Breede-Gouritz Catchment Management Agency & Inkomati-Usuthu Catchment Management Agency and Sedibeng CMA 2018/19 Annual Reports; Water Boards 2018/19 Annual Report with Deputy Minister

Meeting report

Opening Remarks

The Chairperson opened the meeting and welcomed Members requesting a moment of silence for prayer and meditation. The Deputy Minister was present. An apology was noted from the Minister.

Mr M Mashego (ANC) asked if this was a standing apology or if it was an apology specifically for this meeting.

The Secretary and Chairperson confirmed that it was for this specific meeting. The guests were welcomed to start their presentations. She apologised in advance that there was not enough time for presentations to continue at length.

Briefing by the Breede-Gouritz Catchment Management Agency (BGCMA)

Mr Jan van Staden, Acting Chief Executive Officer (CEO): BGMA, took Members through the BGCMA presentation. The Chairperson of the BGCMA was not online so Mr van Staden had to continue. The presentation of the BGCMA began with the purpose, vision and strategic objectives. An overview of non-financial performance and employment equity, as well as a year-end statement, audit outcomes and business objectives to maximise outcomes was provided. The drought had caused challenges – there was a continued influx of over 1 000 000 people that were serviced by the BGCMA area. Public stakeholder engagement and resource preservation had thus become very important. Water resource management was a central primary priority of the BGCMA. Water licensing and water systems management was run through collaboration with the Department of Water and Sanitation (HSWS). Overall, there were many targets that had not been met, as detailed in the report.

The Chairperson informed Mr van Staden that he was not doing well with time and would need to speed up to hand over to his Chief Financial Officer.

Mr Staden agreed to present faster. He continued to present on projects and targets of the BGCMA.

Ms Zanele Mngoma, Chief Financial Officer (CFO): BGCMA, continued the presentation by taking Members through the financial position of the BGCMA. The company was doing well enough to cover liabilities. Financial performance showed revenue was higher than expenditure. The cash flow statement and investment statement showed that the business had a bright future going forward. The BGCMA received an unqualified audit opinion with findings.

The Chairperson informed Ms Mngoma that her time had lapsed and requested that she continue to inform members during the time of questions and answers. She called for the next entity.

Briefing by the Inkomati-Usuthu Catchment Management Agency (IUCMA)

Dr Thomas Gyedu-Ababio, Chief Executive Officer (CEO): IUCMA, presented the IUCMA Annual Report. The context of management, overview of non-financials, financials and challenges were presented for the 2018/119 financial year. Overall, 78% of targets were achieved as was documented in the performance report. A percentage of compliance had improved in 2018/19. This meant that gradually, water quality and management was improving. The drought in 2016 had caused overall challenges with water availability.

Ms Thembelihle Mjaji-Mbatha, CFO: IUCMA, continued by taking Members through the financial report. The IUCMA had received an unqualified audit opinion. Overall, a net surplus was reported. One issue was highlighted in the audit: irregular expenditure of R401 000. This was accounted for by the salary of an official that was not initially budgeted for.

Dr Gyedu-Ababio outlined the challenges within the entity:

 

*           Delegations (Schedule 3): Powers not assigned/delegated by the Minister

– Regulating water use;

–Planning and Operations; and

–Have some MoUs with the DHSWS

•           Drought –natural disaster (water availability issues)

–Resource operations and committees; and

–New facilities need to be developed/constructed

•           Pollution -Malfunctioning of WWTWs

–Provide professional advice;

–Monitor and share information; interactive structures

–Compliance and Enforcement;

–Interdepartmental co-operation (SAPS, NPA, SAHRC, HSWS, IUCMA, Municipalities, DEA, COGTA and SALGA); and

–The WW Infrastructure Grant be restructured

•           Revenue

–The Debtors book; and

–Interacting with water users on a regular basis

 

Briefing by the Sedibeng Water Board

Mr M Dikoko, Chairperson: Sedibeng Water Board, took the Members through the presentation of the Annual Report. He said that it was evident from the Annual Report that this Water Board succeeded in delivering accessible and sustainable water services without major interruptions to its areas of supply in the Northern Cape, Free State and North West Provinces. During the 2018/2019 financial year, water treatment works operated and managed by Sedibeng Water in the three provinces concerned, also produced final water of exceptional quality, complying with SANS 241:2015 requirements.

Statistical analyses using various customer service indicators, established that Sedibeng Water currently maintains a customer satisfaction level of 71% amongst its retail customers and 77% amongst its bulk customers. Therefore, it can be assumed that in general Sedibeng Water had been reasonably successful in maintaining its already high levels of customer satisfaction during the 2018/2019 financial year.

