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SANITATION SUBSIDIES IN PERSPECTIVE:
HOW TO INCREASE THE EFFECTIVENESS OF
SANITATION SUBSIDIES IN SOUTH AFRICA
Report to the
WATER RESEARCH COMMISSION
by
Melanie Wilkinson, Darian Pearce, Stanley Sharaunga, John Flanagan and
Thandi Magagula
Sustento Development Services
WRC Report No 2136/1/14
ISBN 978-1-4312-0545-5
April 2014
ii
Obtainable from
Water Research Commission
Private Bag X03
Gezina, 0031
orders@wrc.org.za or download from www.wrc.org.za
This report forms part of a series of two reports. The other report is Towards the Effective Use of
Sanitation Subsidies: A guide (WRC Report No. TT 592/14)
DISCLAIMER
This report has been reviewed by the Water Research Commission (WRC) and approved for
publication. Approval does not signify that the contents necessarily reflect the views and policies of
the WRC, nor does mention of trade names or commercial products constitute endorsement or
recommendation for use.
© Water Research Commission
iii
EXECUTIVE SUMMARY
It is widely acknowledged that hygienic sanitation is necessary to sustain human life and to ensure
good health and human dignity. As a result, the South African Government has committed itself to
universal access to sanitation. As part of this commitment, poor households1 are provided various
sanitation subsidies to gain access to a basic level of sanitation service. A sanitation subsidy can be
defined as any financial support offered to a household to meet national sanitation policy objectives.
The two key mechanisms of provision of subsidised sanitation services to poor households in South
Africa are those that provide a sanitation facility directly to a household (household subsidy) and
provision of sanitation facilities as part of a subsidised housing service (housing subsidy). These
sanitation subsidies stem largely from public funds, but may also flow from donor inputs. It is
important to note that in the sanitation sector not all subsidies are for the cost of the sanitation
infrastructure (i.e. toilet facility), but may include financial assistance for a range of activities including
project management and health and hygiene awareness and promotion.
South Africa has been providing poor households with this sanitation subsidy for many years. At the
same time a number of perceptions have evolved in the sector related to these subsidised sanitation
services, including:
• That despite industry and governmental guidelines recommending a ceiling amount per
household for the provision of a basic sanitation service, perceptions are that capital and
institutional social development (ISD) costs of provision of basic sanitation services are much
higher than this recommended unit cost.
• There is a growing perception that the capital cost for construction of a basic sanitation facility in
the past 10 years has been unreasonably high.
• There are perceptions in the sector that some households have benefited from more than one
subsidy.
The question thus remains: is the sanitation sector effective and responsible in their use of public
funds and if not, how can the sector become effective and responsible in their use of the sanitation
subsidy? This became the research question of this WRC commissioned study.
The purpose of this study was to investigate sanitation subsidies in South Africa, including economic
and social cost issues, to determine overlaps and gaps of sources of the subsidy and to determine
1 Households with household income below R2 300 per month (Treasury, 2013).
iv
what constitutes effective/responsible use of subsidies. The key purpose of the study was to develop
a guideline for future sanitation subsidy policy formulation and interventions.
Outcomes of the study indicate that:
• The full supply costs of provision of subsidised sanitation facility range from R22 800 for a
ventilated improved pit (VIP) latrine facility to R46 400 for a septic tank system (adjusted to 2012
prices).
• The environmental and health impact costs of an incorrectly constructed, operated and
maintained facility increases the unit cost of a subsidised VIP toilet to R33 800, a 32% increase in
unit cost. Similarly, urine diversion (UD) toilet costs increase to R38 300 (29%) and the unit cost
increase of septic tanks increased to R57 300 (19%).
• The right of access to sanitation, unlike other basic services such as water, housing and
electricity, is not an explicit, but implied, right in the South African Constitution.
• The Water Service Act (Act No. 108 of 1997), the principal policy regulating water service
provision in South Africa, does however, legitimizes the right of all South Africans to basic
sanitation.
• The Constitutional right to housing does include the right of access to a sanitation service as part
of housing according to the Constitutional Court decision on the Grootboom case.
• Despite this relatively strong legislated framework that underpins provision of basic sanitation
service in South Africa, there is still general confusion in the interpretation and implementation of
the framework at various levels of government, including:
o Financing of operation and maintenance of sanitation services.
o Who is targeted by the policy; i.e. all or the poor.
o Few norms, standards and guidelines are provided on the economic efficiency.
o At a municipal level, this lack of clarity in policy has led to confusion in the implementation of
sanitation initiatives.
Perhaps the key conclusion which can be drawn from the study was that the provision of sanitation
services utilising subsidies may be one of the most difficult regulatory environments in which to
operate in South Africa, largely due to the lack of clarity and often conflicting legislation, policies and
strategies from national to local government levels. To meet their Constitutional mandates and be
able to deliver effective and responsible basic sanitation services to all South African all sectors of
government need to understand the interactions, overlaps, gaps and conflicts in subsidised sanitation-
related policies, processes and procedures.
The financial component of the basic sanitation service sector would benefit significantly from a set of
guidelines which could bring all these confusing and contradictory policy documents and instruments
under a single set of guideline, bringing together water services, housing, indigent, municipal and
financial requirements of the subsidised sanitation sector. These guidelines could provide significant
support to the sector, at a national, provincial and local government level.
v
ACKNOWLEDGEMENTS
The authors would like to thank the Reference Group of the WRC Project K5/2136 for the assistance
and the constructive discussions during the duration of the project, as well as the role players who
attended and participated in the workshops held in the course of the project.
Mr JN Bhagwan (Chairman) Water Research Commission
Ms M Wilkinson (PL) Sustento Development Services
Mr D Pearce Sustento Development Services
Prof S Hosking Nelson Mandela Metropolitan University
Dr N Mjoli Hlathi Development Services
Ms L Dunker CSIR
Ms Julie du Pisani Innodev
Ms B Maposa CSIR
Mr I Pearson WATSUP Development
Ms M Mangqalaza Dept. of Human Settlements
Mr J Crafford Prime Africa Consultants
Ms G Matsebe CSIR
Mr M Bannister DWAF
Mr S Sharaunga Sustento Development Services
Mr J Flanagan Sustento Development Services
Ms T Magagula Sustento Development Services
Attendees of the Sanitation Subsidy workshop:
Mr J Archer National Treasury
Mr M Khan National Treasury
Mr I Mahomedall National Treasury
Mr G Gardner National Treasury
Ms M Lipholo PDNA
Mr R Jerrek Cemforce
Mr T Modau Mvula Trust
Mr J Rust Envirosan
Mr B Lewis Envirosan
Mr O Farrow Envirosan
Mr T Krause Envirosan
Mr A de Villiers Cemforce
vi
vii
TABLE OF CONTENTS
1 CHAPTER 1: INTRODUCTION _____________________________________________________________ 1
1.1 Research Objective and Aims ________________________________________________________ 2
1.1.1 Limitations and considerations ___________________________________________________ 3
1.2 Purpose of the Report ______________________________________________________________ 4
2 CHAPTER 2: LITERATURE REVIEW _________________________________________________________ 6
2.1 Defining Sanitation Subsidies in South Africa ___________________________________________ 8
2.1.1 What is a subsidy ______________________________________________________________ 8
2.1.2 What is a Sanitation Subsidy _____________________________________________________ 9
2.1.3 Subsidies: Implications in a General Equilibrium Framework ___________________________ 12
2.2 International Sanitation Subsidy Experience ___________________________________________ 13
3 CHAPTER 3: REVIEW OF POLICIES WHICH GOVERN PROVISION OF ON-SITE SANITATION SERVICE IN
SOUTH AFRICA ___________________________________________________________________________ 17
3.1 Water services policies governing sanitation services provision in the country _______________ 17
3.1.1 Beneficiaries of Sanitation Subsidy _______________________________________________ 18
3.1.2 Costs covered by the Sanitation Subsidy ___________________________________________ 21
3.1.3 Defining a Subsidised Sanitation Facility or Service __________________________________ 24
3.1.4 Subsidies for progressive improvement or upgrade of sanitation service _________________ 26
3.1.5 Sanitation subsidies for the rural areas of the country ________________________________ 26
3.1.6 Sanitation subsidies for the urban areas of the country _______________________________ 27
3.1.7 Free Basic Services Subsidy Policies ______________________________________________ 29
3.1.8 Housing Subsidies within Water Service Policies ____________________________________ 31
3.2 Housing Policies Governing Sanitation Services Provision in the Country ____________________ 32
3.2.1 Sanitation Subsidies within the Housing Arrangement Act (1993) and Housing Amendment Act
(1994) ______________________________________________________________________ 33
3.2.2 Sanitation Subsidies within the New Housing Policy and Strategy for South Africa: White Paper,
1994 _______________________________________________________________________ 33
3.2.3 Sanitation Subsidies within the Housing Act (1997) __________________________________ 35
3.2.4 Sanitation Subsidy in the Comprehensive Plan for Sustainable Human Settlement (2004) ___ 36
3.2.5 Sanitation Subsidies within the National Norms and Standards for the Construction of
Residential Structures (2009) ___________________________________________________ 36
3.2.6 Sanitation Subsidies within the National Housing Code published in 2000 and updated in 200937
3.2.7 Sanitation Subsidies within the Social Housing Act (2008) and the Social Housing Regulations of
2012 _______________________________________________________________________ 40
4 CHAPTER 4: MUNICIPAL SANITATION POLICES AND BY-LAWS _________________________________ 42
4.1 Municipal Indigent Policy within the Context of National Subsidised Sanitation Policy ________ 42
4.2 Municipal Sanitation By-laws within the Context of National Subsidised Sanitation Policy _____ 46
5 CHAPTER 5: REVIEW OF THE SANITATION SUBSIDY (GRANT) FINANCIAL POLICY AND PROCEDURES __ 48
5.1 Government’s Procedure for Conditional Grants to Municipalities for Sanitation Services (As of
2013) __________________________________________________________________________ 51
5.1.1 Government’s Procedures for the MIG-funded Sanitation _____________________________ 51
5.1.2 Urban Settlements Development Grant (USDG) _____________________________________ 56
5.1.3 Rural Households Infrastructure Grant (RHIG) ______________________________________ 57
5.1.4 Human Settlements Development Grant __________________________________________ 57
5.2 Government’s Procedures for Unconditional Grants ____________________________________ 59
5.2.1 Local Equitable Share __________________________________________________________ 59
viii
6 CHAPTER 6: THE FULL COST OF SUBSIDISED SANITATION _____________________________________ 61
6.1.1 Estimating the full supply cost of subsidised sanitation _______________________________ 62
6.1.2 Estimating the Full Economic Cost of Subsidised On-Site Sanitation Facilities ______________ 68
6.1.3 Estimating the Full Cost of Subsidised On-Site Sanitation Facilities ______________________ 70
6.1.4 Method of determining environmental externalities _________________________________ 71
6.1.5 Full Cost of Subsidised Sanitation Service Provision __________________________________ 74
7 CHAPTER 7: PERCEIVED AND ACTUAL DRIVERS OF CHANGE IN THE FULL COST OF SUBSIDISED
SANITATION ________________________________________________________________________ 78
7.1.1 Budget allocations as a driver of subsidised sanitation cost ____________________________ 78
7.1.2 Emergency situations as a driver _________________________________________________ 82
7.1.3 Inflation as a driver ___________________________________________________________ 82
7.1.4 Construction input prices as a driver ______________________________________________ 83
7.1.5 Subsidy as a driver ____________________________________________________________ 84
7.1.6 Double accounting for subsidy __________________________________________________ 85
8 CHAPTER 8: SUMMARY OF GAPS AND CHALLENGES IN THE SUBSIDISED SANITATION POLICY
ENVIRONMENT ______________________________________________________________________ 86
9 CONCLUSION ________________________________________________________________________ 89
10 REFERENCES ________________________________________________________________________ 90
ix
LIST OF FIGURES
Figure 1: Relationship between the National Framework for Municipal Indigent Policies and Free Basic
Services policies (taken from dplg, 2005) .......................................................................................... 19
Figure 2: Levels of provision of sanitation service at a municipal level (taken from dplg, undated1) ............... 29
Figure 3: Financial framework for subsidised sanitation services in South Africa (adapted from DWAF, 2003)
............................................................................................................................................................ 48
Figure 4: MIG funding mechanism (taken from dplg, 2004) .............................................................................. 54
Figure 5: The Full Cost of providing a good/service includes the O&M Cost, Health and Hygiene cost, Capital
Charges, Opportunity Cost, Economic Externalities and Environmental Externalities (adapted from
Rodgers et al. (1998). ......................................................................................................................... 61
Figure 6: Historic national estimates of full supply cost of the various subsidised sanitation facilities in South
Africa, and trends in the costs over time (average cost per facility per year are shown). ................. 67
Figure 7: Estimated full supply cost of each of the subsidised sanitation service levels provided in SA (2012
estimate) ............................................................................................................................................. 68
Figure 8: Left figure shows how the sanitation sector traditionally views the relationship between sanitation
service provision and environment/health impacts. The figure on the right shows the researched
viewed the relationship, with sanitation service provision impacting on the environment (ecosystem)
and thus changes ecosystem service benefits to humans, especially to human health. .................. 71
Figure 9: component required, and thus steps, to a CRA. ................................................................................ 72
Figure 10: Levels of risk, assessed as the product of likelihood and consequence in the event of an
environmental effect on an ecosystem asset (Adapted from Australian/New Zealand Standard on
Risk Management (2004)). ................................................................................................................. 73
Figure 11: Diagrammatic representation of the benefit/hazard-asset-service risk relationships as a result of
open defecation. ................................................................................................................................. 74
Figure 12: Full cost of subsidised sanitation service provision in South Africa, showing cost for well-
constructed, operated and maintained facilities (good) and cost for facilities for poorly constructed,
operated and maintained systems. .................................................................................................... 75
Figure 13: Number of household in South Africa in 2011 with access to each level of sanitation services, by
household income levels (StatsSA, 2011). Top table include household with an acceptable basic
level of service while the bottom table shows households with a below basic level of service ......... 80
Figure 14: Inflation adjusted capital/ISD cost for the various subsidised sanitation facilities in South Africa. ... 83
LIST OF TABLES
Table 1: A typology of policy instruments for sustainable development (taken from Kaufmann-Hayoz et al.,
2001). ................................................................................................................................................... 7
Table 2: Type of sanitation subsidies, based on the intended purpose of the subsidy (adapted from Evans et
al. (2009)) ........................................................................................................................................... 10
Table 3: Case studies of household sanitation and financing approaches included in the Trémolet et al.
