Trans Caledon Tunnel Authority, Water Research Commission, Inkomti-Usuthu & Breede-Gouritz CMA on their 2015/16 Annual Reports

Water and Sanitation

21 October 2016
Chairperson: Mr M Johnson (ANC)

Meeting Summary

Annual Reports 2015/16 

The Portfolio Committee on Water and Sanitation held a meeting with the Trans Caledon Tunnel Authority (TCTA), the Water Research Commission (WRC), the Inkomati-Usuthu Catchment Management Agency (IUCMA) and the Breede-Gouritz Catchment Management Agency (BGCMA) on their annual reports for 2015/2016.

The TCTA said it wanted to be a wiser and stronger entity from within, and thus retained its skills and tried to run the business cost-effectively. In most cases, it had completed all its projects, met its objectives, and 2 590 jobs had been created. However, the number of jobs would decrease because most projects were coming to an end. The entity had received a clean audit finding. The Committee expressed concerns about the Acid Mine Drainage (AMD) programme, the TCTA’s relocation policy, the charge received for its improper calculation of Value Added Tax(VAT), and the process of issuing bonus payments. 

The WRC said there was a move to non-water sanitation techniques around the world. As a result, the WRC was testing around 30 sanitation technologies, in cooperation with global stake holders. Water solutions, together with bio-gas solutions, were used to uplift communities. The WRC was proud of miniSASS, a cell phone app which allowed users to locate the nearest stream or river and see the river’s current health index, which had gone international. With regard to projects initiated annually, 445 projects were in the WRC’s domain, with an increase of about 90 each year. It had received some unqualified audit opinions, and there had been some findings which had been addressed.

Members asked if South Africa was safe with regard to water provision and in light of the drought and weather, new technologies were ready to be used to eradicate the bucket toilet system. The WRC said that what South Africa did not keep in mind was the demand character of the drought. In the current drought, people had not dropped below the required water consumption levels. In the middle of drought, there had been a hike in water use. This was a sociological issue. The shift in climate patterns had changed people’s understanding of drought. There was no avoiding the need to change patterns of water use within the system.

The IUCMA said it had received a decade of clean audits since the inception of the entity. It was also proud of its new water app, which provided water forecasts for community members. The drought was a challenge, but restrictions had been implemented, which had resulted in a 60% reduction. Farmers were irrigating at 40% of previous levels. The Committee wondered if the Agency was not hiding the true challenges because on the ground there were serious water issues. They questioned why the budget had increased.  It was also alleged that in Inkomati, people were consuming dirty water.

The BGCMA said an increase in human capacity was needed, and indicated that regular advice had been provided to key municipalities in the 2015/2016 financial year. It was dependent on a grant from the state which had been cut last year, but this had not had any material impact. With regard to resource protection, 112 water sources had been identified for testing purposes. Various transformation mechanisms were in place. The entity had received an unqualified audit outcome. Members wanted to know why salaries accounted for almost 75% of the Agency’s expenditure. Were its operations sustainable in the light of the funding cuts?

At the end of the meeting, the Chairperson told the Department of Water and Sanitation (DWS) that quicker progress needed to be made. The bucket eradication issue had been raised constantly, and the Department still could not say when the programme would be complete. 

Meeting report

Trans Caledon Tunnel Authority (TCTA): Annual report

Mr James Ndlovu, Chief Executive Officer: TCTA, said that the mandate of the TCTA was to finance and build the infrastructure which had been budgeted for. There were a few projects which it was managing and rolling out. The organisation had a “wall-to-wall” type of structure. It provided advisory services where it could, and built a strong knowledge management reservoir. The TCTA was doing very well.

