The current model of urban development financing is not working. At least not in Kenya.
This model of taxing people and then redistributing the income dates back to 4,000 BC in the city of Uruk when the Sumerians began to rely upon a central distribution centre. The concept subsequently spread across the world. To a large extent, it has worked in many developed economies but appears to be facing major challenges in developing ones.
The citizens pay for services in form of land rent, rates and other levies with a promise that the council, municipality or city will provide the services.
In case of developing countries, this has not worked very well. It is therefore justified that we think differently in seeking innovative and sustainable financing models for emerging cities.
This past week, I have had the privilege of brainstorming with some great futurists in the country in trying to envision how we could best develop and adapt sustainable solutions for our emerging cities.
They were all in agreement that the state of urban development needs a disruption. In this, they want a democratised form of development approach which, instead of pooling resources to provide public services, first utilises resources to address residents’ needs while a part of the resources raised goes into the usual pool for redistribution to other developmental issues.
They noted that the continued formation of residents associations is in itself a disruption and policy makers need to recognize them and begin to work together particularly bearing in the constitutional principle of public participation.
Some associations have indeed taken up work that the cities ought to be doing. We need to support the initiatives with incentives.
The good news is that the emerging technologies like blockchain can very easily re-distribute revenue collected to support both citywide projects and community or residents’ needs. In this disruption, the community-devolved resources will address specific issues like roads, water, garbage collection, street lighting and local beautification with city authorities acting as a regulator.
This will help formalize existing informal security arrangements that have worked in the majority of cases. But more importantly begin to develop more resilient cities that can withstand natural disasters like floods and droughts.
If the proposal for a liberalised environment is accepted, virtually all the local authorities will benefit from increased revenue since residents will ensure that everyone pays for the required levies. In essence, the public will become revenue collection watchdogs within their locality.
At the moment those who don’t pay city levies are in the majority. While Nairobi has City County has only 250 thousand ratepayers, Kenya Power and Lighting has more than 1.8 million connections.
At this rate of default, it will be difficult for the city to offer services. This is the value proposition the new approach will bring to the table. Some city districts, especially the poorer ones, may not raise sufficient resources to cover their own development.
This will mean that every rich neighbourhood will adopt its sister informal settlement areas.
For example, in Nairobi, Lavington and Karen could adopt Kibra, and Kagwangare; Loresho supports Kangemi; Muthaiga support Mathare and so on. Although these informal settlements are home to more than 60 percent of city residents, the area they occupy is very small.
A joint effort between the adopters and the city managers would easily provide for decent infrastructural services to the people living there. The biggest risk to this new way of thinking is the deep-rooted vested interests that will be difficult to deal with without strong political will. Virtually all the elected leaders spend more money in their campaigns than they could ever earn in their entire period in office.
They invariably recover their “investment” from public resources through many cracks in our financial systems. It will take many years to seal these cracks and as such it makes sense that at least some of the money raised though a liberalized citizen cantered development are used locally to provide meaningful development.
There doesn’t appear to be any option left for developing countries’ cities but disrupting their current financing development model and replace it with more innovative and sustainable models.