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Presentation to DPLG May2006


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Presentation by City of Cape Town to the South African National Department of Provincial and Local Government (DPLG) in May 2006. Presented by Mehboob Foflonker and Andre Stelzner, the 2 city Directors responsible for this project.

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Presentation to DPLG May2006

  1. 1. CITY OF CAPE TOWN Creating Sustainable Value in a multi service municipality André Stelzner / Mehboob Foflonker Dir: ERP Business Transformation Dir: ERP Implementation
  2. 2. Agenda Background. SAP Implementation - the City’s ERP system. SAP-ISU – the City’s Utility solution. Creating Value Conclusion.
  3. 3. Background: Significant Political Events in South Africa during the past decade have changed the face of Local Government in Cape Town. Pre- 1994: South Africa internationally isolated and communities segregated on racial grounds. April 1994: first democratic election and government of national unity established. 3-Tier government structure: National, Provincial and Local Government Legislation passed restructuring Local Government: Mergers of 7 previous autonomous Municipalities into a single Metropolitan Uni-City Powers and Duties of Local Authorities changed Next Wave of Restructuring – Establishment of Regional Electricity Distributors.
  4. 4. Background: The City of Cape Town had to merge 7 previously autonomous local government administrations and become a single integrated metropolitan City, but it found that creating a Unicity to be complex due to: • “Lack of standardised financial policies and procedures” • “Each administration ran its own IT systems, many of which did not meet business requirements” • “Back-office systems were deemed (by large) to be outdated, functionally inadequate and not properly integrated” • “Difficulty in merging these systems was in fact hindering the merger of the administrations and undermining the objectives which motivated the creation of the Unicity”
  5. 5. Background: Demographics of Cape Town Population: 3.2 million Share of National GDP: 10.5 % Share of Provincial GDP: 75 % Area: 215 900 ha Rateable Properties: 800 000 Employees: 24 579 Annual budget 2004/05: Operating: R 11,3 billion Capital: R 1,5 billion Annual Income 2004/05: From Utility Services: R 4,36 billion (38,6 %) From Tax and Levies: R 3,14 billiion (27,8 %)
  6. 6. Background: Local Government – the delivery arm of Government Governance closest to the people – providing the following services: Electricity / distribution and peak load generating Water and Sanitation / storage, treatment and distribution Solid Waste / landfill, removal and area cleaning Roads, Stormwater and transport Public Housing Local Economic Development Social - and primary health services Emergency Services Municipal Policing Urban Planning and Environment Sport and Recreation City Administration
  7. 7. Agenda Background. Implementation SAP - the City’s ERP system. SAP-ISU – the City’s Utility solution. Creating Value Conclusion.
  8. 8. Project Implementation: Selection Process 2004 & beyond 2002 & 2003 2000 2001 The years of The years of The year of The year of Benefits Implementation Strategy Selection Projects undertaken during 2001: Resulted in the SAP system and Accenture being selected. Project # 4 Project # 3 Project # 5 Project # 2 • The consultant • The enterprise • The software • The ERP systems selection system integrator selection implementation (March – April 2001) selection (July - (April - June 2001) blueprint planning November 2001) • Gartner was chosen phase • SAP was selected to assist with software (November 2001 - • Accenture was as software and systems January 2002) chosen as the providers integrator selection preferred ERP • Accenture confirms processes system integration their cost & scope partner of implementation
  9. 9. Project Objectives: CA PE METROPOLITA N Blaauwberg AREA City of Tygerberg City of Oostenberg Cape Cape Town Cape Town Town Helderberg South Penins ula “To Implement a functionally rich ERP system, in a manner that will ensure integration, facilitate the merger and bring about organisational transformation.” Thereby, enabling the City to deliver on its Strategic Objectives”
  10. 10. What is an ERP MAINTENANCE Processes An ERPsystem offers organizations a ASSET MANAGEMENT Processes PROCUREMENT Processes REVENUE Processes comprehensive and integrated solution for managing services such as financial, revenue, human resources, maintenance, procurement, leasing, customer care on a single integrated IT system. PROJECT Processes HR processes CUSTOMER Processes It is not so much about the technology as it is PLANNING processes about the integration of business processes. ACCOUNTING processes Workflow provides the means of automating business processes and system integration ensures that only a single record of master data is held – but shared across the application. Debate is whether to implement an ERP system vrs. so called ‘best of breed’ systems. SAP is a specific ERP vendors.
