The Water Research Commission (WRC) overview of its Annual Report for 2019/20 looked at performance, projects initiated and its unqualified audit opinion status.
Highlights of the Trans-Caledon Tunnel Authority (TCTA) focussed on its project implementation portfolio, its debt management profile, funds it needs to raise, performance on its pre-determined objectives, financial position, unqualified audit opinion, royalty payments against invoices prepared by the Lesotho Highlands Development Authority and its irregular expenditure.
The Inkomati-Usuthu Catchment Management Agency (IUCMA) focussed on its strategic objectives and performance information, unqualified audit opinion, and employment statistics.
The Committee welcomed the general improvement in audit outcomes of the three entities but expressed concern about the senior management vacancies in the water sector because it created an environment of instability and lack of strategic focus.
Members asked WRC about water pollution, school gardening projects, its publications, impact of its research and collaboration with universities. TCTA was asked about the water value chain, fundraising and debt management and shortage of engineers. They agreed with the Auditor-General about the matter of emphasis on the royalties overpaid by TCTA and called for DWS to move with speed on the recomputed royalty rates. IUCMA was questioned about the process for replacing the previous CEO, its corporate social investment, and its Schedule 3 delegation.
The Chairperson said the entities should not only ensure they get clean audits but also provide good service delivery. There was a clear lack of planning on human resources turnover especially at management level. DWS currently operates without a Director-General and Chief Financial Officer and the IUCMA board did not have a plan to replace the CEO by the time the contract expired in January 2021. The Committee thus instructed DWS to develop a clear blueprint with timelines on the appointment of senior managers within the department and its entities. She acknowledged the skills gap is more prevalent at the municipal level. WRC had to make available innovations and technologies to remedy the problem of pollution in municipalities. She criticised DWS and municipalities on their continued inability to enforce the 'polluter pays' principle.
Deputy Minister of Human Settlements, Water and Sanitation, Mr David Mahlobo, said each entity was represented by its board chairperson and CEO. However, the Board Chairperson of Inkomati-Usuthu Catchment Management Agency (IUCMA) had passed away and the tenure of its CEO had elapsed. He said the three entities had performed well and congratulated Trans-Caledon Tunnel Authority on reversing the qualified audit status in 2019/20. The officers responsible for oversight functions of the entities were in attendance.
Water Research Commission (WRC) 2019/20 Annual Report
The WRC board chairperson, Dr Nozibele Mjoli, appreciated the opportunity to present the Annual Report and invited the CEO to brief the Committee.
Mr Dhesigen Naidoo, WRC CEO, gave an overview of the WRC performance, its 92 projects, and its unqualified audit opinion in 2019/20. Key areas for WRC included policy and decision making, development of new products and services for economic development, enhancing human capital development by empowering communities and training of youth, ensuring transformation and redress in the water sector, providing sustainable development solutions, and growing human capacity in the water and science sectors.
WRC achieved all its 38 primary indicators and supported 362 students with about 334 in the Masters, PhDs, and postgraduate researcher level in line with its mandate. Its strategic partnerships include the South African Sanitation Technology Demonstration Programme (SASTEP) in collaboration with Bill and Melinda Gates foundation and the multi-donor partnerships Water Partnership Programme (African Development Bank). Partnerships in education include development through the South African Research Chair initiatives model implemented by the National Research Foundation, education initiatives such as Vision 2020, and development of school infrastructure for sustainable sanitation in schools.
