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Establishment and Implementation Challenges Theme 3. Based on Johannesburg Water (JW) Nelspruit Concession Emfuleni Local Municipality (ELM). OBJECTIVE. Share implementation processes Look at processes that have taken place to date Analyse key success factors
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Establishment and Implementation Challenges Theme 3 Based on Johannesburg Water (JW) Nelspruit Concession Emfuleni Local Municipality (ELM)
OBJECTIVE • Share implementation processes • Look at processes that have taken place to date • Analyse key success factors • Highlight key activities which: • Are required for successful implementation • Informs the process • Address risks and mitigating strategies in implementing section 78 decisions • Best practice for designing a delivery mechanism
Cases that will be addressed • Johannesburg Water • Nelspruit Concession • Emfuleni Local Municipality
Background to JW • The iGoli solution was to establish a number of wholly owned private utility companies, capable of becoming self-sufficient through the raising and retention of user fees on specific services sold to individual consumers • The council set up separate, wholly owned utility companies • Utilities are separate legal entities each with • A board of directors, • A managing director • Service Delivery Agreements were signed with each utility • A water and sanitation utility, Johannesburg Water, was established in January 2001.
The Operational Challenges faced by the new company (JW) • UAW was 41.6% on 1999 • Sustainability was threatened • Service Delivery was not taking place as envisaged • Lack of capacity
Was there sufficient Political Support? • It was unclear whether Council was fully committed towards the process • There is insufficient knowledge regarding the change from public to private entity • Conflict of interests regarding the change from public to private company
Poor Information • City of Johannesburg resulted from merging of five municipalities to provide services • The Municipality local council data assumptions were insufficient and inaccurate. • There was no asset register • No accurate record of debtors list or debtors outstanding • No reliable record of liabilities • Impacts on contracting as well as regulation
Other limitations • The City of Johannesburg (CoJ) was left with insufficient skills to carry out regulator functions as most skills were transferred to the Utility • Regulator functions carried out by 3 depts: • WSA manager • Shareholders unit • Contract management unit • Service Delivery Agreement (SDA) deliverables were not sufficiently defined • CoJ retained meter reading and billing of the majority of customers • The process was viewed as privatisation
Overcome the Risks • Continuous communication • Have a political driver for the process • Clear roles and responsibilities • Build capacity • Labour Support • Good governance
Communication • Develop a participative relationship with stakeholders and key role players to ensure that there is a full understanding • Develop an understanding of perceptions and objectives of key role players • Participate pro-actively in the policy and decision making process • Participate in community forums and projects • Develop effective awareness and education • Participate in campaigns on the service delivery agreement issues to ensure complete stakeholders “buy in”
Identify a Key Political Driver/ Custodian • Ensure custodian is aware of all relevant issues • Custodian to interact with stakeholders to facilitate buy-in • Custodian ensures council support
Ring Fence Roles and Responsibilities • Utilise performance management clauses and appropriate penalty mechanisms • Implement an integrated contract management system • Conduct regular stakeholder meetings
Build Capacity • Capacitate regulator • Invest in management development • Invest in skills development and capacity building • Conduct skills audit and develop strategies to overcome the gaps • Implement individual performance management systems • Invest in team building and strategy sessions • Implement and monitor succession planning
Organised Labour Support • Unions were kept informed and had input at all stages of the process • Unions implemented a three year working contract • Salary bands differed between the various municipalities and this was dealt with successfully
Good Governance • Conduct good governance policies and procedure compliance audits • Conduct a critical review of business planning and execution • Segregation of duties • Develop full control policies and procedures • Enhance Internal audit function and conduct regular audits • Hold fraud awareness workshops for management
Successful implementation supported by • Increase understanding by continuous communication • Ensuring continuous capacity development (Regulator and operator) • Securing stakeholder participation and support • Ensuring long term commitment
Communication • Develop a participative relationship with stakeholders and key role players to ensure that there is a full understanding • Understanding of the perceptions • Participate in community forums • Overall Awareness
Capacitating • Invest in management development • Invest in skills development and capacity building – WSA and WSP • Do not forget the capacity required to run the WSA function • Capacitate regulator, if different from the WSA
