Hon Chairperson, hon Minister Molewa, hon Deputy Minister Mabudafhasi, hon members, especially those of my portfolio committee, the water sector family, ladies and gentlemen, may I extend to all of you, on behalf of the portfolio committee, a very warm welcome to this Budget Vote debate of ours. I rise on this occasion on behalf of the ANC and, it is hoped, on behalf of the portfolio committee, in support of this Budget Vote allocation to the department.
I want to start my contribution to this debate on a positive note, by saying that I found our engagements on the Budget Vote and the strategic plan of the department, during January of this year and more recently, to be very useful, productive and encouraging. The engagements have been robust, open and transparent, with the department being forthcoming in engaging on its weaknesses, challenges and even mistakes. They, of course, and rightly so, have also not been shy loudly to proclaim their successes.
That, of course, does not mean that we have all agreed with each other about every aspect of the work of the department, but it has meant that we have been able to undertake our oversight responsibilities and duties towards each other in an atmosphere of respect and honesty, enhancing all the best elements of co-operative governance.
It would be remiss of me not to mention the fact that this constructive and positive approach of the portfolio committee, whilst robustly dealing with its oversight responsibilities and doing so 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, for which, of course, I thank you in steering the committee in the way we have.
It would be remiss of me further not to mention that during all these processes, the portfolio committee has enjoyed the full support and assistance of the Minister and the Deputy Minister. It is in this context that the portfolio committee further acknowledges that in its few interactions with the department, since the various leadership changes were made at Cabinet and parliamentary level, it has discerned a definite, positive, upward trend in the work and activities of the department, and pledges to remain in partnership with the department progressively and decisively to move the department towards operating at its optimal abilities, to serve the nation and our people in creating an efficient, effective, vibrant and sustainable water sector which delivers on the developmental needs of the country.
The department reported that for several months now it has been faced with a serious leadership crisis at senior management level. Most of the top leadership of the department are either suspended pending a disciplinary hearing, including the director-general, the chief financial officer, the Deputy Director-General of Corporate Services and the chief information officer, or are under investigation and removed from performing certain tasks, including all the members of the bid committee. All these suspensions and investigations and subsequent disciplinary proceedings of the top leadership of the department are because of alleged acts of dishonesty, mainly during procurement processes.
The portfolio committee noted that this has meant that Minister Molewa, who was appointed political head of the department towards the end of last year, not only inherited this leadership crisis, but since then has also worked with a senior management echelon performing mainly in an acting capacity. The Minister has acted swiftly and decisively to bring this unacceptable state of affairs to finality. However, the portfolio committee notes and is aware of the fact that disciplinary processes in government are notoriously slow and acrimonious, because of the legal framework in which they are conducted. The Minister has also taken further necessary steps to deal decisively with this matter, for example by replacing the whole bid committee with an interim bid committee and training a new one to assume its duties.
The department informed the portfolio committee that the disciplinary hearings against the director-general have been concluded. She has been found guilty and has been removed from her post. A disciplinary hearing against the chief financial officer has commenced and is in the process of being finalised. Disciplinary proceedings against the head of Corporate Services and the chief information officer are at an advanced stage and a disciplinary hearing will commence soon. The investigation against members of the bid committee and other members of staff is nearing finalisation, whereafter appropriate action will be taken.
The portfolio committee noted that this very unusual and unacceptable state of affairs of alleged serious acts of dishonesty, arising mainly from procurement processes surrounding most of the department's previous senior leadership and its bid committee, has created great instability and uncertainty in the department. The portfolio committee commends the Minister and the present acting senior leadership for the swift and decisive steps they have taken to remedy the matter, and urges them to leave no stone unturned to finally lay this matter to rest in the shortest period of time within the prescripts of the law. The portfolio committee is obviously also mindful of the fact that this ongoing crisis is not conducive to an optimum working environment, and that this has, to some extent, hampered the department's ability to function at its full potential.
