Lesotho Water Highlands Project; Maguga Dam: briefing

Water and Sanitation

18 October 1999
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Meeting report

PORTFOLIO COMMITTEE ON WATER AFFAIRS AND FORESTRY

WATER AFFAIRS & FORESTRY PORTFOLIO COMMITTEE
19 0ctober 1999
LESOTHO WATER HIGHLANDS PROJECT AND MAGUGA DAM: BRIEFING

Documents handed out
Water resource planning, development, operations and international projects
The evaluation of further water resource augmentation schemes of the Vaal River system from a demand management perspective

SUMMARY
A brief overview of the water supply projects that the Department of Water Affairs is currently working on was given. The members of the committee were primarily interested in the Lesotho Highlands Water Project and its progress. Various aspects of this project were discussed, primarily focusing on specific provisions in the treaty concluded between Lesotho and South Africa. The meeting was concluded with the chairperson noting that the members wanted a detailed description of fund allocation and that they would be interested in visiting the various projects, specifically the ones in their particular constituency. It was requested that access permits be organised for this purpose.

MINUTES
The presentation was made by five of the six members of the Department of Water Affairs who were present at the meeting. Dr Paul Roberts commenced with a brief introduction. He indicated that the Department was considered the natural custodian of water in South Africa and that the National Water Act obliges them to develop water strategies. He defined this as the development and management of water resources. He highlighted the need to plan and manage systems which operated on a catchment basis. He explained that this refers to the transfer of water from water rich areas to water deficient areas.

He further noted that the expenditure on the Exchequer Account for the water resources functional area amounts to about 27% of the total Departmental budget, although there was extensive off-budget expenditure on capital projects like the Lesotho Highlands Water Project.

After this brief introduction the chairperson, Ms B Sonjica (ANC), gave members of the committee the opportunity to pose questions.

It was noted by a committee member that the focus seemed to be on the Vaal river and it was wondered what happened to the areas north of Pretoria. It was specifically stated that in the villages in Transkei the rivers seemed to be in flood yet the water supply to those villages was deficient. In response to this Dr Roberts replied that their Department operated on a national basis. He explained that in that area they had found reasonable groundwater but that it was a difficult area and that the costs were high. He went on to say that there were strong linkages between water resources and water services but that the supply to Transkei was a matter which rests with the water services group and accordingly he indicated that he had no specific reply.

Further, it was asked how successful the Water Departments efforts have been?

Dr Roberts indicated that they had been evaluating this and that the job creation and resultant poverty alleviation which came from their projects were important effects which had to be considered. He continued that although there had been some failures the overall results were positive. At this point he handed over to his colleague Guy Preston who stated that they had been working in the areas of the Vaal and Orange rivers but funding was low and that made matters difficult.

It was also asked what the Departments planning for the future to supplement the water deficit was? Dr Roberts replied that basin studies and water resource development entailed design and construction and noted that support services on these were provided. With regard to water services in remote areas they were in consultation with communities, they identified priority areas and this lead to projects.

Mr G McIntosh (DP) asked what the role of the department was as custodian in cases where provinces could handle their own catchment? He noted that the Tugela basin was an area with huge potential and asked why nothing had been done there. Dr Roberts indicated that at the moment they were busy with a major study on the Tugela developments. He noted that the Kwa-Zulu Natal provincial authorities were working closely with them on this. He further noted that as no royalties were paid by them in this area it could be considered a national asset and noted that people would benefit in a tangible way.

In response to other questions it was stated that the Department has already developed one half of our available water resources, some catchment areas more than others. The Water Act indicates that we must first look at the reserves for human supply and the environment before allocating water resources. Dr Roberts noted that there are a number of areas where water resources can be developed, specifically, one must look at the efficiency of utilisation. Thus, people must use water economically and efficiently.

When asked about alternative ways of obtaining water, Roberts indicated that desalinisation was not a workable option as it was too energy intensive, costing in the region of four to six times the current cost of water.

It was also stated that next month they would be conducting a workshop on the amount of water that would be needed in the future. It was indicated that the Presidents office was very interested in this.

Mr P Mathebe (ANC) was concerned that the area around the Dwatzi River was not getting their supply of water. He indicated that he felt that the water was being reserved for the white farmers and not being pumped to the black settlement areas. Dr Roberts replied that he was unfamiliar with this area and repeated that the Water Services dealt with the supply of water to areas, including rural areas. He further noted that the Water Services did a vast amount of planning and suggested that perhaps they should arrange a presentation of their own.

A committee member criticised that our planning does not show planning for a crisis and suggested that the western side of the country which is water rich should supply water to the eastern side through linkages. It was replied that it is not the policy of the Department to develop water resources too early. Factors such as timing, demands and water conservation must all be considered.

Professor Ngubane noted that whenever a dam is put up there must be a displacement of people. She asked how this was dealt with and also what happens to people down the river when the river has been blocked in the north. Dr Roberts replied that they looked at the total system and that they did not infringe on others in a major negative way.

Projects that the Department is currently involved in

This portion of the presentation was delivered by Mr. Ramakwete. He indicated that there were major developments being done by the department and that their primary function was to ensure efficient project design. It was noted that it was departmental policy to ensure that people were better off.

A few of the projects that they are currently involved in were described and the advantages which arose from them was highlighted. Generally, these advantages always related to irrigation for farmers being made possible and the creation of job opportunities during the period of construction of the dam, and thereafter more specialised jobs to maintain the project.

