South Africa needs about R473-billion for backlog eradication, upgrading, growth and expansion, rehabilitation and the replacement of existing municipal infrastructure, PDG consultant Kim Walsh said at the inaugural Infrastructure Dialogue.
The meeting focused on the Municipal Infrastructure Investment Framework (MIIF) and was held at the Development Bank of Southern Africa (DBSA) last week.
Besides other things, the MIIF assesses the amount of capital required to meet the municipal services delivery targets set by government.
Jointly hosted by the DBSA and the Support Programme for Accelerated Infrastructure Development, the Infrastructure Dialogues have been launched to identify relevant topics challenging the infrastructure sector in South Africa and stimulate debate around dealing with blockages to overcome these challenges.
Government has committed itself to removing services backlogs by 2014, in a way that allows municipalities, which have the primary responsibility for delivering services, the capacity to operate and maintain this infrastructure while remaining financially viable.
“The MIIF model has always been run on the assumption that the national government’s aim of eradicating the backlog by 2014 must be met. There needs to be a push on capital expenditure to achieve that goal,” Walsh said.
She added that after all other funding sources had been taken into account, modelling showed that 53% of the capital expenditure would need to be funded through new borrowing amounting to R242-billion over ten years, from 2007.
“To put that into perspective, the current municipal loan book is at R23-billion and an additional R24-billion is required every year for the next ten years. “This is unlikely to be feasible, and demonstrates the scale of the problem that government faces.”
Walsh explained that rough measures of capacity to borrow indicated that municipal borrowing could realistically be somewhere between R112-billion and R135-billion, far too short of the R242-billion required.
She noted that the MIIF modelling showed that a combination of greater caution from municipalities in installing high service levels and greater innovation in capital finance methods was required if infrastructure expansion was to continue without inhibiting municipal financial viability.
“There have been some positive trends in the current munici- pal borrowing environment. Although overall outstanding debt has declined substantially yearly, new borrowing is being reported in municipal financial statements. Annual borrowing has increased by almost four times since 2003/4.”
The bulk of this borrowing is in metropolitan and other large urban municipalities, for whom loans are now the most important source of financing. This group of municipalities accounts for about 90% of outstanding municipal debt.