Sedibeng and Bloem Water Boards on their 2014/15 Annual Reports

Water and Sanitation

02 March 2016
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

Sedibeng Water Board briefed the Committee on its Annual Report for 2014/15. The presentation was based on its area of operation, ministerial directives, achievements, audit report, DIFR performance and financial performance. A detailed analysis of its achievements with respect to the ministerial directives, and a description of what they entailed, was provided. These included construction of the Vaal Gamagara pipeline in Northern Cape, performing the Water Service Authority function for the Ngaka Modiri Molema District Municipality, costing of the business plan at around R1.2 billion, dealing with the War on Leaks programme for Matlosana Local Municipality, bucket eradication at Sol Plaatjie Municipality, Northern Cape, and in North West Province, which was hampered by low supplies of water and sanitation infrastructrure. Other areas included the operation and maintenance of the Bloemhof waste water treatment works, eradication of tankering in the Ngaka Modiri Molema District Municipality (NMMDM), and extending its areas of operation. Sedibeng Water had managed costs prudently, was financially sound, had exceeded revenue and surplus targets and received an unqualified audit opinion. It was offering awareness, voluntary counselling and testing for employees and also financial assistance for study. Sedibeng created 70 new permanent and contract jobs and 395 temporary jobs, and kept its accident rate low. The Board expressed its concern over the equitable share given to municipalities not reaching the Board and asked if the equitable share could not be transferred directly to the water board. It also expressed concern over the debt being owed to it by municipalities.

Members asked about the exact completion date for the bucket eradication, what was being done to recover debt owed by municipalities, including whether agreements were in place, and how the Board was working to avoid wasteful and fruitless expenditure. They wanted to know how many dams were viable, the effect of the water shortages, and the extent of its involvement with Bloemhof. They asked about the recovery time for staff debt and the programmes offered for staff members. They wanted more detail on the fruitless and wasteful expenditure on vehicles not properly equipped for the terrain, and the Eskom interest on debt. They asked if regional infrastructural bulk grants were absorbed by municipalities. One Member raised a concern about areas outside these two entities' operations but was advised that this would be answered by the Department in due course. and heir area of operations.

Bloem Water Board then briefed the Committee on its 2014/15 Annual Report. The presentation was based on its challenges, mission, reasons for its underspending and underperformance, vision, areas of operation, ministerial directives and financial performance. A comprehensive analysis of its achievement and goals was laid down. The challenges of the Board included access to water, debtors position, cash flow constraint, capacity constraints, Capex funding, investigation and disciplinary cases. Non current assets were marginally lower than budget as not all Capex projects were concluded, and this was largely because of cost-containment measures being taken. Raw water charges were below the targeted expense mainly due to a decrease in abstraction of Groothoek Dam. Depreciation was lower due to project values not capitalised and depreciated before becoming operational. Staff cost was marginally lower, as recruitment is now done in a phased approach. There was no irregular expenditure but there was an amount of R1 700 classed as wasteful and fruitless expenditure, for which the individuals concerned had been suspended pending a full investigation. Bloem Water had no contingent liabilities. The entity received an unqualified audit opinion.

Members asked about the costs of bucket eradication and were told that Bloem's costs for this had been calculated lower than costs of other boards. It was suggested that the Department of Water and Sanitation (DWS) should get involved in an equitable share arrangement around the release of water, and another Member thought it would be useful also to get the Department of Cooperative Governance involved. Members asked why there was abstraction from dams until they were completely dry,the plans to treat dams, and the cost drivers of consumption of water. Again, Members wanted to know more about the efforts to recover debt from the municipalities, and from the Department itself, and also enquired about the costs for chemicals. The Department of Water and Sanitation agreed to respond to the issues during its next scheduled meeting with the Committee.

 

Meeting report

Sedibeng Water 2014/15 Annual Report briefing
Mr Rembuluwani Takalani, Chief Executive, Sedibeng Water Board, noted that the presentation would cover the area of operation, Ministerial directives, achievements, and overview of audit report. Sedibeng Water was established in terms of Water Services Act (Act 108 of 1997). It provides services to three provinces: Free State, North West and Northern Cape.

