Poised to Succeed or Set Up to Fail? A Case Study of South Africa’s First Public-Public Partnership in Water Delivery

Abstract

In September 1999, South Africa’s first public-public partnership (PUP) for water service delivery was signed in Odi district, North West province. The PUP brought together parastatal Rand Water Board, the municipalities of Winterveld, Mabopane and a number of peri-urban areas under the Eastern District Councils. Under the agreement, Rand Water Board was to assist in building the capacity of the local authorities to operate and maintain the water service system. The duration of the partnership was to be three years, after which the municipalities were to take full responsibility for the system. Support for the PUP extended far beyond the signatories. The South African Municipal Workers’ Union (SAMWU) played an important role by bringing together its members and community structures to back the partnership. For SAMWU the PUP was seen as a model which would improve service delivery to historically disadvantaged communities while guaranteeing jobs for municipal workers. As SAMWU National Water Coordinator, Lance Veotte expressed at the time, the PUP “fits perfectly with our vision of building the capacity of disadvantaged municipalities so that they can deliver good quality, affordable services to the people instead of throwing in the towel to a multinational company.” Hopes for the success of this initiative were buoyed by promises of financial support from various spheres of government. According to the agreement, each of the municipalities was to contribute 20% of their equitable share grant to the project. The municipalities’ stipend was intended to subsidise payment for citizens who were declared “indigent” and therefore unable to afford payment for water. The Department of Water Affairs and Forestry (DWAF) also added to the funding of the PUP with R42 million spread over three years to help make up for deficiencies in a system where up to 50% of the water which is delivered to the district leaks into the ground. In late 1999 there was great optimism amongst all stakeholders that Odi would set a precedent for supplying effective water service to underdeveloped areas in South Africa. With little industry and an average household income of around R1 750, there was little opportunity for extensive cost recovery and cross subsidisation in Odi. Yet, the intent of the PUP was that with reasonable levels of payment and an improved infrastructure a financially sustainable system could be established in three years. While payment rates in the townships of Mabopane and Winterveld have been adequate, in the peri urban areas only 2-4% of households are paid up. In some areas this has resulted in cutoffs and threats of legal action. In Klipgat, the entire community only receives water every other day as Odi Retail, Rand Water Board’s local outlet, pressures for cost recovery. To make matters worse, a ‘culture of non-payment’ has developed at the top - amongst local government officials. Contrary to their promises, the local authorities have not added a cent of their equitable share money to the coffers of the PUP. Moreover, they have failed to set up an indigent policy. Apart from the municipalities failing to honour their commitment, DWAF has also pulled back from its earlier enthusiastic support for the venture. High level authorities in the Department have all but declared the PUP an exercise that goes against the future direction of water service delivery: increased participation by the private sector. The Department as well as Rand Water Board and SAMWU acknowledge that a capital investment of R20-30 million is needed to bring the infrastructure in Odi up to an acceptable standard. With this injection, partners in the PUP argue that the project could succeed. But no such investment is forthcoming from national government and there is little prospect of a viable loan coming from sources such as the Development Bank of Southern Africa. At the end of 2000, the partnership stands on the brink of collapse. Odi Retail’s arrears for bulk water payment stand at roughly R14 million. As Rand Water Board’s Sam Shabalala observes, the failure to properly finance the project “ is threatening to make all of our hard work come to naught.” All in all, the precarious state of the Odi PUP raises the issue of whether the partnership has been ‘set up to fail’. For Rand Water and SAMWU, as well as advocates for the welfare of poor communities, a failure of Odi would be a blow to the notion of public sector delivery and free service ‘lifelines’ for the poor.