SPAID Programmes SPAID Projects

 

The Support Programme for Accelerated Infrastructure Development / Projects

Ukulungisa Project Preparation Fund (UPPF)


Objectives

To pilot the mobilisation of dedicated private capacity to the effective preparation of municipal infrastructure projects on a sustainable basis.


Background

One of the primary objectives of SPAID is to promote and facilitate the implementation of infrastructure projects by Municipalities.

Research commissioned by BT in 2007 found that the ability to prepare and initiate projects is one of the most significant barriers to expediting new infrastructure investments in Municipalities. BT recognised that these capacity constraints could inhibit the implementation of AsgiSA and has consequently resolved to create a project preparation fund which provides project preparation services to Municipalities.

The Business Trust entered into a Service Agreement with Ukulungisa Project Preparation Fund (the “Fund” or “UPPF”), which is a joint venture between the Infrastructure Finance Corporation Limited (“INCA”) and Project Preparation Trust of KZN (“PPT”) for the delivery of project preparation services.

The Fund will achieve its objectives by providing financial and management resources to municipalities to assist them with the preparation of projects. Project preparation comprises all activities required to secure funding for a project, including business plans, feasibility assessment and concept design.

Over time the project preparation costs incurred by the Fund will be recouped from the capital funds approved for project implementation, thereby allowing the funds to revolve and the Fund to become sustainable.


Rationale

A key objective underlying the establishment of the initiative is the intention to establish a sustainable and independent national project preparation fund which can mobilise private sector funding and technical capacity.

INCA’s primary role within the joint venture is thus to provide market finance (on a 2:1 gearing on the Business Trust’s initial R 12 million) and to perform financial management, whilst PPT’s primary role is to manage the preparation of projects in all its facets.

The fees charged by UPPF for project preparation (which include the costs of project preparation teams, interest and provision for risk) are recouped from capital funds approved for project implementation. This recovery will allow UPPF’s funds to revolve and for it to thus operate sustainably.


Overview

The project preparation work undertaken by UPPF consists of all activities required to ensure that a project is viable and appropriate, and that capital funding is secured. Preparation work includes project screening, pre-feasibility, feasibility, preliminary (concept) design and business plans, as well as the procurement by PPT of project professional teams for the preparation phase.

This project preparation process will typically establish the projects to a point where applications for capital funding are approved. UPPF, through PPT, will ensure effective management of the private sector service providers undertaking preparation work, including monitoring the work done to ensure contractual compliance and that agreed outcomes are met.

The envisaged modus operandi of the Fund can thus be summarized as follows:

  • secure cooperation agreements with targeted municipalities to participate in the scheme;
  • assess, appoint and manage project preparation consultants to act as private sector technical service providers for project preparation;
  • provide bridging finance for the project preparation work necessary to effectively get targeted projects to the stage where their viability is proven and they have secured capital funding for implementation;
  • exercise oversight, risk management and quality control in respect of the project preparation process; and
  • recover the fee charged by the Fund for project preparation from municipalities on successful completion of project preparation.

Strategic Partners

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Outcomes

  • The project preparation approach is piloted
  • A methodology for private sector assistance to municipalities for project preparation is developed and is demonstrated to improve project delivery
  • The merit and if justified the basis for a wider roll out of the MPES is established

Outputs

  • 30 infrastructure projects prepared
  • 15 municipalities assisted

Implementing Partners / Service Providers

Ukulungisa Project Preparation Fund (Joint Venture between INCA and PPT)

Telephone: + 27 11 447 6388

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