This chapter firstly proposes an institutional mapping of the three-tiered governance system in place in South Africa and describes who does what at national and subnational levels. It thus underlines the fragmentation and complexity of water policy and management in South Africa. It then focuses on the water allocation principles in force in the country, as well as the water supply system in place in Cape Town which involves a variety of stakeholders across sectors and levels of government. As such, the Western Cape Water Supply System also appears fragmented both vertically and horizontally, thus requiring important co‑ordination efforts. Finally, it presents the financing framework for water resources and services management in Cape Town and South Africa which relies on a funding scheme composed of seven elements.
Water Governance in Cape Town, South Africa
Abstract
As in many countries, water governance in South Africa is a shared responsibility across levels of government. Key roles and responsibilities for policymaking, policy implementation, operational management, information, monitoring, regulation and financing are allocated across a broad range of stakeholders, thus reflecting the fragmentation and complexity of water policy and management. As a consequence, Cape Town, like all municipalities in South Africa, needs to co‑ordinate with upper levels of government, and vice versa, when designing and implementing water policies. Mapping who does what is the first step to clearly represent the allocation of roles and responsibilities of actors at different levels of government and across water management functions for water resources management (Figure 2.1) and water services provision (Figure 2.2).
Who does what at the national level?
The National Department of Water and Sanitation (DWS) is the lead national entity for water policy. The DWS’s main responsibilities include the development and revision of national policies, the oversight of all legislation that impacts the water sector (including setting national norms and standards), co-ordination with other national departments on policy, legislation and other water-related issues, national communication strategies and the development of national water strategies. The DWS currently fulfils some regulatory functions for the water sector. This encompasses water use authorisation, compulsory national standards for water services, infrastructure regulation, oversight of public entities reporting to the minister, regulation of competition, and some aspects of economic regulation (including setting raw water tariffs and overseeing the setting of bulk water tariffs by water boards and retail tariffs by water service authorities). A further role entails monitoring sector performance, including conformity to national norms and standards. At present, the DWS manages most of the national water resources infrastructure through its Water Trading Entity and National Water Resources Infrastructure Branch.
The Water Trading Entity (WTE) is in charge of developing, operating and maintaining specific water resources infrastructure and managing resources in specific areas.
The National Water Resources Infrastructure Branch that comes under the DWS is responsible for the development of new water resources infrastructure and the rehabilitation, maintenance and operation of existing infrastructure.
The Trans-Caledon Tunnel Authority (TCTA) is a state-owned entity (SOE) specialising in project financing, implementation and liability management. It finances and manages the implementation of economically viable projects, as directed by the National Minister. It also provides integrated treasury management and a financial advisory service to the DWS, water boards, municipalities and other entities that are linked to bulk raw water infrastructure. TCTA projects are financed off-budget and the investment costs are repaid through user charges.
Established in 1998, the aim of the Water Tribunal is to hear appeals against directives and decisions made by responsible authorities or water management agencies about matters such as the issuing of licences to use water. It is an independent body and can hold hearings anywhere in the country.
The National Treasury administers grants for water infrastructure and provides funds to water service authorities for the provision of Free Basic1 services through the equitable share of nationally-derived revenue.
The National Department for Cooperative Governance and Traditional Affairs ensures that all municipalities perform their basic responsibilities and functions consistently. This includes the delivery of municipal services to the right quality and standard, the promotion of good governance, transparency and accountability, the fulfilment of sound management of finances and accounting, and administrative capacity building.
Source: Author’s elaboration based on OECD (2011[1]), Water Governance in OECD Countries: A Multi-level Approach, https://dx.doi.org/10.1787/9789264119284-en.
Source: Author’s elaboration based on OECD (2011[1]), Water Governance in OECD Countries: A Multi-level Approach, https://dx.doi.org/10.1787/9789264119284-en.
The National Department of Health is responsible for setting the norms and rules regarding domestic water supply quality standards.
The National Department of Agriculture, Land Reform and Rural Development, through its Directorate for Water Use and Irrigation Development in its Agriculture Production, Health and Food Safety Management Branch, aims to ensure the efficient development and revitalisation of irrigation schemes and water use.
The Water Research Commission (WRC) plays a key role in water research by establishing needs and priorities, stimulating and funding research, promoting the transfer of information and technology, and enhancing knowledge and capacity building in the water sector. Its fields of focus encompass water resources management, water-linked ecosystems, water use and waste management, and water use in agriculture.
