COSATU SUBMISSION ON THE WATER SERVICES AMENDMENT BILL
PRESENTED TO THE PORTFOLIO COMMITTEE ON WATER AFFAIRS AND FORESTRY
6 October 2004
CONTACT COSATU PARLIAMENTARY OFFICE
021 – 461 3835
More than two decades of the administration of Structural Adjustment Programmes in Sub-Saharan Africa by the international financial institutions which involved privatization of parastatals has eroded the state’s capacity to spearhead development. In many of these countries, the foreign private sector monopolies that took over have not only undermined development but have also been implicated in coups d’état, civil wars and repressive regimes.
In the recent past, there has been a surge in involvement of the South African State Owned Enterprises (SOEs) and private sector businesses on the African continent. In fact, virtually all SOEs under the Department of Public Enterprises, i.e. Eskom Enterprises, Transnet’s divisions, Arivia.kom and Denel/Mechem are heavily involved in all Sub-Saharan regions in particular and parts of the Maghreb.
Most of the public enterprises of necessity deal with the supply of public goods and extension of infrastructure thereof. Given the fact that many of these entities develop and supply the so-called input goods and services to the rest of the economy, naturally they are involved in the exploitation of natural resources which are the national heritage of the country’s citizens. Herein lies a danger; where water is not only a scarce resource for survival - responsible for conflicts in the past- but also the fact that it has often been used as a means of drawing geographic boundary across ethno-religious and political complexes, engendering divisions and rivalries.
It would appear as though that the Water Service Amendment Bill (hereinafter, the Bill) is being proposed to extend the role of the South African water boards only on the African continent - given references to the New Partnership of Africa’s Development (NEPAD) in the Memorandum on the objects.
From COSATU’s point of view, the key issue with regard to the role of the South African water boards in Africa or beyond is the need for a transparent, predictable and clear policy framework rather than an ad hoc process, based on ministerial discretion - ‘as-you-go’.
Hence, we would concur with the sentiments of the former Minister of Public Enterprise, Jeff Radebe;
‘…it is imperative that we ensure that an SOE’s involvement in Africa (and, for that matter, elsewhere in the world) conduct itself with probity. It must integrate commercial viability and returns on investment with appropriate policies of procurement, the empowerment of SMMEs, the employment of local labour and services that serve to build up and encourage sustainable development in the countries of operation. We must ensure that our SOEs do not operate in a manner of imperialist concessionaires and builders of railways and roads who cared naught for the local populations, still less for the communities, and only saw profits at the end of an extractive and exploitative relationship’.
It is therefore evident that the role and modalities of the involvement of South African water boards extraterritorially is a matter requiring a carefully considered policy framework and therefore legislative sanction.
In principle, the Congress of South African Trade Unions (COSATU) would welcome active involvement of South African parastatals in public-public partnerships with organs of democratically elected and accountable governments, be they public service authorities or service providers.
The proposed amendment Bill however is both ad hoc and premature, for reasons outlined below. Therefore COSATU believes that the Water Services Amendment Bill should be suspended until the following questions are addressed:
At the moment, the current institutional framework for water services provision is highly fragmented resulting in duplication of administration and technical functions, inability to attract and retain management and technical staff, inability to invest in the development and training of specialist skills and loss of economies of scale. Giving a legislative mandate as proposed in this Bill – (in effect) to the relatively stronger water service institutions such as the Umgeni Water and Rand Water, will compound this unevenness.
On the other hand, the national institutional reform strategy is yet to be developed and the Department of Water Affairs and Forestry (DWAF) has committed itself to develop the strategy in order to guide and establish a framework for;
In addition, DWAF is yet to complete the process of transferring its water services works or schemes to local governments by June 2005. According to the Strategic Framework for Water Services (henceforth, the Strategic Framework) this transfer process should run concurrently with the institutional reform process; hence the governance and regulation of the water boards is envisaged to be strengthened in short-term.
Thus, this proposed amendment may have preemptive implications that could have an unintended impact from a point of view of the proposed institutional reform, which the Strategic Framework warns against; "These contracts must not pre-empt the institutional reform envisaged …" (p.54).
Hence, in our view, it is necessary to properly align the role of the water service institutions in line with the Strategic Framework – prior to committing them to some extraterritorial roles which may have long-term commitments financially, operationally and institutionally.