He highlighted projects undertaken such as growing vegetables in needy communities by partnering with the Agricultural Research Council to develop school gardens. Using remote sensing to monitor freshwater ecosystems by establishing national excreta flows to revolutionise toilets in South Africa. Collaboration with the National Space Agency under the Fourth Industrial Revolution. It provided programmes that encourage transformation and support redress. Improvements have been made in farm irrigation to encourage more crops per drop of water, and the Virtual Irrigation Academy which teaches farmers to develop effective irrigation through online communication and learning. Systems that ensure wastewater solutions have been developed. WRC has also inspired young South African water entrepreneurs to enhance human capital development. The transformation statistics show that 123 females and 66 black males are in leadership positions and 36 females and 26 black males lead WRCC projects with the majority of the project leaders below 50 years. WRC also collaborates with TCTA and the water boards. WRC was involved in projects within all nine provinces. Levies remain the main source of income (76%) but income is augmented from leveraging incomes. An unqualified audit opinion was achieved.
Trans-Caledon Tunnel Authority (TCTA) 2019/20 Annual Report
TCTA Board Chairperson, Mr Gerald Dumas, expressed gratitude to the Department of Water and Sanitation (DWS) for its support on the matter of royalties. TCTA has been making royalty payments against invoices prepared by the Lesotho Highlands Development Authority certified for payment by the RSA Delegation that reflect a higher net benefit than would have been the case if the net benefit had been recomputed by the parties in the year 2006 or 2007
TCTA CEO, Mr Percy Sechemane, stated the purpose of TCTA was to operate and maintain Delivery Tunnel North of the Lesotho Highlands Water Project (LHWP); fulfil all the Republic’s financial obligations for the Treaty with Lesotho on the LHWP; and provide other water management institutions with advisory services. The project implementation portfolio was given listing projects at the implementation phase, preparation phase, and operation and maintenance phase as well as the outstanding debts that were being managed (see document). Total amount required is R64 billion. Indications are that there is sufficient interest from the market to provide commercial funding with government support, including guarantees where required. These projects support 75% of South Africa’s GDP.
TCTA managed to achieve 43% of its targets. 16 of the 19 projects identified in the annual performance plan targets were achieved under timelines agreed with DWS.
• Mokolo and Crocodile River Water Augmentation Project – Phase 2A (MCWAP2A) was 90% achieved mainly due to poor performance on behalf of the professional service provider. The implementation of this project has been further impacted by COVID-19.
• Acid Mine Drainage (AMD) on the Western Basin: 19 Ml/day was treated compared to the targeted 30-33 Ml/day. This was due to vandalism of the electricity pipes belonging to Eskom by illegal miners ‘Zama Zama’.
• Acid Mine Drainage in the Central Basin, the water was not lowered to the required target level at 118m below ground level due to several plant outages and higher inflows into the basin.
• Acid Mine Drainage in the Eastern Basin, the water was not lowered to the target level at 126 m below ground level due to unplanned two-month plant outage as the transformer providing electricity to the plants failed.
• The funds raised for MCWAP 2A was R672 million and funds invested for VRS as of 31 March 2020 was R3.7 billion with drawdown facilities available. A total of R10.2 billion enabled TCTA to complete all commitments on the implementation of Phase 2 of the LHWP.
• TCTA managed all debt within the borrowing limits and all payment obligations timeously.
TCTA CFO, Ms Busisiwe Shongwe, said the significant items assessed by the Auditor General in the statement of financial position were tariff receivables, cash and cash-equivalents, retained income, and long-term financial market liabilities.
Tariff Receivables were reduced due to lower project activity resulting in lower costs incurred in comparison to the amounts received from DWS. Cash and cash-equivalents increased due to the VRS funds from free cash increases in the year. VRS funds had been invested and were used for debt service payments as well as other project costs. Retained Income increased due to the increased surplus for the year and long-term financial market liabilities reduced due to settling of borrowings and lower funding requirements.
Billed tariffs exceeded budget due to volumes billed being higher than budgeted volumes. Running expenses was below the budget due to lower staff costs, royalties paid and Lesotho Highlands Development Agency operations and maintenance. The finance charges were below budget due to delays in setting up the JSE program for VRS funding and lower than anticipated costs for LHWP and due to lower funding being needed due to general expenditure being below budget.
