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 GrantO 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
2003/04 2004/05 2005/06
Operating subsidy 720 436 768 336 814 434
Transfer Grant 116 000 90 000 120 000
Capex 93 000
Support 20 000 21 000 22 000
Total 949 436 879 334 954 434
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 WSAs 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)
• DWAFs 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 OM 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

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THANK YOU