The Development Dimension of Competition Law and Policy: Economic
Perspectives
Workshop Cape Town May 2nd 2006
SUSTAINABLE ACCESS TO WATER SERVICES: WHAT ROLE FOR
COMPETITION?
THE CASE OF SOUTH AFRICA
E.M. Ueckermann
1
ABSTRACT
This paper addresses the issue of sustainable safe drinking water and the role of
competition.
Before embarking on the issues relating to safe drinking water and
competition, an understanding of the South African water sector is warranted. Thereafter
the three pillars to create sustainable access to drinking water is considered; followed by
some recommendations on the potential role of competition in the sustainability of safe
drinking water.
The paper established that the potential for the application of competition to the
achievement of sustainable access to safe drinking water has been neglected.
Accordingly, the paper suggests that the institutional arrangements in respect of quality
need to make more allowance for competition due to the failure to meet coverage
expectations and inefficient operations. Most important, the paper found that competition
for the market is possible and desirable in metropolitan areas.
In terms of non-
metropolitan areas, the sustainability of the access of safe drinking water is still the sole
responsibility of the government.
1. Background
Generally, it is well understood and documented that the health of a community is
significantly influenced by the standard of drinking water services, and South Africa is no
exception to this (CSIR, 2006). In South Africa, water is an inelastic good and yet safe
and reliable drinking water is not available to 9.1 million (19%) of the population, of
which the greatest proportion live in rural areas (DWAF, 2006). This has adverse effects
on public health as most diseases in South Africa arise from polluted drinking water.
This failure to expand water supply capacity is becoming a threat to future economic
growth. As a result regulators find themselves in the middle of debates about how to
expand and maintain these services, how best to organize the water sector and introduce
more transparency and competition (Gee 2004).
2
Accordingly, regulatory systems need to be reformed to accommodate the needs and
concerns of the poor.
Moreover, the South African water economy has revealed
increasing competition between users, high increasing demand of water owing to
population, economic growth, industrialization and urbanisation and increasing social
costs (Backenberg 1994). Water is typically under-priced as an economic resource and
users do not treat water as a scarce commodity (Winpeny 1994).
In light of this increasing pressure on water resources it is recommended that the
improvement and sustainability of access to safe drinking water at an affordable price
require immediate consideration.
From a competition point of view, the most important characteristic of the water sector is
water distribution are normally natural monopolies at least for domestic customers (Gee
2004). To date, within the South African context, little attention has been given to
competition issues relating to water. Although a legislative framework for the regulation
of water supply is set out in the Water Services Act and more generically in the
Municipal Systems Act, this framework is limited in its understanding of competition
regulation (Armitrage et. al 1999).
To address the issue of sustainable safe drinking water and the role of competition
requires an understanding of the entire water supply system, an assessment of the current
stance of drinking water quality, the possibility to have competition for the market and
the way forward to ensure safe and reliable drinking water over the long term.
This paper will attempt to scrutinize the above. Before embarking on the issues relating
to safe drinking water and competition, an understanding of the South African water
sector is warranted. Thereafter the three pillars to create sustainable access to drinking
water is considered; followed by some recommendations on the potential role of
competition in the sustainability of safe drinking water.
3
1. South African Water sector
Currently, South Africa is considered to be a water-stressed country (Turton et. al, 2003).
The majority of South Africa is semi-arid and experiences variable rainfall with an
average rainfall of 497 mm per annum, a rate well below the world average of 860 mm
per annum (Walmsley 1991; DWAF 2002).
Additionally, it is estimated that national
water demand will exceed supply by 2025 (IWMI 2000; DWAF 2004).
Annually, South Africa is using 12 871 million kilolitres of water with the agricultural
sector being the largest consumer at 62 per cent. Afforestation requires 3 per cent of the
total water requirement and rural and urban populations 4 per cent and 23 per cent,
respectively.
aggregate.
Mining and bulk industrial, and power generation use 8 per cent in
Rural requirements mainly represent domestic use and stock watering
requirements in rural areas; whilst urban requirements include all water used in urban
areas for domestic, industrial, commercial, parks and other communal purposes. The
provision of water for basic human needs (the human component of the Reserve) is
included under rural and urban requirements and is taken as the first 25 litres/person/day
of these requirements (DWAF 2002; DWAF 2004).
South Africa faces an enormous infrastructure backlog. Currently, nine million people
are not covered by the main water delivery networks, which mean they have to buy water
at exorbitant prices from informal vendors (DWAF 2006). Only approximately 24 per
cent of rural people have access to water on site (Statistics South Africa 2003).
Considering the above, water scarcity is a fundamental limitation to the economic growth
potential of South Africa (Backenberg 1994; Blignaut et al 2004). This makes access to
and controls over water a strategic issue.
South African water supply is a natural monopoly and the scope for competition is
limited to the procurement of services and entry into the market. Figure 1 illustrates that
the water distribution sector is dominated by public sector monopolies.
4
From Figure 1 it is evident that the government (DWAF) is regarded as the public trustee
of the nation's water resources and “must ensure that water is protected, used, developed,
conserved, managed and controlled in a sustainable and equitable manner, for the
benefit of all persons” (MacKay 2003).
Important to note is that DWAF also licenses water use, discharges and collect
abstraction and discharge fees and manages water resources infrastructure (for example,
dams and also some water services infrastructure). The other role players include the
following1:

Catchment Management Agencies (CMAs)2 engage in water resource planning
and management at the catchment level (where CMAs are not established, DWAF
fulfils these functions).

Water Boards (WBs) are regional or bulk water services providers. These WBs
are characterised by regional monopolies regulated by DWAF. WBs have been a
long-standing institutional mechanism to provide treated water to large consumers
in bulk, such as Sasol and Eskom.

Water Services Authorities (WSAs) provide water services within metropolitan
municipalities, many district municipalities and authorised local municipalities.
As part of the drinking water system management, WSAs are required to
undertake operational monitoring, and drinking water quality compliance or
verification monitoring.

Water Services Providers (WSPs) provide operational bulk water services or retail
water services and can serve one small rural community, one or more towns, a
large metropolitan area or a whole region; it might be a community-based
organisation, a local municipality, a district municipality, a public utility (owned
by local and/or national government), or a private organisation.
1
This discussion is based, among others, on King (2004), Storer et. al (2004), De Coning et. al (2004)
DWAF (1997, 2004 and 2005a) and Letsoalo et. al (2006).
2
South Africa is divided into 19 water management areas. The idea is to establish in terms of section 78 a
catchment management agency for each of these areas. The purpose of establishing the agencies is to
delegate water resource management to catchment level and to involve water users in the management of
the water resources in that area.
5