A series of national water legislation provides an overarching framework for water management across South Africa. These elements are completed by national, regional and local water-related policies (Box 2.1).
At the national level, six key pieces of legislation set overarching principles for water management in South Africa:
The Constitution of South Africa, adopted in 1996, states the right for everyone to have access to sufficient water and specifies the allocation of water responsibilities across the different levels of government.
The National Water Act (NWA) 1998 (Act 36), which replaced the previous Water Act 1956 that was based on riparian rights and was racially discriminating for water allocation, redefines water rights and establishes a new framework to regulate water resources through licensing, while water was previously considered attached to the land. Finally, it also promotes integrated water management and declares afforestation as a “stream flow reduction activity” due to its impact on the flow of rainwater into streams, and downstream hydrological balance.
The Water Services Act 1997 (Act 108) prescribes the duty of municipalities to provide water supply and sanitation according to national standards and norms. It also defines the roles of the DWS as a regulator and the role of water boards as bulk providers. Both acts are being reviewed and it is expected that they may be merged into one single act to improve integration of resources management.
The Municipal Systems Act (2000) and the Municipal Structures Act (1998) also have relevance to the role of municipalities for water and sanitation service provision.
The National Environmental Management Act 1998 (Act 107) and its amendments of 2003, 2004, 2008 on waste and of 2009 on integrated management complete the legislation in relation with water.
In addition to these pieces of legislation, a number of water-related policies have been passed at the national level:
The White Paper on Water Supply and Sanitation (1994) addresses inequity in water services and water supply development.
The Strategic Framework for Water Services (2003) which sets out a comprehensive approach with respect to the provision of water services in South Africa, ranging from small community water supply and sanitation schemes in remote rural areas to large regional schemes supplying water and wastewater services to people and industries in our largest urban areas.
The White Paper on a National Water Policy for South Africa (1997) defines water as a public trust and states three fundamental principles for managing water resources: equity, environmental sustainability and efficiency.
The Water Allocation Reform Strategy (2008) that seeks to address past water allocation inequity.
The National Water Resource Strategy (2004) that was reviewed in 2012 with the Second National Water Resources Strategy (NWRS 2) to operationalise the establishment of catchment management agencies (CMAs), in particular from a financial perspective with a framework for water allocation and taxes. It ensures that water resources are protected and conserved for the long term while contributing to reaching social and economic goals for the country. The NWRS 2 includes a National Desalination Strategy and a National Strategy for Water Reuse.
The National Groundwater Strategy (2010) intends to make the best use of this resource while protecting it.
The Water and Sanitation Master Plan (2017) has been developed by the national DWS to ensure a more co-ordinated approach to water and sanitation management, planning, implementation, monitoring and evaluation. The master plan points out the priority actions required until 2030 and beyond to ensure the water security and equitable access to water and sanitation services for all in South Africa.
Source: Author’s elaboration based on the White Paper on Water Supply and Sanitation (1994); the Constitution of South Africa (1996); the Water Services Act (1997); the White Paper on a National Water Policy for South Africa (1997); the National Environmental Management Act (1998); the National Water Act (1998); the Municipal Systems Act (2000); the Strategic Framework for Water Services (2003); the Water Allocation Reform Strategy (2008); the National Groundwater Strategy (2010); the Second National Water Resources Strategy (2012); the Water and Sanitation Master Plan (2017).
Who does what at the regional level?
The DWS has 9 DWS regional offices implementing the water policy, as well as controlling and monitoring services. The Western Cape DWS Regional Office has jurisdiction over water resources in the Western Cape Province.
Water user associations (WUAs) are defined under the National Water Act (1998) as “associations of individual water users who wish to undertake water-related activities for their mutual benefit with voluntary membership intended to support the management of local water resources in the common interest”. When the National Water Act came into force, Irrigation Boards were to be restructured into WUAs. However, there are still 220 Irrigation Boards in existence. There are currently 90 WUAs, comprising both new WUAs and transformed Irrigation Boards.
The Breede-Gouritz Catchment Management Agency (CMA) is responsible for the management of water resources at the catchment level in collaboration with local stakeholders. Although much of the water for the city of Cape Town is sourced from the Berg-Olifants catchment (which does not have an installed CMA), the biggest dam of the Western Cape Water Supply System (Theewaterskloof Dam) is located in the Breede-Gouritz CMA.
Catchment management fora are entities gathering local stakeholders to ensure engagement and participation with regard to water-related topics.
