South Africa’s new water strategy

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The South African government has finally set out its plans for the water sector over the next decade and beyond. Much of the theory of the government’s strategy was set out in the 1998 National Water Act but it has taken four years to put the meat on the bones. Although the publication of the National Water Resource Strategy (NWRS) explains the means by which the nation’s water can most effectively be used, it does little to settle the debate over public versus private control of the water sector.

The NWRS was eventually published in August and provides “the legally-binding framework within which the water resources of South Africa will be managed in the future”. It outlines the goals and objectives of water resources management for the country and “provides the plans, guidelines and strategies to achieve these goals”. However, such general statements hide the fact that although the NWRS gives more details on the theory of how private and public money will work together, it is a stepping-stone to a solution, rather than the solution in its own right.

The NWRS has four main objectives. Firstly, to establish the national framework for managing water resources, although this framework can be amended following periodic reviews, which must be carried out at least every five years. Secondly, to establish the framework for the preparation of new catchment management strategies (CMSs), within each water management area. These CMSs will then act as a second tier of strategy under the NWRS.

The third objective of the strategy is to inform the general public of the government’s water resources management policy. This is particularly important because of the widespread opposition to some aspects of current water policy. Finally, the strategy aims to identify development opportunities and constraints, and particularly areas of the country in which limited water resources restrict development.

Within this framework, it appears that the controversial issue of private sector participation is to be left up to individual provincial governments and municipal authorities. At first glance, this may seem as if central government is ducking the issue, but as the provision of water and wastewater services was always intended to be achieved through a combination of public and private investment, it could be the best option.

The selection of a range of public-private initiatives around South Africa should enable comparisons to be made and allow elected officials to discover what works and what does not. If international private water companies are perceived to be successful, then there could be a series of concessions and BOTs on offer over the coming years.

The impact on users
In explaining the NWRS to the National Assembly, South African Minister of Water Affairs and Forestry Ronnie Kasrils commented that some existing privileges would have to be withdrawn in order to compensate both private and state-owned water authorities for the loss of revenue resulting from the government’s free water policy. The preferential tariffs enjoyed by mines are to be abandoned and mining companies are now to be charged the same water tariffs as other businesses. An agreement to that effect has already been drawn up between the Chamber of Mines and Rand Water.

Kasrils also said that past investment had focused too heavily on developing new water sources, at the expense of developing existing resources. Improving efficiency is therefore near the top of the government’s list of priorities.

Greater efficiency will also support the government’s top priority – that of re-allocating water “from low benefit uses to higher benefit uses over time”. Prior to the publication of the NWRS, Kasrils had said: “I am
ensuring that water is used in the public interest. We are moving further away from the situation where people who owned land could claim the right to whatever water flowed past them and use it however they wanted to, regardless of the needs of those out of sight of the river”.

Many large users, such as farms and mines, have had little incentive to improve their water efficiency. As a result, irrigated agriculture consumes 60% of South Africa’s total requirements, while producing only 30% of the country’s agricultural output. The entire agricultural sector accounts for just 4.5% of GDP.

The Ministry of Water Affairs and Forestry (MWAF) therefore feels that it is using more than its fair share of water and intends to restrict use. The Department of Water Affairs deputy director general of policy and
regulation, Barbara Schreiner, said that the government is not trying to take water away from farmers. “We are trying to improve the efficient use of water”, she said.

Both public and private water authorities will now have to apply for abstraction licences. The new licences will be granted by both MWAF and a new set of bodies, to be known as catchment management agencies (CMAs). Licences will generally be granted for up to 40 years and the government reserves the right to alter the conditions of each licence during that period.

Licences may also be enforced on organisations exploiting water resources before 1998. Schreiner said: “We have the powers to call for compulsory regulation if we identify a particularly water stressed area or where major inequity issues need to be addressed. In this case we could ask for all water users in that area to apply for licences”. Satellite technology is being used to track and identify illegal water users.

As a result, the main opposition to the NWRS is likely to come from an unexpected quarter. Rather than the big urban trades unions, AgriSA, the farmer’s union, has appealed to its members to attend the public consultation meetings on the strategy during September and October.

However, Nick Opperman, a director at AgriSA, conceded: “We do not like to be over regulated, but understand that water is a precious resource and must be managed in an equitable and sustainable way. The principle of licensing and registering water use was contained in the Water Act and we will now wait and see how it will be implemented by the agencies”.

A success story
The politicised nature of the water debate in South Africa hides something of a success story. According to MWAF figures, there were 14 million rural people without access to water services in 1994. Thanks to sustained – mostly government – investment, 7.2 million of these had been supplied with running water by March 2002. This was achieved at a cost of R5.3 billion ($485 million). Under this year’s national government budget, R888 million ($80 million) has been allocated to extending water supply and R159 million ($14.5 million) to wastewater services in rural areas, while donors are contributing an additional R197 million ($18 million).

There were fears that even impressive progress in this field would be outweighed by population growth, but the sheer size of the effort put into rural water supply has overcome this problem. Kasrils commented: “By 2008, everyone in the community will be receiving clean water if we maintain our current rate of progress”.

In addition to extending the distribution network, the government has tried to ensure even the poorest people can access enough water for basic requirements. Its free water policy, which was introduced in July
2001, allocates a guaranteed 6,000 litres of free water a year to poor households, mainly in rural areas.

It is up to each local authority to implement the policy, but already 76% of the population, or 29 million people, live in areas that have done so. The irony for many opponents of government policy is that this has
been achieved in a country that is encouraging private sector investment in water.