The Ministerial directives issued to Sedibeng Water to support the local government sphere included;
- Construction of the Vaal Gamagara pipeline in Northern Cape. The entity is dealing with evaluation and it is estimated at R1.2 billion. The current pipeline is old, hence needed to be changed.
- Perform the Water Service Authority (WSA) function for Ngaka Modiri Molema District Municipality. Sedibeng is developing a business plan that deals with the challenges that will be and are being faced currently in executing this directive. The business plan is estimated to cost R1.2 billion. Included in the functions that would need to be done to execute this directive would be: eradicating of tankering; drilling; equipping and connecting boreholes. Hotspots had been identified. There had been resistance from the municipalities but the Minister had stepped in and it was being managed.
- War on leaks programme for Matlosana Local Municipality. This had been completed.
- Bucket eradication in the Northern Cape (Sol Plaatjie LM) and in the North West Province. Sedibeng was directed to eradicate 1 300 buckets. The challenge is that the eradication of buckets requires an increase in supply of water, and there is also the problem of the sanitation infrastructure. This programme is anticipated to be completed by October and November this financial year
- Operation and maintenance of the Bloemhof waste water treatment works. Sedibeng has assisted in solving the problem of sewer blockages.
- Eradication of tankering in the Ngaka Modiri Molema District Municipality (NMMDM). Tankering is a lucrative business in this district but Sedibeng is eradicating it and is making sure that the district gets water.
- Extension of area of operation.

Sedibeng managed its costs prudently, and is financially sound and viable at the consolidated level. In this financial year it managed to exceed its revenue and surplus targets. It had received an unqualified audit opinion. Awareness campaigns, voluntary counselling and testing for HIV were made available for the employees. There was also financial assistance to the employees for enhanced study and currently there are 44 bursary holders, of which 15 are male and the rest female.

Sedibeng was involved in the water and waste-water process operation learnership NQF 2 and 4, with the ESETA. It had 53 beneficiaries, of which 31 were male beneficiaries and 22 female. Apprenticeship training was being done, for 20 beneficiaries, of which 16 were male and 4 were female. Experiential training had 10 students, divided into 7 male and 3 females. The attrition rate for technical staff was kept at 2.58%.  Sedibeng created 70 new permanent and contract jobs and 395 temporary jobs during the 2014/15 financial year. Its Disabling Injury Frequency Rate (DIFR) performance was good.

Mr Teboho Nteo, Finance Manager, Sedibeng Water, stated that Sedibeng is not writing off debts as had been assumed. It is partnering with Eskom to maximise energy. There is an increase in contingent liabilities, mostly because of legal action instituted against Sedibeng by suppliers and employees.

Irregular expenditure amounted to R7.9 million. This was due to procurement of goods to an amount of R4.5 million. Of that, part related to a specific brand of vehicles being requested due to the terrain. The other part related to the procurement of outsourced internal audit services for a period of two years for an amount of R3.4m whilst Sedibeng Water is the process of building capacity for an in-house internal audit function. The irregular expenditure was investigated and condoned by the accounting authority.

R395 000 was noted as wasteful expenditure, this was due to late payment of ESKOM accounts. The wasteful expenditure had been condoned by the accounting authority.

Most of the targets for 2014/15 were fully achieved and others were partially achieved.

Discussion
Ms T Baker (DA) asked the effort being put in place to recover debts, and wanted to know how much that debt was, and who the debtors were. She asked how many of Sedibeng’s dams are viable and how many of the towns being serviced by them were affected by water shortages. She commented that the presentations seemed to contain conflicting information about completion times for the bucket eradication, for in the last presentation the date was given as March 2016, but now this had shifted to October or November, so she wanted clarity on that. She finally asked how are Sedibeng’s raw water sources, and how the Water Board was being affected by the drought?

Mr L Basson (DA) asked if Sedibeng is involved in the Bloemhof pipeline, and whether the Bloemhof water purification has been resolved.

