S78 ASSESSMENTS
CASE STUDY REPORT
MOSES KOTANE LOCAL MUNICIPALITY
THEME 3: MULTI-JURISDICTIONAL S78s AND SOLUTIONS & LINKS WITH
INSTITUTIONAL REFORM
1.
Introduction
Moses Kotane Local Municipality (MKLM) – NW 375 – is situated in the North West of the
Bojanala District municipal area. It is presently the only WSA of the area that has
undertaken its s78 process. The municipal area is characterised by low rainfall, uneven
distribution of water resources and is distanced from main economic centres. The 2001
Census reveals a base population of 236, 838. There is a 51% unemployment rate in the
area which impacts upon affordability for basic services. Approximately 75% of the
households function at below the poverty margin. 36% of the population receives water at
below RDP levels and 69% receive sanitation below RDP levels. 40% of the population is
concentrated in rural and peri-urban communities, while 55% reside in rural settlements
spread throughout the area, the remaining 5% reside in formal urban areas of Mogwase and
Madikwe. The water supply infrastructure comprises the Vaalkop Dam Regional Bulk Water
Scheme (representing the largest single water source to MKLM); regional bulk surface water
schemes utilizing Pella and Madikwe Dams; and individual boreholes and groundwater
schemes.
MKLM was appointed as WSA in its area in terms of an authorization in January 2003. The
LM has completed its s78(1) assessment . The Report has received Council Resolution.
MKLM is currently in the process of building capacity to assert its authority as WSA. The
transfer process of DWAF assets has been initiated. Currently, water services are governed
by interim agreements with Botshelo Water Board and Magalies Water Board. There are also
rudimentary community based schemes that are operated by MKLM in the former Madikwe
District.
2.
Problem statement
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Service provision had been occurring through an external mechanism where two water
boards provided bulk and retail services to MKLM’s jurisdictional area. The trigger to MKLM’s
s78 process was the DWAF asset transfer which led to an existing municipal service or part
of that service to significantly upgraded , extended or improved, where such upgrade,
extension or improvement is not addressed in any existing service delivery agreements, in
terms of s77(b)(iii) of the Systems Act, as amended.
During MKLM’s formulation of its WSDP, which has been finalized and recommendations
have been made to EXCO Council for formal adoption, an internal mechanism was
expressed as the preferred option for service delivery. Within this scenario, MKLM will have
to reach agreement with Rustenburg LM for the provision of bulk water supplies from the
Vaalkop system via regional bulk pipelines crossing MKLM, to Rustenburg communities
bordering MKLM. This is discussed in more detail under sections 3.4. and 4. below.
Indicative of MKLM’s institutional context, the Status Quo assessment reveals:
The WSA has existing arrangements with 2 WSPs: Magalies Water Board provides
services
in the eastern region of MKLM (Mankwe District), while Botshelo Water Board services the
western area (Madikwe District). Within the Madikwe area, MKLM operates community based
rudimentary schemes, supplying fuel and electricity for the borehole pumps.
The areas serviced by the respective WSPs are distinctly different. The western portion of
MKLM comprises mostly rural communities. Majority of the population is served at below
RDP levels, there is a high unemployment rate, and there are water shortages due to
insufficient water resources. By comparison, the eastern region comprises a mixture of
formal urban and peri-urban settlements, and rural communities. The water resources in this
area are the Vaalkop Scheme and regional groundwater schemes, and local boreholes
operated as community based schemes, supported by Magalies Water.
Interim water services agreements are in place between MKLM and the 2 water boards.
DWAF is not a signatory to these and they are due to expire in June 2005. New agreements
will need to be concluded in the event of adoption of an external option.
The following problem areas exist in relation to capacity of Botshelo Water Board: Botshelo
provides services to mainly rural population in the western area of MKLM. Its movable assets
are more than eight years old, has a zero book value and will have to be replaced. Assets
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ringfenced for MKLM is estimated at R100 000. The water supply in the area is
unsatisfactory due to insufficient water resources and service backlogs. There is ineffective
cost recovery and excessive water use in the area. The challenges include difficult access,
high poverty, unreliable water resources, low cost recovery and aging infrastructure.
Accurate information is not available on the total number of personnel dedicated to MKLM.
The total O&M cost for service provision to MKLM is R6.3 million p.a.
By contrast, Magalies Water supplies bulk and retail water services to MKLM’s rural and
urban consumers in the eastern area, through extensive and sophisticated regional bulk
water schemes with considerable material resources and regional technical expertise. It also
operates a number of regional groundwater schemes and community based rudimentary
schemes for MKLM. The water supply situation is above average with 75% of the population
served at or above RDP levels. Most of the movable assets are less than five years old with a
current book value after depreciation at approx. R1000 000. In the rural areas, challenges
do exist due to the nature of the area. There is a total number of 79 personnel dedicated to
MKLM. The total O&M cost for MKLM consumers stands at R33.7 million p.a.
3.
How they approached the problem
MKLM assessed the options for service delivery and found the following to be available:
3.1. Option 1: Maintaining the status quo
3.1.1. The advantages would be:

