Department of Water and Sanitation on Quarter 1 performance, with Minister and Deputy Minister

Water and Sanitation

13 September 2017
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The first part of the meeting was devoted to the Minister of Water and Sanitation answering a wide range of questions from Members. These were centred on the apparent confusion over senior figures within the Department of Water and Sanitation (DWS) being suspended, moved around and returning to old posts. Its financial state, high overdraft and related conflict with the Treasury, were also causes for concern. Generally, the committee seemed to be of the perception that the DWS was being poorly run internally, was failing to meet the operational targets that had been set, and was costing too much. Members also accused the Department of failing to cooperate with Parliamentary oversight, and reminded its senior staff that they were not free to do as they wished.

The Minister took responsibility for the failings which had taken place, but made it clear that options were restricted by a number of difficult circumstances. The primary challenge was the delays and lack of payment on the part of municipalities, which made ordered quarterly reporting and planning of finances difficult to maintain. She stressed the difficult position in which DWS found itself, where it was obliged to provide water and related services to the population, whether it could pay for it or not. Finally, Treasury had imposed severe financial restrictions on the Department, which was already struggling with its outside sources of revenue from municipalities, while the expectations placed on it had not taken this into account. Essentially, the DWS was trying to deliver as best it could, despite changed and difficult conditions.

With the Minister’s departure, Members’ focus shifted to the Acting Director General (DG) and the replacement Acting Chief Financial Officer (CFO). The atmosphere became confrontational and several Members expressed great dissatisfaction, claiming that the DWS was in crisis. The Chairperson was of a similar opinion, but tried to mediate and allow officials to respond to accusations. They reiterated the stance of the Minister, explaining the difficult position of the Department under changing financial restrictions and unchanging obligations to be met. Disagreement arose over the explanation that infrastructure projects would be slowed down and staggered in order to reduce costs, with the Committee refusing to accept that this not have serious consequences. It also expressed suspicion on the competence of officials in acting positions, and on their failure to communicate with the Committee. Several proposals were made for additional briefings, closed meetings, documentation that should be reviewed, and interviews with municipalities.

The afternoon session was devoted to Committee discussions on the way forward to assist the DWS to resolve its challenges. There was agreement on the need for a joint session with National Treasury and the Department of Cooperative Governance (DCoG) over funding and coordination issues; costs could be reduced by implementing new technologies; officials must be held accountable for irregular, wasteful and fruitless expenditure; the debt collection system needed to be reviewed, with the Special Investigating Unit (SIU) called in to assist; and there should be improved communications both within the DWS, and with other role players in government.

Meeting report

Members’ questions and comments for Minister

The Chairperson asked the Members in attendance to take advantage of the fact that Ms Nomvula Mokonyane, Minister of Water and Sanitation, was at the meeting.

Ms T Baker (DA) said that the Director General at the last meeting had been an embarrassment, and did not know what he was talking about. Regarding the activities of the Department of Water and Sanitation (DWS), she questioned allowing Chinese contractors to begin work, despite the red light from Treasury. It had been proved that there would be no benefit for local businesses or communities.

Mr L Basson (DA) asked the Minister to discuss the Umtata report with the Committee.

Inkosi R Cebekhulu (IFP) asked what the effect on farmers in the area would be.

The Chairperson asked about the reports that went to the Minister. He emphasised the importance of land set aside for black farmers, saying that the Committee needed to inform itself on this matter.

Mr H Chauke (ANC) said officials had been suspended while facing serious charges, but now they were back. He asked what was happening, because there was supposed to be a proper briefing. The DWS was behaving as if the reappointments were completely normal. What was the Committee’s role on corruption? Structure within the Department was needed and perhaps a closed meeting with the Minister would help. The Committee could not be in the dark -- it did not have key information, and this needed to change. The DWS was going back to negative reporting, and if it could not deal with this, it would become the Committee’s responsibility.

Mr Basson asked if they could be enlightened on the suspensions which had taken place.

