Input Paper from South Africa Poverty and Inequality Report Access to Urban Infrastructure by the Poor progress in public provision of infrastructural assets

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					REPORT ON POVERTY AND INEQUALITY Background report Access to Urban Infrastructure by the Poor: progress in the public provision of infrastructural assets Compiled by: Gemey Abrahams and Michael Goldblatt March 1997

1.

INTRODUCTION AND SCOPE OF THE REPORT

A central component of the background research for the Report on Poverty and Inequality is an assessment of the situation of the urban poor and of the government’s policies and programmes to address their needs. Although the functioning of the urban economy as a whole will determine the levels of urban poverty, and the speed of its reduction, effective delivery of urban services stands out as a particularly important tool that government can use to directly address the needs of the urban poor. These services include public health care, primary and secondary education, access to welfare services and other social services, as well as housing and other basic infrastructural services. It is these infrastructure services, which are delivered at the household level to improve basic health and quality of life needs, which are addressed in this report. The core services in this regard are potable water supplies, adequate sanitation, household electricity, all weather access roads and stormwater drainage, and solid waste management services. This report will assess the current levels of access to these services by urban residents, focusing on the poorest sections of the community. It will also address the financial and institutional resources committed through government programmes to addressing the backlogs and inequalities of provision, and provide an indication of the progress in this regard. An assessment of current policies and suggested indicators of continued progress will conclude the report. In the broadest terms the report will assess whether the current provision of urban infrastructure is ensuring, as the Urban Management Programme suggests, “that specific manifestations of poverty are being systematically reduced” resulting in an improvement in the short and long-term conditions of the poor (Vanderschueren, Wegelin, and Wekwete, 1996). Due to constraints of available data, partially relating to the methods of service delivery, the three services of water, sanitation and electricity will be focused on. These three services are the priority services for the promotion of health, convenience, and the quality of life. The other urban services will be addressed in a more general sense but without the equivalent level of quantitative detail. Although post and telecommunications are an important component of urban services allowing for economic development and quality of life improvement - these are not included here as they are being dealt with in a separate background document to the main Report on Poverty and Inequality.

1.1.

Definitions of urban infrastructure and levels of service

When discussing urban infrastructure the definition of “urban” needs to be clear, as does the definition of different levels of infrastructure services. Urban services can be supplied at a wide range of levels and with different sets of technologies, they can also be supplied in packages of different service level mixtures. The structure of the apartheid city, and attendant settlement responses by people outside of formal developments has meant that there is no simple or definitive description of an urban settlement. For municipal infrastructure planning purposes a broad typology of settlements has been adopted which considers urban areas in two categories. Definition of urban areas The categories of urban core and urban fringe are used by the Department of Constitutional Development (DCD) in their Municipal Infrastructure Investment Framework (MIIF) which is the primary outline of the government’s analysis of, and response to, the backlog in service provision, in both urban and rural areas. For this reason these categories will generally be used in this report (where other definitions are used they will be noted). In this typology urban core refers to the formal cities and towns (including the former white local authorities and the old black townships), while urban fringe refers to the “variety of circumstances which exist within the boundaries of Transitional Local Councils (TLCs)” (DCD, 1996, p.3). The urban fringe thus typically consists of low-income settlements which have low densities and large service backlogs (although some high income communities are found within the urban fringe). Most of these settlements are informal or squatter settlements. The main aspect of this definition is that the urban fringe is not defined functionally, in terms of livelihood relationships with the urban areas, but institutionally, in terms of the responsibility which the urban authorities have for service delivery in these areas.

The distribution of households in terms of this settlement typology is shown in Table 1. These figures are used primarily because they are the figures currently being used in national infrastructure planning (DCD, 1996) and will probably only be superseded by figures derived from the 1996 census (which are not yet available). Table 1. Current and projected urban household numbers and distribution Urban Core 1995 Households (million) 1995 Household Distribution (%) Household Growth Rate (%) 2005 Households (million) 2005 Household Distribution (%) Definition of service levels As in the case of settlement typology, the definitions in the MIIF will be used in describing service levels unless otherwise indicated. The MIIF divides service levels into packages of services at so-called basic, intermediate and full levels - it also indicates a level termed “the expected urban minimum”. This is a level of service that the MIIF regards as achievable with minimal additional financial input from poor communities and little local crosssubsidisation in addition to the basic national subsidies available. These definitions of levels of service (in terms of water and sanitation) are very similar to those of the Palmer Development Group (PDG, 1994a) who have analysed urban water supply and sanitation levels. The PDG also included a lower level termed minimal which would fall within the lower range of the MIIF’s basic level. The MIIF’s service levels are indicated in Table 2. below. Table 2. Definitions of urban service levels Definition Basic Service Package communal water, ventilated improved pit latrine (VIP) or equivalent, 5-8A electricity, graded roads graveled only where necessary, open stormwater channels lined only 4.32 49% 3.50% 6.10 55% Urban Fringe 0.80 9% 1.42% 0.92 8%

where necessary, communal refuse removal Expected Urban Minimum yard tap, VIP or equivalent, 20-30A electricity, graded roads graveled only where necessary, open stormwater channels lined only where necessary, kerbside refuse removal Intermediate yard tap, simple waterborne sanitation, 20-30A electricity, graveled roads, open stormwater channels fully lined, kerbside refuse removal Full in-house water, full waterborne sanitation, 60A electricity, paved roads with piped underground stormwater systems, kerbside refuse removal Alongside these service packages are the associated internal bulk and connector services. These link major external bulk services (such as water abstraction and purification plants and sewerage works) with internal services which fall within a particular township. The provision and financing of these services are obviously necessary for the functioning of internal urban infrastructure services and generally fall within the ambit of local authorities in terms of both provision and financing - they are also addressed within the MIIF and will be discussed in this document together with internal service delivery. The levels of these services are dependent upon, and conversely can be a constraint on, the levels of internal infrastructure. For example, waterborne sewerage requires internal bulk and connector sewers - without such internal bulk infrastructure the level of sanitation services is constrained to on-site systems. 1.2. Levels of service delivery

In many developing countries national rules and regulations often prescribe high social and physical infrastructure levels which cannot be implemented and enforced by urban governments because they are unaffordable to either the municipality or to the urban poor (Vanderschueren, Wegelin, and Wekwete, 1996). From an analysis of current infrastructure delivery programmes it appears as if there has been an avoidance of this tendency in South Africa. This has the advantage that capital and recurrent expenditure on services will probably not place an excessive burden on the national fiscus but it does mean that the poorest sections of the community will be supplied with a fairly low level of services initially.

For example the MIIF’s current basic service levels in the case of water and sanitation are based on the RDP’s objectives which aim to provide all households with a clean, safe water supply of 20-30 litres per capita per day within 200 meters in the short-term, as well as an adequate and safe sanitation facility per site (ANC, 1994). The MIIF (1996, p.16) notes that “if infrastructure is put in place which is too expensive to run, it places a permanent burden on the economy which dampens growth and can lead to disintegration of the infrastructure”. In the light of the ongoing debate over the appropriate and sustainable levels of services no rigid service levels have been prescribed or made statutory by national government. According to the MIIF it is likely that there are sufficient funds to supply all urban residents with a basic level of infrastructure, as opposed to a smaller number with a higher level of services. Service level improvements above this basic level will have to be financed through locally generated revenue - either in the form of increased user charges (which may preclude the poorest of the poor) or through local cross-subsidisation. The relative financial position of local authorities will therefore influence the probabilities of future upgrading from the basic level of services. The definition of an 'adequate' level of supply is however not a simple or uncontroversial issue. For example in the PDG’s urban water supply survey (PDG, 1994c) the three criteria of a reasonable access to a water source, the availability of a sufficient quantity of water, and an acceptable quality of water were used. This was translated into a physical delivery infrastructure within urban areas of at least one water point (standpipe) per 25 households, or within 50m of each household, with provision for at least 30 litres of water per capita per day. Indications are that amounts of water used in informal settlements with this ostensibly adequate physical infrastructure level can fall below the 30 litres per capita per day level (Goldblatt, 1997). Thus when examining access to infrastructure simple universal technical standards should not be considered to be necessarily “adequate” for the health and quality of life benefits aimed for. The housing subsidy programme also influences service levels. In many instances, the projects approved under the subsidy scheme have full service levels for internal services rather than basic levels. Although this delivers high levels of service to the poor, it raises issues of long term sustainability for both the individual families concerned and the local authority’s ability to maintain these services. The appropriate service level aimed at is a hotly debated issue and one which has important consequences for the role of urban infrastructure in wealth redistribution and poverty

reduction. It will be returned to in section 7 which looks at possible critiques of current infrastructure policy.

2.

URBAN INFRASTRUCTURE AS AN ASSET OF THE POOR

As appreciated within the study broadly, poverty is not simply about income and cannot be measured in relation to income or expenditure alone. Poverty is composed of a range of factors, many of which can be related to the concept of vulnerability. Access to a variety of assets, such as social capital and labour (and by implication health), and productive assets such as housing and equipment, will determine vulnerability and insecurity - as well as the potential for a reduction in vulnerability. In this light, urban infrastructure can be seen to be one of the more important amongst a broad set of assets influencing the status of the poor (Wratten, 1995). As Moser indicates infrastructure should be viewed as assets of the poor that allow them more than just immediate improvements in quality of life but also improve their possibilities of economic productivity and protect them against misfortune, both economic and health related. She says that “at the community level, lack of access to sanitation and a reliable, safe water supply has important consequences for individual health indicators. Equally important to per capita income is the lack of reliable electricity supplies in households with informal sector enterprises. Lack of safe transport in some contexts affects a teenage girl’s access to educational facilities, and consequently drop-out indicators.” (Moser, 1995, p.168). This view of the extended value of urban infrastructure services is empirically supported by many studies. For example, an analysis of water supply in Haiti indicates that its value extends even beyond direct health and time-savings into indirect benefits of improved nutrition, housing construction opportunities and labour productivity (Fass, 1993). Apart from the actual benefits to the poor the political importance of a visible infrastructure programme can also not be overlooked. Aside from the direct benefits to be gained by providing ready access to urban services, the provision of these services serves as a clear and immediate signal that the government’s reconstruction and development commitments are being met in the interests of historically underserved groupings. At the same time it is accepted that the provision of basic infrastructure services is only a partial solution to poverty. As Moser points out “watering and housing” the poor does not solve the problem of urban poverty, which must be addressed via a range of approaches which include improved economic productivity, more stable social systems, and better education and family planning services, amongst others (Moser, 1995).

3.