One of the projects highlighted was the Caledon-Welbedacht Dam. Here sediment accumulates on the riverbed, reducing the capacity of the river and causing the danger of flooding. Consequently people had to be moved.

Another project was that of the Pongola Canal Upgrading where there have been problems with waterlogging. Here the Department had to upgrade the canal so that water is not lost through leakage.

Ramakwete stated that these projects were extremely expensive and that there was not always sufficient funding to complete them. He added that if adequate funding was not received there was the danger that the ratepayers of Cape Town would have to pay.

Dam and resevoir safety

This portion of the presentation was made by Mr. Willie Kreukamp. He indicated that a resevoir must be controlled throughout its life structure. Dam safety was defined as the prevention of the water reserves from being contaminated, the loss of assets due to dam failure, the loss of life, and economic losses.

Dams are classified according to their size and their hazard potential which will in turn determine the application of controls to these structures. In order to make them safe, engineering input is required while they are being designed, built and operated.

The dam safety inspector is in charge of ensuring dam safety. To do this, he must, inter alia, determine whether there are any shortcomings in the structure of the dam which have to be rectified. Owners and engineers of the dam are guided by the department. The Minister has the authority to direct a dam owner to upgrade the dam. In this regard the State is included in the definition of dam owner.

The roleplayers

Various persons are involved in the creating and maintaining the safety of dams. The Department of Water Affairs and Forestry is the largest owner and is bound by legislation. Professional persons are by law required to assist the owner. The requirements are dam specific; this means that they vary from dam to dam. The Minister has an advisory committee on the safety of dams, a dam safety report is written which must be reviewed on an annual basis. Further, the engineering council of South Africa advises the Minister on the acceptability of dams.

Questions and answers

Various questions were posed by the members to Mr. Ramakwete. From his answers the following emerged:

When a project is started the nature of the work created is primarily in the field of construction and as the dam nears completion the availability of this type of work decreases.

It is true that there is a shortage of blacks in the field of engineering. At the moment there is a bursary scheme in place targeting blacks to encourage them to enter this field. It was noted however that their technical team is not entirely white; there are a few blacks working in these positions.

Tenders for the construction work are heard from big and small companies. There is a clause in place that requires both small and large companies to be utilised. However, if it is a big job that has to be completed then the big companies are used.

In order to build a dam it is a requirement that you must first get a licence. There are not many illegal dams in place, and only about five are discovered each year. When these dams are discovered, one must go through the whole process of classification. It is possible to put a hold on water being contained in them until the licence is obtained. Non-compliance with regulations is a criminal offence, however, criminal charges is not a desired option as the whole purpose of the regulations is to ensure safety.

The Dam Safety Office has no disaster fund and there is no insurance for the owner against dam failures. If anything does go wrong the owner (which can be the state) is legally accountable. It was noted that a few countries do have some kind of insurance but most countries do not.

It was indicated by the committee members that they would like an opportunity to visit the dams in their particular constituencies and requested that access permits be made available.

The third part of the presentation was delivered by Willie Kreukamp. He indicated that a new Department of International Liason had been created. Their job was to deal with coordination with sister departments in neigbouring countries. It was noted that South Africa is an active member of the South African Development Community (SADEC) whose basic principle was that there should be balance, equity and mutual benefit for all involved. South Africa is the third driest country in the SADEC alliance.

Maguga development

In terms of this project ,all costs, excluding that of hydropower ,are shared. The policy of the department is that anyone affected must be better off than before. In this regard it must be noted that the construction of the dam was suspended as there was no agreement on the areas of resettlement of the people displaced. Construction only continued once this issue had been settled. This is a clear demonstration of how seriously the interests of the affected parties are considered.

Lesotho Highlands Water Project

This is a mega project whereby a connecting tunnel was built into South Africa and water delivered into the Liebenbergs vlei. Costs are shared differently. Water is transferred from Lesotho to South Africa, en route, they generate hydro-electric power which is entirely a Lesotho cost. The nett benefit of building in Lesotho is to be shared. The old treaty stated that no person shall be worse off than before. The Minister has altered this in the new treaty so that it reads that every person shall be better off than before. The South Africa demands for water can be amended, but not before the construction of phase one (which is currently taking place) has ended.

Mr Kreukamp noted that even though South Africa pays royalties to Lesotho, South Africa was still benefiting compared to what the cost of other options. The other option was to take water from the Orange river in the Free State but this would have been much more expensive. The agreement is that we will pay a royalty to Lesotho over a period of fifty years.

In terms of the financial arrangements it was noted that the South African Reserve Bank is involved and that the money does not come from the State (the exchequer) but from the foreign and local market (the bulk comes from the local market). It was further noted that when Lesotho borrows money they do so with a South African guarantee. This means that we have a contingent liability.

Phase 1 is the only phase that South Africa and Lesotho are committed to build. Phase 2 and phase 3 in the treaty can only be implemented if there is agreement to it. Such agreement would have to be at ministerial level and a definition of acceptable layouts would mean a revision of the treaty. The treaty itself provides for its revision every 12 years.

Benefits of the project

The obvious benefit for Lesotho was that they receive the royalty that we must pay to them over a period of fifty years. Related to this benefit are the various multiplier effects such as growth, development and an increase in tourism.