Stakeholder support • Obtain stakeholder support through transparency and interaction • Own Council • Organised labour • National, Provincial and Local Government
Commitment • Clear commitment and responsibility allocation (key drivers) • This ensured that all obstacles were bridged
Operational achievements • Creation of a state of the art call centre: more than 90% of calls answered in less than 30 seconds • Robust potable water quality monitoring (number of samples multiplied by 3 and more than 99% compliance) • UFW decreased from 42 to 33% (problem of deemed consumption areas) • Environmental compliance (final effluent) increased from 85 to 98%
Operational achievements - cont • 100% of sludge disposed according to national guidelines (compared to 50%) • Number of annual spills at the WWTW’s has decreased from more than 700 to less than 150
Financial achievements • Consecutive to crisis due to poor revenue data and poor billing from the City of Johannesburg, financial turnaround strategy agreed in March 2004 • Break even projected for 2007/8 but actual results far ahead of projections: 2002/3: (R429) mil 2003/4: (R318) mil 2004/5: (R77) mil • Revenue: R3bil (compared to R1,8 bil in 2001/2) • Revenue collection ratio higher than 100% on accounts directly managed by JW
Nelspruit Concession • Key driving challenges • Capex requirement (R 350 m) • Capacity requirement • Operational challenges that needed to be met • UAW – 31% • Sustainability
Nelspruit Concession • Reflecting on key success factors • Total commitment towards process by Councils • Staff buy in due to securing jobs • Community involvement • Capacitation of stakeholders/ community through various programmes
Nelspruit Concession • Achievements • UAW = 14% in urban and 25% in other areas • 25 to 80% increase in collections • Extreme customer satisfaction • Mammoth capital roll out • Improved maintenance & Renewal Programme • Efficient communication • Sustainability • Potential extension of Concession
Nelspruit Concession • Conclusion • Concession was a bold step for Mbombela • Success is evident in almost all areas of the concession since concession started 5 years ago • Water and sanitation services have been extended to tens of thousands of previously disadvantaged communities • Operating costs per stand have halved • National Govt, Mbombela and investors happy with health of the Concession
BACKGROUND TO EMFULENI LOCAL MUNICIPALITY Category B Municipality Located within Sedibeng District Municipality Fourth Biggest Municipality in Gauteng Project Consolidate Subject ± 1 Million Population Prominent Historical Status
PURPOSE OF SECTION 78 • Deterioration of Water Services Delivery • Determination of Best Possible Service Delivery Mechanism • Focus on Turnaround & Long-term Sustainability
OUTCOMES OF SECTION 78 PROCESS INTERNAL ASSESSMENT • Business Unit • Effect of lack of finances: • Cannot operate at current service levels • Cannot improve service provision • Will have cash deficit for the next ten years • In the absence of financial resources, MUST consider External mechanism
OUTCOMES OF SECTION 78 PROCESS (cont.) EXTERNAL ASSESSMENT • In terms of the Municipal System Act • Explore external options after assessment of internal mechanism • Notify the community and consult with labour • Primary Issue: FINANCIAL CONSIDERATIONS • Functional Areas • Capacity of Service Provider • Effective Service Delivery • Labour Relations
OUTCOMES OF SECTION 78 PROCESS (cont.) EXTERNAL ASSESSMENT • CONCLUSION • Provision of Water Services through an external mechanism should be considered • Appears to be the most effective service delivery mechanism • Rand Water will participate through: • The provision of finances • The provision of expertise
OUTCOMES OF SECTION 78 PROCESS (cont.) STRUCTURE OF ARRANGEMENT • Co-ownership of a company by Sedibeng, Emfuleni and Rand Water • Service Delivery Agreement between the company and Emfuleni
KEY PROCESS UNDERTAKEN • Consultation and Buy-in of WHOLE Ruling Party • Consultation and Buy-in of WHOLE Council • Consultation and Buy-in of Executive Structures • Consultation of Labour Formations (MOU) • Consultation of Broad Community & Civil Society • Consultation of Business
KEY PROCESS DRIVERS • Credible Governance of Process • Adequate Resources and Accountability • Continuous Communication and reporting to key stakeholders • Rigorous Business Analysis & Plans (Assessment) • Leadership Commitment • Support of DWAF • Labour
CHALLENGES TO PROCESS • Non-alignment with Provincial Department • Non-alignment with National Treasury • Non-alignment with DPLG • Organised Labour Dynamics (Internal)
LESSONS LEARNT • Detailed & Diligent Assessment • Proper Governance of Process • Unconditional Involvement & Participation of Local Stakeholders • Credibility & Commitment of Sponsors and Champions (Political and Executive) • Alignment & Support of Provincial and National Departments • Support of Organised Labour • Adequate Resources and Accountability • Monitoring of Environmental Dynamics
Overall lessons for successful implementation • Securing stakeholder participation • Having key drivers of the process • Ensuring long term commitment • Ensuring continuous capacity development (Regulator vs. operator) • Ensuring transparency