1. Water Services Reform – the Durban experience : successes and challenges Neil Macleod Durban South Africa

7. What makes our business different Water is a political issue Water is a political issue Sanitation is not ‘sexy’ or understood Sanitation is not ‘sexy’ or understood Most of our assets cannot be seen Most of our assets cannot be seen We cannot choose our customers We cannot choose our customers Many of our customers are poor Many of our customers are poor Effective communication is vital to success in securing funding and getting projects implemented Effective communication is vital to success in securing funding and getting projects implemented

8. South African context National government is the custodian of the country’s water resources and acts as the regulator of all water services providers (WSP’s) National government is the custodian of the country’s water resources and acts as the regulator of all water services providers (WSP’s) The provision of water and sanitation services at the local level is the responsibility of municipalities – water services authorities The provision of water and sanitation services at the local level is the responsibility of municipalities – water services authorities

9. SA before 1995 More than 800 municipal water supply authorities that were combined to create 147 authorities More than 800 municipal water supply authorities that were combined to create 147 authorities Water boards had a right to exist through the national law but this changed to make them water services providers to municipalities Water boards had a right to exist through the national law but this changed to make them water services providers to municipalities

10. Durban Pre 1996 Water and sanitation services were provided by 38 water services authorities Water and sanitation services were provided by 38 water services authorities The capacity of the management varied considerably as the smaller towns found it difficult to attract and retain key staff The capacity of the management varied considerably as the smaller towns found it difficult to attract and retain key staff Tariffs in the smaller towns were under pressure and maintenance suffered Tariffs in the smaller towns were under pressure and maintenance suffered Raising loans and the ability to cross subsidise tariffs was difficult for smaller municipalities Raising loans and the ability to cross subsidise tariffs was difficult for smaller municipalities

11. Post 1996 to 2000 The urban municipal authorities were combined to from 4 regional sewerage authorities and one water supply authority The urban municipal authorities were combined to from 4 regional sewerage authorities and one water supply authority This soon proved to be unworkable and was changed in 2000 when the metropolitan boundary was enlarged This soon proved to be unworkable and was changed in 2000 when the metropolitan boundary was enlarged We learned that water and sewerage services do not work well if operated by separate authorities We learned that water and sewerage services do not work well if operated by separate authorities

12. Post 2000 The 4 regional service providers were joined to form a single ring fenced public entity, providing water and sanitation services to the whole metropolitan area The 4 regional service providers were joined to form a single ring fenced public entity, providing water and sanitation services to the whole metropolitan area The boundary of the metropolitan area was extended to include largely rural areas surrounding the more developed core The boundary of the metropolitan area was extended to include largely rural areas surrounding the more developed core

13. The 3 ‘one millions’ The water and sanitation challenges faced in 2000 were huge: The water and sanitation challenges faced in 2000 were huge: 1 million people without municipal water and sanitation services 1 million people without municipal water and sanitation services 1 million people with severely run down services 1 million people with severely run down services 1 million people with first world services 1 million people with first world services Inward migration to the metro has continued at a high rate Inward migration to the metro has continued at a high rate

14. Asset Customer Management Management Network Revenue Expansion Management Human Resources Management

15. Human resources management Ensuring that the organisation has competent key staff in place for now and for the future. Ensuring that the organisation has competent key staff in place for now and for the future. Standard Operating Procedures to retain institutional memory an ensure effective training Standard Operating Procedures to retain institutional memory an ensure effective training Talent management for succession planning and staff development Talent management for succession planning and staff development Regular reviews of the organisational structure Regular reviews of the organisational structure Build an organisational culture based on the values of integrity and excellence Build an organisational culture based on the values of integrity and excellence

16. Asset management Maintaining assets which already exist. Most water services businesses in developed countries spend over 90% of their capital budget on asset replacement Maintaining assets which already exist. Most water services businesses in developed countries spend over 90% of their capital budget on asset replacement We still don’t know exactly what assets we have or what their condition is in every case. We still don’t know exactly what assets we have or what their condition is in every case.

17. New infrastructure We have extended basic water services to more than 1 million people in the past 10 years and basic sanitation to more than 700 000 people in the past 7 years We have extended basic water services to more than 1 million people in the past 10 years and basic sanitation to more than 700 000 people in the past 7 years Infrastructure solutions have to be affordable and sustainable (financially, environmentally and socially) Infrastructure solutions have to be affordable and sustainable (financially, environmentally and socially) We have had to strike a balance between funding for new and existing assets We have had to strike a balance between funding for new and existing assets Job creation is an important aspect of service delivery Job creation is an important aspect of service delivery

18. The sanitation edge

19. Revenue management Our income is approximately $600 million a year (R5,2billion) for water and sanitation services Our income is approximately $600 million a year (R5,2billion) for water and sanitation services Customers must not have excuses to not pay for services Customers must not have excuses to not pay for services Audited accounts are key to attracting loan finance (AA credit rating) Audited accounts are key to attracting loan finance (AA credit rating) Capex must be efficiently managed Capex must be efficiently managed We accommodate those who fall into debt through innovative approaches We accommodate those who fall into debt through innovative approaches Pricing of services is important Pricing of services is important

20. Pricing policy Water services can be seen as a right to be made available at no cost or as a commodity to be priced using market principles Water services can be seen as a right to be made available at no cost or as a commodity to be priced using market principles We have adopted a combination approach – basic water and sanitation are a right, whereas higher levels of service are priced using market principles (access and usage) We have adopted a combination approach – basic water and sanitation are a right, whereas higher levels of service are priced using market principles (access and usage) Only the poor require a subsidy! Only the poor require a subsidy!

21. Pricing policy continued For customers who are not defined as ‘poor’, the water price is set to cover debt, depreciation and operating and maintenance costs – the average price is about $1.10 per m³. Depreciation is an issue! For customers who are not defined as ‘poor’, the water price is set to cover debt, depreciation and operating and maintenance costs – the average price is about $1.10 per m³. Depreciation is an issue! The price paid for the use of a service increases with the level of service and with volume The price paid for the use of a service increases with the level of service and with volume Average collection rate exceeds 95% annually Average collection rate exceeds 95% annually

22. Flow limiter

25. Sanitation as a resource Certain initiatives such as CLTS portray sanitation as something dangerous or harmful that is to be avoided at all cost. Certain initiatives such as CLTS portray sanitation as something dangerous or harmful that is to be avoided at all cost. Our natural instincts come into play to protect us from harm through faeces Our natural instincts come into play to protect us from harm through faeces The reality is that sanitation has the potential to provide a sustainable source of plant nutrients potable water and also energy. The reality is that sanitation has the potential to provide a sustainable source of plant nutrients potable water and also energy. UD sanitation and waterless toilets must be the technology of the future UD sanitation and waterless toilets must be the technology of the future

31. The reform process Reform is a delicate process Reform is a delicate process The key is to find out what will satisfy the key stakeholders’ expectations The key is to find out what will satisfy the key stakeholders’ expectations It is essential to take the political leadership along in the process and ensure that their concerns and expectations are met It is essential to take the political leadership along in the process and ensure that their concerns and expectations are met

32. Concluding remarks We see our operation as a business to be run according to normal business principles, particularly a strategic approach. We see our operation as a business to be run according to normal business principles, particularly a strategic approach. Innovation is key to our growth and development as an organisation. If it is not working then do something different Innovation is key to our growth and development as an organisation. If it is not working then do something different Communication can make or break any initiative Communication can make or break any initiative The support of political leadership has been critical for success The support of political leadership has been critical for success