Department of Water and Sanitation 2020/21 audit & SIU investigation, with Minister

Meeting report

Minister's opening remarks

Mr Senzo Mchunu, Minister of Water and Sanitation, said the functionality of government had been largely affected by Covid-19. Notwithstanding these challenges, the Department could be said to have been largely functional.

The ministry and the Department at large were committed to strengthening accountability, which contributed to improving service delivery. The Department was aware that this should be preceded by strategy planning, proper budgeting, and performance management in the whole sector.

The Minister said several long-term critical strategies had been implemented since he joined the Department last year. These strategies sought to involve the whole sector in its strategies. Moreover, in the quest to strengthen accountability, the ministry felt that a key priority and stepping stone in this was filling vacant posts to ensure everyone was accountable and that the structures had no gaps, particularly accounting gaps.

This had started with the filling of the Director-General post, followed by four vacant Deputy Director-General posts: Corporate Services; Chief Financial Officer; Regulation, Enforcement and Compliance; and Water and Sanitation. These positions were no longer dependent on acting professionals.

The Deputy Director-General for Infrastructure had a long-standing case that the Department could not just dismiss. It needed to follow due process for the completion of the matter. This was the only post with a vacant Deputy Director-General.

Concerns over many components in the Department had been resolved after consultation with the relevant stakeholders to ensure the structure of the Department was in accord with the repositioning as dictated by the strategic planning. The Department was emphatic on ensuring its technical positioning, rather than just filling posts with people.

Minister Mchunu acknowledged that the mere filling of posts did not automatically result in a strong department. There was a need to interrogate all the systems of the Department. The resulting recurring improper accounting issues in the Department flowed from weaknesses in the system. A lot of attention needed to be paid to systems. As such, the Department was also in consultation with National Treasury and the Cabinet to ensure faster delivery of projects. 

In the annual report delivered to the Standing Committee on Public Accounts (SCOPA) in March 2021, unauthorised expenditure amounted to R641 million, irregular expenditure stood at R18 billion from both the main account (R10 billion) and trading account (R8 billion), and fruitless and wasteful expenditure amounted to R287 million from both the main account (R64 million) and trading account (R223 million). These were large sums of money to go under unauthorised, irregular and fruitless expenditure. However, it was important to note that these improper expenditures had been incurred over several years, before the Minister started serving in Aug 2021. They were reported to the SCOPA only in March 2021.

The ministry was serious about combating irregular expenditure. This was displayed by the various initiatives employed to bring an end to improper expenditures in the ministry and the Department at large. These include condonations, exit strategies (where feasible), and the cancellation of the contracts (also, where feasible).

As of March 2022, the status of the Department's improper expenditure was:

Unauthorised expenditure was still R641 million;
Irregular expenditure was at R16.5 billion, down from R18 billion;
Fruitless and wasteful expenditure had been reduced to R223 million from R287 million.

Minister Mchunu referred to the issues under investigation by the internal audit, the South African Police Service (SAPS) and/or the Special Investigating Unit (SIU).

There were 28 cases registered for investigation between 2009 and 2014. Of these, 27 were financial matters, with only one pending case.

From 2009 to 2018, there was an era of professionals assuming acting positions for unreasonably long periods. During these years, 72 cases were registered, and 68 had been finalised.

Turning to water resource management, the Minister said attention had been shifted from water resource management to water service management --  ensuring water delivery to the people on the ground. Key streams were highlighted per province, with several interventions made through s63 and promoting partnerships and services with municipalities and other stakeholders.

Hearing proceedings based on AGSA report

Mr R Lees (DA) led the questioning of the Department of Water and Sanitation (DWS) into financial irregularities in the Department.

Fruitless and wasteful expenditure

Q: Based on the R78.9 million lost due to external projects, what were the projects that incurred these losses?

A: Mr Frans Moatshe, Chief Financial Officer (CFO)-- These included various projects across the nine provinces, such as the Giyani project in Limpopo and the bucket eradication project that the construction unit in the Department had been implementing. 

Q: On the Giyani project, what was the reason for the loss, and how much of the reported R78.9 million in wasteful expenditure was from the Giyani project?

A : Mr Moatshe -- The information would be drawn from the DWS for the Committee. He requested to be given time to provide a report on these figures.

The Chairperson granted permission.

Irregular expenditure

Q: On condonation referred to by the Minister that had not yet happened. Why was there a delay in getting the condonations for irregular expenditure?

A: Mr Moatshe -- This was due to the investigations not being completed, or some were completed but no consequence management yet being implemented. This would then be carried over to the next year.

Q: This seems to be taking a long period, or were there condonations, disciplinary processes, etc. that had been resolved? Or were these involved in the condonation process?

