National Water Resources Infrastructure Agency SOC Limited Bill: Public Hearings

Meeting report

Ms R Mohlala (EFF) said the agenda indicated that there would be a submission from the South African Local Government Association (SALGA), but the Committee had not received the submission. She asked when the Committee would be sent this submission, as the submissions from the National Treasury and the National Economic Development and Labour Council (NEDLAC) had been sent.

Mr A Tseki (ANC) said all the submissions had been sent to the Committee the previous day.

The Chairperson asked the Committee to proceed with the meeting, and when the item of the presentations came up, Ms Mohlala's issue would be dealt with.

The Chairperson said National Treasury’s submission would be first, as indicated in the agenda. He welcomed National Treasury, and said that the Department of Water and Sanitation (DWS) was present but would not engage in this meeting. He welcomed the DWS.

Ms G Tseke (ANC) referred to the public participation process that had concluded on 4 November, and proposed that the Research Unit of the Committee be allowed to brief it on the inputs made and the way forward with processing the Bill.

Ms Mohlala said she was still concerned about the SALGA issue. She said waiting until the item came up was unfair, as the Committee needed to read submissions beforehand. She had checked her emails and was excluded and not sent the submission. She asked to be sent it, and commented that this treatment and exclusion from some submissions needed to end. The submission needed to be sent now so she could deal with it before SALGA’s presentation.

The Chairperson thanked Ms Mohlala and said he was sure the submission would be sent to her.

He said that the purpose of this meeting was for people to present their views on the proposed National Water Resources Infrastructure Agency SOC Limited Bill. The Committee would then have to consider all the submissions and invite the Department to respond. Therefore, although Ms Mohlala should be sent all the submissions, it was not an issue. The Chairperson asked that Ms Mohlala be sent SALGA's submission.

He agreed with Ms Tseke’s proposal, because the Researcher had assisted with navigating the processing of the Bill. The brief from the Researcher would allow the guests presenting in this meeting to have a picture of where the Committee was regarding this Bill.

Submissions on National Water Resources Infrastructure Agency Bill

Mr Thomani Manugufala, Committee Specialist Researcher, said the Portfolio Committee had published a call for public comments on the South African National Water Resources Infrastructure Agency SOC Limited Bill 2023, as tabled in the National Assembly and tagged as a section 75 Bill. The public comment period had lapsed on 4 November. The Bill provides for, among others, the establishment of the South African National Water Resources Infrastructure Agency (NWRIA) as a state-owned company (SOC), and provides for the objects and functions of the Agency.

The purpose of this brief was to provide an analysis of the submissions received during the comment period to establish the number of people or entities that either supported or did not support the establishment of the NWRIA, and their respective reasons. Lastly, it was to identify the stakeholders that elected to make oral representations to the Committee and make recommendations for consideration by the Committee.

Analysis of submissions

The Committee received 120 submissions, of which 90 (75%) did not support the NWRIA bill. Various reasons were provided for full support, partial support, and complete rejection of the Bill. 

Many of the comments from the public that did not support the Bill were not specific to the content of the Bill, but were related to its intent, which was the establishment of the Agency. These individuals thought that there was no need to establish a new agency, and that government should rather hold the existing institutions accountable and capacitate them to provide these services.

They also indicated that the creation of the Agency would unnecessarily increase the cost of water and privatise water services and their supply. In addition, they were concerned that the Agency would provide a conducive environment for corruption, cronyism and maladministration. In summary, the total sum of the public comments depicted a total loss of confidence in government’s ability to establish the Agency to improve water infrastructure development and the provision of water services.

Among the public individuals, Mr Hendrik Du Toit, a retired former Department of Water and Sanitation (DWS) employee, had indicated that he would like to make an oral presentation to the Committee. However, his comments were mainly irrelevant to the Bill.

Mr Manugufala provided a detailed breakdown of the responses to the Bill:

• Total number of submissions on the Bill = 120
• Submissions in support of the Bill = 12
• Submissions not in support of the Bill = 90
• Submission was partial support of the Bill = 17
• Submissions that were irrelevant to the Bill = 1

Those who had partially supported the establishment of the Agency indicated they would support it only if there were no private sector participation, as the involvement of private companies would be tantamount to privatising basic services.

