ATC100528: Report Oversight Visit to the Limpopo Province

Standing Committee on Appropriations

Report of the Standing Committee on Appropriations on the oversight visit to the Limpopo Province, dated 28 May 2010


The Standing Committee on Appropriations, having undertaken an oversight visit to the Limpopo Province on the 14-18 March 2010, reports as follows:


1. Introduction


The oversight visit took place from 14 to 18 March 2010. Meetings were held at the various dams and tours to inspect the projects were also undertaken. The delegation was as follows: Hon E M Sogoni (Chairperson of the Committee); Hon R J Mashigo; Hon B T Ngcobo; Hon D W Mavunda; Hon J P Gelderblom; Hon M F Tlake; Hon M Swart; Hon P J Rabie; and Hon L Ramatlakane.  The delegation was accompanied by the following Parliamentary officials: Ms TP Xaso (Committee Secretary), Mr S Nyenyiso (Committee Researcher); Mr P Dlomo (Committee Researcher); and Ms V Makubalo (Committee Assistant).


However, the Committee met with departmental officials on various sites during the oversight. The officials were met in order provide clarity and further explanations with regard to the issues identified by the Committee. The departmental officials were as follows: Mr Felix Smith (Chief Director: Infrastructure); Mr Phillip Botha (Chief Director: Finance); Mr Johan Van Niekerk (Contractors’ Representative: De Hoop Dam); Mr Paul Kruger (Project Manager: De Hoop Dam); Ms Moirette Van Rooyen-Venter (Public Liaison Officer: De Hoop Dam) ; Mr Wentzel Van Rensburg (Site Manager: Nandoni Project); Mr Francois Havenga (Site agent: Inyaka Project); Mr Fanyana Mntambo (Regional Head: Mpumalanga); and Mr Justice Nekhompe (Regional office: Mpumalanga).


2. Terms of reference


The visit was a result of the Committee’s ongoing interaction with various departments to monitor monthly spending in terms of section 32 of the Public Finance Management Act (PFMA). The Committee had, over the previous year, observed a trend wherein departments over or under budget subsequently leading to requests for rollovers or virements (shifting funds). This trend had raised concerns on whether departments were planning adequately for projects and whether their budgets were aligned to their strategic plans.  One of the departments wherein this trend was persistent was the Department of Water and Environmental Affairs (the Department).


The Department had indicated that, based on a continuous strategic assessments in consultation with water services authorities, provinces such as Gauteng, Western Cape and Northern Cape as well as some municipalities in Free State were well on their way to wiping out all historic backlogs to water access with the housing backlog remaining the only outstanding challenge (with associated basic services). However, the majority of district and some local municipalities in the Eastern Cape, KwaZulu-Natal and Limpopo would face an uphill battle to meet the targets of wiping out backlogs. Notwithstanding a special bulk infrastructure program which was initiated and was being administered by the Department of Water and Affairs to support construction of regional bulk infrastructure, the estimated total funding required for the bulk infrastructure was over R60 billion.


While the Department of Water Affairs acknowledged existing programmes and their successes, there was a need for cooperation between itself and departments such as Department of Cooperative Governance and Traditional affairs, Environment and Agriculture. This partnership would enable the government to meet two primary objectives namely, delivering on the Millennium Development Goals (MDG’s); and ensuring that all South African had access to safe drinking water and sanitation services. 


In order to overcome the challenge of variable water river flow, many large storage dams had been built. Whilst some of the major projects were underway, the lack of access to clean water was still prevalent with some communities with families, schools and clinics that are without water connections. The Department of Water Affairs had made an attempt to alleviate the problem of water shortage through the construction of a number of dams. The additional budget for infrastructure project was expected to increase from R494 million in 2010/11 to R1.1 billion in 2012/13. In the previous financial year, the Department of Water Affairs was allocated an additional funding of R1 billion to install and refurbish 71 bulk water and sanitation schemes, while in 2010/11 local government had received an amount of R2.5 billion for 2012/13 to enhance access to basic services including water and sanitation.


