Parliamentary Briefing Performance and strategy of the Municipal Infrastructure Investment Unit

1
Parliamentary BriefingPerformance and
strategyof theMunicipal Infrastructure
Investment Unit

• Alwyn Naidoo
• MIIU Project Manager

2
Contents

• Performance report for the year under review
  2004/05
• Background
• Project performance and KPIs
• Expenditure
• The exit plan

3
Performance report for the year under review
2004/05
4
Background

• Cabinet Memorandum No. 14 of 1997 created MIIU as
  short-term arrangement to be wound up in five
  years (2003)
• This term was extended by Cabinet Memorandum 4A
  of 2002 for an additional three years, to 31
  March 2006
• Mandated To encourage and optimise private
  sector investment in local authority services on
  a basis that is sustainable for both local
  authorities and at a national level.

5
Background

• Non-profit private Company established in April
  1998
• USAID Donor support for technical assistance
  (PADCO)
• Project Preparation Fund
• Grants TA to support local MSPs

6
Strategic overview

• Wind-down operations towards closure in 2006
• Municipal market is only sustaining MSPs with low
  levels of risk transfer to private sector
• Respond to Municipal Finance Management Act
  (MFMA) and regulations developed in 2004/5
• Offer credit enhancement to increase municipal
  borrowing from private lenders

7
Project performanceAuditable (PFMA) KPIs (1)
Key Performance Area Target Actual
Active MSP projects 50 77
Completed projects 7 MSPs 1 loan guarantee 2 revenue management 4 MSPs Uthungulu Water (KZN) CPT drop-off (solid waste) WC) CPT SMMEs (solid waste) (WC) Epping Fresh Produce Market (WC) 0 loan guarantee 2 revenue management Mogale City (GA) Albert Luthuli (MP)
Disbursement on MSPs R12,8 m R12,77m
Efficiency ratio 25.5 17.8
8
Project performanceAuditable (PFMA) KPIs (2)
Key Performance Area Target Actual
Active guarantee projects 3 3 Joburg Water (GA) Mogale CIty (GA) Midvaal (GA)
Active revenue enhancement projects 3 3 Ugu (KZN) Thembisile (MP) Dr JS Moroka (MP)
Target value of guarantees to be committed 50 of 35m (R105m) 0
Disbursement related to guarantee projects 375 000 257 500
9
Project performanceAuditable (PFMA) KPIs (3)
Key Performance Area Target Actual
Monitoring of major projects 5 5 ongoing
Customer surveys (Contract Monitoring) 5 completed projects 3 new projects 5 ongoing Nelspruit (MP) Dolphin Coast (KZN) Kelvin Power (GA) Msunduzi (KZN) Mogalakwena (LM) 0 not yet started
10
Project performanceInternal KPIs (1)
Key Performance Area Target Actual
Case studies written up 5 5 in progress (75 complete)
Standard terms of reference documented 3 3 Generic Terns of Reference Generic Request for Proposals Template financial model
Publication of MIIU history and case studies 1 1 Pending
Technical Assistance (TA) not associated with projects 4 hours per project manager per month or a total number of equivalent hours as a ceiling Section 78 task team, dplg MSP workshops, Project Consolidate, loan guarantee marketing
11
Project performanceInternal KPIs (2)
Key Performance Area Target Actual
TA Disbursement of USAID funds 185 000 43 365
Market Development Seminar with financial sector 1 Session with Standard Bank in Aug 04 with Nedbank in Mar 05
Staff development SA staff (includes the use of USAID funds of 15 000 6 personal development plans 6 plans followed UK Study tour, Midrand Graduate Institute, various short courses
Implement MIIU obligations to Johannesburg Housing if fund becomes operational N/A
12
Completed projects (MSP)

• Uthungulu Water (KZN)
• an interim O M contract with WSSA for
  operations of all rural schemes
• CPT dropoff (solid waste) (WC)
• establishment of four green waste drop-off
  centres
• CPT SMMEs (solid waste) (WC)
• CBO waste collection contracts in disadvantaged
  areas,e.g Bloekombos, Kalkfontein, Khayelitsha
• Epping Fresh Produce Market (WC)
• sale of a non-core asset for R16m. A 20yr lease
  was entered into with the new owner, with repair,
  maintenance expansion risk transferred to new
  owner. Proceeds of the sale to improve water and
  sanitation infrastructure. Winner of the Africa
  Investor Award in November 2004.

13
Revenue Management Loan Guarantee

• Mogale City (GA)
• data cleansing, debt review and audit of
  customers, meters, connections, tariffs, etc
  resulting in significant saving of lost revenues.
  Private partner entered a shared risk contract
  with municipality, earning a reward only in the
  event where the municipality saves revenues
  relative to set revenue benchmarks.
• Ugu District (KZN)
• data cleansing, debt review and audit of meters,
  connections, etc to improve revenue. Private
  partner is recommending a replacement of the
  existing revenue management systems to improve
  coordination of all billing systems that have
  existed in the individual B municipalities.
• Thembisile (MP)
• data cleansing, debt review and audit of meters,
  connections, etc to improve revenue.
• Dr J S Moroka (MP)
• data cleansing, debt review and audit of meters,
  connections, etc to improve revenue.
• Loan Guarantee
• MIIU has recently refined the implementation
  methodology and tender document for banks to bid
  on.

