Programmes, Practices, and Preconditions

There is increasing interest in the applicability of land-based financing instruments in subSaharan Africa. African cities are opportune sites to explore the potential of land-based financing. African cities government could better leverage the rising value of urban land to meet their revenue and infrastructure shortfalls. While there is interest in applying land-based financing tools in African cities, most cities are applying little more than the most basic property tax, and this with very modest success. The reasons for the limited use of land-based financing tools are both technical and political in nature. Where additional tools are being used, they tend to be one-off contributions, in cash or in-kind. The use of one-off contributions is largely because they are easy to administer. This paper argues that one-off contributions, while often relatively basic in design and implementation, are a useful tool in the African city context. These contributions enable a city government to meet some of its obligations to accommodate new growth and development while sharing the cost of doing that with the developers of land.

The Cape Town case demonstrates the potential of these tools. This research is based on research conducted in Cape Town between 2017 and 2019. It included a review of Cape Town’s regulatory framework for land development, subnational fiscal contexts, and infrastructure governance arrangements. It also included in-depth interviews with developers and city officials to ensure that the analysis reflects what is actually happening rather than what law and policy might dictate. As we show, in Cape Town, the two types of one-off contributions reviewed are the legally prescribed development charge and the emerging practice of requiring developers of residential properties to include affordable housing units. Through these cases, we show that impact and acceptability of these tools are linked to their programmatic design and their practical implementation. We highlight key issues which the Cape Town case surfaces, including those related to: certainty in how contributions are calculated; the scale of the contributions in the context of total need for revenue, infrastructure, and housing; the scope of the instruments; how the instruments engage with the spatial economy of the city; and questions related to the speed of development processes. These issues point to some of the important preconditions for ensuring that one-off contributions can, in fact, be useful and accepted instruments.

The working paper concludes with a discussion of the applicability of the Cape Town experience in the South Africa and sub-Saharan African contexts. We argue that in the South African context, the wider application of developer charges and inclusionary housing instruments are already underway. The potential to improve the operation of these contributions in other African cities is considerable. There is already a strong practice related to both building permit approvals and to negotiated in-kind contributions. However, before opting to introduce a new type of contribution — and, either formalizing or strengthening an existing one — it is essential to understand what happens in practice and what the interests are of different actors in the land development value chain (and how these might be affected by a change in the current system). In this sense, one-off contributions could be important instruments, but they must be understood ‘in context.’