Facilitating Urban Development in the Drakenstein Municipality
The Drakenstein Municipality, an intermediate city eligible for the Integrated Urban Development Grant, partnered with DBSA to develop its 10-year Capital Expenditure Framework.
The Drakenstein Municipality, an intermediate city eligible for the Integrated Urban Development Grant, partnered with DBSA to develop its 10-year Capital Expenditure Framework. This framework aligns with a three-year capital programme required for the grant business plan submission to the Department of Cooperative Governance and Traditional Affairs.
Drakenstein’s economy thrives on agriculture and tertiary sectors, positioned within a prime agricultural region of the Western Cape. The municipality boasts a diversified revenue base, primarily driven by consumer accounts. They demonstrate sound financial management, maintaining balanced expenditures within their budget. Notably, utilities like electricity, water, and sanitation generate income exceeding their operational costs.
However, maintaining financial viability hinges on efficient consumer debt collection. This is crucial since consumer accounts are a major revenue source. In addition, Drakenstein faces increasing pressure to meet growing service demands from both residents and developers seeking to invest in the area.
The South African government established the Integrated Urban Development Framework to improve its cities and towns. This framework includes creating designated “Intermediate Cities” and providing them with the grant. The Integrated Urban Development Grant combines previous grants and aims to fund infrastructure for the underprivileged and increase municipal investment capacity.
To qualify for the Integrated Urban Development Grant funding stream, eligible municipalities must submit a Business Plan that contains a three-year capital programme that is aligned with a 10-year Capital Expenditure Framework to the Department of Cooperative Governance and Traditional Affairs. Stellenbosch, Drakenstein municipalities and Western Cape Department of Local Government submitted a request to DBSA for support with the development of the Capital Expenditure Framework to address these challenges. The Capital Expenditure Framework will be developed using an integrated software tool to improve project planning, budgeting, and prioritisation.
Drakenstein Municipality, a client of the DBSA with a loan of R662 million, is an Intermediate City required by law to develop annual Capital Expenditure Frameworks aligned with the government’s Integrated Urban Development Framework. In addition, Drakenstein received an interest rate subsidy and a project preparation grant of R23 million and R29 million, respectively from the Infrastructure Investment Programme for South Africa (IIPSA).
Outputs
The Capital Expenditure Framework is an important tool to ensure that long-term infrastructure investment decisions by the municipality are made in a timeous and financially viable manner to support spatial transformation. The demand for capital funding is normally more than what the municipality can afford, hence the need to identify infrastructure requirements for the short, medium, and long term to enable strategic prioritisation.
Developing a Capital Expenditure Framework enables:
- Improve service delivery and eradicate infrastructure backlogs, in water, sanitation, roads, storm water, electricity, etc
- Institute a holistic, integrated, systematic, and cost-effective infrastructure planning and implementation delivery approach within the respective municipal areas of jurisdiction.
Outcomes
Potential development results
Economic impact
- Value of infrastructure to be unlocked in the short to medium term. As a result of the DBSA support National Treasury awarding Drakenstein Municipality R1.4 billion infrastructure grant for the upgrading of the Paarl wastewater treatment works and the construction of the southern Paarl bulk sewer.
- Contribution to the GDP: R493 million
- Capital Formation: R1.69 billion
Job creation
- 5 229 job opportunities are expected to be created in the short to medium term comprising:
- 1 542 skilled job opportunities.
- 2 733 semi-skilled job opportunities.
- 1 024 unskilled job opportunities.
Challenges
The disruptions caused by the Covid-19 pandemic and its associated mitigation measures such as social distancing, curfews, etc. posed challenges during the implementation of the project by slowing down the pace (speed) of the project activities.
The DBSA team has instituted novel processes and arrangements to ensure adequate marketing of the programme and the establishment of open communication channels, both internally and with national stakeholders. A longer period between when an application was received and approved by the DBSA, and due to the urgency of this project, the municipality used in-house capacity to plan and prepare the projects with confidence that they will receive funding from the DBSA.
Cape Winelands District of the Western Cape province.
- 5 229 job opportunities are expected to be created in the short to medium term comprising:
- 1 542 skilled job opportunities.
- 2 733 semi-skilled job opportunities.
- 1 024 unskilled job opportunities.
R493 million
R1.69 billion
R4 Million