South African Association of Water Utilities

1. South African Association of Water Utilities SAAWU SOUTH AFRICAN ASSOCIATION OF WATER UTILITIES Presentation to the Ministry of Water Affairs and Forestry Portfolio Committee on : Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities 30 May 2001

2. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • SAAWU BACKGROUND • Formally the South African Association of Water Boards (now Utilities). • An Association not for gain, representing public sector water service providers in SA. • Represents 19 water boards and 3 other public sector institutions involved in water service provision. • Water boards are organs of state. • Principal objective of water boards is to: • Ensuring access to water services by all South Africans by promoting the interests of water boards and regional water utilities and to ensure effective integration and cooperation within the water services sector.

3. Rand Water Strategic Planning Workshop 2000

4. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • SAAWU BACKGROUND (Continued) • SAAWU members have recently adopted a revised role for water boards and this role is: • “To position water boards as regional water utilities offering a full range of water services and water service delivery solutions, in support of municipal authorities, so that they are able to meet their water service delivery obligations”. • SAAWU will be requesting an opportunity to give a detailed presentation to the Portfolio Committee highlighting the policy, legislative and implementation issues in respect of the new role.

5. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • SAAWU SUPPORT FOR THE FREE BASIC WATER POLICY • In delivering in terms of this role and as public sector providers, water boards can and must, play a meaningful role in assisting with the implementation of the Free Basic Water Policy (FBW). • SAAWU fully supports the principle of FBW as an initiative to improve the quality of life of South Africans, specifically the indigent and rural poor. • SAAWU supports the principal of municipal authorities being the most appropriate institutions to implement FBW, supported by other spheres of government.

6. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • POSSIBLE CONTRIBUTIONS BY WATER BOARDS TO THE IMPLEMENTATION OF FREE BASIC WATER (6kl) • The Water Boards have expertise that can be mobilised to support Municipal Authorities in the implementation of FBW such as: • Water loss management. • Technical and financial (tariff and cross subsidisation model for Municipalities available). • Water demand management. • Credit control implementation. • Formulation of by-laws • Water Boards can be used as a regional/sub-regional vehicle for cross subsidisation in some areas due to the fact that they do operate over political boundaries.

7. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • POSSIBLE CONTRIBUTIONS BY WATER BOARDS TO THE IMPLEMENTATION OF FREE BASIC WATER (6kl) (Continued) • Water Boards can provide support services to NGO’s and CBO’s. • Water Boards can communicate and facilitate the understanding of the FBW policy. • Water Boards can assist Municipalities in determining the amount of equitable share required to cover FBW. • Water Boards where they act as water service providers to municipal authorities can implement and manage the FBW for the municipal authority.

8. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • POSSIBLE CONTRIBUTIONS BY WATER BOARDS TO THE IMPLEMENTATION OF FREE BASIC WATER (6kl) (Continued) • Water Boards are available to assist Municipalities with administration/managing of equitable share. • Water Boards can provide financial, technical and management expertise for low (basic) level water schemes in rural areas, ie boreholes, hand pumps etc. • Water Boards can act as implementing agents for new infrastructure provision.

9. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • OBSTACLES AND CHALLENGES TO FBW IMPLEMENTATION • Demarcation in some cases has not significantly improved the economic viability of some areas (especially rural district municipalities). • Using the equitable share and other resources to supply free basic water to those who are already benefit from the receipt of services. • The extension of infrastructure to communities who do not have any services whatsoever will be negatively impacted by this. • Universal metering and full cost recovery above 6kl is critical for municipal financial viability, ongoing FBW implementation and viability of the entire water sector. This will require significant additional capital investment.

10. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • OBSTACLES AND CHALLENGES TO FBW IMPLEMENTATION (Continued) • Unauthorised/illegal connections will destroy the viability of any scheme and undermine FBW provision. • The process of allocation of funding to capital projects is unwieldy. • Apparent lack of availability of capital for infrastructure projects. • In some cases former homeland infrastructure is not capable of supplying free basic water requirements. • FBW will increase demand in some areas while in some areas it will reduce the demand.

11. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • CHALLENGES ASSOCIATED WITH THE USE OF THE EQUITABLE SHARE ALLOCATION TO MUNICIPAL AUTHORITIES • It is an unconditional allocation to municipal authorities. • Use of funds is totally discretionary. • Administrative capacity is not always sufficient at municipal level. • Equitable share allocations are in-sufficient to meet all service needs.

12. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • CHALLENGES ASSOCIATED WITH THE USE OF THE EQUITABLE SHARE (Continued) • The base for determining the quantum of the equitable share is often not correctly calculated. • Imbalance of timing between the implementation of FBW vs increasing the equitable share allocation. • Problem of understatement of population figures.

13. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • OTHER POTENTIAL IMPLEMENTATION OPTIONS • Cross-subsidisation at National level to supplement equitable share methodology:- • Rebate on raw water tariffs. • Free basic water levy at National level on all users. • SAAWU as a vehicle to administer distribution or cross-subsidy. • Strong political support is required to recover costs above the 6kl FBW consumption level.

14. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • OTHER POTENTIAL IMPLEMENTATION OPTIONS (Continued) • Water Boards can be used as a regional/sub-regional vehicle for cross subsidisation in some areas due to the fact that they do operate over political boundaries.

15. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • EXAMPLES OF THE DIRECT IMPACT OF FBW ON SOME WATER BOARDS • Some water boards are currently operating as water service providers/scheme operators in some rural areas and examples of the direct impact of FBW on these water boards are : • Mhlatuze Water (Northern KZN) • Total costs of FBW on only the 11 rural schemes being operated by Mhlatuze Water in 3 District Municipalities will be R3.5 million per annum. • Umgeni Water • Total costs of FBW on the approximately 60 small rural schemes being operated by Umgeni Water will be R11.39 million per annum.

16. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • EXAMPLES OF THE DIRECT IMPACT OF FBW ON SOME WATER BOARDS (Continued) • Sedibeng Water • The costs of FBW on the approximately 10 small rural and peri-urban schemes being operated by Sedibeng Water will be in the order of R 8.2 million per annum. • Magalies Water • The costs of FBW on the large number of small rural schemes being operated by Magalies Water will be in the order of R8.3 million per annum. • Some emerging water boards that operate in principally peri-urban and rural environments will face serious financial viability problems with the implementation of FBW.

17. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • SUMMARY OF THE DIRECT IMPACT OF FBW ON WATER BOARDS • Someone has to pay for the 6kl of FBW supplied to consumers. • In municipal areas where there is not a healthy mix of high volume urban users and low level rural users cross subsidisation of FBW via the consumer tariff is not viable. • In reality significant parts of South Africa fall into this category. • In these areas the only source of revenue to cover the costs of FBW must come from the equitable share.

18. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • SUMMARY OF THE DIRECT IMPACT OF FBW ON WATER BOARDS (Continued) • The allocation (quantum) and discretionary use of the equitable share does not guarantee that sufficient will be available to cover FBW implementation costs to the rural poor. • Most rural water supply schemes run by water boards, municipalities, NGOs etc will be rendered non viable by the FBW implementation. • Where cross subsidisation is implemented there is a critical requirement for reasonableness to prevail or negative impacts will cause industrial, commercial and domestic users to consider alternatives.

19. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • SUMMARY OF THE DIRECT IMPACT OF FBW ON WATER BOARDS (Continued) • The challenge will be to ensure that sufficient revenue is available (x subsidies or equitable share) to enable municipal authorities/water service providers to recover the full costs of water service provision. • The entire water sector is dependent on revenue from the consumer for services rendered. It is a municipal responsibility to manage the consumer. • If municipalities cannot pay water boards, water boards will ultimately fail along with the rest of the water service sector.

20. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities • CONCLUSION • The challenges of FBW implementation are primarily financial. • These are, however, not insurmountable but they will require rational and resolute decision making, total commitment and the cooperation of all role players. • The Portfolio Committee is requested to ensure that there is appropriate liaison with the Local Government Portfolio Committee on this matter. • SAAWU and individual water boards pledge their full support, capacity and skills to assist in ensuring the successful implementation of the Free Basic Water Policy.

21. South African Association of Water Utilities SAAWU Issues Facing Water Boards in Assisting, Supporting and Facilitating the Provision of Free Basic Water Services by Municipalities Thank You for Your Time and Attention.