It was worth noting the two governmental institutions that had made submissions, the Western Cape Provincial Government (WCPG) and the South African National Biodiversity Institute (SANBI). They indicated they had made the same submissions to the DWS, but it appears these submissions were not factored into the Bill tabled at Parliament. In addition, the Department did not respond to these institutions before tabling the Bill. A cursory assessment of the content of the Bill confirmed the assertion from these two entities.

SANBI submission

SANBI supported the establishment of the NWRIA. Nevertheless, they made specific submissions on the actual text of the Bill that needed to be supplemented, and, in other instances, expanded -- for example, the definition of National Water Resources Infrastructure should include ecological infrastructure which referred to naturally functioning ecosystems that generate or deliver valuable services to people. It included, for example, healthy mountain catchments, rivers, and wetlands. This ecological infrastructure supported water resources infrastructure, particularly upstream of water resources infrastructure. As far as the in-text suggestion was concerned, SANBI proposed the inclusion of the words “adaption to and” in Section 7 (1)(b) of the Bill. This section would read as: “provide, operate, maintain national water resources infrastructure in a manner that takes account of national development objectives, including the adaption to and mitigation of climate change and other risks to a reliable water supply.”

Western Cape Provincial Government submission 

The WCPG did not support the NWRIA Bill in its current form. It was withholding its support because it did not receive the Socio-Economic Impact Assessment (SEIA), which it claimed would provide the rationale or business case for establishing the Agency. It was worth noting that these concerns were raised with the Department during its public participation process, but they were not responded to or provided with the requested information. Although the WCPG did not support the Bill, they had made substantive comments on the Bill, including in-text or clause-specific, and language or drafting errors. For example, in the first paragraph of the draft preamble, the word “its” should read as "their," as the term ‘resources' was plural. Draft clause 1(2) of the Act was superfluous, as South African law already required what was provided in the clause.

Recommendations to Portfolio Committee

It was recommended that the Committee consider both the SANBI and WCPG submissions when considering the Bill, especially the clause-specific comments, as they would strengthen the Bill in terms of quality and substance.

The Committee should consider inviting the Department of Water and Sanitation to brief it on how they had addressed the submissions from the SANBI and WCPG, and provide their reasons for not incorporating some of the submissions that appeared to be improving the quality and essence of the Bill.

It was recommended that those who indicated an interest in making oral representations be allowed to do so, including Mr Hendrik du Toit. It was worth noting that SANBI had indicated that they were not interested in an oral representation, as their submission was substantive, while the WCPG did not indicate whether they would like to make an oral representation or not. However, their submission was also substantive and easy to follow, and did not need further additions. 

(This was an internal document to which PMG does not have access)

The Chairperson asked Mr Manugufala what his advice was in the case of submissions where 90% were not in support of the Bill and 10% were in support of the Bill, given the substantive matters raised during the submission process.

Mr Mangufala said this was a legal and procedural issue that would be best answered by the legal adviser. However, he had seen instances where there had been issues around support for a bill, but it had still become law.

Ms Phumelele Ngema, Parliamentary Legal Adviser, said she was the legal advisor assisting on this matter. She said the Chairperson’s question was not legal, and the numbers of those not in support presented were just an indication of citizens’ frustrations regarding what was happening with the Bill. This was because some of the submissions -- even those that did not support the Bill -- did not indicate the exact reasons for the objections to the Bill.

She said most people not supporting the Bill did not mean it had to be scrapped. However, the Committee needed to consider and deliberate on the views reflected in the submissions. It should then take on Board the views reflected in the submissions that it agreed with.

The Chairperson thanked Ms Ngema and said he was sure her answer was sufficient, as it had been an enabling question. He asked the Committee to take note of the presentations and decide whether the Committee would want to consider what had been raised in these presentations.

National Treasury comments on Bill

Ms Ulrike Britton, Chief Director: Urban Development Infrastructure, National Treasury, described the consultation process between the Treasury and the DWS on the National Water Resources Infrastructure Agency Bill.

