Department, Trans-Caledon Tunnel Authority & Water Research Commission Annual Report presentations & Implementation Review of National Water Act

Water and Sanitation

23 October 2008
Chairperson: Ms C September (ANC)
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Meeting Summary

The Chief Director of Institutional Oversight in the Department of Water Affairs and Forestry made a presentation to the Committee on the Annual Reports for 2007/08 of the Trans-Caledon Tunnel Authority (TCTA) and the Water Research Commission (WRC), highlighting those areas where the Department exercised its oversight. Questions were asked by Members around the TCTA funding, and collaboration between the Authority, the Commission and the Department, but were concerned that insufficient information had been provided on how these organisations were helping the Department to attain its objectives.

The Water Resources Commission presented its report to the Committee, and Members asked questions on the training of and gender distribution among students, the tracing of their movements after they had graduated, the shortage of water in rural areas, the Commission’s relationship with the media and its role in fostering community awareness.

The Trans-Caledon Tunnel Authority highlighted the fact that it had received an unqualified audit, and noted the significant role it had played in Government’s infrastructure development. Members’ questions covered foreign funding, the TCTA’s AA + credit rating and its vulnerability to international market volatility, project prioritisation and the impact of cost escalation on the consumer.

The Department then presented a detailed Implementation Review of the National Water Act 36 of 1998. It highlighted policies and programmes that had not succeeded, corrective action it had taken or planned to take and the overall review of the National Water Act. The Committee questioned DWAF on the amendment of the Act, the infrastructure imbalance between urban and rural areas, infrastructure replacement and the effect of tariff increases.

Meeting report

The Chairperson, Ms C September, noted that this would be the last Annual Report presented to this Committee, and she expressed her profound appreciation for the very interactive relationship the Committee had had with the Department of Water Affairs and Forestry (DWAF). This would assist Members in continuing to fulfill their mandate from the electorate.

Department of Water Affairs and Forestry (DWAF) Annual Report presentations:
Trans Caledon Tunnel Authority (TCTA) and Water Research Commission (WRC)
Mr Silas Mbedzi, Chief Director of Institutional Oversight, DWAF, made a presentation on the Annual Reports for 2007/08 of the Trans-Caledon Tunnel Authority (TCTA) and the Water Research Commission (WRC). He noted that the Trans Caledon Tunnel Authority was established in 1986 to implement and fund the South African part of the Lesotho Highland Water Project. It was a State owned Water Resource Entity. His presentation covered the oversight role of the DWAF, and salient details from the financial statements (see attached presentation). He noted that the TCTA had showed healthy growth in terms of its revenue and DWAF was happy with the manner in which the TCTA had conducted its business. It had also received an unqualified audit. The Water Research Commission also had received an unqualified audit, but with some matters of emphasis from the Auditor General,

Discussion:
Mr J Arendse (ANC) asked for more information on the TCTA’s additional R13.3 million funding.

Mr Mbedzi replied that he would leave it to the WRC to say where the additional R13.3 million funding had come from.

The Chairperson asked whether DWAF could add a little more about the entities over which it had oversight, including who they were and what they did. She asked, for instance, how DWAF had used the WRC to address some fundamental water issues in the country.

Mr Mbedzi admitted that in future DWAF would need to say more about whether the entities (WRC and TCTA) had helped DWAF to attain its objectives, and undertook that next year the Department would address these issues specifically.

Mr Arendse said he found it strange that DWAF had still not actually said anything about these entities but merely promised to report back the following year.

The Chairperson asked in terms how had TCTA and the WRC assisted DWAF with its mandate.

Mr Mbedzi replied that in the following year, when DWAF looked at the performance of the WRC and the TCTA, it would need to examine these issues and to report on whether these entities had helped DWAF to fulfill its mandate and attain its own objectives.

He noted that the TCTA took some of the DWAF plans a step further in order to ensure the provision of water. He promised that in the following year the Department would devote more time to discussing not just their activities, but also the politics of DWAF’s relationship with these entities.

