Hon Chairperson, hon Minister, hon Deputy Minister, hon members, our esteemed water sector family, comrades and friends, ladies and gentlemen, may I extend to all of you, on behalf of the Portfolio Committee on Water and Environmental Affairs, a warm welcome to this annual debate of the Budget Vote of the Department of Water.
I rise on this occasion on behalf of the ANC and hopefully the whole portfolio committee in support of this 2013-2014 Budget Vote allocation to the department. In the past few years the portfolio committee reported that we were dealing with a department which was terminally ill and in deep trouble, facing a myriad of major challenges, each of which could on its own be crippling to any kind of recovery, but collectively almost seemed intractable.
Firstly, we were faced with a serious leadership crisis at senior management level, as most of the top leadership of the department had either been suspended pending a disciplinary hearing or were under investigation, removed from performing certain tasks because of alleged acts of dishonesty, mainly during procurement processes. The leadership crisis, which created huge instability and uncertainty in the department, for all intents and purposes is something of the past, with a last few issues which require wrapping up.
Secondly, the financial management system of the department was either nonexistent or seriously dysfunctional, meaning that the main account had received a qualified audit report for a few years, whilst the Water Trading Entity had received a disqualification on its audit report for many years in a row. It was understandably with great elation that the portfolio committee learnt last year that the department's main account and its WTE account had turned their financial management around to the extent that both accounts had received an unqualified report with many matters of emphasis. Happily, we can announce that this positive trend has continued and even became better this year with the accounts still being unqualified, but with fewer matters of emphasis. [Applause.]
Thirdly, many aspects of the department's core functions were being crisis- managed, some facing serious degrees of serious dysfunctionality. I have dealt with some of those extensively last year and do not wish to do so again this year.
It would therefore be understood that the portfolio committee approached this year's budget hearings with some trepidation, not knowing what to expect. Would the positive upward curve of last year have strengthened and deepened, or would matters have gone backwards again? I can happily and unequivocally report that our engagements with the Minister and the department have been robust, honest, open and transparent, with the department being forthcoming to engage on its weaknesses, challenges and even mistakes. In fact, this year I found the hearings even more useful, productive and encouraging as we were able, for the first time ever, to engage with the methodology of the department in setting its strategic goals and performance targets.
I can unequivocally state that the portfolio committee was pleasantly surprised with the depth and understanding of the vision and professionalism of the input the department placed before us. If the department can deliver on this vision, then the future of the water sector looks rosy and is something to look forward to and to be achieved in all haste. It is in this context that the portfolio committee further acknowledges that the definite, positive, upward trend in the work and the activities of the department it discerned last year has deepened and even strengthened this year and pledges to remain in partnership with the department to progressively and decisively move towards operating at its optimal abilities to serve the nation and our people in creating an efficient, effective and sustainable water sector, which delivers on the developmental needs of our country.
Let me also at the outset thank my long-suffering committee. This committee is one that works very hard. As you know, it is the only committee in Parliament that actually oversees two departments and not only one. So, we do double the work, but we get the same salaries as everyone else. [Laughter.] I firstly want to say that every single member in my committee, across party lines, is extremely diligent and attends the extra meetings that we have over and above other committees, and that their participation is vigorous and at all times of the highest standard we expect.
I particularly want to emphasise here the intellectual vigour with which our committee tackles the issues but, more importantly, the intellectual honesty which is displayed in tackling the issues, while still remaining true to the mandate from their parties. It's exemplary the way that all parties in our committee deal with these issues intellectually in a very honest manner. I really want to thank all the leaders of all the parties in the committee. I owe them a debt of gratitude for working so hard, for making my life much easier and supporting me in what we are trying to achieve in the committee.
I particularly also want to thank Mr Gareth Morgan, who you know has taken a leave of absence from Parliament, for his excellent leadership in the committee and for his huge endeavours in contributing to making this department much better. I also want to congratulate his substitute, hon Rodgers, for the tremendous way he stepped into Mr Morgan's boots - and he is already acting like a veteran in the committee.
Lastly, of course, we want to thank the Minister, the Deputy Minister and the department for the excellent manner in which they engage with us, always being available to provide us with any information we need and always prepared to listen to whatever suggestions we may have.