The benefit for South Africa were that South Africa receives water at a much lower cost than otherwise. In South Africa, the share of the nett benefit is valued at 2.5 billion rand. It was noted that there was no need to pump the water as it gravitates because of the elevation.

Questions

After a brief presentation by Michael Singh (see appendix two) members of the committee were again entitled to ask questions.

It was asked whether, in light of the royalties paid to Lesotho, any royalties were paid to Venda. Singh replied that they were not.

The only other input at this stage was criticism from Mr. Masela. He indicated that he disapproved of the style of the presentation and suggested that only 2 or 3 should have delivered the presentation.

At this time the chairperson closed the meeting with the following comments:

It was noted that the brief was broader than expected.

There was the issue of a desired presentation by the Directorate of Water Services.

The committee members indicated that they want a full picture of the fund allocation.

More detail was required regarding the water resource strategy.

Finally, there was the issue of access cards to enable to members to visit the projects.

Appendix 1:

Water resource planning, development, operations and international projects

  1. WATER RESOURCE MANAGEMENT

The Department of Water Affairs and Forestry is the national custodian of the water resources of South Africa. Water is a scarce natural resource and is a critical factor in most developments and the maintenance of life and of the environment. The water resources management function includes the planning of the national resources, the development thereof, regulation of water allocations, regulation of water use for purposes of water demand management, abstractions and water quality management. Information on water availability both of surface and ground water as well as its quality must be gathered and disseminated. Control over dam safety, flood and drought management are also important components. Many of the rivers of South Africa are shared with neighbouring countries and international co-operation is essential

The following budget programmes are applicable to water resource management: Programmes 2, 3, 4, part of 5, 6 and part of the Water Trading Account as set out in Table 1. A separate document will be provided which will deal with water use and conservation and integrated catchment management.

This document will focus on water resource planning, development, operations and international projects.

Table 1: Water resources budget on the Exchequer Account

(Amounts in R million)

Programme

1999/2000

1998/1999

No.

Description

2

3

4

5(part)

6

Water resource assessment

Water resource planning

Water resource development

Regional implementation

Integrated water resource

Management

68,8

100,6

316,1

98,9

82,0

51,5

86,3

251,5

87,8

80,1

TOTAL

 

664,4

575,2

 

The expenditure on the Exchequer Account for the water resources functional area amounts to about 27% of the total Departmental budget. It should be noted that there is also extensive off-budget expenditure on capital projects such as the Lesotho Highlands Water Project which is discussed further below.

 

2. WATER RESOURCE ASSESSMENT

The quantity and quality of both surface water and ground water are assessed and the information stored on the National Hydrological Information System which is being broadened and converted to a Water Management System. This system will contain spatial information. The information is gathered and captured in the Regions and stored in the Central data bank. The information is essential for the planning and operation of projects. The river information is vital for flood warnings and drought management.

3. WATER RESOURCE PLANNING

The main unit for the planning of the water resources of South Africa is the catchment. In several cases inter-linkages of catchments have occurred by means of water transfer projects and in these cases the water system (eg Vaal River System) is used. The National Water Act requires that a National Water Resource Strategy be compiled which then forms the framework for future water resource allocation, utilisation and development. The current catchment (river basin) studies, the Provincial situation studies and shortly catchment management strategies will all be important inputs in this regard. All of these studies are conducted with public participation of stakeholders.

The Directorate: Strategic Planning is included in Programme 3 and apart from the technical studies related to water (which includes the co-ordination of the National Water Resource Strategy) it also is responsible for the co-ordination of the business planning process towards a Departmental Business Plan. Business Planning is an essential component of the management of the Department as it defines key objectives and measurable outcomes. Business Planning and the budget process are being linked as part of the process of budget prioritisation.

Information Services resorts in Programme 3 as part of a corporate service to the entire Department. Due to the inability of the State to recruit and retain personnel in information technology, this function is increasingly being outsourced. Much attention has been devoted to the Year 2000 (Y2K) problem and the necessary remedial measures will be implemented before year end.

4. WATER RESOURCE DEVELOPMENT

The development of the water resources of the country (dams, pipelines, pumping stations etc) is needed in order to ensure reliable water supplies of acceptable quality for the various water users. The timing for the implementation of additional water supply goes hand in hand with water demand management actions (see separate document). Listed below are various water resource development projects which are set out in Annexure A (page 35-27) of the Departmental budget. It is significant that the main purpose of the two largest projects is to secure water supplies for domestic users in rural and urban areas.

The Department possesses expertise in the civil, mechanical and electrical engineering fields for the design of these projects. The Department also has a limited in-house capacity to construct works and also makes extensive use of contractors.

Funding for water resource development projects has always been a constraint and the Department has been active in investigating the potential of off-budget financing of especially those projects which are economically viable ie with a revenue source which can repay the project costs. Refer also to paragraph 5 below for additional information. An example of such a funding arrangement is the proposed Skuifraam Dam in the upper Berg River near Franschhoek which would be part of the water supply system of Greater Cape Town. This Project has an estimated capital cost of R 780 million. The Minister of Water Affairs and Forestry recently approved the implementation of the Project. A further example of an off-budget funding arrangement is the Mooi-Mgeni Water Transfer Project which is part of the national water infrastructure and which will be funded by Umgeni Water. The estimated capital cost of the Project is R 83 million. The water users in the Mgeni System will ultimately pay for the scheme.

