Department of Water and Sanitation Third Quarter Expenditure and Performance Report, 2022/2023 financial year; with Deputy Ministers
Water and Sanitation
28 February 2023
Chairperson: Mr M Mashego (ANC)
The Portfolio Committee on Water and Sanitation convened in Parliament to receive a briefing from the Department of Water and Sanitation (DWS) on its Third Quarter Expenditure and Performance Report for the 2022/23 financial year.
The DWS said it continued implementing measures to accelerate key service delivery programmes. The Department achieved 71 percent of its performance targets for the third quarter, with 61 percent of the budget spent.
Several factors led to poor productivity on construction projects, including inadequate planning and work scheduling, lack of collaboration and communication between stakeholders and inadequate capacity of water boards and municipalities. The Department said measures to improve project implementation included an infrastructure procurement strategy and improved project management processes. A financial recovery plan was being implemented to deal with historic challenges. Strategic support of municipalities was ongoing. Collaboration with law enforcement agencies resulted in the Special Investigating Unit (SIU) recovering funds involved in previous irregularities.
The Department’s expenditure for the period ended 31 December 2022 amounted to R11.399 billion. This represented 61 percent of the total adjusted appropriation of R18.555 billion, leaving unspent funds of R7.155 billion.
Committee Members said they were pleased to see progress in stabilising the Department given its state of it in 2019. They noted that further improvement was needed, considering that water supply was still a dream for some communities. They expressed concern about the consequence management actions taken by the Department against delinquent officials and asked for a progress report on SIU investigations. Members also asked about the progress of the Bucket Eradication Programme in the Free State and Northern Cape and were concerned about whether people would have water in their households after the project was completed.
The Chairperson acknowledged the presence of the Deputy Ministers of Water and Sanitation, Mr David Mahlobo and Ms Dikeledi Magadzi, and the Director-General of the Department of Water and Sanitation (DWS), Dr Sean Phillips.
In his opening remarks, Deputy Minister Mahlobo said the Department had proceeded with stabilising the administration after becoming a stand-alone department in 2021. The Department was now capable. It was led by the Director-General, and professionals were appointed to fill the vacant positions. The only position not filled was the one for a Deputy Director-General of Construction. The Department was still resolving outstanding issues with the previous DDG, even though the outcomes of a disciplinary hearing had been received. The Department had completed the refinement of its organisational structure and its implementation was underway.
The reconfiguration of the water boards as an instrument at the disposal of the Department in municipalities had been completed. The DG and other officials of the Department had done all the assignments related to Bloem Water, as well as boards in the Northern Cape and the North West. The Department was pleased that there would be permanent water boards in all the cities. In KwaZulu-Natal, there was a process to make Amatola Water an official water board. The Department was also considering renaming Bloem Water because of its expansion. The process to combine Mhlathuze Water with Umgeni Water was moving towards completion. Rand Water was being extended to areas of Mpumalanga.
The establishment of the National Water Resources Infrastructure Agency (NWRIA) would allow the Department to raise funds in the financial markets using the agency’s balance sheet. The Fiscus did not have all the resources to meet the needs of the Department, so the NWRIA would be useful in that regard.
Institutional issues, including the CSA Group issue and the irrigation boards of water associations, were important to the credibility of the Department. The financial position and performance of the Department were also a concern for the Committee. The Department had managed to produce a financial turnaround plan and would report to the Committee on its progress. The Ministry was satisfied that the Department was on track to meet its commitments, especially regarding water resource management.
A continuing area of concern was water services. Several municipalities were not doing well, regardless of the political parties that ran them. Access to infrastructure in South Africa had increased substantially, but it was becoming harder to supply water for a full year without interruptions. The reason for this was old infrastructure and the fact that investment in bulk infrastructure had not kept pace with population and economic growth. The Department had agreed to support several municipalities with water resources, even when they were unable to pay for them, because of this issue. The deterioration of water quality also affected sewerage systems and as a result, no municipality in South Africa did not have a sewage spillage issue.
The Department was pleased that Operation Vulindlela was operational. It felt bad that it took them many years to finalise water licences, but all were finalised. Some licences had to be signed, which took a lot of time. There were many issues with the Water Tribunal that needed attention. The Department’s performance improved gradually, but it was still far from reaching its desired results.
