Briefing by DHS and DWS on 2023 Adjustments Appropriation Bill; with Minister and Deputy Minister

Meeting report

Minister’s Opening Remarks
Ms Mmamoloko Kubayi, Minister of Human Settlements, raised several concerns regarding the budget reduction, the first of which was the employment pay cap. According to her, when departments went before Parliament, they were typically advised not to use consultants as much because they needed to develop their capacity, and cutting the Compensation of Employees (COE) budget was one of the worst things that could happen. A department as technical as the Department of Human Settlements, she said, needed high-calibre and specialised capabilities, which the Department was unable to obtain as it had hit capacity and was unable to hire more planners and engineers. She informed the Committee that one of the Department for Public Service and Administration's requests to amend regulations was to allow at least three-year contracts, which was done through Cabinet processes as part of its review of administrative processes.

She stated that that would allow the Department to have internal capacity, such as when it had to look at the performance of municipalities and felt the need to intervene, but did not have enough capacity to take people from the Department, so it closed the gap for function and not intervening. She informed the Committee that no one wanted to hire people for a year to help municipalities stabilise, and that the ministry had seen the fruit of the interventions of the Department in Nelson Mandela Bay when the Department moved in, and performance began to improve. She stated that the Department examined the performance of the municipalities at the time and saw the need for them to intervene again across the municipalities because the municipalities would have lost capacity in 2021 after the elections, and thus offering them training and ensuring that it understood what was to be done and was being supported by the administration, but the Department was unable to do so due to the work the Department was currently held in.

She stated that that was one of the concerns she was highlighting in terms of the cuts and ceilings, particularly on personnel costs. National Treasury and DPSA had to be creative in their support to the departments. She told the Committee that she would be forthright about the Department's poor performance over the years, such as the return of funds to National Treasury in terms of budgets, and that when the Department looked at budget cuts and what it did annually, it looked at whether the provinces and municipalities would be able to spend, so the Department had a midterm review that everyone went through, to see if the problem was with the percentage of performance. That procedure was followed to ensure that the Department did not lose money within the sector and then divert funding from one province to another when there was a gap.

When the Department moved money around within the sector, within the portfolio, it would still be able to deliver houses holistically and its services and products holistically throughout the nation. The Department was currently dealing with issues relating to Limpopo and the Northern Cape, where the interventions the Department had done in Limpopo were now showing fruits and their performance had increased. As a result, it would have a gap or slow the rate at which it was moving. She added that the agency believed that the revenue was the most unpleasant aspect of the process. She stated that she disagreed with the National Treasury since it went against the Department's recommendations and went against its analysis and assessment of what ought to be done for a province.

She told the Committee that the Department was aware that it would lose money in Mangaung as a sector because it could not be carried over. Instead, the Department wanted to use the money in another area, like the Western Cape, where it could have been used to expand into other projects and for the 16 informal settlements lacking basic services. However, National Treasury had refused to allow the Department to transfer the funds. That was how the Mangaung municipality's Department lost money. She noted that there were times when the Department's methods diverged from National Treasury's, and it had asked for a review of its grant system to tighten controls. The Department also felt that the terms of the grant and how it was being used to implement the grant system permitted the Department to request a review.

The Department was also working on policy review, which would result in the Department being able to shift how it did its current system of business plans by provinces, and then had an Annual Performance Plan (APP), so a province would have a business plan that it submits to the Minister, then the Department would sign it off, and communicate what was going to be implemented. However, the tool for Parliament in legislators would be APP, so the monitoring was two tools that were being used, which the Department believed distracted the provinces and created a lot of administrative work, so with the White Paper Policy of 2023 that the Department was currently in consultation on, it hoped to start implementing it on 1 April 2024.

For the Department to respond more effectively and have resources that could help it as, it also asked teams to assess the business model alongside the technical team. A framework of the topics the Department of Human Settlements worked on, some of the weaknesses it had been able to identify, what the Department would do about those weaknesses as a team and as a sector, and what the Minister and the leadership identified as gaps and performance period were all provided to the Committee.

DHS: Budget Cuts Implications
Ms Lucy Bele, Chief Financial Officer, Department of Human Settlements (DHS), said the budget reductions, as tabled by the Minister of Finance, of R1.645 billion, were as follows:

During the adjustment estimate process, the departmental budget was cut by R3.2 billion.
- Provincial Conditional Grants were cut by R2.1 billion (11.3%).
- Local Government conditional grants were cut by R818 million (6.54%).
- The Department's operational budget was cut by R160 million (4.7%).

Budget cuts impact
The impact on the Serviced Sites was 2 769 and for Housing Units 10 154 less than planned for, before the reduction of the DoRA allocation.

The impact on the investment in Priority Housing and Human Settlements Development Areas was R1 412 035 less than planned, before the reduction of the DoRA allocation.

The impact on the planned budget for the provision of Social and Economic Facilities was R21 248 691 less than what was allocated before the reduction in DoRA allocations.

Service Delivery Implications: Human Settlements Entities

Social Housing Regulatory Authority (SHRA)
The in-year decrease of R25 million would translate to a reduction of funding for 60 Social Housing Units. Approval of new projects would need to be tapered down which would slow down social housing and negatively impact the MTFS delivery.

National Housing Finance Corporation (NHFC)
The demand for First Home Finance subsidies was increasing, as non-mortgage instruments could access the First Home Finance Subsidy, following the implementation of the revised First Home Finance Policy, effective from 1 April 2022. In addition, the subsidy quantum amount had been increased to a maximum of R169 265. With a reduction of R25 million from total allocation, the entity was expected to approve 238 fewer First Home Finance Subsidy applications as anticipated, assuming an average subsidy amount of R105,000 per application.
The associated reduction in the private sector funding injection into affordable housing was estimated at R100 million.

Performance of the Municipal Grants
Urban Settlements Development Grant (USDG) – budget cuts and expenditure as of 31 October 2023
The overall reported expenditure as of 31 October 2023 amounted to R1.3 billion of the adjusted allocation of R7.6 billion, equating to 17% of the total available funds. Only three metros managed to spend over 20% of their total available funds (Buffalo City Metro -26%, eThekwini -26% and City of Cape Town- 23%). The remaining five Metros had reported expenditure below 20% and that was against the straight-line projections of 33% and the metros would be requested to submit recovery plans indicating strategies to mitigate the risk of underspending.

Informal Settlements Upgrading Partnership Grant (Metros)-budget cuts and expenditure as of 31 October 2023
The reported expenditure by metros as of 31 October 2023 amounted to R685 million of the adjusted allocation of R4.2 billion, equating to 16% of the total available funds.
Only three metros had managed to spend over 20% of their total available funds (City of Ekurhuleni – 23%, eThekwini-25% and City of Cape Town-31%).
The remaining five metros had reported expenditure below 20% and that was against the straight-line projections of 33% and just as was the case with the USDG, the metros would be requested to submit recovery plans indicating strategies to mitigate the risk of underspending.

Potential negative service delivery implications due to budget cuts
1. Those budget changes would have a major detrimental impact on human settlement delivery, so residents—especially the most vulnerable—would feel the brunt.
2. The realisation of consolidation and spatial change would be impacted by less spending in the Priority Development Areas or the initiation of new projects.
3. Budget cuts were anticipated to cause delays in the planning and development of new projects and multi-year plans.
4. The availability of provincial and municipal capacity and resources to implement human settlement programs was likely affected especially for the provinces which the Census 2022 study indicated were growing at the fastest rate.

Current Policy Interventions on Low-cost Housing Delivery
- The Department approved the revised subsidy quantum by 29.7% as of 01 April 2023 to enhance delivery of housing.
- The draft Allocations Policy developed sought to help prioritise the most vulnerable groups and would create an intergovernmental committee to investigate issues of prioritisation.
- The approved Norms and Standards for Innovative Building Technologies (IBT) to promote innovative delivery approaches.
- The Special Housing Need Policy was approved and implementation was to be undertaken in collaboration with the Department of Social Development.
- Implementation of affordable rental programmes (Community Residential Units, Social Housing)
- Promotion of ownership through the First Home Finance Programme (previously referred to as FLISP)
- There was continued implementation of the Informal Settlements Upgrading Programme as one of the key human settlement development responses.
- The Housing White Paper was currently being discussed to give effect to the Human Settlements Act.

See attached for full presentation

Discussions
Mr M Shaik Emam (NFP) questioned the Department about whether it had to consider merely providing service sites rather than building houses. He said the Committee had established the Human Settlement Development Bank, so that the bank could either provide funding or secure outside investment to fund the construction of those houses. That would not only increase the number of housing opportunities but would also accelerate economic growth, as the local government was unable to meet requirements and deliver projects on time. He inquired about the Department's progress, level of achievement, and difficulties encountered during implementation.

Considering that South Africa had a 42% unemployment rate and a population expansion of over a million people annually, he noted that 80% of those people would either opt for private housing or government-subsidised assisted housing. He asked the Department whether it believed government could continue that in the long run or if it would look for other options considering those worries. He spoke of the numerous complaints he had received from people who had appeared on the waiting list for the Finance Linked Individual Subsidy Programme (FLISP) and Reconstruction and Development Programme (RDP) housing initiatives only to discover that people had unexpectedly jumped the queues. He was interested in learning what national steps the Department could take to guarantee compliance and a first-come, first-served policy. He stated that while the Department of Human Settlements offered RDP houses, there was no system in place to ensure that those dwellings remained in the hands of the family. However, because people were weak and without employment, they sold those dwellings for a profit, returned to informal settlements, and asked for housing through other members. He asked the Department what steps it had taken to attempt to prevent that from happening in the future, so that when the Department gave housing, it had to never be sold, but rather moved from one member of the family to another, or returned to the State so that it could be given to someone more deserving.

Mr Z Mlenzana (ANC) had concerns about the non-expenditure of 26 to 27 percent referred to by metros and others; he wanted to know from the Department why it felt that moving around unspent funds was not a good idea, especially given the country's burden in terms of the massive debt that had to be serviced. He asked the Department if it wouldn't be better to use the unspent monies from another province for the province in need rather than extracting more funds from National Treasury. He believed that the Minister and the Department had to view them as re-prioritisation of non-expenditure rather than bemoaning budget cuts. He asked the Minister if the ceiling referenced in her explanation for depending on consultants meant that the Department of Human Settlements' organisational structure was meant to coordinate monitoring rather than be action-oriented. If that was the case, he would then comprehend the Minister's statement that the development of that ceiling essentially indicated that all positions were filled and that there was still insufficient capacity to go down for such implementation and ground-level monitoring. Nonetheless, he praised the presentation and stated that the Department was moving the nation in the right direction.

Mr O Mathafa (ANC) expressed agreement with the Department that the R3.2 billion cut would negatively affect the planned programmes and expressed full support for the Department's approach to applying performance-based reductions rather than arbitrarily slashing programmes. However, given the impact that had been identified on service delivery, he asked the Department if there were any other recommendations that it would make to lessen the specific impact that such a move would had, such as the reduction or re-prioritisation due to fiscal discipline efforts, had to the nation find itself in a similar situation in the future. According to what he understood, the Department of Human Settlement and the Department of Water and Sanitation worked together whenever the Department of Human Settlement was brought up. Therefore, he inquired as to whether those two departments were working together to examine those cuts, determine where each department was re-prioritising, consider how each department's decision could affect that of the other, and perhaps even encourage one another to do the same.

