1. KwaZulu-Natal Regional Bulk Water Supply
A CONCEPT PLAN
Presented by Umgeni Water to the
Portfolio Committee on Provincial and Local Government
Date: 7 June 2005
Version 4 6 June 2005

2. Introduction & Background
Global targets & challenges:
Millennium Development Goal (MDG) is to halve proportion of people without access to a sustainable water and sanitation supply by 2015
Estimated 1.5 billion people without adequate water
Estimated 2.5 billion people without adequate sanitation
Africa challenges:
Estimated one third of 800 million population without adequate water
Estimated two thirds of population without adequate sanitation
SADC is unlikely to meet the MDGs unless something drastic takes place

3. Introduction & Background (contd.)
RSA targets & challenges :
Provision of clean running water to all households by 2008
Provision of decent safe sanitation by 2010
4.4 million people do not have access to formal water infrastructure
10.4 million people have access to below basic water RDP standards
Natural disasters-drought conditions in Western Cape and Free State
Range of water institutions-some limited in capacity to deliver on targets

4. Introduction & Background (contd.)
KZN challenges:
KZN has a population of 9.4 million (2001 census)
Of which more than households do not have access to basic water supply standards (RDP standard)
Water Service Authorities can partner with the existing Bulk Water Suppliers to provide more sustainable long term solutions ie a REGIONAL SOLUTION, which also supports the country’s macro policies

5. Context
Water Service Authorities (WSAs) have a responsibility to provide adequate water services within their area of jurisdiction
WSAs generally undertake insular planning and development
Backlogs can be addressed through stand-alone schemes. These stand-alone schemes have proven to be unsustainable without continual and direct technical, administrative and financial support
Slow pace of delivery largely due to co-ordination, capacity and financial constraints
Water Utilities can provide support as Regional Water Service Providers (WSPs) partnering with local, provincial and national government, and other stakeholders

6. Regional Bulk Supply Schemes
Propose that regional bulk supply schemes could be the most appropriate solution to improve water service delivery, although not the only solution
Address backlogs
Improve level of service
Advantage of regional schemes over stand-alone schemes
Sustainability of supply
Rationalisation
Economies of scale
Cross subsidisation
Water quality
Improved level of service
Linking water resources to water supply

7. Regional Bulk Supply Schemes
The following assumptions were used in developing the delivery plan:
REGIONAL SYSTEMS – Regional bulk water service provider concept
APPROACH – Bulk water provision only (abstraction, treatment & distribution)
DEMANDS – Demand centres based predominately on population distribution (formal growth/economic development growth points)
INFRASTRUCTURE – Utilise existing and proposed water service infrastructure wherever possible
RATIONALISATION – Consolidate WTW and distribution systems
RAW WATER SOURCE – To be located at highest elevation (gravity vs pumping; improved WQ; reduced sedimentation)
WTW LOCATION – Close to abstraction point (minimise non-revenue water losses,maximise opportunity to supply both rural & urban demand centres)
DISTRIBUTION – interlink supply system (minimise supply risks ), route to maintain elevations, through demand centres, & along road infrastructure

8. Population Densities
Census 2001 data

9. Water Service Backlogs in KZN
Estimated 40% backlog of all households
Increase of households since 1996 Census (backlog was 33%)
70% of backlogs located in 7 Water Service Authorities
50% of backlogs located in 4 District Municipalities
50% of backlogs located in 11 Local Municipalities

10. 70% of backlogs are within 7 WSAs

11. Backlog Target Areas
70% of backlogs within 7 Water Service Authorities
Priority
Water Service Authority
Priority Area, no households below RDP std
Target Area, No. potential household below RDP std A B C D E F G
eThekwini Municipality
Ugu District Municipality
Umzumbe, Hibiscus Coast
Msunduzi Local Municipality
Umkhanyakude District Municipality
Hlabisa,Jozini, Umhlabuyalingana
Zululand District Municipality
Nongoma, Ulundi
Umzinyathi District Municipality
Msinga
Uthungulu District Municipality
Umlalazi
56 425
25 785
69 797
53 581
30 290
29 111
76 828
92 422
62 219
94 951
TOTAL

