Specifically, this month’s dialogue will address the roads network of South Africa recognising that roads make an important economic and social contribution through improving efficiencies and opening up business opportunities and employment creation as well as providing access to social services such as educational, health and community facilities.

However, in doing this there are currently a range of crucial challenges of which the most urgent includes the following:

Institutional and regulatory environment – responsibility for the road network is spread across all three spheres of government; however some roads have not been allocated to a responsible authority – there remains in excess of 140 000kms country-wide which fall under no authority and thus receive no attention. The interface between spheres of government and authorities is also not always easily managed and thus proves to be problematic – for example the ongoing collapse of the Mpumalanga coal roads notwithstanding their strategic importance to the national economy or the lack of expansion of rural roads which continues to exclude many rural communities from social services and economic opportunities.

Funding – there is a need to expand the network and this has concomitant capital funding requirements; however this is exacerbated by the extremely high proportion of the network which has fallen into total disrepair (ie beyond the useful design life expectancy) and therefore needs replacement and is thus also a capital rather than maintenance cost. Lastly the funding for operations and maintenance is a serious problem, both in amount and availability.

Developmental leverage – roads over their whole life-cycle provide a wide range of economic opportunities; from labour intensive, small contractor construction and community based maintenance initiatives to PPPs.

To ensure that these challenges are confronted in a robust and broad based manner the speakers will be drawn from both the public (different spheres of government and/or agencies) and private sectors.

This dialogue provides the platform to review progress, debate constraints and identify opportunities for constructively moving forward.

Have Your Say…

Should you wish to participate in a discussion of this topic please click on the link below and indicate which sector you are from, namely Private, Public or Other.

The SPAID programme continues to see good progress with some exciting new developments occurring in the first six months of this year. Set out below is an overview of the key highlights of the last six months and plans for the remainder of 2010.

The Infrastructure Dialogues project

The Infrastructure Dialogues comprises high level monthly seminars dealing with relevant topics and issues within the infrastructure sector. The dialogue is attended by 50 to 60 invited stakeholders from the private and public sector that are knowledgeable on the topic being discussed. Reports and documents are circulated prior to the dialogue and experts on the topic are invited to make presentations. The discussions held at the dialogue are summarized into a dialogue report. The documents, presentations and summary are circulated to approximately 400 registered stakeholders electronically. Four dialogues were held since January 2010:

• Infrastructure Sector Procurement Strategies;
• Climate Change and the effect on Municipal Infrastructure;
• 2010 FIFA World Cup – Its Legacy Impact; and
• The role of Public Infrastructure on Urban Regeneration.

For the remainder of the year Dialogues are to be held on the last Thursday of August, September and October.  The proposed topics are:

• Provincial and Local Government Roads Infrastructure,
• the Infrastructure Economic Stimulus Package, and
• Government Performance Management of the Infrastructure Sector.

The order of these sessions will depend on availability of speakers. For information and to register as an electronic participant in the Dialogues log onto www.infrastructuredialogues.co.za. The website also provides access to all of the documentation produced through the dialogues.

This project is being undertaken in partnership with the Development Bank of Southern Africa and the South African Cities Network.

Infrastructure Sector Procurement Support

This project is a follow on of the Limpopo Education Procurement Strategy project which was undertaken during 2009. This project was based on research which highlighted the absence of a rational framework for the procurement of infrastructure and therefore the need for an analytical approach that could support the development of sector specific procurement and contracting strategies, in order to improve governance and delivery outcomes.

There are a wide range of procurement procedures and methods that are available through existing legislation and policies. These are described in various toolkits and guidance notes which are produced by the Construction Industry Development Board (CIDB). However most government entities do not consider these options when procuring services and goods in the infrastructure sector, but only use a limited number of time honored and familiar methods, often resulting in poor and disappointing delivery outcomes. The reason for this is that there is currently an absence of processes, procedures and methods to assist government bodies to select the appropriate procurement approach for meeting their infrastructure delivery needs.

