MTBPS implications on water sector: Department; Water Economist; Black Business Council responses

Water and Sanitation

07 November 2017
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Portfolio Committee on Water and Sanitation received briefings on the medium term budget policy statement (MTBPS) for the water sector from a water economist, the Black Business Council, and the National Planning Commission.

The water economist said South Africa’s water infrastructure was in some trouble. The water that South Africa had was not always well used, the infrastructure was not always well built or built in the right place, and the resources that were used for water were not always effectively used.  The key risks confronting the Department of Water and Sanitation (DWS) involved planning and decision making, and the level and effectiveness of its expenditure. A fundamental dilemma was that more money was needed, but existing resources were being wasted. The allocation of additional resources ought to be contingent on fundamental reforms to improve the governance and effectiveness of expenditure.

The Black Business Council (BBC) said that while there had been advances in respect of providing universal access to water and sanitation, there were some enduring concerns faced by South Africa’s economy. The BBC was a very important component in transforming the economy, but much of the consulting and construction work went to big companies, even though small black companies were a critical leverage-point for the country’s progress. The investment summit on 30 November, however, was a culmination of the BBC’s engagement with the DWS in respect of the need to bring the private sector on board. There was a real need for more engagement between the BBC and the DWS.

The National Planning Commission (NPC) commented on the progress of the DWS in respect of the National Development Plan (NDP) goals, and said that none of them had been achieved. Three priority items that were not achieved were: a comprehensive management strategy, including an investment programme for water resource development, bulk water supply and wastewater management for major centres by 2012, with reviews every five years; the completion of phase 2 of the Lesotho Highlands water project by 2020; and the timely development of several new water schemes to supply urban and industrial centres, new irrigation systems in the Umzimvubu river basin and Makhathini Flats, and a national water conservation programme to improve water use and efficiency.

The discussion based on the presentations was robust and vibrant. While the BBC had engaged with the DWS, the engagements had not been as regular as the BBC would have liked them to be. A key aspect raised was the consequence of late payments to contractors and suppliers, many of which were therefore unable to meet their tax commitments and consequently barred from doing business with government entities – they were not only owed money, but could no longer trade. A further concern was that there was clearly a gap between what the NPC had highlighted and where the DWS was in terms of its latest developments. It was agreed that there had to be a session where the Portfolio Committee, the NPC and the DWS could meet to iron out the issues that had been raised. In the final analysis, the NPC was pivotal in shaping the programmes of the DWS.     

Meeting report

Chairperson’s opening remarks

The Chairperson highlighted that this was a new forum for addressing the budget and the medium-term budget policy statement (MTBPS), the aim of which was to allow independent thinking minds in society to assist government to reflect on the budget and its implications towards Vision 2030. To this end, the Committee had called upon an independent water economist, Dr Rolfe Eberhard, representatives from the National Planning Commission, Ms Mukondi Masithi and Dr Pulane Molokwane, and representatives from the Black Business Council, Mr Pule Mokoena, Mr Gregory Mofokeng and Mr George Tsibani.  There was an apology from Minister Nomvula Mokonyane.

Water economist: ‘Water and the MTBPS”

Dr Rolfe Eberhard said that the focus of his presentation would be on water infrastructure, the main expenditure item in the water sector. South Africa’s water infrastructure was in some trouble. Consequently, the water that South Africa had was not always well used, the infrastructure that South Africa had was not always well built or built in the right place, and the resources that were used for water were not always effectively used. 

The national water budget was about R16 billion. This was a very small share of the economy, but if the national water budget was not spent well, the country was in very serious trouble. Water as a percentage of gross domestic product (GDP) had come down somewhat, from 0.36% to 0.32% of GDP.  The national water budget accounted for about 1% of GDP.  It was a small budget item and therefore it was extremely important that water was well managed.

Water was needed for various basic reasons, key among which were food, business and the wellbeing of people. Water had been identified as a top global risk by the annual Economic Forum. South Africa was in a difficult situation. It had what was called ‘water scarcity’ -- a low level of water available per person -- and it experienced a high variability in water availability. South Africa frequently experienced floods and droughts. Climate change was going to make it more difficult to manage water.  However, these facts need not constrain SA’s economic development. If SA used water well and planned for these changes, it could still progress economically and ensure that everybody had enough resources. There were examples of this. Australia was water scarce, and yet it had a developed economy. Nevertheless, the risk to South Africa was very high. Heading into a dry summer, Cape Town was in a situation where if we do not get the intergovernmental coordination right, we did not manage water well or imposed strict enough restrictions, then Cape Town would be in serious trouble. In Sao Paulo, Brazil, drought posed a public health and economic catastrophe.     

The South African Constitution created separate responsibilities for water resource management and water services.  The raw water infrastructure (surface and ground water) was national government’s responsibility, while water services (water treatment, distribution, etc.) were local government’s responsibility. There were different legal mandates and primary roles related to water infrastructure. National government, through the Department of Water and Sanitation (DWS), with a budget of R15 billion, was governed by the National Water Act and the Water Services Act. Water boards, with a budget of R15 billion, were governed by the Water Services Act. Municipalities, with a budget of R66 billion, were governed by the Water Services Act and municipal legislation.

The usage of water in South Africa was comprised of irrigation -- more the 60% of water use, or 10 000 million cubic metres per year -- urban or municipal use (3 000 million cubic metres), and social use (7%).

The founding principles for water infrastructure in South Africa were built into the 1997 policy, which stipulated that the users of water for economic purposes should pay for the costs of infrastructure, etc. The responsibility of government was to ensure the basic provision of water for all, and to provide subsidies towards this end. Initially, a lot of these subsidies went towards rural projects. While this was still the case, subsidies were also being channelled to municipalities so that they could provide a basic water supply.

