3. Key water governance challenges in Cape Town, South Africa
This chapter analyses the key governance challenges for water resources management and water and sanitation services in Cape Town and South Africa. The chapter uses the OECD Principles on Water Governance to assess key issues related to policy and institutional fragmentation, scale mismatch, policy coherence, capacity, data and information, funding, regulation, integrity, transparency, stakeholder engagement, trade-off management and evaluation. It stresses in particular the multi-level and multi-stakeholder co-ordination issues. It highlights the capacity gaps across levels of government as well as challenges regarding the production and use of data to effectively manage water balance and restrictions. It stresses how trust was undermined among stakeholders. Finally, it explains how below-cost recovery charges generate funding gaps at the national and local levels.
Using the 12 OECD Principles on Water Governance (2015[1]) as an analytical grid, the following key governance challenges for water resources management and water and sanitation services have been identified for Cape Town and South Africa. They encompass issues related to policy and institutional fragmentation, scale mismatch, policy coherence, capacity, data and information, funding, regulation, integrity, transparency, stakeholder engagement, trade-off management and evaluation. Remedial actions already taken to address these challenges have also been highlighted (Table 3.1).
The present chapter uses the OECD Principles on Water Governance (OECD, 2015[1]) to assess the performance of water policy in Cape Town and analyse key water governance challenges that emerged during the crisis although some of them existed before.
Adopted by all OECD countries in 2015, the OECD Principles on Water Governance aim to enhance water governance systems that help manage “too much”, “too little” and “too polluted” water and foster universal access to drinking water and sanitation, in a sustainable, integrated and inclusive way, at an acceptable cost and in a reasonable time frame. The principles acknowledge that good governance is a means to an end to master complexity and managing trade-offs in a policy domain that is highly sensitive to fragmentation, silos, scale mismatch, negative externalities, monopolies and large capital-intensive investment. The principles consider that governance is good if it can help to solve key water challenges, using a combination of bottom-up and top-down processes while fostering constructive state-society relations. It is bad if it generates undue transaction costs and does not respond to place-based needs (Box 3.1).
The OECD Principles on Water Governance intend to contribute to tangible and outcome-oriented public policies, based on three mutually reinforcing and complementary dimensions of water governance (Figure 3.1).
1. Effectiveness relates to the contribution of governance to define clear sustainable water policy goals and targets at all levels of government, to implement those policy goals and to meet expected targets.
2. Efficiency relates to the contribution of governance to maximise the benefits of sustainable water management and welfare at the least cost to society.
3. Trust and engagement relate to the contribution of governance to building public confidence and ensuring the inclusiveness of stakeholders through democratic legitimacy and fairness for society at large.
Source: OECD (2015[1]), OECD Principles on Water Governance, https://www.oecd.org/gov/regional-policy/OECD-Principles-on-Water-Governancebrochure.pdf.
Enhancing the effectiveness of water governance
Principle 1. Clearly allocate and distinguish roles and responsibilities for water policymaking, policy implementation, operational management and regulation and foster co-ordination across these responsible authorities.
Principle 2. Manage water at the appropriate scale(s) within integrated basin governance systems to reflect local conditions and foster co-ordination between the different scales.
Principle 3. Encourage policy coherence through effective cross-sectoral co-ordination, especially between policies for water and the environment, health, energy, agriculture, industry, spatial planning and land use.
Principle 4. Adapt the level of capacity of responsible authorities to the complexity of water challenges to be met and to the set of competencies required to carry out their duties.
Enhancing the efficiency of water governance
Principle 5. Produce, update and share timely, consistent, comparable and policy-relevant water and water-related data and information, and use it to guide, assess and improve water policy.
Principle 6. Ensure that governance arrangements help mobilise water finance and allocate financial resources in an efficient, transparent and timely manner.
Principle 7. Ensure that sound water management regulatory frameworks are effectively implemented and enforced in pursuit of the public interest.
Principle 8. Promote the adoption and implementation of innovative water governance practices across responsible authorities, levels of government and relevant stakeholders.
Enhancing trust and engagement in water governance
Principle 9. Mainstream integrity and transparency practices across water policies, water institutions and water governance frameworks for greater accountability and trust in decision-making.
Principle 10. Promote stakeholder engagement for informed and outcome-oriented contributions to water policy design and implementation.
Principle 11. Encourage water governance frameworks that help manage trade-offs across water users, rural and urban areas, and generations.
Principle 12. Promote regular monitoring and evaluation of water policy and governance where appropriate, share the results with the public and make adjustments when needed.
Source: OECD (2015[1]), OECD Principles on Water Governance, https://www.oecd.org/gov/regional-policy/OECD-Principles-on-Water-Governancebrochure.pdf.
The Western Cape Water Supply System (WCWSS) multi-level institutional setting requires strong and effective vertical and horizontal co-ordination between levels of governments and across sectors to manage and efficiently use water resources. Although overarching principles and roles allocation are duly stated in the legislation and co-ordination mechanisms are in place (see Chapter 2), Cape Town’s 2017-18 water crisis highlighted challenges to implement and achieve effective co-ordination within the WCWSS and at the catchment level.
Co-ordination challenges within the Western Cape Water Supply System
The WCWSS is managed by multi-stakeholder instances. The Strategy Steering Committee, formed after the completion of the Reconciliation Strategy1 in 2007, gathers representatives from all provincial government departments, from the agriculture sector, the Breede-Gouritz Catchment Management Agency (CMA), the city of Cape Town, relevant districts and local municipalities, and the DWS regional and national offices. In addition to this committee, a WCWSS Strategic Operating Forum is held yearly to discuss the operational state of the WCWSS dams and to determine the need to impose water restrictions.
Despite the existence of such multi-stakeholder instances, co-ordination has, at times, proven challenging, especially during the 2017-18 water crisis. The Strategy Steering Committee typically meets twice a year but did not meet during 2016 and 2017 (Ziervogel, 2019[3]) in the absence of an appointed service provider to support the DWS and the committee. The role of the service provider was to update the status of system demand and supply, and the various intervention measures underway, and to put forward recommendations to the committee for consideration and decisions. However, as no service provider was appointed, these tasks were not timeously fulfilled. In addition, a yearly status update of the Reconciliation Strategy for the Western Cape should be published but no update was produced for 2017. A draft was however prepared for 2018 but not finalised. A 2019 status update is currently waiting for final approval before release.
Co-ordination for the implementation of the invasive alien plant (IAP) species clearing programme, to prevent the further reduction of the WCWSS water yield, also proved challenging. Although the responsibility for environmental conservation issues lies within the national Department for Environment, Forestry and Fisheries (DEFF) and the provincial Department for Environmental Affairs and Development Planning (DEADP), several institutions need to co-ordinate to fund and implement these programmes. Funding comes from national, provincial and catchment levels when a CMA is installed and a great variety of national and subnational stakeholders are involved in environmental and water conservation (DWS, DEFF, DEADP, farmers, municipalities, non-governmental organisations [NGOs], etc.). As such, IAP clearing programmes tend to exacerbate multi-level co-ordination issues especially when mandates are poorly funded. These funding and co-ordination issues currently hamper environmental restoration and ecological infrastructure investment to protect water sources and ensure water security at the catchment level. To address this co-ordination challenge, WCWSS stakeholders set up a dedicated water fund for IAP clearing campaigns that sits outside of the CMA (Box 3.2). This allows funding to flow to IAP control from a range of sectors but it also creates challenges with co-ordination due to some overlaps between concurrent responsibilities for environmental management.
