Free Basic Water: hearings

Meeting report

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE
4 June 2003
FREE BASIC WATER: HEARINGS

Chairperson: Mr J Van Wyk (ANC)

Relevant documents
South African Water Caucus Presentation
Water Research Commission Presentation
National Treasury Presentation
Department of Provincial and Local Government Presentation DPLG
Department of Water Affairs and Forestry Presentation DWAF
SAAWU submission
SALGA submission (document awaited)

SUMMARY
Morning session
SALGA had previously highlighted some of the challenges facing the various role-players in the implementation of the free basic water policy. Subsequent to that, it was decided to host public hearings on the issue, although the hearings were only for those groups which the Portfolio Committee had invited to make submissions. Some of the submissions differed on the manner in which the policy was being implemented.

- The South African Civil Society Water Caucus (SAWC) felt that the free basic water allocation of 6kl per household per month was hugely insufficient, contending that this policy, which was introduced to benefit the poor, is now causing them further suffering.
- The South African Local Government Association (SALGA) reported that progress of the policy's implementation was being hindered by lack of funds and resources, and the finalisation of the transfer of water schemes to municipalities from water utilities.
- The South African Association of Water Utilities (SAAWU) stated that water utilities were providing water services to communities where municipalities were not sufficiently capacitated. They reported a lack of contractual agreements between themselves and the local municipalities.
- The Water Research Commission's presentation focused mainly on issues of cost recovery, which would assist the provision of free basic water to impoverished communities.
- Treasury's presentation gave input on its commitment to the provision of free basic services.
- The Department of Provincial and Local Government explained the various budgetary allocations for free basic services, and detailed its role in providing free basic services.

Members raised the following questions in response to the presentations delivered by the Water Research Commission, National Treasury and DPLG:
- the measures in place to address the problem of disproportionate allocation of the equitable share to those municipalities that really need it,
- how the water cut-offs can be addressed,
- ways to improve the results of the surveys so that people actually receive free basic water
- the financial and infrastructural capacity of municipalities to provide free basic water.

DWAF's presentation outlined the implementation status of free basic water provision, policy and strategy development, the Division of Revenue Act 2003 with regard to the local government funding breakdown and the monitoring processes undertaken by DWAF, DPLG and Treasury.

MINUTES
In his opening statement at these hearings, the Chairperson stated that SALGA had previously highlighted some of the challenges facing the various role-players in the implementation of the free basic water policy. It was subsequently decided to hold public hearings on the matter. The hearings, however, were not made open to the general public, but specific groups were invited to inform the Committee on the challenges they faced with regard to the issuing of free basic water. The free basic water policy was a new one introduced during the 2000 elections, an attempt by government to address the poverty situation experienced by many in South Africa.

South African Civil Society Water Caucus (SAWC)
Ms Julie Smith (Researcher) presented the abovementioned group's submission to the Committee, stating that the Caucus represents an allocation of NGO's. The SAWC support the provision of free basic water in principle, but have serious objections to the manner in which it is being implemented. They felt that the free basic water allocation of 6kl per household per month is inadequate.

Two fundamental flaws of the policy were identified. These are that the basic water allocations per household is inadequate, and that the quota is allocated per household, and not per capita. The result is that, whereas this policy was introduced to help poorer households, which generally have more members, and therefore consume more water, it is rather benefiting wealthier households, which are generally smaller, and consume less water.

Ms Smith contended that the free basic water policy is incorrectly based on the assumption that low-income households use less water. She stated that the following factors, which the policy fails to consider, influence water consumption:
- household size,
- illness status of household members (HIV/AIDS patients require considerably more water for hygienic purposes. Also because of high incidences of diarrhoea, they need to flush more.
- toilet flushing
- water consumption increases on week-ends
- water for productive use

Ms Smith stated that, instead of the policy acting as a benefit to low-income households, these people are further disadvantaged by the policy. When they use more than the 6kl free allocation, they are then placed into a higher payment block which is not subsidised, and then face punitive measures when they cannot afford to pay. She added that people who are in arrears cannot access free basic water.

