In terms of the Constitution, local water supply and sanitation services are a function over which municipalities have executive authority. Municipalities which are allocated this function are called Water Services Authorities (WSAs).
The Blue, Green and No Drop audits of municipal drinking water and wastewater systems published by the Department of Water and Sanitation in 2022 and 2023 provided evidence of a sharp decline in the average performance of these systems across a range of indicators since the audits were last published in 2013 and 2014.
The Water Services Act distinguishes between WSA and Water Services Provider (WSP) functions at municipal level. The Act states that a WSA may perform the role of a WSP itself or may contract with an external WSP to provide the service. WSAs have a regulatory function of ensuring that their WSPs provide an adequate service to all consumers in their areas of jurisdiction.
Since the Water Services Act was passed in 1997, almost all WSAs have opted to perform the role of WSP internally themselves. However, very few of them are managing and accounting separately for the WSA and WSP functions as required by the Act, and very few of them have entered into service delivery agreements with their internal WSPs.
This means that most municipalities that have been allocated the WSA function have been neglecting this function.
A few WSAs have appointed external WSPs. Thirty-year concessions were put in place in 1999 by the iLembe District Municipality in KwaZulu-Natal and the City of Mbombela in Mpumalanga. The concession agreements are for the provision of the full WSP function in certain areas of the municipalities, including billing and revenue collection, treatment and distribution of water, collection and treatment of wastewater, development of the required infrastructure, and operation and maintenance of the infrastructure. The WSA retains responsibility for setting the water tariffs.
The concessions do not result in the privatisation of water. The National Water Act prohibits private ownership of water in South Africa. Rather, concessions enable the mobilisation of private sector expertise and finance to assist WSAs to implement their responsibilities.
At the time that the concessions were put in place, both municipalities faced significant challenges, including substantial water losses, ageing infrastructure, limited financial capacity to invest in upgrades, and insufficient technical expertise to manage and operate water services effectively. Large portions of their populations were without access to a reliable basic level of water supply.
In 1999, it was estimated that 45% of the households in the Mbombela concession area did not have access to water. By 2022, at least 94% of the households in the concession area had access to water. In the iLembe concession area, about 60% of the households had access to water in 1999, and almost 100% of households now have access to water.
In the iLembe concession, the concessionaire is achieving a 100% revenue collection rate (ie revenue is collected for 100% of bills issued – all the water is supplied through prepaid meters). In Mbombela, the revenue collection rate is above 90%. The average water revenue collection rate for WSAs in South Africa is about 65%.
Non-revenue water (ie water produced or bought by the WSP which does not generate any revenue) in the Mbombela concession area is 32%, as opposed to 73% for the non-concession areas of Mbombela. In the iLembe concession area, non-revenue water is 21%, as opposed to 55% for the iLembe District Municipality as a whole.
Both concessions have performed exceptionally well in the DWS Blue and Green Drop audits of the performance of their drinking water and wastewater treatment systems.
Notwithstanding these measurable successes of the concessions, they have experienced some challenges, largely relating to weaknesses in the management of the concessions by the two WSAs. For future concessions, many of these challenges could be addressed through improved contract documentation and contract management.
Three WSAs in South Africa have appointed municipal entities as their WSPs. The experience of municipal entities as external WSPs has been mixed, partly because of poor governance and partly because the entities have not been established as fully fledged external WSPs.
The City of Johannesburg established Johannesburg Water (JW) as a municipal entity in 2001. The original intention was for JW to operate as a ring-fenced utility, but in subsequent years some of its functions, including billing and revenue collection, customer relationship management, and parts of supply chain management and logistics such as fleet management, were recentralised into the city administration.
The city provides JW with an annual budget, which is unrelated to the amount of revenue collected from the sale of water. It is therefore difficult to assess the performance of JW as an external WSP, because for many years it has not had all the responsibilities that an external WSP should have.
The Ekurhuleni Water Care Company (Erwat) was established in 1992 as a municipal-owned entity of Ekurhuleni Metropolitan Municipality to manage the municipality’s wastewater treatment works (WWTW). Similarly to Johannesburg Water, billing and revenue collection is done by the municipality, and there is no ring-fencing of revenue from wastewater service charges for Erwat.
However, there is single-point accountability, and the board and managing director have full control over their management functions. Erwat has performed much better than most municipalities in terms of its Green Drop scores, with six of its 17 WWTW obtaining Green Drop certificates and the other 11 receiving scores in the good-performing category.
In 2005, the Maluti-a-Phofung Local Municipality established Maluti-a-Phofung Water as a municipal entity to be its WSP. In its early years, Maluti-a-Phofung Water achieved favourable Blue Drop and Green Drop assessment scores.
However, since then, Maluti-a-Phofung Water has faced a prolonged period of operational, financial and governance difficulties. Its institutional capacity has been steadily undermined by political instability, infrastructure degradation and widespread mismanagement.
Consequently, its performance has deteriorated markedly. Its average Blue Drop score fell from 97.7% in 2014 to 17.7% in 2024. It has also declined in terms of wastewater management – its Green Drop performance dropped from 76% in 2013 to 18% in 2021. All seven of its wastewater treatment works and 30 sewage pump stations are non-functional.
Rand Water and Emfuleni Local Municipality have recently decided to establish a Special-Purpose Vehicle (SPV) to be the WSP in Emfuleni. The SPV will be jointly owned by Rand Water and Emfuleni Local Municipality. Emfuleni Local Municipality will remain the WSA and will sign a 30-year contract with the SPV.
The SPV will draw on the experience and expertise of Rand Water. Rand Water has produced a detailed and thorough business case, which indicates that the SPV would be able to reduce non-revenue water from its current level of 74% in Emfuleni to below 20%. This would provide sufficient funding for the SPV to be financially viable, and to deliver reliable water and sanitation services.
The reforms being implemented in the water services sector, including amendments to the Water Services Act, which will be submitted to Parliament shortly; the Reform of Metropolitan Trading Services Programme being implemented by National Treasury; and the water-related reforms in Phase 2 of Operation Vulindlela will all result in the creation of an enabling environment for the more widespread appointment of external WSPs by WSAs.
Two of the key reforms are the ring-fencing of revenue from the sale of water for the water function and the creation of single-point accountability for WSPs, both of which are prerequisites for the appointment of external WSPs. DM