Fiscal autonomy of

LAW urban councils in

Zimbabwe: A critical
DEMOCRACY analysis
& DEVELOPMENT
Sylvester Marumahoko
Doctoral Candidate, Faculty of Law,
University of the Western Cape

Yonatan Tesfaye Fessha

Senior Lecturer, Faculty of Law,
University of the Western Cape

1 INTRODUCTION
There is a growing realisation in
Zimbabwe that urbanisation has
overstretched the ability and efforts of
central governments to serve from the
centre, giving rise to the search for a
robust decentralisation policy that vests
urban local governments with some
level of autonomy.1 In this context
decentralisation has become critical in
the quest to respond to the varied
service delivery challenges brought
about by increasing urbanisation.
However, efforts to capacitate urban
councils through decentralisation are
futile if urban local government lacks
the necessary financial means to fulfil its
responsibilities.
The nature and extent of fiscal
autonomy enjoyed by urban councils in

VOLUME 15 (2011)
1Fjeldstad “Fiscal decentralisation in Tanzania:
For Better or for worse?” (2003) at 133.
DOI: [Link] Page | 37
ISSN: 2077-4907
 LAW, DEMOCRACY & DEVELOPMENT / VOL 15 (2011)

Zimbabwe is a matter of debate. Current thinking in central government is that Zimbabwean

urban councils already have at their disposal boundless fiscal powers and that they are in a
strong position to mobilise resources for service delivery programmes. 2 It is alleged that the
assignment of any further fiscal autonomy to urban local governments will threaten equitable
development.

On the other hand, there are those who hold the view that urban local governments in
Zimbabwe lack fiscal autonomy. They argue for the assignment of greater fiscal autonomy to
this level of government.3 They point to the failure of urban local authorities to absorb and
deal with the challenges resulting from rapid urbanisation. The lack of adequate fiscal
autonomy, they argue, explains not only the obsolete infrastructure that characterises urban
areas but also the poor delivery of social goods and services to ratepayers. This overall
degeneration is evidenced by poor roads, lack of clean water and a lack of capacity to collect
refuse. Some even suggest that there is a political dimension to the failure by central
government to give more fiscal autonomy to urban councils. This relates to the fact that an
opposition party, the Movement for Democratic Change (MDC), now controls all thirty-one
urban councils in Zimbabwe. 4 The strategy used by the former ruling Zimbabwe African
National Union PF (ZANU PF), some argue, is to undermine urban councils by denying them
revenue streams to carry out service delivery in order to present the MDC as an unviable
alternative to ZANU PF.5

As the foregoing suggests, there is no agreement regarding the level of autonomy to

be enjoyed by urban councils. This article seeks to determine the extent to which the
current system of decentralisation entrenches the financial autonomy of urban councils
in Zimbabwe. In this regard the article will analyse the provisions of the Urban Councils
Act (Chapter 29:15) of 19966 as they relate to the characteristics of local government
financing.
The argument is organised as follows. First, it discusses salient features of fiscal
decentralisation for urban councils in Zimbabwe in a historical perspective, covering
the period from 1890 to 1996. In particular it discusses, in broad terms, the types of
local government, the powers of urban councils, and the sources of revenue provided
for in the Urban Councils Act of 1973 (Chapter 214, thereafter referred to as the UCA).
The article then proceeds to its main thesis and attempts to evaluate the fiscal
autonomy enjoyed by urban councils in Zimbabwe. It does so by analysing the legal
framework for fiscal decentralisation for urban councils in Zimbabwe as provided for in
the Urban Councils Act of 1996 (Chapter 29:15). It concludes with some

2 Ministry of Local Government “Fiscal autonomy for urban councils?” (2008) at 2.

3 See Ministry of Local Government (2008) at 8.
4 IDAZIM Local governance in transition: Zimbabwe’s local authorities during the inclusive government

(2010).
5 Bland “Zimbabwe in transition: What about the local level” (2010) at 8.
6 Legislation in Zimbabwe, except for subsidiary legislation such as statutory instruments and regulations,

is identified by way of chapters and classified in accordance with the subject matter. In this regard, the
Urban Councils Act is referred to as Vol. 15 of Chapter 29.

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 FISCAL AUTONOMY OF URBAN COUNCILS IN ZIMBABWE

recommendations which will hopefully foster debate about local fiscal autonomy in the
context of the constitution-making process that is currently underway.

2 FINANCIAL AUTONOMY FOR URBAN COUNCILS: A HISTORICAL

PERSPECTIVE (1890-1996)
No urban local authorities existed at the time of the formation of the first recorded
urban settlement in Harare, then known as Salisbury. In the period between 1890 and
1923 Zimbabwe, then known as Rhodesia, was run by a private company, the British
South Africa Company (BSACo). This company set up the Salisbury Sanitation Board in
1892 in response to pressure from residents of the emerging town who were worried
about sanitary conditions. The Board can be described as a single-purpose urban local
government structure as its function was only refuse removal and management. 7 The
need for similar boards was evident in other fast-emerging towns. Building on the
experience of Harare, other sanitary boards were set up in 1894 in the urban centres of
Bulawayo, Mutare and Gweru. As in the case of Harare, the BSACo appointed three
people to the sanitary boards. While the boards were confined to sanitation issues at
first, they later evolved into what is the equivalent of the present day urban councils as
they became responsible for service provision in general.
The boards were subordinate to the BSACo in that their members were appointed by
and reported to the company. They were made up of four elected members and three
members nominated by the BSACo. With no executive power and heavy dependence on
the company for funding, they were generally subservient to the BSACo. What was clear
in 1891 was that the BSACo was reluctant to treat the Salisbury Sanitation Board and
other similar boards as “local government in the making”. This was most notable in the
delay in according the board legal status to facilitate service provision. 8
There appeared furthermore to be reluctance on the part of central government to
link the institutional design for the new urban local government structure to
sustainable funding models. For example, the Salisbury Sanitation Board’s scope of
unfunded mandates was later increased to include water supply, public lighting and
“native housing”. It was not until 1897 that the Salisbury Sanitation Board was accorded

7 A single-purpose urban council is a municipal body established with a mandate to provide a single
service; see Steytler “Comparative conclusions” (2009) at 399. Examples of other single purpose urban
councils are found in the United States, and to a lesser extent in Canada and Switzerland. In the United
States, they perform important functions and provide services such as portable water, wastewater
treatment, transit, housing and port services. [The most important of these are the school districts – it is
not clear how this sentence fits with the rest].
8 The delay in setting up the enabling legal framework is interpreted by some as an indication that urban

local government was grudgingly established; see Hlatshwayo “Local government in Zimbabwe” (1998) at
240. In 1897 Harare and Bulawayo became fully fledged urban councils whose members were directly
elected. There was no change in the status of urban councils up to 1923 when the Company’s
administration was terminated on the granting of self-government to Rhodesia. This happened after a
majority of those voting in a referendum chose self-rule rather than being incorporated into the Union of
South Africa.

