Department Budget hearings

Meeting report

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE
6 April 2005
Department BUDGET HEARINGS

Chairperson: Ms C September (ANC)

Documents handed out:
DWAF presentation: Vote 34
Department briefing on budget
SA Local Government Association submission
Department Strategic Plan 2005/6 - 2007/8
Timberwatch submission
Overberg Water Board submission

SUMMARY
The Committee was briefed on concerns related to the Department of Water Affairs and Forestry’s 2005/2006 budget by the SA Local Government Association (SALGA), the Overberg Water Board, the Timberwatch Coalition and Geosphere. The Minister also briefly addressed Members.

The Department’s Director-General explained the major features of the budget and highlighted the differences between the exchequer account funded by the government, and the trading account funded by payments from major water users.

The Overberg Water Board promoted its unique approach to tariffs based on water use, their plans for expanding services and assisting municipalities. They requested the Committee to consider promoting an increased budget of R4 million so that they could clean up 1 000 hectares of alien vegetation to harness the water now lost there.

SALGA summarised its goals as increasing service and efficiency to ensure that the rural poor had access to free basic water and sanitation, as well as successfully transferring services from the national to municipal level. The Timberwatch Coalition stressed the need for responsible and regulated forestry practices on timber plantations, and the dangers posed by unregulated behaviour.

The Minister outlined aspects of the Department’s budget, including licensing, income from major water users, water infrastructure, the BEE Forestry Charter, and funds for poorly-resourced farmers. Geosphere addressed various issues it was involved in, focusing on the social and environmental impact of timber plantations.

Members commented on a number of issues, including the success of the recent Water Week; why the Department was still receiving funding from government in light of its revenue from private water users; when the Department’s restructuring would be finalised; why free basic water services were still not extended to all poor and, especially rural people; the definition of a poor person and whether municipalities would be able to handle water services that were now being transferred to them from national level.

MINUTES

Department briefing
Mr M Muller (Department Director-General) highlighted the main features and key trends of the Department’s 2005/6 budget. There were two main accounts, the exchequer account funded by the National Treasury and the trading account funded from revenues from major water consumers. The exchequer account income had remained relatively stable, but the trading account income had increased rapidly. Expenditure was divided into four groups: Administration, Water Services, Water Resource Management, and Forestry. Expenditure on Water Services decreased as a result of a focus on "ensuring" rather than providing supply and service, as well as from the ongoing transfer of power to municipal governments. Water Resource Management expenditure increased by 30% as a result of sustainable supply programmes and infrastructure developments that required large investments and took time to show revenues. Administration costs had increased slightly as a result of the labour required to make the transfers to the municipalities, but remained relatively constant. Forestry costs also appeared to be stable, but since the forestry trading account had been closed, it was necessary to remember that R40 million was going to the Treasury rather than the Department budget.

Discussion
Mr J Arendse (ANC) asked whether the exchequer or trading account was affected by the transfers to the municipalities, and why, if the revenue and expenditure of the Department were relatively equal, there was still augmentation by the government. He mentioned that the Working for Water program had started with foreign funding, and asked whether or not that funding still existed, what would happen if it did, and where it was reflected in the budget.

The Chairperson asked how the budget conformed to the priorities set forth in the State of the Nation address given by the President, what the difficulties were in achieving those objectives, how those difficulties would be addressed, and whether or not the expectations would be met. She also questioned the lack of coordination with the Department’s Strategic Plan, asked whether they had been linked together, and commented that at times the plan could look quite unmanageable because of the number of programs.

Mr Muller responded that the transfers decreased the Water Services expenditure, but noted that the same amount would still be spent through "different channels." Government augmentation of the budget was still necessary because of expenses like the Swaziland development project which were government subsidized and not yet self-sustaining. Foreign funding was not reflected in the budget, but Working for Water no longer received foreign funding, and instead received a grant from the Poverty Relief fund.

He highlighted three areas in which the budget conformed to the President’s address. The budget provided basic services like water and sanitation, and assisted local governments in meeting their population’s needs. It helped develop the second economy by bringing technology to rural communities and developing "livelihood activities" there. It also helped support the first economy by maintaining and investing in infrastructure development necessary to maintain growth.

