South Africa’sSouth Africa’sMunicipal Infrastructure Municipal Infrastructure
Investment UnitInvestment Unit
Annual Portfolio Budget Hearing26 April 2002
Ms. Marlene Hesketh, Board Chair
Dr. James Leigland, Acting CEO
Ms. Danai Magugumela, Project Manager
Presentation Presentation OverviewOverview
1. Policy & Operation
2. 2001-02 Budget Review
3. 2002-03 Budget
4. 2001-02 Performance Review
5. Lessons Learned & Future
Direction
Policy & OperationsPolicy & Operations
What is the MIIUWhat is the MIIU?? Cabinet Memorandum, No. 14, 1997 Non-profit Sect. 21 Company, est. 4/98 Financial & tech. support from USAID PPU & Project Preparation Fund Grants & TA to support local MSPs Tech. & logistic support provided by DBSA 5-year life-span—likely to be extended
MIIU ObjectivesMIIU Objectives
A government intervention to: Facilitate private sector investment in
municipal services – on a controlled, sustainable basis
Help create a market in MSP services to provide advice to local governments
The MIIU BoardThe MIIU BoardIndependent BOD, representing: Private sector banks & investors Dept. of Provincial & Local Government
& National Treasury The Development Bank of Southern Africa Private individuals and business people Local governments
The Project Preparation Unit:The Project Preparation Unit:How Does it Operate?How Does it Operate?
Municipality applies for MIIU assistance Questionnaire helps conceptualise project MIIU assesses chances for success & development
impacts 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 options
2. Council decision on option (with MIIU advice)
3. Prepare bid documents, draft contract
4. Selection of public or private partner
5. Negotiate & sign contract
6. Financial close -- begin implementation
7. Initiate contract compliance monitoring
Completed MSPs:Completed MSPs:Total ValuesTotal Values
Contracts Values O&M R 42 m O&M plus Capex R 5,167 m Divestiture R 1,407 m Corporatisation R 70 m
---------- Total R 6,686m
Benefits for the Disadvantaged:Benefits for the Disadvantaged:Direct Benefits to Households:Direct Benefits to Households:
Project Households Harrismith water 14,222 Thabazimbi waste 3,000 Nelspruit water 42,667 Tzaneen waste 12,000 Jnb Metro Gas 6,000 Jnb Bus 355,556 Total 433,445
Benefits for the Disadvantaged:Benefits for the Disadvantaged:Indirect Service Efficiencies:Indirect Service Efficiencies:
Jnb Info Tech Dolphin Coast water Nelspruit water Jnb Fleet Jnb Market Jnb bus Eastern Cape IT
Benefits for the Disadvantaged:Benefits for the Disadvantaged:Environmental Improvement:Environmental Improvement:
Thabazimbi waste Robertson waste WMLC waste Nelspruit water
Dolphin Coast water Tzaneen waste Jnb Metro Gas
Benefits for the Disadvantaged:Benefits for the Disadvantaged:More Revenue for Services to Poor:More Revenue for Services to Poor:
Jnb Metro Gas Jnb Rand airport Richards Bay airport Pretoria airport Nelspruit water Dolphin Coast water Jnb Parking
Public-public PartnershipsPublic-public Partnerships
Harrismith Water – 14,222 households Maluti a Phofung Water – 178,000 uThukela Water (MJMSD) – 267,000 Johannesburg Water Utility – 622,000 Eastern Cape Info Tech. – 100,000 Johannesburg Bus & Market – 355,556
2001-022001-02Budget OverviewBudget Overview
MIIU Budget 2001-2002
Financial Mgmt. Goals: Maintain MIIU pipeline Accelerate disbursements; draw down surplus Explore new donor funding New activities: diagnostics; public awareness Accelerate transformation with new staff Target disbursements by category
Budget StructureBudget Structure
1. Revenuesminus
2. Administrative Expendituresminus
3. Project Expenditures
plus
4. Previous FY’s surplus
MIIU Budget 2001-2002
Revenues: Budget Actual Variance
Budget allocation 6,450 6,450 0
Donor grant 0 533 533
Interest 2,250 2,212 -38
Expense recovery 90 224 134
Success fees 2,300 0 -2,300
TOTAL 11,090 9,419 -1,671
MIIU Budget 2001-2002
Revenues: Var Explanation
Budget 0 --
Donor grant 533 Exchange rate correction
Interest -38 Lower IR than expected
Exp recovery 134 More recovered from Padco
Success fees -2,300 Not enough time to adjust bid docs
TOTAL -1,671
MIIU Budget 2001-2002
Admin Expend.: Budget Actual Variance
BOD expenses 28 10 -18
DBSA admin fee 1,579 1,658 79
General admin 699 953 254
Marketing/Comm 342 370 28
Trainee Programme 220 124 -96
Exit Planning 655 141 -514
TOTAL 3,523 3,256 -267
MIIU Budget 2001-2002
Admin Expend.: Var. Explanation
BOD expenses -18 Fewer directors, closer
DBSA admin fee 79 Cost increases on office equip
General admin 254 CEO trips, consulting costs
Marketing/Comm 28 Advertorials; public awareness
Trainee Prog. -96 Interns vs. permanent staff
Exit Planning -514 Delayed pending Cab. Memo
TOTAL -267
MIIU Budget 2001-2002
Project Expend.: Budget Actual Variance
MIIU pipeline 16,171 9,860 -6,311
Concessions 18% 0% -18%
Metros 16% 45% 29%
Dist. councils 35% 34% -1%
Other local councils 31% 21% -10%
MIIU Budget 2001-2002
Project Expend.: Var. Explanation
MIIU pipeline -6,311 New councils; demarcation; powers/functions
Concessions -18% L-t commitments difficult
Metros 29% Conclusion of all Jnb iGoli work
Dist. councils -1% --
Local councils -10% “Bs” unsure of powers/functions
MIIU Budget 2001-2002
Summary: Budget Actual Variance
2000-01 surplus 20,842 20,842 0
Revenues 11,090 9,419 -1,671
Admin. Expend. 3,523 3,256 -267
Project Expend. 16,171 9,860 -6,311
2001-02 surplus 12,238 17,145 4,907
MIIU Budget 2001-02Conclusions: Steady pipeline growth (highest ever project
spending). But growth much slower than expected due to
demarcation, powers & functions. Strong, early grant funding continues to
provide strong financial foundation. Importance of consistent Budget allocations. Need to explore new donor funding.
