Marydale bulk water supply Phase 3: RBIG IRS
First draft report 17 March 2016
Acknowledgments All contributing persons are acknowledged in footnote references.
Prepared by: Herman Schmidt WorleyParsons Tel: +27 54 332 4943 | Mob: +27 83 456 6022 Email: [email protected]
Prepared by:
Adeline Squires Settlement Planning Services Cell: 0837010190 Fax: 086‐5156971 Email: [email protected]
Prepared by: Cisca Diedericks Aurecon Tel: +27 53 807 1240 | Mob: +27 82 370 0220 Email: [email protected]
Prepared for: The Municipal Manager Siyathemba Municipality Tel: +27 53 353 5300| Fax: +27 54 353 1386 Email: [email protected]
Disclaimer The project team makes no guarantee of any kind, expressed or implied, with respect to data illustrated and information in this report, and shall not be held liable in any event for any incidental or consequential damage resulting from its use. We accepts no liability or responsibility whatsoever for it in respect of any use of or reliance upon this report by any third party. This study was funded by the Siyathemba Municipality. The Siyathemba Municipality assumes no responsibility for the content of the research study reported in this publication or for the opinions or statements of fact expressed in the report. The mention of trade names for commercial products does not constitute or imply approval or endorsement of the Municipality. This report is presented solely for informational purposes.
Copyright Copyright © 2016 by Siyathemba Municipality ALL RIGHTS RESERVED No part of this publication may be copied, reproduced or otherwise utilized without permission.
Executive summary Background and purpose The Marydale bulk water supply project has three key drivers, namely: a water shortage which results in water restrictions being put in place at times unpotable ground water supplies with high fluoride and nitrate concentrations which fail to meet SANS 241‐1 standards an increasing demand for water mainly caused by a demand for waterborne sanitation Good groundwater potential was found in three boreholes near to the existing boreholes, which would be the least cost and preferred option. No other options were investigated. Project area and benefiting population The project is entirely located in the jurisdiction of the Siyathemba Local Municipality who is the water services authority (WSA) and the sole water services provider (WSP). The project is to benefit the community of Marydale, one of three settlements in Siyathemba. Marydale has an estimated population of 2 735 and by 2035 it is expected to reach 3 686. Approximately 67.2% of the 673 households in Marydale are indigent and benefit from free basic water of 6 kℓ per month. Businesses in Marydale can be described as ‘run of mill’ types such as basic retailing and services. The number of associated services benefiting include one clinic, one intermediate school, and a community hall. Project motivation and objective The main objective of the proposed water supply scheme is to replace the town’s most unpotable groundwater sources to improve water quality to acceptable norms and to increase the quantity of water. Thus, the project aims to: improve the quality of water supplied to domestic users improve the reliability of the water supply to the town ensure adequate future water supply to the town Main components and extent/scope of works A total of 3 new production boreholes will be equipped as part of this project. They are MRE2, MRE1 and MA3 (also see layout diagram on next page) The 3 borehole is situated within the town boundaries and the bulk pipelines will not cross any other land users. The following infrastructure is proposed: i. Electrification of new borehole position with underground electrical cables and step down transformers ii. Equipping of borehole with the required pumps, valves, meters etc. iii. Construction of new uPVC supply pump lines from the new boreholes to existing pipelines and to a new elevated reservoir. iv. Construction of a new 138m³ elevated tower on a 10m footing and down pipes with valve control to the existing water reticulation network.
v. Construct building to house MCC and other electrical infrastructure with1.8m high razor wire fence The diagram below indicates the areas of development:
Phases and programme The project can be completed within one year i.e. by the end of the 2016/17 financial year. Environmental authorisations were obtained during September 2015. Application ref. No. NC/BA/48/PIX/SIY/MAR2014. The WULA is currently in review by the local DWS office in Upington. A R114.00 admin fee was paid in February 2016, which was required for, to proceed with the review process. Additional formal applications for the construction of the scheme will be submitted upon conclusion of the preliminary design. Alignment, ownership and O&M responsibility The project is aligned to the IDP. The IRS will be presented at a council meeting to be held on 30 March 2016. The Siyathemba Municipality is the WSA for the area and they will take ownership responsibility for the proposed project infrastructure. In addition, the Municipality will act as the implementing agent for the project since it is the most suitable water services institution identified. Job creation Job creation during the construction period is estimated at approximately 18 jobs and 1 337 person days based on previous MIG projects. No new jobs will be created in the operational phase. Institutional Criteria The proposed institutional framework for this project indicates that the local municipality will act as implementing agent for the project, and will, together with the appointed consulting engineers and the Pixley ka Seme District Municipality, manage the project during project execution phase. The municipality has in the past implement projects of this nature and size. The
Niekerkshoop bulk water supply project also funded by the RBIG programme, can be listed as an example of one such project successfully completed by the municipality. The municipality also acted as implementing agent on behalf of the Department of Water and Sanitation for this project and the Department was satisfied with the procurement processes followed as well as the financial management of this project. It is further proposed that Siyathemba Municipality should be the owners of the infrastructure. The municipality will be the only benefitting water services institution and the entire project will be implemented within the jurisdiction area of this municipality. Siyathemba Municipality is also the Water Services Authority and Water Services Provider for this area and no other water services institution such as Water boards, Water User Associations are operational in this area. Although the municipality does experience challenges with regards to technical expertise, there is a total of 16 staff members responsible for the maintenance of civil engineering services to the community of Marydale. Their functions are to maintain water, sewer, roads and storm water infrastructure as well as general maintenance to parks and cemeteries and refuse removal services. The proposed new infrastructure (3 new boreholes, 1 X 138m³ elevated tower and associated pipework) will be integrated with the existing system and will be able to be operated by the same operating personnel currently located in Marydale. Project cost and budget allocation The project is estimated to cost R 8 831 109 including VAT. The social component is 86.3%, and this is to be funded from RBIG. The co‐funding amount will be provided by Siyathemba’s own funds. According to the DoRA of February 2016, the Department of Water and Sanitation allocated R10 million in 2016/17 for the project over the MTREF from RBIG. O&M cost The annual O&M cost of the project is estimated at R 40 500 excluding VAT. This amounts to R3 375 per month or R0.38 per kℓ based on total water demand of 107 631 kℓ/a. The O&M cost of the project is small and can be accommodated within the existing tariff. With regards to affordability, the cost of 6 kℓ water is R81.31 p.m. per household which does not exceed the FBW allocation from the equitable share (R99.75). Water demand management/water conservation A complete WC/WDM review was conducted as part of the Technical Feasibility Study. Please refer to Appendix A. The Siyathemba Municipality is committed to get an approved WC and WDM strategy in place and to provide in their budget for implementation of the strategy. The municipality should target to reduce their total water losses to not more than 15%. Through implementation of a WC/WDM strategy the municipality can lower the water losses from the current 51% to 20% in the next five years and to 15% in the following five years. Infrastructure components are sized considering the target water losses of 15%. It is therefore imperative to implement a WC/WDM strategy to minimize the water losses in order to maximize the design life of the new infrastructure. Progress to date The IRS of the project will be presented to the Northern Cape RBIG Planning Coordinating Committee meeting to be held on 13 May 2016. The DWS CAPEX approval needs to follow. Thereafter, detailed design development and tender document preparation can proceed along with tender procurement.
Conclusion A sustainable water supply to Marydale is required to relieve water shortages and improve the quality of the water to potable standards. Without this project, Marydale will be without a sustainable water supply.
Content 1 INTRODUCTION ...... 1 1.1 Background ...... 1 1.2 Scope of the study ...... 1 2 METHODOLOGY OF THE STUDY ...... 1 3 STRATEGIC & PLANNING ISSUES ...... 2 3.1 Alignment with IDP and WSDP ...... 2 3.2 Alignment with PDGDS, WFGD and Turnaround Strategy ...... 2 3.3 Associated Water Infrastructure ...... 3 3.4 Strategic Importance ...... 3 3.5 Technical Option ...... 3 3.6 Level of Service ...... 4 3.7 Economic Growth Requirements ...... 4 3.8 Water Scarcity ...... 4 3.9 Project Functionality ...... 4 3.10 Capital and Operating Costs ...... 5 3.11 Available Co‐Funding ...... 5 4 SOCIAL CRITERIA ...... 5 4.1 Number of households and people to be uplifted to basic and higher service levels ...... 6 4.1.1 Population circa 2011 ...... 6 4.1.2 Historical trends ...... 7 4.1.2.1 Historical population growth 1985 ‐ 2011 ...... 7 4.1.3 School populations ...... 9 4.1.4 Household growth ...... 10 4.1.5 Factors determining population size and affecting growth ...... 11 4.1.5.1 Migration ...... 11 4.1.5.2 Fertility and mortality ...... 12 4.1.5.3 Population growth expectations ...... 12 4.1.6 Basic and higher service levels ...... 14 4.2 Number of poor households to be served ...... 15 4.2.1 Poverty and household income ...... 15 4.2.1.1 Household income ...... 15 4.2.1.2 Housing...... 15 4.2.1.3 Indigent households ...... 16 4.2.1.3.1 Indigent policy ...... 16
4.2.1.3.2 Number and proportion of indigent households ...... 16 4.3 Estimated number of jobs to be created ...... 17 4.4 Affordability of the proposed water tariffs ...... 18 4.5 Contribution towards poverty eradication, social upliftment and health ...... 18 4.6 Number of associated services benefiting ...... 19 4.6.1 Health facilities ...... 19 4.6.2 Schools ...... 20 4.6.3 Community halls ...... 20 4.7 Socio‐political support for the proposed development ...... 20 5 ECONOMIC CRITERIA ...... 20 5.1 Number of businesses and industries to be served ...... 20 5.2 Expected economic value to be generated by new business ...... 21 5.2.1 Multipliers and values to be generated by O&M of the project ...... 21 5.2.2 Effects of investment in water infrastructure ...... 21 5.3 Number of SMMEs and BEE enterprises to benefit from project ...... 23 5.4 Regional economic benefit from proposed project ...... 24 5.4.1 Employment and unemployment ...... 24 5.4.2 Sector of employment ...... 25 5.4.3 Economic sector contribution to GDP ...... 25 5.4.4 Estimated GDP 2030 ...... 27 6 TECHNICAL CRITERIA ...... 27 6.1 Master Planning ...... 27 6.2 Appropriateness and Acceptability ...... 27 6.3 Water Resource ...... 27 6.4 Water Demand Management and Conservation ...... 27 6.5 Bulk Distribution ...... 28 6.6 Technology ...... 28 7 INSTITUTIONAL CRITERIA ...... 28 7.1 Which Institution will be the owner? ...... 28 7.2 Confidence in the capacity of the institution to implement ...... 29 7.3 Agreements on infrastructure ownership (per scheme component) ...... 29 7.4 Agreement on implementation responsibility (per scheme component) ...... 29 7.5 Proof of implementation capacity (e.g. capital expenditure over last 3 years) ...... 31 7.6 History on past implementation quality & performance (e.g. functionality audits) ...... 34 7.6.1 Section 47 report ...... 34 7.6.2 Back to Basics ...... 34
7.6.3 Municipal Strategic Self‐Assessment (MuSSA) ...... 34 7.6.4 Turnaround Strategy ...... 36 7.7 Agreement on operating responsibilities (per scheme component) ...... 38 7.8 Proof of adequate staff numbers and skills levels (per scheme component) ...... 38 7.9 History in water services interruptions (annual interruptions in household‐days) ...... 39 7.10 Commitments for above by institutional leadership(e.g. municipal mayor and council) 40 7.11 Cooperation agreements between key stakeholders ...... 40 7.12 Approval of institutional arrangements ...... 41 7.13 Cost recovery system (including policy on free basic water and non‐payment) ...... 41 7.14 Water conservation and demand performance by institution ...... 42 7.15 Responsibilities and accountability ...... 42 7.16 Conclusion ...... 43 8 FINANCIAL CRITERIA ...... 43 8.1 Available funding ...... 43 8.1.1 Revised and approved social/economic split of the cost of the project ...... 43 8.1.2 Proposed funding arrangement from RBIG ...... 44 8.1.3 Budget allocation by Siyathemba Municipality ...... 44 8.1.4 Source of fund for the co‐funding ...... 44 8.2 Funding conditions ...... 44 8.3 Financial analysis of cost and income projection ...... 45 8.3.1 Capital cost and repayment requirements ...... 45 8.3.2 Monthly operation and maintenance costs ...... 45 8.3.3 Allowance for cost of water losses ...... 46 8.3.4 Allowance for refurbishment of various components of the scheme ...... 46 8.3.5 Allowance for the cost of free basic water services ...... 46 8.3.6 Provision of institutional overhead costs ...... 47 8.4 Financial modelling of projected income taking into account affordability ...... 47 8.4.1 Affordability and projected sales ...... 47 8.4.2 Allowance for income received from equitable share ...... 47 8.4.3 Potential income generated from the provision of sales taking into account expected growth in demand ...... 47 8.4.4 Allowance for non‐payment ...... 47 8.5 Proposed water tariffs adjustments ...... 48 8.5.1 Water and sanitation tariffs 2015/16 ...... 48 8.5.2 Affordability of current tariffs ...... 49 8.5.3 Proposed tariffs ...... 51
8.5.4 Affordability of proposed tariffs ...... 51 8.6 Financial viability and expected return on investment over the expected useful life ...... 51 8.7 Financial status, performance, and creditworthiness of the municipality and implementing agents ...... 52 8.7.1 Financial status and performance of Siyathemba Municipality ...... 52 8.7.1.1 Clean audit outcomes ...... 52 8.7.1.2 Key financial indicators ...... 52 8.7.1.3 Water debtors ...... 54 8.7.1.4 Adequate budgeting and expenditure on renewal, repairs and maintenance of existing assets 54 8.7.1.5 Creditworthiness ...... 55 8.7.2 Proposals ...... 55 8.7.2.1 Motivation why the project proposal should be accepted ...... 55 8.7.2.2 Identify and quantify the risks of going ahead with the project proposal ...... 55 8.7.2.3 Steps and conditions to be adopted to ensure the success of the project and to negate negative financial status ...... 56 9 LEGAL CRITERIA ...... 56 9.1 Water Use License ...... 56 9.2 Environmental Authorisation ...... 56 9.3 Land and Property Rights ...... 56 10 SUSTAINABILITY CRITERIA...... 57 10.1 Financial Viability ...... 57 10.2 Operating and Management Capacity ...... 57 10.3 Environmental and Social Acceptability and Impact ...... 57 11 CHECKLIST CONCLUSION ...... 58
Acronyms
AADD Average annual daily demand BEE Black Economic Empowerment CHC Community health centre COGHSTA Cooperative Governance, Human Settlements and Traditional Affairs, Northern Cape CPI Consumer price index DM District Municipality DWA Department of Water Affairs (formerly) DWS Department of Water and Sanitation EMIS Education Management Information System EPWP Expanded Public Works Programme FBDM Frances Baard District Municipality GDP Gross domestic product GVA Gross value added Ha Hectare HH Household HIV/AIDS Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome IDP Integrated Development Plan IRS Implementation Readiness Study kℓ Kilolitre = 1 000ℓ = 1 m3 Km Kilometre KwH Kilowatt hours LED Local Economic Development LM Local municipality m6/m3/a Million cubic meters per annum Mℓ Mega litre = 1 000kℓ = 1 000m3 MTEF Medium term expenditure framework NC Northern Cape Province NRW Non‐revenue water p.a. Per annum p.m. Per month PGDS Provincial Growth and Development Strategy PICC Presidential Infrastructure Coordinating Commission RBIG Regional bulk infrastructure grant RDP Reconstruction and Development Programme SDF Spatial Development Framework SMME Small, Medium and Micro Enterprise UDS Urine diversion sanitation VIP Ventilated improved pit WSA Water Services Authority WSDP Water Services Development Plan WSP Water Services Provider WTW Water treatment works WUA Water User Association WWTW Waste water treatment works
1 INTRODUCTION WorleyParsons has been appointed to undertake the feasibility study and implementation readiness study for the Marydale bulk water supply project. The purpose of the study is to apply for funding for the implementation of the project from the regional bulk infrastructure grant (RBIG) programme. Setplan has been approached to prepare three criteria sections, which are social, economic and financial for the Implementation Readiness Study (IRS) and these are detailed in this report. 1.1 Background The study concerns the town of Marydale, which is to benefit from the proposed project. Marydale is situated within the Siyathemba Local Municipality, which is in the Pixley ka Seme District of the Northern Cape Province. The project aims to equip newly drilled boreholes and link the supply to the existing network. The augmentation of boreholes to supply Marydale is needed because the current six production boreholes are inadequate to meet the current water demand and water quality standards.1 1.2 Scope of the study The project requires an implementation ready study for the Regional Bulk Infrastructure Grant Programme to be approved by the Dept. of Water and Sanitation. This report addresses all the 8 fields of criteria, for the purposes of the RBIG application. The IRS checklist concludes this report. 2 METHODOLOGY OF THE STUDY This report is based on quantitative and qualitative data obtained from secondary and primary sources. Secondary sources referred to include: Engineering and technical reports of Marydale’s water supply Statistics South Africa’s population censuses and surveys Municipal documents such as the IDP, SDF, Annual Report, Annual Financial Statement, and budgets Dept. of Water and Sanitation’s reports including guidelines, frameworks, Blue and Green Drop reports, and backlog data Relevant published reports Primary information obtained from persons is referenced in footnotes.
