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1. DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRSPORTFOLIO COMMITTEE COOPERATIVE GOVERNANCE AND TRADITIONAL AFFIRS Rationale for the Review of the Municipal Infrastructure Programme 19 August 2015

2. Content page • Background • Objectives of the Review • Methodology for review • Key review outcomes • Policy responses • Work remaining to be done • Conclusion

3. Background • Municipal Infrastructure Grant programme is the largest local government infrastructure development funding in South Africa (R104 billion over 12 years). • Progamme was introduced as part of major reforms implemented by government to improve service delivery in a coordinated manner (that involves all government spheres). • In line with the Constitution and the Municipal Systems Act, 2003 that stipulate that municipalities should be centres of development and should take control of services and infrastructure projects within their area of jurisdictions after consultations with their communities through IDP public participation process. • Integration of all the municipal infrastructure programmes was a Cabinet decision (2003) to try to find a coordinated approach with regard to the municipal infrastructure delivery. • Consolidated Municipal Infrastructure Programme, • Local Economic Development Fund, • Water Service Capital Grant, • Community Based Public Works Programme, • Building for Sports & Recreation Programme and • Urban Transport Grant. • Communities must determine what government should do for them. • Streamline reporting by municipalities for myriad of grants administered by a number of departments

4. Objectives of the MIG Review • Changes (priorities and delivery approaches) over the past 12 years have necessitated a review of the MIG Policy Framework. • Bring the Policy up to date, retaining the successful elements of the 2004 Framework, improving where elements have not worked well, and responding to issues emerging as priorities in 2014-15 such as B2B (e.g sustainable delivery of services, economic growth though infrastructure development) • Ensure alignment with the Conditional Grant Review process facilitated by National Treasury – Solidifying the context of the MIG

5. Methodology for review • Consultation with national and provincial stakeholders via workshops and one-on-ones • Consultation with DCoG specifically in working sessions and one-on-ones • Municipal case studies of 27 municipalities • Desktop analysis • Draft Policy Framework produced and workshopped with stakeholders in July 2014 with revised principles and objectives • Additional refinement work June – Aug 2015

6. Key review outcomes • MIG has performed well in many respects seen from strong progress in providing access to basic services in some parts of the country. • MIG has resulted in employment creation (projects are subject to EPWP guidelines on job creation – 30% of total project cost spent on job creation) and enterprise development. • Systems and structures across government are well entrenched built over a number of years.

7. Key review outcomes • Over the ten years in which it has been in place, the MIG has achieved significant success in providing access to basic infrastructure for the poor. While not entirely attributable to the MIG, Census 2011 showed strong progress in the provision of adequate infrastructure

8. 2014/15 MIG Expenditure as at 30 June 2015 • Overall improvement over the last three years but in particular • Gauteng from 74% in 2012/13 to 95% in 2014/15 • Limpopo from 58% in 2012/13 to 72% in 204/15 • Mpumalanga from 57% in 2012/13 to 86% in 2014/15 • Northern Cape from 73% in 2012/13 to 85% in 2014/15 • North West from 73% in 2012/13 to 89% in 2014/15

9. Cumulative Key MIG performance outputs since the inception of MIG Programme

10. Key review outcomes • The context of service delivery has changed and MIG must adapt to respond to changes • Increased acknowledgement of municipal differences in terms od spatial and performance realities. • Challenges of infrastructure delivery relating to planning and to O&M. • Widening view of expenditure needs in many munics.

11. Policy Responses • Make allowance of use of MIG for renewal more explicit must take place within a context of proper infrastructure management, including adequate maintenance • Allow use of MIG for economic infrastructure also be used for infrastructure that unlocks economic growth or catalyses revenue generation • Ensuring sustainability of infrastructure - Infras Grants only to be applied where O&M arrangements are in place • Allow municipalities to spend up to 5% of their MIG allocation on repairs and maintenance subject to a planned maintenance programme being in place • Equity in the allocation and use of funds - Mechanism for distributing funds must provide for equitable access to such funds by the poor in order to make uniform progress in closing the infrastructure gap. • Efficient use of funds – Appropriate selection of services (greatest possible improvement in access to basic services at the lowest possible cost). • Predictability and transparency - Funds should be provided to individual municipalities on a three-year basis, consistent with medium term budgeting practice, with minimal in-year changes and with year to year changes based only on clearly defined conditions

