Department of Water and Sanitation 2015 Strategic Plan; Bulk portable water services by Water Boards: Department progress report

Meeting report

Department of Water and Sanitation on Budget Vote and Strategic Plan

Ms Margaret-Ann Diedricks, Director-General (DG), Department of Water and Sanitation (DWS), explained the legislative and regulatory environment in which the Annual Performance Plan (APP) was developed. The plan took into consideration the Constitution, the Public Finance Management Act (PFMA) and additional legislation such as the Public Audit Act, the Money Bills Procedure and Related Matters Act, and the Public Service Act.

The planning process was informed by the Department’s mandate, as well as international agreements such as the Millennium Development Goals (MDGs), the Framework for Climate Change, and the Sustainable Development Goals (SDs). It was further guided by government priorities such as the National Development Plan (NDP), the Medium Term Strategic Framework, and the New Growth Path. There were several inter-departmental programmes, particularly with the Department of Human Settlements (DHS), with which there was a close working relationship.

There were five programmes: administration, water planning and information management, water infrastructure development, water and sanitation services, and water sector regulation.

The purpose of the administration programme was to provide policy leadership, advice and core support services, including finance, human resources, legal, information and communication technology (ICT), management services, communication, and corporate planning. This programme’s strategic issues included skills development. The aim was to reduce the vacancy rate for engineers and scientists, as well as to develop skills through the graduate trainee programme. In terms of communication, there was an effort to engage in stakeholder management and community participation programmes, media relations, marketing and advertising campaigns. The legislative and policy development was aimed at developing the National Water and Sanitation Bill. In terms of international cooperation, it sought to establish strategic partnerships with African and global countries. Finally, with mine water management, the aim was to implement short-term and long-term solution projects as well as to develop a proposal for an environmental levy for the mining sector.

The purpose of the water planning programme was to ensure that the country’s water resources were protected, used, developed, conserved, managed and controlled in a sustainable manner for the benefit of all people and the environment, by developing a knowledge base and implementing effective policies, procedures and integrated planning strategies both for water resources and water services. Strategic issues included determining the needs for water resources and infrastructure development through reconciliation strategies, feasibility and all town studies. Water information management was handled through data capturing, monitoring, information systems and information analyses. The protection of water resources was conducted through reserves determination, resources classification and quality objectives. Water services and local water management was conducted by developing water services bulk master plans, water services developmental plans, and water conservation and demand management (WCDM).

The purpose of the water infrastructure programme was to develop, rehabilitate and refurbish raw water resources and water services infrastructure to meet the socio-economic and environmental needs of South Africa. The strategic issues included infrastructure development, which sought to implement new augmentation projects and the betterment of existing dams; regional bulk infrastructure, which sought to develop bulk infrastructure, community infrastructure and refurbish infrastructure schemes; and operations and maintenance, which focused on implementing dam safety rehabilitation, rehabilitating conveyance projects and developing asset management plans.

The purpose of the water and sanitation services programme was to ensure the provision of sustainable water and dignified sanitation services, including implementation support and advocacy. The strategic issue regarding water sector support was financially supporting resource-poor farmers and installing rainwater harvesting tanks for household productive use, and regarding sanitation services, was replacing bucket sanitation in formal settlements and eradicating sanitation backlogs in rural households.

The purpose of the water sector regulation programme was to ensure the development, implementation, monitoring and review of regulations across the water supply chain in accordance with the provisions of the National Water and the Water Services Acts. Strategic issues included institutional oversight, such as establishing catchment management agencies, regional water utilities and infrastructure agencies to enhance sustainability in water provision; water use authorisation; economic and social regulation, such as developing the raw water pricing strategy and establishing economic regulation; compliance monitoring, including conducting dam safety evaluations and monitoring compliance of water users; water supply services and sanitation regulation, such as assessing water supply systems’ compliance with drinking water standards, wastewater treatment collector systems’ compliance with effluent standards; and enforcement, including investigation.

