Intergovernmental Fiscal Review: Department briefing

Meeting report

LAND AND ENVIRONMENTAL AFFAIRS SELECT COMMITTEE
6 October 2004
INTERGOVERNMENTAL FISCAL REVIEW: DEPARTMENT BRIEFING

Chairperson: Rev P Moatshe (ANC)

Documents handed out:
PowerPoint presentation by Department of Water Affairs
Chapter 10: Intergovernmental Fiscal Review

SUMMARY
The National Treasury presented the Committee with budget projections until 2006/07 for each of the provinces. Free State, Western Province and Northern Province gave feedback on the current state of redistributed agricultural land and advances that have been made, as well as the problems being experienced in this area. Discussion around training and productivity also took place and a Member of the Eastern Cape reported matters that gave cause for great concern. Throughout the meeting, comment was made about the absence of the provinces at the meeting and the need for them to be there to answer serious questions.

In the afternoon, the Department of Water Affairs and Forestry responded to comments made in Chapter 10 of the Intergovernmental Fiscal Review, and commented on what was essential in the budget of water services. An overview was given of backlogs of water and sanitation delivery and the budgets and the transformation process in which the Department was currently involved. Water Services responded to concerns about the delivery of water and sanitation posed by the Committee. Water Services will now be a regulatory body with responsibility lying with municipalities to provide water. The challenges and concerns with staffing were presented with an attempt to transfer staff as opposed to making the staff redundant.

MINUTES

National Treasury briefing
Mr D Mogajane (Intergovernmental Relations Branch: National Treasury) said that they would be presenting agricultural spending trends in the provinces, as per the chapter on agriculture in their published documents: Trends in Intergovernmental Finances: 2000/01 to 2006/07.

Ms A Maheswari (Economic Services within Public Finance) then continued that the agricultural sector comprised of all activities relating to farming as well as processing and distribution functions. Besides being a significant contributor to employment, rural development and food security, the sector generated 3.5% of GDP in 2002. This figure included backward linkages with the manufacturing sector in terms of purchases of equipment and fertilisers and forward linkages through the supply of raw materials. Around 68% of agricultural output was used as intermediate products within the sector.

Ms Maheswari continued that the sector was divided into a commercial farming sector and a small subsistence and emerging sector, the latter being greatly responsible for poverty reduction in rural areas. The September 2003 labour force survey stated that the formal agricultural sector employs about 832 000 farm workers and 350 000 are employed through small scale and subsistence agriculture. This represented approximately 10.3% of employment in South Africa, which made it the second largest industry in terms of informal sector employment and accounted for around 10% of total exports.

Ms Maheswari added that agriculture was constitutionally a shared function between national and provincial departments, while land was a national function only. Other key stakeholders were farmers' unions, co-operatives, voluntary associations and NGO's. The national responsibilities were to formulate policy, establish norms and standards for delivery and to ensure equitable access and distribution of natural resources and support services.

Over the last year, an interdepartmental dialogue had taken place between the provincial departments of agriculture and treasury and the national Department of Agriculture and the National Treasury in order to assess the gaps in policy. This resulted in the Comprehensive Agriculture Support Program (CASP), designed to provide technical and infrastructure assistance to support emerging farmers and in particular the beneficiaries of the LRAD scheme. It was up to the provincial departments to implement these policies. State agencies that were involved were the Agricultural Research Council, the National Agricultural Marketing Council and Landbank.

Ms Maheswari pointed out that the provincial departments of agriculture were all structured differently, some stood alone and some were combined with other departments. The combined national and provincial budget had increased from R3 billion to R4.4 billion from 2000/01 to 2003/04 and was set to increase to R5.5 billion in 2006/07. The budget share allocated to the provinces had increased from 73% in 2003/04 to 78% in 2003/04. The provincial budgets would increase to R4.2 billion in 2006/07. This amount included conditional grants from the NDA for CASP and Land care. The transfers to emerging farmers were focused on aiding those who would be producing for the market and not only for food security. Land care projects would be directed at rural communities to promote the sustainable use and management of natural resources and to support infrastructure development.

Ms Maheswari said that expenditure growth rates varied among the provinces, averaging 9.5%. Limpopo, Eastern Cape, Kwazulu-Natal and North West accounted for 75.4% of total provincial spending on agriculture in 2003/04. A large portion of this expenditure was personnel costs, rather than being spent on agricultural activities, something that was slowly changing.

