Presentation to the Portfolio Committee: Water & Environment Entities / agencies falling within the Department’s mandate Presentation by Ms T Sigwaza Chief Director: Institutional Oversight 26 - 27 January 2011

Policy and legislative mandates In South Africa the Constitution make a distinction between water as a natural resource and water as a municipal service. The key government policies pertaining to water are set out in two policy papers as follows: the National White Paper on Water Policy (1997) and The Strategic Framework for Water Services (2003) The legislative mandates follow from these policies and are set out in two pieces of legislation: The National Water Act (Act 36 of 1998) and The Water Services Act (Act 108 of 1997). In terms of the current policy and legislative mandates, it is the Minister who is the custodian , policy maker and regulator for the water sector. There is no independent regulator for water, (intention to establish an economic regulator) although a Water Tribunal was established by the National Water Act to provide independent reviews& dispute resolutions.

The Institutional Challenge The current institutional landscape is complex with about 184 institutions reporting to the Minister of Water & Environmental Affairs. 2 functional Catchment management agencies and 5 gazetted. Water user associations & irrigation boards = 167 Water boards = 13 OR 14? Water Research Commission Trans-Caledon Tunnel Authority (TCTA) Water Tribunal National Water Advisory Committee About 169 municipalties (WSA’s ) regulated by Minister.

OVERVIEW of WATER BOARDS (wbS)

Mandate and legislative framework WBs derive their mandate from the Water Services Act, 1997 WBs also have to act within the following legislative framework: Water Services Act PFMA & Treasury Regulations Municipal Finance Management Act Division of Revenue Act Municipal Structures & Systems Act 5

Oversight role over WBs List of Documents submitted to the Minister Legislation Policy Statements Sec 39 of Water Services Act, 1997 Shareholder Compacts Treasury Regulation 29.2 Corporate Plan & projection of revenue, expenditure & borrowings Sec 52 of PFMA, 1999 Treasury Regulation 29.1 Business Plans Sec 40 of Water Services Act, 1997 Quarterly Reports Treasury Regulation 29.3.1 Annual Reports Sec 44 of Water Services Act, 1997 Sec 55(1)(d) & 65 of PFMA, 1999 Tariff Increases Sec 42 of MFMA, 2003 Financial misconduct procedures report Treasury Regulation 33.3.1 Materiality & Significance Framework Treasury Regulation 28.3.1 6

Water boards establishment dates ESTABLISHED AGE Amatola Water 1997 13 years Bloem Water 1991 19 years Botshelo Water 1998 12 years Bushbuckridge Water Lepelle Northern Water Magalies Water 1969 41 years Mhlathuze Water 1980 30 years Namakwa Water 1978 32 years Overberg Water 1993 17 years Pelladrift Water Rand Water 1904 106 years Sedibeng Water 1979 31 years Umgeni Water 1974 36 years Ikangala Water serving a rural community in Mpumalanga was disestablished in 2009 and DWA regional office is currently providing water services to the affected communities. Albany Coast Water was disestablished in 2010 and its operations merged with that of Amatola Water.

Capital expenditure budget in R’000 8

Water board sales based on a volumes sales of 2,3 billion kiloliters

Water boards profits/-losses for the year

Debt owed by municipalities by water boards

Generic challenges facing water boards Profits declined from the previous year by 65% mainly due to high energy, chemical (purification) and labour cost together with significant bad debt write-offs against moderate level of tariff and volumeincreases. Long-term service level agreement not signed by a number of municipalities, this impedes the Water Boards ability to enter into long-term CAPEX investment plans, resulting in aging infrastructure with high level of water losses. Municipalities often use their equitable share allocated to them for water for other purposes, National Treasury states that this is an unconditional grant which cannot be paid directly to water boards, therefore debt recovery from poor municipalities are a problem.

Generic challenges facing water boards General governance problem, conflict between board members and also between the board and senior management. One of the reasons for this is that in terms of the Water Services Act, the CEO is involved in the appointment of the board, while the board appoints the CEO, in effect the CEO is involved in the appointment of his/her boss. Deteriorating quality of raw water at intake increases purification cost. Processing of license applications are delayed resulting in many water board exceeding their license conditions. Staff retention and skill shortage especially at remotely located water boards. Magalies, Namakwa and Botshelo are yet to submit their 2010 annual report.

Support offered water boards Water boards do accept the principle that water services must also be expanded to poor areas, in this regard water boards are willing to play an implementing role. However in order to extend services to the poor they will require support from the fiscus as the revenue generating ability to supply poor communities will be limited and banks will be unwilling to fund unviable projects. Water Boards do support the institutional re-alignment project and accept that they may have to be rationalized in order to enhance service delivery.

Support offered water boards Water boards are willing to and able to support DWA with water resource management and water quality issues. One of the key areas that Rand Water wants to get involved in is sanitation services. Some of the larger water boards have the ability to generate significant quantities of energy and are keenly awaiting regulatory approval for entering into such venture.

