water stories johannesburg fr bd 21-06-10

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1

WATER STORIES

JOHANNESBURG

MAnAgeMent contrAct



JEAN-lOUIS cHAUSSAdE

cEO Of SUEZ ENVIRONNEMENT

2

editoriAl WATER STORIES

johAnnesburg

The WATER STORIES collection provides

valuable insight on the services and

contributions made in the contracts managed

by SUEZ ENVIRONNEMENT, who have been

providing water and wastewater services to

local authorities since 1880.

When SUEZ ENVIRONNEMENT signs a contract,

our involvement goes ar beyond the simple

supply o services. To back local development,

we work with the district's industrial networks

in conjunction with regional suppliers, and

make a contribution to the economic and

social well-being o the community.

Our policy o know-how transer ensures

the services are not only improved but also

perpetuated.

In this issue o WATER STORIES, we take a

closer look at the city o Johannesburg, whose

municipal authorities were the frst in South

Arica to sign a management contract with a

private operator, taking the strategic decision

to corporatise its water and sanitation utility.

When the contract ended, in 2006,

Johannesburg Water was ranked the best

large municipal water and sanitation utility

in the South Arica. In addition to improving

technical perormance, the private operator

transerred the requisite skills to the local

management and instilled new corporate

values at Johannesburg Water, based on

efciency and customer service, as well as

empowerment o line managers. It achieved a

complete fnancial turnaround o the utility.

Read on, and learn more about this example

o public-private partnership that shows how

a management contract can bring signifcant

and measurable benefts to the contracting

authority.



bAckground

3

cHANGES Of A NEW ERA

The end o apartheid in South

Arica ushered in enormouschanges. For Johannesburg,these included a majoradministrative reorganisationcombining multiplemunicipalities into new ones,and ully incorporating thetownships.

The ragmentation oresponsibility within themunicipality had created a

culture with little accountabilityor results. Employeemotivation was weak, with poorcustomer service as the norm.Capital investment projectsran into recurrent delays andcost overruns, and operationalproblems o the seweragesystem had become a growingenvironmental concern.

AccESS TO WATERIn 2001 around 85 percent othe population o Johannesburghad access to piped water andsewerage services througha household connection.Another 8 percent had accessto water through an communalstandpipe. The rest o thepopulation lacked access toadequate services. Residential

customers ell into threecategories, each representing

around a million people:

- Middle and high-incomehouseholds livingin traditional urbanneighbourhoods, withindividual meteredhousehold connections

- Mostly low-incomehouseholds living in thetownships (the largest beingSoweto) who had individual

un-metered connectionsand were billed at a at rateor 20 m3 o water a month,regardless o their actualconsumption

- Poor households living ininormal settlements, largelyrural migrants living belowthe poverty level. Whilea minority had individualconnections, most obtained

water through communalstandpipes or tank trucks.

QUAlITy ANd EffIcIENcy

Of SERVIcES

For the inhabitants withaccess to the services, themain problem was a lacko customer riendlinessand responsiveness. Forormal townships like

Soweto, the inrastructureand services suered rom

neglect as a result

o poor sta motivation and thetradition among the populationo reusing to pay utility billsas an act o civil disobedienceduring the apartheid era.

There were other problems,due to the insufcient level oannual investment to keep upwith population growth andtake care o the backlog inservice coverage in inormal

settlements.

fINANcIAl SITUATION

The municipal authoritieswere unable to properlyassess the efciency o theservices because there wasno monitoring o criticaloperational perormanceindicators.

Finally, it was impossible to

calculate the level o non-revenue water (water put intothe distribution system but notbilled) due to defciencies in thecustomer database.

Employee motivation was weak, with poor customer

service as the norm. Capital investment projects ran

into recurrent delays and cost overruns, and operational

problems o the sewerage system had become a growing

environmental concern.



4

WATER STORIES

johAnnesburg

the contrAct

THE MANAGEMENT cONTRAcT

The municipality o Johannesburg was the frst in South Arica to sign a management

contract with a private operator. The aim o this PPP was to leverage the expertise o an

experienced operator or a ew years in order to establish a viable, corporatised public

water utility.



