JABULANI SIKHAKHANE

The World Bank-backed programme to improve the workings of electricity and water utilities in eight metropolitan municipalities will be yet another test case for whether local government politicians and officials can respond to incentives to do the right thing.

Experience thus far — the most recent being the scheme offering relief to municipalities that owed billions of rand to Eskom — shows that most only respond to incentives to do the wrong things.

Just like the debt relief scheme, this new programme will run up against the interests of corrupt local government politicians and officials. Its timing also is bad, kicking off just as municipal elections loom.

The National Treasury and World Bank announced last year that they had come up with a new programme “to improve the accountability, financial health and operational performance of essential urban services” in the eight metropolitan municipalities. These are Buffalo City, Cape Town, Ekurhuleni, Johannesburg, Tshwane, eThekwini, Mangaung and Nelson Mandela Bay.

These municipalities are home to 22-million people — about 35% of South Africa’s population — and account for 85% of the country’s economic activity, according to the World Bank. Relative to other municipalities, metros have a more developed and stable revenue base. However, the metros (bar — with some qualifications — Cape Town) have had a decline in access and reliability of tradable services — electricity, water, sanitation and solid waste removal.

There are four drivers of the crisis: many years of underinvestment in operations and maintenance; weak revenue management and low collection rates; ineffective governance and fragmented responsibilities; declining infrastructure reliability and service quality, particularly for underserved populations.

The World Bank-backed programme seeks to address these shortcomings by offering the metros grants (incentives) subject to improvement in the provision of electricity, water and sold waste.

If the programme is to deliver on its promise, the looters must have fewer opportunities for “eating”. But therein lies the problem. Local government politicians and officials have demonstrated, time and again, that they are not enticed by incentives to improve the provision of reliable electricity and water supplies.

One of the Eskom debt relief conditions was that a municipality must ringfence all electricity, water and sanitation revenue until it had paid it to Eskom and the water boards. This would have snuffed out opportunities for corruption.

Also, politicians have become immune to electoral outcomes — the single most important incentive for politicians in a democracy. Rather, they are more persuaded by the corruption loot, a distortionary incentive.

First, the benefits of corruption incentivise municipalities to make decisions based on who will benefit from an investment and how large that benefit is. It’s no longer the impact of that investment on improving the quality of life and resilience of metropolitan residents.

Second, investment decisions that are informed by corruption weaken the very basis of socioeconomic development. As the National Planning Commission noted in 2012, development has never been a linear process. Development is messy and often characterised by advances, setbacks and plateaus.

The World Bank notes the fraud and corruption as well as political and governance risks in its lending agreement with South Africa. It says the political and governance risk is high because of “the multi-stakeholder nature of the sector” and the governance challenges in many of the metropolitan municipalities.

There’s also political instability, especially in municipalities that are run by coalitions. Municipal elections later this year also add a degree of uncertainty. Given all this, this new venture may go the same way as the debt relief scheme.

• Sikhakhane, a former spokesperson for the finance minister, National Treasury and South African Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.