A sector procurement strategy guides the allocation of resources by a government body in a more rational fashion and identifies the most appropriate and best value delivery management and contracting approach and procurement arrangements for all of the identified categories of work comprising that sector’s infrastructure plan and budget. Such a strategy recognizes and responds to the unique capacity strengths and weaknesses of the public body as well as the specific primary and secondary delivery objectives (desired outcomes) set by that government body.

The approach was successfully piloted and refined in 2009 with the Limpopo Province Education Department (LDoE). Since January 2010 there has been broader acceptance at a national and provincial level of the value of the approach. SPAID has engaged with National Treasury, the Technical Assistance Unit (TAU), the Infrastructure Delivery Improvement Programme (IDIP) and the Construction Industry Development Board (CIDB) so as to integrate and align the Sector Procurement Strategy approach into these institutions programmes and documents. Key achievements arising out of this process include:

• The Sector Procurement Strategy approach is being incorporated into the new phase of the IDIP. The way in which this will occur is currently being formulated.
• SPAID has successfully provided input into a Construction Industry Development Board (CIDB) toolkit that is currently being developed to assist Provinces to manage infrastructure delivery in the Health and Education Sectors.  The sector procurement approach has been incorporated into the toolkit.  The toolkit is expected to be launched shortly by the CIDB.

The Ukulungisa Project Preparation Fund (UPPF)

The Ukulungisa Project Preparation Fund (UPPF) was established by SPAID out of the recognition that project preparation is critical to service delivery and infrastructure development. The objectives of the UPPF were to assist participating municipalities to initiate, structure and accelerate projects; mobilise private sector resources and know-how to accelerate infrastructure delivery and ensure the financial sustainability of the Funds’ activities.

The UPPF commenced engagements with municipalities in November 2008. Take-up was slow and a significant problem was identified as to how municipalities could easily procure the services of the UPPF. This resulted in SPAID exploring a number of mechanism as to how this could occur, none of which were successful. However through this process the issue of project preparation was raised and is receiving more recognition at a national and provincial level.

The UPPF has been restructured and has expanded its focus on a broader set of stakeholders than just the municipalities such as implementing agents (for example, civil engineering companies and consulting companies). In addition it is undertaking pilot demonstration projects to show case the need for, methodology and benefits of effective project preparation.

In addition UPPF is developing a set of tools on project preparation for use by Municipalities.

Infrastructure Inputs Monitoring Project and Infrastructure Spend Tracker

The Infrastructure Inputs Monitoring Project and Infrastructure Spend Tracker both focus on improving understanding of the status of the infrastructure sector.

The Infrastructure Inputs Monitoring Project has developed a system for reporting relevant consolidated information and data on infrastructure projects (demand) and the capacity to provide the key inputs for the projects (supply) on an annual basis. The Project assesses demand trends and potential supply constraints for the key infrastructure inputs associated with the infrastructure investment programmes of government, SOE’s and development finance institutions (DFI’s) as well as the private sector. Two reports have been developed and published to date one in 2007 and one in 2008 (for details see www.spaid.co.za).

The Development Bank of South Africa is taking over the development and publishing of this report in the future.

The Infrastructure Spend Tracker tracks the extent of spending in the infrastructure sector. In recent years the South African public sector’s infrastructure spending programme has formed the centrepiece of government plans to support and facilitate economic growth and development. In addition to contributing directly to economic growth, the public sector infrastructure programme is also supposed to contribute to job creation, reducing poverty and assisting in developing competitive local industry.

The sheer scale of this public infrastructure development programme, together with the fact that rolling annual budgets have continually been supplemented and adjusted, and that so many different parties are actually involved in the delivery of the associated projects, has meant that it has been difficult to track the spending. The Infrastructure Spend Tracker provide an overview of the historical composition of the public infrastructure programme since 2005, with a specific focus on spending by different levels of government (national, provincial and local) and state-owned enterprises (SOEs), and on the type of assets purchased.  It reviews the funding sources for infrastructure spending and assesses the potential impact of public infrastructure expenditure on employment levels in the South African economy, as well as on the international competitiveness of South Africa as a business and investment destination.

The report is available on www.spaid.co.za.