The sector is further characterised by public ownership and control (at the
national and municipal level) and limited participation by private companies.
Where there is private participation, for example, the Dolphin Coast and Nelspruit
concessions, the ownership of the water services assets has remained in public
hands.
The water cycle is fragmented in resource allocation; the economic regulation pertaining
to the quality of the service and tariffs; as well as the environment and public health
issues pertaining to the water quality and consumer’s health risks. The water chain in a
simplistic explanation is as follows. DWAF allocates fixed quotas or water rights to the
WBs such as Rand Water and Umgeni Water for distribution. The WB’s pays the raw
water price, as set by DWAF and CMAs. The water is then delivered to municipalities or
WSPs (water services provider) and companies such as Sasol and Eskom at the wholesale
price to be paid to WBs. This price can be characterized as a monopoly price. Lastly, the
municipalities deliver the water to the final consumers (domestic and industrial users) at
the retail price against a fixed charge and increasing block tariff.
The above structure mostly applies to urban areas.
In almost all South African
metropolitan areas, and those areas provided with water from the major WBs, the
consumer is provided with high quality drinking water. However, most WSAs fail to
satisfy compulsory national standards for potable water, which are an effective regulatory
governance methodology for ensuring drinking-water quality.
Furthermore, in the many small cities, towns and villages that fall outside these regions,
the situation is very different from urban areas and in most cases an unacceptably high
incidence of poor drinking-water quality occurs (DWAF 2005b).
This unserved population relies on rivers, streams, dams, springs, wetlands, boreholes
and other raw water sources for drinking water. This situation is emphasised by an adult
female, living in the rural areas of South Africa:
"Our main problems in rural communities are the following: walking long
distances about 2 to 3 kilometers daily to public tap; carrying heavy containers
6
on our heads 20 to 25 litres per trips; long queues at the point of taps; should
there be contamination at this common point the whole village is at risk."
(DWAF, 2005b)
The quality of these water resources is unsatisfactory or has not yet been determined. In
the case of the unserved communities, stakeholder commitment to the protection of
public health becomes even more important (DWAF 2005b).
3.
Overview of access to safe drinking water
South Africa is regarded as among the top 12 suppliers of drinking water in metropolitan
areas in the world. These drinking water supply systems are usually well managed while
water quality is monitored and maintained in structured scientific programmes comprised
of multi-disciplinary teams (Mackintosh et al, 2004). However, as aforementioned, the
situation in non-metropolitan areas is very different.
Prior to 1994, an estimated 40% of South Africa’s population was without adequate
drinking water (Makintosh, 2004). Furthermore, drinking water quality in rural areas was
often poor and could not be considered safe causing adverse effects on public health. For
example, the water-borne diseases caused an annual estimated 43 000 deaths and 3
million incidences of illness, with an associated treatment cost of some R3.4 billion
(DWAF, 2005b)
To date, 10 million additional people have been supplied with access to drinking water.
Notwithstanding this progress in addressing drinking-water services backlogs throughout
South Africa, the most recent investigations indicate that the actual quality of drinking
water is unacceptably poor in non-metropolitan areas, and that WSAs fail to comply with
compulsory national standards for the quality of potable water (Manxodidi et al, 2004).
Compliance with water quality standards both provides assurance that the water supplied
to households is safe, and assists in ensuring that a satisfactory standard of water services
provision is functioning (DWAF 2005b). As such, monitoring of water quality is a costeffective yardstick for the general assessment and management of the drinking water.
7
Box 1 highlights the regulatory framework to the provision of safe drinking water in
South Africa. In particular, the Water Services Act (No. 108 of 1997), and the associated
Compulsory National Standards for the Quality of Potable Water all WSAs are required
to monitor the quality of drinking water provided to consumers; compare the results to
national drinking-water quality standards; and communicate any health risks to
consumers and appropriate authorities.
8
Box 1: Regulatory framework to the provision of safe drinking water








