The report highlights the need for improved arrangements for financing urban infrastructure, given how dysfunctional infrastructure systems are in so many sub-Saharan African cities. Using a fairly broad definition, land-based financing is being applied quite widely in the form of in-kind contributions by property developers. However, instruments conceived typically as some sort of tax or fee for infrastructure have been ineffective in creating infrastructure improvements. Overall, the scale of finance made available through these means, in relation to the need, remains small.
Yet there is potential to improve the financing of infrastructure through land-based financing measures. Development charges have a big part to play considering how rapidly cities are urbanising. As with any land-based financing instrument, though, the success of a development charges system will depend on how conducive the policy and governance frameworks are to its operation in a particular country or city.
The conclusions are negative in relation to the potential of land-based financing to fund infrastructure serving poor households. At best, land-based financing should be aimed at maximising funding for infrastructure to commercial and residential property for middle- to high-income households. This will at least avoid having to subsidise infrastructure for these developments and hence release other funding sources for infrastructure for the poor, including slum upgrading. It is, however, far-fetched to think that funding all middle- and high-income residential and commercial or industrial developments’ infrastructure through land-based financing will result in enough money to finance infrastructure to support low-income development. Even with these measures in place, a severe shortage of funding for services to poor households will remain. Land-based financing, which ensures that property development for the well-off pays its own way and is not effectively subsidised by the state, is a necessary step towards freeing up finance for capital investment in infrastructure that serves the poor.
Palmer, I.; Berrisford, S. Final report on land-based financing for urban infrastructure in sub-Saharan African cities. African Centre for Cities, Cape Town, South Africa (2015) 60 pp.