Rand Water Annual Report: briefing

Meeting report

PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO COMMITTEE
26 October 2004
RAND WATER ANNUAL REPORT: BRIEFING

Chairperson: Ms N Ntshulana-Bhengu (ANC)

Documents handed out
Rand Water Annual Report PowerPoint presentation
Rand Water Annual Report

SUMMARY
Rand Water informed the Committee of its increased water supply, and how it had managed operational costs efficiently. Rand Water's largest customers were municipalities that used 91% of its water. The company had to be accountable and transparent in the setting of tariffs, but often its tariff reductions, or ' price freezes', were not passed on to the consumer.

Members expressed concern about the lack of infrastructure in the townships, how some rural areas had not benefited from the free basic water allocation, leakages and water losses due to old pipes. They asked if Rand Water was supportive of municipalities charging for water according to a sliding scale; whether it intended to engage in the business of selling bottled drinking water; and whether it had formed any partnerships with water boards in other countries.

MINUTES

Rand Water briefing
Mr S Lushaba, Chief Executive, reported on Rand Water's capacity as the largest utility provider on the continent in terms of size and performance. They serviced the entire Gauteng province, some parts of Mpumalanga, the Free State and the North West. Water supply had increased by 2.2% from 2003 to 2004, which was equal to 16 000 large swimming pools. Rand Water had been tasked to jointly supply the Western Highveld Region. They had used their own trading account to keep a healthy credit rating; were competitive and had been accredited in line with international standards; and had managed operational costs efficiently in order to be self-funding and sustainable. The organisation had undergone transformation in terms of training, designated groups, and Black Economic Empowerment; and had spent R20 million on its social responsibility commitments. The price of unprocessed water had increased over the past five years. The cost of water sold to municipalities had increased by less than that which municipalities charged consumers. They had provided other value-adding services to municipalities, backed up the supply for SASOL, participated in the Presidential Lead Projects, provided sanitation in Winterveldt, repaired old infrastructure in Bekkersdal, Mamelodi and Eersterus, and had installed toilets with the dual flush cistern.

Mr K Naiker, General Manager, Sales and Customer Service, reported that the municipalities comprised 91% of their customers. They had been accountable and transparent in setting tariffs by notifying the municipalities six months in advance of tariff changes, and contributed value to the municipalities intended to be passed unto the end user. They has also separated non-core activities from core ones to ensure these did not influence tariff changes. The challenge was keeping tariff changes within inflation because water tariff increases had always been above inflation. The consumer was not benefiting from improved efficiency, because the value contributed by Rand Water to the municipalities were not being passed on. Its Internal Audit Committee functioned in compliance with the Treasury regulations.

Discussion
Mr S Mashudulu (ANC) was concerned about the lack of infrastructure development in the townships, and water lost through leakages. He felt municipalities had to be involved in setting of tariffs, and that the Committee should investigate how provincial governments could monitor the price of water charged by the municipalities.

Mr C Kekana (ANC) asked which rural areas had been supplied, who supplied the other eight provinces outside of Gauteng, and an indication of targets.

Mr B Solo (ANC) asked about strategic provision in farm areas and non-core activities. He also asked whether tariff increases were discussed with municipalities and was of the opinion that the Committee together with the South African Local Government Association (SALGA) had to investigate.

A Member asked about ways of reaching those who were not benefiting from the provincial supply of free basic water, what were the specific community projects they had engaged in, whether people with disability had been included in their designated groups and what the audit opinion was?

Mr Lushaba responded that leakages and losses were major concerns and that it was very expensive to repair current leakages. Western Highveldt was rural, with scarce water and drought problems, and the pipeline project was to provide adequate water to the area. Rand Water did not have the mandate to provide services to areas not under its jurisdiction, but had to ensure there was infrastructure in place for Water Services Authorities to tap into if they required water. They had offered to work with the Water Services Authorities but they preferred to go out and tender. He reported that other Water Boards supplied water to the municipalities. The municipalities had jurisdiction to source water services from Rand Water or any of the fifteen Water Boards throughout the country. Mr Naiker said the Minister delegated the area of jurisdiction in terms of provision of water by Water Boards; however, Rand Water was willing to extend its area of supply. Municipalities were designated as Water Services Authorities and are accountable for the provision of water and sanitation in municipalities. Rand Water had been careful to broach the subject of high tariffs charged by the municipalities.

Mr Lushaba reported that 10 out of 14 million people who did not have access to water prior to 1994 now have access. The Board was going to dispose of non-core activities in farm areas responsibly and had consulted the Department of Agriculture who has a special facility that helps farmers to operate farms and turn them into financial entities. He reported that RW had conducted investigations and had identified areas of need and offered to assist and had shared information with municipalities who had given an undertaking to extend their reach to those areas. Municipalities received grants, which was used in providing free basic water. RW ensured that households did not loose water supplied by repairing leakages. Designated groups included disabled people.

Ms Y Tyantsi, Corporate Communications Executive, reported that people trained to repair leakages were from the communities and were left with equipment used to continue servicing the community and had set up steering committees made up of people from the communities to undertake community development. To redress conservation and rehabilitation, from 1997 up to date, R7 million had been spent on the removal of alien vegetation, rehabilitation of dongas and the establishment of wetlands.

Mr L Green (ACDP) commended Rand Water on its performance and on its transparency and accountability in the introduction of tariff changes, and asked whether they were supportive of municipalities charging for water according to a sliding scale. If not what could be done, what were the targets for female representation on the Board, whether their R20 million social responsibility commitments were a percentage of annual growth or surplus and what was the annual cost of maintaining standpipes?

