ATC141023: The Budgetary Review and Recommendation Report of the Portfolio Committee on Water and Sanitation, dated 21 October 2014
Budgetary Review and Recommendation Report of the Portfolio Committee on Water
and Sanitation, dated 21 October 2014
The Money Bills Procedures and Related
Matters Amendment Act (Act No 9 of 2009) (Money Bills Act), sets out the process
that allows Parliament to make recommendations to the Minister of Finance to
amend the budget of a national Department.
In October of each year, Portfolio Committees must compile the Budgetary
Review and Recommendation Reports (BRRR) that assess service delivery
performance given available resources; evaluate the effective and efficient use
and forward allocation of resources; and may make recommendations on forward
use of resources.
The BRRR also serves
as source documents for the Standing Committees on Appropriations when they
make recommendations to the Houses of Parliament on the Medium-Term Budget
Policy Statement (MTPBS).
comprehensive review and analysis of the previous financial years performance,
as well as performance to date, form part of this process.
Section 5 of the Money Bills Act requires the
National Assembly, through its committees, to annually assess the performance
of each national department, with reference to the following:
The medium term estimates of expenditure of a
Department, including its strategic priorities and measurable objectives.
These are tabled in the National Assembly
together with the national budget;
The Departments strategic plans and annual
The expenditure report of a department published
by the National Treasury in terms of section 32 of the Public Finance
The Departments annual reports and financial
The Committee on Public Accounts reports
relating to a Department; and
Any other information requested by or
presented to Parliament.
The mandate of the Portfolio Committee on
Water and Sanitation (the Portfolio Committee) is to enhance the principles of
a developmental state through passing legislation and to facilitate public
participation, monitoring and oversight function over the legislative processes
relating to the water and sanitation; confer with relevant governmental and
civil society organs on the impact of water
and sanitation legislation and related matters, enhance and develop the
capacity of Committee Members in the exercise of effective oversight over the
The Portfolio Committee noted the critical
factors informing the strategic and business plans, section 32 reports, annual
report and financial statements of the Department of Water and Sanitation (the
Department) and its Entities.
addition, the Portfolio Committee focused on the way in which the Department
aligned and accomplished its work over the medium term in relation to its
constitutional imperative, legislative mandates, the Medium-term Strategic
Framework of Government, National Development Plan 2030, Outcome 10 Delivery
Agreements, obligations and commitments stemming from multilateral and
bilateral water and sanitation agreements and other international instruments
such as the Millennium Development Declaration and priorities emanating from
the 2014 State of the Nation Address.
To effectively undertake the oversight
mandate of its work as required by the Money Bills Act, the Portfolio Committee
on Water and Sanitation (the Portfolio Committee) having received and
considered briefings from the Department of Water and Sanitation and its
Entities, as well as the Office of the Auditor-General on 14 and 15 October
2014 on the Annual Report and Financial Statements of the Department of Water
(Vote 38) and its Entities for the 2013/14 Financial Statements, reports as
functions of the Department and its Entities
The Department of Water and Sanitations
legislative mandate seeks to ensure that the countrys water resources are
protected, managed, used developed, conserved and controlled by regulating and
supporting the delivery of effective water supply and sanitation.
This entails adhering to the requirements of
water-related policies and legislation, including constitutional requirements
that are critical in delivering on the right of access to sufficient food and
water, transforming the economy and eradicating poverty.
The mandate is derived from the National
Water Act (No 36 of 1998), the Water Services Act, (No 108 of 1997) and the
Water Research Act (No 34 of 1971).
The Department of Water and Sanitation
fulfils its mandate through formulating, coordinating and monitoring the
implementation of national water and sanitation policies, programmes and
legislation with the additional support from entities such as the Water
Research Commission (WRC), the Trans-Caledon Tunnel Authority (TCTA), Catchment
Management Agencies and Water Boards.
Focus Areas of the Department for the 2013/14 Financial Year
The key policy focus areas over the medium
term for the Department in its alignment to government programmes relate to the
sectors contribution to economic growth, rural development, food security and
land reform (Outcome 6 Infrastructure, 7 Rural Development and 9 Local
Government); to promote sustainable and equitable water resource management
(Outcome 10 Environment); Strengthening the regulation of the water sector
(Outcome 6 Infrastructure, and 10 Environment); Support local government to
deliver water services (Outcome 9 Local Government)l contribute to improved
international relations (Outcome 11 International) and build capacity to
deliver quality services (Outcome 12 Public service).
Given the changes and recent trends in the
service delivery environment, the Department undertook a review of its policy
areas, thus refocusing objectives and new commitments to respond to the new
For the 2013/14 financial
year, the Department identified the following strategic issues and performance
targets as critical:
Positioning water as a catalyst for
The policy area emphasised the point about
the centrality of water in the economy.
As reflected in the New Growth Path, water runs through various sectors
as an enabler and bedrock for all future planning and development.
The indicators and performance targets as
noted in the Departments Annual Performance Plan (APP) contribute to a variety
of sectors such as energy, mining, agriculture, and social development.
The success or failure to achieve these
objectives will have a huge impact not only in the water sector but the entire
value chain in the economy.