OVERVIEW of other entities

Trans-Caledon Tunnel Authority (TCTA) Established in 1986 in terms of the National Water Act, is categorized as a Schedule 2 major public entity and is subject to the PFMA. TCTA is engaged in project financing and implementation together with being a specialized liability management entity. It finance and implements bulk raw water infrastructure in a cost effective manner to benefit water consumers. Projects under management by the TCTA: Lesotho Highlands Water Project – Debt under management is R16.8 billion, paid for from revenue generated from water sales. Loan raised on explicit government guarantees. Berg Water Project – Debt under management is R1,6 billion, paid for from revenue generated from water sales, and loan raised by implied government guarantees. 17

Trans-Caledon Tunnel Authority (TCTA) Vaal River Eastern System Augmentation Project – Debt under management is R2,7 billion, paid for from revenue generated from water sales, and loan raised by implied government guarantees. Four new mandates have been issued to the TCTA including the Olifants River Water Resources Development Project Phase 2, the Komati Water Scheme Augmentation Project, the Mooi-Mgeni Transfer Scheme and the Mokolo-Crocodile Water Augmentation Project. Problems are experience in finalizing the mandates for the Mooi-Mgeni scheme as some of the benefiting municipalities are unwilling to sign off-take agreement resulting in Umgeni Water being unwilling to take on the risk for non-payment, as this will negatively affect their credit rating and borrowing ability. 18

Water Research Commission (WRC) Established in terms of the Water Research Act. Plays an important role in water research by establishing needs and priorities for research, stimulating and funding water research according to priority, promoting effective transfer of information and technology and enhancing the knowledge and capacity of the water sector. Key research areas includes: Water resource management Water linked ecosystems Water use and waste management Water utilization in agriculture Derives its income from a levy on raw water tariffs which is currently approximately 4 cents a cubic meter for domestic use. 19

Catchment Management Agencies cont… Inkomati CMA (ICMA) – The ICMA was established by government gazette notice No. 26185 on 26 March 2004 in terms of section 78(1) of the National Water Act. The Governing Board was appointed in September 2005 for a 3 year period. Transfer and delegation of functions – a MoA between the ICMA and the Mpumalanga Regional Office was signed in August 2007, and the first catchment strategy was submitted to Minister in April 2010. Seed funding have been provided for the ICMA, and once activities are transferred, ICMA will be less dependent on state funding which amounts to approximately R20 million p.a. Water resource management functions have been delegated to the ICMA to support them in their initial functions as set out in Section 80 of the NWA. 20

Catchment Management Agencies cont… Breede – Overberg CMA (BOCMA) – Was established by Government Gazette notice No. 27793 on 13 July 2005 in terms of section78(1) of the NWA BOCMA and the Western Cape Regional Office have been working closely in implementing water resource management functions resulting in a cooperative and successful relationship. The water resource management functions have been formally delegated to BOCMA in December 2010 which will result in an effective transfer of functions from the regional office to BOCMA The Catchment Management Strategy is under consideration and will be issued to Minister for approval in March 2011. 21

Catchment Management Agencies cont… Challenges: Debate on the number of CMA’s to be established needs resolution Board of CMA are appointed as representatives of various stakeholders, this excludes technical individuals being appointed to the board Stakeholders are concerned that the establishment of CMA may result in higher water tariffs Clarity of roles with other institutions as water boards and other institutions are able and willing to perform similar functions 22

Water User Associations (WUA) There is limited capacity within DWA to transform all irrigation boards (IB) into WUA. To date about 30% of irrigation boards have been transformed into WUA since 1998. Reason for the slow pace of transformation are: Protection of existing interest and assets managed by IB. Lack of involvement of all sectors and representation in terms of race and gender this suit existing interest as fully represented institutions are likely to dilute the interest of existing members. Main problem with established WUA to support emerging farmers is their lack of financial and operational capacity within newly established WUA. 23

Komati Basin Water Authority (KBWA) KBWA was established in terms of a treaty on water resources of the Komati River basin entered into between South Africa and Swaziland. It is governed by a Joint Water Commission, whose members are officials from both Governments. KBWA is responsible for financing, building, operating and maintaining the water resources infrastructure in the Komati River basin. KBWA collects revenue from various users and ensure payment for the scheme. 24

Institutional Reforms and Realignment

Objectives To develop an institutional framework that clearly defines roles, responsibilities and accountability within the entire water value chain. To have sufficient economies of scale inorder to be efficient and have financial resources to employ skilled managers, professional staff and technicians plus ability to raise sufficient capital funds for investment in essential water infrastructure (find solutions where non-financial viability exists). Need to promote good governance and corporatisation of water sector institutions thereby ensuring separation of policy making, shareholding, and regulation functions. Rationalise and align the number of institutions reporting to the minister inorder to have an effective span of control and viable water institutions

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