  11. 11. Successful Organizations are able to align: STRATEGY: Strategy Organisation What must we do ? TECHNOLOGY PROCESS: How are we going to do it? Process People People: Who is going to do it ?
  12. 12. Project Scope: The City of Cape Town: Scope of implementation - Billing to sundry - Financial Accounting debtors SD FI Sales & Financial Distribution Accounting - Management MM CO - Procurement & Accounting Materials Controlling Inventory SCADA* Mgmt. R/3 (4.6c) and AM PP Management Fixed Assets Production IS-U/CCS (4.63) Mgmt Planning EDI Number of Users - Plant Maintenance QM PS - Asset 6 500 Quality Project Management Management System PM WF Plant Field Workflow Maintenance - Project Service IS HR Support Accounting IS-RE Industry Work Human Solutions Resources Clearance* IS-U / - Real Estate FERC SM - Human Resources & GIS CAD Management Payroll Service AM/FM Mgmt IS-U/ CCS - Customer Care & Revenue Management Systems to be Replaced Original – Replaced = Final 240 – 138 = 102 systems 198 – 128 = 70 interfaces
  13. 13. ERP Program – Past and Future Release dates. Release 1 & 2 GAMAP /GRAP SAP_BW 2005 2006 Program 2003 2004 F A J AA M O D F A J OA NO D F A J A O D F A J A O D F M J S D J A System Support Support to 6300 system users Release 1 Original Project Scope: Release 1 – Expenditure (Go-live Dec 2002) Release 2 – Revenue (Go-live Sept 2003) Release 2 Revenue Release Implement GAMAP GAMAP GAMAP GAMAP compliance as of 1 July 2003 System Enhancements Monthly Releases of new Reports and Functionality Upgrade of Upgrade R3 and ISU Business SAP-BW Warehouse Go-live dates
  14. 14. Agenda Background. Implementation SAP - the City’s ERP system. SAP-ISU – the City’s Utility solution. Creating Value Conclusion.
  15. 15. Challenges faced by the Cape Town Municipal Utilities Social responsibilities of Government in conflict with Commercial Objectives of Utility Business units. Aging Infrastructure with a lack of investment in proactive maintenance. Need to rapidly expand access to basic services in order to – keep track with high rate of urbanisation and eliminate the historical backlog. Many Citizen can not afford basic Utilities. Unbundling of Utility Services from Local Authorities. Managing limited Natural Resources. Initial steps to overcome many of these challenges have been enabled through the implementation of the City SAP-ERP system
  16. 16. Social responsibilities of Local Government vrs. Commercial objectives Unlocking scarce financial resources for social up-liftment and improved service delivery : R extracted, used to improve … Create financial value Preferential procurement Employment equity R extracted, used for … Socially Supports … conscious policies Advance social R extracted, used to upliftment Improve educate staff and provide lower cost, more pervasive service delivery better working service delivery supports … environment … improved decision making allowing matching of supply and demand … Information transparency motivated, better educated Enhance and more productive Enabled by SAP human employees… performance
  17. 17. Infrastructure Maintenance: Plant Maintenance Maintenance Management has been enabled through the implementation of SAP-PM (Plant Maintenance) All infrastructural assets have been created on SAP within a functional location hierarchy. 2 million pieces of equipment (fixed installations, distributed Infrastructure, equipment and plant) 100’s proactive maintenance schedules created. 2 163 PM users across 500 Maintenance Depots and Workshops Centralised call centre for Defect Notification via ISU-CIC and PM Accurate job costing - Integration with Ledger and Asset Register
  18. 18. Infrastructure Provision: Project Systems (PS) Provision of Services to previously disadvantaged communities necessitates an aggressive infrastructure expansion programme. Financial management of projects via PS and Investment Management structures to administer various funding sources. Integration of Project Systems with the Asset Register. Asset Depreciation and Interest Simulation.