4.1 National Projects

Sabie River Government Water Scheme (First Phase: Injaka Dam and Bosbokrand Transfer Pipeline - R84 140 000)

The first phase of the project involves the construction of a dam on contract on the Marite River at Injaka and a pipeline to transfer water from the Injaka Dam to a nearby watershed from where water can be supplied to the Sand River sub-catchment under gravity.

This phase of the project will be able to supply water to 50 000 or more households. The dam will also stabilise the flow in the Sabie River to the benefit of riparian communities. The environmental reserve, when released from the dam, will greatly benefit the instream flow requirements of the Sabie River within the Kruger National Park and Mozambique.

The pipeline is already operational. The expenditure during 1999/2000 will be to advance the construction of the dam by 25 percent of completion, on road deviations within the dam basin and on the completion of a water purification plant for Bushbuckridge and which will replace the present plant which is situated below the full water level of the dam. Further phases will include additional dams and extensive reticulation networks for community water supply.

Luvuvhu River Government Water Scheme - R107 050 000

The main purpose of the Luvuvhu River Government Water Scheme is to supply water for domestic use in the urban areas of Thohoyandou and Louis Trichardt, and to rural communities in the Northern District of the Northern Province, from Malamulele and Lambani in the East to Sinthmule/Kutane in the West. A population currently estimated close to 900 000 will benefit. Some 250 000 people do not have access to safe water supplies at present. Details of the project are set out in document B-98 which was submitted to the Portfolio Committee in 1998.

The scheme will also stabilise water supplies for existing irrigation and will alleviate water shortages in the Kruger National Park.

Construction of the first phase comprising the Mutoti Dam, the Ka-Xikundu abstraction weir, water purification plants at Mutoti and Ka-Xikundu, bulk water supply pipelines and storage reservoirs commenced during the 1998/99 financial year. The second phase, which will be started when water demand so dictates, will mainly involve extensions to the bulk reticulation system.

The funds required for 1999/2000 will be utilised to advance the construction of Mutoti Dam by 15 percent of completion and to commence with the construction of the Ka-Xikundu abstraction weir up to 20 percent of completion.

Caledon-Welbedacht Dam - R7 000 000

Sedimentation in the dam basin upstream of the Welbedacht Dam has caused the flood carrying capacity of the Sand-Spruit through the town of Wepener to be impaired and the backwater effect of the dam to be more severe. That causes frequent flooding of the town whenever concurrent floods in the Caledon and its tributary the Sand-Spruit occur. The funds will be utilised to continue with the expropriation and compensation to owners of properties in the town, which are prone to flooding.

Pongola Canal Upgrading - R6 920 000

The upgrading of this canal system will be completed during the 1999/2000 financial year.

4.2 International Projects

4.2.1 International Liaison

South Africa shares a number of large rivers with neighbouring countries and international co-operation in water matters is therefore of importance. Various forums are used such as bilateral and multilateral water commissions/committees. The active participation within the SADC Water Sector and on other international bodies is also part of this activity. The international liaison work is undertaken in all phases of water resources management from data gathering through to operations. Special organisations have been created for the implementation of international water projects as described below. Due to the increasing importance and work associated with international liaison a new Directorate: International Liaison has been created for co-ordination of this function.

4.2.2. Lesotho Highlands Water Project

The Lesotho Highlands Water Project is a joint project between the Governments of Lesotho and South Africa to augment the water supply in the Vaal River System. The Treaty on the Lesotho Highlands Water Project commits the countries to implement Phase 1A and 1B and provides for further phases after further agreements. Phase 1A, comprising a storage dam (Katse) and some 82 km of tunnel as well as the Muela Hydropower Station and associated tailwater dam is fully operational. The construction of Phase 1B comprising access roads, telecommunication systems, electricity supply systems, accommodation, a large storage dam (Mohale), 30 km long transfer tunnel and a river diversion works (at Matsoku) commenced in 1994 and is scheduled for completion in 2004. In addition to the engineering works, appropriate Environmental Action Programmes are being implemented. The implementation cost of the water transfer component of Phase 1A, excluding financing cost amounts to R5,9 billion and the corresponding cost for Phase 1B is estimated at R3,8 billion. The full funding of the Project is off-budget and the full cost will be recovered from the water users.

The institutional arrangements for the project are defined in the Treaty. The Department of Water Affairs and Forestry is the "Designated Authority" of South Africa which is responsible through its Chief Directorate of International Projects, to attend to national interests during the implementation of the Project. The Lesotho Highlands Water Commission (previously the Joint Permanent Technical Commission), a truly binational body with equal representation from both countries has the role to approve, advise on and monitor the implementation in accordance with the provisions of the Treaty. Decisions are taken on a consensus basis and any disputes are dealt with in accordance with agreed procedures. During June 1999 two Protocols to the Project Treaty were signed at Ministerial level. The Protocols relate to an improved Project Governance structure and to an agreement on the taxes related to the Project. A criminal case of corruption against a former Chief Executive of the Lesotho Highlands Water Authority has been instituted by the Lesotho Authorities.