The Strategic Plan was not closely linked to the budget because they were products of different departments and methodologies, and thus had different ways of approaching the same issues. A stronger link would be beneficial, but because the departments had different requirements and procedures, such collusion would be difficult.

Ms M Manana asked why protection policy targets had shifted to March 2007 from December 2005 and why there was no difference in outputs resulting from the irrigation boards’ change to water user associations.

Mr Arendse asked why there were no objectives listed in the administrative section of the budget, when the other three objectives had been listed. Did that omission mean that all desired administrative change had already occurred? He also asked what form forestry oversight would take.

The Chairperson asked when the restructuring of the Department was ending, and if Mr Muller could walk the Committee through the entire process.

Mr Muller responded that the change in targets resulted from a change in format between the current and previous years’ budget, and noted that the two had no relation to each other. Because the Department was forced to consult with outside parties like industry and local governments, changes were not happening as quickly as the Department anticipated or desired. The Department needed to find a balance between pushing too fast and souring negotiations or missing a target. He stressed that the Department should be strictly held to targets where they were the only party, but asked that the Committee understand that negotiations could only move as quickly as the other parties involved.

The Department of Public Services and Administration, as well as the Treasury, did not believe that the administrative branch of the Department should list objectives, as it was there primarily to support the other branches.

The transfer of Water Services would be completed by April 2006, but the other branches were not as clear. The Department was trying to transfer responsibly, and there were lots of factors to consider. He also noted that a public sector transfer was more complex than that of the private sector, as there were more interests to protect.

The Chairperson commented that the Water Services Management branch also had large differences in targets, and the same question applied.

Mr Muller explained that oversight during the forest transfer was crucial to ensure that economic use of the forests continued, as many rural communities depended on that use. Certain conditions, regulations, and expectations were set forth, and the stakeholders were responsible for monitoring them. He noted that water and sanitation services were completely under the control of the Department, and asked again that the Department be held to those targets.

The Chairperson assured Members that any grey areas would be addressed later, and reminded the Committee that several overlaps existed with other departments.

Overberg Water Board submission
Mr D Abrahams (Chairperson) gave a brief overview of how the Board had transformed from a state-controlled, subsidised scheme to one that was economically viable and sustainable. He credited the unique tariff structure that assigned lower rates to more efficient water users for the Board’s success. The Board provided 40% of their water to towns and 60% to rural communities. They saw themselves as a "specialist organisation," focused on assisting local governments, and were waiting for municipalities to give the "go ahead" on cooperation. He outlined a R4 million plan to the Committee that would save large amounts of water in the Western Cape by cleaning up 1 000 hectares of land below the Theewaterskloof dam, allowing the Cape to harness the same amount of water as they were already taking from the dam.

SA Local Government Association submission
Mr N Macleod (Technical Committee) commented on the similarities of the SALGA and Department objectives to assist municipalities, as some were still not able to meet constitutional goals. He stressed that efficiency and effective management were crucial. He outlined the key challenges as providing basic services and sanitation to rural areas, unpacking the transfer schemes, reducing the sanitation backlog, and completing institutional restructuring.

Problems in meeting this challenge arose from lack of funding and support, as poor people could not afford to pay for services, and he stressed that this needed to be entrenched in the budget. The definition of "poor" was also questioned, as there were various demarcations being used, and this made it difficult to target subsidies. Sector restructuring was also important, as it created opportunities for water boards to become economically viable, both in South Africa and beyond its borders, through "source to tap" service. Regulatory capacity was essential as well, and he stressed that it had to be adequately funded and resourced.

Timberwatch submission
Mr W Menne (Chairperson) stated that their mission was to co-ordinate and monitor the actions of its members, as well as to provide a credible body of information on the plantations. He noted that the emphasis had shifted from environmental to social concerns. There were significant problems with alien trees spreading beyond plantations and devastating the surrounding areas, and the burden of removal fell on the local governments. Timberwatch tried to shift the burden to industry, as the spreading was a result of less-than-satisfactory plantation standards.

He highlighted some of the damaging effects of plantations, including the loss of resources for rural communities, water shortages, and the shift to contracted workers. He noted, however, that Timberwatch was not necessarily opposed to plantations, but felt that they needed to be strictly regulated to avoid negative externalities.

