Department of Water Affairs on 2011 Strategic Plan & Budget

Water and Sanitation

29 March 2011
Chairperson: Mr. J. De Lange (ANC)
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Meeting Summary

Morning session: The Department of Water Affairs presented their Strategic Annual Performance Plan to the Committee. Special attention was paid to the fact that the infrastructure budget for water had doubled and the Committee was particularly interested in how the Department was going about expending such funds. The Chairperson expressed grave concerns that the pattern that had emerged was the Department was simply taking old projects and giving them new names and just expanding old ones. The Department was requested to go back and think about the criteria for determining new projects and present to the Committee the priorities and the criteria for selecting them. The Chairperson reminded the Department again, that they needed to consider the developmental status of the country and build structures where there was a need by the people and the community to spawn further development, as opposed to reactively building them where the economic need was, which were in areas already established.

The Committee highlighted several issues. The first was the thinking of the Department behind the job blitz in February 2011 which saw the Department advertising 624 jobs at once and creating a mass movement of job seekers to its Head Office in Pretoria. The Committee interrogated the Department as to the thinking behind such and if the Department had the capacity to handle the surge in applicants. The Department was also asked why it had only advertised 624, and what happened to the remainder. The Department clarified that it was going through Business Processes Reengineering which was a restructuring exercise to review the Department, part of which were the posts that were currently vacant. There were over 1400 vacancies that needed to be filled. The Committee also expressed concerns about such a method not attracting the right scientific and technical skills needed for the some of the Department’s functions.
The Department was also requested to provide a list of all details of every mine covered in the report, which was part of the acid drainage problem. He would like to have the company secretary name and address. The Committee would call all these mines to come and explain their role in the problem and what they needed to do about it.

Afternoon session:
The discussion on dam rehabilitation and bulk infrastructure programmes continued. The Committee raised questions about funding, the number of dams they had, their plans going forward and the general lack of water in some provinces.

The Acting Director General then gave a presentation on the 2011 budget of Department of Water Affairs with National Treasury and the Office of the Auditor General present. The Budget presentation looked at allocations for the next three years as well as the previous year’s expenditure. The Committee asked questions of clarification about the figures and table content such as what did Efficiency Savings: CoE mean, why did they need such large funding increases, why De Hoop Dam was mentioned on three separate lines in the same table, and where the funds they wanted to roll over to next year came from in the budget and why some projects were ring-fenced by National Treasury. Figures and expenses were scrutinised to a great degree. The Committee also sought to understand what the Water Trading Entity did and why it was there in the first place.

The Committee moved on to question the Office of the Auditor General and National Treasury representatives, asking them to identify challenges or trouble spots they had identified in their dealings with the Department of Water Affairs. The risks mentioned included performance audits, determination of objects, the asset registry, revenue management, classification errors, supply chain management, construction assets, institutional arrangements, technical capacity and alteration and maintenance of existing hardware. An example of poor technical capacity was given where someone

The Department was given the opportunity to answer what they were doing to address these challenges both briefly in the meeting and as a written report, especially on construction tenders.

The Committee concluded that it was happy with the frankness and openness of the Department, its admission of omissions and with the way the Department was handling its affairs considering the challenges it faced on supply and quality. This was especially considering that the previous leadership had turned out to be crooks when it came to procurement. They looked forward to a meeting in the near future when they could come back and report on the tasks they had solved.

Meeting report

Department of Water Affairs Presentation
Mr Trevor Balzer, Acting Director General: Department of Water Affairs introduced his team. He passed on apologies from the Deputy Director General: International Relations who was ill and the Chief Financial Officer who was giving evidence at a disciplinary hearing. He delivered the summary of the Department’s Strategic Plan.

Mr Balzer said that there were quite a few acting positions including the one he was filling, due to the Business Processes Reengineering (BPR) restructuring process happening in the department as per the Minister’s instructions He said that the Department had gone through a restructuring exercise the year before and the budget would be based around that. The Department was currently operating in silos and the BPR process would look at those systems and refine them for the department to operate in an efficient way.

The Department’s legislative mandate was in three Acts: Water Act, Water Services Act and the Water Research Act. The Department had started the legislative review process around the Acts and the Department was engaged in some preparatory work. Some of work on the Water Act had been done two years before and the Department was going back to review inputs made at the consultation process. The review would start around the Water Act and the Water Services Act which was due to take place during the current year and second half of the new year. The Department would report back to the Committee to start the formal process of the review once the internal work was done.

The entities reporting to the Minister such as the Trans Caledon Tunnel Authority (TCTA), the Water Research Commission (WRC) and Water boards had their own plans and budgets even though the Department does review them. The thirteen water boards all had their own strategic plans and budgets and the Department had a separate oversight for them.

In terms of the service delivery improvement plan, the strategic plan had been submitted and had been prepared according to the format and guidelines given to the Department by National Treasury who had set a deadline for all departments to comply with the new format by 2012. The Department had managed to achieve that for the 2011/12 financial year. The service delivery improvement plan ran through key areas, supporting municipalities. Such was the subject of a joint meeting the day after between the Department and the Human Settlements Department, dealing with cross cutting issues for joint outcomes and delivery. There were also issues around the access and authorization for dams and the backlog in issuing water licences which had a desired standard of 100%. There was a dedicated team working on the backlog spearheaded by two Directors General.

On the problem of payment of invoices within 30 days, this was a challenge for the Department as there was still a lot of work to do in that area.

The Risk Management Plan had a new format. Top management would identify risk. All DDGs would then confirm if such were relevant. The Department only had to identify 10 strategic risks. The Department would monitor those through the years to make sure there were processes. There were three external risk managers who would monitor the department against the risk plan. The chair of that committee was one of external risk managers from one of the Department’s entities. 

It was important for the Department to look at the impact of the review on other legislation the Department’s mandate was linked to. There would be a need to take into account what was happening in the Municipal Act and the Municipal Financial Management Act. It was important to make sure that the Acts complement each other. The criticism from the Portfolio Committee over the years was around the difficulty in linking budget to the activities of the strategic plan. The Department had started to address that as presented from page 33 of the Strategic Plan onwards where there was a table to which the budget was linked: Strategic priorities and objectives aligned to the Estimates of National Expenditure.

The Expenditure Trends on page 23 of the Strategic Plan were listed in similar text to what was found in the Estimates of National Expenditure. In terms of infrastructure spending, the investment was not adequate to deal with backlogs. The Department needed to start but the capacity was not adequate as there were 151 projects which included the mega infrastructure project on the Olifants River.

The large infrastructure project costs ranged from 17 to 30 million. While they did not appear as a number in the budget, seven projects were being implemented at the moment which included the project for Moyengeni Phase 2 and the building of the Spring Road Dam. The Department had signed agreements two weeks before with three European banking institutions as well as with Development Bank of South Africa.