I want to start this year by saying something about our research capacity in water science and water technology. It is clear that, as a water scarce country, South Africa's water challenge is a complex one. It should also be clear that South Africa's ability to successfully meet its water challenges will have an empowering effect globally, particularly in Africa, as we engage the uncertainties of climate change and weather variability with an increasing occurrence of flood and drought events, with ever greater intensity. At the centre of our ability to ensure that our new strategy results in genuine improvement in the lives of our people is the development and use of very good and relevant water science and technology. South Africa has the unique benefit of a national water research agency, our Water Research Commission, WRC. Both the chairperson and the CEO are here - you are welcome. The Water Research Commission concentrates the efforts of the South African water research community's efforts on keeping South Africa's water science on the cutting edge internationally and relevant to the country's needs. Water science in South Africa is highly productive, ranking 19th in the world on the ISI index and producing 1,69% of ISI papers globally.
This indicates that our laboratory knowledge is not only good but world class. The challenge that we face, and we have been very explicit with the Water Research Commission during their briefings to Parliament, is to make that knowledge much more accessible to our people, to the real economy and for the achievement of government's goals. We are happy to say that there is a positive response in terms of the WRC's Knowledge Tree concept that details the connection between water research and the outcomes of the impact thereof. We are also pleased to see the expansion of partnerships with other government departments, the private sector and civil society in this process. We are also aware of the fact that the valorisation of research and the realisation of innovation in products and services in the real economy require serious investment.
The journey from the lab benchtop to the farm or factory floor or to government projects requires large investments. I would like to urge both government and the private sector to contribute to the further strengthening of South Africa's water science, technology and innovation through partnership and investment.
As members are aware, after two decades of democratic government in South Africa our department is in the process of reviewing its policies, its legislative framework, and the National Water Resource Strategy, NWRS, against the lessons learnt in the past two decades. In this process, various policy issues have come under review and I wish to air the portfolio committee's engagements and views on these issues. How often do South Africans across party lines and across other differences say, we have very good policies in government but implementing these policies is our problem? The water sector is no different. There are many reasons for this challenge in the water sector, but I want to share some ideas on what I regard as one of the biggest reasons for this problem in the water sector.
Common wisdom in political philosophy circles is that the division of state power and the performing of state functions at the lowest level of government possibly is good and should be encouraged. Although I agree with this general principle, in the real world we must also be aware that the unintended consequences of the fragmentation of state power could be debilitating for efficient and effective provisioning of government services. It is important that each country gets the right balance. The water sector in South Africa, I will argue, is such an example where the consequences have a debilitating impact.
In my view the unintended consequences of the fragmentation of state power in the water sector, arising from our constitutional framework, and funding model, and other choices we have made in respect of our governance and institutional framework in the water sector, is a huge debilitating factor in achieving our goals and policies in the sector. I am not going to go into the whole constitutional dispensation, but you will understand that water is mainly a national competence to a large extent. But there is also the unusual provision in our Constitution where part of the water competence is given to local government to operate within a certain framework, particularly water reticulation.
What you have in South Africa is a situation where there are policies and all the legal frameworks are designed at one level, which is the national level of government, but where the implementation of those policies is fragmented across a whole lot of governments, which is the national department plus at least more than 275 local governments. We then have 280 governments that implement, plus a whole lot of agencies, 12 water boards, two catchment management agencies, and the TCTA and other agencies that are created. There is this whole fragmentation of state power, where we have pooled the policies together in one level, but we then fragment implementation and the funding of those policies, to lower down. Even if, say, 250 of your municipalities act perfectly capacitated in terms of the provisioning of water services, if the other 50 do not do it, then you have a crisis. That is really what we are dealing with here, when I talk about the unintended consequences of the fragmentation of state power.
Obviously in the short term there is not much we are going to do about this. We are not going to change the Constitution or the legal framework. What do we do, then? It is very important for us to be able to ameliorate these unintended consequences of the fragmentation of state power in our sector, by developing government tools and mechanisms to allow for the maximum co-ordination and management of all implementation agencies in the water sector to operate as one vehicle to achieve the goals of our policies and our constitutional legal framework in the sector.
There are at least two areas which I'm going to raise today which need immediate change. The first one is the funding model that we use in this whole fragmented implementation system that we have. As far as local government is concerned, you know the local government funds itself to a large extent on its own and then gets part of an equitable share from National Treasury. The problem with the equitable share, although some of the money is set aside for water services, is that there is no obligation or condition that the municipality should spend it on water services. So, when the municipality sets up its budget, whatever we've agreed nationally, the money should go towards water services, but if they don't want to spend it on water services, so be it.
We have a big problem, particularly in weak local governments where there isn't a capacity, where they don't have a financial base of their own and where they don't have financial statements against which they lend money - those municipalities just go backwards and backwards. Also, our funding model for creating water infrastructure doesn't facilitate them dealing with that, because as political pressures on that municipality mount, they spend that money elsewhere, because there is no obligation to spend it on water services.
