ATC200717: Report of the Portfolio Committee on Human Settlements, Water and Sanitation on The Impact of the Supplementary Adjusted Budget and Revised 2020/21 Annual Performance Plan on the Department of Water and Sanitation (Vote 41), Dated 17 July 2020
REPORT OF THE PORTFOLIO COMMITTEE ON HUMAN SETTLEMENTS, WATER AND SANITATION ON THE IMPACT OF THE SUPPLEMENTARY ADJUSTED BUDGET AND REVISED 2020/21 ANNUAL PERFORMANCE PLAN ON THE DEPARTMENT OF WATER AND SANITATION (VOTE 41), DATED 17 JULY 2020
On 8 July 2020, the Portfolio Committee on Human Settlements, Water and Sanitation and the Select Committee on Cooperative Governance and Traditional Affairs, Human Settlements, Water and Sanitation engaged the presentations on the supplementary budget and revised targets of the Department of Water and Sanitation, Budget Vote 41. On 15 July 2020, the Portfolio Committee met and engaged on the adjusted budget with related reduced targets over the medium-term as contained in the revised 2020/21 Annual Performance Plan and Strategic Plan; and reports as follows:
On 24 June 2020, Minister of Finance, Mr Tito Mboweni tabled the 2020 supplementary budget and delivered the supplementary Budget Speech. The Public Finance Management Act, 1999 read together with the Money Bills Amendment Procedure and Related Matters Act, 2009 empowers the Minister of Finance to table an adjustments budget, when necessary. The tabling of the 2020 supplementary Budget was necessitated by the impact of the COVID-19 pandemic and the economic downturn in the country.
Coronavirus disease 2019 (COVID-19) is defined as an illness caused by a novel coronavirus now called severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). It was initially reported to the World Health Organisation (WHO) on December 31, 2019. On January 30, 2020, the WHO declared the COVID-19 outbreak a global health emergency. On March 11, 2020, the WHO declared COVID-19 a global pandemic, its first such designation since declaring H1N1 influenza a pandemic in 2009.
The Covid-19 pandemic required global action by all nation states to draft and implement a variety of mitigation strategies to reduce exposure to and impact of Covid-19. The responses by individual countries to the pandemic was critical in influencing the trajectory of national epidemics. This has included stringent lockdowns, travel restrictions and the closure of schools and non-essential businesses.
President C Ramaphosa, as the National Executive of South Africa announced on 15 March 2020 that urgent and drastic measures were required to mitigate the spread of the virus and address the emergency of increasing global COVID-19 cases. Given the severity of the matter, the President announced that this necessitated a declaration of a state of disaster. The Minister of Cooperative Governance and Traditional Affairs, Minister N Dlamini-Zuma declared a national state of disaster in terms of section 27 (1) of the Disaster Management Act and gazetted the declaration in Government Gazette Number 43096 of 15 March 2020.
To minimise the economic impact of COVID-19, South Africa, on 21 April 2020, introduced various fiscal and monetary stabilisation measures, such as direct cash transfers to households and businesses through a R500 billion fiscal support package. This included spending on priorities in the containment of the Covid-19 virus and to offset the economic impact of the pandemic.
Following the announcement of the country’s lockdown by President Ramaphosa, the Department of Water and Sanitation, began the task of assisting with water mitigation strategies to vulnerable communities. This culminated in the setting up of the Covid-19 National Command Centre for Water and Sanitation on 23 March 2020. The centre, based at Rand Water in Johannesburg, has ensured that areas with no proper water infrastructure receive water storage tanks and water tankers (water trucks).
The Minister of Finance tabled the 2020 Supplementary Budget on 24 June 2020 along with the Division of Revenue Amendment Bill [B09 – 2020] and the 2020 Adjustments Appropriation Bill [B10 – 2020]. The Supplementary Budget sets out the initial economic and fiscal response from Government to the Covid-19 pandemic. It fast-tracks processes to provide resources to frontline services, provincial and local government, as well as businesses and households, with a specific focus on the most vulnerable South Africans. Furthermore, the Supplementary Budget sets out a roadmap to stabilise debt, improve spending patterns, and creates a foundation for economic recovery.
2. OVERVIEW OF THE IMPACT OF THE SUPPLEMENTARY BUDGET AND REVISED TARGETS ON THE DEPARTMENT OF WATER AND SANITATION
In line with National Treasury guidelines, departments were mandated to assess and prioritise their allocated budgets to contribute to the R500 billion fiscal support package, as well as addressing challenges in dealing with COVID-19. The Department of Water and Sanitation submitted to National Treasury a proposal on where appropriated monies could be shifted or suspended. Having reviewed the proposal, National Treasury thereafter submitted feedback and proposed the following:
The Department received a main appropriation of R17.216 billion in February 2020/21. In the Supplementary Budget tabled in June 2020, a total of R1.755 billion was suspended, while a total of R1.498 billion in additional funds was re-allocated to the Department for its Covid-19 response. The balance means that the Department’s main allocation decreased by R257 million (from R17.216 billion in February 2020 to R16.959 billion in June 2020). An amount of R257 million was suspended from departmental allocations for the support of the COVID-19 macro-economic stimulus response.
