Budget Vote Hearings: Department of Water Entities

Meeting report

Water Research Commission (WRC) Presentation
Mr Dhesigen Naidoo, WRC CEO, said that, in terms of human capital development within the sector, the Commission developed such capacity through support of post-graduate students, the development of research leaders from marginalised and under-represented groups, the development of water entrepreneurs and innovators and the extension of community empowerment through participation in research and development projects.

Knowledge generated by the Commission was used for sustainable development solutions, to inform policy and decision-making, to create new products and services for economic development, to promote human capacity development within the sector and to promote the empowerment of communities.

In relation to project performance, the total number of projects for 2011/12 stood at 322. There were 258 active projects and 74 new projects. The number of finalised projects stood at 96 while the number of solicited projects stood at 101. The number of students it supported had increased from 2 379 in 2010/11 to 2 885 in 2011/12 with the majority being from previously disadvantaged groups. Although the majority of these students were from South Africa, there were also those from other countries with the Southern African Development Community (SADC) region, the rest of Africa and regions outside of Africa.

With relation to the Commission’s income for 2011/12, the bulk of this (R152 million) came through levies while the bulk of its expenditure went to research funding (R135 million).

Highlights for the 2012/13 financial year included improving water supply and sanitation as a means of closing the gap and improving sustainable services, ensuring good governance through integrated planning and ensuring that the different stakeholders within the sector understood their role in navigating towards a desired future, a focus on sustainable development through the sustainable use of rivers and the protection of ecosystems, new technologies with which to tackle acid mine drainage, the empowerment of communities through a focus on agricultural impact at the levels of both commercial and subsistence farming as well as combined off-grid solutions for water and energy.

For the 2012/13 financial year, of its projected total income of R183.5 million, levies were projected to come to R157.4 million. Of its projected total expenditure of R183.5 million, research funding was projected to come to R128.7 million. 

Discussion
A Member asked whether the students could not be utilised to address lack of capacity.

Mr Naidoo answered that as most graduate students tended to follow more high-tech careers, there were challenges around recruiting them. The Commission had, however, started devising a composite strategy to address this. It was also looking into conducting a tracer study which would help it ascertain what happened to students subsequent to them graduating.

The Chairperson asked whether students in rural areas were among those funded.

Mr Naidoo answered that these students were at institutions across all the provinces which had universities. Although it had a list of these institutions, it could not be said with certainty where these students came from originally and whether they returned to work in these areas.

The Chairperson asked why this information could not be found. This was an unsatisfactory answer, particularly as there was an urgent need to ensure greater rural reach.

Mr Naidoo replied that the Commission agreed that this was indeed an important issue. More detail around its plans in this regard could be provided at its next meeting with the Committee.

Ms P Bhengu (ANC) asked whether it also looked at working with further education and training (FET) colleges.

Mr Naidoo answered that it focused primarily on universities as it was at these institutions that research was done.

Dr S Huang (ANC) asked how communities received guidance on their participation on projects.

Mr Naidoo answered that, although there were a few modalities used, the soundest one was the one in which the project was co-developed with the recipient community.

Presentation by the Komati Basin Water Authority (KOBWA)
Mr Beason Mwaka, KOBWA Board Chairman, said that Phase 1a of the Driekoppies Dam and Phase 1b of the Maguga Dam had been completed with both dams operating as a system of capacity 582mcm.

Project loans to be managed included R488.4 million from the Development Bank of Southern Africa DBSA) (to be paid off by December 2020), R233 million from Nedcor Bank (to be paid off by September 2019) and R380 million from Hambros Merchant Bank (the bulk payment of which would be paid by October 2027).

Its executive management structure was made up of the Chief Executive Officer, the Water Resources Manager, a Corporate Support Manager, an Environmental and Development Manager as well as a Financial Manager.

In relation to its 2011/12 Performance Audit, mobile water purification plants and boreholes had been introduced particularly for water supply in rural areas and a sedimentation survey had been conducted in order to update capacity and yield of the Driekoppies Dam. In addition, a women-irrigated vegetable project had been initiated at Middelplaas in order to ensure community food security there.

In terms of its 2011/12 financial statements it had achieved an unqualified audit result for the 2010/11 financial year and had a variance of R54 000.