There were four different funding models that were operating at the moment.  The Trans Caledon Tunnel Authority (TCTA) did not get any budget allocations from the DWS. It raised finance on the market. It financed infrastructure and it sold water at the cost of supplying it. The Water Trading Entity within the DWS, gets a capital allocation from National Treasury, to support the development of water resources infrastructure.  The intention was that users would pay at least the operating costs of the infrastructure, and the infrastructure costs. The water boards were intended to be self-financing. They did not get budget allocations from the DWS. They also built infrastructure and got funds from the market or took loans. They sold water primarily to municipalities which paidd them the costs of that water. 

The primary social contribution in the sector actually comes from local government. There were major transfers from national government to municipalities through the equitable share to support the on-going costs of providing basic water. A third of the expenditure of municipalities was a government subsidy going to municipalities to support their functioning, and the other two-thirds was supplied through tariffs.

There had been some confusion. There was an understandable desire from the Department to play a bigger role in water. It had played a much larger role in providing subsidies to the sector through various mechanisms -- for example, trading accounts, water boards, and some direct subsidies to municipalities. This approach had created some confusion in the sector between what was economic infrastructure that should be funded by users, and what was social infrastructure. The definition of ‘social’ used by the Department had become very broad and vague to support almost any project that the Department would like to do. This was a dangerous situation, because the national budget was limited and should be used very carefully. One should be requiring users of water for economic purposes -- for example, agriculture industry, businesses and people -- to pay the full costs of the water, which was not happening. This reduced the amount of funding that was available for essential projects.  

What were the risks -- and how should Parliament be holding the executive accountable for managing these risks? There were three aspects to be considered.

Planning and decision making

Firstly, to interrogate the timeliness and quality of the water resources, planning that was taking place at the moment. South Africa was entering a period of increased risk concerning its knowledge of what was happening. This was exacerbated by the quality of the data that informed the plans, for example, the delayed introduction of the water resources strategy. Secondly, the quality of the data used to inform the planning was very out-dated. Planning was based on old data. Thirdly, poor-decision making leads to unviable projects and investments, such as the Gariep Dam and  Mgungundlovu project), funds which became non-available for other essential projects. Fourthly, the timing of decisions was problematic – for instance, the Lesotho Highlands Water Project, Clanwilliam Dam and the Voelvlei augmentation. Fifthly, transparency was a concern. While there were mechanisms in place to ensure transparency, some of these committees had not been functional. There had been a massive decline in the level of transparency. There was some relationship between transparency and the politics of water.  

Effectiveness of spend

Firstly, there was a serious concern about the status of the DWS’s finances. The Auditor-General had had very harsh words to say. The DWS had among the highest, if not the highest, levels of irregular expenditure. Secondly, budgets had been exceeded many times over, which meant that other budgets were not being spent where they ought to be spent. Control and discipline around project expenditure was critically important. Thirdly, regarding the competitiveness of tenders, there was serious concern regarding the value for money which was being obtained through contracted services. The contract-related costs were ballooning, considering the quality of the contracting and the competitiveness of the tenders that were being used. Fourthly, there were very serious concerns about the ability of the DWS to collect the revenues that were due to it. This would affect government guarantees. Fifthly, all these factors affected the priority projects for water security.  The budget that was available was not being spent where it should be because of wasteful over-expenditure, and poor choices as to where money was spent. This was decreasing South Africa’s water security. There were very serious concerns around the quality of financial management and project-level controls. 

Level of spend

This risk did not only apply to the DWS, but also to municipalities. Firstly, regarding the cities in South Africa, there were concerns about the level of spending on infrastructure to meet the required investments. What was happening in water infrastructure was that the dams, pipelines, pumps, treatment works, water distribution networks, meters, sewers and waste water treatment infrastructure, was aging and its performance was getting worse. The risks were increasing because we did not have enough money and we were not spending the money that we have to meet the investment needs for water. This requires that we spend money more effectively, and that we become much wiser concerning how we spend the limited grant money which supports social infrastructure.  This means that much greater use of commercial finance would have to be made to support the economic use of water. 

What needed to be done? Firstly, there was a need to re-establish financial discipline within the DWS. Secondly, a clear definition for the social component of water had to be established. Thirdly, the creation of a single Act was a distraction, as it allowed for inaction and policy confusion. A single Act would create more confusion. Fourthly, with a view to greater transparency and accountability, there had been a long-standing proposal since 1997 to take the infrastructure branch out of the DWS and to create a national water resource infrastructure agency that was responsible for creating infrastructure.  This seemed to be a perennial proposal that goes nowhere. Fifthly, there was a need to pay very serious attention to what was happening in the urban areas. The eight metro areas account for about 65% of the economy. If water in any one of these areas fails, it comes at a very substantial economic cost to the country. Cape Town would come close to that this summer, although it would get through it. Sixthly, commercial finance would have to be used much more. This would not only increase the level of finance, but the level of scrutiny. The TCTA was a very good model in this case. Seventhly, there was a need for an independent regulator. In the current situation, where the regulator was situated within the Department, when uncomfortable news came about performance, there were very strong incentives not to disclose the performance, examples being the Green and Blue Drop reports.

Maintaining water quality was a serious concern, especially in relation to the control and management of mining licences (acid mine drainage) and the sanitation in informal settlements. Municipal governance was another major challenge. There were many municipalities that were failing to manage their water services effectively.  Irrigation and emerging farming were raising a set of challenges. While it was important to promote emerging commercial farmers, it was clear that the economic costs of water had to eventually be charged. This must be carried out in such a way to ensure sustainability in the long-term. 

The budget implications posed a fundamental dilemma. A bigger budgetary allocation was not solving the problem. The government had to link the future allocations of money to more effectiveness of spending.

Black Business Council

Mr Pule Mokoena, Executive Head: Policy & Research, Black Business Council (BBC), said the BBC was the overarching confederation representing professional and business associations and chambers, with the main purpose being to lobby government on policy-related matters in order to accelerate the participation of black South Africans in the mainstream economy. The affiliates of the BBC cut across the various sectors of the economy, and the Black Business Council in the Built Environment (BBCBE) was concerned with the construction and built environment sector.

