1. PROVINCIAL INFRASTRUCTURE GRANT NCOP 06 March 2006

2. 2 OVERVIEW Background Trends in the allocation of infrastructure grant Grant framework –Schedule 4 grant –Allocation criteria –Conditions Administration of the grant Performance/Impact of the grant –Growth in budgets and expenditure trends Intervention to improve planning and spending capacity

3. 3 Background Decline in capex between 1995/96 and 1998/99 from R6 billion to R3,9 billion 2000/01 due to rising social services budgets and personnel costs Provincial Infrastructure Grant was introduced in 2000/01 with the allocation of R300 million The 2000/01 allocation was allocated to four provinces that had major damage of their infrastructure due to floods In 2001/02 the grant was allocated R1,4bn rising to R 3,3 b in 2004/05, increase averaging 33,7% Allocation further rises from R3,7 billion in 2005/6 to R5,7 billion 2008/09

4. 4 BACKGROUND To facilitate turnaround in the budgets for education, health & roads infrastructure Grant allocated to prov. treasuries to prioritise infrastructure within these guidelines: –40% each education and roads –13% health –7% rural/agricuture infrastructure Grant allocation criteria –Initially it was an average of equitable share and infrastructure backlogs (education and Health) –Formula revised to include road network as the component – each component has equal shares (33.3%)

5. 5 Allocation of Provincial Infrastructure Grant

6. 6 Type of the grant: Schedule 4 Allocation supplements infrastructure budgets Not a sector or project specific grant – its allocated to provincial treasuries Conditions of the grant allow for monitoring of the budgets of sectors targeted by the grant –Enables a single reporting on infrastructure, with the exception of health which has to report on hospital revitalization programme –Assessment of performance of the grant focuses on the entire budget of the targeted sectors –Facilitate better infrastructure planning for the sectors –Enables implementation of good practises to improve overall performance in the delivery of infrastructure

7. 7 Grant framework: Purpose of the Grant Help accelerate infrastructure delivery –New construction, rehabilitation targeting health, education and roads –Enhance capacity to delivery infrastructure –Improve planning and management –Improve institutional arrangements for infrastructure delivery Increase labor intensity for specific types of projects in line with EPWP guidelines

8. 8 Grant Framework: Conditions of the Grant Submission of infrastructure plans, including list of prioritised projects –List of projects should be completed by and submitted to implementing agents by 31 Oct 06, for the next FY Compliance with EPWP guidelines Submission of quarterly reports on spending and physical progress with projects Monthly IYM and quarterly reports must show that good progress in spending of budget

9. 9 Administration of the grant DOR Act provides for withholding and stopping of the grant when: –Underspending on the allocation is evident –Failure to comply with the requirements persists Unlike schedule 5 grants, withholding of this grant is based on the assessment of the performance of the targeted sector Sector allocation guidelines would be used to determine how much to withhold in cases of non compliance

10. 10 Why Underspending? Underspending of capex persists –R1,8bn in 2004/05 –R700m projected as per the 3 rd quarter S32 report Problems relating to: –planning (no long term, and forward project planning) – budgeting – not based on prioritised projects, and performance –Weakness in institutional arrangements for delivery (client/agency relationship) –Delays in procurement processes –Capacity in departments and public works –Weaknesses in reporting and monitoring

11. 11 I NTERVENTIONS Infrastructure Delivery Improvement Programme to support : –Development of appropriate capacity for infrastructure delivery (people, skills, systems) –Infrastructure plans that provide a clear measure of needs, supply, backlogs & prioritisation –Development & enforcement of contracts, or service level agreements –Improve quality of information reported DOR Act aims to fast-track improvement in infrastructure delivery –Increasing funding for infrastructure delivery –Addressing delivery capacity gaps in departments –Improving forward planning for projects –Managing implementing agents thru’ SDAs –Enforce reporting and monitoring –Threats of loosing the funds where spending is slow

12. 12 ROLLOUT STRATEGY FOR IDIP Phased approach – started with all education, selected 2 health and roads Partnering with Construction Industry Development Board and DBSA National departments key stakeholders (members of steering committee) Provincial Treasury – oversee coordinate and monitor provincially

13. 13 C OMPONENTS O F IDIP Capacity Building strategy –Technical assistants recruited and placed in participating departments Identify gaps in systems and capacity Develop capacitation plan with the department indicating skills required, costs and timeframes for turnaround Facilitate implementation of “toolkit” to correct identified deficiencies in delivery systems Mentoring and coaching staff – counterpart assigned to work with TA and delivery team Provides tools to guide the development of appropriate procedures and systems – include: –Delivery Management Process –Infrastructure Planning –Infrastructure Programme management and Project Delivery –Construction Procurement

14. 14 CHALLENGES: PILOT PHASE Weakness in planning & project prioritisation –Demographic and socio-economic trends analysis –Identification of needs from the institutions ie schools –Inadequate asset management systems Deficiencies in forward planning –budgets not based on prioritised projects, & performance, –Delays in project planning and design: failure to make effective use of MTEF process Weaknesses in institutional arrangement (for own notes poor relationships, blame shifting ) Deficiencies in skills in both departments and dpw – challange attracting and retaining skills

15. 15 Strengthening the interventions: IDIP Phase II Roll Out IDIP to support, & DOR Act enforced to progressively improve planning & budget –Infrastructure plans are reviewed & prioritised projects to be firmed up by end October –Capacity gaps are addressed –Alignment of infrastructure planning and budgeting with MTEF budget cycle –Capital budgets provide for forward planning –Strengthen the infrastructure monitoring system to enforce forward planning –Institutional arrangement - bridge the gap in the relationships and strengthen contractual arrangements –A process to improve information system and analysis – ie asset registers & needs analysis

16. T HANK Y OU