SAWC recommended that the free basic water be fundamentally reworked, and that: the basic water requirements for health, well-being and satisfying productive, sustainable livelihoods should be scientifically calculated and socially assessed; free basic water allocation should be granted on a per capita basis, as opposed to the present per household basis; the various factors affecting water consumption should be considered in the policy.

They proposed the setting of four tariff blocks:
first - amended free basic water policy based on basic water requirements
second - lifeline tariff (20-25kl)
third and fourth - steep rising tariff based on consumption incentives

The following financing options for free basic water were suggested:
- increase internal cross-subsidies mobilised within municipalities that have sufficient surpluses
- substantially increase equitable share grants through the National Treasury to municipalities

Mr Jeff Rudin, a member of SAWC, said that the proposed concept was a "wonderful" idea, but in order for it to work, it must be based on a reality "other than an ideological one". The amount of free basic water must have some relation to how much water people actually consume. He presented the Committee with a motivation in which he called for a rates-based water tariff. The idea is to charge for water consumption in the same manner as property rates are implemented. Property rates are calculated according to the value of the property, with some households paying no rates because the value of their property is so small. Mr Rudin's idea was to adapt the property rates system, so that households that pay no rates, would similarly not pay for water, and with the supply of free basic water not being restricted to 6kl, all the water being free. Those households within the second lower rates block would pay a suitably small amount for all their water, and the charge would increase as the rates structure goes higher.

South African Local Government Association (SALGA) Presentation
Councillor Mayathula-Khoza presented SALGA's submission, informing the Committee that SALGA represents municipalities covering the whole of developed South Africa, and that includes rural communities.

The extension of free basic water to those communities that do not benefit from the policy are hindered by two main external factors:
- the lack of funds to extend the water infrastructure to deliver piped water to unserved communities
- finalisation of the transfer of the DWAF water schemes to municipalities. These transfers should gain momentum from 1 July 2003, with funding provided by the DORA mechanism.

In addition, other challenges faced in rural communities are: a lack of institutional capacity, and an inadequate base from which to subsidise water to the poor.

Provincial Support Units established by the National Free Basic Water Task Team, are now operational in all nine provinces, with Limpopo Province having experienced the most problems. A number of provinces have now indicated their intentions to introduce free basic water as from 1 July 2003, although most municipalities have been providing free basic water since last July.

The following issues require urgent attention:
- the statistics used to measure poverty lines, and supplied by the Department of Provincial and Local Government, are of questionable accuracy. There are therefore inconsistencies in measuring poverty, and problems created in measuring the progress of delivery. As a result, in some areas, the number of people benefiting from the policy exceeds the official number of poor households shown by the statistics. The DWAF municipalities still having to be transferred to municipalities have been excluded from current statistics, and for these various reasons, the reports on coverage of free basic water do not reflect the actual situation.
- since it is not viable to separate free basic water from sanitation, there is a need for the development of a free basic sanitation policy. SALGA has been included in a team commissioned by DWAF to look into the drafting of such a policy. Funding for the implementation of such a policy will place a considerable burden on municipalities, and this matter will have to be seriously considered in the development of a free basic sanitation policy.

South African Association of Water Utilities (SAAWU)
Mr Piroshaw Camay (Chairperson at Rand Water Utilities) presented a submission on behalf of SAAWU, along with Mr T.D. Nkoana (General Manager: Administration) from Lepelle Northern Water Utilities. The South African Association of Water Utilities (SAAWU) represents 18 water boards and five other public sector institutions involved in water services. Mr Camay explained that the authority function for water services delivery belongs to the appropriate delegated municipal entity (the Water Service Authority, WSA) for that area.

In terms of existing legislation, water boards and other water utilities who are SAAWU members are water service providers to the WSA. In many instances, the WSA (municipal authority) lacks the capacity and resources to provide water services. Many water utilities operate and maintain a number of DWAF-owned water supply schemes on behalf of DWAF or the municipal authorities who have been targeted to receive transfer of these assets from DWAF. In many of these instances, these arrangements have not been formalised into appropriate contracts or agreements. Many of these water utilities acting on behalf of the municipal authorities receive a direct subsidy from DWAF for their operations.

