The rationale for local fiscal autonomy suggests that local expenditure and local revenue generation should remain in close proximity. This is achieved through fiscal decentralisation to local government, to ensure efficient provision of local services that align with local needs, and to improve accountability to residents. Fiscal decentralisation has found resonance in developing countries through local government reforms, but in Africa fiscal decentralisation has been focussed mainly on revenue sharing, except in a few cases where some local fiscal autonomy has been achieved. Urbanisation in Africa is likely to continue (UN-Habitat, 2008), necessitating an increase in municipal service delivery which African cities must finance - hence the need for local fiscal autonomy. Local fiscal autonomy is arguably contentious for African cities, partly because provision of municipal services must be tempered with considerations of equity and redistribution to the poorer urban populations, and because inadequate welfare nets from national government do not subsidise the gap in municipal revenue. In the recent past, Kenya and South Africa adopted local government reforms in different forms that has yielded different forms of local fiscal autonomy. The paper conducts a comparative of local fiscal autonomy in municipal services provision in Nairobi and Johannesburg.

The supply or lack of services impacts on people's quality of life, and so the Constitution of South Africa and other strategy documents emphasise the provision of services to all South African citizens irrespective of colour or creed. The services are vast and the responsibility for provision is divided between national, provincial and local authorities. This paper focuses on the delivery of services whose responsibility and accountability lies with the local municipalities, including: water; electricity; sanitation and refuse removal. The paper also explores the background to the recent unrest in the country with a focus on Dipaleseng Municipality, looking at its socio-economic situation, and challenges which include poverty, economic stability and provision of basic services. Sources of data include the South African media, journal articles, relevant documents, websites and databases.

This report was prepared by the International Labour Office as the basis for discussions at the Joint Meeting on the Impact of Decentralization and Privatization on Municipal Services to be held from 15 to 19 October 2001 in Geneva.