CABRI POLICY DIALOGUE (Session 5) Monitoring the execution of - - PowerPoint PPT Presentation

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CABRI POLICY DIALOGUE (Session 5) Monitoring the execution of infrastructure projects 24 August 2017 National Treasury: South Africa

GOVERNMENT’S INFRASTRUCTURE DELIVERY MANAGEMENT SYSTEM (IDMS)

IDMS comprises three core systems:

• a planning and budgeting system
• a supply chain management system
• an asset management system

These core systems:

• have forward and backward linkages
• are located within portfolio, programme and

project management and operation and maintenance processes Collectively these processes and systems, together with a performance management system, establishes the institutional system for infrastructure delivery

UNDERSTANDING INFRASTRUCTURE DELIVERY

CURRENT PUBLIC SECTOR INFRASTRUCTURE INVESTMENT

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The bulk of expenditure is directed towards economic services Non-financial public enterprises to spend R432 billion (46% of total spend) Provinces and municipalities continue to be significant drivers of infrastructure spending due to capacity expansion in transport, housing, water & sanitation, hospital revitalisation and social infrastructure

Percentage National departments 5% Provincial departments 21% Local government 19% Public entities 8% Public private partnerships 2% State owned companies 46%

Total 100% Proportional expenditure of total by level of government between 2015/16 and 2017/18

R million MTEF Total % of Total Economic services 726 082 77% Social services 184 794 20% Justice and protection services 14 606 2% Central government and administrative services 20 392 2% Financial 1 288 0% Grand Total 947 162 100% Total expenditure by functional classification between 2015/16 and 2017/18

FINANCING OF GOVERNMENT INFRASTRUCTURE PROJECTS

• Little incentive to consider user charges or other sources of revenue to improve

efficiency in project delivery

• Cash-flow constraints can impact on project delivery
• Poor in risk allocation and management
• The Infrastructure Investment Programme for South Africa, a €100 million

financing agreement supported by the European Union, which is designed to strengthen project planning and implementation..

Sphere Financing Vehicle Scale Sources ▪ National ▪ Provincial ▪ Municipal (50%) Budget appropriations ▪ Policy framework ▪ On-going commitments including

• Wages & salaries
• Debt repayments
• Bulk of public

infrastructure investment ▪ General taxation revenue ▪ General government debt ▪ Earmarked taxes ▪ Intergovernmental transfers

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SOURCE OF REPAYMENT

Tax Payer Users

SOURCE OF FINANCING

On Budget

Construction of provincial roads is paid for on the provincial budget and tax payers cover O&M costs Building of dams is paid for on the national budget, and users cover O&M costs through water charges

Off Budget

Financing to build hospitals is raised through a PPP and the debt and O&M costs are repaid through a unitary payment from DoH Eskom finances a power plant through raising debt, and commercial users repay the debt over time and cover O&M costs through the tariffs A hybrid approach to repayment PRASA borrows to finance the purchase of new rolling stock and user charges cover a portion of the capital and O&M costs and a unitary payment from DoT services the rest

EXAMPLES

Example Matrix

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• Spatial Planning and Land use Management Act (responsibilities and roles for

each sphere of government)

• Budgets follow functions
• National government allocates funding according to functions
• Sector departments, municipalities and entities = planning (long term) and

implementation = implementation of budgets

• Supporting legislation (PFMA, GIAMA, Infrastructure Development Act, MFMA)
• Supporting institutional framework (National Planning Commission, National Treasury,

PICC, Project Sponsors, Municipal accounting authorities, Municipal council, Department of CoG)

• Based on the powers and functions; contracting happens at sector

departments, municipal and entity level.

INSTITUTIONAL CONTEXT FOR IMPLEMENTATION OF INFRASTRUCTURE PROJECTS

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COMPLIANCE OVERSIGHT

• National government sets norms and standards
• Sector policies / guides on priority areas / strategic and annual performance plans /

service delivery plans

• Establishment of sector norms and standards
• Reviews of planning and design documentation
• Monitoring of programme and project implementation
• Treasury (National and Provincial)
• Legislative compliance (DoRA, PFMA, MFMA)
• Monitoring and oversight
• Ensures value for money and public value
• Coordinates with national departments to ensure compliance with sector norms and

standards

• Combined Treasury and National Sector Department
• Moderation of all planning and performance documentation (in many cases as part of

the “Performance Based System” – where good performance is rewarded financially)

• Infrastructure Reporting Model (IRM) to monitor budget / expenditure performance on

a monthly basis

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MONITORING AND REPORTING

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• National and Provincial Treasury
• Internet based Infrastructure Reporting Model
• Project information:
• Financial and non-financial reporting
• Monitor and report on the development of

infrastructure plans (education and health)

• Joint evaluation between Health and Education

respectively.