Dr George Tsibani, Chairperson: Water & Sanitation, BBC, said that the BBC infrastructure assumed that the National Development Plan (NDP) 2030 Vision, complemented by the Industrial Policy Action Plan (IPAP) 2017/2018 to 2019/2020, provided a menu of options to ensure active participation of black-owned companies within the water industry. Water and sanitation related to the prioritisation of options through some tough trade-offs with the private sector and government to invest in water as a constraining resource for growth and development.

Dr Tsibani said that despite the doom and gloom, South Africa had done very well in terms of access to water nationally. 83.5% of households had access to piped water. However, the challenge that South Africa had, when dealing with water sustainability and security issues, was when it experienced a dormant situation due to operational maintenance of infrastructure.  There was significant progress in respect of access to sanitation by province, although there were still serious challenges in provinces like the Eastern Cape and Limpopo. The stratification of access to water by province showed that nationally, more than 55% of households had access to water outside the dwelling, while less than 55% of households had access to water inside the dwellings.

Regarding access to sanitation, Dr Tsibani said that significant progress had been made in meeting sanitation targets. What was critical in the BBC’s view was how this translated into job opportunities, using technology and innovation that was done by research think tanks like the Water Research Commission.

South Africa’s water knowledge system, which does not reside within the DWS but the private sector, was a risk factor. Once a consultant left the DWS, the information leaves with the consultant. However, in terms of access to water infrastructure, there was significant progress. Insofar as reliability was concerned, there were still some concerns that had to be addressed. 

Dr Tsibani said that billions of rands had been spent on various programmes, and these had covered a number of initiatives. It was important to remember that the key indicator was not necessarily how much was spent at the national level.  What needed to be properly gauged was how well local government was utilising the infrastructure budget for operational maintenance of the infrastructure and also ensuring sustainable services. There were many protests which, among others, were concerned with water and sanitation issues.

In terms of the money flow, there were serious concerns over the use of consultants. According to Consulting Engineers South Africa (CESA), among others, consultation on water amounted to R1.86 billion, transportation amounted to R3.411 billion, and commercial was R1.344 billion. The extent to which black companies played consultation roles was inadequate compared to the big companies. The Black Business Council was a very critical component to transforming the economy of the country. Much of the consulting and construction work went to big companies like Murray & Roberts and Stefanutti Stocks. The DWS and other institutions had to consider black-owned companies as a critical leverage point in terms of going forward as a country.

Dr Tsibani said that there was a serious need to contextualise the discussion and to see water infrastructure investment as a business, rather than as a stock. Water had to be understood as an asset. The current water institutions had to act as enablers. The water sector was very complex. There was a need for people outside the water sector to understand the economics and social imperatives of the water sector.

Mr Gregory Mofokeng, Secretary General: BBC, referred to the preferential payment system for the Black Industrialists Programme (BIP), and said that delayed/non-payment of service providers by the public sector had resulted in the reversal of the economic empowerment and inclusivity gains since the dawn of democracy. The DWS was guilty of not paying contractors on time and the imposition of unfair and non-contractual payment practises, such as the deduction of retention while the Department/water board held a retention guarantee. Payment of service providers/contractors was absolutely essential for the success of the BIP. The BCC was currently lobbying National Treasury to include payment guarantees as a provision in the Public Procurement Bill. Most significantly, there had to be consequence management on state personnel who disregarded the government’s commitment to pay service providers within 30 days.

Regarding bulk water infrastructure development, in recognition of the tough fiscal constraints that would be facing government with the medium term expenditure framework (MTEF), specifically the enormous challenges regarding government’s ability to invest significantly in water and sanitation Infrastructure in order to meet the NDP targets, the BBC was partnering with the DWS on 30 November 2017 to host a Water Infrastructure Investment Summit. The objective of the Summit was to crowd-in private sector investment amongst the government’s bulk water infrastructure programme.

Dr Tsibani outlined the NDP 2030 black industrialisation programme, which had the vision to create 11 million jobs by 2030 by, inter alia, raising exports and competitiveness. Its proposals sought to contribute to W.E.A.L.T.H. creation, by way of Water security, Energy solutions, Agricultural development, Land use and water allocation, Technology and Health. The BIP was linked to the Millennium Developmental Goals (MDGs). Socio-economic development depended on good governance and appropriate investment models. There were serious issues around water governance that had to be taken into consideration.

Dr Tsibani distinguished between the Red Path and Green Path in terms of water and sanitation policy governance. On the one hand, the Red Path highlighted ageing infrastructure, the inability to create jobs, vandalism of infrastructure and waterworks, poor operation and maintenance (O&M), lack of a dedicated O&M budget, and non-revenue water increase. On the other hand, the Green Path championed a black industrial programme with manufacturing using public sector partnerships (PSP), on-the-job training, bulk infrastructure investment, and competent officials in waterworks.

Regarding water and sanitation infrastructure, there were opportunities if one utilised the existing limited resources that South Africa had. In water resource development, a major input was steel, concrete, materials etc, and in water treatment, a major input was steel, concrete, pumps, chemicals, instrumentation; in pipelines and conveyance, a major input was steel pipes, PVC pipes, high density polyethylene (HDPE), pipes and valves; in reservoirs, a major input was steel and concrete, among others; and in pump stations, a major input was pumps, steel and concrete.

Mr Mofokeng said that in terms of economic opportunities for black industrialists, the BBC and BBCBE had successfully lobbied the Department of Trade and Industry and the Presidential Broad-based Black Economic Empowerment (BBBEE) Advisory Council for the inclusion of the construction industry in the BIP. The programme was aimed at transforming the entire construction industry value chain. In the water and sanitation sector, the BIP would be targeted at the following value chain players: built environment professionals (architects, engineers, quantity surveyors, etc), contractors, and suppliers and manufacturers (steel, concrete, materials, pumps, chemicals, instrumentation, valves, steel and PVC pipes, etc).