She said written comments were made on 7 April 2022 and 17 March 2023. Meetings were held on the Bill and the business case between November 2021 and August 2023. National Treasury supported the changes that moved the Water Trading Entity (WTE) out of the DWS. It was of the view that the Bill provided opportunities for a different financing mechanism for water resource infrastructure.

Critical matters raised by National Treasury on the Bill were:

Establishment of the Agency (Clause 3)

The Bill, once enacted, amends Schedule 2 of the Public Finance Management Act (PFMA).

The Minister of Finance did not have the authority to list Schedule 2 entities. This could only be done through an Act of Parliament.

Objects and functions of the Agency (Clauses 4 and 5)

Developing, maintaining, and operating water resource infrastructure and supply in a sustainable, equitable and reliable manner -- there were constitutional imperatives that were set out in Sections 10, 11, 24, 27(1)(b) and 27(2).

Efficiency in management of water resources was critical. South Africa had a water scarcity issue due to the semi-arid climate and the below-average rainfall.

The Agency would be a monopoly and therefore efficiency in investment, development and operations would impact pricing.

Ms Britton listed other critical matters raised in the Bill:

• The composition of the Board (Clause 8);
• The disclosure of interest (Clause 19);
• The remuneration of the Board, the chief executive officer (CEO) and chief financial officer (CFO) (Clauses 13 and 25);
• The funding of the Agency (Clause 31);
• The borrowing authority (Clause 32);
• The budget planning and reporting (Clauses 33, 34 and 35);
• The transfer of assets (Clause 37); and
• The powers of the Minister (Clauses 44 and 47)

(For the detailed submission, see annexure)

The Chairperson thanked Ms Britton and said the presentation was clear. The Chairperson asked if the Committee wanted to engage with the presentation now or later.

Ms N Sihlwayi (ANC) suggested the Committee proceed with the other presentations and engage later in the meeting.

The Chairperson asked if Ms Mohlala had received SALGA’s presentation.

Ms Mohlala said she had received the presentation.

The Chairperson asked SALGA to proceed with its presentation.

SALGA comments on the Bill

Councillor Petros Ngubane, SALGA, apologised for the inconvenience caused by the submission not being sent to the Committee. He said the technical team had told him the submission had now been sent. He appreciated that most of the Committee had worked at SALGA and were aware of the issues that the organisation faced, so the matters raised were not unfamiliar to the Members. It also meant that SALGA was not alone because the Committee was aware of what was experienced on the ground.

Mr Ngubane said he was joined by Mr Lubabalo Luyaba, specialist for water and sanitation at SALGA, who would be presenting on behalf of the Association. SALGA acknowledged that water was a basic right for all South Africans. It was a right that needed to be attended to, as all South Africans had the right to access water.

He said SALGA acknowledged the presentations made by its colleagues, but SALGA had inputs to share. It was aware of the present entities and boards, where in KwaZulu-Natal (KZN), for instance, the Minister was attempting to reconfigure these entities and boards into one body. It had to be acknowledged that the main difficulty experienced in municipalities was the collection of money. Therefore, with the creation of an agency, the issue of collecting money and locating funds to sustain the Agency and its function would remain.

Mr Ngubane said the DWS and the Committee would have to be cognisant of the fact that the establishment of the Agency would come with its own needs. The client benefiting from this, who was the person on the ground, would still be expected to pay for this facility. He said Mr Luyaba was in a better position to explain thoroughly the issues around this matter. He noted that there had been hesitation around the consultation on inputs made by people and SALGA’s opinions on what had been expressed, but it was clear that people on the ground knew what was good for them.

Mr Luyaba presented SALGA’s observations on the consulting process and municipal inputs. He said that the general concept of a National Water Resources Infrastructure Agency was not problematic and could work under the right conditions. The efforts by the DWS to create the right conditions through various initiatives were noted.

The issue of municipal financial viability and funding model, which resulted in households' inability to pay for water, had created a vicious cycle of water debt. It was not clear to what extent the DWS had considered this reality. The right conditions included municipal financial sustainability -- without this, the NWRIA was at risk.

State-owned companies had not and were not performing well, for various reasons. It was unclear what the DWS had, or would, put in place to prevent the NWRIA from performing poorly. One must exercise due caution and mitigate obvious risks.

SALGA’s preliminary recommendation was that the NWRIA would not survive if the financial health of all parts of the system were not taken care of first.