Discussion
Ms D Van der Wait (DA) asked Overberg what amount they planned to save by cleaning up the 1,000 hectares and SALGA what they were planning to do about water losses from leaking pipes and poor maintenance.

Ms C Nkompe-Nygwenya (ANC) asked Overberg how they planned to overcome the gender imbalance on their board and what exactly their tariff scheme was.

Mr Arendse asked how Overberg’s tariffs compared to other water boards, and if Overberg was having difficulty getting towns to agree to their water strategies. He also wanted clarification on the exact hectares Overberg proposed to clean and how it would save water. He asked how SALGA planned to address the sanitation backlogs without an extensive policy, and questioned why the old system of free basic water was not still used. It made more sense to use technology than to redefine the "poor."

Ms Nkompe-Nygwenya asked how Overberg dealt with the challenges of providing free basic water and how they managed to give 60% of their water to rural communities despite a lack of infrastructure.

Mr Macleod responded that there were municipal and national sector plans to monitor water loss, as in some places it was as high as 50%. South Africa inherited a legacy of poor maintenance, and because the up-front costs of infrastructure were so high some actions were unaffordable, although in the long run tightening up the system was less expensive.

He commented that the problem with the sanitation backlog could not be addressed yet, as there was no clear definition of "free basic sanitation," and suggested that this definition could vary depending on the context and location; therefore action had stalled.

Mr D Potgieter (Chief Executive: Overberg Water Board) responded that the R4 million figure was an estimate based on Department research, and that alien trees in the area consumed the same amount of water that was taken from the dam. He clarified that Overberg was not yet providing free basic water, and that the rural distribution was mostly to commercial farmers, not the rural poor. Overberg was not yet providing to the towns because they were still in negotiations over financial arrangements.

Overberg was addressing their gender inequalities, but the problem was that few women had the necessary technical skills. The Minister would be appointing a new board, and the imbalances would be addressed.

Overberg tariffs were comparable to other water boards, although they were significantly more expensive in rural areas because the water was transported so far. Town tariffs ranged from R1.74- R2.20 per meter cubed, and rural tariffs were R4.50.

The area proposed for cleaning extended from the Theewaterskloof Dam downstream to the confluence with another river, and clearing the alien trees would save 3 million cubic meters of water. He also noted that there were other users of the water as well, and suggested they be monitored more efficiently. The cost of this lost water was some R30 million.

Ms S Maine (ANC) asked SALGA what they believed was the correct definition of the poor, and what stumbling blocks there were to meeting the deadlines. She commented that they should provide alternatives in addition to raising their concerns.

Mr M Sibuyana (IFP) asked SALGA what they were doing about the lack of capacity. He asked Timberwatch what they were doing about people’s refusal to follow the regulations, and what restrictions they were not happy about.

Mr S Simmons (NNP) asked Overberg what steps were taken to prevent people from extracting water illegally. He asked SALGA how many municipalities were still not providing free basic water. He asked Timberwatch if they had members on licensing boards in other provinces.

Mr Sibuyana asked SALGA when the transfers would be complete.

Ms S Sigcau (UDM) asked what Timberwatch had done to assist the rural communities near plantations, particularly the Sebokwe people, and what role traditional leaders played in plantation negotiations

The Chairperson asked all three presenters if they had any view on the Department’s Budget (Vote 34), and how it would assist programs they needed to develop. She asked Overberg why they were not planning a provincial water summit instead of merely an Overberg water summit. She asked Timberwatch if they were working to develop a partnership with government. She asked SALGA if they had a plan corresponding to the State of the Nation address, how they would help municipalities implement those programs, and what their response was to the government’s policy of consolidation.

Mr Arendse asked if SALGA’s admission that they fell short of targets was also an admission that they could not run the water board, and questioned why South African water boards would be interested in extending service beyond their borders.

Mr Macleod responded that SALGA defined the poor as earning below R1100 per month, and stressed that South Africa needed to measure that body of people more efficiently. He highlighted stumbling blocks as the limited capacity of local governments, the condition of their assets, and agreeing on expenditures needed for the transfers. Many of the issues raised were beyond SALGA’s control, and they lacked the resources to address them quickly.

