The Secretariat

The Parliamentary Portfolio Committee:

Water Affairs and Forestry

Cape Town

Ms Cassiem

6 October 2004

NATIONAL WATER RESOURCE STRATEGY: FIRST EDITION, SEPTEMBER 2004

We once again compliment the Department of Water Affairs and Forestry on producing a National Water Resource Strategy that provides a good framework for integrated water management for South Africa.

Eskom's status as a strategic user, the allocation of water for the generation of electricity and the licensing of this use is adequately addressed in the document.

The 9^th bullet point in Box 2.9 (pg 48) however gives rise for concern. It states that "All costs associated with the transfer of water will be borne by the users of the transferred water. These include normal water use charges in terms of the prevailing pricing policy together with project and operational costs, as well as the cost of mitigation measures".

This statement appears to be in conflict with GN 1353, the Raw Water Pricing Strategy. In terms of GN 1353, all existing Government water schemes and integrated systems will be subject to a 'Return on Assets' (ROA) charge which will be used for financing the development of new schemes, including augmentation or transfer schemes. Clearly, once the schemes are in operation, the tariffs associated with the water from these new

schemes will have a 'Return on Assets' component, which will be paid by the users of the transferred water. This differs fundamentally from the wording in the NWRS, which effectively says that the users of the transferred water will have to fund the capital required to construct these schemes.

The separate funding of new infrastructure by users, without applying the money raised via the ROA charge for this purpose, will result in users effectively paying twice for the same infrastructure.

It is imperative that the wording in question be revised or expanded upon to remove the possibility of the user paying twice for the same asset.

This concern has been expressed in our letter to DWAF dated 5 February 2003, ref SWPS/012/03. Eskorn is currently in discussion with DWAF on this issue.

Yours sincerely