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Recognising and managing the key challenges in water service delivery

Recognising and managing the key challenges in water service delivery. Analysis of a sample of WSAs Kevin Jacoby 14 June 2013. Overview of presentation. The sample! Standard of water service provision Financial cost estimation Potential consequence of sub-standard water service delivery

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Recognising and managing the key challenges in water service delivery

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  1. Recognising and managing the key challenges in water service delivery Analysis of a sample of WSAs Kevin Jacoby 14 June 2013

  2. Overview of presentation The sample! Standard of water service provision Financial cost estimation Potential consequence of sub-standard water service delivery Conclusions

  3. Sampled municipalities

  4. Standard of water service provision • Backlog of water service infrastructure maint. and rehab. • For 10 sample municipalities: • Water = R 1 163 million (decrease from previous year) R 91k/capita • Sanitation = R 5 129 million (increase from previous year) R 400k/capita • Ekurhuleni sanitation requires a R 1 545k/capita investment • Capital cost of addressing the service coverage backlog • For 10 sample municipalities: • Water = R 5 060 million (same as previous year) R 503k/capita • Sanitation = R 6 109 million (increase from previous year) R 607k/capita • Polokwane water requires a R 3 042k/capita investment and sanitation a R 1 306k/capita investment.

  5. Standard of water service provision (cont.) • Potable water service interruptions • 124 324 in 2009/10 – 113 474 recorded in Cape Town • Days failed sanitation services • 24 days in 2009/10 – 15 of these in Ekurhuleni • DWA blue drop quality • 9 out of 15 • DWA green drop quality • 5 out of 15 • Prioritisation of water services by municipalities • 10/13 incl. water service operational readiness as a risk • 3/10 classify this as a high risk

  6. Standard of water service provision (cont.) • Monitoring effort by municipalities • Average years since last meter audit for 13/15 is 4 years • Polokwane last meter audit 15yrs prior • Metros average years for meter audits is 2 years • Skills adequacy • 31% of water service posts are vacant • Skilled staff service 13 602 members of the population • Engineers service 90 925 members of the population • Technologists service 87 405 members of the population • Technicians service 19 578 members of the population

  7. Standard of water service provision (cont.) • Planning effort • 14/15 had water service development plans • 12/15 had water service master plans • Management of capex • Sources of funding • Internal sources 17% • Grants 45% • Developers contributions 1% • External loans 34% • Other 4% • Note – most external loan funding used by metros • Overall capex budget allocated to water services =15%

  8. Standard of water service provision (cont.) • Per capita investment in water services • R220 • Allocation of water service capex budget • Rehabilitation of water service infrastructure 32.27% • New infrastructure assets - networks 26.21% • New capital - sanitation facilities 15.04% • New capital - bulk water and sanitation/sewage 25.95% • Capital budget spent = 84%

  9. Standard of water service provision (cont.) • Management of opex • Budgeted result R 786million • Actual result R 267 million • ? : Variable costs and costs of transfer exceeded the budget • External support options • Water service consultants (project design) – 14/14 • PPPs - 4/14 • Water Boards - 6/14 • District Municipalities - 3/14

  10. Financial cost estimation • Ring-fencing • 2/15 provide for ring-fenced water service (Metros) • 11/15 find the cost estimation of the water service easy • Internal costing methodology • Percentage of total cost of support services – 6/11 • ABC costing - 4/11 • Mixture of the above - 1/11 • Source and pricing of bulk water provision • 49% of water self supplied (R0,0385 to R3,02/kl) • 23% of water from DWA (R0,4301 to R1,892/kl) • 29% of water from water boards (R3,25 to R4,64/kl)

  11. Financial cost estimation • Fixed and variable cost analysis • 51% fixed costs • 49% variable costs • Varies significantly from authority to authority • NMBM 30% fixed • Ekurhuleni 90% fixed • Asset valuation methods and asset registers • 10/15 – Replacement value • 8/15 - Historical value • 3/15 – Use both methods • Most asset registers are detailed and include extent, age, value and state (condition) of an asset

  12. Financial cost estimation • Adequacy of depreciation • A variance of R90m between estimated and actual depreciation for potable water service in 2009/10 • DRC R8,204 billion • CRC R9,015 billion • DRC/CRC is 75% : is this cash backed? Impact on accumulated surplus/deficit? • Scarcity cost consciousness • Few!– strategies vary from demand management to additional supply • Environmental cost of waste water management not considered

  13. Potential consequences The municipal capital budget in 2006 equalled 75% of the value of buildings completed This percentage was 49% in 2009/10

  14. Conclusions Per capita cost to address sanitation backlog infrastructure maintenance and rehab. was increasing Metros focused more on reducing water coverage backlog rather than the sanitation coverage backlog Potable water service interruptions must be recorded Days of failed sanitation are not being recorded, an indicator of munic. not monitoring sanitation services No negative correlation between quality certificates and backlogs in maintenance and rehabilitation A correlation rather exists with skills and quality of service

  15. Conclusions Operational readiness of the water service a risk but not the highest risk for municipalities Long period between the audit of water meters Municipalities are involved in water service planning. Are these plans being implemented? Various funding sources are available for capital programmes-high levels of external borrowing 15% of total capital budget to water services Municipalities (small) spending more capital on new infrastructures as opposed to maintenance and rehabilitation

  16. Conclusions Municipalities underspend on capital budgets (conditional grants risk?) Budget comparisons reveal the cost of service is recovered by tariffs. Material variations exist if compared with the actual result. Impact on tariff calculations is significant Municipalities make limited use of external support The principle of ring-fencing is not implemented by most Municipalities know little about consumption trends and the nature of demand by users

  17. Conclusions Municipalities use various costing methodologies The bulk water supply varies Inconsistent approach applied to the categorisation of costs between fixed and variable Asset registers complete Depreciation not being recovered by tariffs and not being used to manage the replacement of assets Next water supply is material and not provided for Exogenous environmental costs not considered Capital expenditure/value of building plans decreased

  18. The End Thank you Comments/questions?

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