SALGA recommends:

• Workable proposals to deal with historic municipal debt to the Water Trading Entity (WTE) had to be found and urgently actioned.
• Mechanisms to prevent future municipal water debt must be developed and implemented as part of the NWRIA. If this was not done, the NWRIA would not be viable in the medium to long term as debt would accumulate, as had happened with the WTE before.
• Assurance must be provided to municipalities that the NWRIA would not result in an increase in bulk water tariffs, as municipalities could not afford this.

Mr Lubaya said that if the Agency was inefficient, that cost would ultimately be passed down to the end user and would add to the ever-present issue of municipal debt, therefore undermining the objectives and endeavours of local governments.

(For the detailed submission, see annexure)

The Chairperson said the guidance given by the Researcher indicated that the Committee needed to call in the DWS to respond to the issues raised and assure the entities that had presented in this meeting. He asked the Committee to raise its concerns and comments.

The Committee Secretary asked if the Committee was still going to allow the National Economic Development and Labour Council (NEDLAC) to present.

The Chairperson apologised and asked that NEDLAC proceed with its presentation before the Committee raised its concerns and comments.

NEDLAC comments on Bill

Ms Nobuntu Sibisi, Executive Manager, NEDLAC, said the DWS had tabled the NWRIA Bill at NEDLAC. The Development Chamber task team had engaged on the Bill and signed off on it in August. The task team had agreed on most issues raised on the Bill and had provided inputs for government’s consideration when amending it. It had also provided wording to amend sections of the Bill. (See details in the NEDLAC report).

The following key issues have been raised:

• On the principles to guide the Board, proposals to strengthen governance should be embedded as per King IV, the Public Finance Management Act (PFMA), and National Treasury regulations.
• On the appointment of the Board, the task team proposed and agreed that the Board should encompass individuals who were fit, suitably qualified, and experienced with relevant expertise.
• The Agency should be a human-centred and fit-for-purpose state-owned entity that was obligated to serve the developmental priorities of the state.
• Both the NWRIA Bill and the national pricing strategy needed to distinguish between the charges that the Agency would levy, and those levied by other water institutions.

Areas of concern or disagreement

• Constituencies had agreed on the Bill. However, labour had raised a concern regarding the creation of the agencies in general as a principle. Labour believed that government should be capacitating departments and not fragmenting the public service or circumventing agreements reached at the Public Service Coordinating Bargaining Council (PSCBC).
• In terms of workers and conditions of employment in the Bill, labour proposed that government should consider including a clause that would be based on Clauses 16 and 37(1)(a), (b) and (d) of the Border Management Authority (BMA) Act.
• Government disagreed, stating that integrated funding, development, operation, and maintenance of infrastructure was the overriding objective of establishing the Agency. The country currently has a substantial backlog of water resource infrastructure.
• The DWS could not raise funds on capital markets, and further reliance on the fiscus (beyond what was explicitly guaranteed) was not possible. For this reason, government relied on special-purpose vehicles to fund and implement viable economic projects.
• The conditions of service for employees would be engaged on, and included the transfer agreement that the transfer of staff to the NWRIA would be conducted in line with the provisions of Section 197 of the Labour Relations Act (LRA).

Recommendations

The task team recommended:

• Government should ensure that the transfer of workers does not adversely affect the worker’s benefits and their employment. Therefore, conditions of service of employees must be set through engagements at the PSCBC, and not determined solely by the CEO.
• Government should ensure that the necessary consequence management was undertaken to ensure that the Agency was efficient and avoid operating like current state-owned entities.
• Government must have a proper change management plan and intercompany agreements when merging the existing water entities into one entity.
• The process and outcome of spilt infrastructure between the Agency and other water institutions needed to be clarified in the operating documents, as it affected the spilt in possible income from water use charges. This required clarification of the water value chain and responsibilities for all “national” water infrastructure in a transparent manner.

Ms Sibisi concluded that the constituencies agreed that if the Agency was established, the Department must ensure that it was operated efficiently and effectively. Clarifying roles was important in providing water services, so the role of the Agency should be explicitly clarified.

The engagement at NEDLAC concluded in August, and the NEDLAC report was submitted to the relevant Ministers and the Portfolio Committee.

