Department of Water and Sanitation 2019/20 Quarter 3 performance

Meeting report

Department of Water and Sanitation 2019/20 Quarter 3 performance
Overview

Mr Mbulelo Tshangana, Director General (DG): Department of Water and Sanitation (DWS), said that the third quarter had been extremely tough because of the drought, which had impacted particularly on the Northern Cape, Free State and Eastern Cape. The money allocated to these municipalities was sometimes spent, but also not spent – causing challenges. He was aware of the persistent drought in the western part of the Northern Cape. Approximately R300 million had been redirected to prioritise drought in the Northern Cape. In the Eastern Cape, Amatola Water had been appointed as an implementing agent. As such, the Department had not taken leave over December. Approximately R900 million had been shifted to address drought in the three aforementioned provinces. In quarter three, 49% of targets were met overall and 32% of targets were not met.

Mr L Basson (DA) asked that the Committee meet with the Department to provide clarity on money spent with the Department of Cooperative Governance and Traditional Affairs (COGTA).

The Chairperson confirmed that a meeting between the Committee, the DWS and COGTA would take place either in the current or coming week.

Programme One: Administration

Mr Squire Mahlangu, Deputy Director General (DDG): Administration, said that the Department had done particularly well with meeting its Programme One targets -- 83% of the targets had been achieved. Low spending on employee posts, as well as under-spending on goods and services, had accounted for partial and non-achievement.

The Chairperson referred to the instances where 100% of targets were not achieved, and asked what the challenges were, and what the plans to resolve them were.

Mr Mahlangu directed the Chairperson to slide 9 of the presentation, dealing with financial management, and said it was only once the vacant positions were filled, that these problems would be solved.

The Chairperson asked why vacancies had not been filled.

Mr Mahlangu said that advertisements for posts had been placed, but the compensation of employees (COE) budget cuts had put them under pressure. He added that those positions would be filled, despite the delay.

The Chairperson said that further questions could be raised by Members after the presentation by the Department was given.

A Member raised the point that by the Chair asking her question about unfilled vacancies, she had opened the floor for questions.

The Chairperson clarified that she intended to prompt the presentation for further discussion afterwards with her questions.


Programme Two: Planning and Policy, Information and Monitoring

Mr Moloko Matlala, Chief Director: Water Information Management, Ms Babalwa Manyakanyaka, Chief Director: Corporate Planning, and Mr Tshangana took the Committee through Programme Two.

Of the six sub-programmes, there were four which had been executed well, but targets that had not been achieved included:

The draft populated structure documents for new infrastructure work streams for 17 district municipalities (DM’s).
Coordination and updating the progress of five feasibility studies.

Ms Manyakanyaka added that further targets had not been achieved, stating that the finalisation of the Water and Sanitation Bill delayed these processes. These targets included:

The Cabinet process for approval to gazette the National Water Resource Strategy, edition 3 (NWRS – 3) for public consultation.
The Water and Sanitation Bill gazetted for public consultation.

She said these bills would be ready by March/April. Internal consultation had been done, and the bulk of the work completed. For this reason, the process will be completed by the end of 2020.

Mr Mahlangu added that delays regarding the bill also stemmed from the fact that the Minister wanted to consult to obtain expert opinion from the board of advisors. The delay was more because of internal processes, but they also wanted to make sure that the South African Local Government Association (SALGA) was on board.


Programme Three: Infrastructure

Mr Leonardo Manus, Acting DDG: Infrastructure Development, took the Committee through Programme Three.

He said the challenge with the partial achievement of the Mokolo Crocodile Water Augmentation programme was the acquisition of land and the signing of the memorandum of understanding (MOU). There were currently ongoing negotiations about this. The construction of Hazelmere Dam had been paused because of contractual disputes. There had since been success in signing the contract with the contractor, who would return in the next 30 days. A contractual dispute over construction at the Goedertrouw Dam had resulted in non-achievement, but a parallel process has been employed by the Department.

