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Quantifying Inefficient Expenditure in Local Government: A Free Disposable Hull Analysis of a Sample of South African Municipalities
Author(s) -
Mahabir Jugal
Publication year - 2014
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/saje.12050
Subject(s) - inefficiency , local government , sample (material) , government (linguistics) , capital expenditure , economics , business , public economics , finance , economic growth , geography , microeconomics , linguistics , chemistry , philosophy , archaeology , chromatography
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.