Mhlatuze Water Board & Umgeni Water Board 2017/18 Annual Reports; with the Minister and Deputy Minister

Water and Sanitation

06 March 2019
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Committee met to discuss the annual reports of Umgeni and Mhlathuze Water Groups. The two entities played vital roles in the achievement of the sustainable development goals of the Republic, and provided important resilience against the effects of climate change. The two entities were among the nine water boards under the control of the Department of Water and Sanitation (DWS).

Umgeni Water had seven customers, and covered 44% of KwaZulu-Natal’s (KZN’s) geographical area and 73% of the households. It had a performance of 94.2% in 2017/18, which coincided with an improvement in sales growth, but the effect of the drought had been significant. There were no unplanned disruptions of water supply in the year under review. Umgeni Water empowered youths through the creation of both permanent and temporary jobs. It collaborated with other stakeholders, especially the Water Research Commission and the University of Kwazulu-Natal, to find solutions to diverse challenges linked to water quality, conservation and distribution. Its laboratory had 260 000 analytical results in 2017/18 alone. The entity was financially viable and created significant value for its shareholders and customers. It planned to extend its reach by building three dams in the uMkhomazi River, which was the third biggest river in KZN.

Mhlathuze Water was one of South Africa's leading water utilities, covering the northern areas of KZN. It had managed to stay afloat, despite the severity of the drought, as it had effectively supplied water to its customers in the 2017/18 financial year. It was financially viable as a result of sound risk and financial management. It had achieved 68% of its planned shareholder targets in the year under review. However, it had lagged in youth development and training, as the number of applicants for the development programme had been lower than anticipated. It had technology that treated wastewater and discharged the effluent into the sea in an environmentally friendly manner. The board had dealt with the bulk of irregular expenditure resulting from transgressions in prior financial years, and the indicted officials had been disciplined accordingly. All concerns raised by the AG had been appropriately treated and the entity had received a clean audit opinion for the year under review. 

Members expressed satisfaction with the performances of the two water boards. However, they charged the boards to ensure water supplies to areas that still lacked water within their jurisdiction. Proactive measures should be taken to create opportunities for black entrepreneurs. The boards should also endeavour to reduce irregular expenditure. 

Meeting report

Mr D Mnguni (ANC) expressed satisfaction at the presence of the boards of both the Umgeni and Mhlathuze water boards and the Department of Water and Sanitation (DWS). The Department was always represented at Committee meetings. He expressed appreciation for the reports of the two entities. However, he said that the Water Boards would have to clarify cases, especially where mishaps had occurred. The Department had usually presented on behalf of the water boards when the Committee began its term in 2014, but it now insisted that the boards must present their reports.

Department of Water and Sanitation introduction

The two water boards were based in Kwazulu-Natal (KZN). They took the Committee through the technical information related to the functioning of the boards in light of the hydrological challenges in the province. The water boards also informed the Committee that they applied a risk management system to deal with financial irregularities within the system, as identified by the Auditor General.

Ms Deborah Mochotlhi, Acting Director General, DWS, said Umgeni and Mhlathuze were two of the nine water boards under the oversight of the Department. The water boards were strategic entities that would enable the country to achieve its sustainable goal. They were important in increasing resilience to climate change.

Umgeni’s performance in the 2017/18 financial year had been 94.2%. A total of 435 million cubic metres had been supplied, which was a 6% increase compared to 410 million cubic metres supplied in 2016/ 17. Umgeni had also created 529 jobs. The former board had been terminated in February 2017, and there was a process to appoint new board members.

Ms Mochotlhi said Mhlathuze had achieved 68% of its planned targets. Mhlathuze was financially sustainable, and she hoped the entity would maintain its financial status. The revenue had increased by 1% compared to the prior financial year. There had been 22% increase in the surplus for 2017/18 compared to the prior financial year due to cost containment measures amidst lower water sales volumes. The gross profit and net surplus had increased by 2% from the prior financial year. The current ratio had increased by 0.43%, interest turnover ratio by 10.30%, the return on assets by 2.66%, while debtors’ days had decreased by 16.64% and the debt equity ratio by 0.10%.

