For councils to operate as distinct local government entities, they need to have resources. In this discourse, I set out to describe the three main sources of revenue for councils in order to bridge the information gap that exist among different stakeholders regarding revenue sources of the council which in itself brings about a mismatch in expectations from such stakeholders and what councils actually deliver to the citizenry.
To begin with, Councils’ existence as local government areas came in the wake of implementation of National Decentralization Policy by Malawi Government since 1998. The policy defined the local government areas (35) which comprised districts, towns, municipals and cities with the view of improving service delivery to the communities. These local government areas have been the main implementing agents of Malawi Government Policies. These councils have been empowered through the Decentralization Policy and Local Government Act to implement the functions which have since been devolved from line ministries to the local government level. The Local Government Act second schedule defines the sources of revenue for councils to include: central government transfers, locally generated revenue and funds from Development partners as well Non-governmental organizations.
Central government transfers to councils include all those resources which are sent to councils in order for the council to implement sectoral policies at local level as well as operational resources which are given to councils to facilitate implementation for the same. The number of sectors that have devolved over time has grown from three in 2005/6 financial year to currently sixteen. Among these include: education, health, agriculture, water, gender, immigration, irrigation, trade, housing, National Registration Bureau (NRB) youth and sports. These are otherwise known as devolved funds. Central government transfers also include the funds which are meant for implementation of development projects in councils such as District Development fund (DDF), Infrastructure Development Fund (IDF), Constituency Development Fund (CDF) as well as Boreholes Fund. Urban councils are limited to IDF and specifically for cities they also access city roads rehabilitation resources (through Roads Fund Administration) as well. A typical district council gets District Development Fund, Constituency Development Fund and Boreholes Funds which vary across council depending on some selected parameters. There is no Constituency Development Fund that is allocated to municipals and town councils because the CDF are already conveniently attached to the district except for cities which are relatively bigger.
The second source of revenue for councils is locally generated revenue. Councils are empowered by the local government act 1998/2010 through to collect local revenue in their respective areas of jurisdiction. Five main sources of revenue include: Income from market establishments, income from commercial ventures, fees and service charges, licenses and permits and property rates. Only urban councils can collect from all these sources, but a typical district council does not collect property rates. These resources are used by the councils at that level without sending these resources to the famous Malawi Government Account NUMBER ONE. The LGA also defined, long term revenue sources that are expected to be ceded to councils as follows: Toll gates, casino and gambling fees, motor vehicle registration fees, fuel levy and industrial registration. These have up to now not been ceded to councils for different reasons.
Finally, the councils also get resources for implementing various projects through development partners as well as Non-governmental organization. These resources may be sent directly to councils or the relevant partners may donate in kind or in whichever way as agreed by the two parties. They may set the accountability systems as deemed convenient and consistent with Public Finance Management Act and related statues.
The current status for these revenue sources is around K73 billion using the 2020/21 budget estimates. Central government transfers were estimated around K53 billion, locally generated revenue was estimated to contribute K20 billion. In terms of projects coordinated directly by NLGFC (Social Cash Transfer, Enhanced Public Work Programme (EPWP) K893 million and K12 billion under Social Support for Resilient Livelihood Programme coming to a total of K13 billion was estimated to be disbursed to councils in the 2020/21 financial year. There is no concrete data for Development partners and Non-governmental organizations working in all the councils as they do not fund the councils through NLGFC.
A NLGFC our huge role has been to ensure that these public resources are used to improve the standards of the citizenry. Specifically, allocating central government transfer, monitoring the utilization of resources in accordance with Public Finance Management Act, ensuring that councils are optimizing their local revenue collection potential and ensuring financial accountability systems are in place. Due to the convenience of our institution and expertise, NLGFC is also coordinating implementation of various world Bank funded programmes such as Social Cash Transfer, Enhanced Public Works Programme, SSRLP and the recently launched Governance to Enable Service Delivery (GESD). The LGA also defined, long term revenue sources that are expected to be ceded to councils as follows: Toll gates, casino and gambling fees, motor vehicle registration fees, fuel levy and industrial registration. These have up to now not been ceded to councils for different reasons.
