KwaZulu-Natal Regional Bulk Water Supply

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KwaZulu-Natal Regional Bulk Water Supply

• A CONCEPT PLAN

Presented by Umgeni Water to the Portfolio
Committee on Provincial and Local Government
Date 7 June 2005
Version 4 6 June 2005
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Introduction Background

• Global targets challenges
• Millennium Development Goal (MDG) is to halve
  proportion of people without access to a
  sustainable water and sanitation supply by 2015
• Estimated 1.5 billion people without adequate
  water
• Estimated 2.5 billion people without adequate
  sanitation
• Africa challenges
• Estimated one third of 800 million population
  without adequate water
• Estimated two thirds of population without
  adequate sanitation
• SADC is unlikely to meet the MDGs unless
  something drastic takes place

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Introduction Background (contd.)

• RSA targets challenges
• Provision of clean running water to all
  households by 2008
• Provision of decent safe sanitation by 2010
• 4.4 million people do not have access to formal
  water infrastructure
• 10.4 million people have access to below basic
  water RDP standards
• Natural disasters-drought conditions in Western
  Cape and Free State
• Range of water institutions-some limited in
  capacity to deliver on targets

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Introduction Background (contd.)

• KZN challenges
• KZN has a population of 9.4 million (2001 census)
• Of which more than 700 000 households do not have
  access to basic water supply standards (RDP
  standard)
• Water Service Authorities can partner with the
  existing Bulk Water Suppliers to provide more
  sustainable long term solutions ie a REGIONAL
  SOLUTION, which also supports the countrys macro
  policies

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Context

• Water Service Authorities (WSAs) have a
  responsibility to provide adequate water services
  within their area of jurisdiction
• WSAs generally undertake insular planning and
  development
• Backlogs can be addressed through stand-alone
  schemes. These stand-alone schemes have proven
  to be unsustainable without continual and direct
  technical, administrative and financial support
• Slow pace of delivery largely due to
  co-ordination, capacity and financial constraints
• Water Utilities can provide support as Regional
  Water Service Providers (WSPs) partnering with
  local, provincial and national government, and
  other stakeholders

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Regional Bulk Supply Schemes

• Propose that regional bulk supply schemes could
  be the most appropriate solution to improve water
  service delivery, although not the only solution
• Address backlogs
• Improve level of service
• Advantage of regional schemes over stand-alone
  schemes
• Sustainability of supply
• Rationalisation
• Economies of scale
• Cross subsidisation
• Water quality
• Improved level of service
• Linking water resources to water supply

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Regional Bulk Supply Schemes
The following assumptions were used in developing
the delivery plan

• REGIONAL SYSTEMS Regional bulk water service
  provider concept
• APPROACH Bulk water provision only
  (abstraction, treatment distribution)
• DEMANDS Demand centres based predominately on
  population distribution (formal growth/economic
  development growth points)
• INFRASTRUCTURE Utilise existing and proposed
  water service infrastructure wherever possible
• RATIONALISATION Consolidate WTW and
  distribution systems
• RAW WATER SOURCE To be located at highest
  elevation (gravity vs pumping improved WQ
  reduced sedimentation)
• WTW LOCATION Close to abstraction point
  (minimise non-revenue water losses,maximise
  opportunity to supply both rural urban demand
  centres)
• DISTRIBUTION interlink supply system (minimise
  supply risks ), route to maintain elevations,
  through demand centres, along road
  infrastructure

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Population Densities
Census 2001 data
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Water Service Backlogs in KZN

• Estimated 40 backlog of all households
• Increase of 425 000 households since 1996 Census
  (backlog was 33)
• 70 of backlogs located in 7 Water Service
  Authorities
• 50 of backlogs located in 4 District
  Municipalities
• 50 of backlogs located in 11 Local
  Municipalities

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70 of backlogs are within 7 WSAs
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Backlog Target Areas

