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Quantifying Inefficient Expenditure in Local Government: A Free Disposable Hull Analysis of a Sample of South African Municipalities

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  • Jugal Mahabir

Abstract

Municipalities in South Africa play a pivotal role in the provision of basic services to communities. However, local government as a sphere in the country is notorious for its spending inefficiency, which is cited as a major factor in service delivery failure. This paper quantifies inefficient expenditure at the local government level by estimating efficiency scores for a sample of 129 municipalities in South Africa from the 2005/2006 to the 2009/2010 municipal financial years. In essence, this paper examines the technical efficiency of municipalities by using the nonparametric free disposable hull approach and finds that 10 municipalities are constantly efficient over the period. On average, input efficiency scores range from 42% to 46%, suggesting that, in general, municipalities can achieve the same output levels with over 50% less resources. Quantitatively for the 2009/2010 financial year, this amounts to a total of R80 billion being spent inefficiently, which equates to R220 million being “wasted” per day.

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  • Jugal Mahabir, 2014. "Quantifying Inefficient Expenditure in Local Government: A Free Disposable Hull Analysis of a Sample of South African Municipalities," South African Journal of Economics, Economic Society of South Africa, vol. 82(4), pages 493-517, December.
    • Handle: RePEc:bla:sajeco:v:82:y:2014:i:4:p:493-517
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    2. Isabel Narbón-Perpiñá & Kristof De Witte, 2016. "Local governments’ efficiency: A systematic literature review – Part II," Working Papers 2016/21, Economics Department, Universitat Jaume I, Castellón (Spain).
    3. Ngobeni, Victor & Breitenbach, Marthinus C, 2021. "Production and Scale Efficiency of South African Water Utilities: The Case of Water Boards," MPRA Paper 106242, University Library of Munich, Germany.
    4. Francesco Aiello & Graziella Bonanno & Luigi Capristo, 2017. "Explaining Differences In Efficiency: The Case Of Local Government Literature," Working Papers 201704, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    5. Francesco Aiello & Graziella Bonanno, 2019. "Explaining Differences In Efficiency: A Meta‐Study On Local Government Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 33(3), pages 999-1027, July.
    6. Charmaine B. Distor & Odkhuu Khaltar, 2022. "What Motivates Local Governments to Be Efficient? Evidence from Philippine Cities," Sustainability, MDPI, vol. 14(15), pages 1-19, August.
    7. Ngobeni, Victor & Breitenbach, Marthinus C, 2020. "Technical Efficiency of Water Boards in South Africa: A Costing and Pricing Benchmarking Exercise," MPRA Paper 101501, University Library of Munich, Germany.

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