Dr Sizwe Mkhize, Deputy Director General,  DWAF, added that without the TCTA and WRC, perhaps DWAF would not be performing as well as it had. He noted that there had been collaboration so as to ensure that plans were in place to provide all South Africans with water. In particular, the WRC was playing an important role in advising DWAF on the treatment of waste water.

The Chairperson suggested that DWAF forward information on such matters in writing to the Committee so that there was information on record. |

Water Research Commission (WRC) Report
Dr Rivka Kfir, Chief Executive Officer, Water Research Commission, then presented the WRC’s report to the PC. She highlighted that the country would not be able to meet its water needs unless it addressed water quantity, quality and accessibility. She noted that the Commission had received an unqualified audit; and that the variance between budgeted and actual income and expenditure was minimal. There was a net surplus of R15 million and that would be devoted to the following year’s projects. Revenue had increased by R11.3 million, mainly due to an increase in water research charges.

She then noted that the main areas of impact of the WRC were in the areas of water and society, water and economy, water and health and water and environmental matters.

Discussion:
Mr M Swathe (DA) asked whether the WRC’s funding capacity was only for the 664 students mentioned, or whether they were also funding municipalities,  which were the entities that delivered the water to consumers.

Dr Kfir replied that capacity building was a very complex matter. The WRC would not exist without a research community. It therefore endeavoured to encourage as many young people to study at university so that they could later become researchers.

Mr Swathe also asked how many of those students were employed in DWAF.

Dr Kfir replied that that the WRC did not have the numbers of those students who had been trained and were now serving in the Department. She could try to find such information but it would not be an easy task

She added that the WRC had done its utmost to try to trace graduates, but the problem was that the universities themselves did not seem to know where they had been absorbed. Some remained in the water field while others moved away to other areas. Some were employed in the areas of mining and others entered government departments.

Mr Swathe said that development in rural areas was inferior to that in urban areas and asked what DWAF was doing about this.

Although the question was not specifically answered, Dr Kfir made some general comments about the handling of water resources in different areas. She noted that with regard to local government, district municipalities were a problem. The WRC needed a good entity with whom to work. The Water Information Network of South Africa was such an entity and there were plenty initiatives in the country, but they suffered from a lack of co-ordination and engagement.
Perhaps what was needed was a co-ordinating body for capacity building in local government.

The Chairperson wanted to know whether knowledge dissemination had filtered down to the various levels of society. She indicated that accurate information and knowledge did not seem to be getting through to the media, whose articles tended to sensationalise and mislead rather than educate. She was also interested to hear about the research and academic institutions and wondered if the WRC was actively forging relationships with these two sectors. She pointed out her concerns that in many communities there was a general lack of knowledge about water issues.

Dr Kfir replied that the WRC tried to disseminate as much information as possible. She acknowledged the importance of having a good relationship with the media, but said that the problem was that the media was not interested in good news, but rather tended to want to report on a crisis situation. The WRC tried as much as possible to invite the media to relevant events, especially where there was good news to report.

The Chairperson asked how the WRC got involved in knowledge dissemination at community level. She said that this was especially important in a country which was highly politicised, but where there was also a lack of knowledge about water issues.

Dr Kfir replied that the WRC had several educational programmes in place, including some that tried to educate young children to study science and to learn about the use of water and water-related matters. She acknowledged that South Africa had a shortage of scientists and researchers and a  preponderance of mainly older white males in the field. She then said that although the WRC provided training material but did not conduct the training itself. In respect of the broader picture, the WRC was involved at community level and believed that the best way to involve the community was to incorporate it into its research. An example of this was in-field rain water harvesting, where the community had been involved from inception.

The Chairperson also asked for a response to certain difficulties pointed out by the Auditor General and contained in the WRC’s submission.