12. 15 Regional Bulk Supply Schemes
Pongola
White Mfolozi
Black Mfolozi
Buffels
Upper Thukela
Upper Mhlathuze
Lower Thukela
Lower
Mhlathuze
Mooi
Mvoti
North Coast
Mgeni
15 Regional Bulk Supply Schemes
Mzimkulu
Mzintlava
South Coast

13. Regional Bulk Supply Schemes
Benefits of Schemes on Job Creation & Poverty alleviation:
The schemes to be a chapter in the Provincial Growth & Development Strategy
Link into the Provincial Government Integrated Financial Strategy (IFS) which aims to eradicate poverty and inequality, create jobs and facilitate economic growth
Link into the Poverty Alleviation Strategy of the second economy
Drive service & infrastructure delivery in a sustainable way

14. Indicative Costs of Regional Bulk Supply Schemes
Regional bulk scheme
Capital Cost
Annual Operating & Maintenance Cost
BULK
RETICULATION
TOTAL
(R million)
(R million/a)
Phongola
200 80
280
0.5
7.0
7.5
White Mfolozi
520
140
660
2.5
13.0
15.5
Black Mfolozi
215
735
5.0
20.0
25.0
Buffels
840
205
1 045
3.5
19.0
22.5
Upper Mhlathuze
250
110
360
2.0
10.0
12.0
Lower Mhlatuze 60
260
5.5
6.0
Upper Thukela
710
210
920
4.5
19.5
24.0
Lower Thukela
410
160
570
3.0
15.0
18.0
Mvoti
480
145
625
13.5
North Coast
530
190
720
1.5
Mooi
150 45
195
Mgeni
700
845
1 545
79.0
81.0
South Coast
500
325
825
30.0
32.0
Mzimkulu
1 350
315
1 665
29.0
33.5
Mzintlava
430
130
560
1.0
7 790
3 175
10 965
35.0
295.0
330.0
NOTE: Reticulation capital cost and the annual operational and maintenance costs are based on yard connections for those households below RDP standard.
Since most of these schemes currently do not exist, no refurbishment costs have been included.

15. Regional Bulk Supply Schemes
Estimated Rate of backlog eradication
NOTE: Reticulation capital cost and the annual operational and maintenance costs are based on yard connections for those households below RDP standard.
Since most of these schemes currently do not exist, no refurbishment costs have been included.

16. Indicative Costs of Water Resource Infrastructure
Existing /
Total
Regional bulk schemes supplied
Infrastructure
Proposed
Capital Cost
(R million)
Pongolapoort Dam
Existing
Pongola
Klipfontein Dam
White Mfolozi
Black Mfolozi Dam
350
Black Mfolozi
Ntsingwayo Dam
Buffels, Lower Thukela
Mfule Dam
100
Upper Mhlathuze
Goedertrouw Dam
Lower Mhlathuze
Spioenkop Dam
Upper Thukela, Lower Thukela
Middledrift Weir
Lower Thukela, Lower Mhlathuze
Mvoti-Poort/Isithundu Dam
230
Mvoti, North Coast
Hazelmere Dam (raised) 30
North Coast
Spring Grove Dam
260
Mooi, Mgeni, South Coast
Ngwadini/Lower Mzimkulu Dam
South Coast
Mzimkulu Dam
Mzimkulu, South Coast
Mzintlava Dam
Mzintlava
TOTAL
1 650
NOTE: Mkomazi-Mgeni Transfer Scheme (approx. R4 billion) not included in this table, but is a long-term requirement for the Mgeni scheme.