CURRENT LEVELS OF SERVICE AND ACCESS: THE DEMAND FOR SERVICES

The starting point for assessing the access of the urban poor to infrastructure is a consideration of the current levels of coverage. This basic data will provide the picture of the current needs and demands for services which will form the backdrop for an assessment of current policies and programmes to address these needs. As discussed later, an immediate issue to confront is the availability of data and its reliability. There is no comprehensive and integrated dataset on urban infrastructure, with information primarily being collected by delivery sector (eg. water or electricity). A major study on the demand for water and sanitation conducted by the Palmer Development Group (PDG) and commissioned by the Water Research Commission (PDG, 1994a) in 1994 generally informs national planning for this sector, while the information collated by the National Electricity Regulator (NER) forms the basis for electrification planning. These datasets, and other information gleaned from the World Bank’s metropolitan study and Twenty Towns Project and from the Central Statistical Services (CSS) 1994 October Household Survey, have been collated into an overall assessment of urban infrastructure coverage and demand by the DCD under the MIIF. Although there may be shortcomings in this information it is used here as the basis for an assessment of access of the poor to services because there is no better dataset at present (pending the results of the 1996 census) and crucially because it forms the basis for national infrastructure planning. The MIIF figures have been augmented by data taken directly from the PDG and the NER datasets, and from the 1995 October Household Survey (CSS, 1996) which is not as yet incorporated into the MIIF.

The most important figures from the MIIF have been extracted and are shown in Table 3. From this it can be seen that there is a significant difference in access by those urban residents who live within the core and the fringes of the cities and towns of South Africa. Those in greatest need are those geographically peripheral to the core urban areas - which reflects their economically peripheral status. Much of the urban fringe is made up of informal settlements and site-and-service schemes with low levels of infrastructure. Table 3. Percentage of urban residents with inadequate access (basic level or below) to infrastructure (MIIF, 1996) Services Water Sanitation Electricity Waste Removal Roads and Stormwater Urban Core 17% 5% 14% 26% 32% Urban Fringe 80% 56% 80% 91% 81%

Of the most crucial services of water, sanitation and electricity about 17% of urban core residents have inadequate access to one or more of these services, while about 80% of people in the urban peripheries lack sufficient access to the same facilities. The CSS’s data is collected in terms of racial groupings and shows that most of those lacking urban services are in black communities. In certain areas however (such as in the Northern Cape) the most deprived communities are coloured communities. This is simply reflective of the fact that the poorest urban residents are those with the lowest access to urban services. The racial composition of the poor is itself a reflection of demographics and the particular geography of settlement which developed under apartheid. The Central Statistical Service’s 1995 October Household Survey (OHS), (CSS, 1996, and CSS, 1997) data has been used to provide a greater level of detail than MIIF figures, as well as showing a disaggregation according to province and racial group. The first comprehensive CSS OHS was conducted in 1993, excluding the former TBVC “states”, and was repeated in 1994 and 1995 with modifications and extension to the whole of South Africa. The data therefore has certain limitations. Firstly it is not very recent data, and secondly, since different methodologies were used, the datasets are not directly comparable. They are primarily “snapshots” which cannot be used to indicate progress in access to services. The data is used below in the specific sections on water, sanitation,

refuse removal and electrification to show racial and geographical inequalities in access to urban services. 3.1. Access to Water and Sanitation

Of the full set of urban services, surveys in South African informal settlements indicate that water and sanitation supply is seen as a priority by residents above other services such as electricity, refuse collection and clinics (Crankshaw and White, 1991). They are also key services in the protection of public health. As the World Health Organisation (WHO, 1996) points out, unsafe water supplies and the absence of appropriate means of handling and disposal of human excreta are “two of the major causes of mortality and morbidity in developing countries”. Furthermore, “the poor - especially infants and young children - in rural and urban slums suffer most from these inadequate services and from the misery and death resulting from diarrhoeal disease” (WHO, 1996, p. 5). The provision of these services provides a stark example of the inequalities in service provision developed under apartheid. This is demonstrated in Tables 4. (water supply) and 5. (sanitation) where differential access, at the broadest level of aggregation, to these services are shown. Table 4. 1995 October Household Survey data on access to levels of water supply, in percentages, in urban areas (CSS, 1996) Service Level House connection Site connection Public tap Water vending/tanker Other Total 74.1 19.8 4.0 0.5 1.6 Blacks 56.1 33.9 7.1 0.8 2.1 Coloureds 79.7 16.7 2.8 0.3 0.5 Indians 97.5 1.0 0.1 1.4 Whites 98.8 0.2 1.0

Similar inequalities pertain with respect to sanitation in urban areas, where only 42% of blacks have access to in-house waterborne sanitation as opposed to 98% of whites. The CSS survey also indicates that the notorious “bucket-system” of sanitation is an existing relic of apartheid. Fully 10% of blacks and coloureds still have this system as their means of access to sanitation services. Table 5. 1995 October Household Survey data on access to sanitation in urban areas showing racial inequalities (CSS, 1996) Service Level In-house flush toilet On-site (VIP or above) On-site (below VIP) Off-site None Total 65.5 21.8 9.5 2.6 0.6 Blacks 42.1 36.7 15.7 4.4 1.0 Coloureds 70.2 17.1 11.2 1.2 0.4 Indians 96.6 2.9 0 0.4 0 Whites 98.5 1.4 0.1 -

To provide greater insight into the distribution of services the PDG information has been used to give a more detailed breakdown of access to water and sanitation (bearing in mind that it is not strictly comparable to the MIIF data in terms of settlement typology). In particular the PDG data provides an indication of comparative levels of access in smaller towns and metropolitan areas. These distinctions cut across the MIIF’s urban core and fringe distinctions. The metropolitan areas show levels of inadequate access to water (i.e. at or below a basic level) of 31% while the comparative figure in towns is 19%. Similarly for sanitation 30% of people in the metropolitan areas do not have adequate sanitation services while 28% in towns lack the same service. Populations in smaller towns thus appear to be slightly better served with urban infrastructure, particularly water supplies. The vast majority of South Africa’s urban population (about 70%) are however living in the metropolitan centres so the absolute numbers of people with inadequate services will be largely determined by what happens in these areas. In absolute terms 6 million people in metropolitan areas lack adequate water while 5.7 million lack adequate sanitation. While in towns the comparative figures are far less at 1 million and 1.5 million people respectively (PDGc, 1994).

To meet this backlog the PDG has estimated that the water supply for approximately 892 000 existing urban households needs to be upgraded nationally. In addition, it is estimated that about 164 000 new households per annum are being established in urban areas in South Africa - each requiring a water supply. The majority of these new households, about 122 000 low-income families, are being created in metropolitan areas which already have the largest absolute service backlogs (PDGc, 1994). These backlogs are not evenly spread across the country, with certain provinces lagging behind in service provision. The provincial differences in levels of water and sanitation supply are shown below in Tables 6. and 7. Table 6. Percentage of urban households with access to water at or below the basic level by province and racial group from 1995 OHS (CSS, 1997) Province Western Cape Eastern Cape Free State North West Northern Cape Northern Province Gauteng KwaZulu/Natal Mpumalanga Blacks 22.5 23.9 7.2 11.2 1.3 5.5 3.0 15.3 12.8 Coloureds 1.2 13.5 1.0 0.9 12.6 0 0.5 0.9 0.5 Indians 0 0 0 12.3 0 0 2.0 0 Whites 0.5 3.0 0.5 0.3 0.6 0.9 0 1.0 0.3

Table 6. shows that the Western Cape, Eastern Cape and KwaZulu/Natal are lagging behind in water provision, with Mpumalanga and North West province the next two worst performers. With respect to sanitation again the Eastern Cape has the worst situation, joined at the bottom by Free State, and Northern Cape. Western Cape and Mpumalanga are the next two worst performers (see Table 7.).

Table 7. Percentage of urban households with access to sanitation at or below the basic level by province and racial group from 1995 OHS (CSS, 1997) Province Western Cape Eastern Cape Free State North West Northern Cape Northern Province Gauteng KwaZulu/Natal Mpumalanga Blacks 34.8 49.1 47.5 29.3 48.3 14.9 7.3 21.5 39.2 Coloureds 10.6 28.5 8.4 3.2 34.6 3.8 6.8 Indians 12.3 2.7 Whites 0.3 0.2 0.2 0.3 0.2 -

Box 1. Water supply: paying a premium for being poor Access to water is determined not only by access to infrastructure but also by the price paid for it by the poor. In the absence of a public supply there is, nevertheless, always some system established for the supply of water. This tends to rely on informal access arrangements for water, either from neighbours, from nearby commercial areas, or from natural water sources. There are also some areas where informal sector supply networks in the form of water vending have also developed. Though indications are that water vending is not at as important in South Africa as in other developing countries, where it does exist it demonstrates that the poor have tended to pay substantially more for water than the prevailing price in wealthier areas. For example, in the informal settlement of Phola Park in Gauteng people were paying vendors R1.00 for the delivery of 20-25 litres of water in 1991. The same amount could purchase about 600 litres of water in an area with a reticulated water supply (Coetzee, 1991). Research by Hill (1991) showed that prices of over R1.00 for 25 litres were being charged to residents in Madumbe in Kwazulu/Natal.

A recent case-study researched by Kakebeeke and van Wijk (1996) of two low-income peri-urban townships outside Cape Town shows similar results. In these areas water is supplied by a community-run kiosk system to residents at a price three times that of water supplied to people with a private connection and private water vendors in the area charge three to seven times more than the kiosks (i.e. up to 20 times the price a person with a private connection will pay). There is also the potential for the super-exploitation of the poor’s vulnerable position. In the past this has resulted in water sales at exorbitant prices by residents with access to water to those with no other means of water supply. Prices ranging from R1.00 for 5 litres to R0.50 for 2 litres (Hill, 1991) have been charged.

3.2.

