The Department of Water and Sanitation (DWS) presented its annual report for the 2014/15 financial year, and highlighted its establishment as a new department in November 2014, which had resulted in the transfer of the sanitation function from the Department of Human Settlements.
The Department said 85% of the total budget had been spent. 100% had been spent on water infrastructure management, but there had been major budget under-spending on Regional Implementation and Support. 100% had also been spent on the Municipal Water Infrastructure Grant, the Water Services Operating Subsidy, the Rural Household Infrastructure Grant, the Water Infrastructure Management Programme and the Water Services Project. However, there had been major under-spending on the Bucket Eradication Programme, where only 31% of the budget had been used.
Some of the Members felt that the Department was repeating the issues which had arisen in previous presentations. They said there was lack in the Department’s planning, monitoring and evaluation. As Members of the National Council of Provinces (NCOP), which represented all the provinces of South Africa, they would appreciate a briefing with details for each province. They expressed concern about the under-spending on the Bucket Eradication Programme, saying this should not happen when the Department’s aim was to eradicate the system.
The Chairperson welcomed Members and those attending the meeting, but raised concern over the absence of the Deputy Minister of Water and Sanitation. She said it was critical for the Deputy Minister to be present at such a meeting because of the importance of the water and sanitation service. When it came to oversight, the questions that would be asked would focus on what the Department had said it would do. The presentation was more focused on finance than on the context of the Department’s programmes.
Ms Margaret-Ann Diedricks, Deputy General (DG), Water and Sanitation, said she would convey the message to the Minister and Deputy Minister. The presentation would start with an overview to shed light on the infrastructure projects. The highlights of the Department included the creation of a new Water and Sanitation Department in November 2014 which had resulted in the transfer of the sanitation function from the Department of Human Settlements.
The focus areas within this Department were to:
- Clarify the mandate of the new Department to distinguish it from that of the previous Department of Water Affairs, particularly in relation to the function of sanitation.
- Water governance -- the alignment of the role and responsibilities of its entities to the Department’s mandate.
- Strengthening risk and internal audit in order to deal with any lapses around decision making in order to give effect to the requirements of the Public Finance Management Act (PFMA).
- Ensuring that the function of sanitation, which had been largely centered on the issue of bucket eradication, was widely understood.
She said the Minister had clearly stated that she was not the Minister of Water and Bucket System, but rather Water and Sanitation, so she wanted to ensure that the bucket system was eradicated.
Presentation: Department of Water and Sanitation (DWS)
Ms Babalwa Manyakanyaka, Chief Director: Monitoring and Evaluation, DWS said that the presentation would focus on the financial and non-financial performance of the six programmes of the Department.
Programme 1: Administration
An 85% expenditure of the Department’s budget had been achieved. The allocation of the funds had been done without an assessment of the readiness for implementation of the projects. This had led to low spending of the infrastructure grants. In addition, there had been under-expenditure in the sanitation function due to the late transfer of funds for the financial year under review, as well as a lack of capacity on the part of implementing agents.
A 73% attendance had been achieved, compared to the planned 90% participation in training, in line with workplace skills plan (7 300 of 10 000 interventions). This was due to changes in the employees’ working schedules, and their not being allocated time off for training.
Programme 2: Water Sector Management
There had been 10% completion of the Environmental Impact Assessment (EIA) for the Western Cape Water Supply system, versus the planned 20%. This was as a result of delays in the procurement process. A 4% reduction in the projected demand for eight large water supply systems had been achieved, versus the planned 6% reduction. Furthermore, 40% of the revision of the National Water Amendment Bill -- the draft Bill inclusive of sanitation – had been completed, compared to the planned 50%.
None of the planned four river systems had had Resource Quality Objectives (RQOs) determined, as only draft RQO reports had been developed. None of the planned compulsory licenses in the Mhlathuze catchment area had been issued, as 500 draft licences and records of recommendation were developed. This was as a result of a lack of dedicated personnel to undertake the task, but human resources had been made available and the plan was to complete this task by the end of June 2015.
Programme 3: Regional Implementation & Support
A total of 1 615 job opportunities were created through the Regional Bulk Infrastructure Grant (RBIG) versus the planned 2 441. This was due to labour unrest and the late issuing of appointment letters to contractors, which had negatively affected the creation of job opportunities. Eight bulk infrastructure schemes were completed (10 planned) and 76 bulk infrastructure schemes were under construction (82 planned). The Department had managed to provide 94 859 households with an interim or basic water supply in the 24 priority districts (144 491 planned).
20 581 bucket sanitation systems in formal settlements were replaced with adequate sanitation, against a target of 88 127, while none of the planned 92 000 existing bucket sanitation systems in informal settlements had been replaced with adequate sanitation services. The Department was focusing on replacing bucket sanitation in formal areas, rather than informal areas.
