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DRAFT WHITE PAPER ON WATER SERVICES

Water is Life,Sanitation is Dignity

DRAFT FOR PUBLIC COMMENT

October 2002

Please note:

This document is a draft policy document.

Comments to be submitted to the Department of Water Affairs and Forestry before 30 November, marked for attention of Ms Thuli Khambule

at 012- 336 6572 (tel), 012-323 3877 (fax) or [email protected].

Department of Water Affairs and Forestry

Draft White Paper on Water Services Page i

Department of Water Affairs and Forestry Preface

Preface

Government’s objectives for water services include:

• improving access to, and affordability and reliability of, water and sanitation services for bothhouseholds and firms; with a special focus on sustainable access to safe and adequate clean waterand sanitation for the poor;

• improving governance of sector institutions;

• mobilising government funds to focus on the pressing needs of the poor and increasing otherinvestments by reducing risks associated with private sector financing;

• building effective institutions and developing skills and knowledge for the effective and efficientoperation of water and sanitation services; and

• promoting community and user involvement in infrastructure construction, maintenance andmanagement, especially in poor urban and rural areas, as part of establishing developmental localgovernment.

In support of this broader vision, this White Paper sets out a comprehensive policy approach withrespect to the whole of the water services sector in South Africa, ranging from small community watersupply and sanitation schemes in remote rural areas to large regional schemes supplying water andwastewater services to people and industries in our largest urban areas.

These policies have been developed through a consultative process. On the basis of an initial “Issuesand Options” paper, meetings and workshops with stakeholders have been held around the countryand the public has been invited to comment and give input. This paper is still a draft and a secondround of consultation will be held to obtain comments from stakeholders and civil society.

The provision of at least a basic water and sanitation service to all people living in South Africa remainsan important policy priority. Government is committed to reducing the backlog in services by 2008 inthe case of water and 2010 in the case of sanitation.

Access to a water tap and toilet is no use if the water stops flowing or the toilet no longer works.Sustainability requires that services are affordable. For this reason, we have introduced agroundbreaking policy of free basic water and sanitation services. This means that everybody in SouthAfrica has a right to a basic amount of water and a basic sanitation service that is affordable. With thisright comes a responsibility – not to abuse the right to free basic services and to pay for services wherethese are provided over and above a basic amount.

Providing physical infrastructure is not enough to ensure the health of our people. Emphasis will beplaced on health and hygiene education so that provision of water and sanitation services will beaccompanied by significant reductions in water related disease such as cholera and diarrhoea.

The capacity of government to provide services effectively is a critical constraint in many areas in SouthAfrica. Emphasis will be placed on helping local government to develop the necessary capacity toensure effective delivery. In this respect, the private sector has an important role to play. But in all cases,the public interest will be promoted and protected. Water is life, sanitation is dignity.

Minister KasrilsMinister of Water Affairs and ForestryOctober 2002

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Department of Water Affairs and Forestry Glossary and Definitions

Glossary and Definitions

CBO Community-based organisation.

CG A consolidated capacity building grant.

CMA Catchment Management Agency.

CMIP Consolidated Municipal Infrastructure Programme.

consumer charter A statement by a water services provider that sets out the duties andresponsibilities of both the water services provider and consumers with respect toeach other.

COSATU Congress of South African Trade Unions.

CWSSP Community water supply and sanitation programme.

DPLG Department of Provincial and Local Government.

DORA Division of Revenue Act 5 of 2002.

DWAF Department of Water Affairs and Forestry.

EHP Environmental Health Practitioner.

ES The local government equitable share.

grey water Wastewater resulting from the use of water for domestic purposes but notincluding human excreta.

IDP Integrated development plan, a local government plan in terms of the MunicipalSystems Act 32 of 2000.

industrial wateruse

The use of water for mining, manufacturing, generating electricity, land-basedtransport, construction or any related purpose.

MIG Municipal infrastructure grant, a proposed consolidated grant from nationalgovernment to support investments in municipal infrastructure.

MinMEC A ministerial committee for meetings between national Cabinet Ministers andMembers of the Executive Committee (or Council) of Provinces. The WaterMinMEC, Health MinMEC and Local Government MinMEC are of direct relevanceto the water services sector.

MITT Municipal Infrastructure Task Team.

MJMSD A multi-jurisdictional municipal service district as defined in the Municipal SystemsAct.

NEDLAC National Economic Development and Labour Council.

NGO Non-government Organisation.

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Department of Water Affairs and Forestry Glossary and Definitions

NSTT National Sanitation Task Team.

rudimentarywater supplyservices

A rudimentary water supply service is one which provides households with accessto water with a quality which is adequate from a health point of view and which iswithin a distance of 1 000 meters from the dwelling in which the householdresides.

SALGA South African Local Government Association.

sanitation services The collection, removal, disposal or treatment of human excreta and domesticwastewater, and the collection, treatment and disposal of industrial wastewaterwhere this is done by or on behalf of a water services authority. This includes allthe organisational arrangements necessary to ensure the provision thereofincluding, amongst others, appropriate health, hygiene and water use education,the measurement of consumption, the associated billing, collection of revenueand consumer care.

SDA Service delivery agreement. A contract between a water services authority and awater services provider for the delivery of municipal services, or between waterservices providers.

SETA Sector Education Training Authority.

SMME Small and Medium and Micro Enterprises.

water services Water supply and sanitation services, or any part thereof.

water servicesinstitution

As defined in the Water Services Act 108 of 1997.

water servicesintermediary

A water services intermediary is any person who is obliged to provide waterservices to another in terms of a contract where the obligation to provide waterservices is incidental to the contract (as defined in the Water Services Act).

water servicesprovider

See new definition proposed on page 7.

water supplyservices

The abstraction from a water resource, conveyance, treatment, storage anddistribution of potable water, water intended to be converted to potable waterand water for industrial or other use, where such water is provided by or on behalfof a water services authority, to consumers or other water services providers. Thisincludes all the organisational arrangements necessary to ensure the provisionthereof including, amongst others, appropriate health, hygiene and waterresource use education, the measurement of consumption and the associatedbilling, collection of revenue and consumer care.

WSA Water services authority, as defined in the Water Services Act 108 of 1997.

WSDP Water services development plan, a plan for water and sanitation services interms of the Water Services Act 108 of 1997.

WSP Water services provider, see above.

water sector Includes both water resources and water services.

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Department of Water Affairs and Forestry Table of Contents

Table of Contents

1. Introduction ____________________________________________________ 11.1 The challenge _____________________________________________________________________11.2 Why a new water services white paper? ____________________________________________21.3 Scope ____________________________________________________________________________41.4 Definitions _________________________________________________________________________6

1.4.1 Definition of water services____________________________________________________61.4.2 Definition of basic water supply and sanitation services ________________________61.4.3 Definition of water services authority (WSA) ____________________________________71.4.4 Definition of water services provider (WSP) _____________________________________7

2. Sector Vision and Goals _________________________________________ 82.1 Sector vision _______________________________________________________________________82.2 Sector goals and targets ___________________________________________________________8

3. Guiding Principles _____________________________________________ 10

4. The Institutional Framework ___________________________________ 134.1 The role of local government _____________________________________________________ 134.2 The role of national government__________________________________________________ 14

4.2.1 Department of Provincial and Local Government (DPLG)_____________________ 144.2.2 Department of Water Affairs and Forestry (DWAF) ___________________________ 154.2.3 National Treasury ___________________________________________________________ 154.2.4 Department of Health ______________________________________________________ 164.2.5 Department of Environmental Affairs and Tourism (DEAT) _____________________ 164.2.6 Department of Education___________________________________________________ 164.2.7 Department of Housing _____________________________________________________ 174.2.8 Department of Public Works ________________________________________________ 17

4.3 The role of provincial government ________________________________________________ 174.4 Co-operative governance and co-ordination _____________________________________ 17

4.4.1 Co-operative governance__________________________________________________ 174.4.2 Co-ordination ______________________________________________________________ 18

4.5 Water services providers _________________________________________________________ 184.5.1 Defining water services providers____________________________________________ 184.5.2 Duties of water services providers ___________________________________________ 194.5.3 Types of water services providers ____________________________________________ 194.5.4 Services provision across water services authority boundaries _________________ 214.5.5 Choosing water services providers___________________________________________ 224.5.6 Community-based organisations as water services providers__________________ 244.5.7 Water services intermediaries and the provision of services on private land ____ 24

4.6 The role of water boards _________________________________________________________ 254.7 The role of civil society ___________________________________________________________ 274.8 Linkages to water resources management ________________________________________ 27

5. The Financial Framework_______________________________________ 305.1 Social, environmental and economic considerations ______________________________ 305.2 A changing context _____________________________________________________________ 305.3 A new financial framework _______________________________________________________ 305.4 Funding water services___________________________________________________________ 32

5.4.1 Investment needs __________________________________________________________ 325.4.2 Future capital grant funding arrangements__________________________________ 32

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5.4.3 The equitable share and the funding of basic services _______________________ 335.4.4 The transition to consolidated funding _______________________________________ 335.4.5 Donor funding______________________________________________________________ 33

5.5 Free basic water services_________________________________________________________ 335.5.1 Free basic water ___________________________________________________________ 335.5.2 Free basic sanitation________________________________________________________ 34

5.6 Water services authority responsibilities____________________________________________ 345.6.1 Investments in infrastructure_________________________________________________ 345.6.2 Sustainable service provision ________________________________________________ 355.6.3 Use of equitable share for free basic services ________________________________ 355.6.4 Financial assistance to intermediaries________________________________________ 355.6.5 Financing high levels of service______________________________________________ 365.6.6 Credit control – water services authorities____________________________________ 36

5.7 Pricing and tariffs ________________________________________________________________ 365.7.1 Tariff principles _____________________________________________________________ 365.7.2 Understanding the cost and pricing chain ___________________________________ 375.7.3 Responsibility for setting tariffs _______________________________________________ 395.7.4 The economic regulation of water services tariffs_____________________________ 39

5.8 Water services provider responsibilities ____________________________________________ 395.8.1 Financial viability ___________________________________________________________ 395.8.2 Credit control – retail water services providers _______________________________ 405.8.3 Credit control – bulk water services providers ________________________________ 40

6. Planning, Delivery and Sustainability____________________________ 426.1 Introduction _____________________________________________________________________ 426.2 Planning ________________________________________________________________________ 42

6.2.1 Planning by water services authorities _______________________________________ 426.2.2 Planning by water services providers ________________________________________ 43

6.3 Technology and service levels____________________________________________________ 446.4 Delivery of infrastructure _________________________________________________________ 466.5 Operating water services ________________________________________________________ 47

6.5.1 Separating the roles of authority and provider ______________________________ 476.5.2 Performance management_________________________________________________ 476.5.3 Benchmarking and promoting best practice________________________________ 476.5.4 Improving management____________________________________________________ 486.5.5 Maintenance and rehabilitation ____________________________________________ 486.5.6 Community involvement____________________________________________________ 486.5.7 Consumer care ____________________________________________________________ 486.5.8 Proactive rather than reactive ______________________________________________ 48

6.6 Water conservation and demand management __________________________________ 48

7. Support, Monitoring and Regulation ____________________________ 507.1 Introduction: an approach to support and regulation______________________________ 507.2 Support _________________________________________________________________________ 50

7.2.1 Methods of support_________________________________________________________ 507.2.2 Building water services authority capacity ___________________________________ 507.2.3 Building water services provider capacity____________________________________ 51

7.3 Monitoring ______________________________________________________________________ 517.4 Regulation ______________________________________________________________________ 52

7.4.1 Objectives of regulation ____________________________________________________ 527.4.2 Principles of regulation______________________________________________________ 527.4.3 What is regulated? _________________________________________________________ 537.4.4 The regulatory framework___________________________________________________ 537.4.5 Enforcement of regulations _________________________________________________ 557.4.6 Interventions _______________________________________________________________ 557.4.7 Regulatory policy issues still to be resolved __________________________________ 56

8. The Way Forward ______________________________________________ 57

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ANNEXURE 1: Minimum set of key performance indicators for water services institutions________58

ANNEXURE 2: List of relevant policies and legislation relating to water services_________________59

List of Figures

Figure 1: Water services policy context ______________________________________________________________ 5Figure 2: The relationship between water resource management and water services _________________28Figure 3: Financial framework______________________________________________________________________31Figure 4: Water cost and pricing chain _____________________________________________________________38Figure 5: Integrated resource planning _____________________________________________________________49Figure 6: Water services monitoring and regulatory framework ______________________________________54

Draft White Paper on Water Services Page 1

Department of Water Affairs and Forestry Introduction

1. Introduction

1.1 The challenge

We live in a world of inequality whereabundance lives side-by-side with deprivation.We know that the world has enough resourcesfor everybody to be adequately fed andclothed, and to have access to the basicservices necessary for healthy living – safewater and sanitation. Yet more than one billionpeople do not have adequate access topotable water services and nearly three billionpeople are without adequate access to basicsanitation services. In Africa, more than 38% ofthe population does not have access to a safewater supply, a higher proportion than in anyother region in the world. This is part of theglobal trend towards increasing inequalitybetween developing and developed countries.While there has been significant investment inwater infrastructure, it has not been sufficienteven to keep pace with population growth.

In South Africa inequality in access to basicservices was, and still is, a stark reality, in spite ofSouth Africa being a middle income country.At the dawn of democracy there were some 12million people without adequate water and 20million people without adequate sanitationservices. However, our inequalities havespecific historical roots and our ability to dealwith the services backlog is greater than mostdeveloping countries. South Africa has madegreat strides in reducing this gross inequality. Itis estimated that more than 10 million peoplehave been provided with basic water suppliesin rural and urban areas during the last eightyears. This is an impressive achievement.Unfortunately progress with sanitation has beenmuch slower and great challenges remain.Some 38% of the population is still withoutadequate sanitation.

Good health is dependent on the availabilityand use of appropriate sanitation facilities andthe availability and use of sufficient safe water(at least 25 litres per person per day). Goodhygiene practices are both important andnecessary to promote health.

Water services are intimately linked withpoverty. Lack of access to water supply andsanitation constrains opportunities to escapepoverty. Yet poverty also constrains access towater services by constraining investments ininfrastructure. It is therefore appropriate that akey focus of South Africa’s water services policyshould be on ensuring access of the poor to

basic and sustainable levels of water supplyand sanitation services.

Reliable and efficient water services are also acrucial ingredient for economic growth. SouthAfrica’s low average rainfall, the high variabilityin rainfall, and the cyclical patterns of droughtsand floods all have an impact on South Africa’seconomic growth potential. In this context, it iscrucial that water resources are used wisely toensure that services can be provided. Waterdemand management and water conservationare thus key elements of a water services policyfor South Africa.

The water sector is an important engine ofSouth Africa’s economy. Turnover in the waterservices sector is estimated to be in the regionof R10 billion per annum or more. Inefficienciesin the water sector will have a negative andsignificant impact on other economicprocesses. Efficient and effective services aretherefore crucial.

Services and the use of the water resourcemust be sustainable to ensure that we continueto make progress, and to ensure that futuregenerations benefit from this progress. Whilstthe emphasis during the past seven years wason delivery, it is now timely to place greateremphasis on sustainability.

Last year’s cholera outbreak in KwaZulu-Natal and other parts of the country was awake-up call for us in terms of acceleratingthe provision of water, sanitation andhygiene awareness. It brought to ourattention the unavoidable fact that we hadnot done enough in terms of deliveringsanitation and promoting simple but criticalhealth and hygiene. (Minister Kasrils, BudgetSpeech, 10 May 2002)

What is meant by water services?

The term “water services” means both watersupply services and sanitation services.Wherever this white paper refers to waterservices, sanitation is also included.



1.2 THE WATER SERVICES SECTOR IN SOUTH AFRICA – AN OVERVIEW

Water services refer to water supply and sanitation services and include regional water schemes,local water schemes, on-site sanitation and the collection and treatment of wastewater. All 46million people living in South Africa use domestic water services of some kind. However, it isestimated that some 7 million people (15%) do not have access to adequate water services andsome 18 million people (38%) do not have adequate sanitation services. Water and wastewaterservices are also essential for businesses and industries and efficient provision of these services canhelp to promote economic growth and the eradication of poverty.

The main organisations currently involved in water services are the following:

• The Department of Water Affairs and Forestry is responsible for policy and regulation of thesector and also currently operates water resource infrastructure (such as dams), bulk watersupply schemes and some retail infrastructure (providing services directly to consumers).

• Government-owned water boards currently operate water resource infrastructure, bulk potablewater supply schemes (selling to municipalities and industries), some retail water infrastructureand some wastewater systems.

• Municipalities operate some local water resource infrastructure (such as dams and boreholes)and bulk water supply schemes, supply water and sanitation to the retail consumer (households,businesses and industries) and operate wastewater collection and treatment systems.

• Community-based organisations run small water schemes in rural areas.

• Publicly or privately owned companies provide services in terms of contracts with government ormunicipalities. Johannesburg Water is a water utility wholly owned by the City of Johannesburg.The direct involvement of privately owned companies in the operation of water services in SouthAfrica has been limited to date. Where this has occurred, for example, the Dolphin Coast andNelspruit concessions, the ownership of the water services assets has remained in public hands.

In addition to these organisations, the water services sector comprises any organisation providingwater services, all consumers and households using water services, all employees in theseorganisations and their related representative structures, and professional bodies, contractors, themanufacturing industry and other organisations involved in supporting activities such as research.The roles and responsibilities of water services institutions are discussed in more detail in section 4.

An estimate of the overall size of the water services sector in South Africa is given below:

DWAF Water boards Municipalities Total

Assets (R billion) 40 11,2 ± 50 a ± 100

Investment (R billion pa) 1,2 1,0 2,8 5 b

Turnover (R billion pa) 1,7 3,5 6,8 10 c

Staff numbers 21 700 d 8 000 ± 40 000 e ± 70 000

Volume (million kl pa) 3 300 f

Notes:a) No reliable data available. b) Estimates. c) Does not add up due to double counting. d) Includes all staff.e) Water related staff only. f) Domestic use only.



1.3 Why a new water services whitepaper?

A new context. It is now more than sevenyears since the first Water Supply and SanitationWhite Paper was published in November 1994(referred to hereafter as the 1994 White Paper).Much has been achieved in these seven yearsand the 1994 White Paper played a key part inestablishing an enabling policy framework. Forthis reason, the 1994 White Paper was focusedon the establishment of a new national waterdepartment and the role of this newdepartment in assuming a direct deliveryfunction on behalf of national government toprovide basic water and sanitation servicesrapidly to people living primarily in rural areas.Since 1994, the context has changedsignificantly.

Local government transformation. The localgovernment elections in 2000 represented thefinal phase in the local governmenttransformation process that commenced in1993. It is now possible for local government toassume full operational responsibility for waterand sanitation services as provided for in theConstitution of the Republic of South Africa (Act108 of 1996). This means that the role of theDepartment of Water Affairs and Forestry(DWAF) will change from being a directprovider to being a sector leader, supporterand regulator. The 2002 Division of RevenueAct provides a timetable for the phasing out ofDWAF’s operational role over the next threeyears.1

1 According to the Act DWAF owned and/or operated

schemes will be transferred to the recipientmunicipalities during the period from 2002/3 to2004/5. By 2005/6 their role as service providershould have ended with the transfer of all schemes.Schemes that have not been transferred to localgovernment by this stage will be handed over to and“managed by service providers contracted by DWAFbut funded and supervised by other appropriateinstitutions”.

The White Paper on Local Government (March1998) was published and a suite of municipallegislation promulgated, including the LocalGovernment Municipal Demarcation Act 27 of1998, the Municipal Structures Act 117 of 1998,and the Municipal Systems Act 32 of 2000.