(For the detailed submission, see annexure)

Discussion

Mr L Basson (DA) supported the Chairperson’s proposal that the Department must be called in to respond to the issues raised in these submissions. 75% of the submissions were not in support of the Bill, which was a huge percentage that needed to be revisited. There were numerous issues, one of them being the municipal debt owed to water boards and the DWS. The issue of municipal debt has raised a huge concern about water trading entities and their viability. Since the start of this project, he had raised the issue of municipal debt owed to the DWS and how this would impede on income and the loans that needed to be taken out.

Ms Mohlala asked if the Agency was established as a state-owned company, and whether it would comply with the PFMA and the King IV Report. The reason for her question was although SOEs were important for the South African economy, these entities still faced challenges. Would the non-establishment of an economic regulator that decided water tariffs put the Agency at risk as the sole entity responsible for determining the bulk water tariffs?

In considering the role of the economic regulators concerning determining tariffs throughout the entire water value chain, it was essential for it to function independently.

Ms Mohlala supported the proposal that the Department be called in to respond to issues raised in the presentations.

Mr Tseki asked that the process for the first day of these public hearings be explained to him. He also asked the legal advisor if there was enough time for the Committee to finish processing this Bill before the recess or the general elections in 2024. He did not know how politics could be avoided in the case of the Western Cape rejecting everything the government proposed. Perhaps, as suggested, a hearing needed to be held with the Western Cape so that the Committee could engage with them.

He agreed with the legal advisor that the number of objections to the Bill should not deter the Committee from continuing. The issues that the National Treasury, NEDLAC and SALGA had raised on the performance of the state entities were important. The Zondo Commission had led to an increasing distrust of these entities. The establishment of the Agency was being affected by the performance of other state entities, and therefore a response to deal with issues around public confidence in the state was needed.

Referring to the issue of pricing raised by National Treasury and SALGA, he said he was not sure the Agency would be able to address this matter. The Committee had mandated the Department to work with SALGA and the Department of Cooperative Governance and Traditional Affairs (COGTA) on this issue. It seemed as though all the issues were being shifted to the Agency to address, when this would not be possible. Was there a shifting of issues to the Agency that needed the Committee to continuously do oversight?

Mr Tseki disagreed on the issue of pricing. He was concerned with transferring the responsibility for pricing to the Agency, because the Committee needed to compile a report on what it did and where the challenges were before transferring this matter to another institution. He acknowledged that the issue of historic debt was quite serious. He had concerns with NEDLAC’s presentation because it was not clear if the opinions shared in the presentation were NEDLAC’s, or sectors within the entity.

Ms M Matuba (ANC) supported the recommendations that had been presented, especially those from the Researcer. She also supported the proposal to call in the Department to engage and respond to these presentations. She shared concerns about SALGA and the R17 million debt it was owed. SALGA was owed a lot of money; what mechanisms would be in place to ensure the financial sustainability of the Agency?

Ms Matuba referred to the Researcher’s briefing, and asked what the nature of the submissions that rejected the Bill had been. Was the content of the Bill the issue? Did the rejections pertain to legal and principle matters? Were these rejections qualitative enough to be treated as just disputes, or did the Committee need to attend to and allow for oral representations? Allowing for oral representations was not an issue for this government, which prided itself on being accountable and transparent. She said that if what had been raised during these representations was not outside the prescripts of the Constitution, the Committee would still have to continue with the Bill.

Ms Matuba supported the Bill, but wanted the issues raised to be resolved. She understood NEDLAC’s submission as one of assenting and dissenting views on the Bill. She found comfort in the fact that this Bill would not affect employment or pensions in the different entities. She asked SALGA who would be giving an assurance on the non-increase of bulk water tariffs. SALGA had stated that this was its proposal. How could assurance and agreement in terms of what would happen going forward be ensured?

Mr S Moore (DA) said seeing the converging concerns about the Bill was interesting. 75% of the public opposing the Bill meant that the Committee needed to be thorough during this process. A system needed to be designed to work when the worst leaders were in power, not the best. Great leaders were working in the sector now, but a concern raised across all the presentations was the appointment of the Board. There was also concern about the Minister’s ability to decide which infrastructure needed to be included, and whether this measure was too broad and unregulated.