Water Trading Entity

Ms Nthabiseng Fundakubi, Chief Financial Officer, DWS, said that the purpose of financial management was to ensure the efficient management of the daily financial operations of the Water Trading Entity, processes and systems for the infrastructure and proto-Catchment Management Agency (CMA) components. Debt recovery was a serious problem, and the Department sought to reduce the number of days for outstanding debt. There was increased expenditure on refurbishment and betterment of infrastructure.

Proto-CMAs provided for the protection, development, use and management of the resources at water management area level. They validated and verified water users within respective catchment areas, and also monitored the eco-status of rivers to determine where interventions were required.

She provided an overview of Vote 36, saying that the baseline allocation had seen a slight decrease from R16.4 billion in 2015/16, to R16.3 billion in 2016/17. The budget would increase again to R18.2 billion in 2017/18. When divided by economic classification, compensation of employees for 2015/16 came to R1.4 billion, with payments for transfers and subsidies at R6 billion and payment for capital assets at R7.2 billion. The majority of the budget -- at 76% -- went to water infrastructure and development. This was followed by water and sanitation services, and administration, which each received 9% of the budget. Earmarked funds made up 17% of the budget. These went to the Regional Bulk Grant, the Municipal Water Infrastructure Grant, the Rural Household Infrastructure Grant, the Bucket Eradication Programme, and the Water Services Operating Subsidy Grant.

Ms Fundakubi briefly described the regional allocations through the various grants, including the Accelerated Community Infrastructure Programme (ACIP), Regional Bulk Infrastructure Grant (RBIG) Schedule 6B, the Municipal Water Infrastructure Grant (MWIG) Schedule 5B, and MWIG Schedule 6B. Water Services Operating Subsidy (WSOS) Schedule 5B, Rural Household Infrastructure Grant (RHIG) Schedule 5B, and RHIG Schedule 6B. Some provinces received these grants as a direct grant, while others received them as an indirect grant, depending on the capacity of the province.

The total projected cost of the development of new infrastructure amounted to R39 billion. This included projects such as the raising of Clanwilliam Dam, the Mokolo and Crocodile River Water Augmentation Project, the raising of Hazelmere Dam, the Mzimvubu Water Project and the Nooitgedacht Water Scheme.

Provision of Bulk Potable Water Services by Water Boards

Mr Anil Singh, Deputy Director-General: Regulation and Compliance, DWS, said that water boards were public entities and conducted their primary business in accordance with a mandate derived from legislation and government/sector policies and protocols. They were key strategic entities, as all socio-economic development within their designated area of supply was linked to the delivery of reliable, healthy and cost-effective bulk services. There were a total of nine water boards in South Africa: Amatola Water, Lepelle Water, Mhlathuze Water, Rand Water, Bloem Water, Magalies Water, Overberg Water, Sedibeng Water, and Umgeni Water. They reported to the Minister of Water and Sanitation.

The key role of water sector institutions was to support South Africa as a developmental state to deliver on government developmental objectives through using water for promoting the socio-economic developmental agenda; reducing inequality through access to water and job creation; leveraging additional investments for infrastructure development; enabling rural communities to use water for rural livelihoods; promoting greater citizen participation in decision making; and allowing for innovation and knowledge generation.

The entities reported to the public and Parliament through annual reports and annual financial statements, and to the Department with quarterly performance reports. A contribution to government outcomes was made through providing effective water resources management as a critical foundation to achieving Outcome Four: Employment and inclusive growth, Outcome Six: Efficient economic infrastructure; Outcome Seven: Vibrant and sustainable rural communities; Outcome Nine: Responsive, accountable, effective and efficient local government; and Outcome Ten: Protected and enhanced environment and natural resources.

The selected performance objectives for water boards were water quality compliance, non-revenue water, reliability of supply, financial reporting compliance, and increased access to services.

The overview of entities showed that operational expenses totalled R8.4 billion. The Rand Water Board had the largest share, of R4.6 billion. The volumes supplied were also variable, but again, the Rand Water Board made the biggest contribution. Rand Water contributed 66% of the consolidated revenue. In the medium term, the water boards were budgeting R15.7 billion for 2014/15, R15.3 billion for 2015/16, R19.2 billion for 2016/17, and R21.2 billion for 2017/18.

