Department of Water Affairs on their Annual Report and Audited Financial Statements 2011/12

Water and Sanitation

11 October 2012
Chairperson: Mr J De Lange (ANC)
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Meeting Summary

The Committee met with the Department of Water and the Minister for Water and Environmental Affairs, to be briefed on the performance of the entities.

The first briefing looked at the performance of the Trans-Caledon Tunnel Authority (TCTA) for the 2011/12 financial year. The briefing covered the primary projects that TCTA funded and implemented, performance and job creation. The annual audit of the Water Research Commission (WRC) was also looked at.

The second briefing looked at the performance of the Inkomati (ICMA) and Breede-Overberg (BOCMA) Catchment Management Agencies during 201/12.

The Members raised concerns around TCTA bonuses, disabled employees, updates on Acid Mine Drainage, assets and institutional arrangements. Members questioned the value of the WRC research had whether it had practical outcomes. Members queried the Catchment Management Agencies about pollution, enforcement capabilities and governance structures. Generally, the Committee was pleased by the briefing and the improvement and progress made with the entities.

Meeting report

The Chairperson pointed out that the budget for the Department had already been passed and noted there were a number of appeals to Parliament to change the way this budget process was carried out. The entities themselves would be called to present before the Committee before the end of the year. The Committee was just looking for a short synopsis on the progress of the entities.

The Chairperson welcomed Minister Edna Molewa and said the Committee always accommodated her visits.

Mr Maxwell
Sirenya, DWA Director-General, noted which entities were present and introduced the delegates.

DWA report on Trans Caledon Tunnel Authority & Water Research Commission performance 2011/12
Ms Thoko Sigwaza, DWA Chief Director for Institutional Oversight, highlighted which primary projects the TCTA funded and implemented. These included the Lesotho Highlands Water Project (LHWP) – the South Africa portion of the Delivery Tunnel North, the Berg Water Project (BWP), the Vaal River Eastern Subsystem Augmentation Project (VRESAP), the Mooi-Mgeni Transfer Scheme Phase Two (MMTS2), the Komati Water Scheme Augmentation Project (KWSAP), the Olifants River Water Resource Development Project Phase Two (ORWRDP2), the Mokolo-Crocodile River Water Augmentation Project Phase One (MCWAP1), the Metsi Bophelo Borehole Project (MBBP) and Acid Mine Drainage (AMD) - pump station and treatment plant.

Ms Sigwaza then looked at the performance of the TCTA. She noted that when looking at the deficit for 2011/12, the audited results for 2010/11 recorded a R24 million surplus and this had been restated to a deficit of R284 million in the current financial statements. The overall reason for the restatement was a change in accounting policies applied retrospectively to 31 March 2011, in accordance with the International Accounting Standards Presentation and Disclosure, related to construction assets previously recognised as property, plant and equipment and intangible assets. In terms of borrowing rates and/or credit rating, the TCTA had gained and maintained market credibility that enabled it to access off- budget funding for projects at excellent rates. The TCTA obtained a “clean” audit report for its 2011/12 annual financial statements.

Looking the TCTA bonuses, she noted the figures in the hard copy were old (2010/11) while ones in presentation were correct.

The Chairperson asked who agreed to or approved the bonuses.

Ms Sigwaza said first the board approved the bonuses which were then signed off by the Department through the business plan. She added the Minister was not happy about this process and was waiting on the Presidential Review Committee (PRC) on Salaries before starting a review process.

Minister Edna Molewa said there was a process of alignment with salaries and bonuses for state entities and enterprises. She said the process was being looked at by government through the PRC for a streamlined process.

The Chairperson asked if the lower-level staff also received bonuses.

Ms Sigwaza said they did but they did not focus on them in the presentation information.

The Chairperson was concerned about a warped picture forming where the top-level employees received bonuses and were paid large sums of money where the employees at the bottom, where the need was greater, did not receive. He wanted another section added that gave a broader picture showing what the lower category employees received.

TCTA job creation was briefly looked at.

Ms Sigwaza concluded this part of the presentation by looking at the summary and conclusions. She noted the TCTA played an increasingly strategic role in the sustainable development and use of raw water resources. Despite the current challenges in its operating macro-economic environment and its multi-project arrangements, the TCTA had reported satisfactory results for the 2011/12 financial year by achieving the majority of its contracted deliverables. She added the overall relationship between TCTA and DWA was going well.

Mr J Skosana (ANC) asked how many disabled employees were employed by the TCTA in terms of a percentage.

Ms C Zikalala (IFP) wanted an update as to the progress the TCTA was making on the issue of AMD.

The Chairperson agreed this update was important.

Mr G Morgan (DA) congratulated the TCTA on their audit report and thanked the delegates who had organised a successful visit to the
Lesotho Highlands Water Project (LHWP) for the Committee. He questioned to what extent the TCTA had to have its own assets on the balance sheet to access loan capital.

The Chairperson wanted to know if there were any matters of emphasis in the AG’s report.

Ms Nthabiseng Fundakubi, DWA Chief Financial Officer, noted that R300 million was made available for dealing with the issue of AMD. A directive was issued to the TCTA to go ahead with the awarding of the contract.

