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www.salga.org.za
“LEARNING FROM THE PAST
PLANNING FOR THE FUTURE”
A PARADIGM SHIFT IN
INFRASTRUCTURE FUNDING
CESA – INFRASTRUCTURE
INDABA
10 NOV 2015
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Presentation Outline
Part 1
Who is SALGA
Defining the Context
Part 2
Funding Instruments
Part 3
Re-engineered Grant System
Pooled Funding
Part 4
Governance – Audit
Part 5
Innovation
Part 6
Suggested Way Forward
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SALGA National
SALGAProvinces
7 STRATEGIC GOALS
1) Accessible, equitable, sustainable services
2) Safe and healthy environment and communities
3) Coherent local planning & economic development
4) Effective, responsive and accountable local governance for communities
5) Human capital development in LG
6) Financially and organizationally capacitated municipalities
7) Effective and efficient SALGA administration.
4 APEX PRIORITIES:
1. Review of legislative & policy framework impacting negatively on LG.
2. Review of LG fiscal & financial management framework.
3. Improved municipal capacity.
4. Reposition SALGA as a centre for LG excellence, knowledge & intelligence
Differentiated Approach to Managing / Supporting Local Government
…
…
SALGA MANDATES1. Representation 2. Employer Body3. Capacity Building4. Support and Advisory Role 5. Profiling Role 6. LG Knowledge Hub
SALGA 5 YEAR STRATEGIC PLAN
2012-2017
INTER / NATIONAL CONTEXT1. MDGs & Global Commitments2. National Dev Plan & other national
plans/policies 3. MTSF4. B2B Approach5. Electoral Mandate (2011)
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Population per province and
Number of Water Services
Authorities
NORTHERN Cape
1,1m
WESTERN CAPE
5,8m
EASTERN Cape
6,5 m
16 Munics
NORTH WEST
3,5m
FREE STATE
2,7m
KWAZULU NATAL
10,2m
LIMPOPO
5,4m
MPUMALANGA
4m 9 WSA
GP
12m
11 WSA
27 WSA
16 WSA
13 WSA
14 WSA
24 WSA
20 WSA
18
WSA
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Context Illustration Examples
Number of installations Many treatment plants
Type infrastructure Sewers vs. pits
Geography Area and topography
Economy Poverty
Size of installations ‘bigger is different’
WSAs do not all operate in the same context
The Operational Challenge
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WATER SERVICES BUSINESS IS
COMPLEX
6
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Funding Instruments for Social
and Economic Infrastructure
Source: Grant Review NT
Four tyres of funding instruments:
Grants, Taxes, and Tariffs and Loans
Grants
Conditional mainly for Social
Infrastructure (Under Review)
Equitable Share - for operation and
maintenance
Regulated by Division of Revenue
Act
Taxes - Mainly for economic
infrastructure
Tariffs – Operations and Maintenance
and Capex
Loan – Mainly for Capex
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Fiscal expansion vs. enduring
backlogs
Households’ Access to Service (2001 to 2011)
Local Government Infrastructure Grants 2000-2012 (adjusted for inflation)
Source: NT
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Wet Dry
Sanitation
Roll out of both wet and
dry Sanitation informed
by
Community
consultation
Dignity
Privacy
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After Before
Progressive Climbing
the Water ladder
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Direction of reforms
Budget Forums agreed 3 main priorities for reform:
1. Improved Grant Structure• Greater differentiation - avoid one-size-fits-all,
• Rationalisation in the number of grants each municipality receives
2. Emphasis on Asset Management• Incentivise improved maintenance (not fund) and asset care
• Shift grants to fund existing assets for renewal, not always ‘new’
3. Management of the Grant System
• Clearer roles for nat’l departments and stronger central/holistic management of system (not individual grants)
• A rationalised, more functional and accountable reporting system
Review of LG Infrastructure Grants
11
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International asset management
standards and best practice:
Sco
pe
of
an
ass
et m
an
ag
emen
t sy
stem
a
s p
er I
SO 5
50
00
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Recommended 2016 Budget Change
Allow for grants to invest in refurbishment and renewal; shift away
from just focusing ‘new’ assets
Formally reflect this pivot in MIG (and other grant) conditions
Flexible conditions at first, but tighter over time to avoid abuse
Incentivise better maintenance by supporting the creation of municipal
asset management systems, such as MISA’s Municipal Infrastructure
Performance Management Info System (MIPMIS)
Allow MIG, or other grants, to be temporarily used to generate the
necessary asset registers and asset management strategies
This allow stronger conditions in future to force their use
Must integrate not duplicate with sector-based information
systemsReview of LG Infrastructure Grants
13
Asset Management
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What is “Municipal Pooled Financing”?