A total of 10 959 jobs had been created in 2014/15 and an estimated 17 355 were anticipated to be created in 2015/16.

A total of R3.5 billion was owed to the water boards by municipalities as of the end of February 2015. This was of great concern to the Department, and had been the subject of much discussion in government. Inter-governmental mechanisms had been employed to resolve disputes. The debt had a negative impact on the operations of the water boards.

Mr Singh gave a brief overview of the each of the water boards.

Rand Water operated predominantly in Gauteng, but had expanded into Limpopo, Mpumalanga, North West Province, and the Free State, as per the directive of the Minister. The Board was capable of extending its services, as it had the required capacity. The customer and sales profile included mines, industries, and municipalities, with the Greater Johannesburg Metro being the biggest consumer, at 37%. The five-year capital expenditure plan for 2015-2019 amounted to R13.5 billion. The total number of jobs created between 2014 and 2018 was 21 801. The Rand Water Training Academy had created a further 1 001 jobs.

Mhlathuze Water serviced the north coast of KwaZulu-Natal. Major water projects included the Jozini Bulk Water Supply project, the Hlabisa Bulk Water Supply project and the water supply for the Dukuduku Resettlement Project.

Umgeni Water was located in Pietermaritzburg and serviced the surrounding areas. Its major projects included the augmentation of the Mgeni system, the refurbishment of the Nagle Aqueducts and the asset condition of the Durban Heights Water Works.

Magalies Water supplied the North West province. Its projects included the Pilanesberg north water supply scheme, the Pilanesberg south water supply scheme, and several upgrades at the Vaalkop water treatment plant.

Lepelle Northern Water (LNW) supplied areas in the Limpopo Province. It was implementing various projects for the Department under the RBIG and the MWIG.

Bloem Water serviced areas in the Free State and was undertaking projects to build a pipeline from Rustfontein Water Treatment Works to the Lesaka Reservoir, a pipeline from the Lesaka Reservoir to Motlatla Resevoir, and a pipeline from Gariep to Knellpoort, among others.

Amatola Water had a very large area of supply in the Eastern Cape. Its projected total supply to Amathole District Municipality was 9 586 776 m³ per annum, and its supply to Buffalo City Metropolitan Municipality was 22 145 950 m³ per annum.

Overberg Water was the smallest water board, located in the Western Cape. Its potable water projects included the emerging farmers’ bulk supply pipeline and the Ruensveld-East water treatment works upgrade.

Sedibeng Water covered various areas in the Northern Cape, North West Province and Free State. Its projects included the Vaal Gamagara pipeline -- a nine-year project, the total cost of which would be R10 billion -- as well as the Namakwa pipeline refurbishment, funded by the Department of Water and Sanitation. Internal projects amounted to R298.9m in 2015/16.

Discussion

Mr M Khawula (IFP, KwaZulu-Natal) said that he knew of several very dry areas in KwaZulu-Natal where no projects were being implemented. Why were some areas covered and others neglected?

Mr Sibusiso Madonsela, Company Secretary, Umgeni Water, agreed that not all municipalities were being reached. This was because the regional bulk grant was transferred directly to the water authorities in Zululand. There was interaction with these water authorities and there were moves to incorporate these areas under Umgeni Water.

An Amatola Water representative said that Amatola Water had a gazetted area and did not provide water throughout the Eastern Cape, even though it was the only Water Board in the province. However, the entity did engage with local municipalities when they were approached and the opportunity arose.

Mr D Stock (ANC, Northern Cape) was concerned that the Department was prioritising areas that were far from rivers in Namaqualand, while a community staying next to the Vaal River was struggling for water. It did not make sense to prioritise the remote communities, which would be more expensive to deliver services to.

Mr Stock asked to what extent the Department was involved in Operation Phakisa, and whether budget had been allocated for this?

Mr Singh responded that Operation Phakisa was borrowed from a Malaysian model, which emphasised achieving big results quickly. The Operation was focused on the oceans economy, and DWS was not the lead Department, but gave support for certain projects. A new Operation Phakisa was planned for port operations and mining, which DWS would again support.