  19. 19. Utility Billing: Consolidated billing for various services. Number of Contracts and Devices managed through SAP ISU: Division: Number of Meter Reading Number of Billing interval Contracts Interval Devices Prop. value assessed 671 388 n/a Property Taxes: Annual every 5 yrs. 633 183 577 148 Water Services: Monthly Monthly 616 923 569 821 Sewerage Services: Monthly Monthly 658 306 529 611 Refuse Removal: Monthly Fixed Charge 364 779 Monthly 451 894 Electricity: Monthly Pre-paid 423 527 Total 3 031 694 2 464 886 Number of ISU users = 2 243 Number of PM users = 2 163
  20. 20. Revenue Solution: Progressive Tariff Structures Large disparity in the socio-economic status of citizens Identifying citizens which can – but don’t pay versus Citizens which do not have the means to pay. Implementation of social and resource responsible tariff structures: Property Tax: first R50 000 of property value exempt from tax - then property tax based on % of remainder of property value. Water: first 6 kl free and then step tariff based on property zoning. Sewerage: Availability charge based on property value and consumptive charges as a % of water consumption Refuse: Availability charge based on property value and consumptive charge based on bins removed by week. Electricity: first 50 KwH free and then step tariff per category of user. Rebate system for citizens which are proven to be indigent. Debt payment via arrangement with the raising of interest being suspended for period whilst arrangement is being adhered to. Various other progressive messages to help address arrears. Invoicing in all 3 Official Languages of the Western Cape Province.
  21. 21. Revenue Solution: Consolidated and Itemised Billing Extract of Municipal Account – front page (Balances)
  22. 22. Revenue Solution: Consolidated and Itemised Billing Extract of Utility Bill - City of Cape Town (in Afrikaans): - Property Tax: instalment Plan - Electricity and Water : Step Tariffs with actual Consumption for billing period and availability charges shown in detail. - Sewerage and Waste Removal plus Sundry Charges not shown………
  23. 23. Single view of the citizen Consumption History Click for Graphic View and details of Meter Readings Account Balance. and Period Consumption. Click for current and future amounts raised and details of payments received. Monthly Consolidated Account. History of Customer Click for copy of Invoice Contacts No further action required Click for details Details of Each Service Tab for details of each Utility and Rates Service. Service Orders Raised Instruction to Operational Units to perform work. Click for Progress and Costing Information
  24. 24. Turning the Tide against Non-payment: Payment Ratio How was the benefit realised? • Improved visibility and transparency of information on the new invoice, the ability for citizens to pay their accounts at any municipal pay point and the implementation of a call center to address billing queries. • Revenue Services performed significant data alignment duties in converting data to SAP. • Revenue enhancement interventions have received priority attention. Payment Ratio : 12 month moving average Calculation: • 1% increase in the payment ration = 100.0% R6,05 mil per month. 95.0% • Increasing the payment ration since go-live of ISU has increased revenue 90.0% by R698 mil. 85.0% • Only 10% of this payment benefit has been accredited as a direct ERP 80.0% benefit – a very conservative approach 75.0% has been adopted in the ROI model. 03 4 4 04 4 3 4 l- 0 -0 -0 0 0 v- n- p- p- ar ay Ju No Ja Se Se M M % Payments vs Billings (12 month moving average)
  25. 25. Cash flow. It’s all about Cash in the Bank: Net increase of R667mil between Sept ’03 (SAP go-live) and Sept ’04. Cash Balance SAP 1,600 go- 1,400 live 1,200 R '000 000 1,000 800 Planned loan of 600 R300 mil not 400 taken up 200 0 Au 4 Au 3 Au 2 Ap 4 Ap 3 O3 04 03 Fe 2 O2 Ju 4 Ju 3 De 3 De 2 0 0 0 0 r- 0 0 0 r- 0 0 0 -0 -0 n- n- n- b- b- c- g- c- g- g- ct ct Ju Fe Budgeted Cash Balance Actual Cash Balance
  26. 26. Creating Confidence in utility-billing: Starts with accurate meter readings. Number of Repeated Reason for no meter reading– (SAP / GIS Reporting) Estimates Number OF Number estimates OF meters 2 2612 3 1591 4 755 5 519 6 416 7 303 8 243 9 1433 10 224
  27. 27. Managing scarce Natural Resources Water Consumption Monitoring Cape Town is in the mits of a sever draught. SAP – Spacial reporting
  28. 28. Agenda Background. Implementation SAP - the City’s ERP system. SAP-ISU – the City’s Utility solution. Creating Value Conclusion.