The DWA was also focused on the Groot Letabo River Water Development Project, which looked at raising the Tzaneen Dam and the Nwamitwa Dam. They had engaged with communities as well as with the Minister on this project. The Department was looking at ways that it could speed up implementation of the project to ensure that they would be able to meet some of the immediate requirements where communities were unable to access water because of infrastructure that could not be used due to there being an insufficient water supply. Water purification plants had to be reinstated in order to get existing infrastructure to operate. 

In terms of bulk water infrastructure needs, the Department had done an assessment and provided information to National Treasury about needing R110 million to deal with it. The Department had originally made reference to a need of R60 million but once the plans were refined, this figure had grown.

Page 27 – 30 of the plan listed some of the large projects in the order book and, some of them were already under implementation. Others were for implementation in the longer term. The estimated completion date was around about 2020. Those projects were listed on the Department’s inventory. Others were in the design stage. We will be going through process of looking if projects met requirements across the country.

In terms of personnel, the Department employed 4 286 people. As at September 2010, the number of vacancies stood at 1 555. Advertisements went out a month and a half back bringing this down to 11%. Another aspect the Department needed to deal with was how the strategic plan and budget linked in with outcomes of government which were on page 31 of the Plan. Outcome 4 was about decent employment inducing economic growth and fitted in with Priority One.

The Department had appointed a champion on how the department performed in terms of job creation. The Department has looked at the possibility of creating 500 jobs per annum. The Department was also actively participating in the development of the New Economic Growth Path Plan.

Discussion
Mr G Morgan (DA) asked how effective the recent job blitz was which saw the Department advertising 1000 jobs at the same time. What was the Department thinking to rush such a process? Why did the Department feel the need to rush it, taking into consideration the unintended consequences of such a rush?
 
The Chairperson added that there were always legal issues around labour issues. He shared Mr Morgan’s concern plus the added concern about employing crooks whom it would be difficult to remove later.

Dr S Kalyan (DA) asked if the Department had the capacity to receive all these applications. She asked what the current backlog was for water licensing and how it came about.

Mr Mathebe asked if the Department had the capacity to look into the applications one by one. Given, that people had to apply in person, people were queuing the whole night and that was considered a waste of resources and abuse of people. While he said well done to the Department for placing trainees within the Department, he asked about the breakdown of the trainees and how they were recruited.

Ms H Ndude (COPE) remarked that the Department had indicated they did not have a strategy to care for unlawful water use, but on the other hand, the Department was saying that a plan was being developed on controlling the problem. She was tired of hearing about plans and asked the Department when it would be developed. On page 19 of the Strategic Plan, referring to non compliance with legislation and internal control and code of conduct, she felt that the Department was talking about lack of decisive leadership and asked who was now taking such decisive leadership. She also noted there was no alignment of Strategic Objective 6.1 to the HRD. From Pg 27 to 30, she commended Dr Ruiters, for providing such information as this was always what she wanted to see and understand.

Ms P Bengu (ANC) asked about gender mainstreaming in the Department and what challenges it was facing in recruitment. She asked if the Department had contacted the department dealing with people with disabilities to recruit disabled people.

Mr Mathebe asked if the Department had capacity to deal with over-allocation of water to farmers
 
The Chairperson said that he was flabbergasted that the Department was aiming for only 85% compliance and not 100%. He asked what was happening to the other 15% and why was the Department only aiming for 98% compliance and not 100. If the present target was 38% women and 0.1% disabled, bearing in mind the vacancy rate of 15% which had to come from the same vacancies, then add the 14% target, it meant that the Department only wanted 1% of the targets filled. The Department needed to say how it was going to fix the gender and disabled recruitment requirements. The plan was illogical and needed fixing.

The Chairperson next raised vacancies and asked the Department if it had presented the Committee a document since he was Chairperson to show the breakdown of vacancies. The Department needed to present the Committee with a vacancy plan. The Chairperson also asked about the performance bonus plan that the Committee had requested previously.

Mr Adam Bokoshi, Deputy Director General: Corporate Services, said that the Department had already made a presentation. The Chairperson had made it clear that he was not satisfied with the information about who received performance bonuses and what percentage.

Mr Balzer, Acting DG for DWA, added that the information was now available on performance bonuses, but sought guidance from the Committee on how to submit such sensitive information.

The Chairperson replied that there was no law prohibiting such information being released to the Committee. He wanted to see a culture of performance where rewards were only given to those who deserved them and not given even to those who did nothing.

Mr Balzer thanked the Chairperson for guidance and sought further guidance on the matter of filling the posts as he was under pressure to fill 50% of the vacancies and did not know where to put gender and disabled people.

The Chairperson replied that it was not about that, but that the Department needed to show that 50% of 38% of the workforce were women. He urged the Acting DG to sort out the numbers in the Strategic Plan.

The Acting DG said that the number needed to have a footnote on how it was achieved. He confirmed that the target of 98% was not correct and that the Committee would present the Committee with a report on the progress of the corrections.

Mr Bokoshi in response to Mr Morgan explained that the situation on February 7 was initially as Mr Morgan had described it - that people had to apply in person, but this was then changed. The Department had advertised the change that people needed to go to different venues to apply. People visited the venues and the Department made sure there were enough people to process the applications. The Department did not expect so many people to turn up. Panels were created to short list applicants and those would in turn be interviewed. Out of the 624 posts advertised, 28 were for Mpumalanga, Head Office 202, Gauteng 22, Limpopo 133, Western Cape 34, Eastern Cape 24. It took three weeks to sort out the applications. There were a total of 1453 vacancies.

Mr Morgan asked why only 624 vacancies were advertised and not 1453.

The Acting DG replied that 624 were all the Department could handle for the 90 day compliance period. These were most important according to line management and in line with the panels that had been formed. The other 50%, would be advertised in the new financial year.

The Chairperson asked what line management engagement meant? What would the Department do about the other 50% and why back to line management.

Mr Bokoshi replied that it was the Line Management who completed the submission for the vacancies.

The Chairperson wanted clarity on why the line function needed to be engaged as the posts had already been approved. He also asked what other processes had been put in place since January to get the people employed.

Mr Balzer explained that the reason for the hiccups was also due to the process he had referred to earlier in the meeting about the BPR restructuring process which influenced the posts and how they fitted into the Strategic Plans.

The Chairperson was satisfied with the explanation.

Mr Morgan accepted the BPR explanation and asked if all the 1453 vacancies were funded in the current financial year. The Department had a good response to what happened in that some vacancies may not exist after the review. However, the Department still needed to respond to the Committee in terms of the job blitz as the Department had problems in dealing with it. He was concerned about the scientists and engineers and technicians who had a lot of choice for employment. He asked the department if it had not tried to head hunt such experts. Also, the current state of the Department with no CEO might discourage some scientists and therefore result in the juniorisation of the technical posts. The Department needed to review the efficacy of such a way of filling vacancies.

The Chairperson again expressed that he was happy with the Acting DG’s response that the Department was going through a BPR process.

