[DEBATE] : (Fwd) Joburg Water's supplier also a commodifier

[Patrick Bond]

(With Joburg Water getting nailed in court last week, in part because of 
its Suez connections, let's not forget that its bulk supplier has the 
same drive to commodify its product. E-debater Carina and labour 
researcher Hall have done a great job here.)

Occasional Papers No.15

PUBLIC IS AS PRIVATE DOES:

THE CONFUSED CASE
OF RAND WATER IN
SOUTH AFRICA

Municipal Services Project
Occasional Papers Series
Number 15

Carina van Rooyen and David Hall



ABOUT THE PROJECT

The Municipal Services Project (MSP) is a multi-partner research, policy and
educational initiative examining the restructuring of municipal services in
South(ern) Africa. The Project’s central research interests are the 
impacts of
decentralisation, privatisation, cost recovery and community participation
on the delivery of basic services to the rural and urban poor, and how these
reforms impact on public, industrial and mental health.
The research has a participatory and capacity building focus in that
it involves graduate students, labour groups, NGOs and community
organisations in data gathering and analysis. The research also introduces
critical methodologies such as ‘public goods’ assessments into more
conventional cost-benefit analyses.
Research results are disseminated in the form of an occasional papers
series, a project newsletter, academic articles/books, popular media,
television documentaries and the internet.
Research partners are the International Labour Research and Information
Group (Cape Town), Queen’s University (Canada), Rhodes University
(South Africa), the Human Sciences Research Council (Durban), EQUINET
(Harare), the South African Municipal Workers’ Union, and the Canadian
Union of Public Employees.The Project is funded by the International
Development Research Centre (IDRC) of Canada. For more information visit
www.queensu.ca/msp.
ISBN 9780868104447
© 2007 Municipal Services Project
Design and layout: Joe Goosen
Printed and bound by Logo Printers

Acknowledgements
Carina van Rooyen (cvanrooyen at uj.ac.za) is a lecturer in Development 
Studies at the
University of Johannesburg and is completing a PhD at the School of 
Oriental and
African Studies, University of London on public sector reform, with Rand 
Water as a
case study.
David Hall (d.j.hall at gre.ac.uk) is Director of the Public Services 
International
Research Unit (PSIRU) at the University of Greenwich.
PSIRU’s research is centred on the maintenance of an extensive database
on the economic, political, social and technical experience with 
privatisation
and restructuring of public services worldwide, on the multinational 
companies
involved, and on the impact of the policies of international financial 
institutions
and the European Union, especially in water, energy and health care. 
This core
database is financed by Public Services International 
(www.world-psi.org), the
worldwide confederation of public service trade unions. PSIRU is the 
coordinator of
the Watertime project (www.watertime.org), funded by the European Commission
research directorate.
Additional funding for the production and dissemination of this report was
provided by the Canadian Unions of Public Employees (CUPE).

LIST OF ACRONYMS
ASSEMAE Brazilian Association of Public Municipal Water and
Sanitation Service Organisations
BBW Bushbuckridge Water Board
BOT build-operate-transfer
CBPD community-based projects department
CE chief executive
Cosatu Congress of South African Trade Unions
CSI corporate social investment
DEAT Department of Environmental Affairs and Toursim
(KwaZulu-Natal)
DG director-general
DPLG Department of Provincial and Local Government
DRC Democratic Republic of Congo
DWAF Department of Water Affairs and Forestry
EdF Electricité de France
GEAR Growth, Employment and Redistribution Programme
GM general manager
GWC Ghana Water Company
LHWP Lesotho Highlands Water Project
MIIU Municipal Infrastructure Investment Unit
Ml/d megalitres per day
NCAP Ghana National Coalition Against Water Privatisation
NEPAD New Partnership for Africa’s Development
NGOs nongovernmental organisations
NPM New Public Management
NWRIA National Water Resources Infrastructure Agency
NWSC National Water and Sewerage Corporation (of Uganda)
O&M operations and maintenance
PPP public-private partnership
PUP public-public partnership
RED regional electricity distributor
RSA Republic of South Africa
RW Rand Water
RWS Rand Water Services (Pty) Ltd
SAAWU South African Association of Water Utilities
Samwu South African Municipal Workers’ Union
SFWS Strategic Framework for Water Services
SOEs state-owned enterprises
TNC transnational corporation
UK United Kingdom
UW Umgeni Water
WDM water demand management
WSA water services authority
WSP water services provider
WSSD World Summit on Sustainable Development
INTRODUCTION
UNDERSTANDING COMMODIFICATION AND COMMERCIALISATION OF
WATER PROVISION
WATER PROVISION IN SOUTH AFRICA: REALITIES AND TENSIONS
ABOUT RAND WATER
WHY RAND WATER IS ENGAGING IN OTHER ACTIVITIES
RAND WATER POLICY DEVELOPMENT ON OTHER ACTIVITIES
EXAMPLES OF RAND WATER’S OTHER ACTIVITIES
OTHER CASES OF PUBLIC SECTOR BODIES EXPANDING
BEYOND CORE ACTIVITIES
FACTORS INFLUENCING EXPANSION OF PUBLIC UTILITIES
CONLCUSION: IMPLICATIONS FOR ‘PUBLICNESS’
ENDNOTES
REFERENCES
T A B L E S
Table 1: Key performance indicators of RW since 1995
TABLE OF CONTENTS
4
1
10
21
35
18
16
50
27
56
60
64
67

INTRODUCTION 1
Perceptions of state failures and fiscal deficits have led to dramatic 
changes,
under the rubric of neoliberalism, in the role of the state in many 
societies
since the 1980s. Both the welfare state and the traditional Weberian 
model of
bureaucracy have been the focus of such change (Batley and Larbi 2004:31).
The initial phase, or first-generation reforms, included liberalisation, 
deregulation
and privatisation. The current phase involves the introduction
of private sector management approaches in the public sector, such as cost
recovery and public-private partnerships (Batley and Larbi 2004:xi,1,7).
Smith (2005:168) indicates how this second wave of neoliberalism
is aptly summarised by the process of ‘corporatisation’, while Nickson
(2006:82) has described second-generation state reforms as focused on the
‘four Es’: effectiveness, economic efficiency, equity and an ‘enabling 
environment’
for private sector development. The solution to problems around
delivery and service provision has been prescribed as the introduction of
competition or market dynamics in managing public services. This does not
mean a diminished role for the state but rather a new role – what Bakker
(2000; 2003; 2005) has called re-regulation, and what market proponents
call governance (see Ahlers 2005:18 for a discussion of this).
The increased use of private sector principles, and the actual participation
of the private sector in what is ‘public’, has meant that the boundaries
between private sector domain and public sector domain have been
blurred, although distinctions remain (Larbi 2006:31; Mogale 2003:218).
The new benchmarks set for how public utilities are expected to operate
is not that dissimilar from private sector management. Various structural,
organisational and managerial changes in the public sector, with national
and sectoral differences, have become ‘necessary’, including the separation
of policy and management functions, corporatisation of public utilities, 
distinction
between core and non-core activities, the ringfencing of non-core
activities, outsourcing of non-core services, introducing an 
‘entrepreneurial
ethos’ (Hassen 2004:4). The notion of New Public Management (NPM)
has come to capture much of this shift from government to governance, in
which – to use the language of the post-Washington Consensus – ‘getting
institutions right’ is necessary.
This redefinition of public sector management has meant that what is 
‘public’
has also been re-interpreted. One area where this has played out intensely
is in the provision of water. Privatisation, concessions, 
build-operate-transfer
(BOT) agreements and public-private partnerships (PPPs) with global multiMSP