  29. 29. Value Creating Opportunities Identified A compelling business case was built by only quantifying “ the tip of the iceberg ” Quantified, financial VCOs that are directly attributable to SAP (4) Those financial VCOs that we have managed to quantify (10) Those financial VCOs that can be quantified (managers willing AND data is available) Those VCOs that have a direct financial benefit (45) Those VCOs that we have documented (74 unique of the127 identified) Those VCOs that are known to the City of Cape Town due to a vision and strategy having been defined All value creating opportunities (VCOs) that can be enabled by an ERP
  30. 30. Project Benefits: Financial (CoCT ROI Study) Value of Benefit: 2002 - 2004 R 300,000,000 • Reduction in costs of support staff = R87,5mil R 250,000,000 • Increased Revenue through improved collection R 200,000,000 Staff Costs and daily billing = R192,6 mil Revenue R 150,000,000 • Reduction in Inventory Holdings and increase in Inventory Benefits stock turns = R1,02 mil R 100,000,000 IT Value Opportunity R 50,000,000 • IT value. The cost of supporting SAP with more functionality = cost of supporting legacy R0 systems 2001/2 2002/3 2003/4 2004/5 Project break-even will be achieved before the end of the current financial year R 300,000,000 Project Implementation Costs = R 350 mil ($ 58,3 mil) R 200,000,000 Cos ts R 100,000,000 Benefits Realis ed R0 Net ROI -R 100,000,000 /8 /9 /3 /6 /7 /2 /4 /5 07 08 02 06 01 03 04 05 20 20 20 20 20 20 20 20 -R 200,000,000 Expected Future value of Realised Benefits Cas e Actuals Feb2002 -R 300,000,000
  31. 31. Project Benefits: E-Government – the next wave Bridging the digital divide: ERP project critical enabler to the “smart city” strategy SAP will provide the solid foundation on which the eGovernment strategy of the City will be deployed. eGovernment flip flops relationships: Citizen Citizen Official IT IT Official
  32. 32. Agenda Background. Implementation SAP - the City’s ERP system. SAP-ISU – the City’s Utility solution. Creating Value Conclusion.
  33. 33. Support Organisation – Driving out Business Value Accredited SAP Competence Center Established. Support Team = 150 (Coct = 90, Accenture = 20, Empowerment = 40) With a 3 year strategy to become self sufficient. Business appointed Process Owners and User Groups established. Monthly release strategy implemented
  34. 34. Conclusion: In conclusion, implementing ‘SAP in the City’ has … Helped to align the operational activities of the organisation to its strategic imperatives - basic free services for the ‘poorest of the poor’ Provided a robust technical platform to integrate and standardise business processes across the organisation Significantly impacted the city’s operating model, organisational structure and human performance considerations - Services closer to the People. Provides effective management reporting capabilities, encouraging fairness, accountability, responsibility and transparency Enables financial, as well as non-financial benefits Enabled performance management
  35. 35. Questions ? City of Cape Town: ERP project room (August 2002)