The implementation of project components in Lesotho is the responsibility of the Lesotho Highlands Development Authority. Prior approval by the Lesotho Highlands Water Commission is required of Lesotho Highlands Development Authority's expenditure on water transfer components of the Lesotho Highlands Water Project. The implementation of project works in South Africa was done by the Trans-Caledon Tunnel Authority. There are no new works to be built here for Phase 1B. In addition to the Treaty obligations, which currently comprises the operation and maintenance of the Phase 1A works in South Africa, the Trans-Caledon Tunnel Authority has been directed in terms of the National Water Act to undertake the financial risk management and pay all costs incurred on the water delivery component of the project. The Trans-Caledon Tunnel Authority is governed by a Board of Directors appointed by the Minister. Annual report tabled in Parliament.

Funding arrangements for Phase 1B

The Lesotho Highlands Development Authority is responsible for raising of funds. The funding strategy was formulated in consultation with the Department of Water Affairs and Forestry, the Department of Finance and the SA Reserve Bank and finally approved by the Lesotho Highlands Water Commission. Sources of funding include:

  • Cash transfers from Trans-Caledon Tunnel Authority (arising from the sale of raw water).
  • Loans by European Investment Bank to Lesotho Highlands Water Project
  • Transfer payments by Trans-Caledon Tunnel Authority from an European Investment Bank loan
  • Loans from the Development Bank of Southern Africa
  • A World Bank Loan

Except for the Development Bank of Southern Africa loans, repayment of the loans were guaranteed by the RSA.

Amounts payable to Lesotho

In accordance with the provisions of the Treaty, South Africa is to pay royalties to Lesotho. This is in addition to acceptance of the full cost responsibility for the implementation, operation and maintenance of the water transfer components.

There is the fixed royalty amount based on the nett benefit derived by building the Lesotho Highlands Water Project rather than the more expensive Orange Vaal Transfer Scheme (OVTS). There is also a variable royalty based on actual volume of water delivered.

The royalty payments for 1999/2000 are estimated at R174 million.

Estimated revenue from sale of water

The Department of Water Affairs and Forestry includes in its raw water tariff for the Vaal River supply area an amount to be paid over to Trans-Caledon Tunnel Authority. The revenue generated in this manner will be sufficient to pay for the total implementation, operation and maintenance cost of the water transfer component, including the royalties payable to Lesotho. The bulk raw water tariff for the Vaal River System is determined within a pricing policy that strives to peg the price of raw water to present levels in real terms.

The estimated revenue of the Trans-Caledon Tunnel Authority generated by the sale of water for 1999/2000 is R810 million. This amount is reflected in the Water Trading Account.

4.2.3 Komati River Development Project

The development of the water resources of the Komati River is a joint undertaking of the Governments of RSA and the Kingdom of Swaziland (KOS) in accordance with a binational Treaty signed in 1992. The Treaty provides for a phase I development comprising the Driekoppies Dam and Lake Matsamo in the Nkomazi District of Mpumalanga and the Maguga Dam near Piggs Peak in Swaziland. According to the institutional arrangements the Joint Water Commission (JWC), with equal representation from either Party oversees the implementation of the development on behalf of the governments. A binational implementing authority, the Komati Basin Water Authority (KOBWA) is tasked with the implementation of the project using its own staff and consultants and contractors. Expenditure by KOBWA is subject to approval by JWC. The cost of phase I of the development is to be shared in accordance with the provisions of the Treaty. Provisional ratio of sharing is 78:22 between RSA and KOS, but these figures are to be adjusted on completion of Maguga Dam. The Parties have additionally agreed that the RSA will, within its share of the total cost, accept the full development cost of Driekoppies Dam. Having done so, the cost sharing on Maguga Dam is provisionally 60:40 between RSA and KOS. The Treaty determines that KOBWA shall be reimbursed by the Parties to meet its financial obligations.

The Treaty determines the allocation of the water controlled by the storages and recognises the equitable share of Mozambique.

The objectives of Phase I include:

  • To provide for the expected increase in primary water demand in the basin.
  • To stabilise supply of irrigation water from the Lomati and Komati Rivers.
  • To allow an increase of some 7 150 ha of irrigation in the Nkomazi area in South Africa and 7 400 ha in Swaziland.
  • To stabilise the river flows, recognising the needs of the natural environment and of Mozambique.

Driekoppies Dam and Lake Matsamo

The Driekoppies Dam was inaugurated in July 1998 and thanks to good rain is already 86 per cent full. The Relocation Action Plan for the resettlement and compensation of affected people is being implemented in accordance with a policy developed by the HSRC in direct consultation with the affected communities. All resettlements have been done. Compensation programmes will be completed in 1999.

The capital expenditure was financed by a R488 million loan by the Development Bank of Southern Africa (DBSA) to KOBWA. Repayment of the loan and the direct administration cost of KOBWA will be by means of transfer payments from the Water Trading Account. Bulk water releases from Lake Matsamo to water users are paid directly to DWAF.

Maguga Dam

Construction of the civil works for the Maguga development commenced in December 1996 and is scheduled to be completed by mid 2001. Infrastructure components including access roads to the dam site, improved water supply to Piggs Peak and a new residential area with some 140 new houses is practically complete. Additional health and recreational facilities are being provided. This infrastructure will be available for use by the communities when the construction of the Maguga Dam is complete.

The Consultants for the project are joint ventures including firms from Swaziland and South Africa. The joint venture for the Dam includes one firm from Germany to provide limited expertise not available from within the region. The Contractor for the dam is a joint venture comprising RSA and KOS firms. The optimal use of local labour and sub-contractors was encouraged by means of a preference system.

