Business News of Monday, 14 January 2013
Metropolitan, Municipal and District Assemblies (MMDAs) want passage of the Local Government Finance Bill, otherwise known as the Municipal Finance Bill, to empower them to raise funds for various developmentprojects.
The approbation of the bill, they say, will enable them raise funds on the capital market and other sources for the construction of roads, the provision of pipe-borne water to thousands of people, and the construction of drainage and modern schools.
It will also enable them gradually wean themselves off central government assistance.
“The AMA held discussions with the Local Government Minister about it and presented a paper to him last year. The passage of the bill will make us [MMDAs] stronger and make it possible to finance various projects without having to rely too much on central government,” Dr. Alfred Okoe Vanderpuije, the Chief Executive Officer of the Accra Metropolitan Assembly (AMA), told B&FT in an interview.
Currently, the absence of the bill has left the MMDAs playing catch-up as pressure on social amenities soar with the increase in population. They have no option than to rely on internally-generated funds and central government support for tackling chronic problems like solid waste disposal and floods.
This increasing demand on the central government's scarce resources is what has necessitated the need for MMDAs to consider alternate sources of funds for infrastructure projects.
Conservative estimates by the government indicate that the country’s huge infrastructure deficit requires sustained spending of at least US$1.5billion per annum over the next 10 years to address the shortfall.
The deficit covers all the main infrastructure areas: roads, energy, water, aviation, housing, and ICT. In the housing sector, for instance, the government estimates that the country needs to build about a million more units to bridge the demand-supply gap.
The Municipal Finance Bill is currently under review by the National Bond Market Committee (NBMC) to address various challenges that have stalled its passage into law.
The Committee is seeking to incorporate a strong regulatory framework that will prevent MMDAs from engaging in multiple borrowing and incurring unsustainable debts -- which will ultimately be passed on to the central government.
The review also seeks to enhance the ability of MMDAs to identify and invest in revenue- generating projects using the bonds that they will sell.
The Securities and Exchange Commission has backed calls for the consideration of the bill by the in-coming Cabinet for on-ward submission to Parliament for passage.
Director-General of the SEC, Adu Anane Antwi, has pointed to the passage of the bill as the way forward to quickly address the huge housing deficit, poor roads, and the provision of potable water -- using the MMDAs as vehicles to raise funds.
He said MMDAs should be empowered to raise capital by issuing bonds to finance housing, road-construction and utility development projects, and to use the revenue that would accrue from such investments to pay the interest rate or yield.