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Establishment and Establishment and Implementation ChallengesImplementation Challenges
Theme 3Theme 3
Based on
Johannesburg Water (JW)
Nelspruit Concession
Emfuleni Local Municipality (ELM)
OBJECTIVEOBJECTIVE Share implementation processes Share implementation processes
– Look at processes that have taken place to dateLook at processes that have taken place to date
– Analyse key success factorsAnalyse key success factors
Highlight key activities which:Highlight key activities which:
– Are required for successful implementation Are required for successful implementation
– Informs the processInforms the process
Address risks and mitigating strategies in Address risks and mitigating strategies in implementing section 78 decisionsimplementing section 78 decisions
Best practice for designing a delivery mechanismBest practice for designing a delivery mechanism
Cases that will be addressed Cases that will be addressed
Johannesburg WaterJohannesburg Water
Nelspruit Concession Nelspruit Concession
Emfuleni Local MunicipalityEmfuleni Local Municipality
Background to JWBackground to JW The iGoli solution was to establish a number of wholly owned The iGoli solution was to establish a number of wholly owned
private utility companies, capable of becoming self-sufficient private utility companies, capable of becoming self-sufficient through the raising and retention of user fees on specific through the raising and retention of user fees on specific services sold to individual consumers services sold to individual consumers
The council set up separate, wholly owned utility companiesThe council set up separate, wholly owned utility companies
Utilities are separate legal entities each withUtilities are separate legal entities each with– A board of directors, A board of directors,
– A managing directorA managing director
Service Delivery Agreements were signed with each utilityService Delivery Agreements were signed with each utility
A water and sanitation utility, Johannesburg Water, was A water and sanitation utility, Johannesburg Water, was established in January 2001. established in January 2001.
The Operational Challenges The Operational Challenges faced by the new company (JW)faced by the new company (JW)
UAW was 41.6% on 1999UAW was 41.6% on 1999
Sustainability was threatenedSustainability was threatened
Service Delivery was not taking place as Service Delivery was not taking place as envisagedenvisaged
Lack of capacityLack of capacity
Was there sufficient Political Was there sufficient Political Support? Support?
It was unclear whether Council was fully It was unclear whether Council was fully committed towards the process committed towards the process
There is insufficient knowledge regarding the There is insufficient knowledge regarding the change from public to private entitychange from public to private entity
Conflict of interests regarding the change from Conflict of interests regarding the change from public to private companypublic to private company
Poor InformationPoor Information
City of Johannesburg resulted from merging of City of Johannesburg resulted from merging of five municipalities to provide servicesfive municipalities to provide services
The Municipality local council data assumptions The Municipality local council data assumptions were insufficient and inaccurate.were insufficient and inaccurate.
There was no asset registerThere was no asset register No accurate record of debtors list or debtors No accurate record of debtors list or debtors
outstandingoutstanding No reliable record of liabilities No reliable record of liabilities Impacts on contracting as well as regulation Impacts on contracting as well as regulation
Other limitationsOther limitations The City of Johannesburg (CoJ) was left with insufficient skills to The City of Johannesburg (CoJ) was left with insufficient skills to
carry out regulator functions as most skills were transferred to the carry out regulator functions as most skills were transferred to the UtilityUtility
Regulator functions carried out by 3 depts:Regulator functions carried out by 3 depts:– WSA managerWSA manager
– Shareholders unitShareholders unit
– Contract management unitContract management unit
Service Delivery Agreement (SDA) deliverables were not Service Delivery Agreement (SDA) deliverables were not sufficiently definedsufficiently defined
CoJ retained meter reading and billing of the majority of CoJ retained meter reading and billing of the majority of customerscustomers
The process was viewed as privatisationThe process was viewed as privatisation
Overcome the RisksOvercome the Risks
Continuous communicationContinuous communication
Have a political driver for the processHave a political driver for the process
Clear roles and responsibilitiesClear roles and responsibilities
Build capacity Build capacity
Labour SupportLabour Support
Good governanceGood governance
CommunicationCommunication Develop a participative relationship with stakeholders and Develop a participative relationship with stakeholders and
key role players to ensure that there is a full understanding key role players to ensure that there is a full understanding
Develop an understanding of perceptions and objectives of Develop an understanding of perceptions and objectives of key role playerskey role players
Participate pro-actively in the policy and decision making Participate pro-actively in the policy and decision making processprocess