Minister’s response

Minister Mokonyane said she thought there were contradictions in the praise and criticism from the DA and Mr Basson. The responses of the DG should not have been a problem, as there had been a panel of experts in attendance at the same time.

The Treasury’s rejection had taken place during the tenure of Minister Pravin Gordhan, and besides that, it did not have the authority to reject the project. She disagreed with Ms Baker, defending the Chinese, saying the project had created 3 000 jobs. It was a government-to-government agreement, and this meant that South African priorities could be put first. The criticism was unfair. The project had first been proposed in 1962, and it should not be delayed further. The delays that had already taken place were the cause of the increasing costs. It was important because it would develop the area.

She thanked Mr Basson for his positive feedback.

She assured the Committee that the process of reviewing staff suspensions was ongoing.

Attempts to help farmers through finding and storing water, was also ongoing. The water utilities of Kwazulu-Natal were involved in this. Historically disadvantaged people were getting land deals, but sometimes could not farm because water allocations were delayed. This was the case because of relying on the Department of Rural and Land Affairs. An inter-departmental team had been put together though, including representation from the Departments of Agriculture and Energy, to see what critical services needed to be allocated together.

She said that the DG had been ill, and that that had been unforeseen. The review process of the disciplinary Committee would be changed though. Deputy Director Generals (DDGs) had returned because they had not been charged during the required time period. This did not mean that charges had been dropped. Allegations of corruption would be investigated. She invited the Committee to be more involved in this.

She said that long-term storage of water needed to be looked at, as the infrastructure focus in South Africa had been on immediate consumption.

Mr Chauke thanked the Minister, and suggested a closed meeting with the DG and DDGs. The Committee needed to be more involved. It was embarrassing to defend the DWS in the chamber when his constituency did not have water. He asked if it was a departmental issue. He wanted to know what was happening, so that he could answer to his constituents.

Mr Basson said that his constituency needed to pay for water, but agreed that something needed to be done. The interim weeks had gone well, and that the Acting DG should be permanently appointed.

Mr M Galo (AIC) said stability was needed in the Department.

The Chairperson said there was no stability in the Department, and the Committee could not hold it to account. There was a general, but serious, concern for the position of the Committee. It had to go back to the Department three times to check if it was able to pay outstanding amounts. There were agreements with the Treasury on overdrafts. Something would have to suffer though, such as new projects that would affect the future. The Department would brief more, but he invited Minister Mokonyane to brief them now.

Minister’s briefing

Ms Mokonyane said dealing with local government was a process of constantly licking one’s own wounds. It was harsh, but true. It had new challenges, but no new money. Municipalities received funding directly from Treasury, but the DWS still had to assist them. There was water and bulk infrastructure in place, but municipalities were not doing their job. The bulk resources of the DWS had gone to these unnecessary expenses during the past three years of drought. Treasury could not compensate for this because it was irregular, unless municipalities requested the funding directly. It was right that the Committee was being hard on her, but it should be hard on other water providers as well. It needed to track what the money that was given to municipalities got used for. She asked what the conditions were and who decided on the conditions of grants that were given to local government.

Mr Chauke asked why the Minister of Local Government was not there to answer.

Mr Basson said he agreed with Minister Mokonyane -- it was her responsibility, but an invoice needed to be sent to municipalities. The ministry could intervene, and it must. Cooperative Governance and Traditional Affairs (COGTA) would not be able to do so because it did not have the resources. If municipalities did not pay, they should be taken to court. The DWS did bulk provision, and other services must be carried out by others. It was time to get the Minister of COGTA to attend the meeting.

Ms Baker pointed out that there were constrained municipalities that did not have the funds, and that the Committee should work around this.

The Chairperson said that COGTA, the DWS and others must come together. Several things needed to be addressed, such as debt, infrastructure and maintenance. 10% of the COGTA budget was set aside for maintenance – was it being spent that way? He pointed out that there used to be sugar cane plantations at Umzimvugu. There was a plan to revive a 10 000ha plantation. Part of Kwazulu-Natal was green, but on the way to the Eastern Cape, the other part, which used to be green, was now brown. Collaboration with the Ministry of Agriculture was required.

