south africa’s municipal infrastructure investment unit annual portfolio budget hearing 14 march...
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South Africa’sSouth Africa’sMunicipal Infrastructure Municipal Infrastructure
Investment UnitInvestment Unit
Annual Portfolio Budget Hearing14 March 2003
Presented by
MIIU Board Directors &
Management
Presentation Presentation OverviewOverview
1. Policy & Operation
2. 2002-03 Budget Review
3. 2002-03 Performance Review
4. 2003-04 Business Plan & KPIs
5. 2003-04 Budget
6. Lessons Learned
What is the MIIUWhat is the MIIU?? Cabinet Memoranda: 1997 & 2002 - Life-
span extended to 2006 Non-profit Sect. 21 Company, est. 4/98 Financial & tech. support from USAID PPU & Project Preparation Fund Grants & advice to support local MSPs Administrative support provided by DBSA
MIIU MandateMIIU Mandate
Facilitate private sector investment in municipal services – on a controlled, sustainable basis
Help create a market in Municipal Services Partnership (MSP) services to provide advice to local governments
The MIIU BoardThe MIIU BoardIndependent BOD, representing: Private sector banks & investors DPLG & National Treasury DBSA Private individuals and business people Local governments Awaiting restructuring of Board in terms of
Cabinet Memorandum
The MIIU Grant ProcessThe MIIU Grant Process::How Does it Operate?How Does it Operate?
Municipality applies for MIIU assistance MIIU assesses chances for success & development
impacts – Project Preparation Report Formal grant agreement signed Municipality contributes partial funding (local
ownership) MIIU provides quality control
The Project Development The Project Development ProcessProcess
1. Feasibility Study of MSP options2. Council decision on option (with MIIU advice
on recommendations and implications of options)
3. Prepare bid documents, draft contract4. Selection of public or private partner 5. Negotiate & sign contract6. Financial close -- begin implementation7. Initiate contract compliance monitoring
MSP’s 31 Non-MSPs* 34All MIIU projects to date: 65
*Internal improvements and/or judged non-viable as MSPs
Completed MSPs:Completed MSPs:MSPs vs. Non-MSPsMSPs vs. Non-MSPs
P u b l i c - p r i v a t e 2 2
P u b l i c - p u b l i c 9
C o m p l e t e d M S P s :C o m p l e t e d M S P s :P u b l i cP u b l i c -- p u b l i c v s . P P P sp u b l i c v s . P P P s
A c t i v e P r o j e c t s :A c t i v e P r o j e c t s :T y p e s o f M u n i c i p a l G o v t .T y p e s o f M u n i c i p a l G o v t .
M e t r o s 1 3
D i s t r i c t M u n i c i p a l i t i e s 1 6
L o c a l M u n i c i p a l i t i e s 4 0
A c t i v e P r o j e c t s :A c t i v e P r o j e c t s :P r o v i n c i a l B r e a k d o w nP r o v i n c i a l B r e a k d o w n
W e s t e r n C a p e 1 5 G a u t e n g 1 3 K w a Z u l u N a t a l 1 2 E a s t e r n C a p e 8 F r e e S t a t e 7 L i m p o p o 6 M p u m a l a n g a 5 N o r t h W e s t 2 N o r t h e r n C a p e 1
A c t i v e P r o j e c t s :A c t i v e P r o j e c t s :S e c t o r a l B r e a k d o w nS e c t o r a l B r e a k d o w n
W a s t e 3 3
W a t e r / s a n i t . 1 2
T r a n s p o r t 5
E l e c t r i c i t y 4
MIIU Budget 2002-03
Financial Mgmt. Goals: Maintain MIIU pipeline – 70 in pipeline Accelerate disbursements; draw down surplus –
aiming to meet target by end March 2003 Explore new donor funding – DFID monitoring
system Continue new activities: diagnostics; public
awareness – 4 new ones Accelerate transformation with new staff –
performance reviews
Revenues - 2002-03
Budget Current Variance
Budget allocation 6,000 6,000 0
Donor grant 0 0 0
Interest 2,500 2,521 21
Expense recovery 90 116 26
------- ------- -------
TOTAL 11,090 9,419 -1,671
Revenues - 2002-03
Var Explanation
