DBSA SUPPORT TO LOCAL GOVERMNENT Ben Mokheseng Manager: Infrastructure Finance Local Government SA Financing Division

 Purpose of Presentation  DBSA’s Alignment with National Imperatives  DBSA View: Key Constraining Factors  Msunduzi Local Municipality Overview  Planned CAPEX for the period 2015/16 to 2016/17  MIG & INEP Grants allocation 2015/16 to 2017/18  DBSA Experiences: Infrastructure Investment to Municipalities  DBSA’s Strategic Framework For Municipal Support  DBSA’s Integrated Value Offering  Conclusion Context 2

Purpose of Presentation To provide DBSA’s role in the development space To give an overview of the products and services offered by the Bank. To propose a partnership arrangement aimed at enhancing delivery of basic infrastructure in the municipality 3

DBSA’s Alignment with National Imperatives National Development Plan:  Improve infrastructure in rural areas and the poorest provinces  Scale up investment in infrastructure  Expand maintenance: new and existing infrastructure  Reduce infrastructure backlogs  Accelerate access to clean water through water and reticulation projects  Accelerate access to electricity and improve sustainability of access through refurbishment of key infrastructure National Development Plan:  Improve infrastructure in rural areas and the poorest provinces  Scale up investment in infrastructure  Expand maintenance: new and existing infrastructure  Reduce infrastructure backlogs  Accelerate access to clean water through water and reticulation projects  Accelerate access to electricity and improve sustainability of access through refurbishment of key infrastructure DBSA’s Responses:  Provide subsidy to under- resourced municipalities for accelerated project planning and implementation  Focus on areas with the biggest unfunded gap through project origination initiatives  Providing affordable funding to build sustainable asset base and revenue streams  Collaboration with government departments and private sector players to support infrastructure development and service delivery to local government DBSA’s Responses:  Provide subsidy to under- resourced municipalities for accelerated project planning and implementation  Focus on areas with the biggest unfunded gap through project origination initiatives  Providing affordable funding to build sustainable asset base and revenue streams  Collaboration with government departments and private sector players to support infrastructure development and service delivery to local government 4

DBSA View: Key Constraining Factors  Deteriorating state of municipal infrastructure  Delayed project completion  Lack of credible sector and master planning  Deteriorating state of municipal infrastructure  Delayed project completion  Lack of credible sector and master planning  Delays in appointment of contractors/service providers  Weak and sometimes uncoordinated oversight and monitoring of municipal activities and programmes  Delays in appointment of contractors/service providers  Weak and sometimes uncoordinated oversight and monitoring of municipal activities and programmes  Underspending of capital budgets  High escalation costs  Needs exceed available funding  Limited borrowing capacity  Underspending of capital budgets  High escalation costs  Needs exceed available funding  Limited borrowing capacity Inadequate technical capacity to plan and implement infrastructure programmes and projects. Inadequate focus on O&M Inadequate technical capacity to plan and implement infrastructure programmes and projects. Inadequate focus on O&M Inadequate funding & Few and weak revenue streams (under pressure) Inadequate funding & Few and weak revenue streams (under pressure) Inadequate institutional coordination and alignment of a wide range of current support programmes 5 CONSTRAINTCONSEQUENCE

 Total population in uMgungundlovu DM:  61% of the population is located in Msunduzi LM ( Households: )  Backlogs in Msunduzi LM:  Water: 7,7%  Sanitation: 22,5%  Electricity: 8,1%  MIG expenditure:  2013/ %  2012/ %  Capital Budget expenditure:  2013/14: 67.1%  2012/13: 89.9% Msunduzi Local Municipality Overview uMgungundlovu District Municipalities Population: Backlogs: Water: 19,4% Sanitation: 30,8% Electricity: 28,1% Population: Backlogs: Water: 24,3% Sanitation: 27,7% Electricity: 27,3% Population: Backlogs: Water: 25,6% Sanitation: 30,3% Electricity: 18,5% Population: Backlogs: Water: 39,3 % Sanitation: 36,3% Electricity: 34,8% Population: Backlogs: Water: 9,3% Sanitation: 21,9% Electricity: 14,5% Population: Backlogs: Water: 25,6% Sanitation: 57,8% Electricity: 16,4% 6

Capital Budget 2015/16 (R’000) 2016/17 (R’000) uMshwathi uMngeni Mpofana Impendle Msunduzi Mkhambathini Richmond uMgungundlovu Total uMgungundlovu DM Planned CAPEX for the period 2015/16 to 2016/17 Source: NT database: LG budgets 2014/15 Note: Capital Budget subject to change 7

Municipal Infrastructure Grant Integrated National Electrification Programme (Municipal) Grant National and Municipal Financial Year Municipality 2015/16 (R'000) 2016/17 (R'000) 2017/18 (R'000) MIG Total 2015/ /18 ZAR' /16 (R'000) 2016/17 (R'000) 2017/18 (R'000) INEP Total 2015/ /18 ZAR' uMshwathi uMngeni Mpofana Impendle Msunduzi Mkhambathini Richmond uMgungundlovu District Municipality Total: uMgungundlovu Municipalities MIG & INEP Grants allocation 2015/16 to2017/18 Source: NT Division of Revenue Bill 2015/16 8

DBSA Experiences: Infrastructure Investment to KZN Municipalities (YTD April 2015/16) 9  DBSA KZN municipal exposure: R1,6 billion or 24% of total DBSA municipal exposure*  DBSA provides financial support to 27 municipal clients in KZN  DBSA exposure to Msunduzi LM: R609 million (37% of the total KZN exposure) Source: DBSA database 2015 *Note: Excluding Metro exposure

DBSA’s Strategic Framework For Municipal Support Effective Stakeholder Collaboration Collaboration 10

Infrastructure Investment Project Cycle Municipal development plans: Long-Term Master Plans Project-level Preparation Feasibility studies Project-level Preparation Feasibility studies Financing (Budgets + Loans) Financing (Budgets + Loans) Project Technical Implementation Operations / Maintenance Operations / Maintenance THE Nexus of Planning-Financing-Implementation UPSTREAM DOWNSTREAM DBSA’s Integrated Value Offering Infrastructure investment programming Pre-feasibility studies / project structuring Linking projects to financing BRIDGING THE PLANNING,FINANCING & EXECUTION GAP BRIDGING THE CAPACITY GAP Strengthen Municipalities’ capacities to prepare infrastructure investment 11

Conclusion 9  Municipalities remain strategic focus area for the DBSA  DBSA, as a DFI, is open to partner with Msunduzi LM to further pursue the country’s development agenda Let’s make sure we create VALUE, not just spend MONEY! Let’s make sure we create VALUE, not just spend MONEY!

THANK YOU 12