We have engaged quite a lot with the Treasury about these issues in the past two years, and we are very happy to say that we've seen a new trend in the manner in which we are funding water services in local government. You will see that Treasury has turned more and more to the use of conditional grants, which we have advocated very strongly. You must make sure, if you are planning nationally, that so much must be spent on water infrastructure and water services, that it is actually spent by the different levels of government and the different implementation agencies on what we've asked them to spend it on. You will find that there are original regional bulk infrastructure grants, RBIG, and the latest one, the municipal water infrastructure grants, MWIG, which are the kinds of grants and the kinds of conditions that are now starting to shift our spending models and, hopefully, we can start getting our agencies to pull in all these implementation agencies, about 280 or 300 of them, to all push in the same direction to achieve our policies and our water goals.
The second issue is to try to create centralised planning of our water infrastructure. I mean you get the absurd situation that one agency who must provide infrastructure from here to here would make plans, would get a budget and do so. But the next agency from there then has to create the infrastructure to the end user, but hasn't got a budget and hasn't made plans for it. So, you put in one part of it but you don't do the other part. It is very important that, although each agency keeps its powers and its functions, we start centralising the planning around the provisioning of infrastructure. When we make the plan centrally we must make sure that the implementation takes place at the intended levels. There are a lot of issues we as the committee have discussed in this respect. We can share them with you, but time does not allow that.
Water boards are water utilities, which provide certain water services to mainly municipalities, when they are requested and contracted to do so, for example, mainly providing bulk water to municipalities, some provisioning of infrastructure and some other water services. As the hon Minister said, there are 12 of these utilities, but if truth be told, only a few of these boards are self-sustaining and have an independent economic viability, with only Rand Water and Umgeni Water being long established. In fact, Rand Water is older than 100 years, and emulates our large corporation-like entities; while Lepelle Northern, Mhlathuze, Sedibeng, Bloem, and maybe Magalies Water Boards have real potential to be economically self- sustaining if we increase and change the mandate; whereas Pelladrift, Overberg, Botshelo, Amatola and Bushbuckridge, in their present form, are either terminally ill or have little such potential.
A few figures should suffice to underscore this prognosis. Of the 2,5 billion kilolitres of bulk water sold last year, 2 billion was sold by Rand Water and Umgeni Water. Of the R2 million spent on Capex projects last year, R1,8 million was spent by Rand Water and Umgeni Water. Of the R1,7 million surplus shown on the financial statements of the water boards last year, R1,37 million derives from Rand and Umgeni Water. It is not very difficult to see; you don't have to be a genius to work out that these two water boards really carry the bulk of what happens in the sector. The financial management of these institutions is relatively healthy; most of them, except for two, are in good health; Botshelo and Amatole are really in bad shape.
To further exacerbate matters, some of the worst performing water boards have huge amounts of arrears owing to them by municipalities, particularly the Sedibeng, Bushbuckridge and Lepelle Northern Water Boards. They are, in all, owed R1,4 billion in arrears by municipalities. The Matjahabeng Municipality alone owes Sedibeng Water Board R500 million, of which R400 million has been in arrears for more than 120 days. The Bushbuckridge Municipality owes Bushbuckridge Water Board R250 million, of which almost R244 million has been in arrears for more than 120 days, and the Mopani District Municipality owes the Lepelle Northern Water Board R177 million, of which almost R170 million has been in arrears for more than 120 days.
The impression that has been created with me over a long period of time is that water boards mostly provide services to municipalities in rural areas. But this impression was shattered this year when the department, in fact, brought us a table to show us that the water boards to a large extent provide services to metros, and huge cities and towns, and very few services to municipalities in rural areas. There is a huge growth potential for water boards to be able to play a bigger role in weak municipalities, especially in rural areas. It is in the light of this situation that the portfolio committee supports the rationalisation of the Bushbuckridge, Botshelo and Pelladrift Water Boards into other water boards, but we do so on the condition that the department should draft a detailed implementation plan, considering all contingencies, including the future of all personnel after consultation with the affected water boards, setting out how the rationalisation of these three water boards will be proceeded with once consultation processes have been finalised.
The portfolio committee further supports DWA's plans to rapidly expand the services and mandates of some of the water boards, especially into rural areas, and to pursue and devise further options to make the 10 smaller water boards economically viable. The expansion of the Amatola and the Lepelle Northern Water Board into the Eastern Cape and Limpopo, respectively, are particularly good options. We are also saying that there are various other options, that we need to look at how to expand this whole functioning of water boards.
I thank you. There are a few other issues I have not dealt with, but they are in my paper. If you are interested in them, please read them. I appreciate you listening. [Time expired.] [Applause.]