INSTITUTIONAL REFORM OF WATER SERVICES PROVISION Portfolio Committee on Water Affairs and Forestry 22 June 2005 V.227

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

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

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.

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

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

SECTOR VISION Enhancement of role of WSAs Separation of WSA an 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

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.

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.

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

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

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

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 reviewApril 2006  Approval of strategy (Cabinet)Oct 2006  Implementation Nov 2006  Finalisation of regional reforms2013

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)

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

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

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.

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

THANK YOU Helgard Muller Tel.no. (012) Marie Brisley Tel. No. (012)