8 In fact, these standards have been "tuned" to some extent, as described in the main body of the report. However, the situation is highly variable across municipal sub-categories, as highlighted in the main part of the report.
Introduction
The objectives and scope of the MIIF 7
Municipal infrastructure is broadly defined as 'investment works necessary for the provision of communal services'. MSFM has a function that projects energy needs into the future. unit consumption rates for domestic consumers, which may change over time. the current share of electricity sold to non-residential customers. In the case of capital expenditures, the models also estimate capital costs, regardless of the authority responsible for them.
In the absence of national standards, assumptions have been made about the service level mix to be delivered. In the case of the baseline scenario, this maximum amount is halved to give the figures shown in Figure 6.5. The modeling shows a surplus in the first years of the model period, mainly driven by surplus electricity.
Note: The results relate to the situation reported for the subcategories and the aggregate position is discussed in the main part of the report.
Ownership of the MIIF 7: key stakeholders
The scope of municipal infrastructure
In all cases, the service does not only involve the provision of capital works in connection with infrastructure. Good operation and maintenance arrangements, including customer interface arrangements, are also required for the proper provision of the Service.
Institutional arrangements
However, the responsibilities of the district municipality as a source of authority are not really recognized. From the point of view of MIIF 7, the differentiation between service authority and service provider is important.
The economic and social impact of municipal infrastructure
This framework provides an overall picture of the economic development opportunities with the greatest potential in the country from a spatial perspective. The financial viability of municipalities From the MIIF 7 point of view, the relationship between economic growth and the financial viability of municipalities is most important.
The implications of the MIIF 7 for local municipalities
Public services are recategorized in a model based on the National Treasury's Government Financial Statistics (GFS) standards. In the case of GAPD, unit costs are calculated for each municipal subcategory on a household basis. The relative position for each subcategory is similar to the position shown in the MIIF 5 analysis.
This is probably related to the fact that there are large increases in the payments to these municipalities. The analysis in the report includes all municipal infrastructure, regardless of the service provider responsible for this infrastructure. In fact, the quality of data in the sector as a whole, down to the municipal level, is poor.
In terms of operating costs, the unit cost figures in the models worked well as benchmarks.
Relationship of the MIIF 7 to the consolidated infrastructure programme
Inclusion of housing in the model
Analytical methodology
Modelling features and structure
New features added to the MSFM
Key parameters applied in the model
Population, households and household growth
Households and consumer units
When assessing access to services, the term household is typically used as the unit receiving services. A structure, with perimeter walls and roof, used as a place in which a person or group of people live. Consumer units (CUs) are used as the unit to which the residential lot package is supplied, with the lot package consisting of water supply, sanitation, electricity, the street outside the property and solid waste disposal service.
Economic growth
Poverty measures
However, in most municipalities, this last percentage is closely related to the percentage of families with high incomes, since it is the income earners in these families who work in the businesses that make up the majority of the non-residential sector. It is clear that in the metro, the number of poor households (earning less than R800 per month) has remained more or less constant since 2007, when data were collected for MIIF 5. The increase in the percentage of households in brackets the upper limit is to be expected as there has been significant economic growth over the period since 2001 and also the real value of the upper bounds of the group has fallen over time.
Service levels and backlogs
The first three options are not considered adequate sanitation systems and are therefore below the basic level of service. However, it can be assumed that 'own waste disposal', which is taken as on-site waste disposal, can be adequate in a rural setting if properly managed by the household. Considering urban contexts, the model foresees an additional differentiation between kerbside collection and collection from municipal bins; both are considered to be at or above the base.
Current service levels and backlogs
Data on estimated access to water and sanitation in 2009 were received from the Department of Water Affairs, by municipality and Department of Water Affairs (DWAF) settlement type. 41 The total number of households reported by the Department of Energy differs from the total number of households used in the MSFM, which is based on Community Survey 2007 household sizes. The previous best available data was the National Department for Transport's assessment of the municipal road network, carried out in 2007, which was used in MIIF 5.
Service level targets
As mentioned above, MIIF 7 includes new service level information for municipal public services. But the basic cost accounting structure, with deficient, basic, and full service levels, is retained for the MSFM. However, there is not enough information available in a nationally consistent structure to provide reasonably accurate data on service levels.
Capital costing methodology and unit costs
This is stated in the municipal public services cost book, in which the capital costs per household are developed per category of public facilities. There are currently no expenditure benchmarks available for public transport infrastructure, economic infrastructure, public spaces and government buildings. Tables of unit costs used in the models are included in Appendix B to this report.
Current levels of capital expenditure
The impact of these cost increases on the total capital requirement is discussed later in this report. It is therefore estimated that total capital expenditure on municipal infrastructure, including municipalities and service providers, is currently in the range of R46 billion (2009/10).
Sources of capital
This is an in-kind grant intended to cater for the roll-out of on-site water and sanitation to unserved rural households where connected services are not viable or appropriate. New data on the current total loan book for municipalities is awaited from the National Treasury, with preliminary indications that this is in the order of R32 billion. by the end of 2009. This is well below the budgeted figure for this year of R10.7 billion. and it can be assumed that some of this budgeted amount is unrealistic.
Operating unit costs
The total amount that municipalities have budgeted to borrow for 2009/10 is R10.7 billion, with the majority (R7.9 billion) from the metros, showing their dominance in terms of "indicated willingness to borrow". Assuming about R1 billion of existing loan reductions during the period 2007-2009, the indication is that actual borrowing has been at the level of R4 billion per year. Taking the figure of R32 billion and assuming that the allocation in this loan book between municipal sub-categories is more or less proportional to the amounts in the aggregate budgets for each sub-category gives the following:.