Mr Balzer replied to Mr Morgan that the Department would report to the Committee about the issues he had raised. The BPR process had only just started and the Department was busy appointing the team. The Department should be able to report back to the Committee about progress. The BPR process would also include the Water Trading Entity which would also be part of a later discussion.

The Chairperson asked the Department to make a presentation to the Committee on 30 June 2011 to report on the process and its progress.

Mr Balzer remarked that the Minister had indicated that the Department needed to identify critical posts that needed to be filled and it was an ongoing process. The Department might still see some scientific and technical posts being filled.

The Chairperson requested that the Department (Mr Bogoshi) submit a report on the break down of the vacancies (624) and present an analysis of what needed to be avoided. The Performance Bonus Report needed to be given directly to the Chairperson who would then determine the nature of openness with which it would be dealt with. The Strategic Plan figures also needed to be fixed.

Mr Balzer replied to Dr Kalyan that the backlog was sitting at 1 823 outstanding licences, 878 were being processed and 253 would be finalized by the end of the week. Finalizing meant, delegating to officials who would sign them off in terms of being approved or declined.

Mr Balzer had asked two Deputy Directors General to draw up by the end of the week a revised plan to deal with the licensing backlog that could include changes to the personnel involved and reviewing the efficacy of professional service providers who were giving support. He was due to give the Minister feedback of where the Department was in a fortnight and its action in dealing with licences. The Department would still need to deal with the new applications once the backlog had been dealt with.

The Chairperson asked what kind of capacity was needed to deal with licences.

Mr Balzer replied that it would need various skills. Expertise would be needed for example in hydrology, a scientist, an engineer and a team made up from admin support to technical staff.

Mr Balzer also indicated that the allocation of water at the Loskop dam had not been completed yet.

Section 2 of the Strategic Plan on Water Sector Management
Mr Phillip Botha, Chief Director Financial Management, guided the Committee through Section 2 on Water Sector Management which was about promoting sustainable and equitable water resources management.

The Chairperson asked Mr Botha to provide a list of all details of every mine covered in the report, which was part of the acid drainage problem. He would like to have the company secretary name and address. As soon as the Department gave their report and sorted out problems then the Committee would call all the mines to come and explain their role in the problem and what they need to do about it.

The Strategic Plan showed that the programme looked at issues of resource protection, use, management and sustainable management of resources. It had a budget of about R446,9 million to be increased to R600 million. There was a jump in budget due to the acid mine drainage allocation. Priority area covered here linked to Outcome 10 which was led through the sister Department but looked at water issues. The first area of output was water for growth and development framework. In looking at revising the framework, it was important to link with the water resource strategy. There was also the amendment of water related legislation covered already in the presentation. The Climate Change Strategy Draft Framework needed to be finalized. The Department focused on adaptation issues and the institutional realignment of the framework.

The Chairperson suggested that when department finished with the draft national water resources strategy (NWRS), it needed to engage with the public through public hearings and feed into the 90 day requirement.

Mr Balzer continued the presentation with the Institution Realignment Framework, saying that the process fed into public entities reporting to Minister and the way they were structured. The Committee had raised questions about the shape and size of water boards, and management agencies. All that could feed into the NWRS. In terms of reusing and desalination strategy this was separate as identified as particular areas we need to look at, but it formed the integral part of the water mix of the country. The establishment of the Independent Economic Water Regulator was running as a separate project.

The Chairperson asked what that meant as the word ‘independent’ usually meant Government giving what it should do to others. Mr Balzer said it fulfilled the role NERSA did in Energy. The Chairperson added that when he heard the word independent, it just meant Government giving its responsibilities to another body who would make political decisions anyway.

Mr Balzer continued that most of things were linked to NWRS. In terms of Reconciliation Studies – these were studies that had been done and were reviewed from time to time as demanded in terms of feasibility plans (required in looking at the cities and how much water was used and how much was available from a systems perspective). Seven metropolitan reconciliation studies had been done in major cities. Then the aim would be to seek to do a water balance and be able to identify current usage. The Department would do an all town study.

The Chairperson said that there was need to look at this and also to look at rural ones. Mr Morgan remarked that since after the water conference there was quite a bit of comment in the media about Durban running out of water. The Committee needed to look at the seven that had just finished.

Mr Balzer said that earlier in the year, the Department did provide the Committee with a thin document talking about integrated planning for water which described the seven studies. Info was available and could be presented to the Committee at a moment’s notice which could give water balance in each of those systems. The studies had been done by steering committees taking on board requirements of stakeholders and advised of outcomes.

Mr Mbangiseni Nepfumbada, Acting Deputy Director, General Policy and Regulation, continued the presentation, cross referencing on some of things done on infrastructure. Strategic objective 2.5 related to environmental areas coordinated by the Department of Environmental Affairs. The Department looked at river systems meeting ecological water requirements which was not an easy target.

In response to the Chairperson asking what that meant in real terms, Mr Nepfumbada replied that it related to the health of the water at the source. The Department looked at the quality of water and the quantitative manner as well to ensure water was available for the reserve to be used by people and for water requirements so that the system could provide goods and services and to look at how much impact the Department was having in looking at river health programme. A report would be available on the classification.

The Chairperson remarked that the Department needed to prioritise rivers that could be affected by acid mine drainage.

Mr Morgan said that he understood that many things could be included in the plan such as – quality, ecological reserve, but he was worried about the ecological reserve information that should be up to date when reviewing the water strategy. He asked the Department how up to date the determination was of the ecological reserve referring to water remaining in the system to sustain the health of it. This was in light of large amount of water licences being applied for and issued.

Mr Morgan also said that there were no line items for quality of water dams in SA as the answer always given was that the focus was on rivers. He requested the Department to treat dams in the strategy separately from rivers.

Mr Balzer said that the reserve was not determined for all rivers of the country. The Department prioritized the ones where supply and demand was very close to the catchment or where demand exceed what catchment could deliver, especially in the catchment areas that had licence applications requiring reserve consideration.

Mr Morgan asked if something like such would likely to appear on the Strategic Plan. The Chairperson agreed that the issue about ecological reserves needed to be put in the strategic plan.

Mr Balzer said that the reconciliation studies embedded the issues being discussed and that it might be difficult to tease it out.

Mr Nepfumbad said that the Department did have monitoring programmes focusing on dams and nitrification programme looked at 70-80 of most affected dams.

The Chairperson asked why this was not in the plan. Mr Nepfumbada said that they were integrated in other issues. The Chairperson maintained that the issue was how dams were treated. Hence it needed to be in the Strategic Plan.

Mr Balzer said that the Department was looking at the totality of the system . There were eight systems and 359 large dams in the country.

The Chairperson emphasized that such information needed to be in the report.

Mr Nepfumbada continued that water consumption was the target of the key sectors looking more at mining, domestic and the issue of balancing expectation with what was available. Mr Balzer added that it formed part of the NWRS and the Department would engage with other departments on it.
 
