1. What is driving South Africa’s green infrastructure agenda – is it international commitments, the language of climate change, or resource scarcity.
2. Do we realise that resource scarcity means we cannot do things in the same way?
3. Is the new investment in green energy and infrastructure only happening because it makes sense in terms of good risk management?
4. Do we recognise how valuable the region is as a collective in reducing vulnerability?
5. How are we translating and utilising the great research that is being done in the planning framework now?

The IIMP was initiated in 2006 to assess the impact of the increase in public sector demand in the supply for key infrastructure inputs. It is specifically meant to assist both the public and private sectors with more comprehensive and integrated information on the extent and nature of sector capacity required to meet the expanded Infrastructure spend. IIMP is also intended to build confidence in the projections and trends regarding infrastructure investment such as to motivate substantial private sector investment in additional capacity.

The first IIMP project was completed in 2007. The study, led by Dr. Suren Singh, provided a baseline assessment of various strategic inputs associated with the proposed public infrastructure investment programmes of government and the state-owned enterprises (SOEs). The report covered a review of all the key sectors and sub-sectors in respect of infrastructure in South Africa and provided an assessment of current capacity / outputs as well as public sector demand.

In 2008, the Corporate Strategy and Industrial Development (CSID) Research Programme, at the University of Witwatersrand, was appointed to undertake the second IIMP project. This provided an update of the 2007 research.

In 2011, the third round IIMP takes cognisance of the changed economic context since 2008, and provides a very comprehensive overview of infrastructure demand and supply, looking at no less than 15 infrastructure input sectors, including steel, cement, timber, plastic pipes, capital equipment, skills and transport and logistics costs. Led by Dr. Zavareh Rustomjee for the DBSA, the work is now completed and the results were presented to interested stakeholders.

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 In response EDI Holdings has wound down its operations and closed as of the 31 March 2011.  As such the Department of Energy will review the entire electricity value chain to develop a holistic approach towards energy security.

Eskom and 187 municipalities undertake the distribution of electricity to approximately 9 million customers, 31,000 people are employed in the EDI with an asset base of R261 million.  The operation of the distribution facilities vary between regions and municipalities.  Networks in many municipalities are believed to be in a poor state, with substantial investment required to maintain and rehabilitate assets.  There has been a chronic underinvestment in the upgrading and maintenance of distribution networks.  Much of this is attributed to a lack of asset management strategies, insufficient investment in planned and existing networks, ageing networks, inadequate maintenance and limited coordination of efforts to address national problem.  Limited fund and a lack of skills further exacerbate this issue.

A sound electricity infrastructure is required to support growth targets, create investor confidence and meet customer expectations.  It is estimated that the current requirement of electricity distribution in respect of maintenance, refurbishment, network strengthening and skills development is in the region of R27.5 billion.  The Department of Energy (DoE) has indicated in its Strategic Plan 2011/12 – 2015/16 that this is to be reduced to R15 billion by 2014.

The key programme initiated by EDI Holdings – ‘Approach to Distribution Asset Management’ (ADAM) is forms part of the response.  According to the DoE Strategic Plan 2011/12 – 2015/16 the first step in this process will be to develop an in depth assessment of the actual backlog along with detailed geographical maps at metro city and secondary metros.  Parallel to this process is the need to identify interventions required to rehabilitate infrastructure that is needed in the short term to ensure electricity service delivery.

This Infrastructure Dialogue takes a look at the current state of the Electricity Distribution, and the response required in light of EDI Holdings operations being wrapped up and what needs to be addressed as the EDI restructuring moves into a new phase.

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Economic infrastructure comprises the internal facilities of a country that makes it possible to do business and includes communication, transportation, distribution networks, financial institutions and markets and energy supply systems. Perkins, Fedderke and Lutz contend that the ‘relationship between an economy and its economic infrastructure is analogous to that between a building and its foundation. Economic infrastructure typically exists not for its own sake but rather to support various kinds of economic activity’ . Through research undertaken in 2005 they determined three main findings with regard to economic infrastructure and economic growth in South Africa: Firstly, the relationship between economic infrastructure and economic growth appears to run in both directions. Economic growth provides both the need for, and the resources to fund, various types of infrastructure. Alternatively, the failure to provide appropriate infrastructure services may hamper GDP growth. Secondly, providing the right type of infrastructure at the right time will be an important dimension of South Africa’s continued economic development. Thirdly, the need for investment in economic infrastructure never goes away. Until such time as existing infrastructure becomes obsolete it needs to be maintained, and as certain infrastructure programmes reach maturity new ones should be implemented, always in response to the economy’s changing needs and cost-benefit analyses. (South African Journal of Economics Vol. 73:2 June 2005)