1 WorleyParsons (2014) Marydale: Equipment and infrastructure development of 3 boreholes. Rev A: 2014‐03‐20.
1 3 STRATEGIC & PLANNING ISSUES 3.1 Alignment with IDP and WSDP The latest Water Services Development Plan (WSDP) of the Siyathemba Municipality does not capture the individual towns in the municipal area. However, the need for water services for the greater Siyathemba municipal area is identified. The WSDP is aligned and integrated with the Integrated Development Plant (IDP) of Siyathemba Municipality and forms an integrated part of the IDP public participation and consultation process. The IDP is predominantly strategic as opposed to the WSDP, which is more operationally orientated. Reference to bulk water supply project is made in the WSDP under Topic 13 (List of Projects). 3.2 Alignment with PDGDS, WFGD and Turnaround Strategy The Northern Cape Provincial Growth and Development Strategy guide the Northern Cape Province in the process of development planning by the following principles: i) Equality – notwithstanding the need to advance previously disadvantaged people, development planning should ensure that all persons should be treated equally. ii) Efficiency – the promotion of the optimal utilisation of existing physical, human and financial resources. iii) Integration – the integration of spatially coherent regional and local economic development and improved service delivery systems. iv) Good Governance – the promotion of democratic, participatory, co‐operative and accountable systems of governance along with the efficient and effective administration of development institutions. v) Sustainability – the promotion of economic and social development through the sustainable management, utilisation of natural resources and the maintenance of the productive value of the physical environment. vi) Batho Pele – the placement of people and their needs at the forefront of its concern and to serve their physical, psychological, developmental, economic, social and cultural interests equitably. vii) Mainstreaming ‐ issues of women, children and persons with disabilities must be an integral part of all planning processes, implementation and monitoring of all plans and activities. The IDP of Siyathemba Municipality (which incorporates the WSDP as one of the Sector Plans), has compiled its strategies in line with these objectives. The proposed bulk water supply project for Marydale is particularly aligned with principal II, III and V of the Northern Cape Provincial Growth and Development Strategy. DWS is developing a framework to guide actions and decisions that will ensure water security in terms of quantity and of quality to support South Africa’s requirements for economic growth and social development. Sufficient supply of water is a requirement for the country to achieve its economic growth targets. The provision of water to every person in South Africa is also a fundamental goal that needs to be facilitated by the department’s framework. These two goals must be achieved without compromising the ecological sustainability of water resources. The proposed bulk water supply project for Marydale is in line with the goals of the Water for Growth and Development Framework.
2 In December 2009, the South African Cabinet approved a comprehensive Local Government Turnaround Strategy (LGTAS). One of the main aims of the LGTAS is to renew the vision of developmental local government. To do this the LGTAS seeks to improve the organisational and political performance of municipalities and in turn the improved delivery of services. The proposed bulk water supply project for Marydale is aligned with the goal of the LGTAS which is to improve the lives of citizens, and progressively meet their social, economic, and material needs and thereby restoring community confidence and trust in government. 3.3 Associated Water Infrastructure The existing water infrastructure consists of boreholes and bulk water supply pipelines that feed 2 concrete storage reservoirs. The storage reservoirs distribute potable water to the consumers in Marydale. Wastewater treatment is by means of an oxidation pond system of which the capacity and condition were not obtained. Wastewater is conveyed to the oxidation ponds by means of a suction truck. No sewage reticulation network is in place. Therefore the associated bulk water infrastructure is already in place. This proposed bulk water supply project for Marydale entails the augmentation of the existing water resources to supply in the current and future water demand for a higher level of service, i.e. piped water inside the dwelling and full waterborne sanitation system. 3.4 Strategic Importance The strategic objectives of the Siyathemba Municipality as identified in the IDP are: 1. Sustainable, effective and efficient service delivery to all people in the municipal area. 2. Eradicate backlogs in order to improve access to services and ensure proper operations and maintenance. 3. Promote a culture of participation and good governance. 4. Improve organisational cohesion and effectiveness. 5. To improve overall financial management in the municipality by developing and implementing appropriate financial management policies, procedures and systems. 6. Create an environment that promotes the development of the local economy and facilitate job creation The key drivers for the proposed bulk water supply project are as follows: The Siyathemba Municipality is working towards providing all households in Marydale with piped water inside the house and a full waterborne sanitation system. During summer months, boreholes pumps are running 24 hours per day to supply in the water demand, leaving no time for emergency maintenance and risking uninterrupted potable water supply to Marydale. From the above, it can be noted that the proposed bulk water supply project is in line with strategic objectives 1, 2 and 6. 3.5 Technical Option A detailed water demand analysis was done for Marydale. The projected water demand for Marydale, based on expected population growth and typical water consumption values are 168,152m³/ annum in 2015 to 195,219m³/ annum in 2030. This indicates a current peak day water demand of 784kl/d and a peak day demand of 1222 kl/d for a 15 year design horizon. SRK Consulting conducted a hydrocensus of the Marydale area and subsequently conducted
3 exploration borehole drilling and yield testing. It was concluded that the existing production boreholes can yield a sustainable yield of 671 kl/d. This means a shortfall to supply in the peak day demand of 113 kl/d for the current year and a shortfall of 551 kl/d for a 15 year design period. A part of the Technical Feasibility Report (Phase 2A) various options to supply in this shortfall was investigated. It was concluded that groundwater supply to augment the existing bulk water sources is the most feasible and appropriate option. SRK Consulting recommended three boreholes that should be developed and equipped as production boreholes. This preferred technical option was discussed and agreed with all parties. 3.6 Level of Service Siyathemba Municipality is working towards providing all households in towns with a water connection inside the house and connecting all households to a waterborne sanitation system. As determined by the Section 78 (1) Assessment on Water and Sanitation Services there is a total of 2 households with basic water services and 52 households without basic sanitation services. A total of 419 households have yard connections as the highest level of water supply services and 213 households still make use of a VIP sanitation system. The proposed bulk water supply project will provide the required infrastructure to enable higher level of water and sanitation services for all the households of Marydale, i.e. piped water inside the dwelling and full waterborne sanitation services. 3.7 Economic Growth Requirements Investing in infrastructure creates an enabling environment for economic growth and is an important precondition for sustainable growth. As identified in the IDP, one of the Siyathemba Municipality’s strategic objectives is to “create an environment that promotes the development of the local economy and facilitate job creation”. Marydale area relies mostly on sheep farming, irrigation farming and the production and processing of cotton. From a tourism perspective the economic development strategy also refer to possible 4x4 activities and the possibility of a mineral water development specifically in Marydale. Hunting activities and the processing of the meat also generate an income in the area. It is imperative that reliable bulk water supply to consumers in Marydale is ensured to create the enabling environment to meet the local economic growth requirements. 3.8 Water Scarcity The Northern Cape is well known for its water scarcity and Marydale is part of that statistic. The only existing water resource for Marydale is groundwater through a total of five production boreholes and a well. Through the recent yield testing, the safe yield from the existing production boreholes was determined at 671 kl/d. Marydale experiences a shortage during hot summer months when the borehole pumps are running 24 hours per day. Therefore the safe yield from the existing production boreholes is insufficient to supply in the peak day demand. The recent hydrocensus and subsequent exploration borehole drilling and yield testing concluded that the safe yield from the new exploration boreholes is sufficient to augment the existing production boreholes and meet the peak day demand for a 15 year design period. 3.9 Project Functionality The majority of households in Marydale are classified as indigent and therefore the proposed water supply solution should be tailored to the income level of the community. Also, due to the remote location of Marydale, the day to day operation of the water supply infrastructure at Marydale is executed by the core personnel situated in Marydale. The preferred solution must be
4 functional and easy to operate and maintain. The preferred solution must also incorporate the existing water supply infrastructure. As determined in the Technical Feasibility Report, the preferred solution of augmenting existing water sources with groundwater from the Marydale area will be the most feasible and functional with regards to integration with the existing infrastructure, affordability of the Marydale community and the logistics of the day to day operation and maintenance of the system. 3.10 Capital and Operating Costs Capital and operating cost estimates for the implementation phase of the proposed bulk water supply project was prepared as part of the Preliminary Design Report. Costs are based on current market related rates and need to be escalated on an annual basis. A capital cost of R 8 831 109‐19 (incl. P&G, Professional fees and VAT) is estimated for the implementation phase. It is estimated that the existing bulk water system of Marydale currently service a total of 673 households or 2735 people. The proposed bulk water supply project will increase the capacity of the system to service a total of 3686 people in 2035. The capital cost per household that will be serviced by the proposed bulk water supply project is therefore R13,122.00 per household. According to Table 49, Capital Costs per Household for Water Supply, in section 7 of Municipal Infrastructure: An Industry Guide to Infrastructure Service Delivery Levels and Unit Costs: June 2010, the capital cost per household for a scheme of 1 000 people in the Northern Cape is R37 694 per household. The capital cost per household for the proposed bulk water supply project is lower and can be contributed to savings due to existing infrastructure already in place. The annual O&M cost of the project is estimated at R 40 500 excluding VAT. This amounts to R3 375 per month or R0.38 per kℓ based on total water demand of 107 631 kℓ/a. The O&M cost of the project is small and can be accommodated within the existing tariff. 3.11 Available Co‐Funding The Siyathemba Municipality is committed to co‐fund the proposed bulk water supply project. Please refer to section 8 (Financial Criteria) for more details on the co‐funding arrangement for this project. Also see commitment letter attached. 4 SOCIAL CRITERIA Marydale’s bulk water augmentation requires an implementation ready study for the Regional Bulk Infrastructure Grant Programme. This section addresses the social criteria, which according to the TOR includes: 2 Number of households to receive basic and higher levels of service Number of indigent households to be served and the social cost Number of associated services benefiting e.g. schools, clinics and communal facilities Number of jobs to be created per category i.e. temporary and permanent Affordability of proposed water tariffs Contribution toward poverty eradication, social upliftment and health improvement
2 Dept. of Water Affairs (2011) Water services regional bulk infrastructure programme – Framework for implementation. Version V10, January 2011.P.28.
5 Socio‐political support for the proposed development options The study area concerns the settlement of Marydale situated within the Siyathemba Municipality, which is in the Pixley ka Seme District of the Northern Cape Province. Marydale’s population growth, water shortages and poor water quality has necessitated an assessment of the water service.
4.1 Number of households and people to be uplifted to basic and higher service levels The social criteria section of the RBIG application needs to report on the number of persons for which the project, in this case the Marydale bulk water supply, caters. This section, based on secondary data, sets out a most likely population estimate for Marydale, until the year 2035 to most accurately determine its future water demand.
4.1.1 Population circa 2011 A review of the historical population of Marydale is needed to verify population estimates. Several sources are used to verify household/dwelling numbers. These are Google Average household size in Earth’s aerial photography overlaid with Eskom’s Marydale by subplace 4.36 dwelling count and the Surveyor General’s surveyed 4.13 erven, complemented by StatsSA’s censuses, and 3.79 3.63 3.47 DWS’s backlog and level of service data set. Average household sizes are applied to dwelling and household counts to provide an estimate of the population size. For this two sources are consulted namely the 2011 Census and the Northern Cape’s Balelapa Household Profiling Study. The adjacent figure shows that the average household size of Marydale was 3.79 according to the 2011 Census of Rama Rainbow Rooidal MarydaleMarydale which the Marydale SP area had the highest Rou SP Total household size (4.36) and Rainbow the lowest (3.47). The figure illustrates that average household size Figure 1: Average household size by sub place declined between 1996 and 2011 from 4.73 to 3.78 respectively. The average household size for Marydale reported by the Census 2011 is similar to that reported in the Balelapa Household Profiling Study of the Dept. of Social Development. This study, undertaken as part of the War on Poverty Programme in 2010, states that the average size of Marydale households was 3.86.3 Figure 2: Average household size in Marydale 1996-2011
3 Dept. of Social Development (2012) Balelapa Household Profiling. Siyathemba Municipality. P 5.
6 Marydale Households/dwellings2,616 Population The 2011 Census average household size4 is applied 2,266 2,343 to dwelling counts from Eskom and to the Google Earth image of 2012. These produce estimates of 590 690 610 the Marydale population that range from a minimum of 2 266 to a maximum of 2 616. 2010 Eskom 2011 Census 2012 dwelling structure count count Google Earth
Figure 3: Number of households/dwellings and population in Marydale Table 1: Estimated population of Marydale in 2011, 2010 and 20125
2012 Google Earth dwelling 2011 Census 2010 Eskom structure count count
Population Households Ave HH size Dwellings Population Dwellings Population
Rama Rou 1 101 303 3.63 263 956 262 952
Rainbow 624 180 3.47 116 402 128 444
Rooidal 198 48 4.13 49 202 49 202
Marydale SP 693 159 4.36 162 706 171 745
Marydale Total 2 616 690 3.79 590 2 266 610 2 343
The March 2016 records of the Dept. of Water and Sanitation show that there were 673 households in Marydale. At an average household size of 3.79 it is estimated that the population is approximately 2 552 in 2016.
4.1.2 Historical trends Several sources of information are further consulted to detail historical growth trends in population, households and learner numbers in Marydale.
4.1.2.1 Historical population growth 1985 ‐ 2011 The figure below indicates that the population in Marydale increased unevenly from 1985 to 2011. An exponential trend line is fitted to the Marydale population data, and it indicates that the population increased at a relatively irregular rate between censuses. It varied between the inter‐ census periods from ‐1.96 p.a. (1991‐1996) to 4.04% p.a. (1996‐2011). The annual growth rate over this period was 1.56% p.a.6
4 Data source: StatsSA Censuses 2011, 2001, 1996. 5 Data sources: StatsSa Cencus 2011; Eskom spot count of structures 2010; and a count of dwellings on the 2012 GoogleEarth image dated 10/19/2012. 6 Data source: Eskom spot count 2010; StatsSA Census 2011; Surveyor General’s surveyed erven 2015.
7
Total structures = 613 - 23 non-dwellings = 590 dwellings (approx.) [Eskom] Total erven = 930 [Surveyor General]
Figure 4: Population of Marydale 1985 – 20116
8
Marydale population 1985‐2011 3,000 2,610 Population Expon. (Population) 2,500 2,077 1,881 R² = 0.6839 2,000 1,744 1,704
1,500
Population 1,000
500
0 1985 1991 1996 2001 2011 Figure 5: Population of Marydale 1985 to 20117 8
Table 2: Population in Marydale 1985 – 2011 9
Number 1985 1991 1996 2001 2011 Population 1 744 1 881 1 704 2 077 2 610 Growth rate 1985‐1991 1991‐1996 1996‐2001 2001‐2011 1985‐2011 Annual growth rate (p.a.) 1.27% ‐1.96% 4.04% 2.31% 1.56%
4.1.3 School populations The trend in learner numbers at the school in Marydale shows an increase from 532 in 1996 to its highest point of 695 in 2010. Thereafter, it decreased to 645 in 2014. Over the period from 1996 to 2014, an annual growth rate of 1.08% was recorded. Between 1996 and 2011 the growth rate was 1.58% p.a., which was lower than the estimated population growth rate of 2.88% p.a. over the same period. The Marydale school caters for learners up to end of Grade 9. Table 3: Learners at Sonskyn School in Marydale 1996 to 201410
Number 1996 2002 2007 2008 2009 2010 2011 2012 2013 2014 Learners 532 585 684 678 681 695 673 657 655 645 Growth 1996‐2002 2002‐2007 2007‐2008 2008‐2009 2009‐2010 2010‐2011 2011‐2012 2012‐2013 2013‐2014 1996‐2014 Growth rate p.a. 1.60% 3.18% ‐0.88% 0.44% 2.06% ‐3.17% ‐2.38% ‐0.30% ‐1.53% 1.08% The 2011 Census indicated that 693 learners attended school in Marydale, which is close to the 2010 data from the Dept. of Basic Education. With 693 learners, this represented 26.5% of the total Marydale population in 2011. In Siyathemba the proportion attending ordinary schools was 23.3%, which is similar to the Northern Cape average of 24.3%.11 Because these two data sources, namely Census 2011 and the Dept. of Basic Education, compare well in terms of learner numbers, it can be concluded that the population reported by the Census in 2011 was reasonably accurate.
7 Data source: Censuses 8 Note that the time series does not have equal intervals. 9 Data source: Censuses 10 Data source: EMIS 2007‐2014; school sanitation survey 2002; Schools register of needs survey 1996. 11 Data source: StatsSA, Census 2011.
9 Learners at Sonskyn Intermediate School
684 695 678 681 673 657 655 645 585 532
1996 2002 2007 2008 2009 2010 2011 2012 2013 2014
Figure 6: Learner numbers at Marydale school 1996 to 2014
4.1.4 Household growth Time series aerial photography from Google Earth does not indicate a major influx of households/dwellings between 2005 and 2012 into Marydale. However, it shows that Rooidal was developed post‐2005 and by 2011 it accommodated 50 households. Rama‐Rou expanded on its north‐eastern edge during this period.
Figure 7: Marydale image date 8/7/2005 (Google earth)
10
4.1.5 Factors determining population size and affecting growth
4.1.5.1 Migration Migration, together with fertility and mortality, is an aspect of population change. The people of the Northern Cape are relatively immobile and tend to stay in the same place for their lifetime i.e. at the last 2011 Census 83.5% of the Northern Cape population had been in the same place Not moved between 2001 and 2011 since at least 2001 or born later and had not 90.7% 87.5% 92.0% 87.5% moved.12 The Marydale population is slightly 81.6% more mobile, because 18.4% of the 68.7% population had moved in the ten years prior 50.0% to the 2011 Census. The table below also shows the extent of in‐ migration into Marydale between 2001 and 2011; out‐migration information is unavailable. Overall, 480 people moved into Marydale between 2001 and 2011 or were born after 2001 and had moved there. Movement into Marydale (18.4%) was proportionately higher than that into Siyathemba overall (12.5%). Within Figure 8: Not moved between 2001 and 2011 Siyathemba, Prieska was the main recipient of in‐migration while the non‐urban and farming areas received a relatively high number too indicating a high turnover of people. Table 4: Population living in the current location in the ten years prior to the 2011 Cencus 13 Siyathemba Marydale Niekerkshoop Westerberg Prieska Copperton Total NU Yes 1 596 1 266 45 10077 27 1 419 14430 No 390 150 9 1023 27 792 2388 Born after October 2001 450 396 15 2775 3 441 4080 but never moved Born after October 2001 90 21 120 72 300 and moved Not Applicable 84 3 234 39 360
Total 2 613 1 830 72 14229 54 2 763 21561 Total moved 480 171 9 1 143 27 864 2 688 % moved 18.4% 9.3% 12.5% 8.0% 50.0% 31.3% 12.5% % not moved 81.6% 90.7% 87.5% 92.0% 50.0% 68.7% 87.5% Although it is probable that the out‐migration from farms to settlements has largely ended, with the main out‐migration having taken place during the 1990s and early 2000s, rural to urban migration remains prevalent.14 Between 1996 and 2011, the non‐urban/commercial farm
12 StatsSA, Census 2011. 13 StatsSA. Census 2011, Interactive data in Super Cross. 14 Roux. N (2009) Migration and urbanization: Towards A 10‐Year Review of the Population Policy Implementation in South Africa (1998‐2008). Department of Social Development. [Online]. Available: http://stepsa.org/resources/shared‐ documents/migration‐and‐urbanisation‐‐dept‐of‐social [cited 9 August 2013]. P ii.
