The National Decentralisation Policy

Transfer of finances by the Central Government to Councils take the form of: General, Special and Capital grants. Capital grants are meant to finance capital projects while General grants are additional financial resources extended to local government for use at their own discretion.

Special grants are used to finance prior-earmarked tasks by the Central Government. Transfers from Central Government in the form of grants were supposed to be one major revenue source for Councils for two main reasons.

Firstly, it was the mechanism through which shared taxes was transmitted from the central to the Councils. Secondly, it was the conduit by which the central government provided financial resources to the Councils to carry out specific functions on its behalf.

In addition to grants, Councils have powers under the various Local Government Acts to raise and utilise revenue from their own local sources at their discretion. However, their revenue base was reduced in 1992 when Central Government directed Councils to disinvest in commercial ventures and to sale its housing stock at uneconomical prices.

This is compounded by Government’s failure to honour statutory obligations and inability to pay for services rendered. Further, poor management of resources has worsened the situation.

The 1980 Local Administration Reforms involved extensive devolution of central powers and functions to Councils but owing to poor performance of the economy, matching resources were not transferred or maintained at reasonable levels. Consequently, the reform initiatives failed and Councils remained critically constrained by lack of financial resources.

In addition, even in instances where funds have been available, centralised planning and budgeting has not adequately addressed the needs and priorities of the districts. The situation has further been compounded by the lack of a district integrated budgeting system.

Challenges

The challenges relating to financial resource mobilisation and management are:

- introducing decentralised financial resource mobilisation;

- providing a formula for allocating funds from the Central Government to districts for effective and efficient service delivery;

- provide a system of releasing resources to sector Ministries, Provinces and Councils to ensure timely implementation of development programmes and projects;

- strengthen Central Government’s auditing system to ensure discipline in the handling of financial affairs of Councils;

- building capacity in resource mobilisation and financial management of Councils; and

- updating financial regulations for effective management of financial resources