2002-03 2002-03 BudgetBudget
MIIU Budget 2002-2003
2001 2001 2002-03
Summary: Budget Actual Budget
Revenues 11,090 9,419 8,090
Admin. Expend. 3,523 3,256 4,678
Project Expend. 16,171 9,860 12,845
Surplus 17,145 7,712
MIIU Budget 2002-2003
2002-03
Summary: Budget Explanation
Revenues 8,090 (-) Less interest income
Admin. Expend. 4,678 (+) Two new SA junior staff
Project Expend. 12,845 (+) Recovery from demarcation-
related distractions
2001-022001-02Performance ReviewPerformance Review
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
1. Focus Areas: 5 Signed MSPs1. Focus Areas: 5 Signed MSPs
1. Concessions: - Margate Airport
2. Metros: - Kelvin Power Plant Sale
3. Cs: - uThukela Water (MJMSD)
4. Bs: - Overstrand Solid Waste;
- Maluti a Phofung Water (pub-pub)
1. Focus Areas: in Process1. Focus Areas: in Process
1. Concessions: -PMB Airport; Durban SW
2. Metros: -Pretoria Power; Cape Town SW
3. Cs: -Ugu Wastewater; Amatola SW
4. Bs: -Kwadukuza Water; Rich. Bay Water
[53 active projects at 2/01]
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 (EC) 8. Sekhukhune (MP)
2. JS Moroka (MP) 9. Central Karoo (WC)
3. Mangaung (FS) 10. Kgalagadi (NC)
4. Ugu (KZN) 11. Umkhanyakuda (KZN)
5. Msunduzi (KZN)
6. uMgungundlovu (KZN)
7. Nelson Mandela (EC)
2. 2. DiagnosticDiagnosticss
1. Severe rural poverty means little chance for viable PPPs
2. Officials in urban-centred areas unaware of pending service system crises
3. Budgeting & financial mgmt not suited to early warning of problems
4. Many opportunities for PPPs, but much political resistance
2.2. Diagnostics: FindingsDiagnostics: Findings
1. MSA, Sect. 94(1)(c)2. Powers & Functions Steering Comm.4. Meetings/testimony on MFMB5. DWAF water policy white paper6. DWAF WSA regulations 7. DPLG Cities’ Network8. EDI Restructuring Ring Fencing
3. Govt. Policy & Legislation:3. Govt. Policy & Legislation:Task Teams & CommitteesTask Teams & Committees
Many opportunities to advise local officials regarding MSP development requirements in MSA.
(Sect. 78)
3. Govt. Policy & Legislation3. Govt. Policy & Legislation
Two new full-time Project Managers:
1. Ms. Danai Magugumela
(civil engineer)
2. Ms. Asha Bassa
(lawyer, banker)
4. MIIU Transformation4. MIIU Transformation & Skills Transfer & Skills Transfer
Departure of MIIU CEO, Gugu Moloi, to become CEO of Umgeni Water.
Recruitment of new CEO currently underway.
Change in Senior PersonnelChange in Senior Personnel
Lessons Learned &Lessons Learned &Future DirectionFuture Direction
Lessons LearnedLessons Learned
Continuing need for private investment in municipal infrastructure
Continuing municipal need for assistance with MSPs
Growing need to measure/monitor MSP performance
Need to counter misleading publicity (Nelspruit & Dolphin Coast)
Internal ChallengesInternal Challenges
PFMA Compliance • Auditable performance targets
• Directors’ liability King II – Corporate Governance
• Implications for the MIIU BOD? Succession planning
• Capacity building, successor organisations
• Donor funding (needed? From whom?)
MIIU into the FutureMIIU into the Future
Likely increase in MIIU client basebecause of... Final allocation of powers & functions Permanent appointment of city management MFMA + GAMAP = cost recovery emphasis Consolidation/rationalisation of grant
programmes EDI restructuring (?)
The MIIU Role in ReformThe MIIU Role in Reformbeyond concluding PPPsbeyond concluding PPPs
Review restructuring strategies in IDPs (via diagnostic studies)
Brief clients on restructuring requirements Inform clients re other support programmes Ensure MSPs fit restructuring needs
• Thorough feasibility investigations• Consider all options (incl. public-public)• Use performance-based contracts
Strategic IssuesStrategic Issues
1. Free Water policy• Linkages between the three spheres of
government
• Monitoring of municipal infrastructure investments
• Financial support to the unit to increase impact and capacitate local governance
(Continued)
Strategic Issues - cont.Strategic Issues - cont.2. Implementation of applicable legislation:
• The Municipal Systems Act• The Municipal Structures Act• Pending regulations
3. Communication about MSPs (private & public)
4. Linkages with strategic programmes of govt• Integrated rural strategy• Urban renewal programme
SummarySummary
Best-practice procedures & policies R6.7 billion in completed MSP projects 53 active projects Lessons learned – the need for MSPs in
infrastructure finance The role of MSPs in municipal reform
Thank You.For more information visit…
http://www.miiu.org.za
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