Programme 4: Water Sector Regulation
Under the Water Sector Regulation, only 60% of the stakeholder comments had been incorporated and a draft gazette developed, compared to the planned total completion of the revised water pricing strategy. There had been 32% completion in assessing water supply systems for drinking water supply standards (55% planned) as the 2013/14 Blue Drop Report was drafted. The finalisation of this report had been delayed, as verification audits had had to be conducted in the Free State, Gauteng, Limpopo, Mpumalanga and Western Cape, negatively impacting on undertaking the targeted the 300 assessments.
Programme 5: International Water Cooperation
Two new strategic partnerships (three planned) had been established with countries in Africa, and the signing ceremony had been postponed by Zimbabwe. Eight of the planned nine existing strategic partnerships had been implemented with countries in Africa, and seven of the planned 10 strategic engagements with international and multilateral organisations outside Africa had been attended.
Detailed water trading, per programme
An 89% reduction in irregular expenditure had been achieved, against a target of 100%. There had been a 38% reduction in outstanding debt over 60 days, instead of the planned reduction by 40%.The non-payment by both water boards and municipalities had resulted in the increase in the number of debtor days. Water boards had also raised the issue of municipalities defaulting in their payments to water boards, and of municipalities not honoring the inter-governmental relations framework. The number of debtor days had increased to 288 days, compared to the planned reduction to 60 days. The project plan of raising the Clanwilliam Dam wall had been 4% completed (7% planned). A cumulative total of 38 of the planned 39 dam safety rehabilitation projects had been completed since the programme started in 2005.
Overview of the Audit Report
Indicators of the Audit Report had not been Specific, Measurable, Achievable, Relevant and Time-bound (SMART) because there had been no specifics on deliverables and no lists supporting numbers. Therefore, the Department’s planned to revisit the technical indicator descriptions (TIDs) and also to include lists. Another finding was that there had been inconsistency in data collection and this had been caused by no standard operating procedures being followed. Moreover, there had been calculation errors, irrelevant points of entry and unauthenticated documents resulting from poor monitoring and evaluation (M&E). The Department’s action plan was to establish a dedicated M&E unit, with monthly and quarterly reviews, and to ensure verification of reported performance, including a review of supporting documents.
Expenditure outcome: 31 March 2015
Ms Rebecca Nkosi, Acting Chief Financial Officer: DWS said 85% of the total budget had been spent. 100% had been spent on Water Infrastructure Management, but there had been major budget under-spending on Regional Implementation and Support, which entailed matters such as grants, etc. 100% had also been spent on the Municipal Water Infrastructure Grant, the Water Services Operating Subsidy, the Rural Household Infrastructure Grant, the Water Infrastructure Management Programme and the Water Services Project. There had been major under-spending on the Bucket Eradication Programme, however, where only 31% had been spent.
The reasons for the R68m under-spending in Administration were the delayed invoices for office accommodation and municipal services, and for the imported equipment relating to data storage infrastructure. In Water Sector Management, under-spending of R35m was caused by the delayed purchasing of laboratory analysis instruments for the national surface water quality programme and the Inductively Coupled Plasma Optical Emissions Spectrometer Instrument. Regional Implementation was under-spent by R1.89bn (21%) and this was caused by:
- the prolonged signing of service level agreements (SLAs) and the delayed delivery of materials by suppliers for the Municipal Water Infrastructure Grant (MWIG);
- delays in the finalisation of the implementation plan by the newly-appointed implementing agent and the delays in delivery of ordered material needed for implementation of various regional bulk infrastructure programmes (Regional Bulk Infrastructure Grant);
- insufficient infrastructure to support the bucket eradication programme, with cash flow challenges experienced by the implementing agents.
Ms Manyakanyaka said the under-spending of 21%, equivalent to R33 million, on Water Services Regulation was the result of delayed implementation of a drinking water quality and wastewater management project, and the prolonged period it took for the draft pricing strategy, due to consultations.
Mr Mpho Mofokeng, Chief Financial Officer: Water Trading Entity, DWS, said the revenue from exchange transactions had increased by 13% due to an increase in the volume of consumption, annual tariffs and an increase in interest charged. The revenue from non-exchange transactions had increased from R2.08 billion to R2.72 billion due to an increase in the augmentation from National Treasury to fund the social portion of capital projects, additional external projects awarded to the internal construction unit, and assets received from the Water Users’ Associations.
Operating expenditure had increased to R9.49 billion in 2014/15. This 25% increase was attributed to increases in finance costs, depreciation, impairment and amortization. The finance cost increases were due to the timing of the future cash flows and adjustment on the internal rate of return (IRR). The depreciation, amortization and impairment had increased to R2.07 billion in 2014/15 due the capitalization of new assets. The employee benefit costs had increased by 3% to R696 million in 2014/15 as a result of the annual salary increase.
The increase in debtors year on year was due mainly to interest of R626 million being charged during March 2015, which had not been collected. The increase in revenue from the sale of water was responsible for the balance of the increase in debtors.