Water governance as a condition for sustained
One of the main commitments of the Departments
Annual Performance Plan, is the finalisation of the second National Water
Resource Strategy (NWRS-2).
strategy forms the cornerstone of water resources management in the country and
gives guidance on what future priorities are in the business of water in South
In the 2013/14 financial year,
the Department aims to see the final adoption and implementation of this
strategy by all sectors along with all the technical and support strategies.
In the same context, the institutional
framework to improve water resource management is geared towards
The Department, notes in
its APP commits the establishment of nine catchment management areas within
three years and to formalise the nine regional entities to provide regional
bulk infrastructure and to support municipalities on bulk water provision.
The need for sector skills development
The sad reality is that the sector is losing
its most critical resource, which is its human capital.
The implementation of the goals outlined in strategies,
frameworks and plans need the technical expertise to be realised and most of
these employees within the water and sanitation sectors are either aging or
The Department, stresses in its
APP for 2013/14 the specific targets for recruitment and training of engineers
and scientists to expedite the project of building technical skills in the
The sector skills plan also has
huge commitments towards achieving the objective of capacity building.
Sound financial management and accountability
The Department emerges from a difficult
period of poor audit outcomes from the Office of the Auditor-General which
calls for a new way of doing things from a financial management point of
Though not ideal yet, the last few
years have seen the Department improving on its financial management and
reporting so as to receive a qualified audit with less matters of
The Department has a specific
target to achieve a clean audit in 2014, and for this a number of actions and
undertakings have been prescribed.
Addressing equity and increasing access to
The recent Census results confirm that a lot
of progress has been made to deliver water to the people.
The 94.8 per cent access achievement is a
welcome development in a democratic state but as the Department noted, this
does not remove the reality that many communities, especially in rural areas
still lack access to water.
Department, in its APP, sets out targets for increasing access to these
vulnerable communities as well.
Department has also initiated programmes such as rain water harvesting and new
initiatives to increase access to those who never had water in the first place.
Contributing to the infrastructure build
South Africa has unveiled a massive infrastructure
programme to build the economy and create jobs.
The role of water in this programme is very significant as most projects
require a secure source of water availability in the best quality.
The water sector itself has its own
infrastructure investment plan which has been quantified to cost over R660
billion over the next ten years.
Other critical policy areas under review
relate to water governance as a condition for sustained water delivery,
legislative review of the current water-related legislation, review of the
water pricing strategy, regional bulk water and sanitation infrastructure, dam
safety, institutional reform and re-alignment project, bulk water
infrastructure, compliance with minimum water quality norms and standards,
support for local government and international integration.
Overall performance of key policy focus areas over the medium-term
the last financial year, the Department has not only learnt from what has been
done, but needs to ensure that it does its work better and smarter to achieve
their set goals.
The ideal of ensuring
water security including the supply of and sustainable sanitation cannot only
focus on the needs of the moment, but should look beyond and consider the needs
of generations to come.
the last financial year, the Department has taken stock of all those factors
that inhibit consistent water supply. To address the inhibiting factors, the
Department, together with local government and surrounding communities embarked
on programmes directed at facilitating economic growth, social development,
skills development and community participation.
These programmes include, amongst others, the following War on Leaks,
Adopt-a-River, River Health, Youth Summit, Bursary Schemes, Women in Water
Awards, and South African Youth Water Awards.
remain the Departments flagship programmes aimed at water conservation, water
management, making bursaries available to provide essential engineering skills,
job creation, public participation, economic growth and development.
on Leaks Programme
the period under review, the programme, War on Leaks has substantially reduced
water loss and unaccounted water seepage in most Local Municipalities country
This programme targeted women and
youth and has generated much enthusiasm which has led to communities developing
a strong commitment.
in engineering services and environmental management
youth, especially from rural areas, have registered with tertiary institutions
for careers in engineering services, environmental management and the
protecting ecological degradation.
same institutions of higher learning will work in partnerships with the
Department of Water and Sanitation to train and develop the youth in these
and young people
Women and young people in the various provinces
have been recognised for their efforts and contributions in securing quality
water and the fight against water pollution.
These efforts continue to draw large numbers of volunteers who have as
their objective to ensure sustainable supply of quality water in all
The Department has been consistently faced with
capacity shortages when it comes to technical skills owing to among other
things, aging workforce and the inability to attract and retain young
specialists. One of the contributory factors related to capacity constraints is
that the Occupational Specific Dispensation (OSD) requirements are
In an effort to mitigating
the situation, the Departments approach for the year under review was to focus
on reducing the vacancy rate for the scarce skills, especially in the science
and engineering fields.
Learning Academy, the Department managed to place the highest number of qualified
candidate engineers and scientists into permanent employment in key strategic
These placements serve to
increase the current human capacity needs of the Department, more so, in the
The medium term plan is to
increase the intake of graduate trainees by the \learning Academy, with a more
bias towards the engineering fields.
Infrastructure planning and infrastructure built
Within the water infrastructure planning
environment, the Mbombela reconciliation strategy was developed and twelve
existing reconciliation strategies were updated. Delays were however
experienced in initiating the Vioolsdrift feasibility plan for water resource
development. As this is a joint project between South Africa and Namibia, the
agreement to initiate the project took longer than expected. Further delays
were experienced in completing the Ncwabeni and Western Cape Augmentation
feasibility plans. An appeal against the Ncwabeni environmental authorisation
was received and had to be considered. In the Western Cape, the augmentation
feasibility plan and the environmental authorisation is still outstanding.
