Water Research Commission, Trans Caledon Water Authority 2011 strategic plans

Water and Sanitation

06 June 2011
Chairperson: Mr J De Lange (ANC)
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Meeting Summary

The Water Research Commission promoted research into water affairs. It sponsored research projects and received a levy on water supplies. It was a non-profit organisation, generating just enough income to cover its costs. Its financial position was sound. Members were satisfied with the Commission's financial status and its performance in the research field, but were perturbed over the practice of performance bonuses.

The Trans-Caledon Tunnel Authority had been established as a financing institution. It arranged finances for major projects and provided support to the Department of Water Affairs. It had education and learnership programmes. Members were briefed on the status of several major projects. The TCTA was in a sound financial position. It had a massive obligation in repaying loans but it was still rated as a going concern by the external auditors. Members were satisfied with the operational processes and financial position. However, they were astounded at the salaries being paid and the process in awarding bonuses. While they acknowledged the difficulty in attracting top practitioners in the various fields, it was felt that no employee of a parastatal organisation should be earning twice as much as the President of the country.

The presentation by the Komati Basin Water Authority was cancelled. Members were not satisfied that a junior official had been sent to address Parliament and members of the Board and senior management had not even apologised for their absence.

Meeting report

The Chairperson welcomed the delegations. The focus would be on water affairs. He hoped that all their books were in order. The Committee would deal with the acid mine drainage report in a fortnight. The programme was in place. There was a new structure created by the Minister which would like to interact with the Committee at a later stage. There was an outstanding issue with two "bad kids on the block who had to come back to the Committee to report on their turnaround strategies. These were two of the water boards that had made presentations at the previous round of meetings. Members were planning to visit Pretoria to tackle substantive issues at the end of July as part of an oversight visit. Databases were a vital issue and needed to be verified. Members might need to visit some of the environmentally sensitive developments such as that at St Lucia.

The Chairperson said that the Committee had an oversight role. Entities should be prepared to report to the Committee on their strategic plans and financial statements. The entities were accountable to Parliament and would have to explain qualified audit reports. The Department of Water Affairs (DWA) was also present.

Presentation by the Water Research Commission (WRC)
Ms Janine Adams, WRC Chairperson, introduced the delegation. She went through the mandate of the WRC. One of its important jobs was the transfer of information and technology. A number of students were being trained. It had been a good year for governance. A board charter was in place and the committees were running well. They were in compliance with the National Water Act, the Public Finances Management Act (PFMA) and National Treasury (NT) regulations. Key strategic areas were water resource management, water-linked ecosystems, water use and waste management, and water utilisation in agriculture.

Ms Adams said that researchers were paid on delivery. Water management got about 50% of funding.

Ms Rivha Kfir, WRC CEO, said that the situation was good overall even if some projects were lagging. Delivery could not always be on time due to weather and other reasons. Some roll-over was allowed. Projects were mostly of three to four years duration.

Ms Adams said that the WRC was funding about 300 projects annually. The figure for 2010/11 was 328, of which 259 were active. The number of finalised projects was 76 and 77 were newly initiated. The WRC supported 109 solicited projects. An amount of R110 million had been invested.

Ms Adams said that 520 students were supported by WRC projects, of whom 60% were from disadvantaged backgrounds. Of these, 261 were Black and fifty Indian or Coloured.

Ms Adams said that the organisation was 57% female and 56% Black.

Ms Kfir said that the staff complement was about 55. All the figures were for 2010/11, and had been submitted to the Auditor-General (AG). The figures were still unaudited The financial statements had been submitted by 31 May. The picture looked healthy.

Mr Naresh Patel, WRC CFO, said that WRC had received an unqualified report for 2009/10. There was one emphasis of matter from previous years relating to revenue that had been understated three years previously. It had since been rectified. It was not a significant sum. Under prompting from the Chairperson, he said that it was an issue of reconciliation between WRC and the Department. It had basically been an arithmetic error in the report.

