Local government in South Africa – Efficiencies revisited

Nyatanga, Lorraine

Local government in South Africa – Efficiencies revisited

Thesis / Dissertation

2023

Abstract

Poor service delivery is the continuous song sung by monitoring bodies such as the Auditor Generals and service delivery riots have increased over the years. Efficiency refers to the fact that there should be no waste in the use of resources and that there is rationality in their use. In turn, local government tier in national government is a level of governance that develops as a response of fiscal decentralization implicating a transfer of power and responsibility for public affairs from central government to lower levels, such as regional or local governments. The problem at hand emanates from the limited understanding of the efficiency levels of local municipalities in the RSA and the lack of knowledge regarding the impact of grant support and institutional capacity on their efficiency despite the importance of local municipalities in delivering services. The covid-19 pandemic being an unforeseen circumstance also provided inherent pressure on the struggling economy and ailing government reforms. The focus of this study was to assess the efficiency of local municipalities in South Africa and to find the determinants of efficiency gaps among local municipalities in Republic of South Africa (RSA). Research questions identified sought to clarify how many local municipalities are operating efficiently in South Africa, the effect of grant support on the efficiency of municipalities in RSA and the impact of institutional capacity on local municipality efficiency score in RSA. Using secondary data, the study used the non-parametric Two-Stage Data Envelopment Analysis (DEA) method to measure efficiency of 232 local municipalities in the Republic of South Africa. The study further employed a Tobit regression model to explain what determines the efficiency scores. The study findings show that total population has a negative relationship with efficiency scores. Financial flexibility, financial independence, and grants all have a positive impact on the efficiency of local municipalities in South Africa. Institutional capacity is insignificant in establishing municipal efficiency However, both financial decentralisation and number of households with access to free water have no effect on the efficiency.

Keywords

Development Finance

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