(2010) review of subsidised sanitation in six countries (taken from Trémolet et al. (2010)) ............. 14
Table 4: Summary Evaluation of the six country subsidy programmes review by Trémolet et al. (2010)
(taken from Trémolet et al. (2010)) .................................................................................................... 15
Table 5: Sanitation services per income category as shown by Census 2011 (StatsSA, 2012) .................... 21
Table 6: Current National Housing Programmes funded by government Human Settlement Development
Grant. .................................................................................................................................................. 38
Table 7: Summary of municipality’s indigent policies ...................................................................................... 45
Table 8: Municipal service definitions supported by MIG funding (adapted from dplg, 2004) ........................ 52
Table 9: The COGTA Industry Guide 2010 provides estimates for the unit costs for domestic sanitation per
province, which includes the material costs, labour costs, a construction margin of 15%, and P&G’s
of 10% ................................................................................................................................................ 63
Table 10: Estimated O&M cost per facilities type for 2009 (taken from Mjoli et al. (2009) and Still et al. (2009))
............................................................................................................................................................ 64
Table 11: Recommended H&H unit cost for sanitation initiatives (adapted from unknown source) ................. 65
Table 12: Training, Health, Hygiene and User-education (Community Development) ..................................... 65
Table 13: Qualitative and quantitative classes of likelihood of an environmental effect, or resultant change in
the flow of an ecosystem service having an environmental consequence to a service from an
environmental asset in the ecosystem adapted from the classification adopted by the IPCC (2007).
............................................................................................................................................................ 72
Table 14: Qualitative measures of consequence to environmental services in an ecosystem arising from the
hazards. .............................................................................................................................................. 73
x
LIST OF ACRONYMS
BNG Breaking New Ground
CIP Comprehensive Infrastructure Plans
CoGTA Department of Cooperative Governance and Traditional Affairs
DBSA Development Bank of Southern Africa
DHS Department of Human Settlements
DLA Department of Land Affairs
DH Department of Housing
DoH Department of Health
DORA Division of Revenue Act
dplg Department of Provincial and Local Government
DWA Department of Water Affairs
EPHP Enhanced People’s Housing Process
EPWP Expanded Public Works Program
FBS Free Basic Services
FBSan Free Basic Sanitation
FLISP Finance Linked Individual Subsidy Programme
GEAR Government’s Growth, Employment and Re-distribution Strategy
H&HE Health and Hygiene
HDA Housing Development Agency
HH Households
IDP Integrated Development Plan
IGRFA The Intergovernmental Relations Framework Act, 2005 (Act 13 of 2005)
ISRDP Integrated Sustainable Rural Development Programme
LES Local Equitable Share
MDGs Millennium Development Goals
MHDP Municipal Housing Development Plans
MI Mortgage insurance
MIG Municipal Infrastructure Grant
MTEF Medium Term Expenditure Framework
MTSF Medium Term Strategic Framework
NDHS National Department of Human Settlements
NHBRC National Housing Builders Registration Council
NHFC National Housing Finance Corporation
NHP National Housing Programme
NPM New Public Management
NSDP National Spatial Development Perspective
NSPU National Sanitation Programme Unit
NUSP National Upgrading Support Programme
O&M Operation and maintenance
PGDS Provincial Growth & Development Strategy
PMU Programme Management Unit
RDP Reconstruction and Development Programme
SALGA South African Local Government Association
SHA Social Housing Associations
SHI Social Housing Institutions
SHRA Social Housing Regulatory Authority
SLA Service Level Agreement
SOEs State Owned Enterprises
UISP Upgrading informal settlements programme
URP Urban Renewal Programme
VIP Ventilated Improved Pit toilet
WASH Water, Sanitation and Hygiene
WSAs Water Services Authority
WSDPs Water Services Development Plan
1
CHAPTER 1: INTRODUCTION
The South African Government has committed itself to universal access to sanitation by 2014. As part
of this commitment, the government provides various sanitation subsidies to assist the poor
(household expenditure <R2300 per month) to gain access to a basic level of sanitation service; i.e. in
the case of basic sanitation, at least a Ventilated Improve Pit (VIP) toilet (DWAF, 2003; dplg, 2005a;
Treasury, 2013).
These sanitation subsidies are provided by various funding mechanisms across a number of
governmental departments. However, the key funding mechanisms are those which subsidise
sanitation facility provision directly to households and those which provide sanitation facilities as part
of a subsidised housing service.
One of the rights enshrined in the Constitution is the right “… to access to adequate housing.”
Housing is one of the biggest challenges in South Africa in the delivery of services to the public.
Together with bulk infrastructure and socioeconomic services, housing is increasingly becoming a key
government programme for the delivery of integrated development to South Africa’s communities. The
government is assisting the population through different housing programmes.
The household sanitation subsidy is administered by local government using various sources of
funding, chiefly the Municipal Infrastructure Grant (MIG) and the Local Equitable Share funding
stream. The housing subsidy on the other hand, can be administered by local government if the
municipality is accredited to administer these programmes. Generally, housing subsidies are
administered by the provincial departments responsible for human settlements.
There are generally four types of on-site sanitation facilities provided through the household and
housing subsidised sanitation (hereafter referred to collectively as subsidised sanitation) processes in
South Africa; namely:
• VIP toilets (single or double) which operate on the premise of a dry system, where the excreta
is collected in a pit below the toilet. Organic matter accumulates in the pit while the liquid
component percolates into the substrate where it is ‘treated’ through a biological process. Pits
need to be emptied, generally by the municipality, after a number of years of use (generally 5-8
years).
• Urine Diversion (UD) toilets which operates on the premise of a dry system, separating urine
and faeces at the toilet seat. Urine is generally collected in a soakaway pit and ‘treated’ through a
biological process, while faeces are collected in a vault and after a period of dehydration and
sanitisation, the dried faecal matter is emptied from the vault and buried or burned.
2
• Wet on-site digesters including Low-flow on-site (LOFLOS) systems Aqua-privies or Pour Flush
toilets. These systems are rarely provided in South Africa and operate on the permis of
waterborne sanitation systems, but using minimal water for operation. Excreta are contained in a
sealed pit, conservancy tank and soakaway. These pit or conservancy tanks require emptying at
some point in time.
• Full flush toilets with septic tank and soak-away which operates with the premise of using
water to operate the toilet, however, the sewage is not transported to a wastewater treatment
plant via the municipal sewerage but rather contained and treated in a septic tank and soakaway.
Again, conservancy tanks require emptying at some point in time.
Regulation of provision of basic sanitation services is the responsibility of the Minster of Water Affairs
(and thus the Department of Water Affairs - DWA), while some programme implementation roles can
be by other government departments (Department of Human Settlements; CoGTA; Public Works) and
actual delivery of the service is the responsibility of local government. This has led to a lack of clarity
as to how the household sanitation subsidy processes and procedures in the country, particularly as
to how household sanitation is integrated into the National Housing Programme subsidy processes.
A number of perceptions within the sanitation service delivery sector which underpin the motivation for
this research:
• Despite industry and governmental guidelines recommending a ceiling amount per household for
the provision of a basic sanitation service, perceptions are that capital and institutional social
development (ISD) costs of provision of basic sanitation services are much higher than this
recommended unit cost.
• There is a growing perception that the capital cost for construction of a basic sanitation facility in
the past 10 years has been unreasonably high.
• There are perceptions in the sector that some households have benefited from more than one
subsidy.
• There is also a growing perception within the public sector and the sanitation sector that the
sanitation subsidy provided to poor households is not being effectively and responsibly applied.
The question thus remains, is the sanitation sector effective and responsible in their use of public
funds and if not, how can the research improve this effectiveness and efficiency?
1.1 RESEARCH OBJECTIVE AND AIMS
The overarching objective of this research is to investigate the sanitation-related subsidies in South
Africa, including economic and social cost issues, to determine overlaps and gaps of sources (MIG,
Housing, Equitable Share) of subsidy and to determine what constitutes effective/responsible use of
3
subsidies, with the key purpose to develop a guideline to guide future sanitation subsidy policy and
interventions.
The aims of the research were to:
1. Investigate the changes, over time, of the full cost of constructing sanitation facilities.
2. Investigate the factors that have induced changes in the full supply cost of providing sanitation
facilities.
3. Critically evaluate the extent to which application of the sanitation subsidies have been modified
to respond to the changes in the full supply cost of constructing sanitation facilities.
4. Investigate overlaps and gaps between the various sanitation-related subsidy policies and
processes.
5. Identify and expand the criteria, qualitative and quantitative, that would serve to define the
parameters of what constitutes an effective and responsible use of sanitation subsidies.
6. To develop recommendations/guidelines on how to align sanitation-related subsidy policies and
processes.
The method applied to address the above objectives was to take a 4 Step approach to the research.
These steps include:
• Step 1: Investigation of the historic and present economic and social cost of subsidised sanitation
facilities. In this step the actual historical and present cost of sanitation facilities constructed from
MIG and Housing grants was to be captured and documented.
• Step 2: Assessment of the drivers of change in economic and social cost of subsidised sanitation
facilities. In this step the perceived ‘drivers’ of the changes in economic and socials costs of
subsidised sanitation facilities was to be determined. Drivers could include such issues as
competition for materials with other construction projects; unrealistic demand-driven increase in
material costs; high growth in labour cost; poor understanding of sanitation service provision.
• Step 3: Investigation of the overlaps and gaps of sanitation-related subsidy policies and
processes. In this step subsidised sanitation policies and procedures was to be reviewed to
determine overlap, gaps and conflicts in these.
• Step 4: Determine what constitutes effective and responsible use of sanitation subsidy, which will
include determining what ‘effective’ and ‘responsible’ use of sanitation subsidy is and applying the
principles of effective and responsible use of sanitation subsidy to develop guide for MIG/Housing
subsidies in South Africa.
1.1.1 Limitations and considerations
The research was conducted with the following considerations:
4
• The sanitation subsidises which will be investigated will be limited to MIG, Local Government
Equitable Share and Housing subsidies/grant initiatives in South Africa;
• The research will be limited to sanitation which is provided as a basic level of service. In South
Africa, municipalities are providing as a basic level of sanitation service, a facility that use on-site
methods of storage with or without treatment which includes system where the waste is
stored on-site with or without treatment, before release into the environment. Examples in South
Africa are VIP; UD; LOFLOS and septic tanks systems. Despite the COGTA Industry Guidelines
stating that the use of MIG funds for alternative higher level sanitation systems including
waterborne sanitation is permissible provided that the sanitation scheme can be defined as
providing a basic sanitation facility that is appropriate (and sustainable) for the selected
community, this research was limited to subsidies for on-site systems only, thus excluding flush
toilets connected to municipal wastewater sewerage systems;
• The research will focus on capturing capital and full cost of these sanitation services; and
• The research will focus on reaching consensus on what constitutes ‘effective/responsible’ use of a
sanitation subsidy/grant.
1.2 PURPOSE OF THE REPORT
This report is a compilation of the research which was utilised to develop the WRC Report:
TOWARDS THE EFFECTIVE USE OF SANITATION SUBSIDIES: A GUIDE, the final outcome of the
research project entitled sanitation-related subsidies in South Africa, including economic and social
cost issues, to determine overlaps and gaps of sources (MIG, Housing, Equitable Share) of subsidy
and to determine what constitutes effective/responsible use of subsidies. Since the Guide was
developed with a focus on assisting the sector in ensuring effective and responsible provision of
subsidised sanitation in the country, this Guide were able to include only a limited amount of the most
applicable research which was conducted for this assignment. As a result, there is a need to capture
all other technical inputs from the research into a document, which can then re-enforce, support and
provide additional information to the users of the Guide. This report thus includes these technical
outputs of the research.
This report includes the following sections:
• Chapter 1: Provides the background and introduction to the study and report
• Chapter 2: An overview of the literature related to key concepts of subsidised sanitation
• Chapter 3: A review of the policies and legislation which govern the subsidised sanitation sector in
South Africa
• Chapter 4: A Review of municipal policies which govern the subsidised sanitation sector in South
Africa
5
• Chapter 5: A review of the financial policy and mechanisms which govern the subsidised
sanitation sector in South Africa
• Chapter 6: An estimate of the full cost of subsidised sanitation sector in South Africa
• Chapter 7: Perceptions and actual drivers of changes in subsidised sanitation in South Africa
• Chapter 8: Provides a summary of the gaps and challenges in the subsidised sanitation sector of
South Africa.
6
CHAPTER 2: LITERATURE REVIEW
The need for universal access to improved sanitation is widely recognised. The motivation for
improved access to this service is often based on three arguments of (Evans et al., 2009):
(1) the environmental concerns of the direct and indirect negative effects of poor sanitation or
open defecation ecosystems and the services which they provide. Contamination of water
resources and soils by untreated waste can limit their safety and sustainability. It can also
result in environmental degradation;
(2) the social and public health benefit of investing in sanitation has been shown to have
significant benefit to school attendance, especially for girls, improvement in individual and
household health and increased security, particularly for women. These benefits, along with
improvements in dignity and comfort are felt by all members of society but particularly women
and children;
(3) the political objectives which governments have committed to in a number of international
poverty reduction initiatives, including the Millennium Development Goals, regional
commitments such as the eThekwini Declaration in Sub Saharan Africa and national Poverty
Reduction Strategic Plans.
However, how a country addresses the need for universal access to sanitation, whether this
commitment is driven by environmental, society or political imperatives, can vary significantly.
Kaufmann-Hayoz et al. (2001) distinguishes between five types of policy instruments that can be
applied towards achieving sustainable development and which are also relevant to designing and
implementing sanitation policies (Table 1); namely:
(1) Command and control instruments: regulatory instruments that apply legal prescriptive to direct
the options available for policy or intervention by constraining, sanctioning and excluding certain
behaviours and conduct;
(2) Economic instruments: having the primary purpose to increase efficiency which might relate to
one or many of the following (1) efficient allocation of resource between firms; (2) efficient
allocation between consumers: and (3) efficient combination of products in the economy as a
whole;
(3) Service and infrastructure instruments: goal-directed instruments with the purpose of promoting
desirable and excluding undesirable behaviours. Instruments can be attraction-based (i.e.
provision of sanitation infrastructure) or repulsion-based (i.e. reduced/withdrawal of services to
promote ecological desirable behaviour);
7
(4) Collaborative agreement instruments: formal (legal) or non-legally binding commitments with the
purpose of promoting positive behaviours and actions in a sector;
(5) Communication and diffusion instruments: have the purpose of influencing internal conditions
such as goals, knowledge and behaviours.
Although the sanitation sector in South Africa makes use of all these instruments in addressing their
commitment to universal access to sanitation, of particular interest to this research are the economic
instruments. These national economic instruments are used to drive the municipal
infrastructure/service and communication instruments of the sanitation sector, i.e. the subsidy is
provided for the provision of sanitation facility; hygiene awareness and promotion and in some cases,
operation and maintenance.