The portfolio committee also acknowledges that the present Minister and the present echelon of acting senior management are in this budget hearing accounting to Parliament and taking responsibility for the challenges in the department, especially relating to their qualified financial report, and all the challenges faced with the financial management system, which in the main are not of their making and they have to answer for the actions of others, which is not easy. The portfolio committee urges the Minister and department to remain resolute and decisive in bringing this matter to finality.
The department reported that the Minister has appointed a team of experts to undertake a business review and re-engineering exercise of various aspects of the department, especially those areas where challenges are being faced. This process is ongoing and the department will report progress to the portfolio committee from time to time. The outcome of this review and re-engineering exercise will, in all probability, result in changes to the budget, to the organisational structures and processes, and to the programmes of the department. Obviously, whilst this exercise is proceeding, changes to structures and processes of the department are understandably being minimised so as not to either pre-empt or undermine the outcome of the exercise.
We are particularly waiting to engage with this process, especially around the water trading entity and where it should be going, and of course with the institutional arrangements around water infrastructure. At the moment we use a whole host of arrangements and procurement processes for our infrastructure spend. The department itself has the ability to do some of this work, for example the De Hoop Dam, and then of course there is the Trans-Caledon agency that has a completely different model of operation. These are all being looked at to try to find the optimum models to get a proper water infrastructure model and an institutional arrangement, and we are looking forward very much to engaging with this.
The department also highlighted that it was not complying with the government prescripts of employing 50% women and 2% disabled people, as the actual figures stand at 38% and 0,16% respectively. One of the challenges mentioned was the reluctance by employees to disclose their disabilities. For this financial year, the department has committed to achieving both targets, whatever difficulties are faced. However, the portfolio committee pointed out that even if all the advertised vacant posts were filled only by women and disabled people, this target would still not be met this year. Therefore, the portfolio committee was of the view that obviously and although the government prescripts must form the basis of the department's commitment, the department should compile a business plan indicating how these targets will be met over a reasonable period of time. The portfolio committee expressed the wish to engage with such a plan when it has been compiled.
The Auditor-General gave a qualified opinion in the previous financial year of the department's financial statements on various grounds. If you look at the history of the department this has, of course, been a step backwards. Originally, the department had qualified reports, then under Minister Hendricks a period existed where there were unqualified reports, and then under the previous Minister there were qualified reports again. So, obviously, this is something that we are engaging with quite vigorously.
The key challenges, as assessed by the CFO of the department, the Office of the Auditor-General and the National Treasury, and given as the reasons for the qualified opinion, have had a major impact on the work of the department. What we did as a committee was to make sure that all three of them were present when we discussed these problems and these risks, so that we could get buy-in from all of them with regard to what the best solutions were to deal with these issues. We have commenced with that process and it is ongoing.
They pointed out, firstly, under the main account that there were the following risk areas: incomplete asset registers, the classification of expense items was not correct, problems in supply-chain management, and that our auditing of performance information had weaknesses.
Then, regarding the water trading entity, the Auditor-General first pointed out that it used an accrual basis for accounting, whereas the usual basis for use is a cash basis, and that that in its own right creates certain problems. Four risk areas for the water trading entity were also identified: firstly, revenue management was problematic particularly in that the billing system of the water trading entity had huge problems; secondly, there were problems with the supply-chain management; thirdly, the construction assets were done by way of a model that was not conducive to accuracy; and, fourthly, the audit of performance information was, once again, problematic.
Then, from the National Treasury's side there were four risk factors that were identified in respect of both the main account and the water trading entity: firstly, the institutional arrangements within the department conflated the mandates of the department, and there was a whole explanation on that issue; secondly, in implementing capital projects, the decisions on strategies, finance and projects were taken by the department, whilst the technical capacity was located and sourced outside this process; thirdly, there was inadequate capacity for ongoing operations and maintenance of projects; and, lastly, the lack of a clear tracking system used for revenue collection by the water trading entity did not provide a mechanism to ensure that all clients paid for services. And, as the committee has learnt, this is a huge problem.