Dr Tsibani then went on to highlight the way forward. There were fourteen recommendations, four of which were:

Firstly, private sector providers must provide a funding mechanism, using existing grants to enhance infrastructure development and maintenance, water and sanitation governance and maintenance, local economic development using standardised designs and criteria for local economic development

Secondly, allow new water industrialists and new business models to stimulate competition for reliability of infrastructure, and new operation models spearheaded by new black industrialists.

Thirdly, adopt incubator projects for black industrialists, entrepreneurs, and ‘ideapreneaurs’ by using 21st century technology solutions.

Fourthly, in the context of resource depletion, climate change, and biodiversity and degradation, it was vital that more youth programmes be dedicated to champion modern technology and innovation solutions in the water industry.

Mr Mokoena concludes with highlighting the BBC’s enduring commitment, together with National Treasury, to ensuring greater woman representation. There have, for example, been interventions in terms of legislation and effort to monitor the benefits of these interventions in benefiting woman and youth-owned companies.

National Planning Commission

Ms Mukondi Masithi, National Planning Commission (NPC), gave a background to the establishment and mandate of the Commission, clarifying its relation to the government. Commissioners played a very critical role as advisors to the government, providing recommendations in the interest of the long-term development of the country, and were expected to bring fresh ideas and insight into the long-term plans to advance growth and development in South Africa. The second NPC had been established in 2015 with a mandate to facilitate implementation of the National Development Plan, and to monitor performance against NDP goals, also in relation to water and sanitation.

Outlining the water situation in South Africa, Ms Masithi said that South Africa’s water use per sector was: irrigation (62%), domestic, urban and rural (27%), afforestation (3%), power generation (2%), industrial (3%) and mining (3%).

In terms of infrastructure and water management, Ms Masithi draws particular attention to Catchment Management Agencies (CMAs), pointing out that to date, only two had been established, and were not functional. There had been a decision to not establish the rest and rather to establish one national CMA, regarding which the NPC had its reservations.

Reflecting on water security, Ms Masithi said that the current projections reflected less than normal rainfall in October, November and December. In the period January and February, above average rainfall was expected, also demonstrating the impact of global warming. Over the next 80 years, the Southern African region was expected to receive less than average rainfall.

South Africa’s challenges, which were also Africa’s challenges, included safe drinking water provision; access to adequate sanitation; fostering cooperation in trans-boundary basins (“everyone lives downstream somehow”); water for food security provision; meeting growing water demand; preventing land degradation and water pollution; managing water under global climate change; and enhancing the capacity to address water challenges.

Some of the key questions, based on available data, included: 

  • How likely were we to experience water shortages in the same way that SA had experienced energy shortages?
  • How far were we from such a scenario?
  • What form was the challenge likely to take?
  • What would it take to avert the shortages, and what were the key interventions required?
  • How prepared were we to respond to such a scenario should it arise?
  • With climate change, there would be areas with abundant water -- how do we take advantage of the opportunity?

In her concluding remarks, she said that In order to enable water security planning from a national perspective, one must ensure that water played a central role in socio-economic development. This required developmental planning; monitoring the impact, based on the full water value chain taking into account interdependencies; ensuring that all institutional responsibilities and obligations were carried out and properly supported by sound research, development and innovation; designing and implementing financing models for water projectd that took into account urgent development pressure points and scales the projects to yield results and impact efficiently and effectively in the shortest possible time, taking into cognisance long-term impacts; and finding and creating symbiotic ecosystems that included the private sector, research and development role players, in a practical and pragmatic manner.

Dr Molokwane referred to the progress of the DWS as far as the NDP goals were concerned. None of the NDP goals had been achieved. The following three priority items were not achieved: firstly, a comprehensive management strategy, including an investment programme for water resource development, bulk water supply and wastewater management for major centres by 2012, with reviews every five years; secondly, to complete phase 2 of the Lesotho Highlands water project by 2020; and thirdly, the timely development of several new water schemes to supply urban and industrial centres, new irrigation systems in the Umzimvubu River basin and Makhathini Flats, and a national water conservation programme to improve water use and efficiency. 


The Chairperson commented that this discussion helped the Committee to identify gaps. What was clearly apparent from all the submissions was the need for an economic unit or forecasting structure. This was a forum for all stakeholders to open up.

Mr L Basson (DA) said that everything that had been heard at the meeting actually confirmed what the Committee already knew. Firstly, the Committee had, in meetings, told some of the water boards to stick with a single consultant. The DWS was not assisting in this. Secondly, the DWS was setting up black businesses for failure by not paying them on time. Thirdly, the notion of a guarantee was very helpful. If the DWS did not pay black businesses within 30 days, the latter should call up its guarantee. How were black businesses supposed to pay their suppliers and the interest on their overdrafts? What was critical was that smaller businesses had to be grown. Fourthly, there was a construction unit within the DWS, with excellent expertise, which ought to be taken on board in various projects. For example, regarding Clanwilliam Dam, the DWS had signed contracts with big companies instead of using its internal construction unit, which would be much more economical. If the mechanism within the DWS was set up in such a way that the construction unit could take on board black businesses to do some construction work under their supervision, this was one way of assisting black companies. Fifthly, when discussing the Budget Review and Recommendations Report (BRRR) last week, the Committee agreed that it was important to create an independent regulator for the DWS. The DWS could not be the ‘player’ and the ‘referee.’

Mr Basson asked Dr Eberhard what the pitfalls of having a single Act or a water master plan were. While the Committee had been hearing about this Act for two years, it had not seen it yet. He asked Dr Tsibani if those people who had water up to five years ago, no longer had water because of a failure of infrastructure. Did Dr Tsibani buy into knew technology infrastructure, such as desalination, some examples of which were made in South Africa and did not need to be imported. Regarding the prioritisation of infrastructure, the DWS knew that there would be a water crisis in 2019 in Gauteng, yet it did not have any plans and was dragging its feet on implementation and stopping tenders. There had been a delay of six years on the Lesotho Highlands water project. This would kill the economy of Gauteng. 12, 5 million people depended on water that comes from Rand Water, which was dependent on water that came from the Lesotho Highlands Scheme.

