"The NWRIA will strengthen governance and transparency in the water sector"
South Africa’s water resources depend on an irregular climate. Climate variability and increasing demand are expected to increase the pressure on available water resources, exacerbating existing water stress across the nation.
Primarily responsible for the formulation and implementation of policy governing the water sector, South Africa’s Department of Water and Sanitation (DWS) also promotes effective and efficient water resources management to ensure all South Africans gain access to clean water and dignified sanitation. To attract private investment in infrastructure, a National Water Resource Infrastructure Agency (NWRIA) will be established to help ensure reliable bulk water supplies and help municipalities take action to guarantee water security, while the DWS will continue to do the planning to meet future demand. In this interview, Dr Sean Phillips, Director General of the Department of Water and Sanitation since last January, tells us about the department’s priorities and the plans for the NWRIA.
Can you briefly tell us about your career path and your current role at South Africa’s Department of Water and Sanitation?
I have honours, master’s and PhD degrees in engineering and a Master of Management in public and development management. I have spent more than 20 years working in senior management positions across the three spheres of government, including Head of Department of the Limpopo Department of Public Works and Roads; Chief Operations Officer of the national Department of Public Works; Director General of the Department of Planning, Monitoring and Evaluation in the Presidency; CEO of the Municipal Infrastructure Support Agency; and Managing Director of the Johannesburg Road Agency. I also spent several years working in the Government Technical and Advisory Centre in National Treasury, supporting various efforts to improve government performance. Recently I worked on the Infrastructure Fund at the Development Bank of Southern Africa (DBSA) and Operation Vulindlela with National Treasury and the Presidency. In January 2022 I was appointed Director General of the Department of Water and Sanitation.
Can you tell us about your department’s priorities for water and sanitation services?
Historically, DWS primarily focused on the development and management of national water resources such as large dams and associated infrastructure. However, the Department is now also taking responsibility for addressing weaknesses with water and sanitation services at local government level. This does not mean that the Department will be neglecting its responsibilities regarding national water resources, but rather that it will be doing more to meet its water services responsibilities.
The Constitution, National Water Act, and Water Services Act compel the DWS and other national departments to support municipalities and to intervene where there is non-compliance with national minimum norms and standards. The main underlying causes of the deterioration in municipal water and sanitation services that we have seen are weaknesses in governance; poor asset management, billing and revenue collection, operations management, and maintenance; and lack of personnel with the required qualifications and experience in municipalities.
DWS will consistently intervene where there is non-compliance with national norms and standards for water and sanitation services
To date, national government support and interventions related to municipal water and sanitation services have not been sufficiently effective to stop the decline in these services. The DWS is introducing changes to make support and interventions more effective. These changes include interventions in municipalities through Section 63 Interventions in terms of the Water Services Act as well as through collaboration with the mining and agricultural sectors. The DWS also intends to make greater use of its Water Boards to support and intervene in municipalities.
In addition, grant conditions and grant management processes must be adjusted to ensure that transfers to municipalities for water and sanitation infrastructure are used to address non-compliance with norms and standards; and to ensure that they provide incentives for addressing problems such as non-revenue water.
The NWRIA was established to create an enabling institutional environment for raising private sector finance for water infrastructure
The department has identified municipalities where water and sanitation services are dysfunctional and is now supporting and intervening on an unprecedented scale. However, there is a need to move to a situation where support and intervention by the department, working together with the National Treasury (NT) and the Department of Cooperation and Traditional Affairs (COGTA), is automatic, based on concrete evidence of poor performance, rather than the current ad-hoc approach of only intervening when problems are identified at a political level. The department is therefore putting in place the following measures to make its support and intervention more consistent, systematic, and effective:
- Developing more comprehensive norms and standards for water and sanitation services in terms of the Water Services Act.
- A publicly visible National Regulatory Dashboard showing the extent of compliance with national norms and standards for all Water Service Authorities, drawing on existing monitoring information, including the Drop reports, NT, and COGTA reports, building on the existing Integrated Regulation Information System.
- Rolling regional support and intervention plans based on the evidence in the Regulatory Dashboard, to be managed by DWS regional offices, in consultation with provincial governments, municipalities and DDM structures.
- A range of support programmes need to be developed at a national level, jointly by DWS, COGTA and NT.
Based on the evidence in the Regulatory Dashboard, DWS will consistently intervene where there is non-compliance with national norms and standards for water and sanitation services.
What is the rationale for creating a National Water Resources Agency at this time?
DWS is implementing a range of major projects to augment national bulk water resource infrastructure and to increase the security of supply. In addition to these government-funded projects, DWS is also implementing several blended finance projects, in collaboration with the Infrastructure Fund. We are also implementing several large-scale water resource infrastructure projects in collaboration with the mining and agricultural sectors.
While all these projects will make a substantial contribution to increasing water security in the country, they are not sufficient. The Government is constrained in the extent to which it can finance additional water resource infrastructure projects. The main rationale for establishing the National Water Resources Infrastructure Agency (NWRIA) is to create an enabling institutional environment for raising more private sector finance for water resource infrastructure. The NWRIA will be created by merging the Trans Caledon Tunnel Authority (TCTA) and the Water Trading Entity (WTE) of the Department. Ownership of all the national water resource infrastructure currently owned by the department will be transferred to the NWRIA. The NWRIA will therefore have a substantial balance sheet and the intention is for it to work towards being able to raise finance which is not backed by government guarantees, which is currently a constraint on borrowing by the TCTA. There are substantial revenue streams associated with this asset base which can be used to raise finance.
The establishment of the NWRIA will also address the current fragmentation of asset management and revenue collection functions
The establishment of the NWRIA will also strengthen governance and transparency in the water sector by separating the roles of player and referee i.e., DWS will retain responsibility for planning, regulation, policy and price setting, whilst the Agency will build, operate and maintain water resource assets. It will also address the current fragmentation of asset management and revenue collection functions for national water resource infrastructure between the TCTA, the WTE and the department, and the establishment of the NWRIA will enable them to be integrated into one entity.
How does South Africa plan to attract private investment in water infrastructure?
In addition to establishing the NWRIA to raise finance for national water resource infrastructure, we have established a Water Partnerships Office with the DBSA, to assist municipalities to put in place commercial public-private partnerships in areas such as reducing non-revenue water, water reuse, and desalination, amongst others. The WPO will develop standardized programmes for public-private partnerships to make it easier and quicker for municipalities to enter into Public Private Partnerships. The WPO will recruit specialists in feasibility studies and financial structuring to assist municipalities.
What types of business models could the new agency contemplate to build and operate water infrastructure?
The NWRIA should be open to considering a range of business models for the construction and operation of national water resource infrastructure. This will include the current TCTA model of financing through loans through to public-private partnerships, such as build, operate, and transfer models.
To what extent do you think the new agency will help increase access to water and sanitation to currently under-served communities?
The NWRIA’s responsibilities will be limited to building, managing and operating national water resource infrastructure. This will assist municipalities by ensuring that there is a security of supply of bulk water. The department has other entities (the water boards) and programmes and grants which are aimed at assisting municipalities to provide access to water and sanitation to currently under-served communities.