Bulk Water Supply Contracts Water Forum 14 September 2016 Group Legal Services Tshidi Moalusi Matshidiso Moalusi

PURPOSE BWSC Agenda Agenda Bulk Water Supply Contracts are tools which governs the relationship between Water Boards and Municipalities History of the BWSC Key role players in contracting: from both sides Operations, Water Quality, Planning, Finance and Legal Services.

APPLICABLE LEGISLATION Municipalities have a constitutional mandate to ensure access to water. Schedule 4 B Rand Water, is a state organ in a contractual relationship with the Municipalities in assisting the Municipalities to realize its mandate: section 155 (7) Const. Applicable legislation in relation to the Bulk Water Supply Contract The Rand Water Board Statutes (Private) Act no 17 of 1950- (rights and obligations saved), The Constitution of South Africa, 1996, The Water Services Act 107 of 1998, Intergovernmental Relations Framework Act 2005, Public Finance Management Act 29 1999, Municipal Finance Management Act 56 2003.

BRIEF HISTORY Rand Water used to be governed by the Rand Water Board statutes (Private) Act no 17 of 1950 which was later repealed by the Water Services Act 108 of 1997. The Private Statute made provisions amongst others for the following: Construction of pipelines, entering into contracts for water services and how payments were made.

CURRENT LEGISLATION The Constitution of the Republic of South Africa,1996 Section 27 of the Constitution provides that everyone has the right to have access to sufficient food and water . The highest law in the land, all other laws are derived from its principles. It grants people the right to have access to sufficient water. The Water Services Act 108 of 1997 Section 3 - Right of access to basic water supply and basic sanitation Section 3(1) – Everyone has a right of access to basic water supply and basic sanitation.

CURRENT LEGISLATION Section 4 - Conditions for provision of water services 4. ( 1 ) Water services must be provided in terms of conditions set by the water services provider. In terms of section 4(2)(c) (i)- (vi) the conditions must provide for: (i) the technical conditions of existing or proposed extensions of supply: (ii) the determination and structure of tariffs; (iii) the conditions for payment; (iv) the circumstances under which water services may be limited or discontinued; (v) procedures for limiting or discontinuing water services: and (vi) measures to promote water conservation and demand management.

BULK WATER SUPPLY CONTRACT CONTRACTING Section 19 (1)(b((i) A water services authority may enter into a written contract with a water services provider. 3 OPTIONS ONLY Sections 76, 80 and 40 Municipal Systems Act The parties enter into Bulk Water Supply Contract. Meaning the parties cannot enter into a gentleman’s agreement. Where the contract has terminated, the parties enter into Revival Contracts during the interim period pending negotiations for a new BWSC clauses, such as: financial risk clauses, operational risk amongst others.

BULK WATER SUPPLY CONTRACT CONTRACT TERMS Financial clauses mitigation of risk: Accounts for payment of bulk water supply charges (Clause 26–BWSC) Special payment arrangements (Clause 27- BWSC) Action or omission of the Municipality (Clause 30- BWSC) Operational clauses: Interruptions in Supply (Clause 11—BWSC) Modifications to Processes (Clause 11.4–BWSC) Meter testing (Clause 12.3 –BWSC) New meters to be installed (Clause 12.8–BWSC) Water Quality Clauses Demand Management Clauses Planning General Legal Clauses

BULK WATER SUPPLY CONTRACT SECTION 19 CONTRACT REGULATIONS Definition of Contract as per Water Services Provider Contract Regulations- “contract” means an agreement or renegotiated agreement in writing between a water services authority and a water services provider in terms of which the water services provider is to provide water services with or without capital investment. The regulations outlines provisions for the following aspects of the contract: Definitions Objects of contract Scope of contract Water use licence Performance targets and indicator

BULK WATER SUPPLY CONTRACT CONTRACTING REGULATIONS The regulations outlines provisions for the following aspects of the contract Obligations of the Water Services Authority Cession Arrangements in respect of existing employees Commencement, amendment, breach and termination Property rights Assets Financial Consumer charter Disclosure and monitoring Information required by authority

BULK WATER SUPPLY CONTRACT CONTRACTING The regulations outlines provisions for the following aspects of the contract cont… Financial records Operational records Access to information by consumers Annual reports Warranties Insurance Dispute resolution Prevention of corruption General

PERTINENT ISSUES Rand Water faces range of issues in respect of bulk water supply, these includes (SALGA METRO CONSULTATION) 1. Conditions for Payment Stringent clauses are required to cater for non-payment by Municipalities : Risk profiling – Clauses 26.2.1-26.2.1.3 2. Dispute Resolution--IRFA If there is failure by both Rand Water and the Municipality to agree, the Dispute Resolution clause is invoked

VIS MAJOR / DROUGHT 3. Drought – Clause 14 of the BWSC A Drought clause is imperative to include In terms of the contract, a Drought is defined as : Any event, series of events or changes in water allocation which impact or impacts on the availability of raw water to the Rand Water and consequently on the agreed quantity of water to be provided to the Municipality Rand Water bears the onus of keeping up to date with all factors relating to the quantity of water available for supply Rand Water bears the onus of providing the Municipality with a written warning, which must be furnished no later than 7 days within the implementation of the Water Restrictions due to drought

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