The Chairperson questioned the R2 billion budget that was projected and whether the Department had engaged with Treasury for this.

Minister Molewa noted the inter-ministerial committee and technical committee looked at the total funding for AMD and not just the one project that AMD dealt with. She also noted there were different required budgets for short and long-term solutions. She noted that at that time, the funding was not decided on. She emphasised that these were not complete budgets.

Mr Helgard Muller, Acting Deputy DG, said the percentage of disabled employees was not available in the Annual Report. On the issue of assets, he said it would be discussed in the institutional realignment process of the Department. He added that TCTA may need assets in the future to grow, otherwise growth would be limited so this issue was valid and would be taken forward.

Minister Molewa added that the agency model was the preferred option and this was also reflected in the National Development Plan. She said this area was investigated and the Department was awaiting a briefing on this. It was important to map out this process to avoid duplication of functions and services.

The Chairperson said that thought needed to be given to capacity to lever money. An agency was a good idea as it was not too closely aligned to the Department. The credit rating would need to be thought of.

Minister Molewa noted the thought was not to do away with TCTA but rather to have an agency that had assets of its own without relying on the Department. It was important that water as a public good did not turn into a money making commodity.

The Chairperson said a debate with Treasury was needed and noted this was the kind of situation seen in Spring Grove. There was a specific model when constructing dams for social needs.

Mr Sirenya said there were tensions as seen in the case of Spring Grove. The perception was created that TCTA was very expensive and the authenticity of these claims needed to be investigated.

Mr Muller said they were revising the pricing strategy.

The Chairperson agreed and said municipalities could not be deciding their own tariffs. The matter needed to be looked at in terms of infrastructure which could result in a huge institutional and Departmental overhaul.

Minister Molewa said the Department had started looking at this strategy.

Ms Zikalala said her question was not answered.

The Chairperson commented that the Minister gave a detailed answer.

The Chairperson said TCTA should keep up the good work but he was not happy with the bonuses and felt it was wrong. He felt they had inherited a bad system. He felt it was best to pay individuals a good salary and not award them with bonuses for doing their job.

Water Research Commission
Ms Sigwaza looked at the revenue for 2011/12 noting that during the year under review, the WRC continued to leverage levy income by striving to obtain funds from other sources to support water research. The WRC had obtained a “clean” audit report for its annual financial statements for 2011/12. She pointed out the WRC did not always prepare financial statements according to the PFMA.

The Chairperson said the AG noted the WRC was one entity that went backwards in terms of its finances and he wanted to know what was being done about this.

Ms Sigwaza said the board was looking at an action plan. Looking at the research portfolio, she said during the year under review, the WRC managed 322 research projects at various stages of project life cycle, of which about 79% (259 projects) were active projects and in addition, 133 reports were published. Students were also being trained around research and new appointments were made during the year.

In conclusion she said the WRC was a unique, valuable and strategic research entity that played an important role in the water sector and in water research by establishing needs and priorities, stimulating and funding research, promoting the transfer of information and technology, and enhancing knowledge and capacity building in the water sector. The Commission had reported satisfactory results for 2011/12.

Minister Molewa spoke on the AG’s comments and said the matters of emphasis were on IT systems and procurement and the Department was working hard to improve these matters.

The Chairperson said it was important that the WRC had scope to do what they want and most importantly to undertake government research and have money available to research important priority areas.

Mr Morgan was disappointed in the result of deterioration given that the WRC had a proud history. He asked how the outcomes of the WRC were practiced. He particularly wanted to know if the research was benefitting anyone apart from the academics who researched them and got another published paper. He felt the WRC had to be able to show their value and he did not have a sense of any value.

The Chairperson said the WRC should actually sit down with the Department on the strategic plan to discuss performance indicators. He used the South African Law Reform Commission as an example whereby research was aimed at problems in the justice system and their projects went through the Minister. He said the process needed to be looked at so it was more engaging. He added that it helped when evaluating performance at the end of the year and would so give meaning and value to performance auditing.

Mr Muller said the WRC would take the comments of the Committee into consideration. He said there were a number of policy notices given to the Department from studies emanating from the WRC. He said they looked at certain issues, like desalination and hydrologic-fracturing (fracking) and provided guidelines on possible policy changes.

The Chairperson said this needed to be recorded and reflected somewhere when assessing the performance of the outcomes of the WRC. He said a target should be created to also reflect this.

Mr Morgan associated himself fully with the comments of the Chairperson and felt the WRC needed to go a step further.

Mr Mbangi Nepfumbade, DWA Acting DDG and
Chief Director: Water Resource Information Management, said the Department engaged closely with the WRC on a number of issues.

Minister Molewa said it was an important question and consideration. She noted the WRC was continually producing important research that informed policy and kept the public aware of certain developments. She also noted they worked with other sectors like Health. She highlighted the WRC was involved in obscure research but looking at water in creative ways which came out of “boxing sessions”.

A Department official said it was a world-wide problem of how best to utilize research in a practical and effective manner.

The Chairperson said new thought needed to be given to performance targets to capture this debate.