11 population of Siyathemba decreased from 4 262 to 2 763 respectively; 15 a depopulation of ‐2.85% p.a. Rural migrants choose to relocate to small towns such as Marydale and peri‐urban areas closer to their rural areas of origin. Although the very few higher order services provided in Marydale makes it relatively less attractive than Prieska which has a high school and a hospital. Furthermore, a rapid decline of migration into the Northern Cape is predicted. The 2011 Census indicated a net out‐migration of persons from the province.16 Siyathemba Municipality, without strong pull‐factors, is unlikely to attract immigrants from other parts of the Northern Cape and beyond.
4.1.5.2 Fertility and mortality Besides migration, population growth is determined by natural growth, which is Marydale population pyramid a function of fertility and mortality. The 42 70+ 60 population pyramid of Marydale shows 27 65‐69 42 60‐64 that the fertility rate appears be 42 48 57 55‐59 78 decreasing because the youngest age 54 50‐54 84 groups of 0 to 4 year olds and 5 to 9 63 45‐49 66 year olds are not the broadest. The 69 40‐44 63 35‐39 population structure shows an unusual 63 87 75 30‐34 93 shape, with a severe narrowing of the 87 25‐29 90 youth age group 15 – 19 years. A reason 72 20‐24 90 for this may be that youth attend high 123 15‐19 102 10‐14 school and tertiary education facilities 177 213 135 5‐9 156 elsewhere and leave to seek better 132 0‐4 123 work opportunities elsewhere. Male Female
13 Overall, in South Africa the population Figure 9: Marydale population pyramid is predominantly female, with a sex ratio of 95 males per 100 females in 2011. In Marydale, the predominance of females is higher with 87 males per 100 females. This indicates a higher level of out‐migration by males than females from the area. It is estimated that natural growth will predominate in the Northern Cape in the near future because life expectancy will increase17 even though fertility rates will decrease.18 19
4.1.5.3 Population growth expectations Population estimates from Marydale’s 2015 Reconciliation Strategy20 are reviewed based on historical and anticipated trends regarding migration, fertility and mortality discussed above. There is a risk of extrapolating population based on historical trends and thus these factors are
15 Data source: StatsSA, Census 1996 and Census 2011. 16 StatsSA. Census 2011, Statistical Release P0301.4. 17 United Nations, Department of Economic and Social Affairs, Population Division (2013). World Population Prospects: The 2012 Revision, Highlights and Advance Tables. Working Paper No. ESA/P/WP.228. [Online]. Available: http://esa.un.org/unpd/wpp/Documentation/pdf/WPP2012_HIGHLIGHTS.pdf [cited 11 August 2013] P 77. 18Statistics South Africa. Mid‐year population estimates 2014. P0302. [Online]. Available: http://beta2.statssa.gov.za/publications/P0302/P03022014.pdf P 10. 19 Go, A., Moyer, J., Rafa, M. and Schünemann, J. (2013) Population Futures: Revisiting South Africa’s National Development Plan 2030. [Online]. Available: http://www.issafrica.org/uploads/AF7_15Oct2013V2.pdf 20 DWS (2015) Reconciliation strategy for Marydale Town. Continuation of the Central Planning Region all Towns Reconciliation Strategies. August 2015.
12 considered in combination with possible future developments and economic growth in the area. The projections from the Reconciliation Strategy are, however, considered credible and these are presented below. The Reconciliation Strategy’s estimate is that the Marydale population will reach between 3 491 and 3 686 by 2035. It is also possible given the historic trends and lack of evident economic potential that Maryvale’s population may be lower than the low growth scenario of the Reconciliation Strategy. This too is detailed in the table below as a base population. In this base scenario a population of approximately 3 200 may be reached by 2035. Table 5: High and low population estimates for Marydale to 2035 1985 1991 1996 2001 2011 2015 2020 2025 2030 2035 Base Population 1 744 1 881 1 704 2 077 2 610 2 781 2 942 3 062 3 149 3 213 Growth p.a. 0% 1.27% ‐1.96% 4.04% 2.31% 1.60% 1.13% 0.80% 0.57% 0.40% Low Population 2 552 2 735 2 949 3 146 3 321 3 491 Growth p.a. 1.75% 1.52% 1.30% 1.09% 1.00% High Population 2 616 2 830 3 044 3 258 3 472 3 686 Growth p.a. 1.99% 1.47% 1.37% 1.28% 1.20%
Marydale population 1996‐2035
Population Growth p.a.
4,000 3,686 5.0% 3,472 3,500 4.04% 3,258 4.0% 3,044 3,000 2,830 3.0% 2.33% 2,616 2,500 1.99% 2.0%
2,077 1.47% p.a. 1.27%1,881 1.37% 1.28% 1.20% 2,000 1,744 1,704 1.0% Population 1,500 0.0% Growth
1,000 ‐1.0%
500 ‐2.0%
0 ‐3.0% 1985‐1.96% 1991 1996 2001 2011 2015 2020 2025 2030 2035
Figure 10: Marydale’s high population estimates to 2035
It should be noted that projections and forecasts are typically based on a number of simplifying assumptions and are, in part at least, only as reliable as the data on which they are based. These facts should not be understated when considering the population projections set out below, which attempt to inform possible long‐term water demand. It is thus recommended that the water demand calculations are based on the high population growth scenario.
13 4.1.6 Basic and higher service levels In March 2016, there were 2 households in living in the formal areas of Marydale had no access to a water supply that was equal or above RDP standards in respect of distance. Table 6: Status of water supply 21
FORMAL INFORMAL
RDP
STANDS
below
Basic basic
Standpipe Standpipe
FORMAL INFORMAL Water connection connection
below Below
Connection Connection
Settlement House Erf Communal Communal Standpipe>200m None Unknown TOTAL Total House Erf Communal Communal Standpipe>200m None Unknown TOTAL STANDS Total TOTAL Copperton 0 0 0 0 0 0 0 0 0 30 0 0 0 0 30 0 0 Marydale 203 419 0 0 2 0 624 2 0 0 49 0 0 0 49 0 2 Niekerkshoop 232 295 0 0 0 0 527 0 0 0 0 0 0 0 0 0 0 Prieska 2775 0 365 0 0 207 3347 207 0 0 0 0 0 0 0 0 207 SIYATHEMBA 3210 714 365 0 2 207 4498 249 0 30 49 0 0 0 79 0 209 In March 2016, basic sanitation was unavailable to 52 households, of which most were buckets in the informal areas. A recent bucket eradication project has replaced buckets in the formal areas. Table 7: Status of sanitation supply 22 FORMAL INFORMAL
served
basic
Basic
STANDS not
STANDS
below
tank tank Below
network network
Sanitation FORMAL INFORMAL
tank tank
to to Formal informal
TOTAL Settlement Flush Conservancy Septic UDS VIP Pit Bucket None Unknown TOTAL Total Flush Conservancy Septic UDS VIP Pit Bucket None Unknown TOTAL Total Copperton 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 30 0 0 30 30 30 Marydale 158 250 0 0 213 0 0 3 0 624 3 0 0 0 0 0 0 49 0 0 49 49 52 Niekerkshoop 11 208 0 0 308 0 0 0 0 527 0 0 0 0 0 0 0 0 0 0 0 0 0 277 334 Prieska 1 0 0 58 0 0 307 207 514 0 0 0 0 0 0 0 0 0 0 0 514 4 7 294 449 SIYATHEMBA 459 0 0 579 0 0 310 207 703 0 0 0 0 0 0 79 0 0 79 79 596 3 8 Upgrading and improvements that the Municipality is addressing in Marydale include: Bucket eradication programme has replaced approximately 237 buckets with waterborne sanitation Replacement of VIP toilets with flush toilets Overall demand for flush toilets
21 DWS and Aurecon (2016) Backlog model at end January 2016. 22 DWS and Aurecon (2016) Backlog model at end January 2016.
14 4.2 Number of poor households to be served
4.2.1 Poverty and household income
4.2.1.1 Household income Household income data shows that 11.7% of households had no income in 2011. Overall, this is a higher proportion than that found in the municipality on average at 7.8%. The median income, or midpoint, falls into the R9 601 – 19 200 category. Marydale had 50.2% of households with or less than R19 200 p.a.23
Census 2011 annual household income of Marydale and Siyathemba LM 0.0% R2 457 601 and more 0.2% 0.0% Marydale Siyathemba LM R1 228 801 ‐ R2 457 600 0.2% 0.0% R614 401 ‐ R1 228 800 0.5% 0.9% R307 201 ‐ R614 400 2.8% 2.6% R153 601 ‐ R307 200 5.6% 7.8% R76 801 ‐ R153 600 8.9% 13.9% R38 401 ‐ R 76 800 16.4% 24.7% R19 201 ‐ R 38 400 26.0% 24.2% R9 601 ‐ R 19 200 23.8% 9.1% R4 801 ‐ R 9 600 5.0% 5.2% R1 ‐ R4 800 2.9% 11.7% No income 7.8%
Figure 11: Annual household income comparison Marydale to Siyathemba LM 2011
4.2.1.2 Housing Access to housing, and the condition of housing is an indicator of the level of socio‐economic development of an area. In addition, new housing creates a demand for water services. In 2011, the majority of Marydale households (81.8%) occupied brick/concrete houses. However, 12.6% of households lived in informal dwellings mostly in informal settlements. In January 2016, there were approximately 72 informal dwellings occupied by households on the indigent register.24 Table 8: Types of dwellings occupied in the study area 2011 25 Marydale Siyathemba N % N % House or brick/concrete block structure on a separate stand or yard or on a farm 567 81.8% 4140 71.1% Traditional dwelling/hut/structure made of traditional materials 24 0.4% Flat or apartment in a block of flats 21 3.0% 186 3.2% Townhouse (semi‐detached house in a complex) 21 0.4% Semi‐detached house 723 12.4% House/flat/room in backyard 6 0.9% 54 0.9% Informal dwelling (shack; in backyard) 6 0.9% 219 3.8% Informal dwelling (shack; not in backyard; e.g. in an informal/squatter settlement 81 11.7% 393 6.8%
23 Data source: StatsSA. Cencus 2011. 24 Siyathemba Indigent Register, January 2016. Number of households receiving free basic energy in form of paraffin. 25 StatsSA. 2011 Census.
15 Marydale Siyathemba N % N % or on a farm) Room/flatlet on a property or larger dwelling/servants quarters/granny flat 3 0.4% 39 0.7% Caravan/tent 6 0.1% Other 6 0.9% 15 0.3% Total 693 100.0% 5820 100.0% In Marydale, a high proportion of households occupied dwellings rent‐free (58%), while ownership stood at 28%. This is considerably lower than the municipal (51%) and provincial average (55.1%) of dwelling ownership. Table 9: Dwelling ownership 2011 26 Marydale NC077: Siyathemba LM N % N % Owned but not yet paid off 21 3% 171 3% Owned and fully paid off 174 25% 2 991 51% Rented 87 13% 1 086 19% Occupied rent‐free 402 58% 1 476 25% Other 6 1% 90 2% Total 690 100% 5 814 100%
4.2.1.3 Indigent households 4.2.1.3.1 Indigent policy Siyathemba Municipality has set income criteria for households to qualify as indigent which are:27 Indigent subsidies are available only to domestic households where the total income of all occupants over 18 years of age is equal to two state pensions or less than R2 680 per month (threshold), as contained in the tariff schedule, as annually determined by Council Indigent households in Siyathemba Municipality qualify for 6kℓ of water per month. Households that exceed 6kℓ of water per month and are in arrears will have a restriction apparatus fitted to their water supply.28 4.2.1.3.2 Number and proportion of indigent households There are several sources that measure the number of indigent households including the Municipality’s indigent household register and data from Statistics South Africa. The Census 2011 data is consulted because it is a credible source used by National Treasury to determine equitable share amounts29 and because it is widely recognised that there is an under registration of indigent households by municipalities. The main reason for this is that often there is no incentive to be registered especially in situations where households receive free basic services regardless of their status at the municipality. Furthermore, the number of registered indigent households can vary considerably from year to year, often depending on whether a registration campaign has been undertaken. For the 2014/15
26 StatsSA. 2011 Census. 27 Municipal Indigent Policy 2014/15. Section 4.1.2. 28 Ibid. Section 4.3.3. 29 Development of Models to Facilitate the Provision of Free Basic Water in Rural Areas, Report No 1379/1/05: March 2005. [Online] Available from: http://www.fwr.org/wrcsa/1379105.htm (Accessed: 9 June 2012).
16 financial year 2 758 registered indigents were provided for in the budget and for the MTEF,30 while 2 421 households were registered as indigent at the municipality in January 2016. A two pension model used by most Northern Cape municipalities and practiced at Siyathemba Municipality is applied. In 2011, the value of two old‐age pensions was R2 280 per month or R27 360 per annum. Assuming an even distribution in the R19 201‐R38 400 category, then 60.7% (421) of the 693 households in Marydale would have had incomes of ≤R27 360 p.a. and could, therefore, be regarded as indigent households. Table 10: Annual household income distribution and percentage in indigent category 2011 31 Groups Household income categories 2011 Marydale % Cumulative % No income 81 11.7% 11.7% R 1 ‐ R 4800 36 5.2% 16.9% Indigent R 4801 ‐ R 9600 63 9.1% 26.0% (421) R 9601 ‐ R 19 200 168 24.2% 50.2% R 19 201 ‐ R 27 360 73 10.5% 60.7% R 27 361 ‐ R38 400 98 14.2% 74.9% R38 401 ‐ R 76 800 96 13.9% 88.7% R76 801 ‐ R153 600 54 7.8% 96.5% Non‐indigent R153 601 ‐ R307 200 18 2.6% 99.1% (241) R307 201 ‐ R614 400 6 0.9% 100.0% R614 401 ‐ R1 228 800 0 0.0% 100.0% R1 228 801 ‐ R2 457 600 0 0.0% 100.0% R2 457 601 and more 0 0.0% 100.0% Total 693 100.0% However, the Siyathemba municipality keeps records of indigent households and its register was updated in January 2016. A total of 2 421 households were registered of which 452 were resident in Marydale. Of these 380 households received free basic services and 72 households received paraffin in lieu of free basic electricity.32 At an estimated 673 total households,33 this amounts to an indigent percentage of 67.2%; higher than that found in the 2011 Census. Since the municipality has an updated indigent register, the percentage indigent households is based on this source is used in the social component calculation. 4.3 Estimated number of jobs to be created To estimate the number of construction opportunities for local unskilled labour, data was extracted from 109 projects with person day data and 49 with number employed data from the Northern Cape MIG project list. Person days per Rand and persons employed per Rand was calculated at 0.000173 and 0.0000023 respectively. Based on this average, the Marydale project of R 8 million can create approximately 18 jobs with an estimated 1 337 person days.
30 Siyathemba budget 2014/15 to 2016/17. P 6. [Online]. Available: http://mfma.treasury.gov.za/Documents/03.%20Budget%20Documentation/2014‐ 15/01.%20Draft%20budgets/02.%20Local%20municipalities/NC077%20Siyathemba/NC077%20Siyathemba%20Draft%20Budget%2 02014‐15.pdf 31 Source: StatsSA, Census 2011 32 Data source: Indigent register, Siyathemba Municipality at end January 2016. 33 DWS, backlog data December 2015.
17 Table 11: Estimated construction employment on the Marydale project based on MIG data 34 Person days on MIG project 131 042 MIG Projects value (109 projects) R 759 062 608 Person days per R 0.000173 Marydale project R 7 746 586 Person days 1 337 Number of people on MIG projects 964 MIG Projects value (49 projects) R 424 446 000 People per R 0.0000023 Marydale project R 7 746 586 Persons on the Marydale project 18 4.4 Affordability of the proposed water tariffs The proposed water tariff increases to meet the increased cost of the proposed project as well as the affordability of the proposed tariffs is discussed in Section 5 of this report. 4.5 Contribution towards poverty eradication, social upliftment and health The Framework for Implementation of bulk regional projects sets out drivers of regional bulk infrastructure.35 Three of these drivers, which contribute directly towards poverty reduction, social upliftment and health, relate to the Marydale water project as follows: (a) Need to address access to basic services: Backlogs in basic services are reliant on bulk water services provision. Housing developments in Marydale to cater for those living in informal dwellings requires at least a basic level of water services. There are 2 households without a RDP standard of water supply and 52 with bucket or no toilets. The municipality has provided waterborne sewerage in the bucket replacement programme and is a first phase of upgrading VIPs, which requires additional water. (b) Need to support economic growth and development: Bulk infrastructure must provide both economic and social needs. This project will contribute to poverty reduction, increase levels of service, uplift and stimulate economic growth because it will have a stimulus on: - The water service provider’s business - Socio‐economic benefits resulting from a quality water services and waste water quality that is compliant to standards - Construction with impacts on spending, employment, and taxes and in its operational phase there are multiplier effects Usually, construction works associated with infrastructure projects are seen as generating significant benefits for local communities in terms of increased employment and expenditure within the region. The proposed project presents opportunities for low and semi‐skilled local labour during construction. Such increasing employment, combined with increased income, will positively affect the local economy and have an effect on reducing poverty. Buying power in the area will be increased, and thus there will be the opportunity for new business establishments, which in turn will create more jobs.
34 Data source: COGHSTA. Northern Cape MIG projects from 30 September 2003 to 2014. 35 Dept. of Water Affairs (2011) Water services regional bulk infrastructure programme – Framework for implementation. Version V10, January 2011.P. 11.
18 While providing water does not necessarily result in economic growth, a lack of water and poor water quality can and does inhibit growth.36 The project is aligned to the priorities set in the IDP. Please see Section 3.7 below for details. (c) Need of new infrastructure to improve water services quality: Marydale performed poorly in the 2012 Blue Drop assessment scoring 40% compared to the Northern Cape average of 68.2%.37 Water service quality has a direct impact on the health of a population. Unsafe water supply causes childhood diarrheal diseases, which is a preventable cause of under‐five mortality. The six production boreholes were tested which showed that:38 - Three boreholes had high fluoride levels - All boreholes had high nitrate concentrations Marydale’s drinking water quality compliance was 40% in 2012 representing a downward trend from 53% in 2010. 39 In the 2012 Blue Drop report40 it was stated that the inspectors spent time at the Marydale water supply system and found the infrastructure to show signs of insufficient maintenance even though very well secured. “The following findings were made: - There would also be a complete lack of operation and maintenance manual for any of the pump stations leaving it at risk of being operated or maintained not according to specification. - No operational monitoring taking place; no equipment to do this either. - No standby capacity for any of the 6 pumps in this supply system. - The process of identifying chlorination demand (according to taste) would be high risk and should be amended to be based upon operational (chlorine measurement). - Attention could be given to the covering of Borehole 6. 4.6 Number of associated services benefiting Associated services such as schools, clinics and hospitals will be provided with water and sewerage by the Municipality.