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some form of funding mechanism through access to loans from the market. Even then,
central government had to approve its borrowing powers. In 1898 the Board was given
authority “to levy an annual rate of ten shillings on the owners of every plot in the
township”.9 A year later, the sanitation boards of Harare, Bulawayo, Mutare and Gweru
(also referred to as town councils) were given the power to raise fees in exchange for
providing additional services such as water, electricity, and housing.10
The phenomenal growth of towns, which was largely attributed to the period of
industrial growth that urban areas of Zimbabwe experienced as a result of the Second
World War,11 necessitated the need for an increase in the number of urban councils. In
response, city council status was conferred on seven urban councils, including Harare
and Bulawayo, in 1967.12 During that period 26 town management boards and three
local committees were established to provide services in the smaller towns. This,
however, did not bring any significant change in terms of financial status. The city
councils continued to be subservient to central government, their revenue and
expenditure powers being subject to regulation by central government. The boards and
committees likewise continued to rely on central government for funding.
From the foregoing it is clear that, between 1890 and 1973, a pattern of central
government domination of urban local government fiscal powers characterised the
centre-local relationship. Local government was subordinate to central government in
that its revenue powers were validated by the centre.13 The centre increased this
subordination by entrenching its use of intergovernmental transfers as a tool to control
urban councils. Thus, roughly fifty percent of the revenue of urban councils, about $4
million, was derived from government subsidies. 14 In 1967, urban councils also
received, albeit at a decreasing rate, block grants on a formula basis varying according
to the amount of rates collected. The increased reliance on transfers adversely impacted
on the local autonomy of the urban councils. The enactment of the UCA came at a time
when it was becoming increasingly evident that structural and institutional changes
were needed to strengthen the institution of urban councils and to ensure that
financing models for local government adapted to the challenges posed by
urbanisation.15 As will be contended in subsequent paragraphs, however, the enactment

9 Nhemachena GC & Matongo A “Review of the decentralisation policy and funding mechanisms for urban
councils” (2000) at 3.
10 See Nhemachena & Matongo (2000) at 4.
11 Marsh et al “Local government in Rhodesia” (1974).
12 See Marsh et al (1974). As we shall see later, this hierarchy of urban councils was maintained in the

1973 and 1996 Urban Councils Acts. The elevation and graduation of urban councils has been a feature
associated with Zimbabwe urban councils since the early days when the country was under company
rule. The lowest level of urban councils consists of local boards, followed by town councils, municipalities
and cities. It can be argued that the Salisbury Sanitary Board was the equivalent of the present day local
board. It was the lowest order in the hierarchy of urban councils.
13 Passmore G “Historical rationale of the policy of community development in the African rural areas of

Rhodesia” (1979) at 93.

14 See Passmore (1979) at 93.
15 See Nhemachena & Matongo (2000) at 5. In total, the UCA was organised into 271 sections and four

schedules. In broad terms, the UCA provided for the establishment of municipalities and towns, the

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 FISCAL AUTONOMY OF URBAN COUNCILS IN ZIMBABWE

of the UCA did not improve the status of urban councils since the latter remained
subservient to central government.
The major sources of revenue provided for in the UCA included rates on land and
property service charges and fees charged for services as well as penalties and fines. 16
Other sources were license fees, supplementary charges, plan approval and
development fees, profit from revenue-generating enterprises, lease fees, proceeds from
land sales, rental fees and interest on investment.17 The most productive source of
revenue was property rates. Property rates were a viable source of revenue raised on all
non-residential properties. 18
Generally speaking, the sources of revenue assigned to urban councils under the UCA
were insufficient to the extent that own revenue accounted for only around 30% of
expenditure on average. Central government domination of revenue powers of urban
councils was also evident in the assignment of inelastic and low-yielding sources of
revenue to urban councils. Lucrative sources of revenue, including customs duty, excise
duty and value added tax, were exclusively retained for central government. The limited
sources of own revenue meant that urban councils had to rely on intergovernmental
transfers to finance their mandates.
Despite the vital importance of intergovernmental fiscal transfers to urban council
functioning, neither the UCA nor any other legislation sought to govern the coherent
appropriation of intergovernmental fiscal transfers to urban councils in a transparent
manner.19 This meant that central government exercised unfettered discretion in the
appropriation of intergovernmental transfers, choosing at will the urban councils that
benefitted. Budgetary support went towards projects decided on by central

administration of municipalities, the conferring of city status on urban councils as well as the powers and
functions of urban councils. The Act reserved power to the President to dispense with or modify any
provisions in the Act once the President was satisfied that such action will not prejudice anyone. The Act
assigned authority to the Minister of Local Government to administer the UCA. An example of such
intrusive powers is contained in s 184(1)(a) of the UCA which gave a “blank cheque” to the Minister of
Local Government to regulate the financial processes of urban councils.
16 Section 178(1) of UCA; s 217 of UCA. Service charges were paid by urban residents in exchange for

council services consumed such as refuse collection, sewer and effluent removal, health care and water
consumption (s 178(1) of UCA). Fees were levied for use of council amenities such as schools, bus termini,
caravan parks, bus entry, street parking, cemeteries and crematoria. Penalties and fines were raised from
those caught violating council by-laws (s 178(1) of UCA) Examples of violations included constructing
unapproved buildings, illegal parking and environmental pollution. License fees were paid in exchange
for permission for activities incidental to owning a dog, bicycle, motor vehicle and trading shop within the
jurisdiction of an urban council
17 Coutinho “Sources of local government financing” (2010).
18 The growth of non-residential property pushed property and land rates to the frontline of local

government financing policy. As a result, rates for non-residential property and land constituted between
20 to 30 percent of council revenue (see Nhemachena and Matongo (2000) at 6). However, state land and
properties were exempt from property rates.
19 See Nhemachena & Matongo (2000) at 9. In 1993 the government transferred funds to urban councils

providing health care in the form of reimbursements for expenditure on capital development. Health
grants were reduced from 13% of the budget in 1995 to 5% in the 2001 budget. This left councils to fund
the balance (to finance health expenditures) from very expensive overdrafts or unsustainable increases in
rates and other charges.

