30 August 2005NCOP Briefing 1 Parliamentary Briefing Performance and strategy of the Municipal Infrastructure Investment Unit Alwyn Naidoo MIIU Project Manager

30 August 2005 NCOP Briefing 2 Contents Performance report for the year under review 2004/05 Background Project performance and KPIs Expenditure The exit plan

30 August 2005 NCOP Briefing 3 Performance report for the year under review 2004/05

30 August 2005 NCOP Briefing 4 Background Cabinet Memorandum No. 14 of 1997 created MIIU as short-term arrangement to be wound up in five years (2003) This term was extended by Cabinet Memorandum 4A of 2002 for an additional three years, to 31 March 2006 Mandated “To encourage and optimise private sector investment in local authority services on a basis that is sustainable for both local authorities and at a national level.”

30 August 2005 NCOP Briefing 5 Background Non-profit private Company established in April 1998 USAID Donor support for technical assistance (PADCO) Project Preparation Fund Grants & TA to support local MSPs

30 August 2005 NCOP Briefing 6 Strategic overview Wind-down operations towards closure in 2006 Municipal market is only sustaining MSPs with low levels of risk transfer to private sector Respond to Municipal Finance Management Act (MFMA) and regulations developed in 2004/5 Offer credit enhancement to increase municipal borrowing from private lenders

30 August 2005 NCOP Briefing 7 Project performance Auditable (PFMA) KPIs (1) Key Performance AreaTargetActual Active MSP projects5077 Completed projects:7 MSPs 1 loan guarantee 2 revenue management 4 MSPs Uthungulu Water (KZN); CPT drop-off (solid waste) WC); CPT SMMEs (solid waste) (WC); Epping Fresh Produce Market (WC) 0 loan guarantee 2 revenue management Mogale City (GA); Albert Luthuli (MP) Disbursement on MSP’sR12,8 mR12,77m Efficiency ratio25.5%17.8%

30 August 2005 NCOP Briefing 8 Project performance Auditable (PFMA) KPIs (2) Key Performance AreaTargetActual Active guarantee projects 33Joburg Water (GA) Mogale CIty (GA); Midvaal (GA) Active revenue enhancement projects 33Ugu (KZN); Thembisile (MP) Dr JS Moroka (MP) Target value of guarantees to be committed 50% of $35m (R105m) 0 Disbursement related to guarantee projects $ $

30 August 2005 NCOP Briefing 9 Project performance Auditable (PFMA) KPIs (3) Key Performance AreaTargetActual Monitoring of major projects 55 ongoing Customer surveys (Contract Monitoring) 5 completed projects 3 new projects 5 ongoing – Nelspruit (MP) ;Dolphin Coast (KZN) Kelvin Power (GA); Msunduzi (KZN); Mogalakwena (LM) 0 – not yet started

30 August 2005 NCOP Briefing 10 Project performance Internal KPIs (1) Key Performance AreaTargetActual Case studies written up55 in progress (75% complete) Standard terms of reference documented 33 Generic Terns of Reference Generic Request for Proposals Template financial model Publication of MIIU history and case studies 11 Pending Technical Assistance (TA) not associated with projects 4 hours per project manager per month or a total number of equivalent hours as a ceiling Section 78 task team, dplg MSP workshops, Project Consolidate, loan guarantee marketing

30 August 2005 NCOP Briefing 11 Project performance Internal KPIs (2) Key Performance AreaTargetActual TA Disbursement of USAID funds $ $ Market Development Seminar with financial sector 1Session with Standard Bank in Aug 04; with Nedbank in Mar 05 Staff development SA staff (includes the use of USAID* funds of $ personal development plans 6 plans followed: UK Study tour, Midrand Graduate Institute, various short courses Implement MIIU obligations to Johannesburg Housing if fund becomes operational N/A

30 August 2005 NCOP Briefing 12 Completed projects (MSP) Uthungulu Water (KZN) an interim O & M contract with WSSA for operations of all rural schemes CPT drop–off (solid waste) (WC) establishment of four green waste drop-off centres CPT SMMEs (solid waste) (WC) CBO waste collection contracts in disadvantaged areas,e.g Bloekombos, Kalkfontein, Khayelitsha Epping Fresh Produce Market (WC) sale of a non-core asset for R16m. A 20yr lease was entered into with the new owner, with repair, maintenance & expansion risk transferred to new owner. Proceeds of the sale to improve water and sanitation infrastructure. Winner of the Africa Investor Award in November 2004.

30 August 2005 NCOP Briefing 13 Revenue Management & Loan Guarantee Mogale City (GA) data cleansing, debt review and audit of customers, meters, connections, tariffs, etc resulting in significant saving of lost revenues. Private partner entered a shared risk contract with municipality, earning a reward only in the event where the municipality saves revenues relative to set revenue benchmarks. Ugu District (KZN) data cleansing, debt review and audit of meters, connections, etc to improve revenue. Private partner is recommending a replacement of the existing revenue management systems to improve coordination of all billing systems that have existed in the individual B municipalities. Thembisile (MP) data cleansing, debt review and audit of meters, connections, etc to improve revenue. Dr J S Moroka (MP) data cleansing, debt review and audit of meters, connections, etc to improve revenue. Loan Guarantee MIIU has recently refined the implementation methodology and tender document for banks to bid on.