The DWS had been unable to create the 50 jobs targeted in the third quarter. Kalkvontein Dam was the only rehabilitation project completed out of five projects. Community unrest and a delay in the delivery of material was the reason for this. To stick within the rules of the Public Finanace Management Act (PFMA), projects had to be abandoned when new processes started. This meant that only 101 of the 1 105 maintenance projects had been completed. The majority of unachieved targets under the Regional Bulk Infrastructure Grant (RBIG) were due to the delays getting the contractors on site, or having contractors appointed. The Department was behind schedule with the bucket eradication programme (BEP), and needed to deal with 2 693 bucket system toilets.

Mr Mahlangu added that the dam at Hazelmere was 95% complete, so they had not appointed a new contractor to complete the remaining 5%. In Tzaneen, a key challenge was negotiations that were taking place with traditional leaders – this required leadership from the Department. The biggest challenge with the Clanwilliam Dam was the sluggish procurement processes. Mr Mahlangu took responsibility for this within the Department, stating that this area required a complete overhaul.

Programme Four: Regulations

Ms Thoko Sigwaza, Acting DDG: Regulations, took the Committee through Programme Four, which dealt with water sector regulation, and ensuring the DWS complies with national standards.

She reported that 58% of the five sub-programmes had been achieved. The establishment of the Water Economic Regulator had not been achieved because the Department had had to re-conceptualise the regulator. Going forward, a decision had been taken to review the establishment of the regulator and revert back to the Committee by the end of the quarter. The establishment of the national water infrastructure agency and the recovery plan was on the Minister’s priority list. A delay in the reconfiguration of the Catchment Management Agencies (CMAs) had resulted in a delay in meeting these targets, but these would be met by June. The establishment of the regional water and wastewater utilities had not been achieved, despite consultation.

Mr Mahlangu added that the programmes where targets were not met was where an institutional overhaul was being performed. More consultation was needed here.

Financial Performance Report -- April to December 2019

Mr Frans Moatshe, Acting Chief Financial Officer (CFO): Water Trading Entity (WTE), took the Committee through the detailed report on water trading.

The entity still faced challenges in recovering debts owed to them, so it had not met the 150 debtor day period target.  By the end of December 2019, the Department had spent 59% of the budget, compared to the 80% expenditure forecasted. The highest spending -- in Programme One -- was due to costs such as office accommodation and security. Contractual disputes, supply chain management (SCM) factors and the use of implementing agents were cited as reasons for lower spending in other programmes. The vacancy rate, as well as severe cuts to the Department’s budget, had accounted for under-spending under CoE. There had also been low spending on the Water Services Infrastructure Grant (WSIG) and the BEP.

The water trading account was lagging behind, as spending was relatively low. One of the deviations under economic classification was compensation of employees. There were investigations currently taking place with regard to irregular, fruitless, wasteful and unauthorised expenditure.  There were various commitments to payments amounting to R 4 283 million which would be paid to contractors but had been delayed due to the aforementioned contractual disputes.

Drought funding

National Treasury had been approached to re-allocate R2 555 million towards drought relief measures, of which R1 077 million had been spent by February 21. Re-allocations had been taken from various provinces via the Regional Bulk Infrastructure Grant (RBIG).

Provincial Analysis

Mr Moatshe took the Committee through an analysis of the provincial breakdown of conditional grants. Because of the under-expenditure of previous funds and non-compliance with the Division of Revenue Act (DoRA), a total net amount of R449.064 million could not be transferred to certain municipalities. Regarding outstanding payments to water boards, this would be done by March.

Discussion

Mr S August (GOOD) expressed dismay and concern about the report, commenting that the report for Programme One was only four pages long, and the report for Programme Three was six pages long. The Members had spent thousands of rands of public money to be at the meeting. The report did not state sufficient detail, such as the achievements of the Department per project. Surely project management was a problem in the Department, given the report was distributed to the Committee a day before the time? He found this unacceptable.