In relation to the annual remuneration of its executive management, the Chief Executive Officer’s remuneration stood at R1.057 million, while the Environment and Resettlement Manager’s and Corporate Support Manager’s remunerations were R858 164 and R757 189 respectively. The apparent increase in the Water Resource Manager’s remuneration from R564 923 in 2010/11 to R779 689 was as a result of the position being vacant for two months in 2010/11.

In relation to the remuneration of non-executive members, two of the Board members received no remuneration as they were South African public servants. The remuneration of Mr S Dlamini had decreased from R115 000 in 2010/11 to R58 692 in 2011/12 as a result of him having to serve as chairperson of disciplinary hearings in 2010/11.

In terms of the 2012/13 budget, for operation and administration, a zero-based budgeting methodology was applied for the year one of the budget. The following three years however had been escalated at the current consumer price index (CPI) which, at August 2011, stood at 5.3%. Cost of living adjustments for salaries were obtained and the principles as previously approved by the Board had been applied for the 2012/13 financial year, with either 4% or 7% increases. In relation to long-term loan repayments, as the capital and interest payments were fixed, the budget amount projected remained the same until 2016/17, by which time the first long-term loan would be repaid.

Of its total budget of R254.62 million for 2012/13, its cash-flow projection included R22.3 million on Administrative expenses, R9.84 for Maintenance and Operations, R222.5 million on Long-term loan repayments,

Typical budgeted expenditure for 2012/13 included maintenance on the Driekoppies Dam structure (with a projected budget vote of R450 000), maintenance on the Maguga Dam structure (with a projected budget vote of R315 000) and Maguga Dam instrumentation (with a projected budget vote of R105 000).

In relation to its key strategic areas for 2012/13, efficient water management would see it determining the operating rule to balance 2012/13 water availability and demand, the mapping of 1:50 flood-lines downstream of dams, the improvement of water gauging and telemetry systems and a sedimentation survey of the Maguga Dam. Target dates set for these ranged between December 2012 and March 2013. Resettlement, occupational safety and environment management would see the establishment of a risk and quality control management function, the completion of the Gomora Water Purification Plant and the implementation of a environmental monitoring and management system. The target dates for these ranged between August and October 2012, with monitoring and management being done on a quarterly basis.

Stakeholder information, liaison and cooperation would see the establishment of an information centre at Driekoppies as well as corporate social responsibility in the form of community water and sanitation projects. The target dates set for these were August and March 2012 respectively. The repositioning of KOBWA in a turn-around strategy would see it revise the Treaty so as to allow it to provide professional services and focus on loan restructuring. The target dates here were March 2013 and March 2012 respectively.

Discussion
Dr Huang asked why the remuneration increase for its Water Resources Manager exceeded 7%. What was the reason for the decrease in Mr S Dlamini’s remuneration? Why, given the loan restructuring plans, would certain loans only be paid off so far into the future?

Mr Mwaka answered that this only appeared to be significant increase as a result of the position having been vacant for part of 2010. Mr Dlamini’s remuneration correlated with the frequency of his attending of meetings which was limited as a result of him having to chair disciplinary hearings which were held then. It was looking at addressing the issue of loans and had put in place mechanisms that would seek to address this matter. The present Board was not involved in drawing up the agreements and had spoken to the Development Bank of Southern Africa around improving this situation. Until it had drawn up an effective restructuring of these loans, it was obliged to honour these agreements.

A Member asked how many water purification plants there were currently, where they were and how they were to be transported from place to place. What was defined as a flood-line and were there any dangers presented here? Was a sedimentation survey being conducted at the Driekoppies Dam as well?

KOBWA answered that there were currently three such plants which supplied the areas of Buffelspruit, Block B and Skoonplaas, which were all within the Komati catchment. Flood-line markers had been started.

Ms J Manganye (ANC) asked whether there was an information centre at Maguga Dam.

KOBWA answered that the information centre at Maguga was currently operational and that the centre at Driekoppies would soon be operational too.

Presentation by the Trans Caledon Tunnel Authority (TCTA)
Ms Jeanette Nhlapo, TCTA Chief Operating Officer, said that some of its products and services included bulk raw water infrastructure, Project design, Project management, Debt management, Structuring and raising project finance, Knowledge management, Risk management, Operation and maintenance, Socio-economic transformation and Tariff setting.

