Department of Water and Sanitation Fourth Quarter Expenditure and Performance Report 2021/2022; with Deputy Minister

Meeting report

Briefing by the Department of Water and Sanitation: Cumulative Q4 report (1 April 2021 – 31 March 2022)
The aim of the presentation was to brief the Portfolio Committee on the Department of Water and Sanitation’s cumulative fourth quarter performance for the 2021/22 financial year.

 Quarter four comparison of non-financial and financial performance:
1.Administration – actual achievement (80%), budget spent (88%)
2.Water resources management – actual achievement (59%), budget spent (97%)
3. Water services management – actual achievement (65%), budget spent (82%)

Status of the 2020/21 Annual Reports for DWS, TCTA and WTE
-The 2020/21 audits of the DWS, Water Trading Entity (WTE) and Trans-Caledon Tunnel Authority (TCTA) have been finalised.
-The Department is finalising the annual report and will be tabled when the AGSA has reviewed and concurred with the contents of the document.

See presentation for detailed performance per programme

Quarter Four Financial Overview
-The expenditure for the period ended 31 March 2022 amounted to R15.204 billion, 86% of the total adjusted budget of R17.735 billion, leaving total unspent funds of R2.532 billion.

Economic classifications with under expenditure:
-Compensation of employees – R112.421 million
-Goods and services – R785.311 million
-Transfers and subsidies – R1.165 million
-Payments for capital assets – R1.633 billion

Part D: Overview of the Financial Recovery Plan
Irregular expenditure transgressions:
-Bid evaluation not done in accordance with the advertised evaluation criteria
-Competitive bidding processes not followed: service [providers appointed as sole suppliers without supporting proof
-Contracts signed by an unauthorised official and without legal vetting
-Procurement above R500 000 not done through competitive bidding
-Tenders advertised for a shorter period without National Treasury approval and tenders not advertised publicly

see presentation for further details.

Discussion
The Chairperson asked the Deputy Minister of Water and Sanitation, Ms Dikeledi Magadzi, if she had anything to say after the presentation.

The Deputy Minister said she would give the Members an opportunity to interact with the presentation first.

Ms G Tseke (ANC) commended the Department on its performance in the quarter. She was worried about the total expenditure, saying that it was a lot of money. Despite hearing the Department’s reasoning, she felt that they were not convincing. She asked if the Department would apply for rollover from National Treasury.

On the Vaal River system intervention project, the allocation received was a rollover from the previous year of R500 million. When the Committee looked at the performance, it was not doing well. She asked where the backlog was.

She noted that the Department appointed Rand Water to be the implementing agency. The Committee thought that the agency had the capacity, and it would be able to move with the implementation of the intervention project, but it looked like there were still challenges with implementation. She asked the Department to share where this backlog was. What are the challenges? What are the delays? This meant that next year it would have to motivate for the role of implementation for the very same project. To get an understanding, what are the challenges with implementing this project? She thought the venture was another question but would return to that later.

Another Member had a few questions: what other approaches is the Department taking to reduce the data increase, because these were already excessive and could not escalate any further? The Department was asked what other approaches could be used to reduce debt headaches. Could the Department provide details on the short-term interventions and their success with the Vaal River system? How much money was already spent on the Vaal River system?

The Chairperson spoke on the expenditure report stating that the province was committed to 100%. What does that mean? Does it mean the Department has given them 100% of what they requested, or they spend 100% specifically on predetermined outcomes? He asked if this was agreed on or planned for. Was the money not being used where it was intended? If that was the case, sometimes it could be found that, similarly to the Western Cape, money was being taken out to pay for salaries. Is this not the case here, today, because it was impressive that provinces were spending 100%, but they could have been accepting and spending 100% on different things? The presentation did not inspire eagerness. In accepting non-spending, it was perceived that the Department seemed to be well and comfortable reporting that it did not overspend. This was the general sense. It might say something different, but the Chairperson did not get the sense that the Department was worried about these things.

South Africa has a high rate of unemployment, and it is sitting with a lot of jobs where people could be employed, yet this was not happening. The point of the human resource department was so that it could see everything through. The Department was basically saying that it could not employ people and therefore could not meet its targets on predetermined outcomes. Otherwise, the money could be given back to Treasury or given away. The Chairperson had seen the reports that it would give 80% of what was not being spent to deal with the floods, but the Committee did not get the sense that these things gave the Department sleepless nights, although the Minister might have sleepless nights. The Minister had to deal with looking people in the eyes who are affected and see their tears like the Committee, but the Department, he felt, did not get any sleepless nights.

The Chairperson appreciated the presentation and commented on the targets. He asked why the Department could not meet them if that was its plan. Did the Department not foresee the challenges? This was a concern.