He stated that he was considering working together on projects such as removing bucket toilets, upgrading informal settlements, and regional bulk infrastructure. He noted that those two departments would work together in a typical situation on the projects. He expressed worry about the unauthorised habitation of finished homes, which was occurring all over the nation and involved individuals breaking the law by breaking into completed homes where housing was not allocated quickly enough. Inquiring about the Department's proposed solution, he pointed out that that problem had not only disrupted provincial waiting lists but also sparked tensions and disputes within the communities. According to him, the Committee would be grateful if the Department could let it (the Committee) know what it (the Department) thought and whether any efforts were being made to lessen the detrimental effects that those tendencies would have on communities.

Mr X Qayiso (ANC) agreed with the Minister that the Department had a history of being challenged by itself, but after the presentation, which was all about the budgets being re-prioritised to the point where it touched on the service of the poor differently. He said it was unfortunate that the Committee now had to agree on the very issue it wanted to address, namely the lack of affordable housing for low-income people, in the form of grants that were not being used effectively, which resulted in the budgets being re-prioritised and the grants being shifted for other specific purposes or to fill gaps in other specific purposes. He described that as problematic because dealing with the issue of housing, site availability, and other services was part of dealing with poverty and inequality simultaneously. He noted that that sadly pointed to a topic that would not benefit the poor in that way. He expressed concern that National Treasury had gone to coerce the Department into submission over Mangaung and took over a substantial portion of the budget. He stated that it was wrong for National Treasury to just intimidate without the Ministry's involvement in such matters, and that National Treasury had to return the money that it bullied the Department over. He felt it was appropriate that following the meeting, the discussion that was so uncomfortable for the Department be resumed so that National Treasury could inform the Committee how National Treasury had come to be in that situation where it bullied the Department without engagement and scooped up a certain budget and diverted it outside the political scope, he said National Treasury needed to explain what could have happened in that situation, so that it could be engaged with the Department, So, if National Treasury was present at the meeting, it would be engaged with the Department on other vital issues, even if it was difficult for them to engage. He questioned slide 10 of the presentation and asked for an explanation from the Department. He questioned the Department if it had a consolidated number of incomplete houses in the country, as that was a common complaint when transferring from one country to another. He wanted to know if the Department had a specific financial allocation set to complete all unfinished houses around the country, and if so, he asked the Department to notify the Committee on how the Department would handle it. He inquired whether there was any plan to complete things in a certain framework for the unfinished housing project, or if the Department simply continued to work on other projects.

The Chairperson said the description of the most vulnerable was appealing because the Department provided settlement and housing. He stated that the strongest person in the first row of the queue was not working. So, it is something the Department believed would be supportive, and wishes them luck with it. He agreed with the Minister that the one-year contract for non-staff did not work, but what could one do when planning? He explained that even three years was best for him and that it was something that had to be discussed with National Treasury and the Public Service Commission. The contract was terminated when one was still attempting to comprehend what was going on in the area. The Minister had mentioned ceilings; however, the chairperson stated that when it came to the Compensation of Employment (COE) and cuts, each case was considered on its own merits, and critical posts were protected; however, the chairperson stated that he heard the Minister say something and asked the Minister to comment on that.  

He inquired how the Department's agencies, such as the Social Housing Regulatory Authority and the National Housing Finance Corporation (NHFC), were operating so that the Committee could have a complete picture of the sector. He asked a question about National Treasury's proposed budget cuts. He wanted to know if National Treasury's budget-cutting procedure was consultative. He stated that when he heard the CFO speak about certain grants that were not performing in some provinces and were targeted, he assumed that it was only signed, and that even if those grants were not cut, it was not performing, and they were not going to perform; no magic would come in and make the grants perform.

He asked the Minister what her thoughts were on the fact that the grants were not being cut arbitrarily; there were indicators, and there was a criterion that was being utilised, which included, among other things, non-performing grants, not just that year but in past years. He stated that it all knew where those budget cuts were coming from, and that it was under revenue collection due to the non-performing economy. He said the budget prioritisation was supposed to be temporary; thus, he stated that what would get us out of temporary cuts was to develop the economy. So, he asked what the Department was doing to ensure that the material used in the sector, the major sector, was produced locally, so that the Department could have localisation and create jobs in the country, keeping in mind that everything the Country imported was bad for the economy, but it was even worse than exporting jobs.

He asked the Department what tangible steps it took to ensure that the ERRP component of what was acquired there was manufactured in the country, and how to promote it to create employment. He inquired about the Department of Human Settlements' and the Department of Water and Sanitation's partnership in ensuring that the left was aware of what the right was doing because those were complementary commodities. He wanted to know if the partnership extended not just to the national level, but also to the municipal and provincial levels. He inquired about the Department of Human Settlements' and Department of Water and Sanitation's partnership in ensuring that the left was aware of what the right was doing because those were complementary commodities. He wanted to know if the partnership extended not just to the national level, but also to the municipal and provincial levels.

Responses
Lucy Bele, CFO, answering on whether the process was consultative, stated that during that fiscal year, the Department was aware of budget cuts because National Treasury had notified them that it would need to make budget cuts, but it was unaware of the exact amount that would be made. Next, an AE&E of R1.7 billion for provincial and human settlement grants was given to the Department. The Urban Settlement Grant was also given a single total figure by National Treasury. National Treasury further asked the Department to determine the nature of that cut. At that point, the Department and National Treasury began holding frequent meetings since National Treasury assumed the Department would apply its standard procedure for grant allocation.

Since the Department submitted the application for the first time with R2.8 billion, National Treasury assumed that the Department would apply the formula when applying the cuts. However, National Treasury rejected the submission, stating it did not have the additional R2.8 billion to give the Department. National Treasury provided the DHS with the amount, so the Department made it clear that it would only accept R3.2 billion from the National Treasury. The Department was required to develop the standards for dividing the share among the national, provincial, and entities. It first looked at the formula to determine which provinces performed well and which did not. National Treasury requested R1.7 billion from the Human Development grant, so the Department decided to apply a performance-based criteria to make the cut.

The Department met with National Treasury because it wanted the Department to go over its criteria with them. National Treasury approved of the meeting because it had proof by examining the Department's past year's performance and the year's performance of metropolitan municipalities, all of which indicated agreement. Thus, The Department was left with the operational budget and transfers that needed to be cut, and National Treasury requested R160 million. That presented a challenge because the Department had transfers to its entities included in the operational budget. Thus, The Department was left with the operational budget and transfers that still needed to be trimmed, and National Treasury requested R160 million. That presented a challenge because the Department had transfers to the companies included in the operational budget. To prevent the Department from being unable to continue operating as a National Department and having to close because it would have had to take half of its operating budget, the Department called a meeting with the entities to ask if it could contribute to the R160 million.

The Department was required to call its entities and assess their output. Since the NHFC was the implementing agent for First Home Finance and had already made R20 million toward the Department's target, it exceeded their Medium Term Expenditure Framework (MTEF) target by a significant margin. The Department then asked the NHFC to contribute an additional R25 million toward the R160 million. The Community Schemes Ombud Services (CSOS) was another organisation that succeeded since it generated a lot of revenue and was self-sustaining. The Department asked to reduce the R24.9 million allocated for CSOS because the organisation generated an income, and could make a profit, and CSOS consented. That was the reason the Department stated in the presentation that it believed National Treasury would approve of its keeping the excess after withdrawing the R24.9 million from the CSOS's reserves.

National Treasury disagreed, so the Department went back to National Treasury and told them that the CSOS had already contributed R24.9 million to the budget re-prioritisation. The Department hoped that National Treasury would permit the CSOS to keep the surpluses so that it could continue operating, as it would be a growing concern if it did not. During the mid-term budget adjustment, the Department went to National Treasury because it wanted additional funding for the CSOS but it knew that National Treasury had told the Department that there was no additional funding, however, the CSOS had a lot of projects that it could not kick in and a lot of projects that were still behind because there was no additional funding and National Treasury said there was no additional funding, and informed the Department to find it within its coffers to make sure that it prioritied social housing if it felt it was a priority.

The Department needed to find money somewhere to increase the amount of money it could spend on social housing. The agency knew there was no more funding because the guidelines made that very clear. The entities were operating extremely well; in fact, the audit report returned with no problems and demonstrated significant progress even in service delivery. She agreed with Mr Mlenzana that the best option for re-prioritisation was to move funds, but she also pointed out that that was not an easy task, as the Committee usually questioned the Department about beneficiaries who remained in the province and about the residents. That was because moving funds implied that, for example, if the Department moved funds from Gauteng to the Free State, the residents of Gauteng would not receive service delivery; moving funds was therefore the Department's last resort. Even though that might be the best option, the Department had to first complete several tasks before it could begin reallocating or moving funds from spending provinces or spending metros to non-spending areas. That was because the Department did not want to end the year with unspent funds because those funds were subject to roll-over procedures and, in most cases, involved a lot of complexity due to the Municipal Financial Management Act (MFMA). Unused funds were returned to National Treasury and were subject to Act provisions before becoming revenue.

When the Department moved funds, it did not alter its annual plan because whatever the results that were expected from the province or metro that the funds were moved from, were expected where the funds had been moved to, so as to give the Department the same units that it would have profited from the other province or metro. By the end of the financial year, the Department was not sitting with unspent funds because unspent funds were subject to certain sections of the Act and other than that, it got back to the revenue. However, before the Department moved back, it investigated the provinces and metros that had the capacity to absorb additional funds. She acknowledged that the Department was struggling during the meeting, which was why it was marked in red on the presentation. Even the Minister had mentioned that in her opening remarks. While some provinces, entities, and metro areas performed well, others did not.

The Department's current policy permitted a multi-prong approach, which meant that it sheltered the vulnerable in accordance with their constitutional duty. It was referred to as a multi-prong approach because it also provided service sites regarding what the Department was required to provide and the NHFC First Home Financing for those entering the market for the first time but receiving departmental subsidies. After that, the Department placed what it referred to as rental stock and concentrated on providing social housing and community scheme provisions. When it came to the question of what constituted quality service provision, she stated that those provinces were currently assigned those service sites under policy, and an examination of the MTSF targets revealed annual targets for service provision. Although that was a new initiative, that would be implemented later, it was already in place and had grown, particularly in grants for informal settlements.

The Department could meet the demand of 80% of the population in need of housing if the Department took a multi-pronged approach in which the vulnerable had to be protected based on constitutional obligations, those in the missing middle who required government intervention and support had to continue, and those who were able to provide for themselves could continue to provide for themselves. Those in arrears, known as intermediate or secondary, could continue to provide for themselves. She stated that the government had to continue to do so because it was developmental and interventionist in character. If government left that entirely to the private sector, it would be unable to meet the demands and needs of South Africans, the majority of whom remained in the working class, which was why government's approach remained critical and important for government to pursue and had not to be abandoned.