Dr Kfir replied that the WRC had accumulated a lot of “debt” according to the books, but that this was not in fact real debt. Its financial policy stated that if the WRC failed to get an audited statement, that meant that money was still regarded as owed by the debtor. This created an immense challenge and the A-G had said it should not be part of the WRC’s finances. The WRC had since raised the matter with its board, who had agreed that such debt should not be included in the financial statements. The rules around the financial statement requirements, and the statements themselves, had therefore been changed, thus solving the problem.

The Chairperson asked about the contradiction between cash and accrual. and whether appropriate systems were in place.

Dr Kfir replied that the WRC was bound by the Public Finance Management Act (PFMA). If it had  been able to budget on accrual, it would have been much easier, but it was in fact obliged to report to the system. She said that reconciling the system had been her mission since her arrival but was still impossible to do fully.

Ms Maine asked about the shortage of skills in the Department, and whether the WRC had helped DWAF to address this.

Dr Kfir replied that a problem in DWAF was that members of this Department, like other departments, changed frequently, and as new people took over this would result in some drop in  competency levels.
 
Mr Swathe asked about the scarcity of water in rural areas and the use of underground water in these areas. He asked if the WRC tried to procure information on the distribution of underground water, especially in dry rural areas that lacked surface rivers.

Dr Kfir said the WRC did do research on the use of underground water and how to incorporate such water into the overall water resource management. There was vast knowledge but the WRC was nonetheless were still looking at the use of underground water, especially in terms of water quality and pollution ad treatment. She noted that the WRC had worked closely with DWAF. The WRC had guidelines for water quality and there were many studies that provided information on how to treat water and diseases related to water quality. Although the WRC provided information and the tools to test water quality, it did not police enforcement and application. Therefore although the knowledge on how to avoid such problems existed it was not always correctly applied.

The Chairperson thanked Dr Kfir and suggested that DWAF and the WRC hold regular sessions with press editors so as to share information.

She further said that DWAF should also ask for assistance from Treasury with regard to cash and accrual, because that was their function.

Trans-Caledon Tunnel Authority (TCTA) Report
Mr Johann Claassens, Acting Chief Executive Officer, TCTA, presented on the Annual Report for 2007/08. He highlighted that the TCTA had received an unqualified audit, and that it had received also an AA+ credit rating. He described the various activities, graphically illustrated, and said that overall TCTA played a significant role in the infrastructure development of Government.  Details of some of the projects were given.

Discussion
Mr Arendse asked about project implementation. In this regard he wanted to know if TCTA waited for DWAF to take the initiative or whether it would make its own proposals on projects that it thought might be useful.

Mr Claassens replied that DWAF was undertaking the national planning. The TCTA did not play an active role in that process, but tried to get involved as early as possible in the feasibility study of a project. However the responsibility and accountability for long-term resource planning lay with DWAF, who were doing an excellent job.

Mr Arendse also asked to what extent the TCTA relied on foreign funding and whether, if the national credit rating dropped, the TCTA rating was also likely to fall.

The Chairperson asked to what extent the TCTA was affected by the current international volatility in the markets, what mechanisms it had to protect itself in this regard, and the effect of this volatility on tariffs.

Mr Claassens replied that because TCTA did not receive foreign income, it did not have a natural hedge against currency exposure on foreign loans. It  preferred not to rely on foreign loans but where it did so, it tried to convert upfront to rands. As for its credit rating, this did indeed follow the pattern of the government’s credit rating.

Mr Arendse then asked about projects on which the TCTA was working closely with DWAF and whether it had any idea how many dams would be constructed. He also asked if TCTA had any idea as to which projects would receive priority and if so, whether it would prepare itself to implement these projects.

Mr Claassens replied that TCTA knew “reasonably well” in advance when projects would come its way and could ensure that the necessary resources were in place.

The Chairperson reminded  Mr Claasens that when the Water Board appeared before the Portfolio Committee the Committee had not been convinced by the figures that were presented.

A Member asked a question about the effect of tariff hikes on the end user.