Umgeni Water Board

Ms Ziphozethu Mathenjwa, Chairperson: Umgeni Water Board, summarised the highlights and lowlights of 2017/18 performance. For the first time, Umgeni had a surplus in excess of R1 billion due to intensification of investments, especially in the rural areas. Umgeni had also intensified its support for customers. It was also able to emerge strongly from the drought. Increased service delivery resulted from increased surplus and revenues. Since its establishment in 1974, Umgeni had not serviced communities outside its catchment area. Fortunately, the Minister had granted permission to Umgeni in 2015 to increase its catchment. As a result, it was able to service additional communities in Kwazulu-Natal in the 2017/18 financial year. She expressed her satisfaction with the overall performance.

Irregular expenditure in top management constituted a major challenge in the financial year under review. The Board had deliberated and found that the problem arose from the calculation and interpretation of bonuses. The indicted officials had been punished accordingly. She expressed satisfaction about the alignment in the interpretation and calculation of bonuses from the AG’s and the board’s perspectives.

Another lowlight was the interaction and settlement of a former chief executive. The amount spent on the settlement was the least possible irregular expenditure considering the amount spent on similar disputes in the past. The minimum spent on such disputes in the past was R6.4 million. It would cost more than R6.4 million if the litigation had extended beyond the anticipated time, so the board had avoided the worst possible solution. The board had taken a decision that was in the best interest of the organisation to avoid instability.

The presentation of highlights and lowlights were important to ensure that the Committee and the public were aware of what went on in the organisation. One of the highlights of the organisation was an on-going dam project, which was the biggest in KZN since 1994.

Mr Thamsanqa Hlongwa, Chief Executive: Umgeni Water, spoke on both the financial and non-financial performances. Umgeni had areas of operation in the north, south, east and west of KZN. Places up to the borders of Free State and Lesotho would also be serviced by Umgeni. As such, Umgeni had grown its customer coverage in KZN from 67% to 73%. Umgeni believed in training young people that would drive the achievement of strategic goals, as well as take the reins of leadership going forward. It believed in technology and innovation, which was reflected in the theme of the organisation. It aimed to strengthen partnerships and collaboration with customers, shareholders, the South African Parliament and investors that provided credit to the organisation. It aimed to increase customer coverage by rolling infrastructure into areas that were previously considered rural and not financially viable.

Umgeni Water Group had 1 231 employees, comprising 922 Umgeni Water permanent staff, 117 Msinsi permanent staff and 192 group fixed-term contract staff. Its long term goals of included the provision of reliable, responsive and affordable services and improved infrastructure to increase access, whilst ensuring stable water resources to meet current and future needs. The entity also aimed to develop strategic partnerships, increase support to customers, improve visibility and be a regional leader in the provision of bulk water and sanitary services. The entity ensured sufficient operating cash flows, manages key cost drivers to leverage debt and assets to provide for future expansion, while supporting socio-economic development. The entity also aimed to ensure effective governance and resilience that innovate, educate and support community development and environmental sustainability. It strengthened and developed quality human resources. Further, it ensured a participatory, collaborative organisation dedicated to continual learning and improvement. The performance of the entity was still above 90%.

The entity exceeded 90% in terms of the quality of bulk and potable water supplied to customers. The entity also prided itself in terms of investing in operations and maintenance, particularly with the establishment of infrastructure. The entity had delivered 1 192 million litres per day in the 2017/18 financial year. In terms of customer satisfaction, there were no unplanned interruptions in water supply to customers that exceeded the targeted 24 hours. The entity had made a commitment to its customers that none of its systems would be down for more than 48 hours.

The entity had had robust engagements with a wide range of stakeholders in the year. In particular, information on performance after the drought and water curtailment period was provided.  This effort had culminated in the signing of the seventh customer, uThukela Municipality, in November 2017. The entity promised to help address the water challenges experienced in the municipality.

During the reporting period, 15 strategic water projects were at various stages of planning, design and construction. Umgeni Water had had to slow down on the roll out of planned new infrastructure projects. Overall, 72% of the targeted water infrastructure project milestones had been met for these strategic projects.

