What is the MIIU? Cabinet Memoranda: 1997 & 2002 - Life- span extended to 2006 Non-profit Sect. 21 Company, est. 4/98 Financial & tech. support from USAID PPU & Project Preparation Fund Grants & advice to support local MSPs Administrative support provided by DBSA
MIIU Mandate Facilitate private sector investment in municipal services – on a controlled, sustainable basis Help create a market in Municipal Services Partnership (MSP) services to provide advice to local governments
The MIIU Board Independent BOD, representing: Private sector banks & investors DPLG & National Treasury DBSA Private individuals and business people Local governments Awaiting restructuring of Board in terms of Cabinet Memorandum
The MIIU Grant Process: How Does it Operate? Municipality applies for MIIU assistance MIIU assesses chances for success & development impacts – Project Preparation Report Formal grant agreement signed Municipality contributes partial funding (local ownership) MIIU provides quality control
The Project Development Process 1.Feasibility Study of MSP options 2.Council decision on option (with MIIU advice on recommendations and implications of options) 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
MSP’s31 Non-MSPs*34 All MIIU projects to date: 65 *Internal improvements and/or judged non-viable as MSPs Completed MSPs: MSPs vs. Non-MSPs
MIIU Budget 2002-03 Financial Mgmt. Goals: Maintain MIIU pipeline – 70 in pipeline Accelerate disbursements; draw down surplus – aiming to meet target by end March 2003 Explore new donor funding – DFID monitoring system Continue new activities: diagnostics; public awareness – 4 new ones Accelerate transformation with new staff – performance reviews
Revenues - 2002-03 Budget Current Variance Budget allocation 6,0006,000 0 Donor grant 0 0 0 Interest2,5002,521 21 Expense recovery 90 116 26 --------------------- TOTAL 11,090 9,419 -1,671
Revenues - 2002-03 Var Explanation Budget 0 -- Donor grant 0 -- Interest 21 Higher IR than expected Exp recovery 26 More recovered from contractor ------ TOTAL -1,671
Var. Explanation BOD expenses -60 Remun. budgeted, not approved DBSA admin fee -645 Timing difference re new FY General admin -720 Timing difference re new FY Marketing/Comm 42 Extra recovery re Conference Trainee Prog. -130 Interns vs. permanent staff ------ TOTAL -1,513 Admin. Expend. - 2002-03
Project Spending - 2002-03 Budget Current Variance MIIU pipeline 7,652 4,489 - 3,163 Project Expend.: Var. Explanation MIIU pipeline -3,163 A dditional spending expected before FY end
MIIU Budget 2002-03 Conclusions: Budget 02-03 numbers are current, not actual FY change accounts for major variations Pipeline growing again – affects of demarcation, powers & functions starting to diminish Importance of consistent MTEF allocations. Need to explore new donor funding.
Business Plan Objectives 1.Key focus areas for MSP project development work 2. Diagnostic Studies 3. Government policy & legislation 4.MIIU Transformation & skills transfer
MIIU Pipeline To date 70 active projects – the most ever 23 in concept stage – reflects new growth 35 in feasibility study – key step in process 9 in bid/negotiation stage 33 in solid waste All provinces included – for the first time 65 projects completed; 31 MSPs
1. Focus Areas: 5 Signed MSPs 1.Concessions: Mogalakwena water 2.Metros: Cape Town waste 3.Cs: Ugu, Amatola feasibility studies 4.Bs: Mbombela electricity & rev. mgmt. Theewaterskloof waste
1. Focus Areas: in Process 1.Concessions: Durban waste 2.Metros: Pretoria & CT power 3.Cs: Ilembe water; uThungulu waste 4.Bs: Mangaung Water; Rich. Bay water [70 active projects at 2/2003]
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. Diagnostic Studies
1. New SA CEO: Ms. Karin Pearce 2. New long-term expatriate advisor: Ms. Jacqueline Levister 3. 2 South African Project Managers: Danai Magugumela; Asha Bassa 4. Secured two L-T advisors from DFID 5. MIIU BOD has approved recruitment of two new MIIU project managers 4. MIIU Transformation & Skills Transfer
STRUCTURE OF PRESENTATION STRATEGIC ISSUES FOR LOCAL GOVERNMENT MIIU APPROACH TO ADDRESSING THESE ISSUES MIIU KEY PERFORMANCE AREAS KPI’S BUDGET
OVERALL STRATEGY Policies, planning;legislation;restructuring are in place – the challenge for all sectors of society is sustainable implementation of services and growth HOW CAN MIIU HELP TO ACHIEVE THIS, IN 3 YEARS? MIIU is uniquely placed alongside all spheres of government, has implementation experience and skill, has credibility in the market and has the confidence of municipalities, to facilitate implementation through investment by both the public and private sectors; service delivery solutions within and between both the private and public sectors Therefore, the next 3 years for MIIU are about “MAKING IT WORK”
STRATEGIC ISSUES SUPPLY SIDE AVAILABILITY AND ACCESS TO PRIVATE SECTOR FINANCE SERVICE OPERATORS CONSULTANTS AND BEE DEMAND SIDE CAPACITY TO PRIORITISE, MANAGE,MONITOR COUNCIL COMMITMENT IN RELATION TO RISK GENERIC ISSUES STRATEGIC PLANS – INTERGOVERNMENTAL ALIGNMENT LEGISLATION AND REGULATION
APPROACH TO SUPPLY SIDE ISSUES Stimulate the market’s appetite for water sector partnerships, through CHS in water and sanitation – public or private risk Encourage municipal service partnerships in service delivery, based on public sector borrowing – public risk BEE database and training opportunities
APPROACH TO DEMAND SIDE ISSUES MIIU project process: professional responsibility – council resolutions and implications Ensure financial risk apportionment is appropriate to risk management functions in contract design with regards to the risk of non- payment Facilitate access to “on-the job” training for sector specific, contract related matters