While until recently the focus has been on “grey”, or engineered, infrastructure solutions to combat water scarcity, there is another cost-effective option with the potential to augment water supply. Long-term water security in the Greater Cape Town Region, as elsewhere, begins at the source with the ecological infrastructure (native vegetation, wetlands, etc.) that regulates source water quality and supply. Over two-thirds of the sub-catchments supplying the WCWSS are affected by alien plant invasions, reducing the amount of water that reaches the rivers and dams that feed the region by 55 billion litres (55 Mm3) per year. In a place where every drop of water counts, these losses are significant. These plants, trees such as pine and eucalyptus, quickly replace native species if unmanaged and threaten the diversity of native plant life in the Cape Floral Region, where 70% of plants are found nowhere else on the planet, and alter the habitat for the region’s fauna. IAP species alter soil ecology, increase the frequency and severity of wildfires and significantly impact river flow and aquifer recharge. Despite ongoing efforts to remove invasive trees by programmes such as Working for Water, the problem is increasing. In response, a coalition of partners – The Nature Conservancy, the National Department of Water and Sanitation (DWS), the National Department of Environmental Affairs (Environmental Programmes), the provincial DEADP, the city of Cape Town, SANBI, CapeNature, Coca-Cola Peninsula Beverages, Nedbank, Remgro Ltd and the World Wildlife Fund (WWF) – came together under the auspices of the Greater Cape Town Water Fund Steering Committee. The committee commissioned studies to evaluate the impact of nature-based solutions on water supply, beginning with targeted removals of alien plant invasions, and determine whether investing at scale in catchment restoration is cost-competitive with other supply-side solutions.
The business case analysis models a 30-year period, discounting both costs and water gains at 6% for surface water sub-catchments. Results show that investing ZAR 372 million here (USD 25.5 million; present value) will generate expected annual water gains of 100 billion litres (100 Mm3) within 30 years compared to the business-as-usual scenario. Importantly, IAP removal would already yield up to an additional 50 billion litres (50 Mm3) within 5 years. Approximately 350 job opportunities will be created in the first five years of implementation, as removing alien plant invasions is very labour intensive. Catchment restoration is significantly more cost-effective than other water augmentation solutions, supplying water at one-tenth the unit cost of alternative options. It produces greater water yields than all other supply options except desalination, which is far more costly. The results of catchment restoration programmes will be evident rapidly, with improved supply showing as soon as the first winter rains. Furthermore, catchment restoration produces water yield gains into perpetuity if areas cleared of IAP are maintained.
The Greater Cape Town Water Fund is bringing together private and public sectors stakeholders alongside local communities around the common goal of restoring the surface water and aquifer catchments which supply our water. The water fund aims to support and align with existing government initiatives and act as a catalyst for systemic change in catchment management by cost-effective use of on the ground resources, strengthened capacity and robust monitoring and evaluation. In addition, the water fund will stimulate funding and implementation of catchment restoration efforts and, in the process, create jobs and momentum to protect globally important biodiversity and build more resilient communities in the face of climate change.
Source: The Nature Conservancy, (2018[4]), The Greater Cape Town Water Fund, Assessing the return on Investment for Ecological Infrasytructure Restoration, Business Case, https://www.nature.org/content/dam/tnc/nature/en/documents/GCTWF-summary-11.14.18.pdf
Co-ordination challenges at the catchment level
While the National Water Act (NWA) 1998 mandates the decentralisation of water resources management through CMAs, thus aiming to enhance user involvement in the governance of water at the local and regional levels, progress in this sense has been slow. The incomplete process to establish the Berg-Olifant CMA, for example, has impeded the full implementation of Integrated Water Resource Management (IWRM) at the catchment level. As a result, WCWSS stakeholders have been unable to reap off the benefits from decentralised water management at catchment level through the implementation of CMAs as a co-ordination tool (Box 3.3).
1. CMAs are better positioned to deal with water allocation in light of droughts, current variability and the challenges of climate change.
2. CMAs support resource-poor farmers and are well-positioned to deal with the transformation of water institutions.
3. CMAs are up-to date on the licensing of water use and able to monitor compliance and act on compliance failures.
4. CMAs are able to focus on water quality and protection of water resources against pollution from dysfunctional wastewater works, mines, industry and agriculture.
5. CMAs are good at engaging the public for awareness and supporting the active participation of stakeholders in water resource management.
6. CMAs are able to plan strategically and respond to challenges through adaptive management.
7. Proto-CMAs are not able to operate to the same effect as CMAs.
8. CMAs will be positioned to deal with current failures in the water sector which are needing other actors to step in to fulfil functions neglected by the DWS in catchments.
Source: Munnik, V. (2020[5]), “The reluctant roll-out of Catchment Management Agencies: Assessing the key risks and consequences of delays in finalising institutional arrangements for decentralised water resource management”, http://www.wrc.org.za/wp-content/uploads/mdocs/2943_final.pdf.
Even where CMAs have been established, the low level of funding and the incomplete delegation/assignment of functions by the DWS have limited their ability to undertake their functions effectively. CMAs are endowed with initial functions focusing mainly on co-ordination missions at the catchment level, as stated in the NWA:
“- to investigate and advise interested persons in the protection, use, development, conservation, management and control of the water resources in its water management area;
- to develop a catchment management strategy;
- to co-ordinate the related activities of water users and of the water management institutions within its water management area;
- to promote the co-ordination of its implementation with the implementation of any applicable development plan established in terms of the Water Services Act, 1997 (Act No. 108 of 1997); and
- to promote community participation in the projection, use, development, conservation, management and control of the water resources in its water management area.”
However, in addition to these initial functions, which limit CMAs’ reach and effectiveness, complementary powers and functions may be delegated by the National DWS, as stated in Schedule 3 of the NWA. These complementary functions include for instance:
“- the power to manage and monitor permitted water use within its water management area;
- the power to conserve and protect the water resources and resource quality within its water management area […];
- the power to do anything necessary to implement catchment management strategies within its water management area […];
- the power to make rules and regulate water use;
- the power to temporarily control, limit or prohibit use of water during periods of water shortage.”
The priority action listed in the National Water and Sanitation Master Plan (DWS, 2019[2]) to “establish financially sustainable CMAs across the country, and transfer staff and budget and delegated functions, including licensing of water use and monitoring and evaluation of water resources” seems to point in the direction of delegating complementary functions to CMAs. However, this priority action was to be completed by 2020, which is still not the case. As a result, uncertainties remain with regard to the pace of the reform and its possible form and outcomes. These uncertainties and the slow pace of CMA instalment are hampering effective water resources management co-ordination at the catchment level.
Capacity gaps at the national level
At the national level, a long-lasting capacity gap has potentially undermined the ability of the DWS to fully take leadership and deliver water policy outputs and outcomes. It is argued that this capacity gap partly results from a possible phenomenon of political capture2 (Dassah, 2018[6]; Martin and Solomon, 2016[7]) that has negatively affected the DWS and weakened its effectiveness (Galvin and Roux, 2019[8]). In their article, Galvin and Roux identify erosion of human resources as one of the various potential institutional impacts of capture (Table 3.2). In addition to the capacity gap, it is argued that capture also generated public procurement issues resulting in long delays to appoint service providers (see section on Undermined trust across levels of governments and among stakeholders) and financial mismanagement resulting in underinvestment and low asset maintenance (see section (see section on Undermined trust across levels of governments and among stakeholders).
In 2015, the DWS was established out of the merger of the mandates of the Department of Water Affairs and the Sanitation function from the Department of Human Settlements. Following this merger, the Minister of Human Settlements, Water and Sanitation then commissioned a comprehensive organisational review of the DWS (Vienings, 2015[9]). The outcomes of this review highlighted important capacity gaps and issues, which have only been partially addressed since then.
Turnover and vacancies
The DWS has been suffering from high rates of turnover and vacancy for many years. In 2017, the National Treasury was reporting 900 vacant posts within the DWS. The latest figures reported by the DWS in its Annual Performance Plan 2019/20 to 2021/22 amount to 1 033 (13% of total positions), with 37% of vacant positions in the Chief Operational Office Branch and 31% in the Infrastructure Build Operation and Maintenance Branch.
In 2018, in a report on the functioning of the DWS (2018[10]), the Auditor-General made specific reference to the rate of turnover of directors-general and chief financial officers. From 2009 to 2017, the average duration of senior staff mandate was 11 months with the positions being filled in an acting capacity most of the time. Over this period, three of the four formally appointed directors-general resigned, which added to the instability of human resources management at the DWS. In her speech on DWS Budget 2020/21 (Minister of Human Settlements, Water and Sanitation, 2020[11]), the Water and Sanitation Minister acknowledges the need to “ensure that, especially at top management level, all incumbents are truly fit for purpose because that is the core of the delivery of the department’s mandate”.
