SAAWU COMMENTS ON THE WATER SERVICES AMENDMENT BILL: AMENDMENT OF SECTION 30 OF ACT 108 OF 1977 : 06 October 2004

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SAAWU COMMENTS ON THE WATER SERVICES
AMENDMENT BILL AMENDMENT OF SECTION 30 OF ACT
108 OF 1977 06 October 2004
PARLIAMENTARY PORTFOLIO COMMITTEE OF WATER
AFFAIRS AND FORESTRY ON 08 SEPTEMBER 2004
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1. Preamble

• The Water Services Amendment Bill 2004 seeks
  to provide the necessary statutory authority for
  a water board as a statutory body, to operate
  outside of the borders of the Republic. The
  principle of parastatals and state-owned-enterpris
  es operating extraterritorially is not something
  new to South Africa. Many of these entities such
  as ESKOM, Transnet, DENEL and so on have a long
  history of extensive business interests outside
  the borders of the Republic.

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• Preamble (cont)
• The need for national government, through the
  lead department (Executive Authority) and in
  conjunction with other departments, to provide
  specific statutory authority for and have
  oversight over extraterritorial activities is
  also recognized and acknowledged.

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2. Scope of Extra Territorial Activities

• The engagement of water boards in activities
  outside the borders of the Republic has taken and
  or could potentially take various forms. The
  following examples broadly outline the scope of
  some of these engagements

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2.1 Commercial/Business Activities
(profit motive)

• Where a water board acting on its own, or as part
  of a consortium or as a partner in a joint
  venture seeks out and engages in a business
  opportunity outside of the borders of the
  Republic for the specific reason of generating
  additional revenue and making a profit. This
  would typically be based on a solid business case
  and the utilization of the core competencies and
  capacity that the water board possesses. It would
  also typically require the deployment of
  skills/expertise and related financial resources
  extraterritorially.

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2.2 Support Activities (cost recovery)

• Where a water board provides specific services
  to another party or agency outside the borders of
  the Republic with the specific intent of
  providing support and transferring expertise
  (skills and knowledge) to address specific needs.
  In these instances the primary objective is not
  to make a profit but to provide support on a
  basis where the full costs incurred by the water
  board are recovered. This type of engagement
  would typically be project or consultancy based,
  would have a limited time frame and would require
  limited deployment of skills/expertise and
  related financial resources extra territorially.

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2.3 Capacity Building Activities (no
extra territorial financial implications)

• Where a water board engages with and develops a
  relationship with a similar organization or
  entity outside the borders of the Republic in
  order to learn and exchange expertise (skills and
  knowledge) and build capacity (Institutional and
  people) on an agreed basis. This is typically
  done through the concept of developing twinning
  agreements and partnerships. The primary focus of
  this type of engagement would be capacity
  building and improving the effectiveness and
  efficiency of both parties.

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• Capacity Building Activities (no extra
  territorial financial implications) (cont)
• This type of engagement could require limited
  deployment of skills/expertise (through short
  term staff transfers etc) but would have no extra
  territorial financial implications as the related
  costs are covered locally by the Twinning
  parties.

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Capacity Building Activities (no extra
territorial financial implications) (cont)

• It is proposed that the approval process as
  contemplated in section (3) and (4) of the Water
  Services Amendment Bill only applies to the
  activities as broadly outlined in 2.1 and2.2 and
  excludes Twinning partnerships.

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• Practical Considerations
• 3.1 Timing of approvals
• Where the nature of the potential engagement
  of a water board extraterritorially is a
  commercial or business opportunity the ability of
  the water board to secure a relationship is
  determined by specific timelines and the ability
  to respond quickly. This is always the case with
  contractual opportunities and submission of
  proposals.

