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MUNICIPAL PPP CONFERENCE 18 FEBRUARY 2010. Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure.

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Presentation on theme: "MUNICIPAL PPP CONFERENCE 18 FEBRUARY 2010. Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure."— Presentation transcript:

1 MUNICIPAL PPP CONFERENCE 18 FEBRUARY 2010

2 Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure Development The Role of Gauteng PPP Unit in Municipal PPPs Conclusion

3 Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure Development The Role of Gauteng PPP Unit in Municipal PPPs Conclusion

4 Project Planning Service delivery pressure points Availability of funds for projects Declining capital funding; alternative funding mechanisms Alignment of the project with strategic plans and mandate Harness private sector role in infrastructure development

5 High Level Graphic representation of overlaps. PPP /Conventional Cash Flow - lifecycle costs Budget Coverage - related to affordability Compliance to Legislation PPP planning process as per MFMA, MSA, policies and guidelines Project commitments over the Meduim Term Revenue & Expenditure Framework must be reflected in the budget Cash Flow Model could be used to map out project cash flows to prevent delays due to cash challenges and unnecessary shifting of funds. Lifecycle costs and debt repayment.

6 Click here to add heading MSA S. 78 Criteria and process for deciding on mechanisms to provide municipal services (3) If a municipality decides in terms of subsection (2)(b) to explore the possibility of providing the service through an external mechanism it must— (b) assess the different service delivery options in terms of section 76(b), taking into account— (i) the direct and indirect costs and benefits associated with the project, including the expected effect of any service delivery mechanism on the environment and on human health, well-being and safety; (ii) the capacity and potential future capacity of prospective service providers to furnish the skills, expertise and resources necessary for the provision of the service; (iii) the views of the local community; (iv) the likely impact on development and employment patterns in the municipality; and (v) the views of organised labour.

7 Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure Development The Role of Gauteng PPP Unit in Municipal PPPs Conclusion

8 Water and Sanitation The increasing levels of migration leading to current infrastructure unable to cope Cross-border spill over effects between municipalities Huge capital required for upgrades and maintenance Improved Service Delivery

9 Solid Waste Treatment An international phenomenon... Population and business levels increase leading to increased waste generation Excessive gas emissions pausing climate change risks. (the call for pollution free solutions to service delivery) Increased landfill airspace shortages and shortage of land for new landfill sites Other environmental laws e.g. the new Waste Act calling for waste minimisation strategies. Waste-to-energy option - stimulates private sector demand. High maintenance technologies available; where a Private Party can fill the gap. Solid Waste

10 Commercial Use of Municipal Property Unused or underused municipal properties; e.g. stadiums, under-utilised buildings, vacant land and other multipurpose areas. To create economic movement while stimulating social activities. To promote more efficient management of municipal property portfolios. User fees to the municipality

11 Other Project Considerations Integrated Rapid Public Transport Networks Boost local infrastructure Reduce vehicle gas emmissions Urban Renewal - Property To make local area attractive for residential purposes Involves an integrated approach with regards to infrastructure accessibility thereby drawing more economic activities. International Convention Centre Opportunities

12 Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure Development The Role of Gauteng PPP Unit in Municipal PPPs Conclusion

13 Key to successful PPPs Alignment of proposed projects to strategic plans and mandates to implement. To ensure vertical alignment in terms of national and provincial priorities also to enhance “buy in”. Proper groundwork at inception with regards to option analysis: option with clear value drivers to be selected. Attracting private investors. Appointing good transaction advisors: well rounded with knowledge and experience in the relevant technical area of the proposed project, property management, financial planning and legal expertise. Contract negotiation: to ensure watertight contract terms and conditions. Contract management.

14 Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure Development The Role of Gauteng PPP Unit in Municipal PPPs Conclusion

15 Challenges in Infrastructure Development Ageing infrastructure Maintenance backlogs (lack of maintenance plans and funds) Capacity Challenges Red tape in decision making Supply chain bottlenecks

16 Solutions Enforce infrastructure management system Ringfencing of budget Invest in training and retaining of skilled personnel Reasonable timelines for tender awards (minimise SCM delays) Consistency with IDP priorities and budget – correct use of grant funding Encourage private sector participation

17 Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure Development Solutions The Role of Gauteng PPP Unit in Municipal PPPs Conclusion

18 The Role of Gauteng PPP Unit in Municipal PPPs Compliance monitoring and support throughout the planning process. Receive information on PPP proposals – Analyse for alignment with strategic plans and mandates Assist in the application for the Project Development Facility (PDF). Advise on drafting of project registration documents to be lodged with NT. Advise and assist in the procurement of the Transaction Adviser (TORs and evaluation) Participate in the Feasibility Study Process, through Project Steering Committee. Evaluate project financial models for accuracy and completeness, including the Risk Matrix. Facilitate the Treasury Views and Recommendations (TVR I, II & III) Processes Participate in the Procurement Process (Proc. documentation, bidder evaluation) Participate in Contract negotiation Process through to Financial Close.

19 Gauteng State of Affairs in relation to Municipal PPPs August 2008 - Launch of the Municipal Service Delivery and PPP Guidelines PPP roll out plan to follow up on municipal infrastructure plans. Directors of Service Delivery/Infrastructure Services/Engineering Services and Finance were targeted Aimed at identifying service delivery pressure points Recommend alternative financing solutions Assess municipal readiness to undertake PPP projects in terms of planning and in- house skills for inception. Attract private sector investment Piloted municipalities: - Emfuleni LM - Midvaal LM - WRDM - Lesedi LM - Ekurhuleni Metro

20 Gauteng State of Affairs in relation to Municipal PPPs Feedback High capital funding constraints Indifference General interest to learn more Reluctance due to lengthy planning and the amount of ground work required Political aspects Way forward GT PPP Unit is participating in the IDP TSC (2010/11 onwards) Will be requesting infrastructure plans; aimed at interfacing at early project planning phase To recommend alternative options All municipalities included. Considerations on Project identification -Project scale -Sector (linked to current private sector appetite) -Demand ( linked to revenue sustainability) -Institutional capacity -Section 78 of the MSA (Municipal services) 3 PPP Tests Affordability Value for Money Risk Transfer (financial, technical &operational

21 Contents Project planning Areas that could be considered for PPPs Key to successful PPPs Challenges in Infrastructure Development The Role of Gauteng PPP Unit in Municipal PPPs Conclusion

22 PPP is an option that complements the fiscus for infrastructure while mapping out a long term commitment. (not an easy way out/quick fix, etc.) A need to create a joint effort, willingness to consider and explore wider options. Emphasis should also be placed on the importance of long term plans and benefits that go beyond MTREF. Our office is always ready to advise and support municipalities; to enhance and compliment revenue through private investment.

23 Thank you! For more info: David.rampaku@gauteng.gov.za Oniccah.malebo@gauteng.gov.za Themba.mdletshe@gauteng.gov.za Kgatedi.kobe@gauteng.gov.za


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