The Provincial Department of Agriculture provides a wide range of development, research and support services to the agricultural community in the Western Cape. It serves on the Steering Committee of the Western Cape Water Supply System and makes the link with the network of farm dams across the greater Cape Town Functional Area.
The Provincial Department of Local Government hosts the Provincial Disaster Management Centre which oversees all declared provincial disasters and forms Joint Operating Committees which bring together all Provincial level entities and national stakeholders to align disaster response.
The Provincial Department of Environmental Affairs and Development Planning has a contaminated land and water pollution oversight mandate, as well as an estuary and coastal mandate, under the National Environmental Management Act. It is also the oversight Department for CapeNature, a Western Cape public entity which manages all provincial conservation areas as well as much of the public land.
At the regional level, the following water-related policies have been adopted: the Western Cape Sustainable Water Management Plan dated 2014 and revised in 2019; the Western Cape Climate Change Response Strategy (2014); and the Western Cape Biodiversity Economy Strategy (2016).
Who does what at the local level?
Following the constitution provisions, the responsibility for “potable water supply systems and domestic wastewater and sewage disposal systems” is assigned to local governments. The city of Cape Town acts as the Water Service Authority (WSA) responsible for the provision of water services in its area of jurisdiction. In South Africa, there are currently 144 WSAs.
The Water and Sanitation Department of the city of Cape Town acts as the water service provider for the city of Cape Town, and Drakenstein and Stellenbosch municipalities. As such, it is in charge of providing water (including bulk water) and sanitation services, as well as managing water catchment areas and water storage. The department comprises the following branches: bulk water; reticulation; catchment, stormwater and river management; wastewater treatment works; water demand management strategy; engineering and asset management; Informal Settlements Water and Sanitation Services; scientific services; financial and commercial; support services; and human resources partner.
The Environmental Management Department of the city of Cape Town co‑ordinates and facilitates the implementation of the city’s environmental strategy. Working with a range of other departments, it manages and protects the environment and ensures Cape Town’s long-term environmental sustainability.
The Information and Knowledge Management Department of the city of Cape Town closely works with city departments to improve the management and accessibility of corporate information assets and to provide specialised information services to city departments with regard to information and knowledge management; records management; geomatics; and geographic information system (GIS) mapping and data management.
The Disaster Risk Management Centre of the city of Cape Town identifies, prevents or reduces the occurrence of disasters and softens their impacts. It facilitates the co‑ordination, integration and efficiency of multiple emergency and essential services. It is in charge of the preparation and execution of the city’s Municipal Disaster Risk Management Plan. In the event of a disaster or a large-scale emergency, the Disaster Coordinating Team assembles in the Disaster Operations Centre and acts as a central information point to communicate swiftly with the public during emergencies.
The Water Resilience Advisory Committee (WRAC) was established in August 2017 by the city. It meets monthly since its creation and comprises 15 members from academic institutions, businesses, NGOs or provincial and national governments. Building on an important community of practice in Cape Town, the WRAC gathers a variety of stakeholders outside the municipal administration in order to encourage information and knowledge sharing.
The Ombudsman of the City of Cape Town is responsible for investigating and facilitating the resolution of public complaints against the administration.
The city of Cape Town and Western Cape Government (WCG) formulated an approach together with key partner organisations to support the city’s economy in the face of water scarcity and restricted consumption. This translated into the Economic Water Resilience Task Team which is primarily a group of interested and involved organisations who wanted to contribute to the drought response in addition to supporting their various constituencies or stakeholders. The task team includes the following stakeholders:
WCG’s Department of Economic Development and Tourism (DEDAT) and Department of Environmental Affairs and Development Planning (DEADP).
The Enterprise and Investment and Water and Sanitation Directorates of the city of Cape Town.
GreenCape, a technical not-for-profit organisation which supports the growth of green businesses.
Wesgro, the tourism, trade and investment promotion agency for Cape Town and the Western Cape.
The National Business Initiative, a voluntary coalition of South African and multinational companies.
The Western Cape Economic Development Partnership (EDP), a non-profit organisation focused on providing partnering solutions to improve economic performance.