Access to electricity

The delivery structure of electricity makes it easier to assess detailed figures of numbers of connections (and, based on demographic assumptions, the percentage of households and population served). The National Electricity Regulator data shows that by the beginning of 1996 a total of 79.4% of urban households had access to electricity (probably at a variety of levels). This was calculated from a total number of 3 672 240 households that had an electricity connection (NER, 1997). This can be further broken down by province as shown in Table 8. below. This data is unfortunately not divided between metropolitan areas and towns. Table 8. Households without access to electricity divided by province (in order of greatest need) from NER (1997) Province Urban Houses Without Electricity Mpumalanga Eastern Cape Free State North West Northern Province Northern Cape 79 384 162 262 115 734 69 067 34 203 28 461 % of Urban Houses Without Electricity 40.6 32.8 32.4 30.1 28.8 23.9

Gauteng KwaZulu/Natal Western Cape

374 953 172 001 94 876

22.3 21.3 11.9

A large difference between provinces can be seen. At the extremes a resident of the Western Cape is about four times more likely to have an electricity connection than one in Mpumalanga, although for the most part there is at present a 20-30% coverage. These figures ignore the urban core and fringe split of the MIIF. When considered in these terms it can be seen that, as with other services the urban core is much better served at about 86% overall, while the urban fringe has only about 20% coverage at present. 3.3. Access to solid waste removal

The OHS (CSS, 1997) indicates that municipal refuse removal is similarly inequitably distributed and inadequately provided. Of urban black households about 85% have refuse removed by the local authority, while the comparative figure for other population groups are about 97%. Furthermore refuse removal in about 9% of cases in black areas is carried out at fortnightly or greater intervals, as compared to about weekly removals for 98% of the rest of the population. Table 9. Percentage of urban households with no local authority refuse removal divided by province and racial group from 1995 OHS (CSS, 1997) Province Western Cape Eastern Cape Free State North West Northern Cape Northern Province Gauteng KwaZulu/Natal Blacks 3.8 16.0 6.1 22.7 7.1 19.1 14.1 19.3 Coloureds 2.1 5.3 3.9 1.8 8.2 0 0.5 0 Indians 3.3 0 0 0 0 0 4.2 Whites 1.2 0.8 3.2 1.8 2 4.4 2.9 3.2

Mpumalanga

28.2

6.8

0

1.4

4.

POLICY AND PROGRAMMES FOR DELIVERY (SUPPLY OF SERVICES)

4.1.

Policy Approaches

As infrastructure is provided through many different government departments, it is to be expected that the policies affecting and determining provision, are to be found in a number of government White and Green Papers, Cabinet Memoranda and new legislation. Because of this, and because funding is sourced from many different government departments, government commissioned the preparation of the Municipal Infrastructure Investment Framework (MIIF). The MIIF provides a national policy framework for investment in infrastructure. It looks at service backlogs, predominantly in water, sanitation, roads and stormwater, energy and solid waste, and estimates the investment required to provide all with at least a basic level of service. Details of this programme are discussed below. Electricity is somewhat of a special case within the MIIF, as the electricity sector - largely driven by ESKOM, operates as a fairly distinct sector in terms of delivery and financing methods. The MIIF brings together the various programmes and financing approaches of government aimed at addressing infrastructure backlogs. The underlying policy relating to infrastructure delivery is a composite of policy found in the following White Papers: 4.1.1. Housing White Paper This was one of the first White Papers produced by government and contained a section on infrastructure and service standards and tariffs, in the absence of these being addressed anywhere else at the time. Three important principles relating to municipal services were established and seem to have been largely carried through to later policy approaches : ° services should be provided and operated on a sustainable basis with regard to both fixed investment, operation and maintenance and the natural environment. The general consumer must be responsible for paying for the service; ° ° institutions should be accountable to the communities they serve; the responsibility for the provision of water and sanitation services must be devolved to

the lowest institutional level where adequate competence and capacity exists.

The White Paper suggested that Provincial governments determine service standards and that they should define a service level matrix to guide local authorities because service levels are influenced by many factors. Regarding the poor in particular, the White Paper indicated that “the poor” be identified as a target group (as distinct from the destitute who should be catered for through the Welfare Department) for whom policy regarding cost recovery and tariffs needs to be creatively applied. Regarding water and sanitation, a lifeline tariff was proposed which would be cross-subsidized whereas a monthly service charge per household for solid waste, roads and stormwater was proposed for the poor. 4.1.2. RDP White Paper Although this paper does not have a section dedicated to infrastructure, it allocated substantial funds to so-called Lead Projects that would ultimately deliver infrastructure to the poor. The RDP saw infrastructure development as part of nation-building, especially if it was to meet basic needs and “open up” economic and human potential. The key to meeting basic needs was to have a people-driven process where people would be part of the decision-making process, have a say in the location of infrastructure and be employed in its construction. The following lead projects were originally established and funded by the RDP Ministry (the amounts allocated to them are indicated in brackets: ° the Urban Infrastructure Investment Planning Team - which prepared the initial MIIF and Local Authority Infrastructure Investment Plans (R2,9m in 1994-96). ° Extension of Municipal Services - to improve and upgrade services in local government areas (R850m in 1994-96) ° Urban Renewal Projects (also called Special Integrated Presidential Projects or SIPPs) to kick-start development in major urban areas, especially violence-torn communities such as Katlehong and Thokoza on the East Rand in Gauteng. (R800m in 1994-96). In addition funding went to Public Works Programmes (R250m) to assist with capacity building on infrastructure projects, Provincial Project Preparation Facilities (R28,3m) and Provincial Projects (R100m). Since the closure of the RDP office, most of these RDP projects have been “recast” into different programmes with different delivery methods and will be dealt with below in their

new guises. The important point to note is that these programmes of the RDP were explicitly intended to target the poor and create a realignment of government budgets at all tiers towards greater equity. 4.1.3. Water and Sanitation White Papers The Water Supply and Sanitation Policy White Paper of 1994 was followed up in mid1996 with a more detailed National Sanitation Policy White Paper. The policy approach in both papers is underpinned by principles such as demand driven and community-based provision, provision of basic services as a human right, prioritising those who are inadequately served, the user pays, an acknowledgment of the economic value of water, and integrated development. With respect to the financing of these services, the basic policy is that services should be self-financing at local and regional level. The White Paper on Water Supply and Sanitation Policy notes that “the only exception to this is that, where poor communities are not able to afford basic services, government may subsidise the cost of construction of basic minimum services but not the operating and maintenance or replacement costs” (DWAF, 1994, p. 19). This explicit exclusion of operating and maintenance costs seems to have been changed in the White Paper on National Water Policy for South Africa (1997) to a different approach. This recent White Paper states that there will be an exception to water charges in respect of the amounts seen as necessary to meet basic human needs (pegged at a minimum of 25 litres per person per day). The White Paper states that “these will be provided free of charge in support of the current policy of Government which is to encourage the adoption of lifeline tariffs for water services to ensure that all South Africans can achieve access to basic services” (DWAF, 1997, p.23). The MIIF has also indicated that government is prepared to take a different stance from that stated in the Water Supply and Sanitation Policy White Paper of 1994, by subsidising most of the recurrent costs of services. These possible differences in approach will be discussed later. With respect to sanitation, the White Paper acknowledges that government cannot afford waterborne sewerage systems for all, even within a subsidy system. A basic level of service is proposed, aimed at a level which will at least protect health - this is regarded as a ventilated improved pit latrine (a so-called VIP). The White Paper also sets out the policy approach to financing sanitation. This essentially states that some grant finance is available for capital works but that operating costs must be met by consumer charges, although in some instances inter-governmental grants will be made available. Sanitation services are seen as the responsibility of local government.

4.1.4. The Urban Development Framework The draft Urban Development Framework (UDF) provides an insight into government’s vision for urban settlements. The UDF (DoH, 1997) points out that municipalities are tackling the financing of services backlogs in three main ways: ° the re-prioritisation of budgets towards infrastructure investment in poorly serviced areas; ° ° increased property taxes to provide additional funds for infrastructure investment, and ; national government transfers.

In addition capital costs will be financed by borrowing; by equity from private sector investments in service delivery companies; and by cross-subsidisation through services fees from high to low income households. The MIIF is endorsed as the national policy framework for removing service backlogs and promoting economic development in this sector. The Framework emphasises that “fundamental to the approach adopted is that recurrent costs of any services provided should be affordable” (DoH, 1997, p.20). It thus indicates that although all South Africans should have access to a basic level of services outside of this municipalities are free to determine “what level of service they want to provide”. The UDF indicates that this choice of local authorities must be based on the needs in their communities and the ability to pay for them out of their own local revenue sources (in addition to central government grants). The UDF stresses this latter concern with financial sustainability - saying that any major infrastructure expansion must not compromise the long term financial viability of municipalities. The focus on affordability of infrastructure in the Framework does not preclude the raising of capital through municipal borrowing. In fact, the Framework strongly endorses the financing of capital projects through debt finance. This is premised on a the establishment of a clear regulatory framework for municipal borrowing, which is currently being devised by the DoF. A range of ideas are suggested to ensure that small municipalities, and financially weak ones, have access to capital markets. The UDF also states that municipalities must levy charges to cover recurrent costs. In line with this it suggests that a strategy is adopted to re-establish the payment of service

charges. This strategy should be based on the restoral or upgrading of inadequately services areas; the establishment of tariff and service standards which reflect people’s ability to pay for services; and an improved metering, billing and enforcement system. 4.1.5 Overall infrastructure policy approach

From the above, it is clear that infrastructure policy was initially determined by many different government departments leading to the need for a national policy approach. This led to the preparation of the MIIF, now under the auspices of the DCD. This department is now responsible for co-ordinating service delivery and financing through the MIIF. The MIIF itself, and other service provision policies of the government, falls within a broader policy approach made up of a set of fairly (though not totally) consistent policy principles. This policy approach reflects the government’s commitment to ensuring the supply of an adequate, albeit basic, level of services to all citizens within the medium-term. In line with this, the government’s Growth, Employment and Redistribution (GER) macroeconomic strategy (Department of Finance, 1996, p.15) states that “the provision of basic household infrastructure, in particular, is a relatively low cost and effective form of public intervention in favour of the inequalities.” At the same time such infrastructure investment is to be based on cost recovery pricing principles where this “can practically and fairly be effected” (DoF, 1996, MIIF, 1996), which fits in with the tight fiscal stance of the GER. The principle that services should be paid for by consumers is included in the MIIF and is accepted by other government departments (eg. DWAF, 1994) but is strongly mediated by the MIIF’s financial provisions which suggest that a set of national subsidies will be available (largely through the re-directing of current intergovernmental monetary flows) which will ensure that the typical household bills will be affordable to even the poorest households. The policy approach thus rests on: ° ° ° a commitment to a basic minimum level of services for all in the medium term; the principle that consumers should pay for services; and a welfare role for national government to support those consumers who cannot afford the basic level of services. poor and consistent with the reduction of income

A contradiction is inherent in these principles which are based on both cost-recovery and a commitment to a universal access to services and government support for the indigent. One of the MIIF’s responses to this contradiction is that a minimum level of services will be provided to all but that levels of delivery higher than the national minimum will be demand led, i.e. upgrading will be predicated upon the ability of the consumers to pay for the increased costs. This however, does not entirely remove the contradictory thrusts in government infrastructure policy which means that financial and service arrangements and the balance between subsidies and cost recovery will continue to be determined largely on a case-by-case basis, determined largely by local conditions. The handling of the tension between cost-recovery and subsidies will strongly influence the economic and social sustainability of the government’s urban infrastructure programme.