Compensation of employees had continued to increase nominally but had declined as a proportion of total agricultural spending. It nonetheless remained a challenge to reduce personnel expenditure, whilst expanding the skills base and redirect funds towards agricultural activities.

The non-compensation of employees comprised an increase from 28% in 200/01 to 43% in 2006/07, as a proportion of total agricultural spending and consisted mainly of the allocations for farmer support programmes. The intended impact of this spending was to develop and sustain small subsistence farming.

The largest part of the budget was therefore earmarked for Farmer Support and Development, which would increase from R1.5 billion in 2003/04 to R1.8 billion in 2006/07. The rest would go towards administration, technology research, development and veterinary services. A large part of the Eastern Cape's administration cost went towards the payment of supernumeries.

Ms Maheswari commented that it was difficult to compare productivity among provinces because the reporting system was not standardised. This was a challenge for the future.

The farmer support and development programme accounted for 23.3% of the national agricultural budget in 2003/04, followed by regulatory series. These included controlling risks associated with plant and animal diseases and the use of genetically modified organisms.

Other programmes served to introduce policies to increase productivity and profitability and to mitigate climactic impacts, while expanding and transforming the sector. Agricultural Trade, Business Development, Economic Research and Analysis, Agricultural Production and Programme Planning and Monitoring and Evaluation were some of the programmes aimed at these objectives.

Ms Maheswari said that the budget for Land Affairs included funding for redistribution and restitution. Redistribution grants would increase from R156.6 million in 2000/01 to R614.4 million in 2006/07. Restitution funds would increase from R265.1 million to R 1.4 billion over the same period. The Department aimed to finalise restitution claims by December 2005. The funds for restitution would then be redirected to the LRAD programme, being the key programme through which redistribution occurred. This process of land reform aimed at the redistribution of 30% of agricultural land (24.7 million hectares) by 2015. Over the last ten years 3.3 million hectares had been transferred, of which 1.5 million ha was redistributed, 810 292 ha was transferred through restitution and 773 000 ha was state land mostly under long-term leases to emerging farmers.

By February 2004, 48 463 claims had been settled at a cost of R1 billion and R1.7 billion had been paid out in financial compensation, mostly in settlement of urban claims. There remained 31 231 claims outstanding, most of them being in urban areas and mostly in the Cape Town and eThekwini metros. Funding would be available after December 2005 for possibly untraceable claimants or claims highly disputed. The process would be expedited by the amendment to the Restitution of Land Rights At in 2004, which enhanced the expropriation rights of the Minister in the public interest. This allowed for expropriation of land without a court order or the agreement of the farmer.

The Land Redistribution for Agricultural Development (LRAD) programme was the primary mechanism used by the Department of Land Affairs in conjunction with the NDA for the redistribution of land for the purposes of commercial production, food safety and co-operatives. The programme has benefited some 23 400 households and has transferred 1.7 million ha through redistribution and tenure reform programmes. The redistribution has varied across provinces, largely occurring in the rural provinces such as the Eastern Cape. The scheme was implemented through grants assisting the transfer of agricultural land to individuals or groups and through commonage projects, which increased access to municipal or tribal lands for agricultural purposes.

Future challenges faced by Land and Agriculture were dealing with bottlenecks in delivery. The subdivision of large plots of lands was a key issue, as large groups of people often bought land in order to have access to funding. Clearer guidelines for subdivision were needed. Improved dissemination of technology and access to retail and wholesale financial services for farmers were further challenges for the future.

A balance had to be maintained between supporting historically disadvantaged individuals and sustaining the commercial sector's competitiveness in order to maintain a secure food supply during transformation. It would require increased co-operation and provincial expenditure had to be channelled into training low-skilled staff. Standardised reporting systems for effective monitoring and evaluation needed to be developed.

Discussion
Rev Moatshe re-affirmed the importance of the need for food security.

Mr T Ralane (chair of Finance in NCOP) commented on the presence of the largest number of unskilled staff in the Department of Agriculture and that the MEC's of these departments were perhaps not sufficiently aware of the challenge facing them, especially since they were absent from the meeting. He welcomed the progressive increases in the MTEF. In view of the high percentage of budgets being spent on personnel, Mr Ralane suggested an incentive programme whereby the extent of the expenditure on personnel would be more warranted and less of a problem. He asked whether the National Treasury could give any indication of whether sustainability and specific outcomes were measurable in term of monies spent.