Water Services Act (No. 108 of 1997) – The Water Services Act gives substance to constitutional
requirements with respect to access, national norms and standards and the institutional framework
for the provision of water services;
Compulsory National Standards for the Quality of Potable Water (2001, Regulation 5 of
Section 9 of the Water Services Act) – requires that WSAs implement drinking water quality
monitoring programmes to monitor, improve and report on drinking water service delivery;
Strategic Framework for Water Services (2003) – The Strategic Framework contains guidelines
for the provision of water services, including drinking water quality, and role of DWAF as sector
regulator;
Municipal Structures Act (No.117 of 1998) – This Act provides for functions and powers of
municipalities and other local government structures, of which water services is one of many
primary functions;
National Health Act (No. 61 of 2003) – This Act promotes fulfilling the rights of people of South
Africa to an environment that is not harmful to their health or well being;
The National Water Act (No.36 of 1998) is the principal legal instrument relating to water
resources management in South Africa and contains comprehensive provisions for the protection,
use, development, conservation, management and control of South Africa's water resources, and
The National Water Resources Strategy (2004) provides the framework within which water
resources will be managed throughout the country. The National Water Resources Strategy also
provides the framework within which all catchment management strategies will be prepared and
implemented for water resources management in a water management area.
Government’s Free Basic Water policy was introduced in 2000, to assist in promoting
sustainable access to a basic water supply by subsidising the ongoing operation and maintenance
costs of basic service. A natural follow-up in 2001 was the White Paper on Basic Household
Sanitation, to facilitate affordable access by poor households to a basic level of sanitation service.
Although much progress has been achieved with the application of free basic services,
considerable challenges remain.
Source: Based on Mackintosh et al, 2004 and DWAF 2005b
The question arising is how safe is South Africa’s water under this regime? In order to
assess the quality of water, DWAF investigate the quality of water services at each WSA
based on a self-assessed performance survey. The results indicate the percentage of Local
Governments adhered to the drinking water quality requirements as per SANS 241.
Moreover, the results are based on feedback from 85% of the Local Government
institutions (DWAF 2005a). Overall, it can be concluded that the Local Governments fail
dramatically in the provision of safe drinking water.
9
Table 1:
Current quality of water services delivered per region in South Africa
Perspective
National
Eastern Cape
Free State
Gauteng
KZN
Limpopo
Mpumalanga
Noth West
Nothern Cape
Western Cape
Source: DWAF 2005a
Municipalities reporting
acceptable service quality
34%
35%
31%
53%
28%
33%
41%
26%
29%
42%
Municipalities reporting
acceptable drinking water quality
37%
13%
95%
58%
39%
32%
23%
29%
29%
52%
Important to note is that these figures are only an indicative measure. It should further be
kept in mind that two years ago there was no monitoring system. Accordingly, actual
problems have only been realized recently. In addition, external factors influencing the
service level include the functionality of the infrastructure component, the limited
operational budget as well as the general lack in skills in capacity available (Wensley
2006).
The survey found that only 37% of the WSA’s perceived that their drinking water met
quality requirements; whilst only 34% claim their water services to be of an acceptable quality.
The provinces with the worst drinking water quality were the Eastern Cape, Mpumulanga, North
West, Limpopo and the Northern Cape, which all performed below the national average.
Conversely, it is perceived that the Free State has the best quality water. This can be attributed to
Free State’s Quality Management Programme that serves as the best practice in South Africa
(CSIR 2006). In particular, this programme focuses on effective transfer of drinking water
quality monitoring and management, capacity development and the maintenance of
infrastructure.
10
Generally, the problems were largely confined to rural areas with current weaknesses in
the management and provision of drinking-water quality. Poor water quality in smaller
towns and rural areas can primarily be attributed to a lack of regular
assessment/management of water quality, including source water protection, water and
wastewater treatment optimisation, supply reliability, and maintenance of drinking-water
quality within the distribution network. Yet, an appropriate water quality management
programme forms the basis for proactively addressing the situation in a structured and
effective manner (DWAF 2005b; Wensley 2006).
This poor quality drinking water has tremendous health risks. The risks of being infected
correlates with the level of contamination of the water and the amount of contaminated
water consumed. Hence, the implication is that the people are at risk of water-borne
diseases such as diarrhoea, hepatitis, typhoid, trachoma, and hookworm infection (DWAF
2005b). The table below reflects the average number of cases and deaths in the major
water-born diseases.
Table 2:
Water-borne diseases as a result of poor quality drinking water
Water-borne disease
Average ‘000 (2001 to 2005)
Cholera
Cases
Deaths
Typhoid Fever
Cases
Deaths
Paratyphoid fever
Cases
Deaths
Viral hepatitis type A
Cases
Deaths
Source: Department of Health, 2006
6673
92
151
6
35
2
112
1
From the table above it is evident that cholera is the biggest water-borne disease in South
Africa. On average, the notified number of the cholera disease cases is 6 million per
annum, which represents almost 14% of the total population. In addition, 101 000 deaths
occurred due to the lack of safe drinking water.
11
As a result of this poor quality in drinking water, what are the current challenges faced by
South Africa3? The challenges can be summarised as follows:

Service delivery to smaller towns/communities in non-metropolitan areas is not as
effective and efficient as that in the larger towns of the same WSA.

