South Africa’s embattled water boards, meant to be the backbone of the country’s water security, will have their turnaround plans subjected to a review by private sector specialists as the government scrambles to keep the institutions afloat.
The department of water & sanitation (DWS), led by Pemmy Majodina, is looking to procure private sector water expertise in a process that will look into the transboundary challenges if one water board operates in more than one province, among other objectives.
The mooted “efficiency study”, expected to take about three years, will look into factors that contribute to the financial, technical, operational and institutional inefficiencies plaguing the seven water boards:
- Rand Water;
- Amatola Water;
- Magalies Water;
- Vaal Central Water;
- uMngeni-uThukela Water;
- Overberg Water; and
- Lepelle Northern Water.
The government-appointed entities play a crucial role in managing South Africa’s water infrastructure, operating dams, treatment plants and distribution networks — making them the backbone of the country’s water security.
In the terms of reference drafted to guide the tender process seeking private sector expertise to conduct the study, the DWS admitted that the water boards were falling short of their mandates.
In recent years, the water boards have faced challenges that threaten their financial sustainability and operational efficiency. These challenges arise from rising operational costs, ineffective revenue collection and ageing infrastructure
— Terms of reference
“In recent years, the water boards have faced challenges that threaten their financial sustainability and operational efficiency. These challenges arise from rising operational costs, ineffective revenue collection and ageing infrastructure,” the terms of reference read.
“The study will culminate in a comprehensive final efficiency assessment report to water boards with actionable insights to enhance operational and governance efficiency, including a detailed analysis of current practices, identification of inefficiencies and recommendations tailored to the unique challenges of each water board.”
Some of the key objectives of the study will be to assess the operational efficiency of the entities in delivering bulk water services and analyse the financial performance, including the debt management and long-term financial stability of the water boards.
The study will also include identifying opportunities for cost reduction and reviewing the performance of water treatment, distribution and maintenance.
South Africa’s water value chain is complex, involves multiple role players in different spheres of government and is governed through various pieces of legislation.
Water services are divided between water services authorities (WSAs), which are municipalities responsible for local water access, and water boards, which act as regional bulk providers. WSAs purchase the water in bulk from the water boards and then take responsibility for the infrastructure and processes necessary to supply water to their end-users, including residents, industries and farmers.
The financial health of the water boards remains constrained, mainly due to challenges with collecting debt from municipalities — which currently owe water boards more than R25bn.
The study will also look at and review the water boards’ financial turnaround plans and growth strategies and evaluate revenue management strategies, tariff structures, cost recovery and grant utilisation.
The experts will also evaluate board performances and assess compliance with auditor-general findings.
According to the latest audit from the auditor-general, none of the seven water boards achieved a clean audit in the 2023/24 financial year.
Most of the water boards are financially and institutionally stable. However, all of the water boards are negatively affected by non-payment of their invoices by some municipalities. In particular, Vaal Central Water and Magalies Water are facing financial difficulties due to this non-payment
— Wisane Mavasa, DWS spokesperson
“DWS is the regulator of the water boards. All regulators have to assess the operational efficiency of the entities that they regulate. The minister of DWS approves the treated water tariffs charged by the water boards. This approval should be informed by an assessment of whether or not the requested tariffs are a reflection of the efficient costs of producing water,” DWS spokesperson Wisane Mavasa said, explaining the need for the efficiency study.
“Most of the water boards are financially and institutionally stable. However, all of the water boards are negatively affected by non-payment of their invoices by some municipalities. In particular, Vaal Central Water and Magalies Water are facing financial difficulties due to this non-payment.”
South Africa’s water authorities are also struggling to deliver large projects on time.
For its part, Leppelle Northern Water has issued a tender to procure external expertise to develop business continuity management plans, with the entity facing significant challenges, including ageing, failing infrastructure and chronic project delays, leading to severe water shortages. The water board serves 4.6-million people.
Joe Makhafola, spokesperson for Lepelle Northern Water, said the tender specifications and requirements do not usurp the responsibilities of the executives, as business continuity management is a “highly specialised discipline that requires technical expertise, independent assessment” and alignment.
“The utilisation of external specialists provides an objective and benchmarked perspective that complements internal institutional knowledge, particularly where operational teams are focused on the day-to-day delivery of critical services,” Makhafola said.
“The need for this intervention was identified through a formal internal audit gap analysis, which highlighted areas requiring enhancement within Lepelle Northern Water’s risk management and business continuity environment.
“Addressing audit findings is not discretionary but forms part of sound governance and compliance obligations in terms of the Public Finance Management Act, which requires accounting authorities to maintain effective, efficient and transparent systems of risk and financial management.”
Business Times
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