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government. The lack of constitutional instruction to guide the dispensing of financial

transfers also meant that the amount of transfers simply depended on the wishes of
central government.20
A practice that emerged in 1995 was the increasing use of conditional funding as a
tool to regulate urban councils by prescribing the parameters in terms of which the
funding was to be used. 21 In 1995 ZW$19 240 000 was disbursed in conditional grants
to urban councils. The disbursements constituted less than a third of the total revenue
collections of urban councils. Centralising tendencies were thus entrenched in that what
constituted “approved expenditure” was determined by the centre.
In addition, in order to entrench its oversight role, the centre in late 1996 began to
develop regulations and circulars informing the usage of the grants. 22 Urban councils
were therefore not only subject to stringent financial control of the funding they
received from central government, but also had to account for the way they used it. Any
future disbursement of intergovernmental transfers was predicated on a report
confirming that the guidelines and conditionalities imposed on the funds were fully
complied with. The Minister of Local Government was empowered under section 251(4)
of the UCA to deploy auditors to inspect the accounts of urban councils without the
consent of the urban local authority concerned. The Minister also had the authority to
review the audits done by council auditors.23 In order to intensify intrusive control, the
Minister of Local Government established a parastatal called the Urban Development
Corporation to audit the accounts of urban councils.24 The parastatal was furthermore
directly accountable to central government.
As the foregoing indicates, transfers to urban local governments have been viewed
more as a “favour” than an obligation.25 The transfers were detested by local
governments as they were tied to particular central government policy outcomes which
promoted financial dependence and policy subservience to the centre. Although the
transfers provided urban councils with budgetary support, the non-existence of an
independent institution responsible for determining the transfer and the absence of a
constitution-based formula, similar to the one employed in the Division of Revenue Act
in South Africa,26 entrenched local dependence and promoted inequitable asymmetry
between urban councils. In the absence of a constitutionalised or other agreed-upon

20 See Matongo & Nhemachena (2000) at 8.

21 See Matongo & Nhemachena (2000) at 8.
22 See Matongo & Nhemachena (2000) at 8.
23 Wekwete “Urban local government finance in Zimbabwe: The case of Harare City Council 1992”at 4.
24 See Wekwete (1992) at 4. Central government tried to justify the establishment of the parastatal by

claiming that it would assist urban councils in securing financial control and that it would offer cheaper
audit fees compared to auditors from the private sector.
25 Nyoni and Dingani “Assured revenue sharing method between central government and local authorities

including credit worthiness” (2000) at 21.

26 Section 214(1)(a) of the Constitution of the Republic of South Africa, 1996.

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 FISCAL AUTONOMY OF URBAN COUNCILS IN ZIMBABWE

formula prescribed for calculating the transfers, urban councils could not challenge
these allocations. 27
Local government financing arrangements could be entered into with the state, the
Local Authorities Pension Fund, a municipal medical aid society, medical aid fund or
another local authority.28 Additionally, with the consent of the Minister of Finance,
funding could also be raised from issue stock, bonds, debentures or bills. 29 Borrowing by
urban councils for purposes of financing recurrent expenditure was, however, not
provided for in the UCA. Instead, borrowing powers were authorised for long-term
capital development projects such as the acquisition and construction of permanent
works, the acquisition of immovable property and the acquisition of plants, equipment,
and vehicles. 30 In all these instances, urban councils were expected to secure the
approval of the Minister of Local Government.31 The procedure for accessing borrowing
powers was said to be bureaucratic in nature. For instance, it took as long as six months
before central government satisfied itself that a council met the conditions for
borrowing powers.32 Stringent regulation was often cited as the reason behind urban
councils’ failure to access private funding for the renewal of urban infrastructure. 33
The UCA rationalised the revenue-raising powers of urban local government but
failed to facilitate the assignment of full fiscal powers. The centre assigned revenue
powers to urban local governments at its discretion and could therefore withdraw the
assigned powers as it wished. Beyond the provisions of the UCA, the centre confirmed
its superiority by ensuring that urban councils would have to negotiate with it each time
they wished to develop new streams of revenue. Although not overtly apparent from the
provisions of the UCA, centralising influences dominated the dynamics of
intergovernmental financial transfers. Expenditure on certain budget lines were for

27 The argument for ‘an equitable share’ to nationally raised revenue began to manifest itself in 1995 as it
became clear that government grants were declining in real terms. Nyoni & Dingani (2000) at 21.
Arguments for an equitable share of nationally generated revenue have been influenced by the local
government policy financing model used in neighbouring South Africa. Section 227(1)(a) of the South
African Constitution (fn 26 above) provides that local government (and each province) “is entitled to an
equitable share of revenue raised nationally to enable it to provide basic services and perform the
functions allocated to it”.
28 Section 238(5)(a) of the UCA.
29 Section 238(5)(b) of the UCA.
30 Section 238 of the UCA.
31 The borrowing power application needed to be presented to the Minister of Local Government for his

approval (s 238(2)(c) of the UCA). The Minister of Local Government could refuse to approve the
borrowing power application unless certain conditions prescribed in the enabling Act were met (s 238(3)
of the UCA). The thinking was that unless local borrowing was regulated, urban local government could
end up overextending itself financially. The concern arose because central government was expected to
assume responsibility in the event that an urban council failed to return the money borrowed from
financial institutions (s 238(4) of the UCA). In practice, the Ministers of Local Government and Finance
jointly put their signatures to each borrowing power certificate, in the process committing central
government in the event that an urban council defaulted on its payment (see Ministry of Local
Government (2009) at 10).
32 See Nhemachena & Matongo (2000) at 9.
33 See Wekwete (1992) at 5. With the exception of two urban councils, the city of Harare (the capital) and

the city of Bulawayo (the second biggest city), urban councils were denied the power to borrow from the
private sector by 1992, signifying excessive control by central government on borrowing.

