Department of Water and Sanitation Annual Performance Plan, with Deputy Minister

Meeting report

The Chairperson noted the Minister is absent with apologies. The presence of the Minister is appreciated, not to undermine the knowledge of the Director General and the Deputy Minister. Committee members represent the provinces, and it would be beneficial to bring their matters to the Minister. The Committee does not want to hear from the media that DWS is bankrupt. Is the Department bankrupt or not? She referred to the Lushushwane Bulk Water Supply Project in Mpumalanga that the Committee had recently visited and asked who will be responsible for the project after it is up and running. What happens to people who cannot pay for water? The Western Cape has been in a drought; what has been done to assist it and to what extent has the assistance impacted the province? She noted that Kopanong Local Municipality is not paying Rand Water. As a result, Rand Water has partially suspended their services. This needs to be resolved; people cannot suffer because their municipality has not paid for water. On August 21-25, the Committee is returning to Kopanong and the issue needs to be resolved by then. Most of the things the Committee knows about DWS is from watching TV. If DWS does a project, it needs to brief the Committee about it.

Minister of Water and Sanitation opening remarks
Ms Pamela Tshwete, Deputy Minister, said the Director General has noted that the Committee should be made aware of every activity DWS is doing. The Department apologizes for moving ahead of the Committee. The allegations of bankruptcy will be addressed in the presentation. In 2014, DWS ended up under spending by R200 million. Ever since, there has been continuous budget cuts. There are serious challenges with the water boards. The water boards are owed money by the municipalities and Department is also owed money by the municipalities. She gave the example of OR Tambo Municipality that owes DWS R20 million. DWS has intervened in all of the municipalities that are dealing with the drought. DWS did so because the municipalities did not have the capacity to aid themselves. As a result, there was a lot of irregular expenditure from delivering water. The responsibility of DWS is bulk water supply only. DWS is doing the work of municipalities because people reach out to DWS for any water problem. For example, when the DWS went to OR Tambo Municipality, no one from the municipality was dealing with the drought.

Department of Water and Sanitation on the Budget Vote and Annual Performance Plan
The Deputy Minister was accompanied by Director General, Mr Dan Mashitisho, Mr Sifiso Mkhize, CFO, Ms Deborah Mochotlhi, Deputy Director General of Planning, Ms Petunia Ramunenyiwa, Acting DDG:PMU, Ms Thoko Sigwaza DDG: Regulation, Mr Kay Govender, DDG CS, Ms Janine Julies-Nale, Chief Director of Communication, Ms Babalwa Manyakanyaka CD of Corporate Planning and Organizational Performance, Mr Sputnik Ratau Director of Communication, Dr Thele Moema, Ministry Advisor, Mr Siyabonga Nene, Chief of Staff, Mr Mlimandlela Ndamase, Ministry Spokesperson, and Ms Reshoketswe Moloto, Director of Policy Coordination and Stakeholder Management.

Director General, Mr Dan Mashitisho, explained the briefing would consist of DWS performance and medium term budget information and an overview of the Water Trading Entity (WTE). DWS collaborates internationally, nationally, and interdepartmentally. The mission of DWS is to ensure the universal access of all South Africans to equitable water resources and sustainable water and sanitation services.

Ms Babalwa Manyakanyaka, DWS Chief Director: Corporate Planning and Organisational Performance, gave an overview of the DWS programmes: 1. Administration (providing leadership, management and support services); 2. Watering Planning and Information Management (assesses water loss in large water supply systems, implements water monitoring plans and audits water service authorities on water and sanitation delivery); 3. Water Infrastructure Development (ensures adequate water availability and provision of reliable water supply and sanitation services and eradication bucket sanitation); and 4. Water Sector Regulation (protects water resources by regulation of water supply and sanitation services and compliance monitoring and enforcement).

Mr Sifiso Mkhize, CFO, gave an overview of the grant allocations to Regional Bulk Direct Grants; Regional Bulk Indirect Grants, Regional Bulk Water Boards, Water Services Infrastructure Grant Direct Transfer, and Water Service Infrastructure Indirect Grants. The 2017/18 funding is R9.7 billion. He noted figures for infrastructure projects. The 2017/18 budget has a R748 million surplus which will go towards reducing the overdraft as at 31 March 2017 (see document for full presentation and budget breakdown).

