To manage rapid urbanization effectively, African cities must enhance fiscal strategies and broaden revenue sources.
A two-day Experts Group Meeting in December 2024 to review and validate the Financial Performance Assessment Report of Nairobi City concluded with a call to African cities to ensure financial, fiscal and budgetary planning for proper resource allocation and development in the wake of increased urbanization.
The experts stressed the importance of financial and fiscal space diversification for African cities.
“African cities, particularly the capital cities, are expected to see an influx of urban residents in the near future. It’s important to prepare for this impending urbanization wave,” said Eshetayehu Kinfu, Head of Strategic Programmes Management in the Addis Ababa Mayor’s Office.
Discussing revenue collection and allocation, Godfrey Akumali, County Secretary and Head of County Public Service, Nairobi City County Government, said the City of Nairobi faces liquidity problems due to heavy dependence on national government funding.
“The county aims to diversify revenue streams by leveraging technology to improve efficiency in billing and collection. Updating the taxpayers’ registry is crucial to identify and track customers across all revenue streams in Nairobi,” said Mr. Akumali.
Noting the challenge of uncollected revenue faced by the city, Mr. Akumali stated that going forward, the city’s focus is to collect all due revenues without introducing new taxes, emphasizing the importance of capacity building in technology and internal processes.
He explained that the city is currently funded by national government contributions and its own revenue, which has grown from Ksh 7.8 billion (US$ 60.3 million) to Ksh 12.8 billion (US$ 99.06 million), with the goal of reaching Ksh 13 billion (US$ 100.6 million) by the end of this financial year.
“Nairobi has an annual budget need of approximately Ksh 20 billion (US$ 155 million), equivalent to the equitable share level, necessitating an improvement in its revenue sources,” he said.
“The strategy for increased revenue collection is through digital revenue collection, enhancing compliance through a customer-centric approach, and ensuring efficient use of technology.”
Mr. Akumali indicated that Nairobi City County has already started enhancing revenue collection, with a significant portion of revenues being collected digitally.
The goal, he said, is to ensure higher revenue collection without increasing the tax burden on Nairobi residents.
He stressed the need for more Nairobi residents to participate in the city’s development, as revenue is the basis for service delivery, and emphasized the importance of partnerships with the private sector to expand the revenue base and improve public service delivery.
Jenifer Wakhungu, Deputy Director of Local Transformative Finance at the UN Capital Development Fund (UNCDF), said national governments should simplify and popularize existing policies, enhance training for tech-savvy individuals, and improve resource mobilization and allocation.
She emphasized the importance of research to keep up with dynamic systems and alternative financing mechanisms, including working with private financial sectors and proper fiscal planning.
Ms. Wakhungu also highlighted the need for wealth distribution among regions, especially those rich in natural resources.
“Capacity building and introducing new financing instruments such as municipal bonds are key strategies for the development of cities in Africa,” she said.
She added that local governments should partner with international organizations such as the UN to explore financing for cities and new methodologies or instruments. She emphasized the need to simplify and popularize existing policies to make them more actionable.
The two-day meeting was organized in collaboration with UN-Habitat, the UN Capital Development Fund (UNCDF), and the Nairobi City County Government. It aimed to validate and enrich the financial assessment report of Nairobi City.
The review is part of an ongoing project, referred to by the UN as the Development Account, which seeks to support six selected cities in Africa–Addis Ababa, Dar es Salaam, Kigali, Lusaka, Nairobi, and Yaoundé–and assess their fiscal space limitations due to increased challenges in meeting development needs, including infrastructure, housing, healthcare, and education, in the post-COVID era.
Atkeyelsh Persson, Chief of Urbanization and Development at the ECA, noted that the ECA supports local teams in reviewing and validating the collected data, ensuring its accuracy, completeness, and reliability before proceeding with the analysis and report preparation for all the cities.
“This step is essential for maintaining the integrity of the financial assessment report and providing a sound basis for subsequent analysis and decision-making processes,” said Ms. Persson.
In 1997, the General Assembly established the United Nations Development Account (DA) to enhance the capacities of Member States and serve as a mechanism to fund priority capacity development projects designed to contribute to the implementation of long-term programmes of the United Nations Secretariat.