DWAF in a new role. The 1994 White Paperfocused largely on the role of DWAF and basicservices for households. This white paper ismuch more focused on the role of localgovernment with respect to water andsanitation services for all consumers (urban andrural, domestic and non-domestic), and on theleadership, support and regulatory functionsthat DWAF and other institutions can andshould perform.

New water policies. Important new waterservices policies have been developed andimplemented since the 1994 White Paper andthese need to be reflected in this white paper.The Water Services Act 108 of 1997 madeimportant policy advances specifically withrespect to the institutional framework. The freebasic water policy represents a further policydevelopment within broad municipal andintergovernmental policy towards the goal ofaccess to basic water services by all. Waterresources policies have been fundamentallyoverhauled subsequent to the 1994 WhitePaper, as reflected in the White Paper on aNational Water Policy for South Africa (April1997) and the National Water Act 36 of 1998. AWhite Paper on Basic Household Sanitation(referred to hereafter as the Sanitation WhitePaper) was published in 2001 and extends thesanitation-related policies in the 1994 WhitePaper. The White Paper on Municipal ServicePartnerships (April 2000) sets out policies andprocedures for engaging with public andprivate agencies. These extend the policiesembedded in the Water Services Act.

New financial framework. The financialframework for water and sanitation services haschanged significantly since 1994. During thepast seven years DWAF has been an importantfunding channel for water services. In thefuture, government funding for water serviceswill increasingly shift from the current situation totwo consolidated grant mechanisms directedto local government, namely the localgovernment equitable share and the proposedmunicipal infrastructure grant (MIG).

Taking stock. The 1994 White Paper itself notesthat policy is dynamic and further that it is“created to serve the people and we mustcontinually be reassessing it to ensure that it isperforming its role” (1994 White Paper: 38).There have been seven years of delivery of

We are now entering another importantphase in the long process of building localdemocracy. We have established our newmunicipalities. Now we have to make surethey do their job of providing services to ourpeople, efficiently, effectively, andaffordably. We have to ensure that theyplay their full role in creating jobs andopportunities. And they must do this in away which allows our people to participatein building a better life for all. (Minister Kasrils,9 May 2002)



water and sanitation services. It is anappropriate time to take stock of what hasbeen achieved in this period and to reflect onhow improvements can be made to both thepolicy framework itself as well as itsimplementation.

Maintaining financial & institutionalsustainability. Whilst much of the focus of the1994 White Paper was on delivery, it is nowappropriate to place more focus on ensuringthat water and sanitation projects and theagencies that manage water and sanitationservices can maintain, as well as expandaccess to, water and sanitation services in thefuture.

Measuring outcomes. The monitoring andevaluation framework will focus on outcomesand resource management rather than oninputs. The framework will be closely linked towater services development plans (WSDPs) andintegrated development plans (IDPs) and willform an important component of the regulatoryframework.

1.4 Scope

The scope of this white paper is water services(water supply and sanitation services). Itprovides an overall policy orientation ofgovernment towards the water supply andsanitation sector.

Water services are the responsibility of all threespheres of government and hence this policypaper reviews the role of all governmentinstitutions and not just the role of DWAF.

The interface between water services andwater resources is also addressed with theobjective of achieving integrated planning andeffective management through the wholewater cycle.

This white paper complements the recentlypublished White Paper on Basic HouseholdSanitation (2001) and addresses the fullspectrum of water supply and sanitationservices (not only basic services) as well as theoverarching policy issues pertaining to theinstitutional framework, the regulatoryframework, the financial framework andintegrated planning.

This white paper will inform a review of theWater Services Act and other legislation relatingto water services to ensure that the legislationsupports and conforms to the policies set outhere.

Key interfaces with other government activitiesand policy initiatives include:

• the powers and functions of localgovernment;

• the proposed consolidated municipalinfrastructure grant;

• municipal support and capacity buildinginitiatives;

• municipal financial regulation (MunicipalFinance Management Bill); and

• municipal financial, budgetary andplanning cycles.

The overall policy and legal context for thiswhite paper is shown in Figure 1.

KEY CHANGES COMPARED TO THE1994 WHITE PAPER

1. This white paper is a comprehensivepolicy paper for the water servicessector as a whole.

2. Local government is now the key focusfor delivery.

3. The roles given to water boards in the1994 White Paper and the WaterServices Act are reviewed.

4. DWAF will become a sector leader,supporter and regulator (rather than anoperator).

5. The role of the private sector is clarified.

6. The financial policy framework reflectsthe consolidation of nationalgovernment funding to localgovernment through the equitableshare and the municipal infrastructuregrant (MIG).

7. More emphasis is placed onsustainability and the ongoing provisionof efficient and reliable services.



Figure 1: Water services policy context

HOUSING POLICIESHOUSING POLICIES

HEALTH POLICIESHEALTH POLICIES

LOCAL GOVERNMENTPOLICIESLOCAL GOVERNMENT

POLICIES

FINANCE POLICIESFINANCE POLICIES

WATER RESOURCEPOLICIESWATER RESOURCE

POLICIES

CONSTITUTION

LEGAL FRAMEWORK TO DIRECT & ENABLE POLICY IMPLEMENTATION

LOCAL GOVERNMENT DEMARCATION ACT WATER ACT

WATER SERVICES ACT DORA MUNICIPAL SYSTEMS ACT

MUNICPAL STRUCTURES ACT – AMENDMENT

BILL OF RIGHTS

CONSTITUTION

LEGAL FRAMEWORK TO DIRECT & ENABLE POLICY IMPLEMENTATION

LOCAL GOVERNMENT DEMARCATION ACT WATER ACT

WATER SERVICES ACT DORA MUNICIPAL SYSTEMS ACT

MUNICPAL STRUCTURES ACT – AMENDMENT

BILL OF RIGHTS

WATER SERVICES WHITE PAPERTRANSFER POLICY FREE BASIC WATER

BASIC HOUSEHOLD SANITATION ETC

WATER SERVICES WHITE PAPERTRANSFER POLICY FREE BASIC WATER

BASIC HOUSEHOLD SANITATION ETC

NATIONAL WATER SERVICES SECTOR STRATEGY“to give affect to policy”

•MILLENIUM TARGETS; NEPAD; NATIONAL TARGETS•CABINET MEDIUM TERM STRATEGIC OBJECTIVES

•SECTOR OBJECTIVES AND GOALS

CONSOLIDATION OF SECTOR PLAYER STRATEGIES

NATIONAL WATER SERVICES SECTOR STRATEGY“to give affect to policy”

•MILLENIUM TARGETS; NEPAD; NATIONAL TARGETS•CABINET MEDIUM TERM STRATEGIC OBJECTIVES

•SECTOR OBJECTIVES AND GOALS

CONSOLIDATION OF SECTOR PLAYER STRATEGIES

DWAFWSSTRATEGY

NATIONALSANITATIONSTRATEGY

DPLG / SALGALG SUPPORTSTRATEGIES LG & WS SETA

STRATEGY

PROVINCIAL WS STRATEGIESPROVINCIAL WS STRATEGIES

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1.5 Definitions

1.5.1 Definition of water services

Water services are defined as follows:

Water supply services means the abstractionfrom a water resource, conveyance, treatment,storage and distribution of potable water,water intended to be converted to potablewater and water for industrial or other use,where such water is provided by or on behalf ofa water services authority, to consumers orother water services providers. This includes allthe organisational arrangements necessary toensure its provision including, amongst others,appropriate health, hygiene and waterresource-use education, the measurement ofconsumption and the associated billing,collection of revenue and consumer care.

Sanitation services means the collection,removal, disposal or treatment of humanexcreta and domestic wastewater, and thecollection, treatment and disposal of industrialwastewater where this is done by or on behalfof a water services authority. This includes allthe organisational arrangements necessary toensure its provision including, amongst others,appropriate health, hygiene and waterresource-use education, the measurement ofconsumption and the associated billing,collection of revenue and consumer care.

Water services means water supply servicesand sanitation services or any part thereof.

1.5.2 Definition of basic water supply and sanitation services

• A basic water supply is defined as theprovision of appropriate education inrespect of effective water use as well as aminimum quantity of 25 litres of potablewater per person per day (or 6 000 litres perhousehold per month) within 200 metres ofa household, which is not interrupted formore than seven days in any year; and witha minimum flow of 10 litres per minute in thecase of communal water points. Potablewater is defined as drinking water that doesnot impose a health risk.

• A basic sanitation service is defined as theprovision of appropriate health andhygiene education and a toilet which isacceptable to the users, safe, reliable,environmentally sound, easy to keep clean,private, protected against the weather,well-ventilated, and which keeps smells tothe minimum and prevents the exit of fliesand other disease carrying pests.

A change in the definition of waterservices

The definition of water supply services isnot restricted to potable water (as in theWater Services Act) but includes all watersupplied by or on behalf of a waterservices authority. The definitions of watersupply services and sanitation services alsoinclude all aspects of the servicenecessary for the provision of anadequate service, specifically the businessprocesses (such as billing and revenuecollection) and hygiene and water-useeducation. The definitions in the WaterServices Act need to be amendedaccordingly.

A change in the definition of a basic watersupply service

The Section 9(1) regulations of the WaterServices Act need to be amended to applythe minimum flow of 10 litres per minute tocommunal water points only and not allwater connections.

A right to supply, but not an obligation

The right of water services authorities to insiston providing industrial water to industries(and treating their effluent) within their areaof jurisdiction is created in Section 7 of theWater Services Act. Nevertheless, waterservices authorities do not have anyobligation to provide these services.

The definitions of water services providedhere accurately reflect this distinction. Thedefinitions in the Water Services Act need tobe amended accordingly.



1.5.3 Definition of water services authority (WSA)

The definition of a water services authorityremains unchanged from that in the WaterServices Act 108 of 1997 (Chapter III, Sections 11to 21). A further explanation is given in section4.1 of this white paper.

1.5.4 Definition of water services provider (WSP)

A water services provider is defined as anyperson who:

• has a contract with another water servicesprovider to sell water to, or acceptwastewater for the purposes of treatmentfrom, that provider (bulk water servicesprovider);

and/or

• has a contract (or implied contract) with awater services authority to provide waterto, and/or to collect or accept humanexcreta or wastewater from, one or moreconsumers within a specific geographicarea together with or without theresponsibility to collect any fees that maybe due (retail water services provider).

This definition is discussed further in section 4.5.

Water services to support economic activity

Municipalities do not, and should not, onlyprovide water services necessary for basichealth and hygiene. It is important thatmunicipalities undertake health education,facilitate the provision of higher levels ofservices for domestic users and provideservices which support the economicdevelopment and well-being ofcommunities. (See page 45.)


Department of Water Affairs and Forestry Sector Vision and Goals

2. Sector Vision and Goals

2.1 Sector vision

2.2 Sector goals and targets

The following sector goals and targets are setfor the water services sector. It is useful to setspecific and realistic targets which aremeasurable because this makes it possible toevaluate sector progress by asking the question“How well are we doing?”

The overall responsibility for sector progress willrest with the Department of Water Affairs andForestry as sector leader. Nevertheless, national,provincial and local government, all waterservices institutions and stakeholders (includingconsumers and households) have aresponsibility to contribute to the progressiverealisation of these targets, within availableresources.

WATER IS LIFE, SANITATION IS DIGNITY

All people living in South Africa have access to adequate, safe and affordable water and sanitationservices, practise safe sanitation and use water wisely.

Water supply and sanitation services are sustainable and are provided by effective and efficientinstitutions that are accountable and responsive to those whom they serve.

Water is used wisely, sustainably and efficiently in order to promote economic growth and reducepoverty.

SECTOR GOALS

1. All people living in South Africa have access to an appropriate, acceptable, safe andaffordable basic water and sanitation service.

2. All people living in South Africa are educated in healthy living practices (specifically withrespect to the use of water and sanitation services) and the wise use of water.

3. Water and sanitation services are provided:

• equitably (adequate services to all people, fairly)

• affordably (no one is excluded from access to basic services because of their cost)

• effectively (the job is done well)

• efficiently (resources are not wasted)

• sustainably (there are adequate resources to operate, maintain, rehabilitate and expandservices in the future, as necessary).

4. All water services authorities (local government) are accountable to their citizens, haveadequate capacity to make wise choices (related to water services providers) and are able toeffectively regulate water services provision.

5. The price of water and sanitation services reflects the fact that they are both social andeconomic goods (that is, pricing promotes access to a basic safe service and encourages thewise and sustainable use of resources).

6. Water and sanitation services are effectively regulated nationally to monitor and support theongoing achievement of these goals.


Department of Water Affairs and Forestry Sector Vision and Goals

SECTOR TARGETS

Access to services

1. An additional 7 million people are served with at least a basic water supply service by 2008.

2. An additional 18 million people (3 million households) are served with at least a basic sanitationservice by 2010.

3. All schools and clinics have basic water services by 2005.

Education and Health

4. Hygiene education and the wise use of water are taught in all schools by 2005 (Department ofEducation).

5. 3 million households served with a basic sanitation service have received hygiene education by2010 (Department of Health).

Free basic water and sanitation services

6. The free basic water services policy is applied to all people with access to basic services by2004.

Accountable water services authorities

7. All water services authorities have ensured that consumer charters are implemented throughouttheir area in accordance with sound principles by 2005.

8. All water services authorities report annually on progress against their water servicesdevelopment plans by 2005 and measure the involvement of their communities in theirpreparation as part of the Integrated Development Planning Process.


Department of Water Affairs and Forestry Guiding Principles

3. Guiding Principles

The policies set out in this white paper havebeen informed by the following guiding

principles that reflect international bestpractice.

SOCIAL PRINCIPLES

1. Everybody has a right to a basic water supply and sanitation.

Everyone has the right to have access to sufficient water, to an environment that is not harmful to hisor her health or well-being and to have the environment protected, for the benefit of present andfuture generations. The state must take reasonable legislative and other measures, within itsavailable resources, to achieve the progressive realisation of these rights. (See the Constitution,Sections 24 and 27.)

2. A strong and active civil society has an important role to play in the water services sector.

Government is committed to collaborating with civil society to identify local priorities, informplanning and support service delivery and implementation. Scope for partnership betweengovernment and civil society organisations such as community-based organisations and non-government organisations ranges from loose and informal collaboration to specific and formalcontractual arrangements. Through innovation, flexibility and mutual respect, the energy of civilsociety organisations can be harnessed to support the achievement of water services sectorobjectives.

3. Women should play a central role in the planning, provision and management of waterservices.

Women often bear the brunt of absent or poor water services and hence are key stakeholders in thesector. A targeted effort will be needed to enable women to play a meaningful role at all levels inconsultations, planning, decision-making and the operation and especially management of waterservices.

4. Education is a vital component of water services in achieving and sustaining health and qualityof life benefits.

Water usually assumes a higher priority (for both government and users) than sanitation, butsanitation is equally important for health. Education on safe hygiene practices and on the linkagesbetween unsafe water, inadequate sanitation and disease should be integral to all water servicesinitiatives.



ECONOMIC AND FINANCIAL PRINCIPLES

1. Public ownership of water services infrastructure.

Water is an important social good (“Water is life”) and hence water assets that serve the publicshould be owned by the public, that is, by the water services authority that is responsible for theprovision of services to the citizens in its area or government.

2. Water services must be provided in accordance with sound business principles in order toensure sustainability.

Water services must be run in accordance with sound business principles within a sound subsidyframework. Failure to do this will substantially increase the risk of the service not being sustainable.Sound business principles include sound accounting, adequate provisions for depreciation,adequate spending on maintenance and replacement of assets, effective and efficient use ofresources, and income (including subsidies) which covers expenses.

3. Water tariffs and effective credit control are important components of any strategy to supportsustainability.

Charging for water is essential in order to generate funds for operating, maintaining and investing inwater systems. However, tariffs should take into account the need for a free or affordable basicsupply to the poor in terms of the free basic services policy. Aside from this subsidised element of thetariff, water tariffs should be based on full historic costs and reflect marginal costs. Effective revenuemanagement is essential and requires effective credit control.

4. Demand management should be given as much attention as supply expansion in planning ofwater services and water resource planning.

Water demand management should be a critical and prominent component of the planning andmanagement of water services.

5. Water services should be provided and managed in such a way as to maximise their potentialto support local economic development.

The provision of water supply and sanitation services has significant potential to alleviate poverty throughthe creation of jobs, use of local resources, development of skill, and provision of a long-term livelihood formany households. Water and sanitation programmes should be designed to maximise this potential. Watersupply schemes should be designed to provide water to support economic activities, and sanitationprogrammes should strive to leave as much of the budget as possible within the community.

ENVIRONMENTAL AND TECHNOLOGICAL PRINCIPLES

1. Water services should take into account their impact on the natural environment and seek tominimise any negative impacts through remedial measures.

Integrated and sustainable management of the environment, now and in the future, is the basis ofsustainable development in everything that people do (Environmental Management Policy WhitePaper, 1999).

2. Rational choice of technology.

In the choice of technology, a trade-off must be made between effectiveness, affordability, life-cycle costs, consumer acceptability and environmental impact. Users should be fully informed ofthe available technical choices and related financial implications. Water and sanitationtechnologies should be considered together. Technology choices should be made in the context ofan integrated planning process involving community participation.



INSTITUTIONAL AND MANAGEMENT PRINCIPLES

1. Clear definition of roles and responsibilities for government.

The respective roles and responsibilities of the different independent spheres of government and otherpublic or statutory institutions should be clearly defined. Overlapping mandates should be minimised.

2. Separation of regulatory and operational responsibilities.

A clearer separation of the activities of regulation and operation can help to reduce the potential forconflicts of interest inherent in self-regulation and can improve the clarity of objectives and responsibility.Regulation should seek to protect the interests of consumers and balance this vis-à-vis the need forsustainable institutions.

3. User and community participation is important.

Public participation and involvement in planning and provision of services are now mandatory in termsof developmental local government, the philosophy underpinning the new local government policy.

4. Ongoing capacity building is necessary.

The need for capacity building is ongoing and should be prioritised. Capacity building relates not onlyto “hard” technical skills but also equally to “soft” skills including health education, communication,negotiation, social mediation, leadership and management. Good managers are scarce and shouldbe sought out and nurtured.

5. Information should support monitoring and evaluation.

Information systems should be designed to enable better management and the effective monitoringand regulation of service provision by consumers and regulators. Systems should be as uncomplicated,practical and user-friendly as possible, and designed in a manner that requires the least data for themost information.

6. Knowledge management and structured learning.

Structured learning and knowledge management aim to facilitate improved decision-making andutilisation of lessons learnt by taking into account experiences in other settings, to monitor performancecarefully, and to adapt as new information becomes available.

7. The public sector is the preferred provider of water services.

Water services for domestic use are a public good, therefore democratic local government is in thebest position to make accountable decisions related to how services are provided, taking into accountthe social aspects of water services. For these reasons, where local government has the capacity andfinancial resources to provide services effectively and sustainably, local government is the preferredprovider of water services, with support as necessary and appropriate by other spheres of government,the public sector and the private sector.

8. The private sector has an important role to play.

The private sector has an important role to play in assisting local government and other water servicesinstitutions in the water services sector. Their role includes engineering services (through, for example,design), construction (as contractors, for example), support services (laboratory, security, training,cleaning, maintenance, etc.), operations, investment (through, for example, loan, bond or equityfinancing), management, consulting services and capacity building.


Department of Water Affairs and Forestry The Institutional Framework

4. The Institutional Framework

4.1 The role of local government

Primary responsibility: The primary responsibilityfor water services provision rests with localgovernment.