2
locational and multi-utility companies has increased rapidly since the 1990s
in developing countries (Swyngedouw 2006:50). Such private sector activity
in the water sector peaked in the late 1990s, however, and reached its 
lowest
point by 2003 in developing countries, mainly due to the high financial
and political risk and lower-than-expected financial returns to private 
companies
(Coffey 2006; Johnson 2004:96-7; Morgan 2006:390).
After the initial enthusiasm, then steep fall, water transnational 
corporations
(TNCs) now seem to prefer shorter-term management contracts
involving operations and maintenance (O&M) which, compared to concessions
and lease agreements, hold little or no risks and guarantee income.
Kemeny – a manager with RWE Thames – acknowledged in 2004
that the future for private companies in the water sector in developing
countries was in providing skills and expertise (thereby building capacity
in her view) rather than bringing finance. What is thus happening
is that through PPPs the public sector takes responsibility for long-term
fixed capital investment, while the private sector focuses on improving
efficiencies and earning operating profits (Marin & Izaguirre 2006:3;
Swyngedouw 2006:51).
Further, water TNCs now appear to focus their expansion plans on
fewer countries, namely “on the potentially most profitable markets” in
Europe, the United States, Canada, Japan and China (Johnson 2004:97;
Marin & Izaguirre 2006:3; Brennan et al. 2004:4). In the last few years
this has provided room for new players to enter the market in developing
countries. The latter have mostly been national and regional firms
from, amongst others, Argentina, Brazil, China and Russia (Coffey 2006;
Marin & Izaguirre 2006:4).
At the same time, critique and protests against private sector involvement
in public water services have led to calls by groupings on the left
for the creation of ‘public-public partnerships’ (PUPs) as a mechanism
for improving public services and negating private sector involvement.
The assumption is that PUPs will protect the public nature of water services
much better than PPPs and will be better at ensuring access to water
for the poor and marginalised, particularly in countries in the South.
It is in this context of changes in public sector management and in
the water sector that we see Rand Water (RW), the biggest public water
utility in Africa, entering the market on the continent, as well as engaging
in other activities that are beyond its core function of providing bulk
potable water to local government in the industrial heartland of South
Africa. This report examines the expansion of RW into non-core activities
in the period 1994-2006. The report covers RW’s expansion within
South Africa and outside of it, considers the rationales offered by RW
for that expansion, and deliberates on this expansion in the context of
similar activities by other public sector operations both in South Africa
and in other countries.
Public is as private does: The confused case of Rand Water in South Africa
What factors explain the expansion of public utilities beyond their
original public service responsibility, both within their home country
and beyond?
What is the relationship between commercial activities and public
service provision, and the unresolved tensions created by these seemingly
contradictory activities as a result of the underlying processes of
corporatisation, commercialisation and marketisation?
How and when do PUPs differ from PPPs?
The research methods used to gather information for this study involved the
analysis of various documents, including legislation and policies related to
water provision, water boards and public sector reform in South Africa, 
minutes
of RW board meetings, reports and papers written and presented by RW
management and the in-house newsletter of RW. In-depth formal interviews
were conducted with senior managers of RW on changes in the organisation
since 1994. Formal interviews were also conducted with local government
officials with responsibility for water services who regularly interact with
RW. Various informal discussions took place with other local government
officials and councillors at the monthly Water Services Forum arranged by
RW. All these interviews and discussions were conducted on condition of
anonymity and thus no names of interviewees are used in the report.
This report begins with a theoretical framework for the commodification
and commercialisation taking place in the water sector before sketching
the legislative background in South Africa that legally enables water 
utilities
such as RW to enter into non-core activities. Background information
on RW and its operations give another frame within which to discuss and
analyse RW’s expansion beyond its non-core activities. Except for providing
RW’s rationales and its policy on engagement in non-core activities, various
examples of its engagement in such activities both within South Africa and
outside of it are provided. These are analysed by also considering what some
other public utilities in South Africa and in other parts of the world 
are doing
with regards to non-core activities. The report concludes by identifying
factors encouraging engagement in non-core activities and by highlighting
the tensions created when public utilities engage in activities as 
commercial
operators, leading to concluding remarks on the nature of ‘publicness’.
•
•
•
The study aims to address a series of broad questions, though the lens of
Rand Water:
3
UNDERSTANDING COMMODIFICATION
AND COMMERCIALISATION OF
WATER PROVISION
4
David Harvey (2004), using a historical-geographical materialist approach,
has theorised about how capitalism has been able to deal with its inherent
tendency to crises of over-accumulation and uneven development. For
Harvey (2004:2), over-accumulation in a specific territorial system 
refers to
“surpluses of labour (rising unemployment) and surpluses of capital 
(registered
as a glut of commodities on the market that cannot be disposed of
without a loss, as idle productive capacity, and/or as surpluses of money
capital lacking outlets for productive and profitable investment)”.
To avoid such surpluses being devalued ways must be found to use it.
Harvey argues that capitalism makes use of spatio-temporal fixes, or what
Bond (2004) has called “shifting and stalling”. This entails that “such 
surpluses
may be absorbed by (a) temporal displacement through investment
in long-term capital projects or social expenditures (such as education and
research) that defer the re-entry of current excess capital values into 
circulation
well into the future, (b) spatial displacements through opening up new
markets, new production capacities and new resource, social and labour
possibilities elsewhere, or (c) some combination of (a) and (b)” (Harvey
2004:2). This leads to areas/sectors not previously exploited by capital and
marketisation now being actively used to extend the reach of markets to
prevent a crisis of over-accumulation. The neoliberal project is an example
of this attempt to deal with over-accumulation since the 1970s.
Broadening Marx’s notion of primitive accumulation (i.e. dispossession/
separation of labour from the means of production in a specific 
precapitalist
context), and drawing on the work of Rosa Luxemburg, Harvey
calls these new fixes ‘accumulation by dispossession’. It involves the
accumulation of wealth based on changing property rights and relations,
which is different from accumulation through labour processes/expanded
reproduction. Through privatisation, for example, low-cost public assets
are released which can absorb surplus capital (Harvey 2003:184-5). Utility
services – since the turn of the 20th century provided mostly by the
public sector – and nature, including water, have become part of the
new frontiers exploited by investors in their search for new opportunities
for profitable capital investment (Swyngedouw 2006:49). Public services
and nature are thus being commodified; such commodification and
Public is as private does: The confused case of Rand Water in South Africa
5
privatisation of environmental commons has been referred to as the new
‘enclosure of the commons’.
Castree (2003:275) argues that the process of capitalist commodification
(and its effects) is different for the particular natures that are being 
commodified.
In such a particular nature, the water sector, Swyngedouw (2005)
applies Harvey’s framework. For one, there has been a shift from water as
a common pool resource to private economic good and commodity (Mehta
2003:561; Swyngedouw 2006:61). But as Swyngedouw (2006:64) rightly
indicates, water commodification “has been part and parcel of modern
development, of modern irrigation, and of the urbanisation of water” and
is thus not a uniquely recent phenomenon. And Sayer (quoted in Bakker
2005:545) reminds us that commodification “is not so much a durable state
as a series of passing moments, and is continually being negated in 
consumption
or use”, while Castree (2003:277) makes clear that commodification
indicates that “the commodity status of a thing, object, idea, creature,
person or what-have-you is not intrinsic to it but, rather, assigned”.
Commodification cannot then be understood as a linear process but
should be seen as an ongoing process which is contested, and therefore 
uneven,
partial, transient and not inevitable (Bakker 2005:545; McDonald &
Ruiters 2006:15). Furthermore, water is not a resource that makes it easy to
commodify; it is characterised by two major market failures, namely natural
monopoly and externalities (see Bond 2001). This leads Bakker (2004;
2005:544-6) to refer to water as an “uncooperative commodity”. Despite
this, what we are seeing currently is an intensification of the process of
water commodification and “debates over the form that the commodification
process” take (Swyngedouw 2006:58), as part of capitalism’s attempt to
deal with its crisis of over-accumulation.
We should conceptually differentiate such a commodification process
from ownership issues and privatisation. Swyngedouw (2006:64) highlights
the common fault to equate public ownership with a non-commodified
form of service delivery, which is of crucial importance for this 
report. Mc-
Donald & Ruiters (2005a:3) describe commodification as the “transformation
of all social relations to economic relations, subsumed by the logic of
the market”. It involves “any act, practice or policy that promotes or 
treats
a good or service as an article of commerce to be brought, sold, or traded
through market transactions.” (McDonald & Ruiters 2005b:20). Bakker
(2005:545) indicates how commodification entails socioeconomic, discursive
and material transformations in goods to make them marketable, while
Castree (2003:279-82) identifies various principal elements of 
commodification
as including privatisation.
In water supply, commodification is then the process of how water services
become a commodity, how the market as a social institution influences
access to water and encourages consumerism and individualism. Competition
and efficiency become key aspects influencing allocation. In the process
the exchange value of water dominates over its use value (Marx 2001:18).
MSP
6
Further, a shift occurs from the state hydraulic paradigm with its state 
ownership,
subsidisation, and universal access for citizens to supply-led water
services, to private control of utility networks that sells a commodity to
consumers leading to selective access (Bakker 2002; 2005:546).
Privatisation, on the other hand, indicates a process of increased 
involvement
of non-state actors – mostly the private sector, but also nongovernmental
organisations (NGOs) and community organisations – in the delivery
of a service. It ranges from service contracts, management contracts,
lease agreements, BOT-arrangements and concessions to outright sale of
state assets (divesture). Private sector participation in water supply 
(PPPs) is
about the participation of private companies and private capital through a
variety of contractual arrangements in building, managing and maintaining
water infrastructure on behalf of the public sector, leading to a continuum
of public and private mixes in water provision.
A further distinction should be made between privatisation and 
commercialisation
of water supply. Bakker (2005:544) describes privatisation
as a process of organisational change where there is a shift in ownership
and in management from the public to the private sector, while 
commercialisation
is a process of institutional change where the management
institutions (the rules, norms and customs) change to allow for the 
introduction
of commercial principles (like full cost recovery and competition),
commercial methods (like cost-benefit analysis, ringfencing and performance
contracts) and commercial objectives (like short-term financial
bottom-line and profit-making). It is about running a public service like a
business, without necessarily any direct private sector actor involvement.
It is thus a process of reforming state practices by introducing private 
sector
practices and values to the public sector, thereby blurring the distinction
between state and market (Kihato & Schmitz 2002:11).
This is in line with what New Public Management (NPM) approaches
advocate. Such commercialisation fundamentally alters the underlying
managerial ethos of public services provision and this influences issues
and practices on equity, social justice, subsidisation, integrated and 
longterm
planning, how water is priced and valued, accountability and citizenship.
The debate should therefore not focus on public versus private
ownership, but the principles underlying the delivery of public services
like water supply. This does not mean that ownership of assets does not
matter, however; it does, especially in terms of potential public influence
and control over the service.
Public sector organisations are supposed to serve a certain interest, as
do private sector organisations. In the case of the public sector it is 
meant
to serve the public common interest: society as a whole and in its plurality
(Ranson & Stewart 1994:60). Hoedeman (2006:4) defines publicness
“as commitment to the public interest and accountability to the public”.
Ranson & Stewart (1994:27) further identify public purpose as “distinguished
by a concern to identify needs rather than demand, and to serve
Public is as private does: The confused case of Rand Water in South Africa
rather than accumulate profit”. Certain criteria for practices are also very
particular to the public domain, with equity being the most important, 
according
to Ranson & Stewart (1994:97), and universal provision, accountability,
transparency and democracy being others. The equity principle
finds flesh in practices such as cross-subsidisation across classes, 
genders,
areas/regions, sectors, etc. Furthermore, while competition is sought in
markets, cooperation is meant to be the basis for interaction in the public
sector (Ranson & Stewart 1994:138). The argument is thus that the unique
qualities of the public sector require unique patterns of organisation and
management (Ranson & Stewart 1994:29), meaning private sector principles
and practices cannot necessarily be applied in the public sector.
But instead of allowing management approaches to reflect the particular
organisational purposes and conditions (Ranson & Stewart 1994:36),
NPM-approaches have come to promote the application of private sector
principles and practices in the public sector.
NPM came to the fore in the 1980s to early 1990s, especially in the
United Kingdom (UK), United States, New Zealand and Australia, as an
approach to public sector reform and it has attained hegemonic status in
many countries (Osborne & Gaebler 1992; Pollitt & Bouckaert 2000). NPM
should be placed in the context of neoliberalism and the shift to 
governance,
which is part of a wider shift from Fordist regulation to post-Fordist,
flexible accumulation.
NPM approaches advocate a vartiety of structural, organisational and
managerial reforms in the public sector. Kaul (quoted in Batley & Larbi
2004:15) argues that underlying such changes is a shift from government
concerned with doing, towards government simply ensuring “that things
are done”; or what Denhardt & Denhardt (2003:16) call “steering rather
than rowing”. It leads to a separation between actual delivery and 
management/
policymaking in services (Batley & Larbi 2004:36). Clear distinctions
are also made between ownership and management, purchaser and
provider, and core and non-core activities (Hassen 2004:4). NPM thus
provides room for actors other than government to provide public services
(Batley & Larbi 2004:15; Mackintosh 1997:4). When other actors become
involved, partnerships and relational contracting are expected. Government’s
indirect roles become policymaking, enforcing the law, ‘enabling’
providers and regulating. This is what the re-organisation from government
to governance involves.
Corporatisation is one organisational form that the new managerialism
promotes (Batley & Larbi 2004:44-5). Through corporatisation public entities
mimic business discourses and entrepreneurial practices. Variations on
the corporatisation model include a business unit within a government 
department
or a corporatised utility. What the various corporatisation models
have in common “is a particular approach to accountability: government
becomes the single client for a publicly-owned, yet institutionally separate
service provider” (Smith 2006:2).
7
MSP
For corporatisation to happen two organisational shifts must occur, namely
financial ringfencing and managerial ringfencing (McDonald & Ruiters
2006:12, 18). Financial ringfencing involves a process of “all resources
directly involved in the delivery of a service [being] separated from 
all other
service functions”; and “where resources are shared by more than one
department (e.g. information technology, vehicles) the ringfenced entity
pays the other unit a full-cost fee for the use of those resources.” The 
aim of
such financial ringfencing is to clearly identify all costs and revenues 
related
to the delivery of a specific service to allow managers to identify areas of
financial loss/gains.
Furthermore, financial ringfencing makes it possible for financially driven
performance targets for managers to be introduced. This encourages managers
to narrowly focus on the financial bottom-line of making surplus, as this
will increase their remuneration. These narrow accounting methods allow
managers to give less or no consideration to ‘political’ issues such as 
race,
class and gender equity, health considerations, economic multipliers and the
environment – also known in orthodox economics as externalities, and to be
understood as a practice of cost-shifting (Martinez-Alier 2002:271).
Managerial ringfencing, on the other hand, ensures that these separate
business units and entities are managed by appointed officials at arm’s
length from the public authority. While elected officials still set service
delivery goals and standards, and monitor and evaluate them, the day-today
management and long-term planning is left to the management of the
ringfenced entity. But such managerial ringfencing leads to “inefficient,
near-sighted planning and operational patterns whereby water managers
are unaware of planning and operations in related services such as waste
management, storm-water drainage or health services, leading to potentially
serious health concerns” (McDonald & Ruiters 2005a:8).
Furthermore, in the process of corporatisation separation of elements of
service provision may occur, called unbundling. The aim of vertical and
horizontal unbundling is to increase competition and to have multiple 
service
providers compete with each other. Vertical unbundling, as happened
in electricity industries in various countries, involves the separation of
production/generation (which can be competitive) from distribution (which
tends to be monopolistic). Horizontal unbundling, on the other hand,
means that a service is broken up geographically or by category of service
(Batley & Larbi 2004:33).
But due to the nature of water supply a natural monopoly occurs, making
direct competition nearly impossible and unfeasible in most cases. We
are rather seeing “various forms of competition for, rather than in, the 
market”
and simulated competition being introduced by the state in the water
sector (Bakker 2003:331, own emphasis). One way of simulating competition
is to remove state subsidies and force state-owned entities to compete
for finance with private firms. The phasing out of subsidies to water boards
is an example of this being applied in South Africa. All of these 
indicate the
8
Public is as private does: The confused case of Rand Water in South Africa
active role played by the state through selective deregulation and 
re-regulation
to create a ‘competitive’ environment.
While corporatisation does not have to mean an eroding of the public
service ethos, Smith (2006:2) indicates how in the South this is often 
the case
due to lack of human resources and capacity, insufficient financial 
resources,
sometimes lack of political will and many low-income users of a public
service. Efficiency imperatives then tend to dominate over equity concerns.
When economic maximisation becomes the goal, social and political values
such as equity, social justice, universal access and democracy tend to be
ignored as the service is removed from its historical, spatial and 
sociopolitical
contexts. A further worrying element, highlighted by Swyngedouw (2006:58),
is “the changing character of knowledge within the water sector. Information
that was once in the public domain becomes commodified, takes on
commercial significance and is often treated as confidential”. This 
radically
changes the nature of participation, democracy and accountability.
These processes of commercialisation and corporatisation of water services
as part of the intensification of a process of commodification of water
are being playing out in the South African water sector in contradictory 
ways,
as will be discussed next.
9
WATER PROVISION IN SOUTH AFRICA:
REALITIES AND TENSIONS
The intensification of water commodification globally coincided with the
end of apartheid in the 1990s and has led to contradictions and tensions in
the policies and realities of water provision in South Africa. The challenge
is not just to maintain the existing system and expand the water supply
system to the unconnected (thus addressing unequal access), but also to
reduce water demand due to biophysical water scarcity.
Some – including government – believe that water should be valued as
an economic good to promote its wise use (Earle 2005:3) and ensure that
all have access to some water, instead of some having access to all water.
But in its efforts to ensure this, government is implementing schizophrenic
policies. While Muller & Uys (2004:19) claim that government is attempting
to balance the commercialisation of the water sector and the constitutional
right to access water, the complexity of such a task makes it nearly
impossible, and leads rather to the contradictions, tensions and injustices
we see in the reality of water provision in South Africa.
While in 1994 fourteen million people lacked access to water, by 2003
this was reduced to five million South Africans (11 percent of the 
population)
not having access to clean water within 200 meters of their home
(DWAF 2003). Government’s objective was to clear the backlog by 2008.
The idea is that once the backlog is met, people should move up the ‘water
ladder’ over the next ten years. But the increased provision of water 
infrastructure
and the introduction of ‘free basic water’ in June 2001 do not
mean that water supply is spread across the country evenly – race, gender,
class and space remain markers of inequality in access to water, as does the
amount of water used by agriculture and industry.
Neither does increased water infrastructure provision mean affordability,
sustainability, reliability and continued access to such infrastructure 
and services.
And it also does not mean that good quality of drinking water is provided.
One of the key influences on RW’s engagement in non-core activities
has been the institutional reform within the South African water supply
sector since 1994. Apartheid water provision in urban areas happened
through a three-tier system: the national Department of Water Affairs and
Forestry (DWAF) was responsible for raw water supply via management of
river basins, and building and maintaining impoundments and dams; water
boards (like RW) were statutory bodies acting as regional public water
10
Public is as private does: The confused case of Rand Water in South Africa
utilities responsible for supplying potable bulk water to local government
and large industrial users; and local government distributed retail water to
households and businesses. But a new institutional set-up means that the
new water supply chain is from the still-to-be-formed National Water 
Resources
Infrastructure Agency (NWRIA), to regional water utilities (i.e. water
boards), to water services providers (WSPs) who have been contracted by
a water services authority (WSA) (i.e. local government) to provide water
in its area of jurisdiction directly to households and other users. With 
local
government given the constitutional responsibility to ensure access to
water, there has been a shift in the role of DWAF from being a provider and
directly involved in operations to being sectoral leader with policymaking
and regulation functions. Further, the new institutional set-up requires 
that
where a WSA provides water itself, it has to do so through a separate 
entity,
called an internal WSP. The functions of WSA and WSP are thus to be
clearly separated, with WSAs having political responsibility for water 
provision
but WSPs doing the actual delivery of water and being accountable to
WSAs through contracts in the form of service delivery agreements. A WSA
can also contract an external WSP (either private or public). These remind
of NPM-practices; it is not surprising that such practices as 
ringfencing and
corporatisation are being implemented in the South African water sector as
DWAF turns to Australia, the Netherlands, the UK, France, Japan and the
United States to learn lessons about institutional reform in the water 
sector
(Langford 2004:4; Nokeri 2006:8)
One aspect of the new institutional set-up has been that the private sector
has become increasingly directly involved in water provision. Except
for the twelve presidential lead projects and BOT-schemes of DWAF, the
Department of Provincial and Local Government (DPLG) and the National
Treasury have been promoting the use of PPPs at local government level
(Johnson 2004:1), with local government’s role to create an enabling 
environment
for service providers to operate in.
But despite much being made of PPPs by both government and its
critics, in general the water provision sector is heavily dominated by
government and parastatals (Jones & Williamson 2005:29); only five lease
contracts have been entered into with private companies, and three of these
contracts (all with Suez) pre-date 1995. This low number of contracts was
due in part to strong resistance from civil society to direct involvement by
the private sector in water supply. Although protestors have been vilified
by government as ‘counterrevolutionaries’ and ‘ultra-leftist’, their 
resistance
has led to a shift. Although in the mid- to late-1990s there was a penchant
in PPPs for long-term contracts (Bond 2003:12; Bond & Ruiters 2001:363),
the trend is now towards management contracts of a short-term nature.
While water supply in South Africa is still state-centred, and will 
seemingly
remain so for a while, it is not state-exclusive.
More significant has been the spread of private sector management principles
in the public provision of water services. While principles like equity,
11
MSP
the right to access water and community participation featured prominently
in the mid-1990s, these have over time become replaced in prominence
and effects by practices of ringfencing, full cost recovery and efficiency.
One example of such dominance of market language and practices is the
contractualisation of the water supply chain. Other market practices that
have become standard in South Africa are the implementation of full cost
recovery and congruent credit control practices like water disconnections,
reducing water supply through flow limiting devices and prepaid water
meters for poor households. Further, since the early 2000s municipalities
and other water institutions follow the central state in referring to 
water users
and consumers as customers and have adapted ‘customer charters’ and
created ‘customer service centres’ (Ruiters 2005). Such market language and
the general trend of treating water provision as a business rather than as a
public service (Cosatu & Samwu 2003:19), undermine social justice language
and have very worrying implications for the still-unserved and poor
people’s realisation of their right to water.
Where do water boards such as RW, as ‘public utilities’, fit into this 
restructuring
of the water sector in South Africa? There is much uncertainty
about the answer to this question, as water boards are “somewhat of an
anomaly within the institutional framework” of water supply (Eberhard
2002:9). Although water boards existed before the 1997 water legislation,
this legislation changed the nature of their relations with local government
and DWAF, and generated uncertainties about their future roles and
continued existence.
Firstly, the nature of the relationships between water boards and 
municipalities
has been fundamentally altered. Whereas before, especially in
the case of the bigger water boards, water boards held sway and set the
terms of a relationship, local government is now the authority. Mike Muller,
former director general (DG) of DWAF, explained that water boards had to
prove their value to local government if they wanted to survive (Business
Day 22 November 2000), while then-Minister of Water Affairs, Ronnie Kasrils,
also urged water boards to reposition themselves to be more efficient
and customer-orientated, rather than using their monopoly position to
dictate terms to municipalities (in Wijesekera 2003:33). A proposed National
Water Services (revision) Bill (DWAF 2006) holds even further drastic
changes for the relationship between water boards and local government,
with the proposal being to give more power to WSAs vis-à-vis water boards.
The 2003 White Paper, Strategic Framework for Water Servcies (SFWS),
indicated that “the existing role and institutional structure of water 
boards
may change during the broader process of the institutional reform of water
services provision” (DWAF 2003:18). This paper held as options that some
water boards could remain as primarily bulk water suppliers (i.e. status
quo), others could be transformed into municipal-owned utilities and others
(probably the big water boards like RW and Umgeni Water) could be 
transformed
into source-to-tap public utilities (both bulk and retail WSPs or verti-
12
Public is as private does: The confused case of Rand Water in South Africa
cally integrated water utilities) or multi-jurisdictional water service 
providers
(Muller 2003:4). The expectation was that the role of water boards was to
be clarified in the Institutional Reform of Water Services Provision 
Strategy
(DWAF 2005a), but when a draft of this strategy was released in October
2005 it still had no clear decision about the future of water boards.
DWAF would appear to be leaning towards regional vertically integrated
water utilities, especially in cases of poor performance where regulation
and support to local government have not improved performance
(Nokeri 2006:7). In this regard two senior DWAF officials – Mike Muller
and Marie Brisley (2005) – acknowledged that DWAF was looking to
learn lessons from the restructuring process ongoing in the South African
electricity industry, especially the creation of regional electricity 
distributors
(REDs). What this model implies for the water supply sector is that
the newly announced NWRIA would act as the wholesale supplier of raw