During the year under review, a relatively low staff turnover of 0.018 was recorded, while 76 employees received Long Service Awards. The percentage of gender equity at middle and senior management levels amounted to 30% and 25%, respectively. People with Disabilities (PWD) constituted 1.67% of the total workforce. To ensure that Sedibeng Water is able to attract and retain talented individuals at all levels in the organisation, the reward strategy and employee benefits have also been reviewed and improved.

Ms Keketso Sekonyela, Acting CFO: Sedibeng Water, said the organisation continued its endeavours to contain expenditure, and increase and improve services and income generation, without sacrificing high standards in water services provision. The organisation received a qualified audit opinion for the 2018/2019 financial year. An action plan is being developed by Management to adequately address all the issues raised in the Independent Auditors Report by the Auditor-General of South Africa

Discussion

The Chairperson asked Ms Sekonyela to round up, as her time had lapsed. An opportunity for Members to engage with questions was then provided. A limit of two questions per presentation (six per Member) was given, such that maximum engagement was possible between all Members.

Ms G Tseke (ANC) thanked the three entities for their presentation. A key priority of government was economic empowerment and job creation. With the budgets that the entities were managing, were they creating enough jobs for the people of South Africa, particularly women and young people? A subsequent question was directed at the CMA’s. The establishment of the CMA’s in the National Water Act (1998) centralised approval for activities of CMAs via the National Office of HSWS. ‘What were some of the challenges associated with this arrangement and should there be a shift in this with reviewing of the water legislation’? Regarding Sedibeng, the cover page of the presentation indicated that the CEO, CFO and COO were acting positions. However, the CE indicated in her presentation that the chief positions were filled. What was the status quo? Sedibeng had also regressed in terms of achieving targets as compared to the previous years. A majority of the targets were not achieved. There was also non-compliance with supply chain regulations. ‘How had this happened, when there was leadership in the entity paying themselves exorbitant incentive bonuses’? It was also interesting that the board of Sedibeng was paid the highest compared to all water boards, yet was the worst performers. Could the Deputy Minister (DM) respond and initiate an investigation on this in order to submit a report to the Committee. ‘Did Sedibeng have internal controls in place, including the Internal Audit Committee just to keep the findings by the AG’? ‘Finally, were there any criminal cases or disciplinary steps taken against the official who participated in the adjudication within the entity, particularly because of his (the official’s) vested businesses interests in the contract awarded’?

Mr L Basson (DA) posed a question to Sedibeng. Since the entity was also servicing the North-West, he was considerably concerned about Sedibeng. He was not convinced that Sedibeng should continue as a water board and did not see them in the prior year’s coming up with a mechanism to recover money from municipalities. It was insufficient to just be in discussions with CoGTA regarding this. Was there nothing else that could be done or be presented to the Committee concerning the huge amount of debt owed by Sedibeng to the HSWS and the municipalities to Sedibeng? Were there not workable solutions on how Sedibeng would deal with outstanding money, like whether it was to take over the service delivery in those municipalities where they build themselves? Mr Basson strongly felt that another solution on Sedibeng was needed, and wanted to hear whether the entity had discussed other means of dealing with the situation within Sedibeng. The other two boards were thanked for their presentation, with no further questions.

Ms R Mohlala (EFF) started but did not finish her questions due to connectivity problems. She began by noting the presentations made by all three entities. To IUCMA it was postulated that entities depended on consultants to deliver.

Members could not hear the question further via the online platform as the connection had been lost. Questions continued until Ms Mohlala reconnected at a later stage.

Ms S Mokgotho (EFF) thanked the three water boards for their presentations. Sedibeng water board was asked about contracts awarded. The entity had awarded construction contracts to contractors that were not registered with the Construction Industry Development Board (CIDB) or that did not qualify for the contract in accordance with Section 18(1) of the CIDB Act (2000). ‘How were contracts awarded to contractors who did not qualify’? ‘Did board have internal control’? ‘If yes, why were they not apprised’? ‘Which other contracts were awarded without CIDB grading’'? ‘Could Sedibeng furnish members with a list of projects awarded to contractors’? Regarding collapsed leadership in the Sedibeng Water Board, according to the AG the accounting authority did not exercise adequate oversight responsibility regarding financial and performance reporting, compliance with law and regulations. ‘Why did the board pay themselves exorbitant bonuses that they did not deserve’? ‘Since it appeared that the board did not monitor the activities of the executive management of the entity, what had they dealt with in the meeting they attended’? Regarding procurement for the Vaal Pipeline Project, the procurement was marred as the AG reported complete non-compliance with Section 51(1) and Section A(iii) of the Public Finance Management Act (PFMA) (1999). The Committee had requested a report on the processes followed to acquire contractors for the projects, and a list of successful bidders. The board should thus explain why procurement processes were not followed in this regard.  Ms Mokgotho also expressed concern that there had also been an overwhelming amount of errors on the financial statement, some of which emanated from the previous year. This urged the Member to question whether the CFO of Sedibeng was qualified to prepare financial statements, or whether it was a case of dereliction of duty. ‘Had the board put in place the consequence management system to address this situation’? In light of the incriminating material findings against the Sedibeng water board by the AG with respect to performance information and financial statements where the majority of these issues were reported in 2016-17 and 2017-18 financial years; the water board did not display any sign of improvement, instead, its performance was regressing every year. Bearing these facts in mind, the Member recommended that the Minister place the entity under administration, in order to save it from liquidation. Irregular, wasteful and fruitless expenditure was also a concern. The CFO had stated that Sedibeng was taking measures to address the material irregularities, however did these material irregularities result in consequence management? ‘Did this irregular expenditure include historic irregular expenditure dating back from 2016, or was it simply from the previous year’? There was a concern about the increase in irregular expenditure from year to year. Each year, the water board made commitments to adhere to AG requirements and recommendations but this, according to the Member, had never occurred. This was evidenced by the irregular expenditure amounting to approximately R419 885 000, with no results of consequence management being reported to the Committee (PC)

