tools for decision-making: projecting economic and fiscal

South Africa National Treasury Cities’ Support Program (CSP)

Training Session and National Forum

Leveraging Real Estate Value to Catalyze Urban (re)Development

Tools for Decision-Making: Projecting Economic and Fiscal Impacts

R.McGaffin

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“…bankable from a private and public sectors…”

How do we assess this?

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Conceptual Thinking to Project Decision-making – Cost/Benefit Approach

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Decision

Undertake the Project

Resources Allocated to Project

Decision

Resources Allocated to Alternative Project

Undertake Alternative Project

Decision Project Benefit = X

Value of Project Output

Project Opportunity Cost = Y

If X>Y, recommend project

(Campbell et al, 2007)

Conceptual Thinking to Project Decision-making – Portfolio Management Approach

Asset Management:

• How the project will contribute to the overall financial and socio-economic objectives

• Including deciding on:

• Which project type (TOD), where, which specific project

Property Management:

• Design and management of the project so that it fits the asset management objective

Facilities Management

• Relationship between the requirements of the users of space and building fit and operation (management)

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Conceptual Thinking to Project Decision-making

What are the desired OUTCOMES to address what ISSUES/PROBLEMS?

Categories of Issues:

• Technical – Is it technically feasible

• Financial – Is it financially viable

• Socio-economically viable e.g. job creation

• Politically – how does it fit with the political mandate, priority & timeframe?

“Feasibilities” need to be done for all four from all role-players perspectives – public (different spheres & departments) and private.

Focus on Financial and Socio-economic

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Conceptual Thinking to Project Decision-making

DIRECT (Primary)

INDIRECT (Secondary)

INDUCED (Tertiary)

However to forecast impacts, need data and evidence

Therefore need to review and assess previous projects – Role of M&E – provide accurate and realistic data to forecast impact

Some examples of financial and socio-economic impact undertaken in South Africa

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NDHS

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NDHS

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Direct Indirect InducedCaptialExpenditureonProductionCapitalExpenditureonJobCreationOperationalExpenditureonProductionOperationalExpenditureonJobCreation

NDHS

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CAHF Housing Asset Study

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Social Housing Foundation

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CTICC

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Urban LandMark CBA – State/Household/Developer

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V&A Economic Impact

• Contribution to GGP (Gross Geographic Product)

• Job creation – Direct – Construction and Operation

– Indirect – from the multiplier effect

• Enterprise Development

• Infrastructure to other sectors

• Property Rates • Direct

• Indirect – 23% increase in property

Value 1.5km radius of the V&A –

R245 million

in values additional rates.

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Impact of JDA Investment

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Impact of JDA Investment

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SAPOA Impact of Commercial Property on the Economy

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Area of intervention

…is the project intervening in the

production and consumption of

activities (economic – business activities

(skills development,

informal trading support etc.)

OR

…are we intervening in the production &

Consumption built environment

(land, zoning, infrastructure, tax breaks [UDZs] etc.

What is the outcome? How do we measure it?

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EconomicSystemConsump on

produc on

GrowthDynamicEndogenous-Exogenous

UserLoca onRequirements

PropertyMarket

CapitalSubMarket SpaceSubMarket

DevelopmentSubMarket LandSubMarket

Compe onforSpace

BuiltEnvironment

Builten

vironmentin

fluen

ceseconomicp

erfo

rmance

Possible Assessment Categories

Economic:

• GDP – What is the multiplier?

– Different sectors have different multipliers

• Fixed capital formation

• Job creation • Temporary/permanent

• What type of jobs? Blue-collar, service-orientated

• Different sectors create different types of jobs

• How do these match the labour market – do we know what our labour market looks like

• Do we understand the value-chains of these sectors and what are the entry points for the different parts of the labour market? [Old] CT EGS?

• SMME development

• Skills development

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Financial:

• Tax base

• Operating costs

• Project return

• Level of private sector leverage

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Social:

• Provision of decent housing

• Access to services

• Increased tenure

• Improved health

• Improved education

• Reduction in crime

• Life-cycle costs of ownership

• Decrease in transport costs/time

• Affordability – give lower incomes a fighting chance

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Key Issues/Discussion Points

• How often is this done?

• Do we use consistent methodologies?

• Do we have the necessary data?

• Do we use the study outputs to make better decisions re future projects?

• What is our position with respect to spatial targeting? Are the conditions right for a place to respond to an intervention?

• Do we target an outcome or a driver of change?

• Do we know who we are targeting? Market segment.

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Key Issues/Discussion Points

Other inputs, ideas, ways of doing it, experiences……Domingo, Valerie, Neil…?

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*Inclui receita patrimonial, contribuições, serviços, entre outras.

R$ 454 Bi

R$ 155 Bi

R$ 140 Bi

R$ 15 Bi

R$ 11 Bi

R$ 6 Bi

R$ 31 Bi R$ 29 Bi

R$ 2,2 Bi

R$ 2,2 Bi

R$ 0,5 Bi

R$ 5,0 Bi

R$ 8,0 Bi

tools for decision-making: projecting economic and fiscal

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