Mr D Mnguni (ANC) asked the time frame that Sedibeng had set for staff to repay their debts, and what were the plans to recover debt. He noted that some of the contracts with municipalities had expired and others were not signed, and wanted to know whether Sedibeng still provides water to them; if so, he wanted to know what were the terms of any agreements. He asked also what plans it had to avoid this situation arising in the future, and whether it had plans to avoid delayed payment in the future. Speaking to the expenditure report he wondered whether Sedibeng was not aware of the terrain before purchasing the wrong vehicles.

The Chairperson  asked if Sedibeng had a budget for maintenance of infrastructure.

Mr Takalani said the structure for the bucket eradication had been done but the problem was to make the toilets work. Work was still being done on the treatment plant. This would be completely done by September or October. The raw water quality and amounts are indeed affected by drought. Sedibeng had no dam of its own, apart from one in Northern Cape that it is managing on behalf of the Department of Water and Sanitation. Sedibeng is not involved in the Bloemhof pipeline, nor with the Bloemhof Water treatment waste. Instead, Sedibeng is only doing the operation and maintenance. Matjhabeng Municipality owes the highest level of debt. Sedibeng still supplies water to the municipalities even though their contracts have expired. The contract will be extended every three months, though most of the municipalities do not honour the agreement they signed. The delayed payment to Eskom arose because Eskom sent the invoices to the wrong addresses and by the time they reached the Board, the day for payment had passed. Sedibeng has sent its email address to Eskom so that Eskom can now send the invoices via email. In relation to the vehicles, he explained that another brand was later identified to run better on the particular terrain. One of the hotspots had been identified and it had been put under emergency measures, with a project underway. Sedibeng has drilled boreholes and is busy with equipping and connection to the pipelines. Sedibeng is engaging with the community, and specifically the farmers, since most of the boreholes are drilled on their farms. In relation to budgeting for maintenance of infrastructure, the municipalities kept complaining of lack of funds.

Another representative from Sedibeng noted that the bucket eradication structure had been completed, with some functionality remaining to be completed, hopefully by the end of this financial year.

Mr Nteo said the time frame for the staff repayment of loans is 12 months, but other shorter-term debts like phone calls by the employees would be deducted from their salaries. Only Sand/Vet River is affected by the drought because it is dependent on the rain, Vaal River has no problem. In the Northern Cape, water was drawn from the Vaal river and some water is received from the mines. When the miners mine, they bring out water and then pump into Sedibeng’s pipeline. Sedibeng does not pay for the water but only pays for the cost of pumping the water into its pipeline.

Mr Nteo confirmed that auditors are appointed annually by the audit committee.

Ms M Khawula (EFF) asked if any representative from the SA Human Rights Commission was present at this meeting. She recapped that she had made complaints about ward 19 in Claremont, and the complaints from residents about the overflown pit toilets. The residents were complaining about the smell and the fact that their children were getting sick as a result of that.

The Chairperson responded to Ms Khawula that neither of these two entities present today would be able to speak to her question; the areas that she was complaining about were outside their area of operations.

Mr M Galo (AIC) asked if the recreation, HIV counselling and testing programmes in the organisation were compulsory for the employees and management, and if not compulsory, then he wanted to know how the employees would get involved. He noted that Sedibeng Water was owed R1.3 million and the debt was now running at more than 90 days, so he asked what are the plans to recover that? He also noted that the average expenditure on BBBEE is over 94%, but he asked for the names of the service providers. He wanted to know if the Regional Infrastructural Bulk grant was absorbed in a municipality’s infrastructure, and if it was, he wondered if this would not compromise water services?

Mr Takalani said the programmes were not compulsory but employees were encouraged to participate. The list of the service providers would be sent to the Committee.

Mr Nteo said the Regional Bulk Infrastructural grant is given for a specific project and not for operational expenditure. The grant ceases as soon as the project has ended.

Bloem Water 2014/15 Annual Report briefing
Dr Limakatsi Moorosi, Chief Executive, Bloem Water, apologised on behalf of the chairperson of the Board for his absence.

