PRINCIPLES OF THE WATER ACT

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PRINCIPLES OF THE WATER ACT
NATIONAL WATER ACT, 1998
Social Equity
Ecological Sustainability
Financial Sustainability
Economic Efficiency
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THE CHALLENGE MAR/POPULATION AND GDP
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HISTORY OF WATER IN SOUTH AFRICA

• Legislation (including the 1913 Land Act)
  dispossessed indigenous people of their major
  capital asset LAND
• Land ownership was concentrated in the hands of
  the white minority
• Water Act of 1956 tied water rights to land
  owners, riparian rights
• This dispossessed black South Africans of their
  water
• Other legislation such as poll tax forced black
  men to leave the land for jobs on mines and in
  cities
• Women were left to till the land in those limited
  areas set aside for the black population
• Forced removals concentrated the black population
  in ever decreasing land areas

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WOMEN AND WATER

• Some of the poorest households are those in rural
  areas headed by women.
• Mean monthly income per head in female headed
  household was R243 in 1993. (US37)
• Many households in non-urban areas are forced to
  fetch water from outside the household. Woman
  are predominantly responsible for this task. The
  median time spent by woman collecting water is 60
  minutes a day.
• Womens access to socio-economic rights are vital
  to ensuring gender equality.
• The impact of a tap within 200 meters on the life
  of a woman who previously had to walk several
  kilometers to unprotected spring or river is
  enormous, including freeing up her time for more
  productive activities and improved personal and
  family health.

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THE MANDATE OF GOVERNMENT

• The entrenchment of economic and social rights,
  such as rights pertaining to food and water is a
  requirement and unique feature of our Bill of
  Rights.
• The inclusion of these rights, largely influenced
  by social injustices of the past and the
  aspiration of our people to establish a society
  based on social justice and human rights,
  requires the state to meet these obligations,
  with water being the most basic of rights.
• As a result the Department in the past decade
  made water accessible to 10 million South
  Africans.
• Structured changes to the South African economy
  resulted in sustainable growth rates in our
  economy, this together with a more efficient tax
  collection system, resulted in higher levels of
  income tax collection.
• The decreased interest burden as a result of
  paying off State loans and a decrease in defence
  and other spending has freed up tax revenue for
  social projects/services.

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WATER SUPPORT PROGRAMS

• Enhancing food security for the poor
• National Water Act Schedule 1 makes water
  available free of charge and with no licence
  requirements for reasonable domestic use and for
  food gardens (not for commercial purposes).
• DWAF will provide financial support to Resource
  Poor Farmers in terms of section 61 of the
  National Water Act with funds appropriated by
  Parliament for-
• Capital cost of construction and/or upgrading of
  irrigation schemes
• Subsidies for a limited period on water charges
• Grants for acquisition of water entitlement
• Socio-Economic Viability Studies to investigate
  the establishment of irrigation schemes
• Grant for training of WUA will ensure effective
  management of communal water infrastructure
• Funding of rainwater harvest tanks
• The above mentioned support will contribute in
  promoting economic development in rural areas
  where there are few development opportunities.

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SUPPORT FROM THE DEPARTMENT OF AGRICULTURE AND
LAND AFFAIRS

• Department of Agriculture has made available R250
  million in the 2005/06 financial year to support
  small scale infield agricultural development.
• In addition the Department of Land Affairs is
  promoting the Land Redistribution for
  Agricultural Development Program (LRAD), which
  provides grants to previously disadvantaged South
  African Citizens to access land for agricultural
  purposes.
• In order to co-ordinate financial assistance to
  Resource Poor Farmers, Land Affairs, Agriculture
  and DWAF participate in CCAW (Coordinating
  Council for Agricultural Water), DWAF have also
  began participating in LRAD meetings.
• Participation in these forums ensures structured
  support to Resource Poor Farmers, where grants
  offered by relevant government departments are
  packaged to enhance the viability of supported
  projects.

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WATER AND THE ECONOMY

• South Africa is a middle income, emerging market
  with an abundant supply of natural resources,
  well developed financial, legal, communications,
  energy and transport sectors its stock exchange
  ranks 10 largest in the world with a modern
  infrastructure, but a large proportion of the
  population are extremely poor.
• GDP stands at 491.4 billion (2004 est.), with
  current growth rate of approximately 3.8.
• GDP composition Labour force
• Agriculture 3.6 30
• Industry 31.2 25
• Services 65.2 45
• (contribution of agriculture to the labour force
  is a key issues for policy makers)
• Agricultural products
• maize (corn), wheat, sugarcane, fruit,
  vegetables, beef, poultry, mutton, wool, dairy
  products
• Industries
• Mining (worlds largest producer of platinum,
  gold, chromium), automobile assembly,
  metalworking, machinery, textile, iron and steel,
  chemicals, fertilizer foodstuffs.

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WATER AND THE ECONOMY

• The Gini co-efficient (measures the level of
  income inequality in a county) of South Africa is
  amongst the worst in the world. The lowest 10
  of the population earn 1.1 of household income
  while the highest 10 of household earn 45.9 of
  total household income.
• Of South Africas land only 12 is arable and
  land under commercial irrigation is estimated at
  13 500 sq km.
• Lack of sufficient arterial rivers and lakes
  requires extensive water conservation and control
  measures.