The setback experienced was due to drought in particular. Also, some projects intended to strengthen and extend the delivery of water and sanitation services had been disrupted by disgruntled business forums and other formations that had demanded contracts in an unlawful manner. The resultant delays had had a significant impact on the completion of projects in time and within budget. A total of 599 temporary capital expenditure (capex) programme jobs had been created in the year, with R20 million paid in wages to local labour.

Water efficiencies had been ensured in the bulk business through careful water balancing per system. In the reporting period, water loss had been 2.17%, which was well below the industry norm of 5%. The 2.17% was as a result of periodic back-washing and the resulting wastewater flowing back into the river. The entity was conscious of the inherent risks in its operations and it put appropriate measures in place to curtail the risk before it became catastrophic.

In terms of operational resiliency, the entity had established links and collaboration with academic institutions and researchers both nationally and internationally. Local research was undertaken by local sector partners, including the University of KwaZulu Natal (UKZN) and the Water Research Commission (WRC). The entity funds and directs water research projects in UKZN. It also partners with the WRC to investigate new sanitation methodologies, especially waterless sanitation. Umgeni continued to maintain the quality of its laboratories at a level that ensures provision of a world-class service 365 days a year. These facilities were ISO/IEC 17025 accredited in chemistry, microbiology, hydrology and soil testing, and had highly skilled and dedicated technical staff. The facilities analyse water resources and biological contaminants to determine the chemical dosage responsive to biological contaminants in Umgeni catchments. They had analysed about 260 000 samples in 2017/18 alone.

Regarding water resources adequacy, Umgeni had explored the uMkhomazi river, which was the third biggest river in KZN in terms of hydrological ability but had been previously untapped. Three dams were planned for construction within the river. The first was the Ngwadini Dam, as part of the lower uMkhomazi scheme. The detailed design had commenced in 2017/18 and was planned for completion in 2018/19. The second project was the Smithfield Dam. The feasibility study had been completed and the approval of the environmental impact assessment (EIA) was being awaited. The construction was anticipated to be completed by 2030. The third was the raising of the Hazelmere Dam, where construction was in progress and was expected to be completed in 2019. The Ngwadini Dam would cost about R4 billion, while the Smithfield Dam would cost about R26 billion. The cost of the Hazelmere Dam had not been concluded, but it was believed to be close to R26 billion.

For leadership and employee development, Umgeni Water aimed to strengthen and develop quality human resources and ensure a participatory, collaborative organisation dedicated to continuous learning and development. It invested in young leaders and leadership within the organisation. There was training for mid-, senior- and executive management. The entity partners with the National Treasury (NT) to train engineering graduates and technologists.

The entity was financially viable, creating significant value for customers and shareholders. In 2017/18, strong results were achieved due to sound financial management. These included group revenue of R2.90 billion, compared to R2.51 billion achieved in 2016/17. A net surplus of R1.19 billion had been achieved, compared to R746 million the previous year. Balance sheet reserves were strengthened to R8.1 billion, from R6.8 billion in 2016/17. The reserves had strengthened the balance sheet of the entity, which had given it leverage to invest in uMkhomazi catchment projects. A strong balance sheet was needed to attract investors with appropriate funds.

Mr Hlongwa also presented the financial performance report on behalf of the Chief Financial Official (CFO), Ms Lungi Xaba, who was absent from the meeting.

The top five projects for the next five years accounted for 56% of the total cash flows of R9.8 billion. This would contribute significantly towards water resource security and the elimination of backlogs in the KZN region. The reserves had been growing over the years, and R8.1 billion had been achieved in reserves for the 2017/18 financial year. The entity currently invested about R2.4 billion in various projects. This empowered it in terms of financial sustainability for the next three years. It gave it the leverage to pay off a significant portion of its debt, which positioned it to have better access to funds from investors. Umgeni also had active engagements with debtors in order to recover money from owing customers.