Mr Mathebe asked if there was legislation preventing the department from acting on illegal water usage.

Mr Balzer replied that the Department looked at legal and regulatory aspects and there was a study to deal with unlawful water usage in the Vaal river system whose outcome could be applied elsewhere in the country. The Department had a team advising on how to deal with legal issues and it was an ongoing study.

The Chairperson said that the Department needed to strengthen the Compliance Monitoring and enforcement officers to become great whites instead of dolphins.

Dr Ruiters continued the presentation focusing on the Water Resources looking at the construction of the Nwamitwa Dam and the Umzimvubu River Dam. The Great Letaba River Project in terms of the Strategic Plan would be completed in 2016. The new money would used to the amount of R1.1 billion to be used in terms of the ENE (Estimates of National Expenditure).

Mr Balzer explained that the Department would do split process in dealing with environmental issues. As part of the interim and upfront issues raising dam, it included re-establishing weirs in rivers and reinstatement of existing infrastructure. Minister expected completion in the first half of 2012 financial year.

The Chairperson asked what the priorities were and what criteria was used to decide on those ones.

Dr Ruiters explained that one of the concerns was about the Olifants River Water Resource Development Project. Treasury gave 1.9 billion for the Department to connect pipelines. Such had been explained to the Minister that some of the money would be spent on the system and new money would be split into 5 project packages with the total cost of R13 billion for water distribution for certain areas.

Mr Mathebe asked about the 20 million that had been allocated the year before for the feasibility study.

Ms Thandeka Mbasa, Deputy Director General: Regions, said that the 20 million had been made available for design. R9 million was available for actual implementation. Then they would have to look at the allocation going forward.

Mr Balzer said that the 20 million had been secured but was not in the budget.

The Chairperson said he was worried about the pattern that was appearing of old projects being given new names. He asked if the criteria was based on existing projects because the Department had not decided on new projects.

Dr Ruiters said that the Umzumvubu Project was still in feasibility phase, at the end of the pipleline for implementation. Funds had been allocated for planning and feasibility studies. Raising of the Hazelmere dam costed below R17million. Another project, the Ndoni pipeline was R520 million but was not in document but in the allocations.

The Chairperson asked why it was not in strategic plan.

Mr Balzer said that corrections needed to be made that there was earmarked funds for Ndoni. The Department had to continue with dam safety.

The Chairperson had a problem in that there were no new projects that spoke to the developmental state of the country, but just extension of old ones. He asked the Department to say what criteria was being used to determine projects for the funds that have doubled. He asked for the reprioritization of what he saw in front of him.

The Chairperson said that when the Department next came to present, the seven finished reconciliation metro plans, they would need provisional input on where the water needs were in order to discuss future projects. The debate on making decisions on a developmental basis needed to start. Secondly, Treasury needed to think about municipality not prioritizing water and that Treasury could use that as a condition for giving funds to municipalities. DWA needed to talk with water affairs to make sure that whole project was funded right to the end.

Dr Ruiters said that ‘from the source to tap’ issue was the way for the Department to go.

The Chairperson told the Department that when the Committee called again, the Department needed to come and tell the committee what were the priorities and what the criteria were there for deciding on projects. See where water was needed for the feasibility study.

Afternoon session

Discussion continued
Deputy Director-General: National Water Resource Infrastructure, Dr Cornelius Ruiters, said that Treasury had given the funding when it came to dam rehabilitation, and up to the financial year of 2012-2013 they were looking to spend R1.3 billion of a total of 4 billion set aside for rehabilitation. They were busy with 56 of the projects they had identified; they had already complete 22 dam rehabilitation projects.

The Chairperson asked if these were all the Department’s dams.

Dr Ruiters confirmed that they were. However they made sure that other dams, such as those owned by municipalities were also saved.

The Chairperson wanted them to present a report on that. He would very much like to know what went on with the dams that were outside the Department purview. He would like to know how many dams there were, their details, how did they engage with these dams as a Department and what were the findings from this. He wanted to know how many dams there were.

Dr Ruiters said that the Department had 359. If one included everything, even small farm dams it wa around four thousand...

The Chairperson interrupted saying that he wanted to know about the ones that citizens got water from which were their responsibility. They could not be responsible for farm dams. So what he wanted from the report was the number of dams outside their jurisdiction, what was their role with regard to them and how were they performing that role. He asked Dr Ruiters if they were happy with the rehabilitation, were they doing well, he wondered.

Dr Ruiters stated that they were doing “excellent”.

The Chairperson said that that was a bold statement with this Committee. He wanted it to be noted that when the next dam broke, Dr Ruiters was on record to have said their rehabilitation work was excellent.

Dr Ruiters said that they had received a lot of accolades from the South African Institute for Civil Engineers in terms of the work that had been done. The De Hoop dam’s jump in costs was because the geological engineers had instructed them to dig deeper than was previously calculated, and that contributed to the cost factor.

The Chair said the point was that they had to be careful when using the word ‘excellent’. But he understood that Dr Ruiters was telling them that he was happy and had everything under control there.

Deputy Director General: Bulk Infrastructure, Ms Thandeka Mbassa, said that her responsibility was generally the regional bulk projects. There had been a need for bulk infrastructure which had previously not been provided. In many cases the lack of bulk infrastructure was keeping the municipalities from meeting the Millennium Development Goals. That was the background on how the programme was conceived. They had come up with an estimate of about R60 billion for the bulk infrastructure needs of the country. This would cover the domestic as well as economic requirements of the country.

The Chairperson said he did not understand what this was. Was this R60 billion in addition to what Dr Ruiters projects covered.

DDG Mbassa confirmed that that was correct.

Dr Ruiters said that the projects they were building did not cover the piping that transported water from treatment plants to the municipalities and ultimately to consumers, that was missing and that was what was covered under Ms Mbassa’s bulk infrastructure.

The Chairperson asked if that meant that the country was basically missing R60 billion worth of piping to bring water to the people and municipalities.

Dr Ruiters said that was correct and it could very well be more.

The Chairperson wanted them to find the problem spots that they could and should focus on. They should ask the Treasury for smaller more manageable bulk funding so that they would be more inclined to grant such and which could be got at more quickly. He asked the DG to report back on this issue as well.

Acting Director General Trevor Balzer asked if he could interject and note that they had already done this. They had a planning service and a prospective on the entire country. If one took the R60 billion and added the connecter infrastructure that was needed to connect the municipalities with consumers the figure would move up to R110 billion. Included in this would be certain rehabilitation and refurbishment which was required on waste water treatment works.

The Chairperson asked if Treasury had refused to give them the money despite it having been presented with emphasis on priority and areas of concern.

DG Balzer said that the regional bulk programme had been increased substantially. This was in response to their plans, and they would now have to implement this increase around their plans. The increase this year was R800 million and would go up to R1.7 billion next year. This was a substantial increase, but it was also a programme were much needed doing.