Participate in community forums and projectsParticipate in community forums and projects
Develop effective awareness and educationDevelop effective awareness and education
Participate in campaigns on the service delivery agreement Participate in campaigns on the service delivery agreement issues to ensure complete stakeholders “buy in”issues to ensure complete stakeholders “buy in”
Identify a Key Political Driver/ Identify a Key Political Driver/ CustodianCustodian
Ensure custodian is aware of all relevant Ensure custodian is aware of all relevant issuesissues
Custodian to interact with stakeholders Custodian to interact with stakeholders to facilitate buy-into facilitate buy-in
Custodian ensures council supportCustodian ensures council support
Ring Fence Roles and Ring Fence Roles and ResponsibilitiesResponsibilities
Utilise performance management clauses Utilise performance management clauses and appropriate penalty mechanismsand appropriate penalty mechanisms
Implement an integrated contract Implement an integrated contract management systemmanagement system
Conduct regular stakeholder meetingsConduct regular stakeholder meetings
Build CapacityBuild Capacity Capacitate regulatorCapacitate regulator
Invest in management developmentInvest in management development
Invest in skills development and capacity buildingInvest in skills development and capacity building
Conduct skills audit and develop strategies to Conduct skills audit and develop strategies to overcome the gapsovercome the gaps
Implement individual performance management Implement individual performance management systemssystems
Invest in team building and strategy sessionsInvest in team building and strategy sessions
Implement and monitor succession planningImplement and monitor succession planning
Organised Labour SupportOrganised Labour Support
Unions were kept informed and had input at Unions were kept informed and had input at all stages of the processall stages of the process
Unions implemented a three year working Unions implemented a three year working contractcontract
Salary bands differed between the various Salary bands differed between the various municipalities and this was dealt with municipalities and this was dealt with successfullysuccessfully
Good GovernanceGood Governance Conduct good governance policies and Conduct good governance policies and
procedure compliance auditsprocedure compliance audits Conduct a critical review of business planning Conduct a critical review of business planning
and executionand execution Segregation of dutiesSegregation of duties Develop full control policies and proceduresDevelop full control policies and procedures Enhance Internal audit function and conduct Enhance Internal audit function and conduct
regular auditsregular audits Hold fraud awareness workshops for Hold fraud awareness workshops for
managementmanagement
Successful implementation Successful implementation supported bysupported by
Increase understanding by continuous Increase understanding by continuous communicationcommunication
Ensuring continuous capacity development Ensuring continuous capacity development (Regulator and operator)(Regulator and operator)
Securing stakeholder participation and Securing stakeholder participation and support support
Ensuring long term commitment Ensuring long term commitment
CommunicationCommunication
Develop a participative relationship with Develop a participative relationship with stakeholders and key role players to stakeholders and key role players to ensure that there is a full understandingensure that there is a full understanding
Understanding of the perceptionsUnderstanding of the perceptions
Participate in community forumsParticipate in community forums
Overall Awareness Overall Awareness
CapacitatingCapacitating
Invest in management developmentInvest in management development
Invest in skills development and capacity Invest in skills development and capacity building – WSA and WSPbuilding – WSA and WSP
Do not forget the capacity required to run Do not forget the capacity required to run the WSA functionthe WSA function
Capacitate regulator, if different from the Capacitate regulator, if different from the WSA WSA
Stakeholder supportStakeholder support
Obtain stakeholder support through Obtain stakeholder support through transparency and interactiontransparency and interaction
– Own CouncilOwn Council
– Organised labourOrganised labour
– National, Provincial and Local GovernmentNational, Provincial and Local Government
CommitmentCommitment
Clear commitment and responsibility Clear commitment and responsibility allocation (key drivers) allocation (key drivers)
– This ensured that all obstacles were bridgedThis ensured that all obstacles were bridged
Operational achievementsOperational achievements
Creation of a state of the art call centre: more than Creation of a state of the art call centre: more than 90% of calls answered in less than 30 seconds90% of calls answered in less than 30 seconds
Robust potable water quality monitoring (number of Robust potable water quality monitoring (number of samples multiplied by 3 and more than 99% samples multiplied by 3 and more than 99% compliance) compliance)
UFW decreased from 42 to 33% (problem of deemed UFW decreased from 42 to 33% (problem of deemed consumption areas)consumption areas)