Designation as a water services authority. Interms of Section 84 of the Municipal StructuresAct, the responsibility for providing waterservices rests with district and metropolitanmunicipalities. However, the Act allows theMinister of Provincial and Local GovernmentAffairs to authorise a local municipality toperform these functions or exercise thesepowers. The district (or authorised local)municipality is the water services authority asdefined in the Water Services Act. There canonly be one water services authority in anyspecific area (that is, water services authorityareas cannot overlap).

The role and functions of water servicesauthorities. Water services authorities have thefollowing primary responsibilities:

Realisation of the right of access to basic waterservices: ensuring progressive realisation of theright to basic water services subject toavailable resources (that is, extension ofservices), the provision of effective and efficientongoing services (performance management,by-laws) and sustainability (financial planning,tariffs, service level choices, environmentalmonitoring).

Planning: preparing water servicesdevelopment plans (integrated financial,institutional, social, technical andenvironmental planning) to progressively ensureefficient, affordable, economical andsustainable access to water.

Selection of water services providers: selection,procurement and contracting water servicesproviders (including itself).

Regulation of water services provision andwater services providers (by-laws, contractregulation, monitoring, performancemanagement).

Communication: consumer education andcommunication (health and hygienepromotion, water conservation and demandmanagement, information sharing,communication, and consumer charters).

Separation of the authority and providerfunctions. There must be a clear separation ofauthority and provider functions. Within thisframework, the water services authority is theregulator of the services and is responsible toensure that services are provided effectively,efficiently, sustainably and affordably. Theoperational function is undertaken by the waterservices provider, the institution that actuallyprovides the service. There must always be acontract between the water services authorityand the water services provider.

A water services authority may provide waterservices itself (internal mechanism). In this case,the water services authority must manage andaccount separately for the two functions. Inpractical terms this might mean that amunicipal manager, acting on behalf of themunicipality, contracts (as the water servicesauthority) with the manager of the waterservices department to provide water servicesin terms of a performance contract with themunicipality.

A water services authority may contract with awater services provider to provide waterservices (external mechanism). In this case,there is a classic regulator–operator relationshipwhich must be governed by a contractspecifying clearly the allocation of roles andresponsibilities between the regulator and theprovider.

Choice of service provider. Policies related tothe choice of water services providers arediscussed in section 4.5.

Capacity of water services authorities. Policiesrelated to the development of the capacity ofwater services authorities are presented insection 7.2.

Performance of water services authorities.Policies related to the performance of waterservices authorities are presented in section 6.

Regulation of water services authorities.Policies related to the regulation of waterservices authorities are presented in section 7.3.

Interventions. Policies related to interventions inthe affairs of service authorities (arising, forexample, as a result of institutional failure or theabsence of capacity to undertake essentialfunctions) are presented in section 7.3.



Statutory water services committees. The 1994White Paper provided for statutory waterservices committees to undertake the task ofthe water services authority where there is afailure of local government. No statutory waterservices committees were formed in the period1994 to 2001 and this provision is now obsoleteand will be removed from the relevantlegislation.

Statutory water services committees should notbe confused with community-basedorganisations (CBOs) which may act as waterservices providers in small rural communities,operating with the agreement and support ofthe relevant local government.

4.2 The role of national government

The Constitution obliges the state, that is, allthree spheres of government, to realise therights entrenched in the Bill of Rights. Sections154(1) and 155(7) of the Constitution task bothprovincial and national government, bylegislative and other measures, to support andstrengthen the capacity of local government tomanage their own affairs, to exercise theirpowers and to perform their functions. The Billof Rights also gives provincial and nationalgovernments the legislative and executiveauthority to see to the effective performanceby municipalities of their functions in respect ofmatters listed in Schedules 4 and 5, byregulating the exercise of this executiveauthority.

Section 152(1)(b) of the Constitution states thatone of the objectives of local government is toensure the provision of services to communitiesin a sustainable manner and Schedule 4Bspecifically identifies water and sanitationservices (limited to potable water supplysystems and domestic wastewater and sewagedisposal systems) as a local governmentfunction. The provision of access to waterservices is thus a functional area of concurrentnational and provincial legislativecompetence.

National and provincial government thus havea dual role to play in respect of localgovernment, that is, to support and strengthenits capacity, and to regulate its performance.

The recent “Grootboom” Constitutional Courtjudgement implied that where a municipalityhas failed to progressively plan and implementstrategies for addressing the needs of itsconsumers, and where a municipality does nothave the financial resources to address theseneeds through a strategy of progressiverealisation, it is the responsibility of provincialgovernment, in the first instance, and thereafternational government to support, strengthenand regulate, to ensure the provision of basicservices to those persons in dire need.

All three spheres thus have a real responsibilityand obligation to see to the realisation of basicrights to water supply and sanitation and mustexercise their roles in a manner that indeedprovides for the progressive realisation of thoserights.

The Water Services Act provides adevelopmental regulatory framework for theprovision of water services. The Act enablesnational government to set national norms andstandards for tariffs to ensure efficient, reliable,affordable and equitable water services, whilebuilding capacity in and assisting localgovernment (defined as water servicesauthorities in the Act) to perform its functions.

4.2.1 Department of Provincial and LocalGovernment (DPLG)

DLPG has overall responsibility for the affairs oflocal government in the national sphere. Thisincludes policy, legislation, capacity building,grant allocation and regulation as these applyto the integrated aspects of municipal servicesprovision. These integrated aspects includegovernance, administration, municipal financeand integrated planning.

DPLG exerts many of its responsibilities withregard to local government primarily throughprovincial government, specifically thedepartments of local government establishedwithin each provincial administration.

With regard to water services, the role of DPLGis to ensure that water sector specific policy,legislation, capacity building arrangementsand regulatory responsibilities are integratedinto a coherent relationship between nationalgovernment and local government. This impliesoversight of the relationships which individualsector departments (such as DWAF) have withlocal government.

The specific responsibilities of DPLG that areparticularly important with regard to waterservices include:

Amendment to Water Services Act

The provision for statutory water committeeswill be removed from the Water ServicesAct.



• legislation relating to municipal systemswhich includes provisions for establishingpartnerships and for approving integrateddevelopment plans;

• allocation of equitable share finance andmunicipal infrastructure grants and adviceto National Treasury on other grants to thelocal government sphere; and

• regulation of municipal affairs withprovisions for intervention in the case ofnon-performing municipalities.

4.2.2 Department of Water Affairs and Forestry(DWAF)

DWAF is the national department responsiblefor water matters addressing both waterresource management and water servicesprovision. DWAF has a central role to play infour areas:

1. Policy: overall responsibility for the watersector.

Because of water scarcity, serious servicebacklogs and the linkages between waterresources and water services, waterservices is not “just another” municipalservice. DWAF has overall responsibility forthe management of the water resourcesand for water sector policy (waterresources and water services). DWAF’sspecific functions in this regard includesector leadership, promotion of goodpractice, development and revision ofnational policies, oversight of all legislationimpacting on the water sector, co-ordination with other national departmentson policy, legislation and other sectorissues, national communications, and thedevelopment of strategies to achievewater sector goals.

2. Support: support of other spheres ofgovernment and water institutions toachieve the goals of the water sector.

This support is to be undertaken in terms ofthe Constitution and the principle of co-operative governance. In particular,support to local government needs to beco-ordinated with DPLG and provincialgovernment.

The nature of the support will depend onthe specific needs and requirements oflocal government and water institutions. Itwill include, but is not be limited to,capacity building, the development of

guidelines and practical tools (for example,manuals and courses on how to set tariffs orhow to contract with a water servicesprovider), and technical support withrespect to water services issues (forexample, how to manage unaccounted-for water).

3. Regulation comprising three functions:establishing national standards, monitoringsector performance and making regulatoryinterventions (to improve performanceand/or to ensure compliance).

DWAF’s monitoring and regulatoryfunctions are discussed in more detail insection 7.

4. Information: development andmaintenance of an information base forthe sector for purposes of management,support, monitoring and regulation.

The role of information in management,monitoring, evaluation and regulation isdiscussed in more detail in section 7.

DWAF has been and currently is performingcertain functions that are not part of its futurecore business, particularly operation andmaintenance of water services works andimplementation of new infrastructure. In themedium term (five years) DWAF will no longerprovide water services directly or implementinfrastructure projects.

4.2.3 National Treasury

National Treasury monitors and regulates thefinances of all public bodies (including national,provincial and local government, water boardsand municipal entities). These policies are setout in the Public Finance Management Act andthe soon-to-be promulgated MunicipalFinancial Management Bill.

National Treasury’s primary role in respect oflocal government is to manage the impact oflocal government fiscal activities on nationaleconomic policies, economic activities acrossmunicipal boundaries, the national mobility ofgoods, services, capital or labour and toprovide a framework for sound municipalfinancial management aimed ataccountability in terms of revenue andexpenditure.

National Treasury has a role to play insupporting DWAF and other departments infulfilling their support and regulatory roles in asfar as these roles relate to fiscal matters.



National Treasury’s role is similar to that of DPLGin providing general financial oversight in amanner that recognises the role of DWAF as thewater services sector leader and takes intoaccount water services sector objectives andrequirements.

4.2.4 Department of Health

The Department of Health is responsible forpolicy and operational activities that impactdirectly on the water sector. Close co-operation between DWAF and the Departmentof Health will continue on aspects such as thedetermination of standards for potable waterquality

The promulgation of the new National HealthAct will devolve responsibility for primary healthcare (including environmental health) fromprovinces to district municipalities. Districtmunicipalities will be responsible for ensuringthat the planning of district health services is co-ordinated with water services planning. Theintegrated development plan provides amechanism for achieving this.

Health structures have a particularly importantrole to play in the national sanitationprogramme as these are responsible for thevital health and hygiene education work thatmust be carried out together with the buildingof facilities. The national department will guideprovincial and local government healthstructures to train staff based in clinics and ruralhospitals to do this work. They will also train andsupport community members to work ashygiene educators and promoters on sanitationprojects.

4.2.5 Department of Environmental Affairs andTourism (DEAT)

The sound management of water is central toenvironmental sustainability. While theinterface between water and the environmentoccurs primarily through water resources, DEAThas a role to play with regard to water servicesinsofar as environmental impact assessmentsare required for water services infrastructureprojects.

4.2.6 Department of Education

The national Department of Education isresponsible for developing national educationcurricula and supporting and monitoring theprovincial education departments. The latterare responsible for funding schools, includingthe provision of water supply and sanitation

facilities and the achievement of goodsanitation practices.

The Department of Education, together withthe Department of Health, will developcurricula, guidelines and other supportmechanisms required by teachers and othereducators to educate about health, hygieneand sanitation in their classrooms. Schools arealso an important conduit for the education ofthe broader community.

Furthermore, the Department of Educationtogether with the Department of Health,introduced the Health Promoting SchoolsProgramme in some parts of South Africa. Theprovincial departments are responsible forimplementing this strategy. The followingstrategies provide a framework for promotingschools as sites of learning (with respect tohealth):

• developing education and school policieswhich support health and development,and well-being;

• creating safe and supportive teaching andlearning environments;

• strengthening community action andparticipation through enhancing andexpanding the relationship between sites oflearning and the community;

• promoting life-skills and adult education;and

• re-orienting health and hygiene supportservices towards an accessible, integrated,systematic, preventative and healthpromotion approach.

Big doors swing on little hinges. Sometimesthe most important thing we do in a daycan be one of the smallest acts. Washingour hands with soap and water after goingto the toilet and especially before preparingand eating food is one of these small actsthat can have a major effect in our lives. It isquite simple, if we all wash our hands andthe hands of our children every time we andthey go to the toilet, less children and adultswill get sick and die from waterbornediseases. (Minister Kasrils, speech on Water,Sanitation and Health [WASH] programme,11 April 2002)



4.2.7 Department of Housing

The Department of Housing is responsible for,amongst others things, developing housingpolicy, including the norms and standards inrespect of housing development and co-ordinating the application of the housingsubsidy that is administered by the provincialhousing departments. Potable water supplyand adequate sanitation facilities on housingpremises (or sites) are part of the internalservices “package” which is provided as part ofthe “housing package” funded through thehousing subsidy.

Provincial housing MECs in the provinces have,in some cases, prescribed standards relating tohousing and services. There are concernsregarding consistency of such standards withwater services policy. In particular there hasbeen a trend for waterborne sanitation to bespecified where there is limited bulkinfrastructure and where the costs of providingsuch a service are unaffordable. In order toavoid such situations there is a need for greaterco-operation between DWAF, the Departmentof Housing and provincial housing MECs.Furthermore, in the municipal sphere it isessential for housing planning to be consistentwith water services development planning.

4.2.8 Department of Public Works

The national Department of Public Works actsas the implementing agent on behalf ofnational government departments whenfacilities are constructed or rented. TheDepartment’s activities include the planning ofprojects to construct facilities (usually buildings),administering projects and managing facilitiesfor client departments. The Department thushas an important responsibility in ensuring thatadequate provision is made for water andsanitation facilities in government and publicbuildings, in line with national policy.

The Department of Public Works is alsoresponsible for implementing the community-based public works programme and should co-ordinate with water services authorities to alignpriorities and approaches in this respect.

The role of provincial public works departmentsincludes the implementation of infrastructure onbehalf of other departments in the province.This includes schools and clinics where theyinfluence norms and standards and deliverymechanisms. Nevertheless, client departmentsremain ultimately responsible for the watersupply and sanitation services within theirinstallations, including the associated costs of

bulk water and sanitation infrastructure whereappropriate.

The provision and operation of infrastructure toprovide water services to schools and clinics,and to any other institution in the relevant areaof jurisdiction, is the responsibility of the waterservices authority. However, the provision ofthe school and clinic itself, including its internalfacilities, is the responsibility of the province.Where the water services authority undertakesto provide such “on-site” facilities, includingsanitation facilities, this must be done underagreement with the province. This agreementmust include funding responsibilities.

4.3 The role of provincial government

Many of the general roles and responsibilities ofprovincial government are discussed in section4.2.

Despite the apparent overlap in provincial andnational functions as stated in the Constitution,the practice and execution of powers since1996 has shown a clear separation of roles.Provincial government has focused on directsupport to local government and regulation ofa general nature. National departments arefocusing more on the functional areas withinlocal government (including nationalstandards, regulation, policy and support).

The co-ordinating role of province is discussedin section 4.4.2.

4.4 Co-operative governance and co-ordination

4.4.1 Co-operative governance

The Constitution of the Republic of South Africalays down the principles of co-operativegovernance and intergovernmental relations.All three spheres of government must applythese principles. An Act of Parliament will bepromulgated providing for structures andinstitutions to promote and facilitateintergovernmental relations. Pending thislegislation, the Department of Water Affairs andForestry will strive to facilitate effective andefficient intergovernmental relations on allissues related to the water sector by:

• recognising the authority of municipalitiesto provide water services;

• recognising and supporting the role ofprovincial governments in respect ofmunicipalities and water services;



• supporting and strengthening municipalcapacity to provide water services throughmechanisms identified in this white paper;and

• monitoring and regulating the effectiveperformance of municipalities in respect ofwater services in a flexible manner, takinginto account the different circumstancesand capacity of municipalities.

4.4.2 Co-ordination

National co-ordination. There is currently noformal institution or structure in place at thenational level specifically facilitating co-ordination between government institutions inrespect of water services and related matters,across the water services sector. Existingstructures, such as the water and forestryMinMEC and, at an official level, the MunicipalInfrastructure Task Team (MITT) and the NationalSanitation Task Team (NSTT) have beeneffective in ensuring co-ordination in respect ofmatters affecting water services. The LocalGovernment MinMEC may also provide a forumat which water services issues may be discussedand co-ordinated. In addition, organised localgovernment and other representative bodieshave been instrumental in representing theviews of their members and engaginggovernment. These and similar institutions willcontinue to play an important role in thisregard. Nevertheless, there is a need tostrengthen and improve co-ordination betweennational government departments involved inthe provision of water services.

National Water Advisory Council. The NationalWater Advisory Council, established in terms ofthe National Water Act, deals with both waterresource and service issues and has animportant role to play in strengthening thevoice of civil society at national level.

Provincial co-ordination. Various structureshave been established in provinces for thepurpose of co-ordination. Provincial liaisoncommittees (PLCs) liase with DWAF and otherstakeholders with respect to water relatedmatters. They identify priorities and criticalareas of need and advise on theimplementation of water and sanitationservices investments. Provincial Sanitation TaskTeams (or Task Groups or Co-ordinating Offices)have been set up in each province, composedof representatives from all the key provincialdepartments and municipalities, to co-ordinatethe provincial sanitation effort.

Successful co-ordination depends on activeparticipation and co-operation rather than on

the form of the co-ordination structure.Provinces and regions may establish co-ordination mechanisms that are appropriate totheir particular needs.

Regional and local co-ordination. The waterservices development plan (WSDP), theintegrated development plan (IDP), and therelated consultation processes play animportant role in ensuring co-ordination inrespect of water services. As the WSDPplanning process becomes embedded withinmunicipalities, the lessons learned fromplanning and implementation will start toemerge and the co-ordination role of WSDPsand IDPs will be strengthened.

Co-ordination with water resource planning.The link between WSDPs and water resourceplanning needs to be strengthened. This willoccur through the development of catchmentmanagement capacity and ongoingimprovements in the water resource andservices planning processes. The NationalWater Act requires the development of anational water strategy which informs (and isinformed by) catchment managementstrategies. Catchment management strategiesinform (and are informed by) water servicesdevelopment plans. The Department of WaterAffairs will focus on using these strategies andplans as key instruments in facilitating co-ordination between water services and waterresources. In order to ensure adequate suppliesof raw water, municipalities should ensure thattheir water services development plans aretaken into account by the relevant catchmentmanagement strategy.

4.5 Water services providers

4.5.1 Defining water services providers

The definition of a water services provider isgiven in section 1.5. The definition of a bulkwater services provider is straightforward anddoes not need explanation. Rand Water is anexample of a bulk water services provider inthat it sells water to other water servicesproviders (mostly municipalities). There are,however, important points to note concerningthe definition of the retail water servicesprovider:

• Single consumer interface. The end-consumer or “end user” of the servicesshould have, at any one time, no morethan two water services providers – a retailwater WSP and a retail sanitation WSP, orpreferably a retail WSP which provides bothwater and sanitation services. All



consumers should always know who theirretail sanitation WSPs are and who theirretail water WSPs are.

• Single contractual interface. Equallyimportant and for the sake of practicalaccountability, a municipality should onlyhave a contract with one retail WSP to beresponsible for water services in a specificarea.

• Single chain of contracts. There should bea single chain of contracts that ensures theeffective delivery of water from theresource to the consumer and the effectivereturn of wastewater and human wastefrom the consumer to the resource.

• Contract area defined. A retail WSP’sresponsibility to provide services should begeographically defined and there shouldnot be overlap in contract areas betweentwo retail WSPs providing retail water supplyservices and two retail WSPs providing retailsanitation services. (There may beexceptions to this, for example, in the caseof water vendors who are retail WSPs.)

• Responsibility and risk. The definingcharacteristic of a retail WSP is that the WSPhas responsibility both to provide the waterand/or sanitation services physically (evenif it does not do so itself) and to managethe consumer interface related to thoseservices. The collection of income may bedone by somebody else, but a retail WSP isthe agency that assumes the financial riskrelated to the provision of the services andthe collection of fees.

4.5.2 Duties of water services providers

The main duty of water services providers is toprovide water services in accordance with theConstitution, the Water Services Act and theby-laws of the water services authority, and interms of any specific conditions set by thewater services authority in a contract.

A water services provider must publish aconsumer charter which is consistent with by-laws and other regulations, is approved by thewater services authority, and includes the dutiesand responsibilities of both the water servicesprovider and the consumer, includingconditions of supply of water services andpayment conditions.