Roughly eight municipalities still lacked free basic water, but a free basic water task team would address those problems. He stressed that SALGA did not want to extend their control and wanted to create viable institutions without "parochialism." South Africa’s water boards were not structured to extend beyond their borders, but "source to tap" service was needed to ensure efficiency and competitiveness; a difficult task in the public sector.

Mr Menne responded that Timberwatch had started youth development programmes and projects, but that because of low financial resources, these projects were limited. Timberwatch had members on the water licensing boards in Mpumalanga and the Eastern Cape, but there was not always feedback. He mentioned that there was consultation with traditional leaders, and that their permission was required in local governments, but that they could take advantage of that power. Timberwatch did not have a direct relation to the budget, but rather adopted a watchdog role. They would love to work more closely with the government, but government co-operation was needed for that.

Mr Potgieter responded that controlling illegal access was difficult, especially without any hard knowledge of the numbers, and cleaning the area would have high returns. He stressed that any amount to clean the land would be beneficial. He agreed that a provincial summit would be better and stated that negotiations were taking place, but had no knowledge of the numbers involved in Working for Knowledge.

Minister’s briefing
Minister B Sonjica said that the budget provided for licence verification and the process of compulsory licensing would be undertaken as part of the broader transformation programme. This would be a very challenging task because enforceability was difficult and they were facing resistance, but it would ensure that there was equitable access to water. There was a steady and substantial increase in the overall budget for protection, management and use of water resources. Major water users, such as commercial farmers and miners were providing an increasing contribution to the budget for water resource management.

The budget also provided for continuing investment in water infrastructure, which included building three dams in Limpopo, establishing a National Water Infrastructure Agency and conducting a feasibility study for a new dam. While the budget for infrastructure had increased, its downside was in its management. The Department would present a final report on the establishment of the National Water Infrastructure Agency to Parliament in order to ensure compliance with financial management requirements. These issues would also be discussed in various Water Summits being held soon.

Restructuring in forestry had been a slow process that sometimes impacted negatively on peoples’ livelihoods, so the Department would have to give an indication of the timeframe for completion. The other issue in forestry was the broad-based BEE Forestry Charter. Imbizos were being held in the provinces where there were forests, building up to a National Forestry Indaba on 18 April. The transfer of management of the Knysna and Tsitsikamma forests to SANParks was highlighted as part of the effort to put the management of forests in the best hands. There was increasing spending on monitoring and support activities in both forestry and water. The Department had failed in ensuring the participation of local government in these processes and hoped to improve that in this budget.

Internationally, the Department would be attending the CSD 13 Conference, which looked at progress towards achieving the United Nations’ Millennium Development Goals (MDGs). It was also active in the African Ministers’ Council on Water. A recent issue raised there was access to funds for poor countries to enable them to reach the MDGs. In this budget, the Ministry also gave support to emerging farmers in the form of funds for poorly-resourced farmers. This area needed to be given attention so that the funds were used and not rolled-over. Internationally, this was the Decade for Water, with the theme of ‘water is life.’ The Department would ensure that water and forestry contributed to the development of the first economy and the mainstreaming of the second economy to the benefit of the poorest people in rural areas.

Discussion
The Chairperson said that before the budget vote debate, they would have another opportunity to talk about these issues.

Ms M Manana (ANC) asked for some information about climate change as it related to water shortages in the future.

Mr Sibuyana asked the Minister to make available documents that were relevant to the issues she spoke about.

Ms Ngwenya asked for more information on the R930 million that was transferred to the municipalities. The Department needed to monitor spending and ensure that the municipalities were capacitated to use those resources properly for the sake of the poorest. The Committee did monitoring in a structured way, but when Members went to monitor individually during constituency time, they were seen as interfering.

Mr M Masala (ANC) asked whether Water Week had had an impact on communities and had galvanized them to participate.

Mr S Simmons (NNP) said that the Minister had mentioned nearing the end of transferring responsibility to the municipalities and that project consultation should take place in a technical and financial capacity. In its presentation, however, SALGA had indicated that the budget allocations for the Masimbambane Project for 2005/06 were insufficient to maintain the desired level of support to municipalities.

The Chairperson said that they had not heard whether they would receive legislation for this year and asked what input had been given by the Department into the Co-operatives Bill, as it related to agricultural and water issues. The Committee had met with groups dealing with aquaculture, and the Chairperson asked if the Department had ever ventured into that area.