Table 1: A typology of policy instruments for sustainable development (taken from Kaufmann-Hayoz et al., 2001).
COMMAND AND CONTROL
INSTRUMENTS
ECONOMIC INS TRUMENTS SERVICE AND INF RASTRUCTURE
INSTRUMENTS
COLLABOR ATIVE AGREEMENTS COM MUNICATION AN D
DIFFUSION INSTRUMENTS
Emission standards Subsidi es Servic e instr uments Public-pr ivate agr eements Communication instruments
without a dir ect request
best available technology grants offering or improving ecologically
sound products
agreements on prepaid disposal
fees on specific product groups
presentin g facts
prescrip tive technology
standard
tax allowances withd rawing envir onmentally
undesirable products
agreements on consumption
goals or standards
presentin g options
soft loans offering or improving services that
allow or facilitate ecologic ally
sound action
formal agr eements with
individual compa nies
presenting appraisals, goals, and
norms
guarantees reducing s ervices that allow or
facilitate env ironmentally
undesirable action
providing experience of reality
compensation for foregoing use
of the resource
presenting model behaviour
giving feedback and enabling
selffeedb ack
Licensing Incentive taxes Infrastructure instruments Certifications and labels Communication instruments
with a direct r equest
licence to construct taxes on energy/resources offering or improving
infrastr ucture that allows or
facilitates ecologically sound
action
with legal c ompliance persua ding about f acts
licence to operate taxes on emissions dismantling or degrading
infras tructure that hinder s or
inhibits ecologically sound action
without legal c ompliance pers uading about o ptions
licence to sell taxes on products/processes persuading about goals,
appraisals, and norms
Liability regulations1 Charges sending appeals
strict liability one-time ch arge for con nection to
services
presenting prompts and
reminders
reversal of the burden of
proof
recurrent charges for use stimulating self -commitment
compulsory third party
liability insur ance
charges on advantages (v alue-
added contribution)
prepaid disposal fees
Product s tandards and
regulations for the use of
pollutant substances
Market creation Diffusion instruments
restriction, rationing, or
prohib ition
tradable allowances or permits establishing direct personal
contact
product standards joint implementation establishing contact via person-
to-pers on media
Zoning Incenti ves as part s of action
campaigns2
establishing contact via mass
media
land use regulations rewards
water pr otection areas lotteries
nature conservation zones contests/benchmarking
discounts
Environmental quality
standards (impact thresholds
and standards )
Deposit-refund systems
8
2.1 DEFINING SANITATION SUBSIDIES IN SOUTH AFRICA
Very often, when sanitation specialists and non-specialist begin discussions on ‘subsidised sanitation’
the first questions asked are usually, ‘what is subsidised sanitation’ and ‘does this really exist in South
Africa’. To lend clarity to this issue, the research begins by defining a subsidy and a sanitation subsidy
and how these relate to government supported sanitation initiatives in South Africa.
2.1.1 What is a Subsidy
Defining a subsidy is not a straightforward proposition (Srivastava et al., 2001). The Oxford Dictionary
defines a subsidy as "a sum of money granted by the state or a public body to help an industry or
business keep the price of a commodity or service low”. However, as the box below shows, the term
‘subsidy’ has different meanings and definitions. The research support the use of Evans et al. (2009)
definition of a subsidy as a form of financial assistance paid to an individual, a business or an
economic sector in order to achieve certain policy objectives (Evans et al., 2009). Thus, any financial
support offered to a household to meet national policy objectives (i.e. poverty alleviation, sanitation
service access, water service access, housing, energy access, etc.) can be defined as a subsidy
(Evans et al., 2009).
A subsidy has also been defined as:
• Monetary assistance granted by a government to a person or group in support of an enterprise regarded as
being in the public interest.
• Financial assistance given by one person or government to another.
• A direct financial aid furnished by a government to a private industrial undertaking, charity organisation, or
the like.
• A sum paid, often in accordance with a treaty, by one government to another to secure some service in
return.
• A grant or contribution of money.
Subsidies constitute an important fiscal instrument as they inject money into circulation, unlike taxes,
which reduce disposable income (Srivastava et al., 2001). Provided that the subsidy is designed and
administered responsibly, subsidies can have significant impacts on augmenting the welfare of a
society as the benefits extend beyond the immediate beneficiary to being shared by the present and
future larger population (Srivastava et al., 2001). Subsidies are also used with redistributive
objectives, particularly for ensuring minimum consumption levels of food and other basic needs
(Srivastava et al., 2001). Conversely, subsidies can be extremely costly to the funder and to
beneficiaries if they are poorly designed and inefficiently administered (Srivastava et al., 2001).
9
2.1.2 What is a Sanitation Subsidy
Based on the above definition of a subsidy, a sanitation subsidy was any financial support offered to a
household to meet the national sanitation policy objectives. These sanitation subsidies stem largely
from public funds, but may also flow from donor inputs.
To understand sanitation subsidies, it is necessary to place them in the context of the patterns of
financial assistance offered to the sector as this financial assistance does not only include subsidies
(Evans et al., 2009). This financial assistance may also be provided to the sanitation sector:
• To create and facilitate the enabling environment required for an effective sanitation sector.
Financial assistance may support policy development, capacity building, knowledge sharing and
coordination;
• For activities which target changing individual households, schools and clinic hygiene behaviours,
including hygiene promotion, awareness and educations initiatives, handwashing campaigns and
development of curricula and promotion materials, etc.;
• To cover sanitation marketing costs such as market assessment, promotion of demand,
community-led total sanitation initiatives and supply-side interventions to stimulate supply;
• To cover the cost of public infrastructure and services (including both capital and operational
costs) of, for example, schools, public toilets, shared network services; and
• Cost of private infrastructure and services (capital and operational costs) of household sanitation.
Based on the most urgent need, funding should be made available for some, or all of, these financial
requirements of the sanitation sector. This research focuses on the use of sanitation subsidies to
meet some of the above mentioned financial needs of the sector.
There are many different ways to classify subsidies, for example, by using the purpose of the subsidy
to classify them, the recipients, the source of the funds for the subsidy (government, consumer,
general tax revenues) or means of distributing the subsidy. Evans et al. (2009) categorise sanitation
subsidies based on the intended purpose of the subsidy (Table 2).
However, perhaps the most crucial element related to subsidising in the sanitation sector is the
financing required for the long-term, or lifespan of, sanitation service provision, i.e. if the focus of
subsidises is on household sanitation, then the challenge is to ensure that finance is available for the
operation and maintenance of these. Understanding these key needs of the sanitation sector,
sanitation and economic policymakers should be in a position to design a subsidy programme that
reaches the intended beneficiaries, provides them with the level of financial support that is necessary,
meets the overall budgetary restrictions, and does not waste an excessive amount of funding on
administrative costs (Gómez-Lobo et al., 2000).
10
Table 2: Type of sanitation subsidies, based on the intended purpose of the subsidy (adapted from Evans et al. (2009)).
2.1.2.1 Arguments in Favour of Sanitation Subsidies
The benefits of sanitation service provision are widely acknowledge and recognised. Understanding
these, it is necessary to consider how best to ensure that these benefits are realised by all individuals
in a country. The rationale used to motivate for the use of sanitation subsidies are varied and may
include (Evans et al., 2009):
• Moral arguments which argue that it is a government’s moral duty to provide a minimum set of
basic services to vulnerable and disadvantaged citizens to enable them to live healthy and
productive lives (i.e. a rights-based argument for basic service provision). The moral-based
motivation for subsidised sanitation service provision includes the argument that government has
Mechanism Description
Subsidies for software
Software activities include:
Capacity building and training
Development of promotional materials and campaigns
Monitoring and evaluation systems and processes
Financial management, budgeting and advocacy in national planning processes
Recurrent budgets of health extension worker responsible for hygiene behaviour
activities
Market research and development of sanitation market activities
Recurrent budgets for schools sanitation and hygiene programmes
Subsidies for hardw are Provides for provision of sanitation infrastructure
Direct subsidy Direct payment (cash or vouchers) provided to the households to access sanitation
services
Infrastructure subsidy
The use of public funds to construct sanitation infrastructure at a household level
Households may be required to contribute additional funds or 'sweat equity'
Funds are generally handled by a service provider
Connection subsidy Subsidy to connect poor households to a sewer system
Funds usually handled by a service provider
Operationa l sub sidy Payment to a service provider to offset some or all of the costs of supplying a service
(i.e. payment for operational losses, lowering of tariffs)
Small-scale operator subsidy
Provided to bring down cost of operations of small-scale service providers (i.e. pit
emptying operators, latrine building enterprises)
Can include subsidy for training and business development (accounting, planning,
auditing)
May include start-up loans and guarantees to kick-start an enterprise
Cross-subsidisation
Contribution of one group of service users to part of the cost of another group of
service users
Transfer, through tariffs, from high-volume user to low-volume users
Consumption subsidy (tariffs) Tariffs for sewer services are kept artificially low
Subsidy towards the 'consumption' of the service
Output-based subsidy
Provided to the service provider for services successfully delivered for a pre-agreed
period.
Requires on good quality verficiation and monitoring system
Regulatory subsidy
Provides preferential legal rights for selected service providers.
Tehnical norms and standards and licences allow only selected service providrs to
contruct publicly-funded facilities
Subsidized credit Subsidies and gaurantees provided to micro-financial insitutions which lend money
for sanitation investments to households at a reduced interest rate
11
a duty to promote equity, equal chances and access for all; or to support empowerment of certain
disadvantaged groups or people.
• Economic arguments that translate the above moral arguments into a set of principles by which
subsidies can be designed. This argument assumes that the real value of sanitation services are
not recognised by individuals and households and thus, sanitation interventions (including
subsidies) need to acknowledge:
o Externalities – markets cannot mediate the implications to society (public good2) of
sanitation action or inaction. The rationale for sanitation subsidies in the presence of
positive externalities can be advocated because the societal benefits would require higher
levels of consumption than what would be obtained on the basis of private benefits only
(Srivastava et al., 2001). Since the provision of universal sanitation benefits society as a
whole, it is a public good; and
o Lack of information – individuals may not fully understand or appreciate the value of
improved sanitation, particularly positive health and environmental impacts, and therefore
tend not to prioritise investment in sanitation. However, as mentioned in the bullet above,
investments in sanitation have high levels of societal benefit. This implies that low levels
of sanitation coverage are a merit3 good where the benefits exceed the value placed on it
by individual households. The public sector therefore has an interest in changing
individual choices to increase the level of investment in sanitation and move society
towards universal sanitation. Some policy makers argue that subsidies will offset these
effects and ramp up the rate of investment in a sector with significant and important
benefits for everyone. Subsidies can provide the necessary correctives in such cases.
• Redistribution arguments advocate subsidies to meet redistributive objectives, especially to
ensure minimum level of service to sections of society.
2.1.2.2 Arguments against Sanitation Subsidies
According to Evans et al. (2009) there are essentially two arguments against sanitation subsidies,
namely that a subsidy can have:
2 A public good is one that, if consumed by one person, can still be consumed by other people (Evans et al., 2009)
3 Merit goods are goods that society thinks everyone ought to have regardless of whether they are wanted by each individual
(Evans et al., 2009)
12
• A negative effect on the viability of the sector as a whole. At sector level, the use of subsidies
can both constrain and distort the provision of services. For example, a focus on stringent design
requirements and prescriptive subsidy amounts can lead to many subsidised latrines being
unnecessarily expensive and can stifle local innovation in the sector. In addition to raising costs,
the delivery of infrastructure, operational and regulatory subsidies all have the effect of ‘crowding
out’ other sources of funding. Subsidies can also distort the behaviour of private sector providers
(who may focus for example on producing standard latrines called for by a government
programme rather than on innovation).
• Can have unexpected consequences on household and community behaviours and
outcomes. As well as distorting the national programme, the delivery of a subsidy can have
unintended consequences at a household and community level. Poor targeting of subsidies may
result in the ‘wrong’ (wealthy) households benefiting from the subsidy and fewer needy
households benefiting. Subsidies may also result in the ‘wrong’ type of services being subsidised
(i.e. expensive infrastructure such as waterborne systems). In a subsidised service provision
environment, dependency may become the norm and communities or households cease to make
independent investment decisions, preferring to wait for pubic funded services. Subsidies can
also inflate perception of demand for the service as the service is available without the household
or community necessarily truly wanting it. When subsidies are associated with one particular type
of good, having a short-term delivery focus may result in poor operation and maintenance of the
service, i.e. provision of waterborne systems in water scarce areas or provision of VIP units
without considering pit emptying needs or contamination of groundwater.
At the same time, there is an argument that subsidies can engender resource use inefficiencies and
financially weaken utilities, which hobble efforts to expand and improve services (Komives et al.,
2005; Srivastava et al., 2001). In recent years, the phenomenon of environmentally harmful subsidies
has been widely recognised in the literature. There is considerable international concern about
environmentally harmful subsidies.
2.1.3 Subsidies: Implications in a General Equilibrium Framework
The provision of a subsidy induces its own costs and thus, subsidies should be considered in a macro
and general equilibrium framework. Provision of subsidies is not a ‘free’ exercise as these have to be
financed through tax. The introduction of a subsidy in the sanitation sector will thus affect other
sectors (Srivastava et al., 2001). Every increase in taxes to provide these subsidies would thus
involve a welfare loss, which needs to be matched by the welfare gain through the subsidy. As long
as the subsidy-induced welfare gain is more than the tax-induced welfare loss, subsidisation may be
recommended. But it is important that the welfare and efficiency losses associated with the cost of
financing the subsidies are taken into account. The degree and volume of subsidisation must,
therefore, take into account not only the first-round effects of subsidies affecting the subsidised sector
but also the second and subsequent round effects.
13
Understanding the above mentioned key needs of the sanitation sector, sanitation and economic
policymakers should be in a position to design a subsidy programme that reaches the intended
beneficiaries, provides them with the level of financial support that is necessary, meets the overall
budgetary restrictions, and does not waste an excessive amount of funding on administrative costs
(Gómez-Lobo et al., 2000).
2.2 INTERNATIONAL SANITATION SUBSIDY EXPERIENCE
Although limited, there are a number of countries across the world that also follow a sanitation
subsidy approach to delivery of sanitation services. In this section, some of these countries
approaches are reviewed, which may provide some guidance and knowledge for subsidised
sanitation services provision in South Africa in the future, in particular to address some of the
difficulties and gaps highlighted in the previous sections of this report.
A study by Trémolet et al. (2010) reviewed on-site sanitation financing in six countries by examining:
• the financing sources (who pays); and
• the financing approaches:
o What share is paid by each source, and how?
o What public funding mechanisms are used, including hardware subsidies, software
support, or facilitated access to credit?