Some water utilities provide services to the rural poor where existing municipalities lack the capacity or resources to deliver the services. Here, most consumers are unable to pay for these services, and water utilities rely on subsidies from DWAF to cover expenses. In terms of Section 8 of the Division of Revenue Act (DORA), "an organ of state may in the national or provincial sphere of government only provide funds for a municipal service to the relevant municipality directly". As a consequence, the subsidies which are currently directly paid by DWAF for water services will in future be directed to the local municipality. He summarised the key aspects of this provision under DORA as follows:
- the continued ability of water services to deliver water to the rural poor will be subject to the municipality providing the subsidy to water utilities.
- it is envisaged that the financial viability of some water utilities will be severely impacted, considering the current allocation of equitable share to fund water services.
- the lack of capacity and willingness of municipalities to enter into formal agreements with water utilities for the provision of services is a significant constraint to the effective implementation of DORA.
- there is an urgent need to develop a practical mechanism which will enable a sustainable transition to a situation where subsidies for water services are directed through municipalities.

Mr Nkoana spoke on the impacts of the implementation of free basic water on water utilities, saying that SAAWU fully supported the principle of free basic water as an initiative to improve the quality of life of South Africans, especially the indigent and rural poor. SAAWU supports the notion of municipal authorities being the most appropriate institutions to implement free basic water, supported by other spheres of government. Many water utilities have expertise that can be used to assist municipalities in the implementation of free basic water such as: water loss management; technical and financial management; water demand management; customer management and credit control; operation and maintenance of services. The possible contributions which Water Utilities could make to the implementation of free basic water are:
- where they act as water service providers, they could implement and manage the free basic water for the municipal authority;
- they could provide financial, technical and management expertise for low level water schemes in rural areas (boreholes, hand pumps, etc).
- they could act as implementing agents for new infrastructure provision

Challenges envisaged by SAAWU to the implementation of free basic water are:
- municipal demarcation has not significantly improved the economic viability of all municipal areas (esp. rural district municipalities).
- the equitable share and other resources are used to supply free basic water to those who are already benefiting from services at the expense of those who are not served.
- universal metering and full cost recovery above 6kl is critical for municipal financial viability, ongoing free basic water implementation and the viability of the entire water sector. This also requires significant capital investment.
- many municipalities lack the capacity and / or resources to implement the free basic water policy effectively.

The reality, said Mr Nkoana, is that water is not free, and someone has to pay for the 6kl of free basic water supplied to consumers.

Discussion
Ms R Ndzanga (ANC) stated that Ms Smith had not once mentioned the use of boreholes and water pumps used by people in rural areas, in order to obtain water, for which they pay. She also mentioned the implementation of an "indigenous plan", and asked the Gauteng Council to explain if this plan was being successfully implemented or not.

Mr Neil Macleod (Head: Water and Sanitation, Ethikwini Municipality) said that indigenous policy is an extremely costly scheme to implement and manage in the larger municipalities. Statistics would need to be regularly updated to assess who the poor are, and to assess services that are subsidised.

Mr J. Arendse (ANC) asked Ms Smith where she had derived her information that households were spending between 10% and 20% of their income on water. He further asked her to explain her statement that some people do not have access to free basic water, because they consume more than 6 kilolitres. He commented that she seemed to be opposed to the building of more dams. He continued that should the free basic water allocation be increased, that would result in more water being used. With South Africa's water problems, and with so much of our water running into the sea, that would necessitate the building of more dams. He questioned the viability of sustainable development if it meant that people would have to go without water.

Furthermore, Mr Arendse referred to Mr Rudin's assertion that 25 litres per person per day cannot be taken seriously, saying that for someone who had not had any free basic water before, that was indeed a serious matter.

Ms Smith responded to Mr Arendse that her figures came from research in Pietermartitzburg, and triangulated with research from Johannesburg. The figures were not isolated to water and sanitation, however, but could also include electricity and waste. They are also quite comprehensive in terms of looking at other developing countries. In developed countries, people spend between 1% and 5% on these services. The amounts people are spending for basic services in South Africa are much higher than in the rest of the world.

Continuing, she said that in some areas, people using 7 kilolitres of water, only pay for 1litre. However, in most areas, the same people would pay for the full 7litres, which means that for them, the first 6kl is not free.