In terms of strategic transformation, it placed an emphasis on preferential procurement (with an emphasis on women-owned and local enterprises), enterprise development (with two contractors being developed per project to enable them to construct multi-disciplinary projects) and local employment.

Its main activities included the Lesotho Highlands Water Project, Berg Water Project, Vaal River Eastern Subsystem Augmentation Project, the Komati Water Scheme Augmentation Project, the Metsi Bophelo borehole project and Acid Mine Drainage.

Sector challenges included institutional capacity constraints at both the national and municipal levels, uncertainty over institutional reform and realignment processes, weakness in the economic pricing of water, and in collecting water revenue, growth in water demand across competing sectors, the high infrastructure backlog in water services, uncertainty over the effect of climate change and relatively low use of groundwater and increasing groundwater contamination.

In terms of new advisory services, the TCTA increasingly used its skills to provide advisory services to the Department, small water boards as well as local municipalities.

In relation to the Budget Overview, Ms Halima Nazeer, Chief Financial Officer: Trans Caledon Tunnel Authority added that its Budget Components were, at a glance, made up of Capital Expenditure (R3.644 million), Income (R3.869 million), Directly Controllable Expenditure (R264 000), Indirectly Controllable Expenditure (R853 000) and Finance Costs (R2.543 million).

In relation to budget highlights for financing costs for 2012/13 there would be increased funding requirement as project activity increased.

Discussion
Ms Manganye asked what assistance it provided the Department around Nandoni Dam.

Mr Kondlo answered that the organisation was a special-purpose vehicle and, as such, operated upon invitation by the Department. Its relationship with the Department was constantly growing as the Department involved it in an ever-increasing number of projects.

Mr J Skosana (ANC) asked for more details around the completed projects. What were its plans around assisting with funding for infrastructure projects?

Mr Kondlo answered that two projects had been completed: the Lesotho Highlands project as well as the dam project which had been undertaken to supplement water to Cape Town. It had been working closely with the Department to look at specifically areas of planning where it could potentially add value.

Dr Huang asked how it dealt with the shortfall in is Acid Mine Drainage budget.

Mr Richard Holden, Business Analyst: Acid Mine Drainage  - Trans Caledon Tunnel Authority answered that the budget of R924 million covered all three basins. Implementation on the Eastern basin could however be delayed as a result of the water level being deep.

A Member asked what its administration costs were. Who was responsible for the maintenance of completed projects?

Ms Nazeer answered that all costs incurred were fully recovered from off-takers. 

Mr Kondlo added that completed projects were handed over to the Department for the operations and maintenance phase.

Ms Nazeer added that once the debt had been repaid, the project reverted back to the Department. Operations and maintenance was taken over by the Department once construction was completed.

The Chairperson asked whether it had implemented the model which had been proposed to ensure the empowerment of emerging contractors.

Mr Kondlo answered that the model proposed by the Chief Executive Officer had been implemented. As a result of its specification that larger contractors who were awarded contracts were obliged to empower at least two emerging contractors during its execution of these projects, the TCTA was considered to be role model in this area.

Ms Nazeer added that this criterion was compulsory and that any contractor that did not meet this criterion was immediately disqualified from the tender process. This enterprise development was monitored on-site monthly to ensure this development was not solely an on-paper one. The organisation was, as such, dedicated to genuine transformation and development within the sector.

The Chairperson asked whether it monitored whether municipalities were doing what they were required to do with regards to boreholes.

Ms Nhlapo answered that its directive here was to implement the project and then withdraw. This was short-term project.

Ms Nazeer answered that service providers had been appointed to implement this and were required to provide proof of completion of these projects.

Mr Kondlo answered that more information around this could be provided to the Committee in writing.

The Committee had a lunch break.
Inkomati Catchment Management Agency (ICMA) presentation
Mr Brian Jackson, ICMA Acting Chief Executive Officer, stated that the key focus of the ICMA for the next five year strategic period would be to commence and consolidate the full implementation of its newly delegated functions whilst insuring that ICMA was continuing to perform its initial functions through a Strategic Adaptive Management Framework in line with its Catchment Management Strategy and the Government Outcomes.

With regard to water resource planning and operation, Operational Information Database and website would be installed and implemented during 2013. The purchase of river flow and rainfall data loggers to support the river operations process would be finalised, and data acquisition and maintenance plans would be commenced.

