1st quarter 2010 Expenditure & performance of Department of Water & Environmental Affairs

Meeting report

1^st quarter 2010 Performance: Department of Water and Environmental Affairs (DWEA):  briefing
Ms Nobubele Ngele, Acting Director General, Department of Water and Environmental Affairs, tabled the strategic context for the performance of the Department of Water and Environmental Affairs (DWEA or the Department) for the first quarter of 2010. She indicated that some of the imperatives around delivery included effective governance of the Department, the promotion of intergovernmental relations, support given by the Department to Ministerial events and the management of stakeholder relationships. Ms Ngele noted that the Department had reduced its reliance on professional service providers or consultants. She also noted that the Department was adhering to Parliamentary obligations and was promoting accountability.

Ms Ngele noted that the Department was still undergoing learning curves in relation to the costing involved in business plans, information management, strategic focus and alignment of budget and business planning processes. The Department had put in place interventions that included zero based budgeting and the training of managers on monitoring, as well as performance management. The Department had also in some instances used a task team model as well as team leaders. The National Department was discussing matters fully with the various branches.

Current Expenditure and Performance Trends briefing
Mr Onesmus Ayaya, Chief Financial Officer, Department of Water and Environmental Affairs, tabled the expenditure outcome for the first quarter of 2010 that ended on 30 June. (See attached presentation for full details of all figures and slides). He showed the figures for the programmes on administration, water management, the national water resource infrastructure programme, and water sector regulations. For this quarter, the Department had, in total, spent 15,94% of the 2010/11 budget of R7 996 592. Mr Ayaya then showed the spending according to economic classification, including compensation of Employees (CoE), goods and services rendered, transfers and subsidies, the interest on rent and land, and capital asset payments. He further compared the forecast and actual figures for each month.

Mr Ayaya noted the reasons for under spending as including the large amount of posts that had not yet been filled, and a backlog in the processing of unpaid invoices from the previous financial year.

Mr Ayaya then presented slides on the Department's main account allocation, inclusive of the earmarked funding. He also tabled the Department's drought relief allocation for the Eastern Cape, the Western Cape and Limpopo municipalities for 2010/11. He furthermore presented slides showing earmarked funding per project, as well as non-earmarked funding, sorted by economic classification. He also highlighted branch expenditure and , and provided the Committee with a financial performance analysis.

Mr Ayaya then briefed the Committee on the Water Trading Entity (WTE) and the management of accounts for the period ending 30 June 2010. He included a statement of performance for the WTE, and showed a cash flow statement and a statement of financial position.

In the Income and Expenditure slides, Mr Ayaya described the total functional support, Deputy Director General (DDG) infrastructure operations, as well as Chief Directorate (CD) operations, business development, engineering services, construction management and financial management.

Finally, Mr Ayaya provided the Committee with an analysis and statement of the Department's financial position for the period for 1 April 2010 to 30 June 2010. He noted that there were challenges around cash flow. The backlog on maintenance and the refurbishment of asset infrastructure was estimated at R13 billion. However, the cash generated from the operating activities was not sufficient to cover the refurbishment. Mr Ayaya also noted the challenges around debt management and set out the action plan that the Department had put into place to address those challenges (see attached presentation). Mr Ayaya said that the revision of the pricing strategy was a long term solution to the financial stability of the WTE.

Comparison of first quarter performance against the 2010/11 Strategic Plan
Mr Trevor Balzar, Chief Operations Officer, Department of Water and Environmental Affairs, tabled the Main Exchequer Account (MEA) first quarter performance in comparison to the 2010/11 Strategic Plan to the Committee.

He highlighted those outputs where the Department's Strategic Plan targets had not been reached. These included the target for the creation of decent employment through the regional bulk programme as well as the output for the review of pricing strategy and the infrastructure funding model. He noted that the implementation of the Waste Discharge System (WDCS) had not reached its target due to delays in the procurement process. Other targets relating to the strategic priority of giving effective support to local government were also lagging behind.

Dr Cornelius Ruiters, Deputy Director General, Department of Water and Environmental Affairs, then discussed the Water Trading Entity figures, and said that some of the planned outputs for the WTE had also not been met. These included the implementation of new bulk water infrastructure to meet social water needs, economic growth and development; the supply of water to users, as well as dam safety rehabilitation programmes.

Discussion
The Chairperson wanted to know the progress with regard to the Namaqua Water Board.

Ms Ngele and Mr Balzar noted that a bid had been put through to the National Treasury (NT) regarding the Namaqua Water Board.

The Chairperson expressed concern that there was a dire need for vacancies to be filled as soon as possible within the Department.

Ms Ngele agreed that the filling of vacancies was important. It was often the case that managers were not working in collaboration with Human Resource (HR) departments, but if they could do this, and also operate faster, then the recruitment of staff would run more smoothly.

