Bid to keep things flowing

The intention, which is laid out in the Water Affairs department's recently released second National Water Resource Strategy (NWRS), is yet to be formally announced by water affairs minister Edna Molewa. But it is an idea supported by the National Development Plan (NDP) as well as the report of the presidential review committee on state owned entities.

An attempt to do something similar was first mooted in 2005 when the first NWRS was released. It never materialised. In 2007, the department drafted the SA National Water Resources Infrastructure Agency Limited Bill, but internal resistance left it in limbo, despite support from national treasury and the presidency.

The resistance was driven by a fear that the department would lose much of its professional expertise and be unable to exercise its policy and regulatory functions. Underlying that, some feared white professionals would use the process to undermine transformation.

The project manager for Institutional Reform & Realignment at the department, Konanani Khorommbi, says there is an understanding that it will be done. "We agree in principle on the need for an agency that will manage large water infrastructure resources. The discussion we will have now is what model to use."

Water Affairs is one of a few national departments which tries to perform a major operational role within the constraints of public services structures, according to national planning commissioner and former water affairs director-general, Mike Muller. Other sectors have long shifted specialised operations away from departments into parastatals like Eskom and the SA National Roads Agency.

Already, large water projects like the Lesotho Highlands Water Project are handled by the Trans-Caledon Tunnel Authority (TCTA), a parastatal that reports to the department.

TCTA-run projects, like the Berg River dam in Cape Town, have been executed on time and within budget. But a departmental project, the De Hoop dam, is a couple of years late and well over budget.

Though the construction of the dam is almost complete, there is still no agreement about how to provide the conveyance systems to get the water to mines and communities.

Sceptics suggest the TCTA's mandate (it manages bond-financed projects) should be broadened to include all water infrastructure, rather than creating a new agency that will then absorb the TCTA.

The department manages 250 dams and waterworks, valued at about R100bn. Unlike TCTA projects, its dams and water schemes require significant investment for refurbishment and maintenance. But it does not have the skills to adjudicate tenders and price projects (see box), which has contributed to the inefficient handling of large investments.

Delaying the establishment of an infrastructure agency has undermined the sector. The department says it needs R700bn over the next 10 years to finance the growing backlog in infrastructure. It has budgeted for just under half of this. The rest is expected to be sourced from bond markets, banks and higher user charges.

The NWRS also confirms the department's intention to consolidate its 12 water boards into nine regional water utilities. A public consultation process is under way. Khorommbi says the shift could begin as early as April 2014, when Molewa is expected to gazette the development. But it will take a few years before the process is complete. Some water boards will be merged, while others will have their boundaries changed, Khorommbi says.

The new water utilities will support municipalities by providing water services on their behalf or by providing services directly to municipalities on a contractual basis. They will also develop and manage water resources, bulk water services and wastewater plants.

Muller says the real failure to manage water services lies at local government level. Municipalities are hamstrung by inadequate funding and a severe skills shortage.

By creating a link between municipalities and water boards, it becomes possible for boards to step in where municipalities are unable to.

With these utilities, standardised approaches, equipment and technology across the water industry becomes possible. Muller says it will be easier to train professionals and maintain equipment if requirements are standardised. It will also bring costs down.

There are other benefits. Water boards have flexible recruitment methods and remuneration structures, which makes it easier for them to attract good talent.

Boards are not without challenges. According to national treasury, the combined book value of their assets is just R14,8bn (53% of which is housed at Rand Water) compared with a replacement value of R100bn.

Water boards are also owed R2,3bn, of which R1,3bn is payments in arrears. And Amatola in the Eastern Cape and Bushbuckridge in Mpumalanga are still unprofitable.

An infrastructure agency and more authority for water boards are deemed critical to arrest the collapsing state of much of SA's water infrastructure. But the agency will have to be coupled with other initiatives - like an investment in skills - to succeed.

The NWRS, which was released in July, is the second such strategy to be released by the department. It missed its 2010 deadline by three years. But stakeholders have complimented the department for its lengthy and inclusive consultation process.

The department's chief director of Policy & Strategy, Marie Brisley, says the focus will now fall on implementation. Detailed implementation plans will be drafted for each of the proposals identified by the NWRS, including skills.

The water-sector leadership group will oversee strategic implementation. It is convened by the department but includes stakeholders like the mining, energy and agriculture sectors, civil society groups and communities.

Source: Financial Mail