4.5.3 Types of water services providers

The most common “types” of water servicesproviders are described below for the purposesof illustration. This listing is both brief andincomplete. This is because the definition ofwater services provider is broad and a varietyof possible organisational forms for waterservices providers exist. Both the content of thecontract between a water services authorityand water services provider and itsenforceability (that is, the ability to perform theservices effectively) are more important thanthe type of water services provider. Policyconsiderations related to the choice of waterservices providers, and the regulation of waterservices providers by contract, are discussed inmore detail in sections 4.5.5 and 1 respectively.

• Municipalities. As already mentioned, awater services authority can also be awater services provider, both within its ownarea as well as by contract with anotherwater services authority or water servicesprovider.

• Municipal entities. These are municipal-owned and controlled public providers thatcan be set up in terms of either a by-law orthe Companies Act.

• Water boards. These are water servicesproviders whose primary function is theprovision of water services to other waterservices institutions. The role of waterboards is discussed separately in section4.6.

• Community-based organisations. Acommunity-based organisation, acting as awater services provider, is a not-for-profitorganisation within a specific communityproviding a municipal service to thatcommunity with the mandate of thatcommunity, where the organisation isacting in the overall interests of thecommunity. A more specific detaileddefinition of a CBO, together with adiscussion of CBOs acting as water servicesproviders, is given in section 4.5.6.

• Private operators. These can vary fromsmall, medium and micro enterprises(SMMEs) to more established larger privateoperators. They could be locally or foreignowned and can include multinationalcorporations.

• Other types of water services providers. Insome cases water user associations,industries and mines provide water services



to or on behalf of municipalities (but not asan intermediary – see section 4.5.7). Inthese cases, the organisation is a waterservices provider even though the provisionof water services is not the main business ofthe organisation and the provision of water

services is undertaken for the purposes ofassisting municipalities who have limitedalternatives. The relationship between thewater services provider and the water servicesauthority must be defined in terms of anappropriate contract.

EXAMPLES OF WATER SERVICES PROVIDERS

Type Services provided Example

Bulk water WSP Sale of bulk water to another WSP bycontract.

Rand Water

Bulk wastewater WSP Treatment of wastewater receivedfrom another WSP by contract.

ERWAT, WSSA contract torun Zandvliet TreatmentWorks in Cape Town

Retail water WSP Only provides retail water servicesand takes risk on income from watersales (even though income iscollected by the municipality on itsbehalf).

Johannesburg Water

Retail water andsanitation WSP

Takes full responsibility for provision ofservices and accepts risk on theincome from water and sanitationservices.

Durban Water and Waste(Note: Also provides someof its own bulk services)

Bulk water WSP andretail water andsanitation WSP

Provides bulk water services to otherwater services providers as well asretail water and sanitation services inits own area.

City of Cape Town

Examples of arrangements which are NOT water services providers

Example Services provided Comment

JOWAM Management contract in supportof Johannesburg Water

Does not itself take full responsibility foroperations and income, only supportsJohannesburg Water, who is the WSP.

Queenstown Partial operation of retail waterservices

No responsibility for customer interfaceand no risk related to collection ofincome.



4.5.4 Services provision across water servicesauthority boundaries

Where regional water supply systems crosswater services authority boundaries, waterservices authorities must co-operate with oneanother to establish arrangements to managethe cross border infrastructure. There are threebroad options available to these water servicesauthorities:

• Service agreements. The authority relianton a service from a neighbouringmunicipality may enter into a contract(service delivery agreement) with itsneighbour who would then be a waterservices provider in relation to this authority.

• Water board or municipal entity. The waterservices authorities may contract with anexisting external water services provider (forexample, a water board) or establish anexternal water services provider (forexample, a municipal entity) to serve theregion. Each water services authority willthen contract separately with this externalwater services provider.

• MJMSD. The water services authoritiesconcerned may establish a multi-jurisdictional municipal service district(MJMSD). The MJMSD could then be thewater services provider for the combinedmunicipal area itself or it could contractother services providers. A water servicesauthority may not delegate its keyresponsibilities (for example, the setting oftariffs) and hence an MJMSD may notbecome (or assume the responsibilities of) awater services authority.

Internal and external water services providers – some examples

The Municipal Systems Act defines “internal” and “external” service delivery mechanisms. TheMunicipal Systems Act sets out a process to be followed when selecting an external service deliverymechanism. (See section 4.5.5.) For the sake of clarity, examples of internal and external waterservices providers are given in the table below.

Internal water services providers External water services providers

• The municipality itself• A department within the municipality• A ring-fenced business unit within a

municipality

• A municipal entity• A community-based organisation• Another municipality• A water board• A private company (operating the

services)• Any other arrangement

Regional co-operation based on a servicesdelivery agreement

Municipality A is a water services authoritybut is reliant on a bulk water supply systemlocated in neighbouring Municipality B.Municipality A contracts with Municipality Bin terms of a contract (service deliveryagreement) to provide Municipality A withbulk water at the point where the pipelinecrosses the municipal boundary. In thiscontext Municipality B is a bulk waterservices provider to Municipality A.

Regional co-operation based on theestablishment of a municipal entity

Two municipalities agree that there arepractical and economy-of-scaleadvantages to operating their waterservices on a regional scale. Afterconsidering various options, as requiredunder the Municipal Systems Act, theydecide to set up a municipal entity in theform of a company with each municipalitya shareholder. They decide that this entitywill be the water services provider for theirwhole area, taking responsibility for bulkand retail services. (This arrangement couldapply to bulk water services only.)



4.5.5 Choosing water services providers

Preference for public sector provision. Section19 of the Water Services Act states apreference for public sector provision byrequiring that public sector provision optionsare considered prior to the consideration ofprovision of water services by the private sector.This is repeated in the “Framework for theRestructuring of Municipal Service Provision”(concluded between SALGA and COSATU on11 December 1998) that includes a set ofguiding principles which state that public sectorprovision of municipal services is the preferredoption. This preference arises from two primaryconcerns:

• the concern that the profit motive, animportant motivating factor within theprivate sector (in addition to good service),will result in unaffordable services and lackof focus on servicing people without accessto basic services; and

• the concern that private sectorparticipation in the operation of waterservices could result in the loss of jobs,specifically public sector jobs.

As a result of this agreement, the Section 78process in the Municipal Systems Act prescribesa procedure for the selection of themechanism of municipal service provision inwhich municipal provision of services is to beconsidered first.

Protecting the public interest. It is important tobear in mind that protection of the publicinterest should be the primary considerationwhen selecting a water services provider andthat consumer and other interests need to bebalanced. In a context of resource andcapacity constraints, it may be that theinvolvement of the private sector in theprovision of water services could result in themore effective and efficient provision of waterservices and that this would promote the public

interest more effectively than a serviceprovided wholly by the public sector which isinefficient and/or ineffective. The ultimate testis the protection and promotion of the publicinterest. For this reason, there is scope forprivate sector participation in the provision ofwater services notwithstanding thegovernment’s stated preference for publicsector provision.

PRIVATISATION, PRIVATE OPERATION ANDPRIVATE SECTOR INVOLVEMENT

In common South African parlance, theterm privatisation often is used to refer toany private sector involvement in a service.This is not a correct definition ofprivatisation. In this white paper adistinction is made between various rolesthat the private sector can play in thewater sector (which do not amount toprivatisation) and privatisation itself (whichis the sale or divestiture of assets into privateownership). In South Africa private sectorconsultants and contractors have alwaysplayed an important role in the watersector and hence the use of the termprivatisation to refer to private sectorinvolvement in the water sector isinappropriate.

Regional co-operation through a waterboard

A water board provides water services to (oron behalf of) a grouping of municipalities interms of contracts (service deliveryagreements), but ownership and control ofthe water board rests with nationalgovernment.

DEFINITIONS

The following definitions are used in thiswhite paper:

Privatisation: the permanent sale of fixedassets (that is, divestiture) by the publicsector to the private sector, and/or privateinvestment and perpetual ownership ofassets.

Private operation: the operation of waterassets by the private sector. Where this isdone on behalf of government, this couldbe through a lease contract, a concessioncontract and a build-operate-transfer (BOT)contract. These activities are notconsidered privatisation because theownership of the water infrastructure assetsremains in public hands.



Choosing external water services providers.Water services authorities may choose tocontract with external (including private sector)operators as water services providers providedthat (1) they follow a defendable process andhave applied their minds to the respectivemerits of available choices, (2) they are able toshow the merits of choosing an external waterservices provider over and above an internalwater services provider, (3) they employ bestpractice with respect to entering into contractswith external water services providers, and (4)they use competitive procurement whenentering into contracts with private waterservices providers.

In practical terms, this means the following:

• A water services authority must haveapplied its mind to the merits of providingwater services itself prior to making adecision to consider other service deliveryoptions. It should take into account (1) theimplications of providing the services itself(that is, the “costs and benefits” which aredefined broadly to include financial,environmental, social and economicfactors), (2) the municipality’s current andfuture capacity to effectively provide theservices, and (3) general trends in thesustainable provision of municipal services.

• A water services authority should identifypossible providers including water boards,other municipalities and CBOs.

• A water services authority must havecompared the respective merits of publicversus private provision of the services,taking into account the factors listedabove. If it chooses the private provideroption, it should be able to make a rationaland sound case for this, including amotivation for the strategic and

operational benefits for the water servicesauthority.

• Furthermore, the water services authoritymust report on the respective forms ofprivate sector involvement considered andaccount for the selection of the proposedform.

• When choosing a private water servicesprovider, the water services authority mustemploy a competitive tendering processand be able to show that the contract willprovide value for money, be affordable tothe institution and transfer appropriatetechnical, operational and financial risk tothe private party.

• The extent of consideration referred toabove in the case of the choice of aprivate water services provider will dependon the extent and nature of the contract. Itis obvious that the extent of considerationshould be related to the level andcomplexity of the function beingcontracted.

Choosing CBOs. Refer to section 4.5.6 below.

Form and content of contracts (service deliveryagreements). Whenever a water servicesauthority chooses a water services provider tooperate water services on its behalf, it mustenter into a written contract (service deliveryagreement) with the water services provider.This contract should follow best practicecontracting guidelines. In general, and wherepractical, it is preferable for a water servicesauthority to enter into a single contract withone water services provider who assumes fullresponsibility for the provision of the full servicein a specific geographic area within the area ofthat municipality. This does not mean that aWSA should only have one WSP for its wholearea, but rather that every identifiedgeographical area within a municipality shouldhave only one water (and one sanitation)services provider. This means that, for example,a municipality may have contracts withnumerous different WSPs to cover its entire areaof as many settlements, but each consumershould only have one service provider (one forwater and one for sanitation). This ensures thataccountability is clearly defined and that boththe WSA and the consumer know who isresponsible for service delivery in any specificarea. It is also preferable that contracts includeboth water and sanitation so as to promoteintegrated water and sanitation planning.Where appropriate, a WSA may enter intoseparate contracts for bulk and retail services.

Definitions (cont.):

Private sector involvement includes, but isnot limited to, support services (consultingservices, outsourcing of various activitiessuch as meter reading, cleaning,maintenance etc.), contracting(construction, operations, management),the management of operations (privateoperation as defined above) and financing(bank loans, bonds, equity). None of theseactivities are considered privatisationbecause the ownership of the waterinfrastructure assets remains in publichands.



The regulation of contracts is discussed furtherin section 7.

4.5.6 Community-based organisations as waterservices providers

Definition. A community-based organisation isa not-for-profit organisation situated within adefined community that is mandated by thatcommunity to provide a specific municipalservice to that community on behalf of themunicipality, provided that (1) all members ofthe governing body of the organisation arenominated members of the community and arepermanently resident within the community, (2)all employees of the organisation are membersof the community and are permanentlyresident within the community, and (3) the areaconstituting the community is defined by themunicipality.

Policy. National government supports thecontinuation of services provision by CBOs inappropriate circumstances, but it is necessaryfor water services authorities to appoint CBOsto act as water services providers on behalf ofthe water services authority.

Legal form. A community-based organisationmust be a legal entity. There are various waysof forming a legal entity, but a voluntaryassociation is the most appropriate legal formfor CBOs providing water services at a relativelysmall scale in rural communities.

Establishment and support of CBOs. Ideally,CBOs should be established as a result of abroadly participatory community process. It islikely that this establishment process will requiresupport. This support (which may need to beongoing) could be undertaken directly by thewater services authority or by an agency onbehalf of the water services authority.

Criteria for choosing a CBO as WSP. There aretwo key criteria that a water services authoritymust take into account when consideringentering into a service agreement with acommunity-based organisation to providewater services:

• the appropriate legal status and

• the ability to provide water services as (ormore) cost-effectively compared to otheralternatives.

Process for selecting CBOs. The MunicipalSystems Act classifies CBOs acting as waterservices providers as an external mechanism.This means that the selection of CBOs as water

services providers requires a competitivetendering process. This is not appropriate anda recommendation to change the MunicipalSystems Act will be made.

A water services authority may undertake a“generic process” (in terms of Section 78 of theMunicipal Systems Act) which identifies thegeneral conditions where the selection of CBOsas water services providers is appropriate. Thismeans that a water services authority does notneed to undertake a Section 78 process forevery decision to appoint a CBO as a waterservices provider.

Selection of CBOs and the Water Services Act.The feasibility of CBOs acting as water servicesproviders should be considered prior toengaging with private operators in terms of theWater Services Act.

4.5.7 Water services intermediaries and theprovision of services on private land

Examples of intermediaries:

• Farmers: Where farm workers (and theirfamilies) receive water services (usuallyassociated with accommodation) aspart of their employment contract withthe farmer, the farmer is an intermediaryto his workers. This also applies to retiredworkers and their families. Where thereare other people living on the farm whoare not linked through a current orformer employee relationship, andwhere the farmer agrees to provideservices to these people, the farmerbecomes a water services provider.

• Mines and other industries: Whereemployees receive water services(usually associated withaccommodation) as part of theiremployment contract with the mine orindustry, the mine or industry is a waterservices intermediary to theseemployees and not a water servicesprovider.

• However, if there are people living inthe town who are not employed (or nolonger employed) by the mine/industryand the mine/industry decides toprovide these people with waterservices, then the mine/industry is actingas a water services provider.



A water services intermediary is any person whois obliged to provide water services to anotherin terms of a contract where the obligation toprovide water services is incidental to thecontract (as per the Water Services Act). Thismeans that the intermediary must have acontract with the consumer for a purpose otherthan the provision of the water services (forexample an employment or property leasecontract) in order for it to be recognised as anintermediary rather than a service provider.

Where a person providing water services doesnot have a primary contract with the consumerfor a purpose other than providing waterservices, but continues to provide waterservices, the person providing services is not anintermediary but a water services provider. Thisis the case irrespective of whether the provisionof such services are incidental to the mainpurpose of that institution. Water servicesauthorities must ensure that appropriatecontracts are in place between itself and thesewater services providers.

The central objective of water services policy isto promote access to basic services by thepoor. Intermediaries have a key role to play inthis regard, considering that approximately 8%of South Africans live on commercial farms andprobably another 2% or so live in “privatetowns” run by mines, ESKOM and other bigcompanies. Under this policy water servicesintermediaries are required to provide servicesto these people and the water services

authority must ensure that this is done. Thewater services authority may regulate waterservices provided by intermediaries in terms ofmunicipal by-laws.

Another important issue is the provision of waterand sanitation services to areas where thereare unauthorised settlements where those livingin the settlements do not have rights to use theland. In this context the provision ofrudimentary services should be encouragedpending the speedy resolution of security oftenure issues to allow water services authoritiesto invest in more durable and longer termassets.

4.6 The role of water boards

Context

Water boards represent an important linkbetween water resource management and theprovision of water services directly toconsumers. Water boards were initiallyestablished to provide bulk water services tomunicipalities and other large water users. Theprimary advantages of this institutional modelwere the regional economies of scale inrespect of bulk water supply infrastructurewhich could be realised as well as thesimplification of institutional arrangementsthrough better co-ordination of schemes,especially where complex integrated schemessupplied water to a number of municipalitiesand large consumers.

Prior to the promulgation of the Water ServicesAct, water boards had a monopoly in theprovision of bulk water services within their areaof supply, which was protected by legislation.That is, municipalities were obliged to use thebulk water services provided by a water board.The relationship between water boards andmunicipalities was changed by the WaterServices Act in order to ensure consistency withthe Constitution, which allocated the primaryresponsibility for ensuring the delivery of waterservices to local government. This changemeans that water services authorities are nolonger obliged to use the services of waterboards and that all services provided by waterboards to municipalities must be undertaken bymeans of mutually agreed contracts.

At the same time, water boards were also givenadditional “non-primary” roles, namely tosupport water services authorities in the directprovision of water services to consumers and toprovide retail services to consumers on behalfof water services authorities (with theiragreement and in terms of a contract). This

Examples of intermediaries (cont.):

• Where a mine/industry provides bulkand/or retail water services to aneighbouring town on behalf of a waterservices authority, the mine/industry is awater services provider.

• Sectional title or lease of property:Where co-owners or tenants receivewater services as part of their contractfor management of the total propertyor lease of a property, theowner/landlord/body corporate is anintermediary to the co-owners ortenants.

• Water user associations: Whereemployees receive water services(usually associated withaccommodation) as part of theiremployment contract with the wateruser association (WUA), the WUA is anintermediary to its employees.



was done in recognition of the fact that somemunicipalities would not be able to act aswater services providers and to ensure thatthere was a family of public water servicesproviders to which they could turn.

A significant amount of capacity exists withinwater boards and they have played animportant part in the development of waterservices both historically as well as in the periodafter the democratic transition in South Africa.Nevertheless, there is a need to clarify thechanged roles and functions of water boards.

Policy discussion

The policy for water boards seeks to:

• ensure equity, in particular, by seeking toensure that poor people are able to counton the support of a strong and competentwater services provider where their waterservices authority is unable to provideservices directly;

• improve accountability by clarifyingaccountability arrangements;

• improve economic regulation by definingthe economic regulatory framework moreclearly, including the regulation of pricingand the level of debt, as well as monitoringthe impact of secondary activities on thefinances and risk profile of water boards;

• provide a common vision with respect tothe future of water boards as bulk utilitiesand/or regional source to tap serviceproviders;

• provide flexibility recognising that there isnot a “one size fits all” model: the rationalefor the origin of water boards differsmarkedly for different areas, each of whichhas its own particular institutional history,economic context and social challenges,hence it may be inappropriate to imposeone national institutional model on waterboards as a whole;

• ensure the financial viability of all waterboards in a context where water boards willderive all of their future revenues from thesale of water and provision of waterservices to other water institutions; and

• create regional entities through thepromotion of operational efficiencies,economies of scale and maximise existingcapacity through rationalisation.

There are three broad institutional andgovernance options relating to the future ofwater boards:

DWAF ownership and control of water boards.This is the current policy as reflected in theWater Services Act. The Minister of Water Affairsand Forestry has the power to establish anddisestablish water boards. The Minister isresponsible for the regulation of water boards,including economic and financial regulation interms of the Public Finance Management Act.In terms of the Water Services Act, waterboards are also required to enter into contractswith water services authorities and other waterservices providers to whom they provideservices. There is a need to distinguish betweenthe accountability arrangements for waterboards to national government as “owners” onthe one hand and through contractualobligations with other water services institutionson the other.

Water boards retained selectively. In thisoption, water boards will be retained whereregional bulk schemes cross WSA boundaries.In these cases, the ownership and control ofwater boards is the same as for option 1(national government ownership and control).In other areas, where the “regional” waterservices assets of currently constituted waterboards are wholly contained within thegeographic area of one water servicesauthority, the water board would bedisestablished and the assets transferred to thewater services authority (unless the WSArequested the continuation of the water boardwithin their area).

