The Performance Approach

SECTION I 7.21.1.14 Policy

4.2 THE ANALYSIS OF THEORIES AND APPROACHES

4.2.3 The Performance Approach

Involving communities in developing some municipal KPIs increases the accountability of the municipality. Some communities may prioritise the amount of time it takes a municipality to answer a query, others will prioritise the cleanliness of an area or the provision of water to a certain number of households. Whatever the priorities, by involving communities in setting KPIs and reporting to communities on performance, accountability is increased, and public trust in the local government system enhanced.

Municipal Councils will also find that developing some KPIs in consultation with internal municipal stakeholders (i.e. management and organised labour) can assist in developing a shared organisational vision and common goals for improved performance and delivery.

Performance monitoring indicators need to be carefully designed in order to accurately reflect the efficiency, quality and value-for-money o( municipal services. International experience shows that poorly designed performance indicators can have a negative effect on delivery, and that it is critical that indicators focus on outcomes and not only inputs and outputs. For example, a municipality has a programme for cutting the grass verges.

The aim is to maintain an orderly appearance in the streets and to discourage the dumping of rubbish in public spaces.

However, if the municipality fails to collect the cut grass, it will build up and lead to the dumping of garden refuse by residents. This defeats the municipality's original objectives.

A performance management system which only measures the frequency of cutting the grass (the output)-and not the effect that this has on the maintenance of the public spaces (the outcomes)- will give a misleading report on the effectiveness of the municipality's action (Local Government: White Paper 1998:51152).

In the medium-term, a national performance management system is required to assess the overall state of local government, monitor the effectiveness of development and delivery strategies adopted by different municipalities and ensure that scarce resources are utilised efficiently. It would provide 'early warning' where municipalities are experiencing difficulties, and enable other spheres of government to provide appropriate support before

166

a crisis develops. It would also enable municipalities across the country to identify successful approaches or 'best practice', and learn from one another.

National government will work closely with municipalities, provincial governments and other agencies that can contribute to the development of a national performance management system (such as the Central Statistical Service and Auditor-General's Office) to develop a set of indicators which can be piloted by different municipalities and ultimately lead to the establishment of a national system (Local Government: White Paper 1998:51152)

While it is envisaged that the national system will apply in all municipalities, it will not replace the need for municipalities to set their own KPls as part of the IDP process. A national system can only incorporate indicators which are relevant to all municipalities.

Municipalities will need to continue to develop KPls which are specific to their circumstances and goals, and to the priorities of local communities. (White Paper 1998:51/52).

Besides these aforementioned approaches, there are other approaches that need to be highlighted in this study. These approaches have been taken by municipalities around the world. Each rests on particular assumption about local economies and the impact on local authorities therein. The essential approaches can be distinguished as follows (Department of Constitutional and Development 2000).

4.3 INTERNATIONAL APPROACHES TO LOCAL ECONOMIC DEVELOPMENT

4.3.1 Traditional approaches assert that the key to prosperity is attracting (primary manufacturing) investment through concession such as tax breaks, cheap land, reduced rates, and even direct financial rewards in return for locating in the area. The argument is that investment creates jobs and provides taxes, which can be used for service provision.

Variations on these themes are attempts to attract other forms of economic activity and

funding, such as tourism, government and financial institutions, or spending on national social programmes.

4.3.2 Entrepreneurial-Competitive strategies emphasise the importance of local comparative advantages and small businesses in job creation. Local authorities playa pro-active role in identifying actual or potential growth sectors and in directly supporting local businesses through research, loans, grants, consultancy, premises, technical infrastructure and so on. Municipalities have to engage in research to identify the particular economic strengths of their locality, and some have even produced a local industrial strategy.

4.3.3 Urban Efficiency proponents argue that local authorities should raIse urban productivity, in part by lowering the cost of living and doing the business in the locality.

Some have argued that this is best achieved by minimising government intervention, especially by cutting taxes and services charges, and by privati sing services where possible. By contrast, others believe that strong government planning is the key to achieving efficiency. This argument has particular relevance in South Africa, where apartheid's spatial planning has led to enduring inefficiency. For example, the metropolitan corridors in Cape Town and Johannesburg aim to bring people and jobs closer together, reducing travelling times and costs.

4.3.4 Human Resource Development is also identified as an essential focus for local economic development strategies. The argument is that low skill levels', especially amongst the poor, are key constraints facing potential investors. Furthermore, poor people are unlikely to benefit from whatever new jobs there are unless they have appropriate skills. Local authorities can support the establishment of local training agencies in local areas. In addition, conditions can be imposed on companies doing business with the municipality, requiring that firms provide a minimum amount of training for their employees (Department of Constitutional and Development 2000).

168

4.3.5 Community-based approaches emphasise the importance of working directly with low-income communities and their organisations. Investment is all very well, but the benefits are unlikely to accrue to the most needy unless they are active participants in new development, with the capacity to plan, monitor and enforce wider benefits. Support for institutions such as community credit unions or development corporations is a key feature of this approach.

4.3.6 Progressive approaches explicitly aIm to link profitable growth and redistributive development. An example is construction linkage (also known as planning gain), where planning permission in profitable areas is linked to investment in more impoverished neighbourhoods.

Another example of a progressive approach is a requirement that banks or other fmancial institutions opening a branch in an area must invest a certain proportion of their turnover in local small businesses. Where banks are hesitant to even open branches in low-income areas (such as many townships), municipalities have been known to make such branch opening a condition of access to municipal funds and accounts. Over the past years, several municipalities in the United States have introduced living wage legislation at local level, to outlaw exploitation.

In reality the right balance between these approaches should be established. Such a balance should be based on the priorities and circumstances. Figure 4.1 illustrates four conceptual building blocks for local economic development which must be used together.