5

"ONE cONTAcT" fOR IMpROVEd SERVIcES

The new customer service strategy was driven by the principles o having a single point o

contact or customers and assigning clear accountability or ollowing up on complaints.

Beore the managementcontract, or the inhabitantswith access to the services,

the main problem was a lacko customer riendliness andresponsiveness. Numerouscomplaints were receiveddue to errors in water andsanitation bills. Frustratedconsumers had become usedto voicing their complaints inlocal newspapers.

A new customer service planlaunched by JOWAM just

three months ater the starto the contract, was based

on the principles o havinga single point o contact orcustomers and assigning clear

accountability or ollowingup on complaints: a 24-hourcall centre was establishedto receive all customercomplaints, six operationalregions were created, with onedepot or two, depending on thesize o the region.

The reorganisation producedgood results over the lie o thecontract, with the response

time or solving reportedproblems being gradually

reduced by 30 percent. At the

end o the contract, more than

80 percent o repairs on the

water network were completed

within 48 hours o notifcation,

and more than 80 percent o

sewer blockages were resolved

within 24 hours.

custoMer MAnAgeMent

More than 90% o callsanswered within less than

30 SEcONdS

80% o water network repairsand sewer blockages completed within

48 HOURS



6

WATER STORIES

johAnnesburg

QuAlitY

The new management methods or controlling the quality o drinking water and the

operation o wastewater treatment plants were key actors in helping to improve the

quality o service.

BETTER cONTROl Of QUAlITy Of SERVIcE

dRINkING WATER

QUAlITy

The quality o bulk watersupplied by Rand Water hashistorically been satisactory,but the city had a defcientquality control system such thatless than 150 water samplesa month were collected andanalysed, only hal the nationalstandard o at least 300samples a month. As ar aswater quality in the townshipswas concerned, there was nomonitoring at all.

The new management methodsincluded all the townships inthe water sampling routine andincreased the requency o thequality analyses.

From the very frst year othe contract, more than500 samples a month

were analysed, and thebacteriological complianceconsistently exceeded 99percent throughout thecontract period.

ENVIRONMENTAl

cOMplIANcE Of

WASTEWATER

TREATMENT plANTS

Beore the start o themanagement contract,the compliance rating orwastewater treatment wasonly around 80 percent,there were ongoing problemswith sludge treatment, andlittle attention was paid to

economic efciency. The linemanagement was in the handso technical experts, someo whom lacked adequatepeople skills. Because ocumbersome line reporting, theline managers, those makingdaily decisions aecting plantoperation and compliance,lacked the means to take ullresponsibility or their systemsand had little incentive to seek

more efcient ways o doingthings.

A new management structurewas established, giving more

responsibility to the linemanagers. The private operator

put its worldwide networkto good use, and broughtin experts or short termsmissions, to work closely withthe line managers, and identiyways o improving operationalefciency.

Agreements were signed withthe ederation o armersallowing wastewater treatmentplants to spread their sludge on

private arms situated within aradius o 90 km.

The number o accidentalspills recorded at wastewatertreatment plants ell rom 646in 2001/2002 to only 244 in2005/2006. The compliance othe fnal euent increased romaround 80 percent to more than95 percent at the end o themanagement contract, while

the environmental compliancerate in terms o sludge disposalrose rom 50 percent to 100percent.

500 samples analysedper month



7

Asset MAnAgeMent And inVestMents

A modern and sophisticated asset management system, as well as a comprehensive

programme o preventive maintenance were implemented, in order to quickly improve

the efciency o asset management.

A cOMpREHENSIVE INVESTMENT ANd ApREVENTIVE MAINTENANcE pROGRAMME

Efcient asset managementis essential or the eectiveoperation o inrastructures.The municipal water andsanitation departments werenotably weak in this area,perorming little preventivemaintenance and ailing toproperly supervise their sub-contractors. This resultedin requent breakdowns at

pumping stations. In addition,civil engineering works weresubject to delays and costsoverruns.

The frst step in addressingthese problems was to put

together an asset register anda modern asset managementsystem. With the support oasset management sotware, acomprehensive programme opreventive maintenance wasimplemented.