Third quarter expenditure and performance
The DG, Dr Phillips, said the DWS had continued implementing measures to accelerate key service delivery programmes. For the third quarter, the Department achieved 71 percent of performance targets with 61 percent of the budget spent. A number of factors led to poor productivity on construction projects. These included inadequate planning and work scheduling, lack of collaboration and communication between stakeholders and inadequate capacity of water boards and municipalities. The DWS was taking steps to improve project implementation. These included an infrastructure procurement strategy and improved project management processes. A financial recovery plan was being implemented to deal with historic challenges of the Department. There were ongoing initiatives to accelerate service delivery and provide strategic support to municipalities. Significant progress had been made in stabilising the Department. Collaboration with law enforcement agencies had resulted in recovery of funds involved in previous years’ irregularities.
Ms Babalwa Manyakanyaka, Chief Director: Corporate Planning, DWS, outlined the non-financial performance of the Department. She gave details of the overall third quarter (Q3) performance, the progress in implementing the 2017 Preferential Procurement Regulations and the consolidated progress for designated groups.
The Department achieved 71 percent of its overall targets in Q3. It partially achieved 14 percent and did not achieve 15 percent. Slides in the presentation showed procurement percentages from small businesses and groups designated in the Preferential Procurement Regulations. (See the document.)
Mr Frans Moatshe, Chief Financial Officer (CFO), gave a presentation on the financial performance of the Department in Q3,
Expenditure for the period ended 31 December 2022 amounted to R11.399 billion, representing 61 percent of the total adjusted appropriation of R18.555 billion and leaving total unspent funds of R7.155 billion. For the same reporting period in the 2021/22 financial year, cumulative spending was 55 percent. Compared to the approved drawings to date of R13.393 billion, there was under-expenditure of R1.993 billion (11 percent). The presentation gave details of variations from projected spending in the areas of compensation of employees, expenditure on goods and services, transfers and subsidies and payments for capital assets.
See attached for further details
Ms S Mokgotho (EFF) asked when new measures would be implemented to stop irregular expenditure. The Department said it spent R26.2 million on COVID-19 interventions in the first quarter. What were these and where was the disaster relief of R800 000 implemented? What was the deadline for the Bucket Eradication Programme (BEP) in the Free State? When were the 107 vacancies for scientists and engineers going to be filled? What was the cost of the appointment of debt collectors? What disciplinary measures were put in place to deal with the contractor that provided poor services? Did the Department not anticipate the poor services? If the bulk water infrastructure was old, and the amount of water provided was low, why did the Department not use the budget to replace old water infrastructure in the Free state?
Mr G Hendricks (Al Jama-ah) said all water provision entities were part of criminal syndicates, just as in Eskom, and he did not have confidence in the Department. He asked for details of the progress being made in consequence management. Did the Department pay the expenses of the Special Investigating Unit (SIU) upfront as it was struggling for money? The Department was a criminal organisation. Internal and external audits were not enough. There should be an intelligence-driven unit to deal with corruption.
In Bushbuckridge, there was a water treatment plant where nine percent of the water went to farmers for free, although they had dams on their farms. They plugged into the system to steal the water, which was also the case with water resellers. What revenue did the Department get for water in Bushbuckridge compared to the money it spent? Legislation on water standards needed to be updated. Municipalities provided poor quality water because of the standards.
The Chairperson reminded Mr Hendricks that the representatives from the Department were officials and could not answer political questions.
Mr A Tseki (ANC) said those who knew there was corruption in specific entities and departments had a duty to report it. He warned Mr Hendricks against making general statements with no evidence. On Slide 5 of the presentation, there was a reference to several factors that led to poor productivity on construction projects, including inadequate planning and work scheduling. He asked the Department to elaborate on inadequate planning. On slide 19, there was a reference to 133 percent of applications for finalised water use authorisations. He asked whether that was a mistake as he understood percentages to end at 100.
On slide 25, he was pleased that the Department was taking stakeholder consultations seriously. He asked the Department to provide a summary of historical expenditure for the past five years. On slide 45, he wanted to know if there was any loss caused by the diversion of funds from Nandoni. He proposed a special meeting to deal with slide 49 because it focused on SIU investigations and money that was lost and recovered by the Department. Lastly, in dealing with the Energy Availability Factor (EAF), he asked if the Department was considering hydropower in its dams or any kind of investments in hydropower.
Mr L Basson (DA) warned Members against playing politics with the Department. He said there had been some notable Improvements since 2019 despite the limited water supply. He thanked the DG and Department officials for their excellent work in improving the Department in a short period. He asked the Department to improve its work on the Blue Drop certification programme to ensure people had safe drinking water.
Ms N Sihlwayi (ANC) said some members might not understand the progress made by the Department since 2019 because they were new. The Department did not have a recognisable leadership structure and its performance was poor when the Committee started its work in 2019. The Committee had to stamp its oversight authority over the Department. Giving credit where it was due was important, although the Department still had a long way to go. A lot of capacity building was done in the Department.