Minister Kubayi, answering on waiting lists, said the Department had chosen to implement digitalisation of its system in areas where it presently had HSS and a beneficiary. The Minister stated frankly that the current system was not transparent, did not allow accountability, and was not free of manipulation, which was why the Department wished to reform the system. The Department had started a process of changing the system. However, SITA advised the Department that it was not allowed by the law to do it directly as a department and therefore needed them [SITA] to do the process. She mentioned that it was currently in conversation with SITA, however it was not seeing eye to eye, because what it was giving as timeframes was what was unacceptable to the Department, especially in the IT environment where today with AI and all the advancement of the 4th Industrial Revolution. She stated that she had seen products that were available that only needed to be put through a security system that could protect government information while also assisting with the efficiency of prioritising applications for the aged and disabled when it applied so that a 76-year-old did not have to wait on the waiting list while a 30-year-old was assigned an RDP house.

She advised that the Department deal with the issue of RDP houses being sold for a profit through advocacy because you could not stop them. She stated that the existing policy stated that a person could sell after eight years, but the Department had to be given the right of first refusal, which was not done, and those were some of the issues that the Department was attempting to solve with the policy review.

On the issue of justifying non-payment when money had been borrowed, as raised by Mr Mlenzana, she advised that the Department absolutely could not do so, which was why, as a portfolio, it actively monitored bi-month performance. The Department presented to the Minister, the performance of the provinces and the performance of the municipalities in terms of targets and spending. Then, when it met with the portfolio, it looked at which provinces or municipalities did not perform to protect the money sitting in the account, while services were needed. The Department had learned that that was one of the critical service portfolios that at least 60% of the people who were unhappy in their communities were unhappy because of that. She recommended that the Department have a framework in place to ensure that it spends accordingly since it constantly asked each MEC to account and consult with the MMCs of each municipality if there were any concerns. She stated that the Department paid attention to the National Department, but it also played an active role in ensuring that it not only conserved public cash, but also sold quality spending with service delivery.

On the issue of ceilings versus filling posts, she explained that the Department had identified a list of critical posts that needed to be filled, based on the mandate and areas of non-performance or improvements that the Department desired to see, one of which was emergency housing and informal settlement upgrading. When the re-prioritisation occurred, the Department reduced the number of open positions that needed to be filled. She stated that the Department was now filling the remainder of what it had money for, and that the Department was not only looking at that fiscal year, but also at outer years in terms of allocation. The Department could find that it had enough money for the state to add two or more posts this year, but when it looked at outer years, it realised that those posts were posts that the Department would have no money for, so it withdrew them and did not allocate funds. To address the issue of unlawful occupation, the Department had to enlist the help of law enforcement agencies and activists.

Regarding the matter of cooperation, she stated that the Department had not had any bilateral discussions with the Department of Water and Sanitation regarding the cuts; still, she acknowledged that the idea was commendable, and the agency would investigate it.

She said improper governance practices had affected the Department's companies, but the Department had filled the void by appointing senior executives, establishing boards, and demonstrating accountability. She clarified the statement that National Treasury considered each case on its own merit. She stated that, in her opinion, the cost of employees was not accurate because National Treasury had given the Department a cut and that the Department had to prioritise its own capabilities before submitting it to public service. She said she was unaware of the discussion in which the Department asked National Treasury for permission to fill 15 positions, which National Treasury gave; instead, National Treasury made reductions, and the Department was forced to make do with those reductions.

Regarding the matter of the Department's involvement in the ERRP and other matters, their portfolio did contribute to economic stimulation. She stated that one of the things the Department and the portfolio had done was to dedicate 40% of their expenditure budget to women and check in with the provinces every two months to see how it was doing. According to her, Limpopo was doing well since it spent about 0.5 percent of its budget on women-run businesses. She stated that while Mpumalanga was doing well, other provinces were struggling, and the Department was pressuring them to increase their youth spending as well. According to her, the Department was concentrating on those transformational challenges in terms of ERRP or rebuilding the economy.

Regarding the matter of capacity building through the NHBRC, she mentioned that the Department was providing training and was collaborating with universities like Unisa and GIBBS to educate female contractors. That way, the Department enabled them to understand that it still needed to provide full support even if it declared something as set aside. In addition, the Department managed other portfolios, such as assisting SMMEs and development initiatives in which it had partnered with SITA through NHBRC, CSOS, and TPRA. She told the Committee that to support principal agents at TPRA, the Department was working on transformational challenges there. She said about 10 000 formerly underprivileged people were the aim, to enable them to engage in the mainstream real agency market. In terms of employment operations, she stated that the Department had prospective temporary positions that would help SMMEs and the businesses the Department supported permanently, in addition to contributing to temporary jobs.
Regarding employment through job creation, the Department had prospective temporary positions that would benefit SMMEs and the businesses the Department supported both permanently and temporarily. In terms of its social housing programme, it financed new and emerging developers and those who required support through the NHBRC. She stated that the Department could contribute to the ERRP, but it was also able to support more infrastructure development from its perspective.

The Chairperson praised Minister Kubayi and her staff for the presentation. He inquired about her thoughts on SITA, including if she felt it was time for a review and whether the Department had improved delivery.

Minister’s Closing Comments
Minister Kubayi expressed her gratitude for the Chairperson's and the Committee's engagements and the opportunity she and the Department had been given to explain what it had done. She noted that people occasionally had misconceptions about what departments did and that departments were sometimes accused of not monitoring or performing their duties, necessitating National Treasury's intervention. She gave the Committee and the Chairperson her word that the Department could oversee its work while also giving direction and outlining what needed to be done. She also mentioned that the Department had been persistently advocating with its colleagues in National Treasury to be allowed to continue as policy departments, providing direction in their respective sectors because it was aware of what needed to be accomplished in the portfolio.

She stated that the SITA problem was difficult, and Cabinet had begun evaluating it. The Department had also requested that the Minister of Communications and Digital Technologies investigate how SITA could be improved. The Minister of Digital Communications and Digital Technologies acknowledged the ministry's shortcomings and what was going on in SITA.

Engagement with Department of Water and Sanitation (DWS)

Deputy Minister’s Opening Remarks
Mr David Mahlobo, Deputy Minister of Water and Sanitation, together with his team, expressed gratitude for the chance to fulfil the Department’s mandate. He told the Committee that the Department was happy to appear before it as usual to first account for themselves and then to seek advice and assistance with matters of appropriations. He informed the Committee that government decisions based on the financial situation the nation found itself in had an impact on numerous government departments, such as Water and Sanitation, which had to re-prioritise its budgets and reduce its existing appropriations by over R800 million. However, more importantly, the Director-General and the team would demonstrate how the Department was offsetting that and what the impact would be. He said the Committee knew that the Department was coming to the meeting where a number of questions had been asked in the country and there were a number of challenges. One of the questions a number of people were asking was if the Department was having a crisis. Was the Department going to have water for domestic use, including economic, social, and other benefits that were there?
He stated that the Department responded that South Africa was still a water-scarce nation and that there was a need to manage the water supply appropriately because the country continued to receive rainfall that was only half what was usual for wells. He said that the Department of Water and Sanitation had to ensure that any action it took would prevent a potential water crisis for the Nation by 2030. He said the majority of the Department's and ministry's actions involved too many large-scale projects that were postponed and would affect the supply of water after 2030. Considering large-scale projects such as the Lesotho Highlands, he stated that a crucial issue was brought up the previous time the DWS visited. He told the Committee that all the problems with the Lesotho Kingdom had been resolved, and that the workload had already started, with the help of the Standing Committee on Appropriations, which was chaired by the Minister and the Presidency.

Regarding the Lesotho Highlands phase 2, which was an excellent development, he stated that there were no issues because of the linked Vaal River system with provinces like Gauteng. He stated that while there was a temporary delay in constructing the Clanwilliam Dam in the Western Cape, it was operational again, and the DWS crews were hard at work. With the Lesotho Highlands phase 2 question, which was a very good development, he said there was no problem with provinces like Gauteng regarding the Integrated Vaal River System. In the Western Cape, it could be seen that the Clanwilliam Dam was delayed for some time, and that it was back on the fold and the DWS teams were hard at work. He informed the Committee that DWS was pleased that the economy, including the farming communities in the Western Cape would be covered in terms of the progress made.

Looking at KwaZulu-Natal and its water availability problems, he said the uMkhomazi Water Project, which covered five districts, including Ethekwini, was back online. He said it could have taken a long time to conclude the issues of agreements between the DWS and the necessary municipalities, so that the DWS implementing agents in Umgeni, Uthukela Waterboards, and TCTA could proceed. Those were some of the DWS's achievements, including Umzimvubu, which was discussed even before some persons in the meeting were born. He stated that all other outstanding issues and decisions regarding funding and where to begin and would be resolved in collaboration with National Treasury. He assured the Committee that those people of the Eastern Cape, particularly those in that escarpment, were human and would have access to water.

Water would bring about activities allowing the DWS to create opportunities for agriculture, water access, and other things. While observing the residents of Sekhukhune go to Polokwane and Mogalakwena, he noticed that government had finished building the stunning Hoop Dam in Sekhukhune. He saw people from Sekhukhune coming to Polokwane, Mogalakwena, and a very magnificent dam at Sekhukhune called the Hoop Dam, which government constructed.

The partnership model that the Minister had introduced in accordance with the President's decision of the Social Compact Business would be able now in terms of the Olifant’s management model where DWS was working with Lebalelo Water User Association, a mining community would contribute the 50% that government would contribute so that if it could cover that the water would not leave the communities of Sekhukhune, including the little plateau. Those were the largest interventions; regardless of one's location in Mpumalanga, the Loskop difficulties were resolved. The Minister had stepped in, the DWS had consistently discussed uMkhanyakude, and the Presidency was there even on the weekend. He stated that the Mandlakazi Scheme and all the other required infrastructure, including the Jozini Dam, which was now known as Pongola Board, were being maintained. There were numerous additional places where groundwater would enter, and the Department was adamant that it should be allowed to examine the issue of water mix, which necessitated the exploitation of groundwater.