Discussion

The Chairperson commended Umgeni's presentation. In particular, he expressed satisfaction with the financial sustainability of the entity. He also commended the collaboration between the entity and the DWS to tackle the effects of climate change in the country. However, he believed that the entity could do more to empower black business owners, especially in terms of contracts. He urged it to employ more blacks in the construction and manufacturing sectors. It could also empower the black population through its purchasing power. This would facilitate the achievement of the goals of the Broad-Based Black Economic Empowerment (BBB-EE) programme. He urged the Department and the Water Boards to ensure that big suppliers and manufacturers did not discriminate against upcoming entrepreneurs. The water boards needed to explore renewable energy sources to complement already existing sources of energy.

Ms M Khawula (EFF) expressed concern about the money set aside for drought management that had gone missing, especially in KZN. She requested the board members present at the meeting to provide an explanation for the missing funds. She commented that the boards had not achieved anything tangible since the beginning of the Fifth Parliament. She complained about the lack of water in certain areas of the Republic.

Mr M Galo (AIC) commended the water board for the audit outcome for 2017/18. He complained, however, about the irregular expenditure that had resulted from the payment of bonuses.

Ms N Bilankulu (ANC) expressed satisfaction about the unqualified audit opinion achieved by Umgeni Water. She was also happy with the leadership of the two water boards, as they were chaired by women. She hoped that more women would be placed in positions of authority. She charged the women to perform to the best of their abilities in order to make the women in the Republic proud. She believed that the Members of the Portfolio Committee in the Sixth Parliament would start on a sound note based on the excellent jobs done by the two water boards. She urged the Department to ensure that other water boards in the country replicated the performance of Umgeni Water. She also expressed satisfaction with the way Umgeni had treated the irregular expenditure associated with the payment of bonuses. She was convinced of the capabilities of the leadership at the two water boards.

Mr Mnguni congratulated Umgeni Water on the achievement of an unqualified audit opinion. He urged the entity to do more in order to achieve a clean audit opinion. He said that the entity had been consistent in its performance. He further sought clarity on irregular expenditure. What exactly had the entity done to address the matter? He noted that water supply to customers had moved from 67% in 2016/17 to 73% in 2017/18 financial year. What was the exact population serviced by Umgeni Water? Were the customers based in the cities or in rural areas?

Mr R Hugo (DA) sought clarity on how Umgeni Water interacted with its associated entities. Did they have the same balance sheet? Did the entities have their own assets?

Responses

Ms PamelaTshwete, Deputy Minister, DWS, responded to Ms Khawula's question about the missing money, and said that the Member of the Executive Committee (MEC) for Local Government in KZN was the best person to answer the question.

She said that the members of the board did not have an intention to squander resources on flight tickets and accommodation. The Chairperson of the Committee determined the size of the delegation that came to Cape Town for Parliamentary meetings.

In response to the question on water shortages in certain areas of KZN, she said that the DWS,  the local government authority, as well as Umgeni Water, met in the affected communities and developed measures to address the challenge. There were certain communities that were not serviced by entities under the auspices of the Department. Also, climate change had a significant effect on water supplies in certain areas.


An official of the DWS said that the proposed consolidation of water boards in the country was due to the advantage that could be derived from economies of scale and the cross-subsidy between richer and poorer water boards. The objective was to consolidate the water boards in the country to three by 2030. The decision to consolidate various water boards had first been tested in KZN. Meetings had been held to inform the stakeholders of the intentions. However, the consolidation and rationalisation had not been finalised due to a delay in the legislation that was needed to back up the rationalisation. The Minister had decided to keep the water boards separate until the finalisation of the rationalisation and associated legislation. The draft Bill addressing the rationalisation of the water boards was already at an advanced stage.

Ms Mathenjwa said Umgeni Water had established an enterprise development unit. Furthermore, policies and strategies were being developed by the entity to empower the black population.

The entity was in support of renewable and alternative sources of energy. However, approval of the EIA represented a major hurdle for the entity. The temporary jobs were linked to specific projects. The contract terminated after the completion of such projects.

Regarding bonuses and settlements, she said that the bulk of the money went to lawyers. Therefore, the entity tried its best to explore alternatives that wouold reduce the amount spent on such matters. Umgeni Water cooperated with other stakeholders like the Auditor General and the Public Protector during investigations.