water – “de facto, an Eskom [the state-owned electricity provider] of the
water industry” (Financial Mail 12 August 2005). Water boards could possibly
play the role of transmission companies who would take raw water
from the NWRIA, treat it and supply it to water REDs. Wall-to-wall water
REDs (see National Treasury 2006:864) – co-owned by local and national
government – would buy the raw water from the NWRIA, treat it, distribute
potable water directly to households, collect waste water and treat it
again before discharging or recycling it.
Acceptance of the RED-model in the water supply sector has not yet
been achieved, however, and is proving very complicated. One reason is
that the political and legal obstacles and lessons from the electricity 
sector
concerning its reforms are not all that encouraging (see Thelani Consulting
quoted in Wijesekera 2003:57).
Despite – or because of – all the uncertainty, water boards have been
repositioning themselves to act as regional water utilities offering a full
range of water services. In 2001, the South African Association of Water
Utilities (SAAWU), to which most water boards belong, adopted such a
strategy (Connolly 2001). This strategy is based on continuing with their
primary activity of bulk water provision, but expanding into non-core
activities. The Water Services Act of 1997 in section 29 (RSA 1997:31) 
indicates
that water boards’ primary activity remains “provid[ing] water services
to other water services institutions within its service area”. This involves
bulk potable water provision and bulk sanitation services.
The Act also allows water boards to engage in what it calls ‘other 
activities’.
Such other activities may include acting as a local WSP contracted
by a WSA to provide water directly to households, supplying untreated or
non-potable water to end users who do not use the water for household
purposes, wastewater treatment, catchment management services, performing
water conservation services, providing management services, and
training and other support services to other water services institutions 
(RSA
1997:32). Section 30(1) of the Act specifies that a water board may only
13
MSP
engage in an activity other than its primary activity if: “(a) it is not 
likely to
limit the water board’s capacity to perform its primary activity; (b) it 
is not
likely to be to the financial prejudice of itself, any water services 
institution,
existing consumers and other users serviced by it within its service 
area; (c)
it is in accordance with the board’s policy statement; and (d) it is 
provided
for in a business plan” (RSA 1997:32). The assumption is that water boards
will provide these activities at a profit, and through this surplus fund 
their
primary activity, as the priority of water boards must remain its primary
activity. In light of DWAF’s decision that water boards are expected to be
self-financed, and that subsidies to water boards would be phased out and
ceased after 2005/6 (DWAF 2004a:i), engaging in such profit-making and
income-generating activities is seen as crucial for their continued 
existence.
Except for a profit-motive in other activities, the Water Services Act in
section 41(1) states that the Minister may direct a water board: “to 
undertake
a specific activity (i) at its own cost where the activity is financially
viable; or (ii) against full or partial payment, as directed by the 
Minister”
(RSA 1997:40). The Minister may also direct a water board to desist from
a specific activity (RSA 1997:40). For all primary and other activities 
water
boards have to enter into a written agreement, according to section 32(b)
of the Water Services Act (RSA 1997:33). Furthermore, primary and other
activities have to be managed as separate units (RSA 1997:40), though the
act does not stipulate how such ringfencing of other activities must happen.
Except for engaging in other activities in South Africa, an amendment to
the Water Services Act in October 2004 enables water boards to engage in
activities outside of the borders of South Africa. This was introduced 
despite
strong opposition from local government. The motivation for the amendment
was to legalise Umgeni Water’s extraterritorial operations (see below)
and enable RW to bid for a project in Jordan (RSA 2004:3; RW Board June
2003:584). The amendment stipulates that the Minister of Water Affairs
and Forestry, in consultation with the Minister of Finance, must authorise
an activity by a water board outside of South Africa. This can only happen
after the Minister, in consultation with the Ministers of Finance, Trade and
Industry, and Public Enterprises, and by notice in the Government Gazette,
has determined the nature of the activities, the countries in which such
activities may be performed and the maximum amount of capital a water
board may take out of South Africa (RSA 2004:2).
Fawcett Ngoatje, then-director for international relations at DWAF,
acknowledged in an interview in late 2005 that, except for the initial 
approval,
there was no regulation of water boards when they go into Africa.
A draft of the proposed National Water Services (revision) Bill, however,
holds the potential to curtail these engagements outside of South Africa. If
the 2006 draft is accepted, water boards will have to get consent from the
Ministers of Finance, and Water Affairs and Forestry, as well as the consent
of all WSAs to whom it provides water services, for any extraterritorial
activities. Furthermore, for all other activities within South Africa water
14
Public is as private does: The confused case of Rand Water in South Africa
boards will have to get approval from each WSA to whom it provides
water services. But this bill still has some way to go before it is accepted
as an act, though.
All these factors have influenced water boards to become commercially
focused, directing them to commercialisation and to engaging in other 
activities.
But before looking at how RW has given flesh to its statutory right
to engage in other activities both within and outside of South Africa, it is
useful to sketch a brief picture of RW’s primary operation – the 
provision of
bulk water in the Gauteng province and surrounding areas – and how this
impacts on its engagement in other activities.
15
ABOUT RAND WATER
Rand Water – originally named the Rand Water Services Board – was
formed in 1903 under its own statute as the first bulk supplier of potable
water in South Africa, with responsibility for providing water to the gold
mining industry and towns on the Witwatersrand. Over the years RW has
grown and remained the biggest water board in South Africa – 15 times
larger than its nearest equivalent, Umgeni Water (Tempelhoff 2003) and the
largest public water utility in Africa (RW 2006:4; Umsebenzi May 2003:7;
Verschoor 2006:1). RW has expanded its area of supply to cover Gauteng
and parts of the Free State, Mpumalanga and the Northwest province, giving
it a supply area of 18 000km².
The primary function of RW is the abstraction, purification and
distribution of bulk potable water. For abstraction RW draws 99 percent
of the raw water it uses from the Vaal dam, which is fed by the Vaal
and Wilge rivers (RW 2005a:15). Since there are not sufficient water
resources in Gauteng, a series of water transfer schemes (from the Katse,
Mohale, Sterkfontein, Grootdraai and Woodstock dams) have been necessary.
These transfer schemes rank amongst the most sophisticated in
the world (Ashton & Haasbroek 2002:188).
The water transfer from the Katse and Mohale dams in Lesotho,
phase one of the Lesotho Highlands Water Project (LHWP) completed
in 1998 and 2003 respectively, has been highly controversial. RW had
argued against the start of phase 1b of the LHWP, and then was able,
with others, to persuade DWAF’s technical team to defer phase 2 (Cooks
2004:226; RW Board May 2001:425). RW’s projections are that a new
scheme to further augment water resources would be necessary around
2020 (Thomson 2005).
After abstraction from the Vaal Dam, RW has to lift the flow of water
about 380 meters to purification and booster pumping stations. Its
distribution system entails a network of 3 400km of pipelines of large
diameter and 53 service reservoirs (Cooks 2004:150; Nkabinde 2006).
Currently RW’s capacity to supply bulk potable water is 5 500 megalitres
per day (Ml/d), of which on average only about 3 500 is used, with
the highest daily demand of 4 227 Ml/d experienced in December 2003
(RW 2004a:8). By 2006 only 59 percent of RW’s raw water installed
capacity was used, 70 percent of its treatment capacity, 66 percent of its
primary pumping capacity and 64 percent of its booster pumping capacity
(RW 2006:17). This means that infrastructure development by RW has
kept well ahead of water consumption, leading to large surplus capacity in
RW’s bulk water supply system. Due to the age of the distribution system
16
Public is as private does: The confused case of Rand Water in South Africa
17
(some of the pipelines are over 50 years old and reaching the end of
their design life), RW faces huge maintenance costs, with R1 billion set
aside in 2005 to be spend over the next five years for replacement and
refurbishment (Aquavita 9th issue 2005a:2; Business Report 28 September
2005). If one also considers that about 52 percent of the water
that RW supplies everyday is either lost or wasted/used inefficiently by
RW’s customers and end users (Buckle 2004; Water Sewage & Effluent
2004a:38), then once leaks and wastages are addressed (a current
priotity with RW’s customers) – and in the light of slow growth in water
demand – RW’s overcapacity will be even higher.
RW distributes bulk water to three metropolitan municipalities, 13 local
municipalities, 45 mines and 330 industries. It also provides potable water
directly to 570 households. In 2005/6 about 91 percent of RW’s water sales
were to municipalities, 6.7 percent to mines and the rest to other water 
users
(Nkabinde 2006). Altogether RW supplies 3.45 billion litres of water per
day, and indirectly serves over 12 million people (RW 2005b:11), nearly a
quarter of the South African population.
RW’s water quality compares with the best in the world – in the 1990s
the World Health Organisation rated RW’s water quality as in the top three
in the world (RW 2002a). Further, RW’s own water quality standard is
higher than the SABS 0241:2001, the national standard for drinking water
quality (RW Board December 2004:701).
RW is a public utility with accountability to DWAF. In terms of the
Public Finance Management Act it is classified as a schedule 3B national
business enterprise (RW 2001a:8). RW defines itself as a not-for-profit
public utility but runs on strict business lines (RW 1996:4). It has a 
nonexecutive
board appointed by the Minister of Water Affairs and Forestry,
with representatives from the major stakeholders of RW like municipalities,
mines, commerce and provincial government (RW 2005a:3).
A portfolio integrating committee, comprised of the chief executive (CE)
and five portfolio heads is delegated day-to-day management by the board.
The managerial and organisational structure of RW is aligned into various
portfolios, based on process integration and key organisational outputs, to
supposedly ensure better organisational performance and facilitate growth
in full water services provision (RW 2005b:32-3). In RW’s view this will
help it to achieve its vision: to be “the industry leader and partner of 
choice
in sustainable water services” (RW 2005a:2; RW 2005b:28), which is to be
achieved by 2011 (Nkabinde 2006).
The values underpinning RW’s interactions with internal and external
stakeholders are excellence, spirit of partnership, care, integrity and 
equity.
Its key strategic objectives to guide its activities, budget and 
business focus,
are “to ensure that RW continues to be a viable and sustainable full water
services provider; to position RW as the partner of choice in water 
services,
to satisfy all customers, to improve efficiencies and quality, to achieve
MSP
transformation, [and] to create a dynamic learning organisation” (RW
2005b:11). Keith Naicker (2006), the chief operating officer of RW, 
summarised
these objectives in a presentation to the provincial and local government
parliamentary portfolio committee as “people, planet and profits”,
exactly how Umgeni Water states its “triple bottom line”.
Different from other water boards in South Africa, RW has never received
any subsidy from government for its core function (RW 2005a:3). Its revenue
traditionally has come from the sale of bulk water and capital raised in
financial markets through bonds and loans (none government-guaranteed).
RW claims to have operated on a full cost-recovery basis throughout its
history, as well as a not-for-profit basis as required by its statutes 
(RW 1978;
RW 2005a:3). But throughout its existence cost recovery has been seen to
include all working costs (including maintenance costs), management and
repayment of loans and an appropriation to reserves (RW 1978). Built into
Financial
year
Revenue
for year
(billion)
%
growth in
revenue
year-onyear
Surplus
(million)
%
growth
in
surplus
yearon-
year
Total
potable
water
sales
(Ml/d)
%
growth
of
potable
water
sales
year-onyear
Number
of employees
at end
of year
2005/6 R3.672 6.1 R593* 19.7 3457 0.9 3006
2004/5 R3.460 6.2 R502* 34 3452 1.1 3049
2003/4 R3.258 13 R375* 33.5 3414 2.2 3097
2002/3 R2.884 16.2 R281 45.1 3340 6.3 3108
2001/2 R2.481 13.8 R193 129.8 3143 4.6 3105
2000/1 R2.180 8.7 R84 -33 3005 2.2 3249
1999/02 R2.005 7.9 R135 0 2941 1.55 3339
1998/9 R1.859 -4.3 R135 -47 2896 3.4 3337
1997/8 R1.942 80.5 R258 36.5 2801 5.5 3258
1996/7 R1.076 13.4 R189 -22.5 2656 7.6 3082
1995/6 R0.948 1.8 R244 9.4 2469 -12.8 2824
1994/5 R0.932 16.2 R223 2832 2645
Table 1: Key performance indicators of RW since 1995
* Restated in 2006 as R494 and R392 respectively
(Source: Business Report 3 November 2006; Nkabinde 2006; RW
2006:103; RW 2005b:5; RW 2004a:1,28, 83,109; RW 2002b:39,46-7)
18
Public is as private does: The confused case of Rand Water in South Africa
19
the bulk water tariff is thus a portion for surplus, which in the mid-2000s
is targeted at 15 percent (RW Board June 2003:580; personal interview).
This, as well as various efficiency measures implemented by RW since the
early 2000s and continuous growth in water sales, led RW to a net surplus
of R593 million in 2005/6, a 20 percent increase from the R502 million
surplus in 2004/5 (RW 2006:29,103). Revenue for 2005/6 was 6.1 percent
higher at R3.672 billion (Business Report 3 November 2006; RW 2005b:5),
as indicated in Table 1.
What is clear from Table 1 is that since 2001/2 RW has been experiencing
commercial growth, with surplus growth per year for the majority of this
period consistently over 30 percent. As RW is not supposed to make a profit,
such surplus is justified and used as capital for new infrastructure works
and to pay off RW’s debt; RW refers to such surplus as “not profiteering but
recovering cost of capital” (RW 2004c). In 2004/5, for example, the surplus
of R502 million was mainly appropriated for debt service (30.3 percent of
the total surplus), new capital works (33.6 percent) and provision for debt
redemption (35.1 percent) (RW 2005b:39). By the end of the financial year
of 2006, RW had accumulated reserves of R3.772 billion (RW 2006:103).
It is also clear from Table 1 that while profits have gone up, RW’s
number of employees has been decreasing slowly since 2000. In 2006 RW
employed 3006 staff, down from 3339 in 2000 partly due to the decision
in 2002 to close down the steamplant at Vereeniging in a phased manner.
Perceptions within RW among managers and support staff are that
staff turnover is high, especially amongst professionals who have scarce
skills (Aquavita 3rd issue 2004:3). RW acknowledges that it has an 
increasing
labour turnover among key long-serving staff and is losing skills due
to older white men retiring or leaving RW and others (mainly young black
professionals) being attracted by higher salaries elsewhere (Nkabinde 2006;
Verschoor 2006:2, 7).
RW had been undergoing changes before 1994 but changes in policies
and structures sped up with the appointment of Simo Lushaba as the first
black CE of RW in 2002. He was brought to RW from Spoornet by the RW
Board to drive business and social transformation within the organisation.
Under him the key business drivers were identified as customer focused,
maintaining high product and service quality, achieving business growth
through partnerships, creating a high performance organisation and effective
transformation (RW 2005c:1). He was to create a customer-driver organisation
that could take advantage of new business opportunities in South Africa
and Africa (Dube 2002:55).
For Lushaba the only way to grow the business was by being entrepreneurial
(Financial Mail 3 October 2002). This meant increasing the speed
of commercialisation and corporatisation of RW to change it from being
primarily a public engineering organisation (how Laburn (1979:93) referred
to RW) to a state enterprise in which financial sustainability and 
efficiencies
have become paramount.
MSP
This focus on efficiencies under Lushaba was not linked to a financial 
crisis
within RW (as was the case with Umgeni Water – see Loftus 2005), but was
rather the result of policy directives from DWAF and the permeation of the
South African macro-economic policy context and neoliberal hegemonic
water discourse. Nevertheless, within RW there is much contestation about
the intensification of its corporatisation. While at top management and
board level there seems to be support for this drive, at lower levels much
rumbling is heard.
Since the mid-1990s RW has slowly been expanding its activities beyond
bulk potable water supply. With the acceptance of the Water Services
Act in 1997, RW is now legally becoming involved in the full cycle of
water services, including bulk water supply and retail water, bulk and 
retail
sanitation, and resource protection (RW 2005a:2; 2005c:1). In pursuit of
this strategy RW has expanded both the geographical area of its bulk water
supply, and has expanded beyond bulk water supply into other activities in
South Africa and in other countries.
20
21
WHY RAND WATER IS ENGAGING IN
OTHER ACTIVITIES
The rationales provided by RW for engaging in activities beyond bulk water
supply can be found in its corporate policy, its five-year business 
plans, and
statements made by senior management of RW. The rationales vary depending
on the type of activity engaged in, and whether the other activity is
done within South Africa or outside its borders.
RW states that its intentions for engaging in other activities are defined
in the Water Services Act of 1997. The criteria used by RW are that it
must: support RW’s strategic intent and objectives; be “related to the water
services sector”; “support and enhance the performance of RW’s primary
activities for the benefit of stakeholders”; and “support and strengthen the
capacity of water service authorities [i.e. local government] and 
institutions
in providing effective, efficient, sustainable and cost-effective water 
services
provision to customers in RW’s service area” (RW 2005a:8; 2005c:2). We
categorise the rationales provides by RW into three groups, namely: 
promoting
public interest; supporting the New Partnership for Africa’s Development
(NEPAD) plan; and RW’s own commercial interest.
Promoting Public Interest
For RW the rationale of acting in the public interest when engaging in other
activities is about supporting local government as WSA, engaging in 
corporate
social responsibility and about RW’s role as a public utility.
RW aims to support local government both because it is a statutory
requirement for water boards and because municipalities, as RW’s main
customers for bulk water supply, are facing various problems that might
impact on the financial sustainability of RW if these are not addressed (RW
Board May 1998). One of the constraints is the critical lack of appropriate
skills municipalities are experiencing. RW sees itself being able to help in
this regard (RW 2002a), describing itself as a multi-skilled 
organisation of financial,
managerial, technical and operational skills (Duvel & Nel 1998:iv).
RW also feels that it can help with another constraint faced by 
municipalities:
their difficulty in accessing adequate finances (RW Board May
2002a). In this regard RW states that its excellent financial rating enables
it to access financial markets to generate funding for infrastructure 
development
and other projects at local government level (Duvel & Nel 1998:14;
RW 2002a). But any assistance to local government is only provided on a
MSP
cost-recovery basis: “Rand Water can and will only perform this role if 
government
provides the required subsidies” (RW Board May 2002a).
RW does engage in activities such as poverty relief, job creation and
sustainable development, as part of what it calls its corporate social 
investment
(CSI), which is supposedly beneficial to poor communities and in the
interest of the public. Such activities involve community-based projects
funded by both RW and external sources, and managed by the RW Foundation.
But as will be shown below, RW’s CSI activities highlight the tensions
between the public nature of RW and its commercial drive where CSI is
rather used as a marketing tool.
In terms of its role as a public utility, RW argues that it has a role in
meeting the socioeconomic needs of South African society. This role RW
sees as different to the one played by the private sector via CSI. In a 
position
paper prepared by RW for the World Summit on Sustainable Development
(WSSD) in 2002, RW said “it can be argued that although the private
sector can bring efficiencies in certain areas, if equitable considerations
are to be also served in a financially sustainable manner, then there should
also be a role for public water providers – particularly in terms of 
improving
access to basic water and sanitation services to the poor”. (RW Board
May 2002a; RW 2002a). This assumes that public providers automatically
consider equity issues, which is not always the case.
In the position paper for the WSSD, RW (2002a) stated:
One way of looking at this subject area is to pose a continuum with
‘access’ issues on the one end and ‘efficiency’ issues on the other. On
the ‘access’ end, water is considered as a public good, a human right
where access for all citizens is imperative. At this end, access to and
affordability of drinking water and sanitation are, above all, a political
issue and not purely a commercial one... The ‘efficiency’ end symbolises
a belief that services should operate mainly along commercial
lines and focus on efficiency of serving those who can afford to pay.
In this approach water is viewed as an economic good that should
be charged at full economic cost. It is RW’s position that neither of
these should be sacrificed. A position of balance in the middle of the
continuum is advocated – one which advocates the financial viability
and institutional sustainability of the water provider.
In reality, RW’s focus would appear to be more on efficiency, claiming
that it has showed “that it is able to take bold steps with credit control
in order to further the ends of financial sustainability” (RW 2002a). A
commitment to equity does not feature nearly as prominantly in its
policy documents or business plans.
22
Public is as private does: The confused case of Rand Water in South Africa
23
Further, RW specifically proclaims its support of PUPs when engaging in
other activities (Lushaba 2005) and describes its approach as “pro-public”
(RW 2002a). There are tensions, however, between RW’s actions and its
proclaimed support for PUPs. For example, RW is involved in the Africa
Business Alliance on Water, launched on 1 June 2005 with pilot projects in
Uganda and Mozambique, to develop PPPs in water as a model for other
African countries. RW has also been involved in the development of PPP
courses at tertiary training institutions (RW 1998), but no similar 
courses for
capacity-building on PUPs have been run by RW.
RW probably believes that there is no tension in supporting both PUPs
and PPPs because, as its CE stated at a conference in Nairobi in 2004, the
focus should be on service delivery improvements through efficiency 
improvements,
and not on ownership of the utility (Lushaba 2004). What RW
means by ‘capacity-building’ is promoting efficiency (RW 2005a:19) along
the lines of corporatisation. RW is promoting a shift in water provision 
from
municipal public to corporatised public (RW 2003a), with the seeming 
assumption
that equity will remain part of service delivery rationales. Furthermore,
RW expressed its hope to promote its role as public water provider
“complementary to private sector providers” (RW 2002a). Should a public
utility concerned with equity issues and having a pro-public approach not
at least state it the other way around – i.e. that private sector 
providers are
to complement public water providers?
Support for NEPAD
As part of its equity goal, RW engages in activities that support NEPAD
and that are in line with the Millennium Development Goals (RW 2005d;
2004b). This position shores up the Amendment of the Water Services Act
in 2004, which says that it is important “to enable parastatals to make 
their
contribution to NEPAD in the form of expertise and capacity-building”.
(RSA 2004:3). Through its engagements in Africa RW believes that it will
be “assisting the agenda for delivery of basic services, ensuring adequate
infrastructure and promoting stability” (RW 2003a). RW’s declared focus in
Africa is on capacity-building and institutional development, especially of
public utilities (Aquavita 9th issue 2005b:7; Myeza in Holtzhausen 2004:5;
RW 2005b:44). To show its “commitment to NEPAD as a strategy for 
development”
RW seconded its general manager (GM) for Corporate Services,
Mandiza Mbekeni, to act as CE of the NEPAD Business Foundation South
Africa for eighteen months (RW 2005a:44) while RW’s CE acted as chair of
the water sector in this foundation (Traders Africa 2004).
The kind of skills RW believes it can share with the rest of Africa include
its “strong engineering and water quality management backbone, as well as
its focus on customer service and efficiency” and water demand management
practices (Myeza in Traders Africa 2004; RW 2004b). Significantly,
however, it defines water demand management as “the potential to save
MSP
and use water in a manner that acknowledges it as a scarce resource, and to
increase the revenue potential from water sales by governments” (RW 2004b).
Clearly, corporatisation is another set of skills RW would like to 
impart. As
Thabani Myeza, then the new business manager at RW and now at Rand
Water Services (RWS), commented in reply to a question from a journalist
at Traders Africa (2004):
It is… generally accepted that in order for a utility to run efficiently,
it needs to privatise. Rand Water has proven that this is not the case.
There is a role for private sector but we don’t believe that it lies in
improving efficiency. Utilities should work on increasing their own
efficiencies and profitability prior to considering privatisation so as to
raise their value to investors... There is no reason why a public sector
entity cannot run on business principles and be efficient – this is the
message we plan to take throughout the continent... We believe that
we can help utilities from the point where they have identified a problem,
to the point where they are able to make an informed decision
about their future. This may well mean privatisation, but the decision
to privatise must be one based on choice and sound business principles,
and not one taken out of crisis. RW wants to assist utilities get
to this point so that what is on offer to the private sector has value.
To this end, RW is keen to “share what it has learnt” with other African
utilities, including through the development of “public-public partnership
models” (Myeza in Traders Africa 2004; RW 2005a:44). In practice, however,
they have not been pushing PUPs outside of South Africa, and where
they have it appears to have been little more than a smokescreen to hide
RW’s profit-making intentions. Such smokescreening is clear in RW’s retail
strategy; it defines as one of the characteristics of PUPs that “they 
allow for
full cost-recovery (including a mark up) or in certain instances for a 
sharing
of profit”. (RW Retail Water Operations department 2000:5).
Nevertheless, RW is sensitive to how it is perceived outside of South
Africa. Noting, on the one hand, that it is the “strongest water utility in
Africa and has to be seen to be playing a central role in the development of
Africa”, RW is quick to note that “this role must not be seen as an attempt
to re-colonise Africa”, and rather wants to position itself “as an African
company that understand the needs of our African neighbours, and have
only their interest in mind.” (RW 2004b; Water Sewage & Effluent 2003:6).
In support of NEPAD rhetoric, RW states that Africa’s development
should be led by Africans, with RW as an African utility in a good position
to provide leadership: “We believe we should help to build efficient and
effective utilities to promote service delivery for Africa and that such 
utilities
24
Public is as private does: The confused case of Rand Water in South Africa
25
should be owned in Africa” (Lushaba 2005; RW 2003a; 2004b). RW also
raises the “fear” that “if RW is not allowed to pursue operational 
activity in
support of the development of Africa, then private water companies from
Europe and North America will undertake this work. The implication of this
is that it will limit the development of African skills, it will limit 
the employment
of African people, and will serve to repatriate profits out of Africa”
(RW 2004b) (this though has not stopped RW from entering joint ventures
with private firms from Europe and North America).
Unfortunately, RW does not indicate how its practice in Africa will be
any different from private water companies. As highlighted in the 
introduction,
water TNCs now aim for short-term management contracts and ‘capacity-
building’ of public utilities, which is exactly what RW attempts to do in
Africa. RW seems to imply that simply because it is a public utility it 
should
be distinguished from private water companies, and thus cannot be accused
of furthering water privatisation when it bids for contracts in Africa.
Lushaba (2005) attempts to clarify the debate: “The thing that clouds
this discussion is that up to now getting assistance to improve efficiency
of water systems has been equated to privatisation. ...That argument does
not apply in our case. We are a public entity.” But Myeza (in Holtzhausen
2004:5) indicates the real reaons for RW to engage with NEPAD: “We also
have to think about our future as a company”. For RW “Africa presents a 
lucrative
opportunity for developing infrastructure” (RW 2006:61). Except for
the obvious profits to be made and to be applied to RW’s primary activity,
RW also proposed that going into Africa will help it to deal with its 
perceived
overcapacity in terms of skills – with the added benefit that the skills
are to be used for Africa’s development (RW 2004b). RW thus wants to export
its expertise (Lushaba 2005), exactly what DWAF, via its then-director
for international relations, Fawcett Ngoatje (personal interview), believed
water boards should do. But interviews with local authority officials in 
RW’s
area of supply indicated their unhappiness with RW going into Africa; they
argued that if RW has such overcapacity of skills these should be used to
strengthen the capacity of South African local authorities which face major
problems due to the lack of technical skills. Why sign a twinning agreement
with Lilongwe Water Board in Malawi while Delmas or Emfuleni local 
municipality
in South Africa – RW’s own customers – urgently need help?
Commercial Rationale
RW declares that it is also engaging in other activities to promote RW’s own
growth, especially in the light of profit limitation in primary 
activities (due
to regulation by the South African government). Increased local and 
international
competition by private sector operators in the water sector in South