Mr Claassens responded that the bad news was that the end user ended up paying for cost escalation, although the TCTA tried to minimise the cost of new projects and it also tried to spread  the cost of a project over a period of time. He said there were mechanisms to smooth out the tariffs and to follow a conservative approach, so that the end user was not presented with sudden cost increases. These included spreading the cost over a longer period, increasing the levy on existing water usage, and using those funds to pay for the capital cost. The big risk was that as funding became scarce, projects would also become more expensive. However, TCTA had followed a conservative policy and tried to take at least 70 % of its funding on fixed interest rate terms.

He noted that in general, in regard to cost, the fact that major construction projects involved so many unforeseen contingencies necessitated a substantial contingency fund, which TCTA would try to have. However, where there was a major cost escalation, it might be that there was a need to re-assess the budget and the viability of a project half way through the project.

Implementation Review of the National Water Act (NWA) by the Department of Water Affairs and Forestry (DWAF)
Dr Sizwe Mkhize, Deputy Director General,  DWAF, gave a presented on the DWAF Implementation Review of the National Water Act (NWA).

Under the general heading of what had not worked, he noted that the regulation to support implementation of the Act had not been integrated, that the water allocation programme was lagging behind, which meant that redress and equity had not been achieved, that the establishment of Water Management Institutions (WMI) had been delayed due to uncertainties around the future and the transfer of staff. Challenges in developing a sound asset data base existed. The roles and responsibilities of the WMIs had not been defined, and the delegation of functions and responsibilities had not taken place. Capacity of the Department was of serious concern. Water licensing issues were long and complex, and recognition of the Water User Authorities (WUA) had also been a problem. There had been lack of a strong communication and marketing strategy. Generally, the whole of water resources management was under-resourced.

Dr Mkhize went on to detail some case studies and challenges in respect of the Vaal System, and drinking water quality, as well as the water services infrastructure (see attached presentation). Dr Mkhize noted that the growth and development challenges were substantial. The economic growth rate of 6% required additional water supply. There should be addressing of the backlogs in order to meet the goals of halving poverty by 2014. Transfer of water for long distances was extensive. There were further problems around acid mine water. Water could be made available, but given the long lead times for developing new schemes there was a need for cooperative planning. 

Dr Mkhize noted that at a 98% assurance level, South African water was constituted of 77% surface resources, 9% ground water and 14% return flows. The proportional use per sector was set out in a table. The greatest percentage was 62% to Agriculture, with 27% to domestic use. Although there had been improvements in the population’s access to water supply, from 15.9 million having no access to safe supply in 1994, compared to 5.7 million in 2008, there was still a backlog, and on the projected population growth rates, the domestic share would move, by 2020 to between 30% and 35%, as compared with the current 27% of total national use.

In order to meet this demand in metropolitan areas, the water demand management must be implemented urgently. Groundwater resources would need to be developed more extensively, and further surface water resource development and interbasin transfers would also be required. Desalination was the final option for coastal cities, as inland water would have to be reserved for inland use. Resources to metropolitan areas were under stress, and there would be no further allocation for irrigation from these resources.

The responses of DWAF to strategic needs in respect of Energy, mining, industry, agriculture and forestry and rural areas were set out. In the rural areas there was a need to accelerate delivery.

Dr Mkhize then summarised the risks, threats and challenges, which were analysed in detail (see attached presentation) under the headings of climate change, infrastructure, scarce skills, loss of institutional memory, unlawful water use and pollution, raw and drinking water quality, often poorly managed by municipalities, and pollution of water resources by mining, agriculture and industry.

Finally the key recommendations were presented. These included the improvement of the water mix, water conservation and water demand management to be set up, as non-negotiable and with strict and sector-specific targets, water loss control, promotion of efficient water use, infrastructure improvements, clamp-downs on unlawful water use, and no further allocations to be given to irrigated agriculture, except for new entrants. Afforestation would be promoted and there would be better alignment of planning.