Ms Mokonyane expressed her agreement with the points made by both the Chairperson and Mr Basson. She said solutions needed to be found to the problems blamed on the Department, even though it was not responsible. The equitable share needed to be revisited, allowing bias to underdeveloped areas, but in an accountable way. Some municipalities were not viable, using their budgets to pay salaries and cover some costs, but not to actually operate. These then depended on national government departments to do their work for them. So long as this continued, there would be service delivery protests. Provincial governments were also placed in an awkward position, because they could not actually do anything.

On the issue of suspensions, she said that DGs had caused problems before. They were difficult to remove and replace because of the five-year contracts that they signed. Decisions were made in good faith, and the DWS thought it had made a good appointment, but that turned out not to be the case. Dealing with the consequences did not look pretty, but it was important to resolve issues as soon as possible.

Mr Galo asked if there was a database that could be referred to, especially to do with the protests.

Deputy Minister Pam Tshwete expressed her agreement with Mr Basson, that meeting with local government and other ministries would be a good idea. She added that she thought DGs should not be allowed to leave the country without having an acting replacement.

The Chairperson asked that the Committee be informed about the senior official of the Overberg water board, who had been seconded elsewhere, but had now returned.

Ms Mokonyane said that there was information on areas of strengths and inabilities of municipalities. Some things should be non-negotiable, but some municipalities had no internal capacity at all. National government provides infrastructure, and then municipalities required funds to hire private consultants to run it. The National Council of the Provinces (NCOP) had been gathering information on the subject, and had had some success in resolving such problems in the Free State. It had written reports and brought in representatives of different constituencies.

In answer to Mr Cebekhulu, she said people needed to be formally charged for their transgressions, in order for them to be held to account. Some had, but the issues were more complicated than just corruption. Dereliction of duty, failure to lead a team, adherence to progress reports, or anything put forward by the Auditor General, also needed to be considered.

The Chairperson thanked Min Mokonyane for her time, and asked if there were any other questions for her.

Mr Sifiso Mkhize, Acting DG:DWS said that the Bill would potentially be delayed until March 2018.

Mr Basson accused the DWS of saying that consultation on the Bill was taking place, but was unable to prove that any such work had been done. It had been asked to send documentation, but had sent nothing so far.

Mr Chauke said that the DWS’s progress could be tracked through the quarterly reports, and it did not look like it was meeting its targets. The Department needed to communicate, such as on the issue of writing the new Bill. The Committee could develop its own process, but would prefer the DWS to do it, if it was prepared to communicate.

The Chairperson asked if any documents were classified.

Ms Tshwete suggested a separate meeting to present to the Committee on this.

Mr Chauke said they needed to know who was responsible within the DWS. The Committee could not begin work, such as public hearings, without knowing what it was actually dealing with.

The Chairperson asked Ms Tshwete if there was anything to work with.

Mr Mkhize responded that there was a draft Bill, which was not classified, and could be made available immediately.

Referring to the first quarter progress report, he said that the Sedibeng Regional Sanitation Scheme had been upgraded through five separate schemes. The Sebokeng Waste Water Treatment Works (WWTW) model 6 was 93% complete, with final completion scheduled for May 2018. Protests by workers and local communities had caused delays. The DWS had instituted labour forums with unions, agreeing to pay rises as well as private security protection for labourers. SAPS and private security had been involved to tackle theft and vandalism problems. Spillage problems had been addressed and stopped as well. R1.5 billion worth of work had been completed by contractors, R900 million of which had been paid for so far. Some contract and pay disputes had arisen from this. DWS would present its over- expenditure of R110 million to Parliament, for it to be either prolonged or declined. The 2017/18 budget was requiring reprioritisation as a consequence of this. Amongst new project plans, 52 would be deferred and three would go ahead, all in Kwazulu-Natal.

Mr Basson asked for clarification on the reported expenditure of R800 million in Quarter One.

Mr Mkhize said that the expenditure had been R823 million, but that had been updated to the R900 million which he had referred to earlier. This included expenditures which had subsequently taken place in Quarter Two.