A Member said that national and provincial representatives should have attended the meeting to answer political questions, such as what strategies were being implemented in the province to increase profitability and productivity. He asked what measures were being taken to capacitate and train people in this sector and whether monies were specifically allocated for this purpose. He asked if Land care projects were supported throughout all provinces and if so, were they sustainable. The Member also asked for elaboration on the amendment to the Restitution of Land Rights Act.

Mr Danie Botha (NCOP Select Committee of Finance, Limpopo) asked whether the budgetary allocation for agriculture was sufficient, considering it circumscribed the poorest of the country's population. Agriculture accounted for 75% to 80% of people's livelihoods in Limpopo. He asked where funds would be coming from for the balance of claims. He said there were claims dating back to 1996 in Limpopo, where there was a willing buyer and seller, which to date had not yet been finalised. It was his contention that this was due to lack of funds. Furthermore the farmers of land, which had been gazetted for redistribution, were being constrained from continuing to develop their farms, because banks would not finance them. Commercial banks were not willing to take the risk. He said that there was not sufficient financial support being given to emerging and new farmers. The Landbank only provided support for 30% of total applications made. He questioned where the funds would come from for the further redistribution of 21 million ha over the next ten years.

Mr R Tau (ANC Northern Cape) referred to a presentation by the National Treasury on Monday, where Members were asked to hold their questions over until they could be directed at the Department of Agriculture. It was therefore regrettable that the relevant departments were not present, since Members wanted to ask how monies had been used to positively impact on the lives of people. He commented that agriculture was not receiving enough funding in view of its importance and especially in aid of agrarian reform. The tendency of creating elites through programmes like Agri BEE, rather than broadening participation and training the unskilled needed to be addressed. He also questioned whether expropriation was advisable, as opposed to buying the land outright, considering the cost of expropriation.

Rev Moatshe said the matter would be investigated to determine why the departments were not present at such an important meeting.

Mr M Robertsen (ANC Social Services EC) commented that in the Eastern Cape the same consultants and contractors often received work and that over the last two years they had become very wealthy. This was a cause for concern because these consultants were paid their fees up front out of the monies allocated for certain projects. This often resulted in the project being abandoned due to lack of funds. Mr Robertsen mentioned an example, where four centre pivots were standing on a piece of land unused because the money dried up. Similarly certain contractors tend to get most of the work in the Eastern Cape. He mentioned that from the Department's side, their part in stalling certain food production projects last year, resulted in maize being planted too late, leading to the failure of the project. Regarding infrastructure and irrigation schemes in the former Transkei, he mentioned instances such as 30 wheat combines, 75 tractors, dairy turnstiles and other farming equipment standing unused and having been vandalized. He mentioned a scheme, where the railway line that would be required to access that scheme, as well as the main railway line between East London and Queenstown, had been destroyed. This scheme had 2700ha under irrigation. The citrus area of Fort Beaufort also had a similar infrastructure problem. Although the project was being resurrected, the railway line was gone.

Ms B Dlulane (ANC Eastern Cape) suggested that these matters should be presented to the Department of Agriculture and not in their absence. She was concerned that this might be a futile exercise, since these were serious matters, and asked what would be done to prevent these questions from going unanswered.

Mr J van Rooyen (NCOP) stated his concern and displeasure at the absence of the departments to answer questions that he had prepared especially with regard to the Auditor General's report around the agriculture credit accounts.

Mr Ralane said that the departments from the Free State, North West and Western Cape were present.

Mr Mogajane stated that with regard to the several requests for greater budgetary allocation, the total of R330 billion had to be divided into R50 billion for servicing debts and the balance had to be split vertically among the provinces. The nine provinces then had to distribute the remaining R170 billion on an equitable basis. Limpopo received some R15 billion, which was split according to national and provincial priorities, as well as taking into consideration the President's State of the Nation address. National Treasury had no control over these matters.