14
Distribution of Projects in SA
15
Distribution of projects by sector
16
Expenditure
17
Efficiency
18
Income Statement
19
Statement of Changes in Equity
20
Corporate Governance

• MIIU comprises a Project Preparation Unit (PPU)
  governed by a Board of Directors
• Good governance and an unqualified audit have
  been ensured via the following
• Risk Management Plan
• Materiality Framework
• Investment Policy
• Fraud Policy
• Procurement Policy
• Internal Controls and Procedures
• Management Information System (MIS)

21
Strategic plan 2005/06 (the exit plan)
22
Background

• Cabinet Memorandum No. 14 of 1997 created MIIU as
  short-term arrangement to be wound up in five
  years (2003)
• This term was extended by Cabinet Memorandum 4A
  of 2002 for an additional three years, to 31
  March 2006
• In year 2005/06 the exit plan will be implemented
  as follows
• Closure of projects on the pipeline
• Archiving of project deliverables
• Packaging of institutional memory for dplg as
  executive authority

23
Why exit now?

• Discussions between management and BOD with dplg
  (as executive authority) on the prospect of
  continuity for MIIU date as far back as June 2004
• A decisive position from dplg on the continuation
  of MIIU has not been forthcoming
• At BOD meeting of 24 June 2005, directors
  resolved to proceed with exit plan

24
The exit plan

• Background
• Project activity
• Management contract with DBSA
• USAID-funded contracts
• Other donor issues
• Risk analysis
• dplg
• National Treasury
• Knowledge and information management
• Communication strategy
• Financial reporting
• Closure housekeeping
• Succession arrangements
• Action plan

25
Project activity

• Pipeline of active MSP projects has been audited.
  Projects classified into 3 classes of priority
• All other activities are ongoing, but with
  succession arrangements per activity are being
  crafted for continuity (dplg as natural successor)

26
Management contract with DBSA

• Provides MIIU with
• Treasury and accounting function
• Employment contracts HR services
• Office rental
• Administrative and IT services

27
USAID-funded contracts

• Provisions
• Expatriate staff contracts
• Assets
• Commitment agreement for DCA implementation

28
Other donor issues

• DFID commitment agreement
• Mega-Tech funding
• Cities Alliance (World Bank)

29
Risk analysis

• HR risk staff retention
• Financial risk incurring of liabilities
• Legal risk breach of grant funding agreements
• Reputational risk resulting from exiting from
  funding agreements

30
Department of Provincial and Local Government

• MIIU is a PFMA Schedule 3A public entity (of
  dplg). Whilst certain responsibilities are
  expected of dplg, these cannot be taken for
  granted. MIIU needs to strategise without
  dependency on dplg.
• Expected responsibilities of dplg in winding up
  MIIU
• provide funding for the final year
• de-list MIIU as a public entity
• disengage the Board of directors
• disengage company members
• provide a custodian by September 2005
• take cession of assets, liabilities and
  institutional memory

31
National Treasury

• A business case for delisting of a public entity
  should include
• financial statements of the final year prepared
  on liquidation basis
• transfer (cession) of the entitys function to a
  successor
• transfer of surpluses, assets and liabilities
• risk analysis of de-listing
• closure of budget line, bank accounts, etc

32
Knowledge and information management

• MIIU to package the following for handover
  purposes to a suitable repository
• Projects on the pipeline
• Archived project deliverables
• Institutional memory

33
Communication strategy

• Pronouncement by dplg as executive authority
• Communication from MIIU (in collaboration with
  government) to
• municipalities
• engaged consultants
• PADCO, USAID, DFID
• Press release
• Website updates

34
Financial reporting

• Functional closure to be 31 March 2006, but
  financial closure to be 31 August 2006
• Caretaker arrangement necessary for the March
  August period
• Audit and Annual Report to be prepared
  (liquidation basis)
• Cash flow management to be done monthly to aim
  for zero balance at 31 March 2006.

35
Closure and succession arrangements

• To be managed in collaboration with dplg
• Archiving
• Handling of new requests from municipalities
• Transition out of ongoing project activity from
  January 2006
• Identification of areas where specialist
  successor to MIIU is required to support dplg

36
Budget 2005/06 Monthly cashflow
37
Action plan Key milestones

• Recommend adoption of plan by BOD on 4 August
  2005
• Submit budget to dplg reflective of exit plan
• Set up custodian arrangement
• Communication strategy
• Handover to dplg by 30 January 2006
• Caretaker arrangement required March August
  2006

38
Thank you