Environmental compliance (final effluent) increased Environmental compliance (final effluent) increased from 85 to 98% from 85 to 98%
100% of sludge disposed according to national 100% of sludge disposed according to national guidelines (compared to 50%)guidelines (compared to 50%)
Number of annual spills at the WWTW’s has Number of annual spills at the WWTW’s has decreased from more than 700 to less than 150decreased from more than 700 to less than 150
Operational achievements - contOperational achievements - cont
Financial achievementsFinancial achievements Consecutive to crisis due to poor revenue data and poor Consecutive to crisis due to poor revenue data and poor
billing from the City of Johannesburg, financial turnaround billing from the City of Johannesburg, financial turnaround strategy agreed in March 2004strategy agreed in March 2004
Break even projected for 2007/8 but actual results far Break even projected for 2007/8 but actual results far ahead of projections:ahead of projections:
2002/3: (R429) mil2002/3: (R429) mil
2003/4: (R318) mil2003/4: (R318) mil
2004/5: (R77) mil2004/5: (R77) mil
Revenue: R3bil (compared to R1,8 bil in 2001/2)Revenue: R3bil (compared to R1,8 bil in 2001/2)
Revenue collection ratio higher than 100% on accounts Revenue collection ratio higher than 100% on accounts directly managed by JWdirectly managed by JW
Nelspruit ConcessionNelspruit Concession
Key driving challengesKey driving challenges
– Capex requirement (R 350 m)Capex requirement (R 350 m)
– Capacity requirementCapacity requirement
– Operational challenges that needed to be met Operational challenges that needed to be met
– UAW – 31%UAW – 31%
– Sustainability Sustainability
Nelspruit ConcessionNelspruit Concession
Reflecting on key success factorsReflecting on key success factors
– Total commitment towards process by CouncilsTotal commitment towards process by Councils
– Staff buy in due to securing jobsStaff buy in due to securing jobs
– Community involvement Community involvement
– Capacitation of stakeholders/ community Capacitation of stakeholders/ community through various programmesthrough various programmes
Nelspruit ConcessionNelspruit Concession Achievements Achievements
– UAW = 14% in urban and 25% in other areasUAW = 14% in urban and 25% in other areas– 25 to 80% increase in collections25 to 80% increase in collections– Extreme customer satisfactionExtreme customer satisfaction– Mammoth capital roll out Mammoth capital roll out – Improved maintenance & Renewal ProgrammeImproved maintenance & Renewal Programme– Efficient communicationEfficient communication– SustainabilitySustainability
Potential extension of ConcessionPotential extension of Concession
Nelspruit ConcessionNelspruit Concession ConclusionConclusion
– Concession was a bold step for MbombelaConcession was a bold step for Mbombela– Success is evident in almost all areas of the Success is evident in almost all areas of the
concession since concession started 5 years concession since concession started 5 years agoago
– Water and sanitation services have been Water and sanitation services have been extended to tens of thousands of previously extended to tens of thousands of previously disadvantaged communitiesdisadvantaged communities
– Operating costs per stand have halvedOperating costs per stand have halved– National Govt, Mbombela and investors happy National Govt, Mbombela and investors happy
with health of the Concessionwith health of the Concession
Category B MunicipalityCategory B Municipality Located within Sedibeng District Located within Sedibeng District MunicipalityMunicipality Fourth Biggest Municipality in GautengFourth Biggest Municipality in Gauteng Project Consolidate SubjectProject Consolidate Subject ± 1 Million Population± 1 Million Population Prominent Historical StatusProminent Historical Status
BACKGROUND TO EMFULENI BACKGROUND TO EMFULENI LOCAL MUNICIPALITYLOCAL MUNICIPALITY
Deterioration of Water Services DeliveryDeterioration of Water Services Delivery
Determination of Best Possible Service Determination of Best Possible Service Delivery MechanismDelivery Mechanism
Focus on Turnaround & Long-term Focus on Turnaround & Long-term SustainabilitySustainability
PURPOSE OF SECTION 78PURPOSE OF SECTION 78
INTERNAL ASSESSMENTINTERNAL ASSESSMENT Business UnitBusiness Unit Effect of lack of finances:Effect of lack of finances:
• Cannot operate at current service levelsCannot operate at current service levels• Cannot improve service provisionCannot improve service provision• Will have cash deficit for the next ten yearsWill have cash deficit for the next ten years• In the absence of financial resources, In the absence of financial resources,
MUST consider External mechanismMUST consider External mechanism
OUTCOMES OF SECTION 78 OUTCOMES OF SECTION 78 PROCESSPROCESS
EXTERNAL ASSESSMENTEXTERNAL ASSESSMENT In terms of the Municipal System ActIn terms of the Municipal System Act
• Explore external options after assessment of internal Explore external options after assessment of internal mechanismmechanism
• Notify the community and consult with labourNotify the community and consult with labour
Primary Issue: FINANCIAL CONSIDERATIONSPrimary Issue: FINANCIAL CONSIDERATIONS Functional AreasFunctional Areas
• Capacity of Service ProviderCapacity of Service Provider• Effective Service DeliveryEffective Service Delivery• Labour RelationsLabour Relations
OUTCOMES OF SECTION 78 OUTCOMES OF SECTION 78 PROCESS (cont.)PROCESS (cont.)