He noted that in response to the anti-poverty strategy, DWAF could become involved directly in four ways. There could be economic interventions, to expand opportunities for employment and self-employment, investment in human capital, including skills development, basic services and good governance and support to local government. This would need sufficient funding for development of a strong compliance, monitoring and enforcement function. There was a possibility of retaining assets seized during action against illegal users. The National Environmental Management Act amendments would give powers to officials as inspectors. Appropriate institutional arrangements were to be determined for water services regulation, including institutional arrangements for the national regulator, and drinking water quality interventions would be instituted. There would be augmentation and conservation of infrastructure. A project plan for the review was tabled, with the key tasks and outputs and timeframes indicated.

In summary, Dr Mkhize said that the NWA was a good and solid piece of legislation, which needed to be fast-tracked, and a regulatory framework must urgently be put in place. There should be good alignment and a common vision. The institutional models should be stabilized and institutions should be encouraged to adhere to its intent. There was enough water, but there was a need to address the challenges and address the water mix.

Discussion
Mr Arendse asked how DWAF planned to rectify the shortcomings and which areas of the Act it thought needed to be amended. He wondered whether making changes to some areas would then result in revealing others that needed attention.

Dr Mkhize  replied that some of the challenges would necessitate that the Committee would be called upon to assist DWAF, such as possible changes to the Constitution. He noted that Section 25 of the Act would also require to be revisited, as greater clarity was required on water trading. He also said that more clarity was needed in respect of the matters similar to those experienced by the Department of Land Affairs, where, in view of changed circumstances and needs, there was no longer a place for the willing seller, willing buyer principle, as the majority of the population were poor and were not getting sufficient access. People who had water wished to trade it between themselves, and the section would have to be reassessed to find out how water could be given to those who needed it.

Mr Swathe commented on the infrastructure imbalance between rural and urban areas inherited from the previous regime. Most of the infrastructure and resources were in urban areas, and water from dams in the rural areas was being piped to those in urban areas, while those living near to those very same dams did not reap the benefit.

Mr Swathe then asked about the ageing infrastructure. Many of the facilities had been  constructed in the 1970s and 1980s and these were not being replaced.

Dr Mkhize replied that most of the infrastructure was single-purpose. He added that the ageing infrastructure was indeed a challenge and this would be expensive to maintain in the future. Dr Mkhize then made a comment on the revisiting of tariffs. He said that consumers  complained that water would become very expensive if tariffs were increased. A decision had to be made whether to raise the tariff on the value of the asset or not, or how else to deal with the matters.

Dr Mkhize agreed also with the comments on the rural dams, citing a particular instance where people living as close as 3 kilometres to the dam were not being able to access water from it.

The Chairperson echoed the concerns, citing the example of a man who, his whole life, had stayed near a large dam, and was now buried near it, yet had never enjoyed the benefit of having water in his home.

Mr Mkhize said that the Department’s current policy was to no longer have single-purpose dams but rather to opt for multi-purpose facilities.

Ms M Maine (ANC)asked who was responsible for the replacement of old infrastructure.

Dr Mkhize said that the Department, and not the municipalities, was responsible.

Ms P Bhengu (ANC) asked what measures DWAF had in place to sustain its reserves, especially in the light of climate change.

Dr Mkhize replied that reserves were the first thing one ought to do when planning and were not negotiable. Reserves meant water for people as well as for the environment. When constructing a dam, it was necessary to take into account the provision of sufficient reserves. The “yield” would then be used for other activities. There were indeed challenges, but DWAF was linking up with the Department of Environmental Affairs and Tourism to face these.

The Chairperson expressed the thanks of herself and all Members for the comprehensive report. It was important to decide how DWAF should move forward. It had for some time threatened to make changes to the National Water Act, and she commented that surely by now it ought to have some idea of what it wanted to change. The Committee was not advocating change merely for the sake of change, but change based on a review.

The Chairperson suggested that DWAF should be more open on whether its financial module was assisting it when it came to the issue of implementation. However, in general she commended the Department on raising some grave issues and for being frank and honest.

Dr Mkhize noted that where DWAF might have failed in any respect, it would regard these as areas that needed improvement, would address them and would update the Committee on progress.

The meeting was adjourned.

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