He said the provincial growth development plan of Limpopo consisted of agriculture, mining and tourism, out of which agriculture came first. Considering that spending in Limpopo had increased from R656 million in 2000/01 to about R1 billion, this was substantial in comparison to any of the other provinces. Regarding the powers given to Treasury to monitor and implement budget and expenditure, Mr Moganjane said that the Intergovernmental Relations Branch spoke to various provincial treasuries in questioning their effectiveness in spending in terms of strategies passed by their own various provincial legislatures. Based on these strategies and budget plans, Treasury would hold them accountable. Provincial legislatures should be using processes that were in place. Treasury had also encouraged provinces to look at their efficiency of spending and not necessarily the impact of that spending, as it had become obvious that in many cases budgets were not being spent on core activities and objectives. He said that the application of the funds allocated was key in solving the perceived insufficiency of funds, since resources would always be limited as opposed to being unlimited.

Ms A Maheswari said that the non-standardised method of reporting for non-financial information made it difficult to assess quality of expenditure. For example, in terms of veterinary series, there were discrepancies in ways of reporting and therefore no standard for comparison. It would also require a significant investment into monitoring and evaluation of what was happening in each province; something that would have to be established by the provinces themselves.

Incentives could only become meaningful once the relevant personnel had the skills to deliver the series on which they could be measured. She said that questions regarding training of personnel would have to be tackled by the provinces, especially in light of the fact that the bulk of the budget in all the provinces was going towards the compensation of employees.

The Land care programme was implemented through the Sustainable Resource Management programme. Each of the provinces was allocated an amount for this programme and should therefore be implementing the Land care programme. The amendment to the Restitution of Land Rights Act had been initiated by the Commission for Land Rights and was specifically meant for restitution. In several instances the negotiation process had failed and claims could not be settled, necessitating the need for expropriation powers. This did not obviate the need for any process as it could only be resorted to once all else had failed. The amendment simply excluded the requirement for the Minister to go to court.

Land claims still waiting to be settled consisted of claims for restitution and not redistribution and of these about 80% were urban claims and 20% were rural claims. The claims awaiting settlement were mostly urban. Land Redistribution for Agricultural development (LRAD) was introduced in 2001 and had replaced the Settlement of Land for Agriculture Grant system (SLAG). The allocation for LRAD had increased significantly in the past years and had proven effective.

Rev Moatshe asked for greater clarity on the mechanism behind rollovers.

Mr Mogajane said that most rollovers were catered for by adjustment budgets, which were usually passed around November, in order to reflect those rollovers. Provinces were usually quite strict about rollovers and they were usually allocations of conditional grants, which were intended for a very specific purpose according to the grant. Provincial treasuries loosely monitored the reasons behind rollovers and would allocate only to those departments that would need the funds and depending on priorities. In some cases departments rolled over funds due to lack of capacity to spend and sometimes these rollovers occurred over a number of years. It was the provinces' prerogative to decide whether to reallocate funds to where it could be spent. Whether or not money allocated for conditional grants not being spent, should be reallocated to provinces that were spending it on conditional grants, was a question currently being addressed.

Free State Department of Agriculture briefing
Mr William Barnes (Head of Department) said they wished to comment on some of the key issues in the report by Treasury. Most of the report was relevant to the Free State province and had proved to be useful in providing strategic guidance. Agriculture contributed about 9% of the GDP of the province and was critical to the province. A World Bank study had indicated a client base of about 320 000 farmers and farm dwellers. The Department had established networks with all relevant stakeholders and other departments and donor agencies. They had collaborated with other government Department in serving on various cluster projects, such as the job creation cluster.

The Department was struggling to control and prevent most animal diseases, as its veterinary budget of 42% was barely sufficient. He asked that this part of the budget be reviewed, as important functions such as dipping could no longer be provided by the government. Foot and mouth disease had so far been kept out of the province and twenty of its officials had assisted with the treatment of the disease in other provinces. Unauthorized movement of animals and animal products into South Africa from Lesotho was being controlled by cooperation between the respective departments. Ongoing discussions with Lesotho were proving invaluable.

Most of the former homeland areas had subsistence farming and was part of the rural development programme. Home gardens had been established in these areas. Food security programmes had been launched in December 2002, but no funds had been received from Treasury thus far. Thabanchu was seeing a development in wool sheep farming. Shearing sheds were being built across Thabanchu. Livestock faming would be improved by infrastructure enhancement and training.