Within the infrastructure built programme, the
Department achieved its target of impounding the De Hoop Dam and completing the
construction of the Spring Grove Dam. The regional bulk infrastructure also
managed to complete seven projects, of which three are in the Free State, two
are in Mpumalanga and the other two are in KwaZulu-Natal and the Western Cape,
respectively. The implementation of Olifants River Water Resource Development
Project bulk distribution system in particular was delayed due to the users not
signing the off-take agreements as well as challenges encountered in
differences in the funding and implementation model between the Department and
the commercial users. The Department is negotiating with the commercial users
to contribute funds in implementing the project and where they cannot afford to
contribute upfront, the Department is considering the option of borrowing the
money from the financial market to ensure that the project is implemented on
Policy and legislative review
Regarding policy and legislative review, tremendous
progress has been made in the last financial year, in that the National Water
Resource Strategy 2 (NWRS2) was finalised and published in June 2013.
The Department is currently mapping out the
implementation path of this important strategic tool for water management. The
National Water Policy Review has been gazetted. The review aims to address the
gaps on equity and redistribution of water resources in the country. The
process of amalgamating and aligning the various pieces of legislation such as
those governing mining and environmental management is at an advanced stage.
This process would improve water management and development in the country.
Institutional reform and realignment of water institutions
The implementation of the Institutional Reform and
Realignment of water institutions progressed well which resulted in the
realignment of the existing Catchment Management Agencies (CMAs) and certain
water boards. The Inkomati CMA was realigned into Inkomati- Usuthu CMA and
Breede-Overberg CMA was realigned into Breede- Gouritz CMA (currently at 98 per
cent). In order to enhance service delivery, the realignment of Bushbuckridge
and Botshelo water boards was completed, whilst the completion of the
Pelladrift water boards is at 95 per cent.
Progress with regard to the challenge of Acid Mine
Good progress has been made with regard to the
challenge of Acid Mine Drainage (AMD) in the Witwatersrand area. Since the
inception of the Inter Ministerial Committee on AMD, the immediate solution in
the Western Basin was completed and commissioned in June 2012, and the
uncontrolled decant of AMD in the Western Basin effectively stopped in August
2012. The construction of a pump station and a new water treatment plant in the
Central Basin has been completed.
Major projects undertaken or completed during the
A number of water infrastructure projects were constructed
with seven projects completed.
resource infrastructure projects completed during the year include the
Mooi-Mgeni River Augmentation (that is, Spring Grove Dam) in KwaZulu-Natal;
Phase 2 A of Olifants River Resource Development (that is, the De Hoop Dam) in
Limpopo and Komati Water Scheme Augmentation Project in Mpumalanga.
The water services infrastructure projects
completed through the regional bulk infrastructure grant during the year
include the Middledrift (Nkandla) water treatment works in KwaZulu-Natal; the
Bloemendal pipeline in Mpumalanga; the Hermanus bulk water scheme in Western
Cape and Acornhoek bulk water scheme in Mpumalanga.
Through the implementation of the various
water infrastructure projects, the Department created over 22 000 job
Dam safety rehabilitation programme
As the bulk of the countrys water resource
infrastructure was created in the early 1990s and is thus aging, the dam safety
rehabilitation programme was initiated to address dam safety related
Since the inception of the
programme in 2005, a total of 35 dams have been rehabilitated with a further 8
dams in construction phase.
period under review, priority was given to the rehabilitation of conveyance
systems with 23 sections of canals rehabilitated during the 2013/14 financial
Overview and assessment of financial and
non-financial performance of programme for the 2013/14 financial year of the
Department and its entities
Overview of composition of total available budget 2013/14 (Main Account)
For the 2013/14 financial year, the
Department of Water and Sanitation received a total budget of R10.375 billion,
payment for capital assets and transfers and subsidies formed the majority of
the Departments budget.
Water Infrastructure Management and Programme 4: Regional Implementation and
Support combined account for 84 per cent of the total budget.
The reason for the large budget allocation to
both these programmes is due to the infrastructure projects undertaken by the
Trading Entity (WTE)
The Water Trading Entity (WTE) projected to
collect total revenue of R7 billion in 2012/13.
As at the fourth quarter, it had collected R6.9 billion due to the
concerted effort by the entity to focus on revenue collection and
reconciliation of the top 100 customers.
There needs to be further improvement in the billing and the entitys
ability to collect its outstanding debts quicker.
Regarding infrastructure expenditure, it
projected to spend R2 billion on various projects.
At the end of the fourth quarter, it spent
The under spending of the
R100 million, which is lower than the projected expenditure is due to delays in
delivery of pipes as well as the industrial action at the De Hoop Dam.
Financial expenditure trends of the Department and its entities
The Department spent R10.246 billion of the
allocated budget of R10.4 billion which represents 98.8% of the total spending.