There was groundwater potential in many of those areas due to climate change, as the upper crust was now dry, and the Department would artificially recharge those upper crusts. That was especially true in places without infrastructure. Water mix, or more specifically, recycling, reuse, and reclamation, was a crucial strategy because too much wastewater found its way back into the river system. As an illustration, in Pietermaritzburg, the President had to travel to Umgeni to inaugurate a cutting-edge plant where waste-water effluent had been treated to such a standard that even the treatment costs from Umgeni to Durban were reduced.
But some of that effluent could be utilised for other purposes, such as industrial or agricultural, and a slide was processed to a higher grade, allowing the production of manure and fertilisers—especially considering that Russia and Ukraine were experiencing a shortage of fertilisers. There were problems with fertiliser depletion as well as energy production. The Pietermaritzburg plant would generate one megawatt of electricity for the municipality, demonstrating the close-knit secular economy that Gauteng was experiencing. The Minister interfered in numerous locations, including Northwest, where a Bulela Metsi project was underway.
Rand Water had performed admirably in support of the DG; the Department had also stepped in at Emfuleni, and sewerage was no longer on the streets. As the municipality lacked funding, a balance sheet, and technical know-how, the Department was currently reviving and looking at a new model in which it deployed water boards closer to the municipalities, formed an agency there, and built the capacity of the municipality. Subsequently, Rand Water would replace the outdated infrastructure and restock the municipalities using its own funds. 52% of water was lost, and from there came problems with revenue management—a process known as "build, own, and operate." However, there was also "build and operate" where government looked at partnerships and addressed many of those problems, since no South African could live without access to clean water and sanitary facilities.
The Department had introduced its own tools just to check the issues of how water was managed in the country and the blue drop was back so that the Department could be ascertained on whether the quality of the water that the people were exposed to use for various uses was fit or not. He said the Minister would be releasing a report at the end of the month to demonstrate the number of municipalities struggling and that needed the support of the Department. Some of the municipalities lacked technical expertise, their plans were not operating well, they were broke, and they ran out of chlorine only to disinfect the water. No matter which political party controlled the municipality, there was no single instance where there was no waste water running in the street. Certain cities suffered from cruel conditions, such as sewage water flowing through the streets and overloaded waste-water systems that were not updated to address concerns with population expansion and other factors. The Department was stepping in to help the people live in a safe environment by collaborating with SA Local Government Association (SALGA), Department of Cooperative Governance and Traditional Affairs (COGTA), and National Treasury. The Department was extremely near to handling matters related to its institutions' restructuring. He said the waterboards were finished and that wall-to-wall coverage was provided.
Rand water covered Mpumalanga and Gauteng.
Sedibeng was disestablished.
Vaal Central covered the Free State and the Northern Cape.
Magalies covered the whole of North West.
Umgeni-Thukela covered the whole of KZN.
Lepelle covered Limpopo.
Overberg covered the entire Western Cape.
He said government was wrapping up its investigation into the irrigation boards, which were primarily made up of men and white people and excluded other users. The Department attempted to complete the last round of transition into the Water Use Association, a local people's group focused on water management. Additionally, the quantity had decreased. The Department was expanding its catchment agency and the boards were present. The Department was also looking at Pongola-Umzimkulu and Vaal Orange. The Department’s institutions were operating, and it was extremely happy about it. The National Water Infrastructure Agency was now being discussed in Parliament and Cabinet was supporting it because it needed that agency, which was not a new organisation. The Department was combining the capabilities of TCTA and their construction unit so that both organisations could operate independently in the market and handle big infrastructure projects with the available funds.
He noted that those were a few of the tasks performed by the Department, and that accrual and financial turnaround plans had stabilised. He expressed satisfaction that other parties had recently intentionally politicised water to stir up controversy because it was election season. The Department was increasing its collaboration with local government and municipalities and it was receiving excellent support, but it would remain focused and unwavering in areas of the country where communities faced issues like those in Gauteng.
Briefing by the Department of Water and Sanitation on the Appropriation Bill
Dr Sean Phillips, Director-General, took Members through the presentation.

Strategic priorities and progress of DWS
The establishment of the remaining four Catchment Management Agencies, as required by the National Water Act, is in process, to transfer proto-CMAs to CMAs – two have been established, and the remaining four have been gazetted. As the National Water Act required, progress with transforming irrigation boards into water user associations remained a strategic focus. The National Water Amendment Bill had been gazetted for public comment to achieve greater equity in water use allocations.

The Department aimed to strengthen the regulatory role of the DWS:
- An Independent Advisory Regulator Commission had been put in place.
- The Water Services Amendment Bill extended the powers of the regulator over water services, strengthened the role of the Water Services Authorities as local regulators, had been gazetted for public comment.
-The Department would shortly issue revised norms and standards for water services under the Water Services Act
-There was a need to make the DWS’s regulatory actions more consistent and to further improve turn-around times for water use licenses.
-Measures were taken to strengthen the regulation of tailings dams.
-The Department would issue water use licenses for electricity generation using water resources.
- The Water Partnerships Office was established to increase the private sector investment in water services.
- On the reconfiguration of the Water Boards, decisions had been finalised and were being implemented.
-The Raw Water Pricing Strategy review was nearing completion, and the Department would submit it to the Minister of Finance shortly for concurrence.
On the establishment of the National Water Resource Infrastructure Agency (NWRIA) – the Bill was before Parliament.
-The Department was tackling corruption in the sector, by implementing the SIU investigation recommendations and consequence management.

Reconfiguration of Water Boards
Before the reconfiguration of the water boards, there were nine water boards. There were now seven water boards. The reconfiguration of the water boards was based on considerations of financial sustainability; the need to service areas that water boards did not currently service; addressing institutional confusion caused by having multiple water boards serving the same area; aligning the boundaries of the water boards better with provincial boundaries; and achieving economies of scale.

Supply and demand for raw water
- South Africa was a water-scarce country.
- Raw water supply was currently approximately in balance with the existing demands on a national scale, but there were localised deficits, e.g.
- - Nelson Mandela Bay (2015-2023) and Cape Town (2016-2018) deficits caused by droughts.
- - Gauteng (current) caused by increased demand and delay in LHWP2.
- Water availability in South Africa could deteriorate rapidly as supply contracts and demand escalate due to economic growth, population growth, urbanisation, inefficient use (including increasing physical losses in municipal distribution systems), degradation of wetlands, and impacts of climate change.
- Delays in implementing surface water resource development projects in the past have now been addressed and projects have been accelerated.
- But the broadening of South Africa’s water resource mix was critical for water security as the potential to further develop its surface water resources was limited – the country was already harnessing approximately 75% of utilisable surface water resources.
- There was a need to increase the sustainable use of groundwater, desalination of sea water, return flows from treated wastewater systems (water reuse), and reuse of other poor-quality water such as acid mine drainage – many of those were municipal functions.
- Supply-side measures were necessary but not sufficient to avoid future water deficits. Water Conservation and Water Demand Management (WCWDM) also had to be implemented, particularly in domestic and general industrial use, to reduce physical losses in municipal distribution systems.

Examples of surface water resource projects in implementation
- R40 bn Phase 2 of the Lesotho Highlands Water Project (LHWP 2) for Gauteng and surrounds was in progress.
- R26 bn uMkhomazi Water Project in KwaZulu Natal – affordability deadlock had been resolved.
- R4 bn Phase 2A of Mokolo Crocodile (West) Water Augmentation Project (MCWAP 2A) in the North West & Limpopo – Phase 1 completed, Phase 2 in tender design and documentation stage.
- R24 bn Olifants River Water Resource Development in Limpopo – partnership with mines, construction underway
- R10 bn Vaal Gamagara in the Northern Cape – there were partnerships with mines, and construction was to start in 2024.
- R8 bn Mzimvubu Water Project in the Eastern Cape – funding deadlock had been resolved, construction was underway.
- R0.5 bn Groot Letaba Water Augmentation Project (raising of Tzaneen Dam) in Limpopo – was under construction.
- R1.2 bn Berg River Voelvlei Augmentation Scheme in the Western Cape, construction starting in 2024.
- R4 bn raising of Clanwilliam Dam in the Western Cape – construction.

Approximately 60% of the national water resource infrastructure projects were funded by private finance. Establishing the NWRIA would enable more private finance to be raised, without necessarily requiring National Treasury guarantees under way.

Current water supply challenges in Gauteng
Demand for water in Gauteng had grown rapidly, largely due to population growth. Rand Water had already reached the limit set by the DWS for raw water extraction from the Integrated Vaal River System (IVRS). Phase 2 of the LHWP was now under construction, but was nine years overdue and would only start to bring additional water into the IVRS in 2028. Rand Water now had a R35 billion capital programme which was timed to result in substantial additional treatment capacity coming online when LHWP2 comes online. Demand-supply relationship for treated water in Gauteng was currently very tight and the system was vulnerable to disturbances. Gauteng’s long-term water consumption had to be carefully managed; limits to which further phases of the LHWP or other water transfer projects could provide more water to Gauteng at an affordable cost. On average, municipalities in Gauteng lost 25% of the water bought from RW through leaks. It was imperative that the Gauteng Province municipalities reduce their physical leaks, improve their billing and revenue collection, and improve the maintenance of their infrastructure. It was also imperative that average per capita water consumption in Gauteng be bought down from 253 litres per day, closer to the world average of 173 litres per capita per day.

2023/24 financial year budget adjustment
Cabinet had approved reductions of R881.390 million to the Department’s baseline (Appropriation of R22.257 billion to R21.376 billion), of which:
- R48.996 million was in Programme 1: Administration.
- R331.333 million was in Programme 2: Water Resources Management.
- R501.061 million was in Programme 3: Water Services Management.

Programme 1: Administration
The adjustment of R48.996 million was realised from implementing cost containment measures within sub-programmes, the Ministry, Departmental Management, Corporate Support Services, Financial Management and Provincial and international Coordination.

Those support programmes had no direct implications on the overall socio-economic and service delivery implications.

Programme 2: Water Resources Management
The adjustment of R331.333 million included transfer payments to the Komati Basin Water Authority (R213.755 million), Water Trading Entity (R100 million) and operational budget amounting to R17.578 million. The Komati Water Basin Water Authority was servicing and repaying debt; the current budget cuts were to be covered through current reserves. The adjustment on the Water Trading Entity has been made on slow-moving projects.

RBIG 5B Financial Performance Per Province
Mandatory in-year budget adjustment made regarding the Regional Bulk Infrastructure Grant (5B) amounting to R236.914 million. The Department was working with the municipalities to ensure minimal impact on projects at construction stages.
Transfers to municipalities had been processed in line with the 2023/24 Local Government Payment Schedule as approved by National Treasury; the first transfers were processed during August 2023 to the total amount of R919.278 million. The second transfers scheduled for 03 November 2023 were processed in line with the approved payment schedule; all those transfers would be reported as part of reporting for the third quarter period.

WSIG 5B Financial Performance per Province
Mandatory in-year budget adjustment made regarding the Water Services Infrastructure Grant (5B) amounting to R244.476 million. The Department was working with the municipalities to ensure minimal impact on projects in the construction stages. Transfers to municipalities had been processed in line with the 2023/24 Local Government Payment Schedule as approved by National Treasury. The first transfers were processed during July 2023 to the total amount of R1.359 billion. The second transfers scheduled for 31 October 2023 were processed in accordance with the approved payment schedule. All those transfers would be reported as part of reporting for the third quarter period.

RBIG 6B Financial Performance per Province
The Department had conducted budget re-prioritisation between the Regional Bulk Infrastructure Grant and Water Services Infrastructure Grant.
- Eastern Cape funds had been re-prioritised towards budget shortfalls under the Water Services Infrastructure Grant projects within the province including funding of prior year invoices paid in the current financial year.
- Mpumalanga funds had been re-prioritised towards budget shortfalls under the Water Services Infrastructure Grant projects.
- Gauteng adjustment included the re-prioritised R198 million from capital allocation to goods and services within the Vaal River pollution ‘remediation’ project.
- Northern Cape funds had been re-prioritised to mitigate the risk of under-expenditure. The consulting engineer had been appointed and was in the process of finalising the IRS for the update of the Upington WWTW.

WSIG 6B Financial Performance Per Province
Eastern Cape Drought - Accruals could not be processed during the final payment run of the financial year due to system challenges. The Umgeni-uThukela Water was to undertake the infrastructure development at uMkhanyakude District in the KwaZulu-Natal Province, to address water services delivery challenges. Mpumalanga – the Rooikoppen Sewer Upgrade was ahead of schedule. Contractually, phase 1 & 4 was scheduled to be completed by 28 February 2024, however, they were now expected to be completed earlier. Northern Cape – The construction of Catersridge Bulk Sewer outfall lines and pump station by the Sol Plaatje LM was underway. The professional service provider and the appointed contractor in Phase 2 of that project had terminated due to poor performance by the Implementing Agent.