Mr Mashego requested clarity about an issue. The Minister and therefore the Department of Human Settlements, Water and Sanitation (DHSWS) were ultimately responsible for water deliverance to South Africa’s people. The assumption could be made that in order to expedite the mandate of delivery of water, water boards would deal with the systems and processes in place. If this was the case, why had boards been failing so dismally in their day-to-day work? Why were they given the responsibility to do work for the Ministry if they could not perform or deliver? In Breede-Gouritz, for example, their power had not been given to them by the Minister, yet they continued to work. By implication this would mean a finding against them. Mr Mashego acknowledged this could be the case with other boards. He understood that boards were accounting to the Minister and Deputy Ministers, but that in practice; they were appearing before the Committee for purposes of accounting. When water was not delivered, society would not say that water boards were not delivering, but that government was not delivering water. The Member accused water boards of ‘wanting to take money from Municipalities’ and claiming to have done their work’. It was residents who paid for water, not municipalities. Residents who did not pay, meant that municipalities could not pay. However, even if no payments were coming to the water boards, they were still paying themselves salaries. The jobs of water boards were to collect money. If they were not collecting money, why were they getting paid and calling meetings? In this case, HSWS should provide the Committee with specifications of the existence of boards and their seniors working if they were not delivering. The general phenomenon was that all boards were not meeting their targets, and thus mandates.

The Chairperson invited Ms E Powell (DA) to pose questions, however the Member said her questions had already been asked.

Ms Mohlala continued with her questions. Towards Inkomathi-uSuthu CMA, it seemed the entity depended on consultants to deliver their mandate. Their expenditure on consultants was more than R 50 000 000 during the year under review. In the previous year (2017/18), more than R 11 000 000 was categorised as expenditure on consultants. ‘Please could the entity explain this to the PC’? ‘Were there any plans to curb these expenses in the future’? In future, the board needed to employ engineers, quantity surveyors, project managers, builders and people will skills for sustainable tasks. The prioritisation of out-sourcing, instead of in-sourcing was a hinderance according to the Member, because private companies were driven by profit maximisation and at times were not providing jobs of good quality. A second question was asked to Inkomathi-uSuthu. The independent AG’s report for the year under review indicated that there was a pending investigation by the Public Protector due to irregularities in the management of affairs of the IUCMA. In this regard, the IUCMA should provide details on the issues being investigated and where complaints emanate from. Breede-Gouritz was asked about the AG report, which raised concerns about the leadership issue within the entity. It had been pointed out that the BGCMA had not developed, implemented or monitored internal control regarding financial and performance reporting. It was suggested that the BGCMA address this by furnishing the Committee with reasons accounting for this issue and how it would be addressed going forward. Another question was directed to Sedibeng water board with reference to the recommendations of the AG. It had been recommended that the Sedibeng water board be placed under the administration of the HSWS. On which basis had the Minister placed Amatola and Lepelle Northern Water under administration in 2020 and why were there anomalies in the way water boards were placed under the administration by the Minister. The AG had also found that within Sedibeng, the work and services was not secured within proper processes that were fair, equitable, transparent and competitive. The dependence on tenders had massive political implication and often reduced the quality of work provided because of corruption and corruptibility of the tender system. ‘What led to the non-compliance to the PFMA regulations’? It had also been reported that errors on Sedibeng’s financial statement were overwhelming. There had been a number of omissions and errors. ‘Was the CFO qualified to prepare financial statements or had a breach of duty occurred’? ‘Was there any consequence management in place to address this situation’?

The Chairperson, Mr M Tseki (ANC), Ms N Sihlwayi (ANC) and Ms C Seoposengwe (ANC) experienced data/connection challenges. As such, they could not respond when prompted to pose questions. Mr S August (GOOD) also stated that his questions had been asked, when addressed by the Chairperson.