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example executed at the will of the Minister of Local Government. Moreover, the fiscal
powers of urban councils in relation to borrowing were under siege by the same
Minister. Most importantly, urban councils could not appeal against unfair treatment in
their quest for additional fiscal powers as the Minister of Local Government had final
authority over the administration of the Act. Generally, the centre continued to
dominate the dynamics of local fiscal powers under the UCA.

3 FISCAL AUTONOMY IN PRESENT-DAY ZIMBABWE (1996-2011)

3.1 Introduction
The foregoing historical narration has shown that urban councils lacked fiscal
autonomy during the period between 1890 and 1996. As we saw, the lack of fiscal
authority can be traced back to the early days when the first structure resembling an
urban council, the Salisbury Sanitation Board, was conceived in 1891. The failure of
central government to address the issue of the fiscal autonomy of urban councils is
furthermore evident from the status, profile and development of urban local authorities
between 1901 and 1973. Centralising tendencies dominated centre-local relations with
central government, often tilting the balance of power in its favour. The picture that
emerges during that period is one of a central government that is obsessed with its “big
brother” position in denying urban councils constitutional recognition and the
subsequent fiscal authority that comes with an elevated position.
As indicated, the story did not change with the enactment of the UCA of 1973. The
position of urban councils as subordinate creatures in the configuration of status and
fiscal power was sustained. There was no interest in providing for legal measures that
would narrow the gap between responsibility and expenditure. Rather, the expenditure
discretion of urban local authorities was tightened. The statutory provisions on the
approval of borrowing power applications strengthened the ability of the centre to
shape the local mandate of urban councils.
More importantly, the UCA of 1973 was inconsistent with government policies on
urban councils following the attainment of majority rule on 18 April 1980.34 Post-
independence policies sought to improve the services in formerly racially segregated
areas to match the standards enjoyed by those in affluent communities, where mostly
white people lived. The UCA of 1973 was deemed to undermine efforts to implement
post-independence policies that sought to break with the past and ensure that the
provision of services in urban areas does not take place along racial lines.35
Amendment of the UCA was therefore imperative. The 1980 amendment of the UCA
was meant to remove the racial element in the provision of urban council services in
line with the thrust of government to achieve true democracy by removing restrictions

34 Matumbike “Local government in Zimbabwe 1970-2009: Historical Perspectives and reflections on the
last four decades” (2009) at 9.
35 See Matumbike (2009) at 9.

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on tenure and representation.36 It also abolished the twin-city urban council system by
introducing the one-city concept,37 and brought about the integration of African
townships into the ambit of urban councils under a single tax-base.38
The most important development regarding urban councils came with the enactment
of the Urban Councils Act (Chapter 29:15) of 1996. This section seeks to evaluate the
fiscal autonomy enjoyed by urban councils in present-day Zimbabwe. It will do so by
engaging in an analysis of the above Urban Councils Act (hereafter referred to as the
1996 Act). The issue that needs to be determined is whether the 1996 Act endows
urban local authorities with the fiscal authority to translate income and expenditure
into concrete policy outcomes. An important development that shapes the discussion in
this respect is the constitutional framework for urban councils which will be briefly
discussed.
The Constitution of Zimbabwe, as amended in 1995, does not affirm the funding
arrangements for urban councils. In fact, the Constitution is silent on the establishment
of local government, preferring instead to recognise the existence of Provincial
Governors and Chiefs at sub-national levels of government. A notable feature of urban
local authorities in Zimbabwe, as noted before, is their lack of autonomous status. The
fact that the Constitution is not explicit on local government financing arrangements
therefore comes as no surprise. In the absence of constitutional status, the institutions
of urban councils are perceived as extensions of central government with no capacity to
make autonomous decisions related to finance. The lack of constitutional recognition of
urban local government is often cited as the main cause of fragile urban local authority
financing policy in Zimbabwe. The only attempt thus far at entrenching the fiscal
integrity of urban local governments presented itself in a draft Constitution which was
rejected in a referendum in 1999.39 The draft Constitution of 1999 provided for central
government funding of urban local authorities to enable them to carry out functions
assigned by law.

3.2 The Urban Councils Act of 1996

The major legislative development regarding fiscal decentralisation for urban councils
after the amendment of the Constitution in 1995 was the enactment of the 1996 Act,
which provides a regulatory framework for urban councils in Zimbabwe. The Act is
divided into 321 sections. Like its predecessor, it assigns the power of its administration
to the Minister of Local Government. The power to create and abolish an urban council
is reserved for the President. There are 31 urban councils serving urban communities in
Zimbabwe. In ascending order, there are local boards, town councils, municipal councils
36 Wekwete “The local government system in Zimbabwe: Some perspectives on change and development”
(1988) at 20.
37 See Wekwete (1988) at 21.
38 See Wekwete (1988) at 22.
39 The failed constitutional process was led by the current Chief Justice, Godfrey Chidyausiku. The draft

constitution of 1999 is commonly referred to as the Chidyausiku draft constitution.

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and city councils. Various issues are taken on board when considering the elevation of
urban councils to the different levels, including the size and density of population, the
extent to which the local authority provides employment opportunities within the city
and its environs, the total valuation of properties classified as commercial, retail,
industrial and administrative, the provision of social amenities, historical realities and
political considerations.40
The Act provides for the powers and functions of urban councils.41 Currently, 54
functional areas are mentioned in the Second Schedule, 42 comprising the operational
scope of urban councils in Zimbabwe. The functional areas have to be executed in terms
of the enabling legislation but in practice depend on the financial capacity of urban
councils. The functions assigned to urban councils can be divided into mandatory and
permissive functions, with the mandatory functions being those services considered
essential for any urban local authority. Examples of mandatory functions include road
construction and maintenance, water reticulation, environmental management, primary
health care, building regulation and enforcement of the protection of land-use.43
Permissive functions are those services the provision of which is at the discretion of
urban councils; for example, fire protection, parks, recreation, cultural facilities,
libraries and provision of cemeteries. Content is given to the 54 functional areas of
urban local authorities by policy statements, statutory law and on some occasions, court
judgements.44
With regard to fiscal powers, Zimbabwe is the prototype of a unitary state with the
most lucrative fiscal sources of revenue assigned to central government. Examples of
lucrative taxes accorded to national government include customs duty, excise duty,
sales tax, company tax and income tax. 45 Many reasons are given for the dominance of
central government in the fiscal powers of urban councils. Some of these relate to the
need for national unity, stability and equitable development. There is also a concern
that urban local governments could make regional disparities wider than they already
are if they are provided with unfettered access to additional sources of revenue. 46
Furthermore, it is argued that placing taxes such as customs duty and excise duty in the
hands of urban councils could create distortions in the economy. 47 Distrust in the ability
of urban councils to administer devolved fiscal powers is evident from the fact that the

