FREE BASIC SERVICES

1. FREE BASIC SERVICES 4 SEPTEMBER 2001

2. PROVISION OF FREE BASIC SERVICES PRESENTATION BACKGROUND • Government is committed to provide at least a basic level of services to all low-income households • At the heart of this commitment is a belief in the right of all South Africans to receive at least minimum standard of service • Constitutional duty off all spheres of government to ensure that the free basic services policy is implemented and sustained

3. FREE BASIC SERVICES POLICY OBJECTIVE • Primary objective is equity, welfare and public health • Basic services currently defined as water, electricity, sanitation and refuse removal • NG will review what a basket of basic services should consist of • Free basic services should not slow down the extension of basic services to unserved households • Related to the equity principle is efficiency and local discretion

4. PROGRESS TO DATE • Substantial progress by DWAF in assisting municipalities with implementation of free basic water • DME has also made progress i.r.o. free electricity • Little progress i.r.o. sanitation and refuse • DPLG and NT will develop overarching policies - co-ordination between sectors

5. FREE BASIC WATER IMPLEMENTATION PROCESS DWAF IMPLEMENTATION STRATEGY • Gathering information • Consulting with stakeholders • Preparing of a communication strategy • Preparing draft implementation strategy • Preparing draft guidelines • Conducting provincial workshops

6. FREE BASIC WATER IMPLEMENTATION PROCESS IMPLEMENTATION PHASE 1 • Intensive interaction with lead municipalities • Pilot the implementation strategy • Development of more material to assist municipalities such as guidelines on key issues for implementing the free basic services

7. FREE BASIC WATER IMPLEMENTATION PROCESS IMPLEMENTATION PHASE 2 • PHASED APPROACH/IMPLEMENTATION PERIOD • will allow low capacity and lower income municipalities time to 'phase' in full implementation • NATIONAL GUIDELINES WITH LOCAL CHOICE • the provision of national advice and benchmarks but with scope for municipalities to choose most appropriate local options • NATIONAL AND PROVINCIAL MANAGEMENT AND INSTITUTIONAL SUPPORT • the establishment of adequate management support for municipalities

8. FREE BASIC ELECTRICITY IMPLEMENTATION PROCESS • Consultation process - February 2001 • Draft implementation strategy - March 2001 • National workshop held on 30 March 2001 • Pilot implementation - June 2001 to March 2001 • Cabinet approved phased roll out process - February 2002

9. THE CHALLENGES FISCAL PRESSURES • Not all municipalities able to implement the “free basic services” to the same level of success • phased approach • unserved areas and low-income households to be targeted • free basic services to all only if affordable • Free basic services to be implemented through infrastructure grants, equitable share and cross-subsidisation (tariffs etc) • Equitable share was increased by R400m in 2001/02

10. THE CHALLENGES LEGAL FRAMEWORK • A well developed legal framework is required for the success of the free basic services • Legal framework essential for tariff setting • Guided by the Constitution, Municipal Systems Act, Water Act and Electricity Act)

11. THE CHALLENGES CREDIT CONTROL STRATEGIES AND THE INDIGENT POLICY • Effective metering, billing and collection for services • Effective credit control strategies for those that can afford to pay • will require municipalities to be able to discontinue service and to meter service usage • More comprehensive indigent policy is essential for those that cannot pay

12. TARGETING • Universal approach, i.e. step tariff • All consumers receive basic services for free • Leakage of funds (own or ES) high • Easy to administer • Targeted approach • Subsidy limited to those identified as poor • Limited leakage of funds • Difficult to administer

13. FACTORS IN LOCAL DECISION MAKING • Basic municipal service backlogs and costs involved versus funds available • Ability to identify indigent and capacity to administer targeting mechanism • Types of services, levels and value to be subsidised • Subsidy design • Monitoring and evaluation

14. EXAMPLES OF APPROACHES • A three-part rising block tariff for water, first (basic level) at operational costs of provision, second (intermediate) at full economic cost and third (luxury) at marginal costs • Communal tap at a maximum of 200 meters from each household • Municipal bills reduced by the cost of providing a basic of service only in areas where majority of households are poor

15. THE CHALLENGES CAPACITY OF MUNICIPALITIES • Not all municipalities have adequate capacity to implement free basic services • lack of infrastructure will also hamper implementation • Programmes in place by DWAF and DME to assist municipalities in implementing free basic water and free basic electricity • PIMS centres to be used as support centres for the provision of free basic services

16. THE CHALLENGES PLANNING FOR DELIVERY OF FREE BASIC SERVICES • It is crucial that municipalities should plan for the delivery of basic services in a sustainable manner • The interim IDPs should reflect how municipalities intend to provide free basic

17. THE CHALLENGES • EQUITABLE SHARE ALLOCATIONS ONLY TO CATEGORIES A AND B MUNICIPALITIES • In cases of joint service provision, Categories B and C must agree on an “agency fee” • POWERS AND FUNCTIONS • MONITORING OF THE IMPACT OF THE FREE BASIC SERVICES

18. END OF PRESENTATION THANK YOU