The required resources and expertise are provided by the existing WSPs (water
boards)

The WSPs are responsible for providing the necessary support to the WSA
3.1.2. The associated risks are:

The current institutional arrangements are complex and fragmented, leading to
duplication and inefficiencies
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
The WSA has no direct link to its customers

Insufficient financial transparency and control over the WSPs
The performance of the current arrangement is also influenced by the competencies of the
water boards to provide efficient and adequate water services for all; the terms of the Water
Services Agreements; the ability of the WSA to monitor performance of individual WSPs; and
enforce contracts.
3.2. Option 2: MKLM performing as WSP (internal mechanism)
In terms of the internal option, MKLM would be responsible for managing all aspects of
water and sanitation services within its jurisdiction.
The model for developing an
appropriate management structure would be based on geographic considerations (where
management structures are arranged on a regional basis); functional criteria (where similar
schemes are grouped together and managed as groups); political considerations (where the
services are managed according to political provincial, municipal and ward boundaries); and
a combination of the above (where the management structure would be split along a
regional basis, differentiating between areas served by the distinct supply infrastructure).
The management style and personnel requirements for each management area would be
dependant upon type and level of service; water resources; infrastructure; geophysical
factors; and the consumer’s socio-economic profile. MKLM’s current initiative is to develop a
Spatial Development Framework (SDF) to ensure the most optimal management structure
and that individual management areas coincide with defined boundaries.
3.2.1. Advantages

WSA has control over financial aspects of service provision

Direct interaction with WSA and consumers (closer alignment with municipal goals
and vision)

Capacity building would support other functions of MKLM

Potential financial savings by reducing redundancies and inefficiencies, and decrease
in overhead costs
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3.2.2. Risks

Requires sufficient capacity to be built over a short time

Negotiations with organized labour must occur urgently

Initial establishment costs: acquiring assets and equipment; staff transfers from
current WSPs; internal restructuring; and capacity building

Need to reach agreement and coordination with consumers outside MKLM that are
supplied from the Vaalkop regional water scheme.
3.3. Option 3: Large external organization as single WSP (External mechanism)
This option is an enhancement of the status quo by consolidating all functions of the current
WSPs into one organisational structure. This is viewed as a more effective option that would
lead to savings for MKLM by employing economies of scale, increasing efficiency and
reducing administrative costs. The chosen WSP would be responsible for delivering adequate
and affordable water and sanitation services to the entire area of MKLM. Within this context,
the WSP would be responsible for a wide range of services including regional and local bulk
water supplies, O&M of rural groundwater schemes, retail services to individual consumers,
implementing WC/WDM measures, metering, billing, revenue collection, and monitoring the
water resources. The WSP’s functions and duties would be regulated by a detailed Water
Services Provision Agreement.
3.3.1. Advantages

Required resources and expertise would be provided by the WSP

Reduced costs due to economy of scale

Reduced administrative, monitoring, and management burden on WSA over single
entity responsible for all aspects of water and sanitation services.
3.3.2. Risks

WSA has no direct links with consumers.
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
WSA has lesser control over financial aspects of service provision in comparison to
the internal option (Option 2)

Negotiations with organized labour must occur in relation to future of applicable
personnel currently employed

A careful, time-consuming and challenging procurement process for appointment of
the WSP.

The success of this option is primarily dependant on the WSP’s competency and
WSA’s ability to effectively monitor performance and take action in terms of the WS
Agreement.
3.4. Option 4: Combined External and Internal WSP functions
This option entails a combination of internal and external options for service delivery. The
current WSP would retain responsibility for the operation of the regional bulk supply
infrastructure serving Vaalkop regional water scheme. MKLM would be responsible for all
other aspects of water services, through an internal mechanism, including operation and
maintenance of groundwater schemes, functioning as bulk water provider in areas not
served by regional water schemes, retail services throughout the municipal area and
provision of sanitation services including operation of sewage treatment facilities.
There would be three separate management areas (due to uniqueness of each area),
managed through the combination of external and internal mechanisms to optimise
efficiency.
In terms of this option it is proposed that the operation of the Vaalkop Dam WTW and
regional bulk water supply infrastructure be managed by the current WSP (Magalies Water)
while water distribution, retail and sanitation be undertaken as an internal option by MKLM,
with a substantial staff transfers from existing WSPs. The internal option in this case would
provide MKLM with control over steady and reliable income from its commercial and
industrial consumers.
The major advantage of providing water services through internal mechanisms in the area is
direct involvement of MKLM and interaction with the individual communities. Also a certain
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degree of financial savings may be achieved by streamlining various activities currently
performed by current the WSP in the area.
3.4.1. Advantages

Promotes community empowerment by delivering services through community based
schemes

WSA has control over financial aspects of service provision

Direct interaction between WSA and consumers

Builds capacity within MKLM, providing support for other functions and activities as
well

Potential for savings from reduced duplication and overhead costs

Outsourcing function of regional bulk water service provision will reduce
administrative burden on MKLM
3.4.2. Risks

Need to build sufficient capacity within MKLM over a short time

Urgent negotiations with organised labour must be undertaken. Should negotiations
be unsuccessful interim arrangements will need to be made.

