Involving external organisations in municipal service provision

1. Involving external organisations in municipal service provision Presentation to the MISA conference on ’Accelerating municipal infrastructure delivery through Capacity Enhancement and Strategic Partnerships’ Ian Palmer 25th November 2011

2. Scope of this piece The capacity challenge from an engineering perspective. Overview of partnering options. Overview of contracting options. Some thoughts on how we are doing with partnerships. What needs to be done. And something about funding.

3. Where are we with infrastructure and capacity to manage it? Last and only time we have had good data (SAICE)

4. 9.5 10.0 Gauteng 2009 – 3.2 8.0 6.0 5.0 4.4 4.0 3.1 2.8 2.2 2.0 0.9 0.8 0.6 0.0 Districts Typology 1 Typology 2a Typology 2b Typology 3 Typology 3 Typology 4 Typology 4 Major cities Population - Population - Population - Population - Population - Population - Population - Population - Botswana, 32m Districts 4.5m No 6m Small 10m Districts 10m Large 10m Large 15m Metros 15m Metros Lesotho, (2005) established towns -former (2005) urban areas urban areas (2005) (2007) Namibia, town (2005) TBVC states (2005) (2007) Swaziland (2005) The capacity challenge: engineering professionals in LG Source: Lawless, 2009

5. How is lack of capacity playing out in the 21 priority districts – rural areas specifically • Infrastructure is failing. • Yet we focus on building new infrastructure in situations where we do not have the systems in place to manage it. • Systems are inadequate : • Information on assets is seldom there (including roads). • Customer databases do not exist. • Metering or volume control systems are not in place. • Water is not accounted, technical losses high; hence bulk water costs are high. • Revenue is not being raised from those that use above free basic limits. • In order to accelerate and spend capital effectively we need these systems and the managers to run them.

6. 9.5 10.0 Gauteng 2009 – 3.2 8.0 6.0 5.0 4.4 4.0 3.1 2.8 2.2 2.0 0.9 0.8 0.6 0.0 Districts Typology 1 Typology 2a Typology 2b Typology 3 Typology 3 Typology 4 Typology 4 Major cities Population - Population - Population - Population - Population - Population - Population - Population - Botswana, 32m Districts 4.5m No 6m Small 10m Districts 10m Large 10m Large 15m Metros 15m Metros Lesotho, (2005) established towns -former (2005) urban areas urban areas (2005) (2007) Namibia, town (2005) TBVC states (2005) (2007) Swaziland (2005) The capacity challenge: engineering professionals in LG Gap – 1000 civil engineering professionals Source: Lawless, 2009

7. Trends in infrastructure status and technical capacity ? We have to establish partnerships to fill this gap.

8. Partners: a picture of current arrangements Mainly DBSA, Eskom & water boards NGOs and CBOs

9. Structuring relationships with partners Private Sector (incl Funders) Other National departments MISA Public entities (Eskom, DBSA & Water boards) Provinces Civil society Local government

10. Partnership options with ‘external’ service providers Private Water PLC/Ltd private Privatemanagement options Concession BOT, BOOT, etc.. Utility Management mixed Lease contract Management Contract Municipal Entity O&M Contract Increasing risk taking by private sector Public-private partnershipoptions Municipal Supramunicipal public Public management options public mixed private Utility Ownership Source: Adapted from DCoG

11. Private partnership status

12. Management contracts – bringing in capacity fast MISA can only succeed if it facilitates a rapid increase in engineers working in or with local government, specifically the 22 target districts. This, in my opinion, can only be done through partnerships with the private sector and public entities who have the engineers ‘in house’ or will be able to contract them. Management contracts are an internationally recognised way of contracting in expertise. They can be focused on setting up systems, building an organisation, promoting efficiency and supporting interns. Management contractors can have contracts with MISA and LG. They are typically 3 to 5 year contracts with 5 years preferable.

13. O&M contracts - uThungulu district example uTungulu District Municipality (Northern KZN) is 80% rural and is the best performing DM that is a Water Service Authority in the country, according to DCoG criteria. The DM is well managed financially and collects some revenue from water sales; it is looking at new innovations in this regard. Private contractor has been running their bulk water supply system for over a decade, based on a service contract renewable every three years. The contractor employs 500 people. Based on perceptions of external assessors the contracting arrangements are a success; but there have been proposals by councillors to terminate it with the motivation evidently being to employ the 500 staff, something which will substantially increase expenditure and cut off access to external management expertise.

14. Civil society has a big role to play

15. Partnering with public entities

16. What needs to be done? A major national drive to set up carefully designed partnership arrangements in the 21 districts. Focus on management contracts but with full partnership spectrum considered, including public entity and civil society partners. Regional scale will bring cost efficiencies. MISA is well placed to do this once it has the contracting expertise in place. But it requires a funding mechanism for the local and regional activity over a transitional period. Concepts have been developed for this such a mechanism, using terms such as ‘supplementary operating grant’ or ‘systems improvement grant’. But nothing has happened.

17. Financing: a virtuous cycle Fund a major capacity building initiative No further need for capacity support Increased ability to manage infrastructure This has by far the biggest multiplier of any grant funding: Ability to raise capital finance (own & partner) Increased Ability to raise revenue Improved financial & asset performance

18. Why do these sort of interventions not happen at scale? • Our country is faced with what Andrew Boraine has called ‘disaggregation of effort’. • There is a lack of trust between public sector, private sector, civil society and labour. • Trade unions and anti-privatisation groups have effectively blocked further concession and lease contracts. They even block water board management interventions (OR Tambo). • We have not had the capacity, structure and cooperative arrangements at national level to drive a major intervention based on partnerships. MISA can play this role. • We have not been good enough at getting sound contacts in place, even for quite conventional support interventions. • Funding is not made available at necessary scale (prev slide)

19. To conclude: I believe in local government and we are very fortunate in this country to have the municipalities we have in most cases. Local government will prevail. But in order to prevail, particularly where capacity is so lacking, we must build partnerships to accelerate service delivery.

20. Slide on borrowing not used