4.6.1 Health facilities There is a clinic in Marydale. The targeted number of visits to a primary health care facility i.e. a clinic or community health centre is 3.5 visits per person per annum. On average, the population of Marydale visited the clinic 7.2 times in 2013,41 which was at a higher rate than the average targeted.
36 Department of Water Affairs and Forestry (2008) Strategic framework for sustainable growth and development – A discussion document. May 2008. P.3. 37 DWA (2012) Blue Drop Report. P321. 38 WorleyParsons. Marydale: Equipment and infrastructure development of 3 boreholes. Rev A: 2014‐03‐20. 39 DWA (2012) Blue Drop Report, Northern Cape. P 376. 40 DWA (2012) Blue Drop Report, Northern Cape. P 377. 41 Dept. of Health. DHIS, clinic headcounts 2013.
19 4.6.2 Schools There is one school in Marydale which had 698 learners and 18 15educators in 2014. The school caters for learners up to Grade 9. Thereafter, they mainly attend schools in Groblershoop or Prieska. Table 12: Enrolment at the Marydale school in 2014 42 Total Learners 2014 Institution Learners Gr R learners (including Gr R) Sonskyn Intermediate School 645 53 698
4.6.3 Community halls There is one community hall in Marydale.43 4.7 Socio‐political support for the proposed development A bulk infrastructure project must be aligned with and listed in the Integrated Development Plans (IDP) and Water Services Development Plans (WSDP) of the participating municipalities.44 The Siyathemba Municipality’s IDP Resolution no: 10.1‐29 May 2015 indicates that: “the municipality is in the process to upgrade the water supply network from the boreholes to the two reservoirs in Marydale. One of the reservoirs’ capacity will also be increased.”45 The IDP lists water infrastructure projects as its first priority focus for 2015/16 and these include: 46 5.1.8.1.4 Upgrading of internal water reticulation in Marydale 5.1.8.1.5 Upgrading of external bulk water supply in Marydale 5 ECONOMIC CRITERIA Economic criteria are addressed, which according to the TOR includes businesses and industries to be served, expected economic values to be generated by businesses as a result of the project, number of SMME and BEE enterprises to benefit, and regional economic and value chain benefits.47 5.1 Number of businesses and industries to be served The types of business that are located in Marydale are what can be described as ‘run‐of‐the‐mill’ types which are “dependent on, and limited by, local demand” and if there is only a small demand, which is the case in Marydale, the entrepreneurial space is small.48 ‘Run‐of‐the‐mill’ type business includes fuel stations, supermarket, café, hardware supplier, agricultural coop, cash loans, bottle store, and lotto outlet. The types of institutional entities in Marydale include churches, a clinic, a library, municipal office, a school, a community hall, a police station, and a satellite magistrate’s office.
42 Northern Cape Dept. of Education. EMIS data 2013 Q1. 43 Personal communication with Mr Basson at Siyathemba Municipality on 10 February 2016. 44 Dept. of Water Affairs (2011) Water services regional bulk infrastructure programme – Framework for implementation. Version V10, January 2011.P. 19. 45 Siyathemba IDP Resolution no: 10.1‐29 May 2015. P 52. 46 Siyathemba IDP Resolution no: 10.1‐29 May 2015. P 73. 47 Dept. of Water Affairs (2011) Water services regional bulk infrastructure programme – Framework for implementation. Version V10, January 2011. P 20. 48 Toerien, D.F. and Seaman, M.T. (2012) ‘Proportionality in enterprise development in South African towns’, South Africa Journal of Science, 108(5/6):588.
20 5.2 Expected economic value to be Value added (R mil) O&M spending
generated by new business R 0.02
5.2.1 Multipliers and values to be R 0.02 R 0.01 generated by O&M of the project The relationship between the initial spending and the total effects generated by the spending is known as the multiplier effect of the sector, or more generally the impact of the sector on the economy as a whole. A multiplier expresses the total effects (including the direct, indirect and induced effects) of a specific activity or a Direct Indirect Induced change in some activity. Therefore, a multiplier of 1.6 indicates that for every R 1 spent (direct expenditure) an Figure 12: Estimated production multipliers o the O&M of the project 45 additional R 0.6 is generated within the economy. 49
Economic impact is determined based on the operational Production multipliers in O&M and maintenance costs of the project and its related phase (in Rmil) infrastructure. The annual O&M cost of this project is R 0.08 estimated R 0.0405 million excluding VAT when the project is completed (in 2015 prices). The O&M of the project should deliver a total production of R 0.151 million based on the O&M annual expenditure, R 0.04 of which R 0.04 million would be direct, R 0.03 indirect R 0.03 and R 0.08 induced production. There should be a direct value added effect of R 0.02 million, indirect effect of R 0.01 million and an induced effect of R 0.02 million, which totals R 0.051 million. Direct Indirect Induced 5.2.2 Effects of investment in water infrastructure Figure 13: Value added by O&M expenditure The Financial and Fiscal Commission (FFC)50 prepared a model, which shows the macro‐economic effect of increasing investment in infrastructure. In this model, the FFC simulated investment in water infrastructure and found the following: A 10% increase in capital in the water sector leads to an increase in the output of water and related sectors GDP increases by 0.02% and consumer prices fall by 0.04% Wages increase by 0.01% because labour becomes more expensive due to the increase in capital. The urban highly skilled workers contribute most to this increase. Employment generally falls due to the reduction in the overall price of capital
49 Taljaard, P.R., Van Schalkwyk, H.D. and Louw, D.B. (2008) Market risk, water management and the multiplier effects of irrigation agriculture with reference to the Northern Cape. P.21. 50 Financial and Fiscal Commission. 2010. Technical report: Annual submission on the division of revenue 2010/2011.
21 The O&M of water services infrastructure consumes manufactured products, such as chemicals and pumps, and services such as electricity and insurance. As the water supply or treatment increases, this induces an increase in the demand of products and services resulting to an increase in these products. Subsequently, sectors that use great quantities of water such as agriculture, food manufacturing and mining, benefit from the reduced prices and increased output. The increased supply in these sectors leads to reduced prices in the affected sectors.51 Effect of R1 invested in improving water sector infrastructure About household welfare, the Financial and Fiscal Commission found that there is zero R6.67 effect, with changes in the cost of living being exactly offset by changes in disposable income.52 The contribution of water to the economy in terms of output growth, remuneration and household income generation R1.49 reveals that for every Rand invested in the R1.00 R1.01 improvement of the water sector, output grows by approximately R 6.67; payments to primary production sectors increase by R 1.49; and Investment in Output Increase in Contribution another R 1.01 is contributed to household water sector growth payments to to household infrastructure primary income income. sectors While providing water does not necessarily result in economic growth, a lack of water or Figure 14: Effect of investing on water sector poor water quality can and does inhibit growth. infrastructure The challenge of the water sector is to align the provision of water with the spatial and sectorial growth of the economy.53 Water infrastructure is an intermediate input and its efficient reliable supply raises the profitability of production and thus enhances the marginal productivity of labour and capital. Substantial number of hours without water has a negative effect on productivity. Marydale has been subjected to water restrictions in the recent past. In a study of how water cuts affect productivity, it was found that water disruptions significantly affect productivity, which suggests that water is important in fostering economic growth. Hence, there is a need for the South African government to initiate water infrastructure projects that minimise the occurrence of water cuts. Not only are water assessments required, but the development of water resources and appropriate management systems. The development and maintenance of quality water infrastructure is central to achieving economic growth.54
51 Financial and Fiscal Commission. 2010. Technical report: Annual submission on the division of revenue 2010/2011. 52 Financial and Fiscal Commission. 2010. Technical report: Annual submission on the division of revenue 2010/2011. 53 Department of Water Affairs and Forestry (2008) Strategic framework for sustainable growth and development – A discussion document. May 2008. P.3. 54 Moyo, B. (2011) Do water cuts affect productivity? Case study of African manufacturing firms. Water SA, 37(3):349‐356. [Online]. Available from: http://www.wrc.org.za/Knowledge%20Hub%20Documents/Water%20SA%20Journals/Manuscripts/2011/03%20July%202011/26 03.pdf (Accessed: 3 October 2011).
22 5.3 Number of SMMEs and BEE enterprises to benefit from project All regional bulk projects must identify and specify the amount of anticipated involvement and benefit of SMMEs and BEE enterprises.55 The development of enterprises participating in the construction sector is targeted in the following categories:56 Suppliers of construction equipment and materials Professional service providers e.g. environmental, engineering, quality survey, geology, land surveyors, etc. Built environment service providers such as fencing, painting, civil, mechanical, electric, electronic specialist sub‐consultants Outsourcing and possible privatisation of certain functions that are undertaken by established or parent organisations e.g. internal bus transport services, internal construction and maintenance units The construction sector in its Charter of Broad‐based Black Economic Empowerment has set ownership targets, which should be achieved by 2013:57 30% economic interest held by black people and 30% participation by black people in voting rights 10% economic interest held by black women and 10% participation by black women in voting rights 10% (5% for BEPs) economic interest held by black broad based groups and or black designated groups, specifically black employees In addition: Procurement from local enterprises, specifically micro and small enterprisers with black ownership exceeding 50% should be preferred where appropriate. 58 Skills development should be a specific complement of the construction where 1.5% of payroll is spent on skills development, of which 70% is spent on black people and 25% is spent on black women. 59 Cooperate social investment initiatives can be made during construction by contributing to projects and registered NGOs that benefit black people primarily and promote development in under resourced areas. Projects may include community education and training, career guidance, maths and science initiatives in schools, support conservation projects, community clean up campaigns and environmental initiatives, support arts and culture development programmes, health programmes sport programmes. 60
55 Dept. of Water Affairs (2011) Water services regional bulk infrastructure programme – Framework for implementation. Version V10, January 2011.P 19. 56 Department of Public Works (2006) Construction Sector: Broad‐Based Black Economic Empowerment Charter. Version 6 (Final) 26‐01‐06. P 14. 57 Department of Public Works (2006) Construction Sector: Broad‐Based Black Economic Empowerment Charter. Version 6 (Final) 26‐01‐06. P 9. 58 Ibid. P 12. 59 Ibid. P 10. 60 Ibid. P 15.
23 Should these provisions be applied to the Marydale project, it is estimated that with a contract value of R 7 746 586 (excluding VAT) the distribution to local labour, SMME, BEE is detailed in the figure below. Please note that the values in the figure below are not cumulative.
Target values
Minimum labour content (30% of CP) R2,323,976 Local labour: 60% of 30% (person days) R1,394,385 Labour: 30% R2,323,976 Local Enterprise (LEs): 5% of 25% R96,832 Small, Medium and Macro Enterprises (SMMEs): 10%… R193,665 Black Empowered Enterprises (BEEs): 20% of 25% R387,329 Black Enterprises (BEs): 15% of 25% R290,497 Affirmative Black Enterprises (ABE) Target values:… R1,936,647
R0 R500,000 R1,000,000 R1,500,000R2,000,000R2,500,000
Figure 15: SMME, BEE and local labour target estimates for the project
5.4 Regional economic benefit from proposed project
5.4.1 Employment and unemployment The employed and unemployed together make up the economically Marydale labour force active population61. Unemployment refers to people within the economically active (15‐64 years) population who did not work Discouraged work‐seeker during the seven days prior to the interview, want to work and are available to start work within a week of the interview and have Unemployed taken active steps to look for work or to start some form of self‐ employment in the four weeks prior to the interview. In 2011, the 117 economically active Northern Cape population was 429 426 persons. Of this, 65.9% were employed and 34.1% unemployed 327 according to the expanded definition. In Marydale, the economically active population (aged 15‐64 years) was 648 people 204 of whom 49.5% were unemployed (including discouraged work‐ seekers), which was higher than the Northern Cape average (34.1%) in 2011. The not‐economically active group (aged 15‐64 years) Employed Unemployed consists of learners still at school, homemakers, retirees and those not wishing to work. In Marydale this group accounted for 1 965 or Figure 16: Marydale labour 32.5% of the population aged between 15 and 64 years, lower than force the provincial average of 41.6%. There is a high dependency ratio, i.e. ratio of people younger than 15 or older than 64 to the population aged 15‐64, in Marydale at 74.5:100; higher than the 55.7:100 recorded for the Northern Cape in 2011 and for Siyathemba overall (58.2:100).
61 Data source: StatsSA, Census 2011
24 Not Other Discoura Unempl Unempl economi not Aged <15 Economi Employe Unempl ged oyed oyed cally Depende economi and >64 Total cally d oyed work‐ official expande active ncy cally years active seeker def. d def. (15‐64 active yrs.) Niekerkshoop 468 249 15 375 723 1 830 732 34.7% 36.1% 375 65.3 Siyathemba 1 467 78 72 363 786 2 763 1 617 5.0% 9.3% 363 39.7 NU Westerberg 18 9 18 27 72 27 33.3% 33.3% 18 60.0 Marydale 327 204 117 849 1 116 2 613 648 38.4% 49.5% 849 74.5 Prieska 3 066 1 185 564 4 161 5 256 14 229 4 815 27.9% 36.3% 4 161 58.6 Copperton 9 3 3 18 21 54 15 25.0% 40.0% 18 63.6 Total 5 358 1 725 768 5 784 7 929 21 561 7 851 24.4% 31.8% 5 784 58.2 Table 13: Employment status, not economically active and younger than 15 years 2011 62
5.4.2 Sector of employment63 Employment sector Marydale In the The main sector of employment in Marydale was in the informal formal sector which accounted for 81.3% of those employed. sector, 42 Another 12.5% of employed persons participated in the informal sector and another 6.3% worked in private Private households. Employment in the formal sector was higher in In the househ Marydale and in Siyathemba (78.1) than in the province formal Do not old, 21 (71%). sector, know, 3 273
5.4.3 Economic sector contribution to Figure 17: Sector of employment Marydale GDP 2011 Whereas mining and quarrying accounts for 24% of the GVA of the Northern Cape economy, it accounts for 0.2% in Siyathemba. Siyathemba’s main sector in terms of GVA contribution is community services (27.8 %) followed by agriculture (19.9 %), trade (13.3%) and transport (12.3 %).
62 Data source: Census 2011. 63 Data source: StatsSA. Census 2011
25 Mier R 199,013 Gross Domestic Product 2010 Renosterberg R 233,451 Khâi‐Ma R 313,011 Kareeberg R 315,388 Magareng R 339,121 Siyancuma R 397,169 Umsobomvu R 408,744 Ubuntu R 421,804 Siyanda DMA R 437,628 !Kheis R 440,340 Kamiesberg R 449,129 Karoo Hoogland R 489,006 Richtersveld R 516,154 Thembelihle R 566,484 Siyathemba (including… R 634,313 Dikgatlong (including FBDMA) R 780,301 Hantam (including NkDMA) R 795,944 Kgalagadi DMA R 1,220,147 Emthanjeni R 1,341,358 Phokwane R 1,544,060 Kai !Garib R 1,664,793 Nama Khoi R 1,770,875 Kgatelopele R 1,816,216 Gamagara R 1,941,217 Ga‐Segonyana R 2,452,204 Tsantsabane R 2,634,772 //Khara Hais R 2,661,571 Sol Plaatje R 12,431,231
Figure 18: Contribution of municipalities to the Northern Cape GDP 2010 in R’000 (in constant 2005 prices)
2010 Gross Value Added (in constant 2005 prices The value of Siyathemba’s GVA R'000) Siyathemba contribution was R 634 million in 2010 in 2005 constant prices.64 Community services R145,913 The figure above illustrates the relative importance of the Finance R61,934 Siyathemba economy among other Transport R64,597 Northern Cape municipalities. Trade R69,932 Siyathemba’s contribution to the Construction R14,603 GDP of the Northern Cape ranks 14th out of 27 municipalities. Electricity R31,554 Manufacturing R30,670 Mining R909 Agriculture R104,586
R0 R50,000 R100,000 R150,000 R200,000
Figure 19: Sector contribution to gross value added in Siyathemba
64 Data source: Global Insight
26 5.4.4 Estimated GDP 203065 The GVA, measured in constant 2005 prices, has grown in Siyathemba at an average rate of 4.3% per annum between 2001 and 2010. However, this was a recovery from an improvement from 1.0% between 1996 and 2011. In 1996, Siyathemba’s GDP was estimated at R 412 million (in 2005 constant prices) and in 2010 at R 634 million. Should the positive growth continue in a linear trend illustrated on the figure adjacent, gross value added could exceed R 900 million in 2035. GDP (in 2005 constant prices) Without water there would be no GDP Siyathemba contribution from Marydale because water in R'000 Linear (in R'000) is an essential input. Maintaining a reliable water and electricity supply is R1,000,000 indispensable in preventing the stagnation R900,000 and decline of the town and ensuring a R800,000 positive GDP growth rate. R700,000 R634,313
R600,000 R500,000 R'000 R432,771 6 TECHNICAL CRITERIA R412,248 in R400,000
6.1 Master Planning R300,000 The Pixley ka Seme District Municipality R200,000 Feasibility Study for Bulk Water Supply R100,000 dated 5 December 2007 indicated a shortage in water supply in Marydale. R0 1996 2001 2010 2020 2030 2035 Therefore the project has been identified as a priority on a district level. Figure 20: Growth in Siyathemba’s GDP to 2030 in 6.2 Appropriateness and R’000 Acceptability It was concluded that further development from the groundwater sources in the Marydale area is the most feasible, appropriate and acceptable solution considering the increased capital cost associated with alternative water supply augmentation. 6.3 Water Resource As identified in the recent hydrocensus, exploration borehole drilling and testing conducted by SRK consulting, the existing production boreholes can deliver a safe yield of 671 kl/d. Three new exploration boreholes recommended for development can deliver a combined sustainable yield of 1211 kl/d. Therefore the groundwater resources in the Marydale area have sufficient capacity to supply in at least the peak day demand of Marydale until 2030. Section 21a water use license application forms have been completed for new exploration boreholes NPE4, NPE6 and NPE8 and were submitted to DWA during August 2012. 6.4 Water Demand Management and Conservation A complete WC/WDM review was conducted as part of the Technical Feasibility Study.