30 August 2005 NCOP Briefing 14 Distribution of Projects in SA

30 August 2005 NCOP Briefing 15 Distribution of projects by sector

30 August 2005 NCOP Briefing 16 Expenditure

30 August 2005 NCOP Briefing 17 Efficiency

30 August 2005 NCOP Briefing 18 Income Statement

30 August 2005 NCOP Briefing 19 Statement of Changes in Equity

30 August 2005 NCOP Briefing 20 Corporate Governance MIIU comprises a Project Preparation Unit (PPU) governed by a Board of Directors Good governance and an unqualified audit have been ensured via the following: Risk Management Plan Materiality Framework Investment Policy Fraud Policy Procurement Policy Internal Controls and Procedures Management Information System (MIS)

30 August 2005 NCOP Briefing 21 Strategic plan 2005/06 (“the exit plan”)

30 August 2005 NCOP Briefing 22 Background Cabinet Memorandum No. 14 of 1997 created MIIU as short-term arrangement to be wound up in five years (2003) This term was extended by Cabinet Memorandum 4A of 2002 for an additional three years, to 31 March 2006 In year 2005/06 the exit plan will be implemented as follows: Closure of projects on the pipeline Archiving of project deliverables Packaging of institutional memory for dplg as executive authority

30 August 2005 NCOP Briefing 23 Why exit now? Discussions between management and BOD with dplg (as executive authority) on the prospect of continuity for MIIU date as far back as June 2004 A decisive position from dplg on the continuation of MIIU has not been forthcoming At BOD meeting of 24 June 2005, directors resolved to proceed with exit plan

30 August 2005 NCOP Briefing 24 The exit plan Background Project activity Management contract with DBSA USAID-funded contracts Other donor issues Risk analysis dplg National Treasury Knowledge and information management Communication strategy Financial reporting Closure housekeeping Succession arrangements Action plan

30 August 2005 NCOP Briefing 25 Project activity Pipeline of active MSP projects has been audited. Projects classified into 3 classes of priority All other activities are ongoing, but with succession arrangements per activity are being crafted for continuity (dplg as natural successor)

30 August 2005 NCOP Briefing 26 Management contract with DBSA Provides MIIU with: Treasury and accounting function Employment contracts & HR services Office rental Administrative and IT services

30 August 2005 NCOP Briefing 27 USAID-funded contracts Provisions: Expatriate staff contracts Assets Commitment agreement for DCA implementation

30 August 2005 NCOP Briefing 28 Other donor issues DFID commitment agreement Mega-Tech funding Cities Alliance (World Bank)

30 August 2005 NCOP Briefing 29 Risk analysis HR risk – staff retention Financial risk – incurring of liabilities Legal risk – breach of grant funding agreements Reputational risk – resulting from exiting from funding agreements

30 August 2005 NCOP Briefing 30 Department of Provincial and Local Government MIIU is a PFMA Schedule 3A public entity (of dplg). Whilst certain responsibilities are expected of dplg, these cannot be taken for granted. MIIU needs to strategise without dependency on dplg. Expected responsibilities of dplg in winding up MIIU: provide funding for the final year de-list MIIU as a public entity disengage the Board of directors disengage company members provide a custodian by September 2005 take cession of assets, liabilities and institutional memory

30 August 2005 NCOP Briefing 31 National Treasury A business case for delisting of a public entity should include financial statements of the final year prepared on liquidation basis transfer (cession) of the entity’s function to a successor transfer of surpluses, assets and liabilities risk analysis of de-listing closure of budget line, bank accounts, etc

30 August 2005 NCOP Briefing 32 Knowledge and information management MIIU to package the following for handover purposes to a suitable repository: Projects on the pipeline Archived project deliverables Institutional memory

30 August 2005 NCOP Briefing 33 Communication strategy Pronouncement by dplg as executive authority Communication from MIIU (in collaboration with government) to: municipalities engaged consultants PADCO, USAID, DFID Press release Website updates

30 August 2005 NCOP Briefing 34 Financial reporting Functional closure to be 31 March 2006, but financial closure to be 31 August 2006 Caretaker arrangement necessary for the March – August period Audit and Annual Report to be prepared (liquidation basis) Cash flow management to be done monthly to aim for zero balance at 31 March 2006.

30 August 2005 NCOP Briefing 35 Closure and succession arrangements To be managed in collaboration with dplg Archiving Handling of new requests from municipalities Transition out of ongoing project activity from January 2006 Identification of areas where specialist successor to MIIU is required to support dplg

30 August 2005 NCOP Briefing 36 Budget 2005/06: Monthly cashflow

30 August 2005 NCOP Briefing 37 Action plan: Key milestones Recommend adoption of plan by BOD on 4 August 2005 Submit budget to dplg reflective of exit plan Set up custodian arrangement Communication strategy Handover to dplg by 30 January 2006 Caretaker arrangement required March – August 2006

30 August 2005 NCOP Briefing 38 Thank you