Transcript Infrastructure Management Presentation - MFMA

Infrastructure Maintenance
MFMA ASSET MANAGEMENT WORKSHOP
ZANELE MNCWANGO
National Treasury
24 November 2010
Presentation Outline
• Legislative framework Acknowledges need for
maintenance of assets
• Infrastructure maintenance challenges
• Current Funding levels for infrastructure and
measurement trends & limitations
– Municipalities
– Provinces per sector
• Towards finding solutions
• Conclusions
2
Infrastructure maintenance challenges
• Norms & Standards – no appropriate guidelines,
systems & manuals
• Lack of culture of asset management practices
– Inadequate asset registers and the extent of maintenance needs
unknown
– No lifecycle costing & budgeting – methodology and
skills/capacity challenge across government
• Asset base coverage, resources and skills capacity differ
across the 3 major groupings of municipalities
• Deficiencies in institutional arrangement undermines
actual maintenance of assets
• Funding constraint:
– Quality of infrastructure delivered increases backlogs in
maintenance
– Political imperative to eradicate backlogs vs limited resource
3
Legislative Framework - provincial
•
PFMA [Section 38](1)(d) :
• The accounting officer for a
department, trading entity or
constitutional institution is
responsible for the
management, including the
safeguarding and the
maintenance of the assets of •
the department, trading entity
or constitutional institution -. As
a result, all these institutions
need an asset management
system which is a base for
proper planning and budgeting
for maintenance.
Section 76(2)(d) also states that
National Treasury must make
regulations or issue instructions
applicable to departments,
concerning the improvement and
maintenance of immovable
assets.
GIAMA: Section 5(1)(d)
promotes efficient utilisation and
maintenance of existing
immovable assets and that
immovable assets that are
currently used must be kept
operational to function in a
manner that supports efficient
service delivery.
4
Percentage of maintenance on
provincial infrastructure budgets
R' 000
Education
Health
Roads and Transport
Total
Education
Health
Roads and Transport
R' thousands
Education
Health
Roads and Transport
2007/08
3,572,855
4,798,977
10,622,784
18,994,616
9.1%
12.2%
28.8%
324,228
971,793
3,835,293
Overrall provincial infrastructure budgets
2008/09
2009/10
2010/11
20011/12
5,102,058
5,613,613
7,607,879
8,831,600
6,511,325
7,781,057
8,945,332
9,622,607
13,552,873
13,941,305
14,064,009
15,617,136
25,166,256
27,335,975
30,617,220
34,071,343
2012/13
9,735,668
10,068,295
16,309,630
36,113,593
8.7%
6.2%
25.7%
Percentage of maintenance
0.0%
6.7%
11.6%
0.0%
27.3%
35.8%
8.5%
15.9%
32.2%
11.6%
18.6%
35.0%
627,077
896,406
5,544,481
Maintenance figures
814,544
707,926
1,168,604
1,656,328
5,288,199
5,941,490
798,149
1,745,822
7,032,426
966,392
1,805,787
7,452,069
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Legislative framework - municipal
• The MFMA [section 63] delineates specific duties in
respect of asset management, i.e. The safeguarding
and maintenance of assets, valuation in accordance
with generally recognised accounting practice
(GRAP), maintaining a system of internal control over
assets and keeping an asset register.
• Previously reporting was done using a general
classification (R&M) that allowed for inclusion of
spending that were non capital i.e. staffing
• Recently budget reforms ensure improvement in
reporting for repairs and maintenance – per sector
and per nature of asset (whether new or existing)
• This eliminates errors in reporting on non capital
items
6
Summary of O&M spending in
municipalities- 30 June 2010
Summary - Table A9 asset management for 4th quarter ended 30 June 2010
Description
R million
Total new assets
Total renewal of existing assets
Total capital expenditure- asset class
Audited Outcome
2006/07
2007/08
Current year 2009/10
2008/09
Budget Year 2010/11
Original Adjusted Full Year
Budget Budget Forecast
7 413
12 336
54 101
41 160
43 686
43 686
36 043
34 007
32 813
297
1 823
3 895
4 590
4 066
4 066
5 147
5 309
7 740
7 710
14 159
57 996
45 750
47 752
47 752
41 190
39 316
40 553
Total asset register and expenditure for 4th quarter ended 30 June 2010
Emerging issues
• Strengthening the regulatory framework governing planning and
budgeting for infrastructure maintenance
– Budget documents and reports provides clear information on
maintenance per sector
– Budget rules and enforcement per key infrastructure –problem
assets base not quantified – varying levels of practices across
munics
– Progressive increase in budgets towards acceptable levels
– Lifecycle costing and budgeting for new projects – budgets must
ensure that adequate provision is made?
• Emerging challenge of the water sector assets –
– Reports on collapsing treatment plants
– Dilapidated assets causing a national crisis
– Water quality at risk
– National effort geared to support the sector
– Challenge in funding gap – how to optimise?
• Alignment between the Revenue teams, budget offices, planning and
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technical services
Emerging issues cont…
• Government still needs to accelerate eradication of access backlogs
- challenge is how to strike an appropriate balance to avoid
increasing backlog due to maintenance failure?
• Differentiated approach to resolving funding and capacity problems
– Approach to big cities to enforce planning and budget regulations
and rules
• Revenue enhancement key in improving the ability of munics to
operate and maintain their assets
• Extent of water losses remains a challenge
• Smaller municipalities depend more on national funding - need
scaling up for operation and maintenance – this is being done through
equitable share & strengthen regulation of budgets
– Challenge is to address capacity deficiencies - human resource
strategies
– Assets transferred to LG by DWA – ownership challenges
• Need to find appropriate technical solutions for rural areas –
considering costs of extending infrastructure and its sustainability
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• Need to find appropriate institutional solutions for maintaining assets
Linking maintenance with govt priorities
- provincial Initiatives
• Competition over limited resources means trade offs between
competing needs – new versus existing
• Infrastructure maintenance initiatives achieving employment
objectives of government which are being strengthened:
– EC Sakha Isizwe Household contractor - a routine
maintenance programme
– KZN Zibambele – a Road Maintenance Programme
– GT recruited 69 CIDB level 1 to 4 emerging contractors to
maintain existing road network
– FS Contractor Development Programme 100 emerging
contractors recruited for routine road maintenance
– MP Siyantentela Programme recruited 78 emerging
contractors for routine road maintenance
• R4,1b incentive grant for expanding employment opportunities
through infrastructure esp these maintenance programmes
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Conclusions
• Maintenance problem has been acknowledged across government
• Also acknowledges employment creation opportunities of
maintenance – scaling up funding for EPWP
• Government already taking steps to address the problem:
– NIMS provides for a coherent and coordinated government
response
– Sector initiatives addressing norms and guideline gaps: water,
education, roads
– Regulating municipal budgets and reporting
– IDIP targeting key infrastructure departments in provinces and
plans to roll out to LG – working on localizing toolkit through
CIDB
• Need to address information gaps i.e. asset base, funding and
costing appropriate technical solutions
• Done assessments in Limpopo both capacity and state of assets ,
moving to rest of provinces
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Conclusions
• Collective effort required with stakeholders within LG
and across government
• Capacity and funding constraints remain – requires
innovative approaches targeted to different
categories of municipalities
• Increased effort including how capacity support is
provided – moving from gap filling to in-house
capacity
• Institutionalized FM internship programme –
technical programme, need a national sector led
effort
• Increasing partnerships with relevant sectors
academic institutions etc.
• Working with CoGTA & DWA to look at institutional
governance issues
12
Thank You