65 Source: Derived from Global Insight
27 The Siyathemba Municipality is committed to get an approved WC and WDM strategy in place and to provide in their budget for implementation of the strategy. The municipality should target to reduce their total water losses to not more than 15%. Through implementation of a WC/WDM strategy the municipality can lower the water losses from the current 51% to 20% in the next five years and to 15% in the following five years. Infrastructure components are sized considering the target water losses of 15%. It is therefore imperative to implement a WC/WDM strategy to minimize the water losses in order to maximize the design life of the new infrastructure. 6.5 Bulk Distribution The proposed bulk water supply project entails the development of three new exploration boreholes. The boreholes must be equipped as production boreholes and new pipelines should be constructed to convey water to the distribution reservoirs. A new reservoir should also be constructed to provide storage for at least one peak day. The boreholes sites, location of pipeline routes and proposed new reservoir site are all on municipal property. The pipeline routes were optimized as part of the Preliminary Design Report. 6.6 Technology Construction materials and technology proposed for the preferred option is widely accepted in the industry. Construction will be according to SANS specifications. For the proposed pipelines, uPVC pipe material is proposed. This material has a long lifetime, is lightweight, easy to install, relatively inexpensive and performs very well under the operating conditions expected for this project. For the reservoir, an elevated steel reservoir structure is proposed. Steel reservoirs has a relatively long lifetime and low maintenance costs and are also easier to install than construction of a concrete reservoir. The topography of the Marydale area also further necessitates the use of an elevated reservoir. Resulting from the flow required from the boreholes and the borehole depths, multi‐stage centrifugal or semi axial submersible pumps manufactured from Grade 304 stainless steel will be specified. 7 INSTITUTIONAL CRITERIA 7.1 Which Institution will be the owner? Siyathemba Municipality will be the owner of the newly constructed infrastructure. The Council of the municipality undertook on 31 March 2016 to fulfil this role as well as to update the asset register and asset management plan accordingly. Siyathemba Municipality is the Water Services Authority and Water Service Provider for the entire municipal area, which includes Marydale, which will be affected during the planned project. There is no other municipality or water services institution which will benefit/be affected from this project. Further to this, Siyathemba Municipality is the Category B municipality with the legislative mandate to ensure services to all its inhabitants. The municipality has an approved Asset management policy (June 2010). The purpose of the policy is to ensure that proper management of assets forms part of the management procedures of the municipality and that these are applied consistently. The roles and responsibilities for effective asset management are stipulated in the policy. An infrastructure asset register and asset management plan is also in place. The municipality indicated that they continuously update
28 and improve these documents. One aspect which is currently not ideal is the fact that the remaining lifespan of assets are not included in the register. 7.2 Confidence in the capacity of the institution to implement Siyathemba Municipality is the only water services institution operating in this area. Although the municipality does experience challenges with regards to technical capacity, they have successfully implemented various capital projects over the years. These include, but are not limited to projects funded by the Municipal Infrastructure Grant, Human Settlement Development Programme, Regional Bulk Infrastructure Grant, Accelerated Community Infrastructure Grant, etc. Also refer to paragraph 3.5 for more detail regarding the implementation of capital projects. The Municipality has established a working relationship with the Pixley ka Seme District Municipality to assist them as and when needed. The Technical Director of the district Municipality visits Siyathemba Municipality on a regular basis to discuss the implementation of various projects. This partnership further strengthens the position of the municipality to successfully implement a project of this nature. It is recommended that a project steering committee is established which meets on a monthly basis and can discuss progress as well as any challenges experienced with regards to the implementation of the project. It is recommended that the following stakeholders be involved in a structure like this: Technical manager and project leader on behalf of Siyathemba Municipality Financial accounting officer on behalf of Siyathemba Municipality Project manager on behalf of the Consulting Engineer. Representative from DWS Regional office Ad hoc delegates may include stakeholders such as the civil engineering foremen of Marydale, councillors and representatives from Pixley Ka Seme District Municipality. 7.3 Agreements on infrastructure ownership (per scheme component) The project serves only the town of Marydale which is within the jurisdiction area of the Siyathemba Municipality. No other municipality and/or water services institution will benefit from this scheme or components of the scheme. Siyathemba Municipality is the only benefitting municipality. As designated Water Services Authority and Water Services Provider for the area, all current infrastructure belongs to the Siyathemba Municipality. The municipality undertook to be the owners of the newly constructed infrastructure. This undertaking has been confirmed in writing (letter dated 4 April 2016). It is not envisage that any agreement between this municipality and any other party in terms of infrastructure ownership will be required. 7.4 Agreement on implementation responsibility (per scheme component) It is stated in the Guideline document “Terms of Reference: Feasibility Study and Implementation Grant Programme” that an implementation agreement with the Department of Water and Sanitation is required if there is more than one benefitting municipality OR if the implementing agent is not the benefitting municipality.
29 As indicated in the above paragraphs, Siyathemba Municipality is the only benefitting municipality. Siyathemba Municipality also wish to implement this project on behalf of the Department. The council of the municipality made this commitment during a council meeting which took place on 31 March 2016. This commitment was also confirmed in writing (letter dated 4 April 2016). The municipality is however willing to enter into an implementation agreement with the Department if need be. Implementing agent means the entity, organ of state, or business enterprise responsible for the implementation of a project on behalf of another entity, organ of state, business enterprise. A contract between these parties was negotiated and terms and conditions are agreed upon. The role of the implementing agent will in most scenarios include the implementation of the project as from procurement phase to close out/hand over phase. Activities include the procurement of suitable contractors/suppliers, financial management, project execution management, reporting and capacity building. Criteria which are therefore looked at by government are the following: An agency that the government consider best suited for the task An agency that is respected and heard within the Government An agency that has a reputation for getting things done An agency that has a presence in the geographic areas where the project will be implemented. Ideally, a multi‐sector agency capable of addressing the complex range of problems that confronts the sector/environment with which this project is implemented. An agency with good experience managing financing in an efficient and transparent way. The council of Siyathemba Municipality took the decision on 31 March 2016 to act as implementing agent for the proposed project. This decision was taken by considering the following aspects: 1. Siyathemba Municipality is the Water Services Authority and Provider for the total area of jurisdiction and will be the only benefitting municipality for this project. 2. The project is of such a nature/size which the municipality is comfortable in implementing. Also refer to information provided under paragraph 7.5. 3. Siyathemba Municipality acted as implementing agent for the Department of Water and Sanitation during 2012 – 2015 with the implementation of the Niekerkshoop Bulk water supply project and this project was successfully implemented by the municipality. 4. There are no other water services institutions operating in this area which can fulfil this responsibility. 5. It will be the most cost effective method of implementation if the local municipality implement this project. It can further be noted that the function of supply chain management sort under the Directorate Financial Services which is managed by the Chief Financial Officer. The division for Expediture and Supply Chain Management has the purpose to render expenditure and supply chain management services to ensure compliance with relevant policies and procedures. This division is led by an Accountant. Although provision has been made for this position, it is currently vacant. The municipality does have an approved Supply chain policy in place which is aligned with section 111 of the Municipal Finance Management Act (Act no 56 of 2003) as well as the Municipal Supply Chain Management Regulations.
30 The municipality is willing to sign an agreement with the Department of Water and Sanitation which will set the terms and conditions for the execution of this project. The municipality is also willing to register on the DWS database for implementing agents should this be required. The municipality had previously been appointed by DWS as implementing agent on the Niekerkshoop Bulk water supply project, therefore the assumption that this registration is in place. Should this registration need to be revised, the municipality is willing to register again. As implementing agent, Siyathemba Municipality understands that their obligations are the following: Prepare a detail work plan stipulating the scope of work for the funds allocated per financial year as well as a multi‐year cash flow. The municipality will do all such things necessary to manage the implementation and successful completion of the project in terms of this work plan and cash flow. Establish a management structure for the implementation of the project which shall be headed by a single manager who will be the one point of contact between the Department and the municipality in respect of all contractual, policy and administrative arrangements. He/she will be accountable for the dissemination of project related information to all personnel within the implementation agent’s management team. This person will have to ensure that the projects are implemented in accordance with the relevant technical reports and the relevant legislation and policy guidelines. A Personnel Schedule listing the names and ranks of all staff who will be involved with the management of the project will be agreed upon. Manage the finance of the project (according to the Municipal Finance Management Act) to ensure that the project outcomes are reached within the approved budget as amended by approved Variation Orders. Procure professional and contract services in terms of the prevailing Supply Chain Management regulations. Keep proper records according to ordinary business practices and the department’s requirements. Compile regular monthly, quarterly and annual progress reports detailing the status of each of the Projects in the Project Schedule. Claim from the Department by submitting certificates authorised by the Accounting Officer confirming the accurate value of the work carried out in the previous month. Claims should be in accordance with the project’s cash flow schedules, as revised from time to time and any deviations from this need to be motivated. 7.5 Proof of implementation capacity (e.g. capital expenditure over last 3 years) Since there are no other water services institution operating in this area, Siyathemba Municipality is responsible for the implementation of most of the capital projects funded through the municipal budget and/or various other national and provincial government funded programmes. Adequate confidence in the capacity of the Siyathemba Municipality to implement and successfully complete infrastructure projects can be motivated based on their performance on the following programmes: Siyathemba Municipality is responsible for the implementation of the Municipality Infrastructure Grant (MIG) programme funded by the Department of Cooperative Governance, Human Settlements and Traditional Affairs. The MIG office indicated that they
31 are satisfied with the performance of the municipality. Project as well as financial management and reporting are done according to the expectations of the programme as well as the department. Table 14: MIG expenditure 2012 - 2016
Year Allocation % Spent
2012/13 12,429,000 100%
2013/14 11,800,000 100%
2014/15 9,708,000 100%
2015/16 9,654,000 69% spent end of Dec 2015
Siyathemba Municipality has participated in the Regional Bulk Infrastructure Grant programme as from 2012. Two projects were prioritised on the RBIG project list for this municipality, namely Niekerkshoop Bulk water supply and Marydale Bulk water supply. Niekershoop Bulk water supply has completed its Implementation Readiness Study report during 2012/2013. Construction started during 2013/14 financial year and final invoices were processed during March 2015. The project was completed for a total amount of R9,3 million. The Niekershoop Bulk water supply project is one of approximately 7 RBIG projects successfully completed in the Northern Cape. The Marydale project started in May 2013 during which various planning documents as well as geo‐hydrological investigations and a water conservation and demand management plan were done. Several possible scenarios to address the bulk water challenges in this area were also investigated. A total amount of R2.8 were allocated to these studies. Siyathemba Municipality implemented the Niekerkshool Bulk water supply project as well as the planning phases of the Marydale Bulk water supply project and was responsible for all aspects regarding procurement, project implementation and management, financial management and reporting. Accelerated Community Infrastructure Programme (ACIP): Siyathemba Municipality has submitted various business plans to the Department of Water and Sanitation to benefit from the ACIP programme. A few projects have been approved by the Department and a total amount of approximately R6,9 million has been made available during the 2011/12 (R2,9), 2012/13 (R2,8) and 2015/16 (R1,2) financial years to implemented projects. The funds were mainly used for - Refurbishment of Oxidation ponds at Prieska, Marydale and Niekerkshoop - Purchasing of 2 sewer trucks - Refurbishment of Prieska WTW and Reservoirs These projects have been planned, implemented and managed by the Siyathemba Municipality. Bucket Eradication Programme Siyathemba Municipality is part of the Bucket Eradication programme currently geing implemented in the Province. A total of 237 buckets will be eradicated through this programme. Although the municipality played an integral role during planning phase of this project, the municipality does not implement the project. The Department of Water
32 and Sanitation is responsible for the implementation, but the municipality is part of the execution process. Human Settlement Development Programme Siyathemba Municipality submitted a business plan to the Department of Human Settlements to provide services as well as houses for 364 erven in Prieska. The first phase of the project, to provide services, has been completed and the municipality is now awaiting funds from the Department to start with the construction of top structures. The tables below show all capital projects implemented as from the 2012/13 financial year:
Table 15: Projects 2013/14
Table 18: Projects 2012/13
33 7.6 History on past implementation quality & performance (e.g. functionality audits) The performance of municipalities and/or their capacity to fulfil its legislative responsibilities are being measured via a number of initiatives/platforms. In the bullet points below, a summary regarding Siyathemba Municipality’s performance is provided:
7.6.1 Section 47 report Each year the MEC for Local Government must compile and submit to the provincial legislature and the Minister a consolidated report on the performance of municipalities in the province. The following key performance areas are measured: KPA 1: Municipal transformation and organisational development KPA 2: Basic Service Delivery KPA 3: Local Economic Development KPA 4: Municipal financial viability and management KPA 5: Good performance and public participation Cross‐cutting interventions According to the 2013/2014 Report (latest available report) the municipality scored 60 points and is ranked the 18th best performer amongst all the 27 local municipalities in the Northern Cape.
7.6.2 Back to Basics The Back to Basics programme initiated by the Department of Cooperative Governance, Human Settlements and Traditional Affairs has the aim to build a responsive, caring and accountable local government as well as to provide hands‐on assistance to municipalities to perform on an acceptable level in terms of five pre‐determined pillars. These are: Putting people first Service delivery Good governance Sound financial management Building capable local government institutions Their assessment of the state of municipalities indicated that a significant number of municipalities are just below the middle path or are in a critical state of dysfunction. Siyathemba Municipality was amongst the 15 district and local municipalities categorised as “dysfunctional”.
7.6.3 Municipal Strategic Self‐Assessment (MuSSA) The Municipal Strategic Self‐Assessment was introduced during 2002 and has progressively been refined in support of sector trends and requirement. Overseen by the Department of Water and Sanitation the MuSSA conveys an overall business health of municipal water business and serves as a key source of information around municipal performance. The MuSSA asks senior municipal managers five clear and relatively simple “essence” questions per 18 key business health attributes.
34 These attributes are the following: 1. Water Services Planning 10. Infrastructure Asset Management 2. Management Skill Level 11. Operation and Maintenance 3. Staff Skill Level 12. Financial Management 4. Technical Staff Capacity 13. Revenue Collection 5. Water Resource Management 14. Financial Asset Management 6. Water Conservation and Demand Management 15. Information Management 7. Drinking water safety and Blue Drop score 16. Organizational Performance Monitoring 8. Basic sanitation 17. Water Services Quality 9. Wastewater/Environment Safety and Green Drop Score 18. Customer Care
According to the 2015 Report, Siyathemba Municipality falls within the extreme vulnerable category together with 8 other municipalities in the Northern Cape. In 2014, Siyathemba Municipality was also categorised as extreme vulnerable. 8 Municipalities however succeeded in 2015 to improve their status from extreme vulnerable to high and moderate vulnerable. Siyathemba Municipality has remained in the extreme vulnerable category. The diagram below illustrates the vulnerability levels across the key service areas/business attributes within the Siyathemba Municipality.
Figure 21: MuSSA vulnerability diagram
The top areas of vulnerability in Siyathemba Municipality are: Management Skill Level (Technical) (45.0%) Staff Skills Levels (Technical) (40.0%) Water Resource Management (WRM) (30.0%) Waterwater/Environmental Safety and Green Drop Status (40.0%) Financial Management (40.0%) Revenue Collection (30.0%) Financial Asset Management (20.0%)
35 Organisational Performance Monitoring (45.0%) Customer Care (CRM) (45.0%)
7.6.4 Turnaround Strategy Through the Local Government Turn‐Around Strategy, an index was provided on the vulnerability of municipalities. Four classes were identified, based on spatial, social, municipal capacity and economic indicators: Class 1: Very high vulnerability (LM:57) (DM: 12) Class 2: High vulnerability (LM:58) (DM: 11) Class 3: Medium vulnerability (LM: 58) (DM: 13) Class 4: Low vulnerability (Metro’s: 6, LM: 58) (DM: 12) Siyathemba Municipality was classified in the medium vulnerable category. It was however, highlighted that it has medium capacity to perform functions as stipulated in legislation. In the figure below, a summary of the performance of municipalities in the Northern Cape in terms of the abovementioned initiative are provided. Municipalities that performed above average on the various programmes are marked in greenish colours and those that performed poorly are marked in orange and red. As can be seen, Siyathemba Municipality’s performance is average compared to the other municipalities in the Northern Cape.
36 Figure 22: Summary of performance of municipalities
S47 assessment WSA 2013/14 MuSSA 2015 TAS ‐ Least vulnerable Highest capacity !Kheis 11 6 21 23 Dikgatlong 9 12 20 22 Emthanjeni 1 2 19 12 Gamagara 8 10 7 5 Ga‐Segonyana 10 8 18 11 Hantam 6 9 17 21 Joe Morolong 14 7 25 25 Kai !Garib 4 23 6 16 Kamiesberg 21 18 16 20 Kareeberg 19 16 15 10 Karoo Hoogland 27 21 14 9 Kgatelopele 22 19 5 15 Khai‐Ma 26 15 13 19 Khara Hais 3 1 4 4 Magareng 16 17 27 27 Mier 24 24 26 26 Nama Khoi 15 13 3 3 Phokwane 5 25 12 8 Renosterberg 25 26 24 14 Richtersveld 7 20 2 2 Siyancuma 20 27 23 13
Siyathemba 18 22 11 7
Sol Plaatje 2 4 1 1 Thembelihle 23 5 10 18 Tsantsabane 12 11 9 17 Ubuntu 17 14 8 6 Umsobomvu 13 3 22 24
Best performing Worst performing
The successful implementation of a project of this nature will depend on the commitment and due‐diligence of a number of stakeholders. This creates a nominal risk in implementing and administration of any project. It is believed that Siyathemba Municipality is in the position to manage risks and to execute the planned project.
