Hon Chairperson, hon Minister and Deputy Minister, hon members, the water sector family, and ladies and gentlemen, on behalf of the portfolio committee I extend to all of you a warm welcome to this annual debate on the Budget Vote of our department. On this occasion I rise on behalf of the ANC and, hopefully, the portfolio committee in support of this Budget Vote allocation to the department.
Last year, the portfolio committee reported that we were dealing with a department that was not operating properly and was in deep trouble. It was facing a myriad of major challenges, each of which could be crippling to any kind of recovery, but collectively seemed almost intractable.
We were facing, firstly, a serious leadership crisis at senior management level. Most of the top leadership of the department had been suspended, pending a disciplinary hearing. This included the director-general, chief financial officer, director-general of corporate services and chief information officer, as well as all the members of the bid committee. They were under investigation and removed from performing certain tasks because of alleged acts of dishonesty, mainly during procurement processes.
Secondly, the financial management system of the department was either nonexistent or seriously dysfunctional. The Main Account had received a qualified audit report for a few years, while the Water Trading Entity had received a disqualification on its audit reports for many years in a row.
Thirdly, many aspects of the department's core functions were being crisis- managed and some were reeling on the brink of collapse or serious dysfunctionality.
It was in this context that the portfolio committee noted last year that the Minister, who had been appointed as the political head of the department towards the end of 2010, had not only inherited this leadership crisis, a collapsing financial management system and the dysfunctionality of certain core functions, but had also until recently worked with a senior management echelon of people who were mainly acting in their positions.
Despite the magnitude of the legacy inherited, the Minister has acted swiftly and decisively to bring this unacceptable state of affairs to finality by embarking on a major turnaround intervention through the BPRC, which I will deal with in detail later.
It is therefore understandable that the portfolio committee approached this year's hearings on the Budget Vote with some trepidation, not knowing what to expect. I can happily report that our engagement with the Minister and the department has been robust, honest, open and transparent. The department has been forthcoming in engaging on its weaknesses, challenges and even mistakes. In fact, this year I found the hearings to be more useful, productive and encouraging, as we were able in addition to extensively engage with the work of the BPRC. It is in this context that the portfolio committee further acknowledges that it has discerned a definite and positive upward trend in the work and activities of the department. It pledges to remain in partnership with the department and to progressively and decisively move towards its operating at its optimal level in order to serve the nation and our people by creating an efficient, effective and sustainable water sector that delivers on the developmental needs of the country.
In July 2011 the Minister appointed a committee of experts with varying fields of expertise in organisational turnaround processes, known as the BPRC. It was appointed for an initial one-year period, with the task of defining the challenges facing the water sector and providing clear recommendations on how to support the changes that are needed in the sector and the department, and how to promote growth, infrastructure development, job creation and equity in the sector.
The BPRC embarked on a business process re-engineering intervention to determine and address a number of debilitating issues within the department that are preventing it from becoming an efficient and functional entity. The BPRC has completed its inception report and it is now in the process of implementing some of its key recommendations and findings. This is a dynamic process in that the interventions are being implemented while the department is at work. The Minister refers to this approach as "fixing the aeroplane while it is in flight", which I think is apt.
After extensive engagement with the BPRC, the Minister has approved a new policy and strategic objective directions in respect of which work plans are being developed for some 40 projects or deliverables. These are now being implemented in the following seven key focus areas.
The first focus area is that of the leadership crisis, which has bedevilled the department for a year and a half and created huge instability and uncertainty. For all intents and purposes this is something of the past, with a few last issues that require wrapping up.
This has meant that the department has been able to appoint the following senior management during this year: a new director-general, an acting chief financial officer for the Water Trading Entity, a chief financial officer for the Main Account, a chief director for Policy and Regulation and a chief director for Legal Services. The chief information officer has been reinstated. The new Director-General, Mr Maxwell Sirenya, commenced duty in January 2012. The portfolio committee congratulates and extends a very warm welcome to him and looks forward to a co-operative partnership with him, which will be characterised by openness, trust, honesty and professionalism. Obviously, due regard will be paid to our respective responsibilities.
The second focus area is financial mismanagement. The Minister has set a firm target for the department, to achieve a clean audit for both the Main and the Water Trading accounts in the 2014 financial year. Therefore the first and most important task has been to address the Auditor-General's report of 2011, including the recommendations made by Scopa, with respect to both accounts, with a view to formulating detailed turnaround plans, indicating a recommended corrective action and addressing queries and findings raised by the Auditor-General and Scopa.
The following are proposed interventions. A major project is under way for the reorganisation of the Finance Branch, focusing also on the capacity and capabilities required to provide ideal support to the department's mandate. Considerable progress has been reported in the area of improving financial management in order to achieve a clean audit by 2014. Chief financial officers have been appointed for both the Main and the Water Trading Accounts to improve financial controls and management of the Main and Water Trading Accounts respectively. The turning around of the Water Trading Entity is being treated as an urgent strategic project by the BPRC and the efficiency drive and funding model of the Water Trading Entity is under review to address the huge operating losses, which may in turn involve changes to the structure of the Water Trading Entity.