It was the responsibility of the municipalities to provide water to communities, but what would happen if the communities took the Department to court for not providing water? What would protect the Department in terms of the Constitution? On Slide 11, the percentage of people with disabilities (PWDs) working in the Department was four percent and the figure for youth was 12 percent. What kind of work were they doing? She asked about the challenges faced by the Department regarding corporate services and financial management. What was the Mzimvubu-Tsitsikamma catchment? When communities blocked a project from happening, it said a lot about stakeholder engagement. Why were stakeholders not involved in the planning of projects? The Sedibeng Water Board was dissolved. Why were they given money? She asked for a progress report on the desalination project in the Eastern Cape.
Mr N Myburgh (DA) said the Department made improvements, but it still faced enormous challenges. Consequence management regarding irregular expenditure and corruption must be dealt with effectively and people must be jailed. The Department was one of the targets for state capture and would remain a target for corruption. Was any money retrieved and were there any convictions? Had the Department engaged with the Department of Cooperative Governance and Traditional Affairs (COGTA) and municipalities about collecting water revenue? Was it true that even if the Department completed the Bucket Eradication Programme (BEP), it would not be able to connect water to households?
Ms G Tseke (ANC) also noted the improvements in the Department since 2019 and said credit must be given where it was due. She praised the recruitment of 859 young scientists and engineers. The Committee would go on an oversight visit to the Northern Cape and Free State to monitor the progress of the BEP. Would the Department be able to present the Water Service Amendment Bill and the National Infrastructure Agency Framework Bill before the end of the Sixth Administration? How were business forums affecting the Regional Bulk Infrastructure Grant (RBIG) and Water Services Infrastructure Grand (WSIG) across the country? Did the Department not have a partnership with the National Youth Development Agency (NYDA) and Presidential Youth Employment Initiative (PYDI) to access young people’s businesses? She asked for a progress report on the rehabilitation programme and whether it would receive any allocation in the Department’s budget.
The Chairperson said the Committee could write a positive legacy report about the progress made by the Department. He reflected on the terrible state of the Department in 2019, when the Committee started its work and noted how much progress had been made up to this point. He noted the progress made by the Department on its vacancy rate in Corporate Social Services and asked them to improve on turnaround time in that regard. The Committee was committed to do oversight on the BEP in the Free State and the Northern Cape soon. He noted how in Bushbuckridge, where he grew up, there were no flushing toilets until he was about 30 years old and said although the Department made progress, it took long to deliver services.
Deputy Minister’s response
Ms Dikeledi Magadzi, Deputy Minister of Water and Sanitation, gave a commitment that the Committee would receive written responses to some of the issues raised by Members before its next sitting. The Department and Ministry were working towards resolving consequence management issues. Revenue collection was a big challenge for the Department. The municipalities were collecting little revenue. Most people within municipalities were unemployed and could not afford to pay for water services. Old infrastructure contributed to the loss of water in municipalities, but the Department tried not to impose itself on the municipalities and intervened when requested. The BEP was progressing considerably as the Department ensured that it provided sanitation to new settlements and provided temporary sanitation if it could not provide permanent sanitation.
The Chairperson said the Department and the National Treasury were considering withdrawing equitable share allocations to municipalities that were not paying and asked whether that had been made official.
Dr Phillips said slide 57 showed graphic information about reducing irregular expenditure. The CFO was presenting on what the Department was doing to eradicate old irregular expenditure. There were about 100 vacancies for scientists and engineers which had been advertised, but there were budget constraints which slowed down the filling of those vacancies. Money was reallocated for faster and ongoing projects and the slower projects were allocated the money in the following financial years. The Department had strong internal audit units and an independent audit committee which reported on every investigation and kept records of all investigations which resulted in court or disciplinary action. He asked Mr Hendricks to share the evidence of corruption in the Department if he had it.
Mr Hendricks said he would share all the videos he had with the Department.
Dr Phillips said the Bushbuckridge municipality must collect revenue for the water it supplied. Its water was supplied by Rand Water which collected revenue from the municipality. He said the Department could request information on how much revenue was collected between the two and provide the Committee with that information.
The Department had focused on improving its planning and there had been some notable achievements, but it was still living with the legacy of poor planning, especially in the BEP. When the BEP project was conceptualised and planned, there was insufficient planning on connecting households to more wastewater treatment nodes. This has caused many problems in trying to finish the projects now.
The Department had requested bids for building hydropower or other forms of renewable energy on its dams because the dams used a lot of electricity. The Department wanted to reduce its reliance on Eskom and reduce the demand on its power grid. There was also potential to sell water resources for hydropower to others. The Department could sell water use licences to those who wanted to build hydropower stations on some rivers or dams. The Department planned to open that window of opportunity in March.