Budget 0 --Donor grant 0 --
Interest 21 Higher IR than expected
Exp recovery 26 More recovered from contractor
------
TOTAL -1,671
Admin. Expend. - 2002-03
Budget Current Variance
BOD expenses 70 10 -60
DBSA admin fee 2,215 1,570 -645
General admin 1,451 731 -720
Marketing/Comm 340 382 42
Trainee Programme 130 0 -130
------- ------- ------
TOTAL 4,206 2,693 -1,513
Var. Explanation
BOD expenses -60 Remun. budgeted, not approved
DBSA admin fee -645 Timing difference re new FY
General admin -720 Timing difference re new FY
Marketing/Comm 42 Extra recovery re Conference
Trainee Prog. -130 Interns vs. permanent staff
------
TOTAL -1,513
Admin. Expend. - 2002-03
Project Spending - 2002-03
Budget Current Variance
MIIU pipeline 7,652 4,489 -3,163
Project Expend.: Var. Explanation
MIIU pipeline -3,163 Additional spending expected before FY end
Budget Summary - 2002-03
Budget Current Variance
2001-02 surplus 17,211 17,211 0
Revenues 8,590 8,637 47
Admin. Expend. 4,206 2,693 -1,513
Project Expend. 7,652 4,489 -3,163
2002-03 surplus 13,943 18,666 4,723
MIIU Budget 2002-03
Conclusions: Budget 02-03 numbers are current, not actual FY change accounts for major variations Pipeline growing again – affects of
demarcation, powers & functions starting to diminish
Importance of consistent MTEF allocations. Need to explore new donor funding.
Business Plan ObjectivesBusiness Plan Objectives
1. Key focus areas for MSP project
development work
2. Diagnostic Studies
3. Government policy & legislation
4. MIIU Transformation & skills
transfer
MIIU Pipeline To dateMIIU Pipeline To date 70 active projects – the most ever 23 in concept stage – reflects new growth 35 in feasibility study – key step in process 9 in bid/negotiation stage 33 in solid waste All provinces included – for the first time 65 projects completed; 31 MSPs
1. Focus Areas: 5 Signed MSPs1. Focus Areas: 5 Signed MSPs
1. Concessions: Mogalakwena water
2. Metros: Cape Town waste
3. Cs: Ugu, Amatola feasibility studies
4. Bs: Mbombela electricity & rev. mgmt.
Theewaterskloof waste
1. Focus Areas: in Process1. Focus Areas: in Process
1. Concessions: Durban waste
2. Metros: Pretoria & CT power
3. Cs: Ilembe water; uThungulu waste
4. Bs: Mangaung Water; Rich. Bay water
[70 active projects at 2/2003]
Quick assessment of the service needs Report in 4-6 weeks No obligation to accept findings Guaranteed MIIU follow-up help if
partnerships identified Recommendations for dealing with
other problems (esp. with budgets)
2. 2. DiagnosticDiagnostic Studies Studies
1. Alfred Nzo 8. JS Moroka2. Nelson Mandela 9. Kgalagadi3. Mangaung 10. Central Karoo4. Ugu 11. Umkhanyakuda5. uMgungundlovu 12. Matatiele*6. Msunduzi 13. OR Tambo*7. Sekhukhune 14. Lukhanji* *New in 02-03 15. Bushbuckridge*
2. Completed 2. Completed DiagnosticDiagnosticss
1. MSA, Sect. 94(1)(c)
2. Meetings/testimony on MFMB
3. DWAF water policy White Paper
4. EDI Restructuring Ring Fencing
5. Advice to munis re MSA Sect. 78
3. Govt. Policy & Legislation:3. Govt. Policy & Legislation:
1. New SA CEO: Ms. Karin Pearce2. New long-term expatriate advisor:
Ms. Jacqueline Levister3. 2 South African Project Managers: Danai
Magugumela; Asha Bassa4. Secured two L-T advisors from DFID5. MIIU BOD has approved recruitment of
two new MIIU project managers
4. MIIU Transformation4. MIIU Transformation & Skills Transfer & Skills Transfer
STRUCTURE OF STRUCTURE OF PRESENTATIONPRESENTATION
STRATEGIC ISSUES FOR LOCAL GOVERNMENT
MIIU APPROACH TO ADDRESSING THESE ISSUES
MIIU KEY PERFORMANCE AREAS KPI’S BUDGET
OVERALL STRATEGYOVERALL STRATEGY Policies, planning;legislation;restructuring are in place –
the challenge for all sectors of society is sustainable implementation of services and growth
HOW CAN MIIU HELP TO ACHIEVE THIS, IN 3 YEARS?