The Department of Water Affairs was projecting an under-spending of R372.8 million (5 per cent) at the end of the 2009/10 financial year. Of this projected under-spending, R297 million was for infrastructure projects, namely, Nandoni Water Treatment Works and Distribution Network, Inyaka Water Treatment Works (Phase 2) and Distribution Line, and Hluhluwe Regional Water Scheme (Phase 1, 2 and 3). The Department was expected to request for a rollover of these funds.


It was against this background that the Committee undertook an oversight visit to the De Hoop Dam (Steelpoort, Limpopo), Inyaka Dam (Bushbuckridge, Mpumalanga) and the Nandoni Dam (Thohoyandou, Limpopo) from 14 to 18 March 2010. The reason for the visit was to measure the extent to which expenditure results in the infrastructure delays.  


3. De Hoop Dam


De Hoop Dam is situated in Steekpoort (Limpopo) officials who met with the Committee were as follows: Mr Paul Kruger (project planner), Ms Moirette Van Rooyen (Public Liaison Officer), and Mr Johan Van Niekerk (contractor’s representative).


On the 9 June 2004, Cabinet resolved that the former Department of Water Affairs and Forestry should proceed with the implementation of the Oliphants River Water Resource Development Project Phase 2, subject to environmental authorisation. The phase 2 of this project included the construction of De Hoop Dam. In October 2006, environmental authorisation for the De Hoop Dam was obtained and the initial financing was budgeted for under the National Water Resource Infrastructure Agency in the 2006 budget of the Department. The objectives of the De Hoop Dam were to supply water for both domestic and commercial use in Limpopo.


In 2006, the former Department of Water Affairs and Forestry expected to spend approximately R4 billion on De Hoop Dam projects and water schemes. The construction of the dam started in 2007 using National Treasury funds whilst the finance agreements were being put in place. In 2007, the Department rolled over R260 million from 2006 for the construction of De Hoop Dam. The same amount was, again, rolled over from 2007/08 to 2008/09 due to delays in obtaining the environmental impact assessment for the De Hoop Dam project. The Department further rolled over funds amounting to R227 million from the 2008/09 to 2009/10 for the construction of the De Hoop Dam project. Departmental infrastructure spending was expected to increase from R1.7 billion in 2009/10 to R2.1 billion in 2012/13. Most of this expenditure would be allocated to the second phase of the Oliphants River water resource development project, which included the construction of De Hoop Dam.


The Minister of Water Affairs and Forestry indicated, in 2009, that Limpopo province was one of the most poorly developed provinces in respect of water infrastructure, which was characterised by insufficient bulk infrastructure. This had an impact on the eradication of water service backlog which was at 55 000 households in 2009. While the increased spending is positive for the completion of the projects, the slow budget implementation in this area, which might result to escalating costs, remained a concern. Notwithstanding the poor spending pattern, the department had previously assured the public that the project was on schedule to deliver the first water by April 2011. Theprovince of Limpopo was selected for the roll out of government’s Rural Development Strategy. This development included agriculture which requires water supply. Any delays in the construction of water infrastructure, therefore, impacted negatively in rural development. 


When engaging with the departmental officials, the Committee was informed that 43 per cent of the project was complete. This percentage comprised primarily of excavation, grouting and concreting. Most of the raw materials used were manufactured locally, with only 15 per cent procured from other countries. The labour force used was sourced from the surrounding locality. Steps were taken to accelerate the project.


The Committee was informed that the De Hoop project was allocated R50 million in the 2007/8 financial year; R250 million in the 2008/9 financial year and R600 million in the 2009/10 financial year. The decision to proceed with the project was taken in October of 2006 with the initial completion date set for March 2013. Work commenced on 4 October 2007 owing to environmental conditions that had to be met prior to commencement. The delay resulted in funds not being used thereby necessitating the request of a rollover of funds.


Almost 50 per cent of the water will service communities -with the other 50 per cent servicing platinum mines. It was noted due to the recession and the subsequent decline in platinum sales, mines were less eager to conclude agreements with the Department. The Committee was informed that at the initial stages prior to the commencement of the project, the surrounding mines were invited to invest in the project. While the mines had agreed to this no action was forthcoming from their side. While the Committee is of the view that the service level agreement between the Department and the mines is important therefore this process should be expedited. It is important to note that the non involvement of Mines in this regard will negatively affect the Departmental budgeting process. The project is therefore funded fully by the government. Building costs have escalated by about 25% yearly since the commencement of the project. The construction costs of the social component of the project were therefore expected to increase significantly which may necessitate a request by the Department for more funding.  