During the 2014/15 financial year, the Augmentation Projects Performance budget had been reallocated from non-performing projects in order to fund those projects that required additional funding and the ministerial water intervention projects. The funds had been reallocated from the following under-performing projects:
- Mokolo and Crocodile River (West) Water Augmentation Project (Phase 1 & 2A, including river management). The under spending on the project was mainly driven by the delay in decision making by the policy makers, such as Department of Energy (DoE), the Department of Public Enterprises (DPE), the National Energy Regulator of South Africa (NERSA), and ESKOM-paying customers.
- Groot Letaba Water Augmentation Project (Nwamitwa & Tzaneen). There had been a delay in the approval of the environmental plans for these projects.
- Raising of Clanwilliam Dam wall. There had been delays in acquiring the land for the dam and also delays in the appointment of an environmental control officer.
- Raising of Hazelmere Dam wall. There had been a delay in the appointment of the professional services provider.
The under-spending on these projects were being utilized to fund the following projects:
- The Olifants River Water Resources Development Project (ORWRDP) (Ph 2A), the De Hoop Dam. The project required additional funds due to the acceleration of mechanical work and site rehabilitation. on project.
- The ORWRDP (Ph 2B-I) - bulk distribution (Sub Phases 2B, C and 2D)
- R154 million was paid to the Trans Caledon Tunnel Authority (TCTA) to replenish the working capital.
- Funds also went to the Water Services Projects – projects undertaken on behalf of the main account -- and the funds utilized would be recovered.
The Chairperson asked why there was an Acting CFO.
Ms L Zwane (ANC, KwaZulu-Natal) said that the Committee represented the National Council of Provinces (NCOP) and this meant that it represented all the provinces of South Africa, so Members would appreciate a briefing with details for each province. She asked why there were delays in service delivery and what the Department was doing about these delays. What was the Department was doing in order to avoid retention?
Mr M Khawula (IFP, KwaZulu-Natal) said that the presentation was a repetition of issues previously highlighted. He asked why the Department was not attending to these issues instead of blaming other people. The issue here was the planning. The under-spending on the eradication of the bucket system was an issue, as this should not happen when the Department’s aim was to eradicate the system. He asked why reviews were only being started now.
Ms T Mpambo-Sibhukwana (DA, Western Cape) asked what steps the Department was taking to increase the skills needed, and which institutions it had worked with. What was causing delays with the EIA within the Western Cape Water Supply? What timeframes had the Department established to eradicate the bucket system in each province? The Department should provide the Committee with percentages for each province. What measures had the Department put in place to ensure gender parity? Why had there been a reduction in expenditure on the Clanwilliam Dam?.
Mr Khawula asked for clarity on the Department’s achievements on water sector management.
Ms Zwane referred to the issue of addressing fruitless expenditure, and asked whether verification was done by the M&E unit.
Ms T Mampuru (ANC, Limpopo) asked if the Department was ready to assist provinces, because there were a lot of projects that needed to be attended to. She asked whether the CFO was ready to assist, and advised that she should follow the money -- meaning that the CFO should go to the places where assistance was needed to see the situation in these places. Transferring money to municipalities was not enough -- the CFO needed to go out there and see what was being done with it.
Mr D Stock (ANC, Northern Cape) said the issue in the Northern Cape had been escalated and he appreciated the fact that the Department had actually listened and taken action. The Committee had gone and found good projects being done by the Department, although there had been no official communication from the Department.
Ms P Mququ (ANC, Eastern Cape) asked for how long the CFO had been in an acting position. What was the Department doing about the issue of billing in order to ensure municipalities were adequately capacitated?
The Chairperson said the Department was very weak when it came to planning and evaluation. As long as there was not 100% achievement, it was not an achievement. Under M&E there was formative evaluation, and this was done when there was planning. The NCOP was interested in knowing more about the provinces. She asked if the Department followed its money -- did it know what happened to the money after it had been given. The Department’s finances were not in line with its performance. Money was being spent, but the programme performance was low. There had been an improvement, but the issues being raised were very serious. Although he bucket eradication system was very important, the Department was moving very slowly. There was no action plan to deal with the issues raised by the Auditor General. She suggested that the DWS should have a meeting with the departments that were not paying, to tackle the issue of non-payment.
Ms Diedricks said that the CFO for the main account had been redeployed by the Minister. The lack of planning the Members had highlighted was understood. On the issue of M&E, there had been no Department in 2010 and therefore the DG had established this Department with people who had to be trained. There were only two people doing M&E in the Department. Regarding reports, she said she had requested monthly reports, which she then combined into quarterly reports, and then into yearly reports. For the first time in the current year, the process was in place.
She said the Department was currently dealing with the issue of achieving its targets. She agreed with Members that water planning in 2014/15 had not been good. Some of the concerns raised would be responded to in writing, as requested by the Chairperson.
The meeting was adjourned.
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