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The incumbent Administration of Mayor Kuma Demeksa
got its way at the first assembly of the Addis Abeba
City Council on Thursday, July 3, 2008, when it
received approval for the of 8.8 billion Br budget
that it had proposed. The endorsement was made a day
before Federal Parliament voted in favour of the
largest ever budget request (54.3 billion Br) tabled
before it by Sufian Ahmed, minister of Finance and
Economic Development.
The city’s budget, approved last week, is five times
smaller than what the Federal Government is set to
spend in the coming fiscal year. However, it
represents a little over double of the 3.9 billion
Br budget its predecessor, under Brehane Deressa,
had proposed before its term ended in May 2008.
The former administration had based its proposal on a
revenue analysis made of the city’s capacity to
generate income from direct and indirect taxes.
Addis Abeba, one of the two chartered cities in the
country, is not a beneficiary from the Federal
Government’s 16.4 billion Br budget subsidies to
regional states.
A medium term expenditure management framework, developed
under the Caretaker Administration of Brehane
Deressa, conducted a budget-revenue analysis of the
city administration for three years; it came to the
conclusion that the city’s revenue was, at best,
nearly four billion Birr. Thus, it had instructed
the 61 agencies under its supervision to produce a
very conservative budget to finance their operations
in the coming fiscal year.
This was not what city administration officials were told
soon after the new chiefs took control of the city
government. Money, they were told, would not be an
issue, according to city sources.
“The public would expect a lot from the new
administration,” said Belaynesh Teklay, general
manager of the city’s Finance and Economic
Development Bureau. “We could not limit ourselves to
the survey.”
But the new chiefs were not prepared for what was to come
about. The aggregate request for budget from all the
city agencies for the fiscal year 2008/09 was 26.24
billion Br; an amount that would be nearly half of
the Federal Budget if it were to be approved.
“We never thought that we would be presented with such an
amount for the budget,” a cabinet member, who
requested anonymity, told Fortune.
The largest budget request of 5.4 billion Br was made by
the Addis Abeba Housing Development Project Office.
The City Council significantly slashed this amount
to 2.5 billion Br; the office’s managers would
certainly not be pleased with the decision.
The project office would have wanted to build 55,000
condominium houses in the coming fiscal year. It was
told by the Council to finalize the 33,000
condoshouses its predecessor left unfinished. What
was left over after this task would go to the
expansions of an agro-stone manufacturing centre and
a magnesium oxide factory, as well as infrastructure
expansion and compensation payment to those
relocated from their homes.
The office’s quarter of a billion Birr annual budget,
claims 29.2pc of the total budget. This is hardly
surprising, as housing development is a key focus of
the incumbent administration.
The performance and financing of this office would be
evaluated every quarter, Kuma Demeka, mayor of Addis
Abeba, told the 138 City Council, 99.9pc dominated
by the ruling EPRDF. This was the council’s
inaugural meeting since its coronation in May 2008.
The incumbent’s desire to give priority to investment in
infrastructure development could be reflected in its
allocation of the third largest budget, 1.6 billion
Br, to the Addis Abeba City Roads Authority (AACRA).
The Authority had, however, asked for 2.9 billion
Br. It had planned to finance outstanding projects
(2.1 billion Br) and pay for new ones with the
balance. The City Council decided that with the
approved budget, which represents 17.7pc of the
total, the Authority should finalize on-going
projects and make advance payments for new ones.
The City Council has allocated over half a billion Birr to
the Addis Abeba City Water Sewerage Authority (AAWSA).
The Authority - which for pretty much of the year
fails to meet the city’s needs - wants to increase
the 50pc water provision capacity to the city to
80pc, and pump 420,000 metre cube daily.
This requires the digging of several wells as deep as
700-800 metres, however, none of the drilling
machines that the Authority currently has are
capable of doing this, Prime Minister Meles Zenawi,
once told Parliament. AAWSA plans to buy two new
rigs in the coming fiscal year. In the meantime, it
will borrow two of the rigs the Oromia Water Works
Construction Enterprise has recently bought from
overseas, said Getachew Eshetie, general manager of
AAWSA.
Another area of priority given by the Council is the city’s
Health Bureau, whose approved budget is almost 20
million Br more than its budget for last year. With
a budget of nearly 70 million Br, the city health
authorities plan to finance the construction of 25
new health centres and hospitals that are far from
the city centre.
Ironically, the City Council has approved a mere 50.1
million Br to the city’s Land Development and
Administration Authority; an office that is known to
have had one of the biggest streams of revenue in
the past. Even in the coming fiscal year, this
office expects to raise 2.4 billion Br, after
auctioning 2,400hct of plots to prospective
developers.
The Authority had requested a 1.2 billion Br budget in
order to pay compensation to residents who would be
relocated to make way for the development of
infrastructure on the plots, which would then be
auctioned.
“It’s unthinkable to equip this size of plots with this
amount approved now,” said an official at the
Authority.
The Council was not so penny-pinching when it came to the
metropolitan’s police department, as it an authority
that is tasked with administering law and order. The
department was awarded a 91.3 million Br budget,
including 60 million Br for the construction of a
new headquarters on Belay Zeleke Street, and an
office for the city’s traffic police department on
Haile Gebresellasie Road, Fekadu Zeboka,
commissioner of the metropolitan police, disclosed
to Fortune.
Close to 70pc of the city budget goes to capital
expenditure, and particularly to financing those
ventures that the city officials believe are doable
within the fiscal year, Belaynesh told Fortune.
The toughest challenge to city managers will be the
financing of the budget, according to analysts. They
have a reason to be sceptical.
The incumbent City Administration plans to raise its income
from direct taxes (1.9 billion Br), indirect taxes
(2.6 billion Br), capital gain taxes (3.3 billion
Br), municipal services (851.5 Br), road fund (63.5
million Br), and grants from foreign sources (325
million Br). Ideally, this amount would make the
city government liquid, with a budget surplus of
about 200,000 Br.
This is an ambitious plan considering the failure of the
preceding administration to achieve what it had
targeted for the two years of its existence. The
Caretaker Administration of Brehane Deressa raised
neither the 5.1 billion Br budget it had allocated
for the year 2006/07, nor the 6.5 billion Br for the
subsequent year. In fact, it was this failure by the
Caretaker Administration officials that lead to the
launch of the three-year revenue surveys it had
conducted before its term came to an end.
“The administration’s capacity to collect tax is very
weak,” a cabinet member during the Caretaker
Administration recalled.
This former cabinet member questions the wisdom of the
incumbent administration’s decision to depend on
revenue generated from condo sales and auctioning
plots. His concern stems from experience. The
Caretaker administration had ambitions of raising
6.3 billion Br in the 2007/08 fiscal year; yet its
performance during the first 11 months was a dismal
2.6 billion Br.
The incumbent is banking on four areas to meet its revenue
target: broadening its tax base by netting in those
who dodge taxes being supported by economic
intelligence; completing the 33,000 condos began
last year and selling them; generating revenues
from new and outstanding land lease payments; and
increasing the estimation of daily income of
taxpayers in category “C”, where 70pc of the city’s
taxpayers is grouped. The daily average income of
this group, whose annual income is less than 100,000
Br, was last decided in 2006.
The administration hopes revising this estimate would help
boost revenue substantially, Abaynesh Alemu, general
manager of the City Administration’s Revenues
Agency, disclosed.
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