Failure to enforce pollution control created by mining (acidity and increased
metals content); urban development (salinity, nutrients, microbiological);
industries (chemicals, toxins), and agriculture (sediment, nutrients, agrochemicals, salinity through irrigation return flows)

Inadequate management and monitoring of drinking water services by WSAs
consistently results in drinking water quality that fails legislated requirements as a
result of a lack of drinking water quality data and basic laboratory equipment for
testing of samples;

Maintenance budgets are not adequate to ensure adequate maintenance;

Appropriate technologies are not always implemented;

Vandalism has a direct impact on service delivery and service sustainability;

Present WSA institutional capacity (unqualified and inexperienced staff) is
resulting in inadequate service provision; and

Lack of interventions to address poor drinking water quality compliance with
legislated requirements.
In recognition of these challenges, the purpose of the paper is seeking effective ways to
sustain drinking water quality to protect public health.
3
These findings are based on DWAF 1996;DWAF 1998;DWAF 2002a;DWAF 2002b; Van Duuren 1997
and WHO 2004.
12
4. Sustainability to safe drinking water
Given the above, it is clear that to ensure progress as regards to drinking water quality
provision by WSAs in South Africa sustainability is required. Such a sustainable system
should support the highlighted challenges and are based on three crucial pillars:

Coverage expansion

Investment in asset maintenance

Quality improvements
Coverage expansion
Millennium Development Goals (MDG) stress extending access to water as the most
important objective. Additionally, DWAF has set a target of 100% coverage of basic
level service4 by 2008 (Manus, 2006). While the country is on track to eradicate the
service backlog for basic water supply by 2008, it is important to note that quality
arrangements are typically designed for the monopolistic market structures rather than
with competitive entry and diversification in mind. In addition, the focus is on providing
a relatively good quality levels, taking advantage of economies of scale and scope in
production (Baker et. al 2000). Baker et. al (2000) further suggests that this tends to limit
access of safe drinking water to the poor.
Moreover, the current regulatory approach mostly focuses on the quality of the services
provided to those who are already connected to safe drinking water and those who have
higher quality expectations. Foster (1996) suggest that this, in turn, limits the adoption of
low-cost solutions for extending services to the poor and increases the cost of access for
rural households.
Thus, there remain serious concerns with the proportion of poor
households without an acceptable level of service, provincial disparities in access, and the
historical inequalities inherent in those trends.
4
The basic level service refers to a standard of 25 liters of safe, clean water per person per day, within 200
meters of homes.
13
Under these circumstances Baker et. al (2000) recommends that the institutional
arrangements in respect of quality need to make more allowance for competition due to
the failure to meet coverage expectations and inefficient operations.
Accordingly,
concessions in water supply have been introduced based on the inability of the public
sector to provide effective and efficient services as well as financial constraints in the
development and extension of infrastructure (Idelovitch et. al 1995; Gotz et. al 2000).
However, to date, the growing presence of private sector participation in the delivery of
essential services has not had a very successful track record in South Africa. The
difficulties facing the Dolphin Coast and Nelspruit water concessions illustrate that South
African local authorities are not yet ready to adequately regulate or monitor the private
sector in the delivery of essential services (See Box 2).
Box 2: Summary of Concessions
In 1999 a 30-year Public Private Partnership Concession was signed in the Dolphin Coast area between the
KwaDukuza municipality and Siza, in which SAUR holds 58 per cent of the shares. The end result was a
15% increase in the tariffs and Siza's investment commitment will drop by more than half, to R10 million
from R25 million over five years and (Kotze et. al 1999; Bernard 2001; Gotz et. al 2000; Hempson et. al
2002; Lobina 2003).
In 1999, the British water multinational, Biwater, was awarded a 30-year water concession in Nelspruit,
South Africa. Biwater did not carry out the promised developments and improvements in part because it
lacked the funds to meet its investment promises. There were numerous complaints from residents such as
they don't have access to water; their water is being disconnected; tariffs have increased and are now too
high; households get inflated bills or bills for water when they are not even connected; leaks are still a
major problem and not getting the 6000 liters of free water they are entitled to under national law (Public
citizen 2003).
To improve access to safe drinking water in a sustainable manner, DWAF initiated a pilot
three-way Service Delivery Management partnership. This tool will provide a Technical
Perspective, Management Perspective (including Political perspective) and Community
Perspective in order to achieving the goal of safe drinking-water (Mackintosh 2005).
14
Investment in asset maintenance
