EXPLORING ALTERNATIVES OF FUNDING FOR INFRASTRUCTURE IN THE ECONOMIC DISTRESS

1. EXPLORING ALTERNATIVES OF FUNDING FOR INFRASTRUCTURE IN THE ECONOMIC DISTRESS MMANNINI ANNETTE MAHLOKO

2. INTRODUCTION • South Africa have a responsibility to invest in its infrastructure. • Needs for infrastructure investment • Solid Level of Population Growth • Resources boom • Competitive in the international market • Maintain the quality of life enjoyed by current and future generations : sustainable economic growth • . Rev. Dr. Mmannini Annette Mahloko

3. INTRODUCTION • Grant • More than 80% of ELM infrastructure projects, • Other municipalities depend solely on MIG • South Africa needs the best alternative funding model to ease the burden Rev. Dr. Mmannini Annette Mahloko

4. GOVERNMENT FOCUS • National, Provincial and Local sphere of Government focus. • Leveraging government funds with private sector investment. • Efficiency dividend that private sector involvement can bring in project delivery , and • Management and/or from maximising the ability to earn a return on/of investment Rev. Dr Mmannini Annette Mahloko

5. FUNDING CHALLENGES • Current Funding Structure • Both Private Sector and Government have important roles to play in infrastructure funding • Adequate commercial opportunity Rev. Dr. Mmannini Annette Mahloko

6. INFRUSTRUCTURE FUNDING ALTERNATIVES 1. PPP 5. Government Grant 2. Bank Term Loans MUNICIPALITIES 3. Project Bonds 4. Collective Borrowing Rev. Dr Mmannini Annette Mahloko

7. PUBLIC PRIVATE PARTNERSHIP (PPP) Rev. Dr. Mmannini Annette Mahloko

8. PUBLIC PRIVATE PARTNERSHIP (PPP) • Public-Private Partnership is governed by chapter 11 of the MFMA, • Supply Chain Management (in part 1) and • PPPs (in part 2).2 Rev. Dr. Mmannini Annette Mahloko

9. Why PUBLIC PRIVATE PARTNERSHIP (PPP) • A commercial transaction between a municipality and a private party in terms of which the private party: • Performs a municipal function for or on behalf of a municipality, or acquires the management or use of municipal property for its own commercial purpose; or both performs a municipal function for or on behalf of a municipality and acquires the management or use of municipal property for its own commercial purposes. • Assumes substantial financial, technical and operational risks. Rev. Dr Mmannini Annette Mahloko

10. BANK TERM LOANS Rev. Dr. Mmannini Annette Mahloko

11. BANK TERM LOANS • A term loan is a monetary loan that is repaid over a set period of time. • Usually it involves an unfixed interest rate that will add additional balance to be repaid. Rev. Dr. Mmannini Annette Mahloko

12. BANK TERM LOANS BENEFITS • Process easy to facilitate • Quick and easy to secure • Flexible terms • Amortising • Bullet • Term loans usually last between one and ten years, but may last as long as 30 years in some cases. Rev. Dr. Mmannini Annette Mahloko

13. PROJECT BONDS Rev. Dr. Mmannini Annette Mahloko

14. PROJECT BONDS • Open up alternative debt funding avenue • Strict monitoring and disclosures • Higher costs and capital requirement • Institutional investors participate in infrastructure Rev. Dr. Mmannini Annette Mahloko

15. PROJECT BONDS • Instrumental can be fixed or floating • Unsecured • Competitive Pricing Rev. Dr Mmannini Annette Mahloko

16. COLLECTIVE BORROWING • Pool Financing • Joint effort by municipalities to lend funding for infrastructure projects. • Joburg,Tshwane, Ekurhuleni Sedibeng, Mgolale City .Rev. Dr. Mmannini Annette Mahloko

17. MIG OBJECTIVES .Rev. Dr. Mmannini Annette Mahloko

18. MIG OBJECTIVES ■ Fully subsidise the capital costs of providing basic services ■ Distribute funding for municipal infrastructure in an equitable, transparent and efficient manner which supports a co-ordinated approach to local development and maximises developmental outcomes ■ Assist in enhancing the developmental capacity of municipalities, through supporting multi-year planning and budgeting systems .Rev. Dr. Mmannini Annette Mahloko

19. MIG OBJECTIVES ■ Provide a mechanism for the co-ordinated pursuit of national policy priorities with regard to basic municipal infrastructure programmes, while avoiding the duplication and inefficiency associated with sectorally fragmented grants. • Provide a mechanism for the co-ordinated pursuit of national policy priorities with regard to basic municipal infrastructure programmes, while avoiding the duplication and inefficiency associated with sectorally fragmented grants. .Rev. Dr. Mmannini Annette Mahloko

20. MIG OBJECTIVES ■Provide a mechanism for the co-ordinated pursuit of national policy priorities with regard to basic municipal infrastructure programmes, while avoiding the duplication and inefficiency associated with sectorally fragmented grants. .Rev. Dr. Mmannini Annette Mahloko

21. CONCLUSION ■WITH ALL THESE ALTERNATIVE FUNDING MODELS, THE MUNICIPALITIES HAVE A RESPONSIBILITY TO FOLLOW THE PRESCRIPTS TO THE LATER. .Rev. Dr. Mmannini Annette Mahloko

22. Thank You !