He noted that the ministerial directives issued to the board include bucket eradication and maintenance. The Board had five goals for the 2014/15 financial year,and he would outline these and the performance.
- Goal 1 is to develop, operate and maintain infrastructure to ensure sustainable water service delivery. 66% was achieved, 33% was not achieved and 1% was partially achieved.
- Goal 2 entails securing the supply and quality of raw water sources. This goal was fully achieved.
- Goal 3 entails managing financial affairs to meet current and future obligations. 92% was achieved and 8% was not achieved.
- Goal 4 entails engaging in strategic partnerships with all relevant stakeholders. 50% was achieved, and 50% was partially achieved.
- Goal 5 entails achieving an aligned and efficient institution through an optimisation of all business processes and systems. 80% was achieved, and 20% was partially achieved. The reasons for the underperformance are mostly because of the municipalities not being ready to sign the contracts of service. Also, most of the municipalities and their populations in the areas where Bloem Water operated are poverty stricken.

Mr Ockert Stadler, Chief Financial Officer, Bloem Water, said that non-current assets are marginally lower than budget, as not all CAPEX projects were concluded. The reasons for underspending are largely because of implementation of cost containment measures. The raw water charges were below the targeted expense mainly due to a decrease in abstraction of Groothoek Dam. Depreciation is lower due to project values not capitalised and depreciated before becoming operational. Staff cost is marginally lower, as recruitment is now done in a phased approach. There was no irregular expenditure but there was an amount of R1 700 classed as wasteful and fruitless expenditure. The executive management has suspended the individuals implicated, pending the outcome of a detailed investigation into the matter. Bleom Water had no contingent liabilities. The entity received an unqualified audit opinion. The challenges included provision of water, debtors position, cash flow constraints, capacity constraints, Capex funding, investigations and disciplinary cases.

Discussion
The Chairperson asked about the cost of bucket eradication. He also wanted to know how the Board would measure the demand vs supply of water? He requested the cost in terms of consumption, losses and production per day?

Mr Basson said that Bloem Water receives water from the Caledon River. In December, 6 mega litres per second were released via the Katse dam. Bloemhof receives approximately 1.5 mega litres. The question to be balanced is why should Bloem Water pay more, if the ultimate recipients were only to receive a certain amount of the water. He suggested that the Department of Water and Sanitation (DWS) should get involved in an equitable share arrangement.

Ms Baker suggested that a joint meeting with the Department of Cooperative Governance (COGTA) be held. She wanted to have more detail on the monitoring system or plans in place with regards to abstracting dams. She asked why there was till abstraction from dams until they were completely dry? What is the treatment plan for dams?

The Chairperson asked about the cost drivers of consumption of water.

Dr Moorosi responded that Bloem Water had done a comparison of the costs in relation to bucket eradication, with other areas and had found that the Bloem Water costs were still the cheapest by far. There was a format for the Annual Report. There were standing orders by the Department that stated how much can be abstracted from dams, and when abstraction can stop.

Mr Mokutu Kgwale, Executive: Operations and Maintenance, Bloem Water said the cost of eradicating buckets includes piping, design, and programme management. Bloem water still remains the cheapest of all the water boards attending to this.

Mr Stadler said the production cost will be added in and presented to the Committee at the next presentation. He said that the major cost drivers are energy, repairs and maintenance.

Mr Basson asked the cost per mega litre of chemicals. He wondered when the Department of Water and Sanitation would be paying its debt?

Ms Khawula asked what had been done to recover the debt owed by some of the municipalities that received water services. She also asked how Bloem water uses the budget given to it to avoid water shortages?

Mr Mnguni asked about the timeframe for the investigation on wasteful expenditure, pointing out that the figure was still high.

Mr Anil Singh, Deputy Director General: Regulation and Compliance, DWS, said the questions directed to the Department will be answered in the next meeting that the Department had with the Committee.

Dr Moorosi said there are disciplinary procedures ongoing, but was unable to speak to the exact timeframes. She said that the progress will be communicated to the Committee.

The meeting was adjourned.

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