Mr Chauke asked why the DWS had not reached its targeted expenditure.

A DWS official said that there were quarterly timing overlaps in DWS’s receipt of payments, such as from water boards, which caused certain discrepancies, but otherwise spending was on track. The Department intended to remain within the ceiling that it had been given by Treasury.

The Chairperson asked how cuts in the budget were affecting projects and the Department’s overdraft. He also asked where the “War on Leaks” was in the budget.

Mr Chauke referred to the fact that the Acting CFO was on maternity leave, and asked who was in the position.

Mr Mkhize said that she had been in the position until August, but that there was currently a replacement in the position.

Mr Chauke said that this needed to be clarified, and asked if the Committee could see a letter of appointment.

Ms Tshwete complained that this was not the first time that the Committee was asking about the structure of DWS, and said that this should be resolved once and for all.

Mr Basson said that the documents that they had been given at the meeting were different, and bore different amounts on them.

The Chairperson said the DWS should be allowed to respond. He asked what qualification was required for a CFO, and if the person in the acting position continued to get paid while her replacement was doing her job.

Mr Mkhize told Mr Basson that the correct figure of R886 million was for August, and that the others included subsequent expenses. He then referred to the Acting CFO’s replacement.

Mr Chauke interjected to ask who he actually was, how qualified he was, and what positions he had held earlier. There needed to be an explanation as to why someone was floating around the Department, serving on water boards, but earning a CFO’s salary. The DWS needed to be accountable. He was not against the replacement, but the Committee needed to know these details. He asked again if it could have a copy of the letter of appointment. He complained that there had never been proper oversight.

Acting CFO replacement, Mr Paul Nel, said there was a R2.675 billion overdraft with the Reserve Bank, which had been frozen by Treasury when it had asked the DWS how it intended to repay this money. It had allowed only salaries to be paid. The DWS had estimated its future earnings of R1.5 billion from Treasury, plus water earnings, but Treasury had said that this was not enough. Instead, an agreement had been reached to cut infrastructure projects and reduce the overdraft by R700 billion by March 2018.

Mr Basson accused the Department of funding its debt with the grants it had received to build infrastructure.

Mr Nel denied this.

Mr Basson said that Mr Nel had just said DWS was cutting infrastructure projects and using its income to reduce its overdraft.

M Nel said that ongoing projects at various dams would slow down, but that the conditional funds attached to specific infrastructure development funds would not be used to reduce the overdraft. It would only be normal ongoing projects that would be affected.

Mr Chauke asked what projects these were.

Mr Nel said four dam projects would slow down.

Mr Basson said the process had gone out on tender, but nothing had happened yet.

Mr Nel said the DWS had been told to consider the debts owed to it by the various water boards, but this time it had not done so when drawing up the budget. Money that was not yet in the bank would not be set aside.

Ms Baker said that only the Elephants River project was listed, and asked what else would be put on hold.

A DWS official said that the project was not on hold. Some projects were still out for design. Hazelmead was already under construction. Some budgets had increased. If they surpassed 20%, consultation with Treasury was required. The DWS was staggering implementation and slowing down the process, but not actually putting projects on hold, in order to reduce expenditure. Hazelmead would be allowed to continue. The official also pointed out that Mr Nel had not mentioned that Treasury had greatly decreased the funding it gave to the DWS, and that this had caused difficulties.

Mr Chauke said he wanted a report on what the DWS had not achieved, and why. It had had targets, and the chopping and changing meant that these would not be met. An honest assessment was needed of what had not been met and why.

Mr Basson said that the DWS was the worst performing Department.

The Chairperson pointed out that there were also other costs to putting projects on hold, which had not been mentioned.

Mr Mkhize said he understood the Chairperson, but the DWS had been put in a difficult position. Treasury had not provided new money, but service providers still needed to be paid. There were instructions for when and where to slow down. There were attempts to recover money from municipalities that did not pay, even by taking them to court, but they then pleaded poverty. Services could not be cut as a consequence though, because people could not survive without water.