The TCTA had five objectives which were externally and internally looking. These were related to the delivery of ministerial directives, ensuring that all project activities facilitated social transformation and built communities, operated the business and its projects in a cost-effective manner, building the knowledge and capacity of the organization and ensuring the continuous availability of high calibre human capital. There were two key focus areas. Firstly, the TCTA spoke broadly to the socio-economic objectives of Government. The second focus was making sure that projects were catalysts for growth. The TCTA wanted to be wiser and stronger from within and thus kept skills and tried to run its business in a cost-effective manner. The business was operating within budget.

The TCTA had been focusing on government outcomes. Outcome number 4 spoke to decent employment. TCTA products were focused on cost effective water infrastructure and developing an efficient, competitive and responsive economic infrastructure network. It constantly looked for better pricing for water provision. Financing water could not be expensive. With regard to the development of knowledge, TCTA was very much focused on building skills. Comprehensive training was the key. It wanted to match private sector strategies and was constantly attempting to raise funds.

Prof Ola Busari, Executive Manager: Knowledge Management, TCTA , said that the performance report focused on four objectives. The first had to do with raising finance and the second dealt with constructing infrastructure. The third dealt with the development of skills and the last was TCTA’s advisory role. With regard to financing and debt, in the 2016/2017 year it was able to ensure that it paid its debt on time and it paid its interest. Four projects were at different stages of implementation.

With regards to Mooi-Mgeni River Transfer Scheme, the full yield of the Mooi River could now be transferred into the Mgeni system to alleviate the stress caused by drought. The Mokolo Crocodile River Water Augmentation Project had been completed well before the additional needs caused by the construction of the Medupi Power Station and the associated mining activities. The first 10km of the Olifants River Water Resources Development Project pipeline had been able to deliver water to the water treatment works at Steelbrug since 2014. Delays in the completion of the remainder of the project had not had a service delivery impact, as the infrastructure necessary to take water was not in place. With regards to Acid Mine Drainage (AMD), no discharge of untreated AMD had occurred and there had been no reports of pollution to groundwater.

Mr Nhlanha Nkabinde, Executive Manager: TCTA, said that in most cases TCTA completed its projects. In general, it had learnt a lot from government’s agenda. 2 590 jobs had been created. The number of jobs was decreasing, because projects were coming to an end. In cases were TCTA did not have semi-skilled and skilled labour within a specific areas, it looked to other areas

Ms Carol Mtshali, Financial Controller: TCTA, said that the Agency had received more money than it had budgeted for.  This was due to the high water sales which had been received by the Department in the Vaal River system. This had had a benefit to the consumer, but it would result in lower recoveries in the region if the drought persisted. With regards to the running expenditure, royalties made up R7.75 million of the R1.3 billion amount. These were payments made to the government of Lesotho. The directly controlled expenditure was mostly made up of remuneration costs, which were 2% of the costs incurred. Finance charges were closely correlated with the reduction in capital expenditure. The finance charges amounted to R2.7 billion.

Mr Ndlovu said with regards to the auditor’s opinion, the financial statements had been presented fairly in all respects.

Water Research Commission (WRC): Annual report

Mr Dhesigen Naidoo, Chief Executive Officer: WRC, said the Commission would emphasise the six impact areas. With regard to the big hit items, in the last financial year on the back of the drought, the WRC had launched various tools. One of them was a drought portal. Cape Town was on level three water restrictions, which was the highest in the country.  Furthermore, the WRC also empowered communities. There was a tool called Aqua-trip which was an automatic water shutdown system which managed water leakages. If there were leaks, Aqua-trip would shut down the whole water system. The Women’s Consultative Conference had been launched last week on Friday. It had a number of components. There were 70 candidates. The Committee would need to empower this programme to function optimally.

Mr Naidoo said that the indaba last year had been a global milestone event. There was a move to non-water sanitation techniques around the world. As a result, the WRC was testing around 30 sanitation technologies in cooperation with global stake holders. With regard to international work, in the Global Water Research Coalition Institution the WRC was one of the founding members in emphasising water and sanitation mechanisms. There were important international agreements which had been completed.