• Monitor the capabilities of the departments (Health

and Education) through the Infrastructure Progression Model and make recommendation (pilot stage).

• Support reporting via the development and

expansion of Communities of Practices around identified problematic areas.

• Legislated reporting through various sections of

MFMA, PFMA and DoRA

MAIN CHALLENGE

The Auditor General’s Performance Audit Report on infrastructure delivery by the Provincial Education and Health Sectors (2011) indicated the following challenges:-

“South Africa’s intergovernmental framework is still new and the challenge of improving intergovernmental cooperation and coordination is particular prevalent as regards infrastructure delivery”

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UNPACKING THE KEY COMPONENTS OF THE MAIN CHALLENGE

Governance

• Co-operative governance
• Clarification of mandates – between the Departments / custodian and implementers
• Challenges in having suitable institutional arrangements

Capacity

• Lack of skills within the planning departments (over / under commitments of the departments)
• Poor implementation oversight.

Planning and Budgeting

• planning and budgeting done in silos
• Committed projects are not fully prioritized and budgeted for over the MTEF.
• Projects take longer to complete and handover and often asset registers are not updated.
• Preference for building new infrastructure as opposed to maintaining the existing.

Infrastructure Procurement

• SCM committees have no experience in infrastructure procurement – mostly goods and services
• Environment extremely legislated – due to fraud and corruption. Results in time delays.
• Service Providers challenge SCM decisions continuously – results in committees being risk averse

and always appoint lowest bidder which in many cases results in appointments made to service providers that cannot perform 10 2017/08/17

MECHANISMS TO ADDRESS CHALLENGES …..

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Governance

• departmental mandates clarified and agreed upon in terms of the legislation (Health and

Education)

• Clarity of roles and responsibilities – clear job descriptions

Capacity

• Dedicated skills transfer and capacity building through technical assistance, and training in

planning, procurement and management systems for the provincial and national departments of health, education and public works, along with management oversight functions in provincial treasuries

• The

infrastructure skills development grant for municipalities, which funds the professionalization graduates in built-environment to increase the pool of experienced and professional practitioners. In the long term, these graduates will form a pipeline of qualified professionals.

• Various grant instruments to support mainly municipalities to build capacity as part of

implementing projects.

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MECHANISMS TO ADDRESS CHALLENGES

Planning and Budgeting

• A performance-based infrastructure grant system that rewards provincial departments of

education with additional incentive allocations for building capacity and demonstrating improved infrastructure planning

• Dedicated modules developed as articulated in the IDMS dealing with Planning and

Budgeting, Supply Chain and Asset Management.

• Ongoing training of government Officials (subject to the budget)
• Partnering with universities so as to embed the course academically.

Infrastructure Procurement

• Separation of infrastructure procurement from general goods and services.
• Development and adoption of the Standards for Infrastructure Procurement and Delivery

Management (SIPDM) which sets out the minimum requirements to be complied with for infrastructure procurement.

• At least two university are running a pilot course based on the SIPDM

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KEY LESSONS LEARNT

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• Infrastructure delivery requires a long term view (planning - disposal)
• Strong leadership is key
• Fully capacitated (people, systems and reporting) and capable institutions
• Appoint correctly skilled and qualified people in positions (save time, reduce cost

and facilitate value for money)

• Set the strategic objectives upfront and work towards them
• Supporting legal framework that facilitates implementation and compliance
• Effective institutional framework underpinned by clear roles and responsibilities

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CURRENT REFORMS TO IMPROVE IMPLEMENTATION OF PROJECTS

• Standard for Infrastructure Delivery and Management
• Introduces

a uniform manner in which infrastructure could be procedure and subsequently managed

• Budget Facility for Infrastructure
• The Budget Facility for Infrastructure is a reform to the budget process that creates an

institutional process to support the execution of national priority projects by establishing specialised structures and criteria for committing fiscal resources to public infrastructure spending (CURRENT)

• Municipal Standard Chart of Accounts
• Uniformity in the municipal sphere across all functions of municipalities

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THANK YOU The National Treasury 40 Church Street Pretoria 0001 South Africa

Tel: +27 12 395 6715 Fax: +27 12 315 5477 www.treasury.gov.za

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