Ageing staff and absence of replacement plan
The forthcoming retirement of 22% of experienced DWS workers is leaving significant gaps in skills and, in the absence of proper skills transfer, can put in jeopardy the institutional memory of water policy in South Africa (NIWIS).3 Among the scientists and engineers with high-level skills working at the DWS, 86 would reach retirement age within the next 10 years and currently, no work plan exists to secure replacement and foster the preservation and continuity of the existing technical expertise. As a result, mentoring and training new staff in the water sector has become a major challenge due to the expected shortage of experienced personnel in the medium term. Moreover, as noted by the Auditor-General, a skills audit has not been conducted in the past 15 years at the DWS.
Adverse implications of the capacity gap on water policy
As noted in the Auditor-General report (2018[10]), the observed capacity issues within the DWS adversely affects its performance and its ability to deliver water policy outcomes.
For instance, the lack of staff and capacities is one of the reasons that is contributing to slow down the water use licenses (WUL) speed-up reform. Another reason is the many tools for the protection and use of water that can be overly complex and technical, and that generate significant delays (Centre for Environmental Rights, 2012[12]). The DWS, which is responsible for issuing WULs, was criticised by some stakeholders for taking too long, as the process can reach up to 300 days as per National Water Act regulations. Although the DWS is making changes to its regulatory regime to give effect to the 90-day WUL turnaround time (Minister of Human Settlements, Water and Sanitation, 2020[11]), delays remain long which prevents quick and adaptive reactions and responsiveness, especially during crises. Moreover, it has been noted by the Auditor-General that a number of WULs have been issued in protected areas with stringent conditions rather than being refused. As an illustration of this long-lasting situation, in a decision dated 21 July 2020, the Water Tribunal upheld an appeal to set aside two WULs granted by the DWS to ACWA Power for the development of a new coal-fired power station. The tribunal found that the WUL applications were procedurally flawed but also that the licensing authority had not adequately weighed up the impact of climate change on water security in the region (Final Appeal Decision of the Water Tribunal no WT02/18/MP dated 21 July 2020).
According to some stakeholders, the lack of staff and capacities has also adversely affected the maintenance and operation of DWS infrastructure. In 2016/17, it was suggested that the operation of the WCWSS dams owned by the DWS was not optimal due to non-operational pumps and silted canals among other factors (Ziervogel, 2019[3]).
The capacity to collect and process data and information and the capacity of regulatory authorities to interpret and respond appropriately and timeously based on these data and information is a major challenge. The failure to yearly publish the Blue Drop (water quality) and Green Drop (wastewater treatment) reports since 2013 is an illustration of this situation. The Blue Drop-Green Drop reports are comprehensive assessments, available to the public and water service authorities, on the functioning of water and wastewater treatment plants, and on the compliance with water quality standards. The absence of these reports and of the data and information they comprise has considerable implications for management, operation, risk mitigation, remedial action and refurbishment plans related to treatment plants – and hence water safety and quality (Figure 3.2).
Taking stock of the abovementioned challenges, the DWS recognised the need to build and strengthen capacity in the National Water and Sanitation Master Plan (DWS, 2019[2]), where an action plan details and costs a series of eight measures to implement by 2030. Such measures include the production of a skills and institutional capacity development strategy for the sector aligned to the 2030 National Water and Sanitation Master Plan by indicating what skills (competencies and numbers) are needed by the different water sector institutions to achieve the sector goals and priorities. They also foresee the expansion and continued implementation of existing capacity building programmes such as the 2020 Vision of Water and Sanitation Schools Education Programme, the Community Water Education Programme incorporating climate change or the Water Councillor Leadership Programme. These measures also underline the key role that the Energy and Water Sector Education and Training Authority (EWSETA) will play as the institution responsible for co-ordinating and facilitating skills development and capacity building for the water sector.
In addition, the minister, in her speech on DWS Budget 2020/21 (Minister of Human Settlements, Water and Sanitation, 2020[11]), mentioned a programme to restructure the DWS. The new structure was signed off in 2020 and will be submitted to the Minister for the Public Service and Administration for his concurrence.
Capacity gap at the local level
While Cape Town is endowed with skilled staff and experts – although facing capacity issues below summarised – smaller municipalities in the Western Cape area struggle to attract adequate numbers of specialised technical staff to effectively operate and maintain water schemes. The situation is exacerbated by a below-cost-recovery tariff and a sub-optimal collection of revenue, which further prevents operational plans from being effectively implemented. Nationally, the ratio of civil engineering staff per 100 000 people is less than half of what is required to adequately plan, deliver, operate and maintain services, including water services (GreenCape, 2019[13]). These capacity constraints limit the ability of municipalities to efficiently implement or pilot water assets and technologies. The problem is further exacerbated by the lack of water revenues ring-fencing in most municipalities for reinvestment in water infrastructure, and a heavy reliance on these revenues to cross-subsidise other municipal functions. This leads to fundamental challenges in the local government financing model, especially for those municipalities that do not have strong revenue bases.
With more than 3 800 water and sanitation employees, the city of Cape Town Water and Sanitation Department is endowed with skilled staff and experts. For instance, the city of Cape Town Scientific Services Branch comprises a research facility and an accredited laboratory, under SANAS ISO 17025, that tests some 16 000 samples of drinking water each year, drawn from approximately 300 designated sampling points throughout the water system (boreholes, dams, treatment plants, reservoirs, distribution network). High levels of compliance with SANS 241 standards are attained and the water quality is rated as “excellent”. In addition, the Scientific Services also test treated wastewater from wastewater treatment works and from rivers and perform air pollution testing. The city of Cape Town also has an inhouse mechanical workshop performing customised manufacturing for water and sanitation equipment, materials, spare parts and maintenance. The Cape Town Water and Sanitation Department has an asset register which uses IT inventory and monitoring solutions. These tools which were jointly developed by the city of Cape Town Engineering and Asset Management Branch and the Corporate IT Branch allow to developing an asset management system and department-wide processes with ISO 9001 quality certification. Moreover, the city is certified ISO 14001 and is currently working on getting ISO 45001 certification.
Nevertheless, Cape Town is also facing a high rate of vacancies with 15% of vacant positions, predominantly in the functional Branches of Reticulation, Bulk Water, Engineering and Asset Management and Wastewater Works (City of Cape Town, 2019[14]). Water and sanitation staff costs represent 17% of the total operating expenditure (City of Cape Town, 2019[14]) which is rather low compared to international practices and underlines the existence of several vacant positions to be filled. Furthermore, during the drought, high call volumes and a lack of capacity in the call centre, where some positions were not filled as a matter of urgency, left many calls unanswered (City of Cape Town, 2019[15]). For the past years, important staff retirement has generated some loss of information, experience and institutional memory within the city of Cape Town Water and Sanitation Department. A need for internal staff with experience and expertise in the development and maintenance of alternative sanitation technologies has been identified to fast track the efficiency of service delivery and to sustain technology lifecycle maintenance (City of Cape Town, 2019[14]). In addition, heavy and complex public procurement processes have generated delays in public purchase. In addition to this, budgetary constraints also hamper the creation and filling of potentially much-needed staff positions.
Taking stock of these issues, Cape Town plans a revision of its organisational structure, as well as its working processes and the competencies required inhouse as stated in its Water Strategy 2019 (section on translating the strategy into action and increasing capability) (City of Cape Town, 2019[16]). Emphasis will be placed on increasing fluidity and speed of execution within the organisation, particularly with respect to decision-making, appointments and procurement. The aim is to reduce vacancy rates and recruitment delays substantially but also to optimise procurement processes, with particular attention to value for money and the time taken to contract. Standard operating procedures will be reviewed and improved to retain institutional memory and ensure effective training. Talent management for succession planning and staff development will be emphasised.
