DWA – Water sector investment framework and IRR projects

1. DWA – Water sector investment framework and IRR projects Structure of analysis, data and deliverables v3 PDG 26th January 2012

2. DIAGRAM SHOWING OVERALL INFRASTRUCTURE FRAMEWORK Water resource management institutions (DWA & CMAs) ‘National’ water resource infrastructure WSA WUA ‘Regional’ water resource infrastructure ‘Local’ water resource infrastructure ‘Local’ water resource infrastructure ‘Regional’ bulk wastewater infrastructure ‘Regional’ bulk water infrastructure Local bulk wastewater infrastructure ‘Local’ bulk water infrastructure Non-potable water bulk and distribution infrastructure Sanitation ‘collector’ infrastructure Water distribution infrastructure Individual abstractor infra Sanitation users Potable water users Non-potable water users Return flow ‘dischargers’ Consumers and ‘dischargers’

3. Structure for linking demand – bulk – WR infrastructure Local WR water infra Distribution (retail) water infra - potable Local bulk water infra % - B loss Regional WR scheme C Regional bulk water scheme A % - B loss To other DM % - D loss % - B loss Demand zone X (LM) Regional bulk water scheme B To other DM To other DM Distribution water infra - non-potable Regional WR scheme D % - D loss All % - R loss Regional WR scheme E To other DM Local WR water infra

4. DIAGRAM SHOWING OVERALL INSTITUTIONAL FRAMEWORK DWA, NWRIA or TCTA ‘National’ water resource infrastructure RWUs, (DWA & WSA options) ‘Regional’ water resource infrastructure WUA WSA ‘Regional’ bulk wastewater infrastructure ‘Regional’ bulk water provider ‘Local’ water resource infrastructure ‘Local’ water resource infrastructure Non-potable water bulk and distribution infrastructure Local bulk wastewater infrastructure ‘Local’ bulk water infrastructure Sanitation ‘collector’ infrastructure Water distribution infrastructure Non-potable return flow infrastructure Individual abstractor infra

5. Structure for current water use analysis Local municipality or metro is unit of analysis Estimated by LM based on levels of economic activity (Gross Value Added Estimated from ISPs and Reconciliation Studies Non-residential Mining, power and industry (non-potable) Irrigation Residential Estimated from WMA Internal Strategic Perspectives (ISPs) by quaternary catchment Estimated using settlement level data from DWA database

6. Data – existing use and existing assets Non-potable Potable DWA WS database; water boards DWA WR infrastructure database (via Pula and P-Systems ) Regional WR infrastructure Local WR infrastructure Calculated from unit costs DWA WS database; water boards Grey area; still to be explored; some data from WUAs Regional bulk infrastructure MIIF – based on unit costs But also broken down to LM level. Test water use against other sources of information Local bulk infrastructure Distribution infrastructure ISPs; WARMs; Agriculture and industrial sector info Water use

7. Current demand for potable water (a) residential • Abstract population and household information per settlement from DWA database. • Abstract current service levels per settlement (DWA database). • Tabulate, by LM, water use per household for each service level: • Differentiate between urban and rural. • Differentiate between 5 local municipality level situations (A to B4). • Differentiate between three levels of management (poor, moderate and good).

8. Current demand for potable water (b) non-residential • Non-residential consumers are grouped as follows: • Institutions. • Commercial (tertiary economic activity). • Industrial or manufacturing (potable water only). • Institutional demand is calculated as a percentage of residential demand. • Commercial demand is estimated based on the level of economic activity in the tertiary sectors in the municipality, as measured by Gross Value Added. • Industrial demand: water use per unit of manufacturing GVA is used, divided between potable water and non-potable water.

9. Technical water losses (potable) • Technical losses are applied to get the bulk water requirement for the system. This is done based on typical figures available from benchmarking studies, with variations provided for: • urban and rural. • 5 LM sub-categories. • 3 levels of management of the system.

10. Current non-potable water demand • Water uses are divided as follows: • Irrigation. • Mining. • Power stations. • Industry.

11. Irrigation water use • Best done by quaternary catchment as data is available at this level and these catchment boundaries are small enough to allow for sufficiently accurate alignment with LM boundaries. • Three options have been considered: • WARMs database (registered water use): This has been rejected due to inaccuracy of data and the fact that it does not specifically relate to current water use. • Use per quaternary can be calculated from the WR2005 data set using the WRSM2000 model. However, the cost and time required to do this could not be justified. • Therefore, reliance has been made, in the interim, on data from the Internal Strategic Perspectives for each WMA. Unfortunately this information is based on old data and requires conversion from tertiary to quaternary catchment in some cases

12. Mining, power generation and non-potable industrial demand • These demands will be estimated from ISPs, or where available, from reconciliation studies. As they are point sources they can be relatively easily assigned to LMs, noting that there are many LMs which do not have these uses at all.