On the building of dams, Ms Greeff said that from a social and ecological perspective, dam-building in South Africa has been quite destructive. Only 13% of dams are built for the supply of household water. She often meets with community representatives and has found that people do not generally understand the implementation of free basic water. They ask why their water bills have increased since the implementation of free basic water. Cape Town municipal authorities are sending water bills that are incorrect, and have incorrect telephone numbers on them. The policy and implementation of free basic water is important, because if South Africa can implement it effectively, it could have an international impact, as other countries are considering implementing the same policy.

On Mr Rudin's motivation for rates-based water tariffs, she said that generally, people who don't have to pay rates, are classified as indigent. Speaking on Mr Rudin's behalf, she felt he was not saying that people who have pay rates should have an unlimited supply of water, but when more free water is allocated, it should be allocated to people who don't pay for rates. She said that SAWC was not saying that people should consume as much free water as they like, but as much as they require, with due regard for conservation.

Mr Camay commented that water is free when it falls from the clouds to the ground, but getting that water to the people, costs money. He agreed with cross-subsidisation, conceding that perhaps the basic allocation of 6kl should be increased. However, to supply households with free, unlimited water, would cripple municipalities.

Mr D Maimane (ANC) said that there had to be an acknowledgement that Government has an integrated approach in attempting to roll back the frontiers of poverty.

Speaking to SALGA, Mr Arendse referred to their statement that they cover the whole of "developed South Africa" as strange. He said that in many areas, South Africa is either still developing, or under-developed. Did their statement not suggest that they, in fact, do not cover most of South Africa? Further, he wanted to know if SALGA was working on a proposal as part of a team, or in isolation. He asked what SALGA's role in local government was.

Mr Macleod said that SALGA is the recognised voice of local government. Should local government need to interact with government, they would approach SALGA to do so on their behalf. They provide other services, such as with water and sanitation, where with the help of the Masibambane programme, they have helped municipalities to implement the free basic water policy. Their other role is for SALGA to communicate downwards to municipalities.

Ms Khoza stated that the municipalities operate autonomously. They are encouraged by SALGA to help those who are less capacitated, to promote best practices, and to facilitate in the sharing of skills.

Mr Arendse inquired of SAAWU what efforts they were making, in order to transfer their skills to the municipalities, to enable them to eventually provide water services to the communities on their own, which they actually should be doing.

Mr Piroshaw said SAAWU was continually engaged in skills-transferring. However, he stated, in attempting to contract agreements with municipalities, they often experience difficulties because municipality officials hamper the process. The political arm should enforce itself, and compel them to "come in line".

Ms Ndzanga asked for an explanation to SALGA's statement that Limpopo Province had experienced the most problems in the implementation of the free basic water policy, and in relation to the work of the Provincial Support Units.

Mr Macleod informed her that the consultants who had been called in to assist the Province in implementing free basic water, were not performing satisfactorily. However, they now have employed a consultant who is providing proper support.

A member mentioned a spring in the Eastern Cape Province, which had dried up, because the municipality did not have the funds required to protect the spring. He insisted that SALGA should protect all the water springs and boreholes in the country.

Mr Neil Macleod said that the matter of springs was to be addressed in interaction between communities and their municipality.

Mr M Masala (ANC) stated that SAWC's presentation had been comprehensive, and they had moved for a very ideal situation, but the Committee was concerned with what was practical. He asked to be a little more informed about SAWC, its membership, and if they had a membership constituency in the rural areas.

Ms Liane Greeff (member of SAWC and steering committee member on EMG) explained that SAWC comprises 50 organisations from civil society, the Contact Trust, and the regional water network, NOWISA. It is not a comprehensive caucus covering all areas, but it is growing.

Mr Maviyakule, an industry representative, asked Ms Smith if she intended to continue with her research, in order that a fuller, more representative idea could be gained, rather than giving only the experiences in Pietermaritzburg.

She said that although her research had been done predominantly in Pietermaritzburg, she had received comment from all their networks in other areas, which are internationally based. SAWC was interested in extending their research, but felt that Government should also be involved in the research efforts.

Speaking to SALGA on the finalisation of the transfer of the DWAF water schemes to the municipalities, Mr Masala asked if they were ready for the transfers. He wanted to know if they were sufficiently capacitated, so that if DWAF were to move forward to transfer all the skills to the rural areas, they could deal with it.

