Recognising and managing
the key challenges in water
service delivery
Analysis of a sample of WSAs
Kevin Jacoby
14 June 2013
Overview of presentation
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The sample!
Standard of water service provision
Financial cost estimation
Potential consequence of sub-standard water service
delivery
Conclusions
Sampled municipalities
No.
1
Name of Municipality
Nelson Mandela Bay Metropolitan
Municipality (NMBM)
Category
Province
A
Eastern Cape
2
Ekurhuleni Metropolitan Municipality
A
Gauteng
3
eThekwini Metropolitan Municipality
A
Kwa-Zulu Natal
4
Cape Town Metropolitan Municipality
A
Western Cape
5
Buffalo City Metropolitan Municipality
A
Eastern Cape
6
George Municipality
B
Western Cape
7
uMhlathuze (Richards Bay) Municipality
B
Kwa-Zulu Natal
8
Steve Tshwete (Middleburg) Municipality
B
Mpumalanga
9
Kouga Municipality
B
Eastern Cape
10
Sol Plaatjie (Kimberley) Municipality
B
Northern Cape
11
Polokwane Municipality
B
Northern Cape
12
Stellenbosch Municipality
B
Western Cape
13
Overstrand Municipality
B
Western Cape
14
Midvaal Municipality
B
Gauteng
15
Amathole District Municipality
C
Eastern Cape
Standard of water service
provision
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Backlog of water service infrastructure maint. and rehab.
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For 10 sample municipalities:
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Water = R 1 163 million (decrease from previous year) R 91k/capita
Sanitation = R 5 129 million (increase from previous year) R 400k/capita
Ekurhuleni sanitation requires a R 1 545k/capita investment
Capital cost of addressing the service coverage backlog
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For 10 sample municipalities:
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Water = R 5 060 million (same as previous year) R 503k/capita
Sanitation = R 6 109 million (increase from previous year) R 607k/capita
Polokwane water requires a R 3 042k/capita investment and sanitation a
R 1 306k/capita investment.
Standard of water service
provision (cont.)
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Potable water service interruptions
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Days failed sanitation services
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9 out of 15
DWA green drop quality
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24 days in 2009/10 – 15 of these in Ekurhuleni
DWA blue drop quality
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124 324 in 2009/10 – 113 474 recorded in Cape Town
5 out of 15
Prioritisation of water services by municipalities
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10/13 incl. water service operational readiness as a risk
3/10 classify this as a high risk
Standard of water service
provision (cont.)
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Monitoring effort by municipalities
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Average years since last meter audit for 13/15 is 4 years
Polokwane last meter audit 15yrs prior
Metros average years for meter audits is 2 years
Skills adequacy
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31% of water service posts are vacant
Skilled staff service 13 602 members of the population
Engineers service 90 925 members of the population
Technologists service 87 405 members of the population
Technicians service 19 578 members of the population
Standard of water service
provision (cont.)
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Planning effort
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14/15 had water service development plans
12/15 had water service master plans
Management of capex
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Sources of funding
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Internal sources 17%
Grants 45%
Developers contributions 1%
External loans 34%
Other 4%
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Note – most external loan funding used by metros
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Overall capex budget allocated to water services =15%
Standard of water service
provision (cont.)
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Per capita investment in water services
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Allocation of water service capex budget
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R220
Rehabilitation of water service infrastructure 32.27%
New infrastructure assets - networks 26.21%
New capital - sanitation facilities 15.04%
New capital - bulk water and sanitation/sewage 25.95%
Capital budget spent = 84%
Standard of water service
provision (cont.)
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Management of opex
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Budgeted result R 786million
Actual result R 267 million
? : Variable costs and costs of transfer exceeded the budget
External support options
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Water service consultants (project design) – 14/14
PPPs
- 4/14
Water Boards
- 6/14
District Municipalities
- 3/14
Financial cost estimation
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Ring-fencing
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Internal costing methodology
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2/15 provide for ring-fenced water service (Metros)
11/15 find the cost estimation of the water service easy
Percentage of total cost of support services – 6/11
ABC costing
- 4/11
Mixture of the above
- 1/11
Source and pricing of bulk water provision
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49% of water self supplied (R0,0385 to R3,02/kl)
23% of water from DWA (R0,4301 to R1,892/kl)
29% of water from water boards (R3,25 to R4,64/kl)
Financial cost estimation
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Fixed and variable cost analysis
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51% fixed costs
49% variable costs
Varies significantly from authority to authority
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Asset valuation methods and asset registers
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NMBM 30% fixed
Ekurhuleni 90% fixed
10/15 – Replacement value
8/15 - Historical value
3/15 – Use both methods
Most asset registers are detailed and include extent, age,
value and state (condition) of an asset
Financial cost estimation
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Adequacy of depreciation
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Scarcity cost consciousness
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A variance of R90m between estimated and actual depreciation
for potable water service in 2009/10
DRC R8,204 billion
CRC R9,015 billion
DRC/CRC is 75% : is this cash backed? Impact on accumulated
surplus/deficit?
Few!– strategies vary from demand management to additional
supply
Environmental cost of waste water management not
considered
Potential consequences
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The municipal capital budget in 2006 equalled 75% of
the value of buildings completed
This percentage was 49% in 2009/10
Conclusions
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Per capita cost to address sanitation backlog
infrastructure maintenance and rehab. was increasing
Metros focused more on reducing water coverage
backlog rather than the sanitation coverage backlog
Potable water service interruptions must be recorded
Days of failed sanitation are not being recorded, an
indicator of munic. not monitoring sanitation services
No negative correlation between quality certificates and
backlogs in maintenance and rehabilitation
A correlation rather exists with skills and quality of
service
Conclusions
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Operational readiness of the water service a risk but not
the highest risk for municipalities
Long period between the audit of water meters
Municipalities are involved in water service planning. Are
these plans being implemented?
Various funding sources are available for capital
programmes-high levels of external borrowing
15% of total capital budget to water services
Municipalities (small) spending more capital on new
infrastructures as opposed to maintenance and
rehabilitation
Conclusions
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Municipalities underspend on capital budgets (conditional
grants risk?)
Budget comparisons reveal the cost of service is
recovered by tariffs. Material variations exist if compared
with the actual result. Impact on tariff calculations is
significant
Municipalities make limited use of external support
The principle of ring-fencing is not implemented by most
Municipalities know little about consumption trends and
the nature of demand by users
Conclusions
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Municipalities use various costing methodologies
The bulk water supply varies
Inconsistent approach applied to the categorisation of
costs between fixed and variable
Asset registers complete
Depreciation not being recovered by tariffs and not
being used to manage the replacement of assets
Next water supply is material and not provided for
Exogenous environmental costs not considered
Capital expenditure/value of building plans decreased
The End
Thank you
Comments/questions?