Regional source to tap utilities. In this option,regional source to tap utilities are created(either wall-to-wall across South Africa or inselected areas). The ownership and control ofthese utilities would be agreed by national andlocal government. This option (the equivalentof the regional electricity distributorscontemplated in the electricity industry) wouldrequire a change to the Constitution. It shouldbe noted that regional source to tap utilitiesunder the ownership and control of waterservices authorities could be established.However, this would be a model that mightevolve over time under the control anddirection of water services authorities.

The way forward

Accountability of water boards to waterservices authorities can be strengthenedthrough appointing representatives on to theboards of water boards in consultation withwater service authorities. Within this institutional



option, it is possible to strengthen theaccountability of representatives on the boardsof water boards. It is also possible for waterboards to be rationalised to ensure viability andto promote economies of scale.

It is recommended that, in the short term, anational task team will be established to reviewthe role of water boards. The purpose of thistask team will be to establish a set of commonlyagreed principles for the reform of waterboards and to use these principles as the basisfor policy proposals related to their governanceand reform. This process will be informed by theexperience of reform of the electricity sector inwhich the role of ESKOM and the proposedRegional Electricity Distributors (REDs) raisessimilar issues.

4.7 The role of civil society

A vibrant and durable democracy needs astrong civil society. Government is committedto promoting the active involvement of civilsociety in the provision of sustainable andaffordable water services. This will be donethrough:

• public communication and invitations tooffer comment and input during policymaking and planning processes;

• engaging with representatives of civilsociety including trade unions, women’sgroups, church groups, community-basedorganisations, consumer groups and othernon-government organisations;

• supporting the development of thecapacity of civil society; and

• encouraging civil society to help monitorsector performance at all levels.

4.8 Linkages to water resourcesmanagement

Integrated water resource management

Integrated water resource managementpromotes the co-ordinated development andmanagement of water, land and relatedresources, in order to maximise the resultanteconomic and social welfare in an equitablemanner without compromising the sustainabilityof vital ecosystems.

The National Water Act gives effect tointegrated water resources management(IWRM) by ensuring that the nation's water

resources are protected, used, developed,conserved, managed and controlled in wayswhich take into account at least the followingwater services related matters:

• meeting basic human needs;

• promoting equitable access to water;

• redressing the results of past racial andgender discrimination;

• promoting the efficient, sustainable andbeneficial use of water;

• facilitating social and economicdevelopment;

• providing for growing demand for wateruse; and

• reducing and preventing pollution anddegradation of water resources.

Water Management Institutions

Three types of water management institutionsare conceived by the National Water Act togive effect to integrated water resourcemanagement:

• catchment management agencies;

• water user associations; and

• bodies responsible for international watermanagement.

Catchment management agencies will beestablished to manage water resources in eachof the 19 water management areas (whichcover the entire country), as defined in theNational Water Resource Strategy. The DWAFregional offices will act as the catchmentmanagement agency in water managementareas where catchment managementagencies have not yet been established.

The initial functions of a catchmentmanagement agency are to:

• investigate and advise on the protection,use, development, conservation,management and control of the waterresources in its water management area;

• develop a catchment managementstrategy;



Figure 2: The relationship between water resource management and water services

• co-ordinate the activities of water usersand water management institutions;

• promote the implementation of waterservices development plans; and

• promote community participation.

As the catchment management agencydevelops capacity more water resourcemanagement functions will be delegated. Thecatchment management agency may:

• make rules to regulate water use;

• require the establishment of managementsystems;

• require alterations to waterworks; and

• temporarily control, limit or prohibit the useof water during periods of water shortage.

Water user associations are co-operativeassociations of individual water users who wishto undertake water-related activities for theirmutual benefit. Although water userassociations are water management

institutions, their primary purpose, unlikecatchment management agencies, is toencourage co-operation between water usersto help meet their needs. A water userassociation may provide bulk water services onbehalf of a municipality, in which case it shouldbe appointed as a water services provider.(See section 4.5.)

International water management bodies areestablished to co-ordinate water resourcemanagement activities with neighbouringcountries and have little direct impact on waterservices provision.

Co-ordination between water services andwater resources management

The provision of water services is dependent onthe availability of an adequate quantity andquality of water resources. They must thereforebe provided in a manner that is consistent withthe broader goals of integrated water resourcemanagement.

The catchment management agency will beresponsible for the development andimplementation of a catchment managementstrategy. This catchment managementstrategy must take into account the water

treatment and return ofwater to the river

water resourcemanagement

storing raw waterin dams

raw water abstraction,bulk water treatment and

bulk water distribution

reticulationof water toconsumers

human excreta andwastewater collection

consumer



services development plans and the businessplans of water services providers and it will beimportant for water services authorities to giveearly warning of their requirements. The waterservices development and business plans mustbe informed by the catchment managementstrategy.

Where a water resource is shared betweendifferent users, co-ordination of themanagement, allocation and development ofthe resource will be achieved through theimplementation of the catchmentmanagement strategy.

Development of water resource infrastructure

Any institution (or person) may construct andoperate a dam if that institution is authorised todo so. For most large-scale infrastructure (major

dams and transfer schemes) DWAF hasassumed primary responsibility. In someinstances, special purpose companies havebeen set up for specific (typically large)infrastructure projects such as the LesothoHighlands Water Project. Some water boardsand many municipalities have developed rawwater resource infrastructure.

A policy process is currently underway toconsider the creation of a new national publicentity, taking responsibility for major national orregional water resource development. Such anentity would assume the responsibility for waterresource development and operation of theassociated infrastructure on behalf of DWAF,and develop local water resource infrastructureas a service provider to catchmentmanagement agencies, water servicesauthorities and water user associations.


Department of Water Affairs and Forestry The Financial Framework

5. The Financial Framework

5.1 Social, environmental and economicconsiderations

In order to achieve the desirable social benefitsrelated to the provision of adequate basicwater supply and sanitation services to allpeople living in South Africa, government willcontinue to fund these services. This funding isin three basic forms: (1) funds for capitalinvestment in infrastructure to extend basicservices to those without an adequate service,(2) funds to ensure that the ongoing provision ofbasic water services is affordable to the poor,and (3) funds to develop the capacity of waterservices institutions.

Because water is inextricably linked to theenvironment, the financial and pricingarrangements will also take into account theeffects of the use of water services on theenvironment.

Beyond these social and environmentalmandates, water services will be managed interms of normal financial and economicprinciples that will be applied to the financingand pricing of water services that are not basicservices, provided that environmental impactsare appropriately managed.

5.2 A changing context

At present, national government provides fundsin support of capital investment in the waterservices sector and ongoing operation of waterservices. These funds are provided directly andindirectly through a number of channels,including (but not limited to) the equitableshare, transition grants, a Community WaterSupply and Sanitation (CWSS) operating grant,the Consolidated Municipal InfrastructureProgramme (CMIP), an “implement waterservices projects” capital fund, the community-based public works programme, a financialmanagement grant, a local governmentsupport grant and the restructuring grant.

In the medium term it is the intention ofgovernment to consolidate these transfers tolocal government into three primary channels:

1. a consolidated municipal infrastructuregrant (MIG);

2. the equitable share (ES); and

3. a consolidated capacity building grant(CG).

The proposed changes will be undertaken in amanner that ensures that government’s waterservices objectives can be met. To this end itwill be necessary to:

• define the role of various organs of nationalgovernment in ensuring the sustainableprovision of free basic water supply andsanitation services by local governmentwithin this funding context;

• ensure that adequate capital funds aremade available (both nationally and bywater services authority areas) to providebasic water supply and sanitation servicesto the poor within the target period;

• ensure the financial viability andsustainability of water services providers;

• ensure water services providers (includingcommunity-based organisations acting aswater services providers) are allocatedsubsidies to provide free basic water supplyand sanitation services;

• create the right incentives and regulatoryframework to ensure good financialmanagement and that available resourcesare allocated equitably, promoteefficiency and ensure sustainability,including the appropriate pricing ofservices;

• create appropriate mechanisms to financehigher levels of service, particularly in ruralareas, where these are affordable andsustainable; and

• manage the transition between the currentmultiple funding streams between nationaland local government and theconsolidation of these into three fundingstreams.

5.3 A new financial framework

A new financial framework is proposed toaccommodate the social, environmental andeconomic considerations outlined above, aswell as the change in context and thechallenges that these impose.



Figure 3: Financial framework

The essential elements of the new financialframework are set out below in relation toFigure 3.

• Ownership of assets. Water services assetsused to provide services to the public shallremain in public ownership. There shall beno sale or divestiture of water infrastructureassets by the public sector to the privatesector. Water services assets will be ownedby water services authorities except wherethese are owned by national government(for example, through a national waterentity or water boards).

• Subsidies for infrastructure investment forbasic municipal services will be provided bynational government in the medium termthrough a new municipal infrastructuregrant (MIG). This is a consolidatedconditional grant, consolidated becausefunds will be channelled through a singledepartment, and conditional because theallocation of funds to municipalities will bemade conditional. The nature and detailsconcerning the conditions to achievegovernment’s objectives will be developed

in consultation with the relevantdepartments and SALGA.

• Subsidies for operating costs (to support theprovision of affordable basic services topoor households) will eventually beprovided by national government throughthe local government equitable share (ES).In view of the fact that it is not possible forgovernment to impose direct conditions onthe use of this grant, a transition from thecurrent DWAF “grant in kind” to the newsystem will be developed in consultationwith the relevant departments and SALGA.

• Subsidies for capacity development in localgovernment are provided through a singleconsolidated capacity grant (CG). Sincethis is a conditional grant, it is possible forgovernment to ensure that adequateresources are made available for thedevelopment of appropriate water servicescapacity in municipalities.

• User charges (tariffs) are set by waterservices authorities. These are regulated interms of Section 10 of the Water ServicesAct and regulations gazetted in terms of

water servicesauthority

water servicesprovider

consumer

national government

rates

(user charges forservices provided)

servicedelivery

agreement

Regulatory oversight

MIG (conditional)CG (conditional)ES (unconditional)

DWAF

(includes financial contract)

consumercontract



Section 10 and the national economicregulatory framework.

• Contract or service delivery agreement. Akey instrument of regulation is the contractor service delivery agreement between thewater services authority and the waterservices provider. In terms of Section 19(5)of the Water Services Act the Minister hasregulated the content of such contracts bymeans of regulations. (Notice R 980 of 19July 2002 in the Government Gazette.)

In view of the fact that many different kinds offinancial contracts are possible depending onthe nature of the contract (service deliveryagreement) between water services authoritiesand water services providers, it is not possible tobe prescriptive as to the form and content ofthis financial contract. Nevertheless, thefollowing principles should be observed:

Subsidies should be targeted to poorhouseholds, in the first instance for the provisionof basic services where these are inadequate(capital subsidies), and in the second instancein support of the affordability of the ongoingprovision of basic services (operating subsidies).

The water services development plan should beused as the basis for the development of thecontract and the financial component of thiscontract.

The contract should form the basis for theregulation of the water services provider by thewater services authority.

5.4 Funding water services

5.4.1 Investment needs

The total capital investment needs of the waterservices sector are estimated in Table 1. Thesenumbers are indicative and depend on servicelevels proposed, but do indicate the scale ofthe investment required, some R5 billion perannum or more.

5.4.2 Future capital grant funding arrangements

National government has proposed theintroduction of a new integrated municipalinfrastructure grant (MIG) to provide a formula-based allocation to municipalities for providingall the necessary infrastructure (including watersupply and sanitation) for poor households.When introduced, the current water services-specific infrastructure grants will be phased out.To enable the introduction of this grant,arrangements will have to be put in place toensure that the basic objectives ofgovernment, being equity, access andsustainability, are met. In addition there areconcerns about the capacity of somemunicipalities to implement the projects thatwill be funded by the grant and the planningand implementation of regional infrastructurethat crosses municipal boundaries. There willbe a need to attach sector-specific conditionsto the allocation and spending of theinfrastructure grant and the process will bediscussed with the relevant governmentdepartments and SALGA.

Table 1: Estimated capital investment requirements over 10 years, R million

Urban Rural Total

Water Sanitation Water Sanitation

New infrastructure

Low income residential 8,009 13,154 4,496 10,164 35,823

Non-residential and high income residential

1,602 2,631 450 1,016 5,699

Asset replacement

Low income residential 1,728 2,802 677 101 5,308

Non-residential and high income residential

346 560 68 10 984

Total 11,684 19,148 5,690 11,291 47,813

Source: National Treasury, June 2002



5.4.3 The equitable share and the funding of basicservices

Constitutional basis. In terms of theConstitution, national government must providefor an equitable division of revenue raisednationally to be allocated to local government.This allocation of funds takes into account interalia (1) the need to ensure that localgovernment is able to provide basic servicesand perform the functions allocated to it, (2)the fiscal capacity and efficiency ofmunicipalities, (3) the developmental and otherneeds of local government, (4) the obligationsof the municipalities in terms of nationallegislation, and (5) the desirability of stable andpredictable allocations of revenue shares.

Purpose. It is readily apparent from theConstitution that a primary purpose of theequitable share is to ensure that localgovernment is able to provide basic services toall its residents in an efficient and sustainablemanner. However, the equitable share is notlimited to this purpose, but is also intended toassist local government in carrying out anyobligations set out by national government.

Conditionality. The equitable share is anunconditional grant protected by aconstitutional right. However, should a localgovernment not fulfil its constitutionalresponsibility of providing basic services to all itscitizens whilst at the same time receiving anequitable share allocation, the local authoritycould expose itself to legal challenge(assuming the equitable share adequatelycovers the gap between the expenditureneeds of the municipality for the provision ofbasic services and its revenue raising capacity).At present, the operation of services in manypoor areas is funded by a “grant in kind” fromthe DWAF budget. This conditional grant will bemaintained until appropriate mechanisms aredesigned to ensure that government’sobjectives are met under the newarrangement.

5.4.4 The transition to consolidated funding

At present, DWAF is an important provider offunds for water services, currently havingcontrol over some R800 million for infrastructureinvestment and R700 million for the operation ofwater services each year. In terms of theDivision of Revenue Act of 2002 (DORA), thisfunding will decline over a three year periodand be replaced with the consolidated fundingchannels to local government alreadydescribed above. To meet these targets, new

processes have to be defined, as mentioned inthe previous paragraph.

This will pose significant challenges for DWAF if itis to move from direct financial involvement inthe funding of water services to the indirectroles of support, monitoring and regulation. Akey challenge will be the establishment ofmechanisms by which DWAF, as sector leader,can promote the achievement of the sectorgoals (set out in section 2.2) without any directfinancial leverage.

5.4.5 Donor funding

International donors have played an importantpart in the development of the water servicessector in South Africa, although it is expectedthat this will reduce as attention turns tosupporting the NEPAD agenda on thecontinent. Donor funds will be integrated withlocal funding strategies and be managed interms of national policies for the sector as awhole.

5.5 Free basic water services

5.5.1 Free basic water

Prior to the introduction of the equitable shareas part of the local government financialsystem, the “user pays” principle was one of thecornerstones for achieving the sustainabilityand viability of water services. The adoption ofthe free basic water policy has not negated thisprinciple. On the contrary, the free basic waterpolicy strengthens the principle in that it clearlyrequires consumption in excess of the basicservice to be paid for while enabling freeaccess by the poor to basic water servicesnecessary to sustain life. This policy thussupports the constitutional rights alreadydescribed in section 3.

The right to basic water services in not anabsolute right. It is subject to the state takingreasonable legislative and other measures,within its available resources, to achieve theprogressive realisation of these rights. It is alsosubject to specific obligations such as paymentfor services (over and above the basic amount)and the limitation and disconnection of theservice in certain circumstances.

In terms of the free basic water policy, theprovision of the first 6 kilolitres consumed by ahousehold per month is free of charge. Thepolicy provides for flexibility in the application ofthis policy by municipalities, as the sphere ofgovernment responsible for providing waterservices. Municipalities are not obliged to



implement the policy with immediate effect,but must take reasonable measures, withinavailable resources, to achieve the progressiverealisation of the policy.

The cost associated with providing free basicwater services to poor households is not largefor a country or our economic size and strength.The total cost is estimated to be some R1,5billion per annum, which is equivalent to 0,15%of GDP. This cost can be funded by nationalgovernment through an allocation to the localgovernment equitable share. This can also besupplemented where appropriate throughcross subsidisation between users within asystem of supply or water services authorityarea.

The real challenge of the free basic waterservices policy is an institutional one – how toensure that any subsidies made available tosupport the policy benefit those who most needit, that is, households in remote rural areas,especially those served by small local systems.It is these people who are most vulnerable.

5.5.2 Free basic sanitation

Free basic services policies are intended toensure that all households enjoy at least a basiclevel of service. The equitable share has beenincreased significantly to support this objective.In relation to sanitation, municipalities need toadopt a flexible approach in assessing whatlevel of services they can afford to subsidise.Government’s priority is to ensure that theneeds of the vast number of people who donot have even a basic level of service areserved first, before considering a subsidy forthose who already have a high level of service.

The free basic sanitation policies, which arebeing developed, will distinguish betweencapital costs and operating costs. There arealready several programmes underway whichfund or subsidise the capital cost of providingbasic toilets. (See section 5.2.)

The routine operation and maintenance costsof a basic level of sanitation service are low,and households themselves are best placed toaddress these. The intermittent costs of pit ortank emptying may be significant.Municipalities should develop clear policies onwhat assistance, if any, they will provide whenon-site pits or conservancy tanks are full.

In most instances, waterborne sanitation shouldnot be regarded as a basic level of service.Where a municipality is able to offer a highlevel of sanitation service, the proposed 6kiloliters monthly free water allocation

incorporates a subsidy on the cost of operatinga flush toilet. A municipality should onlyconsider subsidising flush toilets further where itis confident it can fund, administer and sustainthese subsidies.

Subsidised flush sanitation should not beconfused with free basic sanitation. Somemunicipalities can and do subsidise the costs offlush sanitation for poor households, but this isnot likely to be viable for all municipalities. Animportant principle is that each municipalityshould assess its own resources in relation to itsconstitutional responsibilities. There cannot beone national model.

5.6 Water services authorityresponsibilities

5.6.1 Investments in infrastructure

Water services authorities generally own thewater services assets within their areas and areresponsible to ensure that adequateinvestments are made in water servicesinfrastructure and that these investments aresustainable over time.

The water services development plan(discussed in section 6) is an important tool toassist the water services authority to develop arealistic long-term investment plan whichprioritises the provision of basic water services,promotes economic development and isaffordable and sustainable over time.

The primary sources of funds for investments inwater services infrastructure are as follows:

• national infrastructure grants (to beconsolidated in the MIG);

• loans from development institutions andcommercial banks;

Fairness in the application of the free basicsanitation policy

Municipalities should think carefully whenimplementing the free basic sanitationpolicy. The priority focus should be onhouseholds without sanitation and onhouseholds with basic sanitation.Subsidising flush sanitation systems is likelyto be inequitable in contexts where manyhouseholds have no sanitation at all. Thesustainability of such a policy should alsobe carefully considered.



• retained earnings (from user charges);

• local taxes; and

• private equity, for example in the case ofconcessions where ownership of the assetsremains in public hands although the rightto use the assets is contracted to a privatecompany in terms of a long-termconcession contract.

The appropriate financing structure for eachwater services authority must be determinedthrough the development of a long-terminvestment and financing plan.

5.6.2 Sustainable service provision

The primary operational responsibility rests withwater services providers. Nevertheless, it is theresponsibility of the water services authority toensure that water services providers arefinancially viable and sustainable so as toensure the ongoing operation of services andadequate maintenance and rehabilitation ofassets.