The Chairperson asked if there was something similar planned for how they would spend the R800 million as for what they had for infrastructure.

DDG Mbassa said that it was not in the Strategic Plan but it was in the Estimates of National Expenditure (slide 14).

The Chairperson asked if this was what they had approved for the R800 million.

DG Balzer confirmed that it was.

DDG Mbassa said that the Minister had gone to the three provinces with the biggest backlog, Kwazulu-Natal, Limpopo and the Eastern Cape, and seen that there had been some misalignment when it came to their plans. So the dams they were building were scheduled to be finished at a certain time, but there was not guaranteed budget for the bulk infrastructure which would give people access to the water stored there in the dams. There were also issues of under-utilised dams where there was water but people did not use it. And finally there were cases were people simply did not have water. There needed to be alignment so that when the dams were finished, there were pipes in place to take the water to the people. She assured the Committee that they were working on it, but the reality was that it might take some time. The Minister had asked them to re-prioritize and make room for dealing with communities that had dams but no water for instance. They needed to be able to move around funds to developmental areas that needed it or where existing infrastructure was not up to scratch.

The Chairperson asked if he understood correctly that Ms Mbassa was saying they had a plan and it was funded but they needed much more.  

DDG Mbassa replied that they had a long list of projects in different phases; some were in the feasibility stage others in the construction stage. What they had to do was reprioritize within the existing allocation.

The Chairperson said that this was very interesting and he was looking forward to them coming back and engaging the Committee on this reprioritisation.

Ms J Manganye (ANC) expressed concern and even despair at the lack of water in some of the provinces.

The Chairperson said they would keep the powder of their indignation ‘dry’ until the June meeting on the feasibility studies of the seven metros. They would see where the water needs were and engage with them. He was glad that they had this kind of discussion, because what they revealed was that apartheid patterns worked in a certain way. The parts of the country, where white people lived were fine. Of course in the townships next door there would be open sewage and such. What he wanted them to engage on, and not just the Department of Water Affairs but all departments, was the lack of development in poor black areas, the legacy of apartheid. He would wager his house that where the bulk water infrastructure was missing was in the black areas. He claimed that what was needed was a paradigm shift away from the apartheid way of thinking and into a developmental way of thinking. It was not a matter of assigning blame to anyone, he insisted. When a government for 350 years catered for the need of white people; it became ingrained in the ‘DNA’ of the nation. Even though the paradigm started to shift in 1994 the ‘DNA’ of the nation still worked in a certain way. In this Department, the institutional memory was still the apartheid way of thinking. Now 15 to 16 years down the line, the ‘DNA’ had not been shifted substantially at all, and that was the debate he wanted to have with regards to all infrastructure and regional bulk matters. In a developmental sense, resources were still sent into the white areas or continuing the older projects that had started there. He was not assigning blame, indeed if anyone should be blamed, it was him. He had been in the ANC for 17 years and if anyone should be blamed for doing things or not doing things, it was them. Politicians and government should take the blame for this. Of course, you could not ignore realities on the ground; one could not stop giving water to Johannesburg because of the apartheid past. That was where the economic growth was. They would always service the old areas and systems, but there should be new dams, infrastructure and development in areas such as the old Bantustans. It was an issue of leading on water as a Department, an issue of leadership.     

DDG Mbassa said as part of their interim plans while waiting for development to reach deprived areas they had technology such as boreholes, groundwater tapping and rain water harvesting. But there had to be an understanding that these things, as the Chairperson had mentioned, would take time to change. So due to the fact that they were working with a limited resource, water, and that there was only so much money available, there would still be people some years down the line that would not have water. As water was crucial for development, they had a responsibility to balance needs from various sectors. They did have a responsibility to supply everyone with water, but they also had a responsibility to assure economic growth. These were the challenges of the Department.

The Chairperson said that the important thing was that they would be able to tell people that the mindset had changed and that the debate in government had changed. They also could have a proper debate on the priorities of the Department. Everyone knew where the bulk need was, it was mainly where black people lived. It was time to move on to a much more interesting issue, finances. The issues they wanted to spend time on were the roll-overs, what were the new funds, where had they been allocated and the challenge areas.  

DG Balzer said that he looked forward to the debate the Chairperson had alluded to; he did believe that the Department had changed some of the ‘DNA’ in the workings of the Department. However, he agreed that there was still a lot of work to be done.

The Chairperson said that as a Director General he had to say that, but only when the people on the ground told them they had done so, had the shift truly happened.  

Medium term Budget allocation for 2011/12 to 2013/14
Acting Director General Trevor Balzer noted that the presentation was a straightforward financial overview of the Department’s previous revenue and expenditure as well as detailed descriptions of the Department’s different programmes and what funds were allocated for the following three years. In more detail the presentation contained the following points:

· Overview of the three-year medium term budget allocations. This included looking at Additional Funds allocated to Baseline, Additional funds allocated to conditional grants for Local Government (Water Services Operating Subsidy and Drought Relief Grant) and Adjustments to the baselines.

· Medium term budget allocations per programme. This included showing the budget allocation per economic classification as well as per programme (Programme 1: Administration, Programme 2: Water Sector Management, Programme 3: Water Infrastructure Management, Programme 4: Regional Implementation and Support, Programme 5: Water Sector Regulation, Programme 6: International Water Cooperation. It also mentioned variances between 2010/11 and 2011/12 and the reasons for these.

·The Bids submitted to National Treasury were noted, that is, the bids submitted versus actual amounts received, additional funds requested and received capital policy bids and additional funding received.

·Earmarked versus un-earmarked funding per programme with a breakdown of earmarked funding per programme.

(See Documents for full details on tables and numbers). 


DG Balzer mentioned that rollovers would only show up on the budget adjustment in September.

Discussion
The Chairperson asked him if there would be no roll-overs.

DG Balzer said he could not commit to any answer. He continued with the presentation saying that by close of business this term they believed 96% of the budget would have been spent. Some of the 4% leftover could become roll-overs, if they met the criteria set by Treasury.

The Chairperson wanted the DG to remind him how they dealt with the Water Trading Entity.

DG Balzer responded that the Water Trading Entity was not included in this.

The Chairperson asked about the R400 million allocation announced by Cabinet for acid mine drainage.

A discussion ensued back and forth between Department representatives in which it was determined only R225 million of the announced went to their Department, the rest was an allocation to the Department of Mineral Resources.  

The Chairperson asked if according to the slides, all the money up to 2014 had been committed.

DG Balzer answered that yes that was the case unless one reprioritized.

The Chairperson said that meant, if he understood it correctly, any new project would need new funding, or be reprioritised.

DG Balzer confirmed this.

The Chairperson said that was really sad. He asked where Ms Mbassa’s R800 million was on the budget.