4.2

Infrastructure Programmes

The government’s commitment to infrastructure provision is illustrated in number of programmes that are currently funded by the government. Some provide infrastructure directly by offering grants, others, like the housing subsidy, result in infrastructure being provided as part of the product. These programmes are summarised below. 4.2.1 Municipal Infrastructure Investment Framework (MIIF) The MIIF is a national policy framework for removing services backlogs and promoting economic development through infrastructure investment. It brings together within its analysis those sources of finance that are available from national government to assist in the delivery of both urban and rural infrastructure (excluding major, external bulk infrastructure), and to assist in the meeting of the recurrent costs of these services. The MIFF is not a delivery programme - but is rather an outline of how infrastructure delivery should occur and proposals as to how it should be financed - primarily focusing on the role of national government in supporting service delivery at a local level. Funding for infrastructure projects in terms of the MIIF will be therefore be through other delivery programmes of national or provincial government, or through direct disbursements to local government. The functioning of these delivery programmes of government will thus ultimately determine the success of infrastructure delivery. The MIIF’s role is to ensure that sufficient national funds are available to meet the needs of the diverse range of projects that are being managed by different departments and tiers of government.

An example of the MIFF’s relationship to other programmes in the urban setting is the close connection of internal, and internal bulk, infrastructure provision with housing provision - both in terms of delivery and financing. In terms of MIIF planning all internal services in housing projects are expected to be funded out of the R15 000 housing subsidy which has been made available to all households earning below a certain income level. This housing subsidy programme is being managed by the Department of Housing (DoH). Where there is the need for rehabilitation of existing infrastructure the Municipal Infrastructure Programme (MIP) which is managed by the DCD will be available for up to R3 000 per household (this is discussed in more detail below). And where bulk and connector infrastructure is needed, funds from the extended MIP (EMIP) and the Bulk and Connector Infrastructure Grants programme (BCIG) can be accessed The MIIF estimates that a ten year period is a realistic time-frame to address the backlogs in services, based on an assumed average growth rate of 3% per annum. This assumes that each urban household will have access to at least the basic level of service outlined above in Table 2. The framework estimates that 20% of urban households will have this level of service in the medium term, with 25% having a higher intermediate level, and 55% a full level of services. Capital financing for these services will primarily come from a portion (about R10 000) of the R15 000 housing subsidy, with local government making up any shortfalls through borrowing. The MIIF suggests that this subsidy mechanism will be adequate to cover capital costs of the basic package of urban services. Funding Recurrent Costs The above-mentioned sources of funding for infrastructure are all aimed at providing capital resources for infrastructure. However the poor and indigent at the household level, and hence many local authorities at the municipal level, do not have the resources to fund the ongoing costs of urban services, making the installation of services unsustainable over time. This is of great concern to local, provincial and national government and something that has been addressed in recent drafts of the MIIF.

The MIIF indicates that a range of inter-governmental grants, totaling about R800m per year, are already being paid to urban local authorities to “compensate for the provision of services to communities who are too poor to cover the costs of these services themselves” (DCD, 1996, p.19). Furthermore provincial and national government spend about R2 billion each year on providing local government services directly where local authorities do not exist or do not have sufficient capacity. The MIIF proposes that this R2.8 billion be targeted at poor households to subsidise recurrent costs of providing basic services. The DCD’s financial estimates indicate that this “would permit the equivalent of R50 per household per month to be provided in respect of the poorest 40%” of urban households (DCD, 1996, p.19). The DCD estimates that this would be sufficient to cover the full recurrent costs of these households. Although this represents potentially substantial reserves to subsidise the poor, the finances will require redeployment if they are to be efficiently targeted at subsidising services. It has been accepted in principle by Cabinet that this funding be targeted to the poor, but the redeployment is a complex matter which will take some years to implement. The recurrent costs estimates of the MIIF for a basic and expected minimum level of services are indicated in Table 10. which shows how recurrent costs can be fully financed through a R50 per month national subsidy scheme. Table 10. Expected recurrent costs for basic urban infrastructure (excluding electricity) from the MIIF (DCD, 1996) Total recurrent costs Water Sanitation Roads/stormw. Refuse Bulk refuse TOTAL Subsidy (R/House/month) Payments Basic (Rands) 10.50 4.00 12.48 5.80 0.17 32.95 50.00 0.00 Expected Minimum (Rands) 23.65 4.00 12.48 10.17 0.17 50.47 50.00 12.00 11.53

Subsidy available for other 17.05 services

4.2.2. Municipal Infrastructure Programmes The Municipal Infrastructure Programme (MIP) and its associated programmes provide the primary vehicle for the disbursement of funds from a national level for the construction of municipal infrastructure. These programmes are seen as targeted poverty alleviation programmes aimed at the poorest and least well served communities in South Africa. The MIP originated as one of the Presidential Lead Projects announced by the State President on 18 August 1994 and was referred to as the Rehabilitation and Extension of Municipal Infrastructure programme, subsequently being renamed as the MIP. The project was initially conceived of as ensuring rapid and visible improvement in the provision of municipal services which would lay the basis for sustained payment of rent and services and hence facilitate the democratisation of local government. The MIP is a once-off grant funding programme which received R751 million in the 1994/5 financial year - the bulk of which has been carried through into the 1997/1998 financial year (DCD, 1997). The grant was divided between the provinces on the basis of population, poverty index, surface area and skills need in the provinces. Local authorities make application to provinces for access to this national funding As requests far exceeded funds available in the programme, and because of the need to provide bulk and connector infrastructure in support of housing projects, it was extended by the so-called Extension of the Municipal Infrastructure Programme (EMIP). The EMIP was essentially the same type of capital grant support but differed in emphasis - being directed more towards internal bulk and connector infrastructure. Together the MIP and EMIP funded projects cover most basic urban infrastructure and services including water, sanitation, roads, stormwater drainage, electricity, and refuse removal, as well as some community facilities such as halls and clinics. To ensure continued infrastructure provision, and to ensure that housing development is supported in terms of backward linkages into external bulk and connector infrastructure, a further amount of R500 million in 1997/98 has been made available for the implementation of the so-called Consolidated Municipal Infrastructure Programme (CMIP). The CMIP is aimed at being a single funding process that integrates all existing grant funding programmes for infrastructure (DCD, 1997). CMIP will be launched on 9 June 1997 and no allocations have been made yet. It will bring MIP, EMIP and BCIG under one department and will eventually include the Community Water Supply and Sanitation programme of the DWAF, which will be phased out over the next 5 years.

No further allocations will be made to MIP, EMIP and BCIG but their existing funding will continue to roll-over until all approved projects have been implemented. It has similarly been allocated to the provinces based on population and poverty indicators, subject to review at the end of 1997. It is estimated that R1.2 billion will be needed to be spent in the next two years under the direction of the DCD to meet the required delivery targets. Of the R700m already spent by these programmes, counter-funding of between R300m-R400m has been released by local governments, the Development Bank of Southern Africa, and other financial institutions - illustrating the value of government grants in leveraging funds for investment in infrastructure. All projects approved in terms of these programmes need to comply with certain criteria such as leveraging their own funding sources, addressing unemployment, ability to finance, skills enhancement and labour-based construction. It is the latter which is seen by the DCD as important in contributing towards improving conditions for the poor. Through this approach, unemployed people in poor communities where projects are being implemented, will have to opportunity to earn some income and obtain skills training in addition to being recipients of the infrastructure. 4.2.3. Special Integrated Presidential Projects (SIPPS) The SIPP programme is administered through the DoH and has allocated R2034 million to local governments to fund infrastructure development. These funds have been allocated on a one-for-one basis with local governments having to match the grants to receive funding. The programme was initiated as a Presidential Lead Project in the very early days of the government of national unity and identified seven projects to receive funding for integrated upgrading, which was not limited to basic infrastructure and included services such as sports fields. The criteria for selection of the projects is not very clear but most projects appear to be located in areas prominent for severe political disruption or violence in the past. Thus such areas as the KATORUS complex on the East Rand, and Cato Manor in Durban, received a large, rapid influx of funds for upgrading. Provinces without SIPPS complained of unfair treatment and the programme was extended so that now there is at least one SIPP funded project in each province. The emphasis of the projects is integrated development which translates largely into municipal infrastructure in its broadest sense. Thus community halls and sports grounds, internal services and internal bulk infrastructure are all included in varying mixes in the SIPPs.

SIPP grants are a one-off payment and it is very unlikely that the programme will be

continued in its present form. The main criticism of the SIPPs programme is that it was almost entirely supply driven with the RDP office essentially indicating that an defined amount of money was available for “an integrated project” in a particular area, based on political decisions, rather than on a national approach to municipal infrastructure planning. Nevertheless significant expenditure and infrastructure delivery has occurred through many of the SIPPS, such as KATORUS. However, projects receiving SIPPs funding are not allowed to receive MIP funding, thus the SIPPS programme ultimately does not significantly increase the total national funding of urban reconstruction, but rather fragments it. Lessons have been learnt from the SIPPS and these are being incorporated into new policy thinking. Ideas such as an urban renewal fund are being considered, and a programme promoting integrated development may follow, but the details of this are as yet unclear. The limitations of once-off politically motivated funding of infrastructure have been realised and it is likely that any new programmes will be more tightly linked to national municipal infrastructure planning. 4.2.4. Bulk and Connector Infrastructure Grants (BCIG) This is a subsidy programme administered by the DoH to enhance the delivery of housing through the removal of bulk and connector infrastructure backlogs. It is an interim programme and will become integrated into the CMIP when it is launched in June 1997. The BCIG is used to fund bulk and connector infrastructure in respect of water supply, sanitation, roads and stormwater drainage (e.g. water towers, reservoirs, major access roads), where approved Provincial Housing Board (PHB) housing projects are being delayed due to lack of such infrastructure. The grant is limited to that portion of the infrastructure investment that will support a basic level of services and the principle of leveraging other funds is applied. Grant funding is also available to assist service providers (generally the local authority) with project preparation where capacity is a constraint. The RDP Ministry allocated R700m to the Department of Housing in the 1995/96 fiscal year for this programme.