The resettlement and compensation of persons affected by the project is being done in accordance with a policy approved by the two governments. The affected persons are to be left better off than before and to achieve this developmental programmes will be part of the relocation action plan.

KOBWA has taken up loans from DBSA, Hambros Bank and the Swaziland Pension Fund in addition to contributions by the KOS and RSA to fund the work. Loans were procured with a 100 per cent guarantee by the RSA, with 40 per cent back to back guarantee by KOS for their share of the cost. Interest only on these loans is payable during the construction period. Until water can be released for sale (scheduled for 2001), the RSA contribution will be provided for on the budget from the Exchequer Account.

The total cost at completion of Maguga Dam and related infrastructure and resettlement is estimated at R784 million.

Control of Safety of dams

Chapter 12 of the National Water Act (NWA) contains measures aimed at improving the safety of new and existing dams with a safety risk so as to reduce the potential for harm to the public, damage to property or to resource quality. To reduce the risk of a dam failure, control measures require an owner to comply with certain directives and regulations.

The Act requires the Minister to exercise control and for this purpose a Dam Safety Office (DSO) was established in the Department. The core functions of the DSO include:

  • the registration and classification of all dams with a safety risk. The target is to classify some 96 per cent of the 3730 registered dams by March 2000 taking into account their size and potential hazard for causing loss of life and economic losses;
  • the issuance of licences (permits) to construct, alter, impound and abandon dams;
  • administration of compulsory dam safety inspections by approved professional persons appointed by dam owners,
  • motivate dam owners to apply acceptable dam safety standards and to upgrade unsafe structures.

Applications for approval by the Minister as Approved Professional Person are considered after consultation with the Engineering Council of South Africa. The Advisory Committee on Safety of Dams advises the Minister on the activities of the DSO.

Amendments to the current regulations on dam safety will be prepared in consultation with the Advisory Committee on Safety of Dams.

The dam safety provisions of the NWA apply to the state as dam owner. The Department is the owner of 252 dams with a safety risk, including most of the large storages and highest dams in the country. Overall control of dam safety activities at all departmental dams is exercised by the Sub directorate of Dam Safety in Pretoria. Regional offices are however responsible for the day-to-day operation and maintenance of dams in their area.

5. WATER RESOURCE OPERATIONS

The funding of water resources operations is effected on the Water Trading Account, Annexure B page 35-28 of the Departmental budget. The revenue from the sale of water is applied to offset expenditure. Should a deficit occur, then it is augmented on the Exchequer Account in Programme 5 under the item "Operations of water resources". Should a surplus of revenue over expenditure occur, then the surplus reverts to Treasury.

The Water Trading Account is divided into four sub programmes, three of which relate to water resources and the fourth to Water Services. Table 2 below sets out the estimated expenditure and revenue for the three Water Resource components of the Trading Account for the coming financial year and the current one. The bulk of the augmentation of the Water Trading Account arises from the low recovery of operating expenditure of water services.

The three Water Resources sub programmes in the Water Trading Account are:

a) Integrated catchment management which includes the Working for Water Programme as is described in a separate document.

b) Integrated systems in which Government Water Schemes which function as integrated systems such as the Vaal River System are accounted for. These components which include inter-basin water transfer schemes can also be classified as "national water infrastructure". Some 45 schemes are included in this category.

c) Bulk water supply includes "stand alone" bulk water schemes such as irrigation projects and bulk raw water projects to urban/industrial areas. Such projects have the potential of future transfer to water boards, water user associations and catchment management agencies.

Table 2: Expenditure and revenue for the operation of water resources on the Water Trading Account.

(Amounts in R million)

1999/2000

1998/1999

Sub-programme

Expenditure

Revenue

Expenditure

Revenue

Integrated catchment management

Integrated Systems

Bulk water supply

177,1

1 119,1

319,9

41,1

1 387,8

164,6

143,5

1 015,6

382,0

38,0

1 234,8

150,0

TOTAL

1 616,1

1 584,5

1 541,1

1 422,8

Note: The Water Services element of the Water Trading Account is dealt with in a separate document.

The expenditure for Integrated Systems and Bulk water supply cover the normal operating and maintenance cost of the scheme as well as limited refurbishment or replacement of components.

The overall situation on water resources is that there is a relatively small under-recovery of revenue relative to expenditure which is then augmented from the Exchequer Account. Table 2 indicates that there is cross-subsidisation between the three water resource elements. A focus of the financial management in the coming year will be an improved separation of the different revenue streams.

The present value of the National Water Infrastructure (45 schemes) has been determined at about R20 000 million. Table 2 shows that the full expenditure for Integrated Systems is recovered from revenue and the situation will improve even further once the bulk water pricing policy has been fully implemented. An analysis of the national water infrastructure reveals that the capital investment is under-utilised and could perform better thus releasing funds to reduce demand on the Exchequer for new capital works and also for social and other purposes such as general revenue as discussed below.

The 1997 White Paper on a National Water Policy considered the management of the national water infrastructure and stated that:

"…Provision may be made to allow the functions of managing the national water infrastructure to be transferred to a public water utility established for that purpose. The functions of such a utility could include the planning and development of infrastructure, its operation and financing.

This route will only be followed if more detailed study shows that it will give clear public benefits. While it must allow for the self-sufficient development and efficient operation of the main national infrastructure, it should not reduce the ability of the State to promote projects of high social priority, nor should it undermine the ability of the Government to formulate policy, monitor and regulate the sector."

