WSS performance and the creation of Maluti-a-Phofung Water

Presentation for Local Dialogue 15 May 2009 Maluti-a-Phofung Municipality 1

Structure of presentation

 Introducing the research team  The objectives of the research  The methodology  Background and overview  Institutional entities and their roles  Institutional comparisons  Key technical indicators  Community perspectives  Summary of major issues 2

The research team

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Project leader: Anne Mayher

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Researchers: Sibusiso Khanyile and Brand Nthako

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Finance research: Cobus Oosthuizen

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Additional analysis and editorial support: Glen Robbins

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Objectives of the research

 To examine the impact of the institutional arrangements introduced to fulfill the WSS function in terms of:  Performance against key indicators  Community perspectives  Including some comparison with previous arrangements  To draw on this research to inform:  Local advocacy through a Local Dialogue  Themes for the broader Water Dialogues – South Africa process with particular attention paid to institutional issues.

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The methodology

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Examination of available documentation (primary and secondary sources)

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Interviews with key informants

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Community participatory workshops

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Sourcing of specialist financial information

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Expert input from Water Dialogues stakeholders

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Feedback sessions with local stakeholeders

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Overview of Maluti-a-Phofung Municipality

        Maluti-a-Phofung is a local municipality and forms part of the Thabo Mofutsanyana District Major centres: Harrismith, Phutaditjaba, Kestell Population of 360 790 (2001 census) – now estimated at 400 000 84% of population in former Qwa Qwa homeland areas Economic focus on agriculture with limited industrial and tourism development Unemployment estimate at 65% Migrant employment remains important Major historical services disparities between former Qwa-Qwa areas and Harrismith/Kestell Maluti-a-Phofung is located in the south-east of the Free State Province 6

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WSS institutional timeline

1994  DWAF assumes control of former QwaQwa WSS arrangements  Harrismith TLC incorporates surrounding schemes 1998  DWAF contracts Sedibeng to handle for QwaQwa scheme 1999  Harrismith explores obtaining external support in the running of its WSS arrangements 2000  Newly created Maluti-a-Phofung Municipality contracts Rand Water (Amanziwethu) to assist with management and expertise in running of the Harrismith-Intabazwe Tshiame WSS 2001  Sedibeng contract renewed by MaP Municipality in partnership with DWAF and extended to cover Kestell area 2003  Section 78 process proposes creation of external entity, wholly owned by the MaP Municipality to handle integrated WSS for MaP areas as a whole.

 Sedibeng and Amanziwethu contracts renewed on short term basis.

2006  Maluti-a-Phofung Water Pty (Ltd) created and assumes WSP role  Uzinzo (WSSA and Amanzabantu) contracted on 6 year deal to provide management and expertise to enable MaP Water to function sustainably in the future 7

Institutional background of WSP entities (I)

 Sedibeng (1998-2006)  Serviced former QwaQwa areas with mandate from DWAF (and funding)  Sedibeng is a public Water Board that has sought to extend its activities outside its original scope of operations to raise revenue  Scheme involved bulk and reticulation activities with a focus on Phutaditjaba and surrounding peri-urban areas  Sedibeng provided the full management of the function  Until Sedibeng assumed responsibility for Kestell it did not have a significant billing function in the area (thanks to a DWAF subsidy) 8

Institutional background of WSP entities (II)

 Amanziwethu (2000-2006)  An entity created by Rand Water (a public Water Board) to supply services to Harrismith TLC  Serviced Harrismith and surrounding areas through support of WSS activities of the Harrismith TLC and subsequently the MaP Municipality  Amanziwethu officials seconded to work with municipal staff around priority support areas in a “business unit”  Scheme involved mostly reticulation activities for town of Harrismith and surrounding townships  Amanziwethu sought to assist Harrismith and later MaP Municipality to raise revenue levels and quality of services 9

Institutional background of WSP entities (III)

 MaP Water Pty (Ltd) (and Uzinzo) (2006 - )  A publically owned entity created to provided integrated WSS to the entire MaP area – a WSP  Entity given a mandate by its “shareholder” (MaP Municipality) with the mandate administered through the WSA function in MaP Municipality  Uzinzo consortium contracted in by MaP Water to provide management services and to build sustainable capacity within the MaP Water entity  Uzinzo a JV between two private sector entities active in the WSS sphere (WSSA and Amanzabantu Services) 10

Motivation for establishment of MaP Water

 According to respondents and Section 78 process the key factors informing the decision to create MaP Water Pty Ltd were that:  External providers have always been operating in the area resulting in a lack of existing internal capacity and difficulties with sourcing skilled personal to work for municipality  There was a need for an entity to house formerly separate schemes and to manage complex integration process (eg harmonisation of conditions, services)  The prospects for raising additional resources were higher outside the institutional structure of the Municipality (both debt and donor)  The institutional arrangement would allow for corporatisation with potential benefits of dedicated management and ring fencing of assets and activities from other municipal services 11

WSP entity service comparison (I)

  In terms of services rendered the entities were substantially different making a direct comparison difficult.

 Different policy contexts    Different funding basis Different institutional forms Different services and scales of operations The figures below are presented to provide an broad sense of the nature of service coverage. However, it should be noted that they also capture dynamic shifts QwaQwa).

– for example the conversion of standpipe connections to residential connections by MaP Water from the previous Sedibeng (in Amanziwethu (‘00-’06) 8909 Residential Connections 600 Communal Standpipe Access 0 Water Tanker Access 0 Unserved Sedibeng (’98-’06) 39328 Residential Connections 36030 Communal Standpipe connections 1350 Water Tanker Service 3292 Unserved MaP Water (’06- ) 85934 Residential Connections 2620 Communal Standpipe connections 0 Water Tanker Service 16500 Unserved 12

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WSP entity service comparison (II)

It is notable how under MaP Water the service arrangements have changed with a strong focus on the shift from standpipes to residential connections (QwaQwa) and the overall rise in metered connections along with a ongoing decline in the unserved.

