South Africa’s Municipal Infrastructure Investment Unit Operations, Budget & Future Direction Ms. Gugu Moloi MIIU CEO

Operational Overview

The MIIU A government intervention to:  Facilitate private sector investment in municipal services – on a controlled, sustainable basis  Help create a market in MSP services to provide advice to local governments

The Project Preparation Unit: How Does it Operate?  Municipality applies for MIIU aid  Questionnaire helps conceptualise project  MIIU assesses chances for success & development impacts  Formal grant agreement signed  Municipality contributes partial funding  MIIU provides quality control

The Project Development Process 1.Assess feasibility of MSP options 2.Council decision on option (with MIIU advice) 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

Completed MSPs: Total Values ContractsValues  O&M R 142 m  O&M plus Capex R 4,575 m  Divestiture R 414 m  Corporatisation R 50 m Total R 5,181m

Benefits for the Disadvantaged: Direct Benefits to Households: Project Households  Harrismith water 14,222  Thabazimbi waste 3,000  Nelspruit water 42,667  Tzaneen waste 12,000  Jnb Metro Gas 6,000  Jnb Bus 355,556 Total 433,445

Benefits for the Disadvantaged: Indirect Service Efficiencies:  Jnb Info Tech  Dolphin Coast water  Nelspruit water  Jnb Fleet  Jnb Market  Jnb bus  Eastern Cape IT

Benefits for the Disadvantaged: Environmental Improvement:  Thabazimbi waste  Robertson waste  WMLC waste  Nelspruit water  Dolphin Coast water  Tzaneen waste  Jnb Metro Gas

Benefits for the Disadvantaged: More Revenue for Services to Poor:  Jnb Metro Gas  Jnb Rand airport  Richards Bay airport  Pretoria airport  Nelspruit water  Dolphin Coast water  Jnb Parking

Budget Overview

Budget Structure 1. Revenues (DPLG capital, MTEF, donors, interest income)

Budget Structure 1. Revenues (DPLG capital, MTEF, donors, interest income) minus 2. Administrative Expenditures (BOD expenses, DBSA mgmt fee, office admin.)

Budget Structure 1. Revenues (DPLG capital, MTEF, donors, interest income) minus 2. Administrative Expenditures (BOD expenses, DBSA mgmt fee, office admin.) minus 3. Project Expenditures (costs of investigating & preparing MSP projects)

MIIU Budget Goals:  Establish MIIU pipeline, begin disbursements  Establish financial mgmt, reporting, auditing procedures & policies  Complete MPPP projects  Acquire & allocate USAID funding to projects

MIIU Budget Revenues:98-99 MPPP transfer 10,690 DCD capital 12,000 MTEF allocation 0 USAID grant 0 Interest2,806 Padco reimburse 0 TOTAL 25,496

MIIU Budget Revenues: MPPP transfer 10,690 0 DCD capital 12,0008,000 MTEF allocation 0 0 USAID grant 05,400 Interest2,8062,744 Padco reimburse 0 0 TOTAL 25,496 16,144

MIIU Budget Revenues: MPPP transfer 10, DCD capital 12,0008,000 0 MTEF allocation 0 04,006 USAID grant 05,4002,400 Interest2,8062,7442,745 Padco reimburse TOTAL 25,496 16,144 9,292

MIIU Budget Admin Expend.:98-99 BOD expenses 13 DBSA admin fee 1,542 General admin 307 TOTAL 1,862

MIIU Budget Admin Expend.: BOD expenses DBSA admin fee 1,5421,053 General admin TOTAL 1,8621,554

MIIU Budget Admin Expend.: BOD expenses DBSA admin fee 1,5421,0531,435 General admin TOTAL 1,8621,5542,017

MIIU Budget Project Expend.:98-99 MPPP projects 6,712 MIIU pipeline 1,619 TOTAL 8,331

MIIU Budget Project Expend.: MPPP projects 6,7121,135 MIIU pipeline 1,6195,887 TOTAL 8,3317,022

MIIU Budget Project Expend.: MPPP projects 6,7121, MIIU pipeline 1,6195,887 15,023 TOTAL 8,3317,022 15,383

MIIU Budget Summary: Revenues 25,496 16,1449,292

MIIU Budget Summary: Revenues 25,496 16,1449,292 Admin. Expend. 1,8621,5542,017 Project Expend. 8,3317,022 15,383

MIIU Budget Summary: Revenues 25,496 16,1449,292 Admin. Expend. 1,8621,5542,017 Project Expend. 8,3317,022 15,383 Surplus/shortfall 15,303 22,871 TOTAL 15,303 22,871 14,763

