Catalytic Programme & Resource Planning
Catalytic urban development programme resourcing
The metro municipal budgeting process is regulated by the MFMA and has shown vast improvement over the last few years in terms of being medium term budgets that are funded, credible, relevant and reliable. Yet there is a need to go beyond legislative and regulatory compliance and have a long-term financing strategy at an institutional level which is plan led. The catalytic urban development programme set out in the BEPP requires sustained programme-level resourcing. The nature and quantum of resourcing requirements differs depending on where the programme and associated projects are in their preparation process. The funding strategy has to consider the requirements of the whole preparation process and what the impacts are on the broader public fiscus and how these impacts will be managed sustainably.
The IDP, Budget and the BEPP of most Metros have not typically focused on a long-term plan led financing strategy, but more on a programme shaped by the funding envelope or an understanding of affordability under current conditions.
The IDP, Budget and the BEPP of most Metros have not typically focused on a long-term plan led financing strategy, but more on a programme shaped by the funding envelope or an understanding of affordability under current conditions.
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Long Term Financial Sustainability
Implementation of the catalytic urban development programme, and specifically the intergovernmental project pipeline emanating from this, is not possible without funding. Many of these programmes require significant and sustained investment over the medium term. This has financial demands on and implications for the broader budgets of the Metros, in particular. The programme may indeed be beyond the financial capability of the Metro without proper prioritisation and planning. Simply put, the business case for the programme of projects and the projects themselves must first be understood (what would attract investors to invest in these?); then the implications they have on the projected financial position of the Metro and then policy decisions need to be made which include the funding source, be it cash flows, conditional grants and/or external borrowing, depending on the financial capacity of the Metro.
The aim of a Long-Term Financial Sustainability Strategy is to support this process to create a more sustainable and integrated infrastructure development programme, by:
- Providing a financial decision-making tool to prioritise catalytic urban development programmes and associated projects; and
- Determining the financial impact of the programme and/or project on the long term financial position of the Metro and, accordingly, how best to fund the programme and/or project.
A Long-Term Financial Strategy (“LTFS”) can be summarised as follows:
- A long term financial model as a decision- making tool that predicts the future financial performance of the City, based on agreed assumptions, including assumptions related to the implementation of large infrastructure projects; and identifies infrastructure projects that most meet the needs of the city, taking into consideration spatial (urban) demands; the cost of infrastructure and how it will be financed.
- Overall this will assist the city in forecasting the future financial performance of the Metro’s infrastructure projects given certain assumptions and be able to assess the financial impact of various policy choices such as spatial development policy choices, investment choices and funding plan over the long term.
- It aims to enable the Metro to follow a more integrated planning process across departments; and should result in more informed amendments to the development policies of the City to enable the chosen strategy to be implemented.
The Long-term Financial Strategy supports the development of the catalytic urban development programmes in that it has a particular financial approach, where it quantifies these interventions in financial terms and ensures financial sustainability in the process by documenting interventions required to achieve the objectives of the Metro by setting out targets and actions required during the planning period based on the BEPP or MSDF.
Once the financial strategy is formulated the Metro will be able to identify adjustments that need to be made to its Financial Policies to enable the strategy to be implemented appropriately. The latter includes borrowing strategies.
Once the financial strategy is formulated the Metro will be able to identify adjustments that need to be made to its Financial Policies to enable the strategy to be implemented appropriately. The latter includes borrowing strategies.
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Resourcing
Budget alignment
The planning outcomes of catalytic programmes, presented in the MSDF and IDP (previously in metro BEPPs) must clearly find expression in the Metros budget (the entire budget, not only the grant funded portion of the budget) and in time the MSDF and IDP should be a driver of the Metro’s MTREF decision-making. Strategy-led budgeting is essential if a Metro’s Budget is going to progressively build towards the outcomes of a compact and spatially transformed city. Consequently the MTREF Budget’s prioritization of resources in space according to the spatial targeting areas should be measured year on year to track this progression. The MSDF and IDP should therefore close the loop by presenting the spatial budget mix, both in terms of capital allocations and operating allocations associated in particular with the maintenance and renewal of infrastructure.
Operational resourcing
While metro capital spending performance has improved, the business case and investment readiness of capital projects is often weak. This leads to: (i) significant delays in project implementation; and (ii) reduced returns on investments arising from a lack of innovation in project design. The identification, planning, preparation, packaging and implementation of catalytic urban development programmes requires sufficient time, skill, and political and, critically, financial backing. Adequate resourcing of programmes and projects to ensure that they progress with sustained rigour along the preparation process is critical to ensure implementation.
The portfolio management approach advocated is important to ensure resourcing is in place at the right time, in the right form to match the need of the project.
The portfolio management approach advocated is important to ensure resourcing is in place at the right time, in the right form to match the need of the project.
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