His concern was that this Bill was perhaps creating another Eskom -- an organisation ready to fail South Africa. In looking at the governance model this Agency was based on, he was unsure if it had a history of success that inspired confidence. The issue of trust and confidence in the system has been raised numerous times. Addressing the issue of confidence and trust needed to be done right, because once done right, the Agency could intervene critically to secure water provision for South Africa.

Mr Moore said although there was pressure to push this Bill through, and a lot of work had been done in this regard, there were still serious concerns around this Bill. If the Committee got it wrong at this level, it would set South Africa up for disaster. He supported the proposal to call in the Department to engage and respond to these presentations and the public’s concerns. The Committee needed to call in the Department and do its due diligence to avoid stepping into a critical problem.

Ms Sihlwayi thanked the presenters for opening the Committee’s eyes to some of the issues with the Bill. She asked for clarity on National Treasury's concern that some of the clauses in the Bill would require amendments to the PFMA. What were the implications of these amendments in terms of the PFMA as a state power piece of legislation? National Treasury had stated that when a board member had a conflict of interest related to a report and the Agency, this member could recuse themself. She asked for clarification on what the word “recuse” meant- was it physically leaving a meeting? She agreed with the proposal to call in the Department to respond to these presentations so that everyone was on the same page.

Ms M Pietersen (ANC) agreed with the proposal to have the Department appear before the Committee to address the issues raised regarding the Bill.

Ms Tseke said that as she understood it, NEDLAC, SALGA and National Treasury supported the Bill, and these submissions highlighted these entities’ submissions to the Department on the Bill. The Researcher had indicated that there were 120 submissions made. She asked that these submissions, including submissions that did not mention substantive issues on the content of the Bill, be packaged, submitted to the Committee, and taken as part of the process. The legal adviser could assist with this, as the Committee would also engage in a clause-by-clause deliberation where these submissions could be included.

Ms Tseke said National Treasury had indicated that the reasons for establishing the Agency were not explicit in the Bill. However, the objects of the Bill in clause six and the function of the Bill in clauses 7(1) to (6) were explicit in this regard. She asked National Treasury to elaborate on this and reference the Constitution, as highlighted in the Bill. Why did National Treasury believe that the reasons for the Bill were not explicit? She said although this Bill was technical, not everything could be included in it. She thought the Bill was clear on the reasons the Department wanted to establish this Agency. She agreed that the Department needed to come in and respond to the issues raised by stakeholders.

The Chairperson said the Committee’s questions and comments were in preparation for meeting up with the Department to engage on these issues. NEDLAC, SALGA and National Treasury could respond to the issues the Committee had raised in this meeting. However, the intention was to be able to represent the entities that had presented in this meeting during the engagement with the Department. Asking NEDLAC, SALGA and National Treasury to respond to the Committee’s concerns was not undermining the engagement with the Department still to come.

He asked that NEDLAC, SALGA and National Treasury proceed with their responses.

National Treasury's response

Ms Britton responded on the legal PFMA issues, and said once the Bill was enacted, the establishment of the Agency would amend schedule two of the PFMA. Schedules two and three of the Act listed all the public entities subject to the PFMA. The Minister of Finance, however, did not have the authority to amend Schedule Two -- it required an Act of Parliament. The amendment National Treasury was talking about was the amendment of schedule two of the PFMA -- nothing else would be amended in the PFMA through the enactment of the Bill. The listing of the Agency in the PFMA in Schedule Two of the Act was the amendment that was of concern.

Concerning compliance with the PFMA, she said that both the PFMA and the Bill set out checks and balances. She added that ensuring that the responsibilities related to compliance were executed was the job of the Board and the executive authorities. An important tool within this system was auditing and all issues raised by the Auditor-General (AG), who set out what should be addressed through remedial action. Auditing was a powerful tool in ensuring compliance that made the National Treasury comfortable.

Ms Britton said a tool not used often in the PFMA referred to some form of financial misconduct resulting from a breach around financial discrepancies set out in sections 50 to 53 of the Act. Section 54 pertained to financial misconduct and steps the Board and Minister needed to take concerning financial misconduct. An important tool in dealing with financial misconduct was the AG's report. A lot came down to the willingness and ability of the accounting and executive authority to do what the law required of them.

