | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |
Luanshya | ✓ | - | ✓ | ✓ | - | ✓ | - | - |
Chisamba | ✓ | - | - | - | - | ✓ | - | - |
Luangwa | ✓ | - | - | - | - | ✓ | - | - |
Number of technical employees.
Council | Civil engineers | Electrical engineers | Water engineers | Health inspectors | Physical planners | Socio-economic planners |
---|---|---|---|---|---|---|
Lusaka | 11 | 4 | 3 | 14 | 9 | 6 |
Luanshya | 3 | - | 1 | 4 | 3 | 2 |
Chisamba | 1 | - | 1 | 2 | 2 | 1 |
Luangwa | 2 | - | 1 | 2 | 1 | 1 |
The study showed that most local authorities did not adhere to the prescribed guidelines on the utilisation of equalisation funds. Regarding personal emoluments, the study showed that councils have been increasing their expenditure on personal emoluments since 2016. This rise in expenditure is a result of increased recruitment of personnel by the Local Government Service Commission and an increase in salaries and other conditions of services for council employees that were awarded in 2016 and 2017. This can be seen in the expenditure by Lusaka City Council of 53.8% of the total equalisation funds in 2016 on emoluments and 49.3% in 2017. The council increased its expenditure in 2018 to 53.3%. Luanshya Municipal Council spent 24.6% in 2016 and increased its expenditure in 2017 and 2018 to 45% and 65.1%, respectively. Similarly, in 2016, Chisamba and Luangwa town councils spent 53.3% and 56%, respectively. In 2017, Chisamba Council increased its expenditure by 1.7%, whilst Luangwa Council increased its expenditure by 12%. Luangwa Council reduced its expenditure to 65.4% in 2018, whilst Chisamba increased its expenditure to 59.4% in the same year.
Even though expenditure on personal emoluments increased in all selected local authorities, the study revealed that delayed payment of salaries and statutory pension contribution is so prevalent in these councils that employees do not know their next pay day.
Similarly, the Policy Monitoring and Research Centre (
To establish the effect of payment of user fees on service delivery, the study conducted multiple regression analysis. The overall regression model for payment of user fees and garbage collection was statistically significant. The results revealed that 2.7% of all variability in service provision
Smart (
It should be noted that user fees can only be imposed when the services can be priced, such as with water, sewage and electricity. User fees become poor instruments for pricing as they inefficiently crowd out consumers. Objections to user fees are also sometimes espoused because they are regressive, and low-income households may have little access to the services (Bird & Vaillancourt
In determining the methods of service delivery, the study showed that Lusaka City Council and Luanshya Municipal Council employed various methods of service delivery: the use of local government enterprise, contracting out, franchise, volunteers, self-help groups and in-house provision. On the other hand, Chisamba and Luangwa town councils employed in-house provision, supplemented by local government enterprise and the use of volunteers and self-help groups.
The methods of service delivery employed have proved to be very effective in the case of Chisamba and Luangwa, owing to the small population in these areas. Even though Lusaka and Luanshya have tried to employ a number of alternative methods of service delivery, the effectiveness of these methods is still below residents’ service expectations. This is in part due to the growth of Zambia’s population, which has outpaced local authorities’ capacity for service delivery in terms of management, infrastructure and financing. The problem of inadequate service delivery has been compounded by the growing number of residents living in informal settlements, which are characterised by inadequate basic services such as decent housing, clean water, sanitation, refuse collection and roads.
In terms of the machinery necessary for service provision, Lusaka and Luanshya councils have acquired most of the service equipment needed for road maintenance and construction as well as for street light assembly and maintenance. However, all the selected councils have a maintenance schedule that they do not adhere to.
With the introduction of equalisation funds, estimates of revenue and expenditure for local authorities have been increasing. The study showed that between 2016 and 2017, Lusaka City Council increased its budget by 1% and by 7% in 2018, whilst Chisamba increased its budget by 8% between 2016 and 2017, with a 46% increase in 2018. Similarly, Luangwa increased its budget by 8% between 2016 and 2017 with another 8% in 2018. On the contrary, Luanshya reduced its budget by 49% between 2016 and 2017. The council then increased its budget by 85% in 2018.
