PRESENTATION TO PORTFOLIO COMMITTEE ON COOPERATIVE GOVERNANCE

1. PRESENTATION TO PORTFOLIO COMMITTEE ON COOPERATIVE GOVERNANCE DELIVERY OF BULK INFRASTRUCTURE AND BASIC SERVICES Ricardo Hansby Date: 08 March 2011

2. Presentation Outline • Introduction • Background • Progress • Challenges • Strategic Priorities • Way Forward

3. Introduction Policy and Delivery Priorities 2011: • 2011 and beyond, the era of job creation • Basic services and accelerated service delivery through the development of municipal infrastructure (Delivery Agreement – Outcome 9)

4. Problem Statement: • Metropolitan municipalities and municipalities with secondary cities are facing challenges that relate to informal settlements. Bulk infrastructure investments need to be increased significantly to ensure the upgrading of existing and provision of additional networks – Support to Outcome 8 • Dilapidated bulk infrastructure in rural areas needs refurbishment and/or upgrading due to the lack of operations and maintenance and increasing demand pressures – Support to Outcome 7 Background

5. South Africa at a Glance – Universal Access 2007

6. Version 1.0 (December 2009) South Africa at a Glance: 54%

7. Background Cont … Key principles: • Cross-cutting co-ordinating mandate • Respect mandates of line-function/sector departments • Respect autonomy of other spheres of government • Developmental approach; going beyond mere facilitation • Integrating service delivery and moving beyond narrow approach of isolated projects that leads to duplication and high project costs which could have been managed down

8. From 92% to 100% in 2014 From 69% to 100% in 2014 Background Cont... Backlog targets as confirmed in Outcome 9 From 64% to 75% in 2014 From 81% to 92% in 2014

9. Background Cont … Key existing interventions: • The Local Government Turnaround Strategy (LGTAS) and Municipal Turnaround Strategies • The Municipal Infrastructure Grant (MIG) • Basic Services Programmes • Bulk Infrastructure Fund (BIF) • Special Purpose Vehicle (SPV) for Infrastructure Delivery • Engineering Bursary Scheme

10. Access to Basic Services – Progress as at 31 December 2010

11. Progress Against Strategic Priorities • Improved Access to Basic Water • Access to water has increased from 92% (2008/9) to 93%. • A draft support plan has been developed and should be finalised by end of March 2011; and implemented in the 2011/12 financial year • A draft report on alternative technologies for water has been developed and the final draft will be completed by end of the financial year, ready for consultations in the 2011/12 financial year • Improved Access to Basic Sanitation • 70% of the total households had access to basic sanitation. • In addition to the above support plan and report on alternative technologies, an asset management strategy has been developed by the Department of Water Affairs. The awareness program is currently being rolled out by the Department of Water Affairs

12. Progress against strategic priorities Cont … • Improved Access to Basic Refuse removal • 62% of indigent households (1 932 353) benefitting of total identified by municipalities (3 109 722). • National Coordinating structure of National Task Team established and first meeting held. • Improved Access to Basic Electricity • The target for 2010/11 is to electrify 150 000 households. 122 561 House Connections done by November 2010.

13. Progress with the Establishment of the Special Purpose Vehicle for Municipal Infrastructure • The key objective of proposing this arrangement is to ensure better coordination of the provision of technical support to municipalities to strengthen their capacity to provide infrastructure and services faster and better, for the achievement of government targets and Millennium Development Goals. • The department has obtained sufficient support from key stakeholders at all three levels of government for the proposal to establish the SPV following extensive consultations within government undertaken in 2010 • An agreement has also been reached to establish the SPV as a Government Component within the Ministry of Cooperative Governance and Traditional Affairs

14. Progress with the Establishment of the Special Purpose Vehicle for Municipal Infrastructure Cont … • Process of establishing GC entails the submission of a comprehensive feasibility study for approval by DPSA. After an approval is received, a proclamation by the President will pave way for the launch of the GC • It is envisaged that the approval process will be concluded by the end of March 2011 and target is to have the GC operational from the 1st of April 2011 • The GC establishment process also involves the integration of Siyenza Manje Programme currently under DBSA into the entity. This integration was necessitated by Cabinet Decision to shift the budget for the technical support component of Siyenza Manje for the coming MTEF into CoGTA Vote (the allocation of this is about R196 million for 2011/12 financial year) • The budget for the financial management component of Siyenza Manje Programme has been transferred to National Treasury, which will be responsible for the coordination of the financial management capacity building in local government