The water services authority can influence thefinancial viability of water services providersthrough the following mechanisms:

• choices related to the use of the equitableshare (see section 5.4.3);

• the tariff policy and the setting of tariffs (seesection 5.7); and

• the details of the contract between thewater services authority and the waterservices provider, specifically the serviceobligations and the financial conditions ofthe agreement. (See section 5.3.)

5.6.3 Use of equitable share for free basicservices

Three primary mechanisms for funding the freebasic water services policy are:

• cross-subsidisation within the service (usuallyby means of a rising block tariff);

• direct targeted credits to poor households(monthly credits to household tradingaccount invoices) using the equitableshare; and

• service levels targeting using the equitableshare.

Different subsidy targeting mechanisms (andcombinations of these) are likely to beappropriate in different circumstances. Localauthorities should be encouraged to makedecisions most appropriate to their own localcircumstances. This will be accomplished bycreating the right incentive environment andproviding support through information,technical assistance and the sharing of bestpractices. While national government will notdictate to municipalities how the equitableshare should be used, it will demonstrate howdifferent mechanisms can be used in differentcircumstances.

5.6.4 Financial assistance to intermediaries

In the case of poor households living on theirown plots or on communal land, water servicesauthorities can make funds available to installthe necessary infrastructure and provideoperating subsidies to enable the poor to getfree basic services on an ongoing basis. In mostcases this has not been applied where poorpeople live on private land. Here reliance hasbeen placed on the intermediary to fund boththe capital and operating cost of such services.

There is no legal impediment to the use ofgrants for municipal infrastructure (includingwater services) to fund infrastructure for thepoor on private land, subject to certainconditions. The most important of theseconditions is that intermediaries must make afinancial contribution as they become theowners of the infrastructure once it is installed.Specific policies regarding the appropriatelevel of contribution will be developed incollaboration with other relevant governmentdepartments.

Similarly, water services authorities can provideoperating subsidies to intermediaries in terms oftwo possible arrangements:

• The subsidy may be provided to theintermediary directly in terms of a contractbetween the water services authority andthe intermediary specifying the duties andobligations of both parties.

• The subsidy may be provided directly to thebeneficiaries, that is, the poor householdsliving on private land. This may be donethrough a user association.

The reluctance on the part of water servicesauthorities to provide infrastructure andoperating subsidies for water services tointermediaries is understandable given thedifficulty (and cost) of adequately monitoringand regulating these arrangements.



Farmers are employers and are responsible forhousing and related services of their employeesliving on farms. Farmers are thereforeresponsible for the provision of basic waterservices to farm workers and their families livingon their farms, a policy supported by AgriSA.

Another important issue is the provision of waterand sanitation services to areas where thereare unauthorised settlements where those livingin the settlements do not have rights to use theland. In this context the provision ofrudimentary services should be encouragedpending the speedy resolution of security oftenure issues to allow water services authoritiesto invest in more durable and longer termassets.

5.6.5 Financing high levels of service

In order to promote higher than basic levels ofwater services where these can be provided inan economically viable and sustainable way,water services authorities should put in placeappropriate financing mechanisms to make thispossible. (See also section 6.3.) There is a widerange of options available, but the key to theirapplication will be to always ensure that there isadequate income to support the proposedinvestments. Water services infrastructurerequires long-term investments and sincefinancing is often difficult to obtain, DWAF willwork with National Treasury, DPLG, SALGA andother institutions (such as DBSA) to designappropriate financial instruments.

5.6.6 Credit control – water services authorities

Water services authorities have the responsibilityto develop a credit control policy. This policyshould provide for credit control procedureswhich (1) are fair and equitable, (2) provide foradequate notice, (3) provide for consumerrepresentations, (4) allow alternative paymentarrangements, and (5) set out a fair procedurethat will be applied in the event of non-payment.

Where a consumer continues to fail to pay forservices provided after the application of suchprocedures, a municipality should be able totake action that will limit its financial loss andpromote payment. When a municipalityformulates its credit control policy it should takeinto account (1) the need for financial viabilityto support the sustainable provision of services,(2) the effectiveness of the proposed creditcontrol mechanisms, and (3) the impact ofthese mechanisms on the community.

The following principles should be considered informulating credit control policy:

• Consumers should be informed andeducated in respect of water use andcredit control and debt collection policies.

• The restriction of water services to the freebasic quantity is preferred rather thandisconnection. Alternatively, wheredisconnections are implemented, analternative basic supply should be madeavailable if practical (for example, acommunal water supply point). This isparticularly important in poor areas.However, where the costs associated withlimiting water services in this manner wouldhave a substantial impact on the viability ofthe water services provider, water servicesmay be disconnected after properprocedures have been followed, and untilsuch time as the consumer has made anarrangement for settlement of theoutstanding amount. Immediatedisconnection may be appropriate whereservices equipment has been tamperedwith, since this may jeopardise the health ofconsumers and the security of the system.

• Where a consumer’s access to waterservices has been limited and thatconsumer interferes with the restriction in amanner that renders the limitation lesseffective, the municipality may disconnectsuch a consumer until such time as theconsumer has made an arrangement forsettlement of the outstanding amount andpaid any fine that the water servicesprovider may impose.

• Where a consolidated municipal account isrendered and a municipality provideselectricity services, that electricity may beused as the preferred credit controlmechanism.

The limitation (and disconnection) of waterservices is a sensitive issue that requires thebalancing of rights and obligations. Consumershave a right to a basic water supply. However,this right also embodies the obligation toexercise that right reasonably and inaccordance with general limitations placed onthat right. At the same time, water servicesauthorities must ensure sustainable provision ofwater services and ensure the financial viabilityof the water services provider.

5.7 Pricing and tariffs

5.7.1 Tariff principles

A user tariff is just one means of raising revenueto pay for the costs of constructing and



operating water services. Alternative sources ofincome include taxes and subsidies of variouskinds. Nevertheless, tariffs are the primarysource of revenue for water and wastewaterservices in South Africa. (Over 80% of income inthe water sector is derived from the sale ofwater.) In terms of the government’s policy ofinflation targeting, it is desirable to maintaintariff increases below the rate of inflation.

Consumer incentives. Tariffs directly affect theusage or consumption of a service byconsumers. Tariffs that are based on soundeconomic principles can play an important rolein promoting the efficient use of resources andhence reducing wastage. For example, aconsumer who does not pay for water inrelation to the amount of water consumed hasno incentive not to waste water.

Agency incentives. Tariffs also affect thebehaviour of water services providers. Forexample, private water services providers willwant to maximise profits whereas public waterservices providers may have little incentive tocollect income owing to them. The likelybehaviour of water services providers inresponse to different incentives needs to betaken into account when setting tariff policyand tariff levels and specifying the financialcomponent of contracts (service deliveryagreements).

Promoting sustainability. Tariffs should be usedto promote sustainability that may beunderstood in two broad senses:

• Financial sustainability of the relevant waterservices institution means that, subject toexplicit external subsidies, tariffs should atleast recover fully capital (financing anddepreciation) costs in addition to operatingand maintenance costs.

• Environmental sustainability, the protectionof the environment, can be promoted bytariffs that ensure that externalenvironmental costs are internalised intothe tariff. A “rising block” tariff structurewhich discourages excessive use andreflects the marginal cost of expandingsupply capacity, is particularly helpful. Thisis regulated in terms of Section 10 of theWater Services Act. Where this is notadequate, other measures should beadopted to ensure environmentalsustainability.

Other tariff policy principles. Additionalprinciples that need to inform tariff policies aregiven in both the Municipal Systems Act as well

as the Water Services Act. Key principles aresummarised here:

• Equity. Tariffs should be applied equitably.

• Proportional to use. The amount individualusers pay for services generally should be inproportion to their use of that service.

• Affordability. Tariffs for basic water servicesshould be affordable.

• Reflect costs. Tariffs must reflect all of thecosts reasonably associated with renderingthe service.

• Differentiation. A tariff policy maydifferentiate between different categoriesof users, debtors, service providers, services,service standards, geographical areas andother matters as long as the differentiationdoes not amount to unfair discrimination.

• Transparency. Subsidies should be fullydisclosed.

5.7.2 Understanding the cost and pricing chain

The structure of the full cost of water supply andsanitation services and the related tariffs andcharges are shown in Figure 4.

Water resource management charge. Thischarge recovers the costs of water resourcemanagement including evaluating and issuinglicences, monitoring water resource qualityagainst the water resource objectives,detecting and prosecuting unlawful use,promoting water conservation and demandmanagement and removing and managingalien vegetation.

Raw water tariff. This tariff includes the waterresource management charge and recoversthe costs of (1) developing infrastructure tostore raw water, (2) repaying loans and intereston loans related to this infrastructure, and (3)operating and maintaining this infrastructure.

Bulk water tariff. This tariff includes the rawwater tariff and recovers the costs ofdeveloping the necessary bulk waterinfrastructure, repaying loans and interest, andoperating and maintaining this infrastructure.

Retail water tariff. This is the tariff to theconsumer. (It is also called the municipal watertariff in many cases.) This tariff includes the bulkwater tariff and recovers the costs of distributingwater to consumers (developing, operatingand maintaining the distribution infrastructure,



and all the business processes associated withthis, such as metering, billing, income collectionand consumer care).

Sanitation charge. This is the charge or tariffapplied to consumers for collecting humanexcreta and wastewater from their premises. Italso may include the costs of hygiene andhealth promotion. This charge may include thebulk wastewater tariff (see below) or the costsassociated with bulk wastewater treatment ifthis function is done by the same water servicesprovider which undertakes the collectionfunction.

Figure 4: Water cost and pricing chain

Bulk wastewater tariff. This tariff recovers thecost of treating wastewater. This tariff is usuallyapplied when one water services providerprovides a bulk wastewater treatment serviceto another water services provider. The tariff willinclude an effluent charge if implemented.

Effluent charge. This is a water resource chargebased on the “polluter pays” principle. Thischarge is not implemented at present. Thecharge will be implemented in future bycatchment management agencies.

treatment and return ofwater to the river

water resourcemanagement

storing raw waterin dams

raw water abstraction,bulk water treatment and

bulk water distribution

reticulationof water toconsumers

human excreta andwastewater collection

raw water tariff

bulk water tariff

retail water tariffconsumersanitation charge

bulk wastewater tariff

effluent charge

1catchment management charge

2

3

45

6

7



5.7.3 Responsibility for setting tariffs

The responsibilities for setting water andsanitation tariffs are summarised below:

Where DWAF or a water services authority isresponsible for tariff setting, due regard must bepaid to the need for the water services providerto be financially viable as well as to theimperative of equitable access to services.

5.7.4 The economic regulation of water servicestariffs

See section 7.

5.8 Water services providerresponsibilities

5.8.1 Financial viability

The key financial responsibilities of waterservices providers are as follows:

• to operate water services effectively andefficiently;

• to be financially viable; and

• to honour the services delivery agreementwith the water services authority.

(The general responsibilities of water servicesproviders are discussed in section 4.5.)

Financial viability is dependent on anappropriate services delivery agreement(contract) which matches service deliveryobligations (and the associated costs) with theability to generate the required revenue, takinginto account any available subsidies.

Once an appropriate contract (service deliveryagreement) has been put in place, a waterservices provider has primary control over twoimportant financial aspects of service provision:(1) controlling costs, and (2) managing revenuecollection.

Effective credit control is a critically importantcomponent of revenue collection.

Tariff / charge Responsibility Source of authority

Catchmentmanagementcharge

Catchment managementagency

National Water Act

Raw water tariff DWAF

Water board

Water services authority

DWAF’s raw water pricing strategy

Directly regulated by DWAF

National Water Act

Bulk water tariff Water board

Bulk water services providers

Directly regulated by DWAF

Water Services Act

Retail water tariff Water services authority Water Services Act andMunicipal Systems Act

Sanitation charge Water services authority Water Services Act andMunicipal Systems Act

Bulk wastewatertariff

Bulk wastewater servicesproviders

As for bulk water tariffs

Effluent charge Catchment managementagency

National Water Act



5.8.2 Credit control – retail water servicesproviders

Water services authority determines creditcontrol policy. The responsibility for establishinga credit control policy rests with a waterservices authority. (See section 5.6.6.)

The right to disconnect and/or restrict. In orderto protect the financial viability of a waterservices provider, a water services authoritymust give the water services provider the rightto disconnect and/or restrict water servicesconnections, subject to the general creditcontrol policy of the water services authority. Itmust be undertaken in such a way as to protectconsumer and public interests. (See below.)

Fair process. All disconnections and/orrestrictions must be done in terms of a fairprocess and as a result of the failure of aconsumer (or consumers) to fulfil theirobligations in terms of a mutually agreedcontract.

Non-domestic water supplies. Theimplementation of credit control in the case ofthe use of water for non-domestic purposes isstraightforward. A water services provider hasthe right to disconnect water services where aconsumer breaks its contract with the waterservices provider.

Domestic water supplies. The application of acredit control policy in the case of domesticwater supplies must seek to protect the right ofpoor households to receive a basic watersupply service at no cost in terms of the freebasic water policy. The right to a free basicwater supply is not an absolute right, however,and the abuse of the right to free basic watercan result in the restriction and/ordisconnection of the water supply, provided fairand equitable procedures are followed andspecial arrangements for indigent persons aremade. Where households act in a way thatmay harm the safety of others or the security ofthe system (for example, through unauthorisedconnections) immediate disconnection ispermitted.

5.8.3 Credit control – bulk water servicesproviders

Water boards and municipalities acting as bulkwater services providers have an obligation tofunction in a financially viable and sustainablemanner. Effective credit control mechanismsare an important component of any strategy toachieve sustainability.

The Water Services Act specifically authorisesbulk water services providers to limit and/ordisconnect bulk water services to waterservices providers that default on payment forservices provided. However, in view of theimplications of this for ordinary consumers, thisshould be regarded as a last resort.

The extent and scope of credit controlprocesses, procedures and mechanisms shouldbe addressed in the contractual relationshipbetween the water services authority and thebulk water services provider. In terms of theWater Services Act, these should provide for atleast:

• adequate notice to a water servicesauthority to pay for services provided;

• an opportunity for the water servicesauthority to make representations;

• alternative arrangements for payment ofthe amount due;

• notification of the mechanism that will beapplied in the event of non-payment; and

• notification of the MEC for localgovernment and the Minister of WaterAffairs and Forestry.

When a bulk water services provider negotiatesits credit control and debt collection process itshould take into account its financial viability,the need to support the sustainability ofservices, the effectiveness of such mechanisms,the impact of such mechanisms on theaffected community and the public interest.

It is recommended that the following principlesbe adhered to:

• Where the bulk water services provider isanother municipality (or a water board)every effort should be made to support thedefaulting water services authority inaddressing the reasons for non-payment.The principles of co-operative governanceand intergovernmental relations should beapplied.

• Where a water services authority fails toreact to actions taken in accordance withthe above-mentioned principles, the bulkwater services provider should request therelevant provincial executive and Ministerof Water Affairs and Forestry to intervene inaccordance with legislated processesguiding such intervention.



• Where the relevant provincial executiveand Minister of Water Affairs and Forestryfail to intervene in a manner that alleviatesthe non-payment, appropriate relief maybe sought in the Courts.


Department of Water Affairs and Forestry Planning, Delivery and Sustainability

6. Planning, Delivery and Sustainability

6.1 Introduction

This section deals with policies related to theplanning, delivery and operation of waterservices. The policies emphasise theimportance of integrated planning, theappropriate choice of technology and servicelevels, the effective delivery of infrastructure(physical investments) and the efficient andsustainable operation of services. In thecontext of water scarcity, water demandmanagement and conservation are criticallyimportant to all of these activities.

Integrated planning. One of the major lessonslearned since 1994 is the need to focus on anintegrated and planned approach to theprovision of water services infrastructure. Anintegrated approach focuses on programmesand ongoing operations, rather than only oninfrastructure construction. It seeks to promotea developmental approach that includesproper integrated planning, consideration ofthe total business cycle, and adequateattention to ongoing operations. The primaryinstrument of planning in the water servicessector is the water services development plan(WSDP). This plan requires the consideration ofthe physical, social, economic, financial,environmental and institutional aspects ofwater services provision. In particular, it mustreflect the intentions of the local government’sintegrated development plan (IDP), of which itforms part.

The choice of technology and service levels is avery important component of planning. For thisreason, policies related to these choices aredealt with as a separate section even thoughmany of these choices are made duringplanning.

The delivery of infrastructure, that is, investmentsin physical infrastructure (and the associatedcomponents such as capacity building) mustbe undertaken in terms of the water servicesdevelopment plan. It is important that projectimplementation arrangements are botheffective and efficient so as to maximise theuse of scarce resources. It should also beguided by objectives such as job creation andblack economic empowerment.

Operations. While the water services authorityis primarily responsible for the planning of waterservices provision, the water services provider isresponsible for all operational aspects. Policiesrelated to the operation of services emphasise

the need for efficiency, sustainability andfinancial viability, drawing on best practice.

Water demand management andconservation are especially important in thecontext of water scarcity. A holistic approachto water demand management andconservation requires that water demandmanagement be taken into account during theplanning, delivery and operating activitiesassociated with water services. Specificpolicies and strategies related to waterdemand management and conservation areset out in the last section.

Linkages. There is substantial overlap betweenthe content of this section and the rest of thewhite paper, and especially between thissection and section 5 (Financial framework)and section 7 (Monitoring, support andregulation). This is because the activities ofplanning, delivery and operation give practicaleffect to many of the policies contained in therest of the white paper.

Sustainability is the golden thread.Organisational, financial, technical andenvironmental sustainability is givenprominence in both the title and content of thissection because this is the golden thread thatmust run through all of the activities in the waterservices sector.

6.2 Planning

6.2.1 Planning by water services authorities

A framework for planning by water servicesauthorities is set out in the Water Services Act.The key instrument of planning is the waterservices development plan. This is designedand intended to be part of the relevantmunicipality’s IDP and should ideally beprepared as part of the same process.

The planning process

The key elements of the planning process areas follows:

• All water services authorities must developa water services development plan(WSDP).

• A new plan must be developed every fiveyears and the plan should be updated asnecessary and appropriate in the interimyears.



• The WSDP must be integrated with theintegrated development plan of themunicipality, as required in terms of theMunicipal Systems Act.

• The WSDP must integrate water supplyplanning with sanitation planning.

• The WSDP must integrate technicalplanning with social, institutional andfinancial and environmental planning.

• The WSDP must integrate with thecatchment management strategy.

• The planning process must take intoaccount the views of all importantstakeholders, including communities,through a consultative and participatoryprocess.

• The draft plan must be made available forpublic and stakeholder comment and allcomments made must be consideredwhen preparing the final plan.

• The contents of the WSDP must becommunicated to all importantstakeholders.

• A water services authority may not deviatesubstantially from its WSDP.

• A water services authority must reportannually on the implementation of theplan.

A municipality that is not a water servicesauthority is not required to develop a waterservices development plan. Nevertheless,municipalities in this position will still need tointegrate water related issues into theirintegrated development plan. There are twocases:

Where a district municipality is not a waterservices authority, the district should use theintegrated development plan to address issuesrelated to the co-ordination of water servicesbetween water services authorities in thedistrict.

Where a local municipality is not a waterservices authority, the local municipality willneed to summarise the implications of thedistrict level water services development planfor its own area and integrated developmentplan.

Linking planning and budgeting

The water services development plan offerscritical input into the municipal budget, notonly the capital budget but also the operatingbudget. The implications of investments forfuture operating costs are especially important.Budgets must provide for the costs of operatingand adequately maintaining assets, includingexpenditure on initiatives to improve operatingefficiency (for example, water managementprogrammes to reduce water losses). Close co-operation between the manager of waterservices and municipal finance officials isrequired.