MIIU Budget Goals:  Maintain MIIU pipeline, accelerate disbursements  Confirm MTEF funding  Find new donor funding  New activities: interns, success fees, etc.  Target disbursements by category

MIIU Budget Revenues:01-02 MTEF allocation 7,000 Interest2,250 Padco reimburse 90 Success fees 1,425 Donor grant 0 TOTAL 10,765

MIIU Budget Revenues: MTEF allocation 7,0007,000 Interest2, Padco reimburse Success fees 1,4252,000 Donor grant 0 15,000 TOTAL 10,765 24,590

MIIU Budget Revenues: MTEF allocation 7,0007,0007,000 Interest2, Padco reimburse Success fees 1,4252,0001,675 Donor grant 0 15,000 0 TOTAL 10,765 24,5908,965

MIIU Budget Admin Expend.:01-02 BOD expenses 28 DBSA admin fee 1,579 General admin 1,768 TOTAL 3,375

MIIU Budget Admin Expend.: BOD expenses DBSA admin fee 1,5791,735 General admin 1,7682,293 TOTAL 3,3754,059

MIIU Budget Admin Expend.: BOD expenses DBSA admin fee 1,5791,7351,900 General admin 1,7682,2932,508 TOTAL 3,3754,0594,443

MIIU Budget Project Expend.:01-02 MIIU pipeline 19,025

MIIU Budget Project Expend.:01-02 MIIU pipeline 19,025 Concessions 29% Metros 26% Dist. councils 25% Other local councils 20%

MIIU Budget Project Expend.: MIIU pipeline 19,025 17,550 Concessions 29% 29% Metros 26% 12% Dist. councils 25% 47% Other local councils 20% 12%

MIIU Budget Project Expend.: MIIU pipeline 19,025 17,5508,500 Concessions 29% 29% 34% Metros 26% 12% 0 Dist. councils 25% 47% 53% Other local councils 20% 12% 13%

MIIU Budget Summary: Revenues 10,765 24,5908,965

MIIU Budget Summary: Revenues 10,765 24,5908,965 Admin. Expend. 3,3754,0594,443 Project Expend. 19,025 17,550 8,500

MIIU Budget Summary: Revenues 10,765 24,5908,965 Admin. Expend. 3,3754,0594,443 Project Expend. 19,025 17,550 8,500 Surplus/shortfall 14,763 3,128 6,109 TOTAL 3,128 6,109 2,131

MIIU Budget Conclusions:  Steady pipeline growth  Strong, early capitalisation created financial foundation  Importance of consistent MTEF allocations  Critical need for new donor funding  Administrative costs rise as technical transfer begins, offset by success fees

Lessons Learned & Future Direction

Lessons Learned – toward a comprehensive strategy  Need for private investment to supplement govt infrastructure finance  PPPs vs. bonds vs. grants – needed linkages  Measuring/monitoring govt performance  Sustaining MIIU’s value to local govt: -- internships & more local staff -- success fees & revolving fund -- exit strategy & succession planning

MIIU into the Future: MSPs after Demarcation The Municipal Reform Challenge  Developmental local governance  Financial sustainability  Service delivery for all  Coping with a changing environment

Municipal Reform Strategy 1.Planning - IDPs, action plans 2.Restructuring - Utilities, agencies, PPPs 3.Performance Management - Performance-based contracting 4.Capacity Development - Learning to supervise, not implement

Restructuring  Budget Analysis - Match actual revenues & costs  Organisational Redesign - Match structure & function  Partnerships - Assess partnership options - Find public & private partners

The MIIU Role in Reform  Discuss reform strategies in IDPs  Brief clients on reform requirements  Inform clients re other support programmes  Ensure MSPs fit restructuring needs Thorough feasibility investigations Consider all options Use performance-based contracts

Strategic Issues 1. Free Water policy Linkages between the three spheres of government Monitoring of municipal infrastructure investments Financial support to the unit to increase impact and capacitate local governance

Strategic Issues - cont. 2. Implementation of applicable legislation: The Municipal Systems Act The Municipal Structures Act Pending regulations 3. Communication about MSPs (private and public) 4. Linkages with strategic programmes of govt Integrated rural strategy Urban renewal programme

Summary  Best-practice procedures & policies  R5.2 billion in completed MSP projects  53 active projects  Lessons learned – the need for MSPs in infrastructure finance  The role of MSPs in municipal reform

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