Although no specific price was given, it was noted that the water would be expensive -as the total cost to be paid by the mines would depend on the total capital invested in the construction. Both small and big mines would pay the same amount for the water. The Committee noted the need not to over charge mines for water as they were generators of employment.


For the construction of the actual dam (Phase 2A), a shortfall of R800 million was reported. This amount would have to be funded from the baseline of the Department. It was reported that the Department had known from the onset that it would need to augment the funding allocated for the project and  therefore arranged its allocations in such a way that the funding of the dam would not affect other programmes. However, it would be interesting to see how the department plans to re-allocate the funding of the dam and not affect other programmes. An amount of R900 million was given by the National Treasury to fund the social component of the projects (Phase 2B 1).


3.1 Project Challenges


According to 2010 Estimate of the National Expenditure, “the foundation of the dam have been laid, and a volume of 180 000 cubic meters out of an expected 940 000 cubic meters of concrete had been placed in December 2009. The Department was expecting the total cost of the Olifants River water resource development project to amount to R13.7 billion over the project lifecycle. Of these costs, R8.3 billion would be funded from the fiscus and R5.4 billion from off budget funding. The overall De Hoop Dam project was expected to be complete by 2012/13”.


At the time of the visit, the departmental officials reported challenges with the labour force. Although, certain steps were taken to address these in order to avoid delays to the project. Despite the reported challenge with labour, the Department was adamant that it would still meet the expected deadline of April 2011 for the first delivery of water. While the Committee is mindful of the indicated deadline, the Committee is of the view that such dead would not be possible to meet based on the behind work schedule. The Committee was also informed that there were interactions with the surrounding mines to ensure that personnel trained through the project could be absorbed by the mines once the project is concluded. A process was also underway to finalise Service Level Agreements (SLA’s) between the mines and the Department.


In the 2008/09 financial year, the Department of Water Affairs and Forestry under spent by 8.20 per cent on its overall budget. This under-spending was attributed to the slow spending in De Hoop Dam project. It was indicated that disbursements of funds could not proceed due to delays in conclusion of the negotiations to finalise memorandum of understanding with 23 mines. The main challenge that faces this project was perpetual rolling over of funds



4. Nandoni Dam – Water Treatment Project


The Nandoni Water Treatment Works in Limpopo was allocated a total amount of R295 million. The project commenced in 2009 and the completion was set for 2010. The Nandoni Water Treatment Works and Distribution Scheme is regarded as a regional bulk infrastructure project which will supply water to the Vhembe district municipality. The various components of Nandoni Dam had been completed and the water treatment works have been commissioned.


The Nandoni Water Works was divided into two projects: the Nandoni Water Treatment which is going to be completed in 2010/11; and the Nandoni Distribution Scheme. The Distribution scheme was still far from completion.  The Department would have only completed 51 per cent of the entire work, 65 per cent in 2011/12 and 76 per cent in 2012/13.     


About 240 people are employed in the project. The dam was expected to supply 700 000 people once completed. It was reported that Phase 1 of the dam produces 60 mega litres of water per day which was expected to cater for 150 000 people. Plans were underway to construct more water settlements (Phase 2) which would double the capacity of the dam to 120 mega litres of water per day. Areas that were supplied by the dam included Thohoyandou, Makhado, and Mavambe.


The Committee was informed that a stretch of 15 000 kilometers of land was being studied to establish how the Nandoni water would best be utilised. The completing date of the Nandoni project was reported to be 2011. In June/July 2010, the rollout of water was expected to commence. The overall completing of the project including Phase 2 and the Nandoni Distribution Scheme was scheduled to occur in the next five years.


The Department reported that it was encountering engineering challenges wherein some of the pipes going to Thohoyandou did not meet the set quality standards. These pipes had a potential to burst from the force of the water. However, the Department indicated that the quality test of pipes to demonstrate the quality standard of pipes was underway. The Committee is concern that this may cause further delay before the distribution of water.  


