Department of Water and Sanitation Q1 2023/24 Performance; with Ministry

Meeting report

Opening remarks
The Chairperson acknowledged the presence of Deputy Minister of Water and Sanitation, Mr David Mahlobo, and stated that there has been a lot of positive activities occurring such as the addition of members to BRICS and the recent election outcome in Zimbabwe. He also noted that Committee member, Honourable Tseke, had been elected to the Mpumalanga provincial executive committee.

Department of Water and Sanitation 2023/24 Quarter 1 Performance
DWS Director-General, Dr Sean Phillips, outlined five key strategic areas of progress made in Quarter 1:
– The Regulator Commission has been established as an advisory body to advise the Minister and DWS regulation branch to assist with the strengthening and improvement of the regulation function
– The reconfiguration of the Water Boards has been completed in terms of decision-making and is at an advanced stage of implementation
– Three extra Catchment Management Agencies (CMA) have been established to facilitate management of water resources at a local level: Pongola-Mzimkhulu in KwaZulu-Natal, Mzimvubu-Tsitsikama in the Eastern Cape, Vaal-Orange in the Free State, Gauteng, Northern Cape and some parts of the North West
– The operating area for Breede-Gouritz CMA has been extended to include the Berg-Olifants for the entire Western Cape Province and will now be called Breede-Olifants CMA
 – The Blue, Green and No-drop Watch reports were issued in June 2023 and the full Blue Drop and No-drop reports will be issued by the end of September 2023
The DG reported on the transformation of the irrigation boards to Water User Associations (WUAs). The Minister had issued a gazette notice in April 2023 for the remaining irrigation boards to submit proposals for transformation into WUAs by the end of July 2023. The Minister had written to irrigation boards notifying them about the directive, timelines and submission process. The CMAs also had meetings with irrigations boards to clarify the expectations for April to July 2023.

DWS had made the following progress with legislation:
• The Bill for the establishment of the National Water Resource Infrastructure Agency (NWRIA) has been submitted to Parliament. The Agency will own and manage national water resource infrastructure, and raise finance for further development of infrastructure
• The Water Services Amendment Bill is en-route Cabinet for approval so the Bill can be published for public comment. The Bill aims to bring about water services reforms required to address the financial and service delivery sustainability challenges of the water services sector
• The National Water Amendment Bill is also en-route Cabinet for approval so the Bill can be published for public comment.

Ms Babalwa Manyakanyaka, DWS Chief Director: Corporate Planning, gave details of the overall Q1 target performance, progress in implementing the 2017 preferential procurement regulations and its procurement spend on designated groups.

The Department achieved 65% of its targets in Q1. It partially achieved 19% and did not achieve 16% of the targets. It noted the target achievement for each programme and provided reasons for the unachieved targets. Slides in the presentation showed procurement percentages for small businesses and for each group designated for preferential procurement.

Mr Frans Moatshe, DWS CFO, indicated that Q1 expenditure was R3.076 billion, representing 13.82% of the total appropriation of R22.257 billion. There was under-expenditure of R1.993 billion (11%). He explained the reasons for the variations in projected spending in the areas of compensation of employees, expenditure on goods and services, transfers and subsidies, and payments for capital assets.

Discussion
Mr S Moore (DA) noted that it was exciting to see that there was positive movement as indicated in the presentation especially with the Department endeavouring to limit over expenditure.

There were some errors in the presentation which cause some confusion. On page 24 it states that the target partially met is under by 15% but it is actually under by 24%. On page 30 it states the target is partially unmet by 8 but it was 9. On page 40 it states that R466 million has been reprioritised away from Umgeni Water but on page 42 it states that reprioritisation measures to prevent underspending means R338 million is being allocated to Umgeni-uThukela Water.

Ms M Pietersen (ANC) wanted an explanation on how the proposed water services reforms the Water Services Amendment Bill would work. Was DWS expecting Parliament to finalise this Amendment Bill in the Sixth Parliament before the 2024 general elections? The Department reported on the reconfiguration of various water boards. What obstacles has DWS faced during the reconfiguration and what mitigation strategies have been put in place to address those?