Water resource planning data and models
“Since the 1980s, South Africa’s major conurbations have used systems models to guide their water management. These models, run by the national government, are considered world-class. They map links between river basins, reservoirs and transmission channels and use historical hydrological data to predict probable stream flows. Those are then matched to projections of demand to assess how much storage is needed. The models support real-time operations of the water network as well as planning for development. Crucially, they allow planners to assess risks of supply failures to different categories of users and evaluate the effectiveness of responses such as restrictions” (Muller, 2018, p. 175[17]).
Over time, engineers in South Africa have developed a standardised methodology to model future water demand against available supply. Future rainfall is modelled stochastically based on historical rainfall records. The anticipated impacts of climate change are factored into the supply models. Options to balance demand and supply are investigated and evaluated using multi-criteria decision analysis. Timeframes for supply augmentation are typically long, between five and ten years from the commencement of a feasibility study to the supply of water from a new scheme.
The results of the models are yearly discussed by the Strategy Steering Committee comprising national government, city representatives and other stakeholders. Decisions on the augmentation of supplies to cities are typically joint decisions taken by both national and city government in light of the financial implications of projects for city water users who pay for the costs of the supply augmentation through their water tariffs.
However, in the case of the 2017-18 water crisis in Cape Town, the set of assumptions used in the models to determine water allocation and balance, and thus potentially commission an augmentation of the water yield in the WCWSS, turned out not to be justified. The assumptions included the following assertions: allocations are based on available yield; the system hydrology is up to date; there is effective enforcement of withdrawals; there is the timely and effective implementation of restrictions (as and when necessary); there is an effective programme in place to eradicate alien invasive vegetation, and the system is operated effectively in accordance with well-defined rules. Unfortunately, what happened in practice was substantially different from what had been assumed. As a result, the effective system yield was less than assumed and the water balance in 2015 was more potentially precarious than shown in the technical reports at the time (Box 3.4).
As stated by the United Nations, “data is the lifeblood of decision-making and the raw material for accountability. Quality and timely data are vital for enabling governments, international organisations, civil society, private sector and the general public to make informed decisions and to ensure the accountability of representative bodies” (UN, n.d.[18]).
With today’s available digital technologies, the OECD Principle 5 on Water Governance (2015[1]) related to data and information should be easy to implement: “produce, update and share timely, consistent, comparable and policy-relevant water and water-related data and information, and use it to guide, assess and improve water policy”.
Nevertheless, many organisations are still struggling with data. Data and data-related analytics make it possible to understand complex water systems from a holistic perspective. An increasing number of institutions face a widening gap between emerging realities (like growing populations, climate change and rapid digitalisation) and their existing practices. Understanding water systems that get more and more complex in a rapidly changing environment is a huge challenge that water managers have to face. Water managers have to be better prepared for the unexpected (in particular extreme situations generated by climate change) and quality data is again the basic building block in the decision-making process, as existing knowledge and experience are not enough anymore. Continuous monitoring of water systems and processes is key.
In Cape Town during the drought crisis, water-related data and information were needed to describe what happened, to analyse and come up with a diagnosis (why did it happen and how was it avoided). Data can also help to be more predictive (what will happen) while analytics can help to be more prescriptive (what should we do).
Satellite images, multi-model simulations, networked sensor systems and improved forecasts of water-related variables (to name a few) already exist and are ready for exploitation. These tools can be used in rather easy-to-operate ways that consider economic and social factors and can support evidence-based decision-making. But it is important to realise that decisions are made on the interpretation of data. Even if data as such can be considered as objective, interpretation is always subjective.
In 2017, the city of Cape Town already developed a data strategy. Data and data analytics were available and used to solve the drought issue. This allowed the city to develop knowledge and insights, to plan and act accordingly. Timely sharing of data and information was needed to help the city water security.
As stated in the Cape Town Water Strategy (City of Cape Town, 2019[16]), “clear communication is critical in building a water resilient city, both within the municipality itself and externally with the public. Communication is as much about listening to and understanding the needs of others, as it is about conveying information or key messages to them”. But most of the time, communication departments only focus on the conveyance of key messages. Listening to and understanding the needs of others, creating an inclusive and participative dialogue are not easy when some people experienced a lack of trust in the past. South Africa has experience with such dialogues; the 1991 Mont Fleur Scenario Exercise, facilitated by Adam Kahane,1 being a famous example amongst others.
← 1. For more information, see https://reospartners.com/reos-management/adam-kahane/.
Source: Caroline Figuères, (OECD, 2021[19]), Water Governance in Cape Town, South Africa; UN (n.d.[18]), Big Data for Sustainable Development, https://www.un.org/en/sections/issues-depth/big-data-sustainable-development/index.html.
Sub-optimal management
The impact of sub-optimal management of the WCWSS was significant. The Department of Water and Sanitation of the city of Cape Town has estimated that if the system had been managed (regulated and operated) entirely according to the rules and an effective programme to eradicate alien invasive vegetation had been in place, as planned, the dams could potentially have been 18% fuller during the worst part of the drought, which would have allowed the more serious economic impacts of the drought to have been avoided (City of Cape Town, 2018[20]).
Anticipating the impact of climate change
Although climate change was factored into the demand and supply scenarios, it could be argued that insufficient account had been taken of the climate change risks and variability. The modelling assumed a gradual impact over time and no possible step changes. More recent studies have suggested that climate change may have increased the risk of low rainfall years by a factor of three (Otto et al., 2018[21]). These factors are now being considered in future planning.
Ground-breaking research initiated by the city now incorporates the potential for an increase in multi-year droughts. Previous modelling only considered changes in mean annual precipitation and associated runoff.
Challenges with water restriction co-ordination across levels of government and sectors
In accordance with the basic principles for water allocation established in the 1997 Water Policy and the 1998 National Water Act, the DWS allocates water to each catchment area according to licenses for municipal needs, irrigation and other activities such as hydropower, industrial and commercial uses. It also makes decisions on how use is restricted during periods of drought in accordance with agreed processes and rules.
During the 2017-18 water crisis, decisions on water use restrictions were not instituted in time which increased the severity of the drought impacts. In May 2016, 20% restrictions compared to initially agreed balance in the reconciliation strategy were imposed by the DWS on domestic and agriculture water use in the Western Cape but the enforcement of these restrictions on agriculture were delayed. One year later, restrictions were gradually increased for agriculture from 30% to 60%, and from 40% to 45% for domestic use. Although restrictions had been decided by the end of 2016, the agriculture restrictions were only enforced and implemented in March 2017, which was too late to have an impact on the 2016/17 irrigation season (Ziervogel, 2019[3]). It has also been alleged by some stakeholders that the restrictions for agriculture during the summers of 2015/16 and 2016/17 were not adequately enforced. As a result, the total use from the WCWSS exceeded the available yield.
In response to the severe restrictions and penalty tariffs for high volume consumers decided by the city during the crisis, many residents and businesses in Cape Town developed alternative supplies including drilling private boreholes. The legal status of these boreholes was poorly defined legally (guidelines were issued by the DWS in 2018) and have led to over-abstraction, illegal resale of water, inadequate water quality compliance and difficulties to get people to register their boreholes through the online registry.4 Unregulated boreholes are likely to pose a long-term threat to the recharge and sustainability of underground water bodies as well as quality issues due to possible contaminated aquifers in the absence of protected areas. Moreover, the unregulated use of groundwater is competing with legal use granted through water licences. This may lead to a potential overuse of groundwater causing seawater intrusion which further deteriorates water quality making it unusable for many usages. Farmers also looked into micro-solutions to address the drought with the construction of dams on site and the drilling of additional boreholes.
Building upon the drought experience, the city of Cape Town has committed to significantly reduce reliance on rain-fed dams and aims by about 25% when augmentation projects are completed and running at full capacity. A mix of solutions is contemplated comprising augmentation of surface water storage and transfer capacity, groundwater abstraction, desalination, reuse and IAP clearing programmes (City of Cape Town, 2020[22]).
