Water Services Authorities such as the Cacadu and Siyanda District municipalities have a responsibility to ensure delivery in their area of jurisdiction, as mandated by the Municipal Water Services Act (No. 108 of 1997). However, many of these municipalities, particularly those located in rural areas, are resource poor in terms of human capacity, their ability to attract and retain technical capacity in remote areas and their financial sustainability based on people’s ability to pay for services. In addition, there is a worldwide and national scarcity of technical expertise, including that of the water sector.

Technical capacity in the form of engineers, planners and technicians is very limited in the country as available capacity is made up of professionals who are either approaching retirement or are very young, with little or no experience. Water services delivery is increasingly coming under scrutiny by the general public and the Department of Water Affairs (DWA) as the national regulator, as new projects are commissioned while existing infrastructure requires effective operation and maintenance. Since South Africa is a semi-arid country, water services require effective management and use to meet the increasing demand from the socio-economic and environmental sectors. Therefore, the concept of a shared services centre (SSC) in the context of water services delivery in the municipal sector is becoming an increasingly attractive option.

What is an SSC?
An SSC is regarded as a business unit that performs consolidated functions or services across municipalities or water services authority (WSA) boundaries. It brings together functions that are common to multiple business units under a single delivery organisation (Bergeron 2003; Schulman et al. 1999). These functions include human resources, technical operation, procurement, financial management and equipment. In the context of local government and specifically water services functions, an SSC forms a unit in which scarce skills, capacity and services that are currently unaffordable to WSAs on their own can be made available.

Skills and services such as engineering, strategic and project management, plant operators and financial and audit management can be made accessible to each of the participating WSAs, with clear key performance areas (KPAs) and key performance indicators (KPIs). Therefore, the implementation of an SSC could be seen as one possible way to assist resource-poor municipalities with delivering on their mandate.

Why should resource-poor municipalities implement an SSC?
Resource-poor municipalities often require additional resources, such as human capacity and additional funding, to improve service delivery effectively. In a water services unit, an SSC could provide such additional resources on a shared or part-time basis to support municipalities. SSCs are often established to improve services, manage costs and improve organisational efficiency (Searle 2006). The survey conducted by A.T. Kearny in 2005 revealed that 70% of senior executives have claimed success in the implementation of their shared services programmes.

Further research conducted in New Jersey BEA (2006) and Deliotte (2005) has revealed an increased demand for shared services in the public sector. The participating government institutions responded that shared services support their strategic goals and that more than half of the government agencies have implemented or are in the process of implementing an SCC (A.T. Kearny 2005). This research is largely based in the United States. However, being business-sector orientated, the operational needs and challenges faced by both the private and public sector in South Africa are similar and cannot be ignored.

Furthermore, with the increasing encouragement by various spheres of government and the need for WSAs to manage water services as a business, while faced with capacity and affordability challenges, an SSC could be regarded as a possible solution. Therefore, there is great potential for the establishment of an SSC to allow municipalities to access additional resources, which would provide various opportunities, such as cost reduction, process improvement, standardisation and consolidation of goods and services, increased efficiency and quality of service, improved system control, the creation of a service-orientated culture and better-trained employees. According to Bergeron (2003), the effective establishment and implementation of an SSC requires the consideration of various key factors and lessons learnt from other public sector organisations that support sustainability and the positive impact of shared services.

Key factors for successful implementation of an SSC
International research conducted by Bergeron (2003) has identified key factors that create the foundation for a successful SSC in the public sector. These include:
• senior management support
• strong project management skills
• strong change management.