Mr Hlongwa agreed that the entity could empower a target group of people through its purchasing power. However, he noted that the board's decision would be driven by shareholders. The entity looked at alternative energy sources for its operations. He commented that renewable energy sources were not attractive at the moment. The entity had plans to take facilities in close proximity of the sea off the national grid in the future. The wastewater from such facilities would be treated by desalination.

Regarding bonuses and settlements, the entity had an incentive scheme which encouraged staff to go beyond their normal lines of duty. It acted in accordance with the guidance of the Department as far as incentives were concerned. The incentive of an employee was not solely determined by the employee's supervisor. The incentive was determined by the employee’s contribution to the unit, as well as the entity as a whole.

Further discussion

The Chairperson urged Umgeni Water to avoid any bureaucracy that might be inimical to black businesses. The entity should use its purchasing power to empower entrepreneurs in the easiest ways possible. The entity must always be ready to defend its position. He reiterated the need for alternative and renewable energy. He cited a catastrophic event at Rand Water that had resulted from cable theft. The catastrophe that occurred could have been averted if there were alternative sources of energy. The Board should ensure that approval for business or contracts was based on merit, not friendship.

Ms Khawula acknowledged the fact that water distribution to municipalities was the duty of the water boards. However, she urged the Chairperson of the Committee to ensure that water boards supplied water to their customers in an effective manner. Water was a sensitive issue and the Chairperson of the Committee should ensure optimal performance of authorities in charge of water. She lamented the lack of water supplies in certain areas of the country. She also advised the Committee to intervene in areas where crimes were committed in the water distribution process.

Mr Hlongwa said that Umgeni Water had a fully-fledged environmental department. The appointment of members of the board was at the interview stage. 170 applications had been received for different positions on the board. Twenty eight candidates would be interviewed, and shortlisted candidates would be sent to the Minister for consideration and appointment to the various positions.

Mhlathuze Water Board

Mr Mthokozisi Duze, Interim Chief Executive Officer: Mhlathuze Water, said a new board had been constituted. The board now had an interim Chief Financial Officer and an interim Chief Executive.

The Deputy Minister commended the excellent performance of Mhlathuze Water. She expressed satisfaction with the active engagements between the water board and the communities it served, as well as its willingness to transfer its skills to other water boards in the Republic. She said that Mhlathuze Water was one of the most effective entities in charge of water in the country.

Ms Thabi Agatha Shange, Chairperson: Mhlathuze Water, said the new Board had come into office on December 5  2018. All the board members were present at the meeting. It was comprised of 11 members with diverse skills, including finance, engineering, science, administration, governance, leadership and corporate services. The board was a generational mix comprising six women and five men. Seven of the members were below 50 years, while the remaining four members were above 50 years. This encouraged skills transfer and career growth within the entity.

She told the Committee that the board had had to comply with court order on December 20 2018. This was a real challenge for the new board, as evading the court order would have meant that the Minister and the water board were in contempt of court. The case was linked to the suspended chief executive, whose salaries and other benefits were paid continuously. The new board had discovered that the amount spent on the suspended and incumbent chief executive was R22 million over a three-year period. The new board had decided to terminate the appointment of the suspended chief executive in order to stabilise the entity. The board would soon appoint a permanent CEO.

Mr Duze said the presentation would focus on the financial year highlights, governance, an overview of the organisational performance, the 2017/18 audit outcome, the operating statement, the statement of the financial position, as well as amount spent on BBBEE.


Since the proclamation and gazetting of 2015, Mhlathuze Water had operated in northern KZN. The R1 billion assets that was built and launched in 2017 was managed by Mhlathuze Water on behalf of the DWS. Though the entity and the Department had not finalised the contractual obligation, Mhlathuze Water was committed to the effective management of the asset. Its area of operation extended to the entire KZN Province.

It supplied raw, clarified and potable water to both municipal and industrial customers. It owned one of the biggest offshore effluent disposal systems in the country. The system treated waste and eventually disposed the effluent into the sea in a way that was not harmful to the environment. He hoped Umgeni Water could benefit from the technology. The entity implemented water and wastewater infrastructure projects on behalf of various government departments. It provided operational and maintenance services on water and wastewater bulk infrastructure to municipalities and industries. It operated and maintained the Tugela-Goedetrouw Inter-basin Transfer Scheme on behalf of the DWS in the areas of its jurisdiction.

