Intergovernmental Fiscal Review: Water Affairs & Sanitation (Chapter 11)

Meeting report

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE, LAND AND ENVIRONMENTAL AFFAIRS SELECT COMMITTEE: JOINT MEETING
19 May 2003
HEARING ON INTERGOVERNMENTAL FISCAL REVIEW - WATER AFFAIRS AND SANITATION (CHAPTER 11)

Acting Chairperson: Mr V Windvoel (ANC, Mpumalanga)

Documents handed out:
National Treasury: (Powerpoint Presentation)
South African Local Government Association (SALGA) (Powerpoint Presentation)
Department of Water Affairs and Forestry (DWAF): Presentation

SUMMARY
Discussions focused on backlogs in delivering free basic water and sanitation services to poor communities and the complex challenges entailed. Different levels of service in respect of sanitation and the high cost of infrastructure for water born sanitation and sewage treatment posed particular challenges in meeting national and local government targets. Concerns were raised regarding the capacity of local government to efficiently fulfil its role as retail water supplier under the new distribution arrangements, due to commence on 1 July 2003. The role of water boards in wholesale water supply was also discussed.

MINUTES
Presentation by National Treasury
Mr M Booysen, National Treasury, noted that supplying free basic water was important for improving health, alleviating poverty and facilitating economic development. To this end, there was a significant commitment of resources from Government to the programmes concerned. The national budget allocation was R3,1 billion while municipal budgets contributed R11 billion. The water boards accounted for R4 billion. A staff of 29 000 personnel worked towards supplying all South Africans with free basic water.

The presentation also explained the institutional and legal framework of the water sector, the role of water boards, trends in expenditure and budgets, personnel in the water sector, water resources users, water resources strategy, water tariffs and pricing, free basic services, key monetary issues, and challenges facing the eradication of the sanitation backlog.

Presentation by the Department of Water Affairs and Forestry
Mr M Muller, Director General of DWAF, observed that a structured annual inter-governmental review would be helpful in working towards a logical flow of funding to key programmes. However, it was unfortunate that the DPLG, as a key stakeholder, was absent.

He then summarised progress made in providing water and sanitation services. Since 1994 nearly eleven million people had been supplied with free basic water. Currently, 76% of the population or 26.8 million South Africans had access to free basic water. It was anticipated that, by 2008, the entire water supply backlog would have been eradicated and that, two years later, the sanitation backlog would also have been remedied.

On the 1 July 2003 the municipalities would begin taking responsibility for their own water schemes at which point DWAF's focus would increasingly become more regulatory. With this in mind DWAF was examining the role of the water boards and other mechanisms for regulating the water services sector. The Division of Revenue Act (DORA) would inform the planning of funding allocations and accountability.

He then elaborated on plans for the provision of free basic services, the focus of which was to improve infrastructure in poor areas. The goal was to provide six kiloliters of free water per household per month. This amount covered basic household usage, but was not sufficient for extraordinary tap-water usage. Any water consumption over the basic amount would be paid for. It was unconstitutional to cut off water supplies to people not paying for their extra usage. However, accountability and payment for extra water were serious issues. In Johannesburg alone, 40% of water consumption was unaccounted for and, by implication, not paid for. In order to address poor management accounting, local governments needed to be in a position to differentiate between spending on water and other items of local expenditure.

Providing free basic sanitation was more complex because of differences in the levels of service appropriate for a wide range of urban and rural settlements. Flush toilets were not standard items in all households.

With regard to prices and tariffs, the Director General predicted that the price of water would rise at a slightly higher rate than inflation over the foreseeable future. In a recent survey, South Africa's water had been rated as the second cheapest in the world. This was despite South Africa being a water-scarce country. In future, bulk water prices would reflect the scarcity of water as a resource as well as the cost of accessing and distributing it by way of an increasingly complex infrastructure. Bulk water prices would therefore rise every year.

Levels of service would be addressed once the backlog had been eliminated. The option of setting up yard tanks was being investigated to improve water pressure.

In concluding, the Director General noted that Working for Water had clearly demonstrated its worth as a conservation programme. He recommended that nature conservation programmes be included in the scope of the Intergovernmental Fiscal Review.

Discussion
Mr J van Wyk (ANC) asked about the role of DWAF in overseeing the work of the water boards and in establishing Catchment Management Agencies (CMAs) and Water User Associations (WUAs).

The Director General replied that, although an oversight system already existed for water boards, CMAs had not yet been established. The Minister would comment on WUAs in the upcoming budget speech.

Mr E Sigwela (ANC) commented that local government's capacity to administer the new policy was not as problematic as the inappropriate use of available water resources. Towns and rural villages needed to conceptualise a plan for long-term water usage.

The Director General advised that the DPLG would be largely responsible for capacity building. Expenditure on infrastructure and operational costs would inform how end-user revenue and grants from national government would be used in funding the service.

A member asked for more detail on the rationale behind above-inflation increases in the price of water.

The Director General reiterated that water prices were driven by the scarcity of the resource and the cost of accessing and distributing water from as far away as the Lesotho highlands.

Mr D Maimane (ANC) noted that water loss from burst pipes as well as low levels of service continued to present problems in many communities. Municipalities needed clear direction in addressing these issues. He suggested that portable toilets might help with sanitation in poorer communities.