The remaining R129.312 million is attributable to the following:
Unfilled vacant posts across all programmes -
(R29.010 million of the adjusted compensation of employees);
Funds could not be spent on goods and
services (R44.176 million) in respect of the review of pricing strategy,
drinking water quality, waste water and water use efficiency due to unfinished
work on the projects;
An amount of R44 thousand could not be
disbursed on interest and rent on land due to change in accounting treatment of
Transfer payment of R29.988 million could not
be made to various institutions due to administrative and or noncompliance
issues (Ngaka Modiri Molema R1.459 million, Public Sector Education and
Training Authority - R2.483 million, Komati River Basin Authority R6.370
million, other transfer such as payment of leave gratuity R1.109 million and
Several water boards R18.567 million;
Delays in invoicing by Water Services
Authority for the work done on Regional Bulk Infrastructure grant resulted in
invoicing amounting to R9.693 million to be late for payment processing; and
A budget of R16.400 million earmarked for the
prevention and mitigation of disaster and risks could not be spent due to
complicated technical specifications and the nature of instrumentation
required. There is no impact on non-financial performance.
According to the Department of Water and
Sanitation, the under spending is a small percentage of the budget and thus has
an insignificant impact on programme delivery.
The table below reflects an overview of the Departments
financial performance for 2013/14:
The overall variance has reduced
substantially in the fourth quarter of 2013/14.
The main reason for the reduced variance is that most of the
infrastructure projects are completed, which results in the increase in
Programme spending trends aligned to service delivery of the Department and its
The Department has six programmes
(Administration; Water Sector Management, Water Infrastructure Management,
Regional Implementation and Support; Water Sector Regulation and International
Water Cooperation) that are positioned to achieve the Departments strategic
policy priorities within its constitutional mandate.
Programme 1: Administration
of the Administration Programme is to provide policy leadership, advice
and core support services, including finance, human resources, legal,
information and management services, communication, and corporate
The Department spent 97 per
cent of its Administration budget for the financial year.
3.4.2 Programme 2: Water Sector Management
of the Water Sector Management Programme is to ensure that the
countrys water resources are protected, used, developed, conserved, managed
and controlled in a sustainable manner for the benefit of all our people and
the environment by developing and implementing effective policies and
integrated planning strategies.
Operational expenditure in 2013/14 was R457.1 million, the majority of
which was spent on goods and services and compensation of employees.
Expenditure under this programme has increased by R42.6 million, or 10.3 per
cent, when compared with the previous financial year primarily due to
additional spending on these items, with the additional spending under goods
and services mainly on infrastructure and planning consultancy services, and
computer services. The main cost drivers in this programme are in the
Integrated Planning and Water Information Management sub programmes. The
increased expenditure on this programme is due to the increased expenditure in
respect of the development of the National Integrated Water Information Systems
3.4.3 Programme 3:
Water Infrastructure Management
of the Water Infrastructure
Management Programme is to ensure a reliable supply of water from bulk raw
water resource infrastructure to meet sustainable demand objectives for South
Africa within acceptable risk parameters. The Department is tasked with
soliciting and sourcing funding to implement, operate and maintain bulk raw
water resource infrastructure in an efficient and effective manner by
strategically managing risks and assets.
Almost 92.7, which translates to R2.3176 billion of the actual
expenditure of R2.558 billion was transferred
to the Water Trading Entity (WTE)
of which 86.2 per cent, which translated to R2.155 billion was allocated for
infrastructure development that the WTE undertakes on behalf of the Department.
A further 6.5 per cent, which translated to R162 million is for operational
costs of the WTE and the remaining 7.3 per cent, which translated to R182
million is to service the loans of water resources infrastructure in the Komati
River Basin for the Driekoppies and Maguga Dams situated on the borders of
South Africa (SA) and Swaziland. The transfers are based on claims made by the
WTE to the Department.
Programme 4: Regional Implementation and Support
of this Programme is to coordinate the effective implementation of the
Departments strategic goals and objectives at the regional level, including
the establishment of water resource management institutions; facilitate water
conservation and demand management and accelerate communities access to water
expenditure in 2013/14 was R4.9 billion, the majority of which was spent on
compensation of employees and goods and services. Expenditure under this
programme has increased by R501.5 million, or 11.5 per cent, when compared with
previous financial year primarily due to additional spending on payments for
capital assets. The main cost driver in this programme is the Regional Bulk
Infrastructure Grant (RBIG) under Payments of Capital Assets and the
conditional grant transfers to municipalities for the Water Services Operating
Grant and the new Municipal Water Infrastructure Grant for rural communities.
The main reason for the increase in expenditure in this current year is as a
result of the grant allocation increasing significantly from R2.5 billion in
the previous financial year to R3.2 billion in the 2013/14 financial year. This
Programme under spent by R91.7 million which is 1.5% of the programmes budget.
The under spending was predominantly in Current Payments of R90.973 million of
which Goods and Service under spent R65.5 million, and Compensation of
Employees (CoE) under spent R25.5 million. CoE under spending is due to
vacancies not being filled. Goods and Services under spending is mainly for
project contractors under the sub-programme Water Sector Support mainly due to
delays in invoicing and payment processing.
3.4.5 Programme 5:
Water Sector Regulation
of this Programme is to ensure the development, implementation,
monitoring and review of regulations across the water value chain in accordance
with the provisions of the National Water Act and the Water Services Act.