Countries included in the review were Vietnam, Bangladesh, India, Senegal, Ecuador and
Mozambique. Table 3 below shows details of each of the subsidy schemes included in the review
(Trémolet et al., 2010). Broadly, the countries fitted into three categories of sanitation subsidy
approaches, with Vietnam, Bangladesh, and India requiring households to invest in the sanitation
hardware and public support provided for the promotion and creation of demand for sanitation, i.e.
hardware subsidies were limited. These case studies effectively focus on the sanitation components,
which are not a key focus of the South African capital sanitation subsidy. Mozambique provided
partial hardware subsidies to local suppliers to build improved latrines as well as software subsidies.
Senegal and Ecuador on the other hand, like South Africa, provided substantial public support,
primarily in the form of hardware subsidies.
14
Table 3: Case studies of household sanitation and financing approaches included in the Trémolet et al. (2010) review of
subsidised sanitation in six countries (taken from Trémolet et al. (2010)).
Country, project, areas, level of service,
population that adopt sanitation, study period
Financing approach
Vietnam: Sanitation Revolving Fund ( SRF) –
Urban areas
• Mostly bathroom and septic tanks
• 194,000 people
• 20012 to 2008
• Software support for sanitation promotion and hygiene education
• Facilitated access to credit via sanitation revolving fund
• Subsidized interest loan for hardware construction (accounting
about 3% of hardware cost)
• Public funds = 7% of total of sanitation adoption
India, Maharashtra: Total Sa nitation Campaign
(TSC) – rural areas
• Improved latrines
• 21,200,000 people
• July 2000 to November 2008
• Software support for community mobilization, including outcome-
based financial rewards to villages reaching Open Defecation
Free(ODF) status to be spent on sanitation investments
• Outcome-based hardware subsidies for below- poverty households
(covering about 22% of hardware cost for beneficiaries)
• Access to credit in some districts only
• Public fund = 9% of total cost of sanitation
Bangladesh: Dishari (based community Led
Total Sanitation) rural areas
• Basic latrines
• 1,631,000 people
• 2004 to 2008
• Software support for community mobilization, sanitation promotion,
local government strengthening, including outcome based financial
rewards to villages which are 100% sanitized. Rewards come with
no strings attached and do not necessarily need to be spent on
sanitation
• Up-front-in – kind hardware subsidies targeted on the poorest
(covering about 42% of hardware cost beneficiaries)
• Public funds = 31% of total cost of sanitation adoption
Mozambique: Improved Latrines Program (PLM)-
urban areas
• Improved latrines
• 1,888,000 people
• 2001 to 2006
• Software support for sanitation promotion establishment of local
workshops building slabs and latrines
• Out-based subsidies to local sanitation providers for each slab or
latrine sold (intend to cover 40% to 60% of hardware cost)
• Public funds = 58% of total cost of sanitation adoption (estimated)
Ecuador : PRAUAS – rural areas
• Sanitation units (toilet, septic tank,
sink, shower)
• 143,000 people
• 2001 to 2006
• Software support to strengthening municipality to work in
sanitation, for technical designs and monitoring
• Up-front fixed hardware subsidies (covering about 60%of hardware
cost) provided to communities
• Public Funds = 85 of total cost of sanitation adoption
Senegal: PAQPUD – urban areas
• Range of options: improved latrines to
septic tanks
• 411,000 people
• 2002 to 2005 (not including extensions
via GPOBA)
• Software support for sanitation promotion, includes hygiene
promotion and education, community organisation, technical
support
• Output-based hardware subsidies to local sanitation providers for
each sanitation solution built (covering about 75% of hardware
costs)
• Limited schemes to facilitate access to credit
• Public funds = 89% of total cost of sanitation adoption
Trémolet et al. (2010) provided a summary of the evaluation of the six country subsidy programmes,
shown in Table 4 below.
15
Table 4: Summary Evaluation of the six country subsidy programmes review by Trémolet et al. (2010) (taken from Trémolet et al. (2010))
Evaluation criteria Bangladesh Ecuad or India (Maharashtra) Mozambique Senegal Vietnam
Impact on sustainable
access
Substantial and rapid
increase in coverage,
mostly sustained
Substantial increase in
coverage with good
evidence of use
Very rapid increase in
coverage with some cases
of relapse)
Rapid increase in
coverage only when
software support was
also provided
Speed of coverage
increased when required
households contribution
was reduced
Repaid extension of
coverage
Costs Basic sanitation costs
reasonable when
compared to household
income (3 to 4%)
Comprehensive
sanitation solutions:
costly but meet existing
demand
Improved sanitation,
household invest based on
when they can afford
Affordable basic
sanitation solutions,
reduced demand when
incomes grow
Comprehensive
sanitation solutions but
expensive by both
national and
international standards
Cost moderate
compared to other
programmes but high
when compared to
household income
Effectiveness in use of
public funds
High leverage Low leverage High leverage Medium lavage Low leverage Very high leverage
Poverty targeting Effective targeting
through community
involvement
Geographical targeting
reached intended
recipients
Means-tested targeting
effective although some
are excluded
Self-selection via level of
service, with limited
inclusion errors
Geographical targeting
reached intended
recipients
Effective targeting
although lowest income
excluded
Financial sustainability Sustainable as long as
public sector continues
to contribute
Highly dependent on
external finance
Low demand on external
public funds
Dependent on external
financing
Highly dependent on
external financing
Financially sustainable
Scalability Scale-up achievable at a
reasonable cost
Scale-up could be
achieved given relatively
high national income
Has been scaled up at
federal level
Was scaled up in major
urban centres, further
scale-up unlikely
Scale-up has been
achieved in country
Summary evaluation Efficient use of public
funds for rural setting
with strong demand for
low-cost solutions
Only useful for countries
willing and able to fund
high levels of service
Efficient use of public
funds, which are provided
on an outcome basis
Efficient use of public
funds with simple and
effective targeting
Limited use: high
demand on public funds
and limited leverage
Very efficient use of
limited public funds but
may be hard to replicate
16
Key messages provided by the Trémolet et al. (2010) review was the following:
• Public financing for “software” has a significant role to play in creating demand for improved
sanitation and changing community and household behaviours.
• Project designers should look beyond the semantics of simplistic “subsidy vs. no subsidy”
debates to define an appropriate level and form of public investment in sanitation. Answers to
basic financial questions—“Who pays for what, when, and how?”—can determine the extent
to which projects can replicate, expand sanitation, be sustainable, and meet household
needs.
• The different financing strategies adopted had a profound influence on equity, scale,
sustainability, level of service and cost.
• Households are key investors in on-site sanitation and project design and implementation
needs to maximise their involvement.
• Hardware subsidies played a critical role in all six case studies, but these subsidies
should be provided on an output basis rather than (as in South African) input basis. This
stimulates demand and leverages private investment.
• approaches must be targeted to the specific country.
• Well-targeted hardware subsidies can provide a critical safety net for the poor. Such subsidies
should not be used as a substitute for hardware investments by households.
• All countries included a publicly funded software component.
17
CHAPTER 3: REVIEW OF POLICIES WHICH GOVERN
PROVISION OF ON-SITE SANITATION SERVICE IN
SOUTH AFRICA
In this section, water services and housing legislation and policies are reviewed to determine the
sanitation subsidy provision described in these documents.
3.1 WATER SERVICES POLICIES GOVERNING SANITATION SERVICES PROVISION IN THE COUNTRY
Sanitation services provision in South Africa is legitimised by the Constitution of the country. Section
152 of the Constitution assigns the responsibility of local government to, amongst others, (b) ensure
the provision of services to communities in a sustainable manner and (d) promote a safe and healthy
environment (South Africa, 1996).
The 1996 White Paper on the Reconstruction and Development Programme (RDP) provided
government’s vision for the fundamental transformation of South Africa’s society and demonstrated
the manner in which government would implement and manage processes to achieving this. The RDP
identifies the provision of infrastructure for services such as housing, water supply and sanitation as
one of the key elements of developing the South African economy along this new path.
The White Paper of Water Supply and Sanitation Policy (1994) followed the RDP of sanitation service
provision being sustaining (DWAF, 1994).
The policy further highlights that the source of financing sanitation services should include the
following (DWAF, 1994):
o Consumers (households), through their cash contributions and tariff payments;
o Government, at all levels, which can give grants from money it raises from taxes and other
sources;
o Loans, which can be obtained from the “money market”;
o Donations and cheap or concessional loans may be available from local or foreign sources for
some projects;
o Privatisation which can raise funds for service provision in a number of ways.
This 1994 White Paper suggests that services should be self-financed, with the only exception being
where poor communities are not able to afford basic services. It provides the first regulator instrument
for the use of sanitation subsidies to address the needs of poor communities. The government basic
policy framework for subsidised sanitation services outlines these services as:
18
1. Government subsidies will be made available to communities which cannot afford minimum
water supply and sanitation services. Subsidies will only cover the cost of minimum services
provision, not the operating and maintenance costs.
2. Other subsidies provided by the Department of Water Affairs and Forestry for water supply and
sanitation provision will be phased out, particularly in respect to operation and maintenance costs,
except in cases where subsidies are required in the public interest such as for the protection of
the environment.
3. Subsidies will normally be paid to local authorities or statutory Local Water Committees,
rather than direct to a service provider.
4. The amounts of subsidies will be determined locally by the actual cost of providing basic
services.
Using the above mentioned policy framework this report reviews the intent of the other water services
policies in South Africa.
3.1.1 Beneficiaries of Sanitation Subsidy
The White Paper of Water Supply and Sanitation Policy (1994) (DWAF, 1994) clearly indicates the
focus of subsidised sanitation services provision would be communities which cannot afford
minimum water supply and sanitation services.
This policy if followed by a number of policies and strategy statements related to the beneficiaries of
sanitation service. These include:
• 1994 – White Paper on Water Supply and Sanitation: government subsidies will be made
available to communities which cannot afford minimum water supply and sanitation services.
Subsidies will only be available to cover the cost of minimum services provision and will not cover
operating and maintenance costs.
• 1995 – National Sanitation Draft White Paper: poor communities are not able to afford even a
basic level of service, in which case government may subsidise the capital cost of basic minimum
services.
• 1996 – National Sanitation Policy – Government may support local authorities, for municipal
services such as sanitation, with the funds needed to build the basic minimum level of service.
For existing rural and urban households the sanitation subsidy will be available through the
Municipal Infrastructure Programme or other funds.
• 2001 – White Paper on Basic Household Sanitation: current government policy requires that the
very poor be given access to a free basic level of service. Under this policy it is clearly important
for the municipality to have clear guidance on the minimum technical standards and health and
hygiene promotion standards that will satisfy the criteria provided in the definition provided for a
basic level of service.
19
• 2003 – Strategic Framework for Water Services: primary beneficiaries of free basic sanitation
services were the poorest households, but the long-term goal was to provide free basic sanitation
services to all households.
• 2005 – National Framework for Municipal Indigent Policies: the overall objective is to substantially
eradicate those elements of poverty over which local government has control by the year 2012.
Given the definition of the indigent stated in this policy this implies that all should have access to
basic water supply, sanitation, energy and refuse services by this date.
The difficulty with this beneficiary focus is that there is not a clear indication to a municipality as to
what the definition is of ‘poor’ or even of ‘very poor’. Many policies define poor households as those
that have a monthly household expenditure below R1100, however this is a figure which was
introduced in 1994 and has not been increased since. Similarly, there is no policy indicating the
difference between the term ‘poor’ and ‘very poor’ or ‘poorest’ (as used in the 2001 White Paper and
2003 SFWS). The Strategic Framework for Water Services (SFSW) also implies that all household will
benefit from free basic sanitation services, which has significant financial implications for
municipalities in the country.
Section 104(1) (l) of the Municipal Systems Act (2000), requires the Minister for local government to
provide for or regulate the development and implementation of an indigent policy (South Africa, 2000).
The Department of Provincial and Local Government (dplg) in 2005 published a National Framework
for Municipal Indigent Policies so that municipalities could formulate their own indigent policies based
in this framework. This Framework provides a basis for the provision of free basic services to the
indigent by municipalities and needs to be applied in conjunction with the equitable share policy of
National Treasury. Figure 1 shows the relationship between this Framework and the free basic
policies at a national, provincial and municipal level.
Figure 1: Relationship between the National Framework for Municipal Indigent Policies and Free Basic Services policies
(taken from dplg, 2005)
20
According to the 2005 National Framework for Municipal Indigent Policies, the term ‘indigent’ means
lacking the necessities of life. Based on the Constitutional rights of South Africans, the Framework
interprets these necessities to include the basic service of:
• sufficient water;
• basic sanitation;
• refuse removal in denser settlements;
• basic energy provision; and
• housing.
It should be noted that the definition of ‘indigent’ in this Framework specifically excludes a household
income condition as is used in the water services document above to delineate poor households. This
is of particular interest when determining sanitation backlogs in the country. Applying the above
definition for ‘indigent’ verbatim in order to determine sanitation infrastructure subsidy requirements,
can have a significant impact on the financial requirements of municipalities. It would imply that any
household without access to basic sanitation could be classed as indigent. Using this definition, an
analysis of the 2011 Census sanitation services data shown in Table 5 indicates that at least 4.19
million households in South Africa would be classified as indigent (yellow columns). This would imply
that the state will need to make provision for an additional 4.19 million capital sanitation subsidises.
However, Table 5 also shows that the incomes of these households extend across a range of income
groupings, including households in very high income categories (columns highlighted in light yellow in
Table 5). If the Framework’s definition of indigent is combined with an income level indicator (e.g.
R23004 per household per month or R27 600 per annum), only approximately 3.48 million households
(bright yellow blocks in Table 5) would qualify for this capital subsidy as the remainder have
household incomes of > R19 600 per annum, which is generally above the poverty line. Assuming a
R7500 subsidy is provided to each household, this would reduce the financial burden on
municipalities from approximately R31.4 billion to R26.1 billion, an approximate reduction of R5.33
billion.
4 DoRA affordability threshold. See following section for description of this threshold
21
Table 5: Sanitation services per income category as shown by Census 2011 (StatsSA, 2012)
In 2009, the Free Basic Sanitation (FBSan) Implementation Strategy was published. Most
municipalities target free basic sanitation (FBS) (including FBSan, when it is provided) through the
indigent policy and indigent register which is administered by the municipality (Tissington, 2011).
Despite the term ‘indigent’ being introduced in this policy in 2000, the 2001 White Paper on
Household Sanitation and the SFWS of 2003 continue to use the broad terms of ‘poor’ and ‘very poor’
when discussing sanitation subsidy beneficiaries.