In the last our years o thecontract, breakdowns atpumping stations and reservoirs

were reduced by 60 percent,down rom 80 breakdowns amonth to just 29.

Although it was not responsibleor fnancing investment,JOWAM was responsible

or supervising the capitalinvestment programme

implemented by Johannesburg

Water. Civil engineering

works programmes were

ully implemented during the

contract. A new strategy or

investment planning was

also introduced. The private

operator insisted that the

utility's own sta were betterqualifed to evaluate its needs

in terms o inrastructure

expansion and rehabilitation

than external consultants.



8

WATER STORIES

johAnnesburg

Over and above improving technical perormance, the private operator played an essential

role as a driver or cultural change. A new dynamic was created in which the utility’s sta

and the private operator truly worked together to turn the utility around.

REAl lOcAl

EMpOWERMENT

JOWAM took over operations,mobilizing a team o 13 ull-timemanagers. A strategic choicewas made to rapidly transerskills to Johannesburg Water’snew managers so that they couldreplace the expatriate team assoon as possible. The JOWAM

team was reduced to ourmanagers in the third year o thecontract, and then to just two inthe last two years.

In starting up JohannesburgWater, the frst task was totranser all the personnel incharge o water and sanitationservices to the new utility. Thiswas done with no layos.

Greater empowerment o linemanagers and a reorganisationo work during standby periods(nights and weekends) helpedreduce annual overtime by 24percent. Measures were taken toreduce worker absenteeism, andoperational saety was improvedthanks to on-the-job training.

A comprehensive capacity-

building programme wasimplemented. Training targetedevery level o employees, rommanagement to feld sta.Special emphasis was given totraining in customer care, whichwas made mandatory or all theemployees who had contact withcustomers.

huMAn resources

TRANSfERRING kNOW-HOW



9

In the metered districts o Johannesburg, the volume o non-revenue water was only

about 20 percent, while in the un-metered districts, the townships, the level o non-

revenue water was calculated to be 67 percent, due to excessive residential consumption

and leaks on private property.

To counter physical losses,

JOWAM implanted a modernsystem or monitoring waterows and non-revenue water(NRW) in the network. Acomplete telemetry systemwas installed, and continuousmonitoring o reservoirs wasintroduced to prevent nightoverows. Nine ull-timeleak detection teams werecreated and trained to regularlymonitor the network anddetect new invisible leaks.The average number o leaks

repaired annually increased

by 20 percent in relation tothe baseline. By the end o

the contract an active leak

detection programme had

been set up and a large part o

the distribution network was

checked every year.

JOWAM, however, had little

control over commercial losses,

because the responsibility

or meter reading, billing and

collection were only partially

transerred to Johannesburg

Water rom the municipal

authorities.In the last two years o the

contract, as the City transerred

responsibility, JOWAM was

able to set up eorts to reduce

commercial losses. The status

o accounts in the customer

database was reviewed and

adjusted when necessary

and meters were checked or

under-metering.

A RElIABlE NETWORk

non-reVenue WAter MAnAgeMent

Soweto accounted or162,000 connections,90 percent o thewater supplied toun-metered districts,

and 30 percent o thebulk water purchased byJohannesburg Water.

The municipalauthorities,Johannesburg Waterand JOWAM jointlydecided to pursue ademand managementprogramme in Soweto.Set up by Johannesburg

Water in partnershipwith the municipalauthorities in Soweto,this initiative was calledOperation Gcin’amanzi,a Zulu word meaning “toconserve water”.

Sustainable results,however, were onlyachieved througha holistic approach

combining technical,social, revenuecollection, and tariconsiderations.

Individual meters wereinstalled. Prepaymentmeters were identifedby the municipalauthorities as the best

way o helping thecustomers to managetheir water expenses ona day-to-day basis.

In addition to thenational ree basicwater policy (in SouthArica the frst 6 m3 permonth are suppliedree o charge) a specialrebate o around 20

percent was applied tothe general water tari.The sanitation tari wasalso revamped and aree basic sanitationallocation was created(in line with the reebasic water allocation).Customers' debts werealso written o overa 36 month period.