Mr M Mabika (DA) posed questions to Sedibeng Water Board. He wanted the entity to justify the audit findings for the year under review and in three consecutive years. ‘How had it happened that the institution received qualified audit findings on the very same issues for three consecutive years’? Between 2016/17, 2017/18 and 2018/19, there had been re-qualifications on material findings on objectives. ‘What had been done in response in the first, second and third years of these findings’? Mr Mabika was confident that in 2019/2020 the same qualification outcome would be found because of a lack of action to ‘turn things around’. ‘How was it possible to be pleased with financial viability of the entity without compliance with regulations’? Mr Mabika shared Ms Mokghoto’s sentiments on irregular expenditure, which had increased. This suggested that the entity was complacent in their situation, as evidenced in 2017/18 by over R 22 000 000 in irregular expenditure and in 2018/19, irregular expenditure of over R490 000 000. Mr Mabika also requested clarity on the reason that irregular expenditure from the previous years (approximately R31 000 000) had been included in the report for the subsequent year.

Ms Seoposengwe asked a question to BGCMA which she said would also impact and be relevant to other entities. The Member requested a breakdown according to Provinces in relation to the issuing of water licences, particularly for emerging farmers. Sedibeng was then asked about tankers. While the Member appreciated the responses (tankers delivered to provinces), challenges remained. Particularly in the Northern Cape, the taps were flat on the ground and some tankers were distributed with dirty water. As such, it was felt that the tanks were not properly maintained, and this spoke directly to feedback from municipalities. ‘What would be done to address this’? The remaining question was after entities had pulled out, who would take care of tankers? In one instance, there had been a tank which had been placed in the home of a resident. This was applauded by the Member, because it was a form of safeguarding the tank from vandalism. At the same time, concerns remained about the tanks that had been most recently dumped. ‘Would it not have been cheaper to use boreholes to access water’?

The Chairperson added questions of her own, before handing over to the boards and CMAs to respond. The Chairperson requested reasons from Sedibeng justifying why they had not investigated their irregular expenditure in the previous financial year? As Members had indicated, there had been an increase in irregular expenditure which suggested that the board and management were comfortable with the state of affairs without compliance. A previous meeting between HSWS and the Committee was referenced, where the HSWS had been requested to provide an indication of the Cabinet of the Sedibeng board. Could feedback be provided in terms of this? The issues of debt had also been noted. ‘What the CE had presented was problematic because non-compliance with the PFMA resulting in findings from the AG had not been addressed’. The Chairperson questioned what the entities had expected from the Committee, given this circumstance. ‘Why was the management letter of the AG ignored’? This was a key issue. Clarity was also requested regarding the section on Boreholes and why this was shown saying it was managed by Nkomazi Municipality. ‘What had been the issue’? ‘Was it because the entity delivered it, but it was not managed by them’? In terms of the issues of management letters as raised by the AG ‘was there an action plan to address those issues’? ‘Would it be ensured that these findings would not repeat themselves in the following year’s report’? A commitment to this from the board and the CE was requested from the Chairperson. Responses were then requested in the order of presentations.

Responses - BGCMA

Mr Bongani Mnisi, Chairperson: BGCMA, began by introducing himself and inviting the CEO and CFO to respond to questions raised. The CEO was to elaborate on the breakdown licenses and water management areas (as this was where the entity was responsible and thus accountable). The CFO was asked to touch on the issues of the finances and the reporting to the AG as it was highlighted.

Job Creation

Mr van Staden proceeded with the question about the BGCMA and what other boards had been doing for job creation. The BGCMA managed raw water resources, which was not the same as a water board that supplied bulk water to municipalities (including the supply of drinking water to town’s etcetera.). Key responsibilities of the BGCMA were to ensure that water was flowing in the river and that the water was of good quality. This was brought to the context of job creation and the BGCMA as a processing authority regarding license applications. Members were assured that for every license processed in the system and finally approved by the HSWS, their jobs linked to this license (either through farm activity, industry, and building activity etcetera). By efficiently processing legalities, it had been possible to create jobs for youth and women. Much had also been done to remove alien vegetation near to the water resources, as these were sapping the water to the detriment of water supply in rivers for communities to use. This programme was labour intensive which created jobs. Another active effort towards jobs and job creation was the promotion of social projects by the entity. Activities such as food gardening, drama and water tanks were all linked to job creation. Mr van Staden was confident that the entity had tried to do their best at what had to be done.