Government’s conditional grants for subsidised sanitation can only be used for infrastructure for basic
levels of service (Mjoli & Bhagwan, 2009). However, as shown above, there are policy gaps when it
comes to the meaning and interpretation of what a basic level of sanitation is by municipalities. There
is a need for national standards for minimum acceptable levels of a basic sanitation services that
meet the requirements of constitutional right to an environment that is not harmful to the health of all
people. Municipal by-laws should include all aspects of a basic sanitation service as stated in the
policy definition of a basic sanitation service, such as Health and Hygiene (H&HE), grey water
management in dense urban informal settlements, refuse removal, etc. There are also no policy
provisions for the conditional grants to support the operation and maintenance of VIP latrines and
other on-site sanitation technologies.
3.1.2 Costs Covered by the Sanitation Subsidy
According to the White Paper of Water Supply and Sanitation Policy (1994) the cost of a sanitation
system is made up of three basic components (DWAF, 1994):
• Capital costs: the money required to build the sanitation facility.
• Operation and maintenance costs: the costs of keeping the services running (also known as
"recurrent costs’).
Annual household
income
Flush toilet
(connecte d to
sewer age syst em)
Flush toilet (wit h
septi c tank)
Pit toilet with
ventilatio n (VIP)
Pit toilet
without
ventilation
Chemi cal
toilet
Bucket
toilet None Other TOTAL
No income 1121814 56389 198342 460991 69550 68051 147437 54963 2177538
R 1 - R 4800 250050 14013 83666 178563 24567 20687 57304 19905 648754
R 4801 - R 9600 377518 21911 148597 313249 40148 29872 101695 33373 1066364
R 9601 - R 19 600 1008067 65178 313165 666436 81767 62186 202442 76000 2475240
R 19 601 - R 38 200 1337038 78462 297272 646119 81423 69482 159223 71575 2740596
R 38 201 - R 76 400 1216800 62221 132000 311872 38523 33400 53913 30508 1879235
R 76 401 - R 153 800 1047159 51125 56426 131002 14624 9565 14960 10796 1335657
R 153 801 - R 307 600 902317 44739 24489 53488 6099 2775 6651 4733 1045292
R 307 601 - R 614 400 618194 30061 8969 18122 2869 1230 3427 2493 685364
R 614 001 - R 1 228 800 250837 12184 1348 2637 446 228 686 568 268934
R 1 228 801 - R 2 71598 3809 1041 2024 410 217 487 310 79896
R 2 457 601 or more 40913 2347 774 1549 277 155 359 219 46593
Unspe cified 619 40 14 16 2 - 7 2 700
Total 8242924 442481 1266102 2786068 360703 297847 748592 305444 14450161
22
• Replacement costs: the money required to replace the infrastructure once it reaches the end
of its useful life
At the time, the new Government subsidy scheme for the provision of basic water and sanitation
services had not been finalised but the 1994 White Paper did indicate that the basic policy framework
would, while focusing on providing subsidies to communities who cannot afford a minimum sanitation
services, will only be available to cover the cost of minimum services provision and will not cover
operating and maintenance costs (DWAF, 1994). These subsidies would be paid to local authorities
or statutory Local Water Committees, the amounts of which will be determined locally based on the
actual cost of providing this basic service.
The 1995 National Sanitation Draft White Paper, which was the precursor for the formulation of the
National Sanitation Policy of 1996, expands these 1994 White Paper cost categories of sanitation to
include:
• Capital costs: (1) "On site" components such as the toilets themselves, (2) "Internal
infrastructure" such as the sewers in the streets and (3) "Bulk and connector" infrastructure:
the outfall sewers and treatment works, where these are required.
• Recurrent costs: include (1) operation and maintenance costs: the costs of keeping the
services running, i.e. pipe repair, emptying pits, unblocking sewers and paying for the staff
and electricity needed to run treatment works; (2) administration costs: the costs of managing
the sanitation system in the long term; (3) programme costs: the health education, training,
awareness and other support costs which are an essential part of sanitation provision.
• Replacement costs: the money required to replace pipes, tanks and pits when they reach the
end of their useful lives.
The manner, outlined in the 1995 Draft White Paper, of how the sector envisaged these costs to be
paid was based on the same principle as that of the White Paper on Water Supply and Sanitation
(1994) of sanitation being self-financing at a local and regional level. However, the exception would
be where poor communities were not able to afford even a basic level of service, in which case
government may subsidise the capital cost of basic minimum services. Interestingly, applying these
cost categories to the provision of a capital subsidy for provision of basic services, local government
was able to use this subsidy to provide both on-site and waterborne systems as these fall within the
category of capital cost outlined above. This is confusing as the White Paper indicates that the
subsidy is only for a basic minimum service, which at the time was a VIP toilet.
Interestingly again, the 1996 National Sanitation Policy is very clear that inter-governmental transfer
of funds to subsidise the running cost shortfalls of local authorities, usually stemming from the Local
Government Equitable share for Free Basic Services, would not increase in future, and may in fact
decrease. Local authorities thus need to make provision for covering recurrent costs, such as
23
operations, maintenance and loan repayments. As Deliverable 2 of this research showed that to
ensure sustainable sanitation services provision (full supply cost of sanitation), the Free Basic
Sanitation Service operation and maintenance cost of a toilet for a 30 year life-span of a toilet can be
more than double the initial capital cost of the toilet. This has significant financial implications for local
authorities in South Africa, as not only does provision have to be made to sustain the operating cost
of households that have received sanitation services, but also for those households that will benefit
from the capital subsidised sanitation as the country addresses the sanitation backlogs. This is
enforced again, 16 years after this policy, by the 2012 Report on the Status of Sanitation Services in
South Africa, which states that local government internal funding sources are limited, especially in
rural municipalities, severely limiting many municipalities to raise sufficient revenue to cover both their
operating cost as well as their infrastructure needs (DWA, The Presidency and Department of Human
Settlements, 2012). The same report indicated that as many as 26% (or about 3,2 million) of
households are at risk of service failure, 9% (or 1,4 million households) been formal settlements that
have no services and the 64% (584 378 households) been informal settlements making use of interim
services (DWA, The Presidency and Department of Human Settlements, 2012).
The Strategic Framework for Water Services focuses on three forms of sanitation subsidisation in the
country (DWAF, 2003); namely:
(1) Infrastructure (hardware) subsidy (capital subsidy from MIG) from the fiscal budget for the
provision of the sanitation facility.
(2) Software subsidy (subsidy from MIG) from national government to address health and hygiene
promotion.
(3) Operational subsidy (Free Basic Sanitation subsidy from LES) from the fiscal budget for the
operating and maintenance costs of the service.
The Framework differs with the Policy principle discussed above regarding subsidising Operation and
Maintenance (O&M), stating that if the basic service is to be provided free to the poor then the water
services authority must ensure that the costs of providing the service are covered by the local
government equitable share (LES) within the water services authority area. Since the equitable share
is an unconditional subsidy provided to municipalities, this statement could be interpreted to imply that
government is willing to subsidise some of the operational costs of sanitation provided to poor
households. Subsidy arrangements are confirmed by the SFWS and states that subsidies for free
basic sanitation should cover the hygiene promotion costs and the operating costs of providing a
basic sanitation service to households. Ideally, the subsidy for operating costs should be calculated
as a subsidy per household per month for each settlement type and technology used. This subsidy is
then paid to the water services provider or directly to the household. These subsidies should be
applied in an equitable and fair manner, both in the present context and over time. The Framework
thus saw a change in government-thinking on the financial support offered for water services. This
24
make a fourth form of subsidy, namely cross-subsidisation, where a Water Services Authority may
cross-subsidise basic sanitation services through various sources. Subsidisation of the operations of
basic sanitation services may therefore result from national government or through local government
financial management systems.
The review above shows that there are gaps in policy with regards to the conditional grants, as it
cannot be used to finance the costs of operating infrastructure. While the implementation of new
“capital” projects is addressed, this has come at a price of a lack of focus on the far more challenging
requirements of the on-going sustainable operation and maintenance of services. Increasingly,
maintenance, refurbishment and extension of the capacity of existing sanitation infrastructure have,
and are being neglected (DWA et al., 2012). All municipalities surveyed in a study by Still et al. (2009)
did not have operation and maintenance (O&M) plans for VIP toilets and had not provided a budget
for the emptying of full VIP toilets.
3.1.3 Defining a Subsidised Sanitation Facility or Service
The White Paper of Water Supply and Sanitation Policy (1994) clearly indicated that the government
“may subsidise the cost of construction of basic minimum services but not the operating,
maintenance or replacement costs” (DWAF, 1994). At the time, the White Paper indicated the basic
(minimum) level of service to mean a VIP (Ventilated Improved Pit) latrine (in its various forms, to
agreed standards) or its equivalent in terms of cost, robustness, health benefits and environmental
impact; together with ongoing exposure to readily understandable information about correct hygiene
practices.
The 1995 National Sanitation White Paper Draft provides the following motivation for a VIP to the
minimum accepted level of basic service, from a public health point of view there is no difference
between a well-built, properly maintained VIP latrine and waterborne sewerage, but financially they
are very different. Moreover, there are no economic benefits of installing expensive systems such as
waterborne sewage, the only added benefit is increased convenience. There is a real risk of incurring
economic dis-benefits where low income households cannot afford the running costs of an expensive
system and extensive subsidies are needed. Furthermore, where operational costs are not met for
lack of consumer payments or ongoing subsidies, environmental problems and clean-up costs may
follow. As a result, there is a strong focus on affordability of sanitation service provision to the
households, local authorities and central government.
The term basic (minimum) service in this 1994 White Paper and 1995 Draft White Paper could easily
be confused with the broader definition of basic service in the SFWS (2003), which is the provision of
a basic sanitation facility which is easily accessible to a household, the sustainable operation of the
facility, including the safe removal of human waste and wastewater from the premises where this is
appropriate and necessary, and the communication of good sanitation, hygiene and related practices.
25
If the above statement of the White Paper of Water Supply and Sanitation Policy (1994) were to be
read within the current interpretation of minimum service, it would be interpreted to imply that
sanitation subsidies cover the provision of a sanitation facility, the operation of the facility, including pit
emptying and sanitation related hygiene education.
The 1995 National Sanitation White Paper Draft informed the development of the 1996 National
Sanitation Policy. The 1996 Sanitation Policy provides more policy clarity, specifically on sanitation
service provision, broadly addressing urban, rural, rich and poor, sanitation requirements in the
country (NSTT, 1996). This 1996 National Sanitation Policy however is not explicit regarding
subsidise being available to poor households and in fact reinforces that the policy principles apply in
rich and poor communities, in rural and urban areas, and whether sanitation is for individual
households or provided as a system for an entire community. This could be, incorrectly, interpreted to
imply that sanitation subsidies apply to all.
This National Sanitation Policy was followed by the 2001 White Paper on Basic Household Sanitation.
Unlike the 1994 and 1996 White Paper, the 2001 White Paper for Basic Household Sanitation does
not address sanitation subsidy issues other than in a broad sense. The government is currently
reviewing and revising this Basic Household Sanitation policy with the purpose to:
• accommodate aspects to the delivery of sanitation that have arisen due to changes in legislation
and the organisation structure of the sanitation sector since 2001, i.e. the Strategic Framework for
Water Services (DWAF, 2003); introduction of the MIG; devolving responsibility for
implementation to municipalities.
• to address gaps identified by the sector.
The concept document, published the Department of Human Settlements in 2011, suggests that the
revised policy needs to focus on establishment of an “enabling regulatory environment including the
mechanisms for intervention and ensuring compliance with national norms and standards.”
The Free Basic Sanitation Implementation Strategy adds to the confusion of targeting of sanitation
subsidies stating that it is obvious that an on-site system such as a VIP can be defined as a basic
service level for the purpose of a free basic sanitation policy. However, for Water Service Authorities
(WSAs) which serve well established urban areas the majority of consumers, including the poor, may
have waterborne sanitation. The WSA may then choose to see waterborne sanitation as the 'basic'
level of service to be provided free to the poor. But this has major implications for the viability of the
service which play themselves out in the urban periphery. As the proportion of consumers in this zone
who have waterborne sanitation and are poor increase, the costs increase without a proportional
increase in income.
26
3.1.4 Subsidies for Progressive Improvement or Upgrade of Sanitation Service
The White Paper of Water Supply and Sanitation Policy (1994) introduces progressive improvement
in sanitation, suggesting that government subsidises provision of a basic sanitation service, with
upgrades or improvements to this basic level of service being paid for by the individual. Thus,
government would provide a VIP toilet with the capital subsidy and if a household wish to upgrade or
improve this level of service they would be responsible for these costs.
The 1995 National Sanitation Draft White Paper recommends that, based on the Municipal
Infrastructure Investment Framework which showed that government cannot immediately embark on
a programme to provide full services to all, means need to be devised to prioritise sanitation
investments and that subsidies need to be targeted to provision of a basic level of service to all. Limits
were set on governments’ ability to provide grants and subsidies for services including that:
• local governments will be responsible to finance the upgrading of sanitation services to existing
households in their areas;
• grant finance from central government may be made available to assist those areas in which local
government cannot achieve a basic level of service for all households (largely confined to
upgrading local infrastructure, but with some items of bulk and connector infrastructure, to a basic
level only);
• sanitation for beneficiary households could, in terms of national housing policy, be either
sewerage provided by the local authority as a trading service, or sanitation provided utilising a
portion of the national housing subsidy, (or its equivalent in rural areas) as determined by
affordability and financial sustainability, both in capital and recurrent terms; and
• the level of inter-governmental grants made available to subsidise the running costs of municipal
services, including sanitation systems, will not be increased and should over time be reduced.
The 1996 National Sanitation Policy does however differ slightly from the previous White Paper in its
stance that local authorities are responsible for the extra capital and running costs for poor
households wishing for higher level of service than the basic level (NSTT, 1996). This implies that
capital and operational subsidies could be utilised to provide higher levels of service, to the cost of the
municipality and not the household. This actually contradicts the earlier and later policies and could
add significantly to the financial burden of a municipality.
3.1.5 Sanitation subsidies for the rural areas of the country
The White Paper of Water Supply and Sanitation Policy (1994) indicates that the Department’s policy
on the financing of water and sanitation in rural areas is that basic minimum services may be
27
subsidised by the Government, within the constraints of finances available to the State. The minimum
service at the time was the subsidisation of the capital cost of the construction of a VIP toilet.
The 1995 National Sanitation Draft White Paper supported this policy principle, indicating that in the
case of rural sanitation subsides; in addition government would allocate a capital subsidy to enable
individual householders to improve their domestic sanitation to a basic level (in the absence of a
housing or general services subsidy for new or existing households). This subsidy was to be allocated
based on the following principles:
• The capital subsidy be available directly to the individuals who are wishing to improve their
sanitation, so that individuals have maximum say over how it is spent.
• The subsidy would only be given to those who have agreed to contribute their own
resources to sanitation improvement, particularly to the building of toilets. This contribution
needs to be made "up front", e.g. by way of a cash deposit or accumulation of building
materials.