The DWS directed the entity to implement drought interventions in the northern KZN areas of Nongoma and Abaqulusi. The projects identified and protected springs which were drying up. Approximately 3 379 households had benefited from the projects. The project was highly successful, and the AG had investigated its completion to determine if the entity had implemented the mandates given by DWS.

The entity had successfully completed the construction of two 20 million litre reservoirs, which had been commissioned and were now fully operational. The Nsezi Water Treatment Plant now operated on an automated system with all relevant pump stations, which operated optimally. The Tronox pump station had been upgraded and commissioned in February 2018, and was now able to meet the future demands of the areas it supported. In addition, the upgrade of electrical works and pumps at the Mondi pump station had been completed and were now fully operational. The Empangeni pump station had been upgraded and commissioned in February 2018.

The term of office of the former board had come to an end on April 26, 2017, and the Minister had appointed an interim CEO as the accounting authority until the new board was appointed. The process of appointing a new board had commenced in May 2018 and had subsequently been appointed on December 5, 2018. An independent audit and risk committee had been appointed in August 2017 to oversee all strategic financial and risk matters in the organisation. This was part of the strategy to stabilise the organization.

Mhlathuze Water had achieved 41 (68%) of the planned shareholders’ agreement targets. Thirteen planned targets were not achieved. A clean audit opinion had been received on performance information for the 2017/18 financial year. The 2016/17 performance information had been riddled with qualifications. A single issue had been raised in the management report. It was minor, and was related to the targeted number of bulk agreements. However, the matter had been corrected, as recorded in the annual report.

Based on the performance of 68% for 2017/18, management staff did not receive performance bonuses because the entity could not compensate for non-performance on a financial basis. An overall qualified audit opinion had been expressed by the AG. The entity was qualified on four items, which had been cleared by the AG. The AG had picked up an additional qualification item.

He noted that a significant portion of the irregular expenditure had resulted from transgressions in the prior financial years, especially 2016/17 and 2017/18. All payments linked to irregular contracts were considered irregular until such contracts were terminated or the goods were delivered. This did not mean that there was no value for money. The prior years’ irregular expenditure was R248.7 million. This had been discovered by the board, not the AG. The AG had confirmed the irregular expenditure in its register. The affected officials had been disciplined accordingly. Criminal charges had been laid with the South African Police Services (SAPS) on some alleged irregularities that had resulted in fraud in the prior financial years. The accounting authority had submitted a request to seek condonation from the National Treasury. Some matters had been condoned, while the rest had been referred to appropriate authorities for further actions. The R248 million would be cleared in the 2018/19 financial year report, as the entity was determined to investigate the matter based on the Public Finance Management Act (PFMA) checklist that dealt with irregular expenditure.

He said that the CEO had been suspended pending the finalisation of the forensic investigation and legal action. Some executive committee (EXCO) members had also been subjected to forensic investigation and disciplinary processes relating to non-compliance with supply chain management (SCM) policies.

Fraud risk factors that may lead to misstatements due to fraud included possible overpayment of claims on invoices due to lack of an adequate and complete contract register. The board had tightened the controls to ensure that a project’s value and period were not exceeded. Further, unjustified variations to capital projects could result in irregular, fruitless and wasteful expenditure.

In terms of operating performance, the surplus for the year had increased by 22% from prior year due to cost containment measures amidst lower water sales volumes as a result of the drought. The revenue had increased from R534 million in 2016/17, to R539 million in 2017/18. The current ratio had increased by 0.43%, while the debt equity ratio had decreased by 0.10%, showing stronger liquidity and less reliance on financing asset acquisitions. This reduced the entity's exposure to risk. There had been a massive improvement in the interest turnover ratio (10.30%). There had also been a 2.66% increase in the return on assets, while debtors’ days had decreased by 16.64%. This had resulted in a stronger ability to service interest on outstanding debt and a significant improvement in efficiencies in utilising assets to generate earnings. The reduction in debtors days had resulted from a great effort in the collection of debts, thus improving cash flows.