Definitions:
• Municipal Pooled Financing (MPF) is a cooperation between several
municipalities with respect to jointly borrowing money. Specific rights and
responsibilities arise out of such a joint transaction. Thus, the financial
cooperation forms an own economic and social system and is also
perceived and treated as such by its environment.
• A Municipal Polled Financing Mechanism (MPFM) is a specific instrument to
structure MPF.
14
Other Funding Initiatives
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• Primary Objectives
– Fund Projects two year lifespan
– Investment vehicle to attract private sector
• Principles of the fund
– Maximise the level of infrastructure spending through
effective/efficient use of the resources and skills of both the public and
private sectors
– Establish long-term mutually beneficial partnerships between the
public sector and the private sector
– Ability to leverage finance for commercial projects in WC/WDM
– Require WC/WDM projects to be developed in a competitive
environment
– Ensuring value for money is obtained in developing and implementing
WC/WDM projects
Other Funding Initiatives -
Revolving Fund
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GOVERNANCE
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Municipal
Audit Support
Institutional
Capacity
Financial
ManagementLeadership Governance
SALGAs MASP follows a Multidisciplinary approach that is based on 4
Pillars.
We believe that all four pillars in a Municipality need to be strong and
functioning effectively in order for a Municipality to obtain and sustain
unqualified audits and good service delivery SALGA is confident that the MASP based on the 4 Pillars of Support cover the risk
areas and root causes identified by the AGSA as well as the three aspects audited.
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Challenges
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Research Findings
– Analysis of 18 site specific decision scenarios indicate:
• 44% of plants employ less suitable (inappropriate) technologies when matched to their resource base, capacity to manage and effluent quality requirements
• 33% of plant technologies are questionable and may not be the best fit for the operational and management environment
• 22% of assessment plant employ suitable and sustainable technology options
33%
22%
44%
No of 'right fit'technology plants
No of possibly'right fit' technologyplants
No of'inappropriate fit'technology plants
Consequences
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Wet
Sanitation
Most facilities were found to have operational problems
Dry
Sanitation
Dry sanitation O&M problem has not even been seen yet
Example: 36000 VIPs over 3yrs at between R900 – 1200 p/VIP
Good Bad Ugly
What are we Managing
Good Good Ugly
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Cost Recovery –
just two problems
• Below cost tariffs – (tariff setting is a political process rather than an accounting process)
• Negligible collection in rural areas – partly a political problem, partly a practical problem
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Typical deterioration
curve of municipal civil
infrastructure
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23
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Way Forward
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Source: DHET
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Source: ABSA
Option Asset Ownership O& M Capital Investment Commercial Risk Duration
Service Contract Public Public and Private Public Public 1-2 Years
Management
Contract Public Private Public Public 3.5 Years
Lease Public Private Public Shared 8-15 Years
Concession Public Private Private Private 25-30 Years
BOT/BOO Private and Public Private Private Private 20-30Years
Comparing Alternative Service Delivery Options
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Innovation: Energy
Sludge to Energy: City of Joburg
Energy Generations from water supply- Water
Research Commission
Water delivery requires pumping over
long distances
Electricity is the one of the largest
costs in municipalities – in this regard
alternative sources of energy become
imperatives
Hydro power
Bio Gas
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Water Leader July 2014 Sylvain Usher, Secretary General of the African Water Association
Public-plus Private Funding
“Water Utilities that rely entirely on public funding for
capital investment often fall short in terms of resource
mobilisation and are certainly unable to implement
sustainable improvement in service”.
The utility should be able to get its own funding from a variety of financial resources!