• Subsidies made available to individuals should be linked to and recorded on the National
Subsidy Housing Database.
3.1.6 Sanitation Subsidies for the Urban Areas of the Country
The White Paper of Water Supply and Sanitation Policy (1994) indicates that in urban areas, the cost
of internal services and reticulation within a township’s boundaries are generally considered to be part
of the development costs of the property, and is thus a household responsibility. Since internal
services and reticulation remain a household’s responsibility, not local government, the White Paper
could be read to suggest that subsidised sanitation services to peri-urban households of the country
may not be a legitimate use of a subsidy. Additional costs of connector, bulk and treatment services of
both water and sanitation, which are a local government responsibility, are also not covered by the
housing subsidy.
The Implementation Strategy for Free Basic Sanitation follows a similar argument, stating that where
rehabilitation of infrastructure is required (a capital item) it will be provided free except where it is
rehabilitation of buildings, pedestals and pipework of 'on site' infrastructure, which will remain the
responsibility of the household (DWAF, 2008).
The 1995 National Sanitation Draft White Paper concurs with this and highlights that in urban areas
local authorities needed to raise their own finance (i.e. loans, tariffs) to provide sanitation services (i.e.
no capital subsidies are provided for). The exception is where central government will assist a local
government (1) with a capital grant when a local authority has a disproportionately large sanitation
28
service backlog and limited funds; and (2) with a subsidy to assist with alleviating a severe
environmental problem (not caused by mismanagement or injudicious investments) (DWAF, 1995).
The 1996 National Sanitation Policy concurs with the 1995 Draft in that in urban areas the recurrent
expenditure (operations, maintenance, replacements, administration, loan repayments) would be
financed by current income, comprising consumer charges, local taxes and inter-governmental
transfers where they are available and sanitation for new housing will normally be funded through the
national housing subsidy scheme, i.e. so separate subsidy for sanitation will be provided to these
households.
The 1996 National Sanitation Policy has however seen a significant policy shift in the stance to
subsidised sanitation in urban areas in that (NSTT, 1996):
• it does not exclude urban municipalities from having access to grants for capital costs to meet the
national basic level of service for sanitation.
• Unlike the 1995 Draft which stipulates local authorities needed to raise their own finance (i.e.
loans, tariffs) to provide sanitation services, the 1996 Policy relaxes it stance, making mention of
local municipalities financing capital expenditure by borrowing of service providers and some
grant finance.
• It makes mention of urban grants being available through the Municipal Infrastructure Programme
or other sources and that grants for bulk and connector infrastructure and for rehabilitation and
upgrading of sewerage systems will only be available under exceptional circumstances.
The National Sanitation Strategy, published in 2005 to address new development in the sanitation
sector since the 2001 Basic Households Sanitation White Paper, states that “informal settlements
must not be treated as emergency situations for the purpose of this strategy but should be provided
with viable and sustainable solutions. Solutions such as communal facilities and chemical toilets
should not be used where the system is expected to have duration of more than one month (DWAF,
2004).
Providing adequate sanitation in growing urban informal settlements poses a specific sanitation
challenge. According to a recent report by DWA et al. (2012) this is the single greatest challenge
facing the water and sanitation sector in South Africa. The latest data shows that of the one to two
million households living in informal settlements in South Africa, the sanitation subsidy challenges in
the high density of these settlements, insecurity of tenure and complex community dynamics which
make it extremely difficult to plan and implement standard sanitation infrastructure solutions in these
areas. There are also gaps in the national policy with regards to guidelines for the provision of basic
sanitation services in these dense urban informal settlements. In the context of people living on
private land, MIG funding can be used to provide basic services but this is not necessarily applicable
to households that do not have security of tenure.
29
3.1.7 Free Basic Services Subsidy Policies
The Draft White Paper on Water Services (2002) introduces the free basic services concept to the
South Africa institutional environment (DWAF, 2002). The free basic sanitation services are expected
to be provided for through the equitable share, which had been increased significantly to support this
objective. This is in contradiction with the statement made in previous sanitation policies that the level
of inter-governmental grants made available to subsidise the running costs of municipal services,
including sanitation systems, will not be increased and should over time be reduced. The Draft White
Paper highlights that government’s priority to the municipalities should first provide basic services,
using the capital subsidy, to the un-served households before considering an operational subsidy
(Free Basic Sanitation) for those who already have a high level of service. The free basic sanitation,
according the Draft White Paper, would not subsidise the capital cost of providing basic toilets but
rather the emptying of pits and conservancy tanks and a proposed 6kL per month for the cost of
operating a flush toilet. The day-to-day operation and maintenance of the facilities remains the
responsibility of the householder.
The National Framework for Municipal Indigent Policies (dplg, 2005) concurs with this stating that
there are three parts to a well-functioning indigent policy, as shown in Figure 2 below. The figure
shows that municipalities should first focus on providing physical access to a sanitation service, using
the MIG capital grant; i.e. firstly to provide the sanitation infrastructure. The second step in providing
sustainable sanitation service, once sanitation backlogs have been addressed by the municipality, is
the provision of resources to ensure properly functional services in the long term, using the Local
Equitable Share to assist indigent households with Free Basic Sanitation. Finally, access to the
service must be properly targeted, all municipalities have a mix of those who are indigent and those
who can afford to pay for the services provided. This requires careful targeting (dplg, undated1).
Figure 2: Levels of provision of sanitation service at a municipal level (taken from dplg, undated1).
The Strategic Framework for Water Services (2003), which followed the 2002 Draft White Paper,
recommends that subsidisation of sanitation operation cost, should be calculated as a subsidy per
households per month for each settlement type and technology used. The subsidy should be paid to
30
the water service provider or the household (in the form of vouchers). In the case of waterborne
systems, operation and maintenance support includes providing water for flushing. It is recommended
that 15 litres per person per day should be provided in this regard. For a household of 8 people this
will amount to 3 to 4 KL above the quantity provided for in terms of the free basic water; i.e.6 KL. This
will be higher in cases where people are suffering from advanced stages of AIDS (DWAF, 2008).
The SFWS also makes the responsibility for developing a subsidy framework that of the water
services authorities, based on, but not limited to, the targeting of the poor with subsidies and ensuring
that FBS subsidies are sustainable. The SFWS also indicates that DWAF, in consultation with dplg,
will develop practical guidelines for the development of local subsidy policies which facilitate the
provision of free basic services, promote sustainable service delivery and assist water services
authorities to meet their universal service obligations.
In March 2009 the FBSan Implementation Strategy was approved by the Minister of Water Affairs.
The Strategy was developed to guide WSAs in providing all citizens with free basic sanitation by 2014
and to implement their own FBSan policies in line with national policy (DWAF, 2009).
The FBSan Implementation Strategy acknowledges the right of all South Africans to a basic level of
sanitation service and that those municipalities have an obligation to ensure poor household’s right to
access these services.
Some of the key subsidy-related components of the Strategy is the following:
• Capital subsidy arrangements for sanitation infrastructure are managed through the MIG, which is
allocated annually to municipalities based on a formula.
• The water services authority needs to firstly calculate the total amount of operating subsidy it has
available for all basic services and separate this into operating subsidy required for each basic
service (including sanitation). Once the total amount of subsidy available for sanitation is
calculated the amount per household served can be calculated. If the subsidy amount is
insufficient to provide the service free then the water services authority has no choice other than
to set up an arrangement whereby it will provide a subsidy to the maximum that is affordable and
households will have to pay the balance.
• If a municipality is to select waterborne sanitation as a basic service level in the urban core, this
must only be done once financial viability has been tested and if it is certain that the amount of
water needed for flushing is available. O&M support from Free Basic Service provision includes
providing water for flushing.
• While it remains national policy to provide basic sanitation free to the poor, this is constrained by
the financial viability of the water services authorities that are responsible for implementing this
policy. There may be situations where such authorities simply do not have access to sufficient
subsidy funds to provide a free service, at least in the short to medium term. In such cases the
31
authority may place a cap on its free basic sanitation grant and require the beneficiaries to
contribute in cash or kind.
• While the capital costs of sanitation infrastructure or rehabilitation of infrastructure are provided
through other grant, the FBSan policy approaches refer to targeting operating subsidies.
• Poor households living on farms can access capital subsidies for the construction of basic
sanitation infrastructure, with the farmer responsible for operating and maintaining this
infrastructure, together with the households using the service.
• Where the cost of providing FBSan to the poor exceeds the subsidy amount available, cross-
subsidisation should take place, where wealthier users cover all or some of the cost of providing
the service to poor users. The cross-subsidy may be substantial in rich municipalities or it may be
unviable in poor or rural municipalities, in which case the LES is the only form of financing
available to provide FBSan.
3.1.8 Housing Subsidies within Water Service Policies
One of the main gaps in subsidised sanitation policy is the lack of clarity of roles and responsibilities
between departments involved in the sanitation services delivery process. From a national and
provincial perspective, the responsibility was initially with the Department of Water Affairs and
Forestry between 1994 and 2001, then the funding and monitoring function moved to the Department
of Provincial and Local Government in 2001 via the conditional grant funding instrument. In 2009 the
National Sanitation Programme Unit (NSPU) was moved from DWA to the Department of Human
Settlements, with DWA retaining certain responsibilities in the sector including regulation, information
management, high level planning and management of the Bulk Infrastructure Grant. At provincial level
responsibility for sanitation services provision now rests with the Department of Human Settlements,
but with certain links to the Departments of Health, Water Affairs, Education and Public Works. This
fragmentation and the lack of a single national body taking the lead in the sector, has resulted in
serious challenges in terms of the coordination and upholding of norms and standards (DWA et al.,
2012).
The White Paper of Water Supply and Sanitation Policy (1994) states since sanitation is provided at
household level, consistency with urban and rural housing policy is essential, both to ensure
consensus on standards and strategies and to avoid double subsidies. Whether this has occurred in
the 20 years of sanitation services delivery remains a question, with perceptions within the sector
being that this has not occurred.
Of note is that this Draft White Paper highlights that approval of any subsidies should be linked to the
National Housing Subsidy Database to avoid double subsidies and that the way in which subsidies to
individuals can be applied will differ in the urban and rural areas. The Draft White Paper clearly
stipulated that no separate subsidy for sanitation will be provided for households where sanitation is
covered by the housing subsidy.
32
The 1996 National Sanitation Policy has however, differed slightly in its stance in that it indicated a
need to develop mechanisms to avoid double subsidies, not just linking household subsidies to
National Subsidy Housing Database.
The 2001 White Paper on Basic Household Sanitation included some discussion of the housing
subsidy indicating that the Minister of Housing has prescribed a minimum level for each type of
service for subsidy purposes. The minimum level of services prescribed for sanitation is a VIP per
household (erf) unless the situation, such as the soil conditions, dictates otherwise. The housing
subsidy is targeted at individual households. The subsidy can be utilised to provide houses and,
under certain circumstances, a portion of the subsidy amount could be applied to provide internal
engineering services.
The 2002 Issues and Options Discussion Paper: Towards A Water Services White Paper and October
Draft White Paper on Water Services, which is the precursors to the 2003 Strategic Framework for
Water Services, follows the thread from previous policies of highlighting that adequate sanitation
facilities on housing premises (or sites) are part of the internal services “package” which is provided
as part of the “housing package” funded through the housing subsidy.
Like earlier policies the SFWS (2003) recognises the role of the national Department of Housing in the
regulation and management of housing service provision, including sanitation services provision. The
SFWS emphasis that the housing subsidy policies, which are aimed at provincial level, needs to
recognise the right of water services authorities (municipalities) to determine the service level policies
for new housing development, based on what is affordable and sustainable to the municipality in the
long term.
3.2 HOUSING POLICIES GOVERNING SANITATION SERVICES PROVISION IN THE COUNTRY
Section 26 of the Constitution of the Republic of South Africa, 1996, enshrines the right of all South
Africans to adequate housing, with the state required to develop legal and other measures within
available resource to progressively realise this right (South Africa, 1996). Government’s human
settlement development mandate thus emanates from the Constitution, with the state working
progressively towards ensuring this right.
Since 1994, there have been numerous policy and statutory developments in order to give effect to
the new approach to housing. These include the following:
• The Housing Amendment Act (1993) (South Africa, 1993).
• The Housing Amendment Act (1994) (South Africa, 1994b).
• The Reconstruction and Development Programme (RDP) of 1994 (discussed in Section 3.1.1.
above) (South Africa, 1994a). The recognition of housing as a key and priority component of
33
the RDP, which initiated the will and fiscal support to launch sustainable housing
programmes, as part of the Presidential Lead Projects (see section 3.1.1 above for more
details).
• New Housing Policy and Strategy for South Africa: White Paper, 1994 (Department of
Housing, 1994).
• The Housing Act, 1997 (Act No. 107 of 1997) (South Africa, 1997).
• Comprehensive Plan for the Development of Sustainable Human Settlements, 2004
(Department of Housing, 2004).
• National Norms and Standards for the Construction of Residential Structures (2009)
(Department of Housing, 2009).
• National Housing Code published in 2000 and updated in 2009 (Department of Housing,
2009)
• Social Housing Act (2008) and the Social Housing Regulations of 2012 (South Africa, 2008;
Department of Human Settlement, 2012)
3.2.1 Sanitation Subsidies within the Housing Arrangement Act (1993) and Housing
Amendment Act (1994)
In November 1993, the Housing Arrangements Act (Act No 155 of 1993) was passed by Parliament,
making provision for the amalgamation and joint operation of housing funds and certain housing
institutions of the old administrations (South Africa, 1993). The Act was put in place to address
immediate housing needs in the country, while the new democratic government continued negotiation
on future housing policy for the country.
In March 1994, the Housing Amendment Act (No 8 of 1994) was gazetted to extend housing subsidy
to individuals in the entire Republic (South Africa, 1994b).
3.2.2 Sanitation Subsidies within the New Housing Policy and Strategy for South
Africa: White Paper, 1994
The New Housing Policy and Strategy White Paper, which was development in 1994, had the focus of
establishing new systems to address South Africa’s housing priorities, including means to address the
housing backlog in the country (Department of Housing, 1994). The White Paper outlined government
policy approaches and intervention to enable the attainment of the country's housing vision and goal,
two of which were (1) subsidies and (2) infrastructure, service standards and tariffs (Department of
Housing, 1994).
Government committed in this White Paper to provide targeted end-user subsidies as the approach to
addressing the housing challenge in the country (Department of Housing, 1994). A capital subsidy
34
approach, based on subsidy schemes which were already in place, were to be implemented as the
national housing programme. The Housing Subsidy Scheme offered subsidies over a range of
options: project linked subsidies, individual subsidies, consolidation subsidies, and institutional
subsidies (Department of Housing, 1994).