Finally, to supportbehavioural changeamong customers, anexhaustive programme

o community liaisonand social interventionwork was implemented.

By the end o the

management contract inJune 2006, some 42,000households in Sowetohad beneftted rom theproject, representingapproximately 20percent o previouslyun-metered customers.

Hal the customers whoreceived prepaymentmeters consumed less

than the ree monthlyallocation o 6 m3.The other hal hadconsumption ratesaveraging 13 m3, lessthan the 20 m3 meters oestimated consumptionor which they hadpreviously been billed,but now paid in advanceor the portion above 6 m3.

operAtion gcin’AMAnzi



10

WATER STORIES

johAnnesburg

trAck record

JOWAM achieved more than 90 percent o compliance with contractual targets every

year, with clear improvements in customer service, environmental compliance and

cost efciency.

A MAJOR fINANcIAl

TURNAROUNd

The fnancial situationo Johannesburg Watersteadily improved during themanagement contract. It wentrom a net loss o around 25percent o revenue in the frst

year o the contract to fnancialequilibrium in the fth and fnal

year.

The largest part o gainswas due to improvement inoperational efciency, comingrom a combination o actionstaken by JOWAM, as thereduction o commercial losses,increasing in the collection rateor large customers, containingthe overall operating costs,despite the launching o newactivities such as call center,the sludge managementprogramme and the operationGcin’Amanzi.

MOTIVATEd ANd

QUAlIfIEd STAff

The Johannesburg Water sta

became better qualifed thanks

to on-the-job training. The line

managers became able to

handle greater responsibilities

and their eective

empowerment created stronger

motivation.

The transer o betteroperational practices rom

the international experts to

the local sta, like reduction

in electricity and chemical

consumption in wastewater

treatment, preventive

maintenance programme,

customer relations and asset

management, was a key

actor in the success o the

transormation o the utility into

an efcient and sustainable

entity.

The most eloquent illustration

o its positive impact is the actthat the National Benchmarking

Initiative ranked Johannesburg

Water as the best metropolitan

water and sanitation utility in

the country in both 2005 and

2006.

Since the end o the contract in

June 2006, Johannesburg Water

has consistently achieved

healthy fnancial results as

well as a good operational

perormance.

AN EfIcIENT ANd SUSTAINABlE ENTITy



11

trAck record

nAturAl resources Are not infinite.

eAch dAY, SUEZ ENVIRONNEMENT (pAris: seV, brussels: seVb) And its subsidiAries

deAl With the chAllenge to protect resources bY proViding innoVAtiVe solutions

to industries And to Millions of people.

SUEZ ENVIRONNEMENT supplies drinking WAter to 90 Million people,

proVides WAsteWAter treAtMent serVices for 58 Million people,

And collects the WAste produced bY 46 Million people.

SUEZ ENVIRONNEMENT hAs 65,900 eMploYees And, With its presence on A globAl

scAle, is A World’s leAder exclusiVelY dedicAted to enVironMentAl serVices.

SUEZ ENVIRONNEMENT, A 35.4% Gdf SUEZ AffiliAte, reported sAles turnoVer

of 12.3 billion euros At the end of finAnciAl YeAr 2009.



WATER STORIES

johAnnesburg

D e s i g n & L a y o

u t : 6 3 c o m -

P h o t o c r e d i t s : G e t t y i m a g e s - G a l l o I m

a g e s - D e n n y A l l e n , S U E Z E N V I R O N N E M E N T P h o t o

l i b r a r y

SUEZ ENVIRONNEMENT

1 rue d’Astorg

75383 pAris cedex 08

frAnce

WWW.SUEZ-ENVIRONNEMENT.cOM

Share Capital € 3,323,457,083.

Registered with the Paris Register o Commerce and

Companies under number 410 118 608

Printed on a paper made with pure ECF (Elemental

Chlorine Free) ecological cellulose pulp rom trees

grown in sustainably managed production orests,

and selected recycled three-layer fbres. Certifed

by the Forest Stewardship Council (FSC).

June 2010

water stories johannesburg fr bd 21-06-10

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