programme & project principles in public sector planning, budgeting & financial management...
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Programme & Project Principles in Public Sector Planning, Budgeting & Financial Management in Implementing Public Private Partnership In SA
IPMA Research Expert Seminar
Cape Town
9 March 2010
1. Who we are & Our mandate1. Who we are & Our mandate
2. Public sector planning, budgeting and financial management2. Public sector planning, budgeting and financial management
4. Competencies, programme & project management4. Competencies, programme & project management
5. 2010 Focus, Challenges & Opportunities5. 2010 Focus, Challenges & Opportunities
3. Public Private Partnerships in South Africa 3. Public Private Partnerships in South Africa
Table of Contents
Who we are
The Public Private Partnership Unit
Director General
DD General: Budget Office
Head: PPP Unit
Project Evaluation Financial Analysis Business Development Municipal Desk
Performance Monitoring & Evaluation ICT
Minister: GCFO
1. Established by a Cabinet Memorandum in 20012. Mandate: Treasury Regulation 16.
National Treasury Mandate• Constitution: sections 213, 215, 216,217, 218 of Act 108 of 1996; • The Public Finance Management Act (PFMA), Act 1 of 1999, gives effect to the 4 sections,• 213: National Revenue Fund;
– Revenue, – Appropriations,– Direct charges,– Division of Revenue Act (DoRA),
• 215: Budgets; Transparency and Accountability in Financial Management of;– South African Economy,– Debt,– Public sector,
• 216: Treasury Control: Transparency and Expenditure Frameworks;– Accounting practice,– Expenditure classifications,– Treasury norms & standards,
• 217: Procurement; Contracts for Goods & Services;– Economy, efficiency, effectiveness, equity
• 218: Government Guarantees;– Approvals,– Annual reports on guarantees.
National Treasury legal mandate
Economy, Efficiency, Effectiveness
Treasury Regulations
Practice notes
Toolkits
CONSTITUTIONAL RIGHTS
ConstitutionS195(1)(b)
PFMA S38(1)(b) 33 regulations issued under the PFMA
Issued under the PFMA
For specific sectors
MFMA S62(1)(a) 7 regulations issued under the MFMA
Issued under the PFMA
For specific sectors
• Housing,• Education
,• Health,• Water,• Food,• Social
security.
South African Fiscus and Financial Institutional Frameworks
Training Manuals
Electoral Cycle
• Five-year MTSF and Performance Plans
Fiscal Years
Planning & Budgeting
2004 20122006 2007 2008 2009 2010 20112005 2013 2014 2015 2016
5 Year Election Mandate 5 Year Election Mandate 5 Year Election Mandate
Election Election Election
5 year Strategic & Performance Plan detailing Targets & priorities
5 year Strategic & Performance Plan detailing Targets & priorities
5 year Strategic & Performance Plan detailing Targets & priorities
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
Year 3Budget
APPFor
Year 2
APPFor
Year 3
MTEF (3 years)
Year 1Budget
APPFor
Year 1
Year 2Budget
APPFor
Year 2
• 3 Year MTEF & Annual PerformancePlans and Budgets
May 2008
Public Sector Planning, Prioritization, Budgeting & Sequencing
Public Private Partnerships (PPP)
A PPP is defined in South African law (PFMA & MFMA and their regulations):
• A government institution at national, provincial, local level or their agencies enter into a performance contract with a private party,
• The Private party then performs an institutional function and/or uses state property in terms of output specifications or service delivery specifications,
• The infrastructure project should be affordable to government, demonstrate value for money and substantial project risk (financial, technical, operational) should be transferred to the private party (regulatory tests)
• Private party benefits through: unitary payments from government budget and/or user fees
Delays
Opex: Budgeted
0 3 10 30
Cap
ex
Overruns
2
Cap
ex
0 2 10 30 Time (years)
Government Pays (plus CPI)
Private PartyPays
Time (years)
Government Pays
Government Pays
Opex: Budgeted
Opex: Overruns
Tend
er
PP
P
Infrastructure Services Procurement Systems
Government
Design & construction contractor
Operations contractor
Maintenance contractor
Finance contract
PPP-SpecialPurpose Vehicle
Design & construction contractor
Operations contractor
Maintenance contractor
Finance contract
Government
Public Finance (Tender) Private Finance (PPP)
South African Procurement Systems
Long-term service contract
Generic PPP Contractual Structure
GovernmentGovernment
The PPP Agreement
The PPP Agreement
Private Party(Special Purpose Vehicle)
[SPV]
Private Party(Special Purpose Vehicle)
[SPV]
SubcontractsSubcontracts
Subcontractore.g. Construction
Subcontractore.g. Construction
Subcontractore.g. Operations
Subcontractore.g. Operations
LoanAgreements
LoanAgreements DebtDebtShareholding