The reprioritised amount of R1.498 billion within the vote is to support the COVID-19 water and sanitation interventions projects, Phase 1 and 2. Of this amount, the current water tankering from funds from the 2019/20 departmental allocations amount to R306.534 million; and for the 2020/21 financial year, an amount of R200 million will be utilised.
2.1 Budget Adjustments and revised targets per programme
The budget adjustments per programme required revised targets for the current financial year and over the medium-term. There were no revisions in the Strategic Plan but revisions contained in the revised Annual Performance Plans, tabled in Parliament on 14 March 2020 are reflected in the sections below.
The budget adjustments per programme shows that the allocations in Programme 1: Administration, for the financial year under review was reduced from R1.976 billion to R1.933 billion. There is no change to outcomes, outputs, performance indicators and targets in the annual performance plan tabled on 12 March 2020. The majority of the target set for Programme 1 relate to compliance requirements – there are a limited number of new projects in Programme 1 and these will not require additional capacity in the current financial year. The current capacity will be sufficient to deliver on the targets that have been set; and the reduction on the Compensation of Employees will, therefore, not have a negative impact on the Programme’s performance.
Programme 3: Water Infrastructure Development was reduced from R13.795 billion to R13.742 billion. The changes to targets in this programme for the 2020/21 financial year relate to – increase in the number of regional bulk infrastructure projects phases under construction from 103 to 110; decrease in the number of regional bulk infrastructure projects to be completed from 28 to 27; and a reduction of small Water Services Infrastructure Grants Projects under construction from 349 to 326. Programme 4: Water Sector Regulation was reduced from R417 million to R388 million. There are no changes to outcomes, outputs, performance indicators and targets in the annual performance plan tabled on 12 March 2020.
2.2 Key revised allocations by economic classification
An explanation of key revised allocations by economic classification shows that the suspension of funds and virements occurred in Compensation of Employees, Goods and Services, Transfers and Subsidies and Payments for Capital Assets. The R257 million current payments comprise of R50 million under-expenditure resulting from vacant posts across all four
programmes; R214 million from Goods and Services; as well as an increase in payments for capital assets of R7 million.
3. IMPLICATIONS OF SUSPENDED FUNDS ON PROGRAMMES OR PROJECTS
As noted above, there are no implications in respect of targets or outcomes in Programme 1 and 4. The major shift of reductions is reflected within Programme 3: Water Infrastructure Development, mainly with the use of grants for regional bulk infrastructure grant (RBIG) and water services infrastructure grant (WSIG).
3.1 Reprioritised funds from the Regional Bulk Infrastructure and Water Services Infrastructure Grant
An amount of R401 121 million of the Regional Bulk Infrastructure Grant (Direct) will be used for COVID-19 emergency water and sanitation interventions. Funds were reprioritised within municipalities for a number of projects under implementation (that is, that will accelerate response to COVID-19. R200 million is allocated to Rand Water to complete COVID-19 Phase 1 projects. R139 548 million to accelerate COVID projects and R62 573 for Phase 3 COVID-19 projects. The indirect grant of the Regional Bulk Infrastructure Grant for COVID-19 emergency water and sanitation intervention amount to R408 808 million. R100 million has been allocated for Phase 2 COVID-19 projects and R308.808 million allocated for sustainable water supply for Phase 2.
On the direct component of the Water Services Infrastructure for COVID-19 emergency water and sanitation interventions, an amount of R689.033 million will be reprioritized. Municipalities will reprioritize funds and submit revised business plans on Phase 2 COVID-19 activities.
3.2 Number of impacted projects in provinces
The following number of projects will be impacted by reprioritised funds from grants toward water and sanitation interventions in the province through the direct and indirect grant of the Regional Bulk Infrastructure Grant are: Direct grants in the Eastern Cape – 5; Free State – 1; Kwazulu-Natal – 2; Limpopo – 1; Mpumalanga – 3; Northern Cape – 1 and North West – 2 and Indirect grants in the Eastern Cape – 8; Free State – 11 and Gauteng – 4. There will also be funds reprioritised from the Water Services Infrastructure Grant (direct component) from all provinces. All affected district municipalities will reprioritise funds and submit revised business plans on COVID-19 Phase 2 activities.