40 First schedule (s 14) of the 1996 Act. On the other hand, there are 60 rural district councils which carry
out similar functions as urban councils. The Rural District Councils Act (Chapter 29:13) of 1996
establishes rural district councils. The Minister of Local Government administers both the 1996 Act and
the Rural District Councils Act (Chapter 29:13). Both the urban councils and rural district councils are
creatures of statute and therefore enjoy delegated powers.
41 Section 198(1) of the 1996 Act.
42 Second Schedule to the 1996 Act.
43 Section 198 as read with the Second Schedule to the 1996 Act.
44 Section 198 as read with Second Schedule to the 1996 Act.
45 Section 101 of the Constitution of Zimbabwe of 1995.
46 Ministry of Local Government “Budget guidelines for 2010: All Local Authorities” (2009) at 9.
47 This is the response of the ruling party (ZANU PF) to suggestions from ZAPU, a regional opposition

party, that the current constitution-making process should result in the devolution of fiscal powers to
provinces and local governments.

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 FISCAL AUTONOMY OF URBAN COUNCILS IN ZIMBABWE

power of the Minister of Local Government to regulate local government financing is

entrenched in the 1996 Act.48
As indicated earlier, urban local governments in Zimbabwe derive their fiscal powers
largely from the Act which is administered by the Minister of Local Government.
Additional fiscal powers of urban local government are found in other Acts which are
not administered by the Minister of Local Government.49 The present article focuses on
the 1996 Act and discusses, first, the legal framework for revenue, followed by the legal
framework for expenditure. This is followed by an examination of the enabling
framework for borrowing by urban local authorities. Intergovernmental financial
transfers will be discussed in light of current practices, since the Act does not make
provision for it.
3.2.1 Revenue
Sources of revenue include property taxes, fees, intergovernmental transfers and, to a
certain extent, borrowing. As the subsequent discussion will show in more detail, the
sources of revenue are subject to the direction and manipulation of the Minister of Local
Government. Another phenomenon is that these sources are inadequate to meet the
expenditure demands facing urban councils.
Section 269(1) of the 1996 Act provides for property taxes as a source of revenue for
urban local authorities. Despite the fact that property taxes are easier to administer at
the local level, seeing that properties are a visible, fixed and a clear indicator of a form of
wealth, a major area of concern has been the inability of many urban councils to collect
property rates.50 Inadequate data capture has meant that many urban councils are
losing revenue. Yet another challenge urban councils face in collecting property rates is
their failure to set up rating zones and rating units to be assigned to residential
properties for rating purposes.51 In addition, the exemption of state land and
government buildings from the payment of property rates diminishes further the
revenue that accrues to urban councils.52 It is estimated that, on average, urban councils
are losing between 5% and 7% of revenue as a result of the exemption of high-value
government properties, such as office blocks. 53
Fees are the other major source of revenue for urban councils. For example, section
219(1)(a)(1) of the 1996 Act provides for the collection of fees in exchange for the
removal of refuse from properties of ratepayers. Fees for the delivery of water,
maintenance of cemeteries and primary school fees are other important sources of

48 Mushamba “The powers and functions of local government authorities” (2010) at 114.
49 Examples of such Acts include the Water Act (Chapter 20:22), the Education Act (Chapter 20:04), the
Land Survey Act (Chapter 20:12), the Electricity Act (Chapter 13: 05), the Liquor Licensing Act and the
Roads Traffic Act (Chapter 13:11).
50 See Coutinho (2010) at 73.
51 See Coutinho (2010) at 73.
52See Coutinho (2010) at 73.
53 See Coutinho (2010) at 73.

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revenue.54 In addition, section 96(3) of the 1996 Act authorises urban councils to run
health-care facilities.
Generally speaking, however, the fees do not generate adequate revenue for most
urban local authorities. This is attributable to a number of problems. For example,
water user fees are normally set at sub-economic levels as urban local authorities
attempt to subdue consumer backlash. As a result, the majority of urban local
governments in Zimbabwe do not use the cost recovery charging systems which tie the
amount of money paid directly to the water consumed. 55 Added to this is the scenario
presented by different political groups grappling for power who often use ratepayers’
concerns about high water fees for political gain. For example, there is often political
pressure on the local tax administration to relax user fees and revenue collection in
periods leading up to elections.56
There are also other problems associated with charging fees. For instance, payment
of refuse fees is erratic as residents protest the failure of urban councils to offer a
sustainable service.57 Clinic fees are also not determined on the basis of full cost
recovery. It is said that clinic fees charged do not even come close to recovering a
quarter of the cost of health drugs in stock.58 This leads to a situation where primary
health care is subsidised by other cost centres within urban local government.59 The
situation is similar with cemetery fees 60 and primary school fees.61
Urban councils’ capacity to raise revenue from fees is further limited by the fact that
they have to seek the Minister of Local Government’s approval for any tariff imposed in

54 Section 219(1)(a) of the 1996 Act.

55 See Coutinho (2010) at 74.
56 Jonga & Chirisa “Urban local governance in the crucible: Empirical overtones of central government

meddling in local urban councils affairs in Zimbabwe 2010” at 8.