Assisting municipalities to improve the management of infrastructure delivery relating to basic services

In 2008, a review of municipalities revealed several challenges in respect of their ability to deliver services, particularly to meet the 2014 Backlog Eradication targets of basic services. Since that date, SPAID has undertaken a number of initiatives to assist municipalities to improve the management of infrastructure delivery relating to basic services.

In 2008 the Municipal Project Expediting System was developed which is a programme monitoring and management system that enables Municipalities to plan and monitor progress in eradicating infrastructure service backlogs. In 2009, SPAID supported the process initiated by CoGTA which requires Municipalities to develop Comprehensive Infrastructure Plans (CIP). A CIP sets out the requirements for a Municipality to provide sustainable and affordable infrastructure services to its population. SPAID together with CoGTA scoped a Comprehensive Infrastructure Planning Implementation Support process that would assist Municipalities to determine if they were sufficiently aligned to achieve the 2014 Backlog Eradication targets and to develop plans to address any misalignment.

Based on the above work, in February 2010 CoGTA requested SPAID to assist in the development of a strategy to intervene in the failure of low capacity municipalities to meet their municipal infrastructure delivery and service provision targets (the so called Municipal Infrastructure SPV). This proposed intervention to enhance municipal infrastructure performance is currently being tested and the institutional options for implementing it are being assessed.

Since February 2010 extensive work has been undertaken by SPAID together with CoGTA to develop a strategy and business case for the Municipal Infrastructure SPV intervention. A process of testing this is currently underway with key stakeholders.

The discussion centred on the role of public infrastructure in urban regeneration, and it was highlighted that life cycle costs – operation and maintenance – of infrastructure should be factored in to the development of urban regeneration infrastructure.

Urban management was vital, and when developers were costing and planning a project, operation and maintenance of the asset should always be included, so that it did not become a burden for the municipality responsible, after the handover of the infrastructure.

The local authority would struggle to maintain the infrastructure if it did not derive any income from the infrastructure. It was also suggested that there should be a way of making finance available for maintenance of the infrastructure that development agencies were obliged to deliver for citizens.

Geci Karuri-Sebina, a special adviser to Neighbourhood Development Programme (NDP), a division within the National Treasury, noted that the NDP, which administered grants for infrastructure projects in townships, often received plans for developments that were not accompanied by any plans for operation, or programmes for the use of the infrastructure once built.

She added that “thoughtless” public infrastructure spending was not useful.

“I think that public infrastructure is a critical and necessary, but not sufficient condition to promote urban regeneration. I tend to think, that urban management, the much more boring part of it, is more important,” stressed Trust for Urban Housing Finance (TUHF) CEO Paul Jackson.

He noted that public infrastructure upgrades done by the Johannesburg Development Agency (JDA) were “critically important”, and directed where TUHF would invest.

Jackson also explained that his company invested in retail space along Rockey and Raleigh streets in Johannesburg when the JDA upgraded the public infrastructure there, however, he said the company was disappointed that hawkers and illegal traders were starting to move back into the street as it was not being properly managed.

Urban Genesis director Graham Reid stated that “it’s not done when it’s built”.

“There are consequences from the investment, often unintended consequences and one needs to manage them, understand them, monitor them, and constantly recapitalise on them,” Reid added.

Poor urban management led to urban decline, which is why constant urban regeneration was required.

“Implementing agencies must also consider their roles as development facilitators,” JDA planning and strategy manager Sharon Lewis emphasised.

By: Christy van der Merwe (04 June 2010)

Edited by: Mariaan Webb

For more information visit www.sacities.net.

Neighbourhoods in many previously disadvantaged areas have become the targeted focus of infrastructure spend. The NeighbourhoodDevelopment Partnership Grant (NDPG) established by the National Treasury provides technical assistance and grant financing for municipal projects in poor, underserved residential neighbourhoods such as townships.

There are many strategies for urban regeneration. Fiscal measures such as tax breaks are often used, and the creation of Urban Development Zones in many South Africa inner cities is a prime example. Removal of supply side constraints such as restrictive regulations and policies to investment in these areas are also an often used strategy.

This Dialogue focuses on capital expenditure into public infrastructure development as an intervention.