Mr Patel said that there were no unfunded liabilities on the balance sheet. There had been a slight increase in investments. There had been an increase in trade and other receivables. Cash might only be received in the new financial year (FY), but was recorded as a receivable. The cash at year end was committed to research projects. Research costs had increased. There had been an increase in retirement benefits. Accruals for leave and bonuses were in line with HR policies. The financial ratio was 2.8:1.

Mr Patel said there was an accounting deficit of R2.4 million. This was mainly due to non-cash accounting entries such as depreciation. The increase in revenue was R8.6 million due to levy increases. Bonuses had been included in the budget.

Ms Kfir said that bonuses were on a performance basis. There was a pool shared by those who earned it. About 80% of the staff had been awarded bonuses.

Mr Patel said that R1.5 million had been paid out in the 2010/11 FY.

Ms Kfir said the line managers did the assessment. These were cross-referenced between the various departments.

The Chairperson asked who was receiving bonuses. He wanted a report on the category of staff receiving bonuses.

Ms Kfir had the information to hand and gave the Chairperson a written report.

Mr Patel said that WRC had a 100% owned property company, ERF706. It had an unqualified report but had a debt of R400 000 due to loan repayments. The main source of income was rentals. The overall deficit was due to non-cash items. These figures were not included in the report to the Minister. Depreciation was to fixed assets, and accounted for R1 million. There was some outstanding debt. R3 million had been paid to the post-retirement medical aid scheme. The detailed income statement was in the written report.

Ms Kfir said that figures for the previous three years had been submitted as the most recent FY documentation was still unaudited. It was in the written presentation. She gave an outline of the strategic plan. The WRC would continue to fund diverse research aimed at improving the accessibility and quality of water resources. They did not fund marine research, but would look at desalination of sea water.

Ms Kfir said that the easy part was creating knowledge but knowledge had to be relevant. There was a data-base of all projects.

The Chairperson was pleased to hear that the results of research were on the database.

Ms Kfir said that WRC provided information. Research was about studying an area. Data linked to research projects was kept at the university. The Department of Science and Technology (DST) was currently working on a research and management programme.

The Chairperson asked for names and Ms Kfir listed some of the institutions.

The Chairperson asked for a summary listing the credible data resources, and what kind of information was available. He asked the Department of Water Affairs (DWA) to provide this.

Ms Kfir said that WRC would work on the research to collect data. They were focused more on the methodology than the research itself. This would relate to effective governance. They were well regarded globally. For 2011/12 a number of factors would determine the strategy. They would be informed by the DWA and by universities. Discussions were needed with the agriculture sector. An interesting exercise was under way. They wished to be within Pula [see document], and were moving towards that standard. WRC supported a number of government outcomes. Climate change and biodiversity were being addressed.

The Chairperson asked if there was any research into best methods. About R2 million had been wasted on sub-standard pipes on a project in the Northern Cape.

Ms Kfir said that their research did include this although they would not intervene in specific projects. They had conducted research on the effectiveness of the provision of free water. Agriculture was the biggest user, and it was important to understand how this was achieved. There was a range of technology on toilets. There was a centre at the CSIR which evaluated various technologies.

Ms Kfir said that in terms of government's Outcome 9, WRC was looking at improvements to the ability of local government to deliver water services. Hygiene had been covered at a recent workshop. They worked with the South African Local Government Association (SALGA) and certain municipalities. They had tried to get funding from the Bill Gates Foundation. A lot of work was emanating from research started by WRC. Outcome 6 had to do with bulk water supply and pricing strategy.

Ms Kfir said that the research was going towards improving social conditions. She listed a number of key strategic areas. This could be used as a guideline for funding. 50% would go into water resource management and water-linked ecosystems.

Ms Kfir said that the aim of water resources management was supporting the National Water Act. There were a number of programmes in each area. A lot of modelling had been done. Future scenarios were taken into account. There were a number of fields for future research. An important consideration was sediment movement, and pollution.

