Unlocking Infrastructure Financing to accelerate service delivery in local government

Posted: 22 May 2018

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SALGA will host the Municipal Innovative Infrastructure Financing Conference under the theme “Unlocking Infrastructure Financing to Accelerate Service delivery”.

The conference will be held on 13-15 June at the Emperors Palace in Johannesburg and will bring together municipalities, industry experts and key stakeholders in local government infrastructure financing. The conference will also facilitate shared Learning between municipalities through creating a platform to explore, deliberate and share ideas on innovative infrastructure funding mechanisms for South African municipalities. The conference will discuss topical innovative infrastructure funding streams including but not limited to:

• Municipal Bonds
• Municipal Pooled Financing
• Municipal Project Finance
• Public Private Partnerships
• Special Purpose Vehicles
• Tax Incremental Financing

Funding for local government capital infrastructure in South Africa is limited, considering the constitutional mandate to provide basic infrastructure services to communities. Given the limited resources in the form of grant funding and own revenue, municipalities have to find innovative streams of investing in infrastructure and augmenting capital budget deficits in order to accelerate the eradication of infrastructure backlogs and to fulfil their developmental role.

National Treasury is in the process of revising the Municipal Borrowing Policy Framework. Research undertaken by the department has indicated that municipalities with strong balance sheet positions and cash flows are not leveraging these strong borrowing capabilities. Municipalities have been borrowing less than they should due to large scale infrastructure grants from central government. This trend of grant funding is shifting and requires a mind-set shift in funding municipal infrastructure.

The Minister of Finance in his 2018 Budget Speech announced that municipal infrastructure grants will be reduced by R 3,5 Billion in the medium term. This will have a knock on effect on the access of funding to invest in municipal infrastructure. The imminent rapid urbanization has led to programmes that urban municipalities (metropolitan and secondary cities) have to undertake as envisioned in the Integrated Urban Development Framework (IUDF).  The areas aligned to the IUDF in terms of this conference are Policy Lever 4: Integrated Urban Infrastructure and Policy Lever 9: Sustainable Finance. 

Sources of capital expenditure funding per group of municipalities. The figure above depicts the funding mix for capital expenditure per group of municipalities for the 2014/15 financial year (source: Municipal borrowing Bulleting Issue 2 September 2016). It demonstrates that across all municipal groups grant funding is the main source of capital infrastructure funding. 

IF YOU ARE INTERESTED TO TAKE PART AT THIS CONFERENCE, SEE THE UPCOMINMG EVENTS TAB ON THE SALGA WEBSITE PAGE