Ms G Tseke (ANC) appreciated the DWS interventions as people have a right to access water. She sought confirmation if the KZN service providers have been paid as she was not sure if this had been resolved yet. There is a 40% vacancy rate because of the new organisational structure. Is there a timeframe to fill the vacancies? What could be the financial impact of this new organisational structure?

Ms Tseke noted that DWS had overspent on the compensation of employees and that it would address this shortfall through budgetary reprioritisation – so which areas are going to be affected by this reprioritisation and what would the impact on water and sanitation provision? Has the Department conducted public participation to ensure that communities are given an opportunity to make comments on the reconfiguration of the water boards?

Ms Tseke said that it has been reported that Raubex is challenging the tender award for upgrading the Clanwilliam Dam alleging that this tender was awarded to a company that quoted the highest amount. Is DWS defending the case and what effect would this court case have on the Clanwilliam Dam Project?

Ms R Mohlala (EFF) asked how many members were part of the Regulatory Commission and why was there a separate commission if there were already internal systems in place to assist with strengthening and improving the regulatory function? Secondly, could the Department provide details of the challenges and the responses of the water boards in specific areas?

Ms Mohlala asked for a fuller report on the reconfiguration of water boards on the modalities used, the budgets and community concerns raised during this process. NEDLAC previously raised concerns on the establishment of the NWRIA and she asked about how these concerns were addressed. What is NEDLAC's current view on establishing the agency?

Ms Mohlala asked about the current practice for co-ordinating infrastructure in the country. How will the established agency fit into the broader framework of infrastructure development in South Africa? Lastly, she asked if the Minister was involved in bilateral and multilateral discussions with BRICS counterparts on funding for water and sanitation infrastructure.

Mr G Hendricks (Al Jama-ah) stated that Al Jama-ah had been surveying about 50 villages and was shocked to find that the constitutional right of access to water was not being implemented. This position needs to be changed and the reality on the ground is very worrying. For example, in some villages people were still using the bucket toilet system which is something that former President Mandela stated need to be solved. The nation was being let down as some communities are suffering badly. This is especially worrying with the cholera outbreak and the many deaths which have occurred due to the outbreak.

Mr Hendricks stated that the Minister`s suggestion that people boil their water before use is futile if people do not have electricity. Are there other solutions to mitigate this? This is especially applicable to communities who have to share a communal water tank. There are many sanitising products available which can be added to the water. Should not DWS be investigating these sanitising methods as an interim measure? Can municipalities look into their budgets to assist the Minister with this?

The Chairperson asked about the categorisation of certain targets according to both target achievement and budget spend. Can it use a different approac, because this reflects badly on the department? For example, on the employment of women, you show us that you achieved 61% of your targets, which means that there is money left over which is not being spent. This money could have been given to other areas. DWS achieved 32% of R129 million, so does it want to change its strategy for allocating money? Do you not want to allocate money based on the need of the category of persons?

For people with disabilities, 19% of R27 million had been spent. He asked if DWS should rather allocate the remaining money to another target which has a need for this money.

The Chairperson referred to dam safety noting that only nine of the 25 dams are safe and the reason for this was due to poor performance by contractors. No plan was put in place by DWS to ensure good performance by contractors to meet the dam safety target. In bulk water supply, DWS is not doing well on that front, even though it is in its mandate. DWS is behind by R136 million. He asked the reason for the over expenditure on compensation of employees as there are currently 541 vacancies wich are yet to be filled.

DWS response
On how Water Services reforms would work, Dr Phillips replied that the Water Services Act limits the function of the regulator. The National Water Act on the other hand gives the regulator more powers including the power to lay criminal charges against transgressors of the Act and to rectify transgressions and then claim the lost money back. The reason DWS seeks to amend the Water Services Act is to make it similar to the National Water Act to give Water Services more regulatory powers.

On Mr Hendricks’ question about declining municipalities, the proposed amendments to the Water Services Act seek to ensure that at municipal level, there should be water services authorities on the one hand and water services providers on the other hand. Within the Water Services Act, the role of the water services authority is to ensure that water services are provided according to certain standards. But unfortunately, almost all municipalities are not playing their role properly as water services authorities.