Taking a step back, it is important to note that the water sector is capital intensive and
assets to be maintained and implemented include, among others, pipelines, pumping
capacity, storage capacity, water treatment capacity, and metering.
A fundamental
problem constraining access to water is inadequate infrastructure and investment.
Although there are municipalities and WB’s that effectively manage and maintain their
assets, there are various service quality indicators that points to the fact that infrastructure
is not well maintained or being upgraded when required. The challenge is to maintain
this best practice while ensuring the improvement where there are indicators of poor
performance (Manus, 2006).
Manus (2006) further noted that one of these indicators would be the unaccounted for
Water (UW). Since leakages on distribution networks from the greatest component of the
UW, and the fact that fairly high figures have been noted for UW, it can be assumed that
generally insufficient investment have been made in the upgrading distribution and
collection works.
In addition, competition is limited in this area due to the long-tem character of
investments in the water pipe networks. The rationale being; private participation will
tend to maximize short-run profits to improve it’s market position and accordingly
network quality might deteriorate and a considerable share of the produced drinking
water would escape from the leaky water pipes (DWAF 2005b).
15
The current infrastructure concerns are raising the question of on-going sustainability of
drinking water services in the long term.
Moreover, concerns pertaining to the
investment in the infrastructure further questions the sustainability of drinking water
services in the long term:
•
Traditionally the government, due to the nature of huge sunk cost with long
recovery periods, has financed investments in the water sector (DBSA 2005).
Currently, the lack in capital expenditure has resulted in low coverage and poor
quality of service. Another contributing factor is the lack in incentives to improve
the quality of service provided (Baker et. al 2000).
•
Funding for infrastructure upgrading has received limited attention, and underinvestment in scheme rehabilitation is a critical issue. Moreover, the current
population rate under which planning is conducted is 0% (Manus 2006). From
information available from National Treasury, the projected investment in the
water services sector over the next 10 years is about R48 billion. Of that amount,
only R25 billion will come from grants, pointing to a huge market for loan
finance. This investment is made up of water resource development, bulk water
and wastewater infrastructure, and retail water and sanitation infrastructure,
including on-site sanitation systems (National Treasury 2003).
•
Municipalities struggle with designing and implementing workable approaches to
financial and institutional sustainability of water services, but there are no
industry benchmarks. Major problems are lack of income and skills, unaccounted
for water, poor customer management and inadequate credit control (DWAF
2004b).
•
While some municipalities find government grants insufficient and are in need of
loan finance for water services, some do not even have the capacity to solicit
grants to which they are entitled (Manus 2006); and
•
Subsidy schemes should be designed in order to ensure that providers offer
services to the poor without compromising their profitability, and that low-income
people have access to (DBSA 2005).
16
This requires the re-alignment of asset base management to ensure sustainability; i.e. to
prevent operator from under-spending today with deterioration in quality tomorrow.
Quality improvement
Water quality may be affected from the point of abstraction of water to the consumer.
DWAF initiated a wide-ranging program of protection, treatment and monitoring, which
is required to ensure the safety of a water supply. The security provided by this program
relies on each individual aspect being maintained at all times with any failures or faults
being identified and rectified as soon as possible. These aspects include, among others,
catchment management and source water protection; abstraction management;
coagulation, flocculation, sedimentation and filtration; disinfection ensuring an adequate
disinfectant residual, and protection and maintenance of the distribution system (DWAF
2005b).
To improve the quality of drinking water, DWAF developed a comprehensive National
Drinking Water Quality Management Framework (DWQM) to assist in the guidance of
WSAs to effectively manage the quality of drinking water supplied to consumers. Box 3
outlines the key areas of this framework.
Besides the DWQM, quality signaling by WSA’s can be seen as a substitute, or useful
complement, to regulation imposed by the government. Baker et. al (2000) claims that in
this case, quality turns into a competitive characteristic of the providers. Also, some
suppliers who enjoy a monopoly position in their service area might voluntarily choose to
increase their quality commitment to provide a signal to their customers.
17
Box 3: Focus areas of the DWQM

Commitment to Drinking Water Quality Management and Multi-Stakeholder Involvement
— Successful implementation requires the support and commitment of all water sector
stakeholders. Key stakeholders are required to be identified and appropriate mechanisms for their
commitment and involvement must be developed.