After the adoption of the White Paper as policy of the Government, the Minister of Water Affairs and Forestry formed an Advisory Committee to make recommendations on how an investigation into a national water utility should be approached and the scope of such an investigation. The Chairperson of the Portfolio Committee on Agriculture, Water Affairs and Forestry served as one of the members of the Ministerial Advisory Committee.

The study concluded that a National Water Utility could indeed achieve some of the key objectives which government sought to achieve. Specifically, its establishment could with the correct water pricing policy (refer to attached booklet on the draft policy):

  • Release resources for investment in water resources development targeted to social and environmental priorities (financial modelling confirms that this could be as high as R4 950 million over 13 years)
  • End the ongoing subsidisation of existing water users (approximately R600 million per annum)
  • Enable government to decrease its overall debt burden (by R3 500 million)
  • Act as a catalyst for the transformation of the Department of Water Affairs and Forestry itself from an administrative body into an effective and supportive water management institution.

The findings of the study were presented to the Advisory Committee and debated among its members who concluded that the technical and financial conclusions were sound.

It should be noted that in terms of the draft water pricing policy, a system to charge the full financial costs would be appropriate and a National Water Utility would be one way to implement the policy effectively.

At present the implications of establishing the Utility on other functions in the Department are not clear and therefore the matter is on hold while the review of the Department's structure in the context of the broad water resource policy review in terms of the National Water Act (1998) is underway.

Many of the bulk water supply schemes are heavily subsidised particularly the irrigation schemes where recovery of full operating and maintenance cost is being phased in over a five year period from 1997. No recovery of capital cost for these irrigation projects is achieved.

The Water Trading Account is funding the rehabilitation of the Tugela-Vaal Canal (part of the Vaal River System) which will have a total cost of about R120 million spread over three financial years. These costs are funded from the savings of expenditure on electricity for pumping of the Tugela-Vaal Transfer while the canal is being repaired. Fortunately the repairs are being effected just when the Lesotho Highlands Water Project has started delivering water to the Vaal River System and hence the risk of water restrictions has not been affected. Normally such major capital works are funded on the Exchequer Account under Programme 4, but an exception was made in this case for the reasons given above.

Paul Roberts

Deputy Director-General:Development

Department of Water Affairs and Forestry

http://www-dwaf.pwv.gov.za

8 October 1999

Appendix Two

The evaluation of further water resource augmentation schemes of the Vaal River system from a demand management perspective

October 1999

The evaluation of further water resource augmentation schemes of the Vaal River system from a demand management perspective

The following are some of the issues relating to the water demand and WC/WDM potential of Rand Water consumers that should be considered in the evaluation of a new augmentation scheme for the Vaal River System. Although RW consumers only use approximately 50% of the water from the Vaal River system, the development of any further augmentation scheme of the Vaal River System will be mostly attributed to their perceived growth in demand.

Recognition of the need for further Water Augmentation schemes

Since 1905 the average growth in water demand for Gauteng has been in excess of 5% per annum corresponding to the significant historical development of the region. There is no doubt that the growth in demand will continue in line with the expected economic and social development of the region and further water augmentations my need to be developed. The main issue for water resource planning that needs to be addressed is to determine the most likely demand growth scenario for the future and to identify the most appropriate method to reconcile the growth in demand with various options.

Currently there are two sources of future demand estimates for RW's consumers, the first developed by the Department's Water Resource competency and the second developed by the Rand Water Board. Up until recently these where significantly different but are currently been reconciled and aligned to an estimated growth in demand of 2,75% per annum. This represents a significant drop in the historical long-term growth in demand but is in line with the growth over the last fifteen years. It is important to note however that this demand projections do not take into account the possible impact of AIDS or the opportunities of Water Conservation and Water Demand Management (WCWDM)

Indications of the potential of WC/WDM

Inefficient use of water by RW consumers

Rand Water has undertaken various studies and initiatives over the last few years and have indicated the following level of inefficient use of water by consumers:

  • Wastage of water through reticulation leaks of 27 % or 783 Ml/day
  • Inefficient use of water of 25% or 725 Ml/day

Although RandWater admits that more research is required to verify the accuracy of these estimates they are confident that these figures are a true reflection of the level of inefficient use.

This represents a total potential for water savings of 52%. RW currently delivers 2 900 Ml/day in its supply area. The wastage indicated above therefore represents 1508 million litres of water a day.

The estimated wastage of water through leaks was calculated from a minimum night flow analysis. Examples of minimum night flow of 70% of the average demand were identified in a number of areas.

A specific investigation that contributed to the appreciation of these figures is an investigation of 88 000 houses in the Greater Soweto that revealed the following estimates:

  • Up to 48 % of all homes have domestic leaks.
  • Average water lost through domestic leaks was estimated at 36 kl/dwelling/month.
  • The total estimated water losses through domestic leaks and unnecessary wastage in the Greater Soweto is estimated at 75 million litres per day (Ml/day)

Potential of reducing existing demand

It is estimated that the implementation of WC/WDM can reduce the following demand projections:

  • Reduction of water wastage from 27% to 10%
  • Reduction of inefficient water usage from 25% to 10%
  • Reduction in the normal growth rate of 0% to 1% per annum.