DG Balzer said that the R800 million was parcelled out over three years, not one year. He went on to explain the funds allocated to conditional grants. The R450 million in Drought Relief was targeted at the Nelson Mandela Bay metropolitan area to deal with the current water shortage as a result of the drought. He described two options for this relief. One option detailed how water would be taken from the Scheepersvlakte Dam which was on the east of the Nelson Mandela Bay to the metropole. That was water from the Orange River Transfer System; it would eventually come from Lesotho via Gariep Dam, then through the transfer tunnel down the Fish River into the Sundays River. There it got picked up near Paterson at the Scheepersvlakte Dam and then piped to Nelson Mandela Bay. That was what the R450 million would cover. The second option, the desalination plant, was a future project that might be implemented. 

Mr G Morgan (DA) asked if the Drought Relief Grant on the slide could not be named better, as it turned out to be extensive Capital Projects.

DG Balzer said that this was indeed an extensive capital project and the R450 million did not cover the entire cost, they were actually R160 million short.

The Chairperson asked why this project was listed separately from their other capital projects.    

DG Balzer admitted that this was an omission and that this did also fall into the “Mega Projects” category. The Auditor General said they had wanted it separately because it was ring-fenced for a specific purpose. They did not want it mixed with other programmes so they could monitor it effectively. 

DG Balzer said that this would also be corrected.

Ms Manganye asked what area the Water Quality programme covered.

DG Balzer said this only covered the rehabilitation of the Hartbeespoort dam. Water supply issues fell under the regional bulk programme.

DDG Mbassa said that money had been allocated for regional bulk in that area, including R10 million for emergency work.

Mr J Skosana (ANC) wanted them to explain why there were so many divisions on the different phases of De Hoop Dam, and why the funding seemed to be left out some years. What would happen during these years? 

Dr Ruiters explained that this was for the completion of the dam. These were for both the dam itself and the bulk distribution. 

DG Balzer said that this had to be done sequentially; the other phases had to be done before they could start the bulk distribution.

Mr Morgan asked why the
Harties Water Quality Programme funding was two years out. He asked what was being prepared there if anything and if it there was not anything new, could he assume that the funding came from somewhere else and that this was a top off?

DG Balzer said that this was R50 million more than their baseline funding for that particular project.

The Chairperson said that he would like to see next year how much they had saved on electricity. Government needed to set the example when it came to saving on electricity and water. That needed to be the fourth line on the ‘efficiency savings’ slide next year, along with performance bonuses.

DG Balzer replied that they had saved some during the four day black out last year. He went on to explain the charts.

The Chairperson commented that one had to be a mathematician to understand these charts. He asked with regards to the 600 people they had stated they would employ, where on the slides would that be. Was that accounted for by the yearly increase in the ‘employment compensation’ line on page 10?

DG Balzer said that was correct. Treasury did not get involved in any great detail in these numbers; that was the Department’s task. They just follow the broad guidelines given by Treasury.

National Treasury Chief Director of Financial Management, Mr Philip Botha, said that they had a saving on compensation for employees and in future years as they hired that would be swallowed up as shown on the table on page 10. He did have to clarify that this was only the main account and not the Water Trading Entity.

Ms Manganye asked if the project ‘Working for Water’ was still in existence and if it was working.

DG Balzer said that it was working. If they went to page 43 of the Strategic Plan it would detail the project.

Ms Manganye said she did not think they understood her question, but they could perhaps answer it when they came before the Committee again.

DG Balzer suggested they came back to it as a different presentation as the project was quite extensive.

The Chair asked if they had any programmes in the Department that accessed finances from Public Works or did these projects mentioned have separate programmes? 

DG Balzer replied that these projects would have budgets under them even if they were nominally Public Works projects. The Department of Public Works had responsibility for overall coordination of the Expanded Public Works Programme (EPWP) projects. Various elements of these programmes sat on line function departments but they did the coordination. These were implemented within EPWP principles. That was why it appeared on their budget as a ring fenced item. 

The Chairperson said he wanted them to draft a small report for the Committee on these EPWP projects to better explain them.

DG Balzer tried to explain that the EPWP was a programme of government. The custodian of that programme in terms of monitoring was the Department of Public Works. Within line departments there might be allocations for programmes that fitted into the broader context of the EPWP and that would be why it was listed as such.

The Chairperson said he heard what he said, he understood it but he just did not know what it meant. The Chairperson addressed the Chief Financial Officer and asked about the 4% that they might not end up spending this year. Where was it?

Mr Botha replied that as his DG had said, at this point it was very difficult to say.

The Chairperson told him not to come with that bullshit here, he should just tell him where it was. He asked what areas they had not spent in, was it infrastructure, bulk, regional or staff salaries.

Mr Botha replied that a huge portion would be on the compensation for employees, the posts that they could not fill. That would be used for other purposes. There might also be a small portion on regional bulk, there were other role-players involved such as local municipalities that could hinder them in using it for say lack of agreements. On the regional bulk he thought Treasury would agree on a roll-over. Of R200 million from donors they had been given from Treasury, about R50 million was estimated not to be spent. He also believed that they would get that as roll-overs.

The Chairperson said he would like them to send a small report on what roll-overs they would be asking for as they applied to Treasury for roll-overs. Specifically he asked how much money they had not spent and how much of it they would try and roll-over. He would have liked some more information on the donor funds not being spent, but also on whom were the culprits keeping them from spending money say in the municipalities. He did however state that he thought it was good that they had been able to spend 96%.

Dr S Kalyan (DA) wanted some clarity on the donor funding and who managed it. And if they did not use the donor funding what impact could that have for accessing further donor funds for the next financial year. 

DG Balzer said that the amount on the budget that had been underspent was not donor funds.

The Chairperson said they understood that, but not spending donor funds and replacing them with government funds was unacceptable.

Mr Botha said that they still had donor funding.

The Chairperson said they needed the report and they would see why they had not spent the funds.

Mr Skosana asked if the money was all spent or committed.

Mr Botha said this underspending was from a cash basis that would be in their bank account by the end of the year.

The Chairperson said that he did not understand; if they had been committed, they had been spent.

DG Balzer answered that the reality was that invoices did come in during March that they were not able to process before the closure of the year. Also projects that had slowed down, where they had committed funds, would not have spent money as they waited for the projects to reach their target levels.

Mr P Mathebe (ANC) asked how much they had underspent, not in figures but in money.

The Chairperson said, after discussing with the representatives, that it was half a billion unspent. They wanted the exact figures for the end of May. But as of this morning there was R520 million that was not spent.

Mr Botha said that it would go down. His people had told him this morning that there was R60 million lying there ready to be spent.

DG Balzer said that he had detected a typo on the top of table 50 on page 74 in the strategic plan. The financial year listing was incorrect and would be corrected.

The Chairperson asked how much of the numbered revenue did they collect and how much did they get from Treasury.

Mr Botha explained the R2.3 billion from revenue was an augmentation from their main account.

DG Balzer said the transfer payment was not reflected here.

The Chairperson asked if the R2.3 billion was the transfer.