37 7.7 Agreement on operating responsibilities (per scheme component) Siyathemba Municipality is the Water Services Provider (bulk and retail) for its area of jurisdiction. They currently fulfil the function of maintaining and operating all infrastructure components in their area. The municipality will take responsibility to operate and maintain the newly constructed infrastructure as well. The proposed new infrastructure will be integrated within the existing system and will be able to be operated by the same operating personnel currently located in Marydale. The Marydale section within the municipal organogram has the purpose to manage the provisioning and maintenance of civil engineering services to the community of Marydale. This include functions such as maintaining water, sewer, roads and storm water infrastructure as well as provide for parks, cemeteries and refuse removal services. The Marydale section consists of a foreman, 1 driver, 2 tractor operators and 12 general workers. The upgrading/additional infrastructure components are not complex to operate. Throughout the project execution phase, the technical team will include operators of the Marydale section. A proper training session will also take place when the project is handed over to the municipality, in order to ensure that all operators are familiar with the required work and are comfortable in performing these duties. A comprehensive Operation and Maintenance plan will also be compiled by the consulting engineers and will be made available to the Siyathemba Municipality at project hand over phase. The annual O&M cost of the project is estimated at R40 500 excluding VAT. The O&M cost of the project is small and can be accommodated within the existing tariff. The municipality will have to make the necessary adjustments to the annual O&M budget to make provision for the additional O&M activities/equipment needed. The leadership of Siyathemba Municipality is committed to effectively operate the Marydale bulk water supply scheme and have communicated this in writing (letter dated 4 April 2016) to the Department of Water and Sanitation. 7.8 Proof of adequate staff numbers and skills levels (per scheme component) The municipality has an approved organogram. The council of Siyathemba Municipality is being supported by the Mayor/Speaker as well as the Office of the Municipal Manager. The Manager is again supported by three directorates, namely Financial services, Corporate and Community services and Infrastructure services. All these positions are currently filled. The Directorate Infrastructure services are being led by Mr J Basson who is again supported by means of three divisions. Namely Electrical services, Technical services and Town planning and building control. Superintendent and managers positions are vacant in both the electrical and technical services divisions whilst town planning and building control function are being outsourced. The Technical Services division consists of 7 sections which includes the following: Water services Waste water treatment services Roads and storm water services
38 Parks, cemeteries and refuse removal services Workshop services Section Marydale Section Niekerkshoop The only vacant post is the one of Water Services Superintendent. The Marydale section consists of a foreman, 1 driver, 2 tractor operators and 12 general workers. No posts are vacant within this section. Electrical services are available in Prieska and this team visits the Marydale area as and when required. In the Municipal Strategic Self‐assessment for 2015, the municipality has indicated that more than 75% of their key posts on management level, are filled and that, in general, there are a sufficient number of technical management staff positions. It was estimated that more than 50% of technical management staff have the correct skills/qualifications and experience so fulfil their daily responsibilities. A concern was however raised regarding the lack of regular and appropriate water services skills development/training. With regards to technical staff capability levels and numbers, the Municipality is of the opinion that more than 50% of the staff have the correct skills/qualifications and experience to operate infrastructure such as water and waste water systems. The municipality agree that the water and sanitation systems are operated by the appropriate number of staff (according to Regulation 2834). As indicated in the above paragraph, the proposed new infrastructure will be integrated within the existing system and will be able to be operated by the same operating personnel currently located in Marydale. 7.9 History in water services interruptions (annual interruptions in household‐days) In general, the municipality does not experience any significant water services interruptions in the Marydale area. Local pipe leaks are mostly repaired as a matter of urgency and have little or no effect on the service delivery and water availability. In all cases which the municipality could recall, water interruptions were resolved between 24‐48 hours. As part of the water conservation and demand management programme implemented in the municipal area (funded by MIG), all as built drawings of water infrastructure were collected and updated. More valves were installed to have proper zoning of water supply in order to minimise the effect of maintenance/repair work on all consumers. The municipality also has a better understanding of the basic equipment, tools and supplies needed to do repair work on water infrastructure and now have more stock available in the store rooms. This also reduces the response time of water interruptions. During the Municipal Strategic Self‐Assessment which was done in the latter part of 2015, the municipality indicated that none of the consumers have experience water interruptions for more than 48 hours or cumulative interruptions during the last year of more than 15 days. Marydale has been subjected to water restrictions in the recent past during the hot summer months. Restrictions were applied during 10H00 to 14h00 and 21h00 to 06h00.
39 7.10 Commitments for above by institutional leadership(e.g. municipal mayor and council) On the 30th of March 2016, the council of Siyathemba Municipality discussed the status of the proposed project as well as the draft Implementation Ready Study report. The municipality, as only benefitting municipality of this project, took a resolution on that day to commit to the items listed below. A letter in this regard has been sent to the Department of Water and Sanitation and is also attached to this report. 1. Siyathemba Municipality supports the funding application which is submitted to the Department of Water and Sanitation. 2. Siyathemba Municipality agrees with the proposed solutions and scheme components. 3. Siyathemba Municipality agrees with the information as captured in the IRS Report. 4. Should RBIG funds be made available, Siyathemba Municipality understands the principle that only the social component of the capital cost will be funded by the Department of Water and Sanitation. Based on current calculations, the project is estimated to cost R8,831,109 (incl VAT) and the social component is 86.3%. Siyathemba Municipality will provide co funding for the remaining 13.7% (approx R1,209,862). 5. Siyathemba Municipality agrees to the RBIG funding conditions 6. Siyathemba Municipality agrees to the institutional framework proposed in the IRS report. The municipality, as Water Services Authority and Water Services Provider as well as only benefiting institution, will Be the owner of the newly constructed infrastructure and will amend the Infrastructure Asset Register and Infrastructure Asset Management Plan accordingly. Implement and manage the project on behalf of the Department and is willing to enter into an agreement with the Department regarding this. Take responsibility for the operation and maintenance of the newly constructed infrastructure. Through this commitment, made by the institutional leadership of the municipality, it is believed that any funding agent will respect the wish of the municipality to improve water service delivery to the people of Marydale. This should be seen as proof that the municipality regards this project as a priority and that the leadership of the municipality will do everything possible to implement and manage this project in a time efficient and cost effective manner. 7.11 Cooperation agreements between key stakeholders This project will put infrastructure in place which will benefit the town of Marydale. The Siyathemba Municipality and the community of Marydale are therefore the only stakeholders with regards to water supply. As indicated, the municipality will be the owners of the infrastructure and no additional contracts have to be signed regarding these arrangements. Siyathemba Municipality will also take on the responsibility of Implementing Agent. No contract with other water service institutions regarding these responsibilities are necessary. The municipality did however indicate that they are willing to sign a contract with DWS should it be required.
40 Public participation forms an integral part of the municipality’s approach when developing and updating the IDP for a financial year. Specific structures have been established to ensure that all stakeholders in the municipal jurisdiction area are informed about the IDP review and have the opportunity to give their input in terms of status quo information, projects and delivery targets. These forums include structures such as the IDP‐Representative Forum and the IDP‐Steering Committee. Community sessions are also conducted in the various settlements/wards in order to ensure that community members are involved in the compilation process. Through these processes all the stakeholders have agreed that this is a priority project and that funding needs to be secured. The project is listed in the IDP May 2015 as one of the infrastructure priority focus project for 2015/2016. 7.12 Approval of institutional arrangements The only benefiting institution is Siyathemba Municipality who will also be the owner of the newly constructed infrastructure as well as be responsible for the operation and maintenance thereof. According to the Guideline document “Terms of Reference: Feasibility Study and Implementation Ready Study for the Regional Bulk Infrastructure Grant Programme” no other approval on the institutional arrangements are then required. It should be noted that the institutional framework will be tabled at the Regional Bulk Infrastructure Adjudication committee during which representatives from various divisions in the Department of Water and Sanitation are present. Delegates from the Department of Cooperative Governance, Human Settlements and Traditional Affairs also attend these meetings from time to time. Should there be any concerns from these institutions, it will be communicated at this platform and the necessary changes/ mitigation actions will be made before the project will receive final approval for implementation from the Department of Water and Sanitation. 7.13 Cost recovery system (including policy on free basic water and non‐payment) Siyathemba Municipality has an approved credit control and debt collection policy (2013/14). The objective of this policy is to ensure that all revenues, rates and taxes, service levies, rentals and any other revenue due to the municipality is collected in good time and in a humane and a cost efficient manner. The municipality has developed and published a Credit Control‐, Debt Collection‐ and Water Services By‐Laws. These have been promulgated by the municipality in terms of section 156(2) of the Constitution of the Republic of South Africa, 1996 and in accordance with section 13(a) of the Local Government: Municipal Systems Act, 2000 (Act 32 of 2000). The Integrated Development Plan (2015/16) indicates that financial viability is critical for ensuring the sustainability of municipal services. In Siyathemba, the financial viability of the municipality needs to be improved. According to the municipality, their economic situation and cash flow are under pressure, and this is largely due to the low payment culture. The municipality indicated in the Municipal Strategic Self‐Assessment questionnaire that accounts are sent out on a monthly basis to all households which receive services. They are confident that these accounts are accurate. The municipality stated that less than 50% of revenue is currently collected in respect of water services and outstanding debt (older than 90 day) is growing. The Municipal Manager confirmed during the meeting held on 10 February 2016 with the senior management of the municipality, that he and the management of the municipality had discussion on how to improve on the current credit control programme. It is a priority for the municipality to improve on credit control initiatives. The possibility is further considered to appoint an external service provider to assist with credit control/revenue collection activities.
41 It should further be noted that according to the updated indigent register of the municipality approximately 67.2% of all households are registered as indigent households and free basic services can be provided via the equitable share allocation. The impact of the proposed project on the water tariff is calculated to be minimal and the proposed new ta Based on current calculations in terms of the proposed tariff can still be accommodated within the equitable share allocation for FBW. 7.14 Water conservation and demand performance by institution A complete Water conservation and Demand management review was conducted as part of the Technical Feasibility Study. The primary objectives of the study were: Quantifying the existing water losses and determining if the water losses are excessive or not; Determining the main water loss contributors; Providing recommendations in the form of a strategy on the how the water losses can be reduced and how the efficient use of water can be improved. Through this study it was shown that the unit water demands and water losses are high and that there is significant scope to implement WC/WDM in Marydale. The study therefore aimed at providing guidelines to lower total demand, reduce losses and improve consumer metering. The municipality thereafter submitted a business plan to the Municipal Infrastructure Grant programme for the upgrading of internal and bulk water supply in Marydale. This project included the supply and installation of pipelines and erf connections in future development areas, replacement of identified internal network sections with new network, replacement of existing bulk water supply lines with new bulk water supply line as well as the installation of valves as specified by engineer, for future water supply control. In the Municipal Strategic Self‐Assessment, the municipality indicated that the percentage Non Revenue Water by volume is less than 40%. Less than 50% of bulk water inputs to the municipality are accurately monitored using bulk water meters. More than 98% of all residential and non‐ residential connection are however metered and billed. The Siyathemba Municipality is committed to get an approved WC/WDM strategy in place and to provide in their budget for implementation of the strategy. The municipality should target to reduce their total water losses to not more than 15%. Through implementation of a WC/WDM strategy the municipality can lower the water losses from the current 51% to 20% in the next five years and to 15% in the following five years. Infrastructure components are sized considering the target water losses of 15%. It is therefore imperative to implement a WC/WDM strategy to minimize the water losses in order to maximize the design life of the new infrastructure. 7.15 Responsibilities and accountability Since this project is regarded as a priority project within the municipality, there will be a team of people working on this project to ensure the successful implementation thereof. The following people are assigned to the following categories of responsibilities.
42 Table 19: Category of responsibility
Category of responsibility Division Person
Project management Directorate Infrastructure services J Basson HH Meiring Procurement process Directorate Financial services J Basson Directorate Infrastructure services J Basson Financial management Directorate Financial services HH Meiring O&M Directorate Infrastructure services J Basson Office of the Municipal manager Legal requirements R Standhouer Pixley ka Seme District municipality Planning of water Directorate Infrastructure services J Basson services/proposed project 7.16 Conclusion All the criteria for the institutional chapter as listed in the Guideline document “Terms of Reference: Feasibility Study and Implementation Ready Study for the Regional Bulk Infrastructure Grant Programme” have been listed and described in the paragraphs below. The information was gathered from various documents and reports available on the municipal website such as the Integrated Development Plan, Annual Report and Water Conservation and Demand management plan. Other information were sourced from the Municipal Strategic Self‐Assessment report, Section 47 Report as well as MIG expenditure reporting. During a strategic meeting with the senior management of the municipality, the draft information was verified and additional information was sourced. A summary from this report were included in the Executive summary report which was tabled at the Council meeting of 31 March 2016. 8 FINANCIAL CRITERIA The financial criteria section addresses issues of available funding, funding conditions, financial analysis of costs and income projections, proposed water tariffs, and financial viability as set out in the TOR.66 8.1 Available funding
8.1.1 Revised and approved social/economic split of the cost of the project Based on the norms, number of indigents, associated users the social component is calculated at 86.3%.
66 Dept. of Water Affairs (2011) Water services regional bulk infrastructure programme – Framework for implementation. Version V10, January 2011. P 21.
43
Table 20: Revised social component Marydale Population Users 2035 Water Water Supply in % social demand in demand in kl/day component l/c/d kl/d Indigents 67.2% 2 476 80 198 295 67.2% Non‐indigents 32.8% 1 210 25 30 295 10.3% Subtotal 100.0% 3 686 228 77.4% Associated users Schools (day) learners 933 20 19 295 6.3% Schools (boarding) 0 140 0 295 0.0% Crèche learners 93 20 2 295 0.6% Hospital beds 0 300 0 295 0.0% Clinic outpatients (headcount) 26 706 20 1 295 0.5% Community hall seats 92 90 4 295 1.4% Subtotal 26 8.9% TOTAL SOCIAL COMPONENT 254 86.3%
8.1.2 Proposed funding arrangement from RBIG According to the DoRA of February 2016, a RBIG allocation of R10 million is made to Siyathemba.67 The capital cost of the project is estimated at R8.8 million and it can be implemented in less than one year. Table 21: Capital cost summary Amount ex VAT Total VAT Capital R7 746 587 R1 084 522 R8 831 109
8.1.3 Budget allocation by Siyathemba Municipality Siyathemba relies on a capital budget funded mainly from grants and subsidies which amounted to R 12.053 million in 2014/15. A small capital budget allocation is needed for the counter‐funding of the capital costs of this project. Budget allocations are needed for the O&M as well. According to the water revenue and operating expenditure analysis shown in Section 5.7 below, water services make a surplus sufficient to cover O&M costs of the project.
8.1.4 Source of fund for the co‐funding The co‐funding amount will be sourced from own funds. 8.2 Funding conditions Funding conditions will be stipulated by DWS once the RBIG application has been approved.
67 Division of Revenue Bill. As introduced in the National Assembly (proposed section 76); explanatory summary of Bill published in Government Gazette No. 39707 of 18 February 2016. [Online]. Available: http://www.treasury.gov.za/legislation/bills/2016/bills2016_bill02‐2016.pdf P 243.
44 8.3 Financial analysis of cost and income projection
8.3.1 Capital cost and repayment requirements A cash flow of the capital expenditure is provided in the table below. A capital cost estimate of R 8.9 million including VAT is spread over an 11 month period, although the project may take between six and eight months to complete. Table 22: Capital expenditure cash flow for the project including VAT Monthly Cumulative May‐16 R 400 000 R 400 000 Jun‐16 R 500 000 R 900 000 Jul‐16 R 750 000 R 1 650 000 Aug‐16 R 900 000 R 2 550 000 Sep‐16 R 950 000 R 3 500 000 Oct‐16 R 1 250 000 R 4 750 000 Nov‐16 R 1 250 000 R 6 000 000 Dec‐16 R 750 000 R 6 750 000 Jan‐17 R 750 000 R 7 500 000 Feb‐17 R 950 000 R 8 450 000 Mar‐17 R 450 000 R 8 900 000
8.3.2 Monthly operation and maintenance costs Water needs to be priced through its value chain from raw water to retail distribution and the tariff should reflect the O&M costs as well as refurbishment of the infrastructure. It is estimated that the annual O&M cost of the project is estimated at R 40 500 (ex VAT), which results in a monthly cost of R3 375. The following assumptions are used to determine the O&M costs: Maintenance: This portion of the calculation considers the fixed annual costs which do not depend on the amount of water produced i.e. these costs will be incurred even if no water is produced. - The calculation assumes certain percentages of the capital value of the assets as a guideline. These are planning norms widely accepted and used. The following percentages of capital value are used:68
o Pipelines at 0.5%
o Buildings and reservoirs at 2.0%
o Mechanical & Electrical plant at 2.0% - The allowance is meant to be a theoretical blanket cost relating to personnel costs, material costs for maintenance and minor repairs and other costs associated with keeping the asset in good condition. - No personnel cost is included since no additional staff are required for O&M
68 WorleyParsons. Siyathemba Municipality: Bulk water supply to Marydale. RBIG Phase 2B: Preliminary design report. Rev A: 2015‐05‐13. P 17.
45 Operation: includes electricity based on three 0.75kW borehole pumps at 360kWh per month per pump
8.3.3 Allowance for cost of water losses Allowance is made for a 15% water loss in the tariff model. According to the Reconciliation Strategy for Marydale, water loss estimates are about 47%, and water conservation and demand management options are recommended.69
8.3.4 Allowance for refurbishment of various components of the scheme70 No other component other than the project is Package of free basic services envisaged. However, the provision of waterborne through the equitable share 2015/16 toilets to replace buckets and VIPs is foreseen. Refuse, Energy, R 66.19, 8.3.5 R 67.41, Allowance for the cost of free 21% 21% basic water services Providing free basic water services incurs costs affecting the financial viability and sustainability of municipalities. Free basic services are financed from the Local Government Equitable Share,71 as well as Sanitatio cross‐subsidization through the block tariff n, R system.72 Water, R 80.41, 99.75, The equitable share formula provides for a monthly 26% 32% subsidy of R 313.76 for a package of FBS, which includes 10% for maintenance. The monthly amount Figure 23: Package of free basic services for an indigent household in the equitable allocated to water is R 99.75. share allocation 2015/16 The annual cost of FBW water provided to 2 758 indigent households is estimated at R 2 691 000.73 This implies that a kilolitre of FBW costs R 13.56 and for 6 kℓ is costs R81.33 p.m. Comparing the equitable share allocation of R 99.75 for water to the current cost of free basic water indicates that the equitable share is sufficient to cover the cost of FBW in Siyathemba and that of the additional O&M costs pertaining to the project. Table 23: Cost of FBW and O&M cost compared to the equitable share allocation Cost per kℓ Cost of 6 kℓ Budgeted cost of FBW R 13.55 R 81.31 Additional O&M cost of the bulk water supply R 0.38 R 2.26 Total R 13.93 R 83.57 ES allocation to water R 16.63 R 99.75 Surplus R 2.70 R 16.18
69 DWS (2015) Reconciliation strategy for Marydale town, Continuation of the Central Planning Region all towns reconciliation strategies. P 25. 70 Please see technical report by Worley Parsons. Section 5.5. 71 Constitution Section 214 (2) (d) 72 The Block Tariff System: the cost of water increases with usage after the first free block of water, so as to ensure that those who use large amounts of water subsidizes to some extent the free provision of water to all households. 73 Siyathemba Municipality. Budget 2016 Table A10.