There was no urgency on the part of the DWS. The Clanwilliam Dam was an example. The Minister had mentioned that there was no money in this year’s budget for Clanwilliam. If one had to wait for April 2018, another opportunity would be missed. The Clanwilliam Dam project must be done when the dam level was at its lowest.  The DWS was in a complete mess and it was difficult to know where one should begin to fix it. Since water was the livelihood of all, it was beyond belief that the DWS budget comprised only 1% of the government’s total budget. It was a criminal offence going this route. This raised important questions. Was the Minister being taken seriously? Was she doing enough to increase the DWS budget?

Ms Pamela Tshwete, Deputy-Minister: DWS, asked for protection from the Chairperson. The Committee Members should not talk at the meeting as parties.

Mr Basson also asked for protection from the Chairperson.

The Chairperson said that what Mr Basson was raising were real issues. These were issues that everyone subscribed to. The Committee paid very little attention to party political views. The Chairperson implored the Deputy Minister to accept the flow of the discussion and view the Committee as a partner. The Committee had for a long time been hearing about the budget of the DWS of R15.2 billion, yet in real terms this amounted to only 1% of the total government budget. This situation put the Committee in the important position of raising very critical questions. For example, what role was the National Planning Commission playing as it forecast its goals? Would the budgetary constraints allow the DWS to achieve what it had planned to achieve as a target for 2030? A matter which the Committee had raised before was to appeal to the conscience of the private sector.

Deputy-Minister Tshwete asked for an opportunity for the DWS to comment.

Mr Basson said that the Committee was not only there to criticise. The question which Deputy-Minister Tshwete must answer, however, was why the DWS’s budget from the previous financial year had declined by R500 million. What role was the Deputy-Minister and the DWS playing to sell the idea for an increase in its budget? The DWS needed a lot of assistance from private sector. It had been established that R800 billion was needed in the next 10 years just to stop a total collapse of South Africa’s water infrastructure. The country had 824 waste water treatment plants, built to take a capacity of 6 500 million litres of sewage a day. The current situation was that 5 000 million litres of sewage were reaching the waste water treatment plants. The 2014 report indicated that 84% of these plants were at critical risk. This left the DWS with only 16% of waste water treatment plants that were putting water back into our water systems and rivers that was clean. Accordingly, 4 200 million litres of untreated or inadequately treated sewage was being put back into the system which a water treatment plant downstream was not build to treat, and was struggling to clean, at the cost of the people. It was really a crisis. The submissions all brought home this point. We had to do more with less money.

Mr H Chauke (ANC) said that he was trying to tease out the implications of the Medium Term Budget Statement by the Minister of Finance, Mr Malusi Gigaba, for the DWS. What had been the nature of the BBC’s engagement with the DWS thus far? In terms of project management, did the DWS have the capacity to implement projects, and how could the private sector step in and assist in this regard? While the DWS’s had an internal construction unit, it had put many of its projects out on an open tender. How could one understand this area of work, and how were emerging black contractors brought on board to run these major projects, which then ended up collapsing? What skills did these black construction companies need, and how did one move towards equipping them with the requisite skills?

While a huge role was played by local government in the provision of bulk water infrastructure, there was a huge crisis there. The Committee had been trying to forge a relationship between the DWS at a national level with local government. It was important that the roles were defined. A lot of pressure was on the DWS, which raised the question: had the National Planning Commission done an assessment on the ‘Back to Basics’ in relation to the issue of water at the local government level? What skills did the DWS have? The DWS had all the necessary resources, but they were unfortunately underutilised. What was the relevance of the NPC’s engagement with the DWS? As it planned, had it taken into consideration the capacity of the DWS?

Echoing Mr Basson, Mr Chauke said it was important for the DWS to talk to the Committee about the budget. In light of the DWS’s failure to implement projects, it was important in this engagement to come up with a way in which the private sector could play a role in helping to shape the DWS in a way that could promote transformation. There were 4 000 dams in South Africa, yet only 400 were controlled by the DWS. In the process of trying to implement projects that would provide water, the issue of transformation in the water sector got neglected. The Black Business Council would have to develop an interest in this area, where millions of litres of water were controlled by a relatively few white farmers. The discussion, together with the DWS, should be around these areas. One could have sophisticated plans and legislation, but if there was not more equitable control over water sources, legislation would not be effective.

It was also important to engage with the politics of water. There was a summit which was taking place on 30 November, and the Committee would like feedback from the DWS, especially on how domestic resources were being utilised. Among others, guided and supported by Government, there must be a serious commitment in regard to bringing black industrialists on board. A way had to be found in which the system was not disrupted, but which also created more effective black farmers. The research that was available at this meeting provided the DWS with information to come up with a water plan. 

Mr M Galo (AIC), referring to the comments by Deputy-Minister Tshwete, said that the Committee Members were public representatives and were serving as such on the Portfolio Committee. It was unparliamentary to be identified as political parties by the DWS. The Committee was very proud that the DWS was being led by women, particularly African women. Nevertheless, the Committee was very disappointed that the DWS was not delivering, knowing for a fact that the poor African women in the rural areas were the poorest sector in this country. Members could not sit here and fail to raise issues simply because they wanted to nurse one another. If the DWS was not doing well, the Committee would raise issues.

The Chairperson said that the current discussion would not be able to exhaust all the issues raised. One other issue that had been of interest to the Committee was the drought. The situation that the DWS had found itself in was one of having to ‘react’ to drought. As a result, so many things had gone wrong, for example, in terms of irregular expenditure. There were projections that for the next 80 years, South Africa was going to have less average rainfall, which translated into projected drought patterns. An important question was whether SA would be able to mitigate and adapt to the drought situation with the technology that it had.  This was a matter of great concern. A situation that had to be averted was where there were unfunded mandates. The public sector-based water budget was effectively R100 billion, while local municipalities had a budget of R28 billion. Were there any studies which delineated the private sector budget on water?