The Chairperson pointed out to Ms Ngele that a Director General had the authority to discipline managers if they did not comply with recruitment processes.

Ms H Ndude (COPE) thanked the Department for the presentation and emphasised the importance of the Department being open and transparent in its dealings with the Portfolio Committee. She noted the areas of concern, especially the huge amount of correspondence, and said that she was pleased the Department was addressing that issue. She proposed that perhaps it would be useful to have a two or three person task team to sift through correspondence. She was also pleased with those areas of improvement in dealing with the allocated budget.

Ms A Lovemore (DA) was interested to know how using task team models for the eradication of the licensing backlog was going to affect the performance management system.

Ms Lovemore expressed her concern that the billing system was in disarray and wanted to know how that situation had arisen.

Ms Lovemore noted that there was no funding in South Africa for Catchment Management Agencies (CMA) and noted that farmers were paying substantial amounts.

Ms Lovemore sought clarity on the capping of water tariffs and said that she had noted throughout the presentation that the income reflected had been much lower in all cases.

Mr Ayaya said that tariff capping varied from scheme to scheme, and the costs involved played a huge role in determining what the tariff would be.

The Chairperson wanted to know how the Department would be affected by certain money not being utilised.

Mr Ayaya said that if the funds were not re-allocated properly, then there was likely to be a negative effect.

Ms Lovemore sought clarity on backlog eradication and said that if this was adequately dealt with, it may not be necessary to have a tariff pricing increase. She noted the history of the accumulation of debt within the Department.

Mr J Skosana (ANC) noted that three provinces and their municipalities had been mentioned in connection with drought relief. He asked how the Department had reached a decision to assist those provinces, and not the others.

Mr Skosana and Mr P Mathebe (ANC) noted that there could never be an excuse for under spending.

Mr Skosana sought clarity around the letters that still needed to be signed by the Minister of Water and Environmental Affairs, in regard to debt recovery.

Mr Mathebe was astounded that the Department, which had a Chief Financial Officer in place, still had issues around millions of rands of outstanding debt. This suggested to him that the Chief Financial Officer had not put in place an efficient debt collection method.

Mr Mathebe noted that nothing had been said about the Nandoni project, which he felt was an important issues, as reflected by the media publicity around the matter during the previous month.

Ms Ngele outlined the challenges around the Nandoni project. She said that the pipes that had been purchased initially for R178 million had been damaged, but the company from whom the pipes had been purchased had refused to accept any liability for the damaged pipes. The State Law Advisor and the Public Protector had been notified of the claim. She said that the current cost of the pipes was R700 million, in comparison to the initial R178 million. The Department was thus engaged in legal action, and she and the Minister had visited the area. The damaged pipes had caused further ripple damage and Ms Ngele had now put a new scheduled project in motion to address those issues, whilst waiting for the legal dispute to be resolved.

Mr J Skosana said that the company that had initially provided the pipes were professionals, and should have know what it had been doing. He insinuated that there may be elements of corruption in the Department.

Ms Ngele said that the Department had instituted a forensic audit with regard to the processing of the matter, and she would revert to the Committee with a full report.

Mr Mathebe asked how the Department reached its decision on the performance agreement plan.

The Chairperson wanted to know if the Department foresaw any under spending in the financial year.

The Chairperson sought clarity on the earmarked funding. She emphasised the importance of transparency to counteract any corruption in the Department.

Ms C Zikalala (ANC) noted that in some areas people were having great difficulty with water, and were reduced to conveying water around in wheelbarrows.

Mr Skosana said that the technical team from the Department should have been at the Portfolio Committee to respond to queries around this and other projects.

Dr Ruiters added to what Ms Ngele had reported. He said that the Department had decided to put in steel pipes. He had attended a briefing with the Minister and the Deputy Minister, on the re-prioritization of the Nandoni project, as well as another project that had also been in receipt of the defective pipes. The distribution network of Nandoni and the other project would use funding obtained through the re-allocation of money from other projects.

Some Committee Members asked why some projects were listed as multi-year projects. The delays were of concern since water was a necessity.

Dr Ruiters noted that these projects were huge and could not be completed in one year. Some projects were three to five year projects.

Mr Skosana wanted to know what the progress was on the Jozini project.

Mr Balzar said that this project was a multi-year project, with a total cost of R900 million. Currently, the Department had set aside R62 million, and KwaZulu Natal Province had set aside R56 million for the project. In the current financial year the Department had every intention of doing all the planning work with the money that had been set aside.

Mr Mathebe wanted to know the progress on the Loskop dam project.

The Chairperson wanted clarity on the women's empowerment projects, and noted that only projects for Gauteng had been mentioned.

Ms Ngele clarified that there were three projects, including one for the Buffalo River. Each project would provide employment opportunities for 100 women. The Department was working in conjunction with the water boards. These projects were also a means of creating awareness on water issues and hygiene.

The meeting was adjourned.