46 Siyathemba has addressed the following: Equitable share ‐ Siyathemba Only provides FBW to registered indigent R 25,709,0 households 00 Bills indigent consumers using more than 6 kℓ p.m. R 24,934,0 Similar to most municipalities, has set a threshold of 00 two old‐age state pensions to register as an indigent R 24,220,0 household. 00 The adjacent figure adjacent illustrates that the equitable share allocation in 2015/16 amounted to R 24.2 million; sufficient to cover the cost of FBS, which was estimated at R 9.3 million in 2015/16.74 2015/16 2016/17 2017/18 8.3.6 Provision of institutional
overhead costs Figure 24: Equitable share allocation to Siyathemba No provision is made in the tariff for institutional overhead costs, since the additional cost to O&M of the project amounts to R40 500 p.a. and the analysis of revenue and operating expenditure for water showed a 28.46% (R 3.8 million) surplus in 2014/15. Thus, there would be sufficient to contribute to overhead costs.75 8.4 Financial modelling of projected income taking into account affordability
8.4.1 Affordability and projected sales Please see section 5.5 below.
8.4.2 Allowance for income received from equitable share Please refer to Section 5.3 above.
8.4.3 Potential income generated from the provision of sales taking into account expected growth in demand Additional potential income arises from the additional water available for sale. Potential income may arise from water sales to non‐indigent households. Indigent households are not to exceed 6 kℓ of FBW allocation per month without paying for the excess consumed and therefore are not expected to contribute significantly to income.
8.4.4 Allowance for non‐payment The Siyathemba Municipality achieved a collection rate of 77% in 2014/15, lower than the norm of 95%. The debtor’s management indicator of outstanding service debtors to revenue increased to 27.94% in 2014/15, from 25.92% in 2013/14. The net debtors days from exchange transactions i.e. services, increased from 66 days in 2013/14 to 78 days in 2014/15. The norm is 30 days. This provides an indication of the quality of revenue
74 Siyathemba budget 2016. Table A10. 75 Siyathemba AFS 2014/15. P 8.
47 management and if the ratio is above the norm it indicates that the municipality is exposed to cash Siyathemba potable water tariffs flow risks.76 R66.50 2015/16 8.5 Proposed water tariffs adjustments
8.5.1 Water and sanitation tariffs 2015/16 All municipalities should have appropriately structured cost‐reflective water and sanitation R8.60 tariffs in place by 2014 according to National R5.00 R5.50 R6.20 R7.20 Treasury.77 According to Regulations under Section 10 of the Water Services Act, tariffs need to be socially equitable, financially viable, and reflect cost Basic 0‐67‐12 13‐50 50‐150 >150 p.m. recovery. Pricing should be based on marginal cost and environmental sustainability with incentives for Figure 25: Domestic and business potable water conservation. In addition, Regulation 6 water tariffs excluding VAT 2015/16 under Section 10 of the Water Services Act (No 108 of 1997) states that tariffs for uncontrolled volumes and volume based charges have a rising block structure that includes:78 Three or more rising block tariffs The first block has a maximum of 6 kℓ The highest block discourages high water use and reflects the incremental cost that would be incurred to increase the capacity of the water supply infrastructure to meet an incremental growth demand The Municipality has met these conditions of Regulation 6 of Section 10 of the Water Services Act (No 18 of 1997) listed above. Siyathemba has a single water tariff structure for all customer categories. Siyathemba has a two part tariff structure with a basic charge and block tariffs based on consumption in place. In 2015/16, a basic change of R66.50 is levied per month. The first block tariff is 0‐6 kℓ charged at R5.00 per kℓ, while the highest block charge of R8.60 per kℓ is initiated at over 150 kℓ. Sanitation is charged at R192.30 per household per month for sewerage connections and suction at R129.50 per load.
76 National Treasury. MFMA Circular No 71. Uniform financial ratios and norms. P 6 77 National Treasury. 2012. MFMA Circular No. 66 Municipal Finance Management Act No. 56 of 2003. Municipal Budget Circular for the 2012/13 MTREF. 11 December 2012 [Online]. Available: http://mfma.treasury.gov.za/Circulars/Pages/default.aspx [cited 14 May 2013] 78 Department of Water Affairs. Undated. Regulations under Section 10 of the Water Services Act [Act No. 108 of 1997]: Norms & Standards for Water Services Tariffs (Explanatory Notes & Guidelines) [Online.] Available: http://www.dwa.gov.za/dir_ws/DWQR/subscr/ViewComDoc.asp?Docid=406 [cited 1 May 2013] P 20.
48 Table 24: Sanitation tariff excluding VAT 2015/16 79 Sanitation 2015/16 Household sewer connection R 192.30 Suction per load R 129.50 Sanitary removals R36.10 Water tariffs increased by an average of 9.9% from 2014/15 to 2015/16. Average water tariff for the 0 to 6 kℓ block was R 2.74 per kℓ in South Africa in 2011/12; 80 lower than that charged by Siyathemba (CPI adjusted). However, it should be noted that Siyathemba also levies a basic charge, which was not reported on in the national average. Thus, with the inclusion of a basic charge Siyathemba’s water tariffs is more expensive than the national average, especially for smaller volumes consumed. Consumption varies across households, and the tariff levels at approximate volumes are computed to understand the cost for small, medium, and large consumers at Siyathemba. The World Health Organisation (WHO) stated that a per capita consumption of 20 litres per day is a minimum consumption for survival.81 To ensure that most basic needs are met and few health concerns arise between 50 and 100 litres of water per person per day are needed.82 The consumption level for an average family of four can range from 3 kℓ per month at the subsistence end to 30 kℓ per month at the high‐end. Table 25: Monthly cost of water by consumption volumes in 2015/16 including VAT Type of household 3 kℓ 7.2 kℓ 12 kℓ 30 kℓ Non‐indigent households R 92.91 R 117.53 R 147.63 R 274.85 Indigent households R 0.00 R 6.84 R 36.94 R 164.16 Effective price per kℓ R 30.97 R 16.32 R 12.30 R 9.16 Siyathemba provides 6 kℓ of FBW to indigent households per month. Indigent households using 12 kℓ per month would pay R 36.94 compared to R 147.63 paid by non‐indigent households. The effective price paid by low‐volume non‐indigent consumers is high (R 30.97 per kℓ at 3 kℓ of use) compared to high‐volume consumers (R 9.16 per kℓ at 30 kℓ of use). This is due to the fixed charge being levied per month. Indigent households that are considerably larger than the average size of four persons, exhaust their free allocation and are subject to unaffordable tariffs. However, only 4% of Marydale’s households have eight or more members.
8.5.2 Affordability of current tariffs When a household has to spend more than 5% of their household income on water and sanitation, the service cannot be considered affordable according to international standards.83 According to SALGA “water charges above 5% of household income are not honoured or
79 Source: Siyathemba Local Municipality 2015/16. 80 DWA (2013) strategic overview of the water sector in South Africa 2013. [Online]. Available: http://nepadwatercoe.org/wp‐content/uploads/Strategic‐Overview‐of‐the‐Water‐Sector‐in‐South‐Africa‐2013.pdf P 66. 81 WHO (2003) The right to water. 82 United Nations office (n.d.) The Human Right to Water and Sanitation, Media brief. UN‐ Water Decade Programme on Advocacy and Communication and Water Supply and Sanitation Collaborative Council [Online]. Available: http://www.un.org/waterforlifedecade/pdf/human_right_to_water_and_sanitation_media_brief.pdf P 2. 83 WASHCost (2012) Life‐cycle costs approach used for poverty and affordability analysis. International Water and Sanitation Centre. [Online]. Available: http://www.washcost.info/content/download/2452/16883/file/2.8_lcca_poverty_affordability.pdf
49 sustainable.”84 Furthermore, SALGA recommends that the extension of new schemes should factor the tariff as a percentage of household disposable income for all segments of a community’s income. 85 Hence, affordability calculations are made for Siyathemba based on water comprising up to 3% of household income. Based on household income data, it is estimated that 74.4% of households in Siyathemba cannot afford to buy 7.2 kℓ of water and rely on the 6 kℓ of water supplied free. Approximately 67.2% of Marydale households are able to register as indigent. Table 26: Water affordability calculations Affordability Siyathemba FBW in kℓ 6 Cost of 7.2 kℓ p.m. (incl VAT) R 117.53 At 3% of income then monthly household income is at least in 2014/15 R 3 917.80 At 3%, then annual household income R 47 013.60 HH income pa 2011 R 38 047.09 % HH with income less than R# pm 74.4% % HH indigent (can register) 67.2%
If a household uses 400 litres per day, the Cost of water by volume consumed p.m. monthly consumption is 12 kℓ. Consumption R 274.85 of 12 kℓ of water per month would cost a non‐ (VAT included) indigent household R147.63 including VAT p.m. Thus, for a household to be able to afford 3% of household income on water R 147.63 services, they would have needed an annual R 117.53 income of at least R59 052 in 2015/16. R 92.91 Using CPI and household income data from the 2011 Census, it is estimated that 78.3% of households in the Marydale study area would not be able to assign 3% of household income 37.21230 to 12 kℓ water. Kl per month
Figure 26: Cost of water by volume consumed per month (VAT included) in Siyathemba
84 SALGA (2011) consolidated SALGA comments on the proposed bulk water tariff increases submissions by bulk potable water providers (Water Boards) for the financial year 2011/2012. P 3. 85 SALGA (2011) consolidated SALGA comments on the proposed bulk water tariff increases submissions by bulk potable water providers (Water Boards) for the financial year 2011/2012. P 3.
50 Table 27: Assumptions and calculations of water affordability 2015/16 86 Affordability Water Water 7.2 kℓ 12.0 kℓ Kl free 0 0 Basic charge R66.50 R66.50 Household consumption in kℓ 7.2 12.0 Thus: Amount payable including VAT R117.53 R147.63 At 3% of income then monthly household income is at least in 2015/16 R3 918 R4 921 At 3% of income then annual household income is at least in 2015/16 R47 014 R59 052 HH income pa 2011 R38 048 R47 790 % HH with income less than R# pm in 2011 74.9% 78.3% However, should households consume lesser amounts of water, proportionally more households could afford 3% of household income on water. For example: At 7.2 kℓ of water per month 74.9% of non‐indigent households could not afford At 7.2 kℓ of water per month 14.3% of indigent households could not afford
8.5.3 Proposed tariffs The water users pay a water use fee based on O&M cost. The water tariff depends on the quantity of water billed and sold each year. The additional O&M tariff for the Marydale project is R 0.38 per kℓ, which can be accommodated within the equitable share allocation for FBW.
8.5.4 Affordability of proposed tariffs The O&M cost related to the project is R0.38 per kℓ. Since it is within the equitable share allocation for water, it does not have a significant effect on affordability. 8.6 Financial viability and expected return on investment over the expected useful life The financial viability of the scheme is affected by the affordability of the consumers detailed in the above analysis. Although the financial viability is affected by affordability, and water sales make a surplus, measures that would assist in mitigating other risks include: Continue implementing the credit control and debt management policy Ensure that metering, meter reading and billing continues to take place effectively It is not the intention that the project is profitable but rather, at the prices stated the project covers its operating expenses. The real economic benefit therefore from the water provided to the various users is captured through their use and value adding activities. These may be social goods, such as essential water for household use, or value adding activities, which make a contribution to the local and regional.
86 Derived from StatsSA CPI index and Census 2011 and municipal tariffs
51 8.7 Financial status, performance, and creditworthiness of the municipality and implementing agents
8.7.1 Financial status and performance of Siyathemba Municipality Several indicators detail the financial status and performance of Siyathemba Municipality and these are briefly discussed below.
8.7.1.1 Clean audit outcomes It was a national target that by 2014 all municipalities would have achieved clean audits on their annual financial statements and be maintaining systems for sustaining quality financial statements and management information. 87 Siyathemba Municipality was unable to achieve a clean audit opinion in 2014/15. It received a disclaimer, while in 2013/14 it received a qualified audit opinion with findings. In the four years prior to 2013/14, it received disclaimers as well.
8.7.1.2 Key financial indicators An analysis of Siyathemba’s financial health indicators for 2013/14 and 2014/15 are summarised below:88 An operating deficit at the end of the 2014/15 year of R 7.298 million was reported; higher than the deficit of R 5.396 million in the previous year Proportion of water revenue to total revenue decreased to 16.8% from 17.8% Net surplus for water as a percentage of total water income was 28.5%, although this was lower than the 2013/14 figure of 29.4%, but it is higher than the National Treasury minimum of 0% Proportion of expenditure on repairs and maintenance remained very low at 2.7% (2014/15) and 4.9% (2013/14) and below the norm of 10% Employee related costs were 36% (2014/15) and 34% (2013/14) of expenditure, which is at the upper end of the range set by Treasury of 25% to 40%89 Consumer debtors (service receivables) net balance increased to R 5.890 million from R 4.519 million and the amount of debt impairment increased to R 34.172 million from R 29.196 million Grant dependency reduced to 49% of total income from 56%, due to a decrease in conditional grants received in 2014/15 Other notable indicators for 2014/15 include: 90 Balance of accumulated surplus at 30 June 2015 amounted to R428 million (R434 in 2014) R2.9 million was available in cash and cash equivalents at end June 2015, an increase from R1 million in the previous year
87 Thwane, L. 2010. Operation clean audit (OCA) 2014. Presented by Department Cooperative Governance, 25 November 2010. [Online]. Available: http://mfma.treasury.gov.za/MFMA/Guidelines/Asset%20Management%20Seminar%20%E2%80%93%2024%20to%2025%20Nove mber%202010/Operation%20Clean%20Audit%20Presentation.ppt [cited 6 May 2013] 88 Siyathemba. Annual financial statements for the year ended 30 June 2015. Audited. 89 National Treasury 2014. Uniform Financial ratios and Norms. MFMA Circular No 71. 90 Siyathemba Annual financial statements for the year ended 30 June 2015. Audited.
52 Income of R 11.0 million was budgeted for water charges, which varied from the actual by 21.4% (R 13.4 million) Employee related cost (R 31.7 million) was more than that budgeted for (R 31.5 million) Current ratio of 0.4 (current liabilities to current assets) was maintained in both periods, although it did not meet the norm of between 1.5 and 2.0 Indicators that did not improve between 2013/14 and 2014/15 included the following: 91 Debt collection measured in net debtor days increased from 66 to 78, both of which are higher than Treasury’s92 norm of 30 days Water distribution Gross collection ratio decreased from 74% to 68% Income Expenditure R14,90 Deficit for the year increased from R 5.396 million to R13,415 1,165 R 7.298 million ,803 93 R10,521 Water services income and expenditure R9,598 ,201 ,007 The sale of water accounted for 28.5%, and 29.4% of total income in 2014/15 and 2013/14 respectively. During this period, water income decreased by a 9.97%, and expenditure on water distribution also decreased by 8.77%. The surplus thus decreased from R 4.38 million to R 3.82 million, however, the water service maintained a surplus overall. 2014/15 2013/14
Table 28: Water services income and expenditure 94 Figure 27: Water income and expenditure Water distribution 2014/15 2013/14 Growth p.a. Income R13 415 803 R14 901 165 ‐9.97% Expenditure R9 598 007 R10 521 201 ‐8.77% Surplus/deficit R3 817 796 R4 379 964 ‐12.83% Surplus/deficit as % of total income 28.5% 29.4% % of total revenue 16.8% 17.8%
Typical operating cost for Nationally, typical operating cost for water shows bulk water supply in R per kl used purchases at 35%, other expenditure at 32%, employee related cost at 16%, provision for working capital at 7%, and repairs and CMA charge R0.20 Raw water lost R0.30 maintenance at 10%.95 National averages indicate that operating WR infrastructure… R1.00 costs for water supply amount to 13% of the total municipal Bulk water lost R0.66 operating expenditure, while sanitation services are about 4%. Bulk water used R3.30 Siyathemba supplies water at a lower cost percentage (11.0%) of Distribution system R1.60 total operating costs.
Figure 28: Typical operating expenditu for water in Rand per kℓ used in South Africa
91 Siyathemba. Annual financial statements for the year ended 30 June 2015. Audited. 92 National Treasury. MFMA Circular no 71. January 2014. P 8. 93 Siyathemba Municiplaity. Annual financial statements for the year ended 30 June 2015. Audited. P8. 94 Siyathemba Municipality. Annual financial statements for the year ended 30 June 2015. Audited. P8. 95 DWA (2013) Strategic overview of the water sector in South Africa 2013. [Online]. Available: http://nepadwatercoe.org/wp‐content/uploads/Strategic‐Overview‐of‐the‐Water‐Sector‐in‐South‐Africa‐2013.pdf P 62.
53 8.7.1.3 Water debtors The accounting officer of a WSI “must take effective and appropriate steps to collect all moneys due” and may only write off a debt if reasonable steps have been taken to recover debt, recovery would be uneconomical or cause undue hardship.96 WSAs must plan to reduce debt and apply provisions according to its policy. Payment levels measure income as a percentage of billed water services. Furthermore, the unbundling of debtor’s figures is required to assess the impact on financial sustainability. Consumers owed Siyathemba municipality R 5.890 million (exchange transactions which excludes rates and after provision for impairment) of which R 2.298 million was for water at the end of June 2015, accounting for 57% of total service debtors (exchange transactions); this increased from 53% in 2013/14. Consumers and counterparties that default result in a financial loss to the Municipality presenting a credit risk. In its AFS ended June 2015,97 the arrears of councillors accounts are listed which shows that one councillor was in arrears.
