February 2, 2004

By Frank Nxumalo

Johannesburg - Johannesburg Water had no choice but to pass on a 6 percent tariff increase to consumers, it said on Friday.

This was to counter a bulk water price increase that would be imposed on it by its supplier, Rand Water, this year.

The water utility is owned by the City of Johannesburg and serves about 520 000 people.

Jean-Marc Lotthe, the customer executive for Johannesburg Water, warned that the increase might be much higher than 6 percent because the utility was expecting a R400 million loss this financial year to March.

"Johannesburg Metro, our shareholder, might increase this tariff above that of Rand Water to counter this loss. Alternatively it could subsidise us," he said.

He added that Johannesburg Water had to supply 6 kilolitres free to every household but the R2.40 a kilolitre charged for consumption of between 7 and 10 kilolitres was not enough to cover costs.

"It is only with consumption of more than 14 kilolitres, for which we charge R4.40 a kilolitre, that we start making money. For consumption of between 16 and 20 kilolitres we charge R5.50 a kilolitre."

The move follows an announcement by Rand Water that the department of water affairs had slapped a 6.1 percent tariff increase on it for 2004 for raw water drawn from Lesotho's Katse Dam and the Vaal and Sterkfontein dams.

Mduduzi Mkhize, the general manager responsible for potable water production at Rand Water, said the department's tariff increase would have a significant impact on its cost structure because of the high volumes of water it used. 

He said the utility pumped 3.5 billion litres of high-grade water a day to 12 million people in Gauteng, as well as parts of Mpumalanga, the Free State and North West.

Raw water charges alone made up 50 percent of Rand Water's cost structure.

Mkhize said Rand Water's tariffs to its customers, which include municipalities, large industrial firms and mines, were based on the costs of purifying raw water and distributing clean water to consumers. At present the tariff was around R1.30 a kilolitre.

The Lesotho Highlands Water Project agreement required South Africa to continue importing water from Lesotho even if local dams were full, Mkhize noted.

This was because Lesotho needed to release water continuously from the Katse Dam to run the dam's turbines for electricity generation.

Gerald Dumas, the chief executive of the Sedibeng Water Board, which supplies water to about 1.5 million people in parts of the North West and Gold Fields mines in the eastern Free State, said the utility also expected tariff increases of 6.1 percent this year.

"There shouldn't be any difference because we extract water from the same source as Rand Water," he said.