Lessons for Developing Countries

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support,and it is anticipated that Project Consolidate may provide a new framework for their joint efforts.Their local government programs are now more aligned and provide some dedicated operational expertise at the national and provincial policy and monitoring levels.Moreover,multiple donor involvement has made it possible to address different aspects ofthe reform agenda:the technical issues offiscal and operational management, as well as accountability questions in governance ofcouncils and their relationships with local media and civil society groups.This new,integrated approach takes the agenda ofconsolidation significantly forward.Provided it can draw on a wide cross-departmental support base within South Africa, it promises to enhance accountable delivery considerably.

Lessons for Developing Countries

The emergence and gradual consolidation oflocal government in South Africa has highlighted a number ofimportant lessons,both from what South Africans have done right and from the challenges that they have found difficult to resolve.One could identify many lessons,but a few stand out.

Lesson 1: The Power ofVision

South Africans are quite self-critical about their emphasis on policy in recent years.The government has become impatient to prove that it is firmly in the business ofdelivery,not merely ofpolicy making.Yet in articulating powerfully their vision for local government,South Africans have managed to move the reform agenda forward on scale and at a persistent pace.The beginnings were in the constitutional negotiations of1993,followed by a few years offinding their feet through the complex challenges ofundoing a deeply embedded,skewed system and introducing a new one that meets the aspirations ofa democratic nation.The 1998 White Paper on local government’s stance on developmental local government was an important landmark,but developing that vision has not stopped.It has continued in sectors,in the initiatives for partnerships with the private sector,and in the elaborate work ofthe National Treasury to define the fiscal framework more clearly and to set out tight fiscal policy and regulations that enhance monitoring as much as they allow innovations.The vision is developing—and with it the scope to test new ideas and explore new avenues by learning from both international and local experience.

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Lesson 2: Formal Rules Are Just a Beginning Nowhere is this lesson more evident than in the jurisdictional domain identified earlier.Although the constitution clearly defines powers and functions, reality is shaped through many interactions.The optimal assignment of functions and sequencing ofdevolution constantly evolves in a decentralized system.These relationships change and evolve even in developed countries.Even ifthe division ofpowers and functions is clear,regulatory powers ofnational governments or their agencies can impose additional (cost) burdens on local governments.Changes and inconsistencies in national sector policies have not only hampered the scope for local autonomy but also complicated the pace ofservice delivery.South Africa shows that while the creative tension ofpolicy debate is necessary for change,it is also necessary to work hard at filling in the practical details.South Africa continues to face many challenges and has a number ofpolicy and operational tensions to resolve.For example,enhancing municipalities’creditworthiness was never going to be easy amid the uncertainty oftransformation.And improving local revenue while exploring reform options in service sectors,particularly those that may remove sources ofrevenue (such as electricity charges) from local government,poses stringent challenges.

Lesson 3: The Power ofInformation

Budget processes proceed irrespective ofthe quality ofinformation,but the ability to plan,work,and report effectively is in the end fundamentally tied to the nature ofthe information available.At one level,South Africa has tried to work on these issues through more robust auditing.The government has realized that poor audit capacity,poor quality offinancial statements,or long delays in the completion offinancial statements hamper attempts tounderstand trends,to introduce financial management,and ultimately to plan ahead.Ifactual expenditure and revenue are not monitored on a monthly basis and ifsuch information is not available in time to inform the next budget,the quality ofinformation will tend to be poor and unreliable, making budget decision making even harder.

South Africa has also identified the value ofan open process ofinformation management.The introduction ofa regular Intergovernmental Fiscal Review—submitted to parliament—has benefited decision makers.This document has given provinces,municipalities,and officials at the national level incentives and public deadlines to work toward regarding the processing and interpretation ofinformation.The process has already reaped benefits in

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sparking some lively civil society responses.For example,the Budget Information Service ofIdasa,a major national nongovernmental organization has become a vigorous independent analyst ofthe Intergovernmental Fiscal Review,offering provocative critiques and encouraging and informing public debate.

Lesson 4: The Need for Sequencing, but No Inevitable Linearity In a developing country,local capacity is often not immediately available.The shifting offunctions must take this into account.However,one cannot assume that the requisite capacity is available at the national government level either— though many implicitly do make this assumption when they recommend a slow and ordered sequence ofdevolution.Thus,sequencing is not necessarily a linear process in which national government holds the strings and gradually hands over power as the other levels develop capacity (Bird 2003).It is a complex process that requires continuous attention and monitoring.

Lesson 5: Fiscal Decentralization Is about a System, Not Its Parts Alone

Roy Bahl’s (2002) often-stated theorem about the need to view decentralization as a system is nowhere more relevant than in South Africa.The country’s successes and frustrations have often come back to the realization that decentralization will not work ifproblems ofcapacity,budgeting,financial management,reporting,information,and transparency are not addressed simultaneously.Budget reforms and new legislation on financial management have consistently had a direct bearing on improved local decision making and the brokering ofmore effective relationships between politicians and officials.The point made about the power ofinformation is critical in this respect:poor information has visibly compromised local budget processes, accountability,and the ability ofnational and provincial governments to respond effectively and in a timely fashion to local management challenges. But the issue goes wider.Decentralization must be consciously pursued; centralization by stealth happens all too easily.For example,although the local sphere in South Africa is autonomous,not under the control ofthe provincial or national governments,national departments have been able tointervene directly in municipal affairs through the use ofgrants in aid for the delivery ofservices to the poor.This situation has on occasion led to a project focus that did not necessarily take into account local-level considerations