The amendments to the Water Services Act are seeking to ensure that water services authorities actually provide water services to standard. In almost all municipalities the water services authority has only appointed the municipality itself as the sole water service provider. Effectively, this means that the municipality has to monitor itself as it does not have an overseer. But in terms of the Water Services Act, municipalities are supposed to separate the water services authority and water services provider function.

To strengthen the provisions of the Water Services Act and to assess if water services providers are actually providing water to standard, the Director-General wants to introduce an operating licence from DWS. This license will provide an objective way of determining if water services providers are providing water according to standard.

DWS is seeking to amend section 63 of the Water Services Act, because in its current form, it is not practical to implement. Section 63 allows the Minister as a last resort to intervene in a municipality, but this intervention needs to be in line with the constitutional intervention and the provisions set by the Department of Cooperative Governance and Traditional Affairs and the premier of the province to take over the water delivery function in the municipality. Currently in section 63 of the Water Services Act, it is not clear how this intervention will take place. It is not clear if this take-over of a municipality includes taking over billing and revenue collection, supply chain and HR functions which are not directly linked to the municipality. So if section 63 is amended, in this last resort the Minister can appoint a licenced water services provider which will include an intervention on all water services functions including billing and revenue collection. This will mean that the water services provider can be financed.

There are some other minor amendments to the Act in which DWS seeks to strengthen the management of the water board.

On whether the Amendment Bill need to be approved by the Sixth Parliament before the 2024 elections, Dr Phillips stated that it was not an expectation that it be approved before this current parliament`s term of office comes to an end as this would be unreasonable. Given that the proposed amendments are quite complex, there have been various consultations to ensure that the proposals are clear and not rushed. This means that Parliament will need time to review and discuss these proposals before they approve them.

On the reconfiguration of the water boards, Dr Phillips replied that the reconfiguration is proceeding smoothly, with the only issue being the financial sustainability, in particular the Rand Central Water Board. This has taken over the Vaal Central Water Board which has taken over the assets and liabilities of the Sedibeng Water, which includes a debt of over R500 billion from Matjhabeng Municipality and Mangaung Metro. DWS is very concerned about the non-payment of debt by these municipalities especially because the non-payment of debt by these municipalities affects the financial sustainability of the Vaal Central Water Board. This water board has now been put in a position where it can no longer borrow money due to the impact on its balance sheet of taking over the Sedibeng Water Board.

The increasing debt from municipalities to water boards, is a separate matter to the reconfiguration of the water boards. The reconfiguration of the water boards does not address the problem of non-payment of debt by municipalities. The non-payment of debt is an issue which is being dealt with by National Treasury and the South African Local Government Association (SALGA) and the water boards.

DWS has developed standard operating procedures for the water boards and the DWS Water Trading Entity for credit control so that DWS can have a more effective control over the debt owed by municipalities and there other strong measures such as collaborating with National Treasury for the equitable share to municipality to be withheld until such a time they have paid off their debt. The Minister is currently in consultation with the water boards to finalise the credit control measures to address the debt issue.

Dr Phillips said DWS has an new organisational structure in place which has been approved by the Minister. It was a collaborative effort and there was a great deal of consultation before the finalisation of this structure. It is a very long process and it would be a disservice to frequently change the structure given that it is a very disruptive and very involved process that takes a long time. With this new structure, it was developed in such a way that it would meet the DWS needs into the medium and long term.

However, the structure is currently not fully funded due to the limited budget provided by National Treasury. The Department of Public Service and Administration (DPSA) has advised DWS to capture the funded structure and then when more funds become available, DWS can add additional posts from our approved structure and start filling posts. Currently DWS is not in a position to fill vacancies as 100% of the budget has been allocated to other needs so it is difficult to fill the vacancies unless there are resignations, retirements or natural attrition. Even in these scenarios DWS will prioritise certain positions, but not all and this depends on the needs of DWS. Then DWS prioritises certain funds to these filled posts. The reason for this is because Cabinet has approved policies and processes to portfolios which include certain cuts to department budgets.

Dr Phillips replied that DWS has two types of budget reprioritisation. Firstly, there are the internal administrative / corporate services type of budgets. DWS will try to spend on its budget by the end of the year and so it cannot take money away from another budget designated for something else.