The Chairperson said there was clearly a crisis. The Department and the Committee needed to work together. He asked Deputy Minister Tshwete what proposals there were.

Ms Tshwete said the Department had been answering questions like this for a while. It was not like ESKOM -- it could not just switch off water to communities. Some sort of compromise was required.

The Chairperson said implementing agents – the water boards – were appointed, but if something went wrong, the blame was placed on the Department.

Mr Mkhize referred to Mr Chauke’s earlier question, and said that Mr Nel had been chief accountant before his temporary appointment, and that he had the requisite qualifications.

Ms Tshwete said the Committee could be given records for the CFO and other positions, and it should be answered once and for all.

The Chairperson said that all the questions came down to accountability and the Department being able to plan.

Mr Chauke said issues would carry over from year to year, with the implication that each year less will be achieved, even though the same amount was being spent. If this happened, it meant someone had failed to perform. This needed to be addressed, and the Department needed to say what it could not achieve, so that targets could be shifted. The same process applied to the budget. Just because it was formally approved did not mean that the Department could stop consulting with the Committee. The DWS could not just do what it wanted. The Committee in turn was required to report to the House. He said a list of guilty municipalities should be drawn up, and they should be brought before the Committee. The DWS also needed to make it clear who was in what position and receiving what salary. This was an administrative issue, and the executive should not become too involved with it.

The Chairperson said that Mr Chauke was saying “not on our watch”. The Committee needed the report because it needed to know that policy was actually being implemented.

Mr Basson said the figures did not make sense. The Department either had money that it did not spend, or did not have enough and came asking for more. It spent too much while achieving too little. Acting positions had been seconded. He asked if Mr Mkhize had been seconded from Gauteng.

Ms Baker said the Department’s goals were not set quarterly, and this made it difficult to assess success by evaluating quarterly reviews.

Mr Galo said that disappointing results were boring. The Department continued like always, not listening to the Committee. The constant chopping and changing was causing instability.

Committee comments

The Chairperson said that this was a work in progress, after the recommendations of the Committee. It was about monitoring expenditure patterns, and whether the DWS was on course to a point where costing was done as far as achieving the targets was concerned, and having to compare the experiences of the past financial year. That was generally how they looked at their work going forward.

On 4 October, they would expect the DWS to come before the Committee to present the Annual Performance Report (APP), but before the Committee would expect the Office of the Auditor General to come before them and brief them on their findings. After that, they would also expect National Treasury to come before the Committee. These were all empowerment tools for them so that they were ready when the Department came to brief the Committee.

The Chairperson said that the Committee had also indicated that they needed to have a joint session with CoGTA and National Treasury. The Committee Secretary had indicated to him that 8 November 2017 would be day they would meet with both CoGTA and Treasury.

The Chairperson said the Deputy Minister had indicated that the Department had been given a golden opportunity to do more, despite all the cuts that had made. The Committee should get a list of those projects which under normal circumstances would be costing much more in terms of water and so on. Now, with all the innovations that were taking place, that cost had since been cut by half.

The Chairperson said at the plenary he had spoken about a private entity which had approached the Committee and Department with technologies from as far as Australia. The Department was budgeting R1 billion on top of the R1 billion which had been spent in the past on cleaning a certain dam. This private entity’s costs amounted to about R400m, which was far less than what the Department was spending. There were service providers that were running after this private entity, indicating their willingness to pay the R400m for its work. Therefore, it was important to go to the source of the problem, because these service providers they wanted to buy machinery and just clean, which was not sustainable.

The problem was that there is no capacity in the Department's waste water treatment plants. The spillage goes to the river, and that river feeds into the dam, contaminating the dam every day. Therefore, all that the service providers wanted to do was to get their machines and go and clean the dam forever, but they were not addressing the source of the problem. On top of that the service providers talk of maintenance.

So, these were the kind of things that made sense -- doing more with less -- and the Committee wanted to hear more of those proposals from the DWS, and then go out to the public to hear whether there were any other competitors so that the Department did not do the wrong thing. If the Department erred, it would come back to the Committee, and it would tell the Department it was doing the wrong thing.