ICMA would continue with Crocodile River Operations Forum and establish Sabie River operations Forum during 2013, and finalise the Kaap River operating rules; the Sabie / Sand River system operating rules would be implemented. Developments in the White River Catchment would be commenced. The Crocodile Catchment Operations Committee registered a success when it implemented the real time Reserve Calculation Model.

ICMA had attended and supported the initiative of the Mpumalanga Tourism and Parks Authority (MTPA) to revitalise the River Health Programme as this was seen as a key requirement to enable proper monitoring of its effectiveness in operating its river systems. Funds had been set aside in the Strategic Plan to assist with bio-monitoring.

In pursuing and promoting the international developmental agenda, ICMA supported the implementation of trans-boundary water management obligations of the Komati Treaty and the Interim Inco-Maputo Agreement through involvement in the activities of the Komati Joint Operations Forum and the Progressive Realisation of the Inco-Maputo Agreement. ICMA would also continue to provide informed advice to DWA on international agreements, and had signed a partnership with Groot Salland Water Board in Netherlands in order to share knowledge. This led to a number of projects carried out during the year under review.

ICMA would continue to build knowledge sharing networks amongst stakeholders and strengthen co-operative governance responsibilities and partake in new four year Water Research Commission (WRC) project on implementing Strategic Adaptive Management for Integrated Water Resources Management.

The revenue required to achieve all of the prioritised strategic actions would require a significant increase in the current tariff structure. ICMA would be involved in tariff determinations immediately. Once the verification was completed, the billing function would be progressively transferred to the ICMA during the 5-year period.

In terms of the National Water Act, ICMA was the relevant water management institution to which water use charges were payable. ICMA would only be able to take up this function once the links to the Department of Water Affairs (DWA) Water Registration Management System (WARMS) and Billing Systems were in place and the verification process was complete in order to update the water use information on WARMS. After this, a phased-in process to transfer the billing function would commence.

Main challenges identified were around the vacant post of the CEO since 2009 where the entity was advised by the Minister not to appoint a CEO until a new Governing Body structure was in place, and wait for Usuthu to be incorporated into ICMA. It was felt that the three-year waiting period has been too long. It was also highlighted that representation on the Regional Mining and Environment Committee was another factor. Numerous applications requesting representation were written but were rejected. The Minister promised that an intervention in the matter would be discussed with the Regional Mining and Environmental Committee.

The ICMA received an unqualified audit opinion with no matters of emphasis. Various reports of the internal auditors and the Auditor-General indicated that the system of Internal Control applied by ICMA over financial risks and risk management was effective, adequate and transparent throughout the financial year. This was achieved through the risk management processes and identification of corrective actions and enhancements to risk control purposes.

(Graphs and tables were presented for budget allocation and expenditure)

Breede-Overberg Catchment Management Agency (BOCMA) Presentation
Mr Phakamani Buthelezi, BOCMA Chief Executive Officer, briefly highlighted some of the strategic challenges BOCMA was facing. These included:

⚫building legitimacy and credibility. BOCMA was working closely with irrigation boards to ensure water manageability.

⚫financial challenges. BOCMA was not a water rich area, hence the involvement of community in water conservation.

⚫ecosystem was deteriorating in the area

⚫lack of interaction between land reform and water reform.

The Draft Catchment Management Strategy which was presented to DWA in 2010 was awaiting approval during the 2012/13 period so that implementation could commence between 2013 – 2017. A study on the impact of groundwater use on surface water quality and flow in the Onrus River would be conducted, and a determination would be done on the water availability in the Breede River. 70% of water use licence applications have been processed and 100% authorisation on these applications was confirmed.

BOCMA has also started to engage other institutions in order to contribute to improved intergovernmental relations and capacity building. This has been done through marketing and communication activities:

⚫20 newsletters were distributed

⚫32 items of marketing material were developed

⚫ it was estimated that Water Week reached 6 000 people

⚫ 100% maintenance of website

⚫ Water Forums were facilitated and maintained

⚫100% Strategic International Partnerships were maintained

Water Reform was focusing on allocating resources to poor farmers and historically disadvantaged individuals. Five awareness campaigns were done. 100% support was given to the Department of Rural Development and Land Reform for water use applications. Assistance related to finance sourcing was also given to historically disadvantaged individuals and farmers. Water quality monitoring programmes for major water resources were implemented.