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AGRICULTURAL BACKGROUND SOUTH AFRICA

• Agriculture contributes a small and declining
  share of total economic output.
• Nevertheless the agricultural sector is the major
  user of the countrys water resource and also a
  major employer of the labour force.
• Water requirement
• Irrigation 62 - Mining bulk industrial
  6
• Urban 23 - Power generation 2
• Rural 4 - Forestry 3
• While the above mentioned trend may be typical of
  agriculture worldwide, it bears special
  importance to South Africa where water resources
  are scarce.

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AGRICULTURAL BACKGROUND SOUTH AFRICA

• Recent trends indicate increased competition for
  water from other sectors with development needs,
  hence a declining share of water is available for
  irrigation activities.
• Exports from secondary value added activities and
  processing of primary agricultural products
  contributes an additional share of more than 15
  to total value of exports.
• Total potential irrigable land in South Africa is
  estimated at 1.57 million ha. According to
  recent estimates this potential has been fully
  exploited.
• Most of the irrigated land is used for
  large-scale commercial farming, less then 4 of
  the land belong to small scale farmers.

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FINANCING OF WATER INFRASTRUCTURE

• DWAF is custodian of some 300 large dams
  contained in more than 150 Government water
  schemes throughout South Africa.
• The water sector requires investments in excess
  of R20 billion over a period of 20 years for dam
  and related projects.
• The fiscus cannot afford this large capital
  outlay.
• While some schemes are financed with state
  funding the NWA allows the Minister to direct
  TCTA to implement and fund commercially viable
  schemes with non Governmental funding.
• This allows TCTA to raise loans to finance the
  development of new infrastructure on the
  understanding that the loans will be serviced
  through cost recovery from economic water users
  in terms of billable water use charges.
• To better manage and protect this huge network of
  water infrastructure, Cabinet has given approval
  for the established of the National Water
  Resource Infrastructure Agency (NWRIA) which will
  most likely incorporate the activities of the
  TCTA.

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Methodology for determining charges for state
funded (Social) GWSs
FOR NEW INFRASTRUCTURE BETTERMENTS
FOR REFURBISHMENT

• Depreciation component
• Asset value as determined in 2000
• Depreciate on straight line over useful life as
  per table
• Examples Dams 10 over 45y
• Steel Pipes - 75 over 30y
• Asset values will annually be indexed by PPI
  until formal revaluation ( every 10 y)

• Return on assets
• 4 on completion cost new infrastructure, or
• 4 on depreciated replacement cost
• (asset value as determined in 2000)
• Asset values will annually be inflated by PPI
  until formal revaluation (
  every 10 y)
• Not applicable to existing State irrigation
  schemes

• Operation and maintenance charge
• Direct and indirect costs
• Scheme by scheme basis

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FINANCING OF IRRIGATION WATER INFRASTRUCTURE

• The fiscus can no longer afford to develop water
  infrastructure at discounted rates for the
  exclusive use of irrigation.
• In terms of the draft 2005 Pricing Strategy a
  proposed new scheme could have both a social and
  commercial component and therefore a deferential
  charge system could be applied to make the entire
  scheme viable.
• In such a case the commercial component could be
  financed in the Capital Markets via the TCTA,
  while the social/irrigation component of the
  proposed infrastructure could be financed by the
  fiscus.
• The introduction of new irrigation infrastructure
  usually enhances the viability of agricultural
  enterprises.
• As a result commercial banks have recently began
  looking at financing communal water
  infrastructure for commercial agriculture.

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FINANCING OF IRRIGATION WATER INFRASTRUCTURE

• In this regard Rand Merchant Bank has financed a
  dam project in the Pongola area and a water
  pipeline in the Blyde Valley at an estimated
  investment of R300 million.
• These projects were subsidies by DWAF and in the
  case of the Pongola Dam, DWAF has substantially
  guaranteed a portion of the loan.
• The bank has experienced difficulty in recovering
  repayments because of the following-
• Cost overruns on projects
• Reduced commodity prices
• Stronger Rand
• Culture on non-payment on the part of some
  commercial farmers
• Expectation that the State will bail out the
  farmers
• Poor structuring and gearing of the debt
• Droughts/Floods

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FINANCING OF IRRIGATION WATER INFRASTRUCTURE

• DWAF by providing water licence to the Makhatini
  Flats, enabled this community to raise a Land
  Bank loan to establish irrigation infrastructure
  that produced cotton and wheat, sales in one year
  amounted to 269.3 million. The project has
  benefited more than 1000 individual emerging
  commercial farmers and created some 5000
  permanent and seasonal job opportunities.
• Issuing of license was only possible by delinking
  property rights and land rights.

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WASTE DISCHARGE CHARGE SYSTEM

• In the 2005 Water Pricing Strategy, DWAF for the
  first time will introduce the Waste Discharge
  Charge System (WDCS), which consist of the
  following key principles.
• Waste management fee
• Define resource quality objectives (RQO)
• Acknowledge that there must be a pragmatic
  balance between the quality of the resource and
  economic activity.
• In catchments areas the RQO will be set at a
  higher level than in industrial areas.
• If the RQO are met there will be no charges.

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WASTE DISCHARGE CHARGE SYSTEM

• If the RQO is not met an incentive charge will be
  levied, this charge will be set at a rate to
  influence behavior.
• The income derived from the incentive charge will
  be utilized to mitigate the cost of the impact to
  downstream users.
• In addition to an incentive charge, a mitigation
  charge could also be levied to all users of a
  resource to bring back the resource to an
  acceptable quality.

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Mahomed Vawdae-mail vawdam_at_dwaf.gov.za