1. Transfer and Debt Burden as a measure of vulnerability How bad is the situation Kevin Jacoby 14 June 2013

2. Overview Excess burden of cost recovery? Explained Excess burden of cost recovery? Explained Non-revenue water Non-revenue water Debt collection Debt collection Net debt owed for water services Net debt owed for water services IMPORTANT NOTES IMPORTANT NOTES

3. Excess burden of cost recovery When the consumer base from which revenue is collected is limited When the consumer base from which revenue is collected is limited If the base shrinks to a too small a ptn of total served an unsustainable burden might be imposed on those that pay for their services If the base shrinks to a too small a ptn of total served an unsustainable burden might be imposed on those that pay for their services This burden is aggravated by: This burden is aggravated by: High level of non-revenue water High level of non-revenue water Large transfer costs (including the provision for bad debts) Large transfer costs (including the provision for bad debts) Low debt collection percentages Low debt collection percentages The net increase in water service debtors The net increase in water service debtors

4. Non-revenue water (NRW) International Water Commission (IWC) calculation International Water Commission (IWC) calculation NRW includes: NRW includes: Unbilled standpipes Unbilled standpipes Unbilled low cost housing Unbilled low cost housing Unbilled indigent consumers Unbilled indigent consumers Metering inaccuracies (including theft and illegal use) Metering inaccuracies (including theft and illegal use) Mains leaks and bursts Mains leaks and bursts Reservoir overflows and leakages Reservoir overflows and leakages Service connection leaks Service connection leaks

5. Free Water DETAILSNMBMEthekwiniEkurhuleniMidvaalStellenboschAmatholeSteve Tshwete Cubic meters (m3) Free water (non revenue) - bursts, reservoir overflows & leakage Amount of water (m3)35 552 270124 829 322105 735 24314 4002 057 80816 589 2543 975 000 Revenue (charged for) water Amount of water (m3)58 484 000208 137 661214 012 502272 47310 448 9635 533 12111 584 000 Total water served (outflow from purification works) Amount of water(m3)94 036 270332 966 983319 747 745286 87312 506 77122 122 37515 559 000 Percentage non-revenue water 38%37%33%5%16%75%26%

6. Free Water DETAILSBuffalo CityGeorgeOverstrandCapeTownTOTALSTOTALS METROS Cubic meters (m3) Free water (non revenue) - bursts, reservoir overflows & leakage Amount of water (m3)25 031 372518 2712 366 561 77 663 419288 753 297368 811 626 Revenue (charged for) water Amount of water (m3)37 620 6679 206 9296 262 242 253 299 069508 472 720771 553 899 Total water served (outflow from purification works) Amount of water(m3)62 652 0399 725 2008 628 803 330 962 488797 226 0171 140 365 525 Percentage non-revenue water 40%5%27%23%36%32%

7. Debt collection ratio DETAILSNMBMEthekwiniEkurhuleniMidvaalStellenboschAmathole Steve Tshwete DEBT COLLECTION PERCENTAGE Year 07/0898.60%100.21%88.39%98.80%102.22% Year 08/0991.70%94.49%89.60%95.02%30.00%100.74% Year 09/1093.75%96.31%91.08%96.70%95.00%43.00%99.80% DETAILS Buffalo CityGeorgeOverstrandCapeTownTOTALS TOTALS METROS DEBT COLLECTION PERCENTAGE Year 07/0894.61%90.00% 98.67%90.03%78%94% Year 08/0993.84%98.00% 95.37%91.08%80%92% Year 09/1093.58%97.00% 98.78%91.97%91%93%

8. Growth in net debt OUTSTANDING DEBT FOR WATER SERVICESNMBMEthekwiniEkurhuleniMidvaalStellenboschAmathole Steve Tshwete Water Year 07/08327 365 000978 257 0001 650 904 70613 190 09010 586 36049 025 3924 465 330 Year 08/09270 277 1471 040 110 0001 639 375 14021 255 90116 395 84474 029 8984 275 575 Year 09/10312 342 601984 806 0001 798 859 51819 147 82118 824 15591 679 5824 441 040 Sanitation/Sewerage Year 07/08162 896 0009 583 000448 457 0867 412 1606 231 07247 040 3902 862 262 Year 08/09158 872 20511 347 000467 776 2529 208 4159 671 99162 777 0182 968 197 Year 09/10128 621 15411 155 000511 287 46710 127 7936 206 29077 182 0293 129 253 TOTAL Year 07/08490 261 000987 840 0002 099 361 79220 602 25016 817 43296 065 7827 327 592 Year 08/09429 149 3521 051 457 0002 107 151 39230 464 31626 067 835136 806 9167 243 772 Year 09/10440 963 755995 961 0002 310 146 98529 275 61425 030 445168 861 6117 570 293

9. Growth in net debt OUTSTANDING DEBT FOR WATER SERVICESBuffalo CityGeorgeOverstrandCapeTownTOTALS TOTALS METROS Water Year 07/08134 126 48615 838 0679 403 983 651 053 0003 844 215 4143 741 706 192 Year 08/09154 053 32414 165 31311 549 807 747 902 0003 993 389 9493 851 717 611 Year 09/10181 669 44015 746 19912 861 515 808 196 0004 248 573 8714 085 873 559 Sanitation/Sewerage Year 07/0876 637 55710 067 7974 636 018 483 307 0001 259 130 3421 180 880 643 Year 08/0980 960 1789 642 1336 290 461 800 337 0001 619 850 8501 519 292 635 Year 09/1090 261 81412 881 2466 774 919 783 610 0001 641 236 9651 524 935 435 TOTAL Year 07/08210 764 04325 905 86414 040 0011 134 360 0005 103 345 7564 922 586 835 Year 08/09235 013 50223 807 44617 840 2681 548 239 0005 613 240 7995 371 010 246 Year 09/10271 931 25428 627 44519 636 4341 591 806 0005 889 810 8365 610 808 994

10. IMPORTANT NOTES The impact measured does not include indigent consumers subsidised to threshold levels (ES); The impact measured does not include indigent consumers subsidised to threshold levels (ES); The impact measured does not include service consumption in excess of threshold levels and financed from tariffs; The impact measured does not include service consumption in excess of threshold levels and financed from tariffs; Those that do not receive the transfer find it unfair and will be disinclined to pay for services (aggravating the bad debt problem); Those that do not receive the transfer find it unfair and will be disinclined to pay for services (aggravating the bad debt problem); Distortions are induced on paying consumer behaviour (increased water tariffs); Distortions are induced on paying consumer behaviour (increased water tariffs);

11. IMPORTANT NOTES Increasing water tariffs is a feasible and meritorious funding source for transfers on up to some limit; Increasing water tariffs is a feasible and meritorious funding source for transfers on up to some limit; Beyond this limit the water service tariff burden might be excessive; Beyond this limit the water service tariff burden might be excessive; Distortion effects will undermine the long run economic welfare of the whole community and the tariffs are viewed as unfair/inequitable by those on whom it is levied Distortion effects will undermine the long run economic welfare of the whole community and the tariffs are viewed as unfair/inequitable by those on whom it is levied

12. The End Thank you Comments/questions?