GOLD Report I - UCLG

AFRICA38 United Cities and Local GovernmentsGraph 1Local Resources/GDP1.401.201.000.800.600.400.200.00BeninBurkina FasoCôte d’IvoireMaliNigerSenegalTogoGhanaSouth AfricaUgandaZimbabweSource: (i) Regard sur les finances locales dans les pays de l’UEMOA (2001-2004) ;( ii) NALAD, Fiscal Decentralization and Sub-National Government Finance;(iii) Fiscal decentralization in South Africa, Ismail Momaniat.The graph shows that, in most countries, local government finance represents less than 1% ofGDP and 5% of state-level (sub-national) expenditure.Sometimes the law provides a formula forgrant allocation. One of the best examplesis that of South Africa governed by articles213 and 214 of the Constitution. All moneyreceived by national government is paid intothe National Revenue Fund (art. 213). TheDivision of Revenues Act provides annuallyfor the equitable distribution of revenueamongst national, provincial and local spheresof government, and balanced division oftasks to be financed. The Act also definesthe distribution of revenues amongst theprovinces (regions), and finally, sets theamount of conditional purpose-specificgrants for provinces and local governments,financed through the fund. The division ofthese grants are regulated by formulas thatare also defined by law. Paragraph 2 of Article214 in the Constitution contains the criteriato be applied to the revenue-sharingformula amongst local governments andprovinces (in principle, the structure isdetermined every five years). While provincefinances depend essentially on transfers,local government finances mainly rely onown-source revenues (taxes, tariffs andservice charges).The situation in other countries is a lot lessfavourable. The guarantees offered to localgovernments to access revenues also varyfrom country to country. Sectoral grants areroutine in some countries, usually conditionalor purpose specific. These grants areeasily controlled but involve central governmentmonitoring of local governments. Thisis the case in Uganda and Zimbabwe. InTanzania the government is likely to introducecalculation of grant amounts on thebasis of fixed formulas. In Zambia, centralgovernment also transfers funds throughsectoral grants that are not calculatedthrough a set formula; these transfersrepresent only 3% of local budgets. In asecond group of countries, central governmenttransfers mainly consist of general