Operational expenditure in 2013/14 was
R92 million, the majority of which was spent on compensation of employees and
goods and services. Expenditure under this Programme has increased by R4.6
million, or 5.3 per cent, when compared with the previous financial year
primarily due to additional spending on these items, with the additional
spending under goods and services mainly on infrastructure and planning
consultancy services. The main cost drivers are for the appointment of
personnel and consultants to strengthen the regulatory function of the Department
for water use licences; monitoring and enforcement of unlawful water use,
improving the quality of water and waste water treatment works. Within this
programme, Compensation of Employees under spending is due to vacancies not
being filled including the Deputy Director-General (DDG) position. Under
spending on Goods and Services is mainly for computer services under the
sub-programme Water Supply Services and Sanitation Regulation where projects
and activities are underway, but related invoices will only be processed in
3.4.6 Programme 6:
International Water Cooperation
of this Programme is to strategically develop, promote and manage
international relations on water resources between countries through bilateral
and multilateral cooperation instruments as well as organisations, and is in
line with provisions of the National Water Act. The Department also actively
participates at both African multilateral and global multilateral organisations
and forums. Operational expenditure in 2013/14 was R26.2 million, the majority
of which was spent on compensation of employees and goods and services.
Expenditure under this programme has increased by R3.9 million, or 17.2 per
cent, when compared with the previous financial year primarily due to
additional spending on goods and services (mainly for operating leases) and
compensation of employees. The main cost driver in this programme is the Africa
Co-operation sub programme. The increased spending is due to filling of vacant
posts and the expansion of the organisational structure. The increased
expenditure as a result of the expansion of the organisational structure
resulted in this Programme spending 100 percent of its budget and therefore;
funds to the amount of R1.5 million was shifted from Programme 1 to meet the
over expenditure in this Programme.
Entities Financial and Non-financial Performance
Trans-Caledon Tunnel Authority (TCTA)
The Trans-Caledon Tunnel Authority (TCTA) was
established in 1986, by Notice 2631 in Government Gazette No. 10545, dated 12
December 1986, to finance and build the Delivery Tunnel North of the Lesotho
Highlands Water Project (LHWP). In 1994 a directive was received to fulfil the
financial obligations of the Government of South Africa, in terms of the
Treaty, on the water transfer component in Lesotho. On 24 March 2000, the
Notice of Establishment was again amended by Notice 277 in Government Gazette
No. 21017, to include the 1994 directive and to allow for the Minister, in
terms of Section 24 (d) of the notice, to issue directives to TCTA in terms of
Section 103(2) of the National Water Act (Act No. 36 of 1998).
It is categorised as a Major Public Entity
and listed in Schedule 2 of the Public Finance Management Act (Act 1of 1999)
(PFMA). As the TCTA was originally established as a Special Purpose Vehicle to
fulfil South Africas Treaty obligations in respect of the Lesotho Highlands
Water Project, it has undertaken further work, which varies considerably in
nature, on directive from the Minister. The Minister, as the executive
authority, has a responsibility to exercise an oversight role in terms of the
NWA and the PFMA. The TCTA reports to the Minister of Water and Environmental
Affairs on the performance of its functions within three months after the end
of its financial year. This report is accompanied by audited financial
The TCTA is involved in the following
Lesotho Highlands Water Project [LHWP]: The TCTA
is responsible for the debt management and funding of the water transfer
portion of the project as well as the operation and maintenance of the Delivery
Tunnel North. Income is sufficient to repay all water transfer debt over
approximately 20 years after completion of each sub-phase of the project.
The Berg Water Project [BWP] augments the
supply of water to the City of Cape Town by 18% and became operational in
December 2007. The project was funded on an off-budget basis and the repayment
of the long-term loan will be made from the revenue generated from the sale of
water to the City of Cape Town.
The Vaal River Eastern Subsystem Augmentation
Project [VRESAP] is one of South Africas largest water supply projects. It was
declared operational in June 2009 and now delivers water to Eskom power
stations and to Sasol in Mpumalanga. The project costs will be recovered from
revenue generated from the sale of water to Eskom and Sasol.
The Mooi-Mgeni Transfer Scheme Phase 2
[MMTS-2] entails the augmentation of the existing transfer scheme into the
Mgeni River catchment, which will increase the system yield by 60 million cubic
meters per year. The project calls for the construction of the Spring Grove Dam
augmentation of the transfer scheme from the Mooi into the Mgeni River
The Olifants River Water Resources
Development Project Phase 2 [ORWRDP-2] comprises a 40-km distribution pipeline
from De Hoop Dam, which feeds the De Hoop Water Treatment Works at Steel
Bridge, and a pump station near Steelpoort, where it will interconnect with the
Lebalelo Water User Association infrastructure and to the Mooihoek Treatment
Works. The water from the dam is for the mining industry along the eastern Limb
of the Bushveld Complex as well as for domestic consumers in the Sekhukhune
The Komati Water Scheme Augmentation Project
[KWSAP] augments the Komati Water Scheme through water transferred from the
Vaal River, for the sole benefit t of Eskom. The project entails the supply of
approximately 57 Mm3/a, of water to Eskoms Duvha and Matla power stations in
Mpumalanga. The primary purpose of the project was to ensure a secure second
feed to Duvha power station, as the original feed from Witbank Dam could no
longer be used due to the acidity of the dam water and to provide water for the
new Kusile power station.