Furthermore, local research conducted by Van der Linde et al. (2006) has revealed that another key success factor for an SSC is the adoption of a customer-driven focus, and that the success of a shared services unit is largely dependent on its ability to add value to the organisation. Conversely, South African research has identified challenges in the implementation of an SSC that are as follows:
a. A lack of up-front investment, which may cause the project to be under-funded:
• Most WSAs lack funds to contribute to the establishment of an SSC.
• WSAs lack the required information to determine the type and level of technical and financial support needed.
b. A lack of commitment to long-term change, which may result from election cycles and/or shifting political agendas:
• WSA change in both political and administration structures over a five-year period. This often contributes to poor long-term planning, where management such as municipal managers, technical or infrastructural directors, councillors and mayors (the decision makers) leave the organisation, so affecting continuity.
c. The shift from a demand-driven philosophy to a supply-driven service culture proves to be difficult to implement in a government sector:
• WSAs are often faced with a demand-driven society, where services are to be provided to consumers free of charge. However, this demand-driven philosophy has also been exacerbated by the implementation of free basic water (FBW) policies, which require review (free basic water and sanitation policies in relation to indigent communities).
• Most WSAs have not implemented, or would find it difficult to implement, business principles as political will and buy-in are not there. So there is no support for the need to drive water services as a business.
d. The implementation of a shared services business unit is in itself a daunting experience, as it requires the transformation of business and operational processes, people and technology:
• Developing political buy-in and support from participating WSAs requires a great deal of time, particularly to introduce the SSC concept to ensure a common understanding and goal.
• Additional resources, such as human capacity, management systems and leadership, require more funding, which affects time frames for implementation.

The implementation of a successful SSC is highly dependent on the above-mentioned key success factors. The Siyanda District Municipality (DM) in the Northern Cape is one WSA that has managed to overcome some of these challenges in the establishment of an SSC. Cacadu DM in the Eastern Cape is another WSA which, through its S78(3) assessment, is in the process of establishing an SSC for its Karoo Cluster WSAs, namely the Blue Crane Route, Camdeboo and Ikwezi local municipalities (LMs).

Siyanda DM SSC case study
Siyanda DM is located in Upington in the Northern Cape, characterised by remote municipalities, with communities being predominantly rural and living in semi-arid areas. Currently there are four out of six LMss participating in the Siyanda SSC programme. These are the Kgatelopele, Kheis, Mier, and Tsantsabane local municipalities, all of which have WSA status. (Siyanda DM SSC Business Plan, 07).

The establishment of the SSC resulted from constant requests to the DM by LMs to provide technical and financial support. The LMs face the common challenges of a lack of technical expertise to operate and maintain plants, limited financial resources, which makes it difficult to attract and retain appropriate technical skills and sparsely located rural communities with a low population a proportion of which is highly indigent. Kheis LM has a 70% indigent population and this contributes significantly to increasing operations and maintenance costs.

The establishment of the SSC is being managed and housed by the Siyanda DM, with the objective of providing support to local municipalities for water services operations. The Siyanda SSC is a joint initiative between the Northern Cape Local Government, the DWA, the Northern Cape Department of Housing, the Development Bank of Southern Africa (DBSA), the South African Local Government Association (SALGA), the Swedish institutions SIDA and SIPU International and the Frances Baard DM. Funding was provided upfront over a three-year period, from 2007 to 2010. The funding amount declined each year, from R1 million to R750 000 and then to R500 000, with the difference expected to be made available by the DM (Siyanda DM SSS Business Plan, 07). Key components of this study are discussed below.

Functions and opportunities
Functions: The Siyanda SSC provides the following operations and maintenance functions to the four local municipalities:
• technical staff, including engineers, plant operators (for operations and maintenance), planning and supervision
• a water quality management specialist for operations and capacity building of plant operators and on-site training.
Opportunities: The support given by the district through the SSC has provided various benefits to participating LMs, which include the following:
• The DM has managed to access financial support to coordinate and support water services delivery to LMs effectively, which is its key role.
• The DM has sourced human resources to support the LM, which include the procurement of an engineer, a technician and a water quality specialist, all of whom are available to all four LMs.
• Formal arrangements have been developed with the four LMs for operational support through service level agreements. One WSA has signed it at this stage.
• Opportunity has been provided for the DM to transfer skills to the LMs for financial management, technical services planning and human resources development.
• The DM, as the supporting municipality, has been able to build better relations and understanding of the technical needs and challenges of the LMs.

Although the Siyanda DM has benefited from establishing a shared services centre for operations and maintenance services, as outlined above, there are several challenges that have been encountered in the implementation processes.