Ms Kfir said that water-linked ecosystems were the second key area. There were a number of ecosystems which needed rehabilitation. Buffalo City was an example of a successful rehabilitation programme. There was a major focus on urban rehabilitation.

The CEO said that water use and waste management was another focus area. Mining was an important sector. Water supplies and waste management had to be studied at the level of local government. There was a Memorandum of Understanding with Eskom. They were about to sign an agreement with SASOL, which was doing good work on waste management and effluent control. WRC was helping to co-ordinate the research work of other bodies. Future research would be on energy rather than water. Energy costs were high in desalination projects. There was work on acid mine drainage. Bugs could be used to combat acidic build-up.

The Chairperson asked if WRC could be present when the Committee held hearing on acid mine drainage shortly.

Ms Kfir replied that the WRC was part of the inter-governmental work group. Agriculture was the major user of land and water. The WRC was considering food and timber production. Communities were contaminating water supplies. Gender was a major issue in agriculture. The sector was vulnerable to climate change. Renewable energy also needed to be studied.

Ms Kfir said that WRC used various platforms to publicise their work. There were some publications. WRC faced some challenges. The first was to excel as a dynamic hub. It was hard to have an impact as it was a lengthy process. A third challenge was addressing future research.

Ms Kfir presented a budget for the next five years. It was a non-profit organisation and so had to balance income and expenditure. The main expense was on research. The revised budget as at March 2011 was R164 million.

Mr L Greyling (ID) said that the main programme was directed at major users. He asked if there was any research scope for small-scale farmers. He asked if there was specific research as it seemed their work was of an overall nature.

Ms Kfir replied that WRC was open to discussion with small farmers. There might be existing solutions to their problems, or they could be referred to experts. They could be assisted in short-term research agreements, with some funding. This could lead to more intensive research later. There was research into the Karoo and other specific areas.

Mr G Morgan (DA) asked what the drivers were for the selection of study projects. He asked who was putting the ideas into the system, and how candidate projects were selected. He asked what the ratio of solicited to unsolicited bids was. The dominant income stream was from a levy. He asked how effectively it was being collected. The levy was placed on municipalities, but many of these were struggling to paying for the water whether supplied by DWA or water boards. He assumed that levies would produce more revenue if debt collection was better. The Minister of Science and Technology had expressed a wish to have all research entities under her Department. He asked if WRC had discussed this possibility.

Ms Kfir replied that WRC consulted with many stakeholders in selecting projects. The research manager had to understand the field well. There was a call for proposals, and WRC then waited for responses. All proposals were reviewed by experts and consolidated. Various task teams would then vet the proposals further. In some cases WRC would initiate research projects of its own choosing. With water, a multi-disciplinary approach was generally needed. They did not want to stifle initiative.

Mr Mahomed Vawda, DWA Director: Water Resource Finance and Planning, said that the DWA had received a request for a 10% increase but would probably settle on about 7%. About R100 million was transferred to WRC annually. The levy was about R0.04 per cubic metre, and was only charged on raw water supplied.

Mr Patel said that WRC received levies from three water boards directly and from the DWA.

Ms Kfir said that there were different payment schemes in force. The current arrangements allowed for a reasonable cash-flow.

Ms Kfir added that WRC had never fallen under the Department of Science and Technology (DST). There had been such an arrangement at one time, but the research bodies had eventually returned to their mother departments. WRC had always being funded through the levy rather than a parliamentary grant. There had been a decision to separate funding from research. WRC was a funding body. There was no sectoral agency. Her opinion was that it might be good to be part of a bigger umbrella. However, funding might disappear if it went into a joint fund.

The Chairperson said there was no general problem with research bodies being under one department. However, there was a question of policy. There might be the wrong perception if government was funding research directly. Instead there should be an independent body even if closely aligned to government. A political agreement might see funds slipping. Careful consideration of the Minister's proposal was needed. Water was extremely important, but moving WRC to the DST might have unintended consequences. Issues of water needed a special focus. Desalination was an attractive option. Money for research could be sourced from funds set aside for climate change research. Very good research and databases were key drivers.