Africa have also led RW to feel that it has to fully develop 
commerciallyoriented
business practices (Duvel & Nel 1998:16). The CE of RW expresses
it as follows: “We need to take what we have as our core competency and
MSP
leverage that into an organisation that can offer diversified services 
so that
we are able to extract more value out of it” (Aquavita 2002:2). The aim of
other activities is then to raise profits and apply these to Rand Water 
“undertaking
its primary activities or any other activity” (RW 2005c:30), such
as funding capital investment in infrastructure development for bulk water
supply. According to Thabani Myeza (in Holtzhausen 2004:5), new business
ventures would help to ensure the future financial viability of RW.
A burning question though is what happens when losses are incurred from
such other activities, instead of the desired profits? As the case of Umgeni
Water has shown (Loftus 2006), despite ringfencing of other activities, 
if losses
occur they are carried by the water board and are thus inevitably passed
on to water users. A senior member of RW’s staff indicated in an interview
that before the launch of RWS other activities were “ringfenced on our 
financial
statement, but they mostly run at a loss and it comes out of our reserves”.
While in 2005/6 RWS – the company formed by RW for its engagement
in commercial activities – had made revenue of R4.9 million – down from
R9.1 million the previous year – it made a loss of R5.5 million and used 
R3.9
million out of the reserves (RW 2006:118, 134). But so far the value of 
other
activities is comparatively small compared to RW’s primary activity. And in
its business plan RW stated that it did not expect other activities to 
have any
significant impact on RW’s financial viability (RW 2005c:48). Which begs
the question, why then engage in for-profit non-core activities?
In summary, even when the rationale for non-core activities is ‘public 
interest’
or supporting NEPAD, ensuring cost recovery and efficiency appear to
be the primary objective, feeding into the commercial rationale of 
sustaining
RW and promoting private sector management principles in the water sector.
26
RAND WATER POLICY DEVELOPMENT
ON OTHER ACTIVITIES
We turn now to a discussion of the mechanisms through which RW implements
these stated objectives. As RW does not have a specific policy
document dealing with non-core activities, policy development is gleaned
from general corporate policy and five-year business plans, as well as the
organisational restructuring that RW has undergone since the late 1990s.
Two organisational restructuring periods can be identified. The first,
from 1994 until 2002, was characterised by a shotgun approach with various
departments and divisions within RW engaging in other activities in an
ad hoc manner. Because RW operates in a decentralised way, individual
units – like sections, departments and divisions – could to a large extent
plan and do as they wished with regards to other activities, as long as it
was in their ‘business plan’ and budget which had to be approved by the
management committee and the RW Board, and as long as they had set up
a separate cost centre. Other activities engaged in during this period were
mostly of a community-based and cost-recovery nature, with some small
commercial contracts by individual sections.
The focal point of the second period is the launch of the Rand Water
Foundation in 2004 and Rand Water Services (Pty) Ltd (RWS) in 2005 as
ringfenced subsidiaries of RW. The RW Foundation has taken responsibility
for some of RW’s corporate social responsibility programmes, while 
commercial
activities with a profit motive have become centralised in RWS. A
more purposeful approach to other activities is now followed within RW.
Shotgun: An Unfocused Approach
RW’s first engagement with other activities was in 1994 when DWAF approached
RW to become involved in one of the presidential lead projects,
in Winterveldt, north of Pretoria. This project brought RW, by default, into
the retailing of water (Smith and Fakir 2003:1). For this engagement RW
created a unit called the community-based projects department (CBPD)
within the Corporate Services Division (Bonner & Lekgoathi 2004:167).
The CBPD focused on the development of new water services in communities
where it did not exist previously rather than taking over the supply of
services where local authorities were struggling to improve current services
(CBPD 1999:1). In this early period, engagement in community retail water
27
MSP
The problem that we had in the past was that every Tom, Dick and
Harry would come along… Unfortunately what you would get is these
guys coming along, maybe having the right political connections and
getting hold of the CE or somebody high up or DWAF, and the next
thing is now suddenly ‘why aren’t we doing this? This is a fantastic
thing’… In that sense we were getting bombarded from all sides.
and sanitation projects was seen as part of RW’s commitment to addressing
backlogs in South Africa and as part of RW’s CSI commitment.
The growth in the work of the CBPD, and especially its increasing
engagement in retail water, led to structural changes within RW in 1997.
A Retail Water department, a Bulk Sanitation section and a new division,
called Community Support Services, were formed (Segal 1998; Tempelhoff
2003:496). In 1999 the name of the division changed to Marketing and
Communication. Indicative of the different role foreseen for 
communitysupport
services, this division was to become a marketing tool.
Until 1998 most of RW’s other activities were community-based, and
mostly subsidised, or run at full cost recovery. But in its corporate policy
of 1998, after the 1997 Water Services Act allowed water boards to engage
in other activities, RW foresaw two broad types of other activities: 
those in
which profits were made (which RW called ‘new business activities’) and
those done on a cost-recovery basis and aimed at supporting WSAs in RW’s
area of supply (RW 1998).
RW indicated that it was prepared to get involved in other activities on
its own “or in partnership, alliance, or in co-ownership of enterprises with
other parties” (RW 1998). Its commitment to partnerships with all 
stakeholders
was expressed in a new strategic direction since 2000, captured
in the statement “izandla ziyagezana” (Zulu for “together we make water
work”) (RW 2005c:1). Since then RW has actively sought partnerships
with local authorities and its representatives and with other water boards
and water utilities.
Another referred to “nothing [being] pulled together or glued together. It
was each one going off on their own little things.” One of the interviewees
called this “a shotgun approach rather than letting us target some 
things that
we’re specifically good at and that will be easier for us to get.” The 
establishment
of the Rand Water Foundation and RWS were designed to change
that unfocused approach.
28
Engagement in all these activities until the early 2000s had been 
decentralised,
leading to problems of duplication and lack of coordination and
strategy. In the words of one interviewee at RW:
Public is as private does: The confused case of Rand Water in South Africa
29
Centralisation
In a new organisational structure that RW accepted in 2002 it made a 
separation
between primary, other (not-for-profit) and other (for-profit) activities
(RW 2005a:3). Over the next few years such a separation led to the formation
of the Rand Water Foundation with responsibility for most not-for-profit
other activities and the establishment of the Rand Water Services (Pty) Ltd
focusing on for-profit other activities.
Rand Water Foundation
In 2005 RW described its CSI-programme as two-pronged: non-water related
and water-related projects (RW 2005c:6). To fund community water
and sanitation services RW formed the Rand Water Foundation, which was
launched on 19 May 2004 (Aquavita 5th issue 2004:5) as a section 21-company.
The initial idea of the Foundation was “to source funds to provide
capital for infrastructure provision” to those who cannot afford the full
economic cost of water services, so that only the operating and management
costs of water are to be paid by the poor (RW Board July 2001:32).
Another objective of the Foundation was the capacity-building of communities
to manage their own water supply systems (RW Board July 2001:32).
Non-water related CSI activities within RW’s area of supply – such as
HIV/AIDS, disability awareness and bursaries – is handled by a separate
CSI Committee (RW 2005c:6). Such organisational fragmentation of CSI has
produced difficulties: staff in both the Foundation and the CBDP indicated
in interviews how the Foundation and the CSI Committee, for example, see
CSI quite differently, making working together nearly impossible. Reporting
to different divisional heads – the Foundation manager reports to the
GM Marketing and Community Services on operational items, while the
CSI Committee was headed by the GM Corporate Services (RW Board April
2004:509) – does not help in any way. The RW Board acknowledged that
such fragmentation was a weakness (RW Board December 2004:7-6) and
one of the new portfolio coordinators appointed in later 2005 was tasked
with ensuring better coordination between these three units.
Furthermore, funding is an issue. For water-related CSI-projects the RW
Foundation has to source funding externally and in 2004/5 R41 million
was received (Aquavita 9th issue 2005a:2; RW 2005c:9). Since 2003 RW
provided its own Foundation with only R3 million per year for a five-year
period (representing 0.092 percent of its 2003 turnover). But until 2006
the Foundation did not have access to this capital directly; the money was
invested and the Foundation had to implement projects from the interest
earned (RW Board December 2004:705).
In December 2004 the RW Board acknowledged that the Foundation’s
“current funding policy is not suitable and is hampering the development
of the Foundation”. (RW Board December 2004:708). In 2006 the Foundation
thus got approval from the board to use the R3 million a year directly
MSP
on projects. This remains a very small amount that RW is prepared to spend
itself on its own CSI, while it expects other corporate donors to give money
to the RW Foundation. A complaint from within RW, that RW wants CSI
done but does not want to put money and support down for it (personal
interview), seems valid.
Globally, CSI has been promoted in recent years for its business imperative
(Gordon & Camay 2004). RW clearly sees the Foundation as an opportunity
to enhance its marketing and build its image as well: “The Foundation
is a very good vehicle to be used as a marketing tool… Investing in
the Foundation will.… enhance the image of the organisation” (RW Board
December 2004:708); “corporate social responsibility is the best marketing
tool for every business” (RW Board December 2004:706).
Although RW is thus engaging in not-for-profit other activities, it does so
largely through seeking funding elsewhere, including from government, 
corporates
and donor organisations. These are then used to build RW’s image.
Rand Water Services (Pty) Ltd
For-profit activities are centralised in RWS, launched in 2005 as a 
ringfenced
subsidiary company of RW. The initiative came from the Engineering Division,
which in the late 1990s had little in the way of major infrastructural
projects, leaving it with underutilised personnel (Cooks 2004:251; personal
interviews). Instead of laying off people the division wanted to turn to 
other
activities to “keep people” for “capacity to do outside work” (personal 
interview).
In February 2000 RWS was registered with the Registrar of Companies.
What seemed to have held up the full establishment of the Pty until 2005
was partly fear by RW management of the reaction of the unions to its 
formation,
that they might see it as a form of privatisation (RW Board September
2000:136; RW Executive Committee February 2001:127). This was in the context
of strikes in the early 2000s by the Congress of South African Trade Unions
(Cosatu) against government’s Growth, Employment and Redistribution 
programme
(GEAR). In the water sector a number of protests occurred against the
water concession granted in Nelspruit to a British water company and against
the corporatisation of Johannesburg Water and the awarding of its management
contract to Suez in 2000. The South African Municipal Workers’ Union 
(Samwu),
the biggest trade union at RW, was prominent in these protests. However,
in January 2002 Samwu signed a memorandum of understanding with RW
on the formation of the Pty (RW Board January 2002). Their view was 
similar to
that of the reaction by unions to the formation of Eskom Enterprise – 
see later
in this report – who felt that regulated business should not be 
privatised, while
unregulated, non-core business can be (Sikwebu 2007).
In its annual report of 2006 RWS is described by RW as primarily a 
technology
company involved in infrastructure asset management (RW 2006:60).
Initially RWS was to focus on East and Southern Africa, although it was
“to pursue commercial water-related projects in South Africa outside RW’s
30
Public is as private does: The confused case of Rand Water in South Africa
31
area of service and in the broader African continent including the Indian
Ocean islands and the Middle East” (RW 2005a:9; 2005c:31). But already
by 2006 the strategy and business plan of RWS evolved to focus 60 percent
of its activities within South Africa, according to a RWS senior manager who
also viewed consolidation of its business as a challenge for RWS (personal
interview). The assessment of Themba Nkabinda, the new CE of RW, was
also that RWS “definitely need[s] to have a more focused approach in future”
(quoted in Hill 2006a). The key focus areas for RWS, as defined by 
themselves,
are local municipalities (providing advisory services and technology),
the Ghana management contract, bottled water, setting up of a water 
infrastructure
fund, strategic relations, management contracts, capacity-building
mandates, consulting and advisory mandates, procurement contracts and 
development
facilitation transactions in Africa (Aquavita 9th issue 2005b:7; Max
2006a). Because commercial activities are “unknown territories” (Lushaba in
Aquavita 2002:4), RWS aims to engage via partnerships and joint ventures in
these activities so as to obtain more expertise and to spread the risk 
in business
initiatives (RW Board August 2005:58). In this regard RWS is to target
municipalities RW serves through establishing PPPs (RW 2006:61).
By the end of 2005 the two main issues for RWS that had to be addressed
were the capital and operational budget requirements of RWS and the 
transfer of
non-core activities from RW to RWS. In terms of the first issue RW 
provided RWS
with start-up and seed funding for its capital requirements and 
operational budget
requirements. In 2006 RW provided RWS with a loan of R9.039 million (RW
2006:133). At the release of RW’s 2006 annual report Reginald Max of RWS
stressed that the intention was not to use RW’s financial resources for 
projects in
Africa, but rather the “provi[sion of] human resources and expertise to 
implement
projects with funds that countries source elsewhere” (quoted in Hill 2006a).
While the initial idea was clearly that RWS would draw on the capacity
and skills of staff within RW, and that RW and RWS would give each other
preferential treatment, practical issues soon changed that idea:
I think initially it had started out like that, to say that maybe we 
have got
engineers or scientists or other professionals who don’t have a lot of work.
But you are finding now that actually people are stretched because now
there are maintenance of infrastructure and pipelines. The move is now to
say RWS can employ whoever it wants to. If there are people in RW that are
available, they would be the first choice or maybe they can be seconded or
maybe they can apply for a position and get appointed if they are lucky or
they could be used on an advisory basis... It seems with procurement… we
are looking at a preferential procurement of RWS’ service products; maybe
they’ll be our first choice. We would say to the markets, in this particular
arena RW would be first choice... In terms of HR, legal services, we are
looking at having a service level agreement where they [RWS] can then
source from here [RW] but pay for that (personal interview).
MSP
On the issue of transfer of non-core activities from RW, RWS had nine staff
members by the end of 2005 and the expectation was that this would grow
as other activities within RW were transferred to RWS, which was to happen
in 2006. Projects/departments that were identified in 2005 to be 
transferred to
RWS were Emhlangeni Pipe, Zwartkopjes Farm and Retail Water (RW Board
April 2005:772). But the transfer of staff from RW to RWS is proving 
difficult as
there is not support throughout RW for the creation of the Pty, and many 
staff
do not want to work and some do not want anything to do with RWS. Already
in 1998, before the registration of the Pty, Duvel & Nel (1998:33) noted 
that
few people in RW felt “that external work [i.e. other activities] must 
be undertaken”.
These sentiments have continued with indications during interviews
with senior staff that some are not happy with the formation of RWS, and are
not prepared to be transferred to it. One’s view was that other 
activities dilute
the skills of RW even more and that RW should rather refocus and “get 
back to
basics”. Another said, “I think we have lost the plot”. They were part 
of a few
voices that questioned not just RWS but RW’s involvement in other 
activities in
general, and especially for-profit activities. In the words of one manager:
Why do we need it [RWS]? Why do we need to earn profits?... for 95 years
we supplied water and the money it cost us to supply that water is what we
set our tariff at. Now why do we need to have ten million extra coming in?
Another said about RW’s involvement in Ghana:
Why do we need to go to Ghana? Just over the hill people are sitting
without water. Bronkhorstspruit, Botshebelo Water is bankrupt
– there is our opportunity, but we are not going in there; we are
going to Ghana, we are busy in Kenya and another country, Malawi
I think.... What are we doing there? We have people in South Africa
that do not have water. So we go spend millions of rand there in
hope of gaining an income, where we rather could have spent those
millions on a pipeline to Rustenburg or to Bloemhof or to Parys.
Some RW managers interviewed supported the idea of RWS, however.
One of the managers said:
I think there is a need for us to redefine ourselves. To a large extent…we
had these non-core activities… just latched on the side of RW. And very
deliberately now they are being ringfenced and put into a certain box,
which is appropriate. I agree entirely that RW needs to do what it does
best, which is have a look at what we are supposed to be doing and not
a million other things. And ringfence the rest, put it into a commercial
environment, make it self-sustaining and it can look after itself.
32
Public is as private does: The confused case of Rand Water in South Africa
33
While others expressed reservations about RWS, it had to do with how to
implement the ringfencing. One interviewee expressed it as follows:
I think it is necessary that there is this new company who can bring
new opportunities to RW... The problem is whether the dog caught
the bus or whether the bus stopped – what do you now make with
that bus?... We are not geared up for this. We nearly can’t handle the
work we have to do for Gauteng, now we land in a big new Gauteng
in Ghana. And now suddenly we have to say ‘ok, we will sort
it out’. Tell me, how are we going to sort it [Ghana] out? We are still
struggling here. So that new company have to be very careful about
what they do.
There was also concern by a number of interviewees about how involvement
in other activities will impact of the quality of work done at RW:
Our core business is supplying potable water to twelve million people;
that should be the focus. If we get that right, then by all means
we can diversify in other areas so long as it doesn’t hurt that core
business... so we need to get back down to basics, we need to understand
what our prime function is, and perform that function well
… But unfortunately what we are going in trying to build elsewhere,
we are taking the building blocks out of the foundation. And the
foundation is crumbling... If one looks at our skills-base, for example.
We are very light on skills, in fact we are in deep trouble, yet
we are diluting those skills by going into places like Ghana... And at
the minute, supply of water to 12 million people is probably third or
fourth on our priority list as an organisation. And that’s crazy; that’s
what pays the bill. That should be priority number one at all times.
One of the managers who has been involved in various other activities in
Africa assessed his involvement as follows:
It [other activities] doesn’t help us. In fact it has been a distraction.
Again it has taken our focus off from what we are supposed to be
doing... By the way, I was quite excited by it… I quite enjoyed it for
a while and then I realised that I am not doing what I am supposed
to be doing. And people reporting to me don’t get enough guidance
from me because I am away half the time… Even if I am not there, I
am here doing work for there. It’s not good for the organisation.
MSP
Unhappiness with the Ghanaian contract was particularly acute. As one
interviewee indicated, “now that we won the contract we are actually in
deep trouble”. This “deep trouble” refers to the lack of skills that RW is
experiencing itself: “[We] need to give [RWS] the technical support; [we]
don’t have it. That’s why we are recruiting overseas. The people we’re
sending to Ghana at this stage are four people – all four that should have
come from [RW]. We have managed to find one…The other three positions,
all the technical positions, we’re out trying to recruit. And it is costing
us an arm-and-a-leg”.
One of the most positive responses about RWS was that it would “raise the
visibility of RW in the market and internationally with the World Bank and
DfID, British government, European governments, Asian governments, African
governments. So I think it will be – if it is successful – it will be 
really wonderful
for RW that we’ve got the Pty that gives us that extra brand name”.
While the responses to the formation of RWS vary tremendously across
senior staff of RW, it is interesting that not a single person interviewed
working for RW expressed interest in being transferred to RWS. This probably
had much to do with the uncertainties at the time about the relation
between RW and RWS. One of the interviewees summarised it as follows:
The response in RW to the formation of RWS was that initially the
belief was that RW people would want to work for the Pty. The idea
was that it would be easy to include such work in the KPIs [key performance
indicators], but some senior managers were not supportive
of this. It has been realised since that this working for both RW and
RWS is problematic both personally and practically. The success of
RWS cannot be dependent on RW. Some RW staff are positive about
RWS, some sceptical and some jealous – why you and not me? For
some it is a way out of the main RW but they still have a secure job.
There is also a perception of better conditions at the Pty. But the
question is whether the Pty will still be here in two years?
34
EXAMPLES OF RAND WATER’S
OTHER ACTIVITIES
Activities within South Africa
Other activities that RW is engaging in within South Africa are 
identified as
retail water services, sanitation services, capacity-building and 
institutional
development, infrastructure development, water resource management,
community-based projects and other commercial activities.
Retail water services
RW saw expanding into retail services as “the next logical step” due to
its competencies in bulk water provision (RW Retail Water Operations
department 2000:2). RW therefore embarked on a three-pronged strategy
for this: working with DWAF; working directly with municipalities to
improve water and sanitation services; and addressing backlogs in water
and sanitation provision within its area of supply by itself (RW 2005d).
According to RW’s 2000 retail water strategy, its share of the market
lay not only in cost recovery but also in profit-making contracts (RW
Retail Water Operations department 2000; Tempelhoff 2003:586). RW
had two retail water services provision contracts that ended in 2005:
one with the City of Tshwane and Madibeng municipalities, and one
with the Maluti-a-Phofung municipality. For each management contract
a subsidiary of RW was created, namely Odi Retail Water and Amanziwethu
Services respectively. The services provided by RW in these
contracts were revenue management via credit control and cost recovery
programmes, sanitation services, water services, institutional development
and legal support (RW 2005c:23).
In Odi there were two aspects to RW’s involvement: capital infrastructure
development and retail water services provision. RW (via its CBPD)
initially became involved in Odi in 1994 at the request of DWAF to be
an implementing agent for the Winterveldt capital infrastructure project,
one of twelve presidential lead projects in terms of the Reconstruction and
Development Programme. Then in 1995 RW was appointed as the retail
water services provider for Odi, again by DWAF. The aim was to establish
a viable water provider for the area. DWAF agreed to subsidise this activity
with R42 million on a reducing basis for three years, which proved to be
not financially sustainable (Pape 2001; Smith & Fakir 2003:18).
35
MSP
RW began with the retail operations in Odi in April 1996 (Cooks 2004:243; RW
Board October 1998) and in September 1999 signed a three-year WSP-agreement
with the transitional local councils in the area (Van der Merwe 
2003:37). Odi Retail
Water came online in 2000 and was managed by the Retail Water department
in RW. The contract was continued with the Tshwane metropolitan and Madibeng
municipalities when they took over from the transitional councils in 
2001 after
the completion of the local government demarcation process. It involved 
a fixedterm
contract which was reviewed every two years (RW 2005c:25) for which RW
received a fixed management fee. This contract came to an end on 30 June 
2005.
While some see Odi Retail Water as a showpiece (Cooks 2004:244), and as the
first PUP in South Africa, concerns have been raised about it (Pape 
2001), including
the impact of stringent credit control on poor households, attempts to 
‘de-politicise’
disconnections by contracting out credit management, the use of restriction
devices and continued financial difficulties due to lack of financial 
support from
central government.
RW ‘learned’ from this experience and when entering a three-year management
contract with the Maluti-a-Phofung municipality in October 2000, it 
insisted on
cost recovery (RW Committee of the whole board August 1999:183). While RW
(2002b:16) describes it as the first public-public water services 
management contract
in terms of section 19(2) of the Water Services Act, Cooks (2004:245) refers
to it as a PPP. RW helped form a ringfenced company, Amanziwethu Services,
to manage this contract. As with Odi Retail Water, Amanziwethu Services was
managed by seconded staff from RW, and operated by seconded employees of the
municipality (Smith & Fakir 2003:2; Van der Merwe & Ferreira 2001:2). In 
early
2004 the contract was extended for a year.
Different from Odi, about 95 percent of households in the area served by
Amanziwethu Services had water and sewerage connections, though metering and
billing had to be improved (WIN-SA 2005:2). The objectives of the 
contract were
to render “water services and revenue services in an efficient, 
equitable, cost effective
and sustainable manner; and the establishment of a sustainable ringfenced
service delivery unit” (Van der Merwe & Ferreira 2001:1). Some money for the
project was provided by the Municipal Infrastructure Investment Unit 
(MIIU), an
advocate of PPPs. The key features of the agreement were local manpower 
utilisation,
skills transfer, service improvements (leak controls in houses), and system
upgrade (bucket system eradication) (Water Sewage & Effluent 2001:11).
Within sixteen months of the establishment of Amanziwethu Services it 
was operating
at a profit of R1.6 million, followed by another R2 million profit in 
the next
year, which was invested back into the infrastructure (Smith & Fakir 
2003:12). RW
received management fees on the basis of recovery only of cost actually 
incurred,
which was limited to five percent of the billed income in terms of water 
services
(Smith 2005:162; Van der Merwe & Ferreira 2001:2). RW paid R2.1 million 
to the
municipality in the first year, and then R1.2 million in the last year, 
to be used in
other sectors for other services (Smith & Fakir 2003:14).
Positive outcomes of this contract included improved water services, a 
better financial
position, reduced unaccounted-for-water, new waterborne sewage connec-
36
Public is as private does: The confused case of Rand Water in South Africa
37
tions and improved effluent standards, while it came at the cost of 
increased
water cut-offs of poor households due to non-payment and with questions
about capacity within the council remaining. Moreover, while in the Odi
project some sense of building the capacity of the public sector through
partnerships between RW, the trade unions and the community was present,
the Maluti-a-Phofung contract was about building RW’s retail business,
though the rhetoric of capacity-building and solidarity continued. Further,
RW’s staff involved in this project stated their objective as the 
“introduc[tion
of] efficiencies and commercial principles” (in Mvula Trust 2002). Not 
surprisingly,
then, this PUP was followed up by a PPP between the municipality
and a private sector operator when the initial contract with RW ended.
RW was also partnered with French water TNC Vivendi in a joint
venture in 2000 in bid for the Johannesburg Water management contract
– RW’s first attempt at bidding for a management contract with a private
sector partner. The contract was eventually awarded to the consortium
of Suez, Northumbrian Water and Water and Sanitation Services
SA. Bonner & Lekgoathi (2004:174) interpreted RW’s failure to get the
Johannesburg Water contract as the impetus for RW’s refocus on small
towns such as Maluti-a-Phofung.
Both retail water contracts in which RW has been involved showed
the need for financial support from government to make them work. And
in both cases the partnerships between RW and the municipalities were
confusingly called both PPPs and PUPs. Also, in both cases RW promoted
the corporatisation of municipal water services provision (RW 2003a).
Although in 2004/5 the Retail Water department made a profit of R700 000
(RW 2005b:111), RW suffered financial losses over the years through its
retail water function. This lack of financial viability was one of the 
reasons
provided by RW’s Board for the closure of the Retail Water department at
the end of 2005. But the closure of the department should probably be seen
in the light of RWS taking responsibility for retail water services from 
2006.
Sanitation services
The Water Services Act (RSA 1997) describes bulk sanitation as one of
the primary activities of water boards. While some water boards did
previously provide bulk sanitation, RW had not been involved before
1997. To provide sanitation services is thus a new activity for RW. A
Bulk Sanitation department was created in 1997, and was until the end
of 2005 part of the Sales and Customer Services Division. In 2002, the
new CE of RW described sanitation as “an important area for business
growth over the next decade” (in Financial Mail 3 October 2002) and
since RW was aware of its own lack of expertise in sanitation services
it consciously looked for strategic partnerships to leverage its entry into
this sector (RW Board January 2001:264).
In 2003 RW signed a memorandum of understanding with the East Rand
Water Care Company to explore a joint venture between the two organisaMSP