Current levels of operating expenditure
However, this is a very complex topic as there are so many variables that affect these percentages (The extent to which bulk services are included, the extent to which work is outsourced are good examples and the extent to which operations and maintenance activities are mixed are good examples). Note that the figure used in the 2004 round of MIIF was R20 billion, which is a huge overestimate. Therefore, operating expenditure on municipal services (including all municipal overheads and service provider expenditure) is in the order of R151.5 billion for 2009/10.
Operating revenue
Operating income received by other, non-municipal, service providers must be added to the municipal figure. Therefore, the total income for municipal services by municipalities and service providers is in the order of R160.8 billion. The applicable provisions for operating transfers to municipalities, taken from the bill on revenue distribution, 2010, are summarized in table 2.20.
Resource and waste balances
- Energy utilisation in the form of electricity
- Water utilisation
- Wastewater return flows
- Waste management
Wastewater return flows are estimated in the model by taking water supply figures and using return flow factors based on the literature and case study results. The solid waste balance is discussed in some detail in the municipal solid waste sector report. The model results appear to correlate well with the case study figures and are therefore accepted as part of the MIIF 7 findings.
Looking forward: establishing scenarios
- Two scenarios based on service level strategy
- Demographics
- Economic growth
- Target date for removing backlogs
- Other cost-side variables
- Revenue-side variables
- Aggregating information for district and local municipalities
The projections in the population models are based on the estimation of various demographic models as discussed in Section 2.1 using the following figures. In the case of metros, a fuel levy raised by the national government is now included and becomes a new transfer to municipalities. Finally, in the case of revenue, all business and capital transfers allocated to the district and local municipality are added together.
Non-financial results: base scenario
- Eradicating the backlog
- Service level choices
- Definition of poverty
- Cross-subsidy potential
- Resource use and waste streams
In rural areas: 50% of households have access to a full service level and 50% to a basic service level. In informal urban area: 50% of households have access to a full service level and 50% to a basic service level. In rural areas: 10% of households have access to a full service level and 90% to a basic service level.
Results relating to capital finance: base scenario
Capital expenditure
For water, significant increases in unit costs more than offset the reduction in units of consumption served and MIIF 7 Capex is higher than MIIF 5. Expenditure on bulk and connecting infrastructure is a significant part of water supply expenditure. water). Infrastructure rehabilitation: capital expenditure on infrastructure which has reached the end of its useful life and requires construction work to return the piece of infrastructure to a condition in which it can start its useful life again. In the early years of the 10-year program, spending on waste disposal infrastructure is also evident.
Capital finance: all municipalities together
Capital expenditure amounts in the figures include the internal infrastructure needed for low-income households. As noted in the introduction to this report, the MSFM has been updated to estimate the amount of capital funding that can be raised through development costs. The result for the baseline scenario with a stretched housing target is that R42 billion has to be borrowed in the first year of analysis (2009/10).
Capital finance results by municipal sub-category
The reason for the higher loan book is that the total capital expenditure incurred over the full 10-year model run for MIIF 7 is significantly higher than that for MIIF 5 (R959 billion compared to R527 billion). This is one of the main reasons why the MIIF 7 analysis includes a subdivision of municipalities into five subcategories. It is clear from this analysis that the currently envisaged program to deploy infrastructure is not viable as the funding gap is very large and there is no feasible way to fill it.
Results relating to operating expenditure: base scenario
Operating expenditure – all municipalities combined
The reconciliation factors applied to unit costs are given in Table 7.1, as this indicates the extent to which costs in a municipal subcategory deviate from the benchmark. A specific point must be made about road costs: for municipalities with a large proportion of rural roads, the level of expenditure is very low compared to benchmarks, and costs are therefore kept at half the benchmark. This means that the costs in the model are higher than the costs currently incurred by these municipalities.
Operating revenue – all municipalities combined
In the case of solid waste, the surplus is negative, taking into account the fact that the model assumes that the cleaning of public places and roads (sometimes called "sweeping") is taken as part of the service. The operational devolution envisaged in the Department of Revenue Bill, 2010 is summarized in Table 2.20. This information is difficult to obtain and cannot be obtained in the case of country-scale modeling.
Operating results for municipal sub-categories
B4 municipalities lose electricity, mainly due to the high cost of providing a service to remote rural areas. The electricity situation is strongly related to the economic conditions of the municipality assuming relatively low utilization levels for operating transfers (12% of the equity financing is allocated to electricity in the base case models). With regard to 'rates and general' accounting, the situation gets progressively worse from A to B3 municipalities, but is relatively good for B4 municipalities, which is a surprising result.
Alternative scenarios: sensitivity to changes
Lower service level scenario
Finally, in the case of public places, economic infrastructure and administration buildings and systems, no change is assumed for the lowest service level scenario, with figures directly related to current municipal budgets. 69 This figure differs by a small amount from the R61.3 billion in the national LLOS model driven due to the complexity of the subcategory analysis. It is clearly important to gain a much better understanding of the length of roads in the country.
Sensitivity analysis relating to second level variables
Considering the cost side variables, the lower service level scenario also offers large savings on the operating account (R14.8 billion in 2016). The deficit could be reduced by about R32 billion in 2016 if costs could be reduced by 1% per year, instead of the 0.5% increase assumed in the baseline scenario). On the income side, an increase in equity distribution will definitely make a difference.
Conclusions
- Defining a more realistic scenario
- Implications for capital finance mechanisms
- Operating account implications
- Sector-specific conclusions
- Conclusions relating to information and monitoring
- Closure
Therefore, the 'lower service level' scenario becomes important and is described in some detail in the main body of the report. This is a striking result and is associated with the clear improvement in economic conditions in rural areas and the impact of the rapid increase in the fair share transfer. This allowed new unit capital costs to be generated and applied in the models.
