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MUNICIPAL PPP CONFERENCE 18 FEBRUARY 2010
MUNICIPAL PPP CONFERENCE 18 FEBRUARY 2010
Contents
• Project planning
• Areas that could be considered for PPPs
• Key to successful PPPs
• Challenges in Infrastructure Development
• The Role of Gauteng PPP Unit in Municipal PPPs
• Conclusion
Contents
• Project planning
• Areas that could be considered for PPPs
• Key to successful PPPs
• Challenges in Infrastructure Development
• The Role of Gauteng PPP Unit in Municipal PPPs
• Conclusion
Project Planning
• Service delivery pressure points
• Availability of funds for projects
• Declining capital funding; alternative funding mechanisms
• Alignment of the project with strategic plans and mandate
• Harness private sector role in infrastructure development
High Level Graphic representation of overlaps.
PPP /Conventional
Cash Flow - lifecycle costs
Budget Coverage - related to
affordability
Compliance to Legislation
PPP planning process as per MFMA, MSA, policies and guidelines
Project commitments over the Meduim Term Revenue & Expenditure Framework must be reflected in the budget
Cash Flow Model could be used to map out project cash flows to prevent delays due to cash challenges and unnecessary shifting of funds. Lifecycle costs and debt repayment.
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MSA S. 78 Criteria and process for deciding on mechanisms to provide municipal services
(3) If a municipality decides in terms of subsection (2)(b) to explore the possibility of providing the service through an external mechanism it must—(b) assess the different service delivery options in terms of section 76(b), taking into account—
(i) the direct and indirect costs and benefits associated with the project, including the expected effect of any service delivery mechanism on the environment and on human health, well-being and safety;(ii) the capacity and potential future capacity of prospective service providers to furnish the skills, expertise and resources necessary for the provision of the service;(iii) the views of the local community;(iv) the likely impact on development and employment patterns in the municipality; and(v) the views of organised labour.
Contents
• Project planning
• Areas that could be considered for PPPs
• Key to successful PPPs
• Challenges in Infrastructure Development
• The Role of Gauteng PPP Unit in Municipal PPPs
• Conclusion
Water and Sanitation
Water and Sanitation • The increasing levels of migration leading to
current infrastructure unable to cope• Cross-border spill over effects between
municipalities• Huge capital required for upgrades and
maintenance• Improved Service Delivery
Solid Waste Treatment • An international phenomenon...• Population and business levels increase
leading to increased waste generation• Excessive gas emissions pausing climate
change risks. (the call for pollution free solutions to service delivery)
• Increased landfill airspace shortages and shortage of land for new landfill sites
• Other environmental laws e.g. the new Waste Act calling for waste minimisation strategies.
Waste-to-energy option - stimulates private sector demand.• High maintenance technologies available;
where a Private Party can fill the gap.
Solid Waste
Commercial Use of Municipal Property
Unused or underused municipal properties; e.g. stadiums, under-utilised buildings, vacant land and other multipurpose areas.
• To create economic movement while stimulating social activities.
• To promote more efficient management of municipal property portfolios.
• User fees to the municipality
Other Project Considerations
• Integrated Rapid Public Transport Networks• Boost local infrastructure• Reduce vehicle gas emmissions
• Urban Renewal - Property• To make local area attractive for residential purposes• Involves an integrated approach with regards to infrastructure accessibility thereby drawing
more economic activities.
• International Convention Centre Opportunities
Contents
• Project planning
• Areas that could be considered for PPPs
• Key to successful PPPs
• Challenges in Infrastructure Development
• The Role of Gauteng PPP Unit in Municipal PPPs
• Conclusion
Key to successful PPPs
• Alignment of proposed projects to strategic plans and mandates to implement.
• To ensure vertical alignment in terms of national and provincial priorities also to enhance “buy in”.
• Proper groundwork at inception with regards to option analysis: option with clear value drivers to be selected.
• Attracting private investors .
• Appointing good transaction advisors: well rounded with knowledge and experience in the relevant technical area of the proposed project, property management, financial planning and legal expertise.
• Contract negotiation: to ensure watertight contract terms and conditions.
• Contract management.
Contents
• Project planning
• Areas that could be considered for PPPs
• Key to successful PPPs
• Challenges in Infrastructure Development
• The Role of Gauteng PPP Unit in Municipal PPPs
• Conclusion
Challenges in Infrastructure Development
• Ageing infrastructure
• Maintenance backlogs (lack of maintenance plans and funds)
• Capacity Challenges
• Red tape in decision making
• Supply chain bottlenecks
Solutions
• Enforce infrastructure management system
• Ringfencing of budget
• Invest in training and retaining of skilled personnel
• Reasonable timelines for tender awards (minimise SCM delays)
• Consistency with IDP priorities and budget – correct use of grant funding
• Encourage private sector participation
Contents
• Project planning
• Areas that could be considered for PPPs
• Key to successful PPPs
• Challenges in Infrastructure Development
• Solutions
• The Role of Gauteng PPP Unit in Municipal PPPs
• Conclusion
The Role of Gauteng PPP Unit in Municipal PPPs
Compliance monitoring and support throughout the planning process.
• Receive information on PPP proposals – Analyse for alignment with strategic plans and mandates
• Assist in the application for the Project Development Facility (PDF).
• Advise on drafting of project registration documents to be lodged with NT.
• Advise and assist in the procurement of the Transaction Adviser (TORs and evaluation)
• Participate in the Feasibility Study Process, through Project Steering Committee.
• Evaluate project financial models for accuracy and completeness, including the Risk Matrix.
• Facilitate the Treasury Views and Recommendations (TVR I, II & III) Processes
• Participate in the Procurement Process (Proc. documentation, bidder evaluation)
• Participate in Contract negotiation Process through to Financial Close.
Gauteng State of Affairs in relation to Municipal PPPs
• August 2008 - Launch of the Municipal Service Delivery and PPP
Guidelines • PPP roll out plan to follow up on municipal infrastructure plans.
• Directors of Service Delivery/Infrastructure Services/Engineering Services and Finance
were targeted• Aimed at identifying service delivery pressure points• Recommend alternative financing solutions• Assess municipal readiness to undertake PPP projects in terms of planning and in-
house skills for inception.• Attract private sector investment
• Piloted municipalities:- Emfuleni LM
- Midvaal LM
- WRDM
- Lesedi LM
- Ekurhuleni Metro
Gauteng State of Affairs in relation to Municipal PPPs
Feedback • High capital funding constraints• Indifference• General interest to learn more• Reluctance due to lengthy planning and the amount of ground work required• Political aspects
Way forward• GT PPP Unit is participating in the IDP TSC (2010/11 onwards)• Will be requesting infrastructure plans; aimed at interfacing at early project
planning phase• To recommend alternative options• All municipalities included.
Considerations on Project identification-Project scale-Sector (linked to current private sector appetite)-Demand ( linked to revenue sustainability)-Institutional capacity -Section 78 of the MSA (Municipal services)
3 PPP Tests• Affordability• Value for Money• Risk Transfer
(financial, technical &operational
Contents
• Project planning
• Areas that could be considered for PPPs
• Key to successful PPPs
• Challenges in Infrastructure Development
• The Role of Gauteng PPP Unit in Municipal PPPs
• Conclusion
Conclusion
• PPP is an option that complements the fiscus for infrastructure while mapping out a long term commitment. (not an easy way out/quick fix, etc.)
• A need to create a joint effort, willingness to consider and explore wider options.
• Emphasis should also be placed on the importance of long term plans and benefits that go beyond MTREF.
• Our office is always ready to advise and support municipalities; to enhance and compliment revenue through private investment.
