Business Case forthe Pongola-Umzimkulu Catchment Management ...

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Business Case for the Pongola-Umzimkulu Catchment Management Agency 9.1 Sources of Finance Section 84 of the National Water Act (NWA) gives the CMA full authority to raise funds for the purpose of exercising its powers and duties as an original function from the time of establishment. The Act details the possible sources of funding for the CMA as: • Parliamentary appropriation • Water use charges • Money obtained from any other lawful source, including: i. recreational concessions, ii. license application fees, iii. donor support and sponsorship, iv. contractual payments, v. return on Investment, and vi. in-kind contributions. The establishment of the CMA can be thought of occurring over three stages: • Initial functions • Consolidation and implementation functions • Responsibility functions For each of these three, a different source of financing is required based on the ability of the CMA to raise funds and the responsibility of DWA to provide funding to establish a fully functional CMA. These can be described as follows: Initialfunctions The initial (proto-CMA) functions in first 2 years should be mainly funded through water use charges, except for some key institutional establishment processes and initial projects such as the catchment management strategy development. Consolidation and implementation functions The functions delegated during the organisational consolidation in the next two years have both national strategic and WMA level drivers. This should be the determinant of the source of funding for these functions, with those functions being required of national strategic purposes or as part of national programmes possibly being funded from the exchequer on an agency basis. All additional locally required initiatives should be funded through water use charges (or any other lawful source). The funding of the national WR monitoring system (hydrology, groundwater, water quality and resource health) should therefore be from the exchequer (or infrastructure charges where these support infrastructure operation). Similarly funding of classification and Reserve determination processes required nationally ensuring sustainable management of the resource (in the public interest) should be funded from the exchequer. Responsible authority functions The activities associated with the responsible authority functions (from the fifth year) are currently largely performed by DWA under parliamentary appropriation. It is proposed that these functions continue to be funded from the exchequer, even once they are delegated to the CMA, in order to ensure appropriate resources are allocated by the CMA and that funding considerations do not influence regulatory decisions by the CMA. Department of Water Affairs 42
Business Case for the Pongola-Umzimkulu Catchment Management Agency The additional costs of these regulatory functions should be relatively low, given that there will already be significant staff involved in water use management and institutional coordination related functions within the CMA, and that DWA should maintain a technical support capacity to support the implementation of these functions by the CMA. Furthermore, this should be associated with a reduction of the DWA programme costs associated with these responsible authority functions. Based on this assessment and preliminary analysis of the CMA costs, it is argued that the public interest functions of a CMA accounts for about 35% of the total CMA expenditure and that this is relatively stable over the three phases. DWA WRM Charges (Cost Recovery Charges) Establishment and Operational Lim CMA Operations CapitalRepay Service Providers Other (licensing, grants etc) Figure 9: Proposed sources of funding for the CMA 9.1.1 Water Use Charges and the Pricing Strategy The primary source of finance for the CMA will come from water use charges. Water uses as defined in the NWA can be broadly grouped under three categories: • Abstraction related uses 14 • Waste discharge related uses 15 • Non-consumptive uses 16 Over time, the Pricing Strategy, established under the NWA, will allow DWA/CMA to levy charges for most of the water uses defined above, after consultations with stakeholders. Charges are already in place for abstraction related uses and are currently collected by DWA. The Waste Discharge Charge, on the other hand,will be piloted in three catchments around the country over the next two years and rolled out more broadly after that. While assumptions can be made about the implication of implementing waste discharge charges, the pilot testing will reveal the real implications of the system. Lastly, a strategy has been developed for charging for recreational use, as a nonconsumptive water use, however, there is some institutional clarity required as to roles and 14 Section 21 (a), (b) and (d) of the NWA (1998) 15 Section 21 (e), (f), (g) and (h) of the NWA (1998) 16 Section 21 (c), (e), (i), (j) and (k) of the NWA (1998) Department of Water Affairs 43
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