The third focus area is the regulatory framework in which the department operates, formulates policy and drafts legislation. To understand the regulatory framework in which the department operates and to determine how best to promote a rational, coherent and just water system based on equity across the national, provincial and local spheres of government, it is necessary to consider the adequacy of the present statutory relationship existing between the various spheres and among the existing institutions and to benchmark it against international best practice.
When reviewing optimal water policies and laws it is necessary to assess the extent to which they support and enable water development, equitable water allocation, efficient and prudent water use and sustainable water services provision. In our country a further vital prerequisite needs to be factored in, namely that in recognising that the legal empowerment of the poor experiencing difficulties in accessing quality water and sanitation is key to redressing historical imbalances and enhancing integrated economic development, careful consideration needs to be given to the development of a national redress and equity-based water strategy.
The apparent lack of equity, or a more equitable model for the allocation and use of water resources, almost two decades after the attainment of democracy in our country is not only indicative of the legacy of apartheid, but also of the fact that democracy has not enabled government to attain the optimum model yet. To address this constitutional imperative, the department has embarked on a massive project to review and re-engineer all business processes in the water sector.
The framework for meeting the water needs of the poor is being stretched to cover the increasing demands of the expanding urban settlements, industrial sectors and commercial agriculture. However, the BPRC regards the current National Water Act, Act 36 of 1998, as not being adequate in catering for the attainment of such an equity model. If so, there may not be an explicit mandate to address this glaring problem. We need to change this unacceptable scenario with all haste.
The department is aiming for effective water management that will ensure water security, water quality and equitable water access for all, focusing on redress in areas that have experienced ineffective service delivery. There is a need to urgently intervene in order to resolve the skewed water allocation ratios and the configuration of source-to-tap and waste-to- source. In this regard, the aim is to address the negative consequences emanating from historically skewed water allocation. The department is currently developing realistic plans to tangibly meet the challenge of meeting basic human needs, while at the same time protecting environmental imperatives. The water user licence backlog, which could hamper economic development, is being addressed through a complete process re-engineering.
We face serious challenges in regard to both raw water quality and drinking water quality. Two of the most significant sources of pollution are municipal wastewater treatment works and mines. The pollution of raw water has a knock-on effect on the quality of drinking water, with increasing treatment costs for water boards, municipalities and consumers.
The Minister and the department must be commended for the sterling work that is being done with the Blue Drop and Green Drop regulatory frameworks. Despite the fact that South Africa is one of the few countries in the world whose tap water is safe to drink - based on the recently released results of the fourth Blue Drop certification audit cycle - we must be very concerned about the 14 municipalities in seven provinces where the water is partially unsafe for human consumption. This cannot be right and those municipalities should be placed on special intervention programmes to ensure that their systems are brought up to acceptable operating standards and the quality of drinking water is improved.
Regarding acid mine drainage, AMD, the portfolio committee has been actively monitoring progress on the immediate and short-term solutions currently being implemented and is pleased to note that the first stage of the immediate solution in the Western Basin has been commissioned. There is an urgent need to conclude the work on the long-term solution, to ensure that we adequately mitigate the risk of any contamination of our groundwater. The use of treated AMD also presents an opportunity for the augmentation of our water supply in the Vaal River system.
These are the proposed interventions. The department has reviewed the White Paper on water in the light of lessons learnt from policy implementation over the last 18 years and has adopted a new framework of policy principles, which will inform the legislative review process, the development of a new National Water Resource Strategy and a national water services plan, all of which are being undertaken at present. The department's legislative review of its three principal Acts is in the process of assessing whether changes to the entire water management value chain can be effected, to the maximum benefit of water service delivery, with a view to improving water management and attaining equity going forward.
The fourth focus area is infrastructure and asset management improvement. South Africa is facing a number of challenges regarding most aspects of water provision. Water demand is fast outstripping present water sources; new infrastructure is needed in many parts of the country; some waste water treatment works are dysfunctional and ageing; and deteriorating infrastructure is a major contributor to the problem. It is estimated that the national water resources infrastructure maintenance backlog is in the order of R15 billion. There have also been problems and audit findings with the valuation, inventory and depreciation of the department's infrastructure assets. The only way to deal sustainably with these infrastructure issues is through improved asset management that is robust, both from a financial and engineering perspective.
These are the proposed interventions. While a substantial portion of the 2012 and future budget for the department is set aside for the development of infrastructure, this is certainly not adequate to meet the medium to long-term infrastructure development needs.
The Minister must be commended for her initiative of developing a 10-year Integrated Water Sector Investment Framework for the entire water value chain. The initial projection is a requirement of approximately R573 billion. Given that available funding from the various systems indicates that approximately 44% of the funds could already be in place, there is a very significant gap that has to be closed. A long-term infrastructure investment plan is being developed with the assistance of the Development Bank of Southern Africa to establish adequate financial plans to secure funding to provide for and manage the provision of water into the future.