Capital expenditure was below budget due to: under-expenditure in AMD STI was put on hold as professional service provider (PSP) scope of work on discharge pipes from the Eastern Basin was inadequate; under-expenditure in MMTS-2 as court order on a landowner claim still needs to be resolved; delays in award of LHWP advance infrastructure contracts; delays in appointment of the PSP for MCWAP 2A as funding not secured by year-end; Eskom delay in finalising deposit required for starting substation construction; delays in finalizing project agreements with water users.
The Auditor-General issued an unqualified audit opinion with a matter of emphasis on royalty payments by TCTA to the Lesotho Highlands Development Authority (LHDA). TCTA has agreed these overpayments are contingent assets to be reimbursed through reduced royalty payments. TCTA also incurred irregular expenditure on acid mine drainage in previous years but none had been condoned in the year under review. Employees have been trained on the consequence of irregular expenditure. Management partly implemented the consequence management for the irregular expenditure incurred. Charges were issued in some cases and the appropriate processes would be followed to finalize the matter. Condonation requests would be submitted to the National Treasury once finalized. A loss control committee has been established to attend to all irregular matters. Management has assessed TCTA as a going concern.
The CEO said TCTA needed to addresses three critical issues as these had negative impacts on TCTA and South Africa as a whole:
• The need to secure government guarantees to fund the redemption of the R9.4 billion WSP5 bond maturing on 28 May 2021
• The need for government to secure guarantees for the raising of funding to enable Lesotho to proceed with building Phase II of the LHWP
• The need to freeze 2020/21 capital tariffs (especially for projects not impacting on social users).
Inkomati-Usuthu Catchment Management Agency (IUCMA) 2019/20 Annual Report
IUCMA Board member, Ms Shivon Wiggins, said IUCMA had been challenged by COVID-19, the death of its Board chairperson, and the end of its CEO term. The entity received an unqualified audit in 2019/20 and she invited the Acting CEO to brief the Committee.
Acting CEO Adv Bernard Shabangu focussed on the mandate, strategic objectives, and performance information of IUCMA. It received an unqualified audit opinion in 2019/20 and had an overall performance of 84%. A target of 40% was planned on BBBEE operational costs spending but 37% was achieved. IUCMA achieved 100% on its planned programme targets and continued to make sure that the transformation agenda was fulfilled. The risk management profile of IUCMA is properly managed.
Ms Thembelihle Mbatha, CFO IUCMA, said apart from the approved budget, National Treasury approved funds rollover from the previous financial year and revenue was received from paid invoices. Interest was received from prudent management of rollover funds. Management agrees that IUCMA is a going concern but it depends on government.
Adv Shabangu said 24 employment opportunities had been created, 14 graduates have been on a 24 internship which would end in March 2021, three contract posts and seven permanent posts have been filled. 52% of employees have been put on training programmes in the form of bursaries, conferences, and short courses.
The current challenges facing IUCMA are inadequate water storage within the Crocodile River; attempts to control water use during drought using schedule 3 delegations; historical debt recovery from registered water users; death of board chairperson and one board member; and non-compliance in the use of waste treatment plants by local municipalities.
Communications on the board vacancies have been sent to the Minister and IUCMA believes the Minister would assist in completing the process. The contract of the previous CEO expired in January 2021, communications have been sent for Ministerial concurrence. Currently, members of the executive are taking turns to perform the vacant position roles.
Ms M Mohlala (EFF) asked TCTA to state how it envisaged itself in the proposed National Water and Sanitation Infrastructure Agency, if it had received payment for funds owed by DWS, and how it could address the shortage of engineers who played a vital role in TCTA. She asked for detail on its advisory role on the President's National Infrastructure Advisory Council (NIAC) and how TCTA could increase infrastructure in the water value chain.
She asked WRC to state hindrances to the supply of potable water in a changing world. What was the impact factor of the WRC publications and the extent of its collaboration with the University of Witwatersrand. She asked WRC to comment on its spatial planning agenda.