Another area of concern was the area of leakages. In light of the fact that water continued to be stolen, could the Committee be provided with a breakdown of the 37% loss of water that accrued due to leakages? Was theft, especially by white farmers, accounted for in the 37%? What was the overall percentage for leakages? Did the DWS account for leakages with respect to dams that were not under its control? To what extent did the DWS and Department of Trade and Industry (DTI) source manufactured products, like pipes and valves, locally and were the manufacturers black industrialists? In terms of compliance and prevention, what measures were being taken to advance the security of our infrastructure and to prevent theft and vandalism?

Mr Chauke (ANC) said that the Committee was happy about the “War on Leaks’ programme. However, referring to the “Checkpoint” documentary on this matter, what had been the negative side to the ‘War on Leaks’ initiative, and how had the skills that the young artisans had acquired, been utilised -- or remained unutilised?

Dr Molokwane said that apart from being a commissioner for the National Planning Commission, she also worked for two entities housed within the DWS.

The Chairperson said that since this was a colloquium, Dr Molokwane was protected.

Deputy-Minister Tshwete proceeded to thank the Committee Member who had started on a positive note, and thanked the DWS for ensuring access to water. Regarding the question of who was in control of water in this country, the government was not in control of water. While she was not sure if white monopoly capital was in control, she said the responsibility for water and sanitation, and most of the issues that were raised, were at the level of local government. The DWS was suffering because local government did not have capacity. The Portfolio Committee must be able to protect the DWS when issues were raised regarding a matter like taps, which did not fall within the remit of the DWS mandate, but was the responsibility of local government. It would be appreciated if local government were also invited to this meeting.

This discussion had been greatly appreciated, as it helped the DWS to identify gaps, to revise its policies and to ensure that they catered for everyone in the country. However, she did not agree with some of the issues that had been raised. The list of infrastructure projects completed by the DWS had to be given to the Committee, as well as those that were not complete. Mzimvubu was supposed to have been done in 1962, and it was not started yet. The current government was now making an effort to complete this dam.

Because of funding, government could not complete dam projects on its own. It needed funding and help to raise funds to complete dams. The money that the DWS had was not enough. It was acknowledged that the late payments were not in keeping with the rules of governance. All contractors were meant to be paid on time. Regarding the capacity of local government, the situation was very serious. There was ageing infrastructure. New pipes had to be installed. Every year, 1.3 trillion litres of water was lost due to leakages. The rationale of the ‘War on Leaks’ went hand in hand with improving the behaviour of water users, who wasted water at times. The DWS used water agents to go from door to door to teach citizens about the conservation of water.

Referring to the “Checkpoint” documentary, the episode which was screened was set in Tshwane, where unfortunately the situation was serious. This municipality was under another party. There were about 10 000 students that were in colleges from all parts of South Africa that were, among other things, artisans, plumbers and water agents. At some stage, it was important for the DWS to do a presentation to explain the DWS’s plan of action. This programme assisted students who were unemployed and those students who had completed their studies to be absorbed by municipalities. The DWS had good relations with, among others, the Western Cape municipalities, which had committed to absorbing students to fight the ‘War on Leaks.’

Deputy-Minister Tshwete said an important issue that would have to be discussed at the ANC conference was giving black companies and small black businesses work. A list of black companies which worked with the DWS needed to be presented to the Committee so that the Committee could assess the progress of the DWS and how many black businesses were benefiting.

She thanked Mr Chauke for his remarks, saying it was important not only to highlight problems but to present solutions. This Portfolio Committee deserved to be commended, for example, for arranging a meeting to which local government, the DWS, and the City of Cape Town had been invited. The DWS was still responding to issues that were raised at a local government level and, in doing so, the DWS was being punished. Agreeing with Mr Chauke, she said it was vital that roles were clearly defined. Issues that were meant to be addressed by local government ought to be addressed by local government. The water master plan had been delayed by local government. Local government was yet to submit its report in order to be included in the master plan. All stakeholders in the water family had to be part of the process of working out a water master plan.

Mr Sifiso Mkhize, Acting Director General: DWS, said that the DWS welcomed the presentations. The DWS’s budget was inadequate, hence the initiative to come up with the Water Investment Summit. The budget was not sufficient in terms of the work that the work the DWS had to do -- the bulk infrastructure that it had to establish. The Medium Term Budget Policy Statement, which highlighted the facts of a shrinking fiscus, declining revenue and rising debt, painted a picture that would not be overcome in the short to medium term.

Responding to Mr Mkhize comment that the DWS’s budget was inadequate, the Chairperson asked Mr Mkhize what would be sufficient

Mr Mkhize says that he would not want to speculate.

Ms Zandile Mathe, Deputy Director General: Water Resource Infrastructure, DWS, said that for the next financial year, the DWS was aiming to have a R50 billlion budget, which was just for projects that were on the table. It had been the Department’s aim for this to be the budget for this financial year, but many of the projects had had to be halted because there was no money.

Mr Mkhize drew attention to the Clanwilliam Dam project, which had a budget. Treasury had told the DWS that it could not continue as normal. The DWS needed to cut back on some of its major projects. In construction, when the DWS had to cut back when the contractor was already on site, it incurred fruitless and unnecessary expenditure. This concern was being raised with the Auditor-General and Treasury, that when the contractors were on site, it was very difficult to cut back. For example, in the Mzimbuvu project, while all the designs were complete, the construction work was not going ahead because of the uncertainty regarding the availability of the budget. The DWS had made an application to the budget facility for infrastructure at National Treasury. They had promised that they would get back to the DWS by 1 or 2 November as to whether the DWS could go ahead. The DWS could not commit to 2017/18/19 without certainty regarding the available budget. All of the bulk infrastructure was not done within the Department, but by the water boards and the TCTA .

The DWS fully agreed that the shortage of water caused a huge risk. It was working with the United Nations through the High Level Panel on Water, looking at different options and ways to ensure access to sanitation and ensuring that clean drinkable water was available to all. Referring to Dr Eberhard’s reservations regarding the two Acts, he said the DWS had reviewed the two Acts before it had come to the decision regarding the formulation of a single Act. These discussion documents were unfortunately classified. Tomorrow, the DWS would present the roadmap in terms of where the department was regarding the Master Plan, the Regulator, and the Agency. The TCTA was one of the entities with a safe budget in the DWS. Since it had a guaranteed budget, the entity included a social component in all its projects.