Mr Helgard Muller, DWA Acting Deputy Director-General (DDG): Policy and Regulation, said that a policy change recommendation had to be communicated in writing to the DWA. There had been some examples of good research leading to a solid recommendation.

The Chairperson said that the acid mine drainage issue was a great concern. This could even lead to a new water source. Many people were looking at this as a commercial opportunity. If it was an emotive issue there would be pressure on government, and the solution might benefit commercial interests. It was a possibility. Many people had written to him with solutions. It was important to maintain a scientific perspective. He liked the transparent way in which WRC conducted its operations. The WRC needed a focal point.

Ms D Tsotetsi (ANC) wanted a breakdown on students being assisted by WRC by gender and race. She asked what criteria were used in selecting students. It was important to have a scorecard to justify bonuses.

Ms Kfir said there was a breakdown on capacity building: 58% of students were male. Research material came from the university. The quality was improving. One of the criteria in selecting students was previously disadvantaged communities. WRC did not employ them but did have some say. It was rewarding to see students becoming project leaders, but some disappeared. It was difficult to enforce bursary conditions. The National Research Foundation (NRF) provided bursaries. The WRC funded student participation on research projects.

Ms Kfir said that a scorecard methodology was in place. Staff received a partial bonuses for a “very good” assessment, and a full bonus for a standard of “excellence”.

The Chairperson could not believe that 80% of the organisation was working above their expected performance levels. He felt that this statement was a joke. He read through the list of bonuses awarded. It was an administrative organisation.

Mr S Huang (ANC) noted that development costs were R106 million, but he had not seen a breakdown. He agreed with the Chairperson's scepticism on the bonus payments. The CEO's salary was R1.6 million and the bonus was about 13%. He was not sure how the figures were calculated.

Mr Patel said there were four different categories of research. It could perhaps have been clarified in the statement. Research accounted for 70% of this cost.

Mr Huang was not satisfied with the answer.

Mr Patel said that the amount might be broken down in future statements.

Mr Huang was pleased by the honesty of the statement, but he wanted to attach names to the staff levels of the bonus recipients.

The Chairperson was concerned about the division of key strategic areas into four categories. He was worried that this was on a “hit and miss” basis. He asked why some of the research was not focussed on one or two vital areas, such as desalination and mine waste water. A percentage of the budget should be focussed on up to three fixed areas.

Mr Morgan said that there was a need to get the water-trading entity working properly. Debts were regularly written off. Good payers were effectively paying more. This was unfair. If the system worked properly it would be fair, but this was not the case. The water-collecting entities had incorrect data. Some users did not pay for various reasons, but the databases also included non-existent people. He felt that the funding should be predictable. He asked if WRC got the tariff for all water supplied, or if they did not get all that was due to them.

Mr Vawda replied that DWA ensured that all the money that was due to WRC was in fact paid to them.

Mr Morgan understood that WRC was a non-profit organisation, but was sure that they would make use of a bigger budget if it was available. Better payments would make this possible.

Mr Patel said that the tariffs were applied to audited water supply statements. He suspected that DWA was paying on estimated usage.

Mr Mbangiseni Nepfumbada, Acting Director-General: Policy and Regulations, Water Management, DWA, said that Minister had the power to raise levies on land under irrigation and to levy charges on water supplied.

The Chairperson was pleased to see Ms Adams present. WRC was the first entity to put the chairperson of the board before the Committee. It seemed that the finances were in good order. The questions of bonuses had to explored. Departments should rather state that all employees would receive a thirteenth cheque rather than performance bonuses. The country should have the most perfect government system, given the number of bonuses being paid out for excellent work. His mind was boggled. He equated the practice to “fraud”. Performance bonuses should be the exception rather than the rule. Money was being wasted. Overall, WRC was doing a good job.