The Mokolo Crocodile Water Augmentation
Project [MCWAP] comprises a pump station and a 43-km pipeline from Mokolo Dam,
parallel to and tying into existing infrastructure supplying Exxaros Grootegeluk
Mine, Eskoms Matimba power station, and Lephalale Local Municipality. It is
required to increase by 30Mm3/a, the capacity of the scheme to supply water to
the new Medupi power station, which is currently under construction.
The Acid Mine Drainage Project is aimed at
implementing the short-term intervention for the Western, Central and Eastern
Basins of the Witwatersrand Goldfields, as recommended to the Inter-Ministerial
Committee by a panel of experts. The short-term action plan was to stop decant in
the Western Basin and to protect the Environmental Critical Level (ECL) in the
Central and Eastern Basins. The project entails the implementation of
infrastructure comprising water treatment plants, pumps and pipelines to pump,
treat and release the treated water into the natural river system for each of
The Mooi-Mgeni Transfer Scheme: Phase 1
comprises the refurbishment of the existing transfer scheme from Mearns Weir.
The third Strategic Infrastructure Project
(SIP-3) is both a spatial and a catalytic programme. As a spatial programme, it
encompasses the manganese value chain that extends from the Northern Cape to
the Eastern Cape and the transport linkages of the latter into KwaZulu-Natal.
As a catalytic programme, it seeks to unlock economic opportunities in the
Eastern Cape through significant investments in water, energy and transport
The eighteenth Strategic Infrastructure
Programme (SIP-18) is a nationwide programme, and encompasses the entire water
supply infrastructure at national, regional, metro, district and local
municipality levels. It aims to address the existing backlog of water provision
to an estimated 1.4 million households, and basic sanitation to an estimated
2.1 million households. Through a decadal plan of new infrastructure, the
rehabilitation and upgrading of existing infrastructure, and a renewed emphasis
on the operations and maintenance of the latter, SIP-18 will guide water sector
investments towards achieving overall water security, as well as equitable
access to water and sanitation services for all South Africans. Water
conservation and demand management options will complement the planning
framework of new or upgraded infrastructure
Each of these projects is accounted for
separately, with no project having cross default implications to another
project. The TCTAs projected cash flow suggests that the business is viable
and can continue as a going concern. This is supported by an explicit
Government guarantee for the LHWP and implied guarantees on the other projects.
In the 2013/14 financial year the TCTA was
audited by Ernst & Young and an unqualified audit opinion was expressed as
the TCTA complied with the PFMA and International Financial Reporting
Standards. The transactions of the TCTA were in all material respects in
accordance with the mandatory functions of the TCTA as determined by law or
Research Commission (WRC)
Water Research Commission (WRC) is a national public entity listed in terms of
the Public Finance Management Act, 1999 (Act No.1 of 1999) (PFMA), appointed by
the Minister of the Department and reports directly to the Minister. The WRC
plays an important role regarding water research by:
Establishing the needs and priorities for
Stimulating and funding water research
according to priority;
Promoting effective transfer of information
and technology; and
Enhancing the knowledge and capacity building
in the water sector.
WRC mainly derived its income from water research levies amounting to R177 million,
but also obtained leverage income of R19.3 million. It managed 295 active
research projects, initiated 87 new projects, managed to finalise 87 projects
and published 79 research reports and products. A total of 484 students were
supported by WRC-funded projects, of whom 46% were female and 401 or 83% of the
total number of students were from previously disadvantaged groups.
WRC initiated and supported a number of national capacity building initiatives,
including support to national and local government as well as the development
of new training material for different levels of learners and for academic
institutions. Additionally, it extended its support of Mini-SASS, the
simplified version of the Stream Assessment Scoring System. During 2013/14 the
Mini-SASS Web-based data management was finalised and ready for use. The data
portal was successfully tested through the participation of a number of
schools. Communities will now be able to upload their research and/or
monitoring data in this portal. The WRC also published the highly popular
Water@Work, a Career Guide for high school learners, which is intended as an
overview of career paths available in the world of water.
the 2013/14 financial year a qualified audit opinion was expressed by the
Report of the Office of the Auditor-General
on the Main Account and Water Trading Entity
The Department of
Water and Sanitation received a
on the Main Account with the following findings:
The Department did
not have adequate systems in place to maintain records of Regional Bulk
Infrastructure Projects (RBIG) commitments where the procurement of goods and
services have been approved and/or contracted, but where no delivery has taken
place at year end, which resulted in RBIG commitments being misstated by R576
million for the restatement of the corresponding figure for RBIG commitments.
The restatement was made in order to rectify a prior year misstatement. The
Auditor-General (AG) was unable to confirm the restatement by alternative
means. In addition, the AG was unable to obtain sufficient appropriate audit
evidence for the corresponding amounts disclosed as RBIG commitments in note 22
to the financial statements and could not confirm the disclosure by alternative
means. Consequently the AG was unable to determine whether any further
adjustments to prior year RBIG commitments stated at R5.9 billion in the
financial statements were necessary.
