ECONOMIC GROWTH & ENHANCED LOCAL PARTICIPATION THROUGH INFRASTRUCTURE DEVELOPMENT INTEGRATING...
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Transcript of ECONOMIC GROWTH & ENHANCED LOCAL PARTICIPATION THROUGH INFRASTRUCTURE DEVELOPMENT INTEGRATING...
ECONOMIC GROWTH & ENHANCED LOCAL PARTICIPATION THROUGH INFRASTRUCTURE DEVELOPMENT
ECONOMIC GROWTH & ENHANCED LOCAL PARTICIPATION THROUGH INFRASTRUCTURE DEVELOPMENT
INTEGRATING INFRASTRUCTURE DELIVERY TOWARDS 2030
CJ Venter05 October 2010
Introduction
Innovative approach to contribute to the developmental objectives of the state -
•creation of decent work and sustainable livelihoods•education•health•rural development, food security and land reform•fight against crime and corruption
- through infrastructure development and enhanced local participation
Economic growth in Limpopo
• Economic growth:– Large scale mining & industrial development– Government infrastructure investmentbut …– With limited local economic impact and job creation
(jobless growth)
• Infrastructure development:– Growing infrastructure backlogs– Insufficient institutional capacity– Ad hoc and uncoordinated development approach– Funding shortfalls
“Discussion objectives”
• Review current realities ito infrastructure development
• “Paradigm shift” – towards infrastructure development
• Application of integrated project development
• Synergies and alignment with mining sector
• Opportunities for enhanced local participation
• Key considerations and conclusion
INFRASTUCTURE REQUIREMENT
CURRENT REALISTIES
Current development processes
• Current processes are critical:– In annual budgeting cycle– Establishing infrastructure backlogs– Staking the province’s claim for a slice of national funds– Initial project identification
but …
• Current processes are not necessarily:– Focussing on alternative financing mechanisms– Focussing on integration– Political imperatives
What infrastructure is needed?
How will the infrastructure be funded?
Available funding
Shortfall
“PARADIGM SHIFT” TOWARDS INFRASTRUCTURE DEVELOPMENT
Treasury guidelines: 2011 MTEF
• Infrastructure & capital projects / programmes – must ensure the following:– Efficiency– Cost effectiveness– Better allocation of resources
• Project appraisal cycle:– Project identification– Pre-feasibility– Feasibility
• Feasibility study:– Detailed analysis of ALL costs and benefits– Quantitative risk assessment– If above not met, project not ready for implementation
Alternative funding mechanisms
GearingGearing(leveraging funding off assets)(leveraging funding off assets)
Project Finance (borrowing against revenue)
Sponsoring Partnerships (seed funding, underwriting)
Borrowing(conventional, bonds)
Own
Grants
Cash flows under pressure due to growth in debtors
Balance sheet borrowing capacity in decline
Budget deficit necessitates more strategic use of national fiscal resources
Main source of project preparation funding – not to be confused with PPP model
Huge potential, yet reluctance in SA to explore this approach
Internationally, most rapid growth in funding mechanism for new infrastructure creation
“Treasury Guidelines - similar to financier requirements”
A different approach – “paradigm shift”
• Integrated approach to needs analysis and master planning
• Sustainability and affordability vs backlog eradication
• Risk management – technical, financial & institutional
• Important to focus on the question how infrastructure will be funded if sufficient funds cannot be obtained from National Treasury
• Satisfy financiers’ (including Treasury) requirements
• Government assist vs government driven solutions
APPLICATION OF INTEGRATED PROJECT DEVELOPMENT -
MUNICIPAL EXAMPLE
Integration ……. municipal example
R200 mil bulk water & sanitation
5 000 – 10 000 housing unit integrated housing developmentInternal services: R750 milTop structures: R300 milAmenities: R500 mil
Electricity supply system:Bulk: R300 mRetic:R100 m
Refurb of reticulation systems:R200 mil
Rehab of existing informal settlements R20m
Asset manage-ment R80 m
Institutional R30 mil
Roads and stormwater: R200 mil
Integration ……. municipal example
Comments on the example
• Significant service delivery impact• Meets many political imperatives (housing etc.)• Unlocks development (economic development)• Public amenities & social infrastructure• Significant job creation & empowerment impact• Gearing of government funding - 1:3
• Challenge …– Who will put up the development capital?– Too complex to be managed from within a single
department– Major institutional risk
… hence the “paradigm shift”
THE NEW MINING DECLARATION & INTEGRATED SUSTAINABLE
DEVELOPMENT
Addressing inter alia the following …
• Implement the concept of “Mining Vision 2030” through sustainable development principles
• Develop a partnership approach towards mining community development
• Establish regional development funds
• Include Multi-Nationals into development initiatives
• Promote enterprise development
• Enable sustainable job creation and training opportunities
CONSIDER THE FOLLOWING APPROACH TOWARDS …
ENHANCED LOCAL PARTICIPATION
“New paradigm” project preparation to enhance local participation
• Focussed LED through large scale multi-disciplinary projects• Integrated project preparation programme – labour supply &
demand• Technical optimisation vs bankable feasibility• Managed approach towards optimum utilisation of local
resources• Active empowerment programme for local business & labour• Sustainable (regional) training & skills development programme• Consistency of labour practices across developmental
programmes• Integrated reporting ito client needs, governmental guidelines and
legislative imperatives
Integrated project preparation programme – labour supply & demand
Training & skills needs assessment vs labour supply & demand
Formal programme, M&E and reporting – supporting all developmental initiatives
Increased local participation / decrease foreign resource utilisation
KEY CONSIDERATIONS &
CONCLUSION
Key considerations
• Switch intervention to paradigm of “Government assisted solutions” by …– Exploring alternative funding mechanisms to finance the
capital shortfall– Establishing an integrated project preparation capability to
address all developmental objectives– Establishing a project preparation funding facility
• Utilise integrated infrastructure development programme as catalyst to contribute to the Manifesto objectives through …– Local economic development– Enhanced local participation