At city level, the Cape Town Water and Sanitation Department comprises eleven branches. Three of these branches correspond to the stages of water and wastewater services provision (bulk water, reticulation, wastewater treatment works). One branch focuses on catchment, stormwater and river management thus reflecting the city of Cape Town’s objective to become a water-sensitive city through an integrated urban water management approach. These branches are complemented by branches dedicated to infrastructure (engineering and asset management), water demand (water demand, regulation and planning) and water quality monitoring and compliance (scientific services). In addition, three branches provide specific support for finance, capital contracts management, and, information, communication and stakeholder management (auxiliary services). Finally, the Human Resources Business Partner Branch provides an administrative role to the Water and Sanitation Department which includes training and human relations support. As of April 2019, the Informal Settlement and Basic Services branch returned to the Water and Sanitation Department. A new Customer Services Branch was also developed since 2019, to focus on customer relationship and improve metering and billing effectiveness (Table 2.1).
Source: City of Cape Town, (2019[2]), Departmental Buniess Plan 2019/2020, Department of Water and Sanitation.
At the local level, the city adopted the following water-related policies:
City of Cape Town Stormwater By-law (2005)
City of Cape Town Management of Urban Stormwater Impacts Policy (2009)
City of Cape Town Floodplain and River Corridor Management Policy (2009)
City of Cape Town Inland and Coastal Water Quality Improvement Strategy and Implementation Plan (2012)
City of Cape Town Environmental Strategy (2017)
City of Cape Town Preliminary Resilience Assessment (2018)
City of Cape Town Water Strategy (2019)
City of Cape Town Resilience Strategy (2019)
City of Cape Town Integrated Development Plan (2017-22).
Water and sanitation services regulation
In order to complement the institutional mapping of water roles and responsibilities in Cape Town, a more specific analysis of regulatory functions allocation for Cape Town water and sanitation service has been conducted based on the OECD analytical framework on the governance of regulators (OECD, 2015[3]). Regulatory functions in water and sanitation services encompass economic, environmental and social aspects. They can be shared among several institutions. However, they need to be clearly defined and allocated to avoid overlaps and incoherence. Table 2.2 provides a list of regulatory functions for water and sanitation services and the level and institution to which they are allocated in the case of Cape Town.
Source: Based on OECD (2015[3]), The Governance of Water Regulators, https://doi.org/10.1787/9789264231092-en.
As is the case in many countries, key regulatory functions for water supply and sanitation are spread across levels of government and institutions, thus reflecting the mutual dependency and needed co‑ordination of responsible authorities. At the horizontal level, several line departments are involved in the regulation of water services, including the DWS, the Department of Health and the National Treasury. At the vertical level, water supply and sanitation (WSS) are characterised by multi-level regulatory governance from national to the local level. In practice, OECD (2011[1]) shows that the multiplicity of actors across ministries and public institutions, between levels of government and at the subnational level, intrinsically raises multi-level governance challenges. With so many participants, a clear definition of roles and responsibilities, as well as the establishment of co-ordination mechanisms, are therefore crucial to manage water services effectively and efficiently.
Another characteristic of water and sanitation services in South Africa is that some stages of service provision are being regulated, delivered and managed by the same institution, i.e. the DWS and its decentralised offices. Although there are successful examples of self-regulation, the absence of any separation between regulation and operation may generate conflicts of interest. For instance, for electoral purposes, the operator may be forced to adopt an unsustainable economic policy causing service sustainability/quality/efficiency to decline, or, on the contrary, may divert part of the monopoly rent for its own benefit or that of the public authority. In the context of South Africa, where capture has been identified in the literature as a major issue (Dassah, 2018[4]) (Roux, 2019[5]) (Solomon, 2016[6]), the establishment of an independent regulator may be preferred to a self-regulation model. In this model, the regulatory framework for WSS services is organised around the establishment of a dedicated agency that supervises and regulates the water sector independently from the operators, the government and the consumers. This model allows separation of powers between the regulator and the line ministers. This separation concentrates the regulatory functions and powers into a single body and limits potential conflicts between policy formulation and enforcement.
Overarching principles for water allocation
Replacing the previous Water Act 1956 that was based on riparian rights and was racially discriminating for water allocation, the 1997 Water Policy, the 1998 National Water Act and the 2008 Water Allocation Reform Strategy established the basic principles for water allocation in South Africa. These principles follow a clear allocation hierarchy. First, provision is made in the act for “the Reserve, which consists of two parts – the basic human needs reserve and the ecological reserve. The basic human needs reserve provides for the essential needs of individuals served by the water resource in question and includes water for drinking, for food preparation and for personal hygiene. The ecological reserve relates to the water required to protect the aquatic ecosystems of the water resource. The reserve refers to both the quantity and quality of the water in the resource”. After the reserve water allocation is met, international obligation, strategic uses and future uses are the next level of water allocation priority. Then come all other uses (Figure 2.3).
