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Risks and implications of becoming a water service provider

Beware of hidden dragons

By Anthony Turton

, |

Risks and implications of becoming a water service provider

Beware of hidden dragons

By Anthony Turton

, |

5 min read

Once municipal water enters the estate, it is reticulated through a network that has been built by the original developer and is maintained by the HOA. All’s fine and good but, if the estate management decides to provide on-site storage to, for example, ensure regular supply, they stray into a grey area of the law, and may be liable to prosecution. It’s a tricky situation, but – as water is an absolute essential for life – it is well worth teasing it out.

The state as custodian of water

The legal reform ushered in by the adoption of The Constitution of South Africa in 1996 altered the way that water and other resources are managed. Water was nationalised and the control over its storage, processing, distribution and treatment as waste was embedded in a range of legislation that includes the Water Services Act no. 108 of 1997, the National Water Act no. 36 of 1998, and the National Environmental Management and Biodiversity Act no. 107 of 1998. Central to this endeavour are two key issues: rights and control.

Water as a human right

In South Africa, all humans have a legislated right to a minimum daily flow of 25 litres of safe, potable water, which is defined by the SANS 241 standard. The responsibility for this delivery rests entirely on the relevant WSP, which must ensure that all supplied water meets the stringent standards of SANS 241. The right to this daily minimum is the reason that WSPs may not cut off an individual’s water supply for the non-payment of services. In order to fulfil its duty to ensure that all residents of South Africa get the water to which they are entitled, the state needs to control the supply of water, and – possibly even more importantly – the quality of that water.

Control of water

Ensuring that residents receive potable water is only one reason the state needs to control the supply of water. The other is that water is essential for economic growth, and hence the attraction of foreign investment.

Control over all allocations of water is firmly in the hands of water services providers (WSPs), which would usually be a municipality that answers to the state through the Water Services Authority (WSA). This control is absolute, and any entity providing a water service must be registered, or face the legal consequences – although some residential estates have assumed this responsibility without authorisation, and apparently with impunity. However, this does not in any way imply that encroachment by a private-sector entity into the domain of the state is legal or tolerable, or that there will not be consequences; it is merely evidence that the state does not – at present – have sufficient capacity to effectively regulate the provision of water services.

Becoming a water services provider

Municipal water is delivered to estates through a central point, from where the responsibility for reticulation devolves onto estate management. Because the estate is entirely dependent on the state for supply, and because that supply is not always consistent, some HOAs have opted to ensure a constant supply by building bulk storage tanks to ensure constant pressure, and to safeguard against a break in supply. However, once estates take the step of providing on-site storage, they start to stray into a grey area of law, effectively becoming a water services provider.

This grey area is currently occupied by many estates without any problems for the time being. However, once one starts to augment supply the ambiguity recedes. If an estate supplements the supply with anything other than municipally supplied water, the whole risk profile changes, and the HOA, body corporate or board of trustees takes on the role of water services provider that was previously the responsibility of the municipality. Also, the utilisation of borehole water necessitates navigating a veritable maze of red tape.

Water quality and water safety

In theory, merely storing water provided by a municipality in bulk tanks does not alter the parameters of the supplier/consumer relationship because the mains water quality will be defined by SANS 241; it just adds a little detour, and a short delay in delivery. However, it can be argued that storage of municipal water potentially alters its quality by introducing the risk of contamination in the tanks.

The SANS 241 standard, at which municipal water is delivered, defines a range of parameters including biological loads. Water naturally supports biological life, so pipes become covered internally with colonies of bacteria known as biofilm. This is managed by chlorine dosing at the point of distribution into the network. The dose is designed to have a residual chlorine value high enough to counter biofilm in all pipes up to the final tap in the household – assuming no detours and delays. Chlorine in municipal water is slowly released so, if it is stored before its final delivery, there may be insufficient chlorine to prevent the growth of biofilm – and possibly hazardous biofilm – and the water will not meet SANS 241 standards.

This is further exacerbated if the water supply is supplemented with groundwater or harvested rainwater, as these are chlorine-free, and typically contain an array of bacteria, viruses, fungi and chemicals that are specific to each location. These all pose a potential health risk to the end user, and if the worst happens and somebody becomes ill, legal liability can be raised as a remedy.

The longer the water is stored, the bigger the risk becomes, but it is manageable.

Specific risks of becoming a water services provider

There are three specific risks associated with becoming a WSP – legal, regulatory and financial.

  • Legal responsibility for human health is defined by SANS 241, the official standard for all potable water. If water provided by the estate – from their own boreholes, or from tanks used for on-site storage – deviates from SANS 241, end users can seek legal remedy. The best strategy to mitigate this risk is to install a professionally designed, purpose-built point-of-entry filtration treatment system that is capable of providing SANS 241 quality. Writing this into the service level agreement with the solution provider or system integrator will transfer liability to them.
  • Regulatory liability is latent, and is typically masked by the fact that – to date – the state has not intervened when any person or entity has assumed the role of a WSP. However, government is increasingly cash constrained at all levels, and many municipalities do not administer their budgets effectively, so it is likely that municipalities may look to real estate levies to increase their revenue stream. So it is possible that the state may intervene if it loses revenue when an estate becomes an illegal WSP. This is a significant risk, because the estate can become mired in a regulatory minefield should the state decide to protect their own revenue stream. So, if you do decide to take control of your water supply, you should work with the WSA so that you can become a legally recognised WSP. Build a relationship with the regulator, and keep a detailed paper trail of all correspondence. Make it clear that the intention is not to erode revenue streams to the state, but rather to improve the delivery of services so that sustainable revenues are possible.
  • Any WSP has a financial duty to remain liquid by raising the levies needed to maintain the services within the estate. The legal requirements associated with basic human needs can create a complex obstacle that impacts on budget management, and hence on sustainability.

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