To date 120 000ha had been transferred from white to black ownership in the province, initially through the SLAG programme and later through the LRAD programme. State-owned land was being redistributed at present. So far seventeen so-called power-of-attorney land units had been transferred, while seven more awaited transfer and nine more awaited transfer as soon as the legal entities had been registered. The province had a large proportion of such land. Mr Barnes commented that the provincial Department of Land Affairs was financially constricted to carry out its function of redistributing land according to the targets set.

The Community Project Fund (CPF) was a donor fund in the province, which had been redirected in 2003 to agricultural development. The donors were the EU. The funds were being used to assist existing businesses set up under the SLAG and LRAD programmes. He said many farmers had bought land and now could no longer qualify for the LRAD grant to off set loans from LANDBANK. This had resulted in farmers selling off parts of their land to family members in order to access the LRAD grants. Problems with SLAG projects where that too many people were on one piece of land and this needed guidelines for resolution. Mr Barnes said there was an initiative in the province, which introduced the commercial farmers to the new emerging farmers and a good and co-operative relationship existed between the commercial farmers and the new farmers. He mentioned a number of other initiatives in the province to train the new generation in agriculture.

Briefing by North West province
Mr H Groenewald (DA Member of the NW legislature) said that the land reform process was on track, but people required more training and equipment. He said the older farmers around these new farmers were quite willing to provide assistance. He mentioned two farms, one of 25 000 ha occupied by 10 000 people, while only 150 ha was being farmed. There were only three tractors on this farm and if it were not for the diamond field on this farm, the occupants would be in financial trouble. They had also bought 25 head of cattle and were working on a lodge and would be placing game on the land. Mr Groenewald said that despite these positive attempts the number of people on the land was too great and often the occupants questioned the benefits they were supposed to be deriving from the farm.

Skills and equipment were required. A farm that had recently received media coverage, illustrated an instance where a farm was heading for bankruptcy and despite this consultants had recommended it as a good purchase. These consultants were well paid and yet had made incorrect decisions. Despite this, the Department remained positive and recognised the need for agricultural and financial skills and support.

Briefing by Department of Agriculture, Western Cape
Mr P van Rooyen, head of Department, mentioned that the Western Cape was unique by way of climate, with most crops being produced under irrigation. Most of the country's milk, vegetables, fruit and wine came from the Western Cape. The province exported 55% to 60% of all agricultural exports in the country. This meant they were faced with increasing demands from importers, which required research and skills to be transferred to the farmers. This necessitated highly skilled technical people. There were about 8 000 white commercial farmers, about 5 000 LRAD beneficiaries, 2 000 existing coloured farmers, 200 000 farm workers and 20 000 food garden beneficiaries. The budget was about R223 million this year. The Department had no supernumeries and had about 900 staff.

Ms J Isaacs (Dept Agriculture WC) said a process had been initiated to establish the criteria for success on these farms in the WC and as soon as this model was defined, it would be put to use. Currently the state of fallow state land was not suitable for handing over to black farmers and would require phased rehabilitation. None of the water rights on this land had been maintained. Personnel were being appointed to train others and a further 30 to 40 people would be appointed as agricultural community development workers to start encouraging people to choose agriculture as a career path. The province had been allocated R13.6 million for CASP and had received R200 million worth of applications. There were three sources of conditional grants, which had complicated matters. An internal audit had resulted in one single cycle process. Currently the programme supported about 109 projects, 28 food security projects and the rest were mainly LRAD projects. These consisted of existing projects, which required further capacity and new projects. Ms Isaacs said that the departments needed to remember that the farmers were their clients and that they should remain accessible and that personnel had to deliver.

Mr T Ralane asked for confirmation of the finalisation of the restitution process. According to the report, the Free State was not making full use of the veterinary services available to it, while on the other hand stating that they did not have sufficient funding. He asked for clarity on the number of female-headed households in the Free State.

Mr Kolweni (Select Committee on Finance, NCOP) said that in view of the demand for training, there seemed to be no specific allocation earmarked for this purpose. He said that current curricula were not conducive to encouraging youth to enter farming and that perhaps the Department of Education should be involved in changing this.