Transfers to Public Cooperations Water Boards
As part of the measures to prevent underspending, the Department had re-prioritised budgets between Water Boards for the following reasons:
- Correction of the Adjusted Estimates of National Expenditure, including the alignment of the former Sedibeng Water budget allocation.
- Funding allocation for Hammanskraal intervention water crisis.
The available budget was scheduled for transfer in the third and fourth quarters of the 2023/24 financial year.

Impact of the reductions on RBIG Schedule 5B grants
Funding for RBIG was reduced by R236 million

Impact of the reductions- WSIG schedule 5B (1)
Allocations under WSIG were reduced by R244 million in eight provinces, excluding the Mpumalanga Province.
DWS support to municipalities
The Minster had criss-crossed the country visiting those municipalities with severe water and sanitation services challenges. The Minister and municipal leadership had agreed on improvement plans in many of the worst-performing municipalities. The DWS’s contribution was in the form of grants (R14 billion per annum from RBIG and WSIG. The DWS currently has 381 WSIG projects in 119 water services authorities and 99 RBIG projects in 20 water services authorities in construction. For all those projects, the DWS monitored the implementation and provided advice to municipalities.
For some projects, the DWS appointed implementing agents to assist municipalities lacking implementation capacity. For some projects, DWS went further and coordinated regular progress meetings with the municipalities to address bottlenecks and delays. For some projects, the DWS went as far as allocating some of its officials to participate in municipal bid committee meetings to ensure that procurement was done properly.
Lists of major projects with a high level of DWS support per province were provided. As could be seen from the tables, the DWS was increasingly deploying its water boards to assist municipalities. Examples of municipalities receiving very high levels of support from DWS include Lekwa, Matjhabeng, uGu, Tshwane, Emfuleni, Mopani, and uMkhanyakude.
Support to CoT (Hammanskraal)
The Rooiwal Wastewater Treatment Works in Hammanskraal did not have sufficient capacity to deal with the amount of sewage flowing into it and had not been well-maintained for many years. The inadequately managed effluent from the Rooiwal Wastewater (sewage) Treatment Works was polluting the Apies River which flowed into the Leeukraal Dam from which water was abstracted by the City’s Temba Water Treatment Works, which provided water to Hammanskraal residents.The Temba Water Treatment Works was supposed to clean the raw water abstracted from the dam and treat it so that it was fit for human consumption.
However, the water in the dam was so polluted that the Temba Water Treatment Works was not able to treat the water such that it met the required standards for drinking water. Hence, the people of Hammanskraal did not have a reliable or safe drinking water supply for many years. Over the years, the DWS had taken numerous regulatory actions (non-compliance notices and directives) against the city to stop water resource pollution in the area from its Rooiwal Wastewater Treatment Works. Since 2019, the Department has been engaged in legal action against the City for a court order to instruct the City to address the issue.

Litigation
On 12 March 2019, the Department issued a Notice of Motion against CoT seeking relief from court for a declaratory order. The declaratory order was to compel the CoT to comply with its legal obligations by ensuring that the WWTWs were restored to and kept in a proper state of repair.

The CoT filed its notice of intention to oppose on 18 March 2019 and later filed an answering affidavit in opposition. Whilst the aforesaid litigation against the CoT was still pending, the SAHRC issued a report with findings and recommendations. The SAHRC recommended that DWS take over the sanitation function in Tshwane.

In response to the SAHRC report, the Department initiated processes to intervene in terms of Section 63 of the Water Services Act. Letters were sent to the Executive Mayor of CoT and the intervention was refused. The DWS did not have voted funds to provide Metros for water and sanitation and had engaged with National Treasury to seek funding to assist the CoT in addressing the sanitation issues in Hammanskraal. National Treasury indicated that the CoT had funding for that through its USDG, declined the DWS’s request for funding, and indicated that the CoT had to use its USDG grant for that purpose.

Repair and upgrade of Rooiwal WWTW
It was possible that the cholera outbreak that started in Hammanskraal in Tshwane in May 2023 was related to the pollution of water sources in the area from the Rooiwal Wastewater Treatment Works. In light of the cholera outbreak, it was imperative that the Rooiwal WWTW be repaired and upgraded as a matter of national urgency. The DWS did not have voted funds to provide Metros for water and sanitation. Metropolitan municipalities were supposed to use a portion of their USDG to supplement their own budget allocations for water and sanitation. The DWS had estimated the cost of a full rehabilitation and upgrade of the Rooiwal WWTW over the next three financial years to be in the region of R4 billion.

The project could be implemented in stages, with an emphasis on work to stop or reduce the pollution from Rooiwal in the early stages. The Mayor and the City had indicated that the City did not have the capacity on its own to address the sanitation challenges, nor did it have sufficient funds to address the challenges timeously on its own. The mayor had indicated that the City’s SCM processes were corrupted. Before the outbreak of cholera, the Minister and the Mayor had started to engage regarding the potential for working collaboratively, as opposed to litigiously, to resolve the water and sanitation challenges in Hammanskraal.

Programme of action for Hammanskraal
Following the cholera outbreak, that was confirmed with agreement on a joint plan of action. The CoT was to continue to provide water using tankers to Hammanskraal. The CoT was to complete the existing (stopped) project to complete repairs to Rooiwal Treatment Works – the CoT had allocated funding, and the Development Bank of SA (DBSA) was appointed as implementing agent. The DWS and Magalies Water were to construct an additional Magalies Water Treatment Package Plant – Magalies Water was in procurement phase, due to be completed by April 2024 – it would provide drinking water to Hammanskraal so that tinkering could be stopped. The CoT, with DBSA as the implementing agent, was to design major upgrades to Rooiwal to enable it to cope with sewage load – the funding model was put in place by the NT, DBSA and the CoT, design work was under way, and due to be completed by June 2026. The Joint Steering Committee was established and was represented by DWS, CoT, Magalies Water Board, DBSA, COGTA, and Rand Water Board, and it was chaired by the DDG. The Steering committee had bi-weekly meetings since June 2023 to date.

Introduction to the Drop Reports
The Green, Blue and No Drop Certification programmes were tools to provide regulatory information regarding water services, which were largely the Constitutional responsibility of municipalities. The DWS introduced those incentive-based regulation programmes in 2008. In 2014, the DWS stopped the programmes

Minister Mchunu reintroduced the programmes in 2022 after being appointed as Minister in late 2021.

Domestic water cycles
Water for domestic use went through a cycle.
1. Raw water was drawn from rivers and dams and treated in Water Treatment Works by either water boards or municipalities before it was supplied to households.
2. Treated water was required by law to meet drinking water standards set by the South African Bureau of Standards in South African National Standard (SANS) 241. Municipalities and water boards were also required to conduct regular tests on the treated water to ensure it complied with the standard.
3. After households had used the water, it went through the sewer system to municipal Wastewater Treatment Works. The Wastewater Treatment Works removed waste from the water and then returned the water to the rivers. The effluent from Wastewater Treatment Works which went into rivers was also required to meet minimum standards, set by the Department of Water and Sanitation

What each Drop Report focuses on
The Green Drop report was a comprehensive assessment of the state of all wastewater treatment systems in South Africa, including municipal, Department of Public Works and private wastewater treatment systems.
Blue Drop report was a similar assessment of the state of all drinking water systems (including Water Treatment Works and municipal water distribution systems) in the Country.
Both reports included assessments of the condition of the infrastructure; whether the capacity of the infrastructure was sufficient to deal with the demand; whether the required maintenance was being done on the infrastructure, whether the infrastructure was operated correctly; whether the proper treatment processes were followed; whether proper monitoring and controls were in place; and whether the staff had the necessary skills and qualifications.
The No Drop report was an assessment of the degree to which the drinking water distribution systems of municipalities supplied water efficiently, without wasting water.
No Drop assessment included the levels of physical water losses in the system (for example through leaks in pipes); levels of non-revenue water; the amount of water used per customer per day; whether infrastructure was being maintained properly to minimise wastage; the existence of plans and strategies to reduce water losses; the effectiveness of metering, billing and revenue collection systems.
Purpose of the Drop Reports
The aim of that uniquely South African regulatory tool was to improve municipal drinking water quality, wastewater management, water conservation, and demand management.
The reports kept the public and stakeholders informed and updated with credible data and information about the state of water and sanitation services in the Country. The reports also recognised water services institutions that achieved compliance and excellence in providing such services. That served as an incentive for water services institutions to improve their performance.

The reports identified what needed to be done to address each of the shortcomings identified in the reports. In that regard, the reports were a support mechanism, in addition to being a regulatory mechanism, because they provided the owners of the infrastructure with advice and guidance as to how to improve their water and sanitation services.

Publication of the reports
Each comprehensive drop report was released every two years, with the progress assessment report being released in an alternate year. The Progress Assessment Tool was an instrument whereby the Department confirmed and updated functional information and completed a risk assessment for each registered treatment works. The full Green Drop was released in 2022, along with progress assessment of the Blue Drop report. The Green Drop progress assessment report and full Blue Drop and No Drop reports would be released on 5 December 2023.
 
The full reports measured and compared the results of the performance of Water Service Institutions, and subsequently rewarded (or penalised) the institution based on evidence of excellence (or failures) when measured against the defined standards and was based on the entire system including the distribution or collection network, pump-stations and treatment works for either water or wastewater and would also include non-technical aspects such as skills and qualifications of municipal staff. The full No Drop report would provide audited assessments of water losses and non-revenue water in all municipalities in the Country. In June 2023, the DWS issued Green and Blue Drop ‘Watch’ reports, as additional interim reports based on samples.

2022 Green Drop report: summary of findings
The 2022 full Green Drop report found that 334 out of 850 (39%) municipal wastewater systems in 90 municipalities which were water services authorities (63% of the 144 water services authorities) to be in critical condition, receiving Green Drop scores of 30% and below. In 2013, when the last Green Drop assessment report was done, 248 out of 824 municipal wastewater systems (30%) were in critical condition, indicating a decline between 2013 and 2022.

Following the release of the 2022 Green Drop report, the Department issued non-compliance notices to those 90 municipalities, requesting the municipalities to submit Corrective Action Plans to address the shortcomings identified in the Green Drop report. By September 2023, the Department had received Corrective Action Plans (CAPs) from municipalities for 189 of the 334 wastewater systems (i.e., a 57% response rate). By September 2023, only 84 of the 189 plans submitted to the Department were being implemented, with the balance being in planning phase or no progress being reported. For those municipalities which did not submit CAPs, the DWS had issued directives in terms of the National Water Act compelling them to submit such plans. Criminal charges had been laid against some municipalities that had not submitted corrective action plans.

For those 90 municipalities, the Department has issued 184 pre-directives and 94 directives (see Table 1) for non-compliant systems over the last two years.  Some of those pre-dated the release of the Green Drop Report. One of the offences listed in the National Water Act was the non-adherence to an issued directive (administrative action) which was used as the basis for laying criminal charges. Therefore the 12 criminal cases highlighted with the release of the Green Drop Watch report in June 2023 (as a measure of the progress of addressing the results of the Green Drop) were because the Department already issued directives against those municipalities and they failed in securing compliance with the administrative tools.\

Currently, 22 municipalities were facing criminal charges for various offences, including but not limited to, non-compliance to a directive, the unlawful commission of acts or omissions that resulted in water resource pollution or the likelihood thereof (the dockets for those cases were being managed by the DWS and Department of Forestry, Fisheries and the Environment (DFFE)).  Eighteen of those 22 municipalities had systems identified as critical in the Green Drop Report.  The number of cases therefore had increased from 12 in June 2023 to 18 municipalities with systems in a critical state of performance.  The investigations were in various stages and upon completion of the case dockets, they were submitted to the Prosecuting Authority for prosecution decisions.  To date, the Department has also approached the courts for civil interdicts for 17 municipalities, 9 of which had systems identified as critical in the Green Drop Report.