When DWS does budget reprioritisation between projects, it is where projects are moving slower and it looks as if these projects will underspend in the current financial year. To avoid overall underspending, DWS moves some of this money to other projects which are moving quicker. These slower projects are not reduced but their money is just made available in the next financial year so that the slower projects can be completed. Budget reprioritisation does not have any real impact on the ground in terms of projects delivered to communities so it is unnecessary to consult communities about this as it does not change the actual water services projects being delivered to communities.

Dr Phillips emphasised that it is a matter of managing the budget so that there is no under expenditure in a particular financial year. This is because some projects have had problems such as labour disputes or disruptions from business organisations and many other reasons. This is why DWS aims to move budgets faster if possible and then money for slower projects is kept and used in a new financial year to finish these projects.

On why the Regulatory Commission has been established, it states in the National Development Plan (NDP) that there should be an independent regulator for water. The reason for this is the argument that DWS is conflicted as it is both implementer and regulator.

Currently DWS is the regulator of the Water Resources sector and is the regulator of the Water Services sector at municipal level in terms of the Water Services Act. DWS provides grants to municipalities and in that way DWS is an implementer. Then for water resources, DWS owns and manages the water resources sector. Given the conflict that DWS has as being both regulator and implementer, the NDP made a recommendation for an independent regulator to be established for water.

However Dr Phillips stated that it is premature to establish an independent regulator for water at this stage. DWS has rather opted to strengthen the current regulatory function first within DWS. The amendments DWS is proposing for the National Water Act and the Water Services Act are part of the process to strengthen regulation. The Minister had indicated that he was opposed to the establishment of an independent regulator because it was premature. Therefore, to address the concern that DWS is both regulator and implementer, the Minister took a decision to create an advisory body in the interim made up of independent experts so that DWS can mitigate this conflict in the short term and then eventually appoint an independent regulator. But the regulation is currently still being done by DWS with the assistance of the advisory body.

Dr Phillips replied that to Ms Mohlala that DWS can provide a full report on the water board reconfiguration on the modalities used, budgets and community concerns raised during this process.

On NEDLAC`s concerns on the establishment of NWRIA, DWS was in consultation with NEDLAC. Thereafter NEDLAC decided to create a NEDLAC task team to deal with the Bill consisting of organised business, labour and community. This task team has had a number of meetings and DWS has received a final report and they have completed their consultation process for the Bill. This final report showed that there were some areas of agreement and some disagreement on the Bill. The key area of disagreement was from organised labour.Organised labour stated that they were not in favour of having a separate agency in DWS and the current system in place should suffice.

On how NWRIA would fit into government`s framework. Dr Phillips compared this to SANRAL which collects revenue and raises finance and increases investment in SANRAL for road infrastructure. NWRIA will do the same for DWS while owning and developing national water infrastructure. The Trans-Caledon Tunnel Authority (TCTA) will merge into NWRIA as will the Water Trading Entity in DWS and will become one entity.

This one entity will be fully responsible for owning, managing, maintaining and development of the national water resource infrastructure. This means that it will be able to rise more finance on the market for more investment in water infrastructure. The TCTA is limited in how much money can be borrowed and invested in water infrastructure because it does not have a substantial budget, since it needs to have its budget regulated by National Treasury. However, NWRIA will have a substantial balance sheet and it will be in a better position to raise private sector finance and investment in water infrastructure. The fiscus is constrained in the degree to which it can finance this. It will be difficult from the fiscus alone to make investments for water infrastructure which will be necessary to avoid water shortages in the country and to strengthen economic growth.

On whether BRICS can fund this, the BRICS Summit did not specifically discuss South African water projects as it was not the appropriate forum for that. The BRICS Bank does not create a mandate for water funding in South Africa, but once the NWRIA is functional it can get into engagements with BRICS to consult about water funding.

In reply to Mr Hendricks on the performance of water services in municipalities, Dr Phillips agreed that there was an alarming decline in the quality of service. The Green Drop report released last year highlighted that there has been a decline in the performance of waste water treatment and the Blue Drop report issued in June 2023 showed a decline in drinking water systems.