8.7.1.4 Adequate budgeting and expenditure on renewal, repairs and maintenance of existing assets Serious repairs, maintenance and renewal backlogs exist in most municipalities across South Africa, which adversely affects financial sustainability and the reliability and quality of services delivered. Economic growth is not supported either. Because levels of expenditure on repairs and maintenance are low, National Treasury set 98 2014/15 Spending on repairs and parameters. Parameters set for adequate repairs maintenance 99 2013/14 and maintenance budget allocations are at least: Norm 10.0% 40% of the capital budget is allotted to the renewal of existing assets 8.0%
8% of assets value of the municipality’s plant, 4.9% property and equipment stated in the AFS is allotted 2.7% 0.9% 10% of the operating budget is allocated to 0.5% repairs and maintenance Repairs and maintenanceRepairs and maintenance An assessment of the 2014/15 AFS of Siyathemba as a % of total as a % of assets value reflects that 2.7% of total expenditure was spent on expenditure repairs and maintenance, whilst the norm is 10%.100 The percentage of expenditure to total assets value Figure 29: Average spending on repairs and maintenance compared to the norm was 0.5%, inadequate according to the recommendations of 8% by National Treasury. This
96 National Treasury (2001) Treasury regulation issued in terms of the PFMA, 1999. [Online]. Available: http://www.treasury.gov.za/legislation/pfma/regulations/gazette_22219.pdf [cited 6 July 2013] P 28. 97 Siyathemba AFS 2014/15. P 87. 98 National Treasury. 2011. MFMA Circular No. 55 Municipal Finance Management Act No. 56 of 2003. Municipal Budget Circular for the 2011/12 MTREF. 7 March 2011 [Online]. Available: http://mfma.treasury.gov.za/Circulars/Pages/default.aspx [cited 14 May 2013] 99 National Treasury. 2011. MFMA Circular No. 55 Municipal Finance Management Act No. 56 of 2003. Municipal Budget Circular for the 2011/12 MTREF. 7 March 2011 [Online]. Available: http://mfma.treasury.gov.za/Circulars/Pages/default.aspx [cited 14 May 2013] 100 Siyathemba, annual financial statements for the year ended 30 June 2015.
54 suggests that infrastructure is not properly maintained which could have significant cost implications in the future.
8.7.1.5 Creditworthiness A credit rating is essential for municipalities to access capital markets.101 However, Siyathemba is not credit rated by Moody’s. Creditworthiness is an assessment of the likelihood that a borrower will default on their debt obligations. It is based upon factors, such as their history of repayment and their credit score. Lending institutions also consider the availability of assets and extent of liabilities to determine the probability of default.102 Limited balance sheets and lack of liquidity discourages private financiers. The liquidity position of the Municipality is illustrated by current liabilities not exceeding current assets, indicating that the Municipality is operating as a going concern. The current ratio is an indication of an institution’s ability to meet short‐term obligations. Acceptable current ratios vary from industry to industry but the norm for municipalities ranges between 1.5 and 2.103 If a Municipality’s current assets are in this range, then it is generally considered to have good short‐term financial strength. If current liabilities exceed current assets (and the current ratio is below 1), then the institution may have problems meeting its short‐term obligations. If the current ratio is too high, the institution may not be efficiently utilising its current assets.104 Siyathemba had a low current ratio of 0.4 in 2013/14 and 2014/15. Table 29: Current assets and liabilities 2014/15 2013/14 Current assets R13 946 208 R10 318 216 Current liabilities R34 523 585 R28 348 633 Current ratio 0.4 0.4
8.7.2 Proposals Based on the analysis above, motivations and proposals are made below.
8.7.2.1 Motivation why the project proposal should be accepted The Municipality needs to improve its water supply to Marydale, because of water shortages and potability issues. Siyathemba Municipality is operating as a going concern and the project is well within their current water supply capacity since it is adding additional boreholes to the system.
8.7.2.2 Identify and quantify the risks of going ahead with the project proposal The bulk water supply project is listed a priority project in the IDP. Risks in implementing the project are identified and the following measures to mitigate the risks include: Monitoring and implementing WCDM
101 National Treasury (2008) Leveraging private finance. Chapter 6. [Online]. Available: http://www.treasury.gov.za/publications/igfr/2008/lg/Chapter%206%20‐%20Leveraging%20private%20finance.pdf 102 http://www.investopedia.com/terms/c/credit‐worthiness.asp 103 National Treasury. MFMA Circular no 71. January 2014. P 8. 104 http://www.unisa.ac.za/contents/faculties/service_dept/docs/Financial_SABVI12_3Chap1.pdf
55 Good project management needs to be in place to oversee the implementation of the project
8.7.2.3 Steps and conditions to be adopted to ensure the success of the project and to negate negative financial status Several financial indicators need attention to ensure long‐term financial viability: Clean audit outcomes are achieved Cost reflective tariffs are in place and which support WDM Affordability and willingness to pay is taken into account Adequate budgeting and expenditure on renewal repairs and maintenance of existing assets Timeous disbursement of conditional grant funding Debtors are managed 9 LEGAL CRITERIA 9.1 Water Use License Section 21a water use license application forms have been completed for the three new exploration boreholes MRE1, MRE2 and MA3 and were submitted to DWA during September 2015. The application has been approved by the Department of Water and Sanitation on 9.2 Environmental Authorisation According to the National Environmental Management Act (NEMA), 1998 (Act 107 of 1998) Environmental Impact Assessment Regulations as amended in 2010 and the Government Notice R.543 – 546 of 2 August 2010, activities, 11(xi), (a) (b), 40(iv), 24(d) (a) (ii) (aa) were listed for basic assessment. SRK Consulting (South Africa) Pty Ltd was appointed by WorleyParsons RSA to undertake the Basic Assessment (BA) process required in terms of the Act. The application for EA for the project was submitted prior to the promulgation of the EIA Regulations, 2014 and as such, the process was governed by the EIA Regulations, 2010. The Final Basic Assessment Report was submitted to the Northern Cape Department of Environment and Nature Conservation (NCDENC) on 17 April 2015. According to legislated timeframes, NCDENC had 14 days from the date of submission of the Basic Assessment Report (BAR) to acknowledge receipt of the BAR. The NCDENC then had a further 30 days to accept or reject the BAR. The process was completed and approved on 9 September 2015 with receipt of confirmation letter from the Northern Cape Department of Environment and Nature Conservation. Application REF NR was NC/BA/48/PIX/SIY/MAR2014 9.3 Land and Property Rights All proposed infrastructure will be constructed on Siyathemba Municipality property. Therefore no property rights issues exist for implementation of this project.
56 10 SUSTAINABILITY CRITERIA 10.1 Financial Viability Financially, the Siyathemba Municipality is under a lot of pressure to secure payment from debtors and to creditors. The municipality is more reliant on grants to finance expenditure than other municipalities with the same nature, due to the limited revenue raising capacity. The municipality is committed to develop and implement more vigorous revenue raising initiatives, especially with regard to outstanding debtors to improve cash flow generation. Considering the enabling environment that is created for a higher level of services and economic growth, the project is considered financially viable. 10.2 Operating and Management Capacity The implementation institution will be the Siyathemba Municipality. The municipality have the necessary capacity to implement the project successfully The Siyathemba Municipality represented by the Mayor and Municipal Manager take responsibility and accountability for the proposed bulk water supply project, from inception to implementation including operation and maintenance. Furthermore, the Infrastructure Department will be directly responsible for implementation of the proposed bulk water infrastructure supply as well as operation and maintenance of the proposed infrastructure. The Siyathemba Municipality has successfully implemented capital projects over the last few years, including MIG projects. The municipality has also shown significant improvement on its Blue Drop performance, proving it has the capacity to successfully implement projects and improve operating performance. The Siyathemba Municipality is aware of the fact that, as with most municipalities, there is a shortage of labour and appropriate skill levels. However, the municipality remains committed to implement its Skills Development Plan to provide training to ensure that the required skills are developed and maintained. 10.3 Environmental and Social Acceptability and Impact As mentioned in Section 8.2, Environmental Authorisation was granted for GN.R544 activities, 11(xi), (a) (b), 40(iv), 24(d) (a) (ii) (aa). Detailed descriptions of the activities triggered are given in the Basic Assessment Report dated April 2015. The project is also identified in the WSDP, which is a sector plan of the IDP. The IDP undergoes a public participation process whereby the public is given the opportunity to comment on the IDP. No objections to the proposed bulk water supply project were received.
57 11 CHECKLIST CONCLUSION The checklist supplied in the DWA TOR105 is used to provide a short summary of each issue together with relevant page references to this report and other reports where more detailed information can be obtained. Reports referenced are: A: This report (IRS) Others as referenced in the table below Table 30: Criteria checklist of the implementation ready study (IRS)
Criteria Comments Reference Strategic & Planning 1 Issues The Siyathemba Municipality’s IDP Resolution no: 10.1‐29 May 2015 In line with WSDP includes the bulk water supply project at Marydale. Water A: 1.1 and IDP infrastructure projects are a first priority focus for 2015/16. The project is listed in the WSDP. The promotion of the water sector is a strategic intervention for meeting basic needs in the Northern Cape PGDS. “Water is a key necessity for economic growth and that water is also necessary to accelerate job creation and poverty eradication. Further that access to water, water infrastructure and the effective management of water institutions are PGDS106 1.2 In line with PGDS key components of growth and development. But water is not free and 44 unlimited especially in South Africa, and the water being wasted or polluted costs us money and strong regulation is therefore a key component of ensuring sustainability of our water resources.” Regulation of the water sector and implementing WCDM are cornerstones of the PGDS. Are other parts of There is a reticulated water supply in Marydale supplied from the water / boreholes nearby. 1.3 sanitation supply There are approx. 2 households without a water supply and a project chain in place recently replaced approx. 200 buckets with waterborne sanitation. Without this project water assurance and quality is severely Strategic 1.4 compromised. Water restrictions are put in place at Marydale from time importance to time. Do all parties agree Yes, the Marydale project is one of six priority projects identified in the 2015 1.5 to the need Reconciliation Strategies prepared by DWS. The project is expected to be completed by end of 2016/17 financial year. 1.6 Delivery targets A construction period of 8 months is estimated. Marydale has few enterprises mostly of the ‘run‐of‐the‐mill’ type. Economic growth 1.7 Siyathemba’s economy is led by community services followed by requirements agriculture. 1.8 Water scarcity etc. Water is sourced from boreholes. Attention is being given to WCDM.
Other projects dependent on water supply cannot be completed e.g. Functional criticality bucket eradication programme. 1.9 of total scheme and Basic rights of residents are infringed if water cannot be supplied. specific components Frequent water restrictions are announced to limit use. 1.10 Extent of cost Capital cost is R 8 831 109 (including VAT) 1.11 Available co‐funding Own capital funds of Siyathemba Municipality
105 DWA (2011) Regional bulk infrastructure programme ‐ terms of reference: feasibility study and implementation ready study for the RBIG, January 2011. P 18‐19. 106 Northern Cape Provincial Growth and Development Strategy. Abridged version, July 2011. P 44.
58 Criteria Comments Reference 2 Social Criteria Number of It is expected that by 2035 the population will increase to households and approximately 3 686. people to be 2.1 2 households are without basic water. uplifted to basic and higher service 52 households require at least basic sanitation. levels Approx. 200 bucket toilets were recently replaced. Number of poor The total capital cost is R 7 746 587 (VAT excluded). The annual O&M households to be cost is estimated at R 40 500 (VAT excluded). 2.2 served and the Indigent registered households amount to 452 (67.2%) in Marydale. social cost (capital The social component of the project is 83.4%. and operation)
Number of jobs to be created During the O&M phase, no additional jobs are required (temporary and 2.3 permanent, by During construction, 18 temporary jobs are estimated and 1 337 person gender and age days category) Consumptive charges and cost reflective tariffs are determined. Affordability of Household affordability levels are relatively low. For example, based on proposed water an affordability level of 3% of household income on water, 74.4% of 2.4 tariffs (per service households cannot afford 7.2 kℓ of water per month. However, the O&M level and cost of the project is insignificant and is within the R99.75 provided by community) the Equitable Share for free basic water. There is a need to address access to basic services and provide a Contribution continuous water supply which meets the norms in quantity and towards poverty quality. eradication, social 2.5 Without a continuous assured water supply the economy cannot upliftment and grow. health improvement New infrastructure is needed to improve the quality of water services to improve drinking water compliance. Number of The following associated services will benefit: associated services benefitting (e.g. One clinic 2.6 schools, clinics and One community hall communal One intermediate school with 698 learners facilities) Socio‐political support for the proposed IDP107 The project is aligned to the IDP and the council fully supports it. 2.7 development Residents support the project as it is listed IDP project. options (per development option) Economic 3 Criteria Number of current businesses and Marydale is a very small settlement with limited business and service 3.1 industries to be enterprises. served
107 Siyathemba IDP 2013/14 Final. P 61.
59 Criteria Comments Reference Expected economic value to be generated by the Siyathemba’s GVA is estimated to reach over R 900 million (in 2005 3.2 new businesses constant prices) in 2035, which will be affected by water shortages (GDP before and and interruptions. after) as a result of the project Number of SMMEs and BEE Of an estimated contract value of R7.7 million (excluding VAT) the enterprises to following target values are proposed: benefit (by type SMME R 1.9 million 3.3 and monetary BEE R 0.4 million value/benefit) Minimum labour content R 2.3 million during project and Affirmative black enterprises (25% of goods, services and materials) as an indirect result of the project Regional economic benefit from the proposed water For every Rand invested in the improvement of the water sector the users and their following contribution is made to the economy: value chain output grows by approximately R 6.67 integrated payments to primary production sectors increase by R1.49 development 3.4 objectives (socio‐ contributions to household income of R 1.01 caused by consumer economic benefits, prices falling provincial growth Although providing water does not necessarily result in economic and development growth, a lack of water or poor quality water does inhibit growth. objectives, IDPs Substantial numbers of hours without water has a negative effect on and associated productivity. sector programmes like housing) Technical 4 Criteria Is the project part The project is part of the following plans: 4.1 of a master plan WSDP proposal IDP Appropriateness 4.2 and acceptability of Yes. Feasibility report submitted and approved solution Appropriate water resource choice and adequate water allocation (confirmed / 4.3 As per submitted WULA and Feasibility report approved by DWA WRM re choice, water license ‐ volume, assurance and quality)
60 Criteria Comments Reference Compliance to water demand/water conservation objectives (acceptable water 4.4 losses and appropriate plans to reduce / control water demand.) Is a WDM/WC strategy/plan in place Optimal choice of bulk distribution networks (pipeline routes, pump stations and bulk 4.5 storage) As per feasibility report and Phase 1A and 2B reports approved considering full life‐ cycle cost (capital, financing, operating and maintenance cost) Proof of best suited technology 4.6 Yes (pros and cons per option) Institutional 5 Criteria Indicate who will 5.1 own the Siyathemba municipality infrastructure Confidence in the capacity of the 5.2 Yes institution to implement Agreements on Siyathemba municipality will own the infrastructure, thus no agreement 5.3 infrastructure is required. ownership Agreement on 5.4 implementation No agreement required since there is only one benefiting municipality. responsibility Proof of implementation As per IRS report 5.5 capacity (e.g. capital expenditure over last 3 years) History on past implementation quality and MIG projects are being implemented as well as previous IRS projects 5.6 performance (e.g. done by Siyathemba functionality audits) Agreement on operating 5.7 responsibilities (per See commitment letter from Siyathemba attached. scheme component)
61 Criteria Comments Reference Proof of adequate staff numbers and 5.8 As per section 7 in IRS report skills levels (per scheme component) History on water services interruptions 5.9 As per section 7 in IRS report (annual interruptions in household days) Commitments for
above by institutional 5.10 As per section 7 in IRS report leadership (e.g. municipal mayor and council) Cooperation agreements 5.11 As per section 7 in IRS report between key stakeholders Approval of 5.12 institutional As per section 7 in IRS report arrangements Cost recovery A free basic water policy is in place to provide 6 kℓ per indigent system (including household per month. 5.13 policy on free basic water and non‐ Debtor collection rate of 77% achieved in 2014/15, lower than the norm payment) of 95%. Water conservation 5.14 and demand As per section 7 in IRS report performance by institution Responsibilities Siyathemba municipality will be responsible and accountable to 5.15 and implement the RBIG project, and they are supported by their appointed accountability engineering consultant, WorleyParsons. Financial 6 criteria Available funding 6.1 (grant, loan and RBIG funding and co‐funding from own funds. investment) Funding conditions 6.2 (repayment period, No repayment of grant funds are required or of own funds. interest) Financial analysis of cost and income Construction takes place in one year and should be completed by end 6.3 projections (cash 2016/17 flows) Proposed water and sanitation tariffs (R per To recover annual O&M costs, an additional charge of R0.38 is required, 6.4 kiloliter, per and this is within the amount allocated to FBW by the equitable share. volume block, per user) Affordability of proposed water 6.5 and sanitation The project will have a small impact on tariffs. tariffs (by user category)
62 Criteria Comments Reference The project is financially viable. To ensure that water sales does not Financial viability make an operational loss in the future, the following measures need to and expected be implemented: return on 6.6 investment over enforcing the credit control and debt management policy expected useful increasing payment levels life ensuring accurate meter reading and billing Siyathemba municipality does not have a formal credit rating. However, the municipality maintained a surplus on water distribution income in Financial status, 2013/14 and 2014/15. However, the municipality needs to improve the performance and following: creditworthiness of 6.7 municipality and Increase spending on repairs and maintenance implementing Decrease debtors days agents Increase collection rates Improve the audit outcome in 2015/16 7 Legal Criteria Has a water license with adequate The current water use license should be sufficient. A WULA was 7.1 allocation for all submitted for the new infrastructure uses been approved Has an environmental authorisation been 7.2 Yes granted for the construction of the scheme Have all land and property rights issues been 7.3 Not required because WTW will be constructed on the existing site. addressed (and acquisition and servitudes) 8 Sustainability Criteria There are numerous performance areas that require improvements that will contribute to Siyathemba’s its long‐term financial viability, such as: achieving clean audit outcomes 8.1 Financial viability ensuring that cost reflective tariffs are in place adequately budgeting for maintenance and renewal of assets timeous disbursement of conditional grant funding managing debtors and improving debt collection rates Operating and management 8.2 capacity, Siyathemba have sufficient capacity for O&M. See commitment letter. performance and commitment Environmental and The main drivers of the project are to provide an uninterrupted, potable 8.3 social acceptability water supply that supports economic growth and development whilst and impact addressing WCDM issues.
63