The Chairperson said irregular, wasteful and fruitless expenditure were supposed to be criminal acts, and anybody committing a crime should be arrested and jailed. Therefore the Committee should not just talk about these things, but practically work on them, following the Public Finance Management Act (PFMA), which states that those who transgress must be held accountable, and they would follow up on that.

Mr Chauke said that as a way forward, the Committee should note all the issues raised by the Department and communicate them to the Department as it prepared to come back to the Committee with a revised target. His proposal was that the discussions must not just end with today's engagement -- these issues must be communicated so that the DWS could respond. When the Department came back, it must list the targets it has set and those targets must be clear on what direction the Department was taking. When the Committee finalised the report on the hearing of the first quarter performance, they should make recommendations in the report that would go to the House. It should be remembered that the APP had been adopted by them as a Committee. Therefore they would go to the House and say that, having interacted with the Department on the APP and first quarter performance, the following targets had not been met. This would make things easy, because they did not want a situation where, come the end of the year, targets were not met and they got surprised in the last quarter. So the Committee was trying to take away this negative cloud hanging over the Department.

Mr Chauke said that at the meeting of 8 November, the Department must come and present its organogram so that all Members of the Committee were clear about its staff complement, as well as the issue of the CFO, because it was clear capacity was lacking in the Department.

Mr Chauke said also the Committee needed to deal with the issue of the contracting unit of the DWS not being transparent, because there was a conflict between the construction and infrastructure units of the Department. How would it bridge that gap between these two units? They should be able to agree that the Department had the capacity in these units, and that their work complemented each other, without contesting each others' territory. The Department must come up with all the information on whether it had capacity in these units and if not, it must say so.

Mr Chauke referred to the issue of debt collection, saying there was a proposal that the Committee must do its own investigation on debt collection. They would have to do it formally by calling people to come before the Committee. The Department must give them all the contracts it had entered with debt collectors and how much had been paid to them. Parliament did have capacity for forensic investigations, and they should agree as a Committee that they do their own investigation on the issue of debt collection, because the DWS was spending a lot of money with no results. They should therefore invite the Special Investigating Unit (SIU) before the meeting of 8 November to get details with regard to the investigation of debt collection, so they would be in a better position to understand the situation. They would also invite municipalities to appear in Parliament to establish why they were not honouring their debts to the Department. There were other payments involving certain water boards that had not been paid and were owed lots of money by the DWS, and that information must be given to the Committee at some point when the Department came back. It was a partnership the Committee had to build with the Department so that they could deal with the issues that were facing them.

Mr Basson referred to the issue of debt collectors, and said it should be recalled that on 24 May they had been informed that the number of debt collectors was going to be increased, and more would be appointed by the Department. The following day, the Minister had requested a meeting with the Committee, and at that meeting the Minister had denied that debt collectors would be increased. It was as if, between the Minister and the Departmemt, no one knew what the other was doing. He agreed that something was wrong with these debt collectors, because the Department had said they would increase their numbers, but the Minister on the other hand had said no such decision had been taken. This created a suspicion that one should not trust the information that one got from the Department, and the Committee was not on good terms with the DWS when it came to information.

The Chairperson interjected that they had gone as far as to request the Department to furnish the Committee with contract agreements, and that information should be available at their next meeting.

Mr Basson said the amount of money the DWS was wasting on debt collectors was huge. Why was it not doing this job itself? There were intergovernmental relations where the Department could be assisted in terms of debt collection. What was the market-related fee for collecting the amounts of money owed to the Department, because if one collected R100 000, that was one thing, but if one collected R9bn, the commission would be something different. Then one would pay something like 4% commission, which was why Mr Chauke had said they needed to investigate the matter of debt collection. What the Department was paying 10% -- what was the comparative pricing?

The Chairperson thanked Members of the Committee for their inputs. He also thanked the Deputy Minister and her delegation from the Department. The Committee was looking forward to the report which the Department would present before the Committee at their next meeting.

The Committee agreed to meet on 4 October.

The meeting was adjourned.

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