MIIU is uniquely placed alongside all spheres of government, has implementation experience and skill, has credibility in the market and has the confidence of municipalities, to facilitate implementation through investment by both the public and private sectors; service delivery solutions within and between both the private and public sectors
Therefore, the next 3 years for MIIU are about “MAKING IT WORK”
STRATEGIC ISSUESSTRATEGIC ISSUES SUPPLY SIDE
AVAILABILITY AND ACCESS TO PRIVATE SECTOR FINANCE
SERVICE OPERATORSCONSULTANTS AND BEE
DEMAND SIDECAPACITY TO PRIORITISE, MANAGE,MONITORCOUNCIL COMMITMENT IN RELATION TO RISK
GENERIC ISSUESSTRATEGIC PLANS – INTERGOVERNMENTAL
ALIGNMENTLEGISLATION AND REGULATION
APPROACH TOAPPROACH TOSUPPLY SIDE ISSUESSUPPLY SIDE ISSUES
Stimulate the market’s appetite for water sector partnerships, through CHS in water and sanitation – public or private risk
Encourage municipal service partnerships in service delivery, based on public sector borrowing – public risk
BEE database and training opportunities
APPROACH TOAPPROACH TO DEMAND SIDE ISSUES DEMAND SIDE ISSUES
MIIU project process: professional responsibility – council resolutions and implications
Ensure financial risk apportionment is appropriate to risk management functions in contract design with regards to the risk of non-payment
Facilitate access to “on-the job” training for sector specific, contract related matters
APPROACH TOAPPROACH TOGENERIC ISSUESGENERIC ISSUES
STRATEGIC FOCUS ON ESSENTIAL SERVICES: Facilitate intergovernmental alignment between National;provincial programmes and local government:
DWAF;DPLG;DME;DEATcategories of municipalities through projects:
Multi-jurisdiction service delivery areas in water LEGISLATION: Actively participate in the
formulation of regulations appropriate to facilitating service delivery in local government:MFM Act
KEY PERFORMANCE AREASKEY PERFORMANCE AREAS
MSP’S IN ESSENTIAL SERVICES: Water and sanitation, waste and electricity. Some will be PPP’s, others will be public MSP’s. Focus is on MIIU disbursement to projects which enhance investment in and service delivery in the short term, and sustainability in the long term.
Target: 80 active; 9 new DIAGNOSTICS: Enhance the ability of rural
municipalities to deliver through analysis of the status quo and recommendations on solutions within existing resource constraints of MIIU
Target: 5 active; 3 new diagnostics
KEY PERFORMANCE AREAS CONTKEY PERFORMANCE AREAS CONT..
