Modernised Administration for Increased Autonomy

Digitising public administration at the local level improves efficiency and productivity. Faster and simpler revenue collection, especially, boosts transparency and increases municipalities’ autonomy by enhancing their ability to generate more local income in a systematic manner.

Ghana has a legal decentralisation framework that allows for the fiscal autonomy of the Metropolitan, Municipal, and District Assemblies (MMDAs) with important planning and coordination functions. The MMDAs are responsible for infrastructure and service delivery in key sectors of public life: waste management, transport, roads, housing, disaster prevention, births, and deaths, among others. However, Ghana’s MMDAs still depend on central government transfers to fund their development, generating only approximately 20% of their total budget with their own resources. Streamlined, fast revenue collection has the potential to improve their autonomy, but decision-makers need to ensure they invest limited public resources in the smartest way possible. Which policies have the potential to do the most good for every cedi spent?

Ghana Priorities, a collaboration between the National Development Planning Commission and the award-winning think tank Copenhagen Consensus, aims to identify the most cost-effective solutions for the country. Over the last year, 28 teams of economists analysed more than 80 interventions to find the ones that would yield the highest return for each cedi spent in economic, social and environmental terms. The results of these studies are now being published to provide inputs for discussions on public policy in areas spanning a wide range, from health care to transportation.

To study the digitisation of revenue collection in Ghana’s municipalities, researchers for Ghana Priorities have analysed the implementation of software called District Local Revenue (dLRev) to manage property rate collection.

dLRev is an open-source, web-based data tracking and revenue collection software. It is currently set up for property rates and business operating permits, but can also be used for other revenue items, including rents for district infrastructure, fees and fines, and investment. It is jointly developed and implemented by Ghana’s Ministry for Local Government and Rural Development (MLGRD) and the Governance for Inclusive Development (GovID) programme of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). Preconditions for the functioning of the software, e.g. standards for naming streets and assigning property addresses, were jointly created by the project partners over almost a decade.

With a digital address map of a district, a spatial database, and a fiscal cadastre of revenue items, dLRev is used to manage data, billing, and collection, and it has already been tested in nine municipalities that have been using the software throughout the year 2019. For the Ghana Priorities project, the researchers studied the cost and revenue data obtained from these nine municipalities to reach the average costs and benefits over a period of four years.

There are prerequisites anchored on Ghana’s legal and policy frameworks for spatial planning and local revenue mobilisation that municipalities need to satisfy in order to use the dLRev software, including developing spatial databases by implementing street-naming and property addressing and establishing fiscal cadastre from property valuation data. The researchers estimated the total cost for all the different components, including data collection, hardware costs, and the training of collectors, at GH￠ 489,000 for an average MMDA over the initial four years of implementation.

The benefits of dLRev are a faster data collection process, improved efficiency, and increased revenue for the municipalities. Before, the identification of business and property ratepayers was manual, lasting approximately 120 man-days per 10,000 parcels. With dLRev, the data collectors undergo training and use tablets to upload new information immediately to the address map, which reduces the time of data collection to 20 man-days per 10,000 parcels.

Prior to the introduction of dLRev, most assemblies also issued demand notices to clients for the payment of the rates, rents, and other bills, but most of them were hand-written. Even the distribution of bills posed a major challenge for the revenue collectors, as most buildings were not numbered. Therefore prior to dLRev, printing and distribution of bills in the sample municipalities ranged from 15 to as many as 80 days, with an average of 25 days. With the software, this time decreased to only 2 days for the average municipality. As a result, both the number of ratepayers and the compliance rate increased, and the revenue collected grew by an average of 54% in the first year of implementation. The total benefits of the implementation calculated for an average MMDA are GH￠ 4.3 million, which means each cedi spent on this intervention yields a return nearly nine times higher.

Introducing dLRev is not only cost-effective but a critical tool for better revenue management. The efficient taxation of properties has significant untapped potential for increasing local governments’ revenue collection and improving their autonomy. Modernising public administration locally can improve revenue mobilisation substantially, boost efficiency and decentralisation, and give municipalities the tools they need to deliver better services for all Ghanaians. 

This article was originally published in Ghana's newspaper of record - The Daily Graphic.