Mr Mkhize said DWS is not bankrupt. When the newspaper article came out that reported the DWS was bankrupt, DWS still had R2 billion left in its bank account. DWS responded to the article saying they still have that money. DWS has since paid service providers and has closed the 2016/17 financial year. The 2016/17 audit is still to be completed and should be ready by July. In the last seven financial years, DWS has received unqualified audit opinions. The main focuses for the last financial year were commitments and accruals. This financial year is on track. The accruals accrued because DWS issues multiyear projects and the service providers get their work done faster than anticipated. The service providers do not bill for the work that has been done, but DWS has to record the work in their financial statements. R1.5 billion in accruals was recorded as the continuation of multiyear projects. The money is available to pay for the projects. The accruals are paid in line with the projects they were accrued to.

Mr Mashitisho added that Bloem Water Board is under financial stress because of the lack of payments from municipalities. According to a meeting with Bloem Water, the main challenge is that Mangaung Metro owes the water board over R300 million. Bloem Water wants to restrict water access to the metro as a way to get a response from them. The Hoxane Water Scheme project under the Rand Water Board is near completion. The Rand Water Board will operate it until there is capacity for another water board to help operate it.

Mr Mkhize said that various municipalities owe water boards over R3 billion. The DWS cannot cut water services to the municipalities, but the debt is rising. The water debt has resulted in the Water Trading Entity having an overdraft of R2.1 billion. Even when municipalities start paying, it is too little in relation to what is owed.

Discussion
The Chairperson said the presentation needs to be more detailed. It seems as if DWS is hiding something.

Ms L Zwane (ANC, KwaZulu-Natal) commended DWS for giving a fair view on what services would be provided to the provinces. Has DWS been to a hearing with the Standing Committee on Public Accounts (SCOPA) about its financial mangement yet? DWS has projects based on different dams, but are there any dams in KwaZulu-Natal? People need to benefit from dams in KwaZulu-Natal. Is DWS prepared to defend itself to the Auditor-General? DWS needs to ensure it follows procedure for its project plans to avoid irregular expenditure. How many houses have clean and useable water in South Africa? How many bucket systems will be eradicated in this financial year? She noted a budget reduction for Programme 3 and asked how DWS will reach the programme’s targets with the budget cuts. The reasons for increasing the budget for computers and consultants needed to be explained.

Mr C Hattingh (DA, North West) said the Committee learned from the media report that DWS owes contractors R1.9 billion by the end of the financial year. Is this correct? The contractors for the multiyear projects exceed the expected amount of work. How did DWS, if it is in full control of itself, let this situation happen? There is currently a R748 million overdraft and about R200 million will be paid off in the next financial year. Where is this money coming from?

Ms T Mpambo-Sibhukwana (DA, Western Cape) spoke in the vernacular for some of her input. She said that on page 29, 30 and 32, the direct grants and indirect grants are allocated per province. For Regional Bulk Direct Grants, Western Cape is allocated R17.985m; for Regional Bulk Indirect Grants, R12.949 million; and for Water Services Infrastructure Grant Direct Transfers, R30m. What are the criteria for determining the allocation of the budget across provinces? Certain provinces cannot be prioritized over others. How much is the fruitless and wasteful expenditure from DWS? In order for a disaster to be declared as a national disaster, the Minister needs to state this, not the province. What is the specific time frame to pay off the municipal debts? There has been a plan put in place to pay off R2 million a month, but when will the last balance be paid off? With the recent drought, efforts on how to save water need to be explained in the citizen’s own language.

Mr M Khawula (IFP; KwaZulu-Natal) asked why the accruals span over two years, 2015-16 and 2016-17. How does DWS not pay the people it owes after two years? DWS is waiting for a municipality rather than the Rand Water Board to have the capacity to run the Hoxane water scheme operation. How does one start a project and not know who is going to run the operation at the end? What is the policy to be followed when municipalities do not pay the water boards? Who is supposed to be collecting water rates from the users? The users do not pay the municipalities and in return the municipalities do not pay the water boards. How is DWS assisting the municipalities to collect the payments from the users who do have the ability to pay? DWS needs to focus on the users who have this capacity; it must tell the Committee what it will start doing to address this debt.