According to the Strategic Framework this institutional reform could have ramifications for water boards, viz;
In itself, the question of extraterritorial operation of the South African water boards is a crucial area of policy and currently the policy framework informing our water law does not deal with this question. In fact, according to section 29 of the Water Service Act of 1997;
‘The primary activity of a water board is to provide water services to other water service institutions within its service area’.
Hence, COSATU takes exception to the fact that DWAF as a policy custodian and regulator in the sector brazenly condones the fact that Umgeni Water has "in good faith been operating extraterritorially for some time". This means that Umgeni Water has done so without legislative and policy mandate, a development which in itself calls for proper institutional reform and regulatory framework.
As law makers, it is necessary that the Portfolio Committee on Water Affairs and Forestry receive a report from Umgeni Water on their commitments and activities outside the borders of the Republic and a presentation by Rand Water on their intended activities. COSATU contends that this must take place even before the Bill is dealt with, in order to draw some insights as to the implications of this Bill’s amendments.
Thus, COSATU proposes that DWAF initiate a policy document that amongst other matters, take into account and deals with;
The General Agreement on Trade and Services (GATS) seeks to liberalise specific public services including the development and supply of socio-economic infrastructure such as water. The Doha Ministerial Conference that took place in 2001 set a timetable for GATS, around which countries failed to agree during the Cancun conference, in September 2003.
In Sub-Saharan Africa given the lack of institutional capacity and internal capital finance; governments develop their infrastructure in a manner involving a range of external agencies with vested-interests. These include international bulk water service providers, water service providers, water boards and more importantly financiers, against whom the South African water boards may have to compete for contracts. Many of these projects involve long-term commitment on both sides in terms of Build Operate and Transfer projects or concessioned operations and indebtedness, which tend to include onerous terms for client countries. In this regard, it is necessary to formulate a clear policy framework, particularly against the background of discord amongst African countries involving South Africa (which is a member of the World Trade Organisation) with regard to GATS, ahead of Cancun, as some of the African countries opposed GATS.
3 Comments on the amendments to section 30
Whilst we acknowledge the fact that section 49 (1) (a) of the Water Services Act of 1997 accords the Minister the prerogative to make regulations pertaining to ‘matters to be dealt with in policy statements of a water board’; we contend that this provision applies in the context of a water board’s particular service area within the borders of the republic. Hence, according to section 49 (2), the ‘Minister may make different regulations for different water boards’.
Thus, in our view, (as stated above) extraterritorial engagement of water boards requires a policy framework beyond a particular water board’s policy statement or business plan which are subject to ministerial approval or discretion.
Given the context of underdevelopment in most Sub-Saharan African countries and the relative strength in the capacity of the South African water boards, we believe that the required services may overtime change and be influenced by particular conditions affecting their operations. Hence, we contend that the principle Act must categorically stipulate the nature of the activities that a water board may perform outside the borders of the Republic, whereas regulations could deal with other proposed areas (in the Bill) since they are subject to change from time to time, such as;
Notwithstanding the fact that the legislature is entitled to consider a notice in the Gazette as may be promulgated by the Ministry, in our view the question of the role of water boards under different conditions from those originally envisaged in terms of the White Paper on Water Services and the principle Act, and under the aegis of NEPAD- is a policy matter.
We therefore believe that this issue has many ramifications requiring a coherent and predictable framework within which the executive could exercise its discretion, before an amendment to existing law could be made as proposed in terms of the Bill.
COSATU objects to an ad hoc law-making process in the absence of a coherent policy framework, which may open the South African public entities to politically and economically unsustainable long-term commitments which may undermine the South African government’s role in Africa and the developing world.
We believe that involvement of the South African government and public enterprises in the developmental issues affecting African countries in particular, is potentially laden with underlying political and moral dilemmas, which require a clear, consistent and predictable policy framework.
COSATU is not opposed to the engagement of the South African public enterprises in partnerships on the African continent and beyond; providing that such engagement does not undermine their primary domestic mandate (in terms of section 29 of the principle Act) and their long-term viability, as well as the broader African renewal agenda.
We believe that it is absolutely necessary that government completes the institutional reforms for water service institutions and the regulatory framework thereof, before they could begin venturing into such undertakings.