Source: DWS, Manyaka Greyling Meiring, (2003[7]), Balancing equity with sustainability, The Reserve
These water allocation principles are implemented using the following mechanisms:
A water resources planning methodology, including determination of the Basic Human Needs Reserve and an Ecological Reserve, led and managed by the DWS.
A national water pricing strategy which dates back to 2007 and is currently under discussion to be revised.
Scheme-based financing agreements used to develop new urban water schemes, secured on the basis of an off-take agreement with users. This approach was applied, for example, for the financing of the Berg River Dam, the last major scheme to supply Cape Town.
Authorisation licenses of water use by the DWS. The new (post-1997) authorisation process sits alongside a system that recognises existing lawful use pending a transfer of these uses into licensed use, and a mechanism to issue general authorisations. The process of converting existing lawful use into licensed use is still incomplete, and licence application processes have been subject to long delays.
Compulsory licensing. It is a mechanism allowing DWS to review all the water use in an area that is or is soon likely to be under water stress, or where it is necessary to review prevailing water use to achieve equity of access to water. This is done by converting existing lawful water use into licences.
Catchment-based water allocation plans. This process is still largely undeveloped as the roll-out of CMAs has been stalled.
In accordance with these mechanisms, for each catchment area, the DWS allocates water according to licenses for municipal needs, irrigation and other activities such as hydropower, industrial and commercial uses. It also makes decisions on how use is restricted during periods of drought in accordance with agreed processes and rules.
A multi-level Western Cape Water Supply System
Unlike other cities in South Africa, the city of Cape Town enjoys a unique situation as it is a major actor of the Western Cape Water Supply System (WCWSS) which is an integrated and collectively managed water system of dams, pump stations, pipelines and tunnels (Figure 2.4). The city of Cape Town uses around 58% of the WCWSS available yield, agriculture 26%, smaller towns around 6% and approximately 10% is lost to evaporation and other losses from the bulk water system.
Source: DWS (forthcoming[8]), Western Cape Water Supply System Reconciliation Strategy, Status Report 2019
The WCWSS involves a variety of stakeholders across sectors and levels of government. As such, it appears fragmented both vertically and horizontally, thus requiring important co‑ordination efforts (Figure 2.5).
Note: for water resource planning, the function sits primarily with DWS; for water services planning, it sits primarily with the city of Cape Town.
Source: City of Cape Town, (2020[9]), Western Cape Water Supply System
Within this system, the national DWS fulfils the water policymaking and regulation functions for both water resources and services. It also manages and operates the major dams of the WCWSS (Table 2.3). The TCTA finances and implements off-budget bulk raw water infrastructure projects in South Africa, such as the Berg River Dam in the Western Cape.
Source: DWS, (forthcoming[8]) Western Cape Water Supply System Reconciliation Strategy, Status Report 2019
At the catchment level, the National Water Act mandates the decentralisation of water resource management through CMAs. CMAs play a range of functions related to water resource management and also undertake water allocation and regulatory functions. Originally, 19 CMAs were envisaged throughout the country but this number was rationalised to 9 by the minister in March 2012 and confirmed as stated in the NWRS 2 published in 2013. Of these, only two have been established to date and are operational (Breede-Gouritz CMAInkomati-Usuthu CMA).
Two main water management areas cover the Western Cape area, the Berg-Olifant and the Breede-Gouritz. However, only the Breede-Gouritz CMA has been established and the Western Cape regional office of the DWS retains water resource management functions for the Berg-Olifants catchment in the absence of an operational CMA to date. Catchment management is predominantly undertaken by the conservation authorities that manage state-owned land, much of which is previous state forest. CapeNature, the Western Cape Conservation public entity, manages provincial conservation areas as well as much of the public land around Berg River, Steenbras and Wemmershoek Dams as well as many other state-owned landholdings.
At the regional level, the DWS and the city of Cape Town manage and operate the WCWSS, while the TCTA undertakes the financing and implementation of water resources infrastructure as directed by the Minister of Human Settlements, Water and Sanitation as off-budget activities.
At the municipal level, the city of Cape Town is responsible for water resources planning and funding. In the absence of a bulk water utility, three of the WCWSS dams (Steenbras, Lower and Upper, Wemmershoek) were built and are owned by Cape Town which operates them. This situation allows the city of Cape Town to retain a say in the upstream-downstream water resource management, which makes it a unique case in South Africa.