Among the 2015/2016 highlights, the most important nexus was the water, sanitation and energy nexus. Water solutions, together with bio-gas solutions, were used to uplift communities. The WRC was proud of miniSASS, a cell phone app which allowed users to locate the nearest stream or river and see the river’s current health index, which had gone international. This was extended to the adult domain, and it had been adopted internationally. Mexico was planning a full scale roll-out.

With regard to projects initiated annually, 445 projects were in the WRC’s domain, with an increase of about 90 each year. This fluctuated yearly, however. With regard to the number of finalised projects, there were 440 in total.

Mr Fazel Ismail, Chief Finanacial Officer (CFO): WRC, said there were two things to highlight with regards to the financials. WRC had received some unqualified opinions, and there were some findings which had been addressed. The WRC’s primary source of funding was research. With regard to sustainability, the WRC was increasing its leverage income. There were increases in funding sources. With regard to expenditure, the WRC was in-line with its budget.

Mr Naidoo said that there had been a drop in the number of students supported by the WRC, to 492. Besides this target, all of the other targets had been met or superseded. Furthermore, there were projects operating outside SA’s borders, but funding for such projects came from international sources. There had not been a need to invest South African money in these international projects. The WRC wanted to orientate projects in a way that they could be applicable throughout the country. There were a fair number of small, micro and medium enterprises (SMMEs) participating in WRC projects. The WRC had over 90% participation of students who were black. Furthermore, females outnumbered males.

With regard to project leadership, 60 personal development plans (PDP’s) had been completed. The bar was moving with regard to reducing the dominance of the white male sector. It had not lost white males, but was experiencing a unique transformation.

Discussion

The Chairperson said it would be valuable if the WRC presented the online portal. He asked Mr Naidoo how long he had been in office.

Mr Naidoo responded that he was in his second term.

The Chairperson said that greater stability was found in entities, such as WRC, than was found in the Department.

Ms T Baker (DA) referred to the drought, and asked how prepared South Africa was to deal with the coming summer, as it would be warmer. With regard to sanitation technologies, would any of WRC’s projects deal with bucket eradication? To whom was the water research levied?

Mr T Makondo (ANC) asked how the TCTA was dealing with problems of reallocation at the Olifants River Water Resources Development Project. Turning to the WRC, he asked how safe the country was with regard to water consumption.

Mr L Basson (DA) asked the TCTA to explain and clarify issues pertaining to the payment of bonuses, as one employee had had to be paid R3 million in bonuses after he had taken the TCTA to the Commission for Conciliation, Mediation and Arbitration (CCMA). Furthermore, it had calculated value-added tax (VAT) incorrectly had had to pay a bill. How was it going to handle this?

The Chairperson asked for clarification on affordable infrastructure for the TCTA. What had been the model as it went out to the market? With regard to local skilled labour, while it utilized unskilled labour did it factor in the need for skilling? Did the TCTA skill local unskilled workers? He was concerned with the Acid Mine Drainage (AMD) programme, as its long term objective of catering for a lot of provinces, especially Gauteng, was taking forever. He asked to what extend the TCTA was working with the private-sector, which was focused on maximizing profits. What were the costs associated with  delays?

Mr Ndlovu said with regards to the strategy of dealing with employment equity and transformation, historically the TCTA had made sure that for any project there was a triangular structure. The companies which TCTA used needed to build and transform the other two companies. With regard to the employment equity level, this was always at level seven. The TCTA was anticipating that black companies which were at level nine would be used. Level eights and nines would improve the big five companies. Level sevens were being grown and there was very good progress. Some of these companies were forming agreements with big companies.

With regard to funding, the TCTA always looked for partners which could match tariffs and meet users’ needs. It negotiated with banks to get the best price. It ring-fenced cash-flows and used the state as a last resort. All ring-fenced projects were ensured to manage the mandate of the TCTA for the next 20 years. All projects were rated individually so that they could attract a particular price.