Centralised Approval & Powers given to BGCMA

Centralised approval by the National Office was mandated by the PFMA. It had been asked if this should remain, or if the PFMA should be amended to cater for more independence. Since the establishment of the entity, it was assured that the BGCMA had received constant support from the HSWS. If any information was required from the HSWS, for example, the BGCMA had always been able to call or connect with the Department. What the BGCMA did not have the ultimate approval over, was the final authorising of the licenses. Any application and approval process linked to licensing was highly technical, especially since the operating environment had become smaller (lower water supply). For the foreseeable future, Mr van Staden advised that the HSWS stay central to license applications. Perhaps later on, the power could be delegated in totality to the BGCMA. In relation to the powers given from the Minister to the BGCMA, some the powers had not yet been delegated by the Minister. License applications, for example, was a power that resided with the HSWS. BGCMA therefore acted as a commenting authority which also made recommendations. This was a role played within the system without the authority of the Minister.

Ms Mohlala rose on a point of order to ask asked about audio. She wanted to know if she was the only one who could not hear the meeting due to network problems.

The Chairperson and other Members said that they could hear, and that Ms Mohlala’s network was the issue. As such, the meeting would proceed.

Breakdown of Licenses Issued

Mr van Staden then informed the Members that in the year in question, the BGCMA area had received 60 applications. Of what was received, there were two that were ‘completely black’ applicants. All the rest were BBEEE compliant.

Leadership Issues

Ms Mngoma continued to address questions around leadership issues.  Regarding the question of the agency not furnishing their commission with the Annual Report, the reason for this was because the relevant section of the act was new and the BGCMA had not been aware of this. Going forward, a Compliance Officer had been appointed to make sure the incident did not occur again. Ms Mngoma then admitted that she had not heard the question about leadership properly and requested the possibility of it being repeated as she had challenges with the network.

The Chairperson asked the Member who had asked the question to identify themselves.

Ms Mohlala, who had raised the question, repeated herself. Her question was about the concerns raised by the AG report. It was pointed out that the management had not developed, implemented or fully monitored internal controls           regarding financial reporting. In this regard, the BGCMA should furnish the Committee with reasons for this, why this was the case and how it would be addressed.

The Chairperson thanked Ms Mohlala and confirmed that the CFO heard the question.

Ms Mngoma confirmed she had heard the question and requested that she respond at a later stage of the meeting as she needed to refer back to the Annual Report.

The Chairperson then called for Inkomathi-uSuthu officials to respond to questions.

Responses - IUCMA

Economic Empowerment

Mr Gyedu-Ababio began by explaining that the entity had tried to empower the people during their stakeholder engagement. When it came to contracts, catering etcetera, they had employed BBEEE companies. They also empowered by hiring interns within the water management area. External bursaries were also given for studies for young people to empower themselves. In terms of gender, the entity had 49% males to 51% female’s ratio. In executive water resource management, many of these were women (all women in supply chain management, for example)

CMA and Centralisation of Activities of HSWS

IUCMA reported that they had been working very hard together with the Department, however there were issues with centralisation, for example when the entity was not getting assets. Because of certain system links, the IUCMA found it difficult to do some work. What would probably have to be done, according to Mr Gyedu-Ababio, was to get smaller systems - for example subs - that were compatible with the bigger ones such that when they went down, a smaller one could be used and activities could continue. Regarding money that came from the HSWS, sometimes this came very late. This delayed projects, especially when the IUCMA had to seek intervention, ultimately resulting in incomplete targets. The process of licensing, whereby applications were circulated between the Department and other stakeholders, certainly delayed the process of finalising licenses. At the time of the meeting, IUCMA was waiting for the pricing strategy such that it could be approved and the process could go faster.

The use of Consultants

Mr Gyedu-Ababio assured Members that though the IUCMA used consultants, they were not overly relied upon (as was suggested). When they came in, things such as legal fees, verification, validation and other consultant expenses alone were approximately R5 000 000. That kind of work had not been done, but across the country these consultants had been used to provide guidance, so that going forward internal processes could be strengthened. The internal audit model was part of the same contract as mentioned. There had been a forensic investigation within the IUCMA during the period presented. The IUCMA was also implementing their groundwater strategy. This is where part of the money had to be used. Most expenses had since been reduced, however. For example, the catchment management strategy was being dealt with in-house, which was due to be completed in the second quarter of 2020. A legal adviser had been appointed to circumvent paying high external legal fees. The IUCMA’s hardware networks (fees) were also reduced.

Public Protector Investigation

The source of the information was still being addressed. The allegations were that the IUCMA had sponsored a concert that the CEO had increased his salary and excessive international travel of board members. The IUCMA had subsequently conducted an internal investigation and had found the allegations were false. The DHSWS also investigated the same matter. When one was the board, it was very difficult for the CEO to increase his own salary. Regarding the allegations of sponsoring a concert, this had been a means to execute a water cleaning assignment. It was assured that all international travel of executive members had been essential. No guilt or wrongdoing on the part of IUCMA had been proved at the time of the meeting.

Water Licenses

In 2018/19, only approximately 10% of what IUCMA had done was for black people. The IUCMA had gone into communities to educate and support them. Many could not get consultants to do water and environmental studies, so the IUCMA stepped in to do this for free to provide access for these people.