The Department did
not have adequate systems in place to maintain records of RBIG commitments
where the procurement of goods and services have been approved and/or
contracted, but where no delivery has taken place at year end, which resulted
in RBIG commitments being misstated by R630 million. In addition, the AG was
unable to obtain sufficient appropriate audit evidence for the amounts
disclosed as RBIG commitments in note 22 to the financial statements and could
not confirm the disclosure by alternative means. Consequently the AG was unable
to determine whether any further adjustments to RBIG commitments stated at R5.4
billion in the financial statements were necessary.
The system of
controls to maintain records of goods and services received but not yet paid
for at the end of the financial year, relating to RBIG, was inadequate and
there were no satisfactory audit procedures that the AG could perform to obtain
reasonable assurance that all outstanding invoices for RBIG have been included
in accruals. Consequently, the AG was unable to determine whether any further
adjustments to accruals stated at R1 billion in note 23 to the financial
statements was necessary.
The Department did
not have adequate systems in place to maintain records of additions to the
buildings and other fixed structures for the current and prior year due to the
status of the accounting records, which resulted in additions being misstated
by R204 million. In addition, the AG was unable to obtain sufficient
appropriate audit evidence due to lack of supporting documents for the amounts disclosed
as additions for current year and prior year in note 33 to the financial
statements and could not confirm the disclosure by alternative means.
Consequently the AG was unable to determine whether any further adjustments to
additions stated at R1.5 billion (2013: R358.2 million) in the financial
statements were necessary.
The Department also received a qualified audit opinion in 2012/13, but
is continuously showing substantial improvement with its financial management
Water Trading Entity
The Department of
Water and Sanitation received a
on the Water Trading Entity (WTE) with the following
The entity did not
recognise all revenue relating to water licenses issued, in accordance with
GRAP 9 Revenue from exchange transactions. Water use licenses were approved and
issued to users in the current and prior period. The approved licenses were not
uploaded on the Water Users Allocation and Registration Management System
(WARMS), which resulted in the non-billing of lawful water users. The AG was
unable to obtain sufficient appropriate audit evidence that all revenue from
the sale of water services had been recognised and could not confirm the
revenue from the sale of water services through alternative means. Consequently,
the AG was unable to determine whether any adjustments to the sale of water
services and related trade receivable balance stated at R7 308 824 000 (2013:
R6 462 074 000) and R2 420 596 000 (2013: R2 055 117 000), as disclosed in note
3 and 12 to the financial statements was necessary.
was a resultant impact on the surplus for the period and accumulated surplus.
The AG was also not able to determine the full extent of the understatement of
penalties for late registration of water use, as the Water Trading Entity did
not maintain adequate records to indicate whether the users whom were granted
licenses in the current and prior year period were unlawfully using water
before their license applications were approved.
Portfolio Committee findings and specific recommendations regarding the
Department, Water Research Commission and Trans Caledon Tunnel Authority Annual
This section summarises the Portfolio
Committees observations and specific recommendations flowing from the engagement
with the Department, Water Research Commission and Trans Caledon Tunnel
Authority as detailed in the sections above.
High number of acting positions and potential workforce vacuum as a result of
were raised regarding the high number of acting senior positions, including
that of the Director General. Furthermore, the Department has consistently
noted bringing retired engineers and specialists in the technical fields out of
retirement to fill the capacity constraints within the Department in respect of
those fields. Concerns were raised regarding the potential human resource
vacuum left by ageing engineers and technical specialists and the efforts taken
to mitigate this challenge.
Department responded that there was a concerted effort to fill the acting
positions within the Department.
addition to this initiative, the Department is also training and mentoring
young scientists and engineers to fill posts.
The Portfolio Committee recommends that the
Department provide quarterly progress reports, with systematic targets, on the
way in which it will address these challenges.
concerns were raised regarding the extensive use of consultants within the
Department to deliver services, the payment of consultant for the provision of
Information Technology Services for the Department amounting to R419 m for the
use of 25 consultants over a period of 60 months was cited as an example. The
Committee felt that there was an urgent need to build capacity within the
Department to reduce spending on consultants.
Committee recommends that the Department provide quarterly progress reports,
with systematic targets on the way in which it will address the challenge.
6.3 Foreign staff employed within Department
Portfolio Committee noted that the annual report reflected 20 foreign nationals
employed by the Department. This was not only restricted to the technical
professions and extended to administrative workers as well. Concerns were
raised regarding the number of unemployed South Africans in the country and
whether or not the Department was not able to source skills from within the
existing pool of unemployed South Africans.
functioning of internal audit committee
Portfolio Committee raised concerns regarding the functioning of the internal
audit committee, the extent to which issue of fruitless expenditure was picked
up by the internal audit committee before the audit of the Auditor General.
This raised questions about the extent of internal control within the
Department and the capacity of senior management in respect of implementing the
recommendations of the internal audit committee.
Committee recommends that the Department provides feedback of its plans, as
well as a progress report on a quarterly basis so that these challenges do not
arise in the future.
With specific reference to the under spent funds of
R100 million by the WTE, the Portfolio Committee noted with concern that
argument made by the Department that this under spending is a small percentage
of the budget and thus has an insignificant impact on programme delivery.
Portfolio Committee recommends that the Department provide a detailed report on
the reasons for under spending in the WTE, as well as its plans to ensure that
under spending does not happen in the future.
