PARLIAMENTARY PORTFOLIO COMMITTEE OF
WATER AFFAIRS AND FORESTRY ON 08
SEPTEMBER 2004
SAAWU COMMENTS ON THE WATER SERVICES
AMENDMENT BILL: AMENDMENT OF SECTION
30 OF ACT 108 OF 1977
: 06 October 2004
1.
Preamble
The Water Services Amendment Bill 2004 seeks to
provide the necessary statutory authority for a water
board as a statutory body, to operate outside of the
borders of the Republic. The principle of parastatals and
state-owned-enterprises operating extraterritorially is
not something new to South Africa. Many of these
entities such as ESKOM, Transnet, DENEL and so on
have a long history of extensive business interests
outside the borders of the Republic.
Preamble (cont)
The need for national government, through the lead
department (Executive Authority) and in conjunction with
other departments, to provide specific statutory
authority for and have oversight over extraterritorial
activities is also recognized and acknowledged.
2.
Scope of Extra Territorial Activities
• The engagement of water boards in activities outside the
borders of the Republic has taken and or could potentially
take various forms. The following examples broadly
outline the scope of some of these engagements;
2.1
Commercial/Business Activities (profit
motive)
• Where a water board acting on its own, or as part of a
consortium or as a partner in a joint venture seeks out
and engages in a business opportunity outside of the
borders of the Republic for the specific reason of
generating additional revenue and making a profit. This
would typically be based on a solid business case and the
utilization of the core competencies and capacity that the
water board possesses. It would also typically require the
deployment of skills/expertise and related financial
resources extraterritorially.
2.2
Support Activities (cost recovery)
• Where a water board
provides specific services to
another party or agency outside the borders of the
Republic with the specific intent of providing support and
transferring expertise (skills and knowledge) to address
specific needs. In these instances the primary objective
is not to make a profit but to provide support on a basis
where the full costs incurred by the water board are
recovered. This type of engagement would typically be
project or consultancy based, would have a limited time
frame and would require limited deployment of
skills/expertise and related financial resources extra
territorially.
2.3
Capacity Building Activities (no extra
territorial financial implications)
• Where a water board engages with and develops a
relationship with a similar organization or entity outside
the borders of the Republic in order to learn and
exchange expertise (skills and knowledge) and build
capacity (Institutional and people) on an agreed basis.
This is typically done through the concept of developing
“twinning” agreements and partnerships. The primary
focus of this type of engagement would be capacity
building and improving the effectiveness and efficiency of
both parties.
Capacity Building Activities (no extra territorial
financial implications) (cont)
This type of engagement could require limited deployment
of skills/expertise (through short term staff transfers
etc) but would have no extra territorial financial
implications as the related costs are covered locally by
the “Twinning” parties.
Capacity Building Activities (no extra territorial
financial implications) (cont)
It is proposed that the approval process as contemplated
in section (3) and (4) of the Water Services Amendment
Bill only applies to the activities as broadly outlined in
2.1 and2.2 and excludes “Twinning” partnerships.
3. Practical Considerations
3.1 Timing of approvals
Where the nature of the potential engagement of a water
board extraterritorially is a commercial or business
opportunity the ability of the water board to secure a
relationship is determined by specific timelines and the
ability to respond quickly. This is always the case with
contractual opportunities and submission of proposals.
Timing of approvals (cont)
The timing of the approval process as contemplated in
section (3) and (4) of the Water Services Amendment Bill
will therefore directly impact on the practical reality of
a water board being able to respond in time to secure
specific business opportunities. It is therefore proposed
that a specific timeframe should therefore be set for
the approval process contemplated in section (3) and (4)
of the Water Services Amendment Bill
4.
Typical arguments Against Extra Territorial
Activities
There are sector stakeholders who raise a number of
arguments against the engagement of water boards in
activities outside the borders of the Republic. These
arguments are typically centered on the following issues:
Typical Arguments Against Extra Territorial
Activities (cont)
•
•
Given the service delivery challenges and massive
backlogs for service delivery in South Africa how can a
public sector organization justify using capacity and
resources outside the country?
Some
Water
Service
Authorities
(municipalities)
perceive that “their consumers are funding” activities
performed outside the borders of the Republic through
the water tariff.
Typical Arguments Against Extra Territorial
Activities (cont)
•
Some Water Service Authorities (municipalities) argue
that the authority for a water board to perform
activities outside the borders of the Republic should be
given by the Water Service Authorities (municipalities)
served by that water board in the first instance.
5.
Counter Arguments
The following counter arguments are raised in regard to
those set out in paragraph 4. above;
• Some of the more well established and capacitated water
boards have built up highly specialized skills and capacity.
Where this specialized skills and capacity can be
leveraged and easily, cost effectively and quickly
deployed to secure viable (profit making) business
opportunities for a water board, without a negative
impact on its primary activity in SA, this should be
permissible as it:
Counter Arguments (Cont)
 Enables the water board to secure additional revenue
streams and improve business viability.
 Contributes to a reduction of overall business risk.
 Can generate profits that can be used to buffer
tariff increases for consumers.
 Ensures the optimal utilization of institutional
capacity.
Counter Arguments (Cont)
 Builds additional skills capacity and expertise.
 Empowers, provides incentives for and motivates
staff.
 Gives South African institutions an international
profile and enhance the image of the water sector and
South Africa.
Counter Arguments (Cont)
All of the above are important for the water board
and are also in the direct interests of the
municipalities served by the water board.
Counter Arguments (Cont)
• The existing provisions of the WS Act as these relate to
ring fencing of other activities and business risks are
very specific and these provisions would apply to any
business venture activities performed outside the borders
of the Republic.
Compliance with these provisions and the regulatory
oversight of the Executive Authority are considered more
than sufficient to ensure that municipal customers and
consumers do not “bankroll” any inappropriate business
ventures of a water board, either within or outside of
the borders of the Republic.
Counter Arguments (Cont)
• The Water Service Authority/s served by a water board
should manage the business relationship between the two
entities in terms of a formal, balanced and fair contract
that is specific to the business relationship between the
two entities. SAAWU and SALGA have developed a Model
Bulk Water Service Agreement for the sector.
Counter Arguments (Cont)
The responsibility of a Water Service Authority must be
to ensure that such a contract is in place and then to
specifically focus on managing performance and service
delivery as agreed in terms of the contract. Undue
influence of a municipality/s on the wider functioning and
scope of business of a water board is inappropriate as
this is the broader role of the Executive Authority.
Counter Arguments (Cont)
• Water boards have substantial capacity, skills and
expertise that can and should be deployed to benefit
the country, the region, the continent and where
appropriate the broader international community. South
Africa is considered to be a leader in water services
provision and its sector practitioners (managers,
engineers, scientists and technologists) are recognized
and
acknowledged
internationally
for
their
achievements.
Counter Arguments (Cont)
It is seen as critically important that this South African
expertise is able and prepared to make a meaningful
contribution to relevant SADC, NEPAD and AU initiatives
and objectives as well as global objectives where
appropriate.
6.
Conclusion
The South African Association of
Water Utilities
welcomes with appreciation the steps taken by the
Minister to create a statutory mechanism to enable water
boards to operate extraterritorially and requests that
the proposals made in this submission are given
consideration, to include once off exemptions to water
utilities seeking such permission.
THANK YOU