57 See Coutinho (2010) at 74; s 229(2) of the 1996 Act. Although refuse collection fees are a viable source

of revenue for urban local authorities, residents do not always settle their accounts on time in protest
against erratic service. The Minister of Local Government has authority under the 1996 Act to reduce the
tariff for refuse collection. Residents and ratepayers associations make the situation worse by calling on
their membership to boycott payments until service delivery improves.
58 See Nhemachena & Matongo (2000) at 17. Urban local governments are constrained as their health fees

are subject to regulation by central government. The thinking of central government in prescribing health
fees seems to be that allowing urban councils to effect full cost recovery on primary health care
disadvantages poor citizens who may be pushed out of the health care system.
59 See Nhemachena & Matongo (2000) at 18.
60 See Nhemachena & Matongo (2000) at 19. The cemetery fees urban local authorities collect for

providing burial space do not come close to covering the administration costs which they incur. As is the
case with primary health care, other cost centres are responsible for sustaining cemeteries owned and
run by urban councils.
61Although provision of primary education is a local government function, not much revenue is generated

from school fees. In conformity with central government policy, urban local governments are not allowed
free rein in determining levels of school fees in the schools that they run. Council schools in urban areas
have to be sustained by other income generating accounts as is the case with primary health care and
cemeteries. One such income generating account that urban local governments used to sustain council
schools relates to “beer profits”. This was, however, made impossible when central government decided
to reduce this source of revenue by collecting excise duties on the beer produced. This effectively shifted
the burden of financing the service onto other urban council general taxes such as rates and
supplementary charges.

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suburbs where poor people live.62 Under normal circumstances, section 219 of the
1996 Act affords urban councils some measure of discretion over sources of revenue by
stipulating that a full council resolution is the basis for setting charges. However, the Act
compels an urban local authority to seek the Minister’s approval before executing a
tariff in a poor suburb. The objective of the policy is to ensure that the poor are not
excluded from municipal services by their inability to pay municipal charges for
services. Only when objections to the tariff have been resolved and the tariff has been
gazetted by the Minister of Local Government does the tariff come into operation in
poor suburbs.63 In as much as it takes into account the plight of the unfortunate, this
restriction on the powers of an Urban Council limits the revenue which urban local
authorities can raise.64 The situation would be different if central government assisted
urban councils with poverty relief in these areas.
The inadequacy of revenue collected by urban councils is evident in many ways. An
analysis of the budget of an urban local authority can reveal misalignment between
revenue and expenditure. In this regard, the existence of a budget deficit is as a general
rule compelling evidence of inadequate revenue. For example, the City of Harare
budgeted to collect revenue amounting to US$230.09 million in 2010 against an
expenditure target of US$275.63million. The result is a budget deficit of US$45.54
million.65 In practice, the actual deficit will amount to much more as revenue collection
invariably falls short of anticipated targets. Similarly, an analysis of the water account of
the City of Harare for the 2010 financial year shows that the City is set to collect a mere
US$77.33 million, or 33.6%, of total revenue of US$230.09. 66 This is a mere drop in the
ocean compared to the same period in 2001 when the contribution of the water account
was at around 45% of total council revenue receipts. 67 Property rates, which were
previously considered the cash cow of the City of Harare, are yielding low revenue:
US$47.96 million, or 20.8%, in the 2010 budget68 as against averaging 30% of the total
budget in the early 2000s. 69
Inadequate own revenue means that urban councils have to rely on
intergovernmental transfers. However, the Act does not provide for intergovernmental
transfers; the direct injection of annual central government funding takes place at the
discretion of central government. The allocation process is moreover masked by
secrecy, giving credence to claims that political considerations are at the centre of
disbursements. Central government has availed funding equivalent to around 3% of the

62 Section 219(1)(c) proviso (a) of the 1996 Act.

63 Section 219(b) proviso 1 of the 1996 Act.
64 Section 228(2) of the 1996 Act authorises urban local authorities to come up with by-laws with

revenue implications. The by-laws, however, must be approved by the Minister of Local Government.
Examples of by-laws with revenue implications include dog and hawker’s licenses. See Coutinho (2010)
at 75.
65 See Coutinho (2010) at 78.
66 See Coutinho (2010) at 78.
67 Ministry of Local Government: Analysis of performances of urban councils (2004) at 2.
68 See Coutinho (2010) at 78.
69 Ministry of Local Government (2010) at 3.

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budgets of the cities of Harare and Bulawayo in intergovernmental financial transfers

over the past ten years to assist the metropolitan cities overcome immense urbanisation
challenges. In money terms, US$250 000 was injected as budgetary support. Much of the
funding went towards renewal of urban infrastructure. 70 Specifically, the funding went
into the renewal of water supply and sewer infrastructure which had been
overwhelmed by rural-urban migration dynamics. 71 The grants were furthermore
conditional. The funding allocation was decided by central government officials who
determined the needs of each urban council in the absence of a constitutionally
protected formula. Although the intergovernmental financial transfers inject much-
needed revenue, the continued reliance of urban local governments on
intergovernmental financial transfers has entrenched dependence and subservience.
Central government grants to urban councils come in two forms: block grants and
tied grants.72 Block grants are unconditional in that central government does not specify
the use to which they are to be put except that councils have to account for the use to
central government.73 These grants are an important source of finance for implementing
projects identified by the villages and wards in the district.74 However, tied grants, as
the name suggests, come with strings attached in that they have to be spent on specific
services as indicated by central government or its agencies. 75 The grants are always tied
to specific policy objectives which increase central government’s oversight. These
grants are an important source of funds to finance services such as education, health,
roads and administration. Capacity to absorb these funds and to comply with central
government criteria is an important variable in determining future disbursements. 76
As already indicated, central government support for urban councils has been in
steady decline for the past two decades.77 Intergovernmental financial transfers began
to decline with the worsening of the macro-economic conditions caused mainly by the
flight of donors following the implementation of the land reform programme. The
decline of intergovernmental fiscal transfers is especially evident in what is usually
referred to as “public sector investment programmes”. In the late 1990s the term began
to be used to denote conditional grants to urban local authorities to assist with the
renewal of urban infrastructure.78 The grants were used in capital-intensive projects
such as expanding the sewerage works of urban councils, which private financiers were

70 See Ministry of Local Government (2009) at 4. Official records indicate that overall government support
for urban councils has been declining (i.e. from ZW$23 500 000 in1997/1998 to ZW$11 546 000 in 2000.
Government support was less than a third of the revenue needs of urban councils. The figures are made
worse by the observation that Zimbabwe experienced unprecedented hyperinflation during the period
under review. At one point inflation was pegged at 140 000%, thus rendering worthless the value of the
intergovernmental financial transfers.
71 See Ministry of Local Government (2009) at 4.
72 Zimbabwe Institute “Local government policy review” (2005) at 20.
73 See Zimbabwe Institute (2005) at 20.
74 See Zimbabwe Institute (2005) at 20.
75 See Zimbabwe Institute (2005) at 20.
76 See Zimbabwe Institute 2005) at 20.
77 See Nhemachena & Matongo (2000) at 6.
78 See Ministry of Local Government (2009) at 7.