Summary of findings in the Blue Drop Watch Report
151 out of 1035 water treatment systems in the Country were sampled, covering all service authorities. In terms of the condition of water treatment infrastructure, 3% of the sampled systems were found to be in a critical infrastructural condition; 12% were found to be in a poor infrastructural condition; 49% were found to be in an average infrastructural condition, 31% in a good infrastructural condition; and 5% in an excellent infrastructural condition.  Municipalities were required to monitor the microbiological and chemical quality of the water provided to residents at specified intervals, including hourly, daily, weekly, fortnightly and monthly tests of various types in line with SANS 241.

SANS 241 was informed by the World Health Organisation Guidelines, in term of which at least 97% (i.e., good or excellent compliance) of tests for microbiological contaminants and chemical compliance conducted over a year had to comply with water quality standards, for the water to be considered safe to drink. Water quality tests carried out by the municipalities themselves during the 2021/2022 municipal financial year were assessed. The results were rated as follows:
- bad (< 95% of water quality tests met SANS 241 standards)
-poor (95-97% of water quality tests met SANS 241 standards)
-good (97-99% of water quality tests met SANS 241 standards)
-excellent (> 99% of water quality tests met SANS 241 standards).

The assessment indicated that:
39% of systems achieved excellent, 11% of systems achieved good, 9% achieved poor, and 41% achieved bad microbiological water quality compliance. 17% of systems achieved excellent, 13% of systems achieved good, 15% achieved poor, and 55% achieved bad chemical water quality compliance. During the audit period, 11 municipalities did not report water quality data to the Department or provide any other evidence that they had been testing their water quality. The Department had issued non-compliance notices to those municipalities, instructing them to issue advisory notices to their residents that their water might not be safe to drink if it had not been properly tested.

In the 2014 Blue Drop report, only 5% of municipalities had bad or poor microbiological water quality (as opposed to 50% in the current sample). That indicated that there had been a sharp deterioration in drinking water quality since the last blue drop report was done. The 2023 blue drop watch report indicated that the drinking water produced from some municipal water treatment systems during the 2021/2022 municipal financial year had not met the SANS 241 standard and could, on occasion, pose a potential health risk. The report did not provide an indication of the status of water quality in municipalities. In terms of SANS241 and the norms and standards issued by The DWS under the Water Services Act, when the tests carried out by a municipality indicate that the water supplied posed a health risk, the municipality had to inform its consumers that the quality of the water that it supplied posed a health risk.  The DWS had sent directives to the municipalities identified in the Watch Report as having systems with poor or bad compliance. The directives required the municipalities to inform their residents that it still had poor or bad compliance. The public could safely consume water from their taps if their municipalities indicated that the water being provided was being tested and met the requirements of SANS 241. Municipalities were responsible by law to inform affected constituencies as soon as there was any change in quality.

Implications of 2023 Blue Drop (drinking water) findings
What that meant:
According to SANS 241 (which was informed by World Health Organisation Guidelines), drinking water was unsafe if less than 97% of tests for microbiological contaminants and chemical compliance conducted over a year complied with water quality standards (i.e., poor or bad Blue Drop ratings). In other words, it was not ‘microbiologically’ safe to drink the water in half of our drinking water systems at times during 2022, which resulted in an increased risk of life-threatening water-borne diseases such as cholera and chronic diarrhoea. The fact that 85% of drinking water systems were in an average or better infrastructure condition indicated that non-infrastructure factors such as a lack of skilled staff or a lack of proper process controls were as important as infrastructure condition, if not more important, as contributors to poor performance.

Critical Drinking Water Supply Systems identified in June 2023 Blue Drop Watch Report
A high TSA score (100%) indicated that the infrastructure, equipment, and processes were in an excellent condition, whilst a low TSA score (0%) indicated failure and dysfunctional process and infrastructure. The TSA inspections covered each process unit of the treatment facility, coupled with randomly selected checkpoints of the delivery and distribution network. 

COGTA, DWS and NT collaboration to address worst-performing municipalities in terms of Drop Reports
Blue, Green and No Drop Watch reports were presented to Cabinet on 7 June 2023. Cabinet requested the DWS and COGTA to develop a joint action plan for the worst-performing municipalities.
The action plan covered municipalities which had wastewater and/or drinking water systems which scored less than 10% in the Green Drop and/or Blue Drop assessments (i.e., the municipalities which were performing the worst in terms of the quality of their water and sanitation services)
Plans covered 30 municipalities in 7 provinces – Gauteng and KZN did not have any municipalities with wastewater and/or drinking water systems which scored less than 10% in the Green Drop and / or Blue Drop assessments.  The DWS, COGTA, MISA and NT were engaged in support work in many other municipalities with poor Blue and Green Drop results. There were 90 municipalities with wastewater systems in a critical or poor state of performance in terms of the 2022 Green Drop report.
There were 105 municipalities with drinking water systems with poor or bad microbiological compliance in terms of the 2023 Blue Drop report.

Action plans
DWS-COGTA-MISA-NT action plans for each of the 30 municipalities with wastewater and/or drinking water systems that scored less than 10% in the Green Drop and/or Blue Drop assessments were presented to Cabinet. For each municipality, the following summarised information was provided:
- A summary of the blue and green drop findings and the root causes of the poor performance
- The infrastructure needed in the wastewater and/or drinking water systems which scored less than 10%
- Funding allocations to address the infrastructure needed (over MTEF period)
- Maintenance actions to address the lack of maintenance.
- Capacity building measures by the municipality, DWS, COGTA, MISA and NT
- Interventions by DWS, COGTA, MISA and NT to address administrative and governance weaknesses.

Common findings of drop reports and root causes
The following Blue and Green Drop findings and their root causes were common across many of the worst performing municipalities: Non-adherence to standard operating processes for drinking water treatment and wastewater treatment, caused by municipalities failing to hire the necessary staff with the correct skills and qualifications as well as poor management in the municipalities; Infrastructure in poor condition, caused by a lack of maintenance, which was in turn caused by non-prioritisation of budgets for maintenance and operations as well as poor billing and revenue collection, which were in turn caused by poor leadership and poor management.

The DWS, COGTA, and DHS allocated approximately R20 billion per annum in water and sanitation infrastructure grants to municipalities, but often that money had to be used to repeatedly repair and refurbish infrastructure that had deteriorated rapidly due to a lack of maintenance by municipalities.
Vandalism and metal theft were an increasing cause of infrastructure failure, but that was partly a result of inadequate security being provided by the municipalities.

Infrastructure actions
The DWS and COGTA allowed municipalities to use their MIG and WSIG funding for repairs and refurbishment. However, that did not address the lack of routine maintenance by municipalities, which had to be funded from municipal revenues. That could only be addressed by improving municipal billing and revenue collection and by the prioritisation of budgets for maintenance by the municipal leadership. Some municipalities did not carry out any maintenance, and did not even keep frequently required spare parts. MISA offered support to municipalities to improve their infrastructure asset management and undertake infrastructure condition assessments. In many cases, funding for refurbishment or augmentation of infrastructure to address the Blue and Green Drop infrastructure-related findings had already been allocated over the MTEF, mostly through the DWS’s RBIG and WSIG grants and DCOG’s MIG grant, but also by the municipalities themselves in a few instances, and through support from the private sector in a few instances. For those municipalities that do not yet have funding allocations to address the Blue and Green Drop infrastructure-related findings, the DWS and COGTA would work with those municipalities to re-prioritise their grant allocations to address the findings.

Lack of capacity of wastewater systems
Due to rapid rural-urban migration coupled with housing developments, there has been a huge increase in the number of connections to water-borne sewage systems. However, many municipalities had not invested in upgrading their sewage collection and treatment infrastructure to cater for that increase, and many wastewater treatment systems did not have the capacity to deal with the increased sewage load. The DWS had estimated that it would require approximately R50 billion to address that backlog in the wastewater treatment system capacity. The negative impact of that lack of capacity was exacerbated by the ‘dysfunctionality’ of many of the existing wastewater treatment systems. Due to the lack of capacity of the wastewater treatment systems and other factors such as poor maintenance and poor operation of wastewater treatment systems, billions of litres of wastewater, including partially treated or raw sewage, was being put into rivers and the environment by municipalities every day.

Capacity building actions
MISA was building capacity in the municipalities by:
- Hiring engineers and making them available to the municipalities to assist them with engineering expertise.
- Recruiting and allocating young graduate engineers and apprentices to municipalities
- Facilitating the training of process controllers
- Offering support to municipalities to improve their project management, contract management and asset management practices.
- Assisting the municipalities with funding applications for infrastructure.

The DWS was building capacity in the municipalities by:
- Offering councillor induction programmes, in collaboration with SALGA
- Offering training of process controllers and support with registration of process controllers
- Offering support with registration of wastewater and water treatment works
- Helping with the development of water services development plans and five-year reliability plans
- Helping with the development of water safety plans, risk abatement plans, sludge management strategies, and operational and compliance monitoring plans

The NT had carried out a diagnostic review of the local government capacity building system. The review identified a need for a whole-of-municipality approach to support and capacity building for municipalities, involving collaboration across all stakeholders.

Financial actions
The NT was focusing on the following areas of support to municipalities:
- Ensuring that tariffs for trading services were set to be cost reflective and to recover the cost of providing the service.
- Reconciling the General Valuation Roll (GVR) to the billing system for completeness of revenue so that all customers that appear on the GVR also appear on the billing system.
- Developing tariff policies to reduce disputes.
- Improving indigent management
- Assist municipalities in institutionalising standard operating procedures for financial management.
- Improving billing and revenue collection.

The above NT support was provided through technical advisers under the Municipal Financial Improvement Programme (MFIP), as well as by Budget and Revenue Management technical advisers placed at seven provincial treasuries and the NT offices, and 22 municipal support technical advisers placed in districts. The NT was also working on issuing a transversal tender for smart prepaid meters for electricity and water to enable prepayment for water services. Regarding the National Fiscal Framework, water and sanitation services were self-financing through revenues from the sale of water, apart from the equitable share and grants from the national government to municipalities to address infrastructure backlogs and enable municipalities to provide free basic water to the indigent.

In terms of the Local Government Fiscal Framework, municipalities obtained revenue from municipal property rates and from service surcharges on the sale of water and electricity, in addition to the equitable share and grants from the national government. Revenues from the sale of water and sanitation charges could be used for any municipal purpose and were not ring-fenced for expenditure on water and sanitation. Many municipalities were running the water function at a loss – due to very high physical water losses in their systems and due to weak billing and revenue collection, it paid more for treated water which it procured from the waterboards than it obtained in revenue from the sale of water, that was not financially viable and could not be sustained. Similarly, municipal revenue from the sale of electricity was under pressure, due to loadshedding, customers moving to off-grid solutions, and bulk electricity prices increasing more quickly than retail electricity prices. Some municipalities could be financially not viable (did not have a sufficient tax base). With the support of the relevant sector departments, including COGTA, National Treasury was leading the review of the Local Government Fiscal Framework.