Boreholes

This was done for monitoring the ground water and quality. Where there were areas of great need, for example communities with schools or farming communities, boreholes were drilled for these people to use. After equipping it, it was given to the municipality concerned for them to take care of the maintenance. This had been done in Mkhondo Local Municipality.

The Chairperson thanked IUCMA and handed the floor to the team from Sedibeng.

Ms Mohlala said her question about the Public Protector investigation had not been answered, though this could have been because of the network. The Member wanted the answer to be repeated.

The Chairperson said the question had been answered and called for Sedibeng.

Responses - Sedibeng

BBEEE and Unemployment

Ms Sekonyela began with Ms Tseke’s question about BBEEE and what was being done to combat unemployment in South Africa. It was reported that Sedibeng had achieved a 95% BBEEE rating. They had employed 41 permanent employees of Sedibeng Water based on the organogram that they had. The Chair would answer to the question about the cover page of the presentation and executive positions which were still not filled at the time of the meetings. The two positions that had been filled were lower than the executive: Senior Management Accountant and the Supply Chain Manager.

Audit Opinion Regression

 Ms Sekonyela continued by responding to Ms Tseke’s question about the opinion and qualification of the AG that had regressed. This was true, there had been a number of issues towards the financial year end. One of these issues was that Sedibeng had changed their accounting framework as per the AG’s advice. This caught them in a position where they were unable to deal with matters internally, hence all the matters raised. Had they stayed with the previous framework, it was felt that the particular issues would not have been experienced (for example deferred income, commitment etcetera). There was also an internal audit department, which was working at almost 98% in the finance department. It was assured that Sedibeng was adhering to the reports. They believed that in the financial year including 2020, there should be an improved situation because of the appointment of officials responsible for what had been a challenge in the Sedibeng organisation. The Committee was assured that efforts were being concentrated on improving audit opinions at Sedibeng in the financial year of the meeting 2020/21. Sedibeng was also financially viable, however they had problems with cashflow because of issues raised with debt collection.

Debt Collection Mechanisms

In response to Mr Basson’s question about potential mechanisms that could be put in place by Sedibeng for debt collection, it had been decided within Sedibeng to go with the legal route. Since COVID019 had cause various challenges, the legal route had become necessary. This meant suing ‘the people’ in terms of what they actually owed Sedibeng. The process would unfold from June and Sedibeng would legally pressurise their debtors to pay the money owed to them. Particularly in the North-West and Free State, there was no commitment from those provinces to actually pay.

Contracts

In response to Ms Mokghoto’s question about contracts and why the process had not been followed, it was explained that at the time Sedibeng had tried to connect with the Construction Industry Development Board (CIDB). There had been no positive response, ultimately meaning Sedibeng could not register on their database. After finally registering in the following financial-year, contracts needed to come to an end because it was not possible to recover from irregular expenditure in this manner. In the 2020/2021 financial year therefore, many of these contracts would be terminated where Sedibeng had not been registered on the CIDB. A commitment was made, as it had become possible, to submit the requested list to Parliament by the following Friday after the meeting, via the HSWS.

Collapse in Leadership and Oversight

Sedibeng was looking at re-addressing the process of appointments and bringing back leadership into the organisation. Sedibeng had wanted this to occur from executive downwards to make sure everything was done accordingly.

Omissions and Errors of the Financial Statement

In the financial year, at the time of the meeting (2020/2021), it was confirmed that the correct skills were present in the organisation to complete work in a short period of time.  Sedibeng had already started having financial statements that complied.

Performance Information

While there had been somewhat of an improvement in performance information, this was not completely what Sedibeng had wanted to see. They had still wanted to see the movement of these outcomes, especially the audit outcomes and also the improvement in the management of irregular expenditure. For this reason, a supply chain manager had been appointed to investigate matters of irregular expenditure. It had been found that, in some instances, that the irregular expenses were deviations which needed to go through the National Treasury. It was those kinds of separations that Sedibeng had begun going through to try to proceed in a correct manner.

Consequence Management

In the 2016/17 – 2017/18 financial years, consequence management took place. There was a case open and the Committee could be provided with the information on this. At the time of the meeting, Sedibeng was busy addressing 2019/20 and the previous financial years to be able to delineate irregular versus condonation (via National Treasury) matters. Issues of increasing expenditure had been addressed. This was because of the carry-over Sedibeng had. Ms Sekonyela expressed that she wanted to have a look at the R31 000 000 included in the irregular expenditure of the report. This was an error where they had not included it in the previous year as some of the irregular expenditure. They agreed with the AG that this should be excluded in the subsequent financial year.