tions to address the sanitation backlogs in RW’s area of supply, and “then
within the broader African context” (RW Board February 2003:371).
The kind of functions that RW says it will attempt to engage in with
regards to sanitation services include: “collections of bulk waste water 
from
water services institutions; treatment of wastewater; discharge of treated
wastewater into the natural environment; …process monitoring; industrial
effluent monitoring; and resale of treated wastewater/effluent to industry”
(RW 2005a:7). RW states in its business plan that it will engage in 
short-term
provision of technical, operational and managerial expertise; limited-term
contracts to provide sanitation services on behalf of water services 
authorities;
and long-term contracts to take responsibility for sanitation services for
water services institutions (RW 2005a:7). RW has already entered short-term
contracts with municipalities to provide managerial, operating and technical
skills. Examples are the maintenance contract with Tshwane in Odi for
retail sanitation that started in January 2002 (Aquavita May/June 2002:7);
the operational and management support services to MidVaal and Meyerton
Sebokeng wastewater treatment works since 2002 (RW Board November
2002:320); operational support to the Lekoa Water Company on the Sebokeng
wastewater treatment works (Cooks 2004:246); assistance to the
Dipaleseng municipality since August 2002, which was extended for another
three years in 2003 (RW Board February 2003:371); and RW’s biggest bulk
sanitation project, a three-year contract from 2005 with a value of R2.6 
million
with the Randfontein council to manage the local waste water treatment
plant and to monitor industrial effluent (Hill 2006b; Ntirisano 2005:8).
As part of its community-based projects, and seen as CSI, RW has been
responsible for the Winterveldt sanitation presidential lead project 
that started
in 2001 and that will run until 2007. The project was funded jointly by
DWAF and the City of Tshwane municipality. Another sanitation project in
which RW is involved, through its CBPD, as part of a consortium, is the 
Bekkersdal
bucket eradication project funded by Gauteng DWAF with R1.3 million
(Aquavita 8th issue 2004a:7; RW 2005b:75; RW 2005c:7). With Malutia-
Phofung RW was also eradicating buckets in Intabazwe (RW 2005b:75).
A significant failed contract in terms of sanitation services was the 
attempted
PUP with the Emfuleni municipality, Sedibeng District Council
and Lekoa Water Company to form the Metsi-a-Lekoa company. This was
to be the largest PUP ever formed in South Africa (Water Sewage & Effluent
2002:55) and was expected to entail a twenty-year services delivery
agreement. While it was called a PUP it is noteworthy that RW intended to
generate profit out of the contract in the long term; its financial 
model was
based on breaking even after ten years and then having a “potential ten-year
profit-making period” (Kriel et al. 2003:9). RW, the Sedibeng District 
Council
and Emfuleni municipality were to be the shareholders of this company.
RW was to fulfil a management role at Metsi-a-Lekoa, with Sam Shabalala
of RW appointed as acting CE of the company.
38
Public is as private does: The confused case of Rand Water in South Africa
39
After various delays in negotiations, lack of political and financial 
support
from national government (RW 2005a:7) and resistance from National
Treasury to the significant capital requirements of the project (Kriel et
al. 2003:5), RW felt by October 2003 it had no choice but to withdraw.
National Treasury’s opposition to the deal was based on the belief that it
constituted “fruitless and wasteful expenditure under the Public Finance
Management Act” and that RW would be in violation of the Act if they
pursued the deal (Kriel et al. 2003:6). National Treasury further indicated
to RW that it “would be depriving Emfuleni of revenue through having a
controlling capacity instead of assisting as a social responsibility” 
and that
National Treasury expected RW “to be involved as a supplier not as a 
partner”
(RW Board August 2004:582).
But what was really behind National Treasury’s resistance to the project
is to be found in a report by Kriel et al. (2003:6) hidden in a 
footnote: “In a
telephone conversation, the opposition of National Treasury to the 
publicprivate
partnership [sic – should read PUP as it refers to this project] was
confirmed as a general resistance to these transactions”. It is widely known
that National Treasury and MIIU prefer PPPs, and their resistance to this
PUP would thus make sense in that light. What is odd though, is why this
resistance held up the project. In terms of section 54(2) of the Public 
Finance
Management Act RW must get approval from DWAF (its executive authority)
for any ‘significant’ business activity; National Treasury is only to be 
informed.
Though the project was not yet formally sanctioned by DWAF when
National Treasury raised its opposition, DWAF indicated its support in a 
letter
to the minister of DPLG dated 31 May 2003 (Kriel et al. 2003:16-7), wherein
financial support was requested from DPLG (RW Board June 2003:562).
By the time of its withdrawal RW had already invested R9 million in the
project (Aquavita 6th issue 2004a:3) but it recouped the R1 million 
consultancy
fee paid to PriceWaterhouseCoopers as facilitator of the negotiation
process (RW Board July 2002) from Emfuleni municipality (Rudin 2005).
Also, funding of R6 million allocated by the Swedish Water Development
Fund for the Metsi-a-Lekoa project over a period of three years was still
to be utilised (RW Board December 2003:422,443). Despite the failure to
enter into a PUP, Metsi-a-Lekoa continues to exist but now under the ambit
of the Emfuleni municipality. One of RW’s key staff in the then-Retail Water
department, Sam Shabalala, resigned from RW in the process to remain
with Metsi-a-Lekoa.
The attempt to establish the PUP was a bruising encounter that led to
much discussion in the RW Board (RW Board June 2004:550), left some
RW managers bitter and might go some way in explaining reservations
within RW about PUPs, despite its rhetorical support for them.
Capacity-building and institutional development
One of the main institutional development projects that RW has been
involved with has been the formation of the Bushbuckridge Water Board
MSP
(BBW). RW’s involvement in the area started in 1995 when it was appointed
as implementing agent by DWAF on a presidential lead project
on a cost-recovery basis. In 1997 DWAF appointed RW to help in the
establishment of a water board to supply bulk potable water to the areas of
Bushbuckridge, Hazyview and Nsikazi North. RW’s functions in the project
were clarifying the functions of a BBW, developing its capacity to manage
bulk water supply, transferring infrastructure and other assets from DWAF
to BBW, employing and training staff, establishing policies and systems,
and developing a five-year business plan (RW Board October 1998; RW
1999:9). The project was to run from April 1997 to March 1999. On 5
December 1997 BBW was established with ten board members, two staff
and five seconded RW staff (RW Board October 1998; RW 1999:9). But the
continued need for support, advice and monitoring of BBW led DWAF to ask
RW to continue institutional support and capacity-building to BBW. This 
second
phase of the project focused on capacity-building and skills transfers in
areas of operations, maintenance, water quality and finance (RW 2005c:6).
All these services were provided by RW on a cost-recovery basis. By
November 2003 RW had invoiced DWAF for just under R1 million for capacity-
building (RW Board February 2004:468) and in 2004 the institutional
capacity enhancement agreement with BBW was extended to March 2005
with an allocated budget of R500 000 (RW 2005c:6). RW’s own assessment
of its experiences in this project has not been too rosy. In fact, RW’s 
Board
cautioned its management in 2005 “to avoid a repeat of RW’s experiences
with Emfuleni municipality, Bushbuckridge Water and Odi Retail projects”
(RW Board April 2005:782).
Another institutional development project for RW was Ikangala Water
Board. In December 2002 RW was approached the first time by Ikangala
Water, established in February 1998, for technical assistance (RW Board
February 2003:371). Since its inception this water board has operated at a
deficit (in 2004/5 it had accumulated deficits of over R85 million while its
annual revenue is only R1.3 million) and it relies solely on DWAF-subsidies
and mostly on DWAF-seconded staff for its existence (DWAF 2005b). In
April 2005 DWAF requested RW to assist Ikangala Water with management
and technical support aimed at improving water service provision to
the communities of the Western Highveld. RW’s interest in this 
capacitybuilding
project is partly explained by the fact that the Western Highveld
Emergency Scheme managed by RW will have Ikangala Water as its
primary customer. RW’s involvement in Ikangala Water is on a costrecovery
basis with funding coming from DWAF (RW Board December
2004:731; RW Board June 2005:814).
Infrastructure development
As part of its other activities, RW has been involved in infrastructure
development projects. Such activities involved projects in, for example,
the Western Highveld region and Sasol (RW 2005b:77). The R110 million
40
Public is as private does: The confused case of Rand Water in South Africa
Western Highveld Emergency Scheme, funded by DWAF and RW, involves
the building of a 40km pipeline from Mamelodi to Cullinan and from there
to Ekangala near Bronkhorstspruit to augment water supply to the Western
Highveld region where 1.3 million people live (Aquavita 2nd issue 2004:7;
Water Sewage & Effluent 2004b:30). RW was appointed as implementing
agent by DWAF in February 2004 on this joint venture with Inkangala Water
and Magalies Water, in whose supply areas the pipeline project fell (RW
Board February 2004:448). Since then DWAF has extended RW’s area of
supply to include this area leading to an overlap of areas of supply between
RW, Ikangala Water and Magalies Water (RW Board August 2004:636).
DWAF contributed R70 million to the scheme (with R50 million of this
money coming from National Treasury (RW Board February 2004:472)) and
RW R42 million, on the understanding that RW will own the infrastructure
(RW 2005c:8; RW Board August 2004:636). Ikangala Water will be the
primary customer of the scheme (RW 2005c:8), with DWAF standing as
guarantor of payments from Ikangala Water (RW Board August 2004:636).
In this project RW is thus partly subsidising its other activity, but 
the benefit
for RW in this case is that it will own the infrastructure despite most of
the financial contributions coming from national government, and that it
has secure income despite the deficit problems at Ikangala Water due to
minimum average draw-off that will “enable RW to fully recover its capital
contribution” (RW Board August 2004:637).
Sasol Synfuels awarded RW in June 2004 the R60 million contract to
design and construct a 13km pipeline to deliver an additional 40-50Ml/
day of water to its plant in Secunda (Creamer Media’s Engineering News
17 October 2005; RW 2005b:77). RW transferred the contract from its
Engineering division to RWS on its formation. The contract also included
an annual R208 000 maintenance contract over five years (Creamer
Media’s Engineering News 17 October 2005; RW 2005b:36, 43).This is
a commercial contract.
Water resource management
With it primary activity the supply of bulk potable water, RW has a
significant interest in water resource management. The Water Services
Act of 1997, the 2003 SFWS (DWAF 2003:65) and the Water conservation
and water demand management strategy for the water services
sector (DWAF 2004b) direct all water institutions, including RW, to
implement water demand management (WDM) and make it part of
their activities. For this purpose RW established a Water Cycle Management
section responsible for implementing WDM. But as Cooks
(2004:218) indicates its main challenge is funding – RW is not subsidising
such activities after the exhaustion of its ‘drought fund’. The
main aim of WDM is to reduce water demand through reducing wastage
and using water sparingly and efficiently.
41
MSP
With money from the drought fund RW, through its Community Support Services
division, started various WDM-projects that included two main aspects,
namely retrofitting houses in low-income areas and doing leak repairs, and
raising awareness about water scarcity and the ‘economic value’ of water
(Beukman 2002:13; Tempelhoff 2003:521). In terms of the first aspect, it was
done “on an as-and-when needed basis” with municipalities putting forward
proposals to RW (Buckle & Naicker 2006:3). These projects included water
reticulation network loss repairs, retrofitting of schools, and 
retrofitting private
houses. In all these projects the average water consumption was reduced,
with temporary employment for local plumbers (Naicker 2006).
To raise awareness about the economic value of water, RW is engaged
in education and communication through its sub-brands WaterWise and
Clean Water Challenge. The WaterWise initiative, implemented through
RW’s Marketing department, delivers information, education and awareness
about water waste minimisation and responsible water use via site visits
to RW operations and to RW’s catchment areas, interactive educational
workshops for schools (the School Water Action Project), community theatre,
talks at garden clubs and media advertisements (Cooks 2004:220; RW
2000:20; 2005a:16; 2005c:5; Taylor 2006). The Clean Water Challenge
involves a taste test programme at selected gyms, exhibitions and major
shopping malls in Gauteng to ‘educate’ people and change perceptions
about tap water as unhealthy for human consumption – a strategy which
conflicts with RW’s stated intentions to enter the bottled water market (RW
2005b:59). All these ‘educational’ activities further the view of water 
as an
‘economic good’ and deepen the commodification of water in South Africa.
Except for WDM, RW is also involved in water resource protection
(or water conservation). Catchment management forums, rehabilitation
of wetlands and removal of invasive alien plants are part of RW’s water
conservation activities to secure its water supply (Buckle 1998:3, 6;
Cooks 2004:223). RW takes part in various catchment forums, which it
leads and funds at the request of DWAF. In these forums RW does a water
quality auditing function and facilitates sharing of water quality 
information
through an Internet website (RW 2005c:5). RW’s engagement in these
forums is at its own cost.
As part of its wetlands rehabilitation activities, RW established the
Mnweni Trust in 1999 to promote the rehabilitation and conservation of
the Mnweni catchment area in the Drakensberg region of KwaZulu-Natal.
RW provided initial capital investment of R2 million. Two donga 
rehabilitation
projects were implemented in 2004 in the Mweni area with R6.8
million, funded by the Department of Environmental Affairs and Tourism
(DEAT), which created about 60 local jobs (RW 2005c:7). The trust was
also appointed as implementing agent by DEAT to develop the Amangwane
Mnweni Cultural Centre based in Bergville as a cultural and hiking centre
(Aquavita 9th issue 2005c:12).
RW’s alien vegetation eradication project has as its objectives securing
42
Public is as private does: The confused case of Rand Water in South Africa
water supply, the protection and restoration of biological diversity, 
and the
maximisation of social and economic benefits by training and employing
local communities on the project (RW website) – a mixture of own interest
and CSI. Thus, initially, in 1996, RW invested R10 million to support
DWAF’s Working-for-Water programme (Tempelhoff 2003:527). Alien
vegetation removal activities by RW, funded by DEAT and DWAF’s Working-
for-Water programme, occurred in the Upper Tugela catchment, the
Mnweni catchment, the Northern Woodstock catchment, the Golden Gate
area and the Perskeboomspruit catchment (RW 2005c:7). In 2000 the programme
was also implemented in Krugersdorp and Elandsfontein at a cost of
about R2.2 million per year, funded by DWAF and the Gauteng Department
of Agriculture, Conservation, Environment and Land Affairs (RW 2005c:7;
RW website). A number of RW’s water conservation activities fall under the
responsibility of the RW Foundation and are seen by RW as part of its CSI,
despite most of the funds coming from external sources.
Community-based projects
Other recent CSI-related projects not yet mentioned include school
garden projects, sport heroes walk against HIV/AIDS, Siluma wetlands
rehabilitation project, and the Flora Farming project in Merafong. All
these activities are done on a cost-recovery basis, which, for supposedly
CSI activities, seems odd.
Other commercial activities
Two commercial activities RW has been involved in over the years that
have not yet been mentioned are worth highlighting here: Zwartkopjes Farm
and Emhlangeni Pipe. RW acquired Zwartkopjes Farm in 1905 and since
1917 has been conducting farming activities on this land (RW Board January
1991:384). Various problems, including recent corruption (RW Board
August 2004:585) and poor management (personal interview), have meant
that the farm activities have not been commercially viable. In 2004/5, for
example, the farm made a loss of R13.6 million (RW 2005b:111) and in
2005/6 a loss of R6.7 million (RW 2006:119).
Emhlangeni Pipe first operated as the RW Pipe Plant from 1965 when it
was established to do pipe reconditioning and the manufacturing of pipes
and pipe specials for RW (Tempelhoff 2003:354). It was expanded in 1995
with the building of a new spiral mill pipe factory, at a cost of R32.25
million, to supply about half of RW’s annual large diameter pipe 
requirements
at less than market costs (Cooks 2004:157; RW n/a). As part of the
efficiency drive within RW, pipe manufacturing was ringfenced and Emhlangeni
Pipe was opened in 1997. Because of the drop in demand for water
from the late 1990s, RW needed fewer pipes for new bulk water 
infrastructure.
In 1999 the board therefore allowed Emhlangeni Pipe to submit tender
43
MSP
prices to supply pipes to outside companies at a profit. But the wider pipe
manufacturing industry was struggling at the time and the demand for large
pipelines was down (Tempelhoff 2003:600). Eventually, on 15 June 2001
Emhlangeni Pipe ceased operations (RW 2001b:4) and in 2002 RW accepted
an offer of $2.2 million for the plant and equipment of Emhlangeni Pipe
from a company based in Saudi Arabia (RW Board May 2002b).
A new commercial activity to be undertaken by RWS via a black
economic empowerment initiative is bottled water (Hill 2006a). Engaging
in this has been described by RW as diversifying its income stream after
marginal growth in bulk water sales in the last three years (Business Day 6
November 2006). The conflict of promoting the quality of RW’s potable water
but at the same time pushing bottled water has already been highlighted.
Activities outside South Africa
Other activities outside of South Africa’s borders are also seen as a key
growth point by RW. For purposes of discussion here, the three forms of 
activities
allowed by water boards outside of South Africa (SAAWU 2004) are
reviewed here, namely: commercial/business activities; support activities;
and capacity-building. The basis for this distinction is whether 
activities are
expected to be profitable or not-for-profit, and whether they are 
countrybased
or project-based.
Commercial activities
Commercial activities are intended to make a profit. The first and largest
water services management contract won by RW outside of South
Africa is the joint venture between Vitens International BV (51 percent)
and RWS (49 percent) (Holland Water Aid 2006:28) to run about 80 of
Ghana’s urban water supply schemes. While it was originally conceived
as a ten-year lease contract, in 2003 the Ghanaian government changed it
to a five-year management contract due to pressures from civil society and
because of lack of interest by the private sector (Amenga-Etego & Grusky
2005:286; Public Agenda 9 December 2005). The contract – valued at
$120 million over five years, including a management fee of ten million
Euros – was signed in November 2005 and became operational in June
2006. The contract is financed with $103 million from the World Bank,
$5 million from the Nordic Development Fund and $12 million of Ghanaian
taxpayers’ money. The Vitens Rand Water Services BV consortium was
awarded the contract ahead of Veolia Water and SAUR. In Ghana the
operator of the project is known as AquaVitra.
Justification by the Ghanaian Minister of Water Resources, Works and
Housing for awarding the management contract to foreign companies was
that “[a]s a nation we cannot pride ourselves as good managers, Ghana
Airways collapsed, Ghana Water Company was about to collapse and so
government decided to take a hard look at the company and see how best
44
Public is as private does: The confused case of Rand Water in South Africa
we can improve on its efficiency” (Property Express 16 November 2005).
This elicited strong responses from within Ghana where it was interpreted
as hinting that “only a white man can manage our companies” (reported
in News in Ghana online 25 November 2005). Yeboah (2006:50) argues
that it is part of a “mindset of Eurocentrism associated with the elite and
decision-makers of the country.”
The controversy over the water sector restructuring complicated matters
for the water operator. But the stipulations of the contract also make it
an easy target for those who opposed it. For example, the huge disparity in
pay between Ghanaian employees and the eight expatriate staff is seen as
unacceptable (NCAP 2007; Public Agenda 9 December 2005; TUC 2005).
Further, the contract states that “the operator, its sub-contractors and 
their
foreign personnel shall be exempted from paying taxes” (GWC 2005:18).
Another benefit for the private operator is non-liability for non-payment of
electricity (GWC 2005:17,18). In contrast, about 1600 employees of Ghana
Water Company (GWC) were laid off in 2005 before the awarding of the
contract, in preparation of cutting costs, with further retrenchments 
expected
(Holland Water Aid 2006:28; NCAP 2007). Another contentious aspect
of the contract is section three that obliges AquaVitra to provide and 
maintain
current services and has clear targets for the reduction of non-revenue
water, but it is totally silent on any obligation to expand services and 
ensure
access for the poor; any such expansion is the responsibility of and to the
cost of GWC. The TUC (2005) correctly highlights “the irony that one of the
ways to increase non-revenue water is to cut-off those who are too poor to
pay for water”, with the contract giving the operator the right to 
disconnect
users for non-payment (GWC 2005:10). The contract also makes clear the
intention of the government to move the management contract into a longterm
lease contract (GWC 2005:2).
The operational practice of AquaVitra has irked many in Ghana. The
2007 wage dispute with workers is an example. Workers asked for an 80
percent wage increase but were offered 35 percent on condition that the
government pay AquaVitra this cost and that workers achieve 18.7 percent
increase in revenue collection while also accepting the introduction of
performance-based pay. If these conditions were rejected, AquaVitra’s offer
was for only 20 percent wage increase (NCAP 2007). Further, the drive by
AquaVitra for improved billing, cost recovery and efficiency follows the 
pattern
of both Vitens and RW in their home countries.
AquaVitra, though a consortium of two public utilities, is acting like
a private company and operating along the principles and practices of a
private company. Hoedeman & Kishimoto (2006) state that the “Vitens
management identifies strongly with the private sector and see no inherent
value in maintaining a public sector water delivery capacity in Ghana.”
It also exposes the double standards of the Dutch in this case. While the
Dutch passed a law in 2004 that prevent private companies from providing
public water services in the Netherlands (Hall, Lobina & de la Motte
45
MSP
2004:3-4), AquaVitra acts like a private company when providing public
water services in Ghana.
RW (2005d) claims that its motivation for its involvement in this contract
is that it is supporting NEPAD and the Millennium Development Goals. But
despite RW’s statement that it is “important that Africans drive this 
initiative
[i.e. NEPAD]” (RW 2004b), it has partnered with a non-African company in
Ghana. This however does not stop Reginald Max (2006b) of RWS calling
the Ghana-project a South-South partnership.
RW further defends its participation in Ghana by making much of itself
and Vitens as public utilities (Lushaba 2005). Lushaba, the then-CE of RW,
trying to defend RW’s involvement during a radio debate on 8 July 2005,
said that RW wants to help build capacity in Ghana; “[t]hat’s why we call it
public-public partnerships”. The reaction of Al-Hassan Adam (2005), of the
Ghanaian National Coalition Against Water Privatisation (NCAP), was to
say that RW has come to Ghana in the “spirit of the private sector.”
Commercially, it makes little sense for a city the size of Accra to give
a management contract for water distribution to RW, which has very little
experience in that type of work – none at all in fact, except for the 
Odi and
Maluti-a-Phofung projects. Contrary to RW presenting itself as one of the
largest utilities in the world, with respect to water distribution it 
has less
experience than hundreds of much smaller municipal companies across
Africa in this particular aspect of water services. The attraction of RW for
the Ghanaian government must be largely due to the political credibility it
brings in the context of NEPAD.
The Ghana project is also important for RW’s reputation and future
involvement in Africa, with RW eying a similar contract in Egypt (Business
Day 6 November 2006) and in Mozambique – where Vitens does have the
contract for the Four Cities Project (RW 2005c:34). Vitens and RW would
appear to be compatible partners: RW’s competency is in bulk water treatment
and bulk distribution while Vitens’ competency is in reticulation and
management (Holland Water Aid 2006:28; Max 2006b); both are public
utilities that operate on business principles; both are working to establish
themselves as source-to-tap water companies; and in activities in Africa
both prefer to focus on management contracts in urban areas and not to
make financial investment themselves in projects/contracts (Vitens states
this as one of its departure points for international activities, while 
it is more
implicit in the case of RW).
A failed PPP concession in which RW was involved was the Disi Water
Supply project in Jordan. This was a 40-year concession for the 
construction of a
350km pipeline from the Saudi Arabian border to Amman, and its O&M. Cost
estimates for the project varied considerably, from US$500 to US$730 million
(Business Report 29 October 2004; Platts Global Water Report July 2004). RW
was involved in a consortium consisting of itself (as operator), Astro & 
Edgo,
Joannou & Paraskevaides (J&P) (Overseas) Ltd from Cyprus and Group Five (as
contractors), and the Arab Bank & Housing Bank from Jordan (as financiers).
46
Public is as private does: The confused case of Rand Water in South Africa
In the end, the contract was awarded to another consortium, led by Saudi-
Oger, even though RW’s consortium had a lower bid. But in October 2004
the Jordanian government decided to terminate the procurement process.
RWS now continues to work with the Ministry of Water and Irrigation in
Jordan to study alternatives for the implementation of the Disi-Amman Water
Scheme (Hill 2006a; Jordan Times 27 July 2005; RW Board December
2004:701). The failed bid though cost RW R1.3 million (RW Board August
2003:28), raising once again the issue of who pays for these failed 
out-ofcountry
attempts (plus those in Tanzania, Nigeria, Rwanda and the Democratic
Republic of the Congo (DRC), to name but a few).
Support activities
Support activities in Africa are done on a cost-recovery basis and are 
mostly
project-based. RW has been involved in such activities with Swaziland,
Mauritius and Zambia. These activities typically involve assistance with
technical skills and are funded externally. For example, in 2004 the New
Business Development department in collaboration with the Scientific
Services division conducted training and a development needs analysis
assessment at the Central Water Authority in Mauritius (Aquavita 6th issue
2004b:2). In 2002 RW was contracted by the International Water Association
to hold two workshops with the Water and Sanitation Association of
Zambia (RW Board January 2002) involving training aimed at the top 
management
of newly established commercial water utilities. Topics covered
included customer relations, billing system, reducing costs and regulation.
RW has also become involved with support in post-tsunami Sri Lanka.
Relief and rehabilitation initiatives from the South African water sector
were convened by the Minister of Water Affairs and Forestry in January
2005 (DWAF 2005c). After reconnaissance visits to Sri Lanka and the
Maldives in April 2005 two national programmes in Sri Lanka and a sectorwide
approach project in the Maldives were decided on (Malkiewicz &
Mthembu 2006:2). RW was appointed as implementing agent by DWAF in
Sri Lanka, with the value of the support programme set at (a paltry) R600
000 (Malkiewicz & Mthembu 2006:7). Assistance on integrated planning,
institutional development, decentralised management practices, operations
management practices and geographic information systems, amongst others,
is now provided by a team of three experts in Sri Lanka (DWAF 2005c).
In early 2006 two RW experts that were to provide technical training
on plant O&M analysed the level of expertise in this regard as “high”
and identified “structural policy and management problems” as the key
problem area, leading to a new focus on “good governance” (Malkiewicz
& Mthembu 2006:5,6), with its inevitable principles of efficiency and
cost recovery. Support activities thus seem to be a tool to export South
African experiences of efficiency, cost recovery, corporatisation and
commodification of water. Further, the minutes of a RW Board meeting
47
MSP
indicate another motive for support activities: “It was resolved that there
were no business opportunities for RW on the Maldives” (RW Board June
2005:809), hence RW’s lack of involvement in the effort there?
Capacity-building
SAAWU (2004) explains capacity-building projects in Africa as typical
twinning agreements between public sector bodies. The distinction made
between support activities and capacity-building by RW and SAAWU is
thus that the first is project-focused while the latter is country-based. By
July 2005 five South African water utilities had already signed twinning
agreements with countries in east and southern Africa (Aquavita 4th issue
2004:7; Civil Engineering 2005:23), with RW having two such contracts
– in the DRC and Malawi – and discussions ongoing with Kenya. RW also
signed an agreement with four other public utilities in 2002 to promote
South-South PUPs. Nothing came of this, however, as discussed below.
The memorandum of understanding signed between RW and Regideso,
the national water utility of the DRC, in February 2004 is seen by RW as
the model for its country-based partnerships (Holtzhausen 2004:6). In terms
of this agreement RW is to offer Regideso capacity development, operations
management, technical assistance and rehabilitation of infrastructure 
(Aquavita
3rd issue 2004:10). RW has already provided capacity-building for a
team of senior management from Regideso on water treatment process and
technology (RW 2004a:56). Further specific projects have been identified
(Holtzhausen 2004:6; RW 2004a:56) and RW and Regideso are attempting
to get donor funding from the World Bank, EU, African Development
Bank and the Development Bank of Southern Africa for these projects (RW
2005c:34; RW Board December 2003:421).
RW also signed a twinning agreement with Lilongwe Water Board in
2005 that in the short term enables both parties to share ideas and 
information,
and transfer skills, while the medium- to long-term plan is for
specific areas of cooperation to be project-driven, with a focus on issues
of governance, water demand management, revenue management, policy
issues and infrastructure development (Civil Engineering 2005:23; RW
Board June 2005:811). RW sees more opportunities in Malawi in the
future since “Malawi is also starting its institutional reforms for the 
water
sector” (Aquavita 7th issue 2004:2).
The potential for a different kind of capacity-building was in the agreement
in August 2002, at the World Summit on Sustainable Development,
between RW and four other public water utilities, namely the Brazilian
Association of Public Municipal Water and Sanitation Service Organisations
(ASSEMAE), the Department of Water and Sanitation in Porto Alegre,
the Water and Sanitation Municipality of Recife and Umgeni Water. This
South-South partnership was to promote PUPs and the role of public water
utilities in equitable service delivery to all. Piroshaw Camay, 
chairperson of
RW’s Board at the time, said that through this partnership RW was advocat-
48
Public is as private does: The confused case of Rand Water in South Africa
ing “that the social value of water must be recognised and strengthened.
Water is a common property, a public good, to be used for providing water
security for people, local production needs and ecosystems” (quoted in Van
der Merwe 2002:35). But the agreement also acknowledged that from time
to time it may be necessary to enter into contracts with private sector 
companies
on a temporary and short-term basis. Hoedeman (2006:13) reports
that due to lack of funding and “a sudden turn by the two South African
water companies towards commercial expansion strategies… this PUP failed
before it really started”. But as this current report illustrates, there 
was no
‘sudden turn’ in RW but rather a realisation and recognition of how RW
uses its ‘publicness’ to promote its commercial interests. Hall, 
Lethbridge &
Lobina (2005:10) rather aptly describe the rescindment of the agreement as
“differences over objectives between the two sets of companies: the South
African companies saw it as a vehicle for engaging in PPP-style ventures
abroad, whereas the Brazilians saw it as a global vehicle for promoting
public ownership and operation of water services”.
In conclusion, many of RW’s other activities in Africa – commercial,
support and capacity-building – are based on political policies and finance
from governments, aid agencies and donors, through conventional procurement.
The objectives and economics of some of the commercial and
support contracts – for example, constructing or advising on conventional
engineering projects, or training – may not be more problematic than any
other procurement contract. Some of the contracts, however, are highly
problematic, in their political objectives, in their economic impact and in
their commercial impact on RW. The Ghana-contract is a clear example
of this, and the Disi water-project is an example of a BOT-model which
has proved very damaging elsewhere in the world (Hall & Lobina 2006a).
RW also seems to be following the trend of water TNCs in the developing
world, namely to focus on providing skills rather than bringing capital. In
these activities, how is RW acting as a public utility in the public 
interest?
Commercially, such contracts have serious political risks that RW does
not appear to evaluate effectively. The absence of the major TNCs from the
groups bidding for the Disi and Ghana contracts suggests that they had 
assessed
it as too risky, and RW’s participation may indicate that they were
unaware of the economic problems of BOT-contracts elsewhere, or that they
were relying on non-commercial factors to cover the risk. RW’s commercial
judgment may be doubted in general, since RW has been expanding at a
time when private companies are withdrawing from the developing countries
market. The weakness of the commercial case is a further reason why the 
international
ventures of RW can be seen as a politically-driven response to the
commercial opportunities created by global policies of privatisation of 
water
and the specific opportunities of NEPAD. Furthermore, the hints of a 
condescending
approach by RW in its capacity-building activities in Africa can
in no way promote public sector capacity-building. If RW is serious about
public sector capacity-building, it is going about it in the wrong manner.
49
OTHER CASES OF PUBLIC SECTOR
BODIES EXPANDING BEYOND CORE
ACTIVITIES
RW is not the only public sector utility in the world to have expanded its
operations beyond its core remit. The following section briefly reviews the
experiences of several other public utilities with clear similarities: 
Umgeni
Water; Eskom (the South African electricity company); Uganda’s National
Water and Sewerage Corporation (NWSC); and Kowaco, the South Korean