Another issue was the transformation of water, because that was one area that would be raised at all the meetings. The Department said it could not perform that duty within a set turnaround time, which it set itself. This was worrisome because this was meant to speed up the issue of water transmission. The history and background of water in this country were known, and this issue had to be dealt with and not left in the air for too long. Water had been a resource that was prioritised for a certain race in the country. It could take more than 20 years to say that South Africans saw a difference in this aspect. It was known that, when one travels, especially to farming communities, most of which were on the riverbanks for a specific race, nice and green, they owned those waters in those rivers. The new farmers or the emerging post made it seem like people were always emerging. The Department was a referee far from the water. The Department was urged to do better with this, though it was trying to redress the imbalances of the past. The Member was happy that the Department was able to unlock some of the projects that were in dispute. The Department had been acknowledged, and the Minister had been travelling in the country and meeting communities. This was appreciated.

The license was a matter of urgency, and the DWS needed to ensure that it happened. The Department’s issue or challenges of personnel needed to be addressed.

A Committee Member said that the Department heard that the Committee wanted transformation now and not tomorrow. The struggle for transformation should be addressed now and not tomorrow. The presentation presented, to the Committee, the Department’s challenges and some of its achievements. The Member was impressed with the National Water Amendment Bill, but they thought it was important for the Committee to continue to be empowered by the content of any Bill. They suggested making it official to identify a space where the Committee could get a workshop in the field so that it could understand it.

The second issue was the transformation of irrigation ports and the water use associations. They only understood what the water boards were. What have these associations done? What is their brief going, and what are they going to do with the issue of financialisation of the water-use license application? As it was said before, transformation should happen now, not tomorrow. The question had been raised about who was involved with these water licenses since 2019. The content in the criteria of this application should accommodate for all, and should be for all and not for some. Elements of this process should allow recruits from the previously disadvantaged to redress transformation now and not tomorrow.

On the issue of procurement, especially on the consolidation of designated groups: The Chairperson heard young people when they spoke about the country; they are eager to change things today. Now, when there was a target of 30% and an achievement of 19% it could not be bad, but what one would like to hear was that the content made an impact. So, young people should be listened to when they speak about monopoly capital. They want to get a chance to address the economy of the country, so these things should be taken seriously. They were called young people and among them were stress and depression. These young people had the potential ability to assist government. It was important to receive the content that made an impact on what the Department wanted to achieve. The Chairperson also spoke about representation of people with disabilities and women in the targets.

A Committee Member said that it was important to get to the crux of the matter - government was not getting to where it wanted [to go]. Many people always complained that the ruling party has had 28 years in government without getting things done the right way.

Another Committee Member noted there was an indirect grant. Can the Committee get clarity on what this indirect grant is and how it happens?

A Member said there was a presentation on community protests. The Member suggested there be a unit that dealt with community participation that led on programmes that necessitated that. There was non-performance on the budget. If a project was stalled by communities, there should be an action plan to achieve its intended outcomes. The plan needed to be able to empower and lead the Department so that it did things the way it wanted according to its budget.

With the irregular expenditure, there was the appointment of service providers that were hand-picked. Many things were done outside of the Public Financial Management Act (PFMA), and everyone knew that. The process of meetings to discuss these issues was continuous. With things done outside the designated parameters, it was sad to see that old situations and practices kept resurfacing. There had been an issue with people that were doing business with the state. These people had been paid billions and they received business in the huge number of people that were unemployed, so they were creating parallel funds for their families. Government should create systems that protect itself. There was huge criminality in society, but not everyone could be a police official, as not everyone was trained for it. There must be a system to pick up these discrepancies immediately.  

A Member asked what happened to the people that broke the law if they were connected to pulling government down, because it was problematic for these people to leave the state empty to benefit themselves and their families. It was not misconduct; it was not a human resource matter, and it was a political matter. The decision to bring down the state was a political one. If the Department did not implement the ropes and water system and build bridges, it became a state issue and will continue to be that way regardless of who was in pain. It was not by mistake that people were giving themselves over for quick gains.

DWS Responses
An official from the Department thanked the Committee for its comments. The Department was ready to answer the questions on the financial matters as an overview. It recognised the challenges that were related to procurement. Since the beginning of last month, the Department, through the leadership of the CFO, had organised the training for all the officials, particularly at senior level and those responsible for procurement. These officials would go on training related to bid specification and the PFMA, so it could implement its projects correctly. It was hopeful that by June, all the officials that were responsible for PT-related matters and the specification committees would have been trained, and all the procurement and SCM officials would have been retrained. This was also part of ensuring the Department achieved its financial targets, and stop non-compliance with SCM policies on transformation. This was part of trying to ensure the Department unlocked the potential -- for answers and to ensure that it achieved its goal of transformation because this was imperative.

With the licenses, 90 days was the way to go.  The teams were working together from one province to another to ensure it killed off the backlog of these licenses by June 2022.