System Analysis and Management — Effective management requires an understanding of the
entire water supply system (from the catchment and its source water, through to the consumer, and
back into the water system), an assessment of the hazards and events that can compromise
drinking water quality, and the implementation of preventative measures and operational controls
necessary for assuring safe and reliable drinking water.

Supporting Programmes — This includes basic elements of good practice to ensure that the
system has the capacity to operate and adapt to meet challenges. This includes training of
employees within the water sector, community involvement, research and development, validation
of process efficacy and documentation as well as effective reporting systems.

Review & Audit — This includes ongoing evaluation of water quality data and audit processes
and their review to ensure that the management system is operating efficiently and satisfactorily
and to provide a basis for continual improvement.
Adopted from DWAF (2005b) based on NHMRC/ARMCANZ Co-ordinating Group (2001)
Last but not least, quality of drinking water will improve if best practice program in the Free
State is followed. The rest of this section is based on a discussion provided by CSIR (2006).
Under this program, the Free State government’s Department of Local Government and
Housing oversees an externally based consultative auditing function to assist
municipalities. Overall, this program is based on a WQM Information System, which is
able to guide:

Municipalities in meeting a progressive realisation of rights for every household
within the Department of Local Government and Housing’s area of jurisdiction.

The structured addressment of water quality issues (chronic and acute),

Consolidate areas of success by ensuring managed and supported transfer of
mandated functions to Local Government

Greater emphasis on guiding and assisting capacity Building and infrastructure
improvement,
18
To monitor and improve the quality of water, drinking-water samples are collected from
towns at the municipalities of the Free State Province on a monthly basis. The collected
water samples are analysed for various microbiological and physico-chemical parameters
(depending on the water in question) utilizing internationally accepted methods. Water
quality data is then collated, verified and interpreted according to required standards,
which helps to identify issues of concern that require attention and highlights
improvements made in service delivery. This aids in the identification and alleviation of
numerous drinking-water quality issues of concern. This is evidenced by the generally
extremely good adherence to drinking-water quality across the Free State.
5. Potential role of competition
Considering the above, it is clear that the traditional model is not reliable to assure the
sustainability of safe drinking water. To ensure sustainable access to safe and affordable
water, the role of competition in this sector is not a question of principle, but one of
practice.
As aforementioned, competition in the South African water sector is limited due to high
transport costs relative to value; health and environmental objectives; importance of
social objectives; regulatory environment; foreclosure issues and the highly concentrated
market. Importantly, a study by the Asian Development Bank (ADB) stressed:
“A key advantage of having the private sector provide public services is that it allows
public administrators to concentrate on planning, policy and regulation” (ADB 2000).
Yet, the South African government is of the view that the introduction of effective
competition might improve the unemployment situation together with a tremendous
increase in water tariffs. Therefore, it is rather the function of government to ensure that
adequate water supply and sanitation services are provided to the population, particularly
to the poor and the vulnerable (Manus 2006). Thus, this mandate cannot be delegated,
outsourced or privatized.
19
Conversely, theory suggests that competition for the market is possible and desirable, e.g.
the situation in which operators compete in order to obtain the right to provide one or
several of the services of the vertical water chain in a particular geographical area (EC
2002; ADB 2000).
For a start, new entrants can only be allowed to enter if they obtain a right to operate
from the government. Currently, the government only allocates fixed water quotas to the
regional monopolized WB’s, based on historically determined quotas (DWAF 2004a;
Thompson 2002). In other words, only WB’s are able to obtain water for distribution
from the specified catchment areas. Consequently, this exclusivity led to the inability to
meet demand and quality requirements. Moreover, this foreclosure issue is against the
Competition Act.
This said; the only anti-competitive behaviour in this sector that might improve the
sustainability of access to safe drinking water is the investigation of foreclosure issues in
metropolitan areas.
If this foreclosure issue can be solved, alternative bulk service
providers will be in the market, providing a competitive environment as well as
accelerating the area of access to safe drinking water. To ensure the quality of the water,
the granting of such a right should involve a number of quality requirements to be met.
Such requirements could potentially enhance the companies to compete on quality
dimensions that modify the economic value of the service, such as customer relations.
This is an option that brings a range of skills, expertise and access to funding, while still
retaining a high degree of public accountability. The direct benefits would be an increase
in the number served, an improvement in quality of water delivered and overall service
delivery efficiency.
20
Additionally, this will encourage water supply companies to charge competitive water
tariffs due to competitive pressure in upstream or downstream markets. Lesser
investments would be required for capacity building of utility personnel while they work
with the efficient private sector. On the other hand, these rights might attract private
capital and transforming water systems into economically viable and financially attractive
enterprises. Last but not least, it is important that the water supplied remains acceptable
to consumers (EC 2000).
At the moment there are few organisations and companies in favour of an open water
market. The South African Agricultural Union, the Council for Scientific and Industrial
Research (CSIR) and the main electricity provider, ESKOM, were in favour of water
trading per se (Bate et.al 1999; King 2004). Yet, the success of this strategy ultimately
hinges on the willingness of government to remove number of institutional and legal
barriers.
This is a major step in enhancing competition for the market. Theory suggest that the
introduction of such water rights should run parallel with other water market reforms,
such as privatization and institutional reform (Armitrage et. al 1999, ADB 2000). The
rationale being, the successful implementation of these water rights would reinforce the
other reforms and allow greater gains to be made by the whole community.
In terms of non-metropolitan areas, issues around the protection of the poor, logistics of
delivery of water services, the environment and the quality of drinking water should be
solved before efficient competition can be introduced.
Therefore, in terms of non-metropolitan areas, the sustainability of the access of safe
drinking water is still the sole responsibility of the government. The introduction of
competition in this part of the sector will only provide the prerequisites for access to safe
drinking water and will not change the market environment accordingly. Currently,
DWAF recommends informal water vendors to ensure the access to safe drinking water
(DWAF 2005b). These informal water vendors are described in Box 4.
21
Box 4: Informal water vendors in rural areas