The Department had made an input to the Presidency and COGTA on measures that could be taken to reduce the impact of load shedding on water and sanitation services. The response received was that the Minister of Water and Sanitation must encourage municipalities and water boards to provide their own power supply. The Department was doing assessments on its Blue Drop programme. It would issue initial reports on it in July, and a full report on both the Blue Drop and Green Drop programmes in August.
On consequence management, he said he received reports regularly on the progress of financial misconduct cases. Some officials had been dismissed, including a Deputy Director-General. Criminal cases had also been opened.
The Department spent a lot of time engaging municipalities, but the challenge was that despite all their efforts and assistance they offered to the municipalities, the Blue Drop and Green Drop water supply situation was worsening. The National Water Act Amendment was almost ready, but the Water Services Act might take a bit longer. The Water Services Amendment Act would be informed by research into fundamental reforms to enable the Department to intervene and support the Blue Drop and Green Drop supplies more effectively.
The Department was currently processing 70 percent of water applications within 90 days. It needed to get to the 100 percent target set by the President. The Department currently had about 190 technical vacancies in its offices. Once those positions were filled, it would be able to produce at the level expected by the President.
Mr Risimati Mathye, DDG, Water Resource Management, said one of the challenges was that people in municipalities did not understand the difference between demand and supply in terms of how much water they consume. The use of a log sought to provide answers. It looked at how much water was being consumed, how much water was logged in the infrastructure, and how much was billed to collect revenue.
The BEP faced a lot of challenges relating to planning. Initially, no designs and no engineering were developed for the project. The Department had to integrate the BEP into a water treatment plant to address the flushing system problem. The Department also considered how it would accelerate the engineering processes. The target dates for the completion of the BEP kept moving because of new problems arising from the lack of initial planning.
The commitment for the end of March was based on the Department wanting to get the system functional. There were a lot of challenges including redesigning the design structure, but the Department was still committed to the cause. Unfortunately, the area where the Department was building the BEP was waterlogged because of rain, which delayed everything. The Department would present a progress report to the Committee explaining all the challenges faced and the actions taken to address them.
Dr Phillips said the Department had an agreement with the National Treasury on municipalities that did not pay water boards. The Minister was consulting with all the mayors of municipalities about the credit control measures regarding the payment of water boards.
Mr Moatshe said the Department did not have any outstanding invoices from the SIU because it paid as the investigations were done. The appointment of implementing agents was made through the Department’s Bid Administration Committee. It assessed their capacity to deliver on a project based on criteria including financial statements, availability of personnel and technical abilities or skills.
Mr Livhuwani Mabuda, Chief Director: Integrated Water Resource Planning, said the Department had met with municipalities on several occasions about the heightened debt, and a committee of about 15 stakeholders was established.
Dr Phillips said the Department did not allocate any money to the Sedibeng Water board after it was closed. Bloem Water and Magalies Water had taken over the work that Sedibeng did, so the allocation that was previously for Sedibeng went to them.
Ms Nthabiseng Fundakubi, Deputy Director-General: Water Services Management, said the Department had detailed information about the status of the cases with the SIU. Out of 63 cases, 55 were finalised, of which five resulted in dismissals, and 11 resulted in suspension without pay. The Department had consequence management in place. It worked closely with the SIU and met with them quarterly to fast-track the progress of the cases. The Department also had an Integrity and Ethics Committee that helped enforce consequence management.
Ms Tseke said the Department had mentioned that a contract was terminated for poor performance in Limpopo. She asked whether there was any disciplinary hearing of the contractor and asked about another who was said to be underperforming in the Eastern Cape.
Ms Sihlwayi said the Department must improve its employment of youth, women, and PWDs.
The Chairperson said the DWS squandered R17 billion in Mopani in 2019 and asked why it must be given another R33 billion.
Mr Moatshe said the Department had a clause in its contracts that stipulated the penalties for underperformance by contractors.
Mr Mathye said Mopani received direct grants in the past, but the current implementation meant the Department withheld the money until contractors were appointed and implementation plans were drawn up. The Department wrote a letter to the municipal manager to ensure that the provincial department team was involved in the procurement processes from the ground up. The Department wanted the municipalities to be independent and offered skills transfers and programme management training to ensure the officials gained the necessary skills.
The meeting was adjourned.
Mashego Mr MR
Basson, Mr LJ
Hendricks, Mr MGE
Magadzi, Ms DP
Mahlobo, Mr MD
Mokgotho, Ms SM
Myburgh, Mr NG
Sihlwayi, Ms NN
Tseke, Ms GK
Tseki, Mr MA
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