Public procurement: “Irregular expenditure” and harmful delays
Since 1994, public procurement processes have been decentralised from the Central National Tender Board to individual ministries and departments. Over the years, the oversight of these processes by the National Treasury and the Department of Public Services and Administration have been weakened while procurement rules have hardened. Nevertheless, in his 2018 report on the DWS (2018[10]), the Auditor-General notes that “irregular expenditure continues to significantly increase year on year. [They are mostly] related to deviations from prescribed procurement processes on the basis of emergency procurement. Although such deviations are allowed, […] it was often not approved; or, if approved, the reasons for the deviation were not reasonable and/or justifiable”. The amount of irregular and wasteful expenditure is reported to reach a total of ZAR 31 billion (USD 2.1 billion) (Minister of Human Settlements, Water and Sanitation, 2020[11]).
In addition, some of the DWS senior management staff vacancies mentioned in section on Capacity gap were linked to integrity issues and resulted from precautionary suspensions linked with allegations of misconduct or corruption. This situation led to the creation of a Stabilisation Committee which is a disciplinary unit dealing with 166 cases, emanating from the Auditor-General’s annual reports over a number of years ( (Minister of Human Settlements, Water and Sanitation, 2020[11])). The examination of previous cases led to 97 officials being found guilty, 16 being found not guilty and 24 resigning. This widespread situation of public procurement irregularities led to growing mistrust which in turn led to stricter rules and legal provisions.
During the water crisis, the DWS also delayed the enforcement of crucial water management decisions. Whereas the city of Cape Town and the provincial government had both declared a drought disaster during the first trimester of 2017, the DWS waited one more year to do so, thus preventing budgets from being reprioritised and emergency relief funding from being released. The South African Water Caucus asserts that the reason for this delayed decision stems from spiralling debt, mismanagement, maladministration and corruption in the DWS (South Africa Water Caucus, 2017[23]) which illustrated, at the time, the possible capture of the department.
The abovementioned evolution together with the procurement challenges and budgetary constraints faced by the DWS resulted to some extent in underinvestment and low level of operation and maintenance of in DWS-owned infrastructure (Auditor-General, 2018[10]). These issues also led to impactful delays in the appointment of firms and consultants. For instance, in 2016 and 2017, the DWS experienced challenges in the appointment of consultants to update the Reconciliation Strategy for the WCWSS. This, unfortunately, coincided with the severe drought experienced within the WCWSS leading to a lack of information limiting the use of hydrological models.
Taking stock of the situation, the city of Cape Town underlines in its Water Strategy its ambition to optimise procurement processes (Box 3.5) “with particular attention to value for money and the time taken to contract” (City of Cape Town, 2019[16]).
Municipal procurement is regulated by the Municipal Finance Management Act No. 56 of 2003 (MFMA) and its regulations, including the Municipal Supply Chain Management Regulations (2005). These regulations specify the minimum requirements but municipalities are allowed to apply stricter standards. The National Treasury also sets further requirements. The MFMA outlines the competitive procurement processes and unsolicited bids are not encouraged. As stipulated by the National Treasury, for projects worth more than ZAR 30 000 (USD 2 056) but less than ZAR 50 million (including value-added tax), the price contributes 80 points of the total score and the Broad-based Black Economic Empowerment (B-BBEE) status contributes 20 points. For projects above ZAR 50 million (USD 3.4 million), the price contributes 90 points and the B-BBEE status 10. Municipalities can also specify prequalification criteria to limit the competition to certain groups. These groups include companies with higher B-BBEE scores, exempted micro-enterprises (EMEs) and qualifying small enterprises (QSEs).
Companies wishing to do business with the city of Cape Town must first register with city’s supplier database and the national Central Supplier Database (CSD). For goods and services less than ZAR 200 000 (USD 13 700), Cape Town publishes Requests for Quotations (RFQs) on its procurement portal. Companies must first register as a supplier and then register on the portal. For goods and services exceeding ZAR 200 000 (including value-added tax), a formal bidding (tender) process is required. Companies must be registered as a supplier and registered on the tender portal where tenders are advertised. Tenders are also advertised in local newspapers. For tenders valued at more than ZAR 10 million (USD 0.7 million), there is a more extensive process, including additional documentation requirements.
Source: GreenCape (2019[13]), Water: Market Intelligence Report, https://www.greencape.co.za/assets/Uploads/WATER-MIR-2019-WEB-01-04-2019.pdf.
From a “command and control” to a “collaborate and communicate” approach
Cape Town’s 2017-18 water crisis was marked out by several turning points in communication triggering important changes in trust among stakeholders. At the beginning of the crisis, the city of Cape Town introduced several “command and control” measures, using a top-down approach and a “carrots and sticks” policy to address the drought situation. In January 2016, Cape Town first introduced water restrictions without clearly explaining the reasons leading to these restrictions. It also began to launch a “name and shame” media campaign to expose repeat water restriction offenders. “The identities of all customers who pay admission-of-guilt fines or who appear in court regarding contravention of level 3b water restrictions will be made public by the city of Cape Town‚” (City of Cape Town, 2017[24]) announced the mayor in the media. In 2017 and 2018, further water demand management measures were implemented such as tariff increases5 and penalties for high volume consumers which appeared as punitive solutions; reduced pressure in distribution networks or instalment of water management devices in households using more than their water allowance. This “command and control” approach and the lack of a pro-active communication on the rationale for such decisions eroded trust and public support. This loss of trust from the citizens led to a questioning of the capacity of the city of Cape Town to address the critical situation. In this context, many Cape Town residents installed rainwater tanks or drilled private boreholes. Although these water supply alternatives reflected the adaptive capacity of residents, they also translated, to some extent, a sense of distrust towards the city and a loss of social cohesion with the search of individual solutions for those who could afford the investment (Sieff, 2018[25]). In the long-term, these solutions can jeopardise groundwater resources sustainability (see section on Data and co-ordination challenges to effectively manage water balance and restrictions). For instance, water-intensive industries that were hit hard by punitive tariffs and restrictions during the drought significantly augmented their supply with groundwater which has had a reverberating impact on municipal revenue and groundwater resources. Discontent grew further when the mayor proposed to levy an additional “drought charge” on certain properties to gradually compensate for the water budget deficit (ZAR 1.7 billion in 2017/18, USD 116.5 million) caused by the drastic consumption reduction. “This levy was perceived as a “punitive tax” for adhering to the city’s water preservation campaign” (Visser, 2018[26]).
In addition, in May 2017, a reorganisation of water and sanitation responsibilities within the city administration, in a rather tense political context with the mayor surviving a vote of no-confidence by one vote and imminent municipal elections scheduled in 2019 as well as internal political tensions in the mayor’s party, have also contributed to further trust erosion. A Water Resilience Task Team (WRTT) was established in the Directorate of the Mayor and, as such, was politically accountable to the executive mayor. The drought management prerogatives were thus transferred from the Cape Town Water and Sanitation Department to the WRTT. This marked an important breakdown in trust and communication between the mayor and the Water and Sanitation Department.
In January 2018, the city communication changed when the mayor released a press statement (City of Cape Town, 2018[27]) saying: “It is quite unbelievable that a majority of people do not seem to care and are sending all of us headlong towards Day Zero. At this point, we must assume that they will not change their behaviour and that the chance of reaching Day Zero on 21 April 2018 is now very likely”.
Although this statement may be perceived as externalising the drought management failure onto citizens, the mayor’s message also acknowledged, to some extent, the failure of the “command and control” approach by recognising that Day Zero was inevitable despite all measures undertaken by local public authorities. As pointed out by Ziervogel (2019[3]), “The Mayor’s message […] was also the point where the burden of responsibility shifted from the City of Cape Town, saying they were in charge and could augment water supply, to citizens being responsible for reducing water to avoid a crisis”. The overall approach to the crisis progressively shifted from “command and control” to “collaborate and communicate”. Throughout this period, several bottom-up initiatives stemming from a variety of stakeholders emerged. For instance, the Water Warriors were created, whose purpose is to collect donated water from the general public and big businesses through volunteer donation stations and distribute it to areas affected by the drought. Virgin Active, a nationwide health and fitness club, invested over ZAR 24 million (USD 1.7 million) towards an extensive range of technological, behavioural and process-related interventions to reduce and save water. The business reduced water usage within its Western Cape branches by 62% and as a result, now use a total of 7 652 kilolitres per month. The payback period of all interventions was 20 months. Transpaco Flexibles, a manufacturer, recycler and distributor of plastics products in the Western Cape, reduced its water use by 85% within a 4-month timeframe, from 87 m3 per day to 13 m3 (GreenCape, 2018[28]; 2019[29]).