Regarding the economic regulation aspects and the associated risks, Ms Britton said this Bill sets up a monopoly in the same way that Eskom or Transnet were monopolies. What was important with monopolies was ensuring there were no rent-seeking opportunities, which was done through an independent regulator. She said an independent regulator was in place to ensure that the Agency was not the player and the referee when it came to deciding when and what infrastructure was provided, and how it would be paid for. With some independence within the economic regulatory framework, one would get checks and balances on how the entity prioritised, invested, and developed water resource infrastructure that was independently determined.

 Ms Britton said a dispute resolution mechanism would be an important tool within the economic regulatory framework. Therefore, as defined in the Bill and the National Water Act, water users would be allowed to contribute to how water resource infrastructure was developed. In this context, National Treasury agreed that the Bill created more transparency around pricing and investments, and strengthened accountability when dealing with concerns about the Agency charging monopoly prices and operating at higher costs than required for some level of efficiency within the system.

On the issues around municipal debts, pricing and the Agency's financial sustainability, Ms Britton said it was important to understand the relationship between the Agency’s sustainability and the municipalities’ inability to pay for the bulk water charges and maintenance of their water-related infrastructure. These challenges were due to challenges within the municipalities, and not necessarily a function of water pricing.

National Treasury’s work in metropolitan municipalities showed that revenue from water services collected for bulk water charges and the maintenance of water infrastructure was used in other areas within municipalities. The work being done with the support of COGTA, and the Department’s proposed reforms on water services and regulation, was expected to reduce risks around bulk water municipal debt and deal with existing risks within water services. This success depended on strengthening governance arrangements around water charges and pricing at a municipal level. How water was paid for was more important than what the Agency’s role was.

Ms Britton said another mechanism to deal with and provide for transparency was the role of the water pricing strategy that aimed to set out better parameters around the transparency on how water was charged, to ensure efficiency within the system. Regarding the Bill not being explicit, she was not regarding clause 6, but rather clause 37, which was on transfers and assets. She said the Bill focused on moving the Trans-Caledon Tunnel Authority (TCTA) to this Agency, and there was a lot of provision for the financial risks and legal certainty in the Bill. However, the Bill was not explicit about transferring the Water Trading Entity out of the Department and into this Agency.

The assets that underpinned this entire Agency were within the WTE that would be moved out of the DWS. This move created a balance sheet for the Agency that would allow the National Treasury to leverage these assets. National Treasury supported the setting up and the function of the Agency. There needed to be explicitness, because legal certainty, the Agency’s mandate and the transfer of assets and liabilities, had been provided for in Clause 37.

Around the issue of disclosure and recusal, Ms Britton said the Bill sets out that the Companies Act would be followed in this regard. It was quite clear that board members would have to disclose interests, whether material or not. What was not clear was the circumstances in which recusal would be required from a board member. Would recusal be required if this issue was material or not material?

The objective around this was that the Board or member of the Board had to act in an unbiased manner. Was the only way to act unbiased through recusal, or were there alternatives? It was not clear how this issue would be treated.

Parliamentary Legal Advisor's comments

Ms Ngema said in terms of the issue of the amendment and the implications for the PFMA, the Act had provisions outlining what should happen. Section 4 indicated there were possibilities for amendments to the PFMA done by other legislation. However, what was stipulated in section 4 required consultation with the relevant Minister or the Minister of Finance. It would be indicated in the Department’s presentation to the Committee whether this consultation had taken place concerning this Bill. The amendment must then be brought before Parliament and, considering the consultation and the provisions in the PFMA working together with National Treasury, the changes would be effected.

Ms Ngema said the Committee was correct in raising this issue of whether the Bill would amend the PFMA, because when this Agency eventually had to be listed, an amendment to the PFMA would be made. The possibility of an amendment by this Bill indicated that this Agency was a Schedule Two entity under the PFMA. The PFMA was clear on the procedure in such cases, and the legislative processing and powers of Parliament would be clarified as the process continued. This was not much of an issue, as the PFMA guided the process of listing a Schedule Two entity.