Num ber of Connections 37500 35000 32500 30000 27500 25000 22500 20000 17500 15000 12500 10000 7500 5000 2500 0 Service Level Comparison Water Connections Source: WSDP 2004/5 and 2008/9 Metered Residential Unm etered Residential Com m unal Standpipe Access Unserved Qw aQw a 2004/5 Qw aQw a 2008/9 Harrism ith Intabazw e Tshiam e 2004/5 Harrism ith Intabazw e Tshiam e 2008/9

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WSP entity service comparison (III)

 Overall in, backlog terms, each successive entity has reduced total backlogs from over 1/3 of the population to less than 10% since 1994.

WSA Maluti a Phofung Local Municipality FS194 Total Water Backlog April 1994 140,284 Total Water Backlog Oct 2001 75,852 Total Water Backlog April 2007 30,970 Source: DWAF NWIS 14

Note:

This table provides a

comparison of consolidated financials of Sedibeng and Amanziwethu

(adjusted to 2007)

against those of Map Water

(2007) It highlights: (1) Increase in water sales revenue under MaP Water (2) High level of DWAF grant allocations for MaP Water (3) The losses incurred by the municipality with the previous arrangement compared to net profit generated for reinvestment in service upgrading under MaP Water (but DWAF grant driven) 15

Issues arising from technical study:

Comparing the institutional arrangements    On the institutional reform process (from Sedibeng & Amanziwethu to MaP Water):  Concerns were raised about the rigour of Section 78 process and related lack of public engagement On the institutional comparison (between Sedibeng, Amanziwethu and MaP Water):  Different mandates, geographic focus areas, structures and funding aside, MaP Water does appear to have successfully integrated the services with a surplus being generated for reinvestment.

 However, the surplus is in large part a function of increased DWAF subsidies which are not necessarily guaranteed in the future.

In terms of service comparisons (between Sedibeng, Amanziwethu and MaP Water):  Major progress has been made on backlog eradication and MaP Water has significantly raised the number of residential connections (converted from standpipes).

 This process has also involved a shift to metering which was not a major priority for Sedibeng 16

Issues arising from technical study:

MaP Water Pty Ltd’s performance   In order to reflect on MaP Water’s performance it is critical to understand the allocation of institutional roles and responsibilities that inform what it does.

An institutional “supply chain” exists in which the performance of each entity is very dependent on the performance of others.

Municipality WSA MaP Water (Pty) Ltd Uzinzo Roles:

Section 78 process Policy direction WSA approvals and oversight Billing Operating and capital Allocations Capital project Implementation (bulks)

Roles:

WSS planning (WSDP) WSS coordination WSS standards WSP contracting WSP oversight WSP M&E

Roles:

Implementation and management of WSDP Programme including Budgeting, administration, HR, strategic and technical capabilities Reticulation scheme Design, implementation & maintenance

Roles:

Entity establishment & consolidation (systems, Procedures, technology, knowledge transfer) Expert support Capacity building 17

Issues arising from technical study:

MaP Water Pty Ltd’s performance  Major issues identified included:  Municipal staff, MaP staff and Uzinzo consortium members agree they are still on a learning curve with respect to roles and responsibilities  A key challenge has been the turn-over of skills/staff at MaP Water – in particular with regard to seconded staff form the Uzinzo consortium  The effectiveness of the Municipal billing arrangements remains a concern with low priority given to recovery of water revenue form customers thereby limiting Uzinzo’s ability to secure and improved incentive in terms of operations.

 The quality and responsiveness of capital programmes in the Municipality, on which MaP Water depends, needs ongoing attention.

 The high DWAF subsidy level might not continue leaving a requirement for major revenue adjustments/efficiency improvements.

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Issues arising from community workshops (I)

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Rationale for selection of community participatory workshop sites:

 Since 84% of the population live in the former QwaQwa area and 15% live in Harrismith (the other 1% live in Kestell), 3 communities were chosen in the former QwaQwa area – Bolata, Thaba Bosiu, and Riverside - and 1 was chosen from Harrismith – namely, Intabazwe (urban township and informal settlement) 19

Issues arising from community workshops (I)

 Key issues identified by areas:  “Urban” QwaQwa issues were around:  The introduction of metering and the impact this will have on poor consumers  Quality of service (pressure and downtime)  Lack of consultation/communication  Peri-urban/rural QwaQwa:  Uneven access and lack of FBW   Lack of access to water mains and cost of connection “Illegal” connections where residents connected themselves under circumstances where there was no provision or they could not afford connection cost  Intabazwe  Reliability  The introduction of metering and the impact this will have on poor consumers     Use of restrictors Lack of sanitation and standpipes for informal settlement Lack of consultation and communication Weak reporting lines/accountability 20

A summary of core issues identified

   In terms of the institutional arrangements/model:  Oversight, monitoring, planning and policy issues are still evolving but there are apparent gaps (eg irregular mtgs and no independent review in place)  Public engagement and communication matters have remained quite marginal around WSS matters  Planning for a declining subsidy environment needs attention as does the effectiveness of revenue management by the Municipality  Building local capacity must be a focus of attention As backlogs are reduced the quality and level of services as well as their affordability needs consistent attention:  Planning, delivery and operations management must become more consultative and informed by user perspectives  Particular service delivery matters needing attention include:  The roll out of metering  The approach to free basic services    The cost of connections and water supply Lack of standpipes in informal and peri-urban settlements Quality and responsiveness of service providers Communication and consultation must be enhanced to secure greater accountability and user voice 21