Overarching principles for water resources and services financing
The National Water Act 1998, the Water Services Act 1997 and the National Pricing Strategy for Raw Water Charges 2007 set a sound and coherent system of finance for water resources and services management. The National Pricing Strategy establishes social equity, ecological sustainability, financial sustainability and economic efficiency as the key objectives to achieve while stating that water charges are set with the purpose of funding water resource development and management (Box 2.2).
This strategy refers to pricing for the use of water from South Africa’s water resources and not to the pricing of water services, which is dealt with separately under the Water Services Act, 1997. In other words, the approach deals with first-tier water, i.e. the use of raw (untreated) water from the water resource and/or supplied from a government waterworks. It does not deal directly with second- and third-tier water, i.e. water supplied in bulk (often by water boards) and distributed to households (usually via a water services authority), except for water supplied from government water schemes. The strategy deals with all first-tier water as reflected in the use of ground and surface water resources and covers the setting of prices by the Department for Water Affairs and Forestry (DWAF) as well as by water management institutions as defined in the National Water Act (NWA).
The pricing strategy contains the objectives, methodology and implementation strategy for setting water use charges for purposes of:
Funding water resource management by the DWAF and water management institutions, through water use charges, Section 56 (2) (a).
Funding water resource development and use of waterworks by the DWAF and water management institutions, Section 56 (2) (b).
Achieving the equitable and efficient allocation of water, through a charge hereafter referred to as the “economic charge”, Section 56 (2) (c).
Providing for a differential rate for waste discharges, Section 56 (5).
The following objectives are shaping the pricing strategy:
1. Social equity
The Pricing Strategy for Water Use Charges coupled to the granting of financial assistance will contribute to social equity and redress of the imbalances of the past, both with respect to equitable access to water supply services and direct access to raw water.
2. Ecological sustainability
In terms of Chapter 3 of the NWA, the water needs for the effective functioning of aquatic ecosystems must be protected. The water required for the ecological reserve must be safeguarded and the cost of managing the reserve must be paid for by all registered and billable users in terms of Section 56(2) (a) (iv) of the NWA. To promote the preservation of resource quality, the polluter pays principle for waste discharge is adopted in this pricing strategy.
3. Financial sustainability
In order to ensure financial sustainability adequate revenue must be generated to fund the annual cost related to:
The management of the country’s water resources.
The operations, maintenance, refurbishment and betterment of existing government water schemes and waterworks owned by water management institutions.
The development of new user-funded schemes.
The financial framework makes accommodation for the financial autonomy of water user associations (WUAs) and catchment management agencies (CMAs). As stated in the previous pricing strategy, the full financial cost of water resource management and supplying water should be recovered from water users, including the cost of capital. While it is important to keep water prices as low as possible, the DWAF has to ensure that water is priced at levels consistent with efficient and effective delivery of services.
4. Economic efficiency
In the context of water scarcity, ensuring an efficient allocation of scarce water resources requires that the price of water is set to reflect its scarcity value, first to ensure that water is conserved and, second, that some water used for low-value purposes is redirected to alternative high-value purposes. This can be done administratively or by using market-related mechanisms. It is also critical to ensure that the water resource management systems implemented are cost-effective and do not become an unnecessary financial burden on the water users.
Source: Author’s elaboration based DWS (2007[10]), Pricing Strategy for Raw Water Use Charges, Department of Water and Sanitation.
This funding scheme includes seven elements: a water resource management charge, a raw water tariff, a bulk water tariff, a retail water tariff, a sanitation charge, a bulk wastewater tariff and a water discharge charge (Figure 2.6).
The water resource management charge and the waste discharge charge are set and collected by the CMA and by the DWS when no CMA has been established, as per the National Water Act. In all cases, these charges are regulated by the DWS following the provisions of the National Pricing Strategy for Raw Water Use Charges (Box 2.3).
The water resource management charge aims to recover the costs associated with water resources management including evaluating and issuing licences, monitoring water resource quality against national standards, detecting and prosecuting unlawful water use, promoting water conservation and demand management, and removing and managing alien vegetation. This charge applies to all water users but is capped for the forestry and irrigation sectors thus constituting an implicit subsidy to those sectors. For emerging farmers, this charge is explicitly subsidised. At present, this charge is not very significant. The implementation of the water discharge charge is based on the polluter pays principle as it charges for the discharge of water containing waste into a water resource or onto land.
Source: Department of Water Affairs and Forestry (2003[11]), Strategic Framework for Water Services.