Trans-Caledon Tunnel Authority (TCTA) presentation
Mr Simphiwe Kondlo, TCTA Deputy Chairman, introduced the delegation. The TCTA was a special purpose vehicle established by the DWA to raise funding for special projects. They responded to specific mandates from the DWA. TCTA was project driven and did not get a specific budget. End users would pay the costs of the projects. This was mainly commercial or bulk municipal users. True costs of water had to be reflected in project costs. Borrowing had to be reduced. TCTA implemented directives in accordance with government policy. Tariffs fell within government policy and were based on usage.

Ms Zodwa Mbele, Executive Manager: Project Finance, TCTA, said that tariffs were adjusted annually, based partially on inflation. There were annual negotiations.

Mr Kondlo said that there was a current shortfall of R2.6 billion per annum on the water infrastructure.

Mr Kondlo listed the strategic objectives. The first was delivering on the mandates provided by the Minister. The second was to facilitate social transformation. National goals had to be fulfilled. The third was to operate the business projects and processes in a cost-effective manner. They were subject to scrutiny from various parties. A fourth objective was to build knowledge and capacity. He believed this was being done in a unique manner. Finally, high calibre human capital should be available to deliver on its mandate.

The Chairperson raised the example of the Spring Road Dam where 32% had been added to the municipal water tariff. This was to be channelled to TCTA. If the users were to pay, the poor would have to carry the projects. It might be different in other departments. The only subsidy was the free water. TCTA dealt with the infrastructure. He liked the finance model used by TCTA, but this would only work in an ideal world.

Mr Kondlo said that the users should bear the true costs. Municipalities should get grants to cover the costs of free water to the indigent. There should be specific instruments to alleviate the burden on the poor.

Mr Muller said that most of the water for the eThekwini Municipality went through the Water Board. There might have been a misapprehension over the 38% increase. The municipality would carry the cost of a development. It would recover the cost from rich people who could pay and from subsidies for the poor.

Ms Mbele said that some expansion was due to increased industrial development. Client bases were stratified. When DWA did the planning, they first assessed the ability of the community to pay for services. There should be leverage on those who could afford to pay.

The Chairperson had heard that free water was not being provided to the extent of government policy.

Ms Mbele said that eThekwini could afford the project on its own balance sheet.

The Chairperson said that eThekwini would use the 32% increase rather than dig into its reserves.

Ms Mbele said that the increase would balance out over time.

Mr Vawda said that it was a 46c increase. The tariffs ranged between R10 and 12.

The Chairperson said more work was needed in this regard. Each municipality would have to be analysed. A uniform tariff across the country could be an option. People in the under-performing municipalities might suffer as a result.

Mr Muller said that a presentation could be prepared for the proposed oversight visit later in the year.

Mr James Ndlovu, CEO, TCTA, explained how some of the strategic principles were being put into effect. The interest of TCTA was getting the best price for the provision of water. Liability management was stressed throughout. The ability to find the cheapest funding had been strengthened. This had been done for the Spring Road Dam. TCTA had a programme for strategic transformation. This was being achieved through preferential procurement, enterprise development, local employment and skills development.

Mr Ndlovu said that infrastructure projects were undertaken by five major construction companies. There was a need for transformation in this sector with the emphasis being on developing female-owned and small Black owned companies. On each project two smaller contractors were being developed to the stage where they could undertake major multi-disciplinary projects. Often scarce skills had to be bought from the private sector. TCTA would like to see a pipeline of building skills. Nine bursary recipients were in their final year of study and there was an internship programme involving ten interns. TCTA wished to reach out into the deep rural communities to train young people to be the accountants and project managers that it needed.

Mr Ndlovu said that TCTA provided support to the DWA. Problems in the water supply system included the inability of customers to pay their bills and poor financial management. TCTA was contributing towards a turnaround strategy for the DWA. It was providing solutions for the acid mine drainage problem. It was giving strategic advice on the Northern Cape pipeline.

