DBSA SUPPORT TO LOCAL GOVERMNENTDBSA SUPPORT TO LOCAL GOVERMNENT

Ben MokhesengManager: Infrastructure Finance Local Government SA Financing Division

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

Context

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 provincesScale up investment in infrastructure Expand maintenance: new and existing infrastructureReduce infrastructure backlogsAccelerate access to clean water through water and reticulation projectsAccelerate access to electricity and improve sustainability of access through refurbishment of key infrastructure

National Development Plan:Improve infrastructure in rural areas and the poorest provincesScale up investment in infrastructure Expand maintenance: new and existing infrastructureReduce infrastructure backlogsAccelerate access to clean water through water and reticulation projectsAccelerate access to electricity and improve sustainability of access through refurbishment of key infrastructure

DBSA’s Responses:Provide subsidy to under-resourced municipalities for accelerated project planning and implementation Focus on areas with the biggest unfunded gap through project origination initiativesProviding affordable funding to build sustainable asset base and revenue streamsCollaboration with government departments and private sector players to support infrastructure development and service delivery to local government

DBSA’s Responses:Provide subsidy to under-resourced municipalities for accelerated project planning and implementation Focus on areas with the biggest unfunded gap through project origination initiativesProviding affordable funding to build sustainable asset base and revenue streamsCollaboration with government departments and private sector players to support infrastructure development and service delivery to local government

4

DBSA View: Key Constraining Factors

Deteriorating state of municipal infrastructure Delayed project completion Lack of credible sector and master planning

Deteriorating state of municipal infrastructure Delayed project completion Lack of credible sector and master planning

Delays in appointment of contractors/service providers

Weak and sometimes uncoordinated oversight and monitoring of municipal activities and 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

Underspending of capital budgets High escalation costs Needs exceed available funding Limited borrowing capacity

Inadequate technical capacity to plan and

implement infrastructure programmes and projects.Inadequate focus on O&M

Inadequate technical capacity to plan and

implement infrastructure programmes and projects.Inadequate focus on O&M

Inadequate funding &

Few and weak revenue streams (under pressure)

Inadequate funding &

Few and weak revenue streams (under pressure)

Inadequate institutional coordination and

alignment of a wide range of current support

programmes

Inadequate institutional coordination and

alignment of a wide range of current support

programmes

5

CONSTRAINT CONSTRAINT CONSEQUENCECONSEQUENCE

Total population in uMgungundlovu DM: 1 017 76461% 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%

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: 65 793 Backlogs:

Water: 25,6% Sanitation: 30,3%

Electricity: 18,5%

Population: 63 142Backlogs:

Water: 39,3 % Sanitation: 36,3%

Electricity: 34,8%

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%

6

Capital Budget 2015/16 (R’000)

2016/17(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

uMgungundlovu 313 784 296 029

Total uMgungundlovu DM 1 251 829 1 071 882

Planned CAPEX for the period 2015/16 to 2016/17

Source: NT database: LG budgets 2014/15Note: Capital Budget subject to change

7

Municipal Infrastructure Grant Integrated National Electrification Programme (Municipal) Grant

National and Municipal Financial Year National and Municipal Financial Year

Municipality 2015/16 (R'000)

2016/17 (R'000)

2017/18 (R'000)

MIG Total 2015/16-2017/18 ZAR'000

2015/16 (R'000)

2016/17 (R'000)

2017/18 (R'000)

INEP Total 2015/16-2017/18 ZAR'000

- -

uMshwathi 26 764 27 703 29 111 83 578 18 000 18 900 22 000 58 900

uMngeni 22 249 22 993 24 109 69 351 5 000 5 000 10 000

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 65 000 67 000 73 000 205 000

MIG & INEP Grants allocation 2015/16 to2017/18

Source: NT Division of Revenue Bill 2015/16 8

DBSA Experiences: Infrastructure Investment to KZN

Municipalities (YTD April 2015/16)

9

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

DBSA’s Strategic Framework For Municipal Support

Effec

tive

Stak

ehol

der

Effec

tive

Stak

ehol

der

Colla

bora

tion

Colla

bora

tion

Effec

tive

Stak

ehol

der

Effec

tive

Stak

ehol

der

Colla

bora

tion

Colla

bora

tion

10

Infrastructure Investment Project CycleInfrastructure Investment Project Cycle

Municipal development

plans: Long-Term

Master Plans

Project-level Preparation

Feasibility studies

Project-level Preparation

Feasibility studies

Financing (Budgets + Loans)

Financing (Budgets + Loans)

Project Technical Implementation

Project Technical Implementation

Operations / MaintenanceOperations / Maintenance

THE Nexus of Planning-Financing-Implementation

UPSTREAM DOWNSTREAM

DBSA’s Integrated Value Offering

Infrastructure investment

programming

Pre-feasibility studies / project

structuring

Linking projects to financing

BRIDGING THE PLANNING,FINANCING & EXECUTION GAP

BRIDGING THE CAPACITY GAPStrengthen Municipalities’ capacities to prepare infrastructure investment

11

Conclusion

9

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!

Let’s make sure we create VALUE, not just spend

MONEY!

THANK YOU

12