Consult the public for guidance on municipal debt write-offs
By Josef Kefas Sheehama.
The National Assembly has received a proposal from the Landless People’s Movement (LPM) asking NamWater and Nampower to forgive the debts of local authorities who owe NamWater and NamPower a combined total of nearly N$1 billion and N$807 million, respectively.
The primary issue facing Namibian local authorities, particularly those in charge of large cities, is the growing disparity between financial resources and municipal spending requirements. Rapid urban population expansion, which generates an ever-increasing demand for public services, new public infrastructure, and its maintenance, is one of the key causes of this widening fiscal disparity.
The local authorities’ genuine role has been diminished for a very long time since they have been treated like any other office. Most towns regularly overestimate or inflate their revenue predictions while creating their annual budgets, either to indicate a surplus or to appear as though additional spending needs are amply covered by incoming money.
As a result, the revenue predictions are rarely supported by reasonable or verifiable revenue assumptions, which prevents municipalities from being able to collect this income and puts them in a tight cashflow situation. If such circumstances occur, communities must cut spending to make sure there is enough money to pay these obligations. It won’t take place. Local governments should be able to function independently of the federal government. The predicted write-offs will make customers and municipalities more reluctant to pay their bills, worsening the situation for the respective SOEs that are already burdened with bad debt.
The most difficult individuals to live with on a daily basis are the old, the unemployed, and the disabled. Many of them lead lives of poor quality as a result of their low wages or complete lack of income. Due to their inability to navigate the towns, they are frequently excluded from the city’s labour force, market, and social networks. Elderly and disabled persons experience many deprivations, which make their problems persistent and resistant to single-issue solutions. Therefore, in order to enable Nampower and Namwater to have their obligations forgiven, local authorities should give them the numbers.
The importance of all human resources, including the aged, the unemployed, and persons with disabilities, has been emphasized by national goals for social fairness and advancements in human rights. Therefore, it’s critical to create plans for enhancing the living conditions of the elderly, unemployed, and crippled. Elderly and disabled persons run the risk of living in areas where their quality of life is poorer than that of their peers from the same social class.
Additionally, a portion of a pension should be accessible to those who are still working. After people pay their rent or mortgage, food costs, and utilities like water, the increase in energy prices has a significant impact on their discretionary spending power. The increase in average earnings is far smaller than the increase in prices. It is obvious that inflation has an impact on people’s household income. They must already be noticing the rising cost of goods. Employers might limit wage raises and are unlikely to compensate employees for these growing additional expenses.
But right now, it’s nearly impossible to find a savings account that can outperform inflation. Everyone will feel like they are being squeezed hard because they will all be hit. If nothing changes, it will seem like a tragedy to lower-income households.
The political reaction should undoubtedly concentrate on that, but many middle-class individuals will also experience significant hardship as a result of the expected increase in their cost of living. Low-income households would have the hardest difficulty coping with the country’s overall pressure throughout 2022. Additionally, if inflation becomes out of control, the government may adopt a contractionary fiscal policy. These actions, including raising interest rates and raising borrowing costs, could hinder economic growth.
Local governments buy water and electricity to resell to their constituents. Additionally, it must provide sanitary services, such as treating sewage and purifying water or else outsource the job at a cost. It must collect sufficient revenue to cover the difference between the fiscus allocation it receives and the budget it sets for service delivery. Municipalities must be managed like businesses if they are to succeed. Any company that wants to know how its revenue is generated and how it is made up must have a revenue model in place. Understanding how this money is produced and the crucial levers of the revenue value chain that need to be carefully handled, are crucial. Like in any organization, knowing your product lines and how well they sell is essential to carrying out your sales strategy and generating the necessary revenue. To execute reforms, local governments must have the resources and political will to do so. In order to adopt the required legislative and institutional changes and boost revenue, they should also garner support from urban residents.
Municipalities have suffered significant revenue losses as a result of several persons abusing the poorly run indigent registers and enjoying free services intended for the poor. Utilizing data from a variety of sources, lifestyle audits are a practical approach to monitoring impoverished registers on a budget. In order to prevent non-payment for rendered services, it is crucial to keep an eye on how much free basic services are being used by persons who have been designated as poor. It is vital for local authorities to keep open and warm relations with the public. When customers are kept close, they tend to have empathy for the suppliers and develop an affinity for them. It is this affinity that will stir the urgent need to pay the invoice or statement the moment it reaches the customers. The municipality can build this relationship between itself and its customers by responding expediently to their service needs, resolving any queries, making it easy for customers to pay the municipality and if necessary, reminding the customer to pay their bills.
To do this, local governments themselves make little effort to increase their own earnings from affluent households, enterprises, and from service fees. As a result of requesting permanent write-offs, many towns become more reliant on government bailouts.
Therefore, the nation must first consider how much revenue autonomy is required because real revenue autonomy is a prerequisite for effective fiscal decentralization. The local government is fully aware of the citizens’ constitutional right to obtain power and water. Therefore, before debts are written off, these motions must be submitted to the general public.