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reluctant to fund because the balance sheets of most urban local governments made
them non-creditworthy. In terms of these programmes, central government officials
determined how much money was allocated to urban local authorities. 79 In addition,
stringent conditions accompanied expenditure, providing little room for communities to
be part of planning processes related to these programmes or even to express
preferences in respect of the prioritisation of projects.80 This type of funding was
discontinued three years ago because of funding challenges, with some projects
abandoned before completion.81
The drastic reduction in intergovernmental financial transfers has not been
accompanied by an increase in the revenue powers of urban councils. Urban councils
have nothing to replace the funding which is no longer coming their way. In as much as
this paralyses their operations, it has not prevented the centre from burdening urban
councils with unfunded mandates. The lack of constitutional or statutory standing for
intergovernmental fiscal transfers in Zimbabwe deprives urban councils of the legal
basis for holding central government to account for neglecting its obligation to disburse
equalising grants.
As the foregoing suggests, inadequate revenue dominates the context within which
urban councils operate. Inadequate revenue, in turn, results in poor service provision,
which is evident in poor water supply, refuse removal and sewerage systems.82 Besides
reducing the fiscal autonomy of urban councils, inadequate funding makes urban local
authorities subservient to central government in many ways. It increases the
commitment of urban councils to central government and exposes them to centralising
tendencies which scuttle efforts to link communities’ expenditures to own revenues. It
creates a situation in which urban councils increasingly look to central government to
bail them out financially, strengthening the perception that central government is a
superior level or form of government.83
3.2.2 Expenditure
A key aspect of good fiscal decentralisation would see urban councils not only
developing but executing their expenditure programmes with minimal central
government oversight.84 Consistent with modern trends of fiscally-empowered sub-
national units, the principle of subsidiarity needs to be reflected in the expenditure of

79 See Ministry of Local Government (2009) at 2.

80 See Ministry of Local Government (2009) at 3.
81 For example, the budget for the City of Harare for 2010 does not make provision for government

grants. It can be argued that this shows how sceptical urban councils have become about the ability of
central government to support them through intergovernmental financial transfers. Instead, the budget
makes reference to a loan of US$50 million, ironically obtainable from central government. In addition the
city will be financed by a loan of US$12.97 million, obtainable from private financial institutions.
82 See Coutinho (2010) at 84.
83 See Matongo & Nhemachena (2000) at 5.
84 United Nations Development Programme Primer “Fiscal decentralisation and poverty reduction”

(2010) at 6.

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urban councils.85 This is not the case with urban local authorities in Zimbabwe where
the intrusive nature of the Ministry of Local Government is not only legislated, but
permeates all local expenditure programmes in practice. For instance, section 311 of
the 1996 Act gives a blank cheque to the Minister of Local Government to intervene by
authorising investigations into any feature of the activities of urban councils. 86 Further,
by means of an obscure oversight authority, the Minister can dominate local
expenditure priorities and regulate such programmes by setting aside the expenditure
powers of urban councils. When this happens, expenditure priorities are authorised and
given form from the centre.
Consistent with national best practices, the Ministry of Local Government also
enforces a wage-service bill ratio of 30% to 70%.87 This ratio provides a formula for
managing the budgets of urban councils and releasing more resources towards capital
development. According to the formula, 70% of the budgets should be used to fund
projects such as water supply, sewerage works, road maintenance, street lighting,
refuse removal and primary health care, while only 30% should go towards salary
obligations and other recurrent expenditures.
Urban councils are compelled to demonstrate compliance with this requirement
before the Minister of Local Government gazettes their tariffs. This prevents the
creation of “salary urban councils”. Furthermore, the Ministry emphasises the need for
urban councils to pay modest salaries in order to spur economic recovery. 88 Despite
this, urban councils are urged to design and operationalise innovative organisational
structures that seek to reduce overhead costs. 89 The general idea is to restrict the
expenditure patterns of urban councils so that they do not have an adverse effect on the
national economy.90
Another feature of central government control is that the Minister of Local
Government can disrupt council priorities on expenditure even where they were subject
to legitimate public engagement processes. In addition, urban councils refrain from
exercising their full expenditure powers out of fear of the consequences of the oversight
role of central government. Central government controls on the use of finances
necessarily weakens the expenditure discretion of urban councils. The end result is that
they are constrained in their response to the express demands and preferences of
residents and are left to battle service delivery backlogs with little or no assistance from
the other spheres of government, yet are often blamed by residents for not being
proactive.

85 See UNDP (2010) at 3.

86 See Mushamba (2010) at 115.
87 See Ministry of Local Government (2009) at 2.
88 Modest salaries make it difficult to attract and retain professional staff. This, arguably, impacts on the

ability of urban councils to fulfil their service delivery mandate in the short term and to develop capacity
to fulfil other functions in the long term.
89 See Ministry of Local Government (2009) at 2.
90 See Ministry of Local Government (2010) at 2.

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It would appear that the institutionalisation of financial controls is a well thought-out

central government strategy to limit the autonomy of urban councils, especially as it
relates to their expenditure. These financial controls go to the core of the autonomy of
urban local authorities and create a situation where the ability of urban councils to fulfil
their mandates is paralysed.