What next for the private sector?
Domestic and foreign water private companies are already in evidence in South Africa, and French firm Suez is in a strong position to take advantage of any new contracts that may be offered.

Suez subsidiary Northumbrian Water was awarded a management contract to run water and wastewater services in the Johannesburg area in November 2000 (see GWI, Vol. 1, Issue 7, p.9). Suez’s South African subsidiary, Water and Sanitation Services (WSS), also operates a number of Build, operate, Train and Transfer (BoTT) contracts in Gauteng, KwaZulu-Natal and the Cape provinces.

The Johannesburg contract is something of an interim arrangement and is due to end in 2006. A new utility, Johannesburg Water (JW), is the contracting body and it will be interesting to note how much
attention is paid to the contract when it is due for renewal. It will also be interesting to see how far Northumbrian Water is able to boost cooperation with South African black empowerment enterprises, as it is legally and contractually required to do.

The debate over PSP has been fuelled by a series of controversial contracts. These include Biwater’s 30-year concession in Nelspruit and Saur’s concession for a similar term in the Dolphin Coast area. In both cases, lower than anticipated water demand has been a major factor. Although both cases have attracted their fair share of negative press, it is comforting to potential investors that the relevant government authorities have stepped in when required.

The lack of a government blueprint for the water sector was partially responsible for encouraging opposition to PSP. Now that detailed plans have been published, it is possible that opposition will recede.
Unlike in most of Africa, it is the opposition to PSP that is the greatest threat to private investment, rather than the lack of market opportunity.

Opposition to privatisation has mainly come from trades unions, and progress towards planned concessions in both Cape Town and Durban has faltered as provincial governments have hesitated over pursuing the privatisation option.

Local governments have effectively been waiting for the national government to set the pace and to determine long-term policy through the publication of the NWRS. Opposition has become most heated
over the Biwater concession in Nelspruit (see GWI, Vol.3, Issue 8, p.11). However, the government has staked a great deal on the contract, with President Thabo Mbeki reported to have said that “under no
circumstances must the contract be allowed to collapse”.

Increased storage
Kasrils claims that the NWRS also supports the case for increased reservoir capacity.

In an undoubted reference to the campaign for the new Berg river dam, which will supply Cape Town, the minister attacked anti-dam campaigners. He commented: “As we face the challenges of climate
change, I am struck by how poorly Africa is developed to cope with it. The US stores 6150m3 of water in dams and reservoirs for every American. In South Africa, we store only 746m3 per person; in the rest of Africa, it is only one tenth of that, 40m3 per person in Ethiopia and just four in Kenya. Yet our climate is more uncertain, arguably justifying more, not less, storage”.

Although the NWRS predicts sufficient water resources until 2025, it acknowledges that regional shortages are possible. The strategy divides South Africa into 19 water management areas and calculates that 11 will face water deficits.

However, there seem few other options to reservoir construction. There are few major groundwater aquifers that could be developed, while river flow is generally uneven because of the seasonality of rainfall. The strategy document proposes the construction of desalination plants but acknowledges that further technical advances will be required before this becomes an economic option.

However, Kasrils has been careful not to overstate the likelihood of future water shortages. Responding to claims that South Africa could run out of water by 2030, he commented: “We have more than enough water to meet the needs of all. We have the political will and the professional skill to make the most of what we have, even though we have relatively little water per person compared with many other countries”.

At the heart of the NWRS lie the new CMAs, which will be established to manage and oversee the use of water resources at a regional level. These agencies will be responsible for coordinating and overseeing the activities of private companies, state bodies and other users. It is not yet known how these new agencies will influence the operations of other relatively new utilities such as Johannesburg Water.

DWAF is currently responsible for administering all aspects of the 1998 National Water Act but new regional and local water institutions, such as the CMAs, will gradually take on much of the responsibility and authority for water resources management. The eventual aim is for DWAF to provide the national policy and regulatory framework within which other institutions will directly manage water resources.

The NWRS does not contain any details of pricing strategy. The 1998 Act empowers the Ministry of Finance to establish a pricing strategy for most water use, after consulting with the public, while the 1997 Water Services Act sets out the pricing arrangements for bulk water and water distributed to households.

Beyond the NWRS
Under the terms of the NWRS, the South African government can help finance major water infrastructure projects, and it is already supporting the Berg Water Project in the Western Cape. As the table on page 8 indicates, DWAF is broadly keeping its infrastructure investment in line with budgetary requirements.

While the South African press has attacked the government for average water losses of 30%, the figure is certainly the lowest in Africa and better than in many other countries. However, the government is keen to crack down on illegal connections and the figure does leave room for improvement. The other main area of growth in government expenditure is extending the provision of wastewater services.

Kasrils told the National Assembly earlier this year: “Effective sanitation is a key to breaking the chain of transmission of cholera and many other diseases, yet it always takes second place to water supply”. He continued: “My aim is to ensure that the budget allocation for sanitation programmes increases steadily over the coming years, without prejudice to the pace of progress in water supply”.

The NWRS is not the be all and end all of the South African government’s water strategy. Policies will no doubt be adapted and altered before they are introduced. However, the NWRS sets out the rules of the game and it is now up to each local authority in the country to decide how it wants to proceed.

Given the vast income differentials in South Africa, there will undoubtedly need to be some continued form of state investment in water and wastewater supplies. The choice lies in whether the lion’s share of services will be provided by private or public operators.

The gradual spread of the water distribution network over the past eight years may calm opposition sufficiently to enable the process of offering private concessions to continue. The seven million people who now receive piped, partly free, water, can testify that poor South Africans are not about to become victims of raw, unfettered capitalism.

See also: Cape Town latest