DWS briefing: assessment, evaluation and analysis of the Water Boards from 2019 to date; with Deputy Ministers

Meeting report

The Chairperson said that he was attending the meeting from King Shaka International Airport, as his flight was scheduled to leave at 11:05.

The Chairperson expressed deep concern about the situation in KwaZulu-Natal. He described the situation in KwaZulu-Natal as "very dire". Halls and temporary accommodations are overcrowded. “The people are suffering”. There are currently 58 families, amounting to 135 people living in one hall, which accommodates married, unmarried, children, and adults of all ages. On one homestead there is an old lady who lives with 22 children. The parents are said to be scattered all over South Africa to seek work opportunities. An intervention by the Portfolio Committee and/or other Committees is due to address the situation. 

A moment of silence was observed.

The Chairperson moved to the second item of the agenda and asked if there were any apologies. The apologies were submitted by the Minister.

The meeting moved to the presentation by the DWS. DWS was asked by the Chairperson to be time cautious when presenting as the presentation was “too long”.

Department of Water and Sanitation (DWS) briefing: assessment of water boards in respect of mandate, institutional arrangement, governance, budget, and operations
The presentation (see attachment) covered various topics surrounding the water boards. The change drivers for review of Water Boards include the following:
-In some instances, the relationships between water boards and municipalities are poor and not conducive to optimal outcomes for service delivery.
-The financial viability of some water boards is marginal. In some instances, this is related to an underlying structural issue (geography and client base), in addition to challenges with billing and revenue collection at municipal and non-payment by municipalities to water boards.
-Municipal performance is generally weak and compromises effective and sustainable water services delivery. This means that services are not being effectively expanded to households without an adequate service, that services being provided to existing households may not be sustainable, and that the quality of services is deteriorating.
-There have been ongoing governance problems in some water boards.
-As far as possible, Water Boards should be financially sustainable and able to raise capital from the market for infrastructure projects.
-All geographical areas that need the services of Water Boards, which are not yet serviced by Water Boards, should be covered by Water Boards.
-Some areas are serviced by multiple water boards, resulting in a degree of institutional confusion (for example, Hammanskraal, where two Water Boards and the Tshwane metro are all supplying water, resulting in confusion when there are disruptions in service delivery).

The non-payment by municipalities has great impact on the sustainability of the business(es). As of 31 March 2022, the Water Trading Entity is owed R23 billion, and this amount is rising due to non-payments by municipalities. Water Boards are owed almost R14 billion as of 30 Mar 2022, and they are rising due to non-payment by municipalities; this includes R9.7 billion which is overdue. There are inadequate investments in infrastructure, which will have an adverse impact on meeting the current and future increased demand for water services. This in addition to the inadequate money allocated to operations and maintenance with high risk of unreliable services negatively impacting water quality and quantity, and health and hygiene, and critically on the environment. This also emanates an inability to maintain positive cash flows from operations, in the long-term impacting growth and sustainability. There is a potential collapse of the institutions operating under the Department. For example, Sedibeng Water is being disestablished as a result of non-payment by municipalities. The presentation also touched on the fact that there has been irregular, fruitless and wasteful expenditure of R8 billion.

[See presentation document for more details]

Discussion
Ms N Sihlwayi (ANC) welcomed the DWS presentation and was pleased with the way it was presented. The summarised versions of the report were not new information, but rather a different approach. There were reports presented to the Portfolio Committee back in 2021, which were “lost” in the latest summarised version. 

The Lepelle Northern Water matter was one that caused some instability at the time. The report tried to clarify or find solutions but did not provide enough information, as one official is said to have resigned. There were many officials involved in the matter of LNW, including the Chief Financial Officer. Perhaps the Portfolio Committee needs to be thoroughly briefed on the decisions that had been taken.

The other problem is that of the Amatola Water Board. The Portfolio Committee received a startling report in 2021. The report detailed the events that took place during the tenure of the previous Minister. Some of the activities mentioned in the report took place before the current Portfolio Committee was formed. The PC is interested in what happened to those matters. Whether those problems been put into the system and dealt with?

Her other question was about the money allocation to some institutions that seem to be under-spending because they are overpopulated. Sedibeng, Amatola and Umgeni are populous, and one would therefore expect a lot of money to be allocated to these water boards. This was in view of the amount of water these water boards supply.

The task team that is inclusive of COGTA should intervene to deal with some of the matters that involve the municipalities and water boards. The consequence management must be established on the R4 billion that has been set aside.

An oversight visit by the PC earlier this year showed that a certain minority ethnic group, in Ndlambe Local Municipality, receives water, while the majority is not provided with water. This is particularly true in the Alexandria area where there is a desalination plant. DWS has not yet resolved the matter. Ms Sihlwayi apologised for using "race/colour" to describe the matter, but she could not find other ways to describe the situation in the local municipality.

The Chairperson made a few corrections to the arguments that were presented by Ms Sihlwayi. Instead of classifying the areas as white areas, she should have said “upmarket” and “minority” because there are black people who live in those areas.

He handed over the duties of chairing the meeting to Ms Tseke.

Ms Tseke asked to switch off her video due to network challenges. Her concerns were about the R8 billion that had been classified as irregular, fruitless and wasteful expenditure. The Department must reflect on how it will address the matter.

The reconfiguration of water boards is set to be completed by the end of June 2022. Is the Department on track to complete this? The Department must provide thorough information on the top 43 municipalities that owe water boards – including the amounts owed. Are there government departments that owe the municipalities? While this is a matter of COGTA, the PC must be informed.