4.2.5

National Housing Subsidy

This subsidy scheme is administered through the PHBs and provides a once-off, capital subsidy for land, housing and infrastructure to beneficiaries earning less than R3 500 per month. The purpose is to provide basic shelter and services to the poor and to mobilise a range of private sector actors into the housing market. Over time, the types of housing subsidies have increased from only project-linked subsidies to include individual, institutional and top-up subsidies. In addition, there are also funds available in terms of the Discount Benefit Scheme to allow beneficiaries to purchase their government-owned houses, and a hostels redevelopment programme. The most common subsidy is the project-linked subsidy which delivers water, sewerage, electricity, surfaced and unsurfaced roads in various combinations and levels of service, together with a plot of approximately 250m2 with secure (freehold) tenure and a very basic shelter. The subsidy amount for the lowest income earners (less than R800 per month) is R15 000. The overall intention, therefore is to provide some form of basic housing and services to the poor. As of 31 January 1997 the housing subsidy programme had approved about 431 000 subsidies since the April 1994 elections and the PHBs are said to be releasing approximately 10 000 subsidies per month, nationally. Of the approved subsidies however, only about 143 000, or 33%, had been paid out. This amounts to 9% of the housing backlog described by the Minister of Housing in the National Assembly in August 1996 - the implications for urban infrastructure of this slow housing subsidy delivery are severe and are discussed below. The Ministry of Housing is nevertheless still committed to delivering 1 000 000 houses by 1999. 4.2.6 Land and Settlement Grant

The Department of Land Affairs and Agriculture introduced a Settlement/Land Acquisition Grant to support its Land Reform Programme. Although it is targeted largely at rural and semi-rural beneficiaries, it is not exclusively a rural subsidy. It has a maximum value of R15 000 per beneficiary household. It is to be used for land acquisition, enhancement of tenure rights, investments in internal infrastructure and home improvements, according to beneficiary plans. It may not be used in addition to the housing subsidy and does not cover bulk infrastructure, so as not to duplicate sources of government grants. In line with government policy, this programme intends to enhance the ability of poor households to gain access to land and shelter

4.2.7. Electrification Grant
ESKOM has been the largest direct provider of electricity over the past 6 years. In 1996/97 ESKOM made a grant of R300 million available to local authorities to assist them in

electrification programmes. This grant was disbursed by the National Electricity Regulator (NER) and is likely to be repeated in some form on an annual basis to allow local authorities a more substantial role in electrification. The grant will in the future probably not come from ESKOM directly but will be sourced from taxation on the wholesale price of electricity to distributors. This will then be reallocated, on the basis of need, to support the electrification programme. The 1997 grant was allocated on two bases. The first was exclusions - those authorities who were in arrears to ESKOM or who failed to provide the NER with adequate information were excluded. The second was cost - the grant was provided to those distributors who could supply connections at the lowest cost, not necessarily to those in greatest need. It seems likely that future grants will be more directly targeted at the areas of greatest need, and hence at areas with the poorest consumers (Forbes, 1997).

5.

INSTITUTIONAL ARRANGEMENTS

A complex set of institutions is responsible for urban service delivery - these include national government (primarily the DCD and the Department of Housing), provincial and local government, and parastatals (primarily ESKOM and the Water Boards). The operations and financing of these institutions is being broadly coordinated by the DCD which sees its role mainly as ensuring that there are sufficient financial resources from the national level to enable the provision of at least a basic level of services to all urban residents within approximately ten years. The actual delivery of services will take place mainly through local governments as well as through ESKOM in the case of electricity. 4.2 Government departments responsible for infrastructure.

The Constitution of South Africa states that one of the objects of local government is to ensure the provision of services to communities in a sustainable manner. In addition, the developmental duties of local government include structuring and managing their administration and budgeting and planning processes to give priority to the basic needs of the community. Lastly, the Constitution states that national legislation must take into account the need to provide municipal services in an equitable and sustainable manner

(Republic of South Africa, 1996).

These broad provisions form the point of departure for provisions made in local government legislation. The Local Government Transition Act, Second Amendment Act, 1996, sets out the powers and duties of metropolitan and metropolitan local councils. Section 10(c) of this Act states that a metropolitan council shall promote integrated economic development, equitable redistribution of municipal resources and the equitable delivery of services to ensure that imbalances are addressed. In this way it creates the enabling framework to address poverty and access to services by the poor. The provision of municipal infrastructure is a local government function. This does not, however, mean that local government has to deliver or install the services itself. It may enter into different arrangements for the delivery of a service. Ultimate responsibility for the function, however, remains with local government. In metropolitan local government structures the powers and duties for service provision are divided between metropolitan councils and metropolitan local councils. The concept being that bulk services are provided by the metropolitan council (e.g. water and sewage treatment, reservoirs and bulk water, sewer mains, arterial roads) while water, sewerage and electricity reticulation is provided by the local councils. In the case of electricity the primary provider is ESKOM , alongside 398 other electricity distributors made up mainly of local authorities. In the water sector local authorities are generally responsible for water and sanitation except for the fairly minor role that some Water Boards play in direct reticulation to end-users. Although the provision of infrastructure services takes place at local government level, there is a complex set of institutions responsible for funding urban service provision. These include national government - primarily the DCD and the DoH - who are responsible for a number of national programmes, as well as provincial government and local government, parastatals and private funding institution. Funding for national programmes is usually channeled to local government via provinces. The following government departments and programmes currently allocate funds which contribute towards infrastructure provision.

Table 11. Government infrastructure programmes and the responsible authorities Department Department of Constitutional Development and Provincial Affairs Department of Housing Programme 1) Municipal Infrastructure Programme (MIP) 2) Extension of Municipal Services (EMIP) 3) Municipal Infrastructure Investment Framework 1) Housing Subsidy Programmes 2) Bulk and Connector Infrastructure Grants 3) Special Integrated Presidential Projects Department of Land Affairs and Agriculture
ESKOM and the NER

Land Acquisition and Settlement Grant (mostly but not exclusively rural) Electrification Grant Community Water Supply and Sanitation Programme (mostly rural but some peri-urban areas included)

Department of Water Affairs and Forestry

5.2.

Private-public partnerships

The role of private participation in infrastructure delivery has been accepted in principle by Government. The DCD and the DWAF have taken steps towards developing a regulatory framework for partnerships between local government and the private sector in recognition of the range of difficulties that may arise from the handing over of service delivery to private sector agencies. The DCD has also initiated a series of pilot projects involving private-public partnerships. R50 million has been earmarked for project preparation, and nine projects have been approved for support. It is estimated that the total capital cost of the selected projects will be about R1.5 billion (Department of Finance, 1997). Alongside these projects the DCD and the DWAF have been drawing up guidelines for municipalities considering entering into service provision arrangements with private companies. These will eventually be replaced with a comprehensive policy and regulatory framework for such partnerships. The eventual scope and nature of these partnerships is unclear at present. Significant roleplayers are strongly opposed to them, such as the South African Municipal Workers Union, and they still comprise a very small aspect of local government service delivery. They may in time play a highly important role in urban service delivery, particularly in the light of

limitations in local government capacity to deliver infrastructure (Business Day, 1997c). 5.3 Other institutions involved in infrastructure delivery

In addition to the government programmes mentioned above, which offer capital-related grants or subsidies, there are a number of other institutions outside of government which fund the provision of infrastructure. These include the parastatals such as ESKOM (electricity generation and reticulation) and the Water Boards (bulk water reticulation to local authorities and some local distribution). Some non-governmental organisations (NGOs) also have a service provision function, such as the Mvula Trust, but these primarily tend to serve rural areas. Lastly, certain financial institutions also fund infrastructure, mostly by offering loans to local authorities and other service providers. The Development Bank has recently undergone restructuring and is refocusing its primary business towards the funding of municipal infrastructure, through gearing the above-mentioned grants and putting together structured financial packages for local governments. The Development Bank dispersed R1,3 billion in development loans and grants in the 1995/96 financial year and estimates that the figure would remain at roughly the same level in the 1996/97 financial year. However, it intends increasing its activities in financing infrastructure significantly in 1997/98 and hopes to disperse around R2 billion - increasing this even more in the following year. This level of investment will be achieved as the finance ministry has approved an additional R3 billion in callable capital for the Bank, taking the total funds available to R5 billion (Business Day, 1997b). In addition, “a private finance house has been formed by local institutions and a UK-based group to help address South Africa’s huge infrastructure backlog by raising R1,2 billion during the coming 12 months and R12 billion over the next seven years” (Business Day, 1996b). The company, the Infrastructure Finance Corporation (INCA) will offer loans to municipalities, provincial governments and district councils. It will act as an important intermediary and will also pursue co-funding opportunities with government, concessional funding sources and other private infrastructure financing institutions. It will provided 5, 10 and 15-year loans at low interest rates and will use the technical resources of the Development Bank to assist with assessments.

6.

IMPACT OF CURRENT PROGRAMMES ON THE POOR: WHO HAS GOT MORE TAPS, TOILETS AND TARRED ROADS?

The approach taken in this section has been to obtain a broad sense of the impact of the programmes and not to attempt an accurate quantitative analysis of impact. Information has been sourced from interviews with officials and others involved in infrastructure provision, newspaper articles and reports. Progress in the delivery of urban infrastructure is difficult to assess accurately for a number of reasons. The first is that current statistics on access to urban services are drawn from “snapshot” surveys. There is no consistent and recurrent monitoring of service provision using the same definitions of both service levels and urban areas, as well as using the same baseline demographic data. A second reason is that urban areas are to some extent a “black box” in terms of service delivery. Although the macro municipal infrastructure planning and financial arrangements are done at a national, and sometimes provincial, level the actual delivery of infrastructure is primarily administered by local authorities. Because funding comes from different government departments and because there is no system of coordinated reporting of infrastructure provision by local authorities there is little sense of the impact of current expenditure and policies at the urban level. Another problem is that urban populations are far from static themselves. It is estimated that about 20-30 000 people a month enter and settle in Gauteng alone. Alongside this are intra-urban movements - with internal urban growth and fluxes from formal to informal settlement arrangements. Thus even if progress in delivery of physical infrastructure was know the proportions of the poor being serviced by this infrastructure would still remain somewhat unclear. The problem of inadequate sense of progress is being partly ameliorated by the DCD who have initiated a project-level reporting system under the MIIF programme, and by the NER who have an annual update of new electricity connections. The following indications of improvements in the urban poor’s access to infrastructure is derived largely from these sources. The Department of Housing is also establishing a comprehensive, national, database, termed the HUIS database, whereby it will be able to obtain information on most aspects of the housing subsidy programme. The DCD’s reporting system for the MIP works at a project level and indicates the overall

expenditure status of the project. Only a minority of projects, however, can be analysed at the level of detail of, for example, numbers of taps and toilets provided.

6.1.