The Department said that transformation would be addressed by the Bill. The Department unit for this dealt with community participation, which would be led by this specific member in the refined structure.

With the filling of posts, the Department was hard at work, and had filled senior posts. The ministers had announced, in the DMS, the appointment of the DDG who would be responsible for regulation and license compliance. The DDG would be occupying office as at 01 June 2022. The other Deputy Director-General that was responsible for water services management would also be coming on board. The Department was hoping that capacity-related matters would be dispelled of, and those positions would be filled. The senior positions of engineers had been filled. This was a testimony, as the DWS was now doing work in Limpopo to ensure that it achieved those infrastructure projects that it promised the Portfolio Committee as strategic priority projects for the Minister to deliver.

On legal matters, it took the advice given by the Committee on appeals and what it should do, going forward. The Department would give details on the status, and promised to return to the Committee and report on this bill, and to give the status of all other bills that were in the pipeline in the Department.

The Department said it would plan for a rollover again in the coming year, for the underspending, when it came to the Vaal River works for the remedial plan that was given. It wanted to do proper due diligence and work out exactly what had to be done before it started. There was also a Constitutional Court judgement on 17 February 2022, which invalidated the preferred procurement policy that was being used by government. National Treasury issued an instruction stating that, for submissions from February onwards, it should not do any new procurement until court judgements had been negotiated and settled. That was the main reason for the underspending in the Vaal River. Due diligence was the one main reason.

On data: there was an increase. National Treasury had identified 40 to 42 municipalities with the highest risk in the water sector, water trading entities, water boards, and Eskom. It was doing roadshows with these 42 municipalities to try and see what the problem was, and to try to rectify it at the municipalities. In conjunction with that, National Treasury withheld the equitable share of all municipalities that owed money, specifically for water and electricity. There were profits in December, where there was an equitable share for those municipalities with debt. The biggest item that was helping the Department was avoiding legal action, because it was not nice for government entities to take each other to court. The Department had received ten judgements already; it was serious about reaching an agreement. 54 municipalities were still in the process. With the total spending, the Department did not have the ticket present at the moment, but would have it before the end of the meeting.

On the difference between direct and indirect routes and whether the Department just gave money to the municipalities: for a municipality to receive a direct grant, the Department did due diligence on the municipality. The Department looked at the municipality’s track record and, in conjunction with National Treasury, decided whether the municipality had the capacity and history to get the money directly and do the work on its own. If so, then the Department made a direct transfer to the municipality. If it decided that the municipality did not have the capacity or anything else, then the Department did not make the direct transfer. With the indirect grant, the Department controlled that project, or the money, and it would get implementing agencies that would have total control of the project. The municipality did not have any say, hence the indirect grants.

Another official responded to the question about transformational issues - the Department was currently busy with the amendment of the National Water Act and the Water Service Act. As it stood, the Department had received a certification or recertification from the state law advisor on some of the content information in the bill so it could be aligned to a Constitutional Court judgement that was delivered in 2005. The Department was currently working around those issues. DWS was taking this seriously. One of the amendments was specifically designed and intended to address issues of transformation, especially when looking at the lack of equitable allocation of water. The Department was trying to amend that section so it could accelerate transformation. It was also amending section 26. This was so it could come up with regulations that would facilitate transformation. There were other amendments that would be prepared so that, whenever required by the Committee, the Department could deal with and educate Members on those amendments. At that stage, the Department was still trying to address the concerns that were raised by the state law advisor.

Rainwater was meant to deal with sewer spillages that were happening around the communities. The Department also had to deal with the biosolids as part of that. That way, it realised that there were collapsed sewer pipes that had to be fixed. That was part of the scope. The Department was also attending to critical pump stations. There were a couple of pump stations in and around that were currently not working and spilling because of multiple reasons. Some of them were not working because of not having electromechanical works. DWS was going to be attending to those critical pump stations. It was also going to do the replacement of the wastewater treatment works – three of them. It had done work on three of them already but needed to make sure that all the wastewater treatment plants operated well and were refurbished, because the majority of those that were corrected were not operational. The Department had to deal with the capacitation of the municipality. It received a serious lack of capacity from local municipalities. As part of the intervention, the Department was going to ensure that unit was capacitated and had all the tools and employees that were trained. The employees would be trained and converted to the required process control level so they could do operational maintenance on the infrastructure while the Department was delivering the upgrade in that municipality.

