ASSET MANAGEMENT

The cornerstone of long term financial sustainability Financial sustainability has been the ‘buzz-word” in the municipal space for a considerable number of years, and with good reason. But what are we really talking about? What is financial sustainability? Although there are numerous theoretical definitions for financial sustainability, it effectively relates to being able to be there for your beneficiaries in the long term, or simply put… ..the ability not to stop the provision of services or sacrifice quality because we ran out of money.

The cornerstone of long term financial sustainability How do we achieve sustainability in the future? Not only do municipal assets form the basis for revenue generation, but the extent and quality of services are products of the manner in which these assets are operated and maintained. Definition of asset management (LGIAMG) The process of decision making, planning and control over the acquisition, use, safeguarding and disposal of assets to maximise their service-delivery potential and benefits, and to minimise their related risks and costs over their entire life.

The cornerstone of long term financial sustainability Building on asset management Sustained Reliable infrastructure & Service delivery revenue O&M LOS & SOS Lifecycle cost Asset management Demand

EXAMPLE: STRATEGIC OBJECTIVES Alignment of strategic objectives and asset management objectives Prioritise 70% of investment in revenue generating assets 3 Target investments in targeted growth areas (60% of all capital spending) Eradicate service access backlogs by 2030 Maintain the productive capacity vested in assets by ensuring that asset consumption does not exceed 50% at portfolio level Reduce water distribution losses to below 30% Target 20% of total renewal expenditure as green renewal A safe and workable workforce Social upliftment Unifying city identity yet celebrating diversity Financial health and sustainability Environmental sustainability Economic development Spatial efficiency EXAMPLE: STRATEGIC OBJECTIVES 6 5 4 1 EXAMPLE : ASSET MANAGEMENT OBJECTIVES 2

Alignment of strategic objectives and asset management objectives Adopted from

Asset management plans – Value chain The asset management system reaches across virtually all areas of a municipality, and so does its asset management plans. An asset management plan deals with all activities associated within an asset portfolio: regulations and objectives needs (demand) conceptualisation funding procurement and creation operations performance and maintenance renewal decommissioning and rehabilitation accounting Adopted from

Asset management plans – Value chain

Portfolio planning processes Implementation authorised Asset management plans – Value chain Needs and opportunities, taking into account the current asset portfolio no Preparation & briefing Infrastructure planning Strategic resourcing Project initiation Does the project require a feasibility study? Portfolio planning processes Prefeasibility Feasibility New, renewal, upgrading? yes Project planning processes Proceed with procurement Project terminated Is there sufficient information to proceed? Implementation authorised Implementation deferred Concept & viability Design development Production information Manufacture, fabrication and construction information Detailed design processes Works Hand over Site processes Package completion Close out processes Adopted from

what exactly needs to be funded? Do we really know? Bridging the infrastructure funding gap for sustainable service delivery Even the most dynamic economies are faced with infrastructure funding constraints. Whilst striving to bridge the gaps of the past, we find ourselves faced with daily outcries for higher levels and standards of services, both in rural and urban communities. Coupled with the challenge of ageing infrastructure, the funding gap keeps expanding. A variety of funding models and instruments exists, but… what exactly needs to be funded? Do we really know?

Lifecycle strategies and plans Bridging the infrastructure funding gap for sustainable service delivery What does the future hold 10, 15 or 30 years from now? What needs to be funded? Customer profiling Future demand? Lifecycle strategies and plans Infrastructure profiling

Drivers of effective asset management Currently, what drives asset management in South African Municipalities? Legislation and regulation (GRAP, MFMA, SIPDM, SPLUMA, SANS 55000) Reactive needs identification Effective asset management is a product of the alignment of: objectives needs resources and the discipline to meet the objectives with in the confinements of regulations and constraints.

Drivers of effective asset management So what are the drivers of effective asset management? Asset management practices Service provision models Leadership and teams Policy, Strategy and plan Information systems Risk management Monitoring and improvement

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