Dr Ruiters explained that the revenue he referred to was the transfer from Treasury into the Water Trading Account. He explained the total revenue and projected expenses were on table 52 (page 75).

The Chairperson admitted to being totally and utterly confused. He asked if the R2.3 billion to the Water Trading Entity was from Treasury. One says yes, DG says no. Then Dr Ruiters says that table 52 was what they collected. He asked what table these two were put together on. He asked what was correct and what was wrong.

DG Balzer said that table 50 as it stood was the trading revenue and expense account and operating infrastructure. He tried to explain that the deficit came because they had to factor in depreciation against the return on assets. There were also some users were they could not charge on the return of assets in terms of the water pricing strategy.

The Chairperson asked what tables 51, 52, 53 were. They were very substantial figures. What were they doing being shown on these tables.

DG Balzer admitted to being at a slight disadvantage for not having his Chief Financial Officer with him. But he should know these things as well.

The Chairperson said that his worry was that the figures he got today were completely different to the ones presented in January. Back then he had been made to believe that a large amount of money existed in the trading entity. While these charts in the strategic plan said something completely different.

DG Balzer admitted that he was embarrassed, to say the least. 

Mr Mathebe asked f they expected the Committee to adopt this.

The Chair said they should let this stand over as the DG had been very honest that he clearly did not understand what was going on here. He wanted to turn to the problem areas of the financial systems. Problems that the Treasury had with dealing with these accounts. He wanted the Auditor General to expand on this for them. He wanted the CFO and DG to respond to these issues and what was being done about them.

Mr James Aguma, Senior Manager at the Office of the Auditor General, said that there were basically four areas within the accounting system were the Department faced challenges. The first one was assets. Basically the problem here was the asset register they had was not complete. Further there were certain assets that were not on this register.

The Chairperson asked how big the problem was, and he would like them to flesh out the details of the register a little more.  

Mr Aguma said that every province had an asset register as well as the one at head office.

The Chairperson asked what kind of assets were being excluded or not registered.

Mr Aguma said that last year it had been a variety of assets, but the larger ones had been immovable assets.

The Chairperson asked where they put them if they were immovable and what were they, were they like dams, buildings or property.

Mr Aguma said that the issue was around assets that belonged to the Water Trading Entity and some that belonged to the main account. The issues last year had been that they had been unable to get clarity on where certain assets belonged on the register. They also shared the system making it hard to know what asset belonged where. The second challenge they had after the asset register was classification errors. This meant expenses could be incorrectly classified and registered.

The Chairperson asked what the risk was with that.

Mr Aguma said it would be problematic for purpose of disclosure when someone uses funds. The third one was supply chain management. The issues here was a non compliance with the law. This was especially when it came to irregular expenditure that they were unsure of where it had occurred.

The Chairperson asked if this was procurement.

Mr Aguma confirmed this. Supply chain was a complicated issue as departments were there to spend their money. But the trouble spots were areas where you needed three ‘quotations’ and they got only one, or where something should have gone to tender because it was over R500 000 but it did not go to tender. There was also the issue of variation orders were contracts were extended via mechanism of variation orders without necessarily going through the approval post Treasury had set up. The fourth challenge would be the audit of performance information. The issues they picked up here were that the Department’s strategic plan had some instances where the indicators were not specific, not measurable and not time bound. Another thing they picked up was because of the structure of the Department they would go to the regions and find business plans that did not tie into the strategic plan. The quarterly reports do not link up with the strategic plan.

The Chairperson said he would like to have a session with him where he could describe to them how these audits worked. He wanted to move on to the Water Trading Entity. He asked how many problems they had there.

Mr Wikus Janse von Rensburg, Audit Manager,said they were limited to four.

The Chairperson asked him to tell him first what the Water Trading Entity was. He had been told that under the apartheid system they had created this thing, and he was trying to understand it. He would like to know why they still had this separate entity when there seemed to be so many mix ups with it.

Mr von Rensburgsaid that the Water Trading Entity (WTE) collected revenue by way of invoicing. It was run like a business. The revenue was collected and spent on infrastructure and maintenance.

The Chairperson ask if he understood it correctly: it was a revenue collecting mechanism within government where that revenue was used by the same department again to deal with things that would usually be budgeted.

Mr von Rensburg said that was his understanding of it. The first challenge was revenue management. This was mostly around the accuracy for the invoicing of customers and to a lesser extent the validity of these invoices. It also had to do with the tracking and arrangement of backlogs and the lack of clear meter readings for customers. There were substantial difficulties with the manual information interface, meaning that customer information had to be put into the system manually. This again could lead to problems with billing where error did occur, creating backlogs. In addition to that it was a manual billing process that did invite human error. Finally there also needed to be controls and checks in place for consumer accounts. The second challenge was supply chain management. They had identified irregular expenditure. The third challenge was construction assets. One of the risks in this area was the inherent complexity of the calculations needed and the simple fact that experts needed to be present and assist when they did them. Another challenge was the revaluation which currently was done every ten years but this was proving to be too long a stretch of time. It needed to be done more regularly. The final challenge was the audit of the determined objectives. Here the main issue was the reliability of measurements used.

The Chairperson thanked Office of the Auditor General and asked if Treasury had any risk areas to add.

National Treasury Director of Public Finance, Mr Petrus Mafji, said that they had three challenges they would wish to raise. The first challenge had been the institutional arrangements. The problem was that the Department was a policymaker, implementer and a regulator. Everything in the Department of Water was in one ‘pot’.

The Chairperson said that he heard what Treasury was saying, but what he thought was that even if they did have three different entities, they would still give the same amount of money. What was the risk involved to government delivering on their promises. The fact that other departments had done it differently was not necessarily a good answer. He needed to understand the rationale of that problem.                  

DPF Mafji replied that the risk there was the capacity of these entities to implement capital projects.

The Chairperson asked if his answer was capacity. And if they split these entities up into three separate ones with the same people, would not capacity be the same problem. It was the same people doing the job.

DPF Mafji replied that if it was outside the Department it had to be operated and run like a business. And if it was operated like a business, they were obliged to have the right people and not prolong the projects.

The Chairperson asked him if he was saying that he wanted to privatise the Water Trading Entity.

Not really DPF Mafji answered.

The Chairperson asked him what he would do since he wanted to run it as a business separately.

DPF Mafji replied that if they were within the Department they could not borrow money. If they were outside they could borrow money against their assets and perhaps bring it together with the Trans Caledon Tunnel Authority (TCTA). They would not have the problem of not collecting revenue or not measuring what they were selling. It was not privatising water services; it was enhancing the delivery to the people. There would of course be a subsidy to those who could not afford it.

The Chairperson asked if what he was saying was: they did not want to build capacity in government; they wanted to privatise and give subsidies to private companies.

DPF Mafji said it was not really what he was saying. It would be a public entity not a private company.