Regarding the skills within the DWS, it would be helpful if, on a different occasion, the Department could come and give a presentation on the capacity of DWS. There were gaps -- for example, the DWS had never had a water economist, which would play a critical role in terms of looking at the budget which the DWS had and the work that it had to do, and to forecast what was achievable or unachievable. This was something that had to be looked into.

Mr Chauke asked the DWS to deal with the issues raised by the National Planning Commission and to explain how it engages with the Commission? It was important for the DWS to be clear about how the NPC informed its work. Regarding the private sector, how would it come on board? The DWS and the Committee had to escalate interventions regarding the drought. It was concerning that drought had been declared and was not adequately funded. When the DWS reprioritised its funds, it had been unable to claim back the money because these payments were unauthorised. This raised very important questions: How did the DWS relate to the National Planning Commission? How did these entities plan to bring on board the resources and capacity of the private sector? The master plan must speak to the above relationships.

The Chairperson said that Vision 2030 must be a societal, shared vision across society and government, so that efforts to tackle poverty, inequality and unemployment were synchronised. Whatever plan the DWS had needed to speak to that same target of Vision 2030. In this regard, the DWS did not seem to be gearing itself towards Vision 2030. The DWS had to try to think out of the box. What was it that the DWS wanted to achieve that spoke to Vision 2030?

A member of the DWS highlighted that the progress report, as articulated by the National Planning Commission, had to be updated. For example, they disputed the accuracy of the progress report, which stated that ‘the national water resource strategy had not been implemented’. They also said there had been ‘no progress’ regarding the drafting of ‘a comprehensive management strategy including an investment programme for water resource development, bulk water supply and wastewater management for major centres by 2012,’ which was not entirely accurate. Although the DWS had not presented the master plan, the investment plan had been presented. Reference had been made to the Lesotho Highlands water project being delayed, but there was a detailed implementation plan as to when the project would be started, ended and the reasons why. Therefore, the NPC’s progress report had to be updated. There was an updated plan on the status quo in relation to the establishment of CMAs and why the mentioned ones that were initially planned were no longer planned. There was a change in strategy that had been discussed with Treasury. Regarding the Umzimvubu project, there was a more recent report. Regarding the ‘mandates of the existing water boards’, the DWS would be presenting an updated version to the Portfolio Committee tomorrow.

Mr Mathe said that of the presentations, the one that was most closely aligned with the vision of the DWS was that of the BBC. Both presentations, however, reflected a lack of understanding regarding why the DWS had taken some of the decisions that it did, especially the pro-poor oriented decision-making. An important example was Umzimvubu dam. In contrast to neo-liberal understanding, there was a real need to appreciate that the government had to go an extra mile to ensure that the poor were brought into the mainstream economy. For the DWS, the Umzimvubu dam project was geared towards creating a city and ensuring there was development around the dam.

Regarding the TCTA, there was no organisation which was as funded as the TCTA. The problems of this sector were systemic. The issue was that the current government had not done an audit when it took over, and had never asked what it was inheriting. There was agreement regarding the symptoms. Outside of this meeting, it was important to discuss what the causes were of where the DWS was currently. Among the main causes was the issue of the Municipal Structures Act, where some municipalities were given the ‘water business’ without an understanding of what it entailed. The issue of governance was the main issue that had led the Department to where it was. The Municipal Structures Act had to be addressed.

Deputy-Minister Tshwete said that the BBC had raised an essential concern, namely, the issue of curriculum. The majority of the requisite skills, such as hydraulic engineering, were still possessed by white people, which spoke to the abiding legacy of apartheid.

The Chairperson said that by all means, the stakeholders, as far as possible, had to engage with each other without dialoguing.

Dr Eberhard said that while there was agreement with respect to symptoms, very robust discussion was needed regarding the solutions. There was a key cautionary note which the Committee had to take into consideration: When a proposal was put to the Committee for a project, it was important to understand the full dimensions of the project. While not engaging the merits of the project, if the intention with Umzimvubu was to create a city, then the proposal for Umzimvubu dam had to be a holistic proposal. It must have the Department of Economic Development, the Immigration Department and National Treasury on board, and had to be a comprehensive programme that was thought through and agreed on by government as a whole. In a context where there was limited money, if the limited money was spent on one project, by definition, the DWS would not have the available funds for other projects. It was about making good choices about how many people would benefit, and how they would benefit from the money that government was spending.

The Chairperson said that Dr Eberhard’s point related to the question of transparency.

Dr Tsibani said that he was cognisant of the water sector, particularly as of 2003, when the strategic framework for water services was adopted. What had also been taken into consideration was that there were 152 water service authorities (WSAs) and that there were now 144. The period between 2003 to the present was a period very close to the medium-term developmental goals, the emphasis of which was less on sustainability, even in terms of the funding models. The focus was more on universal access. This was why, as per the presentation, water knowledge was a gap. When ‘water security’ was included in the calculations, this required tripling municipalities that were under financial stress. While the discussion seemed to be saying that, as the BBC, the issues of reliability and water security had not been taken into account, this was not the case.  It was possible to have ‘universal access’ at 79%, but when considering issues of ‘reliability’, due to drought and other factors, there was lower than 50% performance.

The Chairperson said that it was concerning that the DWS took short cuts by outsourcing construction agencies to the neglect of drawing upon, or developing, its own internal construction unit. In so doing, the DWS leaves the skills base in the Department redundant. This was despite the fact that a substantial portion of municipalities had major capacity challenges.

Mr Mofokeng, responding to a concern raised by Mr Basson, referred to a quote in the construction industry: ‘He who defines the specification, determines the outcome.’ The solution was really for the BBC to work closer to the DWS and study the types and specifications of the tenders that were coming out so that the DWS could increase the participation of black players throughout the water and sanitation value-chain.