Ms P Samka-Mququ (ANC) spoke in the vernacular. She wanted clarity on the bucket eradication system as in the Eastern Cape in Ntabakhulu there are more than 37 houses still using buckets. She referred to direct and indirect grants on page 33 of the presentation and noted there are provinces not mentioned and she asked why. On the monies owed by municipalities for water, no solution has been given. Does the Committee just leave it at that? She asked about progress on the Mzimvubu dam that was supposed to be built in the Eastern Cape but has not been mentioned in the APP. She had raised this before and the Minister’s reply was they were still doing feasibility studies, and waiting for land approval where they were going to build the dam.

The Chairperson said the Committee has had discussions about DWS and is knowledgeable about these issues. When DWS answers a question, they must respond fully. Why are there so many challenges about water? The most important job for this Department is to ensure the community has water. DWS is allowing the overdraft to happen, not the water boards. Where do the water boards expect to get money if users do not pay the municipalities? Why are only a few water boards being given money from DWS and others are not? Western Cape and Mpumalanga do in fact have sanitation buckets; the Committee wants to hear that all of these bucket toilets are eradicated as well. How far along is the War on Leaks project?

Deputy Minister Tshwete said she had met with the students in Western Cape who are working on the War on Lakes project. The project was divided into three phases because there was not the capacity to take on 15 000 students at once. The project is working on desalination to deal with the drought, which will cost about R300 million. The project is able to give out water to many households. The specific number of households reached will be given to the Committee upon further research. Most of the DWS projects were not started by the current leadership. The DWS’s job is to ensure that these projects are completed before it brings new projects. It is not the responsibility of DWS to capacitate the municipalities. The students’ intentions are to go door to door, speaking in the relevant language of the area, to inform citizens about conserving water.

Mr Mashitisho said that Rand Water was appointed as the implementing agent for the Hoxane Water Scheme project. The main issue is that when the project is done, since it cuts across multiple municipalities, there should be a regional vote on who manages the project. The Water Trading Entity is run apart from the mainstream Department. Treasury put a system in place that an entity is not allowed to go into overdraft, but they allowed the entity to run an overdraft anyway. There is a process in place that is looking at the structuring of DWS. That will help to determine how the entities relate to DWS.

Mr Mkhize said the WTE overdraft happened because the non-payment by the municipalities had a ripple effect on WTE. The budgets of the water board entities are focused on the revenue they collect. By 2017/18, the entities were owed over R3 billion and DWS allocated this money to fund projects. Since they ended up not being able to collect from the municipalities, the entities had a short fall of R2.6 billion and that is how the overdraft occurred. The Mzimvubu water project is under way with building two dams. The designs for one dam is almost complete and the other is finished. DWS will start construction this financial year.

Mr Mkhize said the DWS appeared before SCOPA for the 2015/16 financial year to discuss irregular and fruitless and wasteful expenditure. There has since been measures put in place to increase financial management and to reduce irregular expenditure. The irregular expenditure was due to two different projects: the IT project completed three years ago where DWS could not agree with the Construction IT Alliance to advertise the project on their website; and the Giyani emergency project that DWS put into place after visiting the area. R14 million was declared as wasteful and fruitless expenditure. This expenditure included such items as missed air flights and a case with the State Attorney where DWS had to pay interest. DWS went to Treasury to raise the drought but Treasury said there is no money and DWS needs to reallocate its budget to deal with it. This resulted in irregular expenditure as well. DWS has seen lapses in project management and finances. A system has since been put in place to ensure contractors move at the same pace as the DWS schedule.

Ms Manyakanyaka said that the bucket eradication program was only focusing on formal areas, not informal areas. There was a finite number of over 52 000 buckets that had to be eradicated throughout the country. The project was not looking at other areas like Khayelitsha. However, DWS did pilot communal ablution facilities in Khayelitsha. DWS said they would play an advisory role on these facilities.

It was noted that 89.4% of households have piped water. According to the figures, there are 10.3 million households with access to water and by the end of 2019, 15.5 million will have access.

The Chairperson said that the bucket eradication programme is aimed at formal settlements. When DWS comes to present to the Committee again, it needs to have the number of bucket toilets eradicated and outstanding for each province. DWS needs to take these issues seriously because the Committee is representing the provinces. What led to the overdraft is that the water entities at the time were owed R3 billion and DWS started projects thinking that it would be paid. Any normal person would not commit to money they do not have. DWS needs to come back to the Committee and provide it with more information.

The minutes from 6 June 2017 were approved with no amendments.

The meeting was adjourned.