To address this, firstly, DWS is constantly travelling around the country and making inspections of municipalities, discussing an action plan with municipalities to prioritise funding for infrastructure related issues. There are soft issues which need to be dealt with such as management challenges, hiring people who are not qualified for the job, not prioritising maintenance, and not prioritising water treatment works. The second thing which DWS does is that the Director-General office is trying to strengthen its regulatory function within DWS by standardising its regulatory action across all reginal offices to become more consistent in regulatory action.

Dr Phillips noted that at times DWS has not been creating penalties for when a municipality is for example polluting the environment. DWS is seeking to have more control of this and be consistent is monitoring municipalities. Another way that DWS is strengthening its regulatory function is by developing improved minimum norms and standards for water and sanitation services such as increasing the number of workers at water treatment works instead of having more managers.

The amendments to the Water Services Act aims to address these issues in a very fundamental way such as by issuing water services providers with licences and the appointment of water services authorities who have licences.

On the tender award, Dr Phillips stated that firstly DWS does not decide that only certain categories of people should be assigned to a project. In terms of the law, any person can make an application for a tender so that no one is discriminated against. Once the tender is awarded, certain factors have been considered as to why for example Black people were awarded a tender. Only 20% of points are counted for smaller projects for preference and 10% to larger projects for preference. The rest of the points have to be allocated on the basis of price and these rules have to be applied meticulously. The targets that are set when applying this process are generic and not set up by DWS as it is set for the whole country. The 10% and 20% calculations are done by DWS to give as many people a fair opportunity but it is limited by law.

Mr Moatshe answered that it is correct that DWS is shifting funds from Umgeni Water as these are funds that have been allocated for specific projects under the leadership of the water boards. With the reprioritisation of funds, these funds are part of the Water Services Infrastructure grants to municipalities. Some of the reprioritisation of funds is going to the water boards and the others funds are for the grants for Mhlathuze Water Board. On the reprioritisation of funds to Umgeni, these funds were previously for Mhlathuze Water but have now been reallocated to Umgeni as there is more of a need there.

With the invoices, Mr Moatshe confirmed that these were paid at the beginning of the new financial year. On compensation, DWS is more focused on cost containment rather than on projects in changing the way business is conducted such as on cost items like catering, events and conferences.

A Department official provided information on the court case saying that the parties have commenced settlement talks and have reached an outcome favourable to them and we await the outcome in the Cape Town High Court.

Mr Leonardo Manus, DWS Chief Director: Infrastructure Operations & Maintenance, replied about dam safety with only nine out of 25 dams being declared safe. What prevented the dams from being compliant was that the required five-yearly dam safety evaluations were overdue. There is a shortage of approved professional persons in DWS. The procurement process took longer than anticipated and has not been favourable especially for the optimum functioning of such a unit and this is why they amended the internal infrastructure strategy and policy to increase the pace at which procurement happens.

A Department official replied that the Regulatory Commission consists of 11 members who are appointed from across the country. Their term is from August 2023 and it is for a three year contract. Most of the members have qualifications in development, engineering, construction and finance and provide advice.

Ms Manyakanyaka replied about the errors found in the report on page 30. The first quarter covers April to June so in the annual performance plan, DWS had planned 55 projects, but two of the projects had already been completed. Adjustments could not be made to the finalised annual performance plan. These completed projects cannot be reported in the new financial year due to timing. The error on page 24 will be fixed.

Minister’s response
Minister Senzo Mchunu emphasised that DWS was working tirelessly especially with the proposed amendments and proposed Bill. But it is difficult to meet the infrastructure plans due to a limited budget. The National Water Resource Infrastructure Agency Bill is before the Speaker of Parliament, it has already gone through department consultation and comments.

The Minister noted that Director-General has already stated that the Water Services Act needs to enable the Minister to intervene in municipalities more easily as there are issues which need to be dealt with. This means that DWS needs enough resources to be able to intervene. This is especially because some water services providers do not have the capabilities to actually be water services providers.

We as the Department will be inspecting certain villages to check that water is being provided and many areas of KwaZulu-Natal have seen good progress in water provision.

On the independent regulator, DWS has already been giving valuable advice on how water services should be regulated.

The Committee adopted its Committee programme for the third term and the meeting was adjourned.