Financial Autonomy of Decentralized Local Authorities and Local Development

By Dr Hervé Ondoua, Bin Meh, Boris Andzanga Ndzana & Dr Jean Cédric Kouam (Download pdf version)

Financial Autonomy of Decentralized Local Authorities and Local Development in Cameroon

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Introduction

The financial autonomy of Decentralized Territorial Collectivities (DTCs) is today considered as the foundation of local governance. It confers decision-making power in financial matters to municipalities and regions, as well as a certain level of independence in the management of the resources at their disposal. In Cameroon, the general principles of financial autonomy are defined in the law on the General Code of DTCs, in particular in the Fifth Book, which repeals the law establishing the financial regime of local authorities and that on the financial regime of the State. Thus, financial autonomy should enable DTCs to develop by using their own resources in improving the living conditions of their populations. Despite these powers, DTCs still depend for the most part on income from municipal taxes and income transferred by the State. However, DTCs in Cameroon have real economic and financial potential but not a degree of financial autonomy that would allow them to accelerate the development of their locality. This reflection is aimed at local elected officials, political authorities, government authorities and civil society, with the aim of examining the effectiveness of financial autonomy in the face of the economic and financial potential of DTCs and their ability to implement their own local development projects. This article relates financial autonomy and local governance, on the one hand, and shows how financial autonomy is a factor of valorization of local resources, on the other hand.

Financial autonomy of DTCs and local governance in Cameroon

Several reflections agree on the fact that decentralization is an administrative management technique relating to “all the financial relations between the State and the Territorial Communities”. In doing so, the local governance of Decentralized Communities is understood as the set of techniques used to better organize the city and distribute local public resources. It is therefore necessary to establish the proper functioning of local authorities and a basis for sharing tasks, responsibilities and skills.

In Cameroon, local authorities have little financial autonomy because they have limited leeway to collect tax revenue. This right is exclusively reserved to the State. This is why the resources of the DTCs come mainly from the sharing of state taxes, from the proceeds of local taxes whose regime is set by the legislator, or from local taxes  whose rates can be determined within the limits set by the law.

Indeed, financial autonomy acts on local governance in two ways:

• First, it provides a foundation for local democracy by creating a link between citizens and local communities. In municipalities, the governance instruments generally used are budgets, management accounts and administrative accounts. These instruments make it possible to create confidence between the elected representatives and the populations if they are rationally used. But it is clear that the revenues of municipalities still depend heavily on grants and other transfers. However, these allocations and other transfers from the higher level (central State) are still not paid within the prescribed deadlines (per quarter). This reduces the visibility of the municipalities on the data relating to the predictability of their budget, something that undermines the achievement of the local development objectives enacted through the various tools and municipal strategic planning frameworks.
• Then, on the economic level, the fiscal autonomy granted to local authorities should enable them to link the amount of taxes they levy to that of the public services they offer. But here again, the State always poses a problem because the municipalities have enormous potential in terms of tourism, richness of the soil, border proximity with neighboring countries, etc. Almost all of this potential remains untapped depending on the municipality. Also, vast areas of land not yet registered remain included in the public domain of the State in several localities. The administrative procedures for registering these areas for the benefit of the municipalities remain complex.

Financial autonomy of DTCs and development of local resources in Cameroon

The financial autonomy of DTCs in Cameroon would contribute to valuing local resources in different ways:

• By reducing the disparities that exist between local communities. Indeed, public expenditure is a function of the size and density of the population. Each locality has its specificity (geographical, demographic , social, economic, etc.). Financial autonomy should therefore enable each locality to reveal its potential by investing directly in what it has that is better than the others. Thus, each locality can position itself according to the resource it possesses the most and improve the living conditions of its populations, which will lead to a strong diversification of the national economy.
• By contributing to the development of local and national value chains. It is for the DTCs to create a competitive advantage by generating value Developing value chains means identifying activities that generate margins for the locality and create value for local populations. Concretely, it is necessary to identify the links that make the locality gain or lose value and allocate the necessary resources to key activities with the aim of optimizing the locality’s competitiveness in one or more sectors. For this, it is necessary to have the funds provided.
• By strengthening the development of SMEs and the competitiveness of the economy. This will help create more jobs in the DTCs, support household income and reduce the poverty rate. To achieve this, financial autonomy could allow localities to reduce regulatory burdens and simplify tax procedures. This will encourage several SMEs to leave the informal sector.
• By helping Cameroon to take better advantage of This requires strong production in the DTCs in order to access a larger market. Indeed  AfCFTA offers important economic and social advantages that localities must seize to develop, and at the same time, develop the whole national territory. The World Bank (2022) speaks of nearly 18 million additional jobs and up to 50 million people lifted out of poverty. It is therefore an opportunity for the DTCs and for Cameroon.

Conclusion and proposed recommendations

The objective of this article was to examine the economic and financial potential of DTCs and to assess their ability to implement local development projects. It appears that local financial autonomy is the way in which DTCs can develop.

Thus, we can offer the following recommendations:

• DTCs should prioritize the implementation of projects according to the urgent needs of the population and their financial availability.
• The State should respect the deadlines for the repayment of taxes and other transfers to RLAs, which would help them to have the necessary means to define and implement development programs specific to their regions.
• Finally, the populations must pay their local taxes and collaborate more with the local authorities by contributing to the definition of priority projects. They could also contribute to local development through the definition of a participatory investment framework.