PRESENTATION TITLE Presented by: Name Surname

2. PROBLEM STATEMENT (1/2) There is a need for an independent Economic Regulator within the water sector to effectively address the following challenges:

Insufficient investment in maintenance, refurbishment and replacement of infrastructure.
Poor management of services – interrupted supply, water quality, etc
High levels of unaccounted for water – theft, wastage, unbilled.
Areas still unserved, particularly in sanitation.
Weak tariff setting and billing.
Value for money in use of grants, (e.g. MIG) and Equitable Share.
High levels of debt within the sector. 4<br>

PROBLEM STATEMENT… (2/2) These challenges leads to:

unsustainable services;
non‐viable institutions;
degrading infrastructure, and
water users do not get the services they are entitled to and paying for, as according to their human rights. 5<br>

3. STATUS QUO (1/2) 1. Conflict of interest
Dual mandate: support and regulate = affects the decision-making.
A referee and a player for raw water charges - infrastructure developer and operator, as well as the management body that spends the revenue.

2. Legislative limitation
No legal provision for the establishment of the regulator as one of the institutions of the department.

3. Water Services Authorities as regulators
Self regulation for WSAs as bulk service providers
Municipalities only require and accept support from the national government department.

4. Under capacitated regulated institutions
Lack of capacity in both human resources and skills or experience within the sector. 6<br>

7 STATUS QUO…(2/2) 5. Skills for regulatory function
Employment processes unable to secure personnel with the required skills and expertise.

6. In effective economic regulatory function within the Department

Oversight & Regulatory functions are within the same branch.

Regulator is not recognised as an authority with independent decision.

7. Implementation of debt management
There is no implementation of the punitive measures.

8. Strong policy framework for tariff development
Raw and bulk water tariff development – legislated process and tariff approval is by the Minister.

WSAs – Municipal Council mandated to approve the tariff for water services and adheres to the prescribed norms and standards.<br>

4. A CASE FOR CHANGE The challenges experienced by the sector impede the promotion of effective, efficiency, financially viable and sustainable water resources and water services.

NDP - Regulation Commission proposal:

Government departments, Regulators and Utilities must improve their performance:
- Create investor certainty and encourage new investment.
- Ensure that the infrastructure is operated efficiently and tariffs
are set at appropriate levels.

Regulators can be optimistic to smooth prices and avoid economic shocks.

In the long term, users must pay the bulk of the costs for economic infrastructure, with due protection for poor households.

The role of government and the fiscus is to provide the requisite guarantees so that the costs can be amortised (remunerated/paid) over time. 8<br>

5. AN EFFECTIVE ECONOMIC REGULATOR 9<br>

5.1 ECONOMIC REGULATORY FUNCTIONS 10<br>

11<br>

6. GOVERNANCE The regulatory governance should allow an autonomous environment to the regulatory institution.

NDP (2030) RECOMMENDATION PROPOSAL:

“The quality of regulation, however, is not just about the regulator:

The state itself must have adequate capacity and capability to formulate effective policy framework, support the design, establishment, review and improvement of regulators – and to respond adequately to issues identified by capable regulators.

Improved regulatory performance is vital for national development. Capacity‐building remains a core challenge, requiring sustained training to improve leadership and technical capabilities”. 12<br>

Role of the Minister of Water and Sanitation
Policy making;
Shareholder representation; and
Project development and operations
To set minimum levels of service


Role of the Accounting Authority
Setting strategic guidance and developing operational policy of the regulator;
Appointing the Managerial Staff
Monitoring performance and accountable for regulatory efficiency. 13 6.1 Reporting protocol and Accountability<br>

7. PROPOSED ORGANOGRAM 14<br>

8. ESTIMATED ESTABLISHMENT BUDGET 15 SOURCE: PERR REPORT (2013)<br>

9. SOURCES OF REVENUE The National Treasury and the Department are expected to fund the establishment costs, with users paying the running costs in the form the Economic Regulator charge

The main source of revenue for an independent Economic Regulator will be the revenue received from the economic regulator charge once all the legal requirements are done.

It will cover the costs of operations with no profit element. 16<br>

10. TRANSITIONAL PLAN (1/2) Adopt a progressive and incremental approach:

To facilitate the gradual introduction of the Economic Regulatory functions to the sector.

The business case provide an operational transitional plan, which consists of the functions and the timeframes towards a fully functional independent institution. 17<br>

TRANSITIONAL PLAN (2/2) 18<br>

11. PROPOSED CONSULTATION PLAN 19<br>

12. CONCLUSION The sector is in need of an effective economic regulation, which can be achieved through the establishment of an independent institution.

To promote the NDP (2030) water sector vision:

All South Africans must have affordable access to sufficient safe water and hygienic sanitation to live healthy and dignified lives by 2030 20<br>

Thank you 21<br>