Progress of the MIP and associated programmes

According to Richard Kruger at the DCD, the MIP and EMIP have been largely successful. He bases this on the monthly reports he receives which indicates progress in allocating funds to projects. Additionally, applications for funds have been consistently oversubscribed, indicating a great need on the ground. The ability of the projects to obtain counter funding in the early stages of the programme is viewed as another indication of the success of the projects. Despite this broad statement of progress, as discussed above it is difficult to assess accurately the actual increases in numbers of poor people with access to specific services. However, the expenditure of funds on infrastructure projects does provide a fairly good sense of progress in infrastructure delivery. Since the inception of the MIP a total of R1351 million has been made available for service provision. Of this R1265, or 94%, has already been committed to actual projects. A total of 1089 projects will be supported by these MIP and EMIP funds of which 115 projects have been completed and 369 are currently under construction. The DCD estimates that these projects will provide new or rehabilitated infrastructure services to 12.14 million beneficiaries (DCD, 1997). The DCD provides a rough sense of the allocation of these funds by category, with 57% going to water services, 23% to sanitation, 11% to roads, and 1% going to refuse removal, electricity and community facilities apiece, as shown in Table 12. They also indicate that these funds have been used to leverage an additional 19% of local authority funds and 10% of other sources of finance, which has raised a further R523 million bringing the total to R1788 million.. Table 12. MIP spending by infrastructure category Sector Water Sanitation Roads Refuse Electricity Community facilities R’s (millions) 721.87 374.45 134.52 9.23 12.58 12.58 Percentage of Total 57 29 11 0.73 1 1

The rate of onward disbursement of funds from a provincial level seems to have been one of the bottlenecks in the delivery process. Of the funds which had been committed to approved projects by the DCD by the beginning of 1997 about R413 million had been disbursed to the provinces, but only R300 million, or 73% had been onwardly disbursed to the implementing agents (DCD, 1997). The DCD has given attention to this, however, and delivery seems to be speeding up in 1997. As an example of MIP delivery at a provincial level, in Gauteng the rate of delivery has increased since the inception of the MIP and EMIP, with less than R1m being spent in the first year compared to R45m being spent to date. It is anticipated that R400m will be spent over the next two years (interview with James Kattanach, Gauteng manager). He also observed that in the first two years water was viewed as top priority for communities whereas now it is only third or fourth priority, indicating that many of the water needs of communities in the province have been met. Gauteng’s experience with an accelerating pace of delivery appears to be a national phenomenon. Richard Kruger has indicated that there is an upward trend in spending and said that from their experience it takes about 80% of the construction project life-cycle to spend the first 20% of funds (Business Day, 1996c). Thus it appears, based on expenditure trends, that the country is beginning to enter the delivery phase of many of the MIP projects. An important criterion in the approval of MIP projects is the use of labour-based construction, preferably using local labour and imparting skills training. Consequently, all these projects are seen as contributing to improving conditions of poverty in local communities. This approach is now embodied in the Department of Public Work’s Green Paper which looks at transforming the construction industry to make it more labourintensive and promote community-based public works. The approach is one that rewards private-sector contractors who subcontract to small businesses; who buy materials from small business suppliers; who buy technical, professional and managerial services from small businesses; who enter into joint-venture agreements with small businesses and who use small businesses in the banking sector. In this way the department feels that they “are able to redirect money to sections of the community which were previously disadvantaged” according to Jeff Radebe, Minister of Public Work. (Star Business Report 23/4/97) Thus far about 79 000 people have been employed in infrastructure provision, of whom 30 000 have received accredited vocational training. The DCD estimate that by the end of 1997 a total of 242 000 people will have been employed and 94 000 trained. Although most of

the employment opportunities created have been temporary the ongoing maintenance of infrastructure and services will create permanent job opportunities. 6.2. Electrification

The electricity sector has demonstrated rapid progress in delivery since 1994. In that year 3 466 953 urban households had access to electricity. In 1995 205 827 houses were added, and in 1996 about 400 000 additional houses were supplied with electricity. Thus over a two year span the urban total has risen by about 600 000 or an increase of 17%. If a similar rate of progress continues all urban residents would be able to have household electricity within 2-3 years. Indications are that continued progress is possible at a similar rate. ESKOM has made R300 million available for local government for 1997 which would translate into about 200 000 new connections in that year. This is apart from approximately 270 000 new connections which ESKOM will make directly, connections which will be financed separately by local governments, and connections financed by other infrastructure programmes. The constraining factor in the case of electricity is seen as primarily a lack of capital funds (Boschoff, 1997), as local authorities are relatively easily able to access private sector capacity for the actual physical delivery of electricity. The R300 million electrification grant is aimed at leveling the terrain between ESKOM and Local authorities. ESKOM, relatively unconstrained by capital limitations, has been able to deliver significantly faster than local authorities until recently. Since 1996 however the gap between the number of ESKOM connections and local authority connections has begun to narrow. This is partly due to the fact that ESKOM electrified the cheaper consumers first and is increasingly moving to more remote and expensive rural consumers, partly due to local authorities having begun to re-establish themselves after the transitional arrangements, and partly due to capital being more easily available for at least some urban local authorities.

7.

DIFFICULTIES IN URBAN INFRASTRUCTURE DELIVERY

A set of possible problems can be identified which may constrain the delivery of services to the urban poor or which may lead to inappropriate delivery of infrastructure. 7.1. Low levels of service payments

In urban areas municipalities are able to recover costs for services via tariffs and taxes, and are responsible for this cost recovery. On average however only 69% of residents pay their service charges. Some municipalities are able to absorb the cost of non-payment through cross-subsidisation. However a number of them are struggling. This has led to a situation where the total amount of outstanding debts to local authorities at the end of October 1996 stood at 25% of annual income from rates and service charges (Olver, 1997). According to the Department of Finance Budget Review (1997) the major source of budgeted local government income is from service charges. Thus electricity, water and sewerage charges make up R17.8 billion of local government revenue. A crucial issue therefore, that will be faced by all urban authorities is the lengthy culture of rent and service boycotts prevalent in South African cities. Initially conceived as a political strategy, the non-payment of urban services has continued beyond the advent of national democracy. The attractiveness of free services; ineffectual tariff collection and education strategies; poor quality of services; slow delivery; and a residual suspicion of city managers, have all contributed to continued low levels of payment in many areas. Low payment levels for services compound a difficult financial situation for municipalities. A combination of factors including the costs of incorporating former townships into municipal jurisdictions, low capacity for financial management in some areas, and inappropriate tariff and inter-governmental grant mechanisms have resulted in an unsustainable situation where 48 local authorities can not pay their ESKOM bills and 95 have insufficient funds to cover a month’s salary bill. The answers to overcoming these financial difficulties lie in improved financial management by municipalities, tougher measures for non-payers, such as service cut-offs, closer monitoring of municipal finances by central and provincial government and the development of a culture of payment in urban areas. As the effectiveness of the metering and billing system, and the trust people place in it, is a major factor in payment this also needs to be a major priority if more costs are to be recovered through payment for services. Most of these measures are being taken already with varying degrees of success. Some of them, however, particularly the threat and carry though of service cut-offs, are politically difficult and are not being aggressively pursued by some local governments. At the same time there are examples showing that a turn-around in payment levels can be achieved, such as the Umgeni Water Board’s high payment rate of around 90%. Also, encouragingly, the results of a recent survey on urban water supply indicates that,

contrary to many expectations, poor payment levels are not driven by a sense of entitlement to free urban services amongst informal settlers (Goldblatt, 1996). Rather there appears to be a widespread acceptance that water is not a free good and that payment is necessary. This is mediated however by broader political issues which make a translation from the personal acceptance of the validity of payments, to the actual occurrence of payments, far from simple.

The long history of rent and service boycotts has led to a “culture of non-payment” which is not easily changed. There is thus a seemingly anomalous situation at present with the survey finding an almost 100% agreement that payments for water supplies was necessary, alongside actual payment levels of between 5% and 30%. Whether the high levels of nonpayment countrywide are due to boycotts and unwillingness to pay for services or to an inability to pay, will obviously have a large bearing on future cost recovery strategies. There are a number of national strategies and programmes established to tackle these issues of financial management and non-payment. Project Liquidity is a DCD programme designed to track municipal finances, provide early warnings of potential difficulty and support municipalities out of trouble. The programme should help overcome the financial management issues in municipalities. The Masakhane campaign was designed to encourage payment for services. To date it appears to have had limited impact on a national scale although there are pockets of success. However it is now being relaunched at a local level and also includes a more effective, national, educational role regarding the need to pay for services. According to James Kattanach, the Masakhane campaign is gaining momentum at a local level and payment levels are beginning to rise in some areas of Gauteng. He noted that where they are doing MIP and EMIP projects they link these to the campaign by putting up advertising boards, e.g. indicating that the project is a Masakhane road, or reservoir. With the introduction of CMIP later this year, the intention is to link the two programmes closely to create greater awareness and commitment at local level. Electricity The situation with regard to electricity is somewhat different. Due to the structure of the industry it is not non-payment alone which is the key problem. It is rather, “the low consumption by newly connected dwellings in the disadvantage communities [which] poses the biggest threat to the viability of the electrification programme” (NER, undated). They propose an emphasis on strategies to make electrical appliances and their use more affordable to poor households, as well as education on the benefits and safety of electricity.

7.2. Subsidies, cross-subsidies and tariffs In urban areas cross-subsidisation is being implemented. However of concern is that it is being done in the context of a relative absence of consistent national policy for either tariffs or cross-subsidisation. There is currently no uniform national policy on tariffs for basic services across the service sectors. For example, although for water and sanitation the National Water Supply regulations (DWAF, 199b) do outline a tariff system, there is no national policy on cross-subsidisation in the water sector. Also, as mentioned above, there is contradictory policy with respect to water on whether operating and maintenance costs are to be subsidised or recovered. In the absence of consistent national policy, issues like cross subsidisation have been taken up in the courts. Two recent cases, one against the Pretoria Municipality by a ratepayers organisation, and the other by a group of Sandton ratepayers against the Johannesburg Metropolitan Council, have challenged local government actions in implementing crosssubsidisation. In the Pretoria case the court ruled that charging a flat rate for all services, as opposed to charging a metered tariff, was in itself not unfair. But where the flat rate did not reflect the fair value of the services and was substantially lower in some areas, the differentiation was unfair. The judgement in the Johannesburg case came out in favour, in principle, of the use of local government charges as a redistributive measure. As a result of these cases particular characteristics of cross-subsidisation are now

enshrined in common law. Effectively the courts have begun to influence government policy on this area. Given two judgements which already have taken different approaches to tariff policy it is clear that the legal system is not the ideal forum to be developing policy on such issues. There is an urgent need for the uniform tariff policy to be developed and implemented to fill the current vacuum particularly in a climate of dissatisfaction with levels of rates and services in municipalities and problems with levels of payment. Essentially the issue is that government has committed itself to both universal delivery and to fiscal restraint and thus cost-recovery. The contradictions between these two commitments are best resolved by a consistent national policy approach to service delivery and pricing. The MIIF has attempted to do this in a broad sense, by establishing a minimum service level and by demonstrating how national government can subsidise the poor to meet the costs of this service level. However it is apparent that other national departments have not necessarily taken the same approach to service delivery, and that local governments similarly do not have a consistent approach.

