"The aim of the report will be to increase water efficiency and leakage reduction from water supply networks and will add to the already established Green Drop and Blue Drop reports," department spokesman Linda Page said.
Page said the report, to be published next year, will provide the public with information about water use, water loss and efficiency of water used within a municipality.
She said that No Drop assessments would be undertaken across all municipalities in South Africa over the next six months and repeated every two years.
The No Drop Report will publish audited values pertaining to water use and management in each local municipality, reporting such figures as part of the Blue Drop scorecard, which measures the quality of drinking water.
"Research data from 132 (of 237 municipalities) representing 75% of the total volume of municipal water supply, show that the current level of non-revenue water is estimated at 36.7%, of which 25.4% is considered to be losses through physical leakages," Page said.
In South Africa, the 30th driest country in the world, water losses are estimated to cost the economy R7.2bn per year.
Page said the department expected to find pockets of excellence with regards to efficient water usage in the country, while special interventions to address inefficiencies would be required in other municipalities.
She admitted that technical ineptitude and ageing infrastructure were causing severe water losses.
"Inadequate maintenance and repairs of existing infrastructure, long response time to water leaks and a culture of water wastage are some of the challenges facing the SA water sector," Page said.
According to estimates in the National Treasury, South Africa's water demand will outstrip its supply by 2030.
The No Drop Report will add to the department's "War on Leaks" project, which is geared towards urging municipalities and communities to report and fix water leaks.
"If you know your facts, then you can work out where you have problems and know how to improve. This is where the No Drop Report will be helpful," said Roy Tombs, operations manager at Mpumalanga water provider Sembcorp Silulumanzi.
"It's a very clear system for determining whether you are investing in the best infrastructure and practices, and whether you have the correct people employed to deal with issues of water loss and management."
In her 2013/14 Budget Vote, Water and Environmental Affairs Minister Edna Molewa singled out behavioural patterns as the biggest cause of water wastage.
"We are losing our clean drinking water in the distribution system because of leaking pipes, dripping taps and illegal water use. These are all behavioural patterns that have a negative impact on the use of water," she said.
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