The levels of subsidy available to the end-user would be determined by fiscus constraints, but the
White Paper like water services policies indicates that the focus of subsidy interventions would be
those most in need and least able to contribute to the costs of their own housing.
The 1994 White Paper clearly indicates that the approach outlined by the policy applies to the
provision of water, sanitation, roads, stormwater drainage and domestic energy to housing
developments (Department of Housing, 1994).
Like the early water service policies, the White Paper has the underlying principle that communities
should pay for the operational and maintenance costs of the service provided. Water and sanitation
services were not to be provided free.
The White Paper goes on to say that to address the need of destitute households the state would
provide a subsidy from the government fiscus or from tariff structures (i.e. tariffs need to be structured
to also address this need) (Department of Housing, 1994). The province, as the sphere responsible
for housing delivery, was required to define what this category of ‘destitute’ meant.
The White Paper outlines that external bulk and connector services to residential areas are the
responsibility of local government, while internal infrastructure must be provided by developers
(Department of Housing, 1994). The White Paper is not prescriptive as to the type of sanitation
facility/service to be provided through the housing subsidy.
Effectively the White Paper concurs with early water services policies in that:
• beneficiaries of subsidies would be poor individuals, based on household monthly expenditure;
• operational costs are to the households; and
• internal services will be provided by the developer, i.e. provincial housing department using the
capital housing subsidy.
Where this White Paper differs from the early water service policies is:
• provincial departments are responsible for the housing service delivery and thus the housing
subsidy; and
• sanitation services provided is not limited to a VIP toilet.
35
3.2.3 Sanitation Subsidies within the Housing Act (1997)
The Housing Act 107 of 1997 is the primary piece of housing legislation in South Africa, legitimising
the policy principles outlined in the White Paper published in 1994. The Housing Act provides for a
sustainable housing development process, laying down general principles for housing development in
all spheres of government; defining the functions of national, provincial and local governments with
regard to housing development; and laying the basis for financing national housing programmes
(South Africa, 1997).
Section 14 (9) legalises the consolidation of former subsidy schemes into a national housing
programme, phasing out within a year the every housing subsidy granted in terms of (South Africa,
1997):
(i) the Housing Act, 1966;
(ii) the Development and Housing Act, 1985:
(iii) the Housing Act (House of Representatives), 1987:
(iv) the Development Act (House of Representatives), 1987; or
(v) the Housing Development Act (House of Delegates), 1987.
The Act is relevant to sanitation because it specifies sanitation as a fundamental part of the right to
adequate housing, in that the Act defines housing development to include all citizens and permanent
residents of the Republic having access to potable water, adequate sanitary facilities and domestic
energy supply’ (South Africa, 1997).
The 1999 Housing Amendment Act extents the period for phasing out of the subsidy scheme in
Section 14 (9) of the Housing Act to one year after the commencement of the 1999 Amendment Act
(South Africa, 1999).
Despite the Act clearly defining sanitation services as a legislative requirement in the provision of
housing, it was only after a ground-breaking Constitutional Court decision on the Grootboom case that
this right was recognised. The court ruled that the right delineated in section 26(1) is a right of “access
to adequate housing” as distinct from the right to adequate housing encapsulated in the Covenant.
This difference is significant. It recognises that housing entails more than bricks and mortar. It
requires available land, appropriate services such as the provision of water and the removal of
sewage and the financing of all of these, including the building of the house itself. For a person to
have access to adequate housing all of these conditions need to be met: there must be land, there
must be services, there must be a dwelling. Access to land for the purpose of housing is therefore
included in the right of access to adequate housing in section 26” (Constitutional Court of South
Africa, 2000). Sanitation is thus included as part of this Constitutional right to adequate housing.
36
3.2.4 Sanitation Subsidy in the Comprehensive Plan for Sustainable Human
Settlement (2004)
Ten years after the introduction of the housing programme in 1994, a comprehensive review of the
government supported housing programme was conducted, which led to the Comprehensive Plan for
Sustainable Human Settlement commonly referred to as “Breaking New Ground” or “BNG” (DHS,
2009). The BNG document provides an outline of governments plan for the development of
sustainable human settlements for the following five years (Department of Housing, 2004). The BNG
document focused on sustainable human settlements, while retaining the basic principles of the 1993
Housing White Paper, in (Department of Housing, 2004):
• collapsing the existing 3 subsidy bands, at that time available to households earning below
R3500, into a uniform subsidy amount;
• expanding the Department’s mandate to encompass the entire residential housing market,
specifically expanding interventions to households with income R3501-R7000;
• shifting the focus to improving the quality of housing and housing environments by integrating
communities and settlements; and
• setting new minimum standards for housing products (Department of Housing, 2004; DHS, 2009).
3.2.5 Sanitation Subsidies within the National Norms and Standards for the
Construction of Residential Structures (2009)
In 1999 the National Norms and Standards for the Construction of Residential Dwellings were
introduced by the Minister of Housing in terms of section 3(2)(a) of the Housing Act. These provided
minimum technical specifications including environmentally efficient design proposals.
On 1 April 2007, these standards were revised in the National Norms and Standards in respect of
Permanent Residential Structures (National Norms and Standards), which are contained in the 2009
National Housing Code (DHS, 2009b). All stand-alone houses constructed through application of the
National Housing Programmes must at least comply with these norms and standards (Tissington,
2011).
According to the Norms and Standards (DHS, 2009b):
• Provision of bulk and connector services by municipalities outside the boundaries of project sites
must be financed through internal sources of revenue of municipalities or other resources; i.e.
they may not be financed by the Integrated Housing and Human Settlement Development Grant
(IHAHSG).
37
• Provision of internal reticulation services must be funded through alternative funding resources,
however, in exceptional circumstances these services may be funded through the provincial
annual housing development funding allocated by the Minister.
• The level of the engineering services to be provided is determined by the provisions of the
relevant National Housing Programme. In general, all residential properties created through the
National Housing Programme must comply with at least a VIP or alternative system agreed to
between the community, the municipality and the MEC. The Norms and Standards continue to
mention that if a flush toilet is provided, a dual flush toilet cistern must be installed that operates
efficiently and safely on a standard flush of 4,5 litres instead of the current norm of 9 litres.
Although the subsidised sanitation policy clearly states that the provision of sanitation services should
take into account the growing scarcity of water in South Africa, there is no policy enforcement of the
use of water efficient technologies when full waterborne sanitation systems were provided to meet the
basic sanitation needs of poor households. This could compromise affordability and long-term
sustainability of waterborne sanitation services for poor households.
These Norms and Standards thus also differ from the 1994 Sanitation Policy in that housing should
include at a minimum a VIP toilet – funded from external sources and NOT the housing subsidy.
These Norms and Standards concur with the 1994 Sanitation Policy in that the housing subsidy can
be used, in exceptional circumstances, to provide internal sanitation services (which in many cases
was taken to read that this was the norm rather than exceptional circumstances).
3.2.6 Sanitation Subsidies within the National Housing Code published in 2000 and
updated in 2009
The National Housing Code, a requirement of the Housing Act (1997), were first published in 2000,
with an updated and amended version in 2009. This National Housing Code provides the policy
principles, guidelines and norms and standards applicable to the various housing assistance
programmes introduced by Government since 1994 (DHS, 2009a; DHS, 2010). The purpose of the
National Housing Code is to provide an overview of the various housing subsidy instruments available
to assist low income households to access adequate housing in South Africa.
To meet Constitutional housing imperatives, legitimised in the Housing Act of 1997 (Act No 107 of
1997), Government has introduced a Human Settlement Development Grant that provides funding for
a suite of housing programmes to provide poor households with access to adequate housing. In line
with meeting the access requirements, the Human Settlement Development Grant funds the following
housing programmes (summarised from DHS, 2009a):
38
Table 6: Current National Housing Programmes funded by government Human Settlement Development Grant.
Programme Description
1 Integrated
Residential
Development
Programme
Purpose: to integrate low income settlements on the urban periphery into the larger
human settlements.
Provides for: the acquisition of land for low, middle and high income housing (including
servicing of stands) and for a variety of land uses including commercial, recreational,
schools and clinics.
Available to: individuals via projects
2 Upgrading of
Informal
Settlements
Purpose: upgrade the living conditions of people living in informal settlements
Provides for: provides secure tenure and access to basic services and housing by in
situ upgrading of informal settlements, which may require residents to be relocated if the
conditions are not suitable for this upgrading. Only financing the creation of serviced
stands, with beneficiaries required to apply for housing construction assistance through
the other National Housing Programmes (e.g. Individual subsidies, Enhanced People’s
Housing Process, Social Housing, etc.).
Available to: individuals via projects
3 Provision of
Social and
Economic
Facilities
Purpose: to fund primary social and economic amenities, where funding is not available
from other sources. The Programme provides assistance to all municipalities which do
not have sufficient financial resources to provide such facilities.
Provides for: where funding is not available from other sources (i.e. municipal funding),
capital funding is provided for the (1) medical care facilities; (2) community halls; (3)
community park/playground; (3) taxi ranks; (4) sport facilities; (5) informal trading
facilities; and (6) basic ablution facilities for the above. Ownership, operation and
maintenance of the facilities provided through this programme reside with the
municipality.
Available to: municipalities via projects
4 Housing
Assistance in
Emergency
Circumstances
Purpose: after the National Disaster Relief Fund renders the first line of Government
assistance in emergency situations, this programme can be used for temporary housing
for disaster victims until such time as they can be provided with permanent houses.
Provides for: All affected persons who are affected by the emergency situation and are
not in a position to address their own housing emergency can benefit from this
programme.
Available to: municipalities via projects
5 Social Housing
Programme
Purpose: this funding stream is applied to “restructuring zones” which municipalities
have identified as areas of economic opportunity and where urban renewal/restructuring
impacts can best be achieved.
Provides for: development of affordable rental in areas where bulk infrastructure
(sanitation, water, transport) may be under-utilised. A precondition for receiving the
sliding scale capital grants is that social housing institutions need to be accredited and
also access own capital contributions.
Available to: individuals via projects
6 Institutional
Subsidies
Purpose: while the Social Housing Programme focuses mainly on achieving urban
integration and upgrading in declared restructuring zones, this programme provides
affordable rental accommodation in other parts of settlements. The Programme also
provides for the sale of units by the social housing institution after at least four years
have lapsed.
Provides for: provide capital grants to social housing institutions which construct and
manage affordable rental units. The Programme also provides for the sale of units by the
social housing institution after at least four years have lapsed.
Available to: beneficiaries then apply to the housing institution to occupy the rental
stock.
7 Community
Residential
Units
Programme
Purpose: since the Social Housing and the Institutional Subsidy Programmes do not
provide rental accommodation which is affordable to the very poor (and often informally
employed), this programme fills this gap.
Provides for: secure, stable rental tenure to these lower income persons/households.
The grant includes funding for the capital costs of project development and future long-
term capital maintenance costs.
Available to: individuals via projects
8 Finance Linked
Individual
Subsidy
Purpose: assistance to qualifying households to acquire an existing house or a vacant
serviced residential stand through an approved mortgage loan. These properties are
available in the normal secondary housing market or have been developed, as part of
39
Programme Description
Programme projects not financed through one of the National Housing Programmes.
Provides for: access to funding for the following two categories; (1) Credit Linked
Subsidies for applicants that can afford mortgage loan finance, providing a subsidy that
is linked to credit from a financial institution; and (2) Non-Credit Linked Subsidies where
the applicant cannot afford mortgage loan finance, the applicant can for a subsidy to
acquire an existing house entirely out of the subsidy and may supplement this with other
funds that may be available to him or her. Qualifying persons who bought vacant
serviced stands may apply for need assistance to construct a house using the Non-
Credit Linked Subsidies.
Available to: individuals via projects
9 Rural Subsidy:
Communal
Land Rights
Purpose: applies in areas of the country where communal tenure is the normal,
requiring that these tenure rights first be confirmed through the processes prescribed by
the Minister of Rural Development and Land Reform.
Provides for: housing development on communal land registered in the name of the
state or which will be held by community members subject to the rules or custom of that
community. The housing subsidy may be utilised for (1) the development of internal
municipal services where no alternative funds are available, (2) house building, (3)
upgrading of existing services where no alternative funding is available, (4) upgrading of
existing housing structures or (5) any combination of the said options.
Available to: approved housing development projects and may not be accessed on an
individual basis. However, funding can be flexibly applied to meet real needs.
10 Consolidation
Subsidy
Programme
Purpose: assists individuals who received services sites from housing schemes
instituted before introduction of the White Paper on a New Housing Policy and Strategy
for South Africa in December 1994.
Provides for: The programme provides support to cover the cost of:
• compiling a project application;
• the registration of the beneficiary for subsidy purposes;
• project management and technical advice; and
• construction of a house or the upgrading of an existing house.
Available to: individuals via projects
11 Enhanced
Extended
Discount
Benefit
Scheme
Purpose: support decisions made regarding the transfer of pre-1994 housing stock and
are intended to stimulate and facilitate the transfer of public housing stock to qualifying
occupants.
Provides for: occupants of public housing stock the opportunity to secure individual
ownership of their housing units.
Available to: individuals
12 Rectification
Of Certain
Residential
Properties
Created Under
The Pre-1994
Housing
Dispensation
Purpose: to improve municipal engineering services where inappropriate levels of
services are delivered and the renovation and/or upgrading, or the complete
reconstruction of dwellings that are severely structurally compromised.
Provides for: improvement interventions on residential properties created through State
housing programme interventions during the pre-1994 housing dispensation that are still
in ownership of the public sector institution and/or that were disposed of to beneficiaries.
The Programme thus applies to properties currently owned by a municipality and/or
provincial government as well as individual persons.
Available to: individuals via projects
13 Housing
Chapters Of
An Integrated
Development
Plan
Purpose: to assist municipalities to compile the Housing Chapter of IDPs.
Provides for: assistance to all municipalities which do not have sufficient financial
and/or human resources for the undertaking of Housing Chapters of IDPs.
Available to: municipalities annually
14 Operational
Capital Budget
(OPS/CAP)
Purpose: to assist provincial governments to appoint external expertise to supplement
the capacity required for housing delivery.
Provides for: capacity to support the (1) Informal Settlement Upgrading Programme; (2)
projects that facilitate the creation of integrated sustainable human settlements; (3) the
provision of primary social and economic amenities; and (4) the unblocking of stalled
projects
Available to: provincial governments
15 Enhanced
People’ S
Housing
Process
Purpose: assists households who wish to enhance their houses by actively contributing
towards the building of their own homes.
Provides for: beneficiaries to establish a housing support organisation that will provide
them with organisational, technical and administrative assistance. Training and guidance
40
Programme Description
on how to build houses are also supplied.
Available to: individuals on a project basis.