state-owned bulk water supply company. We also look at the contrasting
activities of the Swedish public sector electricity company, Vattenfall, and
the municipal water company of Stockholm, Stockholm Vatten. Finally, we
briefly note expansion by other public utilities around the world.
Umgeni Water
Umgeni Water (UW) is a South African state-owned bulk water supplier to
many parts of KwaZulu-Natal, serving about five million people with 894
employees. It was established in June 1974. As for RW, the 1997 Water
Services Act has legally enabled UW to engage in non-core activities. The
then-Minister of Water Affairs (quoted in Loftus 2005:85) complimented
UW on being the leader amongst water boards when it came to engagement
in commercial activities. UW was the first water board to establish
a subsidiary in 1997, called UW Services (Pty) Ltd, for its engagement in
other activities. UW was also the first South African water board to operate
in Africa, already in 1998, long before the 2004 Water Services Amendment
Act made it legal. Loftus (2004:73) therefore refers to UW Services as
“an aggressive commercial subsidiary”. UW offers the same kind of services
as RW in its engagement in other activities.
Similar to RW, UW is a corporatised public utility which has as its bottom
line ‘people, planet, profit’ (Loftus 2004:73) and which acts in many
regards as if it is a private company (Loftus 2005:84). Like RW, UW has
been successful at raising capital in the market via bonds, but according
to Loftus (2004:73) it has been “singularly unsuccessful at finding 
profitable
outlets for investing this capital”. UW thus, in the mid-1990s, turned
to two kinds of activities – commercial activities in Africa and rural water
projects in South Africa – to invest its surplus capital. Like the case of
RW, much of the funding for other activities in which UW became in-
50
Public is as private does: The confused case of Rand Water in South Africa
volved in South Africa came from government bodies: between 1996 and
2002 UW received R104 million from government for rural water projects
in KwaZulu-Natal (UW quoted in Loftus 2005:86; 2006:181). Especially
because rural projects were not made part of UW’s subsidiary company but
remained part of UW’s primary activity (Loftus 2005:86), losses experienced
in these rural projects led to massive bulk water tariff increases being 
imposed
in the late 1990s.
In terms of Africa, in 2002 UW signed a three-year management contract
with Port Harcourt in Nigeria, with its eye on the Lagos-contract (Loftus
2005:93). But the failure by Port Harcourt to make the quarterly payments
led UW to pull out of the contract in 2003 and resulted in a R14 million 
loss
(Loftus 2005:95). UW was also looking for opportunities in Algeria, 
Botswana,
Ethiopia, Ghana, Lesotho, Malawi and Rwanda (Loftus 2006:184).
It is interesting to note that in Rwanda, Umgeni Water, Eskom and RW were
all to compete with one another for a management project, were it not 
for the
withdrawal of RW’s consortium. Loftus (2006:184) argues that UW’s engagement
in Africa is purely in search of profitability.
Eskom
Eskom is the state-owned electricity company of South Africa and one of the
largest power companies in the world. When Eskom’s status was changed
in 2002 from a statutory body to a public company, regulated and 
nonregulated
business were separated, with Eskom Holdings (Pty) Ltd housing
non-regulated business (Hassen 2006:15). Eskom Enterprises (Pty) Ltd was
set up in 1999 as a legally separate company, but fully owned by Eskom. It
was seen as a way for Eskom to find new business to replace the expected
loss of generation and distribution activities under the plans for the 
liberalisation
of South Africa’s electricity system, and also as a way of pursuing the
objectives of NEPAD (Financial Mail 4 July 2003). At the height of its other
activities it was involved in 30 countries. It bought power stations in 
Libya,
Mali, Uganda and Zambia, became a partner in the distribution company
of Uganda, invested in rehabilitation and management of a power station
in Nigeria, and a gas-fired development in Mozambique, had a number
of consultancy contracts, was anticipating buying Zesa, the Zimbabwean
electricity company, and was getting “closer to achieving its goal of 
becoming
Africa’s dominant energy supplier” (Financial Mail 26 July 2002). It
also diversified into telecoms ventures in South Africa and Lesotho (Africa
Energy Intelligence 22 September 2004). Further diversification was into
bulk water services, mainly repairs and maintenance, via Rotek Industries
(Pty) Ltd, created in 1998 out of Eskom’s Central Maintenance Services and
part of Eskom Enterprises.
These other activities began to encounter a variety of problems with cash
flow, re-specification of contracts and profitability. In 2003 Eskom 
Enterprises
had to write off two of its major telecoms investments, resulting in losses
51
MSP
of over R1 billion, and it closed the Nigerian operation (Liquid Africa 23
September 2004). The South African parliament discussed a cash injection
to keep Eskom Enterprises viable, and in 2004 a ‘revised business model’
was imposed by government, ‘non-core’ activities were sold off, and Eskom
Enterprises was reabsorbed into Eskom as a new Enterprises Division. It
nevertheless planned to continue to develop its activities in Africa 
(Business
Day 23 April 2004; Thomas 2006). But in April 2006 it was reported that
Eskom had decided to end all investments outside the country, although it
was later claimed that the company would continue with Umeme, its joint
venture with Globaeleq running the distribution company in Uganda, and
that Eskom “was still interested in several large-scale African projects 
such
as the Capanda dam reserve in Angola, rehabilitation of the Inga 1 and 2
dams in Democratic Republic of Congo, extension of the coal-fired power
plant at Morupule in Botswana, the Muela dam in Lesotho and extension of
the Kapichira dam in Malawi” (African Energy Intelligence 24 May 2006).
Uganda’s NWSC
The National Water and Sewerage Corporation (NWSC) of Uganda is a
wholly state-owned utility established in 1972, and supplies water and
sanitation services to 15 of the 41 large towns in the country, covering
approximately 55 percent of the urban population. Since 1998 NWSC has
reorganised itself on commercial principles, using internally delegated area
management contracts to area teams, introducing benchmarking, changing
to performance- and profit-related pay and reducing staff. The union
sees this as part of a strategy to defeat consistent pressure from the IMF
and World Bank to privatise NWSC (Werikhe 2006). But the reforms have
been viewed sceptically by some Ugandan NGOs because of the commercialised,
profit-driven approach (Wateraid 2003).
NWSC has had two management contracts with TNCs. The first was
from 1997 to 2001 with Gauff, a German consulting firm. The second was
with Suez from 2002 to 2004, which was not renewed for a third year 
(Ballance
& Tremolet 2005). NWSC has remained a 100 percent state-owned
company, though it has considered selling some shares to the public (The
New Vision 10 May 2005). It presents itself locally and internationally as a
model efficient public sector company (Muhairwe 2006).
NWSC has entered into consultancy contracts to help build capacity
in neighbouring countries. It offers advisory services, under commercial
contracts, in management, billing services, customer care, implementation
of capital development projects and financial/tariff modelling services.
Similar to RW, this is seen both as a commercial activity and as a support
programme for other water services in Africa: “As a parastatal and public
company, we offer public-to-public and public-to-private partnerships to
customers within and outside Uganda” (The New Vision 12 May 2005)
and “[w]e have reached a stage of sharing our knowledge with the outside
52
Public is as private does: The confused case of Rand Water in South Africa
world through our external services unit, which earns Uganda foreign 
exchange”
(The New Vision 13 April 2005). In 2005 NWSC said it expected
to have US$400 000 of consultancy projects by mid-2006 (The New Vision
31 August 2005). The contracts include: a consultancy worth US$10 000
000 for the Nairobi City Water Works; one with Dar-es-Salaam, Tanzania,
to help build a public sector operation after the termination of a private
concession in 2005 (The Sunrise 26 August – 2 September 2005); and one
with the Nkana Water and Sewerage Corporation, Zambia, to provide support
for change management, billing services and information technology
development (Daily Monitor 1 August 2005). As already mentioned, NWSC
has also been contracted on the Ghana-project.
Kowaco (South Korea)
The Korea Water Resources Corporation (Kowaco) is a state-owned corporation
responsible for bulk water supplies. Municipalities, responsible for
retail water distribution, have been encouraged to invite tenders to operate
their water services, and Kowaco has expanded into water distribution by
bidding for such consultancy and operating contracts. The motive is 
explicitly
presented as a national defence against foreign companies: “Kowaco
vigorously seeks out this type of business to provide evenly balanced water
services for the entire nation and to defend the Korean water market against
foreign multinational companies” (Kowaco 2005).
At the same time, Kowaco (on their website) has a stated ambition of 
expanding
internationally:
Kowaco will utilise its overseas business as a pillar of future growth
and develop into a global leader in the water services industry due to
our diversified business portfolio… We plan to intensify our efforts by
establishing overseas offices in major markets such as China, South
East Asia and South America... The ultimate goal from international
investment projects is to be one of the global top three water companies
through developing high-return projects.
It has won a number of overseas consultancy and reconstruction contracts,
but nearly all are concerned with dams and reservoirs, Kowaco’s main 
business.
It has also won an 18-month water services rehabilitation contract in
Erbil, northern Iraq.
Vattenfall and Stockholm Vatten (Sweden)
The Swedish state-owned electricity company, Vattenfall, embarked on
a period of expansion in the late 1990s and early 2000s. Sweden formed
53
MSP
a liberalised electricity market with Norway and Finland in 1996, which
meant power producers could sell electricity anywhere in the region. The
great majority of electricity companies in these countries were either 
stateowned
or municipally-owned. Vattenfall bought distribution companies
from municipalities within Sweden, to secure part of its own home market.
This could be explained as defensive behaviour, but Vattenfall also bought
both generating capacity and distribution companies from Finnish 
municipalities
to enable it to operate in Finland (the Finnish state-owned company
was behaving in a similar way). This can be treated as ‘aggressive defence’,
since Sweden, Finland and Norway had become one market and with Vattenfall
not retaining all its original activity in Sweden, it had to expand to
stand still. However, when other European markets were liberalised from
1998, Vattenfall adopted an extended strategy of expanding into other
countries, notably Germany, where it is now the third largest electricity
company. Since Germany is a separate market, this is certainly not defensive
(nor an act of solidarity).
A different kind of expansion was by Stockholm Vatten, created as a
corporatised water company by the city of Stockholm in the 1980s, and 100
percent municipally-owned. In the 1980s and 1990s it entered a number
of partnerships with municipal water operators in the Baltic states (Latvia,
Lithuania and Estonia). These partnerships were part of an international
programme to help clean up the Baltic Sea, and were specifically aimed at
training the management in the Baltic states to deliver improved technical,
financial and operational performance. Stockholm Vatten did not establish
any subsidiaries for these partnerships, nor has it bought any companies, or
entered into any concessions or management contracts.
The difference between the behaviour of these two Swedish public
operators is significant. One is operating to pursue commercial 
objectives in
an entirely liberalised market in its own country and abroad, in competition
with other publicly- and privately-owned companies. Stockholm Vatten, by
contrast, is not pursuing commercial objectives, but has engaged in 
timelimited
international partnerships with other public operators with specific
capacity-building objectives defined by public interests – in this case, the
international public interest in cleaning the Baltic Sea (Hall & Lobina 
2003).
Other Cases
Electricité de France (EdF) is one of the three largest electricity 
companies
in Europe, and was 100 percent state-owned until 2006. EdF pursued active
expansion in Europe and globally, and has major holdings in electricity
companies in South America, Africa, and Asia. This expansion was pursued as
a commercial exercise, with the expectation of significant and secure 
profits for
EdF, and with the explicit and implicit support and encouragement of the 
government.
Outside Europe, EdF experienced some serious losses, especially with
its Latin American operations, and is now withdrawing from these activities.
54
Public is as private does: The confused case of Rand Water in South Africa
The Spanish municipally-owned water companies from Madrid (Canal Isabel
II) and Bilbao (Aguas de Bilbao) have both invested in privatised water
operations in Colombia and Uruguay respectively. In both cases these were
undertaken as commercial ventures, not solidarity actions. But a new law in
Uruguay has outlawed the sale of water systems and management contracts
to the private sector (Hall, Lobina & de la Motte 2004:1). In May 2005 the
Uruguayan president decreed that private companies could continue to operate
until the end of their contracts but the contract with Aguas de Bilbao
has been cancelled due to non-compliance (Santos & Villareal 2006).
In Italy, Germany and Austria a number of municipal utilities have expanded
internationally, and in nearly every case such expansion has been
linked to a partial privatisation. This is also true of the Czech and 
Russian
electricity and gas companies. In all cases, the expansions are treated as
commercial activities. Significantly, the two private TNCs that now dominate
the German (and European) electricity and gas markets, RWE and
E.ON, both developed out of consolidation and privatisation of municipal
utilities (“stadwerke”) from the 1960s onwards.
A few cases of public sector expansion that are quite different eminate
from Brazil, where public sector water operators have sought to offer
support for the development of other public sector water operators within
Brazil and beyond. The best known example is Porto Algre’s Department of
Water and Sanitation, but the association of Brazilian operators, ASSEMAE,
has also taken a leading role in promoting these partnerships as 
non-commercial
activities, including support for the Cochabamba municipal utility
in Bolivia (which is being redeveloped to replace the failed privatisation).
These Brazilian actors have also taken a lead in promoting this form of
partnership internationally, as the case of the attempted PUP with RW and
UW, discussed above, shows. In Honduras, SANAA, the state-owned water
company supplying the capital Tegucigalpa, has been used as a 
capacitybuilding
unit to train rural water operators. SANAA does not appear to have
engaged in any commercial expansion of its activities.
Aguas do Portugal – owned by the Portuguese state – has some involvement
in private concessions, notably in Aguas de Mozambique, a commercial
operation in Mozambique. However, there was a contrast with the
private partner in this venture, the French TNC SAUR. After the floods in
1999 required repairs that would have reduced the profitability of the 
concession,
SAUR decided to withdraw; Aguas do Portugal, along with the Mozambiquan
NGO, continued in the consortium. The difference may have
been due to difference in commercial judgment, or to different weight being
given to development objectives.
What all these cases show is that RW is not unique in expanding beyond
core activities both within and outside of SA. But the cases also show that
there are different motivations and different ways in which this can be 
done.
55
FACTORS INFLUENCING EXPANSION
OF PUBLIC UTILITIES
In this next section, we consider the factors that influence the type of
expansion activities in which public utilities might engage. The main 
apparent
drivers of the various forms of expansion beyond core activities by
public utilities fit into four categories, though more than one factor may
apply to any given case of expansion by a public entity.
Defence Strategies
One recurrent factor that takes place when privatisation or liberalisation
policies develop within a country is the possibility of foreign companies
taking over operations that have been run by local public sector operators.
Public utilities then ‘need’ to defend national interest by ensuring 
that such
operations do not fall in foreign hands, especially water provision, 
which is
generally seen as a strategic national resource. Such public sector 
operators
may be seen as ‘national champions’, winning contracts within their
own country, but outside their original remit, in order to prevent foreign
takeovers. The case of Kowaco comes to mind, where the contradiction is
that it expands into activities in other countries while at the same 
time not
wanting foreign companies in Korea. NWSC in Uganda advances a somewhat
different version of this argument by presenting commercialisation as a
defence against the structural adjustment policies of the IMF.
The creation of liberalised markets, or the threat of privatisation as a
result of opening of services to private bidders, make it far more likely
that public sector operators will attempt to compete commercially due to
the perceived threat that if they do not compete they will be taken over.
Perceived competition due to private sector participation in water provision
was regularly raised within RW as a factor in the intensification of 
their corporatisation
process and their engagement in other activities. In such cases
utilities engage in other activities out of self-defence. RW also used 
defence
of the ‘Africanness’ of public utilities in justifying its engagement in 
Africa.
Opportunistic Strategies
Regional or global economic policies, such as the development of the
internal market in Europe, NEPAD in Africa, or privatisation 
conditionalities
56
Public is as private does: The confused case of Rand Water in South Africa
of the World Bank, also create new business opportunities that encourage
national and international commercial expansion. Liberalisation and 
privatisation
in other countries provide an opportunity for a state to encourage
expansion by key companies in that sector, whether private or public, as a
way of developing national dominance in a regional or international market.
This might be due to nationalism or due to a desire to support domestic
capital in their expansion into the region.
In most cases World Bank funding and its conditionalities are critical in
creating the conditions for neoliberal restructuring in the water sector. As
water TNCs are withdrawing from developing countries, national public
utilities and firms from developing countries seems to be filling the space.
Public Sector Structures and Operations
The existing structures of the public sector affect what is possible. Scale
and size are clearly significant: larger city, regional and national 
entities
are more able to expand commercially than municipal operators. If the
water services of South Africa or Korea had the typical vertically 
integrated
structures, with bulk supply as part of the municipal distributors,
the large regional or national companies would not exist. While scale and
size are influential, regional or national scale does not inevitably lead to
commercial expansion.
In RW’s case the institutional reform in the water sector in South Africa
raised questions about the future of water boards, leaving water boards
‘needing’ to reposition themselves. By gaining experience in retail water
contracts, for example, water boards can position themselves to become
vertically integrated companies and act as regional water distributors, thus
ensuring their continued existance.
What seems particularly significant in determining whether a public sector
operator expands, either for commercial purposes or for developmental
solidarity, is the senior management of the public sector operator. Both in
Stockholm Vatten and in Brazil, for example, managers have been important
in supporting solidarity action. The same is clearly true in 
commerciallyminded
entities. Further, the corporatisation of public utilities prepares them
for application of principles and practices of private sector management,
leading to a greater focus on financial sustainability and the tendency 
to want
to engage in commercial activities. NPM-thinking means that public utilities
see themselves as having to do something else than providing a public
service. RW, for example, argues that it “is in a mature market in its bulk
water business” (RW Retail Water Operations department 2000:3) and needs
to look at expansion. NPM demands a different mindset from public officials,
and this is incentivised via performance management contracts that reward
managers who achieved mainly efficiency and financial goals. In RW’s case,
for example, the CE was a paid a performance incentive bonus of R798 000
in 2005/6, on top of a basic salary of R617 000, other cash benefits of 
R342 000
57
MSP
and contributions to retirement and medical aid of R52 000, leaving him
with a total package of R1 809 000 (RW 2006:106).
While for other public utilities financial difficulties have led them to
expand beyond core activities, in RW’s case its corporatisation has seen it
accumulate capital. To ensure that such overaccumulation and overcapacity
do not led to ‘idle surplus’, RW has been expanding geographically and
into other activities. Despite RW suffering losses of R9.9 million in 2005/6
in other activities, down from losses of R14.6 million in 2004/5 (RW
2006:119), it will continue in such activities as long as its core 
activities
continue to generate the huge profits they have over the last few years.
There is further little evidence that expansion by public sector water
bodies is driven by commercial market research. In the case of RW, for
example, there appears to have been no attempt to reconsider the policy
of international expansion in 2003 after the leading TNCs had announced
their intention to withdraw from these markets as a result of inadequate
returns on investment and high levels of political risk. The TNCs lost 
interest
in the management contract in Ghana, but the public sector operators
RW and Vitens appeared to be unconcerned by this negative market judgment
by much larger, more commercial, and more experienced companies.
Kowaco’s expectations of the global water business appear similarly
unconnected to reality.
Political and Economic Policies
The national government of the state-owned company is a key player,
whether in support (or opposition) for expansion as a defence against
foreign companies, as a commercial expansion into foreign markets with
a simple profit motive, or as an instrument of public policy at home and
abroad. The policies of municipalities or (in federal states) regional 
entities
are also relevant where they are owners – some may seek commercial
activity, some may avoid it, some may seek solidarity action. The reasons
for these different approaches have much to do with ideology and with the
economic system within which they operate.
For South African companies, NEPAD has been a significant factor, both
as a regional economic policy creating new markets, and as a driver of
the South African government’s wish to see its own companies exploit the
opportunities of those markets. Within South Africa, the macro-economic
context of GEAR and the Accelerated Shared Growth Initiative of South Africa
have also created a framework that encourages the restructuring of the
public sector along the line of NPM-approaches, prompting public utlities
to get involved in commercial activities.
Such policy framework (both macro- and micro-level), especially since
the late 1990s, has actively pushed water boards such as RW into other
activities. Not only does water legislation legally allow them to do so,
DWAF’s reduction and eventual end to subsidies to water boards means
58
Public is as private does: The confused case of Rand Water in South Africa
they feel compelled to implement full cost-recovery policies and diversify
income streams. To be self-financed they look for profit-making 
opportunities,
and with primary acitivities regulated, non-core activities seems to be
the place for such profit-making. With money made available from DWAF
and other national government bodies to municipalities to enable them to
fund and contract for all sorts of activities, the road has been paved 
for public
water utilities to engage in other activities for profit-making or at 
least on
a cost-recovery basis.
There is a separate set of initiatives which developed not in response to
liberalised markets at home or abroad, but as a way of developing public
sector operators for public interest objectives – as with the support 
for the
Baltic states by Stockholm Vatten, the Honduras capacity-building, and
developments in Brazil. The public sector operator in these cases acts as a
capacity-builder of other public sector operations, as a vehicle of 
solidarity
and mutual public interest. If we consider the national context within
which such public sector solidarity operates, it seems as if the presence
of neoliberal policies, or the lack thereof, might play a role. In the 
Brazil
case the government adopted a law in 2005 that encourages domestic
PUPs (Hoedeman 2006:9).
The work of authors such as Bakker (2002, 2003), and Graham & Marvin
(1994a; 1994b), who made use of the Régulation school to identify
various phases in the development of utilities, could be insightful when
considering such a context. What their work shows is that factors such as
phases of industrialisation and economic structure of the economy (i.e.
regimes of accumulation) and the mode of regulation (either competitive
or monopolistic) impact on the manner in which the utility operates.
Their argument is further that in the current context of post-Fordism public
utilities are privatised (and corporatised) and increasingly globalised with
international finances becoming sources of utility investment. The key
question now is whether one can have public entities working for the
public good if they are situated in a neoliberal context.
59
CONCLUSION: IMPLICATIONS
FOR ‘PUBLICNESS’
The case study of RW exemplifies not only the tensions between the various
kinds of activities that public utilities engage in but also the mostly
hidden processes of contestations and contradictions within public utilities
such as RW around hegemony building for commodification and corporatisation.
The RW case raises many questions about the nature of public
utilities, what publicness is and what PUPs are. This last section considers
what engagement in other activities, especially profit-making activities,
means for ‘publicness’.
Within its area of bulk water supply RW holds a natural and legislated
monopoly. Now RW has become involved in various other activities
outside of its primary role of bulk water provision. Except that RW legally
has the right to engage in other activities both within and outside of SA,
other rationales provided by RW for its other activities are public 
interest,
support for NEPAD and its own commercial interest. RW has expanded its
other activities from CSI (supposedly subsidised) to cost recovery to 
include
profit-making. A further change has been that other activities are not only
undertaken in South Africa but also in Africa and the Middle East. In South
Africa RW seems to be heavily engaged in capacity-building activities on
a cost-recovery basis, while in Africa it is engaged in commercial, support
and capacity-building projects. Capacity-building in most cases meant
expanding entrepreneurial practices in the public sector.
The Minister of Water Affairs and Forestry said in 1999 of RW that it is a
model for other water boards (in Tempelhoff 2003:580). Kriel et al. (2003)
went further to describe RW as South Africa’s ‘leading exponent’ in PUPs in
the water sector, while at the same time an annex to a report by the World
Commission on Dams Secretariat (2000:A-39) gave credit especially to RW
for contributing “substantially to the shift from subsidised water supply to
cost-recovery approaches”. This paper highlights that although all these
statements are true, they are not to be seen as necessarily positive.
The purpose of this report is not to determine whether RW is ‘good’ or
‘bad’ but rather about how we ensure that public utilities like RW act 
in the
‘interest of the public good’. There are tensions between RW being a public
services provider and at the same time acting as a commercial operator.
This is not a unique position: the NPM-model of corporatisation and 
commercialisation
means that this is reality for many public services providers.
60
Public is as private does: The confused case of Rand Water in South Africa
In its other activities RW – and other public utilities – seems to be 
schizophrenic;
or, if we adopt Loftus’ (2004:73) point when referring to UW, RW
has “confused identity”: is it a public utility that acts in the public 
good or
is it a company out to make profit? Can it be both, as RW claims?
As Swyngedouw (2006:50) rightly indicates, when the profit-motive
– whether in private or public companies – comes to be the benchmark for
performance, decisions concerning price and supply-demand are radically
altered and contradictions are created. Tensions are created between 
profitmotive
and provision of public services. RW is structured like a company,
operates on commercial principles and has created ringfenced companies
for other activities. But at the same time RW regularly proclaims itself 
to be
a public entity, at times (though not nearly enough) providing support to
other public sector bodies for no more than cost recovery. Unfortunately,
it appears that the reason for RW’s assertion of its public entity 
status is its
interest in accessing more easily the many opportunities for money making
in capacity-building, support activities, management contracts, etc. It is a
pro-market public sector entity.
In South Africa, due to national legislation, RW can enter service
agreements with local authorities without having to follow an open tender
process. To then push for full cost recovery, principles of competition and
efficiencies – principles of the private sector – and ensuring that a 
corporatised
model for local government is established, does not necessarily mean
it is acting in the interest of public good. Although RW proclaims 
itself able
to combine public interests and commercial rationales, the reality has been
that efficiency goals have received priority above equity, accountability
and democracy goals. Of course, efficiency goals can be in the interest of
the public good, but if they are the only goals pursued they can be 
destructive
to the public good. Simply because an entity is public-owned does not
mean it will pursue equity goals actively.
Similarly, RW highlighting its public nature in activities in Africa does
not make sense, as it is RWS – a stand-alone business company – that
engages in activities on the continent. RW’s assertion of itself as a public
entity is thus seen as opportunism rather than any real commitment to the
ethos and principles of the public sector. As Adam (2005) argues in the case
of RW’s involvement in Ghana, the company is running in the name of the
public but acting in the interest of the private. It does so by contributing
to the acceptance of the ethos and principles of the private sector in water
provision, both in South Africa and Africa, with enormous consequences for
access to water by the poor. In this way RW is contributing to ‘accumulation
by dispossession’.
Another way in which RW furthers the corporatised model, and spreads
the commodification of water, is through many of its capacity-building 
projects.
There is a need to unpack what kind of capacity is built (i.e. type of
knowledge transferred) in what areas, and in whose interest. Unless 
capacity-
building builds the capacity of the public sector to act in the interest of
61
MSP
public good, fulfilling both equity and efficiency goals in a 
transparent and
democratic manner, it is not public sector capacity-building but private 
sector
promotion. This also means that simply because a public sector entity
is engaged in building the capacity of another public sector entity, it 
is not
necessesarily the kind of PUP progressive-minded people want to support.
We need to ask, ‘What is public about PUPs?’
There needs to be a clearing of the muddied waters of PUPs and an
uncovering of the various guises of ‘public’.
In this regard a typology of PUPs is helpful, such as that offered by 
Brennan
et al. (2004): public-popular, public-community, public-workers, public-
cooperatives and public-public. This typology identifies various kinds of
partners (who are non-private sector) who can be involved in a PUP. The
typology provided by Hall, Lethbridge & Lobina (2005:2) builds on Brennan
et al.’s by identifying PUPs based on different types of partners, as well
as the objectives of the partnership (such as building capacity, improved
services, defence against privatisation, building stronger community support
and accountability). They further indicate that PUPs have “a stronger
commitment to capacity-building and skills development; increased 
participation
of local communities; clearer systems of accountability; and commitment
to keep public services in the public sector” (Hall, Lethbridge &
Lobina 2005:10). All of this highlights aspects that PUPs should address in
strengthening publicness.
Hoedeman (2006:8) indicates various kinds of activities that can be
performed under PUPs, such as “reforming (and democratising) decisionmaking
and planning; institutional and human capacity-building (including
training of managers and workers to boost capacity and public sector ethos:
including integrity, equity, clarity, accountability, transparency, 
openness,
cooperation, and evaluation); managerial consulting, training and capacity-
building; administrative support (including working conditions, salaries,
benefits, and supervision of any outside contracting); financial planning,
social tariff setting (differential for domestic, industrial, 
commercial, institutional,
and agricultural uses), billing, and customer service and collection &
assistance in locating available finance; maintenance (including repair and
replacement of equipment); leakage control and other sustainability 
measures;
advice and other assistance in operational infrastructure and/or project
design assistance in service delivery; construction; operation; expansion
of coverage; information technology”. As Hall & Lobina (2006b:35) argue,
PUPs should not be about managing large-scale infrastructure “nor agents
implementing specific policies, e.g. cost-recovery mechanisms” but “should
aim to provide local management and workers with the necessary skills
to identify problems, choose solutions, and implement chosen strategies,
including the ability to manage capital financing mechanisms”.
All this means that ‘publicness’ is much more than just public ownership.
It is about public sector entities acting in the interest of the majority
of the public, performing activities for the benefit of public good in a
62
Public is as private does: The confused case of Rand Water in South Africa
transparent and democratic manner. Denhardt & Denhardt (2003:42-3)
identified the values to underpin such new public service as serving 
citizens,
not customers; seeking the public interest; valuing citizenship over
entrepreneurship; thinking strategically and acting democratically; 
recognising
that accountability is not simple; serving rather than steering; and
valuing people, not just productivity.
What are the barriers preventing this from happening? Of course there
are various financial, institutional and structural barriers in neoliberal
contexts, but continued contestations and struggles will and are helping to
constantly shift and move dominant processes and realities. And we should
draw heart from realities within public sector entities, like RW, where
buy-in from staff to the corporatised model and commodification is not
complete. While it is true that some welcome the erosion of the ‘publicness’
of RW, others feel uncomfortable and contest it. Ultimately, as King
and Stivers (1998) remind us in their book Government Is Us, government,
including public utilities, belongs to its citizens.
63