BOCMA had approved five budget reports. 80% of the revenue had been collected. Tariffs were also reviewed. Five annual performance management evaluations were completed for each staff member. A conducive environment had been created to retain skilled personnel. 100% of vacant posts had been filled with skilled personnel according to employment equity.

⚫BOCMA had identified a number of risks:

⚫insufficient water storage capacity. A plan was to sensitise water users.

⚫failure to make resources available due to current backlog of applications. Attempts were being made to up-skill staff.

⚫inconsistent understanding of the national policy

⚫lack of integration of land and water reform. Efforts were being made to establish and maintain intergovernmental relations.

⚫ineffective revenue collection due to uncertainty of water users and lack of capacity to verify existing accounts. Transfer of the billing system from DWA to BOCMA was seen as the solution.

⚫lack of continuity and insufficient skills at Board level. Training was currently being provided to Board Members.

⚫insufficient marketing and communication plan. Marketing and communication strategies would be developed.

For three consecutive years BOCMA has achieved an unqualified audit opinion. Surplus was standing at R4.3 million. Surplus was sitting at R17 million.

(Graphs and tables were presented for budget allocation and expenditure.)

Discussion
ICMA Presentation
Mr J Skosana (ANC) remarked he was struggling to understand the core business of ICMA because some of the things the entity was doing were done by DWA. He stated he did not understand what the funding ICMA was getting from DWA was meant for; how the organisation was assisting the community; and why the remuneration of Board Members jumped from R200 000 to R800 000.

Mr Jackson, on the issue of the core business, explained that legislation mandated ICMA to be a water resource agency to ensure that water was allocated fairly and equitably to rivers and users; prevent and remedy effects of water resource pollution; transfer water rights on a temporary basis; promote community participation in water resource management; and to conserve and manage water resources. All this information was put into a plan for water allocation.

With regard to the budget from DWA, he stated that DWA was collecting revenue on behalf of ICMA and a certain portion of that revenue was transferred to ICMA to execute its duties.

About community benefits, he elaborated that ICMA was also advising local government on water development services. The institution participation division within ICMA was responsible for finding stakeholders and engage with them on matters of equitable distribution of water.

Regarding the remuneration of Board Members, he elaborated that the Minister decided to increase the number of members from 14 to 18. That was the reason for the increase.

Mr G Morgan (DA) wanted to know what the trends were in ICMA regarding fresh water quality, and what the capacity of ICMA was in terms of compliance and enforcement.

To which Mr Jackson expatiated they were picking up decreasing trends and that was a cause for concern. It was not a big issue compared to other CMAs. The situation was that there was a possibility that it could not get worse. That was why surveys were done to look at improving monitoring sites.

On compliance matters, he explained that it was executed on water abstraction only. The staff was tripled in the last 12 months to handle issues around compliance and enforcement. Already, ICMA received 12 cases of which 80% of them were resolved. Other cases were still on-going.

BOCMA Presentation
Ms M Wenger (DA) asked what plans were in place to address matters identified in risk management such as lack of corporation from local government; water storage; and backlogs on employing people.

To which Mr Buthelezi elaborated that BOCMA was working well with SALGA and that an agreement was in place to improve water management in the area. Municipalities were engaged on capacity matters on whether to upgrade or not on certain issues around water management so that municipalities could engage communities.

Regarding water storage, he said BOCMA was located in a water rainfall area. The rainy winter season was good for the organisation and that meant water would be stored for summer.

On the issue of backlogs, he noted the problem lay around the issue of licences. Licence applications were done by BOCMA because DWA did not have personnel skilled in licensing in the area where BOCMA was located. That was why BOCMA was doing the licensing by itself.

Mr Morgan wanted to find out about trends in fresh water quality in the BOCMA area.

Mr Buthelezi said results on all new information were published. Hotspots and sources of pollution spoiling water were monitored heavily.

The Acting-Chairperson enquired why the staff budget was standing at 54%.

Mr Buthelezi emphasised that there was a 75% increase on expenditure and operational expenses. This was because BOCMA was a growing company and lots of people have been employed and new furniture bought. Already, the management was trying to stabilise staff appointment in BOCMA.

The meeting was adjourned.