Jowater’s trials and tribulations

During the financial crisis of 1997, Joburg's over 800km of sewers and similar length of water mains fed 153-211 thousand stands where water use was unmetered and unknown. Only about 20% of rates and services revenues owed by townships and peri-urban areas were being collected. Total arrears stood at over R3.2bn. Although defaulters could have water and electricity cut and face legal action, this happened so rarely that defaulting spread.

R165m-worth of water was unaccounted for in Joburg's 1997/98 financial report, and R176m in 1999. In 2000, Joburg acting CEO Mavela Dlamini said this would be water consumed in informal settlements through illegal connections or communal taps, and it would take about five years to ensure the proper accounting of water.

In October 2000 President Mbeki promised the poor undefined basic amounts of free water and electricity. New water affairs minister Ronnie Kasrils, soon specified 6,000 litres or free water a month per household, based on the existing Durban metropolitan model. Local councils would decide how to deliver, price and charge for water and other services. Joburg went for every household to avoid means-testing. But non-payment, illegal connection and vandalism of metered water systems was rife, so implementation looked difficult. Many preferred not to pay for water at all.

Johannesburg's iGoli 2002 restructuring plan corporatised water and sanitation for management by a private contractor while wholly remaining council property. Joburg-owned Water & Sanitation Utility employing 2,600 was renamed Jowater. The management contract was valued at R20m plus performance-based incentives for five years from February 2001 and attracted several internationally-led bidding consortiums. The winner was Jowam (Johannesburg Water Management) with shareholders Northumbrian Water (UK), Ondeo, and Water Services South Africa - the latter two connected with Suez (Lyonnaise des Eaux).

Jowam committed to reduce Jowater's annual water losses to R260m a year. At R550m, the losses included R25m illegal connections, R70m faulty meters, R170m billing errors, R130m unpaid bills, R120m physical losses, R5m city use and R30m free provision. Budgeting R1.2bn annual water revenues, Joburg promised to finance residents' free water from July 2001 by graduated usage-tariffs, investing R100m in 100,000 new water meters. Poor communities using communal taps would get all their water free. Those with water meters would be rebated up to R24 a month, and city households without meters paying a flat R22 would pay R18 from scheme-start until meter-installation. Commercial users would pay for every drop. Random audits of flats and townhouses would get landlords to pass on the free 6 kilolitres.

During 2001-2002 Joburg cut off water from a few people in arrears until minister Kasrils declared water a basic right, which councils cannot cut. They have to give the property occupier proper notice then reduce supply to a slow trickle. The water ministry advertised our duty to pay bills for services rendered, with little success.

With some Soweto residents burning utility bills to protest Eskom's electricity cutoffs, Joburg's overall arrears rose from R300m in 1996 to R4.5bn in 2001. Revenue collection rose from 85% in 2000, peaked at 93% then fell back to 89%. Joburg wrote off R2bn of bad debts and Eskom wrote off R1.4bn of Joburg township arrears. By end-2003 collections fell to 87% and arrears rose to R6,5bn. For the eighth successive year the auditor-general noted incompleteness of revenue including both City Power and Jowater but said city finances and monthly collections were improving.

The mid-2003 Joburg budget included R192m for water and sewage-related projects. The 2001 census had said 86% of responding Joburg households had access to both running water and a flush or chemical toilet. Jowam began building permanent water-borne sewers in informal settlements, replacing chemical toilets with ventilated improved pit latrines in low-income areas, developing other areas, and upgrading infrastructure to deal with the rapid growth in the Sandton area, originally reticulated for sparse settlement. Jowater claimed improved response times and customer service, stricter compliance with regulations and higher staff morale.

The Anti-Privatisation Forum continuously attacked Jowater, its Declaration Against Water Privatisation ignored the fact that government had just nationalised water in 1998. Jowater workman Xolani Shenge was shot and injured in Phiri, Soweto. Rand Water blamed rising prices of the water ministry's bulk raw water from Lesotho and Eskom's power for its rising water charges to Joburg/Jowater. SA's average 10.6% water price increase in 2003 was the single largest in the world. Member firms of the Chamber of Mines suffered annual water price increases of 18% during 2002-2004.

Residents in Phiri, Soweto periodically rampaged, protesting Jowater's plan to install pre-paid meters. Losing over 7m tons of water costing R158m monthly in Soweto alone in 2003, Jowater planned to spend R450m over five years to install pre-paid metering infrastructure and pipes as a 'water management tool'. In March 2004 marchers burned summonses for non-payment of services.

Public institutions are not entitled to free water but over 100 schools, 120 government departments and 158 council facilities owed Jowater more than R100m and faced disconnection in mid-2004. In November a parliamentary committee recommended excluding those who can afford it from free water, and not installing meters in the homes of the 'previously disadvantaged'. Another anti-privatisation march rejected the whole cost recovery approach as undermining 'the fundamental human rights stipulated in the constitution'.

Jowater claims there's no leadership crisis, seems to retain solid management expertise, and keeps trying to roll out services and solve problems openly and transparently. Joburg accepts its obligations to provide services but also to ensure prompt payment and otherwise to terminate services. Mid-2004 collections exceeded 95% with the 98% target in sight. The city's mid-2004 budget allocated 23% (R450m) of spending to water and again raised the tariff by an above-inflation 9%.

When Jowater recently tried increasing inadequate water pressure, leaks appeared all over city streets. Sewers are constantly overflowing. But Joburg's partial infrastructural breakdown - daily water and power cuts, burst pipes, excessive litter, illegal dumping, and traffic congestion - is partly caused by the huge development boom that is in progress. It’s hardly surprising if Jowater can't sustain delivery capacity while under-funded. With municipal elections in 2006, high-profile municipal housing and welfare delivery may take short-term precedence over maintaining infrastructure. Jowater claims its 9,800km of piping will cope with growing demand for the foreseeable future.

At end-2004 city arrears had climbed to R7.1bn. A burst pipe left 13 suburbs dry for ten hours, but many huge power cuts have kept the media focus on City Power instead. Though Jowater's latest annual loss was R110m, the opposition DA felt that it had produced satisfactory results for Joburg consumers. When its management contract expires next February, Jowam may also have satisfied its shareholders. But the water loss reduction target remains remote. Joburg should contemplate full privatisation next.

Author: Dr Jim Harris is a freelance researcher and writer. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article/ 3 May 2005
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