1. 1 The creation and operation of uThukela Water (Pty) Ltd as a multi-jurisdictional service delivery partnership for water delivery A presentation of preliminary findings of research conducted for Water Dialogues-SA Glen Robbins 16 September 2008

2. 2 Presentation outline Purpose of the research The context of the study and the methodology employed The findings  Rationale for the establishment of UTW  The process related to the institutions establishment  The performance of UTW  The present operational context  Lessons for the possible replication of the MJSDP model

3. 3 Purpose of the research Core purpose  Examine the lessons generated from the experience of a multi-jurisdictional service delivery partnership in the field of water Approach of the study must reflect on:  Rationale(s) for the choice of institutional model  Processes related to the creation of the institution  Operational experiences of the institution

4. 4 Locating UTW’s area of operations UTW originally created by 3 districts (Umzinyathi, Amajuba and Uthukela) and the Newcastle Municipality in 2004

5. 5 Methodology and contextual factors The core methods used were:  an analysis of documentation;  interviews with direct stakeholders Note: Limitations resulting from the KZN Department of Local Government and Traditional Affairs process relating to UTW.

6. 6 Findings: A brief background overview 1997  15 local municipalities and 2 RSCs initiate Regional Water Services Study (RWSS)  Partnership structures set up to provide oversight 1999  RWSS reports creation of Water Board not viable with the then levels of tariffs.  Participating municipalities reject notion of an entity answerable to Minister of Water Affairs 2000-2003  Newly elected Amajuba, Uthukela and Umzinyathi Districts agree to formation of uThulela Water Partnership to examine other options for collaboration in water services.  Funds raised to undertake SP2030 exercise to guide selection of appropriate institutional options and service delivery models  Three districts vote to implement SP2030 recommendations for forming uThukela Water (Pty) Ltd  2003 - Newcastle LM granted WSA status and endorses SP2030 2004  1 July UTW begins its operations

7. 7 Findings: Rationale for establishment Two main strands of rationale:  Formal documented case based on technical perspective: Collectively the areas faced massive backlogs with little in the way of available capacity and resources to make substantial progress on reducing these; A collaborative venture would allow for sharing of scare capacity and assets and enable economies of scale in provision to be realised; Political boundaries made little sense when planning service provision of water, especially where the entities share a catchment. Why specifically a wholly owned company? Had tried a less formal partnership and not succeeded Necessary to disentangle water and sanitation from complex bureaucratic structures to give it the necessary focused attention Company structure would allow for appropriate arms length governance and securing of necessary technical expertise that the public sector struggled to secure; The independence of the structure would allow for direct raising of funds from major ODA donors.

8. 8 Findings: Rationale for establishment Background contextual factors identified by some respondents:  A history of political alignment and trust between key role players created appropriate conditions;  Political and administrative leadership were tired of taking direct responsibility for this most problematic of service delivery areas;  Considerable pressure form policy makers (such as DWAF and DPLG) and other influencers (eg ODA donors) to test service delivery partnership model;  Direct interest of some stakeholders in creating entity outside Council structures for their own benefit (policy alignment, contracts, salaries ….).

9. 9 Findings: The process Momentum built up for the establishment or UTW over an extended period of time Optimistic technical studies gave further impetus to the process as did eagerness of other spheres of government Process was characterised by limited public participation and transparency New processes and legislative frameworks being tested (Section 78; WSA formation etc) for the first time Weak legal, operational, management and information systems rapidly appeared as shortcomings in the process Uthukela District withdrew at end of 2004 in dispute over funding

10. 10 Findings: Performance Backlogs  Water backlog estimated in 2003 at 52%  Present water backlogs estimated by DWAF to range from 37% in Newcastle to 74% in Umzinyathi (2007) Operating costs  Sources suggest per project cost for UTW between 10-30% more expensive than cost experienced by Municipalities Due to risk premium, high salaries, building systems from scratch or lack of hidden cross subsidy? Obtaining funding  Consistently lower budget flows to UTW than projected in business plan  Almost no progress on leveraging other donor funds

11. 11 Findings: Present operations Second Board suspended in 2007 by KZN MEC for Local Government – administrator appointed and inquiry/audit initiated Technical expertise from eThekwini WSS and Umgeni Water brought in Dialogue with municipal stakeholders initiated and systems being rapidly upgraded Partners are awaiting findings of Provincial led inquiry. Most expect UTW to continue and lament their inability to secure WSP roles individually. Possibilities include re-inclusion of Uthukela District and/or limited term management contract (private company, water boards?)

12. 12 Findings: Lessons Broad concept of MJSDP supported Preconditions  Need more than general assurances of preparedness to collaborate  Must have trust, experience of working in risky fields, be backed up by substantial partner capacity building and underpinned by comprehensive legal frameworks Process should:  Have clear and detailed steps;  be transparent and accountable and involve wider stakeholder participation;  expertise must be of suitable standard and advice must be independently reviewed. On choice of model:  Creating new entities is costly and difficult – be aware of this;  Explore incremental routes to the full or consider introduction of 3 rd party expertise in early years Operational scope:  Avoid overloading mandates to new bodies – expand on basis of demonstrated performance/capabilities External influencers:  Roles and expectations must be clarified upfront and be made transparent Alignment of funding models with institutional innovation:  Explore options to reduce transactions costs and lack of access related to funding pools.