• 70 of backlogs within 7 Water Service
  Authorities

Priority Water Service Authority Priority Area, no households below RDP std Target Area, No. potential household below RDP std
A B C D E F G eThekwini Municipality Ugu District Municipality Umzumbe, Hibiscus Coast Msunduzi Local Municipality Umkhanyakude District Municipality Hlabisa,Jozini, Umhlabuyalingana Zululand District Municipality Nongoma, Ulundi Umzinyathi District Municipality Msinga Uthungulu District Municipality Umlalazi 137 803 56 425 25 785 69 797 53 581 30 290 29 111 137 803 101 436 25 785 76 828 92 422 62 219 94 951
TOTAL 405 792 591 444
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Pongola
White Mfolozi
Black Mfolozi
Buffels
Upper Mhlathuze
Upper Thukela
Lower Thukela
Lower Mhlathuze
Mooi
Mvoti
North Coast
Mgeni
15 Regional Bulk Supply Schemes
Mzimkulu
Mzintlava
South Coast
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Regional Bulk Supply Schemes

• Benefits of Schemes on Job Creation Poverty
  alleviation
• The schemes to be a chapter in the Provincial
  Growth Development Strategy
• Link into the Provincial Government Integrated
  Financial Strategy (IFS) which aims to eradicate
  poverty and inequality, create jobs and
  facilitate economic growth
• Link into the Poverty Alleviation Strategy of the
  second economy
• Drive service infrastructure delivery in a
  sustainable way

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Indicative Costs of Regional Bulk Supply Schemes
Regional bulk scheme Capital Cost Capital Cost Capital Cost Annual Operating Maintenance Cost Annual Operating Maintenance Cost Annual Operating Maintenance Cost
BULK RETICULATION TOTAL BULK RETICULATION TOTAL
(R million) (R million) (R million) (R million/a) (R million/a) (R million/a)
Phongola 200 80 280 0.5 7.0 7.5
White Mfolozi 520 140 660 2.5 13.0 15.5
Black Mfolozi 520 215 735 5.0 20.0 25.0
Buffels 840 205 1 045 3.5 19.0 22.5
Upper Mhlathuze 250 110 360 2.0 10.0 12.0
Lower Mhlatuze 200 60 260 0.5 5.5 6.0
Upper Thukela 710 210 920 4.5 19.5 24.0
Lower Thukela 410 160 570 3.0 15.0 18.0
Mvoti 480 145 625 2.0 13.5 15.5
North Coast 530 190 720 1.5 18.0 19.5
Mooi 150 45 195 0.5 4.5 5.0
Mgeni 700 845 1 545 2.0 79.0 81.0
South Coast 500 325 825 2.0 30.0 32.0
Mzimkulu 1 350 315 1 665 4.5 29.0 33.5
Mzintlava 430 130 560 1.0 12.0 13.0
TOTAL 7 790 3 175 10 965 35.0 295.0 330.0
NOTE Reticulation capital cost and the annual
operational and maintenance costs are based on
yard connections for those households below RDP
standard. Since most of these schemes
currently do not exist, no refurbishment costs
have been included.
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Regional Bulk Supply Schemes
Estimated Rate of backlog eradication
NOTE Reticulation capital cost and the annual
operational and maintenance costs are based on
yard connections for those households below RDP
standard. Since most of these schemes
currently do not exist, no refurbishment costs
have been included.
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Indicative Costs of Water Resource Infrastructure
Water Resource Existing / Total Regional bulk schemes supplied
Infrastructure Proposed Capital Cost
(R million)
Pongolapoort Dam Existing 0 Pongola
Klipfontein Dam Existing 0 White Mfolozi
Black Mfolozi Dam Proposed 350 Black Mfolozi
Ntsingwayo Dam Existing 0 Buffels, Lower Thukela
Mfule Dam Proposed 100 Upper Mhlathuze
Goedertrouw Dam Existing 0 Lower Mhlathuze
Spioenkop Dam Existing 0 Upper Thukela, Lower Thukela
Middledrift Weir Existing 0 Lower Thukela, Lower Mhlathuze
Mvoti-Poort/Isithundu Dam Proposed 230 Mvoti, North Coast
Hazelmere Dam (raised) Proposed 30 North Coast
Spring Grove Dam Proposed 260 Mooi, Mgeni, South Coast
Ngwadini/Lower Mzimkulu Dam Proposed 230 South Coast
Mzimkulu Dam Proposed 350 Mzimkulu, South Coast
Mzintlava Dam Proposed 100 Mzintlava
TOTAL 1 650
NOTE Mkomazi-Mgeni Transfer Scheme (approx. R4
billion) not included in this table, but is a
long-term requirement for the Mgeni scheme.
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Regional Bulk Supply Schemes