Siyanda SSC challenges
The establishment of the Siyanda SSC experienced challenges, which can be attributed to a lack of knowledge and/or poor consideration of the identified key success factors. These challenges include the following:
• Poor co-operation and support from the LMs, which led to a lack of communication and participation. This could be linked to poor support from senior management, poor change management and a lack of commitment to long-term change, which may result from election cycles and/or shifting political agendas.
• A limited project budget owing to LMs being unable to make a contribution, because of a lack of finance. Therefore, funding is limited to what is made available by project donors and this led to the programme being under-funded.
• Non-existence of shared service payment plans for WSAs, which would identify resources and costs to be paid for and so assist the programme to sustain itself and improve ownership by participating municipalities.
• Poor planning by LM technical units on their organograms and infrastructure maintenance. This could be attributed to a lack of project management skills, which led to poor coordination and support from the DM.
• High travelling and accommodation costs, rather than actual operational and maintenance costs, owing to the widespread locations of the LMs (Kgatelopele Municipality is 300 km away from Siyanda District Municipality).
• A lack of progress reports for submission to the council, which would facilitate decision-making and financial support and improve services delivery to communities.
• A lack of programme monitoring and evaluation by the DM and LMs to assess the impact and value of the SSC.

These challenges have provided lessons to the Siyanda SSC participants from which to improve their shared services implementation process with the rest of the LMs, as well as benefiting other municipalities that may be interested in establishing an SSC.

Siyanda SSC lessons learnt
The lessons learnt from the establishment of the Siyanda SSC have provided insight into the processes involved in implementing an SSC within local government. These lessons are as follows:
• The establishment of an SSC requires more time for project/concept introduction to LMs than the initially planned 12 months. This is a result of the fact that it took more than two years to get all four LMs to understand and support the SSC, and only one LM has managed to sign the services contract with the DM. Factors that contributed to the delayed establishment of the SSC include the following:
• a lack of knowledge and understanding of the objective of establishing an SSC
• political boundaries, where other WSAs would not be comfortable to share resources with neighbouring WSAs
• a lack of understanding that the powers and functions of WSAs are not affected.

Key factors that would contribute to the effective establishment of an SSC of local government water services delivery include:
• sourcing political buy-in, including mayor and provincial officials, and council resolution that would promote decision-making by LMs
• identifying the required services, support and training needs and budgeting for them as part of the operating and maintenance budget
• developing clearly defined roles, responsibilities and expectations
• developing an effective communication system to raise and resolve issues
• establishing, implementing and monitoring service level agreements.

Cacadu DM proposed SSC
The Cacadu DM in Port Elizabeth is in the process of establishing an SSC, which has been recommended through S78(3) options assessment. An SSC is one of the options that have been identified as a potential solution for the Cacadu DM’s Karoo Cluster WSAs in supporting water services delivery and self-sufficiency going forward.

The Cacadu DM Karoo Cluster of LMs comprises Baviaans LM, Blue Crane Route LM and Ikwezi LM. They all have WSA status, but with limited capacity. This cluster of municipalities faces challenges similar to those of Siyanda DM including remote and sparsely populated municipalities, the inability to afford payment for services and to attract and retain appropriate skills, a lack of planning and strategic management skills, a lack of water quality management expertise and a lack of operational backup (J&G S78(3) Options Assessment Report 2009).

The proposed Cacadu – Karoo Cluster SSC would be a unit where water services scarce skills and capacity, currently unaffordable to each of the WSAs independently, can be made accessible to them, with clear KPAs and KPIs. The DM has an established District Information Management System (DIMS), to which all LMs have access. Therefore, centralisation of resources has already been introduced, which should add value to the proposed water services SSC for the Karoo Cluster.

Why should the Cacadu – Karoo Cluster establish an SSC?
The Cacadu – Karoo Cluster requires additional resources to improve its water services delivery. These include technical skills in the form of engineers, a water quality specialist, financial and planning management and plant operators.

These WSAs are category B3 rural, low salary scale-level municipalities, which makes it difficult for them to attract and retain appropriate skills. The municipalities are located far from one another, which leads to high operational costs owing to travelling and accommodation. They have high water resources management issues and water and wastewater quality management resources are critically required in order to ensure the delivery of water to appropriate standards.

