Keeping the water flowing is as important as keeping the lights on

Reform of the sector is urgent and SA dare not leave it to those responsible for the parlous state of affairs

The considerable attention the new administration is giving to Eskom is both understandable and necessary. But failures in the management of water pose as much risk to the national economy as Eskom does, and wholly insufficient attention is being given to water. Why is this the case and what needs to be done?

The immediacy of impact is one reason. Disruption of coal deliveries, for example, will rapidly result in the lights going out, affecting almost all South Africans.

In contrast, water infrastructure can be undermaintained for years and still deliver a tolerable service. If the next dam is not built in time, nobody notices unless and until the rains fail. At this point, it is expedient to blame the resulting crisis on drought. This is wrong. The purpose of water resources planning and management is to build resilience into the water system in the face of climate variability, a phenomenon familiar to SA and likely to present greater challenges in future.

While the Cape Town drought was unusually severe, an estimated one in 300-year event, this was not the fundamental reason for the crisis. There is compelling evidence to show that had the integrated water system been managed in terms of agreed-on rules, dam levels would have been much higher, essentially negating the risk of a serious crisis. The Day Zero panic cost SA billions of rand in lost revenues and investments, and incalculable reputation damage.

Cape Town is not the only metro to be put at economic risk as a result of poor water management. The whole of Gauteng has an increased risk of severe and economically damaging water restrictions because of a delay of at least six years in the next water scheme.

The Department of Water and Sanitation can be thought of as the equivalent of Eskom, except that its responsibilities are much greater and its technical capability incomparably lower. This is a dangerous state of affairs.

Damaging disclosures concerning gross financial mismanagement within the department have not resulted in significant changes to the management team responsible. The problem is systemic: the department had seven directorsgeneral in eight years. A long-standing proposal to professionalise the management of water resources infrastructure, made first in the 1997 Water Policy and repeatedly since then, has gone nowhere, notwithstanding various undertakings by different ministers over the years.

The reform of the water sector is now urgent and cannot be left to the leadership within the department, the same leadership that was responsible for the parlous state of affairs. Reform is needed in four key areas:

Governance. It is now widely recognised that Eskom’s failures were, to a significant extent, the result of governance failures. The antidote to the failures at Eskom includes sound appointments at the board and senior management levels, higher levels of transparency and accountability, and recognition of the need for deeper structural reforms. The same antidote is necessary in the water sector, starting with the appointment of a respected and capable team to lead the necessary and significant reforms.

Water resources planning. In the absence of sound information and analysis, the plans for the water sector will be flawed. The National Water Resources Strategy is the water equivalent of the Integrated Resource Plan for electricity. The National Water Act requires the strategy to include estimates of water requirements, the quantity of water available and the resulting water balances by catchment management area. It must be reviewed at least every five years. Like the Integrated Resource Plan reviews, the National Water Resources Strategy reviews have been late and based on outdated information, leading to flawed analysis and underestimation of the extent and severity of the problems facing the sector.

The recently published National Water and Sanitation Master Plan, which is not mandated by legislation, serves to confuse rather than illuminate. What is urgently needed is the creation of a dedicated professional team with the necessary competencies and resources to lead a continuous water resources strategy development and review process, together with the political will to publish updates regularly.

Separation of functions. The department is the policy-maker, regulator, planner, investor and operator of water resources infrastructure. These multiple roles create conflicts of interest. While the separation of functions was largely established as a policy principle in 1997, there has been no significant action on this to date. The department’s latest round of proposals for institutional reform are muddled. Firstly, its intention to establish a single national catchment management agency misunderstands the core purpose of these agencies, namely to enable the effective participation of water users in the management of water within a catchment area.

Second, the proposal to include water services as a function of a national water infrastructure agency fails to recognise that the Constitution allocates responsibility for the provision of water services to local government.

Third, the proposal for a single agency for regulating both water resources and water services fails to appreciate the fundamental differences between the two functions.

Water resources regulation is primarily about the allocation and management of the right to water use. Water services regulation is essentially about the institutional effectiveness of water services providers. A single regulator combining these very different functions is more likely to create confusion than achieve effective regulation.

As with Eskom, deep structural changes are necessary to adequately address the significant challenges facing the water sector. This will require both clear thinking and political will.

Pricing and finance. The water sector is more capital intensive than the electricity sector. Investment choices and their financing are therefore as important as those facing the electricity sector. Few would disagree with the proposition that available government subsidies should prioritise meeting basic human needs in fulfilment of its constitutional obligation. Beyond this, water is essentially an economic good. If the price of water reflects the actual costs of providing that water, then the necessary infrastructure (beyond meeting basic needs) can be financed through loans. Therefore, if prices recover costs, the availability of finance is not a constraint.

Unfortunately, the department has blurred the important distinction between the economic and social value of water. This has resulted in suboptimal pricing and financing of water, including significant subsidies for both urban and agricultural water users. SA is water scarce; any subsidies for water need to be very carefully considered as to their impact and sustainability.

Three actions are urgent: the appointment of a respected and capable team to lead the necessary reforms in the sector; the introduction of much greater levels of commercial financing into the sector to support the sustainable development of economic water infrastructure; and an immediate priority focus on significant improvements to project management and water resources planning capability.

South Africans have reason to hope that the president will address the water crisis as seriously as he has the Eskom crisis. However, every month of delay increases the risks. Eberhard is an economist and independent public policy professional.