UNFUNDED TECHNICAL ASSISTANCE: Enables practical implementation of alignment between and within spheres of government through timeous intervention and advice on request Revenue Enhancement Programme -DPLG National Infrastructure Cluster Committee – DPLG;DWAF;DEAT;DPE
etc DWAF national coordinating committee DME/EDI Task Group Treasury/PPP Unit: Regulations for MFM Bill
COMMUNICATION Conferences/Seminars: less in number but more focused on impacting
municipalities and the private sector Monitoring and Evaluation system: establish in MIIU and begin M&E
on 5 projects Website: establish and keep up to date
Auditable KPIsAuditable KPIs
1. No. of active projects 80
2. No. of new completions 9
3. Total disbursements R14.1m
4. No. of completed diagnostics 8
5. No. of new diagnostic starts 3
6. Diagnostic disbursements R0.6m
7. Disbursement-related opex
to total grant expenditure 28.4%
Internal MIIU KPIsInternal MIIU KPIs1. Establish a project monitoring system 12. Value of MIIU TA to munis
20hr/mon3. Value of MIIU TA to other govt. 20hr/mon4. Completed electricity ring-fencings 35. Reports on ring-fencing implications 36. Established credit guarantee scheme 17. Agreements for muni access to guarantee 18. Development plans for MIIU’s SA staff 49. Contract mgmt course for muni officials 110. New funding for MIIU R14.9m
MIIU Budget 2003-04 – Approved by the BOD
2002 2002 2003-04
Summary: Budget Current Budget
Revenues 8,590 8,637 12,290
Admin. Expend. 4,207 2,693 6,591
Project Expend. 7,652 4,489 14,150
MIIU Budget 2003-04
2003-04
Summary: Budget Explanation
Revenues 12,290 (+) New donor funding expected
Admin. Expend. 6,591 (+) Two new SA staff
Project Expend. 14,150 (+) Recovery from demarcation -related distractions, plus
new project managers
Success factors for Success factors for sustainable infrastructure and sustainable infrastructure and
service deliveryservice delivery Know the true cost, now and in the future – life cycle cost of infrastructure Know who is going to foot the bill now and in the future – whether it is
consumers or taxpayers or a combination of both Ensure level of service (quantity and quality) is appropriate to affordability Ensure users and providers of services understand and agree to price and level of
service – stakeholder cost/benefit Develop appropriate performance monitoring in the public sector Take timing into account: maturity of the market; political climate; budgetary
flows Enable certainty for life of the project so that everyone knows what they are in for
Certainty in:– Legal and regulatory framework– Pricing policies– Who carries what risks under normal and abnormal circumstances– Decision-making procedures and accountability
Success Factors in the Success Factors in the Municipal Sphere in SAMunicipal Sphere in SA
Human Capacity: identify solutions and make recommendations which spell out implications; move from feasibility to implementation; monitor; preemptive and remedial action
Financial management: intergovernmental coordination so that planning is meaningful and prioritising/scheduling can be done with certainty – knock on effect on construction industry; financial services sector; stability in the local environment;accountability for spending decisions
On average, +90% of municipal revenue comes from own sources – local economic base is very important, but local economic planning can’t on its own overcome macro structural problems.
Success Factors in the Success Factors in the Municipal Sphere in SA Cont.Municipal Sphere in SA Cont.
Legal and regulatory environment: • Local government legislation recognizes discretionary powers of
other spheres, e.g. Tariff capping; free basic services. Need for certainty of mechanisms for municipalities; private sector
Local government empowered by law to decide solutions and to carry the burden of risk: importance of local political responsibility for risk apportionment in a project• Requires cost benefit analysis to establish UP FRONT who can
and should afford what; and a determination of who is best able to manage which risks
• UP FRONT: Define Material Adverse Government Actions; determine what constitutes systemic risk and how to manage it; penalties
SOLUTION FRAMEWORKSOLUTION FRAMEWORK No single stakeholder has what it takes to create sustainable
infrastructure – partnerships between providers and users are needed; regulation should incentivize partnerships.
In the long run, sustainable infrastructure delivery means resources must come from taxpayers or consumers, i.e. users are the key. Targeting intragenerational equity should be deliberate. Ultimately, failure becomes a taxpayers’ cost – systemic non-payment by some impacts on all.
In the short term, infrastructure investment by its nature, happens in “large chunks”, and, both public and private investment is needed to overcome the “backlog hump” – we should be mindful of ensuring that at a minimum, intergenerational equity is attained in levels of service and cost of service.
CONCLUSIONCONCLUSION
Everyday decisions by municipalities, should answer these questions:
What are the long-term impacts of the decision? Is the decision sustainable at a local level? Have the economic, social and environmental
impacts been taken into account in the decision?