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• Timing of approvals (cont)
• The timing of the approval process as
  contemplated in section (3) and (4) of the Water
  Services Amendment Bill will therefore directly
  impact on the practical reality of a water board
  being able to respond in time to secure specific
  business opportunities. It is therefore proposed
  that a specific timeframe should therefore be set
  for the approval process contemplated in section
  (3) and (4) of the Water Services Amendment Bill

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4. Typical arguments Against Extra
Territorial Activities

• There are sector stakeholders who raise a
  number of arguments against the engagement of
  water boards in activities outside the borders of
  the Republic. These arguments are typically
  centered on the following issues

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• Typical Arguments Against Extra Territorial
  Activities (cont)
• Given the service delivery challenges and massive
  backlogs for service delivery in South Africa how
  can a public sector organization justify using
  capacity and resources outside the country?
• Some Water Service Authorities (municipalities)
  perceive that their consumers are funding
  activities performed outside the borders of the
  Republic through the water tariff.

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• Typical Arguments Against Extra Territorial
  Activities (cont)
• Some Water Service Authorities (municipalities)
  argue that the authority for a water board to
  perform activities outside the borders of the
  Republic should be given by the Water Service
  Authorities (municipalities) served by that water
  board in the first instance.

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5. Counter Arguments

• The following counter arguments are raised in
  regard to those set out in paragraph 4. above
• Some of the more well established and capacitated
  water boards have built up highly specialized
  skills and capacity. Where this specialized
  skills and capacity can be leveraged and easily,
  cost effectively and quickly deployed to secure
  viable (profit making) business opportunities for
  a water board, without a negative impact on its
  primary activity in SA, this should be
  permissible as it

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• Counter Arguments (Cont)
• Enables the water board to secure additional
  revenue streams and improve business viability.
• Contributes to a reduction of overall business
  risk.
• Can generate profits that can be used to buffer
  tariff increases for consumers.
• Ensures the optimal utilization of institutional
  capacity.

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• Counter Arguments (Cont)
• Builds additional skills capacity and expertise.
• Empowers, provides incentives for and motivates
  staff.
• Gives South African institutions an international
  profile and enhance the image of the water sector
  and South Africa.

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• Counter Arguments (Cont)
• All of the above are important for the water
  board and are also in the direct interests of the
  municipalities served by the water board.

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• Counter Arguments (Cont)
• The existing provisions of the WS Act as these
  relate to ring fencing of other activities and
  business risks are very specific and these
  provisions would apply to any business venture
  activities performed outside the borders of the
  Republic.
• Compliance with these provisions and the
  regulatory oversight of the Executive Authority
  are considered more than sufficient to ensure
  that municipal customers and consumers do not
  bankroll any inappropriate business ventures of
  a water board, either within or outside of the
  borders of the Republic.

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• Counter Arguments (Cont)
• The Water Service Authority/s served by a water
  board should manage the business relationship
  between the two entities in terms of a formal,
  balanced and fair contract that is specific to
  the business relationship between the two
  entities. SAAWU and SALGA have developed a Model
  Bulk Water Service Agreement for the sector.

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• Counter Arguments (Cont)
• The responsibility of a Water Service Authority
  must be to ensure that such a contract is in
  place and then to specifically focus on managing
  performance and service delivery as agreed in
  terms of the contract. Undue influence of a
  municipality/s on the wider functioning and scope
  of business of a water board is inappropriate as
  this is the broader role of the Executive
  Authority.

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• Counter Arguments (Cont)
• Water boards have substantial capacity, skills
  and expertise that can and should be deployed to
  benefit the country, the region, the continent
  and where appropriate the broader international
  community. South Africa is considered to be a
  leader in water services provision and its sector
  practitioners (managers, engineers, scientists
  and technologists) are recognized and
  acknowledged internationally for their
  achievements.

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• Counter Arguments (Cont)
• It is seen as critically important that this
  South African expertise is able and prepared to
  make a meaningful contribution to relevant SADC,
  NEPAD and AU initiatives and objectives as well
  as global objectives where appropriate.

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6. Conclusion

• The South African Association of Water
  Utilities welcomes with appreciation the steps
  taken by the Minister to create a statutory
  mechanism to enable water boards to operate
  extraterritorially and requests that the
  proposals made in this submission are given
  consideration, to include once off exemptions to
  water utilities seeking such permission.

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THANK YOU