A: Minister Mchunu -- Condonations had been agreed upon as a mechanism to resolve some of the outstanding matters. However, there was a qualification that was subject to National Treasury approval processes. These were ongoing in the Department; it may very well occur that whilst the instrument was available to be utilised, it was yet to find specific application to the cases at hand.

A: Dr Sean Phillips, Director-General(DG) -- In the last year, some matters have received condonations from the National Treasury, with some reaching finalisation.

Q: Of the irregular expenditure for the year under review (R179 million), R162 million involved contracts that varied by more than 20% without the pre-approval of National Treasury. The Department reported that the investigation was still to be conducted. How much of this had been dealt with?

A: Mr Moatshe -- A total amount of R4 billion had been condoned, referring to cleaning services contracts of R53 million; a call centre service contract amounting to R230 million, security services amounting to R967 million, and information technology (IT) services to the Department of R236 million.

Q: Material irregularity item 42 seemed to relate to the increase in the capacity of the Hazelmere Dam in KwaZulu-Natal, which had been ongoing since 2015. There were costs involved for the re-establishment of sites and so on. Some six years later, the project had not yet been completed. Who were the companies involved in the project, as it had been reported to amount to a loss of R28 million that had been incurred?

A Mr Moatshe: The companies involved in the project were Group Five and Ingérop South Africa (ISA).

Q: Was it correct to say the project was incomplete? If so, what steps were being taken?

A: Mr Leonardo Manus, DDG: Infrastructure -- the project was at 96% completion. The remaining 4% was for anchoring and stabilising the structure that had been added. Of the outstanding four percent, 60% of the work was done, with an expected completion date of February 2023.

Q: What were the additional costs associated with this, and what did the claims amount to?

A: Mr Manus -- The figure was still being determined by the adjudicator. The assessment was incomplete, but was currently at R46 million.

Q: The floods and damage that resulted from KwaZulu-Natal earlier this year did not give the full benefit for the retention of volume as done by the project, due to the incomplete work -- was this correct?

A: Mr Manus -- Yes, but before the floods, the benefit of the additional capacity was experienced. However, the full benefit of the retention of water was not experienced. The civil engineers responsible for the structure before construction stated that the dam remained structurally intact, and there was no blemish to the structural integrity during the flood.

Q: On losses incurred and possible future losses -- which sound like they would be higher than the losses already incurred -- why had the Special Investigating Unit not been involved in a proper investigation of who was responsible? Even if they had not, the question remained -- who were the officials involved, and had they undergone disciplinary processes?

A: Mr Manus -- The nature of the losses was in terms of the delay due to the design change during the construction, which had led to a dispute resulting in the losses.

A: Mr Michael Motsatsi, Chief Audit Executive -- On the corrective measures, an investigation was done by internal audit, from which recommendations were received. However, these were received recently, and no implementation had occurred at this stage. As this adjudication dated back to 2014, some of these officials were unfortunately no longer employed by the Department. Perhaps the Chief Financial Officer could add to that.

Q: What recommendations have been made? Who were the officials? Please reassure the Committee that these officials would be followed, even if the Department no longer employed them.

A: Dr   Phillips -- The processes for disciplinary hearings had not been finalised yet, although they were underway. For purposes of allowing the process to be followed, the names of the officials could not be shared publicly as they had not been declared guilty yet. It was important to note that these officials were not criminally charged, and their conduct was regarding negligence. Warnings or dismissals would be issued if the Department still employed the officials. If these officials had been involved in fraud and/or stealing money, then criminal action would have been pursued.

Q: Employees that leave the employ of the Department and had been found to have civil liability, could they not be charged with a civil action for recovering the losses the Department incurred as a result of their actions?

A: Dr Phillips -- Agreed, but this may be a difficult exercise to ensure recovery from individuals who erred in judgment whilst carrying out their duties, compared to recovering funds resulting from theft or fraud.

Vhuwani pipeline

Q: In terms of the SIU investigation, there was a disciplinary referral that the Department had lost. Accordingly, in 2018 a review application was filed with the Labour court. What was the status of this case?

A: Ms Nthabiseng Fundakubi: Chief Operations Officer (COO) -- In terms of the review submitted to the court, the case was still pending. The difficulty faced by the court was the inability to serve the notice to the implicated party. This was a party that was currently under suspension as a DDG of Infrastructure.

Q: This person was presumably being paid for four years, and yet she cannot be located. The review was instituted four years ago. How much was she paid -- the standard salary of a DDG was between R1.5 and 1.7 million. Why was she not served at the hearing, seeing she had not been able to be served by the courts?

A: Dr Phillips -- The state attorney was responsible for serving the summons and ensuring actions proceeded; therefore, the Department could not issue summons during departmental disciplinary proceedings for themselves.

Mr Lees commented that this seemed to be poorly handled -- for someone to be paid all this time, yet the action taken to resolve the matter had been slow.