Ms S Mokgotho (EFF) raised concerns about financial management in Programme One. The Committee had been pleading with the Department since June 2019 to complete their work efficiently, but she felt the Department was deliberately dragging its feet. She was not “buying it” when the Department said they had to cut budgets, and asked why people were not being employed. Regarding Programme 3, about 50 jobs had not been created because of the Department’s inability to achieve its targets. There was also the issue of eradicating the bucket system, which was about restoring the dignity of people – this was non-negotiable. She asked what the delay was, as people were living in appalling conditions unsuitable for any human being, and this spoke to basic human needs.  She was concerned over bulk water projects not being delivered because the Department was not monitoring tenders. The issue of “procurement processes” meant the DWS did not have appropriate people who are able to properly appoint tenderers and deliver.

Ms L Arries (EFF) said that since the report was for the third quarter targets, it was expected that well over 75% of targets should have been met in this report. However, fewer than 50% of all targets had been achieved at the end of the third quarter. Under Programme One dealing with administration, there had been an absence of information on performance. It was unacceptable that until the time of the meeting, no vacancies had been filled, and she asked why this was the case. She also expressed concern over the R32 million paid to the Amatola Water Board, asking how municipalities could be supported to ensure their master plans were in order.

Ms G Tseke (ANC) said the Committee had not been happy to receive the presentation very late the night before, and requested the DWS to improve on that matter. She requested clarification on the report of the progress made regarding jobs created, as 50 jobs created was insufficient in relation to the budget allocated to this. She asked why the Hazelmere Dam project was at 95% completion, yet reportedly none of the targeted jobs had been created. She requested the Chairperson to demand a commitment to a deadline from the Department to respond to the critical vacancy situation. The Department was asked to elaborate on its under-spending on goods and services. The state of water infrastructure had to be discussed further, so that municipalities could also be taken to task. Why had two municipalities not submitted their assessments, since it was reported that 14 out of 16 municipalities have submitted theirs? She reminded the DWS that the deadline for eradicating the bucket system had previously been set at 2006, and extended to 2015 by the Department, yet in 2020 it had still not been fulfilled. The DG was asked to further discuss wastewater treatment and wastewater plants in the country, as more than R60 million had been spent on a particular treatment plant that was currently not working. Dysfunctional municipalities should be dealt with, as on the one hand many municipalities did not have the capacity to provide services such as water, and on the other hand, these services were desperately needed. She asked what the youth prizes were about.

Ms N Sihlwayi (ANC) asked when the Committee would see permanent positions, and no longer ‘acting’ positions, such as the DG. Programme Three was a cause for concern, as there was a lack of maintenance of contracts. Was there monitoring taking place outside of the intervention by the Department? It was also unacceptable that the Department was still asking for information on various situations, such as at the Vaal.

Mr M Mashego (ANC) raised concern regarding changes to the budget. Changes to the budget, which had been passed at a sitting, should not have been as simple as the Minister had done it.  This undermined the Committee. R16 billion given to the portfolio now had R13 billion remaining, with over R8 million that would not be allocated because the Department did not have the capacity to spend it. What did they mean when they said they ‘don’t have water’ for the poor, but others had a water surplus?  For example, just past Kimberly there was plenty of water which had been privatised. He said punishments should be imposed on municipalities which did not inform the Department about their performance, and have them answer. China was building a hospital in 10 days for the treatment of Coronavirus victims, yet in flashy offices in South Africa officials were still deciding whether to give communities water. It was a pity that the Minister or Deputy Minister was not in attendance at the meeting, as it had been asked what their role was in holding landowners and traditional leaders to account. What was the Members’ role, as elected officials, in engaging our constituents to deal with this particular issue? He requested a report on the demographic makeup of the construction companies. The DWS and the Committee should not fail to meet with SALGA. The discrepancies found in contracting processes were in fact instances of corruption.

Mr X Ngwezi (IFP) questioned why documents had been received late, asking that the matter be addressed. In a country with a high unemployment rate, why had posts remained vacant for so long? Communities had been asked to pray for water, but even when it rained, there was water that got lost. Perhaps it was time to consider water harvesting and include this in the next report. When would the Committee be getting the annual report? The matter of ‘acting’ roles should also be addressed. Approximately R600 million was left for the remainder of the financial year – would this be enough? Institutions of traditional leaders also played a role in unlocking the challenges that exist in the process, and this should not be understated.