DWA report: Inkomati & Breede-Overberg Catchment Management Agencies performance 2011/12
Ms Sigwaza looked at the performance of the Catchment Management Agencies noting
both CMAs received unqualified audits with no matters of emphasis.

Ms Sigwaza looked at the Breede-Overberg Catchment Management Agency (BOCMA) performance and pointed out the achievements for the year. These included the approval from the Minister for gazetting the Catchment Management Strategy for public comments, establishing the institution as the centre of water resources management in its area of operation, transforming two Irrigation Boards to Water User Associations, commenced with verification of water use in priority catchments of the BOCMA area and access to Water Authorization and Registration Management System (WARMS) to ensure the correctness of water registration and billing. Added to this, 126 Control and Compliance inspections were conducted, which was 200% more inspections than planned, the BOCMA evaluated 204 rezoning/land use applications, which exceeded the expected rezoning numbers by 46%. During National Water Week ±4000 children and teachers were reached and made aware of the Water Cycle and their role in water resource management. It received an unqualified audit

Turning to the Inkomati & Breede-Overberg Catchment Management Agency (ICMA) performance, she highlighted the following achievements for the year: It included the submission of a revised five-year Strategic Plan and Budget and the Annual Performance Plan in line with new Treasury guidelines in January 2012 following the prescribed timeframes and institutional realignment. The Inkomati-Usutu CMA Business Case had been drafted and stakeholders were consulted, received an unqualified audit, got approval from the Minister for gazetting the Catchment Management Strategy for public comments and approval by the Governing Board of a new Remuneration Strategy and organisational structure. Added to this, the ICMA completed a high resolution land cover classification of the entire Inkomati
Water Management Area (WMA) in support of the validation and verification project, installed 34 real time water flow data loggers and 15 real time data loggers throughout the Inkomati WMA in support of river operations, a Water Resources Information management dashboard had also been successfully installed that would enable stakeholders to access all water resources operational data. It completed the first phase of the project to install water meters in the middle of the Komati River between Mananga and Carolina and 27 pollution incidents were attended to and satisfactorily remedied.

The Chairperson asked what a data-logger was. He was happy the installation of water meters had begun.

Ms Sigwaza answered and continued with presentation. She concluded noting the BOCMA and the ICMA had made significant and effective strides in positioning the entities to fulfil the mandate of protecting, using, conserving, managing and controlling water resources in an equitable and sustainable manner while appropriately involving all stakeholders in their WMA. Key strategic challenges of skills and capacity building were being addressed and overall the performance over the reporting period had been satisfactory.

Ms B Ferguson (COPE) questioned the amount of pollution incidents.

Mr Morgan questioned enforcement capabilities in the CMAs and asked to what extent the Department actually carried out licensing of mines and their input in the process. Looking at enforcement capabilities, he wanted to know capacity and the means.

Ms Thandeka Mbassa, DWA Deputy DG, said the CMAs performed the function of water sector management more effectively than the Department could but delegation needed to be speeded up.

The Chairperson asked if they had a board of directors. He felt government should function under the auspices of a minister and not a board of directors. He had problems with these institutional governance arrangements.

Minister Molewa believed the interaction of the Department with the Committee was important and allowed the Department to see things differently and allowed for issues to be worked through together. She spoke about discussions on different institutional arrangements.

Mr Muller said the 27 incidents were the only cases of pollution of water reported.

Mr Johan Van Aswegen, from DWA:
Mpumalanga, explained the change of situations of rehabilitated mines and the change in the pH balance of water flowing down.

The Chairperson said this was a new intervention. He wanted a briefing on some of the issues the Minister raised. He noted he had real problems with governance issues and the potential for conflict.

Minister Molewa said this would be spoken about.

Ms Zikalala was worried about the rural areas and water pollution given that people got their water from the rivers. She questioned how it was that sewage ran into the river.

Mr Sirenya said that old infrastructure contributed to the pollution of water. He said the increase in population exacerbated this problem.

Minister Molewa said a number of issues were looked at by the Department on “realignment” even before the AG raised them. She noted the Department enjoyed and truly valued working with the Committee.

The Chairperson said that in the first week of next year, the Committee would sit down with the Department and entities to look at performance issues as some of the indicators for certain projects were not correct and the method of evaluation needed to be reviewed. Many Members had raised the point that the indicators were wrong and in some cases the Department was actually doing well but the indicators were incorrect. Different indicators were needed for the entities. He noted that he was surprised at the good things in the Department like the unqualified audit for the Water Trading Entity and was amazed results were being shown this quickly. He noted the role of the new DG in these improvements and said this would be reflected in the Committee’s report. He was, however, worried about the Achilles Heel in the Department which was procurement – this was not a criticism but something that needed to be rectified.

He said next week the Committee would be meeting with the Department of Environmental Affairs. The week after that, there would be public hearings on the National Water Resource Strategy (NWRS). He was worried that there were only three submissions so far so suggested an advertisement be put into newspapers to say the Committee would accept very late and urgent submissions. He also wanted each entity to make a submission.

Mr Morgan added input should be sourced from a selection of the water boards.

Meeting was adjourned.


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