Billions needed to maintain water sector

2012-04-16 15:37

Water-stressed South Africa needs to invest a massive R573 billion in water infrastructure, services and demand management over the next decade, but has budgeted for less than half this amount.

This gap was a “significant shortfall”, water affairs chief operations officer Trevor Balzer told reporters at Parliament today.

“If you look at (what is needed across) the total water value chain, you’re looking at a figure of R573 billion over 10 years,” he said.

This included about R394 billion for water services, R162 billion for water resources infrastructure and R16 billion for water demand management.

“If you look at the current budget allocations, taking into account all of the grant-funded programmes that National Treasury has put in place as well... our 10-year projection is that 44% is budgeted for. You’ve got a gap of 56%,” Balzer said.

The R573 billion total covered all departmental, municipal and water board infrastructure and services requirements, he said.

Water Affairs Minister Edna Molewa told journalists that it was clear a “lot of money” was needed to meet the nation’s growing demand for water.

Asked if above-inflation tariff increases to help fund this huge shortfall were now on the cards, she replied: “Probably”.

Molewa said that when a lot of money is needed to be found, “it goes without saying that the cost is likely to be very high. And therefore the charges that have to be paid may also be high”.

The department was looking at standardising tariffs across the various sectors, and there was therefore a possibility of cross-subsidisation. This exercise would be completed by the end of the year, Molewa said.

Proportional water use in South Africa at the moment breaks down as:
» Agriculture – about 62%;
» Domestic sector – about 27%, of which 23% goes to urban areas and 4% to rural areas;
» Mining – about 2.5%; and
» Industry – about 10%, of which Eskom consumes about 2% and forestry about 3%.

There is also a provision for the environment – made in terms of the National Water Act – to ensure stream flows and protect ecosystems.

The different sectors pay different tariffs for the water they use.

Molewa suggested there was a possibility of either National Treasury or the government subsidising the huge amounts of investment needed in water infrastructure and services, but said it was too early to pronounce on this because discussions were ongoing.

“It’s not possible for us to say at this point in time because we have to negotiate... to be able to say that if this is a commodity that’s needed by everybody to do development, and you’re charging for it way above inflation, for instance, that would strangle development.”

Molewa also said government was looking to the private sector to help fund the infrastructure her department needed.

This follows remarks she made last month, when she said her department was hoping to attract foreign investment to help revive its ageing water infrastructure.

A total of 43 wastewater treatment plants were under development in South Africa, and “if we co-funded, we could take the money saved and spend it elsewhere”.

Molewa said at the time that an ideal situation would be “going rand for rand” with private investors.

Balzer today said that for new infrastructure, the department alone would need R230 billion over the next 10 years. It would also require “in the order of R96 billion” for the rehabilitation of existing infrastructure.

A statement tabled by Molewa today, detailing progress made to date by a special task team appointed in June to advise on a turnaround strategy for the department, delivers what amounts to a stinging indictment of work carried out by her predecessors.

Among the challenges identified by the 13-member business process re-engineering committee, is that the sector is characterised by a “lack of leadership and management skills; administrative complexities due to multi-level governance; elitist and undemocratic decision-making processes; and relatively poor institutional performance”.

Molewa appointed the team following the Auditor-General finding fault with the department’s water trading and main accounts.

The minister today also announced that a major project was underway to re-organise water affairs’ finance branch, which included the appointment of a new chief financial officer.

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