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KCCA’s new approach to raise funds

Kampala Capital City Authority deputy executive director Eng. David Luyimbazi Ssali said they have secured some funds to kick start the newly launched strategic plan.

                                       KCCA deputy executive director Luyimbazi

While the Kampala Capital City Authority (KCCA) has over the years had ambitious plans to improve service delivery and meet the increasing demands of residents, limited resource envelop has always been an obstacle.

For instance, although it had a sh5.59 trillion first five-year strategic plan implemented from 2014, most of what had been lined up was unaccomplished due to insufficient finances.

According to officials, only sh2.24 trillion worth of projects for the first strategic plan was realized.

Being a government agency, KCCA mainly depends on the government to finance its activities, and given the competing government priorities, the money is ever inadequate, constraining service provision.

In a bid to change that and ensure that the public gets the needed services and infrastructure on time, as planned in the recently launched $1.9b (about sh7.1 trillion) 2020/21-2024/25 five-year plan, KCCA intends to deploy a new approach to raise sufficient resources, according to its deputy executive director, Eng. David Luyimbazi Ssali.

Speaking during an interview recently, Luyimbazi said KCCA plans to unlock non-traditional sources of financing, where it will work with private service providers to fund the development of the various projects, so as to complete the traditional financing from the government. This is also commonly known as blended finance.

“We want to be able to provide facilities now, and not 20 years later because that is when government resources will be available. We know the government has limited resources, yet the demand for service provision in terms of roads, proper waste management, drainage systems, efficient transport, and health services, among others, is increasing drastically,” Luyimbazi said.

He added: “We want to unlock the full spectrum of investment sources through which services can be delivered because the traditional approaches cannot work anymore.”

KCCA intends to ensure efficient garbage collection and disposal services, improve water and sanitation services, improve the drainage system and its management, to avoid flooding, improve healthcare service provision and implement the Mass Rapid Transit System for efficient transport system in the Greater Kampala Metropolitan Area.

The others are the development of lake-front spaces – Luzira and Ggaba — to enhance the city’s attractiveness, promote water transport and lake tourism, convert slums into modern low-cost housing, as well as reconstructing and rehabilitating the road network.

According to Luyimbazi, the projects that are commercial in nature (have a revenue stream), such as the development of lake-front spaces, mass rapid transit system and garbage collection, especially in areas where residents can afford, would be tendered out to private players to invest and realize a return on investment.

“If the government alone is to finance our investment plans, it does not have enough money to be able to meet the needs of Kampala. However, it is also possible to unlock private sector investment. There are many export credit agencies globally that can be unlocked to invest in infrastructure in Kampala,” he said.

He added: “There are also development finance institutions that can invest in Kampala as long as we unlock the opportunities. There are also commercial developers that can invest with an intention to realis a return. We need to allow Public Private Partnerships (PPPs), joint ventures to invest in major infrastructure projects.”

It is only services that cannot generate revenue to sustain them and offer a return on investment, according to Luyimbazi, that will depend on government resources.

According to Luyimbazi, KCCA has some funds secured to kick start the newly launched strategic plan, including the $288m (about sh1.07 trillion) loan secured from the African Development Bank for road reconstruction and rehabilitation and about $77m (aboutsh339.78b) from the French government for street lighting.

He noted that KCCA is also processing about $150m from the United Kingdom Export Finance that is expected to be used for road construction and rehabilitation, as well as building flyovers.

Additionally, there is also between $30m-$40m (about sh112.16b-149.5b) from the Japanese government to finance the improvement of about 20 junctions in Kampala, as well as installing traffic signals.

The finance ministry spokesperson, Jim Mugunga, alluded to adopting the blended financing as one of the key options to fund development needs, saying it would enable the development of infrastructure developments in partnership with the private sector to lessen the servicing obligations on the taxpayer.

“Blended finance is affordable money; the sub-Saharan African countries have projects which ought to have been completed already, but the pockets are not deep enough. So, if you want the project delivered now and in an affordable manner, and off budget for you to get a breather, the solution is blended finance,” Mugunga said.

Fred Muhumuza, an economist, also said blended finance can help bridge the funding gaps, though he added that the country has a lot to do to harness the funds.

Muhumuza, however, alluded to risks involved in blended finance, such as the mismatch between the private sector and public sector expectations. He said the private sector is profit-oriented while the public sector is not.

“The private sector is coming in to make money while the public sector is looking at offering a service. The private sector always makes annual returns yet government does not. Although it makes annual budgets, there are no guidelines on when to achieve what,” he said.

Luyimbazi added that KCCA intends to improve the effectiveness and efficiency of its internal revenue mobilization methods to raise more revenue. “Automation will increase our revenue collection, but also reduce the losses. People have been losing money by paying to people who are not authorized to transact on behalf of KCCA,” he said, adding that it will also increase compliance.

KCCA currently collects about sh100b annually, but Luyimbazi anticipates that it will increase with automation to between sh400b and sh500b.

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