Limits to support and intervention
There were limitations to addressing poor municipal water and sanitation performance through national support programmes:
In those cases where the leadership of the municipality was not responding to directives or not listening to advice or not accepting support, performance could only be improved by addressing the leadership challenges. The main cause of the decline in water services was poor maintenance and operation by municipalities – which had to be funded by revenue from the sale of water by municipalities to customers. The national government could not decide to prioritise maintenance and operation funding on behalf of municipalities – those decisions had to be made by municipal Councils. The national government could not hire staff on behalf of municipalities – the municipal leadership had to prioritise filling key technical positions with appropriately skilled staff and a budget for that from revenue. The DWS was repeatedly providing municipalities with grants to repair infrastructure, which was not maintained by the municipalities, deteriorated again rapidly, and then funding needed to be provided again.

The Department's high levels of support and intervention were slowing the decline in water and sanitation services, not arresting or reversing it.

The municipal water and sanitation function had to be fixed to arrest and turn around the decline in municipal water and sanitation services, which required a fundamental reform.

Water Services Act distinction between the water service authority and water service provider functions
Local water supply and sanitation services were functions over which municipalities had executive authority (S156 and Schedule 4 Part B of the Constitution). For municipalities, the Water Services Act distinguished between roles of the Water Services Authority (WSA) and the Water Services Provider (WSP). Only a municipality could be allocated the power and function for the WSA function – allocated by the COGTA Minister, WSA had a primarily constitutional water role of municipalities. The WSA could approve any legal entity (municipality, municipal entity, another municipality, CBO, NGO, organ of state, private company, or water board) to function as a WSP in the municipality. Almost all municipalities currently had both WSA and WSP (had approved themselves as sole WSP). The Water Services Act required the WSA and WSP functions to be managed and accounted for separately by municipalities – that had not been happening. The key role of WSA was to ensure that WSP provided services that met the minimum norms and standards – which had not been happening.

Challenges with S63 and S73 of the Water Services Act in current form
In its current form, S63 and S73 of the Water Service Act were unworkable:
After consultation with the Minister of DCOG, they required Minister to ask province to intervene. Only once Minister was intervening could the Minister issue a directive to WSA to perform the function effectively. That indicated that, if the S139 Constitutional intervention by the province was not undertaken or was not effective, the Minister could assume responsibility for water services function to an extent necessary to maintain essential national standards (subject to the NCOP’s approval)/ However, in practice, the water services function was not a ring-fenced function within municipalities –it was integrated into the whole municipality. There was no mechanism for financing the water services run by the Minister in terms of S63 if water revenues remained with the municipality. Therefore, the Minister would also have to assume responsibility for many financial, supply chain, and human resources management functions under the municipal manager.

Objectives of proposed amendments to S63
- Distinguish between the DWS Minister’s role as the Water Regulator to enforce minimum norms and standards, and COGTA Minister’s role, together with provinces, to intervene in local government in terms of S139 of Constitution. -
-Change from “intervention” (i.e., associated with the taking over of a function of another sphere of Government through a cooperative government process) to a regulatory process of correcting something to ensure compliance with obligations under the Water Services Act.
-Provide for the Minister to implement regulatory enforcement protocols (non-compliance notices, directives) for water services and to make gross non-compliance an offence, similar to the National Water Act.

As a last resort, after following other regulatory protocols, the amendment aimed to empower the Minister to rectify non-compliance on behalf of the failing institution: The Minister could instruct the WSA to appoint a licensed and competent Water Services Provider, to carry out all WSP functions, including technical functions, revenue, customer relationship, and corporate functions (HR and SCM).
The DWS would not choose the WSP – WSA could appoint a WSP of its choice as long it was licensed. Municipal Systems Act processes would have to be followed if required to change from one WSP to another. When introduced, the licensing process would be kept as simple as possible and licensing requirements would be kept to a minimum to avoid unnecessary bureaucracy.

Financial liquidity challenges of water boards
The funding model/Fiscal Framework of water boards based on tariffs and the ‘collectability’ thereof, and non-payment by municipalities for services rendered, impacted the water boards significantly. Water Boards and the Water Trading Entity (WTE) were owed over R25 billion as of 31 October 2023. The poor financial position of water boards impacted ratings by rating agencies, resulting in a negative impact on investors’ willingness to invest in the capital programmes. The persistence of non-payment and the increase of the debt overtime could have the following impacts on Water Boards over time:
- Operations and maintenance would continue to decline and deteriorate and could have serious consequences for the population’s health and livelihoods.
- Inability to meet expectations on delivery of new water infrastructure.
- Those conditions indicated a material uncertainty that could cast significant doubt on the water boards’ ability to continue as a going concern. It would result in the water board not being able to provide water to municipalities. Those factors would play a role when lenders determine the risk involved in lending money to the water boards and would certainly increase the interest rates on those loans (if any), resulting in increased costs to the water users.

Debt owed by municipalities to the water boards (October 2023)
Amatola Water Board, Lepelle Northern Water and Vaal Central Water Board were in distress due to non-payment by the municipalities. Other water boards were still also affected as well and that could affect their positive cash flows from operations in the long term, thus impacting growth and sustainability.

Debt owed to the Department by waterboards.
The Water Boards currently owed the Department an amount of R6.236 billion. The Standard Operating Procedure (SOP) had been developed to improve billing and revenue collection strategies for the Water Boards and the Department’s Water Trading Entity. The SOP was intended to strengthen credit control. The Department had implemented a debt relief programme and incentive scheme to encourage customers to pay up their historical outstanding debt within a reasonable period and the interest was waived. The Department had also introduced the debt relief programme where the debt of the municipality to the WTE/Water Board would be written off incrementally after the municipality had demonstrated commitment in the payment of invoices for the period of 12 consecutive months where a one third of its arrears debt would be written off.

See attached for full presentation

Discussions
Mr Z Mlenzana (ANC) said the presentation focused more on the Department's successes and excellent work than on its problems. If there was any reason for the good expenditure, there would be motivation or a re-evaluation of the re-prioritisation. He praised the Deputy Minister and his team for a job well done and remarked that it was a thorough report. Nonetheless, he was interested in learning about the Department's problems and how it resolved them.
 
Mr H Mmemezi (ANC) noted that the presentation was informative. He noted that although the Committee was pleased with the presentation, there were still a lot of issues because many South Africans had similar experiences. Even while it was stressed how important it was to save water for the hard times ahead, he pointed out that a lot of water, both potable and potable, was lost through leaks in townships and informal settlements, which only occurs in informal settlements and townships, never in the suburbs, giving the sense that “we were still living in ancient South Africa”. He informed the Department that closer relations and monitoring had to not result in communities experiencing long-term water shortages, leakages of water and sewers, and embarrassing experiences of cholera outbreaks, such as the people of Hammanskraal in Tshwane and rivers full of excrement. He urged the Department to investigate providing proper water systems for rural arrears, as some rural areas still did not have tap water.

Mr X Qayiso (ANC_ expressed his appreciation for the Department's report. He praised it on its efforts thus far, as well as the number of projects for which it had allocated funds to ensure service delivery in the areas of water and sanitation. He stated that that justified the Committee's decision to conduct physical oversight of the regions indicated in the report, which guaranteed that the Parliament had to go on to conduct oversight, which was intriguing. There was a progressive sort of approach to having the issues that were confronting the issue of water and sanitation in the country, particularly about several projects that were now happening.

He asked about several municipal grounds, infrastructure, and maintenance granted to municipalities. Referring to slide 9 of the presentation, he stated that in Gauteng alone, close to 25% of water leakage occurred. He wanted to know what was happening in the Department and the issue with municipalities receiving infrastructure and maintenance grants. He stated that if the towns received that grant, there had to be no need for a dispute of that type. He recommended that the Department highlight the specific difficulty. He needed to know if towns were experiencing capacity issues or if there was simply a lack of coordination between those departments.

He wanted to know if the Department had taken any steps to prioritise a breakdown of municipal underspending on water grants used by the province to have a complete picture of what was going on with the grants. He inquired about the budget for eradicating the bucket system in the Free State, whether that would be a moving target with a specific deadline, and, if so, what the progress was. He urged the Department to inform the Committee if the Department had a specific schedule for that issue, and, if so, how long the timeline was. Because that was a topic that had come up multiple times during the meeting. He was concerned about the water board collapse and the R18.8 billion that the municipalities owed the water boards, specifically referring to slide 65. He questioned the DWS on how those municipalities would be helped to pay off that massive debt. How would the Department help those waterboards as it was seeing an ‘uptick’, which indicated that the Department was having major issues with water management?

He requested information from the DWS regarding any mechanisms that aimed to intervene in that specific scenario. He asked to know the name of the collapsed water board. He stated that he thought the DWS and the Department of Human Settlements collaborated, therefore he wanted to make sure. According to him, there was an abandoned sewage facility in Thaba Nchu, and the local community had attempted to inquire with the local government about its status to learn more. Regretfully, no answer came from the authorities. He asked the Department to investigate the plant and determine what was happening with it.

The Chairperson stated that the cuts being discussed resulted from SARS not collecting enough income, which emanated from an economy that did not deliver the needed rate, and that the remedy was to implement ERRP. His question was that apart from what the Department was doing, were there any programmes to try and encourage localisation, so that the Department did not import anything, especially in the big projects that it was busy with and importing most of what would impact the economy negatively, even more worrying was that it was more tantamount to export, exporting jobs and exporting revenues to those countries we import from.

Responses
Deputy Minister Mahlobo told the Committee that while the Department did not try to present an optimistic picture of everything, over the past nearly three decades, the Department had taken steps to guarantee that people who were denied access to water due to their skin colour were now receiving it, along with access to benefits such as the environmental, cultural, and social aspects of it. That had been confirmed by both the Department’s own report and the report of the Census 2022. He stated that the ANC administration did not deny that certain people had been left out, and that it was the people who were prioritised, particularly the most vulnerable in rural communities, including those on farms. He informed the Committee that the Department had just been required to present a policy framework outlining how cities on privately owned land had to never be denied their rights to water, including the benefits.

He stated that despite the Department’s accomplishments, the Department had to admit that there had been setbacks. One of the setbacks was that while many people had access to water infrastructure in their homes, the taps did run dry for several days or weeks, and those challenges were caused by old infrastructure and many leaks. Many towns had outdated infrastructure and had neglected their O&M problems, which was why many choices had been made to allocate a specific portion of funds for O&M. While municipalities earned most of their revenue from water and electricity, they were unable to obtain revenue from water sales and did not reinvest the money in water; instead, they utilised it for other purposes. The reason for certain municipalities’ availability of water in terms of reliability was that there were certain municipalities where access to water was at 90% or higher, but availability had decreased to 60-70%, and those were the concerns that the Department was discussing.

