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DBSA SUPPORT TO LOCAL GOVERMNENT Ben Mokheseng Manager: Infrastructure Finance Local Government SA Financing Division Context 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 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 DBSA’s Responses: Provide subsidy to underresourced 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 CONSTRAINT CONSEQUENCE Inadequate technical capacity to plan and implement infrastructure programmes and projects. Inadequate focus on O&M Deteriorating state of municipal infrastructure Delayed project completion Lack of credible sector and master planning Inadequate funding & Few and weak revenue streams (under pressure) Inadequate institutional coordination and alignment of a wide range of current support 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 5 Msunduzi Local Municipality Overview uMgungundlovu District Municipalities Population: 38 104 Backlogs: Water: 19,4% Sanitation: 30,8% Electricity: 28,1% Population: 106 374 Backlogs: Water: 24,3% Sanitation: 27,7% Electricity: 27,3% Population: 92 710 Backlogs: Water: 9,3% Sanitation: 21,9% Electricity: 14,5% Population: 33 105 Backlogs: Water: 25,6% Sanitation: 57,8% Electricity: 16,4% Population: 63 142 Backlogs: Water: 39,3 % Sanitation: 36,3% Electricity: 34,8% Population: 65 793 Backlogs: Water: 25,6% Sanitation: 30,3% Electricity: 18,5% Total population in uMgungundlovu DM: 1 017 764 61% of the population is located in Msunduzi LM 618 536 ( Households: 163993) Backlogs in Msunduzi LM: Water: 7,7% Sanitation: 22,5% Electricity: 8,1% MIG expenditure: 2013/14 99.1% 2012/13 99.6% Capital Budget expenditure: 2013/14: 67.1% 2012/13: 89.9% 6 Planned CAPEX for the period 2015/16 to 2016/17 Capital Budget 2015/16 2016/17 (R’000) (R’000) uMshwathi 32 990 6 000 uMngeni 33 428 23 268 Mpofana 22 371 22 726 Impendle 22 137 22 481 Msunduzi 792 599 665 980 Mkhambathini 17 276 17 551 Richmond 17 244 17 847 313 784 296 029 1 251 829 1 071 882 uMgungundlovu Total uMgungundlovu DM Source: NT database: LG budgets 2014/15 Note: Capital Budget subject to change 7 MIG & INEP Grants allocation 2015/16 to2017/18 Municipality Municipal Infrastructure Grant Integrated National Electrification Programme (Municipal) Grant National and Municipal Financial Year National and Municipal Financial Year 2015/16 (R'000) 2016/17 (R'000) 2017/18 (R'000) MIG Total 2015/162017/18 ZAR'000 2015/16 (R'000) 2016/17 (R'000) 2017/18 (R'000) INEP Total 2015/162017/18 ZAR'000 - - uMshwathi 26 764 27 703 29 111 83 578 18 000 18 900 uMngeni 22 249 22 993 24 109 69 351 5 000 5 000 Mpofana 12 295 12 610 13 082 37 987 6 000 6 300 8 000 20 300 Impendle 12 063 12 368 12 825 37 256 6 000 6 300 8 000 20 300 Msunduzi 192 456 200 546 212 671 605 673 10 000 10 500 15 000 35 500 Mkhambathini 16 851 17 362 18 129 52 342 10 000 10 000 8 000 28 000 Richmond 18 017 18 579 19 421 56 017 10 000 10 000 12 000 32 000 uMgungundlovu District Municipality 106 052 110 412 116 949 333 413 Total: uMgungundlovu Municipalities 406 747 422 573 446 297 1 275 617 Source: NT Division of Revenue Bill 2015/16 22 000 58 900 10 000 65 000 67 000 73 000 205 000 8 DBSA Experiences: Infrastructure Investment to KZN Municipalities (YTD April 2015/16) 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 9 Effective Stakeholder Collaboration DBSA’s Strategic Framework For Municipal Support PLANNING SUPPORT Sector and master plans Feasibility plans Infrastructure investment plans FINANCE SUPPORT Long Term Loans Bridging Finance (e.g. MIG & INEP) Structured Loans (e.g. PPP) Private Sector Providers IMPLEMENTATION SUPPORT Project management/ implementation Contract management Progress monitoring Reporting and evaluation support 10 DBSA’s Integrated Value Offering Infrastructure Investment Project Cycle THE Nexus of Planning-Financing-Implementation UPSTREAM Municipal development plans: Long-Term Master Plans DOWNSTREAM Infrastructure investment programming Pre-feasibility studies / project structuring Project-level Preparation Feasibility studies Linking projects to financing BRIDGING THE PLANNING,FINANCING & EXECUTION GAP Financing (Budgets + Loans) Project Technical Implementation Operations / Maintenance BRIDGING THE CAPACITY GAP Strengthen Municipalities’ capacities to prepare infrastructure investment 11 Conclusion 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! 9 THANK YOU 12