ENDNOTES
1 Barnett & Whiteside 2005.
2 The FBW-policy promises 6 000 litres per household per month, amounting
to 25 liters per person per day for an average household of eight people.
For various critiques against the content of the policy, its very idea and
problems with its implementation, see Bond (2005), Cosatu & Samwu
(2003), Cottle (2004:23-7), McDonald (2002), McDonald & Pape (2002)
and McDonald & Ruiters (2005b).
3 For example, about 60 percent of water used is for agriculture (Eberhard
& Pegram 2000:vi; Francis 2005; National Treasury 2003:218); mining and
industries account for 16 percent of water use, households for 12 percent,
with the rest being used to meet environmental needs (Cottle 2004:11;
RDSN 2000). Of the 12 percent of water used for domestic purposes in
South Africa, less than ten percent is consumed by all black households;
only one percent by rural households (Bond & Hallowes 2002:36; Cottle &
Deedat 2002; RDSN 2000).
4 Interestingly Deloitte & Touche (1997:5) claim that in general the water
industry tends to be a follower of the electricity, telecommunications and
gas industries.
5 Their criticisms included arguments that losses incurred from such 
activities
would be passed on to municipalities via increased bulk water tariffs
and that the accountability of water boards to WSAs are undermined (RSA
2004:4).
6 This is part of the Auditor-general’s (2004:27) classification of 
public entities.
Such Schedule 3B public entities are public business enterprises generating
income and being substantially self-funded. Such companies are run
in accordance with business principles (Auditor-general 2004:27). In terms
of assets RW is ranked fourth in a list of state-owned enterprises (SOEs),
according to Sekgobela (2003:21), after Eskom, Transnet and Telkom, and
before Denel, ACSA, the South African Post Office and the SABC.
7 Lushaba resigned at the end of 2005, two years before his five-year 
contract
expired, to take up a position as vice-president for shared business 
services
with Lonmin mining group. This was amidst speculations amongst RW
64

