The ”No Drop Program” – Incentivizing and Facilitating Municipalities to Reduce Water Leaks

By Moloko Raletjena (Scientist, Municipal Water Use Efficiency, Department of Water and Sanitation), Marlene van der Merwe Botha (Managing Director, Water Group Holdings and Implementation Team Leader), and Willem Wegelin (Director, WRP Consulting Engineers and Water Loss Implementation Team Expert), on behalf of the MSP members

The Challenge

Non-revenue water (NRW) in South Africa is a big problem. Approximately 41% of municipal water does not generate revenue. While figures vary between service providers, average physical losses in municipal systems are estimated to be around 35%, against a global best practice of about 15%. As a result, municipalities are losing around ZAR 9.9 billion (about US$ 710 million) each year.

How did we find ourselves here?

Post-democratic South Africa prioritized new infrastructure to meet the needs of a long-underserved and marginalized population. The institutional and financing environment that developed as a result incentivizes huge capital investments rather than maintenance. By the government’s own admission, water resources management suffers from an overreliance on building new infrastructure at the expense of investing in the maintenance of what already exists. In this environment, under-resourced municipalities have had no incentive to pursue systematic investigation of water loss trends.

At the same time, lessons drawn from efforts to address NRW in other countries tell us that at a local level, NRW reduction projects tend to be very small. Structuring them is very time-consuming and incurs high coordination costs for participating entities, whether they be government or private sector.

Addressing NRW is therefore not merely a case of fixing leaky pipes. A strategy to effectively and sustainably address NRW would need to shift conventional, state-centric, and centralized water resources management planning focused on building new water infrastructure and exploiting new resources, toward a more comprehensive strategy that prioritizes demand reduction and reuse strategies.

If NRW reduction programming could be incentivized on a larger scale, it would be the first step toward realizing economies of scale that would not only be more efficient in terms of use of resources, but would also unlock new, more lucrative opportunities for private sector participation, helping to expand business and create jobs.

The Solution

The No Drop Program is a collaboration between the Department of Water and Sanitation (DWS) and SWPN to do just that. It is an incentive-based regulatory innovation that incentivizes municipalities to act on NRW and provides a national baseline of reliable data to catalyze private sector participation in the space.

On the surface, the No Drop Program is a water use efficiency rating system aimed at municipalities to encourage performance excellence through a rewards and penalties system. A simple scorecard assesses and ranks municipalities on water losses, revenue collection, and water use efficiency. Municipalities can be compared to each other and their performance evaluated against the requirements of the law and best management practice.

Below the surface however, the process of completing the assessment is a capacity development exercise intended to catalyze appropriate assessment, development, and resourcing of NRW and water demand management (WDM) initiatives at municipal level.

The complete No Drop assessment was adopted into South Africa’s regulatory framework and a comprehensive No Drop audit of all 152 municipalities, including South Africa’s eight metropolitan municipalities (metros), was carried out in two phases in 2012/13 and 2013/14.

Progress to Date

The results of the assessments were a clear call to action for water stakeholders.  A municipality that achieved a >90% No Drop score was knowledgeable of their current status in terms of water conservation and WDM (WCWDM). In total, 30% of the water supply systems assessed obtained a >50% No Drop score, with a balance of 70% attaining a <50% No Drop score. None of SA’s eight metros received a No Drop Certification (>90% No Drop score).

In the intervening period, the No Drop Program has proven extremely effective in improving the water conservation discipline of municipal water services. It has catalyzed collaboration on integrated WCWDM and created new opportunities for private sector participation.

With the introduction of the No Drop Program in 2014, the KwaZulu Natal regional office of the DWS, working together with Umgeni Water, integrated WCWDM into a forum for municipalities in that region.  The forum uses the No Drop Program as their basis for benchmarking and capacity-building.

The uMhlathuze Municipality has used these regulatory and capacity development efforts to accelerate their own WCWDM program. In 2014, the municipality issued a “Reduction of Non-Revenue Contract,” leading to a reduction of NRW from 48% to 30% to date.  The city now plans to focus its efforts on individual zones. Plans are in place for the SWPN and its partners to scale up these efforts.

There have been important legislative impacts as well, with a number of municipalities updating their bylaws to strengthen WDM. Legislative amendments include penalties for illegal connections, water restrictions during drought periods, and limits on monthly household consumption, among others. Some municipalities have also provided training on the WDM aspects of the by-laws.

There has been a significant shift in terms of conventional thinking about NRW at the national level as well.

The most recent NWSMP specifically recognizes the importance of innovation in addressing WCWDM challenges – a significant shift from the conventional top-down approach of a decade past.

“The desired state of operations should be based upon the service outcome expected, and not necessarily on detailed aspects of operations. This principle supports the regulatory approach of setting standards within the limits of regulatory enforcement capability and affording operations management the opportunity of optimization through innovation.” (NWSMP, 2018)

Although the original intention was for the No Drop assessment to be undertaken on a yearly basis, organizational challenges within DWS and a lack of appropriate allocation of budget funding has meant that no No Drop assessments or audits have been completed since 2015.

Despite this, some of the DWS Regional Offices have continued to support and mentor municipalities in their region to complete the assessments on a regular basis.

The DWS, in collaboration with the Ministry of Environment and Food of Denmark, also recently developed No Drop Guidelines, which provides detailed descriptions of the No Drop process, assessment criteria, and how to address each criterion. This is a valuable guideline and will greatly assist municipalities in preparing for the audits, which will be reinstated in 2018/19 per the NWSMP.

Key Lessons

• The SWPN used a small investment of cash and time inputs of partners to take the No Drop Program from being an idea to a regulatory tool that was applied by government in about 12 months. Such rapid policy development, testing, and deployment was enabled by the participatory nature of the SWPN process.
• Beyond being a tool for regulation, the No Drop Program developed management instruments that municipalities use to plan for and assess progress in their NRW management, and that the national water authority and other stakeholders use as basis for public and private funding motivations. The program also provided the first information base that is audited and credible to both public and private sectors, catalyzing partnership.