Mr Nkabinde said the TCTA had developed finance to manage AMD. It was in the process of implementing the process as part of the Vaal River system. The amalgamation of projects through integrated funding was crucial.

Ms Mshali said that the R36 million bill involving VAT was related to issues of provision. The TCTA had been working with the South African Revenue Service (SARS) to establish who was in the wrong. The issue was being addressed.

Mr Sibalo Dlamini, Head of Projects: TCTA, said the TCTA focused on skills development programmes, and there was a budget allocated for this. It was at the entry level at the moment. Programmes were approved and were monitored continuously.

With regards to delays in the Olifants River Water Resources Development Project, these were as a result of community unrest in the area. This involved access to land. Problems were being managed in the contract under “delay damages”. The TCTA had engaged with the community. There was unexpected community unrest and it proactively managing this with local authorities and tribal leaders. Good relations between the TCTA, local authorities and the communities had since been established.

With regards to contractors, through TCTA expertise, the Agency had managed to make the contractor sub-contract some of the work. Even though there were delays, the TCTA had managed to stay within budget. It had never managed to exceed its budget.

The Chairperson asked how the Department had learnt from this process. In previous gatherings, the Committee had heard that the Department had experienced delays which had led to a dramatic rise in the budget. There had been cases where a rise of almost 100% was reported. This was the point -- staying within budget after delays.

Mr Nkabinde said with regards to reallocation, the TCTA had a structured approach. There was a land acquisition policy, and compensation was paid to the community. Areas were identified where new houses could be built. The TCTA did this in consultation with local authorities, and community forums were established.

Mr Ndlovu said that if the TCTA did not have the time to listen to communities, it would lead to great problems. Its policy was that of continuous consultation with communities. With regard to bonuses, it was in dispute with one of its executive members, and the matter was at the CCMA. It had a policy on bonuses. The organisation had a policy on incentives and remuneration. Targets would be set, based on a balance score card. There was a corporate balance card which had to be achieved.  Recommendations would be made to the board, which it decided on the incentives.

Mr Basson asked the Department to explain if this was a norm within the Department.

The Chairperson said that it was a concern that the Department needed to discuss a number of issues, while it did not have all its members present.

Ms Baker spoke on the explanation with regard to the bonus payments. The TCTA had said that the board could use its discretion to pay board members bonuses. Who monitored this discretion?

The Chairperson said the Department had advised the Committee that there were deviations because of the drought emergency. It was as if the Department had no clue, and it had been a surprise that the drought had struck. This was why he wanted to look at the WRC portal. This spoke to the integration of work from a planning and budget point of view.

Ms M Khawula (EFF) said the TCTA had spoken about the relocation of people. Did it relocate them to good areas with proper facilities? Did it provide decent living conditions, and if vegetation was destroyed in old areas, what did it do? Were people informed of their rights before they were moved?  What criteria were used to select people for the WRC Women’s Conference?

Mr Naidoo said the WRC was sorry that it did not have the portal present. On the broader issue of the predictability level for the drought in South Africa, forecasts had been made. Some communities had taken these forecasts seriously, and others had not. What South Africa did not keep in mind was the demand character of the drought. In the current drought, people had not dropped below the required water consumption levels. In the middle of drought, there had been a hike in water use. This was a sociological issue. The WRC had to become more serious about predictability. He added that there had been extreme events and disasters around the world. The shift in climate patterns had changed people’s understanding of drought. There was no avoiding the need to change patterns of water use within the system.

Furthermore, there were no significant technological barriers anymore. The WRC had shifted its processes to empower implementation and impact. One of the issues with water was that the price of water did not have relationship with the value of water. If South Africa wanted to work internationally, efficiency around productive processes was essential.

A completely new method was needed for managing water. With regard to water technologies, he said that they had so far been proven only at the laboratory level. Water technologies needed to be tested on the ground to assess a range of issues, and their feasibility and accessibility. There was potential that South Africa could play a leading role in a sanitation revolution worldwide.