Mr M Tseki (ANC) addressed issues of performance and expenditure, and said it was concerning that non-financial performance was at 29% and financial performance at 59%. He felt that the performance of the WTE was improving, but justifications for non-performance -- especially in the main account -- were unreasonable. For example, ‘delays of procurement’ and ‘Ministerial approvals in process’ created a narrative that was doing a disservice to the Department itself. The Department had gone ‘astray,’ and the Chairperson should help the Committee to ‘bring them back.’  He doubted that there had been progress overall since December. It was concerning that money had not been spent, despite grievances splashed in the media.

Ms N Sihlwayi (ANC) expressed dismay that promises made had not been fulfilled, and that there was little information on some issues which needed to be conveyed to poor communities in distress. When billions were allocated to communities, responsibilities could not be abdicated. The idea posed by the Committee in the previous year about a monitoring unit in the Department had been accepted, but nothing had happened since. She wondered whether the consultation plan worked, together with the strategy. Regarding the payments for capital assets, she requested clarity on why merely 31% had been achieved.

The Chairperson said she was “underwhelmed” by the report on Programme One. She told the DG that if he did not shape up the Department, he would sink with it. Abnormalities should not be reported as normalities. She pleaded for a culture of professionalism in the system. While the Committee understood the problems faced by the Department, their patience was diminishing. The report did talk about what would be done and what the expectation from the Committee was. A grey area that had been identified was that the support given to municipalities was not the same as the support given by COGTA. She agreed with Mr Ngwezi that an update should be given as to why the report had not yet been tabled, saying this would be helpful in keeping Members abreast with developments. She requested the Department to start with this, as it was also important because some municipalities did not have the capacity to log disasters with the Department. She re-iterated that Members on the whole were disappointed, saying the report indicated “more than a disaster.”

DWS’s response

Mr Shangana said that reports that were due to have been finished in August 2019 had been completed only in the weeks before they were presented to the Committee. The Trans Caledon Tunnel Authority’s (TCTA’s) report was concluded in January 2020, and the Water Trading Entity (WTE) annual report was concluded two weeks prior to the presentation. Their biggest concern had been that the TCTA, which was used to leverage capital from the private sector, would receive a disclaimer as the result of a limitation of information. It was explained that because of the relationship between these two entities, the TCTA and the WTE, the delay in the TCTA had cause a delay at the WTE, while being under extreme pressure from the Johannesburg Stock Exchange (JSE). Ultimately, it had been a painful process, which showed the need for restructuring within the Department.

The DG committed to bringing the lessons learnt before the Chairperson. He felt that as long as they continued with the duality of accounts, they would not go far. Further consideration regarding the management of the Water Trading Entity account was prompted. The two departments which had two accounts were the DWS and the Department of Public Works (DPW), which was better at managing control of these accounts. However, in the case of the DWS, the one account was influenced by what happened with the TCTA, and vice versa. The Minister had given the Department five months to come up with a credible proposal.

The annual report was ready and, once received, would be tabled within 30 days. 

Regarding consequence management, the DG admitted that perhaps the Department was not reporting to the Committee frequently enough about what they were doing. Currently, there were two DDGs that had been charged, with various forensic investigations in process under the internal audit unit. One DDG had been found guilty thus far. The DG felt confident that the process had taken its course. In order to receive condonation from Treasury, consequence management would need to run its full course. The current aim with running that process was to reduce the irregular expenditure.

Approximately five material irregularity letters had been received through the Auditor General (AG), which referred to the R9 billion of irregular expenditure within the Department. The Department had also bailed out the Mfuleni Municipality, which had been under Section 139 for the last few years, to the value of approximately R33 billion. COGTA had also disbursed R90 million to the Mfuleni Municipality.

Ultimately, as a summary of the Department’s financial position, fruitless and wasteful expenditure has increased. There are commitments that should be translating to expenditure, but there is low translation into expenditure. The DG acknowledged that the Department was facing huge problems, but felt they were surmountable.

The meeting was adjourned.