Department of Water and Sanitation 2019/20 Quarter 4 Report; Limpopo and Gauteng Oversight Report; with Deputy Minister

Human Settlements, Water and Sanitation

25 June 2020
Chairperson: Ms M Semenya (ANC)
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Meeting Summary

Video: Portfolio Committee on Human Settlements, Water and Sanitation 25:06:2020

The Committee was briefed by the Deputy Minister for Human Settlements, Water and Sanitation on the fourth quarter performance of the Department, and was informed that that it had not met its set targets by almost 26%. The key contributor to the Department's non-performance could be traced back to its lack of achievement on the provision of infrastructure.

The administration programme had met most targets, except for the one related to the debt owed by municipalities to the Department. It had explored various avenues to address this situation, and one of the options being looked at was the attachment of municipal assets. There had been under-spending on local management and policy related issues. The non-achievement in the regulatory field was due mainly to the delay in the establishment of the Independent Economic Regulator. The decision to build ten catchment management areas (CMAs) had also been curtailed, which had affected the overall performance of the Department. However, it had recorded an improvement in the payment of accruals to creditors, and its overall expenditure stood at 92%.

Although there was general support and appreciation that the Department had made inroads in addressing its challenges, one Member expressed her dismay at the praise that had been heaped on the Department for its performance. She called the performance "lacklustre," and questioned how Members could be content with a marginal increase of 52% to 55% in performance. This worried her, as there was nothing to celebrate.

Members also criticised the fact that the bucket system had not yet been eradicated, and called on the Department to ensure that that the bucket system be consigned to the dustbin of history. They urged it to exercise stringent project management controls, as delays not only had budgetary consequences, but also impacted on service delivery.

Meeting report

Department of Human Settlements, Water and Sanitation: Q4 performance

Mr David Mahlobo, Deputy Minister of Human Settlements, Water and Sanitation, said the Department had not met its set target by almost 26%. The key contributor to the non-performance could be traced back to programme 3.

Programme 1 had met most targets. The only target that had not been met related to the debt owed by municipalities to the Department. It had explored various avenues to address this. One of the options that were being looked at was the attachment of municipal assets.

In programme 2, the Department had under-spent on local management and policy-related issues. The finalisation of the Water Resources Regulation bill had been considered important, as it tied in with the national water resource strategy.

In programme 4, the Committee was informed that non-achievement was related mostly to the establishment of the Independent Economic Regulator. The decision to build ten catchment management areas (CMAs) had also been reduced. The delays with these programmes had affected the overall performance of the Department.

The Department recorded an improvement in the payment of accruals to creditors, and overall expenditure by the Department stood at 92%.

Discussion

Ms G Tseke (ANC) said that she appreciated the progress made by the Department on the payment of accruals. She commended the engineering and scientist graduate programme, and expressed the wish that the beneficiaries were all young men and women. It had been pertinent to prioritise the agenda with the inter-ministerial task team’s investigation into the debt owed by municipalities. She expressed her concern at the challenges experienced with the bucket eradication programme (BEP), especially in the Northern Cape and Free State, and asked to be briefed on how much the government had spent on the programme since its inception, and the targets that had been set.

Mr L Basson (DA) indicated that he could see the Department had done a lot to bring about the necessary changes, but expressed concern about the ballooning debt of the water trading entities that stood at R17.6 billion. This amount was equivalent to the Department's annual budget. He advised that it might be prudent to spend a significant amount of time on addressing the ballooning debt and how this money could be recovered. If this trend was not arrested, the debt may be about R20 billion in 2021. He described it as a run-away train.

He called on National Treasury (NT) and the Department of Cooperative Governance and Traditional Affairs (COGTA) to intervene and assist, and requested the Department to furnish the Committee with information on their plans to remedy the situation. He mentioned that that the Trans-Caledon Tunnel Authority’s (TCTA's) liabilities stood at R19.3 billion, a reduction from the 2019 figure, and wanted to ascertain what the installments on the liabilities had been.

Ms M Mohlala (EFF) recalled that the acting Director-General (DG) had mentioned that the Department had considered the implementation of a new policy. This new policy was supposedly premised on the attachment of municipal assets in lieu of municipal debt to water trading entities. She wanted to know which legislation made provision for such an eventuality.

In the presentation, the Department had addressed all the condonations that had been approved and those still under review, in particular the condonation of R10 billion, and she wanted to ascertain whether the R10 billion had been condoned.

She added that over the past three years, the Department had implemented several turnaround plans. To date, the Committee had not been apprised on whether these turnaround strategies had yielded any results. She called on the Department to provide it with a comprehensive report on all these turnaround strategies. She said it had to address the institutional challenges it experienced in Programme One, as they had an impact on the supply and demand of water.