Part of this will require the effective management of costs across all water institutions. The existing water pricing strategy is under review and will be assessed to ascertain its suitability to the various groups of consumers and in providing sufficient funding to maintain their infrastructure and mechanisms of supply.
One of the greatest challenges facing water provision in South Africa is its ageing water resource infrastructure. Initiatives to address the backlog on the rehabilitation of infrastructure are being developed through effective long-term financial planning.
A rigorous infrastructure asset management system, enabled by information technology, will also be implemented, to ensure that asset monitoring and conditioning are properly conducted in future.
A further challenge is the linking of the bulk infrastructure provided by our department to reticulated water infrastructure that is provided by local government water service authorities. This requires a new approach to water provisioning through integrated and aligned service delivery arrangements, with a concomitant, functional infrastructure from source-to- tap and waste-to-source. This requires joint planning and execution between the spheres of government and strong co-operative governance frameworks to impact the redress of the underserved areas of our population. This is further exacerbated by the dual management of sanitation, particularly in the rural areas, where the department is responsible for regulation while the Department of Human Settlements is responsible for implementation. Although the portfolio committee fully supports this initiative, we caution that it can only work if National Treasury fundamentally changes its present funding model of the water sector, especially as it relates to local government.
The fifth focus area is institutional arrangements. The present governance model of institutions and the water sector, although well intentioned, seems highly inappropriate in many instances. It often operates in a seemingly haphazard manner and is often not properly or adequately integrated with the source of policy development in the department, and more often than not that leads to institutional fragmentation or to the overlap of functions.
Added to this inappropriate, fragmented institutional model is the fact that the water sector is often characterised by a lack of leadership and management skills, administrative complexities due to multilevel governance, elitist and undemocratic advisory and consultation processes, inappropriate decision-making processes and inadequate water-literacy and water-education programmes. All of these factors lead to relatively poor institutional performance across the entire water value chain.
These are the proposed interventions. A consideration of the various options led to the preferred institutional arrangement for the financing, development and management of national water resources infrastructure being through an agency ring-fenced within the department. A differentiated establishment of regional water utilities is under consideration. The intention is to reduce the number of water boards by merging some of them and extending their footprints and, through this, to build fewer, stronger and more financially viable institutions, with a strong focus on supporting local government and their primary function as bulk service providers.
Further institutional reform and realignment will undertake a reconfiguration of the catchment management agencies and the transforming of irrigation boards and water user associations. The establishment of nine reconfigured catchment management agencies, with strong stakeholder involvement, is envisioned.
I will not deal with the sixth and seventh focus areas today because of time constraints, but they deal with organisational design, human resource development and information and communication technology.
May I conclude by saying that I have deliberately and extensively dealt with the recommendations of the BPRC and the work plans flowing from it in detail, because the portfolio committee and I realise that these unfolding turnaround processes have dominated the attention and time of the department during the last year and will continue to do so in the next year or two. We are also mindful of the fact that we have engaged only once with these unfolding processes and that there will be a continuous need to engage the department in the course of this year, in order to remain in the loop with what must be regarded as work in progress.
For now, the portfolio committee acknowledges this important intervention by the Minister, notes the ongoing work of the BPRC and is appreciative of the fact that a systematic and thorough approach is being used to highlight the challenges found in the systems and structures of the department, relating to the seven focus areas that I have just dealt with.
The committee welcomes the number of interventions identified for each of the above challenges and particularly noted that the BPRC is not only identifying challenges and possible solutions but also working with the Minister and the department's officials to immediately implement some of the recommendations. Although my first assessment of such a huge undertaking may be somewhat superficial, it appears that the greatest progress has been made in re-engineering the financial management systems, human resources, information technology, governance issues and outsourcing arrangements, while many of the new policy initiatives await implementation.
The portfolio committee also noted with interest that, to add extra momentum to the delivery of the BPRC's recommendations, the Minister has decided to establish a departmental mechanism to monitor and report on its progress. This is a vital additional innovation. The committee needs to be kept informed of the work in progress and requires the next briefing once the task team concludes its work in July 2012.
Finally, this of course does not mean that we have all agreed with one another on every aspect of the work of the department or on the proposals of the BPRC, but it has meant that we have been able to undertake our oversight responsibilities and duties towards one another in an atmosphere of openness, respect and intellectual honesty.
It would be remiss of me not to mention the fact that this constructive and positive approach of the committee - while it deals with its oversight responsibilities robustly and with intellectual honesty - would not be possible if I, as chairperson, did not enjoy the support of every member and party in the portfolio committee in steering it in the manner that I have.
It would further be remiss of me not to mention that, during all these processes, the portfolio committee has enjoyed the full support and assistance of the Minister, the Deputy Minister, the acting director- general, the new director-general and all the staff, as well as the BPRC. [Applause.]