Responsibilities

In response to Mr Mashego’s question, it was explained that Sedibeng was a bulk water service provider. As such, when reservoir levels were reached, they believed they were able to supply. However, sometimes circulation levels between municipalities had serious leaks, meaning that the water would not get to the people who were supposed to get it because of the internal reticulation made. The DM would address matters raised in Ms Mohlala’s question regarding Sedibeng being placed under the central administration of the HSWS. Procurement that was not fair and equitable had been dealt with. Sedibeng was making sure that in the 2020/2021 financial year it would be clear that irregular expenditure would have been categorised and dealt with in detail. Before books would be closed in the 2020/21 financial year, they would make sure to adhere to necessary steps in relation to irregular/fruitless and wasteful expenditure. The Committee was assured that accounting errors were being cleaned up and this would be seen at the end of the 2020/21 financial year’s audit.

Tankers in the Northern Cape (COVID-19 efforts)

At the time, Sedibeng was making sure that they were building a tent for the tank. Because of Covid-19, they had to make sure that tents were actually delivered. It was agreed that the people of Sedibeng Water would make sure that there would be something like a pipe if there was no stand yet. Ms Sekonyela said that she was committed to following-up on this after the meeting and they would report back to the Committee on the status. There was a challenge with dirty water in the Northern Cape, where there was a non-compliant tanker which was operating during COVID-19 operations. This tanker had been recalled and removed. Sedibeng had since stabilised the area of the tanker. The de-mobilisation of tanks was part of the COVID-19 efforts which would be started later (1 June 2020). The reason for this delay was non-sustainability of water tanking costs. In the Northern Cape, actually piped through communal points or tanks. There was a confirmed continuation Sedibeng would be re-deploying other tankers, and was busy drilling boreholes at nearby areas. This was to be able to stop tanking and make sure that the water was clean in this area.

Investigation of Expenditure

Sedibeng had finally engaged the process of an investigation, which they were busy with. This would be presented to the board by 30 June 2020. It was true that irregular expenditure had increased, and this was also brought forward from the previous financial year. They would want to see that irregular expenditure was being addressed before the end of the financial year.

Internal Audit

An internal audit was in place. Sedibeng was working hand in hand to make sure that internal controls for the organisation were improved. The matters of internal controls were being attended to, to ultimately improve them generally. The Deputy Minister (DM) would address the matter of the board going through Cabinet.

Debt

Sedibeng wanted to ensure they gave people water. However, they were unable to supply this if they were not paid. They were making an effort to recover money via the legal route and wanted to do this in June/July. The entity was confident that they would be able to collect going forward. Ms Sekonyela then handed over to the Deputy Minister and Chairperson to respond to further questions.

Ms N Sihlwayi (ANC) wanted to raise two questions.

The Chairperson asserted that the meeting was still taking responses, and if there was time at the end of the meeting these could be addressed. Otherwise, it would be arranged that Ms Sihlwayi pose her questions in writing.

Ms Mohlala was unsatisfied with the answers given. The CEO responded about financial statement errors, but this was insufficient as she merely said that she ‘noted’ errors on the statement. Ms Mohlala wanted an answer on whether the CFO was qualified and/or able to prepare financial statements and whether there was consequence management. The Member requested that the chairperson of Sedibeng respond to these questions as they were not properly addressed by the CEO.

Mr Dikoko proceeded with further answers to questions directed to Sedibeng. The board dealing with ‘this aspect’ had only come in April and functionally in June 2019 (the previous year). The three unqualified audits started as early as in the 2016/17 financial year’s audit outcomes. This was subsequently in the 2017/18 year which was during the term of Sedibeng’s previous CE. For the previous 13 years, Sedibeng had been audited by a private company. The AG only started in 2016/17 – this was how issues were revealed. The board had always tried to get deeper into even earlier years to uncover all wrong doing based on what the AG picked up in the first audit outcome. The then acting CA, after the disciplinary process, was then only terminated on 13 June 2018. The previous board had also just adopted the new structure in early (February/March) 2019. Before that, the board had been dissolved (which was why the new board had only come into operation in June 2019).  At the time, the board had taken a decision to start recruiting the Chairperson of the Executive (CE), who would ensure the filling of all other positions: acting CFO, COO and all other relevant executive-level structure positions. The emphasis of the PC, that it needed to be ensured that this process was being split up, was noted. The board had taken a resolution that by earliest 1 August, there needed to be a new CE, who would then ensure that all the structural formation was taken into account. Regarding the increase of irregular expenditure, the board had tried to find this out from the AG, who had emphasised that on their first year of investigation they saw that there were irregularities which had been transferred from the previous year. This is why irregularities had risen.

The Chairperson requested Mr Dikoko to switch on his camera.

Mr Dikoko obliged and continued with his responses. On the issue of the correctness of the board, the Deputy Minister would deal with this.

The Chairperson addressed the CE of Sedibeng, requesting a better response to Ms Mohlala’s question.

Mr Dikoko added that the acting CE was the CFO, so the acting CFO was the management accountant. Their view was to fill these positions with fully qualified people as a matter of urgency. It was to be noted that the CE, CFO, COO and company secretary were acting-members. 