She asked IUCMA to extend its CSI to other communities without a potable water supply.
Ms N Mvana (ANC) noted the IUCMA favourable audit opinion and encouraged it to strive to achieve 100% target performance. She asked it clarify its surplus funds. She congratulated WRC and encouraged it to improve its on its target projects. She asked TCTA to state how it would manage its debt and to comment on how it would raise the funds needed for its projects that support 75% of the country’s GDP.
Ms N Sihlwayi (ANC) asked WRC to state its role in mitigating water pollution as this constitutes a huge challenge to the environment. She asked it to state how it assisted DWS in preventing water pollution and how it assisted youth entrepreneurship.
Ms C Seoposengwe (ANC) asked WRC to give clarity on the school gardening project and how the schools fund their water bills. She asked for WRC plans in addressing historic challenges that have arisen on water distribution policies.
Mr M Tseki (ANC) asked the IUCMA board why it had not begun to replace the previous CEO whose contract had expired.
The Chairperson welcomed the general improvement in audit outcomes of the three entities but expressed concern about the clear lack of planning in the sector on human resources turnover, especially at management level. She asked the Deputy Minister and the Department to comment on what it was doing to address critical vacant posts.
The Chairperson asked TCTA how it would access the funds and resources promised by government for the development of water infrastructure. How would TCTA assist DWS to get more resources to clean the polluted dams.
She asked IUCMA to explain why its Schedule 3 delegation has been put on hold and asked for clarity on gender employment statistics and graduates employed in 2019/20.
Dr Mjoli replied that South Africa was a water-scarce country and the waters are polluted due to agricultural and mining activities. WRC comes up with water-efficient policies but the water ends up being polluted. However, people responsible for cleaning the polluted water lack the skills necessary to clean polluted water. The people responsible for cleaning polluted waters need to be empowered to deal with water pollution using water-efficient technologies. Although WRC provides efficient water sanitation technologies, people feel that the technology provided is inferior. The poor do not have access to potable water because there is a preference for inappropriate water solutions in rural areas.
Mr Naidoo replied that WRC has unpacked the implications of water tariff increases in rural areas and would share the report with the Committee. There had been an increase in pollution in South African waters from agricultural, mining, and pharmaceutical abuse practices. Microplastic contamination is a great challenge in South African waters. Also, climate change is leading to drier water cycles and changes in rainfall patterns affect water infrastructure. Capacity is a major challenge in treating polluted water and South Africa does not have enough technicians and engineers to manage its water infrastructure.
Mr Naidoo replied that publication in high-impact journals is vital and WRC encourages its researchers to do so. WRC collaborates with the University of Witwatersrand and other universities to ensure that efficient water solutions are provided. The climate change notion of the water-sensitive design concept is been pushed as part of the spatial planning agenda. WRC is intensifying efforts to ensure it makes major impacts in providing efficient water solutions but this is limited by the budget approved.
Mr Naidoo said projects on reduction of acid mine drainage cannot be up-scaled from laboratory scale to pilot scale. WRC is dealing with pollution but monitoring has to be implemented on a larger scale and the enforcement of a water pollution charge on persons and organisations engaging in water pollution. Standards to establish pollution have to be worked out and ways to deal with the active causes of water pollution have to be established. WRC is building infrastructure to enhance water quality.
Mr Naidoo said the statistics on youth show that there are more youth researchers. This is unique because it is not the norm in other sectors. WRC also has a graduate employment program in collaboration with the Department of Science and Innovation.
The sanitation programme has the possibility of making the schools a safe place, WRC has given the Department of Basic Education the guidelines for school gardens, and has also implemented water-wise programmes in school.
WRC has implemented South African Sanitation Technology Demonstration Programme (SASTEP) that assists youth entrepreneurs to be more relevant in markets. WRC laboratories can be empowered by budgets to have more impact in global markets. WRC is working on providing efficient water solutions that would mitigate challenges faced by TCTA.