Mr Macleod said that there were about 300 schemes nationally that were to be transferred, and SALGA was convinced the transfers would be successful. About 8000 staff must be transferred. Although some transfers would be effected on the 1^st July 2003, the entire transfer process will take between one and three years.

Mr Piroshaw felt that the ultimate objective of delivering free basic water to everybody would be hampered by the lack of contractual agreements between Water Utilities and the municipal authorities. SALGA should consider the absolute importance of such contracts.

The Chairperson mentioned that SALGA was involved in national free basic water tasking forums, but felt other organisations and civil society should also get involved. He further mentioned the policy of granting potable shares to SALGA and local government. In spite of this, water is not subsidised with these grants, and there are still water cut-offs. He suggested that this grant be used to subsidise those people who require more than 6kl, but cannot afford to pay. He further wanted to know what was being done about water losses.

On involvement in water forums, Councillor Mayathula-Khoza said that individual municipalities participate in individual water utilities. SALGA encouraged their provincial associations to engage with civil society.

Mr Macleod said that, having examined municipalities to see how they administer their finances, it was noted that some municipalities do not utilise their equitable share properly. On water losses, he said that the various municipalities, especially those ones that have the capacity, were working on the water losses in their areas. He added that in one particular municipality, the cost of water losses amounted to R100 million.

Councillor Mayathula-Khoza said that Water Utilities do not support water cut-offs at all. She mentioned the existence of an 8-step guideline for municipalities to follow, where local authorities do not meet their accounts.

Mr Neil Macleod said that when people have a free basic water supply, they actually use less than 10kl. If municipalities were to supply 25kl water free, which was what SAWC was suggesting, over 60% of people would pay nothing for water.

He said that when doing an actual count of poor houses "on the ground", one comes up with a figure exceeding the official figures. It is therefore important to receive the new set of statistics from the latest census, as soon as possible.

Water Research Commission submission
Mr Lansana Marah, MD: Sigodi Marah Martin Consultants, presented a submission on behalf of the Water Research Commission. He spoke on the government's commitment to ensuring access to basic social and economic services to all in South Africa, and DWAF's efforts subsequent to the 1994 elections, in extending basic water services to those who were not being served. However, difficulty in securing user payments threatened the financial viability of such a programme. Cost recovery therefore became imperative, if service expansion needs were to be met.

Success in cost recovery varies widely, with the percentage of household consumers paying regularly ranging from near 100 to near 0. The most successful method for encouraging cost recovery has been the use of service restrictions to penalise non-payment. Other practices, such as the Masakhane campaigns, progressive tariffs, and offering convenient payment facilities improve cost recovery, but more moderately.

Concluding his presentation, Mr Marah advised that the reconfiguration of municipalities, along with the implementation of the free basic water policy, has had a marked influence on the enhancement of recovery costs. As punitive sanctions become more necessary, they also become more expensive to implement. He advised the abolition of flat rate billing. Lastly, he advised that for effective cost recovery, consumers who use more than the free basic water allocation, should be billed for what they consume.

National Treasury submission
Mr Malcolm Booysen presented National Treasury's submission to the Committee. Some priorities for the current year were listed as:
- reviewing the formula for equitable share
- on the legislative front, enhancing municipal revenue through the Property Rates Bill, and the
Municipal Finance Management Bill
- infrastructure grant reforms

National Treasury aims to assist municipalities to accelerate the provision of free basic services to poor consumers. These free basic services include water, sanitation and refuse removal. The new allocation for 2003/4 is R822 million, aside from the S-grant allocation.

Mr Booysen reported that 76% of municipalities provide free basic water, with wide-ranging disparities ranging from 1.2 kilolitres to 12 kilolitres free.

His presentation stressed that municipalities must enter into a service delivery agreement by 30 June 2003, or a date determined by National Treasury.

The Water Services Operating Subsidy provides for operation maintenance and related staff costs of water services works to be transferred. The subsidy is available to water service authorities from 1 July 2003 to 30 June 2006. There are substantial personnel implications emanating from the transfer of water schemes, as DWAF expects to transfer approximately 8100 staff to local government.