12. Policy Responses (cont.) • Introduce two MIG ‘streams’ • MIG-1 is current MIG • MIG-2 has less conditionality and is monitored based on overall capital programme and achievement of agreed outputs, rather than on a project-by-project basis • Allow municipalities qualifying for N funding window in MIG (27 Priority Districts) to use up to their full N allocation for rural roads • Use the M window in the formula to offer incentives for strong performance • Introduce Infrastructure Investment Plans as a condition for municipal allocations that will ensure that selected MIG projects from IDP fit within sustainable capital expenditure envelope of municipality • allowance of use of MIG for renewal more explicit must take place within a context of proper infrastructure management, including adequate maintenance • Allow use of MIG for economic infrastructure also be used for infrastructure that unlocks economic growth or catalyses revenue generation • Ensuring sustainability of infrastructure - Infras Grants only to be applied where O&M arrangements are in place • Allow municipalities to spend up to 5% of their MIG allocation on repairs and maintenance subject to a planned maintenance programme being in place • Equity in the allocation and use of funds - Mechanism for distributing funds must provide for equitable access to such funds by the poor in order to make uniform progress in closing the infrastructure gap. • Efficient use of funds – Appropriate selection of services (greatest possible improvement in access to basic services at the lowest possible cost). • Predictability and transparency - Funds should be provided to individual municipalities on a three-year basis, consistent with medium term budgeting practice, with minimal in-year changes and with year to year changes based only on clearly defined conditions

13. Policy Responses (cont.) • A top-slice of MIG for ‘Regionally Strategic Municipal Infrastructure’ for infrastructure that is regionally significant, of national priority or required to address an urgent situation • Improved coordination of MIG across spheres • Reintroduce coordinating structures • Improved national sector policies on basic services • Active engagement by sector departments in planning and budgeting processes of target municipalities • Improved sector monitoring of relevant norms and standards • Improved monitoring and reporting to identify obstacles in implementation proactively of implementation activities happening at a local level. • Introduce two MIG ‘streams’ • MIG-1 is current MIG • MIG-2 has less conditionality and is monitored based on overall capital programme and achievement of agreed outputs, rather than on a project-by-project basis • Allow municipalities qualifying for N funding window in MIG (27 Priority Districts) to use up to their full N allocation for rural roads • Use the M window in the formula to offer incentives for strong performance • Introduce Infrastructure Investment Plans as a condition for municipal allocations that will ensure that selected MIG projects from IDP fit within sustainable capital expenditure envelope of municipality • allowance of use of MIG for renewal more explicit must take place within a context of proper infrastructure management, including adequate maintenance • Allow use of MIG for economic infrastructure also be used for infrastructure that unlocks economic growth or catalyses revenue generation • Ensuring sustainability of infrastructure - Infras Grants only to be applied where O&M arrangements are in place • Allow municipalities to spend up to 5% of their MIG allocation on repairs and maintenance subject to a planned maintenance programme being in place • Equity in the allocation and use of funds - Mechanism for distributing funds must provide for equitable access to such funds by the poor in order to make uniform progress in closing the infrastructure gap. • Efficient use of funds – Appropriate selection of services (greatest possible improvement in access to basic services at the lowest possible cost). • Predictability and transparency - Funds should be provided to individual municipalities on a three-year basis, consistent with medium term budgeting practice, with minimal in-year changes and with year to year changes based only on clearly defined conditions

14. Work to be concluded • MIG review areas to be finalised (to be concluded by the end of August 2015): • High level design of MIG-2 stream • Identify qualifying municipalities • Propose eligibility tests for inclusion in MIG-2 • Standard format for application for inclusion in MIG-2 • Propose indicators against which performance will be monitored • High level design on incentives • Propose performance measures to be used • Propose weightings of performance measures • Conceptual proposals for implementing MIG in dysfunctional municipalities • Proposals relate to the use of regional management contracts as a means of increasing capacity and putting systems in place in municipalities to manage infrastructure effectively in the long term

15. Conclusion • The targeted outcome of MIG is the provision of sustainable basic services to the poor, which will ultimately contribute to alleviating poverty. • Provide municipalities with a consolidated capital grant that allows them the flexibility to prioritise infrastructure investment needs according to their specific circumstances, in line with norms and standards set by national government departments.

16. THANK YOU