Current and total assets of the entity stood at R413 million and R959 million, respectively. The total liabilities of the entity had decreased from R344 million in 2016/17 to R292 million in 2017/18. The entity's reserves had grown to over a R1 billion in the current financial year. The target for 2017/18 financial year had been 50.1% of discretionary spend on black-owned companies. However, the actual achievement had been 53.14%. The total spent on goods and services had been R365 million, of which R194 million was spent on black-owned companies.

Mr Duze said that the entity was financially viable and self-sufficient. The AG supported the decision that the two water boards remain separate entities. This prevented Mhlathuze Water, a growing entity, from the risk exposure that might arise from a merger. The entity was confronted by drought. Nevertheless, it had stayed afloat as it had managed to effectively supply water to its clients. The entity lagged in terms of youth development and training, as the number of applicants to the training programme was lower than anticipated. He added that the financial concern raised by the AG had been resolved. Other concerns highlighted in the AG's report were being dealt with by the board. He informed the Committee that the board had improved its performance in terms of governance. 

Mr Gugile Nkwinti, Minister of the DWS, commended the performance of Mhlathuze Water and Umgeni Water. He expressed optimism about the management of the boards, and believed that they were well placed to overcome various challenges. He urged the boards to consider and treat the various concerns raised by the AG.

Discussion 

The Chairperson commended the presentations of the two water boards, but sought clarity about their intention to address the risk of irregular expenditure. He acknowledged that the boards supplied water to municipal authorities, which in turn supplied to individual households. How did the boards monitor what happened to the water supply to individual households? This was a growing concern that might have significant effects in the long term if not properly handled. He urged the water boards to be more effective in job creation and water conservation. They should collaborate with other entities, especially the Department of Environment, to achieve set goals. He sought clarity on the maintenance budgets of the two entities. 

Ms Khawula said that the irregular expenditure of R248.7 million was a clear case of corruption within the water board. Was the crime committed by an individual, or by a group of people? She commended the performance of Mhlathuze Water. She noted that the new board had been constituted three months ago. What strategies was the entity using to achieve its set targets? How did the entity manage to recover money from its debtors?

Mr Galo urged Mhlathuze Water to ensure effective leadership to avoid problems and corruption within the organisation. He sought clarity about the nature of the irregular expenditure. Had the board verified the reasons for the irregular expenditure? He also sought clarity on the punishment given to the suspended CEO.

Mr Mnguni commended the performance of Mhlathuze Water. He was convinced that the entity was moving in the right direction. He noted that there had been a vacuum in the leadership for more than nine months. How did the new Board manage to achieve satisfactory results? He sought clarity about water shortage in certain areas of KZN. Was the shortage caused by the water boards, or by the municipal authorities? Were those areas serviced by Mhlathuze Water? 

Ms Bilankulu expressed satisfaction with the job done by Mhlathuze Water. There had been significant improvements in the results achieved by the two water boards, and she encouraged other water boards to follow the example of Umgeni and Mhlathuze Water. She commended the dedication and commitment of Mr Duze since he assumed office as the accounting authority and the CEO. The achievements of the two water boards were vital to the Committee, as Members could pride themselves for effective water supplies in areas covered by the two entities. She urged Mr Duze to share his strategies with the Committee. She commended the efforts of Mr Duze to supply water to areas that previously lacked water. She urged the AG to attest to the performance of Mhlathuze Water. 

The AG informed the Committee that all concerns identified in the prior financial year had been addressed. The management of Mhlathuze Water had become more effective. He said there was a long list of disciplinary hearings. The officials that were found guilty had been disciplined accordingly.  He expressed satisfaction with the performance of Mhlathuze Water. 

Mr Mnguni said that the comments of the AG attested to the fact that Mhlathuze Water had performed excellently.  He expressed satisfaction with the performance of Mhlathuze Water. 

The Chairperson said that the Committee aimed to work together with all stakeholders, including the Department and the boards, to ensure effective water supplies to the clients and communities.

The Minister thanked both water boards for excellent performances.

Ms Khawula asked what measures had been taken to address the water shortage in Cape Town. 

The Chairperson said that the boards responsible for water distribution in Cape Town would be in the best position to address the matter. 

The meeting was adjourned.

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