The consequences of late payments had to be considered by the Committee. When companies were not paid on time, immediately a VAT invoice was raised, and if SARS was not paid, companies were regarded as no longer compliant. As a result, companies were no longer able to trade. Therefore, many companies that were not being paid were also shut out of doing business -- they were not only owed money, but could no longer trade. SARS was not interested when, in their defence, companies argue that municipalities have not paid them. Another consequence was, when one considered the financial services industry and how it related to companies that do business with government, the financial services industry was now red-circling those municipalities, departments and SOEs that do not pay on time. Therefore, a company may have the opportunity to get work from the DWS or a particular municipality, but when the company goes to raise money to implement that project, it was unable to because the bank, or whoever was supposed to support the company, says that the department was a ‘bad payer.’ Therefore, the company was unable to trade. This was something that all stakeholders had to be alive to.

Mr Basson added that this also entailed a 10% fine on the VAT.

Mr Mofokeng, affirming Mr Basson’s point, said that penalties had to be paid when SARS was paid late. Apart from the penalties, companies had the additional burden of being unable to trade. These were the implications of delaying payments in the system.

While the BBC was excited about the construction unit, it did not know the extent of its capability and capacity. The BBC believed it was good to do business with a capacitated state. A developmental state had to be capacitated. A lack of capacity on the part of the state did not create a very good business environment. There was another discussion that was ongoing, led by the Minister of Rural Development and Land Reform, Gugile Mkwinti, in his capacity as the leader of the Presidential Infrastructure Coordinating Committee (PICC). There was a proposal that the state must have its own construction company and bank. The DWS ought also to have a view on that discussion and see how it could engage, especially considering the Department’s own capacity. The question that needed to asked was, what does the state as a whole have in terms of capacity? There was possibly a lot of duplication in the system. The concept of a state-owned construction company was not new. The question was how a new one should be configured and how one should take into consideration the fact the Department of Public Works had got the Independent Development Trust, the DWS had a construction unit and that the Department of Human Settlements had the Housing Development Agency. How could this discussion be consolidated so that one entity could service the state and ensure that the state was able to effectively and efficiently plan thoughout?

Regarding the issues which Mr Chauke had raised, the BBC had engaged with the DWS, although the engagement had not been as regular as the DWS would like it to be. There had been two issues that had been engaged at a municipal level.

Firstly, the Lesotho Highlands water project had been addressed. The concern which the BBC had was that the South African government was not sticking to the treaty. The BBC had stressed to the government that the treaty ought to be applied as it was. Moreover, it wanted South Africa’s procurement laws -- that is, BBBEE -- to apply as far as that project was concerned. The BBC was assured that this alignment had happened.

Secondly, the investment summit on 30 November was a culmination of the BBC’s engagement with the DWS in respect of the need to bring the private sector on board. There was a real need for more engagement between the BBC and the DWS.

A final point, with regard to the Black Industrialists’ Programme, the policy existed to create black industrialists and it was now time to step forward and implement it. It was important that everyone was aware that the primary requirement for a company to be accepted into the Black Industrialists’ Programme was at least 51% effective black ownership.

Regarding the ‘War on Leaks’ programme, the BBC believed it could engage with the government on the matter. One could not train the youth and expect all of them to be absorbed by the government. It was important also to create entrepreneurs out of these youths. In order to address the high youth unemployment rate in South Africa, how could the youth seamlessly be absorbed into the economy? The youth had creative ideas and municipalities should seek to empower them

Dr Molokwane referred to the capacity/skills of the DWS and the data regarding South Africa’s water situation, and said these breakdowns would be presented to the Committee in the New Year in the water security framework. Regarding the progress report, he commented that when projects were in progress and reports were being submitted to Parliament, this did not qualify as ‘achievement.’ The end result was that the DWS needed to have completed, for example, the Lesotho Highlands water project in 2020, which would not be the case. A comprehensive management strategy had been needed in 2012, which was not achieved, irrespective of whether it was submitted in 2015. The NPC was unable to assess the DWS, based on ‘working towards’ kind of activities. In respect of the CMAs, the deliverables were not achieved, despite the fact that there may have been justifiable reasons for them not having been delivered. Priorities should not be shifted as we ‘change our minds’ -- the DWS was being assessed on the basis of its priorities. As far as the DWS’s priorities were concerned, it had not performed.

Mr Chauke said it was unhelpful that when there were clear failures, the DWS continued to defend itself. Where there was failure, there must be acknowledgement. This would help to prepare for the future. There must be a session where, with the Committee, the National Planning Commission and the DWS should meet and really iron out these issues. The role of the Committee was to highlight where the DWS had not performed.  The National Planning Commission was pivotal in shaping the programmes of the DWS.

The Chairperson said the aim of the meeting was to empower the Committee to get a sense of the implications of the budget that had been allocated to the DWS for socio-economic related issues, as per the Vision 2030. There were a number of issues that had been raised that would still need to be raised with the DWS on an on-going basis. A concern was that there was clearly a gap between what the NPC had highlighted and where the DWS was in terms of its latest developments. A key question, therefore, was whether the report that the NPC was releasing in January was reflecting the recent developments in the DWS.

Dr Molokwane said there was agreement that the NPC needed to work closer with the DWS. What needed to be understood was that the impending status quo report evaluated all the NDP goals and priorities. The report was very clear-cut about whether or not goals had been achieved.

The Chairperson reiterated the need for the NPC to work more closely with the DWS. Moreover, in the absence of a timely report from the DWS to the NPC, it was the Department’s fault. The NPC was the ultimate assessor in terms of reaching the Vision 2030 goals.

Dr Molokwane said that the NPC received all its information from the DPME.

The Chairperson commented that this had been a very vibrant, innovative and objective discussion. A lesson from the discussion was that more such meetings were needed. The institutions and universities in the neighbourhood of Parliament had to be sourced and utilised.   

The meeting was adjourned.      

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