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Local Municipality Productive Efficiency and Its Determinants in South Africa

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  • Nara F. Monkam

    (Department of Economics, University of Pretoria)

Abstract

The paper assesses the technical efficiency of 231 local municipalities in South Africa for 2007 and investigates the potential determinants of efficiency gaps among local municipalities in the country using the nonparametric Data Envelopment Analysis (DEA) and the parametric Stochastic Frontier Analysis (SFA) techniques. In relation to the DEA technique, efficiency scores are subsequently explained in a second stage regression model with potential explanatory factors using a Tobit regression model. The results show that on average, B1 and B3 municipalities could have theoretically achieved the same level of basic services with about 16% and 80% fewer resources respectively; the difference between the most efficient and the least efficient municipalities being quite substantial. The results also show that B4 municipalities could have theoretically achieved the same level of basic services with about 62% fewer operating expenditures. Furthermore, fiscal autonomy and the number and skill levels of the top management of a municipality’s administration were found to influence the productive efficiency of municipalities in South Africa. The paper findings raise concerns over the future of local municipalities in South Africa, especially B3 and B4 municipalities, about their capability to efficiently deliver on expected outcomes on a sustainable basis.

Suggested Citation

  • Nara F. Monkam, 2011. "Local Municipality Productive Efficiency and Its Determinants in South Africa," Working Papers 201120, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201120
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Brian Tavonga Mazorodze, 2025. "Modelling Municipal Cost Inefficiencies in the Frances Baard District of South Africa and Their Impact on Service Delivery," Administrative Sciences, MDPI, vol. 15(6), pages 1-27, June.
    2. Isaac Khambule & Oliver Mtapuri, 2018. "Assessing the role of Local Economic Development Agencies in KwaZulu-Natal, South Africa," Local Economy, London South Bank University, vol. 33(4), pages 438-455, June.
    3. Sugiyarto, Ardi & Lee, Boon L. & Wilson, Clevo, 2025. "Narrowing the gap: Dynamics of Indonesia's public expenditure performance in economically lagging districts," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 2299-2318.
    4. repec:eur:ejserj:34 is not listed on IDEAS
    5. Nara Monkam & Charles Shaaba Saba, 2025. "Fiscal Autonomy and the Path to Sustainable Local Economic Development: A Multilevel Municipal Analysis in South Africa," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(5), pages 7336-7362, October.
    6. Enrique J. Buch‐Gómez & Roberto Cabaleiro‐Casal, 2020. "Turnout, political strength, and cost efficiency in Spanish municipalities of the autonomous region of Galicia: Evidence from an alternative stochastic frontier approach," Papers in Regional Science, Wiley Blackwell, vol. 99(3), pages 533-553, June.
    7. Daniel Nkosinathi Mlambo & Mashupye H. Maserumule, 2024. "Constitutional and Legislative Frameworks for the Local Sphere of Government in South Africa: Analytical and Interpretive Perspective," Insight on Africa, , vol. 16(2), pages 211-229, July.
    8. Isaac Otoo & Michael Danquah, 2021. "Fiscal decentralization and efficiency of public services delivery by local governments in Ghana," African Development Review, African Development Bank, vol. 33(3), pages 411-425, September.
    9. Isaac Khambule, 2018. "The role of Local Economic Development Agencies in South Africa’s developmental state ambitions," Local Economy, London South Bank University, vol. 33(3), pages 287-306, May.
    10. Isabel Narbón-Perpiñá & Kristof De Witte, 2016. "Local governments’ efficiency: A systematic literature review – Part I," Working Papers 2016/20, Economics Department, Universitat Jaume I, Castellón (Spain).
    11. 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.
    12. Jam Ayanda & Bayat Mohammed Sayeed & Rulashe Tando, 2024. "Exploring Ethics in South African Municipal Procurement: Professionalism, Compliance, and Ethical Dimensions Interface," HOLISTICA – Journal of Business and Public Administration, Sciendo, vol. 15(1), pages 73-95.
    13. 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.
    14. 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.
    15. 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.
    16. 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.
    17. Md Harun Or Rosid & Zhao Xuefeng & Sk Alamgir Hossain & Mohammad Raihanul Hasan & Md Reza Sultanuzzaman, 2021. "The Impact of GDP on Cross-Country Efficiency in Wealth Maximization: a Joint Analysis Through the Stochastic Frontier and Generalized Method of Moments," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(1), pages 1-6.
    18. 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.
    19. Caitlin Blaser Mapitsa & Loren Landau, 2019. "Measuring Municipal Capacity to Respond to Mobility," SAGE Open, , vol. 9(1), pages 21582440198, February.
    20. Isaac Khambule & Cecile Gerwel-Proches, 2019. "Exploring the role of social dialogue in local economic development: A case of a South African Local Economic Development Agency," Progress in Development Studies, , vol. 19(1), pages 36-54, January.
    21. Isaac Khambule, 2021. "Decentralisation or deconcentration: The case of regional and local economic development in South Africa," Local Economy, London South Bank University, vol. 36(1), pages 22-41, February.

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    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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