• Job Creation Opportunities
• Direct Temporary 73 700 (6.7 jobs per R
  million)
• Direct Permanent (includes Water Waste Water
  Schemes, Reticulation Associated Services)
  Estimated Total 5 000
• Assuming a direct to indirect ratio of 13 this
  relates to
• Indirect Temporary jobs - 221 100
• Indirect Permanent jobs - 15 000

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Regional Bulk Supply Schemes

• Job Creation Opportunities (contd.)
• Multiplier effect arising from water service
  delivery
• Agriculture (irrigation, aquaculture)
• Residential Development (including housing,
  electricity, roads, communication)
• Temporary Jobs Direct
• Permanent Jobs
• SMMEs through water electrical servicing
  (estimate 1 new small business per every 10
  electrical connections)
• Industrial Activity Stimulated

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BEE Opportunities

• Expanded Public Works Programme (EPWP) to be
  applied to the implementation of both bulk and
  reticulation schemes
• Infrastructure sector of EPWP emphasizes work
  creation through labour-intensive construction
  methods
• These schemes will be a catalyst to the Water
  Sector Charter
• Estimated BEE benefits derived from the
  construction of the regional bulk schemes

Component Total Component Value (R million) BEE BEE Component (R million)
Professional 2 360 80 1 900
Contractors 4 956 60 3 000
Local Labour 2 124 80 1 700
TOTAL 9 440 6 600
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Funding

• Innovative approach to project financing required
• Water tariffs to remain affordable to end-users
• Integrate plans and funding into Municipal IDPs
• Possible sources of funding available include
• Partially or fully obtained from WSPs
• Financial institutions

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Funding Solutions

• The R11billion to be broken down into the 15
  projects and for each project establish

• Raw costs for Capex, Opex and Maintenance
• Direct Revenue Streams
• Level of financial support required from the
  various stakeholders (Treasury,
  Municipalities, Water Utilities, DWAF)

• The above framework would address critical
  issues such as
• - implementation vehicle
• - specific risk mitigation
• - affordability of water tariff to end
  users.

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Funding Challenge
Reduce the project debt illustrating the
effects of R150m per year from 2009
All KZN Bulk Retic All KZN Bulk Retic with
Umgeni Water R150m subsidy
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Funding

• Funding Options What will it look like?
• PPP Concession Structure
• Leasing Structure - Share Based or Asset Based

• Funding Sources Who will finance it?
• Banks most flexible but not the cheapest
• Securitisation Conduits
• Debt Capital Market CPP, Bonds (Corporate
  Project)
• Non-banking Intermediaries INCA TCTA
• Development Finance e.g DBSA, DFID (UK)
• Infrastructure Funds AIIF, KZN Growth Fund
  MIG
• Financial Sector Charter

• Factors to be considered
• Credit enhancement Impact on sources and cost
  of funding

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Regional Bulk Supply Schemes
Stakeholder consultations to date

• DWAF Minister
• DWAF DG
• Provincial and local government DG 2 deputy
  DGs
• KZN Premier subsequently KZN full Provincial
  Cabinet
• Presidency (Mr Aboobaker and Mr M Morobe)
• Other Water Utilities Uthukela and Mhlathuze
• Municipalities Ugu, Illembe, Sisonke, Ethekwini,
  Msunduzi
• Financial institutions RMB, Standard Bank,
  Investec, ABSA and DBSA
• National Treasury DG Deputy DG
• Banking Association (Mr Coovadia)
• Local Government Housing and Traditional Affairs
  KZN MEC
• KZN Local Government Association by 10 June
• Institutional Investors e.g. Public Investment
  Corporation (To schedule)

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Regional Bulk Supply Schemes
Progress to date

• Technical task team established
• Representatives from DWAF(KZN), Mhlathuze Water,
  uThukela Water eThekwini and Umgeni Water
• Producing a high level business plan
• Presentation to Municipal Managers, CEOs and
  EXCOs of water utilities by 30 June 2005

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Regional Bulk Supply Schemes
Way Forward

• Need to drive initiative at
• - National Level targets to met per province
• - Provincial level Alignment to be achieved
  across the province
• National Treasury to provide a Technical Advisor
  to the KZN Regional Bulk Supply task team
• Project action plan and financial packaging to be
  completed by July 2005

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Thanks for listeningLets get to it!