EXTERNAL ASSESSMENTEXTERNAL ASSESSMENT CONCLUSIONCONCLUSION
• Provision of Water Services through an Provision of Water Services through an external mechanism should be consideredexternal mechanism should be considered
• Appears to be the most effective service Appears to be the most effective service delivery mechanismdelivery mechanism
• Rand Water will participate through:Rand Water will participate through:• The provision of financesThe provision of finances• The provision of expertiseThe provision of expertise
OUTCOMES OF SECTION 78 OUTCOMES OF SECTION 78 PROCESS (cont.)PROCESS (cont.)
STRUCTURE OF ARRANGEMENTSTRUCTURE OF ARRANGEMENT
Co-ownership of a company by Co-ownership of a company by Sedibeng, Emfuleni and Rand WaterSedibeng, Emfuleni and Rand Water
Service Delivery Agreement between Service Delivery Agreement between the company and Emfulenithe company and Emfuleni
OUTCOMES OF SECTION 78 OUTCOMES OF SECTION 78 PROCESS (cont.)PROCESS (cont.)
Consultation and Buy-in of Consultation and Buy-in of WHOLEWHOLE Ruling Party Ruling Party
Consultation and Buy-in of Consultation and Buy-in of WHOLEWHOLE Council Council
Consultation and Buy-in of Executive StructuresConsultation and Buy-in of Executive Structures
Consultation of Labour Formations (MOU)Consultation of Labour Formations (MOU)
Consultation of Broad Community & Civil SocietyConsultation of Broad Community & Civil Society
Consultation of BusinessConsultation of Business
KEY PROCESS UNDERTAKENKEY PROCESS UNDERTAKEN
Credible Governance of ProcessCredible Governance of Process
Adequate Resources and AccountabilityAdequate Resources and Accountability
Continuous Communication and reporting to key Continuous Communication and reporting to key stakeholders stakeholders
Rigorous Business Analysis & Plans Rigorous Business Analysis & Plans (Assessment)(Assessment)
Leadership CommitmentLeadership Commitment
Support of DWAFSupport of DWAF
LabourLabour
KEY PROCESS DRIVERSKEY PROCESS DRIVERS
Non-alignment with Provincial DepartmentNon-alignment with Provincial Department
Non-alignment with National TreasuryNon-alignment with National Treasury
Non-alignment with DPLGNon-alignment with DPLG
Organised Labour Dynamics (Internal)Organised Labour Dynamics (Internal)
CHALLENGES TO PROCESSCHALLENGES TO PROCESS
Detailed & Diligent Assessment
Proper Governance of Process
Unconditional Involvement & Participation of Local Stakeholders
Credibility & Commitment of Sponsors and Champions (Political and Executive)
Alignment & Support of Provincial and National Departments
Support of Organised Labour
Adequate Resources and Accountability
Monitoring of Environmental Dynamics
LESSONS LEARNTLESSONS LEARNT
Overall lessons for successful Overall lessons for successful implementationimplementation
Securing stakeholder participation Securing stakeholder participation
Having key drivers of the processHaving key drivers of the process
Ensuring long term commitmentEnsuring long term commitment
Ensuring continuous capacity development Ensuring continuous capacity development (Regulator vs. operator)(Regulator vs. operator)
Ensuring transparencyEnsuring transparency
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