The International Finance Corporation (IFC, a part of the World Bank) commissioned me in November 2014 to carry out a pre-feasibility study concerning the possibilities of introducing Pooled Financing Mechanisms (PFM) in South Africa.
The main objectives of this assignment were
- To complete a first survey of the overall applicability of PFM in South Africa,
- Identify appropriate stakeholders and partners for implementation of PFM in South Africa as well as explore opportunities for cooperation with them,
- Provide a preliminary advice on possible designs of PFM in South Africa and potential roles and opportunities for IFC.
- Suggest an approach for IFC to engage in the introduction of PFM in South Africa.
The assignment included meetings in South Africa (Nov. 24 -28, 2014) and in Washington (Jan. 21-22, 2015).
The final report was finalized in the beginning of March 2015. The executive summary can be found here.
My conclusion is that many of the prerequisites for PFM are present. It could be a way forward to further expand the cities’ financing activities on the capital market and add increased flexibility and diversification in the funding operations for creditworthy municipalities such as metros and some secondary cities. For other municipalities to become a part of PFM, intense efforts must be made to increase their creditworthiness and management capacity.
A national seminar about Innovative Schemes for Financing South African Cities arranged by FMDV took place in Johannesburg in the end of January 2015. At this occasion, I presented the findings of my study. One of the outcomes was to propose a process that will integrate all the key stakeholders in a consultative approach, building a feasibility study for a possible implementation of a Sub National Pooled Financing Mechanism in South Africa. In order to customize a model adapted to the South African environment, the Member of the Mayoral Committee of the City of Johannesburg, Geoffrey Makhubo, called for the support from the Provincial to National government, Municipalities, South African Cities Network (SACN), South African Local Government Association (SALGA), the Institute of Municipal Finance Officers, Development Finance Institutions and other financial institutions. Mr Makhubo finally asked Fonds mondial pour le développement des villes (FMDV) to support on the coordination of this consultative program, and invited both SALGA and SACN to identify the relevant municipalities to take part to the program.