Point-of-use treatment methods: In communities where no clean water sources are available, and
contaminated water is routinely consumed, low-technology point of use treatment methods are
recommended, including boiling, use of household bleach or HTH granules and exposure to sunlight.

Preferential use of groundwater as a water source:
Where available, groundwater
(boreholes/springs) may be used, because when sources are properly protected, bacteriological
contamination is minimised.

Mobile water supplies: Where water quality has deteriorated to such an extent that conventional
methods such as boiling and adding disinfectants are inadequate, mobile water supplies/tanks should
be provided, while interventions are undertaken to improve the situation.
Adopted from DWAF 2005b
Whether these informal vendors will ensure sustainability is questionable as these
informal vendors are considered to be more expensive than piped connection over the
long-term. Additionally, there is an urgency of establishing treatment facilities to ensure
the sustainability of the quality of the drinking water (Mackintosh 2004b). Further, the
monitoring of consumer comments and complaints is of utmost importance.
This
information will provide valuable information on potential problems that may have gone
unidentified in performance monitoring of the water supply system.
22
6. Conclusion
The paper established that the potential for the application of competition to the
achievement of sustainable access to safe drinking water has been neglected.
Accordingly, the paper suggests that the institutional arrangements in respect of quality
need to make more allowance for competition due to the failure to meet coverage
expectations and inefficient operations. To safeguard the sustainability of drinking water
services in the long term, the paper emphasises the need to address the current
infrastructure concerns and concerns pertaining to the investment in these assets. A
further suggestion to improve the quality of drinking water is to apply the best practice
program in the Free State on a national basis.
Most important, the paper found that competition for the market is possible and desirable
in metropolitan areas.
Instead of allocating fixed water quotas to the regionally
monopolized WB’s, competition for the market can be introduced where operators
compete in order to obtain the right to provide the bulk distribution services of the
vertical water chain in a particular catchment area. The ideal will be to have more than
two water supply companies in each particular catchment area.
The result is a
competitive environment as well as accelerating the area of access to safe drinking water.
In terms of non-metropolitan areas, issues around the protection of the poor, logistics of
delivery of water services, the environment and the quality of drinking water should be
solved before efficient competition can be introduced.
Therefore, in terms of non-
metropolitan areas, the sustainability of the access of safe drinking water is still the sole
responsibility of the government.
23
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