The link between economic infrastructure and economic growth has been recognised by the South African Government. Over the last ten years Government has made significant and increasing investments into infrastructure development. The investment into infrastructure was one of the cornerstones of the Accelerated and Shared Growth Initiative for South Africa (AsgiSA) which resulted in over R320bn of public expenditure being used for this purpose since 2006. Government’s current economic strategy the New Growth Plan (2010) sees public investment in infrastructure as being a key ‘job driver’ both to create employment directly, in construction, operation and maintenance as well as the production of inputs, and indirectly by improving efficiency across the economy.

In accordance with this policy position, infrastructure investment is one of the 12 delivery outcomes that forms part of the Presidency’s Performance, Management, Monitoring and Evaluation programme. This programme is approved by Cabinet and comprises a new outcomes-based approach to defining targets and measuring progress of National Ministers and Departments. Twelve outcomes have been agreed as a key focus of work between now and 2014. Each outcome has a limited number of measurable high-impact priority outputs and sub-outputs with targets. In turn, each output is linked to a set of activities that will help achieve the targets and contribute to the outcome. Each of the 12 outcomes has a delivery agreement which in most cases involve all spheres of government and a range of partners outside government. Combined, these agreements reflect government’s delivery and implementation plans and its central priorities.  Outcome 6 is focused on infrastructure investment with the aim of creating ‘An efficient, competitive and responsive economic infrastructure network’. There are six outputs:

1) Improving competition and regulation
2) Ensuring reliable generation, distribution and transmission of electricity
3) Ensuring the maintenance and strategic expansion of South Africa’s road and rail network, and operational efficiency, capacity and competitiveness of South Africa’s sea ports.
4) Maintenance and supply availability of South Africa’s bulk water infrastructure
5) Communication and information technology
6) Developing a set of operational indicators for each segment

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South Africa Cities Network commissions a study that looks at the effect of planning and land use laws on housing and infrastructure delivery

The Department of Cooperative Governance and Traditional Affairs (CoGTA) and the South Africa Cities Network (SACN) are in the process of commissioning a study that looks at, among others, the effects of planning and land use management laws on infrastructure delivery. Through a broad survey into the practice across a number of economic hubs in the provinces of South Africa, the study looks to better understand the effects of the old and mostly inappropriate land use legislation on land development. With new national and provincial land use legislation in the cards, the study aims to identify critical areas for intervention for these laws, to enhance the ability of both government and the private sector to develop and deliver on housing and infrastructure needs.

Resource Documents:

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It is easy to be critical of municipalities with declining service delivery and increasing charges, but the municipal system is highly complex, says eThekwini infrastructure planning strategic executive Ken Breetzke.

“The challenge is to align the thinking of senior management across the organisation, otherwise coordinated strategy fails,” Breetzke told the twelfth Infrastructure Dialogue, held in Johannesburg last month.

The topic for the dialogue was Municipal Infrastructure Investments Framework – Planning Till 2019.

The first dialogue in this series took place in June 2009, the topic being the Municipal Infrastructure Investment (MIIF). At that dialogue, the key findings of the then MIIF Round 5 analysis were debated.

Some of the findings included that significant capital expenditure would be required over ten years if the infrastructure service backlogs were to be met by 2014 and to ensure infrastructure growth and renewal.

Total capital expenditure of about R47-billion a year over ten years was predicted, requiring between R15-billion and R24-billion to be borrowed each year (depending on the infrastructure levels of services adopted), in addition to capital grants available to municipalities from the national government.

eThekwini has an annual capital budget of around R6-bilion and an operating budget of R18,5-billion.

Breetzke added that, for the 2013/14 budget, eThekwini is under huge pressure and the Municipal Services Financial Model is being used to force the budget down from around R6-billion (currently, including all funding) to R4,5-billion, which is a more sustainable position.

The intention of the spatial/geographic review of projects is to ensure that eThekwini targets key areas, such as promoting key public transport corridors by ensuring that budgets are committed for all infrastructure, rolling stock, social facilities and the fast-tracking of planning approvals and urban management within these corridor areas.