Planning to provide services in unauthorisedsettlements. The provision of services to peopleliving on land without permission of the ownerof the land poses a challenge to water servicesauthorities. Water services authorities shouldseek to address the security of tenure issuesexpeditiously. In the interim, basic waterservices (including basic sanitation services)should be provided. In many cases,investments in Ventilated Improved Pit latrineswill prove to be a more satisfactory, cost-effective and sustainable solution than relianceon temporary bucket collection systems orchemical toilets.

6.2.2 Planning by water services providers

Business plans. All water services providers mustdevelop a water services provider businessplan. This plan should show how the activitiesof the water services provider will support theachievement of the desired outcomes of theWSDP. The business plan should be used as thebasis for the contract between a water servicesauthority and a water services provider.

The requirement that all water servicesproviders develop a business plan is new.

Where a water services authority is also thewater services provider

Where a local municipality is both a waterservices authority and the sole waterservices provider in its area, the waterservices development plan can fulfil thefunction of the water services providerbusiness plan and it is not necessary for themunicipality to develop a separate businessplan.



Where a water services authority contracts anexternal water services provider, the waterservices authority must ensure that the waterservices provider develops a water servicesprovider business plan.

Reporting. Water services providers must reporton progress in relation to the business plan atleast annually and provide any informationrequired by the water services authority formonitoring purposes on a monthly basis.

6.3 Technology and service levels

Making choices. The choice of technology andservice levels can have a very significantimpact on the financial viability andsustainability of services. Hence these choicesare a critical component of water servicesdevelopment planning. It is especiallyimportant that these choices are made in aninformed way, taking into account all of therelevant factors.

The role of minimum standards. Nationalgovernment has defined a set of compulsoryminimum “norms and standards” in terms of theWater Services Act. The intention of thesestandards is to protect the interests ofconsumers by ensuring that certain basicminimum standards are met.

Support versus regulation. Where possible,water services authorities should strive both tomeet and exceed these minimum standards.However, it is important to note that in the shortterm it will not be possible for water servicesauthorities to meet some of the minimumstandards in all cases as a result of very realresource constraints. In these cases, it is not theintention of national government to “punish”water services authorities for failure to meetthese standards, but rather to support waterservices authorities in their efforts to meet thesestandards. However, where water servicesauthorities do have the capacity to meet theseminimum standards and fail to do so, then theregulatory function of national governmentbecomes important in order to protectconsumer and public interests. Policies relatedto monitoring, support and regulation arediscussed in section 7.

Technology innovation. Technology innovationundertaken in the spirit of promoting theachievement of the policies set out in this whitepaper is encouraged.

A duty to provide basic water services. Everywater services authority has a duty to ensurethat at least a basic water supply and

sanitation service is provided to everyhousehold within its area of jurisdiction. Thisduty is subject to the availability of resourcesand to the “progressive realisation” of rightscontemplated in the Constitution.

A focus on services for all. When developing aninvestment plan as part of the WSDP, a waterservices authority should aim to provide basicwater services (as defined in this white paper)to all households within its area within areasonable period (five years).

Financing higher service levels. Only where allhouseholds already have a basic level of watersupply and sanitation service in a water servicesauthority area may national funds be used tofinance higher levels of service. Otherwise,service levels which are higher than basic mustbe funded or financed based on theassociated user charges and/or other localtaxes or tariffs.

Full life-cycle costs. When evaluatingalternative technology options, water servicesinstitutions should, wherever practical, considerthe full life-cycle costs of each option. Forexample, an assessment of the costs ofwaterborne sanitation should include not onlythe cost of the initial investment in sewers, butalso the associated costs of providingwastewater treatment capacity and thenecessary additional water supplies, as well asthe future operating and maintenance costs ofthese systems.

Design horizon. Investment planning shouldtake into account an appropriate planninghorizon and realistic projections of populationand income growth for design purposes so asto avoid the risk of over or under investment.DWAF, in consultation with other relevantdepartments, will provide guidance in thisregard.

Cost-effective design. Design should be cost-effective and seek to meet best-practicebenchmarks, taking into account operatingand maintenance requirements.

Affordability and sustainability. When choosingtechnologies and developing infrastructureinvestment plans, the associated revenues anduser charges/tariffs must be taken into account,making sure that the required tariffs areaffordable to consumers and that the waterservices provider is able to raise sufficientrevenues to cover its costs.

Linking tariffs to service levels. The tariffs andcharges that a user pays should, whereverpractical, be linked to the level of service



provided. Users with higher services should berequired to pay more per “unit of equivalentservice” compared to users with lower levels ofservice.

Free basic water. Wherever possible, provisionshould be made to enable provision of a freebasic water supply in terms of national policy.

Community consultation. An importantprerequisite for sustainable services is adequateconsultation with, and involvement in planningby, local communities. Consultation shouldtake place prior to investment in water services.

Consumer choice: designing for mixed levels ofservice. Wherever practical, infrastructureshould be designed to accommodate mixedlevels of service within communities, allowingconsumers to elect a level of service which suitstheir needs and which is affordable to them.

Use of controlled flow connections. In thecontext of free basic water, water servicesproviders should consider the benefits ofoffering households controlled flow connectionsthat can provide a basic supply of water cost-effectively.

Pre-payment meters in the context of free basicservices. Where pre-payment meters areinstalled, these must take into account the freebasic water services policy and allow foraccess to a basic amount of water at zerotariff.

Metering uncontrolled connections. Allunrestricted water connections must bemetered. Where this is not the case, a planmust be put in place to either restrict the supplyor to install a meter within a period of threeyears.

Integrated planning of water and sanitationtechnologies. Investments in water andsanitation services must be planned in anintegrated way, taking into account thefundamental linkages between water andsanitation services.

Design standards and non-domestic waterdemand. When designing water systems, non-domestic water demand must be taken intoaccount.

Water for income generating activities.Municipalities should plan not only to providewater services necessary for basic health andhygiene but also to support economic activitiesthat support the economic development andwell-being of communities. (See page 7.) The

provision of services which support commercialand industrial activities should be determinedby economic demand, that is, the ability ofusers of the service to pay for the service.Where there are grounds to subsidise theseservices, the subsidies should not come fromother water users, but rather from local ornational taxes. Planning should also take intoaccount the demand for water services tosupport economic activities.

Grey water. Where on-site sanitation systemsare provided together with on-site watersupplies, adequate consideration must begiven to the disposal of grey water.

Choosing between waterborne and on-sitesanitation. In general, on-site sanitation systemswill be most appropriate in rural and peri-urbanareas and waterborne or related systems will bemost appropriate in more densely populatedurban areas. This is because waterbornesystems are very costly to install, operate andmaintain where living densities are low.Exceptions to this general rule are rare. Thepotential threat of polluting the groundwater isoften given as a reason for precluding on-sitesanitation options. However, in the vastmajority of cases, the cost of treating thisground water or obtaining water from analternative source is more cost-effective thaninstalling and operating a waterbornesanitation system. In this context it is importantto note that studies have shown that theinadequate maintenance of waterbornesanitation systems poses a greater threat to theenvironment in South Africa than on-sitesanitation systems.

Eradication of bucket toilets. The bucketsystem is generally considered to be anunsuitable and inappropriate level of service.Unless compelling evidence to the contrary isprovided and there is consensus from thecommunity, all municipalities must identifyprograms for the eradication of bucket systemsand must set target dates to do this inaccordance with government sanitation policy.

Pit emptying. Water services authorities mustensure that appropriate arrangements for theperiodic emptying of pits (or appropriatealternative mechanisms) are put in place.

Water conservation and efficiency. Waterefficient fittings, appliances and practices canhave a major impact on conserving water andshould be incorporated into design standardsand practices wherever possible. Examples ofthese include: low volume shower heads, waterefficient taps, low volume flush toilets, manualrather than automatic urinals, water-wise



gardening methods and water efficientwashing machines.

Domestic plumbing leak repair. A commonproblem in many areas is leaking taps andtoilets. Even where houses are privately owned,water services authorities should considerproviding assistance for the repair of plumbingfittings as this can be a cost-effectiveintervention to reduce water services costs(both to the consumer and the water servicesprovider).

Pressure management and leakage control.Water services providers should adopt asystematic approach to reduce water leakage,taking into account costs and benefits.Pressure management is a cost-effective wayof reducing water losses and managingdemand. Technical innovations in this area,such as “smart” pressure reducing valves thatreduce pressures during off-peak periods, havebeen implemented successfully in South Africa.

Management information systems The effectivemanagement of any business relies onavailability of relevant and timely information.Water services institutions should strive toimplement effective management informationsystems.

6.4 Delivery of infrastructure

Ownership of assets. All water services assetswithin a water services authority area areowned by the water services authority, exceptwhere assets are owned by nationalgovernment or national government-ownedentities, and except where these assets arelocated on private land. In the case of assetson private land, ownership of assets may passinto the hands of the person owning the land inthe following circumstances:

• where an “on-site” sanitation facility isprovided to a household; and

• where assets are required for services toconsumers served by a water servicesintermediary who owns the land on whichthe consumers reside and where thatintermediary has made an appropriatecontribution to financing the cost of theassets.

In other circumstances the water servicesauthority must register a servitude across theprivate land where its assets need to crossprivate land. Unless there is compellingevidence to the contrary, this does not apply totrust or communal land.

Asset management. A water services authoritymust maintain a register of water services assetsand put in place a system to manage theseassets in terms of the maintenance andrehabilitation plan. (See section 6.2.1.)

DWAF-owned schemes. DWAF is in the processof transferring all of its water services schemesto water services authorities. This transfer istaking place as agreed between DWAF andSALGA and in terms of the following policyprinciples:

• The receiving municipality will be the WSAin whose area of jurisdiction the waterservices works are situated.

• The receiving municipality will be the districtmunicipality that is the WSA, or those localmunicipalities that have been authorisedby the Minister of Provincial and LocalGovernment.

• WSAs without WSP capacity will appoint anappropriate WSP for schemes to betransferred.

• DWAF will support WSAs to identifyappropriate WSPs for transferred schemes.This support will be negotiated as part ofthe transfer agreement.

• The extent to which schemes will berehabilitated beyond meeting minimumsafety requirements will be negotiated withthe receiving WSA and will be dependenton funding from National Treasury.

• Transfer of staff will be in accordance withthe relevant legislation and agreementsreached at the PSCBC, and will beconducted in a fair, transparent andunbiased manner.

• Water services authority and water servicesprovider capacity support will be providedby DWAF through the transfer process andwill be negotiated between DWAF and thereceiving WSA in terms of the transferagreement. Institutional capacity supportwill be limited to capacity necessary for theongoing sustainability of the schemes to betransferred.

• The transfer of water services schemes andrelated staff should not negatively impactupon the continued delivery of services.

• The levels of service that are currentlybeing delivered by the DWAF-operatedschemes should be maintained and where



possible improved over time. This includesthe delivery of free basic services toindigent communities.

The question as to whether the ownership ofassets can be transferred to an institution otherthan the water services authority is still to beclarified (for example in cases where the waterservices authority is either unable or unwilling totake transfer of the assets.)

Planned projects. All water servicesinfrastructure must be developed inaccordance with the water servicesdevelopment plan and in conformity withrelevant standards and guidelines.

Implementing agents. An implementing agentis an organisation appointed by the waterservices authority, or by national governmenton behalf of the water services authority, totake responsibility for managingimplementation of a number of projectsthroughout the project cycle, includingfeasibility, project planning, construction andoperator training. The implementing agentmay take responsibility for contracting andpaying the individual contractors andconsultants or its role may be limited to settingup the contracts for the water services authorityto sign, and to authorising payments to suchcontractors and consultants.

Where a water services authority does not haveadequate capacity to implement infrastructureprogrammes and/or projects, it may appoint animplementing agent to implement waterservices infrastructure on its behalf in terms ofapproved procurement procedures.

6.5 Operating water services

6.5.1 Separating the roles of authority and provider

Where a water services authority is also a waterservices provider, a clear distinction betweenthe water services authority and the waterservices provider functions must be made. Theprimary water services authority functions arethose of planning and regulation. (See sections6.2 and 7.) The primary function of a waterservices provider is to operate the waterservices infrastructure. Policies related to thisfunction are set out below. A water servicesprovider may also manage the delivery ofinfrastructure (“capital projects”) on behalf ofthe water services authority.

6.5.2 Performance management

All water services authorities are required toimplement a performance managementsystem in terms of the Municipal Systems Act.This system of performance managementshould be closely linked to the commitments ofthe water services provider in terms of itscontract with the water services authority,whether such a contract is “in-house”, in thecase of a municipal water services provider, orwith an “external” body. In either case thecontract and its performance managementimplications must be consistent with the WSDP.

The requirements for a performancemanagement system may be divided into“statutory” and “voluntary” components. In theformer case the requirements to report oncertain performance areas will be laid down bythe water services authority while in the latterthe requirements will be set by the waterservices provider itself in order to promoteefficient and good service to consumers. Inboth cases the system must be based on keyperformance areas with key performanceindicators set for each area. The water servicesprovider must collect the necessary informationto measure performance in relation to theseindicators and must establish an appropriatereporting system for recording suchperformance. The water services authority willrequire reporting on certain of theseperformance indicators, in terms of thecontract, to be used for monitoring purposes.(See section 7.3.)

6.5.3 Benchmarking and promoting best practice

The Department of Water Affairs and Forestrywill play a leading role in developing a set ofkey performance indicators and best practicebenchmarks for the purposes of:

• comparative evaluation of theperformance of water services authorities;and

• comparative evaluation of water servicesproviders.

A proposed minimum set of key performanceindicators for water services authorities ispresented in Annexure 1.



6.5.4 Improving management

Good management is key to effective waterservices provision in South Africa. Wheremanagement capacity is lacking, the waterservices provider must develop a capacitybuilding strategy that may be based ontraining, recruitment or contracting. The use ofappropriate forms of management contractingas a means to improving the effectiveness ofwater services providers in South Africa isencouraged.

6.5.5 Maintenance and rehabilitation

It is essential for water services authorities toprotect their assets by ensuring that anappropriate maintenance plan is developedand implemented. This plan must be based onthe principle of preventative maintenance inorder to ensure, as far as this is practical, thatdamage to assets is prevented before it occurs.

The water services authority must ensure thatthe maintenance plan is part of the waterservices development plan and that this plan isimplemented in terms of a contract with thewater services provider. The water servicesprovider must give the maintenance plan duemanagement attention through theimplementation of adequate maintenanceprocedures and practices.

Assets must be rehabilitated and/or replacedbefore the end of their economic life. Thisrequires the planning and implementation ofasset rehabilitation projects and ensuring thatthe necessary capital funds are madeavailable.

6.5.6 Community involvement

Adequate consultation, education andcollective and individual accountability forservices is prerequisite to cost recovery andeffective management of service delivery.

6.5.7 Consumer care

Water services authorities and providers shoulddevelop adequate consumer/customer carefacilities and should adopt a customer-focusedapproach to service delivery.

6.5.8 Proactive rather than reactive

Pro-active management is one of the keyfactors that characterise the differencesbetween the operation and management ofcommercial enterprises compared to the

public sector. Water services providers shouldlearn to be pro-active with respect tomarketing, customer focus, preventativemaintenance and management informationsystems.

6.6 Water conservation and demandmanagement

Water resources need to be managed in anintegrated manner. Historically, more emphasishas been placed in South Africa on watersupply than water demand management.However, in the context of water scarcity andthe unequal distribution of water resources inSouth Africa, water conservation and waterdemand management are becomingincreasingly important. The importantrelationship between water supply and waterdemand is shown in the context of anIntegrated Resource Planning Process in Figure5 (with the traditional supply side planningshown in blue, and the water demandmanagement and integrated resourceplanning components shown in yellow). Whereappropriate planning has not been done,licence to abstract additional water may bedenied in terms of the National Water Act.

Effective water conservation and demandmanagement rests on an understanding of:

• water demand and, in particular, the keyfactors influencing demand;

• options to reduce wastage throughimproved management;

• options to reduce inefficient water usethrough technological innovation, financialincentives, changes in habits, institutionalincentives and legislative changes; and

• options to reuse water through recyclingand finding alternative uses for wastewater.

Water demand management is best promotedthrough a multipronged approach includingthe following:

• Legislation and by-laws. Key legislativeinterventions include the metering ofunrestricted connections, the banning ofautomatic flushing urinals, and the settingof water-use efficiency standards for waterfixtures and water-using appliances.



• Improved management. Effectivemanagement of water services can greatlyreduce water losses and improve billingand revenue collection, all of which willhave a significant impact on waterdemand. Implementing appropriate waterservices provider contracts is probably thebest means of promoting improvedmanagement.

• Technological innovation. Changes intechnology can have a significantinfluence on water demand. Choice oftechnology is usually a function of theprevailing set of prices. The appropriatepricing of water in terms of soundeconomic principles, especially forindustrial water use, will go a long way topromoting technological innovation andhence managing water demand.

Figure 5: Integrated resource planning

• Pricing. In addition to promotingtechnological innovation (see above), theappropriate pricing of water will result inmore effective and efficient water use bydomestic and other consumers. (Waterpricing policy is discussed in section 5.7.)

• Education. Promoting public andconsumer awareness of the preciousness ofthe water resource and the need to use itwisely is an essential strategy for waterdemand management.

water demandforecast

integrated waterresource plan

evaluate demand options

evaluate supply

options

implementsupply projects

tariff design

implementdemand management

Catchment Management Strategy

Water Services Development Plan


Department of Water Affairs and Forestry Support, Monitoring and Regulation

7. Support, Monitoring and Regulation

7.1 Introduction: an approach tosupport and regulation

The purpose of support, monitoring andregulation is to facilitate the achievement ofthe sector goals and targets outlined in section2 in the best manner possible.

The need for balance. In South Africa there aresignificant disparities in the capacity of waterservices institutions between and within regions.In this context, it is important to strike theappropriate balance between support (inorder to develop capacity to meet sectorobjectives) and regulation (in order to ensurethat policy objectives are met). On the onehand, national government will strive to assistlocal government and other water servicesinstitutions in their task of managing waterservices effectively. On the other hand, whereadequate capacity exists, water servicesinstitutions will be held accountable forperformance.

A focus on support. Over the next five or moreyears, national government will focus onsupporting water services authorities and otherwater services institutions so as to promote theeffective delivery of water services and theachievement of the sector goals and targets.A great deal can be achieved by helping tobuild the capacity of water services institutionsand by encouraging the establishment ofappropriate contractual relationships betweenwater services authorities and water servicesproviders. Nevertheless, it is still necessary toregulate water services authorities and to haveoversight of the contractual relationshipsbetween water services authorities and waterservices providers. This is especially the casewhere there is adequate capacity, for examplein the metropolitan areas.

7.2 Support

7.2.1 Methods of support

Government will provide support to waterservices institutions in the following ways:

General support that is available to allwater services authorities and other waterservices institutions, for example, watersector training and the development ofguidelines and tools.

Targeted support to specific water servicesauthorities and public water servicesproviders. Types of targeted support couldinclude strategic advice as well as financialand other material support.

Interventions. Where general and targetedsupport efforts are not successful, provincialand national government could intervenein order to protect the public interest.Interventions are a form of regulation andare discussed in section 7.4.

7.2.2 Building water services authority capacity

It is the responsibility of national and provincialgovernment to support local government in theperformance of its duties and responsibilities.Capacity needs to be developed in thefollowing broad areas:

• planning (financial, technical, social,environmental and institutional);

• infrastructure delivery (managing “capitalprojects”);

• establishment of water services providerarrangements;

• regulating water services providers andconsumers (by-laws, contractmanagement); and

• communication and education.

