Municipal Planning and Infrastructure Implementation Support A Sustainable Governance Framework

2. Municipal Planning and Infrastructure Implementation Support A Sustainable Governance Framework

3. Planning is a Pre-requisite for Implementation “FAILING TO PLAN IS PLANNING TO FAIL”

4. Infrastructure Development Challenge • Increased infrastructure funding needs -(R251 bn over 5 years): • Metros: R95 bn, secondary : R50 bn and under resourced municipalities: R105 bn • Increased funding gap - (R105 bn over 5 years): • Metros: R36 bn, secondary: R10 bn and under resourced municipalities: R58 bn • Capital transfers to municipalities, despite growing, not sufficient to bridge the gap. • Municipal revenues growing slowly and under pressure • Metros down to 21% of capital budgets from 30 % in 2006. • Secondary municipalities down to 20% of total capital budgets from 38 % in 2006. • Under resourced municipalities down to 17% of total capital budgets from 32% in 2006. • Municipalities under spending for infrastructure – Metros under spending of 21%, capacity constraints secondary and under resourced municipalities under spending of 40%. • Changes in the nature and location of poverty – migration to metro, consumers under pressure, unemployment high, poverty levels between 40-55% in smaller municipal areas. 4

5. Actual CAPEX Spending 5 National Treasury: Local Government Section 71 Reports for the financial years: 2009/10, 2010/11 and 2011/12

6. Future Budget Transfers Projected infrastructure transfers to secondary municipalities: 2012/13 to 2016/17 • Capital budgets growing on average with 8.1% per annum over period • Grant transfers remain main source of expenditure • Borrowing projected at only between 6 and 9% of the annual budget and showing downward trend by 2017. Projected infrastructure transfers to under resourced municipalities: 2012/13 to 2016/17 • Capital budgets under pressure and aggregate 7.3% growth projected. • Grant transfers remain main source of expenditure • Borrowing projected at only 1% of the annual budget by 2017. National Treasury Local Government Data Base,

7. Borrowing Trends • Total municipal debt grew from R18.7 bn in 2005 to R48 bn in 2011 (40% over past three years) • b. During the past three years the DBSA’s contribution to municipal debt declined: • From 46% during 2009 to 37% September 2011. • DBSA’s share of the 2011/12 annual borrowings declined to 11%. • c. DBSA significant role player in: • Under-resourced municipal debt market (84% of total debt). • Secondary municipal market (73% of total debt). • Under-resourced municipalities constitute 3% of total municipal debt from all sources. Borrowings as % of total annual capital expenditure 19% 24% 22% 20% 24% DBSA as % of annual borrowings 11% 25% 45% 28% 29% 20% 31% Trends in annual municipal borrowings: DBSA and other funders (adapted estimations)

8. Gap analysis Technical Assistance Sound municipal policies, process and procedures Macro-Level Development Planning PLANNING FRAMEWORK Skilled and experienced management and staff CRITICAL REQUIREMENTS Consultation / priority needs IDP (5 year strategy) Identify gaps in planning MTEF (Budget alignment) Identify funding gaps SDBIP – Implementation plan PMS In year reporting (Implementation and monitoring) 8

9. 1. Conceptualisation / Scoping 2. Pre-Feasibility / Feasibility Project Level Planning 3. Business plan/registration 4. Pre-design 5. Procurement 6. Construction and implementation 7. Project evaluation 8. Operations and maintenance 9

10. DBSA’s Lessons of Experience • Large number of municipalities slow to deliver infrastructure due to various issues, amongst others capacity constraints. • Under spending on CAPEX mainly attributed to: • Poor capital budgeting (capital budgets not adequately funded, funding sources not credible) • Capacity constraints (planning and technical in terms of preparing tender documentation) • Poor capital expenditure planning (implementation planning at the beginning of the financial year which leads to a slow start to spending) • Poorly managed procurement processes leading to further delays to spending • In some cases pace of infrastructure delivery influenced by the availability of transfers, which are spread over the MTEF period. • Under resourced municipalities have limited balance sheets, making it difficult to attract bridging and other credit facilities to accelerate the pace of development in their areas. • To accelerate municipal infrastructure provision (especially in under resourced municipalities) options include the pledging of conditional and other NT grant transfers to municipalities. 10

11. Possible Alternative Models for Delivery • Internal Institutional Capacity • In-sourcing / Project Management Units (PMU’s) • Shared Services • Third party Consulting 11

12. DBSA’s Support Programmes Provision of development finance and delivery capacity to deliver infrastructure Infrastructure funding Direct delivery • Drive investments focusing on: • Sectors: energy, water and sanitation, transport, ICT, health, education, • South Africa (municipalities, state-owned enterprises, other public, private-public partnerships, private sector intermediaries • Rest of SADC Support key government priorities: local government, health, education and regional integration • Grow development assets • Leverage third party funds • Diversify product offering in support of infrastructure development 12

13. DBSA Support to Municipalities Municipal Planning Support Unit Financing Unit Municipal Implementation Unit Project origination Planning Support Financing/Lending • Pre-Implementation Support • Implementation readiness assessment • Review of project concept, specifications, TOR for PSPs, technical documentation, designs, etc. to ensure quality and appropriateness of technical solutions • Support with respect to the development of procurement strategies and the expedition of supply chain management processes • Financing • Direct interventions • Subsidized lending • Bridging finance • Application • Bilateral agreements • Implementation Support • Review and validation of implementation plans • Compliance check and reviews • Programme and project management support. • Contract management support • Progress monitoring and reporting support • Evaluation and impact assessment support • Capacity building • Operations & Maintenance Planning • Review and assist with the development of credible O&M Plans • Development of strategies for the reduction of water and electricity losses

15. DBSA PROCESS

16. Conclusion: Benefits of Effective Planning Increasing capital spending Deepening service delivery impact Leveraging borrowing capital to do more Growing the economy of the regions Attracting more budget transfers Social development 16

17. Development Bank of Southern AfricaHeadway Hill1258 Lever RoadMidrandSouth AfricaPO Box 1234Hallway House1685South Africawww.dbsa.org CONTACT INFO