16 Farm
Residents
Housing
Assistance
Programme
Purpose: address the wide variety of housing needs of people working and residing on
farms by providing a flexible package of housing models to suit the local context.
Provides for: capital subsidies for the development of engineering services- where no
other funding is available, and adequate houses for farm workers and occupiers in a
variety of development scenarios. Funding available under the Programme will only be
available for the provision of basic water and sanitation services as an option of last
resort. Such services must be financed from other funding resources.
Available to: individuals via the farmer
One major factor linking housing policies is that the provision of access to basic sanitation services is
linked to delivery of the national subsidised housing delivery programme, through the Human
Settlement Development Grant (NHSS) (Tissington, 2011). This effectively means that the efforts to
address sanitation services backlogs may experience the same long delays experienced in housing
delivery, with people forced to wait to be allocated a housing subsidy (and a house) before their
access to sanitation is improved. In many cases, this delay in sanitation service delivery is linked to
the challenge of providing bulk services infrastructure to developments, like the “construction of new
water treatment and sewage processes plants, including pipelines to bring fresh and clean water to
the people (Tissington, 2011).
3.2.7 Sanitation Subsidies within the Social Housing Act (2008) and the Social
Housing Regulations of 2012
The Social Housing Regulations of 2012 give effect to the Social Housing Act (2008) (Act No. 1199 of
2008) (South Africa, 2008; DHS, 2012). The Act focuses on social housing, which is defined as the
rental or co-operative housing option for low to medium income households and requires the Minister
to make regulations prescribing any matter required to be prescribed by regulation under this Act and
a code of conduct, the investment criteria and the qualifying criteria for social housing institutions.
The Social Housing Regulations of 2012 have the following sanitation-related inclusions (DHS, 2012):
• 19. (4) The developer or the social housing institution concerned must secure access to bulk
services, such as water, electricity and sewerage, and road access to the municipal street
network, either by way of a service agreement or via written confirmation from the municipality.
• 19. (5) The availability of bulk services as well as the agreed connection points must be recorded.
• 20. (1) In order to comply with the housing criteria, the internal services must be designed and
constructed to comply with municipal requirements and must be optimal in terms of upfront capital
cost and subsequent maintenance obligations.
• 20. (2) The metering of consumption (water and electricity) must be addressed and implemented
to suit both the municipality's and the social housing institution's administrative capacities.
41
• 20. (4) The design of individual units must comply with the minimum standards laid down in the
Housing Code and Building Regulations with respect to unit size, room size and level of finish.
42
CHAPTER 4: MUNICIPAL SANITATION POLICES AND
BY-LAWS
Subsidised sanitation services at a municipal level are impacted on by a number of municipal policies;
however the most important of these is the municipality’s indigent policy and its sanitation by-laws. If
not developed in line with national policies, these policies and by-laws may add to the confusion
currently experienced by municipalities in delivery of this service or may even contradict national
sanitation services intentions. In this chapter, a review of a few municipalities’ indigent policies and
by-laws is provided.
4.1 MUNICIPAL INDIGENT POLICY WITHIN THE CONTEXT OF NATI ONAL SUBSIDISED SANITATION
POLICY
Section 97(1)(c) of the Municipal Systems Act, 2000 (Act no. 32 of 2000) states that a municipality
must provide in its debt collection and credit control policy for indigent debtors that consistent with its
rates and tariff policies and any national policy on indigents (South Africa, 2000).
In 2005 the dplg conducted a national review of municipal indigent policies, the key subsidised
sanitation-related findings included (dplg, 2005d):
• That most municipalities included in the review applied a household income principle to
determine indigents. For example, 36% of the sample municipalities indicated that they felt an
income of below R1100 was an appropriate criterion to categories indigents. A few
municipalities (16%) classified indigent households as having a household’s income of below
R1500, while 5% used a R500 per month as the indigent household level. Interestingly, at the
time, at least 20% of municipalities provided FBS to all households. This means of determining
households to qualify for indigent FBS does not follow the recommendations of the National
Framework for Municipal Indigent Policies which states that the definition of indigent explicitly
excludes a household income condition. This is partly due to the difficulties of measuring
income but, more importantly, it relates to the fact that the condition of being indigent is
experienced by the lack of these basic goods and services and their cost and the way they are
provided in different locations in the country is highly variable (dplg, undated1). However, the
Guidelines for the Implementation of Municipal Indigent Policies almost contradict the National
Framework for Municipal Indigent Policies in that it goes on to say in attempting to provide a
definition of who is an indigent in this guideline, we have examined the definitions from the FBS
sector departments; we have examined research on municipal definitions as well as many other
sources. Also conditions vary from municipality to municipality and therefore attempting to
develop a uniform single definition for who is an indigent across the country, which can be
monitored and compared, proves difficult.
43
• DWAF set the qualification for FBW at less than R800 per household
• DPLG set the indigent income threshold per household at R1100 per month (DPLG has indicated
that the threshold should be moved to R1600 per month)
• DME state that households consuming less than 150kWh per month could be regarded as poor
and be given the 50kWh per month
What characterises an indigent household is not only its income or consumption levels. A combination
of criteria makes up the definition of an indigent household that is eligible for FBS (dplg, undated2).
Hence, the Guideline recommends that criteria that municipalities should use to define indigent
households should include: South African citizenship or someone with refugee status; must be
resident in the dwelling; may reside in an informal settlement; can prove they cannot afford to pay for
services (i.e. provide UIF card; bank statements, proof of income, letter from employer, etc.); have a
combined monthly household income of no higher than R1600; can be a child headed households
and household without access to FBS infrastructure should be regarded as indigents (dplg,
undated2). This last point reinforces the Census 2011 issue of households with very high monthly
household income but lack access to basic services being classed as indigent (see Table 7)
• At least half (50%) of the sampled municipalities indicated that they did not have sufficient finance
to support their FBS initiatives (dplg, 2005), this is despite 71% of municipalities believing they
would be able to sustain their FBS initiatives.
• Of the budget which municipalities had available for FBS, only 25% of the R3.7 billion at the time
would target Free Basic Sanitation, with 56% targeting FBW and the remaining 18% targeting
Free Basic Electricity.
• 44% of the sampled municipalities indicated they were rolling out FBSan.
• 32% of municipalities indicated a preference for flush toilets from the provision of FBSan, followed
by VIPs (13%) and Septic Tanks Systems (2%).
• 46% of the sampled municipalities relied on the equitable share to provide FBSan, while 4% relied
on national grants.
• Many of the municipalities indicated a consistent definition of an indigent household across FBS
areas.
A rapid review of municipal indigent grants, shown in Table 7, indicates similar issues with these
policies. Most of these policies apply household income as the criteria for determining indigent
households; however some of these policies apply the criteria of a household not earning more than
two government pensions to be classified as indigent.
These policies also apply criteria such as ownership of a single property, being a South African citizen
and must have an account with the particular municipality. What is clear from this review is that there
are no consistent criteria applied to determine an indigents list across municipalities in South Africa.
44
This review also shows that most municipalities make FBSan available through the application of a
credit to the indigent household’s monthly municipal account. The level of this subsidy is determined
by individual municipalities, based on their available resources. Municipalities may also waiver
interest on debts of indigents and may also have a policy of not cutting off the service of an indigent
household due to non-payment of accounts.
The approaches used by municipalities to target sanitation subsidies to poor households exclude
many of the poorest households as the minimum monthly household income criteria applied to
compile the indigent register in many municipalities does not allow for multiple families living together
in a single household unit. Backyard dwellers were also excluded from qualifying for indigent
subsidies as the municipality recognized a stand as one-household-unit only.
According to Tissington et al. (2008), there is also a number of challenges encountered by
municipalities in formulating indigent policies and managing indigent registers, including:
• problems with defining the poor and the narrow definition of ‘indigent’ ;
• ineffectiveness of targeting to reach those in the most need;
• onerous and stigmatising process to apply as an indigent; and
• increased administrative burdens on municipalities.
Despite the existence of a national FBSan policy and an FBSan Implementation Strategy, many
municipalities have not implemented FBSan.
In terms of the provision of additional free water for poor households connected to waterborne
sanitation, the FBSan Implementation Strategy recommends 15 litres per person per day for flushing;
however, given that one flush of the toilet can use up to 8 litres of water, the suggested allocation for
waterborne sanitation is insufficient to meet the basic needs of large households.
45
Table 7: Summary of municipality’s indigent policies
2010 2012 2009 Und ate Undat e Undate 2012
Municipality MOGALAKWENA MUNICIPALITY:
INDIGENT POL ICY
Chief Albert Luthuli Municipality BUFFALO CITY MUNICIPALITY POLICY:
INDIGENT SUPPORT
MAFIKENG LOCAL MUNICIPALITY
INDIGENT PO LICY
MASILONYANA LOCAL MUNICIPALITY
INDIGENT POL ICY
MOGALE CITY:
INDIGENTMANAGEMENT POLICY
UMZIMKHULU MUNICIPALITY Indigent Policy
Criteria for
qualification for
Indigent
Assistan ce
A private residenti al household can
only be registered or remain registered
as indigent if:
1. The tot al gros s monthly inc ome of
the household does not exceed two
government ol d age pens ion or
disabil ity grants.
2 No membe r of member of the
househol d owns other fix ed property.
3 If the two pensioners (husband and
wife) re cieve only a pension a nd no
additi onal income.
4 The applicant must occupied the
premises and it must be in the
Mogalakwena area,
In order to quali fy as a n indigent hous ehold, a
househol d shall –
(a) have a total income less than R1.500 per
month;
(b) shall occupy a dwelling that recedes
municipal services;
(c) no member may own fixed property other
than the one i n which they resi de; and
(d) shall comply with any other terms or
conditions determined by the council from time
to time.
In a remote rural community, househol ds may
still apply and be registered as an indigent
household , although bene fits sha ll be li mited
to acce ss to fre e basic water deli vered in
water tanke rs.
Indige nt households qualify us ing the
following qualification criteria:
1 The combined income of the
househol d (gross household inc ome) does
not exceed the poverty threshold
value
2 livi ng in a prope rty owned by a member of
the househo ld
3 No member of the hous ehold may not own
any property i n addition to this property
4 The hous ehold must be a resid ent of and
have a reg istered a ccount with the
Municipality
5 South Afric an citizens or recognis ed
refugee s
6 A tenant or oc cupier can a pply for the
benefits in respect of the charges he/she is
billed
Qualifying as an indigent
1 A househol d of combined or joi nt gross
income of R1100,00 per month
2 Only reg istered re sidentia l consumers of
servi ces deli vered by counci l.
3 Househ olds who formall y apply for rel ief
4 Do not own more than one prope rty
5 Not receiving significant benefits or
regular monetary payments.
6 Owners who live on the premi ses.
In order to qualify as a n indigent:
1 the property must predominantly be for
private residential,
2 must be the regi stered own er of the
property
3 the total household income must not
exceed the joined pensions of the 2 state
pensio ners exclu ded from determining
household income:
Foster Child Grant,
Child Support Grant, and
Care Dependency Grant.
4 the applica nt must not be the
regis tered owner of more than one
property; and
5. The tota l househol d income must be
R1,100- 00 to qualif y for indigent grant.
Persons who are cla iming indi gent sta tus:
1 Must be a resident of Mogale City.
2 Must be i n posses sion of a va lid South
Africa n identity document.
3 earning an equivalent of or less than two
times the Government pension grant.
4 Must be the owne r or tenant.
5 Must ha ve an acti ve Municip al Account.
A debtor will be conside red indigen t if:
1 the total household inc ome is les s than R
2,500 per month.
2 shall not own any fixed property in addition to
the property in res pect of whic h indigent s upport
.
3 are Ci tizens of th e Republic of South Africa.
4 Res ident within UMzimkhulu Munici pality.
5 In possession of a service agreement and or
monthly stat ement wi th UMzimk hulu
Municipality.
FBSan Benefit Indige nt debtors wil l recei ve a rebate
of the amount charged on a stand of
averag e 500m2 as described by budget
on a monthly ba sis.
Only qualifying indigent households that have
been registered by the municipality in terms of
this Indi gent Polic y may receive benefits under
the Free Basic Services Policy
Each reg istered i ndigent hous ehold shal l be
subsidised for sanitation as provided
for in the a nnual budget.
Housing assistance is provided as a means
of technic al, rather tha n financi al
support.
The reci pient’s monthl y account wil l be
credited, on a monthly basis, with the
amount in accordance to the indigent level
as wa s determined by the council.
The Council s hall from time to time
determine the overall subsidy for indigent
debtors. T his amount inc ludes rates ,
water, sewerage availability, refuse
removal a nd VAT.
The indigent debtor is exempted from
payin g for s ewerag e.
The following forms of assistance could also
be given to indigent households:
1 The accounts of successful applicants
should be flagged to prevent credit control
meas ures .
2 No interest should be charged on arrears.
3 The ac crued arrears of an indig ent
househol d should be pla ced in sus pense
account a nd be
reviewed 1 2 monthly.
4 The ac count of an indi gent househol d that
appli ed for an Indige nt Grant should be
credited with an amount totaling the amount
as a pproved by the Counci l.
Indigent subs idies may be g ranted on:
rates (100 or full subsidy),
refuse removal (100 or full subsidy),
All registered indigent households will, on
approval, be designated as:
Indig ent and sha ll be cha rged the dete rmined
economi cal ta riff o r charge for a s ervice
applic able to thei r designa tion.
The indi gent househol d’s monthly ac count will
be credite d with the amount of the i ndigent
subsidy a s determined by the budget according
to their designati on.
An indig ent househol d shall qualify to receive
subsidised services on the following terms and
conditions:
46
4.2 MUNICIPAL SANITATION BY-LAWS WITH IN THE CONTEXT OF NATIONAL SUBSIDISED
SANITATION POLICY
By-laws are the legislation of municipalities, similar to the legislation made by the National and
Provincial Governments, and give effect to the subsidised sanitation policy of a municipality (DWAF,
2005). The regulations of sanitation services by municipalities and the enforcements of these cannot
be achieved without sanitation by-laws. The Constitution and the Municipal Systems Act recognise
by-laws as the only instrument through which a municipality exercises its legislative authority (DWAF,
2005). In addition the Water Services Act No. 108 of 1997 requires municipalities to proclaim water
services by-laws and the Municipal Systems Act requires municipalities to proclaim tariff by-laws and
credit control and debt collection by-laws. These by-laws are thus the legislative instrument through
which municipalities give effect to their policies and are a critical instrument in ensuring the
municipalities’ sustainability. By-laws should (DWAF, 2005):
• set out the relationship between the municipality, its service providers and consumers; and
• provide clarity in respect of the rights and responsibilities of the municipality, its service providers
and consumers.
According to DWAF (2005) municipal by-laws should include details related to subsidised services,
including:
• That a municipal council may implement subsidies,