5. Inyaka Water Treatment Works


The water treatment was regarded as a regional bulk project which would provide reliable water supply to Bush Buck Ridge local municipality in Mpumalanga. This project was allocated a total amount of R283 million in the 2009/10 financial year.

The implementation and completion of the projects was expected to be in the following phases (Sabie River Government Water Scheme):

• Inyaka PHASE 2 will be completed in 2008;

• Inyaka PHASE 3 will be completed in 2010; and

• Inyaka PHASE 4 will be completed in 2012.


In the 2010/11 financial year only 81 per cent of the project would be completed for water treatment, 98 per cent of the work would be completed in 2011/12 and 100 per cent of the work would be completed in 2012/13. The dam would supply 100 000 kilolitres of water once completed. The allocation of funds was broken down into the following phases:

  • PHASE 1:                     R115 million
  • PHASE 2:                     R110 million
  • PHASES 3&4:   R240 million


Approximately 750 000 people would be supplied with water on completion. The total number of people who were employed during the construction of the project was 420. A feasibility study was underway to determine how the water would reach the households. The Committee was informed that the purification of water was done by Bush Water Board. The Department’s role was to deliver water to the reservoirs, and then the Ehlanzeni DistrictMunicipality was responsible to deliver water to the communities.  


It was noted that a holistic and integrated approach to the delivery of water was missing. There was no coordination between national departments, provincial departments and municipalities. Apart from commissioning a study on how the water would reach communities, it was not clear what the regional office was doing to ensure that water was delivered to the communities. Notwithstanding the roles of the various stakeholders, the Committee noted that the Department had a constitutional obligation to ensure the delivery of water. Clear deliverables were required in order to ensure this and service level agreements (SLA’s) could be entered into between the municipalities and the Department.  


Some of the challenges reported in respect of this project were the stealing of transformers from boreholes; and the quality of some pipes which could burst from the pressure of the water, -these results to the installed water system not being able to work. A team of experts was established to look into the issue of pipes. Despite the involvement of communities in the Project Steering Committee, the stealing of transformers remained a challenge for the Department. Participants in the Project Steering Committee were community members chosen by the communities from community forums. Some of these were representatives of the local chiefs.  


6. Findings


  • It is important to note that the Department of Water Affairs has a budget deficit of R1.2 billion which occurred during the 2009/10 financial year. This deficit is expected to grow up to R1.3 billion by the 2012/13 financial year. The budget deficit is a result of the Capital Payments as well as the Refurbishment and Betterment Programme. In the year 2009/10, Capital Payments were allocated a total budget of R749.1 million but at the end of the financial year the Department spent up to R1.8 billion which was way above what was budgeted for. The Department spent about R525 million on the Refurbishment and Betterment Programme.


  • The involvement of other stakeholders in implementing water projects is important. This is due to the fact that water does not only cater for community as basic services (social component) but also water contributes to economic development (commercial components).


  • The Department indicated that the environmental impact assessment took three years to be completed. The Committee was concerned about the delays caused by environmental impact assessment in starting the project;


  • The conclusion of agreement with the mines remained a challenge which causes budget escalation;


  • The Committee was concern about the role of spheres of government in the implementation of the process;


  • The Committee was also concern about the empowerment of the local people through employment and the provision of basic services; and


  • The increase in the price of the project to R1.2 billion remained a serious challenge.


7. Recommendations


  1. With regards to the Department of Water Affairs and its deficit, the Committee recommends that the Department submits a written plan on how it plans to address the deficit. The written submission should also detail how the Department plans to avoid such occurrences in the future.  


  1. With respect to the Inyaka Water Treatment Works, the Committee recommends that the Department of Cooperative Governance and Traditional Affairs designs a model for packaging of service delivery that would encompass all services required in communities, e.g. water, electricity, schools, etc.  


  1. With respect to the comprehensive environmental assessment process, the Committee recommends that the Department produces a plan and submits it to Parliament on how it shall reduce environmental impact assessment period as the prolonged assessment negatively impacts on the timelines of the project.


  1.  With regards to the mining sector and usage of water for commercial purposes, the Committee recommends that the department expedites the process of service level agreement with mines as this will empower both communities and mines.


Report to be considered.


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