Collaboration across stakeholders and levels of government took several forms. At the regional level, Provincial Disaster Management Clusters worked for 3 years supporting the city of Cape Town and other municipalities through the drought. Agriculture water from Groenvlei Water Users Association was released to assist the city of Cape Town during a critical period of the drought. At the city level, the Water Resilience Advisory Committee (WRAC) was established in Cape Town in August 2017. This committee meets monthly since its creation and comprises 15 members from academic institutions, businesses, NGOs or provincial and national governments. Building on an important community of practice in Cape Town, the WRAC gathers a variety of stakeholders outside the municipal administration in order to encourage information and knowledge sharing. In its Water Strategy, Cape Town capitalises on this experience to further create a Collaborative Resilience Action Plan – a multi-stakeholder platform to co-ordinate efforts and improve governance and decision-making during any crisis. In addition, the city of Cape Town has set up an Open Data Portal where datasets on basic service and infrastructure, demography, human settlements, finance, economic development, etc. are accessible. However, despite all the efforts and work accomplished, the incorporation of technical information into decision-making is not always optimal and there is still room for improvement in evidence-based decision-making.
Communication also changed with data and knowledge progressively becoming the backbone for information sharing with stakeholders. The Water Dashboard, launched in November 2017 and accessible on the city of Cape Town website, gives weekly updates on dam levels and water consumption in the form of tables and graphs. Furthermore, in January 2018, the Water Outlook was created. As stated by the city of Cape Town itself, “during 2017, information on Cape Town’s management of the drought was limited. This caused much suspicion, distrust and significant misinformation. The Water Outlook was […] developed to provide credible information to stakeholders which was easily digestible and covered the main themes emerging from public enquiries” (City of Cape Town, 2018[30]). It presents an overview of the city’s programme to manage water demand, to augment water availability and water provision, as well as the associated costs (Box 3.6).
The city of Cape Town’s Water Outlook describes the responses being considered to increase the security of the water supply going forward to include:
Updating hydrological information to confirm the yield of dams and integrated system. This will help develop safe yield rather than over-allocate.
Improving catchment management with a focus on clearing alien vegetation that can increase the system yield.
Reviewing the level of desired supply assurance for the city of Cape Town (currently 1 in 50 years).
Source: Ziervogel, G. (2019[3]), Understanding the Cape Town Drought: Lessons Learned, https://www.africancentreforcities.net/wp-content/uploads/2019/02/Ziervogel-2019-Lessons-from-Cape-Town-Drought_A.pdf.
In addition, to these key water-related communication documents, Cape Town also developed guidelines for the safe use of alternative water supply, thus recognising their growing importance, and a guide for the safe use of greywater focusing on recommendations to reduce health and environmental risks. Water-saving materials (downloadable posters, leaflets, presentations, videos, hospitality materials, etc.) were made available on the city of Cape Town website page Think Water. In January 2017, an online map was also launched, with green dots showing houses that were doing well at saving water.
Businesses, including major retailers and shopping centres, also took part in the global communication efforts, especially in early 2018, at the peak of the crisis, by increasing their communication around water saving. Partnerships with companies and non-profit organisations assisted in raising water-saving awaireness and spreading water-saving messages. A retail group invited the city to provide information sessions for their staff and allowed the city to position representatives in their stores to engage with shoppers about saving water. Wesgro, the tourism, trade and investment promotion agency for Cape Town and the Western Cape, established a communication centre comprising about 30 people, which has been reconvened to face the COVID-19 crisis. Taking stock of the growing resistance from Cape Town residents towards tourists and visitors seen as competing water users, Wesgro also issued a data-oriented press release explaining that touristic water consumption was very low (from 1% to 3% of overall domestic consumption) compared to the economic growth it generated. This data and information sharing type of communication succeeded in diffusing citizens’ adverse reaction on the issue. Joining efforts with businesses, the city of Cape Town launched a communication campaign in October 2017 entitled “Save like a local”, targeted at tourists and visitors. Nevertheless, the water crisis had extensive economic impacts. It resulted in 37 000 job losses in the Western Cape Province and an estimated 50 000 people were consequently pushed below the poverty line. The accommodation sector reported a 10% decline in occupancy rate.
Lessons learned throughout the drought crisis in terms of collaboration and communication were hailed as the key to improve stakeholder engagement and trust. As stated in its 2019 Water Strategy, the city of Cape Town intends to strengthen further long-term collaborative relationships with local water stakeholders by co-producing data and evidence, jointly creating and maintaining collaborative platforms, and conducting regular social surveys to better understand the needs and perceptions of citizens, for instance (Box 3.7). Although these efforts need to be amplified and sustained over time, interesting outcomes have already emerged from collaborative programmes such as the Water Resilience Collaboration Laboratory, thus paving the way to strengthen collaboration and potentially turn it into co-operation.
The city of Cape Town recognises that collaborative relationships need to be built and maintained at many different levels of the Cape Town water system, including between:
Collaborative relationships are based on trust and trust is built where there is transparency and mutual accountability, and where stated intentions of all partners are consistently translated into actions. Based on the intensive experiences of engagement during the drought and learning from these, the city of Cape Town will promote and facilitate the building of trust in the following tangible ways:
Engaging citizens and civil society. The city of Cape Town will endeavour to create an enabling environment in order to be responsive to citizen-led water initiatives. The city will continue to work with social partners and collaborative intermediary organisations. It will undertake regular social surveys to better understand the needs and perceptions of citizens, and work with research institutions, NGOs and neighbourhood organisations that have established processes for documenting community water use and needs, perceptions and attitudes.
Engaging business. The city of Cape Town will continue to work with collaborative intermediary organisations such as GreenCape, Wesgro and the WWF to better understand business needs and perceptions and improve communications.
Engaging government. The city of Cape Town will continue to work with collaborative intermediaries such as the Western Cape Economic Development Partnership (EDP) and the National Treasury’s City of Cape Town Support Programme to facilitate productive relationships with other spheres of government including the Western Cape Government and various national government departments.
Engaging labour. The city of Cape Town will continue to work with organised labour as a key partner in service delivery to ensure that the rights of workers are protected.
Engaging researchers. The city of Cape Town will continue to engage with research working groups such as the Freshwater Forum, the Cape Higher Education Consortium, the Water Research Group, the Water Research Commission and the Water Hub to develop and pursue applied research and evidence-based decision-making to assist the city of Cape Town to better fulfil its mandate and implement this strategy. The city of Cape Town will also explore a transdisciplinary research approach and partner with researchers to co-design research agendas and projects for the city.
Engaging key customers. The city of Cape Town will set up a key customers unit to be more responsive to their needs.
Engaging international expertise and experience. The city of Cape Town will enhance existing and develop new knowledge sharing partnerships with national and international bodies able to share relevant knowledge and experience to enable more effective implementation of this strategy. Where appropriate, Cape Town will make use of collaborative intermediates to support this effort. In addition, the city is committed to sharing its own experiences with these institutions in order to contribute to the global community of practice.
Source: City of Cape Town (2019[16]), Cape Town Water Strategy, , http://resource.capetown.gov.za/documentcentre/Documents/City%20strategies.