The Chairperson said the Committee had gone through the process of creating a new bill, and taking over from the TCTA and others. The Committee had gone through the process and adopted a decision that proposed that the Bill was a section 75 bill. This decision had been sent to Parliament. This Bill was then sent back to the Committee for finalisation. The Committee was now at the point where the Department had taken the recommendations to the stakeholders. These stakeholders were now presenting to the Committee their issues which the Committee would take and engage on with the Department to finalise the Bill.

He said an impression must not be created that the Committee had not come to a resolution on creating the new Bill that would become an act. The Committee had given the go-ahead for the DWS to engage with stakeholders, and the Department would now be invited to appear before the Committee to finalise this engagement, as per the Researcher’s suggestion. The Committee was at the second phase, where the Department responded to all the concerns and set out the path forward when the Bill was enacted. The wrong impression must not be given to stakeholders engaging with the Department that there was no resolution on the creation of the new Bill, when that was not the case.

SALGA's response

Mr Luyaba said SALGA could not comment on whether the Agency would comply with the PFMA, as the Agency had not been established at this point and it would be speculative. Regarding the issue of the independent regulator, he said the longstanding position was that it was needed for various reasons. On who should give assurance on the non-increase of tariffs, SALGA expected the DWS to do so, as the champion of this undertaking.

Mr Luyaba said SALGA disagreed with the National Treasury on tariff affordability not being an issue, but rather the municipalities’ frequent misuse of collected funds for water services. In tariff consultations, affordability studies had been conducted by enough municipalities to demonstrate that some of the proposals on bulk water tariffs were not affordable for some of them. It was not reasonable or fair to conclude that all 144 municipalities could afford tariffs, based on eight metropolitan municipalities.

The Chairperson said from his experience of working with SALGA, it could be expected that National Treasury and SALGA would always disagree on issues of debt and expenditure.

Mr Ngubane said it was a blessing in disguise to have people of the Committee’s calibre speaking from experience on the issues that SALGA faced.

The Chairperson asked if the Committee was now going to adopt the Researcher’s suggestion to meet with the Department so it could respond to these presentations and the public submissions, and then submit the final product to the Committee.

The Committee Secretary reminded the Chairperson that NEDLAC had not given its responses.

NEDLAC's comments

Ms Sibisi referred to two points that had been raised. She addressed the issue related to NEDLAC’s position, and who it represented. NEDLAC supported that Bill, as discussed at NEDLAC. She explained that in terms of the NEDLAC protocol, the organisation had four constituencies that engaged on the Bill, and where there were concerns or disagreements that arose during the engagements, these would be noted in NEDLAC’s report, along with the position of each social partner that disagreed on these issues. She had raised the position of labour in terms of NEDLAC’s protocol.

Committee recommendation

The Chairperson asked if he was correct to assume that the Committee would support the Researcher’s recommendation that the Committee needed to meet with the DWS, where all these issues could be raised and answered formally by the Department so that the Committee could make a final decision on what the Bill should look like.

Ms Matuba supported the Researcher’s recommendation.

Ms Shereen Dawood, Committee Content Adviser, said the Committee still had oral submission requests from stakeholders. She asked if the Committee was going to wait for those oral submissions and then allow the Department to respond, or if the Department would respond today.

The Chairperson asked when these oral submissions would be made.

Ms Dawood responded that the oral submissions would be provided as a briefing to the Committee next week. The Committee programme had created a slot for oral submissions, and this Committee had received only two definite oral submissions.

The Chairperson asked if there was a reason why these oral submissions had not been slotted into this meeting. However, it did not matter -- the Committee was still going to call a meeting with the Department which would probably take into cognisance that there were still other oral submissions to come. He asked if Ms Dawood would consolidate these oral submissions into a workable report.

Ms Dawood said she would consolidate the oral submissions into a report, but she was unsure what the submissions were.

The Chairperson said Ms Dawood must consolidate the oral submissions into a report and bring it along with the reports that would be presented to the Department.

Ms Dawood said she would do so once she received the oral presentations.

The Chairperson asked for a Member to second the Committee's support of the Researcher’s recommendation.

Ms Tseke seconded the recommendation.

The meeting was adjourned.