Concerns were raised regarding the disciplinary
cases within the Department particularly with regards to fruitless and
irregular expenditure. The Department noted that it had embarked on a programme
to finalise outstanding disciplinary cases and that this was only impeded by
the death of an employee or when the employee leaves the public service. It was
further noted by the Department that when employees go to another Department,
they are still held liable and disciplinary action is still taken.
Portfolio Committee recommends that the Department provide a quarterly report
on previous disciplinary cases, the outcome of these, as well as a progress
report on when outstanding disciplinary cases will be finalised.
Portfolio Committee raised concerns regarding the backlog in the issuing of
water licences which is resulting in loss of revenue. It was reported that
there are 104 mines that are operating without water licenses and the extent to
which this is going to be addressed by the Department. The Department responded
that they moving a new Information Technology system and that these issues are
in the process of being addressed. In respect of loss of revenue is respect of
water, the Department indicated that it was not the domestic, industrial or
agricultural sectors that were the culprits that are not paying. It was the
municipalities whose slow payment had an impact on the revenue of the water
Portfolio Committee recommends that the Department provide a quarterly progress
report and plan with specific timeframes on when the licensing backlogs will be
6.8 Under spending
within the Regional Bulk Infrastructure Grants (RBIG)
Portfolio Committee raised concerns regarding the disbursement of Regional Bulk
Infrastructure Grants, Members recounted instances where funds were paid to
service providers without following the correct tender procedure, and monies
paid without the delivery of the service. The Portfolio Committee queried the
extent to which this is being monitored and managed by the Department as it
seems to be an ongoing issue which has been consistent in the annual reports of
the Department over the previous financial years.
Committee recommends that the Department provide a quarterly progress report
with detailed plans and timeframes on the way in which it will address the
challenges within the RBIG.
6.9 Progress made in respect of 2% disability
The Portfolio Committee queried the extent to which
the Department had met the 2% employment target for disabled persons. The
Department responded that they had not met the target and that the information
was not clearly indicated in the annual report. The Department further noted
that this target was not met by any government department within the public
service though the Department was striving to attain this target.
The Portfolio Committee queried the high number of
vacancies within the Department in addition the moratorium which was placed on
the appointment of new staff. The Department indicated that the moratorium was
as a result of the sanitation component into the new Department, however this
moratorium was not cast in stone and new staff could be appointed once approval
from the Minister was attained.
Committee recommends that the Department provide a quarterly progress report
with detailed plans and timeframes on the way in which it will address the
challenges related to vacancies.
Conclusions and Recommendations
In further aligning and strengthening the
Department and the Entities plans, programmes and goals in line with financial
allocations, the Portfolio Committee requested that the Department and the
Entities give further consideration to the following:
Financial and performance reporting and
compliance with legislation
The Portfolio Committee recommends that the
Department strengthen the following controls to create an environment that
supports reliable financial and performance reporting and compliance with
Increase stability within the portfolio by
filling key vacant positions within the Department;
Increase competence of employees by
encouraging continuous learning and training;
Parliament to oversee the way in which senior
officials are held accountable for non-compliance with laws and regulations;
Implement adequate systems/processes to
support accurate and reliable financial and performance information reporting;
Implement adequate systems/processes to focus
on overall compliance and include consequence management, where necessary; and
With regard to financial and performance
management, enhance the checks and balances during the year to ensure that
all reconciliations are done on a daily/monthly basis.
Department, in its Human Resource component faced challenges in terms of
diversity management with low targets for women and people with disabilities
Therefore the Portfolio
Committee requests plans and a progress report with regard to the above.
spending and irregular
Department needs to seriously engage with curbing irregular expenditure,
financial reconciliations and under spending. The Portfolio Committee
recommends that stringent action should be taken against those Department and
Entities who are found to have massively under spent, given the disjuncture
between the needs of society and the allocated funds not being effectively spent.
The Portfolio Committee requests, as a matter of urgency, short, medium and
long term interventions in this regard.
The Portfolio Committee awaits a report in this regard.
regard to water infrastructure management, the Portfolio Committee recommends that
the Department furnishes the Portfolio Committee with a progress report
indicating new time frames for the delayed projects, as well as furnish a
progress report on projects delayed by resettlement and land acquisition
implementation and support
regard to regional implementation and support, the Portfolio Committee resolved
that the Department develop a plan to address OSD employment challenges and
this plan should have timeframes; as well as provide a progress report on
delays in completion of some RBIG projects.
regard to water sector regulation, the Portfolio Committee requests a progress
report with respect to delays experienced in completing the compulsory
licensing processes in targeted water management areas.
regard to auditing of the Department and entities, there is an inconsistency in
that the Office of the Auditor-General does not, in some instances audit the
work of a particular entity.
currently the case with TCTA which is being audited by Ernst and Young.
The Portfolio Committee requests from the
Department and the Office of the Auditor-General, a report on the way in which
auditing of all Departments and Entities, will over time, be audited only by
the Office of the Auditor-General.
outcomes of areas raised by the Office of the Auditor-General
of the areas raised by the Auditor General on the audit outcomes of the
Department, the Department is expected to provide a quarterly progress report.
The Portfolio Committee on Water and
Sanitation recommends the adoption of this
Budgetary Review and Recommendation Report (BRRR) for
the Department of Water and Sanitation
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