Transfer of Water Services

1. Transfer of Water Services DWAF, DPLG, SALGA, NT JOINT POLICY POSITION OVERVIEW November 2002

2. Policy Objectives • Give effect to constitution and legislation in terms of municipal authority for water services • Ensure compliance with Division of Revenue Act • Enhance certainty, predictability and transparency of transfers from DWAF to the respective municipalities / institutions • Ensure that transfer enhances institutional and service provision sustainability • Set out principles that will guide the transfer process

3. Transfer Context • In 1994 DWAF inherited former Homeland schemes comprizing : • 334 bulk schemes (currently 321 after reclassification by FA study) • 3027 rudimentary infrastructure • 9456 personnel (currently 8489 – based on Persal of June 2002) • Operational finance (Trading Acc4) currently = R695 mil for 2002/3 • Post 1994 DWAF implemented capital projects: • 1003 Water, 336 Sanitation and 235 Management projects • 375 completed projects form part of the current transfer package • 182 completed projects inside existing schemes • 193 completed projects outside existing schemes • Total Transfer Package currently involves 514 assessments

4. Transfer Context DWAF owned Asset Values • R 10,3 billion Replacement Value • R 7,5 billion Present Value • R 727 million Total Refurbishment Cost Asset Value per asset type: • Bulk schemes represent 84% of national asset value • Rudimentary infrastructure represents 8% to 9% of the national asset value • Completed projects outside schemes are 9% of the national asset value

5. Time-frame • Commenced 1 April 2002 • Where municipalities remain the WSA in terms of authorisations Transfer Agreements may be signed prior to 1 July 2003 • Latest effective date for transfer is 30 June 2005 • As of 1 July 2005 DWAF will no longer be operating or maintaining water services works Effective date of authorisations Latest effective date of transfer 100% subsidy starts reducing 1 July 2003 30 June 2005 1 July 2006

6. Receiving institutions • Receiving municipality will be WSA in whose area the water services works are situated • A WSA may select another receiving institution • Existing contracts between DWAF, municipalities and water boards will be taken into account in negotiations • Identification of a receiving institution for cross boundary schemes will be a joint decision between DWAF and affected WSAs

7. Division of Revenue Act - Operating Subsidy • Financial framework within DORA must cover hang-over period 31 March to 30 June • Conditional grant has two components: operating (O) and staff (HR) components Operating Subsidy Grant in Kind utilised by DWAF until effective date of transfer (Schedule 6) Conditional Grant (direct transfer) to WSA from effective date of transfer (Schedule 5)

8. Conditional Grant:O and HR components • 100% O Component available from 1 July 2003 until 30 June 2006 - thereafter decreases by 30% p/a over 3 years terminating on the 30 June 2009. • 100% HR Component available from the effective date of transfer for a period of 3 years (not exceeding June 2008) - thereafter decreases by 30% p/a over 3 years. • HR component ONLY for those staff that are transferred • Conditional grant must be shown on municipal budgets

9. DoRA 2003: Water Services Grant • New grant to provide for ‘once-off costs’ for transfer: • refurbishment • processes to facilitate and support transfer • sustainability (functional, financial, HR) assessments • land and legal issues • Available from 2003/04 financial year for a 3 year period until 2006/07 financial year • Comprises a DWAF component (grant in kind) and a WSA component (conditional grant) • WSA component will be negotiated in the Transfer Agreement

10. Budget for Transfers

11. Municipal Systems Act: Section 78 assessments • Section 78 assessments (selection of WSP) for transfer will be part of the broarder division of powers and functions Section 78 assessments • DPLG will provide support to the powers and functions section 78 assessments • In selecting WSPs, WSAs should take into account the potential benefits of regional efficiency, economy of scale and the availability of resources from neighbouring WSAs • Appointment of WSPs must take place on the same date as the transfer of assets, staff, budgets and the provision function

12. Transfer Agreement • Transfer will take place through a legally binding TRANSFER AGREEMENT between DWAF and the WSA / receiving institution • The Transfer Agreement will identify the effective date of transfer (no later than 30 June 2005) • The Transfer Agreement will include confirmation of DWAF as the interim WSP and financial arrangements • Conditions for transfer will be negotiated and attached to the Transfer Agreement (including financial support) • Where a WSA takes transfer of more than one scheme, a single Transfer Agreement will be signed

13. Rehabilitation Funding will be provided to meet the following refurbishment requirements: • design capacity (or demand requirements where design capacity exceeds demand) • minimum legislated standards in terms of the Occupational Health and Safety Act • minimum compulsory waste discharge standards (applicable to December 2005) in terms of the NWA • minimum legislated norms and standards in terms of section 9 of the Water Services Act excluding • upgrading to meet basic water supply standard • fitting volume measuring / controlling devices to user connections

14. WSA and WSP capacity support WSA and WSP capacity support will be: • negotiated in terms of the Transfer Agreement • within the limitations of budget allocations • identified in the receiving WSA’s WSDP • limited to capacity necessary to ensure the ongoing sustainability of the schemes to be transferred • provided through existing DWAF and DPLG institutional support programmes for local government • WSP capacity support is limited to organs of state and CBOs

15. Land and sustainability issues • DWAF and the WSA will determine the minimum rights in property necessary for the effective operation and maintenance of the schemes • DWAF will assist WSAs in negotiating rights in property • Transfer should not negatively impact upon continued delivery of services • Current levels of service should be maintained and where possible improve over time • DWAF will support WSAs to include transferred schemes into their WSDP

16. Human resources Transfer of staff will be in accordance with: • the relevant legislation (such as LRA) • agreements reached by the Public Service Co-ordinating Bargaining Council (PSCBC) • DWAF’s Policy on Transfer of Personnel from the Department of Water Affairs and Forestry to Other Institutions/Organisations • staff requirements negotiated between DWAF and the WSA / receiving institution • WSAs will guarantee employment for a period of 36 months (covered by the 100% subsidy for staff costs).

17. Long-term financial sustainability • Where income generated by schemes is inadequate to recover O&M costs, or the scheme cannot be cross-subsidised: a) DWAF to prepare submission to IDTC motivating ongoing financial support b) Submissions supported by IDTC forwarded to DPLG and/or National Treasury for further action • National government to consider making arrangements for ongoing conditional grant following termination of the Transfer Agreement

18. Implementation • IDTC provides overall strategic guidance, oversight, and dispute resolution role • Transfer Agreements between DWAF Regional Offices and receiving municipalities / institutions • Implementation guideline with supporting model agreements and tools • Joint DWAF, DPLG, SALGA, NT communication strategy as part of powers and functions and Free Basic Water communication strategy • Alignment of DWAF and DPLG approaches to give effect to division of powers and functions and transfer programme

19. THANK YOU