The Chairperson requested the Deputy Minister and the DG address the meeting.

Mr David Mahlobo, Deputy Minister of Human Settlements, Water and Sanitation proceeded on behalf of the DG, who was stuck with some work pertaining to financial mobilisation for National Treasury.

Ms Nthabiseng Fundakubi, CFO, DHSWS, answered questions on behalf of the DG. Ms T Sigwaza was performing oversight on these entities.

Ms Fundakubi responded to questions related to governance issues.  Relating to HSWS support for entities, particularly with irregular expenditure, the HSWS had established a forum where certain members of the audit committee in the HSWS met with chairpersons of all the entities to address issues raised in the AG’s report. There was also a CFO forum to address matters, which was provided for support for oversight. It was clarified that Sedibeng was one of the boards that needed to be rectified. The Minister was applying her mind to the options in terms of all boards that did not go for Cabinet: a decision needed to be made to dissolve these boards, or to continue with them. The decision had yet to be taken by the Minister. She handed over to the Deputy Minister to respond to matters of centralisation.

The Deputy Minister answered the remaining questions. There were certain issues that were cross-cutting. It needed to be noted that as reports were received, entities were at a different standing. Some were doing well and others were struggling. As the team indicated, the HSWS would do whatever it wanted to support them because they were an important instrument of society to discharge some of their activities. The first two presentations were the entities that were established in terms of the National Water Act. The last presentation received from Sedibeng – there functions were from the Water Services Act. The first two entities - BGCMA and IUCMA - had just been established in the time of the democratic dispensations, meaning that resources were being managed more at a community level (catchment management level). This process had taken long, because by this time, there should have already been nine such institutions created. However, the team led by Ms Sigwaza had made a submission to the Deputy Minister and Minister to approve that they should be able to make more of these agencies. These agencies had been given delegations. They were not given full delegations as they had to be established – the necessary capacity needed to be created. At the same time, they were in the same offices as the HSWS regional offices. Therefore, issues about delegation and transition had been addressed. For example, the Deputy Minister knew of the IUCMA had requested additional delegations which had been approved subsequent to an evaluation (to ensure implementing capacity). There was no CMA that was operating without the approved delegation in terms of the NWA, to which the Minister from time to time assigned those particular responsibilities. If there were issues of delegation on the basis of further assessment, consideration would be made on this particular point. With respect to Sedibeng, the results of financial management were not desirable. The Deputy Minister was optimistic that this could be turned around with assistance from the HSWS. The remedial action plan would also be monitored in terms of the issues raised by the AG. This included issues of the stabilisation of administration which resulted in challenges to holding people accountable.

Regarding financial health and the financial position, some water entities were deteriorating. This was in part because some users were not paying for water they had used. A further report on this would be given to the Committee with the Department of Cooperative Governance and Traditional Affairs (CoGTA). These entities would be raising these issues. Equally so, the HSWS would also be trying their best to address complaints made about the HSWS’ ‘inability’ and delays to disperse funds due to be dispersed’. Generally, the BGCMA and the IUCMA had reached a stage of maturity, which was evidenced by 95% in non-financial performance indicators. In terms of financial performance, they had both received an unqualified audit opinion, but there was still room for improvement. These matters, with the guidance of the HSWS would be supported to be strengthened.

The Chairperson allowed Ms Sihlwayi to continue with her question.

Ms Sihlwayi thanked the Chairperson for the opportunity to raise her questions, since her network was restored. She referenced Sedibeng’s remarks that they were in the process of taking Municipalities to court because of non-payment. The Committee had processed with the Department of CoGTA to address issues of debt – ‘were the entities aware of this’? ‘What was the relationship between the two departments’? Secondly, in the report there had been non-utilisation of funds – ‘what was the reason for this’? The Member speculated about whether the budget had been meant for a particular program that was to service people.

Mr Mabika made a follow-up on the question regarding irregular expenditure. He requested to be taken through how irregular expenditure of a previous year was also reported on the following year. This was the case of the R31 000 000 that had been carried over. If this was the case, it meant that in the next financial year the amount would be carried over and not dealt with. He did not understand this and therefore requested clarity.

The Chairperson explained that irregular expenditure remained in the book until there was an investigation and condonations were submitted to the National Treasury. Once the National Treasury had condoned this, it became regularised. Sedibeng had not done this, which was why Members had repeated questions about why management was not dealt with following the letter from the AG. The issue would therefore go out of the books without condonation – it would recur. This showed that someone was not doing their job if consequence management was not taking place.

Ms Mohlala requested to make a follow-up.

The Chairperson noted that questions had not all been answered, but time had lapsed. Written submissions would be made to the Secretary of the Committee and delivered to Members.

The Chairperson thanked Members and adjourned the meeting.