The method of service delivery will also affect tariffs and cost-recovery, for example in the case of water provision via public standpipes it is unclear how authorities will accurately recover costs and ensure payments. Public-good services, such as roads and stormwater, may be similarly difficult to directly recover costs for. Electricity In the electricity sector there are currently over 2 000 different tariffs being charged for electricity countrywide. This makes any rational cross-subsidisation programme extremely difficult. In addition certain hidden subsidies are built in to the current system - for example, ESKOM’s national flat “wholesale” rate to local authorities is in effect a subsidy from Gauteng and Mpumalanga consumers (whose real price should be lower due to their proximity to the majority of the power stations) to consumers in the rest of the country (Forbes, 1997). The NER is leading a process to rationalise tariffs and then to rationalise electricity distributors from about 400 into a manageable number. Already distributors have to be licensed by the NER and have to have their tariffs approved - although in practice a number of them are charging unapproved tariffs. Once this rationalisation has occurred the NER will move to a national system of tariffs based as closely as possible upon cost of supply. This does not preclude the use of subsidies within the sector in the future, however these subsidies will have to be transparent. The removal of these funds would raise difficulties for many local authorities - at present there is a R2 billion surplus from electricity sales which accrues to local authorities. The NER’s recommendation is that this surplus remains at the local level but is converted to a transparent electricity tax - probably at the level of about 15% of turnover. In addition to this, the NER is suggesting that cross-subsidisation occurs within the electricity sector from high-income and high-consumption consumers to low-income, lowconsumption consumers within the domestic category. This would involve the removal of any subsidy flows between the domestic and other sectors but would allow crosssubsidisation within the jurisdiction of any distributor from the wealthy to the poor. As mentioned above there is a third subsidy, in the form of the national electrification grant which will be sourced from taxation on the wholesale price of electricity to distributors. This is for capital expenditure on electrification, and will be, in effect, a subsidy between different distributors. This would allow wealthier, high-consumption, and well electrified

areas like Gauteng to continue to subsidise the electrification programme in areas such as the Eastern Cape.

Box 2. Water supply tariff structures With the determined focus on cost recovery that local government needs to have, tariffs are obviously an important component of the water supply system. There is no uniform national policy on tariffs although there are National Water Supply Regulations which details a tariff structure. The tariff structure defined in the Regulations requires the inclusion of three types tariffs for the supply of potable water to domestic consumers. These requirements include a lifeline tariff and block scale sliding tariff. The lifeline tariff allows for the provision of not less than 6kl per “consumer” per month for a minimum level of service. The amount of this tariff is to be set according to the operating and maintenance costs for the supply of the water consumed. Thus those paying the lifeline tariff will not be expected to pay for the capital cost for their basic level of service, which is consistent with national policy on water supply. For those consuming above a basic level of service a block tariff system will apply. For water up to 30kl per “consumer” per month historical costs of capital and operation and maintenance will be paid. For those consuming above this 30kl a marginal cost tariff is applicable, which is as close as possible to the actual economic price of water. This structure is designed to benefit the poor given that the lifeline tariff applies to those with a minimum level of service and by assuming that they will choose to consume a small amount per person in order to save on tariffs. The structure makes sense in the way it ties the tariff to the level of service. If one can afford a higher level of service than the minimum it can be assumed that they can also afford a higher tariff. However it leaves some issues unresolved. Presumable the Regulations equate “consumer” with household in the case of residential water supply. Thus a household of four will have access to a lifeline tariff of 50l per person per day, while one of nine will have access to 22l per person per day - the equity implications of this are not dealt with. This amount also raises the debate of whether the poor should have to pay higher costs for water used to generate basic livelihoods, beyond personal consumption. For example the irrigation of food gardens which families are dependent upon.

7.3.

Local authority capacity

There are indications that local authorities do not have the human resource and institutional capacity to deliver infrastructure at the rate and scale needed to eradicate backlogs. In Kwazulu/Natal, for example, only 5.07% (R32.8 million out of a total of R636.4 million) of funds allocated for infrastructure projects in 1996 had been spent (Business Day, 1997a). Funds from the BCIG, the MIP, EMIP and the SIPP have been allocated to local authorities in the province but have not been spent. With the far-reaching transformation at local government level, problems with service delivery have been experienced. The reasons most frequently cited include staff demotivation; the fact that most politicians are new and still “finding their feet” with respect to policy and operations; and high staff turnover where many experienced officials have left, creating capacity problems which are compounded by having many new, lessexperienced officials. The loss of senior experienced staff from local government was raised as a problem in all the delivery sectors, including electrification. A study by Coopers and Lybrand (1997), looking at constraints to delivery in Gauteng also identified this as one of the major problems limiting local government capacity to deliver infrastructure services. In addition, some local governments have set up new, separate departments to handle RDPtype developments, including projects in terms of the above-mentioned infrastructure grants. The long lead-time in getting these departments staffed and operationalised has led to delays in implementation. 7.4. Capital constraints

According to Steve Boschoff at the NER the primary reason delaying electrification is inadequate funds. Although local authorities do not necessarily have the technical expertise for electrification projects there is sufficient private sector expertise which is available to local authorities. The bottleneck, as far as electrification is concerned, is therefore inadequate capital and not inadequate capacity. The R300 million grant by ESKOM to local authorities is expected to go some way towards improving the situation, but should be seen in the light of local authority requests for a total of over R1 billion for electrification projects in 1997.

This is supported by James Kattanach in terms of broader infrastructure provision. He feels that the more capital that is made available in terms of infrastructure projects, the more local authorities will build up capacity to meet demand, over time. Linked to the problem of absolute capital constraints are problems associated with single-year budgeting processes in local government. Budget allocations that require departments to spend the funds in a single year run contrary to the reality of spending on infrastructure projects. The introduction of multi-year budgeting should begin to address this problem (Coopers and Lybrand, 1997). An additional solution suggested is to link funding to project milestones, thus allowing funds to be released in line with the project life-cycle. The Coopers and Lybrand (1997) report found that programmes funded from a national level tend to get trimmed so that each province only receives funding to deliver on a portion of the projects submitted for funding. They identified this as an important constraint but progress reports indicate that allocated funds have been very slowly spent - indicating that capacity to implement the existing quota of projects is itself limited and a bottleneck of delivery. Bond and Tait (1997) argue that in fact there is not a fiscal constraint at the national level to housing and service provision. Their argument is based on the government’s commitment to use 5 percent of the total budget for housing by 1998. They calculate that this amount would be sufficient to meet RDP housing, and urban infrastructure goals if disbursed properly. 7.5. Linkage with housing subsidies:

Another problem is that the provision of funds for municipal infrastructure, as currently structured, is delivered largely through the housing subsidy system and is therefore tied into that system. This means that formal access to land and or housing, and the tenure status of residents, will determine their access to infrastructural services. This may mean that the most marginalised - i.e. those in informal settlements without formal housing subsidies or similar subsidies, will continue to have inadequate access to services. The disbursement of housing subsidies is also proceeding slowly. Thus infrastructure expenditure tied to this subsidy scheme will be similarly delayed. Since 1994 about 362 000 subsidies had been approved, with the current rate of approval at about 10 000 per month (Business Day, 1996a). This rate of 120 000 new subsidies per year falls below the approximately 166 000 households per year expected by the MIIF to be receiving subsidies, and below the PDG (1994c) figures which estimate that 144 000 new low-income

households alone require services, apart from the backlog of at least 683 000 households. The reliance on the housing subsidy as a finance mechanism for urban infrastructure therefore may be questioned, as it will see the poor improving their circumstances only at the rate of delivery of that subsidy. An additional issue associated with linking infrastructure and service delivery to the housing subsidy is the spatial planning of infrastructure delivery and urban planning. The disbursement of funds linked to the housing subsidy scheme means that any spatial planning problems of that scheme will be replicated in other infrastructure programmes (as, of course, will successes). One of the possible “spatial” problems of the housing subsidy scheme is that it is primarily demand-led, and within this, led largely by developers. Thus the disbursement of subsidies are not necessarily directed under the control of an urban planning strategy. Amongst other forces, access to land and pre-existing settlement patterns are driving location decisions and infrastructure provision is having to follow. It would possibly be preferable if infrastructure provision was able to be used to guide urban development more strongly than at present. For this to happen the current housing subsidies programme and approach would have to be changed. According to Chippy Olver at the DCD it would be better to allow DCD to fund infrastructure and for housing to actually fund housing, i.e. the DCD would take responsibility for funding bulk and connector infrastructure, and for funding internal municipal infrastructure. This would allow it to provide infrastructure in a supply-driven, planned way - allowing it to promote better urban planning, densification, linkage with transport, and other related issues. 7.6. Inadequate information and indicators of progress

The basic data limitations for urban infrastructure planning have been made clear during the course of this report. The MIIF, which is the central planning document for urban infrastructure, is based on outdated and inadequate information. This is clearly a problem for urban services planning, particularly at a national level. At a provincial level similar problems have been found. For example, in Gauteng, the lack of an integrated planning and monitoring process was seen as an impediment to successful delivery of infrastructure and urban services (Coopers and Lybrand, 1997). The national information base is being improved by the DCD’s project reporting system for

the MIP, and by initiatives of other departments. The DoH is also compiling a Housing and Urban Information System (HUIS) in two phases. The first phase, which is almost complete, has concentrated on the housing subsidy programme information. This database will provide information on the status of the housing subsidy projects and on their beneficiaries.

A need has also been identified for a much broader, multi-disciplinary database for urban information. This will give the department a means of monitoring the performance and effectiveness of their policies. To this end they intend establishing an indicators-based system. Phase two of the HUIS programme will include data will enable the indicators to be calculated and monitored. Additional socio-economic data will therefore be input to the HUIS during this phase. The intention is to take a modular approach and begin with a pilot project. This project will establish a limited number of key indicators and measure them for a few areas where data is available. Additionally, the HUIS database will aim to develop indicators which are internationally acceptable and consistent. The DoH is closely involved in the United Nation’s Habitat initiatives on global cities and is hoping that its indicators programme will fit into, and be compatible with, that process. The HUIS database will not attempt to capture data for the entire country but will use a “warehouse” approach which relies on downloading existing information from various source (such as local authorities). It therefore may not extend to all parts of the country and will also suffer from difficulties with different data definitions and baselines. However it is an attempt to establish a single, consistent information source on housing, services and urban conditions. Hopefully, over time it will become a significant instrument to measure the impacts of government housing and urban services and development policies, and their impacts on the poor. Information on progress in access to services will also be improved by future consistency of the CSS’s October Household Surveys, which will provide a sample survey-based method of tracking improvements in service levels. The 1996 Census results will also hopefully provide a better demographic information base than is currently available.

9.