“Spatial planning will feature strongly in the next few months and an additional R2-billion in funding is needed to achieve the desired targets and for eThekwini to run sustainably,” noted Breetzke.

He pointed out that the municipality needed a stronger focus on economic growth to fund social programmes and that public housing should no longer be the driver.

- Affordable Housing

- State of Electricity Distribution in South Africa

- Economic Infrastructure – Monitoring & Evaluation

- Social Infrastructure

- Roads Infrastructure (repeat topic)

- Infrastructure Inputs Monitoring

If you have any topics you would like to suggest for future dialogues please e-mail info@infrastructuredialogues.co.za

Fundamental problems in providing bulk infrastructure, such as water, sanitation, and electricity, are slowing down government’s housing delivery programmes, (Human Settlements Minister Tokyo Sexwale).[1]

Work done by among others the South Africa Cities Network (SACN) shows that a leading cause of a lack of infrastructure is the lack of finance to build it.[2] However, it is not only a finance problem. Housing infrastructure delivery can also be hampered by among others, a lack of capacity at local government level, poor planning for infrastructure delivery, complex and bureaucratic policy an legislative processes that hamper its delivery, local governments with little authority in matters of infrastructure delivery and so on. This dialogue will investigate this vexing question.

[1] Engineering News 24 November 2010 Infrastructure problems Slowing Housing Provision – Sexwale INTERNET http://www.engineeringnews.co.za/article/infrastructure-problems-slowing-housing-provision-sexwale-2010-11-24-1

[2] See for example South African Cities Network (2008) Securing Municipal Finance in Southern Africa.

This analysis was conducted by differentiating municipalities into categories ranging from metropolitan to deep rural municipalities, as the ability / capacity to borrow will differ markedly.

Equally important, the analysis looked at the operating account and the expenditure and revenue requirements to ensure that existing and new infrastructure provided could be adequately maintained to ensure sustainability. The analysis predicted expenditure of about R125bn in 2007, rising to R190bn in ten years (2006/07 prices).

As for the capital account, the ability to raise operational revenue including the availability of grants, such as the equitable share, will differ markedly between categories of municipalities.

The MIIF is an ongoing process and since the first dialogue, an updated analysis (Round 7) has been undertaken and new findings have been formulated.

Again briefly, the findings are that capex of about R97bn per year is predicted over ten years and that borrowings of about R49bn per year are required. On the operating account, an expenditure of R177bn in 2010 is predicted rising to R320bn in ten years.

These represent very large increases in comparison with MIIF 5. Part of this is due to escalation but it is due largely to higher expenditures on water and roads estimated in MIIF7. Also, modelling is highly dependent upon the availability of appropriate data. In MIIF7, significant work was undertaken to improve the unit costing of services and analysis of exiting infrastructure and the impact on capital required for asset rehabilitation and replacement. Not surprisingly, this indicates that significant additional expenditure needs to be incurred by municipalities to preserve their (infrastructure) assets.

Whilst, the National analysis is significant, the MIIF is also aimed at encouraging municipalities to undertake their own infrastructure investment analysis to improve financial sustainability as part of Infrastructure Investment Planning and as critical inputs into the Integrated Development Plan. The dialogue will include municipal experiences in this regard.
The MIIF is primarily concerned with the technical and financial analysis to promote sustainable service delivery at the municipal level. However, this cannot be dealt with in isolation from the institutional and governance issues that need to be addressed to ensure that proper multi-year planning and budgeting takes place in the first instance and that sustainable implementation plans are fully implemented.

The dialogue will provide the platform to review progress, identify and debate constraints and constructively formulate recommendations as a way forward.

Objectives of the MIIF

The Municipal Infrastructure Investment Framework (MIIF) is an ongoing initiative to review the investment requirements for the municipal sector and assess the financial status of municipalities in the future based on projected investments. The overall objective of the Framework is to:

•    Assess the amount of capital which is required to meet the municipal infrastructure delivery targets of Government and to assess the options for ensuring that sufficient capital finance is available to cover this capital cost.
•    To ensure that the infrastructure programme is financially sustainable, which implies that there is sufficient operating revenue to cover the operating and maintenance costs of infrastructure-related services.
While one part of the MIIF focuses on the national picture, another part places emphasis on supporting municipalities with their own infrastructure investment planning initiatives. The MIIF is therefore intended to serve all spheres of government involved with municipal infrastructure. In the sense that the private sector is also involved in delivering and financing infrastructure the MIIF will also be of interest to those outside government.

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