The Treasury is working with SA’s eight metros on a performance-based incentive that will help them with cash to fix their water, electricity and waste management services, on condition they ring-fence revenues from these services in professionally run utilities that can ensure service delivery.
The new approach to the three big “trading services” in the metros is part of phase two of Operation Vulindlela, which adds reforming SA’s ailing local government to the list of growth-boosting reforms the joint presidency/Treasury unit will tackle.
The trading services reforms aim to address the rapidly deteriorating quality of services in most of the metros, largely the result of severe underinvestment in infrastructure and maintenance for at least a decade. The reforms aim to create fully integrated utilities with professional managements that are fully accountable for delivering the services, collecting the revenues and looking after and investing in the assets.
While that’s the typical model in most countries, in SA the billing and revenue collection are usually undertaken by city authorities, not by its water or electricity department. One metro cited by the Operation Vulindlela team collects R10bn a year in water revenue but spends just R1bn of that on maintaining and upgrading the associated infrastructure.
The trading service reforms will focus on the eight metropolitan municipalities that account for more than 60% of the economy and are home to than 22-million people. Treasury plans to set aside R54bn over the next six years for metros to access in the initial phase of the programme.
Anthea Stevens of the Treasury’s cities support programme said on Tuesday the metros would have to match the funding on a one-for-one basis through improved revenues or their own borrowing.
They will be able to access the funds only if they meet a series of conditions, including setting up the services in a structure that is a single point of accountability with professional and skilled staff and separate financial accounts.
Saul Musker, the director of strategy and delivery support in the presidency said Operational Vulindlela would not prescribe what institutional form this might take; each metro would decide on its model, be they concessions or public private partnerships or corporatising the services. But the reforms would allow for a much stronger licensing and regulatory regime that would hold the utilities to account.
Finance minister Enoch Godongwana’s March 12 budget included a provisional allocation of almost R9.5bn over the next three years for “turnaround revenue-generating services in metros”.
Speaking at the Bureau for Economic Research conference on Tuesday, Stevens said demand for the reforms had come from metros themselves as “non-revenue” water — water that is lost to leaks or theft — had increased rapidly in the metros over the past decade and there had been severe underinvestment.
Investment in infrastructure needs to double or treble, she said, but metros needed to make better use of their existing resources to turn about service delivery.
Creating new trading services utilities with separate financial accounts also aims to enable metros to tap private investment in infrastructure. It’s understood the World Bank is also in talks on funding the new utilities.
The Operation Vulindlela local government reforms will also implement new rules to ensure senior municipal officials are properly qualified.
A comprehensive review of the institutional structure of local government is also under way, led by the department of cooperative governance, with a new white paper expected to be finalised by this time next year.
The municipal funding model is also under review.
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