The establishment of an SSC at Siyanda District Municipality has produced positive outcomes, where the DM has managed to achieve the following, which are some of the resources that the Cacadu DM – Karoo Cluster intends to obtain:
• sourced and coordinated funding to support LMs in their water services delivery needs
• sourced human resources to support the LMs, which include the procurement of an engineer (made available by the DBSA Siyenzamanje Project), a technician and a water quality specialist, all of whom are available to the participating WSAs
• developed formal arrangements with the four LMs for operational support through services level contracts
• developed strategic systems to transfer skills to LMs for financial management, technical services planning and human resources development
• better relations and understanding of water services needs between the DM and the participating LMs.

Cacadu DM – Karoo Cluster proposed SSC
Taking into account the identified key success factors and lessons learnt from the Siyanda DM SSC establishment, the Cacadu DM in the Eastern Cape is in the process of establishing an SSC for its Karoo-based WSAs to assist them with improving water services delivery.

This Cacadu – Karoo Cluster SSC is being proposed with the aim of attracting and sharing the cost of skills to enhance the current operational capacity on the ground. However, the success and sustainable establishment of this cluster would need to take into account the key success factors identified above, as well as lessons learnt from the establishment of the Siyanda SSC.

A five-year strategic plan is proposed, which would guide and facilitate the establishment of its shared service from year one and beyond. The plan includes mandatory areas of support, human resource and capacity development (technical, financial, and administration), facilities and support unit costs. The areas of operational support that have been identified are:

• water and wastewater quality management
• infrastructure inventory development
• revenue enhancement
• water demand management
• coordinated planning for the Karoo Cluster with respect to water services
• material standardisation and efficiency (bulk procurement)
• monitoring and evaluation of service delivery.

The proposed five-year plan has recommended a financial contribution from each participating WSA, which could be an upfront nominal fee sourced from equitable shared or grant funding into the programme. This nominal fee would increase each year based on an agreed operational contract for the first five-year period. After this, a membership fee is recommended from the participating WSAs.

A drawdown list of services would be available to participating and non-participating WSAs at different costs. An SSC has a strong potential to address the existing water services challenges within the Cacadu – Karoo Cluster as the process could be more positive and productive in relation to that of Siyanda DM. An SSC could promote a move towards the development and enhancement of sustainable water services practices by LMs.

How could an SSC be established by resource-poor municipalities?
Starting from the bottom, council ownership of the project is key to the success and sustainability of the project. Then identification of water services needs would have to be conducted by a WSA, with agreed KPIs. An agreement would need to be in place (service level agreement) in order to clarify roles, responsibilities and expectations between the two parties. Reporting, monitoring and evaluation would then be required to assess the impact of the established SSC.

Conclusion
Based on a review of international literature, there is strong evidence that an SSC could greatly improve water services delivery in resource-poor municipalities. This has been evident at Siyanda, where the four participating WSAs, namely Kgatelopele, Kheis, Mier and Tsantsabane, have benefited and improved water services delivery through the establishment of the Siyanda DM SSC.

The four participating municipalities have had challenges, including the lack of technical expertise for plant operation and maintenance, limited financial resources (which hinders the attraction of appropriate technical skills), sparsely located rural communities, which increases operations and maintenance costs, small populations with a high proportion of indigent communities unable to pay for services, and a lack of water and wastewater quality management expertise.

The Siyanda SSC has provided various resources to address the water services operational needs of the participating LMs, such as the sourcing of budget to enable LMs to deliver their water services functions, the provision of technical skills (such as an engineer and a water quality specialist) for operations and maintenance, planning and management and water quality management, as well as the acquisition of additional equipment for infrastructure repairs and maintenance.

Furthermore, the SSC has provided opportunities for all stakeholders, particularly the DM and the participating LMs, to develop formal service level agreements rather than ad hoc local municipality support, to transfer skills to the LMs on financial management, technical services planning, and human resources development issues, and has allowed the DM to build better relations and understanding of the technical needs and challenges of the LMs as the supporting municipality.

The incorporation of the identified key success factors and lessons learnt from the establishment of the Siyanda SSC (such as the need for political buy-in for effective decision-making, clearly defined roles and responsibilities for stakeholders, the implementation of service level agreements and the development of an effective communication system to address water services issues), has provided clear evidence that the establishment of a SSC is a viable, practical and recommended option for resource-poor municipalities to improve water services delivery.

Khuthalile Mahlaba, Karen van der Merwe, Cobus Oosthuizen and Robyn Tompkins of Jeffares & Green