Mr Muller said that climate change was fuelled by emissions into the atmosphere that caused the earth to warm. As the world was getting slightly hotter, climate would begin to change, causing more variability in temperature, more rainfall and more droughts. In South Africa, predictions were particularly bad for the west, including higher temperatures and less rainfall. Climate change was a global issue, but South Africa had to look at emissions from industry and cars, and at whether timber could help to clean the air. A strategy was needed for South Africa as part of an international agreement, and the Water Resource Strategy provided some tools for response.

South Africa did not have a large aquaculture industry, but it was a large industry worldwide. Fish farming could cause a lot of water pollution, so the Department was concerned with looking at water quality problems. The Water User Associations provided a good model of a co-operative. These were groups that came together to manage water in a co-operative manner, even though they used government infrastructure.

The Department had not been involved with the Co-operatives Bill, and no major issues had been raised by legal services, except concern with the lack of a legal framework for small farmer agricultural co-operation.

There would be a meeting between the Department of Provincial and Local Government, SALGA and the Department on 7 April about the funding for Masimbambane. Unfortunately, the EU grant funding would decrease over the next few years and the challenge was to examine how to take some of the Masimbambane activities into the Department’s budget. It was a very important project, and they wanted to see it continue.

The Minister said that if the decrease in funding had a negative impact on a municipality, Project Consolidate would address it and had already identified 139 municipalities that might have technical or financial problems. In terms of monitoring, officials had been deployed to some municipalities. They had seen that various sectors involved in management co-operated to some degree but did not have a structure to compare or align strategies.

There was great interest in saving the Congo Basin forest because of its potential to reduce climate change, so there needed to be co-operation within Africa. Most emissions came from the developed world, but the developing world suffered most. South Africa was categorised as a ‘water scarce country’ and did not have enough water resources for an expanding population, so they had embarked on a conservation and demand-management strategy.

They were trying to "demystify" language to make it more accessible for people and were trying to develop a culture of using water efficiently. During Water Week, the message had gone to schools but had not reached communities as it should have, but this was a continuing process. Cape Town was doing well at promoting water conservation and had begun to appoint Water Officials to monitor water use in the townships. The Department was amending the National Forest Act and would work on a plan to deal with monitoring in constituencies, including educational initiatives and providing information on policies. Access to information would empower people in the communities.

Geosphere submission
Geosphere was represented by Mr Philip Owen and Mr Godfrey Silaule. Mr Owen said that Geosphere focused on timber plantations and opposed them due to their lack of sustainability. Timber plantations were not an effective way of dealing with climate change because harvesting and processing of the timber produced carbon dioxide and they exerted too much pressure on water resources and soil.

Geosphere was also involved in other environmental issues in Mpumalanga. This included involvement in the environmental impact assessment of the expansion of the Sephi Nongadwana pulp mill, determining the value of the grasslands being replaced by timber plantations, assessing the impact of timber plantations on indigenous communities and cultures, promoting grassroots participation, developing an environmental hotline and involvement in the FAC review of timber plantations.

Dams had a huge negative impact in terms of trapped sediments, nutrients and silting. The budget should include a comprehensive cost and benefit analysis of timber plantations to quantify the costs of dried up bodies of water and lost plants and grasslands. Mr Silaule spoke about the social impact of timber plantations in terms of labour exploitation and the impact on farm workers. Timber was a highly labour intensive industry, and most employees were from historically disadvantaged communities. Much of the work was done through sub-contractors, so there was little accountability on the part of big companies. There should be an integrated approach between Department, the Department of Agriculture and the Department of Labour to look at regulating the industry. Access to free basic water was also an issue for farm workers and intervention and monitoring was required from the Department.

Discussion
The Chairperson said that Geosphere had addressed individual issues, thereby making it hard to provide a response. She suggested that Geosphere make their submission in writing in order to enable to Department to make a full response.

Mr Owen said that they had had short notice about the opportunity for presentation and had not been able to gain access to a copy of the budget.

The Chairperson said that the budget at hand was the budget presented in February and was accessible from many sources. They had been given sufficient notice about the presentation.

The meeting was adjourned.