The raw water tariff (or water resource development charge) is set by the DWS following the national water resource management pricing strategy. This tariff includes water management and infrastructure charges related to the development and use of waterworks, covering planning, capital costs, operation and maintenance, depreciation and future infrastructure build on government water schemes. The tariff policy requires a 4% real return on the depreciated current asset value. In 2019, it amounted to R3.59/m3 on average at the national level for domestic and industrial use (DWS). This charge applies to all water users, except stream flow reduction activities. Subsidies can be granted to emerging farmers.
The bulk water and wastewater tariffs are set by water boards or Water Service Authorities as per the Water Services Act. They are collected by Water Service Authorities. They are regulated by the DWS following the Norms and Standards in Respect of Tariffs for Water Services (2001[12]). They should also be formally approved by the DWS although no clear approval criteria and method have been elaborated. In 2017, the bulk water tariffs averaged ZAR 7.44/m3, varying from ZAR 4.18/m3 to ZAR 15.86/m3 throughout the country (DWS).
The retail water and sanitation tariff paid by customers is set and collected by the WSA. It is established following the rules provided in the Water Services Act stating that tariffs should notably cover:
All reasonable costs directly and indirectly2 associated with the operation, maintenance, refurbishment and development of water services, water services customer care and all costs associated therewith.
Payments required to redeem water services related loans over a reasonable period.
A net surplus of a minimum of 6% per annum on revenue.
According to the Pricing Strategy for Water Use Charges (DWS, 2007[10]), their setting method is based on the actual cost recovery of the activities required “to protect, allocate, conserve, manage and control the water resources and manage water quality”.
“These costs could include but are not limited to the following activities:
- Planning and implementing catchment management strategies.
- Monitoring and assessing water resource availability and use.
- Water use allocations.
- Water quantity management, including flood and drought management, water distribution, control over-abstraction, storage and streamflow reduction activities.
- Water resource protection, resource quality management and water pollution control.
- Water conservation and demand management.
- Institutional development and enabling the public to participate in water resources management decision-making.”
DWS and CMAs are the authorities in charge of budgeting annually for the estimated costs of these activities and thus determining the level of water resource management charges and waste discharge charges. The activities that may be partially or completely funded from the water resource management charge and the waste discharge charge are explicitly listed in the Pricing Strategy for Water Use Charges (Table 2.4).
Source: Author’s elaboration based on DWS (2007[10]), Pricing Strategy for Raw Water Use Charges, Department of Water and Sanitation.
Table 2.5 details the institutions responsible for setting, regulating, collecting and cashing in each type of charge included in the overall water price.
Source: Based on DWS (2007[10]), Pricing Strategy for Raw Water Use Charges, Department of Water and Sanitation.
Water and sanitation service provision is financed through tariffs paid by the different categories of users, and subsidies stemming from national and local budgets. Subsidies are used to finance both capital and operational expenditures (Figure 2.7). Although the Water Service Act (1998) stipulates that water economic flux should be ring-fenced, in Cape Town, for instance, WSS revenues are only separately accounted for since 2018.
Source: Eberhard, R. (2002[13]), “Administered prices: Water”.
Cape Town Water Service Provider
According to the Water Services Act 1997, the city of Cape Town is the WSA responsible for service provision at the municipal level. Thus, Cape Town Water Service Provider services more than 4.2 million people via water and sewer connections that supply more than 600 000 domestic properties and 230 000 households living in informal settlements. However, as the city of Cape Town is growing rapidly, the number of connections increases every year due to population growth (5% per year during the past decade according to Africapolis) and migration. Each year, on average, the Water and Sanitation Department provides connections to 8 500 new customers. Table 2.6 describes Cape Town water service customer base.
Source: City of Cape Town (2018[14]), Water Outlook 2018 Report, https://resource.capetown.gov.za/documentcentre/Documents/City%20research%20reports%20and%20review/Water%20Outlook%202018%20-%20Summary.pdf. City of Cape Town (2019[15]), “Cape Town Water Strategy”, http://resource.capetown.gov.za/documentcentre/Documents/City%20strategies%2c%20plans%20and%20frameworks/Cape%20Town%20Water%20Strategy.pdf.
All water consumption from formal properties in Cape Town is metered and consumers are billed according to their consumption for the variable part of the invoice. The current residential WSS tariff is composed of a fixed charge (established in 2018) which varies according to the size of the connection and a variable part that follows four increasing blocks, and that can be modulated according to four restriction levels depending on the dam level (Table 2.7 and Figure 2.8). However, it should be noted that during the water crisis, the number of restrictions level were greater as restrictions went up to level 6B which is no longer in force today. One-off connection charges are also applied when new connections are installed and set at the full costs of connection installation.