Mr Ndlovu said that TCTA had completed a risk management strategy report in February 2011. There were three elements to be considered before embarking on a project. TCTA would look at the operations of the bank which it planned to approach. Projects must be fully funded before being adopted. TCTA had to be conversant with the money market business.

Mr Johann Claassens, Executive Manager: Project Management & Implementation, TCTA, gave updates on the major TCTA projects. The first was the Lesotho Highlands Water Project (LHWP). All debts on this project would be repaid within twenty years. Phase One of the project was on course and an increased tariff would fund Phase Two. TCTA was negotiating with the Lesotho government, which wanted guarantees on sales of electricity. An agreement had been reached the previous week, and it should be signed off in late June or early July 2011.

Mr Claassens said that the Berg Water Project was fully operation and delivering water to Cape Town. TCTA was ahead of the repayment schedule. The City of Cape Town was making direct payments.

The Chairperson asked who was paying for the usage.

Mr Vawda replied that the law required DWA to pay for raw water supplies.

Ms Mbele added that the DWA needed to approve the arrangements.

Mr Claassens moved on to the Vaal River Eastern Sub-System Augmentation Project. This had been developed for Sasol and had become operational in June 2009 already. A temporary pumping station was in place and the final completion of the project was expected to be in June 2011. One of the contractors had been terminated and replaced due to poor performance. Sasol and Eskom were both satisfied with the delivery.

Mr Claassens turned his attention to the Mooi-Mgeni Transfer Scheme: Phase 2. This was a new project. Construction contracts had been awarded and work had commenced in February 2011. There had been complicated tariff negotiations. The sod-turning ceremony had been on 16 May 2011. The budget was R1.7 billion, and the target date for completion was April 2013.

Mr Claassens said that the Komati Water Supply Augmentation Project (KWSAP) was running smoothly. The contractor was on site and funding was in place. The target date for completion was October 2012.

Mr Claassens said that the Olifants River Water Resources Development Project: Phase 2 was a major project. The DWA had constructed the De Hoop dam and pipeline. There were funding constraints as the mines were reluctant to sign unconditional agreements. Funds were being secured for Phase 2 and TCTA hoped to award contracts by December 2011. The project budget was R1.9 billion. There was a 50% balance between social needs and the mining sector. National Treasury had been approached for an allocation of R1.2 billion over the following three years while the rest would be raised from TCTA's own balance sheet. There was a move to provide for the designated group which would be serviced by this project. The mines needed to sign the agreement before finances could be arranged.

Mr Claassens said that the Mokolo-Crocodile Water Augmentation Project was being developed mainly for the Medupi power station. The project was on schedule and the expected completion date was June 2013. A tender process was under way and construction contracts should be awarded in December 2011. The project budget was R2.1 billion. Institutional funding agreements had been signed.

Mr Claassens said that the Metsi Bophelo Borehole Project would benefit rural communities in several provinces. The project budget was R26 million. On site investigations had commenced and the final appointment of a service provider would happen shortly.

The final current project was the Acid Mine Drainage Project. TCTA was excited to be involved in this. A ministerial directive had been issued on 6 April 2011. The first phase would be a short term strategy and would include three actions. These were the installation of pumping infrastructure, water treatment and the release into the water system. Treatment would not make the water of potable standard but would restore the Ph balance. Heavy metals would be removed. This was not ideal but would reinstate mining processes. TCTA's involvement would be more on the infrastructure side.

Ms Halima Nazeer, CFO, TCTA, said that TCTA was still busy with its financial reports for the 2010/11 FY. She presented financial highlights from the 2009/10 instead. Each project had been ring-fenced. The cost of infrastructure was reflected as an asset until the debt was fully repaid, normally for twenty years, and was then handed over to the DWA. There was full cost recovery from end-users. A constant tariff was in place in real terms which only increased as a result of inflation. This would increase affordability over the twenty year cycle. There was a shortfall over the first few years of the repayment of a debt. There were higher funding costs at first as there was an accounting deficit. Projects would generate cash at a later stage and would break even over time.