staff that the board refused to increase the pay he demanded after another
financial year of increased revenue and profit.
8 In 2005 RW’s foreign financial rating from Standard and Poor’s was
BBB+ (RW 2005b:97) and its long- and short-term domestic ZAR currency
ratings in 2004 were AA and A1+ respectively (Joffe 2004:4).
9 A section 21-company is established in terms of the Companies Act of
1973. It is an organisation that is set up as not-for-profit; if profits 
are made,
these are not to be shared out to members of the company.
10 This can be compared to the minimum of R50 million (about 0.15 percent
of turnover) that is provided by Eskom to its foundation and the R200
million (0.49 percent of turnover) that Telkom set aside for its foundation
(RW Board December 2004:708). In fact, for the SOEs for whom statistics
were available between 1994 to 2003, Gordon & Camay (2004:32) found
that RW spent the least on average per year.
11 Over 90 percent of RW employees are unionised (Verschoor 2006:5);
the three recognised unions are Samwu (representing just over 50 percent of
all RW staff with the majority of its members support staff), the United 
Association
of South Africa with 16 percent of union membership at RW and the
RW Staff Association with 15 percent union membership (RW 2004a:51).
12 “In this regard RWS will seek out relationships with banking 
institutions,
development finance institutions, donor agencies, other water utilities, 
consulting
engineers and other stakeholders”. (Max 2006a).
13 This area includes Winterveldt (a peri-urban and rural area), Ga-Rankuwa
and Mabopane (both urban areas).
14 It is interesting to note that the City of Tswane referred to its 
contract
with RW as a PPP (City of Tshwane 2005:778).
15 A further confusion is that RW in its 2003 annual report listed its 
involvement
in Odi and Maluti-a-Phofung as social responsibility projects
(RW 2003b:31).
16 It is a section 21-company of the Ekurhuleni municipality formed after a
corporatisation process of the wastewater treatment function of the 
Ekurhuleni
municipality (Naidoo 2005:54).
17 RW established this fund in 1995 in response to the drought experienced
in SA (Bonner & Lekgoathi 2004; Tempelhoff 2003:594) – during
this period the fund accumulated R70 million through penal tariffs charged
65
MSP
to customers who exceeded their quota during the water restrictions period
(Bonner & Lekgoathi 2004:169; Buckle 1998:2; Tempelhoff 2003:520).
18 Vitens is a public utility, owned by provincial and municipal authorities
in the Netherlands, serving 23 percent of the Dutch market (four million
customers), making it the largest water supplier in the Netherlands. Like
RW, Vitens creates subsidiary companies for its commercial activities.
Vitens International, its operating arm outside of the Netherlands, already
has experience of O&M management contracts – it has a contract similar to
a management contract in Mozambique and a twinning agreement with the
Suriname Water Company, for which it gets paid a consultancy fee (Vitens
website).
19 Umgeni Water withdrew just before the second stage of the bidding,
while Biwater and Suez withdrew early due to pressure by anti-privatisation
groups in Ghana and the UK. Vitens/RWS stayed in possibly due to their
perception that since they were public utilities, and in their 
belief/rhetoric
then not promoting privatisation, such pressures would not be exerted on
them. Another factor might be their inexperience in such activities; the TUC
(2005) refers to Vitens and RW as “smaller, inexperienced would-be water
multinationals”.
20 The actual management contract, as well as a World Bank contract,
refers to the company as AquaVitra, while RW in its 2006 annual report
repeatedly refers to AquaVita.
21 A fact not widely known is that Uganda’s National Water and Sewage
Corporation was awarded a contract worth $12 million “to provide technical
experts and short-term consultants” for this project. Yeboah (2006:61)
argues that Uganda’s involvement might have been purposefully low
profiled due to “the opposition to foreign involvement (especially Ugandan
involvement) that prevails in certain segments of the Ghanaian population”.
22 This compares to 55 percent and 45 percent wage increases accepted
by public utilities workers in, respectively, electricity and state housing
(NCAP 2007).
66
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