Ms C Hlatswayo (EFF) emphasised the importance of sound project management principles, as bad project management impacted on service delivery and led to rocketing costs. She lamented the fact that the Department had failed dismally on capital projects. Many of these projects had stalled, which had led to an increase in expenditure. She called on the Deputy Minister to provide assistance.

Ms N Mvana (ANC) said that although rollovers were not encouraged, the Department seemed to promise that they would be utilised as was intended. She was worried that the Department was saying that Treasury had agreed with them.

Mr S August (Good) took issue with the debt of water authorities. The R17.6 billion debt had ballooned by almost R11 billion since five years ago, when the amount had stood at R6 billion. The situation was not good, as it meant that this debt may increase in the coming years. He asked the Deputy Minister to brief the Committee on what the Department intended to do to arrest this development. He lamented the continued talk of turnaround strategies, as it seemed that nothing concrete ever came from these strategies.

Mr M Tseki (ANC) welcomed the progress made, and indicated that he aligned himself with the questions posed by Mr Basson.

Ms N Tafeni (EFF) said the payment of invoices within 30 days had been a chronic challenge, especially where the bucket eradication system was concerned. She requested detailed information on the payment of invoices.

She lamented the continued under-spending on water sector regulation, commenting that it was unacceptable that the Department had under-spent by R145 million. How much had been budgeted for the Infrastructure Agency, and how had this impacted on the funding and establishment of an independent economic regulator?

The Chairperson welcomed the performance report, as it indicated that there had been stability. The Department had managed to address financial management issues, and had improved on the 30-day rule for the payment of goods and services.

She offered her support for the engineering and scientist graduate programme. She hoped that these graduates would be absorbed into the Department and assist with the reconstruction of their country.

She asked the Deputy Minister to provide the Committee with all the plans for the big capital projects. This would enable the Committee to get a keen grasp of what was meant when certain projects experienced delays.

Department’s response

Deputy Minister Mahlobo said he had been pleased with the performance of the acting DG and other top level officials. They had done a lot to stabilise the Department. However, the Department was not yet out of the woods, and the new organisational structure should be properly designed. If the design process was not done correctly, it might continue to be saddled with challenges. The Water Services Act would now be incorporated into the organisational design of the Department, and a new unit that would focus solely on water services would be created.

He expressed his support for the Department's progress in dealing with accruals, as R1.6 billion in accruals had been reduced significantly, but was concerned with the irregular expenditure, especially in the main account and the water trading account. The Department had done much to clean up issues instances of irregular expenditure, and the presentation had painted a clear picture of what the Department had done and planned to do to arrest the situation. He added that several investigations by a range of agencies into the financial affairs of the Department were under way.

He appreciated the inputs by the Committee on the rapid escalation of municipal debt. This had prompted the Deputy Ministers of Finance and COGTA, in conjunction with himself, to form an inter-ministerial task team on the debt issue. In many instances where water boards were owed money, the Department had been able to mediate, and Mangaung was an example. Litigation should be a last resort. It was important for entities to honour their agreements, and that the Department considered the attachment of assets as a non-starter, even though other state entities such as ESKOM had considered this option.

He assured the Committee that the Department did not have a problem with providing a trend anaylsis report on debt escalation. Several water use associations and other industries had been able to honour their payments. This was the reason why the trading account continued to show positive results.

Deputy Minister Mahlobo said that in many respects the Department was a microcosm of the South African state's efficiency and capacity. There had always been serious challenges with planning, financing and the execution of big capital projects, which was why the President had decided to be the lead on infrastructure development. The President had recently hosted an infrastructure summit where most issues had been unpacked. Infrastructure development would form the basis of South Africa's economic recovery. There had also been renewed focus on the creation of an infrastructure agency. The bill had been finalised, but had stalled at some stage.

He added that water was going to be at the cutting edge, and that no country would be able to survive if it did not deal with water-related challenges.

He called for an improvement in contract management, with an in-depth analysis of what was necessary on how to manage contracts and enforce contractual obligations.

There had been no opposition to the creation of an independent economic regulator, and the Department had done a lot of comparative analysis work.

The Department was pleased with the graduate programme, but he lamented the impact that the Covid-19 pandemic had had on the academic year and the fact that graduates would now graduate online. He agreed that the Department should continue to invest in these students and that these students should be absorbed by other spheres of government as well. It was important for municipalities and water authorities to have access to these skills.

He requested more time to deal with the challenges involved in the Vaal River, Giyani and Pretoria projects. He indicated that he would like to come back to the Committee with the correct information, and proposed that the Committee should convene a joint meeting with the Department and affected municipalities.

On pollution and water treatment works, the Deputy Minister said he did not like the term "water treatment works.” The Department was looking forward to employing new technology that would ensure zero waste. South Africa should be able to "beneficiate". In Johannesburg, the municipality had employed technology that enabled the conversion of slush into energy. He would like water treatment centres to be known as water reclamation centres.