The study revealed that revenue collection by the councils is too low and still remains a challenge. Most service users do not pay charges or levies for the services they receive from the council or their agent. When respondents were asked who should bear the cost of council services, 62.4% reported that the local authority should finance its operation and cost of service provision, whilst 37.6% of the respondents said that the users of council services should bear the cost of service provision. What the residents do not know is that service provision depends on the presence of effective demand and the willingness and patriotism of individuals to pay taxes.
The study results are similar to the findings of the Policy Monitoring and Research Centre (
Similar results were obtained in a survey in Tanzania and Uganda, which indicated that citizens have a general appreciation of the necessity of taxation to support local service provision, but chose non-compliance because of a lack of confidence in the local government. Based on survey data from 2003 to 2006, Fjeldstad et al. (
Administratively, the study showed that councils are now managed by qualified manpower. Generally, all directors and heads of departments in all selected councils have acquired degrees, including middle managers.
The study concludes that the selected local authorities do not adhere to the prescribed guidelines for the utilisation of equalisation funds. Generally, local authorities have been spending a large proportion of the equalisation funds on personal emoluments and councillors’ allowances, leaving little or nothing for capital improvements. This is partly because of the recent mass recruitment of council employees by the Local Government Service Commission in the period 2016–2018 and an increase in salaries and other conditions of service for council employees.
In determining the methods of service delivery, this study has shown that Lusaka City Council and Luanshya Municipal Council employed various methods of service delivery: – the use of local government enterprise, contracting out, franchise, volunteers, self-help groups and in-house provision. On the other hand, Chisamba and Luangwa town councils employed in-house provision, supplemented by local government enterprise and the use of volunteers and self-help groups.
The employed methods of service delivery have proved to be very effective in the case of Chisamba and Luangwa owing to the small population in these areas. Even though Lusaka and Luanshya have tried to employ a number of alternative methods of service delivery, the effectiveness of these methods is still below residents’ service expectations.
The study has revealed that with the introduction of equalisation funds, estimates of revenue and expenditure for local authorities have been rising steadily; whilst councils have been increasing their expenditure, their fiscal effort has been declining, with the exception of Lusaka. This has been compounded by weak collection efficiency, as most service users do not pay charges to the council.
Through this analysis, the paper has established the underlying causes of inadequate service delivery by local authorities in Zambia. It has provided relevant information on the expenditure composition of local authorities
The research has identified inherent inadequacies in service delivery models used by local authorities in Zambia and the functional assignment of expenditure and revenue by the central government. Arising from these inadequacies, the study recommends that the central government and local authorities redesign the current revenue structure and strengthen financial management. In addition, local authorities should increase their reliance on their own revenue with meaningful discretion. This will strengthen the link between benefits and costs of local services, making local officials more accountable to taxpayers and more fiscally responsible.
Arising from the service inadequacies, the following recommendations are given to make councils functionally and financially vibrant:
The central government and local authorities should redesign the current revenue structure and strengthen finance management. Local authorities should enhance their collection efficiency and link collected revenue with expenditure.
Local authorities should increase their reliance on their own revenue with meaningful discretion. This will strengthen the link between benefits and costs of local services, making local officials more accountable to taxpayers and more fiscally responsible.
The authors have declared that no competing interests exist.
H.C. conceptualised the research study and contributed to data collection, analysis and drafting of the article. E.K. contributed to the drafting of data collection instruments, analysis of data and structuring of the article. E.N. contributed to the drafting of the data collection instruments and drafting of the article.
This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.
Data sharing is not applicable to this article as no new data were created or analysed in this study.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any affiliated agency of the authors.
Informed consent was obtained from respondents in order to ensure that all respondents participated freely and voluntarily. Confidentiality was guaranteed before embarking on data collection from respondents. Furthermore, the respondents were free to withdraw from the study if they felt uncomfortable. Ethical concerns were taken into consideration in the study. Ethical approval was sought from the University of Lusaka Research Ethics Clearance Committee (UNILUSREC). The study received UNILUSREC approval number IORG0010092-002.