He said that the WRC’s levies were on water, and were charged to bulk users and consumers. Some passed the charge on to consumers. With regards to Aqua-trip programme, he said that the war on leaks was a scale up programme. It was not a duplication.

With regard to the Women in Water empowerment programme, the Minister was trying to address the issue of women left behind. This was a pilot programme. There was a process in place to ensure that women were playing a role. As a pilot, it could include only a small number of women who had specific qualities.

Mr Anil Singh, Deputy Director General: Water Sector Regulations, Department of Water and Sanitation (DWS), said that the TCTA had responded on the issue of bonuses. This was a controversial topic, but the Department had policy in place. The board made a request to the Minister to approve bonuses. The TCTA could provide a written response with regard to the bonus issue. The Department had a governance model to strengthen the Minister’s oversight role. With regard to the TCTA, the DWS would come back to the Committee with answers.

Inkomati-Usuthu Catchment Management Agency (IUCMA): Annual report

Ms Patience Nyakane, Chairperson: IUCMA said that the Agency was making progressive strides in technological advancements. With regard to knowledge sharing and capacity building, a conference had been held in the catchment area. A women’s conference had also been held.

The financial performance had resulted in a clean audit. The IUCMA had received a decade of clean audits since the inception of the entity. The Chairperson was proud of this achievement.  Board stipends were in line with National Treasury guidelines. Inkomati had received the lowest rainfalls. The IUCMA also monitored annual rainfall. An app had been created to give people proper water forecasts.

Pertaining to water utilization, the IUCMA had facilitated the eradication of application backlogs for water use licences. This had emphasised the need to have water licensing at the local level. With regards to employment equity, there was a move towards a balance in gender. She said she could be held accountable if it did not have a 75% representation of women in executive management next year.

The drought was a challenge but restrictions had been implemented, which had resulted in a 60% reduction. People were irrigating at 40% of previous levels. Efforts had been made to engage with Cooperative Governance and Traditional Affairs (CoGTA).

Ms Thembelihle Mbatha, Acting CEO: IUCMA, said the Agency’s new water app was a key achievements, of which it was proud. There had been a roll-over of funds and only one finding, which dealt with performance issues.

Discussion

Mr Basson said the audit committee had mentioned that the Minister had withdrawn a delegation to the board, and asked why that was so.

Mr Baker said that a few weeks ago there was an incident where there was no water in Amsterdam. How stable was the water supply in the area? Was the water demand model accurate in predicting water? What was going to happen between now and the finalisation of the project?

Ms Khawula said that there were problems, but the presentation was not showing them. In Inkomati, people were consuming dirty water. Was the IUCMA hiding things from the Committee?

The Chairperson said that there had been a sharp increase in revenue. What was intriguing was the investment revenue. These were areas of keen interest. There was also a sharp increase in cash in the bank. Were there any correlations between the investment and the operating surplus?

Ms H Kekana (ANC) commented that when it had talked of 100%, it had said that there were no problems at all.

Ms Nyakane said that one of the challenges was the issue of AMD. The Department had spoken to this. The ICUMA was facing a serious situation. It was at a 60% level, from 100%. Irrigation was at 40%. Farmers irrigated in turns. With regard to water services, IUCMA was working with municipalities. Some were facing issues, but IUCMA was primarily a water reserve agency, and not a water service entity.

With regard to delegation, it had received delegation, which had to be reworked.  With regard to catchment, the IUCMA had moved into a new part of the area. It had finalised a project in the Usuthu water scheme area. This touched on why the budget had increased so much. IUCMA was taking care of the Usuthu part of the catchment area.

Furthermore, staff had been beefed up, and some of the projects too. With regard to increases, there were some timing issues with regards to transfers. The IUCMA had R30 million in reserves, and interest rates were more favourable.