3.2.3 Borrowing
Section 290(1) of the 1996 Act sets out a framework within which urban councils may
source external funding for expenditure programmes. Borrowing by urban councils for
recurrent expenditure is not permitted. Urban local authorities are only permitted to
borrow in order to finance capital projects subject to restrictions set out in the Act. The
list of capital projects for which they may borrow include the acquisition and
construction of permanent works or undertakings; the acquisition of immovable
property or any interest therein; the making of advances authorised by this or any other
Act; the payment of compensation; the liquidation of the principal monies owing on
account of any previous borrowings; the relief of general distress occasioned by some
calamity in the council area; as well as the acquisition of plant, equipment, vehicles and
the like.91
Section 290 of the 1996 Act outlines criteria which all urban councils must meet
before they are granted borrowing powers. The discretion to grant borrowing powers is
the joint prerogative of the Ministers of Local Government and of Finance. A council
resolution must be in place before the borrowing power application is presented to the
Minister of Local Government for his approval.92 The resolution to borrow money must
have been approved by the majority of the councillors in a full council meeting, without
the Mayor having used his casting vote. The borrowing power application should
furthermore state upfront the projects and amount of money to be borrowed and
whether any objections raised by members of the public have been resolved. The
application, which is then forwarded to the Minister of Local Government, must be
accompanied by objections received from the public. The law authorises the Minister to
use his discretion to approve part of or the entire application for borrowing powers. In
addition, the 1996 Act grants authority to the Minister to set conditions and restrictions
on the period of validity of the borrowing powers.
The provisions for borrowing in the UCA were adopted unaltered in the 1996 Act.
The institutions from which urban councils can borrow were for example maintained.
The legislated institutions from which borrowing powers can be obtained are the State,
the Local Authorities Pension Fund, a municipal provident fund, a municipal medical aid
fund, sick fund and another local authority.93 Further, with the authority of the Ministers
of Local Government and of Finance, funding can be raised from the issue of stock,
bonds, debentures and bills. Funds borrowed may not be used on projects other than

91 Section 290(1) of the 1996 Act

92 Section 290(2)(a) of the 1996 Act
93 Section 290(5)(a) of the 1996 Act.

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those for which the borrowing power was processed. Short-term borrowing by means
of a bank overdraft or short-term loan is granted only when the Minister of Local
Government has sanctioned the borrowing powers. 94
The regulation of sub-national borrowing entrenches the intrusive control of urban
local authorities by central government. Although borrowing should be regulated,
central government should not impede urban councils’ reasonable access to other
sources of revenue. Related to this is the fact that borrowing is restricted to capital
development. In a nutshell, the rights of urban councils to borrow for purposes of urban
renewal manifest worrying central government subjugation.

4 CONCLUSION
The Constitution of Zimbabwe does not recognise local government, nor does it extend
any form of autonomy, let alone fiscal autonomy, to urban local authorities. The
problem is compounded by the fact that the 1996 Act does not guarantee the financial
autonomy of urban councils. The provision of revenue powers in the 1996 Act was not
sufficient as the sources of revenue assigned to urban councils are not self-sustaining. In
the absence of high-yielding sources of revenue, urban councils have struggled with
their service delivery mandate. In addition, the revenue autonomy of urban local
authorities to decide on alternative financing options is restricted. Although the Act is
the basis for the statutory powers of urban councils to raise revenue, central
government regulation through the Minister of Local Government is a major
constraining factor. Urban councils are assigned weak revenue powers, leading to a
wide gap between revenue and expenditure figures.
The absence of constitutionally protected intergovernmental financial transfers is
another demonstration of the lack of local financial autonomy. In the absence of a
constitutional instruction for dispensing grants, central government has adopted an ad
hoc approach to intergovernmental fiscal transfers. The increase in conditional grants
as opposed to unconditional grants has further entrenched central government’s
dominance of local fiscal powers. The use of conditional grants is increasingly
associated with the central government agenda to influence the pattern of expenditure
of urban councils. Inflexible conditions attached to grants are at variance with the tenets
of good intergovernmental financial transfers. However, due to the fact that
intergovernmental financial transfers are not provided for in the Act, urban councils
have no legal basis for challenging central government to honour its obligation.
Limited financial resources in the context of the world-wide economic recession, as
well as the dire state of the Zimbabwean economy, also pose a threat to the financial
viability of urban councils. In the absence of a constitutional directive to prioritise local
spending, it is very likely that urban councils will continue to receive the crumbs which
fall from the table of central government.

94 Section 291 of the 1996 Act.

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Insofar as financial power has been transferred to urban local authorities, they enjoy
a restricted discretion on expenditure. The determination of urban councils’
expenditure powers is a function which is subject to central government approval.
Unless authorised by the Minister of Local Government, all expenditure is carried out
within the framework of a hard budget.95 The Act grants the Minister of Local
Government excessive powers to regulate the funding arrangements of urban local
governments. The Minister may set aside council decisions on financing arrangements
even where they were informed by valid public consultation processes. Some
expenditure cannot be executed without the Minister’s approval. In some instances the
Minister may suspend the expenditure powers of urban councils and opt to direct
expenditure processes from the centre. Although in legal terms some expenditure
authority has been devolved, the parameters prescribed by central government
severely limit the exercise of such authority by urban councils. Urban local government
expenditure authority is therefore nothing more than a delegated function.
Another dimension with significant implications for the fiscal autonomy of urban
councils relates to the failure of urban councils to exercise their right to borrow funds
from lending institutions. Although there is statutory provision for sub-national
borrowing, it cannot be exercised without the approval of central government. The
“right to borrow” is at the behest of the Minister of Local Government who may approve
which institution an urban council should borrow from. The right to borrow is
furthermore granted under the specific condition that such borrowing be used for
funding capital expenditure and not recurrent expenditure. In addition, the Minister has
the final word on the size of the loan sought. The process for borrowing power
applications is often criticised for being too burdensome. The regulation that all
borrowing by urban local governments be subject to clearance by central government is
clearly contrary to the spirit of creating financially sound urban councils.
Much needs to be done to ensure that urban councils are endowed with the
necessary financial resources and authority to fulfil their mandate. The decentralisation
of major functions in Zimbabwe has not always been followed by the decentralisation of
fiscal powers, resulting in unfunded mandates. While the statutory framework for urban
councils (the 1996 Act) assumes a form of financial delegation, fiscal autonomy is in
practice diminished by overriding national mandates, thereby rendering urban local
authorities fiscally accountable and dependant on central government.
The picture that emerges is one of an urban council sector that is, financially
speaking, under heavy barrage from central government. There is a need to develop
robust and clearly defined constitutional and legal provisions to support fiscal
decentralisation in order to strengthen urban local governments. An enabling
environment for fiscal decentralisation in Zimbabwe should begin with constitutional or
legal mandates for some minimum level of autonomy, rights and responsibilities for

95“Hard budget” is a term in economics that is used to refer to a budget that cannot be tampered with
once approved by, for example, the relevant urban council.

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urban local authorities. The constitutional review process currently underway in

Zimbabwe provides an opportune platform to constitutionally entrench urban councils
and their fiscal powers.

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