Note:
1. Restriction measures only apply to the use of municipal drinking water and not alternative water such as rainwater, greywater or groundwater. Groundwater use must comply with the National Department of Water and Sanitation regulations.
2. Drippers or soaker hose irrigation allowed for areas not exceeding 100 m2 per property.
3. High priority parks, public open spaces and sports fields and subject to any additional conditions determined by the Director of Cape Town Water and Sanitation Department.
4. Topping up or filling of swimming pools with municipal drinking water is allowed subject to: i) the pool is covered with a non-permeable solid pool cover when not in use; and ii) the recovery of backwash water and the use of rainwater for pool topping up where practically possible.
5. Commercial car washes may use municipal drinking water subject to industry best practice water conservation norms and the recycling of at least 50% of the water used.
6. Targeted water network zone pressure as measured at the zone critical point at ground level. Zone pressure is expected to be lowest at the critical point, thus most of the zone should experience pressure higher than at the critical point.
Source: City of Cape Town (n.d.[16]), Homepage, https://www.capetown.gov.za/ (accessed on 02 February 2021).
Source: City of Cape Town (2019[15]), Cape Town Water Strategy, http://resource.capetown.gov.za/documentcentre/Documents/City%20strategies%2c%20plans%20and%20frameworks/Cape%20Town%20Water%20Strategy.pdf.
The Water and Sanitation Department of the city of Cape Town has set up 36 key performance indicators (KPI) to assess and monitor the service quality. They are part of a broader corporate monitoring and appraisal system at the city level. For each of these 36 KPIs a target value is defined each year and KPI monitoring is shared monthly with the Water and Waste Portfolio Committee, the Executive Mayor and the Mayoral Committee and the City Council. However, the outcomes of the Water and Sanitation Department monitoring are not publicly available.
References
[9] City of Cape Town (2020), Western Cape Water Supply System.
[15] City of Cape Town (2019), Cape Town Water Strategy, Department of Water and Sanitation, http://resource.capetown.gov.za/documentcentre/Documents/City%20strategies%2c%20plans%20and%20frameworks/Cape%20Town%20Water%20Strategy.pdf.
[2] City of Cape Town (2019), Departmental Business Plan 2019/2020, Department of Water and Sanitation.
[14] City of Cape Town (2018), Water Outlook 2018 Report, Department of Water and Sanitation, https://resource.capetown.gov.za/documentcentre/Documents/City%20research%20reports%20and%20review/Water%20Outlook%202018%20-%20Summary.pdf.
[16] City of Cape Town (n.d.), Homepage, https://www.capetown.gov.za/ (accessed on 2 February 2021).
[4] Dassah (2018), “Theoretical analysis of state capture and its manifestation as a governance problem in South Africa”, The Journal for Transdisciplinary Research in Southern Africa, Vol. 14(1), p. 4.
[11] Department of Water Affairs and Forestry (2003), Strategic Framework for Water Services.
[10] DWS (2007), Pricing Strategy for Raw Water Use Charges, Department of Water and Sanitation.
[12] DWS (2001), Norms and Standards in Respect of Tariffs for Water Services, Department of Water and Sanitation.
[8] DWS (forthcoming), Western Cape Water Supply System, Reconciliation Strategy, Status Report 2019.
[13] Eberhard, R. (2002), “Administered prices: Water”.
[7] Meiring, M. (2003), Balancing equity with sustainability, The Reserve.
[3] OECD (2015), The Governance of Water Regulators, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264231092-en.
[1] OECD (2011), Water Governance in OECD Countries: A Multi-level Approach, OECD Studies on Water, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264119284-en.
[5] Roux, G. (2019), “Dam state capture: its cascading effect on the Department of Water and Sanitation”.
[6] Solomon, M. (2016), “Understanding the Phenomenon of “State Capture” in South Africa”, Southern African Peace and Security Studies, Vol. 5/1.
← 1. The Free Basic policy passed by the South African government in 2001 that promotes more equal service delivery, mandates that municipalities provide 25 litres per day per person, or 6 m3 per month for a household of 8, at no cost to end users and accessible within 200 m from their homes.
← 2. These costs include notably staff costs, debts repayment, depreciation costs, bulk water and electricity tariffs, contracted services.