Below-cost recovery charges
Below-cost recovery charges at national level
As described in Chapter 2, the DWS is currently regulating water resource management charges, water resource development charges, bulk water and wastewater charges and wastewater discharge charges. Although some generic tariff setting principles are established in the Pricing Strategy for Raw Water Use Charges (DWS, 2007[31]) (Table 3.3), no precise method (detailing tariff-setting formula, for instance, and the associated required information to be collected/provided) and no clear tariff-setting process are defined, apart from a yearly stakeholder consultative process on tariff. In addition, the current regulatory capacity in the water sector is insufficient in terms of: the number of skilled staff to implement regulatory requirements; the appropriate tools for regulation in the context of limited staff (3% of DWS staff is in charge of all regulatory tasks); and financial resources. As a result and in the absence of robust economic regulation guidance and means, tariffs and charges are set below-cost recovery level. This situation weakens the DWS’ financial capacity to properly maintain, rehabilitate and upgrade its water and sanitation assets.
It should also be mentioned that there was some reluctance among water service authorities to see water charges increase. Some of them perceived the raw water tariff as an “economic rent” for the DWS which is both the operator and the regulator of raw water infrastructure, resulting in a gamekeeper and poacher problem. There is also a perception among water service authorities that the establishment of CMAs will increase the water resource management charge significantly, thus ultimately increasing the overall water tariff. This triggered resistance to any charge increase despite their current low level.
Below-cost-recovery tariffs at the local level
The city of Cape Town recognises in its Water Strategy (2019[16]) that the water tariff has to change in order to better reflect costs of service provision: “both the structure and level of water and sanitation tariffs will change over time to better reflect actual costs and provide appropriate signals for efficient water use and investment in additional supplies”. Currently, the water and sanitation tariff covers operation and maintenance expenditure. The city of Cape Town plans to increase the tariff so that revenues will at least meet actual costs, including the cost of replacing ageing infrastructure. This evolution is needed as, for instance, the current targets for water and sewers network renewal rates range from 0.2% to 0.4% (City of Cape Town, 2019[14]). This means that the network is presently amortised over a maximum period ranging from 250 to 500 years which is not sustainable.
In Cape Town, residents in formal housing use 66% of the city’s water while informal settlements account for 4% of the total consumption (Box 3.8). The rest of the consumption concerned industrial and commercial uses. About 1.5 million people cannot afford to pay for water and are eligible for the Free Basic Water Policy. This policy, passed by the South African government in 2001 and that promotes more equal service delivery, mandates that municipalities provide 25 litres per day per person, or 6 m3 per month for a household of 8, at no cost to end-users and accessible within 200 m from their homes. When translating this national policy requirement into its local water policy, Cape Town decided to expand the Free Basic Water volume to 10.5 m3 per month.
According to South Africa’s 2011 Census, 20.5% of Cape Town’s households live in informal dwellings – with 7% in informal backyard structures and 13.5% in informal settlements. This proportion is expected to rise steadily as more and more people move to the city looking for work. Urban or peri-urban informal settlements are located near urban centres or economic node and are characterised by a lack of formal town planning layout and approvals, a lack of formal tenure and informal housing without building plans and related approvals (Housing Development Agency, 2014[32]).
There are currently 204 recognised informal settlements in Cape Town comprising 437 individual pockets. These pockets can be large blocks of hundreds of homes, small clusters of only a few homes scattered on land in between formal houses or individual homes on plots surrounded by food gardens. There is a wide variation in the number of households in a pocket, ranging from 3 in Chris Hani Park area to nearly 8 000 in Enkanini area. Many of the informal settlements in Cape Town were established before 2000 and are not recognised as permanent, and their residents lack occupation rights and security of tenure. Only 17 pockets (4%) are less than 5 years old; around 286 pockets (65%) were established before the year 2000 and 103 (24%) were established before democracy.
In line with the national government policy, the city of Cape Town provides free basic water and sanitation services to residents in informal settlements with 1 water tap per 25 families within a radius of 200 m and a minimum of 1 toilet per 5 families. As a whole, the city of Cape Town provides and maintains over 10 000 communal standpipes (taps) and over 50 000 toilets which are regularly cleaned. Most informal settlements have full flush (waterborne) toilets and these are generally preferred by both the city and communities. However, it is not always possible to place flush toilets in areas that are vulnerable to flooding, on unstable ground (e.g. former solid waste disposal sites), on private land or so densely settled that there is no room for water infrastructure. Hence, alternative toilets have also been installed comprising, for instance, chemical toilets, portable flush toilets or container toilets. The majority of these non-flush alternatives are cleaned three times a week. From 2006 to 2014, 30 000 toilets have been installed in informal settlements throughout the city of Cape Town.
Source: City of Cape Town, South Africa website, 2020; Housing Development Agency (2014[32]), “Informal settlements: Rapid assessment and categorisation”.
In 2020, 270 000 households were receiving free basic water and sanitation which represented a cost of ZAR 681.5 million (USD 46.7 million) or approximately 10% of the yearly operational expenditure (City of Cape Town, 2020[33]) (Figure 3.3). This cost is expected to keep growing due to continued urbanisation and migration flows toward the city. The level of non-revenue water reaches on average 22% (City of Cape Town, 2019[14]). As a result, about 78% of the water produced generates billing. As the invoice collection ratio is 84% in 2019/20 (City of Cape Town, 2020[33]), the revenues from invoicing effectively cashed in represent 66% of the water produced which strongly reduces the financial base of the water and sanitation service (Figure 3.4). As a result, setting cost-reflective tariffs may generate affordability and acceptability issues, especially in a context of increasing block tariff structure.
Source: City of Cape Town (2019[14]), Departmental Business Plan 2019/2020, Department of Water and Sanitation.
The city of Cape Town foresees that the current fixed charge, established in 2018, will increase to cover a greater share of fixed costs while ensuring that the tariff remains affordable. The variable share of the water price will gradually be set at the average incremental cost.6
Funding gaps
Funding gap at the national level
Funding needs for water resource management
Although water resource management charges and the waste discharge charge exist in South Africa, the waste discharge charge is not implemented and the water resource management charge is set too low to serve as an incentive and effective economic instrument to manage water resources and to collect needed revenues, thus not delivering their economic nor financial function in the end.
According to the Pricing Strategy for Water Use Charges (DWS, 2007[31]), their setting method is based on the actual cost recovery of the activities required “to protect, allocate, conserve, manage and control the water resources and manage water quality”.
“These costs could include but are not limited to the following activities:
- Planning and implementing catchment management strategies.
- Monitoring and assessing water resource availability and use.
- Water quantity management, including flood and drought management, water distribution, control over-abstraction, storage and streamflow reduction activities.
- Water resource protection, resource quality management and water pollution control.
- Water conservation and demand management.
- Institutional development and enabling the public to participate in water resources management decision-making”.
However, despite these generic provisions and principles, no detailed costing method is set forward. The strategy only states that “total budget cost of each activity will be divided by the registered volumes to arrive at a unit charge per activity”. As a result, the level of the water resource management charge remains low due to low estimates of activities’ funding needs. In the revision of the Pricing Strategy for Water Use Charges dated 2015 (DWS, 2015; not approved[34]), it was provided that in “situations where there is an under-recovery of costs, or where there are limited revenue opportunities in the water management area, to cover the costs of public interest functions, i.e. activities that are in the interest of the broader society, the National Department for Water and Sanitation (DWS) will provide fiscal support to the CMAs”. Fiscal resources were hence foreseen to complete water resource development charges to reach full cost recovery. However, this revision was never approved. As a result, the absence of a sound method for setting abstraction and pollution charges in South Africa remains an issue that should be addressed to reap off the benefits of these economic instruments.
In addition, water users should also be charged for the environmental and scarcity costs induced by water abstraction or use, as this is essential for achieving full cost recovery. Indeed, the general principle for setting water charges is to reflect the externalities that water abstraction (or water pollution) by one user causes to third parties and the environment – not only to pay for the activities required “to protect, allocate, conserve, manage and control the water resources and manage water quality” (DWS, 2007[31]) (Box 3.9). In most cases, due to data limitations and practical issues, public authorities are not able to measure environmental and opportunity costs of using water accurately. Still, water users must get an accurate signal about relative water availability and quality across time and space.