Ms Nazeer said that 2009/10 had seen the first of TCTA's projects, the LHWP, turn into a surplus. The income as at the end of the 2009/10 FY was R2.7 billion from revenue and R3 million from other sources. TCTA had paid the Lesotho government royalties of R342 million and had other operating expenses of R392 million, mostly on staff costs and amortisation, resulting in an operating surplus of R2.0 billion. However, the cost of finance was R3.0 billion. Other financial income had been R849 million, resulting in a net project deficit for the year of R151 million. She said that TCTA had enjoyed an unqualified audit report as it had since its inception.

Ms Nazeer presented the budget for the FY 2011/12. No problems were anticipated and a major component was capital expenditure (CAPEX) at R2.4 billion. There were new mandates to be serviced. Funding costs were higher at R2.5 billion. Directly controllable expenditure was budgeted at R264 million and indirectly controlled expenditure at R763 million. The budgeted income was R3.4 billion.

Ms Nazeer said that the staff complement would be at the same level, which was lower than the approved organogram. TCTA would be moving to new premises in the current FY, near to its current offices in Centurion. She said that performance bonuses had been paid to all staff members who had a rating of one point or more above the rating of three. Bonuses had been paid to 80% of the staff. In 2009/10 this had amounted to R14 million to 160 staff members. She did not realise that the Committee wanted to see a more detailed breakdown.

Mr Nepfumbada said that the request for the detailed information had been forwarded to the company secretary.

Mr Kondlo said that the information had been prepared in the way TCTA had expected. The information could be provided.

Ms Nazeer said that the highest planned expenditure was on the KWSAP, for which R828 million had been allocated in the current FY. Running expenses of approximately R1 billion included directly and indirectly controlled expenses. There was a deficit of R78 million, which was lower the approved amount for the FY 2010/11. This was due to lower financial costs. TCTA had negotiated fixed interest rates on its loans. CAPEX was lower than the 2010/11 budget due to delays in some of the projects. TCTA needed funding to the extent of R3.5 billion.

Ms Nazeer said TCTA had been assessed as being a going concern. This had been confirmed by the external auditors. All debt should be paid on time.

Mr Huang pointed out that the salary of the CFO was over R2 million per annum, and there were incentive bonuses on top of that.

CEO said that TCTA tried to attract the top achievers within the different fields of work. Salary packages did not include provisions for medical aid and housing. There was a plan to buy the skills at 80% of the market value, and the remaining 20% would be paid if the targets were achieved. There had been a different incentive scheme prior to that.

Mr Kondlo said that one of the biggest debates was the issue of bonuses in the private sector. National Treasury should drive the investigation. It was an uncomfortable debate. There were conditions of employment entrenching the bonuses. There was continuous benchmarking. It was difficult to attract the pricey skills, especially in the banking sector.

Ms Nazeer clarified that 80% of the staff had received bonuses.

Mr P Mathebe (ANC) asked if the people receiving bonuses also received a 13th cheque. He asked how the nine students were selected. He had not heard the CEO correctly on contracts. He asked if the big firms were being compelled to work with smaller concerns.

Mr Ndlovu said that TCTA had been challenged to foster transformation. The strategy for new projects was that there would be a new venture, incorporating at least two Black companies. Their value should double by the completion of the project. This was not working so well. TCTA had a database of small companies. They were monitoring the situation closely. Lessons had been learned on the Berg project. The media were used to target students. Media had to be appropriate to reach deep rural communities. Most of the provinces were represented in the training schemes, particularly Limpopo.

Ms Nazeer said that there was no thirteenth cheque.

Ms Tsotetsi queried the R2.6 billion. She felt that a disproportional amount of money was going to female enterprises.