Mr Sechemane replied that TCTA would be directly affected when the proposed National Water and Sanitation Infrastructure Agency (NWSIA) is established. However, the proposed NWSIA would still face the funding challenges that TCTA is facing presently. The Minister would provide direction on how TCTA works with the proposed entity. Improvements have been recorded in meeting deadlines on tariff payment periods of water invoices.
The primary debtor of TCTA is DWS because DWS stands surety for defaulters who do not pay tariffs at the right time. Funding agencies question payment shortfalls on tariffs and banks want more guarantees as the economy is presently challenged.
Rural areas are challenged by a shortage of engineers as engineers do not want to work in rural areas. TCTA is engaging with universities to take advantage of working with LHWP because most engineers do not want to work in Lesotho. Technicians are also needed to mitigate the challenges of water pollution and the DWS has its iLearn DWS Academy.
Adv Shabangu replied that its corporate social investment (CSI) is an annual project and IUCMA conducts easements to identify areas that are challenged with potable water supply. In the past, water pollution solutions by IUCMA have focussed on the usage of surface water but research is ongoing on using groundwater. He clarified the employment statistics based on gender.
Ms Mbatha replied that the rollover funds were approved by National Treasury but the increased operation costs were due to expenditure in support of COVID-19 procurement.
Adv Shabangu said IUCMA has finalised its water catchment area management strategies and is revising its water allocation reforms strategies to ensure historically disadvantaged communities are empowered. He mentioned the interventions made by IUCMA to address inequality in water allocations.
Adv Shabangu replied that of the 91 employees, the number of females was higher and more females have received training opportunities.
Ms Thoko Sigwaza, DWS Acting DDG: Regulation, said all Catchment Management Areas were in a position to accept the Schedule 3 delegation. All the entities performed well based on their deliverables and financial outcomes. The appointment of the IUCMA CEO was been addressed by DWS.
Ms Fundakubi Nthabiseng, DWS Chief Operations Officer, said all policy related matters of the entities had been addressed.
Deputy Minister response
Deputy Minister Mahlobo said wrong agricultural practices and acid mine drainage led to pollution of water, soil, and air but emphasized the role of the DWS entities in ensuring that water, soil, and air quality is maintained in South Africa. He said the transformation agenda would play a key role in managing the water quality. DWS would come back to discuss the water tariff and water rate changes with the Committee. He congratulated the IUCMA for its performance despite the challenges faced by it. DWS would address the Schedule 3 delegation.
Chairperson closing remarks
The Chairperson remarked that the entities should not only ensure that they get clean audits on their financials but also ensure that they provide good service delivery. She expressed concern about the clear lack of planning within the sector concerning human resources turnover, especially at the management level. She said it was unacceptable that the DWS currently operates without a Director-General and Chief Financial Officer. She expressed concern that DWS and the IUCMA board did not have a plan in place to replace the Chief Executive Officer despite the knowledge that the contract was reaching its end. The Committee thus instructed DWS to develop a clear blueprint with timelines on the appointment of senior managers within the department and its entities. She acknowledged the skills gap is more prevalent at the municipal level. She instructed WRC to make available innovative ideas to effectively deal with the problem of pollution and cooperate with the Department of Cooperative Governance and Traditional Affairs and municipalities to make available innovations and technologies to remedy this challenge. She criticised DWS and municipalities on their continued inability to enforce the 'polluter pays' principle.
The Committee resolved that it would continue to interrogate the annual reports of water boards to ascertain if they are implementing their mandate for the benefit of the people of South Africa.
The Chairperson agreed with the Auditor-General on the royalties paid by TCTA. The Committee called on the DWS to move with speed to agree on the effective date of the recomputed royalty rates to assist TCTA to resolve this matter of emphasis in the audit.
The meeting was adjourned.
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