Mr Barnes said that the Department would fast track the 144 outstanding rural claims. This was not going to be easy and they had seconded six permanent staff and nine interns from the Department to the Land Claims Commission. They had set money aside for the settlement of claims. An action plan was in place and the MEC was also part of the process. The Department did not previously have the capital budget, but now they had CASP and EU funding. The province definitely had female- headed household farmers and the national winner came from the Free State last year. Mr Barnes said they had received a conditional grant, which previously could only be used in certain towns. This had been revised and mostly livestock had benefited from the grant.

Mr van Rooyen said that the Western Cape had excellent veterinary services. In one year they had inoculated 55 000 dogs against rabies. Vets in the province had assisted other provinces with the accreditation of their laboratories. Approximately R20 million had been spent on veterinary services. The Elsenberg Agricultural College had been changed to the Cape Institution for Agricultural Training, which provided for tertiary training and further skills upgrading. Campuses were opening in George, Morreesburg and Oudtshoorn. Courses were also offered in situ. New hostels were being built at Elsenberg. The province had a programme of going to schools to promulgate agriculture as a career as well as a young professionals programme, where black honours students were approached and offered bursaries to do their master and Phd's. The Department had given bursaries to eight students per year and had so far helped eighteen students. The number would be increased to twenty per year. These were top class students, one of whom was already mentoring others along the same path.

Mr van Rooyen mentioned a three- province project between the Eastern Cape, Northern Cape and the Western Cape. Together they had approached foreign donors and as a result would be receiving substantial funds from the EU to upgrade laboratories, soil and water laboratories and computerised decision-making models to test policy options.

Ms Isaacs said the province had 60 agricultural claims and were not dispersed. The Department would only get involved once the negotiation was complete. In terms of the restitution process, the validation and registration would be completed by December 2005, although the process would still extend beyond that. She said females headed most of the food security projects in the province and that most of the LRAD beneficiaries were female. It just depended on how data should be reflected and in which context it was being requested.

Department briefing on backlogs
In the afternoon, Mr H Muller (Manager: Water Services) explained the current situation regarding backlogs in provision of water and sanitation to all areas. The sanitation backlogs were worse than the water backlogs. He provided figures for the size of the water sector and the budgets. The Department had now become a regulatory body with operating support being phased out. Capital funds had also been phased out to municipalities. He explained the challenges facing the sector and the areas that needed immediate attention. See presentation.

Discussion
Mr T Ralane (ANC) asked if the Department had checked the audit done by the Auditor-General's office. He also asked if the Department had been able to do a capacity audit of municipalities particularly in terms of the transfers of staff. He pointed out that there were many capacity problems in municipalities and was it feasible to transfer the provision of water at this stage. Mr Ralane then asked about the staffing costs and salary scales of the water boards. The bigger water boards were paying less than the smaller water boards. He asked about the norms and standards regarding this. He also asked if there would be a problem in salaries regarding the transfer of staff. He added that the fact that some municipalities paid more than others would add to the problem of transfer staff salaries.

Mr Muller said that he could not answer about the salaries paid by water boards. It was the aim of the Department to regulate water boards better. They were planning to look into what municipalities were paying.

Mr M Mzizi (IFP) referred to the support that the Department wanted to give local government. He raised the issue of financial sustainability of basic water services. Free basic water was still a problem in water services. Free basic water was a service that was expected countrywide. He asked how the Department could assist municipalities in this regard. He also asked what criteria were being used to profile a recipient of free basic water. Mr Mzizi raised a concern about farming areas and access to irrigation. People did not have access to rivers running through farms. How was the Department assisting the public for purposes of irrigation, he asked.

Mr Muller said that regarding support to local government it would not be the Department who put in the pipes for water. It would be the municipality and that this would now be part of the municipal budget.

Rev Moatshe wanted to know about the shift of responsibility to municipalities. Did this now mean that water was no longer a national responsibility as it appeared the Department was pulling out, he asked.

Mr Muller said that the chairperson was correct. The National Department was pulling out because the Constitution said that water responsibility was a function of local government. National Treasury had said that the Department had to stop doing the function of local government. Sanitation did not get enough attention at municipal level and the Committee should look into that. He said that the role of support was co-operative governance and the Department had to provide support in planning. Mr Muller said that if the public wanted information about free basic water there was an Internet page on each local government site. He appealed to the Committee to pass on complaints or concerns so that the Department could investigate these. They had support teams to assist with this. Free basic water was managed through equitable share and cross subsidisation.