Breede-Gouritz Catchment Management Agency (BGCMA): Annual report

Mr Bongani Mnisi, Deputy Chairperson: BGCMA, said that ever since the Agency had been operational it had received clean audits.

Mr Phakamani Buthelezi, Chief Executive Officer: BGCMA, said the main focus was on the quality of water. BGCMA wanted to make sure that the water which it management was of quality. The mandate was very clear. The founding legislation was the Water Management Act. There were eight strategic objectives which the BGCMA aimed to achieve. An increase in human capacity was needed. Regular advice was being provided to key municipalities. There was a direct relationship between water resources and water service.

With regards to the budget, BGCMA were dependent on grant from the state. This was slashed from last year but it did not have material impact. With regards to annual performance information, there was a need to development a water catchment plan. A product provider was present. It needed to make sure that there was water for the environment. 80% of water licences were made. 11% registrations were finalized, 65 audits were completed, 113 samples were taken, 2 quality reports were completed and 4 projects were completed in Breede-River.

With regard to resource protection, 112 water sources had been identified for testing purposes. Various transformative mechanisms were in place. The entity had received an unqualified audit outcome.  With regard to audit risks, there were three committees -- a technical committee, a human resources committee and an audit committee -- which ensured that there was risk management in place. The management of the committees was consistent. The grant received by the Agency had been slashed by R13 million. R23 million had been received from the state.

The Chairperson said he could not understand what was meant by internal audit being outsourced.

Mr Buthelezi said PricewaterhouseCoopers (PWC) had been used to do the internal audit.

Mr Basson looked at the financial statement in comparison to the budget, and said that the project expenditure was R5.3 million, but R2 million had been spent on personnel fees. R18.5 million had gone to salaries. Were grants funding salaries and not projects?

The Chairperson asked for clarity on internal and external audit. It became internal when one had one’s own system, and provided monthly audit reports and better tracking. External audit gave the ultimate report at the end of the financial year. He asked for clarity on this.

Mr Basson said that salaries made up 74.9% of total expenditure. This was way too high, and an explanation was needed on why the percentage was so high.

Mr Buthelezi said that capacity issues had led the Agency to use external auditors. He said the external audit books were with the Auditor General.

Ms Zanele Ngoma, Chief Financial Officer: BGCMA, said that project costs and consultant fees were not linked. With regard to salaries, this was a service-orientated agency. It was not business orientated, and that was why salaries were high.

Ms Kekana wanted clarification on the issue of fraud, which the report had not mentioned.

Mr Buthelezi said that this related to the fact that there had been no irregular expenditure within the agency.

The Chairperson said that this was self-explanatory. There was no fraud and consequence management.

Mr Basson said that there had been a huge cut in grants and the Agency had had to utilize its own cash. In the new financial year, had it received increased grants? If not, it would have a shortfall. What was the situation in the current financial year?

Ms Ngoma said that in order to survive the budget cuts, it had asked the government to allow it to utilize roll-over funds. The budget was about R47 million. The Agency was safe this year.

Mr Baker said that when water tariffs were increased, the entity’s tariff increase had been denied. Had this had any impact on cash flow and revenue?

Ms Ngoma said that it had consulted with the stakeholder, and as the entity was reliant on the grant it had had no impact.

Ms Khawula said evidence was needed to show what had been done. What was the extent of the work the Department had done? Were water issues being taken seriously by the DWS? Issues which had been raised since she had been in the Committee were still present. Mr Singh, as DDG, needed to go and look at which things which were said in the Committee. The Department needed to provide a report on its key accomplishments since 2014. Other key stakeholders in state entities were needed at the Committee’s meetings.

The Chairperson said the lives of the people needed to improve. This was what kept the Committee together. Matters needed to move a lot more quickly. The bucket eradication issue had been raised constantly. The Department could not respond as to when the bucket eradication programme would be complete. This was what the Committee was saying. This was a constant problem -- there needed to be faster movement. Time needed to be managed better to deal with these issues.

The meeting was adjourned.