Rand Water does have capacity. What contributed to the irregular expenditure of roughly R2 million? Can the Department to respond if there are no further clarities needed by the Members?

Responses by DWS
The Director-General of DWS, Dr Sean Phillips, said that there are two current SIU investigations into Lepelle Northern Water. The first was the Proclamation No R22 of 2016: The awarding of contracts to LTE Consulting by the Lepelle Northern Water and Gauteng Department of Human Settlements (extended by Proclamation No R39 of 2019), and Proclamation No 27 of 2019: Lepelle Northern Water: Contract awarded to Blackhead. There is potential for another proclamation. The SIU (Special Investigating Unit) has assessed allegations about drought relief, and has applied to the President for proclamation to investigate. On the two current SIU investigations, although they are not yet completed, the SIU has made certain referrals – including the undergoing Civil Litigation Action, to set aside the contract with LTE Consulting (Pty) to the value of R4.1 billion.

As indicated by Ms Sihlwayi and there was a disciplinary referral related to the Lepelle Northern Water CEO who resigned. But there was also another one related to the Manager of Planning at Lepelle Northern Water, which was postponed a bit later. That manager has been charged with misconduct by Lepelle Northern Water, and the disciplinary hearing is currently underway.

They are other referrals related to these cases. The Minister has intervened at Amatola Water Board because of governance challenges. He has replaced the board of Amatola Water Board with an interim board. The DWS is working closely with the new board interim board, and there is stability and improvements to the organisation already.

DWS does not transfer money from the government to the water boards for project funding. Water boards can borrow money to finance projects, and they borrow money based on the revenue they receive from selling water. Funds are only allocated to water boards when they have been tasked by DWS to implement DWS projects, like Emfuleni Intervention by Rand Water, which is funded from the DWS budget. 

Chief Financial Officer (CFO) of DWS, Mr Frans Moatshe, said the Department is, indeed, working with the CFOs of various water boards to manage the historic irregular, fruitless and wasteful expenditure. The DWS is also working with National Treasury on incidents that require a condemnation process. As a request by the PC Members, when the DWS present the quarterly reports, it will include the status of each case.

The DG intervened to say that the DWS will send the information on the top 43 municipalities owing to water boards and how much they owe. He planned to send it directly to Ms Tseke.

Ms Tseke asked for the information to be sent to the Portfolio Committee Secretary, Ms Nosipho Bavuma.  

Other Matters Raised by the PC
The DWS will complete the reconfiguration of Sedibeng Water by end of June 2022. There will be a gazetted notice that will be issued. Rand Water has a lot of capacity, and the Department is minimising them to Mpumalanga and Gauteng. DWS will reassess the capability and capacity once the reconfiguration has been done. This is to assess if there is a possibility to expand.

Ms Tseke asked if there are government departments that owe implementing agencies.

Dr Phillips gave a response and said that there are government departments that owe implementing agencies. This includes water and electricity bills. It is something that COGTA is looking at.

Ms Sihlwayi sought clarity on the matter of Nooitgedagt. It is said to be 99% complete. However, there are continuous water outages, which are considered by many to be a “water crisis”. Could that be the cause of the infrastructure development? Will this cease once the project has been completed?

As a sustainable question, the DG provided a response that water boards do not receive money from the Department. Water boards borrow money, presumably, from private sectors. The concern is around the funds that are owed by municipalities to the water boards. Are water boards able to pay back the money to their borrowers given the current non-payments?

Mr L Basson (DA) said that the situation in Qqeberha is not about the Nooitgedagt Project. It is about the municipality's inability to spend the R58 million that was allocated by COGTA. The allocation was for the pump stations to be upgraded. The money was allocated on 04 February 2022. There have been no upgrades since then. Other reservoirs are suffering as a result. It is a big problem in the Nelson Mandela Bay Municipality.

Ms Sihlwayi asked the acting chairperson, Ms Tseke, if the response could come from the DWS.

The acting Chairperson asked the Deputy Minister of Water and Sanitation, Mr David Mahlobo, to provide responses when giving his closing remarks.

Closing remarks and final responses
Deputy Minister Mahlobo said that the entities (water boards) play an important role. The Department of Water and Sanitation is working on improving its instructional oversight mechanism. Water boards remain the most efficient mechanisms for facilitating the Department's goals and are one of the strongest state-owned enterprises. The Minister uses water boards to intervene and provide support. When it comes to governance and fighting corruption in the water sector, there will be no room for corruption and malfeasance. Every cent that gets lost denies every drop that could be distributed to communities, including the social-economic benefits.

There is an intervention taking place in Nelson Mandela Bay. Deputy Minister Mahlobo requested that the Department be given a chance to have oversight responsibility. This has been escalated by the fact that Nelson Mandela Bay is prone to droughts. The intervention will bring stability to the system in Nelson Mandela Bay. The Minister will visit Nelson Mandela Bay on Friday as part of provincial and national government intervention. 

Deputy Minister Mahlobo was disconnected.

Deputy Minister of Water and Sanitation, Ms Dikeledi Magadzi, intervened and said that the Department will engage with the Nelson Mandela Bay Municipality on Friday (03 June 2022) and the provincial government in the Eastern Cape. The Department will be visiting Matjhabeng Municipality to assess what is happening and thereafter inform the PC of its findings. In her closing remarks, she thanked the Portfolio Committee for giving DWS the opportunity to provide an update on the status of the water boards.

Deputy Minister Mahlobo, having been reconnected, apologised for the disconnection, and explained that it was due to poor reception.

Ms Tseke stated that the Minister will be visiting the Nelson Mandela Bay Municipality. The briefing was very thorough and insightful.

The meeting was adjourned.