and accountability of the water
service.
A regulator must be able to apply
enforcement strategies that achieve
the best possible outcomes whilst
keeping the costs and burden as low
as possible. (This can be achieved
through a combination of punitive
measures as well as incentives.)
In a final development, the IER can
scrutinise investment plans of the
water institutions and proposed
sources of funds for these institutions.
The National Treasury and the
DWS are expected to fund the
establishment costs, with users
paying the running costs in the form
of the economic regulator charge. If
all goes according to plan, the IER
can be up and running within the
next two to four years.
The IER can create a balance in
the representation of the interests
of government, institutions (service
providers), and users. It is essential
that the economic regulator be
competent and credible. This can
only be achieved if it can act in
a neutral or unbiased and non-
discriminative manner towards its
customers, and understands the
business that is regulated, through a
proficient and effective process with
measurable outcomes. u
innovations
Poor management of municipal
water and sanitation services —
interrupted supply, water quality,
and high levels of water that is
unaccounted for.
• Weak tariff setting and billing in
many municipalities; for example,
cases where the municipal
tariff is lower than the rate paid
to a water board that supplies
bulk water. Clearly not a viable
situation.
• Value for money in use of
capital grants (such as the
Municipal Infrastructure Grants,
or MIG, and the Regional Bulk
Infrastructure Grant, or RBIG).
• High levels of debt within the
sector.
The result to the above-mentioned
challenges has led to unsustainable
services, non-viable institutions,
degrading infrastructure, and water
users not receiving the services they
are entitled to — and paying for. This
is a direct violation of the basic human
rights as enshrined in the South
African constitution, while stifling
economic growth.
The NDP recommends clear
separation of the accountability
lines between a minister and the
administration (which includes
the regulator). Therefore, the
current intention is to establish an
objective regulator with structural
as well as financial independence.
Structurally separate from the central
governmental structure (whereby
a regulator’s decision can only
be overruled by a pre-designated
arbitrator). Financial independence
can be achieved with the IER funded
by an earmarked, secure, and
adequate source.
The IER will set as its target to
assess the tariff-setting process and
approve these throughout the water
value chain. This means regulating
tariffs such as the water resource
tariff (currently unregulated), the
bulk tariffs for potable as well as
wastewater (currently only partly
regulated), resource management
charges imposed by the catchment
management agencies, and retail
tariffs (water and sanitation in
municipalities). In addition, the scope
can be extended to address service
quality and ensure compliance with
national norms and standards. The
regulator will monitor cost implications
of compliance with service quality
standards. Above all, the regulator
should protect consumers by
monitoring and ensuring efficiency of
supply. The IER will act in the public
interest by transparency of information
Above all, the regulator should
protect consumers by monitoring
and ensuring efficiency of supply.
•
About the author
Helgard Muller is a regular
contributor to Water, Sewage &
Effluent (WSE). His vast knowledge
in policy and regulations while at
the Department of Water
and Sanitation adds huge value
to WSE.
Water Sewage & Effluent March/April 2018
37
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easier to simply increase rates and
tariffs to make books balance instead
of efficiency gains. There is anecdotal
evidence of an irrigation board who
stated that they would like to pay but
struggle to get a bill out of the DWS.
Water boards are the bulk providers
in the water sector. Tariffs set by
these state-owned enterprises (SOEs)
are insufficiently regulated within
DWS as the DWS Minister is both a
shareholder and a regulator of these
SOEs. This is another conflict of interest
and aggravated by poor corporate
governance within some water boards.
There is insufficient investment in
maintenance, refurbishment, and
replacement of national water
infrastructure. The 2017 SAICE
Infrastructure Report Card for South
Africa allocated a ‘D minus’ for
bulk water resources, with critical
comments such as “insufficient
maintenance and neglect of renewal,
partly due to funding shortfalls.
Systems are in general operated too
close to failure”. Water resources
infrastructure is an invaluable national
asset and must be properly cared for.