APPROACH TO GENERIC ISSUES STRATEGIC FOCUS ON ESSENTIAL SERVICES: Facilitate intergovernmental alignment between National;provincial programmes and local government: DWAF;DPLG;DME;DEAT categories of municipalities through projects: Multi-jurisdiction service delivery areas in water LEGISLATION: Actively participate in the formulation of regulations appropriate to facilitating service delivery in local government: MFM Act
KEY PERFORMANCE AREAS MSP’S IN ESSENTIAL SERVICES: Water and sanitation, waste and electricity. Some will be PPP’s, others will be public MSP’s. Focus is on MIIU disbursement to projects which enhance investment in and service delivery in the short term, and sustainability in the long term. Target: 80 active; 9 new DIAGNOSTICS: Enhance the ability of rural municipalities to deliver through analysis of the status quo and recommendations on solutions within existing resource constraints of MIIU Target: 5 active; 3 new diagnostics
KEY PERFORMANCE AREAS CONT. UNFUNDED TECHNICAL ASSISTANCE: Enables practical implementation of alignment between and within spheres of government through timeous intervention and advice on request Revenue Enhancement Programme -DPLG National Infrastructure Cluster Committee – DPLG;DWAF;DEAT;DPE etc DWAF national coordinating committee DME/EDI Task Group Treasury/PPP Unit: Regulations for MFM Bill COMMUNICATION Conferences/Seminars: less in number but more focused on impacting municipalities and the private sector Monitoring and Evaluation system: establish in MIIU and begin M&E on 5 projects Website: establish and keep up to date
Auditable KPIs 1.No. of active projects 80 2.No. of new completions 9 3.Total disbursementsR14.1m 4.No. of completed diagnostics 8 5.No. of new diagnostic starts 3 6.Diagnostic disbursementsR0.6m 7.Disbursement-related opex to total grant expenditure 28.4%
Internal MIIU KPIs 1.Establish a project monitoring system 1 2.Value of MIIU TA to munis 20hr/mon 3.Value of MIIU TA to other govt. 20hr/mon 4.Completed electricity ring-fencings 3 5.Reports on ring-fencing implications 3 6.Established credit guarantee scheme 1 7.Agreements for muni access to guarantee 1 8.Development plans for MIIU’s SA staff 4 9.Contract mgmt course for muni officials 1 10.New funding for MIIU R14.9m
Success factors for sustainable infrastructure and service delivery Know the true cost, now and in the future – life cycle cost of infrastructure Know who is going to foot the bill now and in the future – whether it is consumers or taxpayers or a combination of both Ensure level of service (quantity and quality) is appropriate to affordability Ensure users and providers of services understand and agree to price and level of service – stakeholder cost/benefit Develop appropriate performance monitoring in the public sector Take timing into account: maturity of the market; political climate; budgetary flows Enable certainty for life of the project so that everyone knows what they are in for Certainty in: –Legal and regulatory framework –Pricing policies –Who carries what risks under normal and abnormal circumstances –Decision-making procedures and accountability
Success Factors in the Municipal Sphere in SA Human Capacity: identify solutions and make recommendations which spell out implications; move from feasibility to implementation; monitor; preemptive and remedial action Financial management: intergovernmental coordination so that planning is meaningful and prioritising/scheduling can be done with certainty – knock on effect on construction industry; financial services sector; stability in the local environment;accountability for spending decisions On average, +90% of municipal revenue comes from own sources – local economic base is very important, but local economic planning can’t on its own overcome macro structural problems.
Success Factors in the Municipal Sphere in SA Cont. Legal and regulatory environment: Local government legislation recognizes discretionary powers of other spheres, e.g. Tariff capping; free basic services. Need for certainty of mechanisms for municipalities; private sector Local government empowered by law to decide solutions and to carry the burden of risk: importance of local political responsibility for risk apportionment in a project Requires cost benefit analysis to establish UP FRONT who can and should afford what; and a determination of who is best able to manage which risks UP FRONT: Define Material Adverse Government Actions; determine what constitutes systemic risk and how to manage it; penalties
SOLUTION FRAMEWORK No single stakeholder has what it takes to create sustainable infrastructure – partnerships between providers and users are needed; regulation should incentivize partnerships. In the long run, sustainable infrastructure delivery means resources must come from taxpayers or consumers, i.e. users are the key. Targeting intragenerational equity should be deliberate. Ultimately, failure becomes a taxpayers’ cost – systemic non-payment by some impacts on all. In the short term, infrastructure investment by its nature, happens in “large chunks”, and, both public and private investment is needed to overcome the “backlog hump” – we should be mindful of ensuring that at a minimum, intergenerational equity is attained in levels of service and cost of service.
CONCLUSION Everyday decisions by municipalities, should answer these questions: What are the long-term impacts of the decision? Is the decision sustainable at a local level? Have the economic, social and environmental impacts been taken into account in the decision?
Thank You. For more information visit… http://www.miiu.org.za
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