Environmental costs correspond to damage induced by water abstraction or pollution. For example, too much groundwater abstraction may cause saline intrusion in coastal aquifers or reduce river flows. Excessive surface water abstraction may result in reduced environmental flows and ecosystem functioning and require expensive infrastructure in some sectors to allow them to ensure secure water supplies. Note that the same level of pollution can generate different levels of externalities, depending on features of the receiving water body (e.g. dilution capacity, instream water quality levels) and potential uses downstream (recreational, drinking water or others). Industry and public water supply can incur significant increased treatment costs to ensure that the abstracted water meets their quality standards.
Opportunity costs of using water represent the foregone opportunities of alternative water uses. These costs are incurred when one water user or polluter affects the use of the resource by any third party. For example, higher water withdrawal by a city might affect the quantity of water available to downstream irrigators, thus imposing costs on these users. There are also opportunity costs associated with the exclusion of other potential users in areas where water quality is unsuitable for use. Technically the opportunity cost is defined as the value of the water in its highest value alternative use. Opportunity costs are typically higher where water is scarce and competition to access is fierce. They are also higher when water is being used for low-value uses, preventing access for higher-value uses. If property rights are in place and tradeable, the market value of water would reflect opportunity costs.
Source: OECD (2017[35]), Water Charges in Brazil: The Ways Forward, https://doi.org/10.1787/9789264285712-en.
Funding needs for water and sanitation investment and operation
Volume 1 of the National Water and Sanitation Master Plan (DWS, 2019[2]) clearly acknowledges that the situation of the water and sanitation sector is currently not financially sustainable. This is confirmed by the outcomes of the Municipal Strategic Self-Assessment (MuSSA)7 2019 that shows that one of the top areas of vulnerability of water supply and sanitation (WSS) services is the financial management of services. This situation raises important concerns with regard to asset management and the associated negative externalities. A total of 56% of the over 1 150 wastewater treatment plants are in poor and critical condition and need urgent rehabilitation and proper operation. Infrastructure is ageing with 57% of the asset being depreciated and needing renewal. This situation generates water quality issues in areas where effluents are discharged. In this context, the capital funding needs have been assessed to approximately ZAR 90 billion (USD 6.2 billion) per year for the next decade, with about 78% for water supply and 12% for sanitation. This assessment of capital expenditure needs includes the necessary funding to address refurbishment (ZAR 59 billion, USD 4 billion) and renewal (ZAR 332 billion, USD 22.8 billion) backlogs, as well as the development of new infrastructure and an asset replacement value representing 8% of the installed value. A funding gap of ZAR 33.3 billion (USD 2.3 billion) per year (or ZAR 333 billion, USD 23 billion, in total for the coming 10 years) is anticipated (Table 3.4), representing more than one-third of the capital funding needs. In addition, the National Water and Sanitation Master Plan (DWS, 2019[2]) also points out that a yearly funding operational gap of ZAR 5 to 10 billion (USD 0.35 to 0.7 billion).
As stated in the National Water and Sanitation Master Plan (DWS, 2019[2]), several reasons account for this long-lasting insufficient funding situation of the water and sanitation sector in South Africa:
The low collection rate of fees from municipalities and Water Boards has increased by 14%, from ZAR 13.1 billion (USD 0.9 billion) in September 2018, to ZAR 14.9 billion (USD 1 billion) in September 2019 (DWS), which weakens further the DWS capital expenditure capacity.
The reduced revenues generated by high non-revenue water which amounts to 36% on average in 2019 at the national level with a maximum of 49% in Limpopo Province (DWS).
The non-cost-reflective tariffs despite the provisions of the Water Services Act.
The fiscal constraints that have lowered the national subsidies granted to the sector.
The sub-optimal procurement processes that generate recurrent financial mismanagement.
Funding gap at the local level
The city of Cape Town, unlike many other municipalities in South Africa ( (DWS, 2019[2])), holds separate water accounts from city accounts since 2018, thus ensuring a clear identification of water money revenues and spending. Nevertheless, Cape Town water and sanitation service is not financially sustainable as revenues collected are low and insufficient to cover operating, maintenance and renewal costs. The existing funding gap is further aggravated by a decreasing invoice collection ratio which dropped from over 90% in 2012/13 to a low of 60% in 2018 (Figure 3.5). The period of the drought also brought along important financial issues with water consumption more than halved. As a result of this sharp reduction, the revenues of the service also decreased dramatically with a ZAR 1.7 billion deficit in 2017 (Visser, 2018[26]). The COVID pandemic and the associated economic crisis are likely to degrade further the collection ratio which had resumed increasing in 2019.
Cape Town water and sanitation asset base is valued at ZAR 75 billion. The operating budget was ranging between ZAR 7 and 8 billion from 2016 to 2018 but rose to ZAR 11 billion since then. In its 2019 Water Strategy, Cape Town plans a ZAR 40 billion investment programme over the next decade (or approximately ZAR 4 billion per year). This represents a sharp 70% increase compared to 2018/19 capital expenditure and even a higher effort compared to the years before. A mix of solutions is being considered to fill the funding gap. They include a WSS tariffs increase, economic and technical efficiency gains, a pooled city of Cape Town financing strategy as well as grants. Indeed, the financial framework for WSS investment funding in South Africa mainly relies on a mix of tariffs, grants and subsidies. National government grants represented 54% of capital spending on municipal WSS services in 2014/15 (DWS, 2015[36]). In addition to investment grants, operating subsidies are also distributed to WSS services and represented 12% of total operating income from water services in municipalities. Overall, the level of grants received by local WSS varies according to the size of the municipality and ranges from 62% for rural towns to 18% for metropolitan areas, like Cape Town (Figure 3.6). Nevertheless, fiscal constraints may reduce the amount of available subsidies, thus aggravating further the existing funding gap for the city of Cape Town water and sanitation service.
Source: City of Cape Town, (2021[37])
Source: DWS (2015[36]), Strategic Overview of the Water Sector, Department of Water and Sanitation.
References
[10] Auditor-General (2018), Report of the Auditor-general to the Joint Committee of Inquiry into the Functioning of the Department of Water and Sanitation: Challenges Facing the Water and Sanitation Portfolio, https://www.corruptionwatch.org.za/wp-content/uploads/2020/02/180327AGSA-Challenges_Water_Sanitation.pdf.
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Notes
← 1. This reconciliation strategy provides a decision support framework to facilitate the reconciliation of predicted future water requirements with available water in the WCWSS over a 25-year planning period.
← 2. “State capture can be defined as the actions of individuals or groups both in the public and private sectors, influencing the formation of laws, regulations, decrees and other government policies to their own personal advantage. […] It is apparent to note that state capture undermines the efficiency of the state, especially where there is a direct relationship between state capture and corruption. This primarily happens when a state is paying more than it is supposed to for outsourced goods and services. State capture also undermines the efficiency of the state. This happens through poor quality services and public goods being delivered by patronage networks but less than capable service providers, through fiscal resources being redirected away from public goods provision for the poor or from value-adding economic endowments towards servicing some or other patronage network; and by weakening state capacity through appointing pliable but less than capable people in key positions, especially in finance procurement and political bearers (Whelan, 2016[38]). Jonas (Jonas, 2016[39]) asserts that the most important element state capture takes away from a state is its legitimacy. This happens through governance systems and rules being flouted with, leading to a lack of transparency and accountability within the structures of the state” (Martin and Solomon, 2016[7]).
← 3. NIWIS is the National Integrated Water Information System (http://www.dwa.gov.za/niwis2).
← 4. See https://www.capetown.gov.za/City-Connect/Register/Water-and-sanitation/Register-a-borehole.
← 5. Special permission was obtained from National Treasury to change the tariff within the year.
← 6. The average incremental cost is the average of the future cost incurred in adding additional supplies and can be calculated by dividing the discounted value of future supply costs by the (similarly discounted) amount of additional water to be produced (Bahl, 1992[40]).
← 7. Overseen by the DWS, the Municipal Strategic Self-Assessment asks 5 questions that cover 18 key business health attributes.