Ms Nazeer replied that the shortfall was in the national water structure. The figure indicated the depth of the crisis and what TCTA was doing to relieve the stress. She did not have the figures regarding Black female contractors. There was a points system which favoured female ownership. She would inform the Committee.

Mr Ndlovu said that TCTA was dealing with a women's group.

The Chairperson said that the R2.6 billion infrastructure backlog was a wish list.

Mr Morgan was interested in TCTA telling the meeting on their stand on acid mine drainage. The Minister had issued a directive in February. He asked how close the award of a tender was.

Mr Claassens replied that TCTA had been given a short term mandate to pump, treat and release the acid water drainage. A professional service provider had been appointed. The appointment was on the base of due diligence. The first step was to accumulate information. They would then move to a design phase. This would be construction or upgrading of infrastructure. The final phase would be construction. If construction started by January 2012 they should be operational by September 2012. They were looking at immediate solutions. Initial funding from DWA was R400 million. Mines would be co-funding in some cases.

Dr Huang was still not clear on the 80%. He asked how the different levels of bonuses were determined. The salary of the company secretary had almost doubled since the previous year, and he had received a considerable bonus.

Mr Mathebe asked if TCTA liaised with municipalities regarding the supply of water to local communities.

Mr Claassens said that in some cases there were joint initiatives with municipalities and other concerns.

Ms Mbele said that there were poor communities in some of the areas. The Olifants River project was designed in part to upgrade the local communities.

Mr Kondlo said that the company secretary had been appointed at a management level. However, it had been decided to upgrade his status to an executive level.

The Chairperson asked if this was the same company secretary that had forgotten to pass on the message about what was required in the presentation.

The Chairperson felt that the bonus award was less irrational than that of WCR. However, the CEO was being paid twice the salary of the President. TCTA was a department providing a service. No public servant could be paid as much as the President. The incentives were paid on who one was rather than what one did. This was the problem of the debate. The only work this institution did was to provide a service, and yet its CEO was paid twice as much as the President. He had a problem with the fact that the Department had allowed this.

Ms Tsotetsi queried an amount of R15 000 budgeted for the Diski Dance during the World Cup.

The Chairperson queried an amount of R128 000 for t-shirts. Money was being wasted.

Mr Ndlovu said that the money was spent on participation in World Cup projects.

Ms P Bhengu wanted an elaboration on housing costs.

Mr Huang commented on the high salaries. No organisational structure could allow for the massive increases awarded.

Mr J Skosana (ANC) said that more clarity was needed on the report. The situation was shocking.

Mr Claassens said that eighty houses should have been built as part of the Berg River project for the local community. TCTA had entered a transfer agreement with the Stellenbosch municipality. It was agreed that the houses would be sold and the proceeds used to build further houses. It could be seen as seed capital. TCTA had to pay R5 million for sewerage on behalf of the municipality, which had been re-reimbursed.

The Chairperson said that it was a policy issue. TCTA had been allowed to decide on its own salary and bonus structures. Other entities had been pegged to civil service remuneration structures. He had no logical or moral explanation. He asked the DWA to make a comparison of the salary structures in the different entities. There might be good reasons. There was a major political discussion needed on salaries. The legal framework governing salaries should also be given. He wanted to see a report before any future bonuses were paid.

The Chairperson was happy with the finances of TCTA. He acknowledged that it was not easy to attract top people on civil service salaries. He wanted to see the applicable NT regulations. He urged TCTA to keep up the good work. There was a fluidity in the building of infrastructure. The system was not sustainable at present.

Komati Basin Water Authority (KOBWA) presentation
The Chairperson found it totally unacceptable that only a Commissioner had been sent by the Komati Basin Water Authority. The DWA agreed with this stance. No paperwork had been sent in advance. This presentation would be heard at a later date, and there would be harsh words for the absent officials. There had been no apology. There was no respect for Parliament by an organisation that was entrusted to deal with foreign governments.

The meeting was adjourned.


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