CONCLUSION

No strong recommendations are proposed in the conclusion. Rather the key elements of current approaches to urban infrastructure provision are summarised. 9.1 Commitment to a basic level of service

The government is committed to providing a basic level of service to all. This is evident in both policy approaches and programmes that it has introduced. Through these programmes government grants are provided to enable service providers to deliver services at this basic level. 9.2 Ability to eradicate the backlogs

There is also a commitment to eradicating housing and services backlogs. However, it is noted that most government programmes have initially been slow to deliver, resulting in a growing backlog - particularly in the delivery of housing subsidies. The slowness of delivery is generally ascribed to the new policy and political environment, and the lack of capacity at local government level. Delivery is expected to increase, however, and this appears to be happening in the housing and municipal infrastructure environment. There also appears to be a rising expectation within financing bodies (such as the Development Bank) which are presently gearing up to leverage funds for infrastructure. The delivery of a basic level of service to all is projected to take at least 10 years but will be dependent on economic growth rates 9.3 Ability to deliver financially sustainable services to the poor

This is at the heart of the debates about urban services. The MIIF proposes a relatively low minimum service level - based on the argument that there are insufficient funds currently available to provide a higher level and that poor consumers will not be able to bear the recurrent costs of a higher level of service. An alternative view is argued by Bond and Tait (1997, p.21) who claim that there are two flaws in this reasoning. The first is that the MIIF has failed to factor in additional benefits - such as public health, environment and macroeconomic and micro-economic multipliers - gained from higher service levels, and has therefore “overplayed the net capital cost to the fiscus of providing high levels of

The second argument is that recurrent costs can be subsidised to a greater extent than allowed for in the MIIF through cross-subsidisation based on progressive service tariffs in wealthier areas. Bond and Tait (1997, p.22) claim that “it will be feasible through crosssubsidisation to provide lifeline water, sanitation and energy to all. Instead, present policy will put a severe limit on what can be upgraded, particularly since nearly all communities inhabited by low-income households will be without sewerage lines”. Bond (1997) claims that there is emphasis on cost-recovery to the exclusion of redistribution of resources via cross-subsidisation in present government policy. At the same time it can be argued that most of the government grant programmes offer capital grants and the impact of the ongoing service and maintenance costs is usually under-emphasised. Proposals to increase the levels of service to the poor now, may prove to be economically difficult to sustain in the longer term. These debates cannot be answered without reference to the issues of levels of service payments, willingness-to-pay for services by consumers, and costs of supply. These will largely determine the financial viability of local government and the ability of these authorities to improve the services of their poorest households. Cost-recovery The problem of low service payments is confounding local governments’ ability to deliver service that will be sustainable. Increased payment levels, and regular monthly income in the form of service payments, increases the service provider’s ability to secure funding from financial institutions for infrastructure development. The need for clear tariff and subsidisation policies will go some way to ameliorating these problems. With respect to water supply, as an example, a key aspect of achieving a balance between universal access and financial viability of the system is the degree of cost-recovery built into the water supply system and the ability and willingness of consumers to contribute to improved water services. An appropriate income and tariff policy geared to cost recovery is essential for a sustainable approach to rapid expansion of water supply but by itself will not be enough to meet the water supply challenge. A change in the culture of non-payment will demand a political solution; better tariff enforcement; and the building of a new civic culture. Economic viability does not only depend on the consumer; supply agencies will themselves have to look carefully at reducing the costs of service provision. Key areas with respect to water supply are the use of appropriate design standards and a reduction in the percentage of unaccounted for water losses (Eberhard and Palmer, 1993). Other strategies such as

labour-intensive construction methods which have been shown to both reduce construction costs as well as provide local employment and community responsibility need to be further explored (Rivett-Carnac, 1987). Similar emphasis on cost reduction, efficiency and employment generation needs to be placed on service delivery authorities or agents in other sectors. Willingness and ability to pay The government needs a better understanding of issues relating to willingness and ability to pay. Indications are that there is insufficient knowledge of what urban consumers can afford and the income stratification of poor urban consumers in this regard; and what the reasons are behind non-payment of services (i.e. the relative contributions of poor collection, lack of metering, dissatisfaction with service levels, and weak enforcement). Improved local government financial management Efforts to improve local government planning and budgeting for infrastructure provision, through the introduction of multi-year budgeting and the introduction of infrastructure investment plans, are two positive interventions to promote sustainable delivery. The first is important in that it more realistically accommodates the planning and implementation of infrastructure projects, which usually takes place over more than a one year horizon. The second aspect will promote more realistic, community-driven projects which will meet needs over time and allow capacity to be built up to meet the programme’s requirements.

9.5.

Data collection systems and indicators of progress

Although there does appear to be progress in the collection of information on urban infrastructure and its delivery this is still a problem in all sectors. In both the electrification and general infrastructure programmes it appears as if national government has difficulty in getting reliable, and up-to-date information on both current levels of service and service provision from local authorities. This includes information on actual numbers of people served (and unserved) as well as supporting financial information on average costs of connection, and payment levels. The absence of a national database makes it difficult to monitor progress accurately, and to set appropriate targets and timetables for delivery. There are a number of initiatives to collect and collate information at a national level but these are not well co-ordinated. Departments were unaware of the actions of other departments in this regard, and information is not necessarily being collected in a consistent manner in different sectors.

For example, the NER collects data by registered distributor, while other departments collect data by municipality. Indications are that other data is being collected by geographical area, not municipal.

It seems appropriate to rationalise data-gathering and to develop national protocols for the collection of data. Mechanisms should also be established to force local authorities to supply statistics in a timely manner. This is being done in some departments by the simple expedient of threatening not to release funds unless information is provided - this should be instituted broadly. As access to services improves, information will continue to be necessary to assess payment levels, and cost-recovery at the local level. The development of working system of information provision from local authorities is important, therefore, for the long-term as well as for the immediate requirements of infrastructure provision.

10.

REFERENCES

African National Congress, 1994: The Reconstruction and Development Programme, Umanyano, Johannesburg. Bond, P., 1997: Ditching the poor? The municipal infrastructure framework, SA Labour Bulletin, 21(2), 19-22. Bond, P., and Tait, A., 1997: The failure of housing policy in post-apartheid South Africa, Urban Forum, 8(1), 18-40. Business Day, 1996a: Housing backlog rises - analysts, Business Day, 30 December 1996. Business Day, 1996b:, Business Day, 29 October 1996. Business Day, 1996c: ‘Municipal scheme will benefit millions’, Business Day, 24 October 1996. Business Day, 1997a: MEC warns that project funding might be lost, Business Day, 21 January 1997. Business Day, 1997b: Development Bank given extra R3bn on call, Business Day, 26 February 1997. Business Day, 1997c: Rates battle won, the war is far from over, Business Day, April 21, 1997. Coetzee, H., 1991: Taps and Toilets: A Study of Water Supply in Monitoring, Newtown, Johannesburg. Coopers and Lybrand, 1997: unpublished interim report by Coopers and Lybrand Management Consulting Services for the Gauteng Department of Development Planning and Local Government, relating to the improvement of the process of delivery of capital and infrastructure projects. Crankshaw, O., and White, C., 1991: Report prepared for Johannesburg City Council based on a household survey of Powa Park, HSRC, Johannesburg. South Africa, With

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Department of Water Affairs and Forestry, 1997: White Paper on a National Water Policy for South Africa, Republic of South Africa, Cape Town. Eberhard, R., and Palmer, I., 1993: The management of urban domestic water supplies in South Africa - key challenges and issues, Paper presented at the 1st Southern Africa Water and Wastewater Conference. Fass, S. M., 1993: Water and poverty: implications for planning, Water Resources Research, 29(7), 1975-1981. Goldblatt, M., 1997: The Provision, Procurement and Pricing of Water in Informal Settlements in the Johannesburg Metropolitan Region, unpublished Msc dissertation, Department of Geography and Environmental Studies, University of the Witwatersrand. Hill, E., 1991: A critique of moves towards privatisation of water vending systems in informal settlements in the Durban functional region, unpublished Masters dissertation, Town and Regional Planning Department, University of Natal, Durban. Kakebeeke, W.J., and van Wijk, C.A., 1996: Water Supply and Sanitation in Low-Income Urban Areas: Partnerships and Stakeholder Participation, in Managing Water Resources for Large Cities and Towns - Report of the Habitat II International Conference, 18-21 March, Beijing, p.27-36. Mcarthy, J., and Rogerson, C., 1993: Unscrambling the demographic mosaic, in C. Rogerson and J. McCarthy (eds), Geography in a Changing South Africa, Oxford University Press, Cape Town, 38-50. Moser, C., 1995: Urban social policy and poverty reduction, Environment and Urbanization, 7(1), 159-171. National Electricity Regulator, 1997: NER electrification database, NER, Sandton, Johannesburg. Palmer Development Group, 1994a: Meeting the Demand for Water and Sanitation Services: Getting it Right in the Transition, Water and Sanitation in Urban Areas:

Financial and Institutional Review, Report No. 3, Water Research Commission Report No. 571/3/94. Palmer Development Group, 1994b: Summary Report, Water and Sanitation in Urban Areas: Financial and Institutional Review, Report No. 6, Water Research Commission Report No. 571/6/94. Palmer Development Group, 1994c: Overview of the demand for and costs of water supply and sanitation services in South Africa, Water and Sanitation in Urban Areas: Financial and Institutional Review, Report No. 3, Water Research Commission Report No. 571/3/94. Rabie, N., 1997: Department of Water Affairs and Forestry, personal communication, February 1997. Republic of South Africa, 1996: The Constitution of the Republic of South Africa, Act 108 of 1996, Cape Town. Rivett-Carnac, J., 1987: Labour-intensive construction approach for community organised water supply, Development Southern Africa, 4(4), 697-706. Vanderschueren, F., Wegelin, E., and Wekwete, K, 1996: Policy Programme Options for Urban Poverty Reduction: A framework for action at the municipal level, Urban Management Programme, World Bank, Washington D.C. World Health Organization, 1996: Water Supply and Sanitation Sector Monitoring Report, 1996, report WHO/EOS/96.15, WHO, Geneva. Wratten, E., 1995: Conceptualizing urban poverty, Environment and Urbanization, 7(1), 11-36.

Interviews with: Boschoff, S., National Electricity Regulator, Customer and Support Services Department. Forbes, R., National Electricity Regulator, Financial, Pricing and Tariffs Department. Jackson, B., Development Bank of Southern Africa. Kattanach, J., Provincial Programme Manager, Gauteng Department of Planning and Local Government. Kruger, R., Department of Constitutional Development, National Programme Manager for
MIP and EMIP

National Electricity Regulator, undated: Lighting up South Africa, 1995 Progress Report on Electrification, NER, Johannesburg. Olver, C., Department of Constitutional Development, Chief Director -Municipal Infrastructure and Local Government Finance. van Broombsen, D., Department of Housing. Wallis, J., Department of Housing, Director, Urban Development, Manager of SIPPS programme.


				
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