Ms P Mququ (ANC, Eastern Cape) asked several questions in her vernacular language.

A Sedibeng Water representative said that the Vaal Gamagara pipeline had to be replaced because it had reached the end of its lifespan and demand had increased. This was being funded by the RBIG.

Ms T Mpambo-Sibhukwana (DA, Western Cape) asked for an explanation of the acronyms used in the presentation, as it was hard for the Committee to keep up with them. She also asked for a written report detailing what maintenance was needed in the different provinces.

Ms Diedricks agreed that written submissions on acronyms and details of the maintenance would be provided.

Ms Mpambo-Sibhukwana asked how far the Department had progressed with the eradication of the bucket system.

The Chairperson also asked about the eradication of the bucket system, and sought assurance that it would be eradicated in the current financial year.

Ms Diedricks responded that the responsibility to provide sanitation had previously resided in the Department of Human Settlements (DHS), where the bucket eradication project had been initiated, and was initially a two-year programme. This was the final year of the programme, and buckets would be completely eradicated in formal settlements, but not informal settlements. There were initially thought to be 88 000 bucket systems left, but this was found to be closer to 66 000 after a verification process. At the end of June 2015, 43 000 would have been eradicated. By the end of the financial year, the rest would be eradicated. The DHS had appointed the water boards as implementing agents, but the Standard Chart of Accounts (SCOA) had since directed that state agencies should not be used for indirect grants. Contractors would therefore be appointed to do the last bucket eradications. There were almost no buckets in Gauteng’s formal settlements. Only 58 were left in Ratanga, and there was a specific reason why they had been left. This was why there was no budget allocated to Gauteng for this project.

The project had been run as part of a troika between what was the then Department of Water Affairs (DWA), DHS, and the Department of Cooperative Governance and Traditional Affairs (CoGTA). The troika had not considered the bulk infrastructure, and it had turned out that pipes had had to be put in place. The cost and associated costs were therefore higher than expected. A report on this was being prepared which could be shared with the Committee.

Ms Mpambo-Sibhukwana said that in some of the regional allocations, certain provinces had not been mentioned. For example, in the table of Regional Allocations: RHIG 5B, Gauteng and the Western Cape had not been mentioned. Why was this?

Ms Fundakubi said that Gauteng was not affected by transfers. which were mostly aimed at old homelands provinces, and therefore they had no allocation.

Ms Mpambo-Sibhukwana asked what efforts the Department had made to educate people about saving water. Leakages were extremely costly. What were the Departments of Water and Sanitation, Basic Education and Health doing to address this?

Ms Diedricks responded that the water leakages were in excess of 40%, costing a total of R7 billion per annum. This was a huge amount of unaccounted for water. The President made an announcement about a War on Leaks programme in the State of the Nation Address, including the employment of 15 000 men and women. This would entail skills development and training of youth as plumbers and skilled artisans, which would contribute to job creation.

Mr Squire Mahlangu, DDG: Corporate Services, DWS, said that with regard to creating awareness, the DWS had recently won the United Nations (UN) Water for Life Award on water conservation, for their work in training school children.

The Chairperson asked the DG to demonstrate that the Department was committed to job creation. While some water boards were planning to increase their employment capacity, others had seen decreases. Why had so many temporary jobs been created? What was an emergency intervention?

Mr Singh responded that the Minister was empowered to issue a directive to a water board to carry out an emergency intervention where there was a problem with water supply.

Ms Diedricks responded that there were so many temporary jobs because a lot of the jobs were project specific. For example, if the Department was constructing a dam, they required specific skills and would employ people for the duration of the project. This was why a lot of temporary jobs were created.

Mr Madonsela said that there were several projects in the region that created employment, including the Adopt-a-River project, the Working for Water project, and the bulk water scheme at Mizana. A total of 638 job equivalents had been created in 2014/15 directly from capital projects. An additional 260 jobs had been created from indirect projects by the Department. The target was to create more than 600 jobs from capital projects.