The Johannesburg Inner City Regeneration Charter for example refers to 5 pillars for inner city regeneration one of which is to “Maintain and Upgrade Infrastructure”. Thus the public sector through infrastructure development has the potential of improving these urban environments which can leverage private sector investment and ultimately revitalise and rejuvenate these areas. Such public infrastructure investment has also the potential of improving social inclusivity, alleviating poverty and creating employment, enhancing security, integrating previously disadvantaged areas into the mainstream urban fabric, enhancing social and community participation and regeneration, building strategic partnerships with the private sector, community organisations and voluntary groups, and even countering cyclical property cycles by providing profitable alternative areas for investment in lean times. There are also environmental benefits to be attained from infrastructure investment in regeneration as it utilises previously built up “brown field” sites rather than opening up new “green fields” to development.

This Dialogue session intends to review the successes of the substantial investment into public urban infrastructure for purposes of urban regeneration that have happened in South Africa. It will explore the quantum of this investment and the type of infrastructure investments that has been employed. It will explore the successes of these investments in terms of leveraging private sector investment and other elements of a score carding including employment creation and urban integration. It will delve into the effectiveness of these investments in enhancing social cohesion, creating safe neighbourhoods and creating effective markets. It will also explore the workings and synergies that are created by deploying infrastructure investment incentives with other intervention measures such as fiscal incentives and regulatory and policy incentives.

Have Your Say…

Should you wish to participate in a discussion of this topic please click on the link below and indicate which sector you are from, namely Private, Public or Other.

In response to massive service backlogs and recent widespread protests against inadequate service delivery, the government has accelerated investment into infrastructure.

The failure to preserve these new investments, along with what is already in place, will not only jeopardise these investments, but will also threaten stability further, and give rise to costly repairs later on.

National Treasury Intergovernmental Relations director Malijeng Ngqaleni said that the maintenance problem has been acknowledged across government.

Among the infrastructure maintenance challenges, she cited a lack of culture of asset management practices, such as inadequate asset registers and the extent of maintenance needs.

“There are deficiencies in institutional arrangements, which undermine the actual maintenance of assets and the one-size-fits-all approach to fiscal flows to municipalities is a major problem,” Ngqaleni told the Infrastructure Dialogue, held at the Development Bank of Southern Africa (DBSA).

The Infrastructure Dialogue, jointly hosted by the Support Programme for Accelerated Development, a partnership between the Business Trust and the Presidency of the South African government, and the DBSA, is a series of monthly dialogues dealing with key issues in the infrastructure sector.

These dialogues provide a platform for discussion and exchange of views between senior government, private sector and civil society stakeholders in the sector.

Ngqaleni noted that there is a need to strengthening the regulatory framework governing planning and budgeting for infrastructure maintenance.

Afcap Consulting director Johan Kruger said that the timely maintenance of infrastructure increases economic life and delays capital replacement.

“The quality of maintenance of municipal infrastructure has a direct and indirect impact on private sector productivity and profitability affecting the tax base for central government and the gross domestic product of South Africa in turn, leaving less money for maintenance,” warned Kruger.

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.

SPAID – www.spaid.co.za

Business Trust – www.btrust.org.za

Infrastructure Dialogues – www.infrastructuredialogues.co.za

Article from engineeringnews.co.za

Protests over poor public service delivery have soared this year. While service delivery remains a critical issue an equally critical issue is the increasing proportion of deteriorating infrastructure, often resulting in a poor and often unacceptable quality of services.

Protests over poor public service delivery have soared this year. While service delivery remains a critical issue an equally critical issue is the increasing proportion of deteriorating infrastructure, often resulting in a poor and often unacceptable quality of services.

Protests over poor public service delivery have soared this year. While service delivery remains a critical issue an equally critical issue is the increasing proportion of deteriorating infrastructure, often resulting in a poor and often unacceptable quality of services.

Protests over poor public service delivery have soared this year. While service delivery remains a critical issue an equally critical issue is the increasing proportion of deteriorating infrastructure, often resulting in a poor and often unacceptable quality of services.

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