FIGURE 4.1 LED BUILDING BLOCKS

Attract

*

Production

*

Consumption

*

Government & Finance

*

National Surplus

Build

*

Skills & Institutions

*

Entrepreuneurship

*

Trust & Participation

* Information Flows

Lead

*

Good Governance

*

Efficiency

*

Economic Strategy

*

Spatial Plan

Circulate

*

Buy local

*

Cross Subsidise

*

Linkage

*

Local Partnership

Source: Local Economic development: Department of Constitutional Development

4.4 A New Local Government Development Approach

• The new local economIC development approach is known as the Integrated Development Planning (IDP). IDP is a process through which a municipality can establish a development plan for a short, medium and long term. It enables a municipality to (Integrated Development Planning for Local Authorities 1992:2):

• assess the current situation in the municipal area, including available resources, skills and capacities;

• assess the needs of the community;

• prioritise these needs in order of urgency and importance;

• set goal to meet these needs;

• devise strategies to achieve the goals within a set time frame;

• develop and implement projects and programmes to achieve key objectives;

• set targets so that performance can be measured;

• budget effectively with limited resources; and

• regularly monitor and reassess the development programme and make changes to it where necessary (Integrated Development Planning for Local Authorities 1992:2).

(a) Integrated Development Planning

The Land Development Objectives, or LDOs (in terms of the Development Facilitation Act) and Integrated Development Plans, or IDPs (in terms of the Local Government Transitional Act Second Amendment Act) provides municipalities with powerful statutory instruments through which to define local priorities. In combination, they can form the basis of a participatory planning process to establish clear objectives, targets and strategies for local areas, ranging from economic growth, investment, and employment

170

creation to training, poverty alleviation or reduction and service and tariff levels. If these plans are realistic, that is, based on a thorough assessment of current realities and available resources, they can provide important signals to local and external stakeholders.

4.4.1 The meaning of Integrated

"Integrated" is probably the key to what is the difference about Integrated Development Planning. Integrated means considering not just one sector (e.g. Transport) or one group of issues (e.g. Environment), but instead bringing together all important sectors, issues, and concerns into a whole (Integrated Development Planning 1996: 2).

4.4.2 Who is involved in the IDP planning process?

In many municipalities, the primary responsibility for preparing Integrated Development Planning will rest with the Councillors, Officials and staff. In some cases, strategic technical support can be obtained from professional town planners, environmentalists, engineers, architects, economists, sociologists and institutional strengthening specialists.

There are lots of people who are involved in planning for the IDP, among others are (Department of Constitutional Development :2000):

• Council;

• NGO's and civics;

• Community leaders; and

• Organisation and many other many more.

(b) Municipal Budgeting

10 g. (1) Every municipality shall (Department of Constitutional and Development 2000).

(a) conduct its affairs in an effective, economical and efficient manner with a view to optimising the use of its resources in addressing the needs of the community;

(b) conduct its financial affairs in an accountable and transparent manner;

(c) prepare a financial plan in accordance with the integrated development plan in respect of all its powers, duties and objectives;

(d) structure and manage its administration and budgeting and planning processes to give priority to the basic needs of its community, and promote social and economic development within its area of jurisdiction and support the implementation of national and provincial development programmes;

(e) manage its financial resources to meet and sustain its objectives;

(f) regulate monitor and assess its performance against its integrated development plan;

and

(g) annually report to and receive comments from its community regarding the objectives set in its integrated development plan.

Local Government Transitional Act Second Amendment Act

Municipal budget generally operates on the basis of 'last year plus inflation'. This makes it very difficult to evaluate the effectiveness of municipal expenditure, or to assess whether or not the right priorities are being addressed. The introduction of a financial plan prepared in accordance with the IDP will help to solve this problem. The financial plan should be medium-term; that is it should look at the income and expenditure of the community over several years. This is important since infrastructure investments may take several years to finance, and other loans or other liabilities may also span several years. The financial plan should look at a wide range of issues related to municipal revenue, such as tariffs and payment levels, land markets and rates income, intergovernmental grants, subsidies and private loans. In general the aim of the financial plan should be to maximise municipal revenue and the impact of municipal expenditure (Local Economic Development 1996: 12).

172

(c) Town Planning, Land Development and Linkages

Many municipalities currently have reactive towns and regional planning; when crises occur, planning starts. This reduces the ability of the municipality to use spatial planning as a tool to promote social and economic development. LDOs should be used to put planning on a more proactive footing. The land development principles of the Development Facilitation Act are a sound basis for more development planning.

These principles mean that municipalities should actively promote land development, rather than merely seeking to control it. In other words, local government should identify land with potential, prepare it for development, and make its willingness to issue certain rights. This will stimulate investment in return for relatively little risk. Examples of projects where municipalities have played an active role in promoting land development are Cape Town's Waterfront and Durban's International Convention Centre.

Such prestige projects are often celebrated as drivers of economic development because of the effect they have on the image of the city and the jobs they create (Local Economic Development 1996: 14).

(d) Infrastructure Investment

Infrastructure represents,

if

not the engine, then the 'wheels' of economic activity ...

Users demand infrastructure services not only for direct consumption but also for raising their productivity by, for instance, reducing the time and effort needed to secure safe water, to bring crops to market, or to commute to work. Much studies attempting to link aggregate infrastructure spending to growth of GDP show very high returns ... What is evident is that a strong association exists between the availability of certain infrastructure-telecommunication (in particular), power, paved roads and access to safe water- and per capita GDP. (World Development Reportl999;

Infrastructure for Development-World Bank).

Investment in infrastructure can have important implications for economic growth, income distribution and poverty alleviation, and municipalities can employ this