Agreement
ShareholdingAgreementEquityEquity
Cash Flow & Project Finance Structure
1
3
2
InfrastructureEconomy: Turnkey
models
IMP
LE
ME
NTA
TIO
N
TR
EA
SU
RY
AN
D
AC
CO
UN
TIN
G O
FF
ICE
RA
PP
RO
VA
LS
t1t0 t2 t end Years
Gov. No expenditure
Private Party initial investment
Private Party projected investment
Private Party projected expenditure
Private Party projected earnings from unitary payment
OP
ER
AT
ION
S,M
AIN
TAIN
AN
CE
, UP
GR
AD
E A
ND
HA
ND
OV
ER
Gov. Unitary payment
10 -30Years1-3 Years
Inve
stm
ent
PPP cycle
PPP Practice: Project & Cash Flows
Register Project
Prepare Construction Variations &
Amendments
Conduct Feasibility Study
Prepare RFQ
Prepare RFP
Prepare Value for Money (VfM) Report
Engage in PPP Agreement Negotiation
National Registered Project
Variation Request
Project Feasibility
Issued RFQ
Issued RFP
VfM Report
PPP agreement
Variation Request
Treasury Registration Letter
Treasury Variation Approval Letter
Treasury Approval IOr TVR I
Treasury Approval Letter
Treasury Approval IIAOr TVR IIA
Treasury Approval IIBOr TVR IIB
Treasury Approval IIIOr TVR III
Treasury Variation Approval Letter
Prepare Operations Variations &
Amendments
INCEPTION
FEASIBILTY
PROCUREMENT
CONTRACT MANAGEMENT& EXIT
Activity Output Project Cycle Regulatory Activity
The Regulatory Cycle & PPP Project Cycle
State of PPPs in SA
• 25 projects with more than R13 billion private sectors investment– Office accommodation – Hospital infrastructure & Clinical services– Correctional facilities (prisons)– Fleet management– Pharmaceutical supply chain services– Eco-tourism facilities– Private sector use of state land for commercial
purposes– Municipal solid waste management– Municipal water services– ICT
• Toll roads
PPP Competencies
Data Result
ICT competenciesProgramme & project
management competencies
KnowledgeInformation Action
Implementation
Public Sector & PPP competencies
ProcessExpertiseDesign
Adapted from Venkatrama’s process-information continuum
Elements of successful project management
– concept– design
– planning – costing
– management – construction
– monitoring – performance
– delivery
But who does what?
Health vs Education Infrastructure Services
Health Sector Education Sector Infrastructure Services
Hospital Structures Educational Structures Access
Hospital Equipment Educational Equipment Enabling
Hospital ICT Educational ICT Support, enabling, SD
Hospital Hard Facilities Educational Hard Facilities Infrastructure support
Hospital Soft Facilities Educational Hard Facilities Support, enabling,
Hospital Administration Educational Administration Support, enabling,
Clinical Services Education Services Service Delivery (SD)
Best Practice Norms & standards (KPIs): Educational infrastructure Services
• Number of schools, i.e. number of schools per number of residents,
• Number of learners, cost per learner,• Number of teachers, number of teacher per student,• Mixture of new & refurbishments,• Construction times,• NPV of unitary or school fees, or combination.
1. Adapted IMF, 2007, PPP Pilot Studies: Brazil, Chile, Colombia, Ethiopia, India, Jordan & Peru,2. DTI survey of 90 PPP Schools projects in English Schools.
ICT Services
1. ICT Governance,
2. Desktop & Data Centre,
3. Intranet & Internet,
4. Corporate applications,
5. Telecoms (voice, data, video),
6. ICT Security,
7. Printing.
ICT cost categories
1. Hardware,
2. Software,
3. Network (voice, data, video),
4. Data,
5. Private Party,
6. Consumables.
Challenges to working: Faster, Harder, Smarter
• BEE & SMME access to PPP resources,– both financial & non-financial,
• Government support,– Programme, & project management,– Project finance,– technical assistance to facilitate financial close,– contract management to extract efficiency gains in finance, design, construction,
operation, maintenance & upgrade, (economies of scale & scope)
• Private sector– Transaction advisory, “the same culprits syndrome”, & lack of capacity,– Project finance, – Efficiency in PPP feasibility study & best mix of funding,– Competition on innovation,– Co-financing & co-funding.
• Sector Public Private Partnerships
Opportunities• Health
– Chris Hani Baragwanath & George Mkhari: Gauteng– 5 projects in Limpopo,– KwaZuluNatal and Eastern Cape in pipeline,– Watch other provinces,
• Education,• Housing,• Eco-tourism, public transport, portable water supply, liquid
& solid waste,• Public sector fleet management & office accommodation,• Use of state property,• ICT: supports, enables, & delivers service, • Public Sector General Ledger, Economic Classification &
Reporting.
Contact Details
Cedrick MuleyaPPP UnitNational Treasury240 Vermeulen Street PretoriaSouth Africa
Tel: +27 12 315 5576Cel: +27 84 608 9640Fax: +27 12 315 [email protected] www.treasury.gov.za