The Chairperson said it was the same thing. What did he think had happened to SASOL and its like; they now did their own thing irrespective of the goal of the government or the need of the people of South Africa. They were making business decisions. But all right, they were now arguing so he wanted to stop this debate. What was the second challenge?

DPF Mafji said that the second risk was technical capacity.

The Chairperson said it was like what Dr Ruiters had told them about where some person, whom Dr Ruiters did not want to reveal, had signed off on the instalment of pipes that had failed immediately and needed to be replaced costing R240 million. Dr Ruiters was still going to give him that name. But that would be an example of what he was talking about where they had signed off on something that, had it been technically been done differently, they would not have seen R240 million go down the drain.

DPF Mafji said that it was actually R500 million.

The Chairperson told him to cease talking before he gave the Chair a heart attack. R500 million by that person whose name they were looking for, he lamented. But that was the kind of thing he was raising. These were decisions being taken in the Department when they lacked the necessary technical skills.

DPF Mafji confirmed that. The third challenge was related to alteration and maintenance. This was where the link with TCTA came in as well. They built the infrastructure and once it was complete it was transferred to the Department. So operating and maintaining the infrastructure lay with the Water Trading Entity which did not have the capacity for that task. The last challenge was revenue collection which had already been highlighted.

The Chairperson told the DG that he did not expect a complete exhaustion of this but some responses would be good. What he would want to hear was what was being put in place. In his view, except for his little philosophical ‘tiff’ with the Treasury, all the problems were systems related. What was being done with it.

DG Balzer said the assets matter had been addressed with Parliament's Standing Committee on Public Accounts (SCOPA). The reclassification of the immovable assets had been discovered and the change had been submitted but it had been too late for the Auditor General to change his report. This had been sorted out and he hoped to see a different outcome in the audit of this year. He could provide a list of both movable and immovable assets.

The Chairperson wanted the Auditor General to have a better relationship with the Department. That would allow them to fix mistakes before time was up. They should meet regularly. Of course the responsibility came from the CFO. It was bad management and bad politics not to have close ties with your ‘enemies’.        

DG Balzer said they had re-established the Audit Steering Committee, chaired by the CFO, which met once a fortnight. It had a split agenda looking at both the main account and the Water Trading account.

The Chairperson asked if it included the Treasury.

DG Balzer said it did not. But the point was taken.  

Mr Botha said that the ‘asset people’ had been part of the meeting and he felt they had been able to achieve many good things.

DG Balzer said that in terms of supply chain he had taken some action and hoped to see some positive results there. They had started with the establishment of a Bid Ajudication Committee, and he had established an Interim Departmental Bid Adudication Committee, chaired by Dr Ruiters. The DDGs and practitioners from supply chain managers made up that Committee. This was while they were training other officials to deal with the supply chain problem up front. He expected to be able to disband the interim Committee within a month and establish a permanent body.

The Chairperson noted when the DG had come to him in January and said that all his top management were crooks and thieves around procurement. The DG had proven this to him by finding them guilty one after the other. The Chairperson had asked that he sit down and analyse the procurement system and find the weaknesses. When top management was involved in procurement fraud, there was a much deeper problem at work. The weaknesses the former DG manipulated the system with had to be found and removed. If the system were fundamentally flawed, the new structures put in place would start to become corrupt.

DG Balzer said that this had been done and was part of the new system they were putting in place. He would provide the Committee with the report for this.

The Chairperson noted they would probably sit with him in private on that so they did not go public and tell all the criminals about the weaknesses in the procurement system. He did expect that as an urgent report though.  

The Chairperson said on the procurement issue, he wanted to see something thought through when they came back, he wanted checks and balances. He did not want to trust a bid committee because they were in a very difficult situation. There were too many ways of putting pressure on them to do things in a certain way. It had to be a clear system with no room for corruption to grow. They could not again have a Department were all the top management were crooks.

DG Balzer said, on the performance information, he believed they had tried to address the issues that had been raised about the Strategic Plan. They had taken the issues forward; it had been the first steps to assure better alignment.

The Chairperson wanted to produce a report on how they had dealt with all the problems raised, except for procurement which would be dealt with separately. 

DG Balzer said he had a list of actions they had taken in terms of the revenue accounts. They had taken action on the water use application process, which at the moment was decentralised. They were looking at ways to deal with the lack of an information automated system in the Water Registration Management System (WARMS).

The Chairperson wondered if the review would also look at the technical and financial problems or would they only look at the bigger issues of where WTE should fit in. 

DG Balzer replied they would look at the technical issues as well. One example would be to split the financial responsibility for the main account and the Water Trading account. They were reviewing applications for CFO and would have appointed a very well qualified, chartered accountant as CFO by the month of April who would run the WTE.

The Chairperson said that was a very good checks and balance. He liked the natural tension it created to have accountable, financially responsible systems. It was a good short term solution if nothing else.  

DG Balzer said he could not guarantee sitting there that the changes they had started making would make an impact going forward.

The Chairperson understood that. But it was still important that there was a movement going in the right direction. He did understand though that the people that were here were not the ones who had made the problems in the first place. These were the ones forced to fix the problems of their predecessors.

DG Balzer said that their splitting of the accounts had been done together with the Accountant General’s unit, not the unit here today. On the challenges raised by Treasury, they were mostly business risks and they would be picked up by the business process reengineering exercise. Mr Mafji’s point about the Department being a regulator, implementer and policymaker did show up as a somewhat incestuous relationship. But that needed a philosophical debate on how to deal with it and develop the Department.

The Chairperson said that the institutional arrangements of how revenue was collected had to be revisited. That did not mean corporatisation or anything else.   

DG Balzer said he had touched upon the three other issues Mr Mafji raised though he did not think he needed to go into depth about them now.

The Chairperson said that on some of them, they needed to sit down with Mr Mafji and Dr Ruiters and find out how these mistakes were made. They also had to determine what capacity was required, how many engineers were missing for example. The capacity issues were absolutely vital. They needed to find out what were the best mechanisms they could create to deal with these issues. They just could not keep making half a billion Rands worth of mistakes, they just could not. He would like them to report back on this as well.

The Chairperson did want the DG to know that he was definitely seeing a positive upward trend that he was happy with. The leadership problem of the past had been dealt with very well, better than most other departments would have managed, considering their entire top level had been crooks. He was very happy, even considering the issues they had engaged them on. They were here to hold them accountable, but they were also partners in fixing the problems they encountered. Though things would take time, they were going in the right direction.

Mr Morgan said he was cautiously optimistic concerning the issues that had been raised and he had faith in the senior staff of the Department. He was happy with the frankness and honesty they had heard today. They had challenges to deal with in the Department, challenges of governance and moral. He admitted that the burden was extreme. He wished them good luck as they took the issues forward.

The Chairperson said they would sit down and list all the areas where they had found difficulty and put it in a report and they would adopt it on 12 April. He thanked everyone for attending and taking part.

The meeting was adjourned.


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