Ms M Gumede (ANC) felt there had not been much change in terms of access to water in some areas. Communities felt they were being overcharged. He asked for clarity on which areas had benefited from leakage repairs, and which municipalities had taken over the supply of bulk water.

The Chairperson explained that bulk water suppliers and water reticulators had different roles. The Water Boards were responsible for cleansing raw water from the dam, while the municipalities reticulated water and sold it to the end user. The Water Act made provision for municipalities to play a dual role of bulk water supply as well as water reticulation. The Water Boards could not interfere in reticulation of water. The municipalities were responsible for repairs of old pipes, and to accommodate the number of consumers. Rand Water passed on an amount of R92 million to ensure tariffs were lower, but consumers had not experienced a decrease in tariffs. Some municipalities have taken advantage of the Water Act and were serving areas of Rand Water's jurisdiction.

Mr Lushaba reported that Rand Water did not apply a sliding scale, but were selling water at a flat rate to the municipalities. They supported a sliding scale because of the cost involved in supplying water, which was driven by the provision of infrastructure. The expansion of infrastructure was driven by peak demand, which was in turn driven by high users of water. The municipalities reticulate water and sold to household and factories, collected and treated waste, and discharged it back to raw water. The main source of raw water for Rand Water was the Lesotho dam. He mentioned that some Water Boards had their own water extraction, purification and distribution systems and they were at the moment working with two municipalities who had engaged them in reticulation. Municipalities charged consumers who consume more water higher tariffs to cross subsidise poor households. Whether sliding scales were appropriates was debatable, but changes depended on the disposable income of people. On the issue of demographic targets, Rand Water hoped to increase women representation in management to 50%, and there had been an increase from 12% to 28% from 2000 to 2004, which was far above what other corporate organisation had achieved. Their social responsibility commitments were driven by 5% of their net income. Standpipes were the responsibility of the Department of Water Affairs and Forestry (DWAF), and maintenance costs were transferred to the municipalities, and financed through tariffs paid by consumers who used more than free basic water. He reported that Rand Water was willing to engage any municipality on social responsibility, and had done work in the Free State, where they had committed themselves to removing alien vegetation.

The Chairperson commented that certain issues needed to be looked at before applying the sliding scale. She was concerned that in applying the free basic water policy, large poor families were being penalised. She felt it was the responsibility of the Department, the Committee, municipalities, and Water Boards to promote the awareness of saving water and of its affordability. She asked whether Water Services Authorities had impacted on Rand Water and whether they had any relationships with other Water Boards.

Mr Lushaba said the issue of free basic water had to be linked to the Indigent policy, and had to encourage the registration of indigent families in order not to pay for water. He reported that Rand Water had patented a brand, Water Wise, that had educated people on how to use and conserve water. Water Services Authorities had helped to structure relationships. A partnership agreement had been signed with SALGA, Mpumalanga to assist in the delivery of basic water, and other stakeholder relationship forums had been concluded with SALGA, Gauteng and the Free State. Rand Water had a customer forum that engaged with customers every two months and supported the objective of the New Partnership for Africa's Development (NEPAD) to promote and facilitate partnerships that would make water work for Africa. The proposed amendment of the Water Services Act would allow Water Boards to service countries outside of South Africa.

Mr M Phadagi (ANC) was concerned about the thriving business of bottling already purified water and charging exorbitant prices for them, and how companies such as Coca-Cola and Nestle have bought out smaller companies in the business. He wanted to know if there was any chance of Rand Water engaging in that area.

Mr Kekana commented on how water supply was mostly industrial based, and asked if other sources of water supply in Africa could be tapped to supply drought-stricken areas.

The Chairperson commented that an 'indaba' for water boards and all stakeholders, could help provinces to understand where pipes were located, and would develop infrastructure to ensure that the distribution of water from SASOL connected to densely populated rural areas without pipes. It should be a joint responsibility of the Water Boards and the provinces.

Mr Lushaba reported that currently Rand Water was distributing bottled water free of charge to partners. The separate entity, Rand Water Services (Pty) Ltd, had to investigate other activities outside of bulk water supply and would have to find appropriate partners to distribute if it decides to commercialise bottled water since the success of the business was the ability to distribute.

The Chairperson commented that since South Africa was rated number three in the world in terms of water and sanitation provision, it had a significant role to play in Africa in terms of water supply, and in its approach to NEPAD.

Mr Kekana commented that other sources of water supply had to be investigated, and also to create the right framework for economic growth in terms of providing basic services.

Mr Lushaba reported that Rand Water had entered into a partnership with Regideso, the National Water Authority of the Democratic Republic of Congo (DRC). A study into water supply in the greater Kinshasa area had revealed that the DRC had the capacity to generate electricity for the next thirty years. They were discussing the possibility that the canal would provide water to Angola and Namibia. This would freeze the capacity of water taken from the Orange River. They were also discussing the possibility of addressing rehabilitation of the water purification works in parts of Kinshasa with the Development Bank of South Africa (DBSA). Other partnership agreements had been concluded with Magalies Water and Ikangala Water to jointly supply water to the Western Highveld Region. Rand Water was the implementing agent on behalf of the Department in the construction of a 500 mm diameter pipeline to supply potable water to WHR, and was currently focusing on developing partnerships in Southern Africa because it was a drought-prone area.

The meeting was adjourned.