The Department had to do advocacy in the communities in the valley because of the challenges that it was having. The official said there was an issue raised that led the Department to delay implementation, as a result of due diligence. It also had challenges with the community in the Vaal that continued to stop its contractors and workers when they were deployed in that municipality. Fortunately, two weeks ago, on Thursday, the Minister had a meeting with the mayors of the city and local municipality leadership, and they were given marching orders on how to deal with its employees. From last week, the situation was improving, but that contributed to the delay in the implementation of the project. As part of recovery, the Department was coming up with an excellent lesson plan that would assist. It is possible the R100 million for the current financial year might not be enough to deal with all the challenges. As part of that acceleration process, it was engaging the Director-General, who was engaging Treasury in getting additional funding to deal with some of those issues.

On the question on associations established under the National Water Act: they were established to manage local water resources for a common purpose. The Department operated at a very restricted local level and was, in effect, cooperative associations of individual water users who wished to undertake water-related activities for mutual benefit. One of the constitutional functions was to prevent water from any water resource from being wasted. The Department protected the water resource and prevented any unlawful water use. It removed or arranged any obstruction and replaced them with water coolers. The main functions for water use associations and irrigation boards on water were established under the Water Services Act under sections 28 and 29. The primary activity of the water board was to provide water services.

An official said that the Department was given R6 million to drive pump stations. It had six pumps, of which only one was running – which meant dumping sewage was difficult. The concern was that Eskom was closing the account of the municipality, and the money was sitting in its account, meaning it could not be used for these issues. This was recently raised with the Department, through the Director-General, to have a discussion about getting that money released back to it, or the same in a rapid response unit or construction unit to go and rectify those pumps. The purification plant was not working at all. It was not a human resource problem in the dam. Assistance was requested to rectify the issue of dam pollution.

Another official said that on the bad side, a question that was being asked would not be answered in the meeting but needed to be taken on board. On equity: the money that would be given would not be used properly because of debt. The Department knew the difficulties of this. If this was the case, a solution proposed by one of the Committee Members be the most viable one. It was agreed that there should be intervention of a rapid response unit.

Deputy Ministers’ Remarks
Deputy Minister Magadzi said in the summit that was held back in February, the issues of transformation were really spoken to in depth, and the Department was in the process of making sure it dealt with some of the issues as indicated. Some of the issues would find a way into the amendments that it was dealing with.  

It was worth noting that some irrigation boards are over 70 years old, and it was important to work with them, so the Department could know how to deal with certain situations, going forward. The National Water Act demanded that the Department turn the irrigation boards into the Water Users Association.

On challenges of protests in communities: some of the challenges required a developed action plan. One of the things the Department would do is go to communities. It came across people who wanted 30% of the total amount of debt construction. The President said that these people should come to the fore. These people should have been reported to the police, because this was extortion in a way, but most of the contractors were not comfortable in reporting these types of matters to the police due to being afraid that it would lead to violent activities against the construction company. The Department had also seen in the past, employees of the municipality would protest and stop rent water to be able to do work. It had seen in other areas, situations where the communities that stopped construction had not been done in a way that accommodated the employment of community members. These were things the Department was working around and making sure that where there was a project in a village, the traditional leaders should be involved. The councillors should be involved, and mentors should be involved.

On youth employment, there were several programmes in the Department that were addressing the challenges of the youth. There was an institution that was training the youth to be professionals. It believed that once it trained the youth to be professionals, this would assist in having professionals in the Department. The Department was also looking at procurement but this had been addressed already.  

The Department should ensure youth, women and persons with disability should also benefit from procurement services. It should be remembered that this was an assessment of what the Department did in all four quarters of 2021/22.

The DM noted that one of the Committee Members commented that the presentation was not inspirational. Going forward, the Department should ensure it stated what it was going to do, the targets it needed to meet, and what other things it could do. The Department should report on the innovation to meet targets. The Department should reshape its thinking and reshape its approach to work on other related matters. It was indicated that there were many cases of public servants doing business with government in countries like the United States (US). The Director-General had already indicated consequence management that already happened to some of these public servants. Some were dismissed, but this differed from one case to the other. With the system and workers, it meant there was no public servant that could do business with government because they were gainfully employed by the government of South Africa, and it became unfair when they intended to do business with government. The Department previously submitted the number of public servants who had been doing business with government, action taken against them, and the progress thereof. Some cases are with the Special Investigating Unit. Cases were reported and case numbers received from the police. The Minister believed the police service was not fighting a losing battle; it was winning gradually because most of these cases dated back to 2013. Some of these cases were close to being finalised.

The Ministry of Water and Sanitation became a challenge. It should be able to meet its targets. It had a rollover of large amounts of money, and there were massive water and sanitation issues. It needed to work smarter and in a way that ensured it did not need such a massive rollover. It needed to work smarter, diligently, efficiently, and effectively. The Department would return to the Committee on some of the matters.

Committee minutes
The Committee considered and adopted the minutes of 10 May 2022.

The Chairperson thanked the officials of the Department for the presentation on the fourth quarter report, and hoped the Committee would receive a first quarter report for 2022/23.

The meeting was adjourned.