4. OBSERVATIONS AND RECOMMENDATIONS
The Portfolio Committee on Human Settlements, Water and Sanitation, in interrogating the presentation by the Department of Water and Sanitation makes the following recommendations to the Minister of Human Settlements, Water and Sanitation:
4.1 Sustainability of tankering of water as a short-term measure vs long-term implementation of source development
The Portfolio Committee welcomed the assurance by the Department that part of the reallocated funds of R1.498 billion will also be used to implement source development or bulk linkage projects to replace the need for water tankering; and move toward the sustainable supply of water post the tankering. The R200 million assigned for water tankering for the 2020/21 financial year as an intervention was duly noted and acknowledged.
The Portfolio Committee was of the view that water tankering, in the long-term is not only unsustainable; but could be open to manipulation and corrupt activities. The committee further noted that interventions devised for long-term development of bulk linkage projects should be focused on communities (villages) in provinces that have no access to water and sanitation service provision. The Portfolio Committee also noted that the Department did not provide detailed information on the number of disbursed tanks and associated budgets, not only to communities, but also to schools without water. The school intervention programme was in collaboration with the Department of Basic Education.
The Portfolio Committee recommended that the Department should provide the Committee with the proposed funding plan of sustainable bulk linkage projects that would completely eliminate the need for water tankering in the affected areas. The proposed funding plan should, amongst others, include areas that are currently served with water tankers and timeframes for completion of these projects by the 3rd quarter 2020/21. The Portfolio Committee further recommended that a progress report be provided on disbursement of tanks with associated budgets for communities and schools.
4.2 Reprioritisation of direct and indirect grants from Regional Bulk Infrastructure Grant and Water Services Infrastructure Grant
The Portfolio Committee called for a speedy reprioritisation process by municipalities, with the necessary oversight assistance from the Department of Water and Sanitation, for the approval of revised business plans and associated budgets of the affected projects funded through Regional Bulk Infrastructure Grants (RBIG) and Water Services Infrastructure Grants (WSIG) for COVID-19 interventions.
The Portfolio Committee also stressed the importance of cooperation between the Department of Cooperative Governance and Traditional Affairs on the effective use of grants, such as the Municipal Infrastructure Grant, RBIG and WSIG for sustainable water and sanitation service provision. The Portfolio Committee resolved that the Department of Water and Sanitation provide the revised business plans for water services authorities for COVID-19 related short-term interventions before the end of 2nd Quarter 2020/21. The Portfolio Committee further recommends that the Department of Water and Sanitation utilise the District Development Model to further strengthen the planning and completion of projects with the use of the Municipal Infrastructure Grant, Water Services Infrastructure Grant and Regional Bulk Infrastructure Grant.
4.3 Transfer of water assets to municipalities post-Covid
The Portfolio Committee noted Rand Water will, as per the legislative framework, be transferring assets, such as built infrastructure in the form of equipped boreholes to municipalities. This will be undertaken post-COVID-19. The Portfolio Committee resolved that the Department and Rand Water should provide a COVID-19 assets register that clearly shows the number of assets to be transferred to provinces and municipalities by end of the 4th Quarter 2020/21.
4.4 Creation of job opportunities
The Portfolio Committee noted that there were no clearly identified targets on creation of job opportunities over the medium-term plan of the Department of Water and Sanitation. The Portfolio Committee resolved that the Department should provide details of measurable plans and timeframes to address this; and to incorporate it into the Strategic Plan.
4.5 Acting positions in the Department
The Portfolio Committee note with a concern the high level of acting in critical positions. The Portfolio Committee recommended that positions must be filled on permanent basis and ensure that acting positions are reduced. This must be presented to the Committee by the First Quarter of 2020/21.
The Portfolio Committee, will further engage the Department of Water and Sanitation, to assess the overall impact of the adjustments on set targets reflected in the revised Annual Performance Plan.
Report to be considered.
The RBIG supplements the financing of the social component of regional bulk water and sanitation infrastructure. It targets projects that cut across several municipalities or large bulk projects within one municipality. The grant funds the bulk infrastructure needed to provide reticulated water and sanitation services to individual households. It may also be used to appoint service providers to carry out feasibility studies, related planning or management studies for infrastructure projects. It has both direct and indirect components. In areas where municipalities have the capacity to implement projects themselves, funds are transferred through a direct grant. In other areas, the Department of Water and Sanitation implements projects on behalf of municipalities through an indirect grant. A parallel programme, funded by the Department of Water and Sanitation, also funds water boards for the construction of bulk infrastructure. Sourced from Division of Revenue Act, 2017.
This grant aims to accelerate the delivery of clean water and sanitation facilities to communities that do not have access to basic water services. The grant, administered by the Department of Water and Sanitation, provides funding for various projects, including the construction of new infrastructure and the refurbishment and extension of existing water schemes. It has both direct and indirect components. In areas where municipalities have the capacity to implement projects themselves, funds are transferred through a direct grant. In other areas, the Department of Water and Sanitation implements projects on behalf of municipalities through an indirect grant. Sourced from Division of Revenue Act, 2017.
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