Enhancing the financial position of cities: Evidence from Kampala

Abstract

The city of Kampala in Uganda provides an illustrative example of how institutional and administrative reform, without widespread policy change, can generate substantial increases in municipal revenues. Through the implementation of more efficient digitalised systems, attracting higher capacity staff, and a focus on the ‘citizen as a client’, the city has managed to increase own-source revenues three-fold from UGX 30 billion (US$8.2 million) in 2010/11 to UGX 90 billion (US$25 million) in 2018/191, as well as crowd in more central government and donor funds. These reforms were made possible by strong leadership, a political window to act, and strong support from development partners. What was striking was the administration’s reflection that its most significant success was not in doing something new, but rather in doing its job as it is meant to be done. Furthermore, the reforms contributed to achieving an investment-grade credit rating in 2015, creating the potential for increased funding opportunities for large-scale investments in the future. This, coupled with recent regulatory change to remove the previously restrictive 10 per cent cap on borrowing, provides promising new avenues for attracting investments. However, a number of stakeholders noted concerns that, despite overcoming regulatory hurdles, the city is still not equipped with the capacity to develop bankable plans and projects. For development partners, the example of Kampala highlights the need for collaboration to build capacity, both in reforming systems and in designing implementable strategies and bankable projects worthy of external finance. However, concerns around the way development finance skews prioritisation of projects, as well as the difficulties in providing for ongoing maintenance which are often not accounted for in development partner investments, were also highlighted.