INSTITUTIONAL REFORM OF WATER SERVICES PROVISION

1. INSTITUTIONAL REFORM OF WATER SERVICES PROVISION Portfolio Committee for Provincial and Local Government 7 June 2005

2. Presentation outline The aim is to :- • Create awareness of the need for institutional reform of water services provision in South Africa • Clarify the scope of water services provision reforms • Clarify the role and governance of water boards • Describe the proposed process and actions • Institutional reform investigations • Governance review • National boundary study

3. CABINET MANDATE Mandate for reform of WS institutions given by Cabinet in September 2003 in Strategic Framework for Water Services (SFWS)

4. Background • Water Services Authorities (WSA) assigned powers and functions to ensure sustainable water services (WS) • WS Providers (WSP’s) undertake service delivery functions within geographic area. • WSP’s must be held accountable through a clear set of governance arrangements.

5. BACKGROUND (CONT.) • Electricity reform currently being undertaken • Regional Electricity Distributors (REDS) recommended based on study • Challenges in implementing wall to wall regional entities • Look at lessons to be learnt by the water sector • Similar operations • Network infrastructure across poor and richer communities • Legal framework

6. Water Services Provision in SA: An Institutional Perspective • 154 WSAs • 15 Water Boards • WSAs are also providing water and sanitation • Some community based WSPs • Municipal entities – JHB Water, ERWAT, Midvaal Water Company, Uthukela Partnership • Privately owned companies – Dolphin Coast, Nelspruit concessions • Over 200 WSPs in total

7. SECTOR VISION • Enhancement of role of WSAs • Separation of WSA and WSP functions • Ensure viable WSPs • Formation of professionally managed regional providers to realise economies of scale • Institutional models that will ensure effective delivery especially in small towns where the need is the greatest

8. OBJECTIVES OF REFORM • Provision of appropriate level of WS for sustainability & to enhance FBW/S. • Improve performance of WSP’s. • Improve financial sustainability of the WS sector by enhancing revenue collection and consumer mngt. • Improve accountability of WSP’s to WSA’s and consumers.

9. OBJECTIVES OF REFORM • Use existing capacity & attract, develop & retain professional & technical skills, improve employment and gender equity. • Improve efficiency of water through demand management & conservation initiatives. • Improve regulation of WSP’s to ensure technical & environmental standards are met & services are appropriately priced.

10. Principles and approach • WSA responsible • WSP are accountable to WSAs • Bottom-up process • Diverse outcomes • Develop options on a case-by-case basis with stakeholders • National Government leadership role • Incremental • Based on sound business case • Regionalise where advantages are clear • Economies of scale • Equitable service delivery to all • Transform existing rather than creating new institutions

11. SCOPE OF REFORMS IN THE WATER SERVICES SECTOR • Focus on Water Services provision • Long term process • Initial priority for DWAF will be regional water services provision, reviewing governance of existing regional WSPs • Local reforms will happen through S78 processes – with DWAF’s support and guidance • Boundary study will inform longer term vision on regional water services provision

12. CURRENT WB GOVERNANCE ARRANGEMENTS • Primary function of Water Boards – bulk water services provision to WSAs and other users • Accountable to Minister of Water Affairs and Forestry (shareholder) • Contract with customers (WSAs and other) • DWAF has a regulatory function as well • DWAF need a review to clarify governance accountability and regulatory responsibilities

13. REVIEW PROCESS • Progress report to Cabinet June 2005 • Final draft strategy July 2005 • National Indaba Aug 2005 • Finalise strategy Sept 2005 • Priority areas identified by Aug 2005 • Lessons from Priority areas Sept 2006 • Boundary study July 2006 • Governance review April 2006 • Approval of strategy (Cabinet) Oct 2006 • Implementation Nov 2006 • Finalisation of regional reforms 2013

14. REVIEW PROCESS (cont) • Parallel/linked processes • DWAF regulation strategy • Sector support linked to Project Consolidate • Transfers • Local Section 78 • Governance review of state owned enterprise (DPE)

15. PRIORITY AREAS • Key issue in the Institutional Reform Strategy is the identification of priority areas. • Criteria for identifying priority areas include • clear business case to improve service provision/reduce costs of delivering services • service delivery need • absent or weak institutional capacity • service delivery and institutional failures • local initiative and the likelihood of success. • DWAF will initiate investigations in priority areas • Will link with local processes such as S78

16. GOVERNANCE REVIEW • DWAF, with SALGA, will initiate a detailed review of the potential legal forms and governance options for water services provision. • Review governance of water boards • Will link with governance review of state enterprise undertaken by DPE

17. NATIONAL BOUNDARY STUDY • DWAF needs to have view on appropriate scale for regional bulk and regional integrated water service providers. • Will consider the following: • Integrated water resource management, • Economies of scale, • Economies of scope, • Construction of large scale water resource schemes, • Access to finance, • Cross subsidies, • Access to professional skills.

18. NEXT STEPS • Finalisation of National Strategy for Reform of Water Services provision • Continued collaboration with sector stakeholders, including NT, DPLG, SALGA and SAAWU as well as local stakeholders • Studies as outlined above • Implementation by 2013

19. THANK YOU Marie Brisley Tel. No. (012) 336 6565 E-mail: marie@dwaf.gov.za Norman Nokeri Tel.no. (012) 336 8194 E-mail: par@dwaf.gov.za