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ECONOMIC GROWTH & ENHANCED LOCAL PARTICIPATION THROUGH INFRASTRUCTURE DEVELOPMENT

INTEGRATING INFRASTRUCTURE DELIVERY TOWARDS 2030. ECONOMIC GROWTH & ENHANCED LOCAL PARTICIPATION THROUGH INFRASTRUCTURE DEVELOPMENT. CJ Venter 05 October 2010. Introduction. Innovative approach to contribute to the developmental objectives of the state -

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ECONOMIC GROWTH & ENHANCED LOCAL PARTICIPATION THROUGH INFRASTRUCTURE DEVELOPMENT

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  1. INTEGRATING INFRASTRUCTURE DELIVERY TOWARDS 2030 ECONOMIC GROWTH & ENHANCED LOCAL PARTICIPATION THROUGH INFRASTRUCTURE DEVELOPMENT CJ Venter 05 October 2010

  2. Introduction Innovative approach to contribute to the developmental objectives of the state - • creation of decent work and sustainable livelihoods • education • health • rural development, food security and land reform • fight against crime and corruption - through infrastructure development and enhanced local participation

  3. Economic growth in Limpopo • Economic growth: • Large scale mining & industrial development • Government infrastructure investment but … • With limited local economic impact and job creation (jobless growth) • Infrastructure development: • Growing infrastructure backlogs • Insufficient institutional capacity • Ad hoc and uncoordinated development approach • Funding shortfalls

  4. “Discussion objectives” • Review current realities ito infrastructure development • “Paradigm shift” – towards infrastructure development • Application of integrated project development • Synergies and alignment with mining sector • Opportunities for enhanced local participation • Key considerations and conclusion

  5. INFRASTUCTURE REQUIREMENT CURRENT REALISTIES

  6. Current development processes • Current processes are critical: • In annual budgeting cycle • Establishing infrastructure backlogs • Staking the province’s claim for a slice of national funds • Initial project identification but … • Current processes are not necessarily: • Focussing on alternative financing mechanisms • Focussing on integration • Political imperatives

  7. What infrastructure is needed?

  8. How will the infrastructure be funded? Shortfall Available funding

  9. “PARADIGM SHIFT” TOWARDS INFRASTRUCTURE DEVELOPMENT

  10. Treasury guidelines: 2011 MTEF • Infrastructure & capital projects / programmes – must ensure the following: • Efficiency • Cost effectiveness • Better allocation of resources • Project appraisal cycle: • Project identification • Pre-feasibility • Feasibility • Feasibility study: • Detailed analysis of ALL costs and benefits • Quantitative risk assessment • If above not met, project not ready for implementation

  11. Alternative funding mechanisms Own Cash flows under pressure due to growth in debtors Borrowing (conventional, bonds) Balance sheet borrowing capacity in decline Grants Budget deficit necessitates more strategic use of national fiscal resources Main source of project preparation funding – not to be confused with PPP model Sponsoring Partnerships (seed funding, underwriting) Internationally, most rapid growth in funding mechanism for new infrastructure creation Project Finance (borrowing against revenue) Gearing (leveraging funding off assets) Huge potential, yet reluctance in SA to explore this approach “Treasury Guidelines - similar to financier requirements”

  12. A different approach – “paradigm shift” • Integrated approach to needs analysis and master planning • Sustainability and affordability vs backlog eradication • Risk management – technical, financial & institutional • Important to focus on the question how infrastructure will be funded if sufficient funds cannot be obtained from National Treasury • Satisfy financiers’ (including Treasury) requirements • Government assist vs government driven solutions

  13. Application of integrated project development - MUNICIPAL EXAMPLE

  14. Integration ……. municipal example Roads and stormwater: R200 mil Public amenities Social / economic infrastructure Institutional R30 mil Asset manage-ment R80 m Electricity supply system: Bulk: R300 m Retic:R100 m Rehab of existing informal settlements R20m Refurb of reticulation systems: R200 mil 5 000 – 10 000 housing unit integrated housing development Internal services: R750 mil Top structures: R300 mil Amenities: R500 mil R200 mil bulk water & sanitation

  15. Integration ……. municipal example • Total project value: R2 480 mil • Funding sources: • Housing subsidies: R 700 m • MIG: R 150 m • Commercial finance: R1 400 m • Other government: R 230 m R2 480 m • Private sector investment in commercial & bonded properties: >R1 500 mil • Development capital required: ±R120 mil

  16. Comments on the example • Significant service delivery impact • Meets many political imperatives (housing etc.) • Unlocks development (economic development) • Public amenities & social infrastructure • Significant job creation & empowerment impact • Gearing of government funding - 1:3 • Challenge … • Who will put up the development capital? • Too complex to be managed from within a single department • Major institutional risk … hence the “paradigm shift”

  17. THE NEW MINING DECLARATION & INTEGRATED SUSTAINABLE DEVELOPMENT

  18. Addressing inter alia the following … • Implement the concept of “Mining Vision 2030” through sustainable development principles • Develop a partnership approach towards mining community development • Establish regional development funds • Include Multi-Nationals into development initiatives • Promote enterprise development • Enable sustainable job creation and training opportunities

  19. CONSIDER THE FOLLOWING APPROACH TOWARDS … ENHANCED LOCAL PARTICIPATION

  20. “New paradigm” project preparation to enhance local participation • Focussed LED through large scale multi-disciplinary projects • Integrated project preparation programme – labour supply & demand • Technical optimisation vs bankable feasibility • Managed approach towards optimum utilisation of local resources • Active empowerment programme for local business & labour • Sustainable (regional) training & skills development programme • Consistency of labour practices across developmental programmes • Integrated reporting ito client needs, governmental guidelines and legislative imperatives

  21. Integrated project preparation programme – labour supply & demand

  22. Training & skills needs assessment vs labour supply & demand

  23. Formal programme, M&E and reporting – supporting all developmental initiatives

  24. Increased local participation / decrease foreign resource utilisation

  25. KEY CONSIDERATIONS & CONCLUSION

  26. Key considerations • Switch intervention to paradigm of “Government assisted solutions” by … • Exploring alternative funding mechanisms to finance the capital shortfall • Establishing an integrated project preparation capability to address all developmental objectives • Establishing a project preparation funding facility • Utilise integrated infrastructure development programme as catalyst to contribute to the Manifesto objectives through … • Local economic development • Enhanced local participation

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