The acting Chief Financial Officer (CFO) informed that the Department had made several requests for condonation. The Department had received approval to condone an amount of R347 million. It continued to engage with National Treasury (NT) on the other condonation requests.

NT attached conditions to any approval of rollovers, so the funds could be utilised only in a certain way.

On the Department's loan book, he said that the reconciliation for the end of March 2020 had been finalised.

The TCTA loan balance sheet stood at R17 billion, and the bond redemption dates had been staggered. An amount of R1.3 billion had been paid annually to service the liabilities.

The Head of the Bucket Eradication Programme addressed all questions related to this programme. He said that the programme had been plagued by systemic challenges, especially with procurement, which was why the Department had explored various avenues to improve the procurement framework. It had had to contend with other bottlenecks as well, such the geological impact, as many areas did not have proper geological stability, and this hampered the construction of toilets.

He added that Griekwastad had a 94% success rate thus far. Ten toilets still had to be built. The challenges experienced with this project were centred on external factors, but these were being addressed. The Department had also partnered with the Water Research Commission (WRC) on the matter.

To date, the Department had eradicated 40 955 buckets out of a total of 52 429. Since the inception of the programme, the government had spent about R4.2 billion on the eradication of the bucket system. This amount also included expenditure on bulk infrastructure.

On the Vaal River and Giyani projects, the Department had issued a directive that increased the inflow of water into the Vaal. Fifty tons of rubbish had been removed from the sewer network. Tshwane would be a construction site for the next year, and detailed information would be given in due course.

The acting DG added that the Department had not taken a decision to attach the assets of municipalities. The Department was committed to exploring all other avenues as prescribed by the relevant legislation.

Follow up questions

Ms Hlatswayo said she appreciated the radical progress that had been made by the Department since the Sixth Parliament had started, and encouraged it to continue to do things well and appropriately. It should be very professional, and could ill afford to be ineffective. It needed to have thoroughly planned budgets and action plans with relevant timeframes, and its leadership had to ensure constant monitoring and evaluation of all projects.

Ms Mohlala expressed her dismay at the praise that had been heaped on the Department for its performance. She called the performance "lacklustre," and questioned how Members could be content with a marginal increase of 52% to 55% in performance. This worried her, as there was nothing to celebrate.

Deputy Minister’s response

Deputy Minister Mahlobo concurred with the views by the Members, and conceded that there was significant room for improvement in the Department. The executive stood ready to support it after all the difficulties it had faced. The turnaround strategy would hopefully address all these matters. Project and financial management had to be improved, and all detailed plans would be shared with the Committee.

He accepted the criticism that had been leveled against the Department on the financial versus non-financial performance. The government had to strengthen its support for water services. Water resource management was an important cog in the sustainable use of water resources and service delivery, which was why the Department was an important support structure for water services authorities that had collapsed. These interventions did come at financial cost to the Department, as they had not been budgeted for.

He said he would be focused on the issues highlighted by Members, and would heed their recommendations and inputs as necessary building blocks for improvement. The Department needed to sustain and enhance performance annually.

The Chairperson replied that the Department had done well, considering the position the Department had been when the new executive leadership was appointed. She added that there was an urgent need for the Committee to engage the Special Investigating Unit (SIU) on all outstanding cases under its purview.

2018-19 Budget Review and Recommendations Report (BRRR)

The 2018-2019 annual report of the Department was ten months late. The Portfolio Committee had therefore decided to look instead at the entities that had undertaken work on behalf of the Department, which was why the Committee had requested both the Department and the TCTA to present their annual reports at the same time.

The report highlighted the financial misstatements of the Department and the Trans-Caledon Tunnel Authority. These had been corrected. The Portfolio Committee had held a meeting in May with the TCTA where it had been indicated that these misstatements had been attended to.

On the Money Bills Act, it was noted that the Committee had looked at the efficacy and efficiency of the Department's finances in relation to service delivery.

In Programme 1, it was indicated that 100 % of the final appropriation had been spent. The water infratructure development programme had seen 98% spent. Under Programme 4, the water sector regulation unit had under-spent by R11.9 million, largely due to vacant posts.

The Committee indicated that there should be regular interactions with the SIU on investigations that pertained to the Department of Human Settlements, Water and Sanitation.

Discussion

Mr Basson said there was nothing wrong with the report, but he would like to add some additions, and would submit these in writing.

Mr Tseki said that he was happy with the report. However, he questioned the sporadic dates.

The Report was accepted by Members.

Oversight visit to Limpopo and Gauteng

The Portfolio Committee had paid an oversight visit to Limpopo and Gauteng from 3-7 February 2020 to oversee and assess the efficacy of water infrastructure and human settlements development. Members adopted the report on the visit.

The meeting was adjourned.

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