He said the Committee was quite contradictory since people's experiences in some regions were that they did not have water for several days, which was why the Director-General and the team could declare they were aiding those towns. One of the issues with those communities was that they could not acquire funding if they did not plan on time. The DWS spent more time assessing municipalities, showing them how to create business strategies and technical reports and perform implementation readiness studies. The Department had unlocked all of that in several municipalities where it was possible. Many municipalities were unable to carry out those projects due to a lack of funding; as a result, the Department had enlisted the expertise and vast capacity of the water boards.
Some of those water boards, such as Rand Water, had been in operation for more than 120 years, were listed on the Stock Exchange, and were among the largest in the Southern Hemisphere and Umgeni. Those water boards were established to assist those localities. While there was initial resistance to the fact that those water boards might be able to assist, there was now a positive attitude among local government to accept the Department's assistance, including other implementing agencies that the Department was bringing, as well as issues of even bringing businesses on board.

He said the Department acknowledged that more needed to be done for those other communities, but local government carried most of the duty. The Department had decided that no one had to be left behind, and to support those interventions that the Ministry was carrying out throughout the provinces, several initiatives were carried out using departmental funds. In addition to the water problems and the outdated infrastructure, loadshedding was another issue that affected the system. Some municipalities never constructed their infrastructure to at least have a backup energy source. For that reason, the Director-General and his team constantly worked with Eskom to support the exemption of specific vital infrastructure from load shedding. But looking at the situation in Johannesburg, Eskom had now granted the Department the authority to control its own loadshedding.

It took longer for that specific system to perform the recharge if they load shed themselves for an extended length of time, say for two hours, on the water system. The Deputy Minister emphasised that, in addition to loadshedding, there was the issue of climate change, which was now a fact rather than a myth. While commemorating the centennial, the Department faced difficulty, which was why he was with the Minister at Haartebees Dam. The structure was intact and helped the economy in various ways, including concerns about recreation, the stalls that were present, including household and agricultural use, and the icing problem. When temperatures were high and thunderstorms occurred, the amount of consumption rose, which was why the Director-General had issued a plea to use water carefully and to halt the imprudent water uses that people engaged in, such as watering gardens, washing cars with hose pipes, and so on.

He stated that those were the things that municipalities required, but most of them were struggling, but the situation in Gauteng was stabilising. The Department was aware that there were still communities that were experiencing difficulties. He did note that while most municipalities were having difficulties, the situation in Gauteng was beginning to stabilise, and the Department was aware that communities were still facing difficulties. He discussed the erratic water delivery in informal settlements, pointing out that while most municipalities offered water through tendering, the Department did not support that approach because of the potential for system exploitation.

He said some of the people employed by water service authorities vandalised infrastructure and that there was no monitoring and accountability where authorities monitored that the water tanker had a number plate, the name of the driver, or if the drivers did not ask for sexual favours and did not abuse women. But the Department was also keeping an eye on that on the highways. In certain aspects, it could be observed that out of ten trucks, only two were operational, with the remaining trucks purporting to be free of those problems. Regarding the matter of Hammanskraal, he concurred that it was among the cruellest environments to which people could be subjected. The Public Protector, who was protected by Chapter 9 of the Constitution, produced a highly critical report, and the South African Human Rights Commission collaborated with the ministry to create an action plan aimed at providing support to the Hammanskraal community.

He said although there had previously been opposition, the present administration had chosen to allow the Department to step in since it was unable to complete the task. The Department had promised, that the inhabitants of Hammanskraal would not be forgotten because they were also human. With assistance from the DG and the CFO, the Ministry had set aside an extra R240 million to help through the implementing agent, who would handle those problems. Rand Water has done amazing work in trying to revitalise and renovate infrastructure. The Minister had given the MEC in Gauteng the task of handling the political issue in Emfuleni. He emphasised that Rand Water had made incredible efforts to try to revitalise and update the infrastructure. The quantity of effluents discharged into the rivers and fields was now returning to the system for treatment; still, the Department was taking care of other wastewater systems in the area.

He said towns in financial dire straits, such as Emfuleni, were now collaborating with waterboards to bring private and state-owned businesses together. It was clear that that had relieved the situation. Although Standerton constructed the most exquisite human settlement, the sewer returned to the homes of the residents since bulk sewer infrastructure was not installed. The Department stepped in when the court ordered the municipality to be placed under administration and the Minister of Finance was appointed Mayor. The communities were made aware of that action when the Department cleared the streets of sewerage. The Department, had been helping everywhere. For instance, in eThekwini, where floods caused the most damage to the sewer systems, the Department was called upon to clean up the water issues because of the old infrastructure and various problems, such as building on flood lines. Then there was the matter of Umgeni acquiring 10 of the largest eThekwini plants, which would supply nearly two thirds more, for the Department to be able to ensure that eThekwini continued to be the Department's preferred destination.

He said the Department had determined that the people of South Africa could not be subjected to such barbaric conditions. The Department was assisting in many other areas where those communities were struggling, which was why the team spoke about the Green Drop. Most of the wastewater treatment systems were in poor shape, but a collaborative plan was in place to assist them.

On the Vaal system, he stated that while there had been some improvement on the ground, the Department's work was not finished because it would have to investigate the rehabilitation of the dam because it was one of the most important and most polluted systems, and the Department had asked Rand Water and other academics to investigate the matter. That was the same thing that the Department did to the Hartbees dam where sewer from municipalities in Gauteng, nearly 400 litres a day got to be deposited into the Hartebees system, contaminating it and causing problems for the downstream users, including the issues of treatment.

On Thaba Nchu, he said the Mangaung municipality was still his constituency, and that one could see when Minister Kubayi was presenting, that metros were generally sponsored by the Urban Settlement Development Grant, and when some of those issues were given. He remembered that the wastewater plant that Mr Qayiso mentioned was really abandoned and incomplete. He had visited it, and it dumped sewage into rivers and the field, which was undesirable. The Department was assisting the municipality of Matjhabeng in the Free State, which owed the DWS over R5 billion and Eskom billions.

He stated that the Department was at risk since the Matjhabeng Mayor wanted to be gripped by the hand for assistance. He stated that the Department assigned the Vaal Central Water Board to assist that town. Water was one of the most essential parts of water infrastructure in the economic reconstruction recovery plan as part of the network industries. The Committee was correct in that the country had to use that infrastructure investment and development to promote manufacturing first and foremost because there were opportunities for manufacturing in terms of input and our built environment was still one of the most important things. Our country had been exporting those raw commodities, which were then sold back to South Africa at exorbitant costs.  There were piping concerns, pump issues, and cement issues, and other countries could even give South Africa leverage.

He said one of the things the Department spent a lot of money on during Covid was the chemical chlorine merely to disinfect the facility.  Because many of those things were imported, there was a potential, but a lot of activities had been implemented. One of the topics the Department investigated was the funding partnership office. The problems of independent water producers, as an example for desalination, a very expensive yet vital technique. Those were the items that the Department was interested in so that it could galvanize its water investment, but it could also grow. The Department of Water and Sanitation's water and sanitation supply in South Africa was unrivalled and unequalled. He stated that, as much as the Department agrees, individuals still had to be reached. For the first time, South Africans, particularly women, did not have to walk such large distances. Water was a major theme at the launch of 16 Days of No Violence against Women and Children. Women no longer had to walk large distances to get water; water was now available at the tap. Some women still walked long distances, but the exposure of women to unpaid work, the threat of gender violence, and issues of rape were no longer present.

The burden of being expected to fetch water instead of going to school, doing other activities, and playing with other children had been removed, let alone the burden of diseases around waterborne diseases, so the Department's conviction to reach out to all South Africans had not to waver, because it was the right thing to do. It was not doing any favours to the citizens by providing water. The Department could guarantee citizens that it was a responsive Ministry, and that local governments would have its backing.

Dr Sean Phillips, DG, in response to a question about the use of grants for leakages, stated that the grants the Department received were subject to constraints. The Regional Bulk Infrastructure Grant and the infrastructure grant for water services, were capital funds to communities to help them overcome backlogs in water and sanitation facilities, not maintenance grants. Municipalities were supposed to fund infrastructure repair from their own income under the fiscal system. National Treasury had slightly loosened the restrictions to allow the grants to be used for rehabilitation, so municipalities could apply for those subsidies to perform things like repairing and replacing ageing pipes with new pipes. Municipalities had to prioritise the requests the Department made for funding from those awards after consulting with the Government.

He said there was not enough money in the grants to cover all the demands. As a result, there was a great need to replace underground leaky pipes, but there were others needed as well that towns frequently prioritised when applying for grants. He suggested that the opportunity to raise money from the business sector to replace old, leaky subterranean pipelines might be the key issue to emphasise. The Department's Water Partnership Office worked to help municipalities establish public-private partnerships. That was so that the municipality could get the private sector to replace its pipes and earn a return on investment from the savings the municipality achieved from fewer leaks.

Regarding the inquiry into which water board filed for bankruptcy and how the Department decreased the municipal debts to the boards. He said the Department had to close the Sedibeng Water Board because it had gone bankrupt. In addition to National Treasury heavily supporting towns to enhance billing and revenue collection, the Department was implementing standardised credit management methods across all water boards to lower local debt. The Department’s amendments to the Water Services Act would also result in more efficient management of billing and revenue collection by municipalities. To add to the issue of localisation, the Department had started the process with National Treasury's Chief Procurement Officer and the DTI to put in place a transversal tender for chlorine against which municipalities would be able to place orders which would provide an incentive for increased investment in local production of chlorine because now there were only two companies locally which produce chlorine.

Mr. Frans Moatshe, CFO, DWS, regarding the breakdown of the underspending by province, stated that as of November 28, 2023, the Department's overall spending and RD grants, including direct and indirect grants, were at 57%. As previously indicated, the Department was on the right track to spend the remaining funds. As of right now, the Department's overall spending on the Water Service Infrastructure Grants, including both functional allocation and local government and indirect allocation, was at 60%. Further, the Department informed the Committee that the Department was also implementing acceleration plans to ensure that the remaining budget was spent by the end of the fiscal year.

Dr Tseliso Ntibi, DWS, Regarding the Marquard Dam, which was a municipality dam under the management of the Setsoto Municipality, said a business plan had been approved, the project would cost approximately R9 million, a consultant had been hired, and the Department was collaborating with the municipality to ensure that the dam was being refurbished and rehabilitated, particularly for maintenance.

Regarding the Thaba-Nchu Wastewater Treatment Works, he stated that Mangaung oversaw them and that the project commenced almost two years ago; however, the contractor departed in June 2023. The municipality had a recovery plan that called for hiring a new contractor by January 2024, which the Urban Settlements Development Grant funded. Additionally, the Department monitored service quality and notified the municipality of any violations.

A DWS representative responded to a question about buckets by saying it was unclear whether the bucket system had to be eliminated. He clarified that the Committee was aware that Human Settlements gathered that and that it was not a shifting target because it had a set end date.
He told the Committee that the Department started out with 14 000 buckets in the Free State and Northern Cape, of which it had now eliminated 12 000, leaving roughly 1 400. Of that number, the Department was currently working on about 600 of the 1 400 buckets in Campbell, meaning that by March 2024, the Department would have a backlog of roughly 800 buckets. He updated the Committee on the Department's progress in Free State, stating that 60% of the Department's stations would remain after it closed at the end of the year. Although the Free State was a level region, he acknowledged that there were obstacles arising from SMMEs and that excavations caused delays in development, and the province on schedule in terms of spending.

The Chairperson expressed gratitude to the Deputy Minister, the Director-General, and the entire DWS team for a well-written report. The Committee acknowledged the Department's noticeable intervention in the pro ince and municipalities and expressed appreciation for their support and involvement.

The meeting was adjourned.