Mhlathuze Water Board

Q: Three implicated employees resigned before the completion of the disciplinary hearing. A criminal case was opened. What was the progress on this matter?

The Departmental officials did not have the information on hand

Amatola Water Tank Project

Q: Proclamation R23 of the SIU found that two officials failed to disclose their interest in procuring tanks. One of these officials was an intern who was a director in one of the companies that were suppliers of water tanks. What action had been taken against these officials?

A: Ms Fundakubi -- Investigations were still ongoing. The SIU had referred the case for civil litigation, criminal proceedings, and a disciplinary hearing.

Q: This matter has been going on since 2020. What was the cause of the delays? When did they envisage these being wound up?

A: Ms Fundakubi -- The Water Board handled the disciplinary processes, so the SIU had made referrals to the Water Board.

Ladysmith

Q: For the past 15 years, there has been difficulty in getting the Department to provide a water supply from the Spioenkop Dam to supply water for the desperate people in the greater Ladysmith area.  

Why was there such a delay in getting water to, yet the Department had approved this project in 2010? Why were people not being assisted to get access to water?

The DWS officials did not have all the information regarding this on hand, and they said a report would be provided.

General Discussion

Dr Phillips asked if, in future, the Department could get the questions beforehand.

The Chairperson replied that they would not. This was a hearing, and officials had to bring all the information.

Ms V Mente (EFF) said she was not comfortable with the answer on water tankers. Government had not given the Committee thorough information on what was happening, such as how many water tankers were procured by the Department, how many reached the people, and how many were not accounted for. Most importantly, what was government doing about it?

On the Giyani water matter, the Department was offering vague answers that were not in line with the hearing standards.

Dr Phillips responded that the Committee would be provided with a thorough report on this after the hearing. The Giyani contract had been awarded irregularly.

Ms Fundakubi said the LTE company was implicated. The matter was with the courts now. The hearing was sat down for October, and the pensions of the officials were being withheld.

Ms Mente asked if the funds had been paid back. There was a huge amount of money paid for the Giyani project. How far was the process of getting the money back, as annexed by the courts?

Ms Fundakubi said that no money had yet been received in terms of civil recovery. The process of recovery was ongoing. The amount that would be potentially recovered was related to the Vhuwani pipeline, and involved an amount of R95 million. The Giyani project was still going through the courts.

Mr Lees referred to contingent liabilities listed in the annual report, and said of concern was the R223.7 million from Old Mutual Insurance relating to damage due to fire. Could the Committee be told more about this, and whether this had become a cost?
Mr Moatshe replied that the amounts were not as yet costs on government’s books, as they were still going through litigation.

The Chairperson commented that the extent of corruption in the water environment was indicative of what had been seen, and it had continued. It seemed persons in the water environment were committed to corruption and undermining the due legal processes. A better approach and response from the highest office of the Department, with consequence management, would have far-reaching consequences.

Referring to the provision of water through water tankers, he said communities across the country, particularly in rural areas, could go for months on end without water, yet these communities had water systems. There was a proliferation of water tankers anchored in tendering, creating suspicions of corruption. Was the Department investigating organised crime or a syndicate of water tanker providers who would go out of business if communities received water directly from the available water sources?

Dr Phillips said the DWS was aware of this, and agreed that water tankers were not a good solution. There was awareness of the corruption among tanker service providers who sabotage municipal water infrastructure to ensure they stay in business.

The Department's officials were, therefore, much more active, and on the ground. Currently, officials are on the ground weekly in various municipalities where water and sanitation challenges are the most severe. There are interventions currently in about 20 municipalities in the country. There were plans to increase visibility.

Minister's closing remarks

Minister Mchunu said municipal service provision had declined -- most municipalities were underperforming in the areas of water and sanitation. The challenges included lack of capacity, general poverty, corruption, and billing. This led to a lack of service provision.

In some cases, water tankering had become an official corruption syndicate that was legitimised by mayors and executives in municipalities.

It was going to prove difficult for the Department to act as the watchdog for corrupt service provision activities. This was the role of local government. The Department would not allow grants to be used for hiring tankers to provide water to communities, except in emergencies. For instance, when there is a sudden eruption of activism over lack of water services in a municipality, if the local mayor and municipal officials are unable to provide answers, to calm down the emotions the officials tell the community members they would provide water tankers. Most of the time, however, the local municipalities were not able to financially manage the tankers sustainably, and they then brought the concerns to the national Department.

The Department believed that municipalities must invest in piped water infrastructure, and boreholes for emergencies.

The Minister appealed to Parliament and the SCOPA to come together to fight corruption and avoid tankering. Grants had to be channelled to piped water, as it was sustainable and a better investment going forward.

The meeting was adjourned.