17. Regional Bulk Supply Schemes
Job Creation Opportunities:
Direct Temporary – (6.7 jobs per R million)
Direct Permanent: (includes Water & Waste Water Schemes, Reticulation & Associated Services) Estimated Total: 5 000
Assuming a direct to indirect ratio of 1:3 this relates to:
Indirect Temporary jobs
Indirect Permanent jobs

18. Regional Bulk Supply Schemes
Job Creation Opportunities (contd.) :
Multiplier effect arising from water service delivery
Agriculture (irrigation, aquaculture)
Residential Development (including housing, electricity, roads, communication)
Temporary Jobs Direct
Permanent Jobs
SMME’s through water & electrical servicing (estimate 1 new small business per every 10 electrical connections)
Industrial Activity Stimulated

19. BEE Opportunities
Expanded Public Works Programme (EPWP) to be applied to the implementation of both bulk and reticulation schemes
Infrastructure sector of EPWP emphasizes work creation through labour-intensive construction methods
These schemes will be a catalyst to the Water Sector Charter
Estimated BEE benefits derived from the construction of the regional bulk schemes:
* Includes plant and materials
Component
Total Component Value
(R million)
% BEE
BEE Component
Professional
2 360 80
1 900
Contractors*
4 956 60
3 000
Local Labour
2 124
1 700
TOTAL
9 440
6 600

20. Funding Innovative approach to project financing required
Water tariffs to remain affordable to end-users
Integrate plans and funding into Municipal IDPs
Possible sources of funding available include:
Partially or fully obtained from WSPs
Financial institutions

21. Funding Solutions
The R11billion to be broken down into the 15 projects and for each project establish:
Raw costs for Capex, Opex and Maintenance
Direct Revenue Streams
Level of financial support required from the various stakeholders (Treasury, Municipalities, Water Utilities, DWAF)
The above framework would address critical issues such as
- implementation vehicle
- specific risk mitigation
- affordability of water tariff to end users.

22. Funding Challenge
Reduce the project debt – illustrating the effects of R150m per year from 2009
All KZN: Bulk & Retic
All KZN: Bulk & Retic with Umgeni Water R150m subsidy

23. Funding Funding Options: What will it look like?
PPP – Concession Structure
Leasing Structure - Share Based or Asset Based
Funding Sources: Who will finance it?
Banks – most flexible but not the cheapest
Securitisation Conduits
Debt Capital Market – CPP, Bonds (Corporate & Project)
Non-banking Intermediaries: INCA & TCTA
Development Finance e.g DBSA, DFID (UK)
Infrastructure Funds: AIIF, KZN Growth Fund & MIG
Financial Sector Charter
Factors to be considered:
Credit enhancement – Impact on sources and cost of funding

24. Regional Bulk Supply Schemes
Stakeholder consultations to date
DWAF : Minister
DWAF: DG
Provincial and local government : DG & 2 deputy DGs
KZN Premier & subsequently KZN full Provincial Cabinet
Presidency : (Mr Aboobaker and Mr M Morobe)
Other Water Utilities : Uthukela and Mhlathuze
Municipalities: Ugu, Illembe, Sisonke, Ethekwini, Msunduzi
Financial institutions : RMB, Standard Bank, Investec, ABSA and DBSA
National Treasury : DG & Deputy DG
Banking Association : (Mr Coovadia)
Local Government Housing and Traditional Affairs KZN : MEC
KZN Local Government Association – by 10 June
Institutional Investors e.g. Public Investment Corporation (To schedule)

25. Regional Bulk Supply Schemes
Progress to date:
Technical task team established
Representatives from DWAF(KZN), Mhlathuze Water, uThukela Water eThekwini and Umgeni Water
Producing a high level business plan
Presentation to Municipal Managers, CEOs and EXCOs of water utilities by 30 June 2005

26. Regional Bulk Supply Schemes
Way Forward:
Need to drive initiative at :
- National Level – targets to met per province
- Provincial level – Alignment to be achieved across the province
National Treasury to provide a Technical Advisor to the KZN Regional Bulk Supply task team
Project action plan and financial packaging to be completed by July 2005

27. Thanks for listening Let’s get to it!