15. Quantum of funding provided for in government support through conditional grants is not enough to address the infrastructure backlogs (R400 bn) especially in vulnerable areas • Quantum in current infrastructure envelopes limited (own resources augmented by conditional grants not enough) • Already limited resources are not targeted/focussed correctly towards bulk infrastructure focal areas • Conditionalities of grants limits investment (misalignment between conditionalities of conditional grants and investment priorities of government i.e. MIG not providing bulk infrastructure towards new human settlement developments) Challenges

16. Capacity to plan, implement and maintain infrastructure programmes and projects is a problem • Poor capacity to manage the infrastructure lifecycle • Limited technical expertise especially in vulnerable areas and complicated bulk infrastrucural components • Infrastructure systems are poorly planned resulting in unsustainable and expensive fragmented systems • Poor municipal investment in CAPEX (new or upgraded) and OPEX (repairs and maintenance of infrastructure) • Inability of funders, planers and implementers to effectively optimise resources for bulk infrastructure due to the lack of limited coordination and focus on bulk infrastructure requirements Challenges Cont ...

17. Challenges Cont … • Proliferation of new co-ordinating structures with confusing mandates; • No real practical engagement with infrastructure sector stakeholders to develop solutions • Lack of national plan integrating infrastructure planning and moreover delivery at local level • The cost of infrastructure projects (anti-competitive behaviour) • Payment of contractors (well over 30 day payment requirement) • Vested interests, cronyism and rent-seeking at local level undermine cost competitiveness, quality and integrity of projects

18. Determine bulk investment requirements from a institutional and funding perspective • Determine the capacity required to deliver irrespective of which institution is responsible/will take responsibility • Determine the Investment required for both CAPEX and OPEX • Evaluate current support and resource initiatives by government dealing directly or indirectly with bulk infrastructure • Effectiveness of quantums and whether the conditionalities of conditional grants requires alignment • Contribution of municipal own resources and capacity • Role of the private sector in providing financing and skills • Effectiveness of dedicated technical expertise to ensure effective infrastructure programme & project planning, operations and maintenance of bulk infrastructure – life cycle management • 3. Develop and implement an appropriate strategy providing solutions on differentiated support and funding to ensure adequate bulk infrastructure investment Recommendations

19. 4. Enhanced coordination wrt to bulk infrastructure and should focus on: • Dedicated technical support and expertise • improve and optimise on existing technical support to ensure effective infrastructure programme & project planning, operations and maintenance of bulk infrastructure – life cycle management (Special Purpose Vehicle) • Capacity should follow funding • Funding - improve and optimise on bulk infrastructure investment, • improve the quantum of the infrastructure investment envelop to deal with bulk infrastructure (CAPEX and OPEX) • Envelop includes conditional grants, municipal own resources • Improve conditional grant targeting and alignment • Coordinated engagements in the budget processes across all spheres on bulk infrastructure • Mobilise private sector though partnerships - enable delivery partnerships to secure social investment from government, economic investment and skills from the private sector • Note: Each sector is unique and will have to be treated accordingly although coordination within government would be required to ensure the optimal use of support and resources. Recommendations Cont ...

20. Way Forward • National Integrated Municipal Services and Bulk Infrastructure Plan with view of crowding-in funding and support programmes into priority areas in every province • Clear programmes and projects to use Bulk Infrastructure development for Employment Creation at local level • Simplify institutional architecture supportive of bulk Infrastructure development in order to avoid institutional confusion, duplication and fragmentation • Develop basic strategy that will deal with immediate and long-term capacity constraints for delivery of bulk infrastructure

21. Way Forward Cont … • Reduce/collapse into fewer the number of initiatives/programmes to address bulk infrastructure development at local level • Build clear linkages with bulk infrastructure stakeholders • Bulk infrastructure funding to be tied to planning and implementation support as well as capacity building as a funding requirement • The support and capacity building should not only focus on project management, but also accelerated procurement of services for infrastructure projects and contract management • The Special Purpose Vehicle should be strengthened

22. DCoGTHANKS YOU!