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

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

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

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

Free Water DETAILSNMBMEthekwiniEkurhuleniMidvaalStellenboschAmatholeSteve Tshwete Cubic meters (m3) Free water (non revenue) - bursts, reservoir overflows & leakage Amount of water (m3) Revenue (charged for) water Amount of water (m3) Total water served (outflow from purification works) Amount of water(m3) Percentage non-revenue water 38%37%33%5%16%75%26%

Free Water DETAILSBuffalo CityGeorgeOverstrandCapeTownTOTALSTOTALS METROS Cubic meters (m3) Free water (non revenue) - bursts, reservoir overflows & leakage Amount of water (m3) Revenue (charged for) water Amount of water (m3) Total water served (outflow from purification works) Amount of water(m3) Percentage non-revenue water 40%5%27%23%36%32%

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

Growth in net debt OUTSTANDING DEBT FOR WATER SERVICESNMBMEthekwiniEkurhuleniMidvaalStellenboschAmathole Steve Tshwete Water Year 07/ Year 08/ Year 09/ Sanitation/Sewerage Year 07/ Year 08/ Year 09/ TOTAL Year 07/ Year 08/ Year 09/

Growth in net debt OUTSTANDING DEBT FOR WATER SERVICESBuffalo CityGeorgeOverstrandCapeTownTOTALS TOTALS METROS Water Year 07/ Year 08/ Year 09/ Sanitation/Sewerage Year 07/ Year 08/ Year 09/ TOTAL Year 07/ Year 08/ Year 09/

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);

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

The End Thank you Comments/questions?