SCOA JULY 2015: The role of metropolitan municipalities IGR Presenter: Malijeng Ngqaleni | DDG: Intergovernmental Relations | 21 JULY 2015

Prioritise cities as the engines of the economy 2 “South Africa’s spatial landscape has to be re- shaped, including investment in dynamic city development... we will support cities to improve living conditions, modernise transport and communications infrastructure, expand the urban economy and promote trade and investment” Medium Term Budget Policy Statement Minister of Finance, Nhlanhla Nene 22 October 2014

The metros grow faster than the rest of the country every year (except 2002) 3

Metros now have the opportunity to play a more leading role in stimulting inclusive economic growth Metros must play a more leading role in enabling cities to become the “engines” of inclusive urban economic growth 2015 MTEF builds strongly on NDP & emerging IUDF through focussing on the importance of massive investments in urban areas to: –Maintain & renew basic urban infrastructure to reduce supply disruptions and support growth; –Restructure settlement patterns to build more productive, inclusive and sustainable cities; –Universalise access to basic services; and –Revive investment in affordable housing in partnership with the private sector But metros will need to do more with less –Fiscal consolidation will be shared across spheres –Municipalities must expand access to non-grant sources of finance (own contributions and partnerships) 4

National Treasury is responding to the challenge A focus on the city space economy Improving urban resource allocation across sectors and spheres, with a special focus on municipal project delivery and sustainable city governments Improving fiscal intergovernmental alignment to improve returns on investment and long term impact and working with CoGTA to strengthen intergovernmental coordination Improving collaboration with the private sector to increase financing for municipal projects and catalysing private sector investment in targeted urban spaces 5

The CSP’s support to cities is anchored by an overarching narrative City Support Programme Core City Governance Support Human Settlements Support Public Transport Support Economic Development Support Climate Resilience Support Under- standing context Building leadership & good governance Creating institutional alignment Planning for TOD Addressin g fiscal, financial & revenue issues Addressing regulatory and land issues Supporting delivery of catalytic projects in integration zones Sustaining service delivery

Policy and Regulation Deliverables The National Development Plan urges coordinated planning, regulatory and investment approaches within a spatial targeting framework that indicates where investment should be focused The Urban Networks Strategy (UNS), a strategic spatial targeting and investment prioritisation approach, has been formulated Built Environment Performance Plans have been introduced via the DORA that require metro’s to do spatial targeting in term of the UNS, develop indicators, prioritise catalytic projects and optimise funding from own revenues, borrowings and grants The Integrated City Development Grant has been introduced via the DORA that incentivises metro’s to spatially target catalytic projects These reforms are closely aligned with the Integrated Urban Development Framework being coordinated by COGTA 7

Urban Network Strategy A spatial targeting approach aimed at the agglomeration of public and private investment towards a more inclusive urban form o National (Targeted cities) 8 o City wide Identification of primary networks (CBD, Corridors, Urban Hubs) and prioritisation of integration zones Secondary networks (Urban hubs, secondary links) o Precinct planning to identify catalytic projects Alignment of LG grants, public incentives and provincial and SOE funds via BEPP process Precinct Management (urban management) of targeted network elements/zones

Precinct Planning in Urban Hubs The Neighbourhood Development Programme has assisted metro’s and secondary cities with precinct planning of urban hubs Precinct Concept – Involves the planning and phasing of public and private sector land uses based on anticipated pedestrian behaviour using the Urban Hub Toolkit and ToD principles Catalytic project identification –The precinct concept leads to the identification and prioritisation of catalytic projects and strategic public interventions (non-capital) –A project pipeline is established for funding purposes across sectors and spheres. 9

10 Urban Hubs in & around Gauteng

Metro’s have all made adequate (though variable) progress with urban network planning via BEPPs 11 Cape Town Joburg NMBBCM TshwaneEkurhuleniMangaung eThekwini