Mr Kolweni (ANC) congratulated the Department for playing the role of a regulator. He asked for a list of specific projects being done in the Eastern Cape in order for the Committee to include the sites on their provincial visit. He then asked about the problem of unequal charges and how the Department would harmonise charges as a regulator. Service delivery was also raised as a concern and the Member asked how the Committee could assist in this regard.

Mr A Watson (DA) pointed out that financial management remained a concern. What had the Department done to rectify the weaknesses pointed out by the Auditor general and how much progress had been made. He said that a municipality had received authority from the National Treasury to borrow R22 million. He asked how they were going to borrow this money. He also asked how salary overpayment was still possible. This spoke to the internal weaknesses of the Department and he asked what progress had been made.

Mr Muller said that regarding the audit the director general and the chief financial officer would come and present on those issues. He pointed out that as a manager the Department had taken the issues very seriously and the Department was working on them.

Ms F Nyanda (ANC) raised the issue of service providers not being paid for projects completed. Service providers had complained that they were always paid late. She also raised the fact that there was no water in Mpumalanga and how far the project to build a pipeline from Pretoria had progressed.

Mr Muller said that there was no straight answer for Mpumalanga. Through institutional reform the Department might be able to find suitable service providers. The pipeline was under construction. Rand Water had been concerned about payment. He assured the Committee that the Department had flagged this as a serious concern.

Ms H Matlanyane (ANC) said that local municipalities had complained about the water authorities and the red tape that existed which had resulted in a culture of distrust. She asked for clarity on what the red tape was and how the Department was helping in the situation. She also raised the issue of sanitation in rural areas. There were concerns that pit latrines were causing water borne diseases. She asked how fast the Department could ensure viable safe sanitation in these areas. The lack of water in rural areas was also raised as a serious problem. The Member wanted clarity on the crisis.

Mr Van Rooyen (ANC) said that the problem with water was a case of the haves and have-nots. He gave an example of Gauteng worrying about free water yet in other provinces there was no water at all. He raised the issue that some people are selling water in these areas, which was wrong. He raised the issue of the pipeline being built in Mpumalanga that had not amounted to anything. Mr Van Rooyen wanted to know exactly what the Department would be doing as regulators and what could the Department say about areas where there was no water. He wanted to know how they planned to get water to these areas and what progress had been made.

Mr Muller said that the Department would build capacity as regulators to monitor.

Mr Van Rooyen said that the issue of the pipeline by Rand Water and the water being controlled by districts needed crucial intervention. It had to be top priority.

Ms B Dlulane (ANC) asked about water and sanitation tables. Category B municipalities should have been given more money because they were not metros with big infrastructures and therefore she wanted to know what motivated the decrease in the budget. She said that some municipalities did not have the capacity to take on this responsibility and what was the Department doing about that. She also asked if there were irrigation water boards at local, district or national level. On the question of staff she wanted to know if the Department planned to transfer staff to municipalities that did not have capacity.

Mr Muller said that municipalities could appoint service providers to deal with water. If the municipality had no capacity they could bring in other assistance. He also said that irrigation was a water resource issue. All he could say was that the public had to have licenses if they wanted to irrigate. Regarding the metros in the budget (table 10.5) the biggest portion of their money came from their own revenue base. He admitted that staff was a huge challenge. The Department was engaging with the issue. They had a principle not to lay off any staff but rather to retain and transfer. They were also talking to labour unions.

Mr F Adams asked about the Water Research Commission and backlogs. He wanted to know if the Department was using the Commission to do research. He wanted to know what role DWAF was playing.

Mr Muller said that the Department had a close relationship with the Water Research Commission. He said that they had to respond for themselves.

Mr G Snell (ANC) asked how the Department was looking at balancing new infrastructure to deal with backlogs and how they would sustain access to water in the years to come.

Mr Muller said that water resources would see 21 new dams being built. They were looking for other avenues to provide water.

The Commission said that they were dealing with the same questions. It was explained that they were not implementers but rather developed tools and capacitated local government. They offered to make research done on the issues raised available. The Commission agreed that sanitation was a serious problem and shared the concern of handing over water services to municipalities. They offered their services.

The meeting was adjourned.