Capacity building will be accomplished by thefollowing means:

Financial assistance. In future, financialassistance to water services authorities for thepurposes of developing capacity will bechannelled through the consolidated municipalcapacity building grant.

Training. Use will be made of sector-based andother training initiatives including the LocalGovernment SETA.

Knowledge transfer. One of the most effectivemechanisms of capacity building is theappropriate transfer of knowledge andexperience between water services authorities.The primary mechanisms for this are formalforums such as the South African LocalGovernment Association (SALGA), the Instituteof Municipal Financial Offices (IMFO), the Water



Institute of South Africa (WISA), the Institute ofMunicipal Engineering of Southern Africa(IMESA) and informal contacts betweenmunicipalities facilitated by these or othermechanisms, such as the Cities Network.

Guidelines and tools. As one component ofsupport, the Department of Water Affairs andForestry has developed, and will continue todevelop, a suite of guidelines and tools to assistboth water services authorities and waterservices providers. These guidelines and toolsare available on the DWAF web-site(www.dwaf.gov.za).

Direct strategic advice and institutionalsupport. This type of support is based on waterservices authority capacity assessments andthe water services provider challenges thatwater services authorities are facing. Theprimary objective of this support is to ensurethat water services authorities are able toaddress the different functional areasnecessary to fulfil the authority function, such asthe development of water services policies andby-laws, tariff determination and equitableshare allocation, capacity to addressinfrastructure backlogs, water servicesdevelopment planning, decision makingconcerning water services provider institutionalarrangements and contract management.Through developing water services institutionalcapacity, water services authorities are betterable to engage with water services supportprogrammes, as well as address majorchallenges such as free basic water,sustainability issues, transfer and theimplications of the allocation of powers andfunctions between district and localmunicipalities.

Co-ordination of national support. Futuresupport from the Department of Water Affairsand Forestry will be driven by the needs,priorities and challenges identified by waterservices authorities so that support is responsiveto local government challenges. In this regardnational government will develop an overallsupport strategy in consultation with localgovernment to ensure co-ordinated supportand optimal use of resources.

Establishing water services providerarrangements. Where water services authoritiesdo not have the capacity to undertake thewater services provision function themselves(either for the whole area or in parts of theirarea), they need to identify and appointexternal water services providers. The processof establishing water services providerarrangements must follow the policies set out inthis white paper. The Department of Water

Affairs and Forestry will provide generalguidelines as well as targeted support to waterservices authorities to assist them in this process.

7.2.3 Building water services provider capacity

There is a wide disparity in the capacity ofwater services providers across the country fromrelatively well-resourced providers inmetropolitan areas and many towns to veryunder-resourced and under-capacitatedproviders in many small towns and rural areas.

National government will provide support forthe establishment of effective water servicesproviders, especially where water servicesauthorities are weak, where there are noeffective water services providers in place andwhere national water services assets aretransferred to water services institutions.

Developing water services provider capacity inthese areas requires a multipronged strategy.DWAF will develop and implement a strategy tosupport the development of effective waterservices providers. Any direct financial supportprovided for the purposes of assisting theestablishment of water services providers will bedone in terms of a well-defined policy andtransparent criteria.

National government will not provide directfinancial support for the operation of waterservices except through the already establishedfunding channels such as the equitable share.(See section 5.)

7.3 Monitoring

Monitoring is an essential tool needed foreffective support and regulation. Relevant,timely and reliable information can make anysupport given more appropriate and effectiveby informing the nature and extent of supportneeded. Similarly, monitoring will help toidentify instances where interventions areneeded to protect the public interest.

Consumers are in the best position to monitorthe effectiveness of water services provision.They are the first to experience the effects ofpoor, inadequate or absent services. Therefore,the most important and effective monitoringstrategy for the sector is strengthening thevoice of consumers, that is, providingappropriate communication channels forconsumers to voice their concerns.

It is the responsibility of water servicesauthorities to put into place mechanisms forfacilitating, listening to and responding to



consumer and citizen feedback on the qualityof services provided.

In addition to this, consideration should begiven to supporting the development ofconsumer organisations representing theinterest of water services consumers. Theseorganisations should also have directrepresentation on the National Water AdvisoryCouncil.

Water services authorities must report annuallyon progress in relation to their water servicesdevelopment plans. This is also an importantmonitoring tool, both for consumers and citizensin the water services authority areas as well asfor provincial and national government. Whilethe water services development plan isprimarily a planning tool for water servicesauthorities, it offers an efficient instrument fornational or provincial monitoring andregulation, requiring minimal additional effort ifproperly compiled.

Water services providers must report regularly towater services authorities on performance inrelation to their business plans and the contract(service delivery agreement). This is animportant monitoring tool for water servicesauthorities.

7.4 Regulation

7.4.1 Objectives of regulation

The purpose of regulation is to ensure thatgovernment objectives are met. Within thewater sector, government has the following keyobjectives:

• Social objectives: to ensure the provision ofbasic services (especially the extension ofservices to the poor), to ensure affordabilityof basic services, and to protect consumers(with respect to quality of service andhealth considerations).

• Economic objectives: to promoteeconomic development through effectiveand financially viable water servicesinstitutions, adequate investment ininfrastructure, the appropriate pricing ofwater and wastewater services, and theefficient use of water.

• Environmental objectives: to promoteenvironmental sustainability and to protectthe environment through the appropriateregulation and management of waterresource abstractions and discharges, andthrough the promotion of water

conservation and demand management.(Water resources are regulated in terms ofthe National Water Act.)

Policies and regulation must seek to strike theappropriate balance between these objectivesand must be developed in accordance withsound principles.

7.4.2 Principles of regulation

Institutional clarity: There must be a cleardefinition of the respective roles andresponsibilities of those involved in regulation.

Completeness and consistency. The regulatoryframework should be complete and applyconsistently across the sector.

Respect the executive authority of localgovernment. In terms of the Constitution, localgovernment has executive authority to providewater and sanitation services.

Integrated with local government regulatoryframework. The regulation of water servicesmust be integrated with the overall regulatoryframework for local government.

Representation of stakeholders. Regulationmust ensure that the interests of all stakeholdersare adequately heard, whilst none of themshould have excessive influence. The twoprimary stakeholders are consumers(households and businesses) and water servicesproviders. Much of regulation is aboutbalancing the respective interests of these twostakeholders.

Capability. The regulatory framework shouldbe neither complex nor onerous and should bematched to the capabilities of water servicesauthorities and water services providers.

Flexibility. A “one size fits all” regulatoryapproach is not appropriate in the SouthAfrican context. The regulation of a largemetropolitan water services provider poses anentirely different set of challenges compared tothe regulation of a community-based waterservices provider managing local water andsanitation services in a small rural community.

Regulating performance. Wherever practicaland appropriate, emphasis will be placed onregulating performance (in terms of contractsor agreed plans) rather than absolutecompliance with stated regulations. In thecontext of developmental local government,this is a more flexible model and is moreappropriate to the South African context.



Balancing standards and costs. An appropriatebalance needs to be struck between desirablestandards and the costs associated withmeeting these standards.

Support water resource management. Theregulatory initiatives in the water services sectorshould support and integrate with waterresource management.

Dispute resolution. The primary mechanism forthe regulation of water services providers is bycontract. Wherever practical, contractualdisputes should be resolved through existingarbitration mechanisms rather than relying onthe costly and lengthy process of litigation.

Support rather than punish. Whereverpractical, the regulatory emphasis will beplaced on support rather than punishment. Thisis in the spirit of co-operative governance. Thiswill be promoted through positive incentives forimproved performance and by assistinginstitutions where performance is less thanadequate.

7.4.3 What is regulated?

In light of both the objectives and principles ofregulation set out above, the key things to beregulated in the water services sector are thefollowing:

• Access to services: Are appropriateinvestments being made to extend servicesto the poor?

• Technical standards. Are minimumtechnical standards being met?

• Quality of service: Are water servicesprovided in a reliable manner? Is thequality of water adequate? Are consumersable to exercise their rights?

• Pricing: Are water services appropriatelypriced so as to ensure the affordability ofbasic services but also to promoteeconomic and environmental objectivesand to ensure the financial viability of waterservices providers?

• Investments. Do investment decisions takeinto account the long-term implications forsustainability?

• Efficiency of service. Are water servicesprovided efficiently?

7.4.4 The regulatory framework

The key elements of the monitoring andregulatory framework are set out in Figure 6.

National government is the sector regulator

Within the framework of the Constitution,national government is the overall regulator ofthe sector. This regulatory role takes fourprimary forms:

• the setting of national norms andstandards, including the specification ofcertain planning requirements and theregulation of tariffs;

• the regulation of water services authoritiesin terms of these norms and standards;

• the regulation of contracts between waterservices authorities and water servicesproviders; and

• the direct regulation of organs of state (forexample, government-owned andcontrolled water boards).

The key elements of the regulation of waterservices authorities by national government areas follows:

• Provision of basic services. Water servicesauthorities must take reasonable steps torealise the right of everyone to have abasic water supply and sanitation service,subject to certain limitations, including theavailability of resources and the right to limitor discontinue the provision of waterservices if there is a failure to comply withreasonable conditions set for the provisionof services.

• Standards. Water services must beprovided in terms of any national normsand standards that may be prescribedfrom time to time relating inter alia to waterquality, effective and sustainable use ofwater and operational efficiency andviability.

• Tariffs. The tariffs must be set in terms ofnational norms and standards. (See section5.)

• Planning. Water services must be providedin terms of a water services developmentplan. (See section 6.)



Figure 6: Water services monitoring and regulatory framework

• Contracting with water services providers.The process of contracting and the contentof such contracts are regulated by nationalgovernment.

• Monitoring water services providerperformance. The water services authoritymust monitor the performance of anywater services providers within its area ofjurisdiction to ensure compliance withnational norms and standards and thecontract.

• By-laws. The minimum scope of themunicipal by-laws related to water servicesprovision is specified by nationalgovernment.

• Reporting. There is a duty placed on waterservices authorities to report to nationalgovernment on the performance of thewater services authority as it relates to thewater services development plan.

Water services authorities regulate the provisionof water services

The key elements of the regulation of waterservices by water services authorities are asfollows:

• Accountability to citizens. Democraticlocal government, as the water servicesauthority, is ultimately accountable to itscitizens for the effective delivery of servicesto meet its citizens’ needs.

• By-laws. The municipality regulates waterservices within its area in terms of a set ofby-laws that it must promulgate. These by-laws set out the general rights, duties andresponsibilities of consumers with respect tothe activities related to water services.

• Water services provider contracts. Where amunicipality contracts with a water servicesprovider, the municipality regulates thewater services provider by contract. (Evenwhere the municipality is itself the waterservices provider, the municipality mustenter into a contract between themunicipality as authority and themunicipality as water services provider.See section 4.5.) Any contract developedmust be consistent with national norms and

Water ServicesAuthority

government

• planning requirements• standards• tariffs

(1) sector targets + funds(2) regulation of contracts(3) national norms and standards

WSP = WSA

Constitution

external WSP WSP = organof state

audits against WSDP

consumers consumers consumers

reports with respect tobusiness plans and contracts

direct control

consumer contracts

service delivery agreements



standards. All contracts are subject tonational regulatory oversight.

• Business plans. All water services providersare required to prepare and report againstbusiness plans.

• Consumer contracts. All water servicesproviders must enter into contracts withtheir consumers setting out the general andspecific rights, duties and responsibilitieswith respect to the provision of waterservices to each consumer or group ofconsumers.

• Reporting. Water services providers have aduty to report regularly to water servicesauthorities on operating performance vis-à-vis their contract and business plan.

7.4.5 Enforcement of regulations

A critical question to be asked is: what happensif regulations are not adhered to? Or in otherwords, how can regulations be enforced? Thereare three different cases to consider:

1. A consumer breaks a by-law or fails to meetthe contractual obligations with the waterservices provider.

This case is straightforward. Theconsequences and remedies must beprovided for in terms of the relevant by-laws and consumer contract.

2. A water services provider fails to meet itscontractual obligations.

• The water services provider is a municipality(but not the relevant water servicesauthority).

• The water services provider is a municipal-owned entity.

• The water services provider is a waterboard or government-owned entity.

• The water services provider is a privatecompany.

• The water services provider is a community-based organisation.

These cases should be straightforward. Awater services authority must have acontract (service delivery agreement) andthis contract must specify theconsequences and remedies wherecontractual obligations are not met.

3. The water services provider is the waterservices authority.

This case is dealt with below.

A water services authority fails to conform tolegislative requirements.

Where a water services authority (or a waterservices authority acting as a water servicesprovider) fails to conform to legislativerequirements, then national and provincialgovernment will, in the first instance, seek toremedy this situation through general andtargeted support. (See section 7.2.) Wheretargeted support fails to achieve the desiredresults, then provincial and nationalgovernment may intervene in terms of anintervention policy and strategy. (See below.)

7.4.6 Interventions

The regulation of one sphere of government byanother. In terms of the Constitution, localgovernment is an independent sphere ofgovernment. The Constitution assigns to localgovernment the executive authority for watersupply and sanitation (water services), includingsetting tariffs and making by-laws. Provincialand national government may not take actionsthat undermine local government’s ability toexercise this executive authority. Thisdecentralised structure of governance relies onco-operation between the different spheres ofgovernment and means that a nationalregulator must respect the independent rightsand duties of local government whenregulating. Nevertheless, national governmentcan enforce legislation provided due process isfollowed (see below).

Enforcing legislation – inter-government issues.National government and provincialgovernments are obliged to support andstrengthen the capacity of municipalities andto see to the effective performance bymunicipalities of their functions, by regulatingthe exercise of this executive authority. Inexercising these roles, national governmentmust apply the principles of co-operativegovernance and intergovernmental relations asset out above and contained in Section 41 ofthe Constitution. These principles require allspheres of government (and all organs of statewithin each sphere) to co-operate with oneanother in mutual trust and good faith byassisting and supporting one another, avoidinglegal action against one another; and makingevery reasonable effort to settle disputes andexhaust all other remedies before approachinga court to resolve a dispute.



Legal action. National government must, in thefirst instance, support municipalities inaddressing the situation that gives rise to non-performance. Notwithstanding the above, inspecific circumstances national governmentwill need a mechanism that will allow it to actmore decisively in respect of municipalities. If,despite all efforts, the local authority refuses toperform (or is negligent in performing), nationalgovernment may resort to legal action. It islikely that this action will be of a civil rather thancriminal nature which will allow for a range ofremedies that may prohibit municipalities fromundertaking certain actions or obligemunicipalities to take certain actions.

Direct interventions. Interventions can rangefrom providing assistance with drafting by-lawsto running of the water services for a limitedperiod of time. Although intervention bynational and provincial governments issupported by the Constitution and provided forin legislation (Constitution, Sections 100 and139; the Water Services Act, the MunicipalSystems Act and the draft Municipal FinanceManagement Bill), direct intervention should bea last resort. Where interventions areundertaken, these must be co-ordinatedthrough provincial government and DPLG.Section 63 of the Water Services Act needs tobe reviewed to improve its effectiveness.

7.4.7 Regulatory policy issues still to be resolved

Although much of the overall regulatoryframework as set out above is quite clear, thereare a number of specific policy issues that stillneed to be resolved. These are discussedbelow.

The regulation of water boards. While waterboards (as water services providers) willincreasingly be regulated in terms of contractswith water services authorities, the specificapproach and detail will depend on the future

institutional model for water boards (see section4.6) as well as the broad framework for theregulation of state-owned enterprises.

Regulatory independence. Currently, thenational regulatory function lies with the Ministerof Water Affairs and Forestry and is exercisedthrough DWAF. During the first round ofconsultations, many stakeholders expressed theview that an independent regulator would bepreferable. However, in the short to mediumterm, there are no plans to take the regulatoryfunction out of DWAF but rather to develop thefunction within DWAF. In the longer term thepossibility of an independent regulator outsidegovernment should be reconsidered.

Regulation of management contracts. It ispossible for water services providers to enterinto management contracts which aresignificant both in terms of the value of thecontract and the number of consumersaffected. These management contracts arenot directly regulated at present. There is acase to be made for direct national regulation(or at least regulatory oversight) of thesecontracts.

Economic regulation. The current regulatoryframework provides no practical guidance ona number of key aspects of economicregulation including the following: how todetermine efficient costs, what a reasonablerate of return on assets is, how depreciationshould be calculated, how to value assets, andwhether prices should be regulated based onrate of return of assets, cost-plus regulation,price cap or a cap on profits. Further workregarding this is to be done, and the basicmanagement capacity of water servicesinstitutions is currently being developed.


Department of Water Affairs and Forestry The Way Forward

8. The Way Forward

This is a draft white paper. Some key policyissues remain unresolved, including:

• the ownership of assets (should all waterservices assets be owned and controlled bywater services authorities?);

• the future role of water boards (regionalgovernment-owned entities versus waterservices authority-owned entities);

• some aspects of the regulatory framework,particularly with respect to the regulation ofwater boards and policies and guidelines

with respect to economic regulation (theregulation of tariffs); and

• the policies governing the transfer of DWAF-owned and controlled assets to waterservices authorities.

This draft white paper will be used as the basisof a final round of consultation with allstakeholders. After this consultation process, afinal white paper will be prepared forsubmission to Cabinet before the end of theyear.


Department of Water Affairs and Forestry Annexure 1

Annexure 1

Proposed minimum set of key performance indicators

(To be reported by water services authorities in terms of the annual water audit)

Name Description Definition

Access to services

Access to water % of households with at least a basic water service

Access tosanitation

% of households with at least a basic sanitation service

Free basic water % of households with access to free basic water

Free basicsanitation

% of households with access to free basic sanitation

Water management

WSParrangements

Existence of WSParrangements

% of the WSA area with WSP arrangements

Water losses Unaccounted-forwater

(Bulk water supplied less water sales) / (bulk watersupplied)

Water is tested Frequency of sampling for testing

Safe water Water supplied is safeto drink

% of samples meeting standard

Operations

Reliability ofsupply

Supply interruptions Number of days in year during which supply is notavailable to consumers

Staffing Adequacy andefficiency of staffing

Staff per 1000 water and sanitation connections

Financial

Maintenance Adequate expenditureon maintenance

Proportion of expenditure spent on maintenance

Depreciation Income statementreflects cost ofdepreciation of assets

Depreciation charge as % of replacement cost of assets

Use of subsidies Subsidisation of waterservices to the poor

% of equitable share spent on subsidising water servicesto poor households

Payment levels Payment levels byconsumers that areexpected to pay

% payment rate by consumers that are expected topay


Department of Water Affairs and Forestry Annexure 2

Annexure 2

List of Relevant Policies and LegislationRelating to Water Services

White Papers

White Paper on Basic Household Sanitation – September 2001

White Paper on Municipal Service Partnership – April 2000

South Africa’s National Housing Policy – March 2000

White Paper on Environmental Management Policy – April 1999

White Paper on Local Government – March 1998

Transformation of the Health System White Paper – April 1997

Water Policy White Paper – April 1997

Water Supply and Sanitation Policy White Paper – November 1994

Legislation

The Division of Revenue Act 5 of 2002

The Draft Health Bill, 2001

The Local Government Financial Management Bill, 2000 (in Parliament)

The Local Government: Municipal Systems Act 32 of 2000

The Public Finance Management Act 1 of 1999

The Local Government: Municipal Demarcation Act 27 of 1998

The Local Government: Municipal Structures Act 117 of 1998

The National Water Act 36 of 1998

The Water Services Act 108 of 1997

The Intergovernmental Fiscal Relation Act 97 of 1997

The Local Government Transition Act 97 of 1996

The Constitution of the Republic of South Africa Act 108 of 1996

The Health Act 63 of 1977

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