Initial establishment costs include acquiring of assets and equipment, costs
associated with staff transfers, internal restructuring and capacity building

Negotiations with commercial consumers in MKLM and Rustenburg LM must be
concluded. These influence the final outcome of the process
An important exercise was undertaken towards determining the direct and indirect
costs associated with each option. The outcome was as follows:
Option 1 (Status Quo): R40 036 606
Option 2 (Internal):
R36 366 909
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Option 3 (External):
R38 668 713
Option 4 (Combination):
R37 803 712
The costs represent water services only as sanitation services provided to the majority of the
MKLM area was of a rudimentary nature such that it would only have a marginal impact on
the cost comparison.
From the exercise it is found that maintaining the status quo would be the most expensive
option, however the above costs exclude initial establishment costs. This alters the picture,
since initial establishment costs would not be applicable to the status quo option. Further,
MKLM finds that the appropriate option should not be purely dependant upon financial
consideration, but must also take account of legal implications, HR requirements, existing
capacity and the needs and expectations of the consumers. Option 4 was expressed as the
preferred option, ie bulk supply would occur via a single external WSP (Magalies Water) and
MKLM would take be more extensively investigated though the s78(3) process. over all other
aspects of service delivery through an internal option. This combination option would
Subsequent to an analysis of the specific options available (as set out above), MKLM set
about identifying critical issues that have arisen from the exercise that need urgent address.
These are: gaps in information regarding the status quo (eg. incomplete HR information
from Botshelo Water; inaccurate O&M costs for a number of schemes in Magalies Water area
of supply); human, financial and material resource requirements associated with each option
needs in-depth evaluation; to fully assume its role as WSA, MKLM must develop the
necessary management structures as soon as possible; municipal by-laws and credit control
policies need to be finalised; asset transfer agreement with DWAF needs to be concluded;
strategy to create community awareness and public participation process; establish and
support community based water committees.
4.
Issue/theme focus
The case study illustrates the complexity of the status quo and the need for a more creative
option. Option 4 provides for this. The combination of an internal and external mechanism
involves the current external WSP retaining responsibility for the operation of the Vaalkop
Dam WTW and regional bulk water supply infrastructure, while MKLM assumes responsibility
for operation of all other aspects of distribution and retail water and sanitation service
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provision. The reasoning behind the envisaged arrangement is that since the complexity and
sophistication of the regional bulk supply infrastructure serving MKLM’s area requires
experienced personnel to manage and operate such a system and that the regional bulk
supply scheme is located outside MKLM’s boundaries, the municipality cannot assume
ownership and operation of the scheme without capacity and reaching agreement with all
other parties involved. The administrative burden, coordination, frequent negotiations and
associated additional responsibilities would not suit MKLM’s capacity context, and falls
outside the scope of the municipality’s core functions. The more practical arrangement is to
secure an agreement between the various WSAs and Magalies Water, where the water
board will be appointed as regional service provider managing operation of bulk water
supply from the Vaalkop WTW.
By MKLM providing retail services through an internal mechanism, there would be closer
interaction between WSA and communities. This would enhance efforts to improve levels of
service and it would eradicate the present uncertainty around payment to operators of
individual groundwater schemes. It is anticipated that such operators would be drawn from
local communities, while the technical and administrative staff will be based at regional
offices to be established in central locations with reasonable access for outlying villages.
Vigorous capacity building will need to occur within MKLM for success with this option. A
more in-depth analysis of this combination option will be undertaken during the s78(3)
process.
5.
Lessons learnt

The s78 process is greatly facilitated by internal commitment.

There is a need to have direct involvement and support from political and official
levels
from
inception,
more
especially
in
the
case
of
the
preferred
combination/hybrid option of internal and external mechanism, which includes a
regional approach to water services for all WSAs in the area.

MKLM has inadequate capacity to undertake water services on a regional basis, thus
will maintain retail services within its area by continued functioning of a Department
(internal mechanism), while bulk supply would occur via a single external regional
WSP, Magalies Water (external mechanism)
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
A practical approach that calls for a regional arrangement is to secure an agreement
amongst the various WSAs and Magalies Water, where the water board will be
appointed as regional service provider, managing operation of bulk water supply
from the Vaalkop WTW.

Adequate fore-planning must occur with regard to securing information on the
status quo, especially when it involves various institutions from which information is
required.

Cooperation and co-ordination is essential amongst all relevant WSAs.
For further information please contact: Moses Kotane LM on 014 553 2947
Or
1. Rudy Bosman (Legal Advisor to MKLM S78/WSDP)
0832500569
2. Johan Potgieter (S78 Project leader)
014-5556321 /
0828298273
3. Jurie Vorster (Bojanala Municipality PIMSS- Legal Support)
0827840839
4. Mary Mokoena (SALGA WS Co-ordinator)
0829082751
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