12 A catalytic project pipeline is emerging City Project Financials (R'm)Project Status Total Value (R'm) Funding Source Private Sector Leverage (R'm) TotalSelectionPreparationConstructionCompleted MunicipalLoanGrantProvinceSOEPPP Johannesburg R %30%25% 2646% 54% Tshwane R %62%12%8% EkurhuleniR %32%51% %66%34%0% eThekwini R %42%5%38% Mangaung R %72%11%0% 1631%44%25%0% BCM R % 30% 54% R %50%20% NMB R %32%16%11% Cape Town R %0%17%31%0% 3221%34%44%7% TOTAL R %34%21%15%18%0% R %44%25%13% Investments of R128.5 bn across 232 project currently identified Majority at selection (30%) or preparation (44%) stage Predominantly funded by own sources (41%) or grants (21%)

And we agree that challenges remain Intergovernmental Fragmented national activities Housing accreditation & Mega- Projects Stalled Public Transport devolution Slow release of state owned land Frustrating and slow regulatory / licencing systems Planning misalignment (city, provincial and national spheres) Weak coordination of SoE investments in cities Grants not yet aligned with inclusive economic growth priorities City-level Governance Institutional fragmentation continues “business as usual” Rising personnel costs, creditors days, irregular expenditure and qualified audits Weak alignment with private sector investment decisions Insufficient capacity dedicated to project preparation and pipeline Lack of innovatione in financing and implementation modalities Many examples of the challenges, but metros must help to demonstrate the alternatives

A new fiscal package for inclusive urban development Objective: Accelerate catalytic project preparation & implementation –Provide clear support –Underline urgency –Provide direct financial incentives Will be performance-based 14 DoRA Revisions* Infrastructure Grant Review and restructuring Grant flexibility Grant pledging Financing Support* Accelerated origination Market-making Lending innovation Project Preparation* Support Cities PPF IIPSA Reforms to Devt Charges Re-regulation Coordinated communication Implementation preparedness

…. and the spotlight will stay on urban economic performance in 2015 Global benchmarking index on Cost of Doing Business in each metro –World Bank flagship, all metros participated 15 Useful diagnostic tool  comparable micro-level data  baseline for analysis  identifies bottlenecks and reform opportunities Analysis to Feb 2015 Report Drafting April 2015 Final report & public launch Mid-May 2015

Summary of key issues Metro governance and capacity challenges must be firmly addressed in a time-bound manner –Visible commitments to effective expenditure management –Commitments to infrastructure renewal and maintenance “Intergovernmental coordination” challenges cannot be allowed to delay implementation indefinitely Specific measures needed in all metros to move from project identification to preparation New approaches to financing are required National Treasury remains ready to explore all options to accelerate project preparation and implementation –Must be based on actual proposals rather than broad concepts 16

What remains to be done? National Treasury will continue to provide fiscal and technical support to metropolitan municipalities, through: 1.Continuing to reform the fiscal framework to support accelerated project implementation Fiscal package of grant reforms, DBSA financing, funding for project preparation and re-regulation of Development Charges 2.Working with CoGTA to prioritise the resolution of issues in intergovernmental coordination Metros to concentrate on project-focused needs Task team on Urban Public Transport with metros Strengthen working relations with NDHS & NDOT 3.Expanding the programme of technical assistance from the Cities Support Programme to: Provide transaction advisory, governance & financial management support Review regulatory and other obstacles to project implementation Strengthen private sector participation and finacing leverage 17

What remains to be done? Increased support to improve prioritisation of targeted spaces (integration zones) and improved catalytic project identification and prioritisation by metro’s Work with DHS towards the alignment of their Policy and Grant Framework with the targeted built environment optimisation process Work with metros and DoT to improve public transport prioritisation within targeted urban network routes Catalyse spatially targeted private sector investment to align public incentives, such as the UDZ tax incentive, Jobs Fund and the range of DTI incentives in partnership with the DTI 18