The above reductions can be achieved from the following initiatives:

Reduction in water wastage (27% to 10%)

  • Reducing reticulation losses
  • Reducing plumbing leaks of domestic and consumer installations
  • Reducing indiscriminate water wastage through consumer awareness and incentives

Reducing inefficiency in water use (from 25% to 10%)

  • Reducing domestic internal water usage through retro-fitting of plumbing fittings and appliances
  • Reducing of industrial and commercial water demand through the implementation of best management practises
  • Reduction of water usage through a change in customer behaviour

Reduction in new demand from 2.75% to 0-1% per annum

  • Improved plumbing standards of new domestic developments (i.e dual flush toilets)
  • New proposed water regulations
  • Metering of all new consumer

Relative Investment

One of the most important developments internationally in water resource planning is the integration of all resources in the entire water supply chain in order to achieve the most optimal solution for society at large. This approach recognises the potential of WC/WDM as an alternative to high capital supply side infrastructure options.

The economic and social evaluation of selecting the best solution of supply side management or demand side management must be based on all the costs related with the entire supply chain and not only for the cost of developing the augmentation scheme. These should include the cost of bulk infrastructure such as reservoirs, treatment plants and pumps.

The following illustrates some of the economic issues developed by Rand Water that should be taken into account in an economic analysis to determine the best option of reconciling future demand growth for the region.

Economic benefit of implementing WC/WDM in the Vaal Supply Area

The economic benefit of implementing WC/WDM is significant. The following estimates indicate the possible savings for differing capital infrastructure by 13 years:

DWAF

RW

Sanitation

Reticulation

9.19

billion

6.8

billion

18.01

billion

15.4

billion

The amounts indicated under the DWAF and Rand Water is directly related to the development of infrastructure as related to the augmentation option, and the Sanitation and Reticulation cost is related to development of additional capacity which will be required as a result of the increased load on the systems. The figures quoted were determined in a study conducted by Rand Water.

Savings due to avoided operating costs, such as the costs of electricity and the cost of chemicals are also significant and could be as high as R 4 billion

The savings to the public are higher than the above figures due to the fact that the retail price of water also allows for non-payment that will be positively affected through WC/WDM.

The potential savings have to be compared to the cost to implementing WC/WDM measures. RW estimates that the costs of such measures are less than R 2 billion.

Gauteng Water Cycle Management project

DWAF together with RW, Gauteng Province and other key role players are currently implementing a project "Gauteng Water Cycle Management" (GWCM) that will have a significant impact with regards to further augmentation schemes for the Vaal River System. The project objective is to develop and get consensus and approval by all key role players to a regional WC/WDM strategy. The main focus of this initiative is to develop proposals that will ensure the implementation of WC/WDM. The intention is that these proposals will be accepted at a summit workshop to be held in April 2000. At the initial GWCM workshop held during the 12 and 13 of October 99, delegates agreed on a declaration of intent (Appendix 1) which clearly illustrates the commitment of most key role players and water services institutions to the process. The declaration also indicated the very strong opinion that the industry does not need or cannot afford a further augmentation scheme to the Vaal River System in the short term. (A copy of the declaration is attached). Approximately 250 delegates representing most key role players and institutions attended the workshop.

Appendix 1

GAUTENG WATER CYCLE MANAGEMENT - DECLARATION OF INTENT

13 OCTOBER 1999

We the delegates representing the majority of water institutions and key stakeholders in the water supply industry of Gauteng attending the Gauteng Water Cycle Management workshop

Noting the following problems and constraints:

  • High water losses within systems and inefficient water utilisation by users
  • Deteriorating water and sewage reticulation systems
  • Low levels of payment for services, increasing debt profiles and declining financial capacity of Local Authorities
  • Inadequate levels of services to many communities
  • Inadequate integration of management planning and water related functions throughout the supply chain

Declare our intention and commitment to developing and implementing a regional strategy that will ensure the efficiency and sustainability of the water services industry to meet the needs of consumers and users in an equitable, affordable and sustainable manner.

Although more research and information is required we are convinced of the enormous opportunities of WC/WDM in meeting the strategic intent. We recognize the need for regional co-ordination and integration to achieve the strategic intent and are committed to a process over the next few months to develop binding proposals that will result in specific action plans. The following issues will be developed into specific proposals that will be finalized and considered at the proposed summit meeting to be held in April 2000:

  • Commitment to achieving a water demand growth target of 0% per annum over the next 5 years
  • Commitment to support WDM initiatives and the establishment of a WDM fund for these initiatives
  • Establishment of a Regional Co-ordinating Body that will manage the integration and co-ordination of a regional WDM strategy
  • A demand to participate in joint decision making about future augmentation schemes
  • Contributing to the development and implementation of a policy to service indigent communities
  • Development and implementation of holistic programmes that will address the issue of non-payment

We also agree to the principles of a protocol that increases water availability in a supply area by first exploiting the WC/WDM options before engaging major infrastructure options. We further recognise that a decision for a further augmentation scheme for the Vaal River System may need to be taken soon and insist that all water institutions affected are involved in such a decision. We are of the strong opinion that a further augmentation scheme currently cannot be afforded by the industry and may not be in the best interest of the public at large.

The decision on the next scheme must be developed as part of an integrated strategy based on the principles of Integrated Least Cost Planning (or Integrated Resource Planning) as part of an overall Water Management Plan for this supply area based on the principles of Sustainability, Equity and Optimal Use.

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