The Chairperson asked Ms Fundakubito to explain the process behind indirect transfers.

Ms Fundakubi said that a direct grant was when the funding was listed under the Department’s vote, and was then transferred directly to the municipality to implement, but this was done only where there was compliance. Indirect grants were funding managed by the Department on behalf of those municipalities where there was not sufficient capacity to manage the funds themselves.

Mr Khawula asked for an explanation of how under-spending had occurred when there were so many communities that needed water.

Mr Madonsela said that the allocation for Umgeni Waterfor the last financial year had been R313 million. This had been overspent due to the building of a new water purification plant and bulk infrastructure.

Ms Fundakubi responded on under-spending, saying that internal procurement processes caused delays in finalising agreements, preventing projects from kick-starting. Part of the under-spending was also caused by the fact that the Department had received part of the budget only in the last quarter of the financial year. In an effort to ensure completeness, it was necessary to conduct due diligence on all payments. There were delays in water services authorities making submissions to the Department, and non-compliance with regulations also meant that the Department sometimes had had to withhold payment. There had also been delays in the implementation of the Bucket Eradication Programme. The Department had submitted a request for a roll over of funds that were committed but not paid.

The Chairperson asked what was causing these delays, when citizens urgently needed water. She requested a list of municipalities that were refusing to implement.

Ms Fundakubi said that the Department could provide a list of municipalities that were experiencing delays with implementation.

Mr Singh said that a generic explanation for under-expenditure could be provided. It was generally caused by problems with the procurement process and delays in authorisations.

A representative from Rand Water said that capital expenditure had been over 90% of what had been planned. There had been a lot of litigation, as certain previously advantaged companies were unhappy when contracts or tenders were awarded to newer companies. The Water Board then had to wait for the court cases to be resolved before they could progress, and several big projects had been delayed for this reason. When this occurred, the entity tried to adjust priorities in the three and five year plan. Using this strategy, they had achieved over 90% of expenditure on an annual basis, despite the delays.

Mr Singh said that these were common reasons for under-spending.

A representative from Umgeni Water said that the entity had not had under-expenditure the previous year, and although they were behind with expenditure in the current year, they anticipated that they would catch up before the end of the financial year.

Mr Khawula said that he did not appreciate the generalisations. He would prefer each water board to explain their under-spending very specifically.

A representative from Amatola Water said that the entity had just embarked on the upgrade of six plants. There had been a delay in expenditure because RBIG spending had to be approved by National Treasury, which had taken some time, but the final payment had been made so a pick-up in activity was expected. As a turn-around strategy, the entity was insisting that every project should have a procurement plan, with key milestones mapped out.

A representative from Lepelle Northern Water said that the entity had strengthened the project management unit to address the challenge of under-spending.

A representative from Magalies Water said that the budget for the previous financial year had been R415 million, of which 80% had been spent. The reasons for the under-expenditure were twofold. A plant upgrade project had been delayed by public protest. Since then, there had been more interventions to engage community leaders and address their concerns, and protest action had since been reduced. The second problem was that they had not received any responses for some advertised tenders, forcing them to review the scope and specifications and then re-tender. This was the cause of delays.

A representative from Sedibeng Water said that the entity had under-spent by 39% as there had been a delay in the design of the project. However, this had been rectified and the project would be completed on time.

The Chairperson asked to hear more about the Rand Water Training Academy.

A representative from Rand Water replied that the academy addressed the water board’s need for skills by giving unemployed youths technical training. It was a joint project, conducted with the National Treasury, which was providing the funding. The course had a strong practical aspect, with 18 months spent in class and 18 months in training at the water plants. Students coming out of the programme were deployed to rural areas, where there was often a dearth of skills as people preferred to work in bigger cities. The academy sought to teach transferable skills, so that the students could also find jobs outside of the Water Boards. The challenge was to find the right people with the necessary basic skills to undergo the training.

Mr Khawula asked what un-earmarked funding was.

Ms Fundakubi responded that this was funding that could be shifted within the Department. Earmarked funds required Cabinet approval to be adjusted.

The Chairperson adjourned the meeting.