The Director General agreed that portable toilets were currently the only option for poor communities. Flush toilets not only used more water, but also impacted on provision for waste water treatment.

Ms M Nkompe-Ngwenya (ANC) said that the Department would need to focus on what was realistically achievable and affordable. She asked the Director General to elaborate on yard tanks and commented that capacity building was an important aspect of the committee's oversight role.

The Director General explained that, instead of running pipes from a single source to every household within a community, yard tanks could be built for a cluster of households. The yard tank would fill up constantly, ensuring consistent water pressure despite simultaneous usage by several households. This system significantly reduced expenditure on piping. He emphasised the importance of the Committee's oversight role.

Ms B Thomson (ANC, Kwazulu-Natal) expressed concern about the lack of information available on municipal sanitation spending, requesting an explanation. She asked why only 76% of South Africans had access to free basic water.

The Director General conceded that the lack of information on sanitation services needed to be addressed as a matter of priority.

Mr Van Wyk advised that the target for free basic sanitation was 2010. Annual targets were reviewed each year with this in mind. Last year's target had not been met because actual costs had far exceeded estimated costs, which needed to be re-calculated particularly in respect of toilets. The three-year implementation deadline for local government was too short since municipalities depended on national and provincial government allocations for capital project funding. Some municipalities would not be able to meet the cost of supplying free basic water without significant subsidisation.

The Director General acknowledged that, for targets to be realistically set and met, the cost of toilets would have to be revisited. He undertook to revert to the Committee on this issue. With regard to the transfer of water schemes to local government, he stated that the equitable share would be used to meet free basic water costs. Unfortunately, however, the Treasury's formula for calculating the equitable share did not take into account the cost of water. While some municipalities with arid climates and poor infrastructure paid R50 per kiloliter of water, others paid R1,50 per kiloliter. If the formula were to be changed to take this into consideration, however, municipalities could claim that their water came at a higher cost in order to improve their allocations.

Mr V Windvoel (ANC, Mpumalanga) stated that the eradication of the bucket system was imperative because it is dehumanising as well as unsanitary. DWAF needed to work closely with DPLG to address this and the issue of effective accounting in respect of conditional grants.

The Director General stated that the Intergovernmental Fiscal Review would play an important role in this regard. SALGA, DPLG, DWAF and Treasury would need to liase closely in establishing a water sector leadership group. Co-operation would also have to take place at a local level.

Mr Booysen addressed some of the issues that had been raised during the discussion.

With regard to the accountability of municipalities that received national grants for water and sanitation programmes, he stated that Treasury could withhold funds from those municipalities that did not account for the money they had spent. Furthermore, the Department would publish the amount of funding allocated to the municipalities in local newspapers as well as in the Gazette.

In terms of capacity building, the National Treasury had tabled a framework to deal with issues of funding for capacity building through the DPLG. Municipalities should not simply present a business plan to DWAF and expect to receive funding. The Treasury should be involved.

Mr S Simmons (NNP) commented that when a municipality received funding for a project, DWAF and Treasury should follow up to ascertain whether the project had been completed.

Briefing by South African Local Government Association (SALGA)
Ms S Makotoko, Manager: Municipal Finance and Fiscal Relations, delivered SALGA's presentation which focused on the challenges for water service delivery, the challenges associated with implementing free basic water, sanitation delivery, the transfer of DWAF assets to municipalities, the role of water boards, the role of catchment management agencies, and the need for greater sectoral investment.

Discussion
Mr Maimane noted that the eradication of the bucket system was an important priority, especially because it was mostly used in poor, largely black, urban communities. Since portable toilets also tended to be dehumanising, flush toilets were preferable. Education on health and hygiene was a priority for SALGA, which would aim to start its own education programme in the rural areas.

Mr T Khalipha stated that SALGA was committed to addressing the sanitation backlog, which should be eradicated by 2010. The main problem in respect of backlogs in both the sanitation and free basic water programmes was people's inability to pay, particularly in rural areas.

Ms Thomson asked what generally caused pipes to burst and whether the high cost of treating sewage was slowing down the provision of water borne sanitation services.

Mr Khalipha replied that water loss as a result of burst pipes tended to occur in areas with old and deteriorating infrastructure. This problem was costly to address.

Ms Makotoko advised that infrastructure for water borne sewage was very high and not widely in use outside metropolitan areas. Sewage treatment plants formed part of a higher and more costly level of service.

Ms Nkompe-Ngwenya commented that poor communities were not benefiting from free basic water because the infrastructure was not in place. The sanitation backlog should be addressed as soon as possible.

Mr Van Wyk stated that SALGA had not adequately addressed its role in the Intergovernmental Fiscal Review process. He commented that the role of the water boards could change upon the transfer of DWAF assets to municipalities and that there were concerns that rural and small municipalities would not be able to administer their own free basic water programmes. He asked if research was being conducted to develop a flush toilet that uses less water.

The Director General remarked that water boards would continue to play an important role in wholesale water supply. Research into cost-effective sanitation was ongoing.

Mr Windvoel asked SALGA for a target date for the eradication of the bucket system. He also asked for clarity on the CMAs.

The Director General replied that CMAs are still in the development stage. They would be established with the aim of preserving the country's rivers and underground water resources and would include representatives from national and local government.

The meeting was adjourned.