13. Data –future use, new infrastructure and rehabilitation Non-potable Potable DWA WR infrastructure planning data (in DBSA data set?) Regional WR infrastructure Local WR infrastructure Calculated from unit costs and asset management principles DWA data aggregated by DBSA; checked against national overview based on reasonable unit costs Regional bulk infrastructure MIIF – based on economic, demographic, LOS, water conservation and demand management provisions. Grey area; still to be explored Local bulk infrastructure Distribution infrastructure Project based on economic and technology factors Water use

14. Forward projections- water use and water abstraction

15. Population growth projections

16. Household size

17. Economic growth • Individual projections required for: • Tertiary sector (commercial, government etc) • Manufacturing, • Mining • Agriculture • Growth estimates from various sources will be used. • Likely 4.5% in 3 years time; 6% beyond that but probably optimistic.

18. Access to services • A target is set for everyone to have access to an adequate level of service in 10 year time, noting that the model only works at 10 and 20 year time frames. This ‘adequate’ level of service can be adjusted and will differ for urban and rural circumstances.

19. Water conservation and demand management • Demand management interventions will be included by: • Residential: providing for reducing demand per household for specified service levels. • Non-residential consumers: providing for demand increased at less than the rate of economic growth due to technical efficiency gains. • Water conservation initiatives relating to the way the system is managed between point of abstraction and point of supply will be modelled as reduced technical losses.

20. Data – O&M expenditure and revenue Non-potable Potable DWA WR infrastructure database; DWA scheme tariff data Regional WR infrastructure Local WR infrastructure Calculated from unit costs Water board data; some from DWA Regional bulk infrastructure Grey area; some info from WUA business plans?; work from first principles if necessary MIIF – based on body of case studies. Local bulk infrastructure Distribution infrastructure MIIF – driven by FBW policy and affordability criteria. Tariffs to be assessed using what existing data exists Water tariffs to users

21. Costing methodology – local infrastructure

22. Costing for regional and national infrastructure

23. Linking demand zones to infrastructure • Potable water • DWA WS database links settlements to bulk water schemes. • Link from bulk water schemes to wate resources schemes is via abstraction points. Data here is limited and judgement will be applied, informed by ‘all towns’ and ‘reconciliation’ studies. • Non-potable water • Irrigation use to be linked to schemes where these exist, using ISP reports. • Mining, power and industrial demand will be linked to schemes, as far as possible, if they are not served from own sources.

24. Projecting future capital costs • Capital requirements will be grouped as follows: • New infrastructure for expanded demand. • New infrastructure for upgrading service levels. • Rehabilitation of existing infrastructure. • The default projections will be made in the same way they are made for MIIF: • Using unit costs based on component capacity for new infrastructure. • Using a percentage of asset value in the case of rehabilitation. • This will provide a smooth curve for each demand zone with the infrastructure split into distribution, bulk and WR and also into local, regional and national components. • Against this the actual projects which have been identified need to be assessed.

25. Projecting future O&M costs • This sill be done based on unit costs which have been taken from local government case studies used in MIIF, from water board cost data and from DWA cost data. Costs will expand as services and the quantity of water supplied grows.

26. Capital finance arrangements • With the data included in the analysis, it will be possible to divide expenditure into ‘economic’ and ‘social’ components. This will allow for an assessment of grants and debt finance, with some provision for the use of internal reserves in some cases. It is highly likely that there will be a capital financing gap and the implications of this will need to be addressed.

27. Revenue projections • Revenue to cover operating expenditure will be grouped into tariffs and subsidies. • The model will allow average tariffs to be estimated at retail, bulk and water abstraction level and will allow an average household bill to be calculated. • This, in turn, can be assessed in relation to an ‘indicative’ affordability level which will determine the extent to which water supply arrangements are viable within a specific subsidy framework.

28. Using the national analysis for individual RWUs modelling • The national analysis will include all demand and all infrastructure, including the information supplied by water boards themselves for their current supply areas. • In the RWUs analysis a specific area of the country will be selected for one of the proposed RWUs. This will allow aggregate demand to be calculated for that area and identify the infrastructure in local and regional categories required to serve that demand. • All this information will be abstracted into a separate RWU model which will allow a mix of primary, secondary and tertiary activity to be tested and will give a capital finance program and operating budget projections for each proposed RWU.

29. The model as a tool to assess division of responsibility between institutions • A most important feature of this analysis is it will allow decisions to be taken on how infrastructure responsibilities in the country will be shared between DWA, NWRIA (if instituted), RWUs, WUAs, LG and other service providers (typically private sector organisations such as mines, farmers, industries etc).

30. Structure of deliverables National data in spreadsheet form by LM level data on demand and infrastructure serving the LM area broken down into categories (note that the accuracy of this will not be high for this ‘Phase 2’ Framework Link LM demand zone to schemes Data on regional schemes, current and future, in spreadsheet form, giving scheme characteristics and financial info. Link spreadsheet detail to GIS Schemes and LM demand zone data linked to GIS so that information can be shown spatially National financial model giving aggregate figures for country Link detail for demand zones and schemes to national model Report on major findings and strategic issues