In providing solutions to all the above challenges that were mentioned by all these role-players, the department highlighted the following actions which have been taken or are in the process of being taken. Firstly, there is the appointment of a separate chief financial officer for the water trading entity, suitably qualified and to be seconded to the department from the business sector, to address all the risks identified by the Auditor-General.
Secondly, the business engineering process - which I have already alluded to - should address certain institutional issues that were also identified by the National Treasury. The department has also established a risk- management committee that has identified 10 risk areas and which monitors these risk areas and then reports back to the director-general.
Another action is the appointment of an interim audit steering committee comprising officials from the Office of the National Treasury, the Auditor- General and the department to address issues around supply chain and procurement management issues - as I indicated in the beginning, the problem that exists is around procurement. Therefore, this committee will now look with these three agencies at how to change and remove many of the risks that exist in the supply chain management.
There is also the action of the implementation of an integrated management system with the help of the National Treasury. The misclassification of assets is being corrected. There is the formulation and implementation of clear asset management plans, and a mechanism linking all procurement to the business plan during approvals.
Both the Auditor-General's Office and the National Treasury agreed that the department, especially the acting CFO, was fully co-operating in addressing all these challenges in terms of the financial management system of the department. The portfolio committee emphasised that it expected the department to consult the Auditor-General's Office and the National Treasury every step of the way as it addressed all the challenges it faced in its financial management system.
The portfolio committee recalled that the South African government committed our country to meeting the Millennium Development Goals by 2015. However, the manner in which all or most departments annually report to Parliament in respect of their strategic plans and budget allocations does not include a report to explain the extent to which the annual strategic plan and budget allocations will actually contribute to a department reaching the targets which are contained in that portion of the Millennium Development Goals falling within the department's remit. The portfolio committee, therefore, strongly recommends that the department should annually include in the strategic plan a section which spells out in detail how the strategic plan and budget allocations for that year will meet the targets and aspirations to which our country committed itself in terms of meeting the Millennium Development Goals which fall within its remit.
The portfolio committee requests, in the interim, that the department compile a report for tabling in Parliament as soon as possible, reflecting the Millennium Development Goal targets which fall within its mandate, and then to indicate the extent to which the targets have been met or whether they are going to be met. It is the wish of the portfolio committee that the achievement of the MDGs falling within the department's mandate becomes a standing item on its agenda, for example when the department gives input for the country's report tabled in the UN, such input should also be shared with the portfolio committee for engagement.
In respect of the water infrastructure budget, the department indicated that there had been some increases in the baseline, but emphasised especially that the small infrastructure projects, including operations and maintenance projects which will be implemented through the Regional Bulk Infrastructure Programme, have received a substantial allocation increase of almost R900 million for this year. This is welcomed by the portfolio committee, and our wish is to see the water infrastructure budget in coming years being substantially augmented beyond the baseline.
The committee recommends that the department should give further consideration to an engagement with the National Treasury to reach consensus that when allocating funds for infrastructure projects to the department, the National Treasury should, at the same time and as part of the allocation, make a conditional grant allocation to the relevant municipality in order for the project to be fully funded from the beginning through to completion, rather than leaving it to the municipality to arrange separate funding for its infrastructure - from the point at which the department stops its infrastructure and has to take it to its clients.
One further major challenge identified by the portfolio committee is that all additional budget allocations made in terms of the water infrastructure programme are in respect of existing projects only, and no funding is being allocated to fund new infrastructure programmes. Therefore, all water infrastructure programmes are locked into the present growth path of the country. If one adds to this the fact that 98% of all current water resources have already been allocated, then it is pretty obvious that the future availability of new water resources may soon become a major restriction or inhibitor of growth in our country.
To illustrate this point - and we were very fortunate, Minister, to call on Prof Mark Swilling to give us an input on the economics of development - when dealing with South Africa's resource constraints on growth, Prof Mark Swilling pointed out that although 98% of available water resources have been allocated, the growth rates follow exactly the level of water availability. So your growth path, with regard to what the signs show you, is actually in line with and mirrors exactly your water availability. Therefore if we are locked into a situation in which most of our water has been allocated and we have no funds to create new infrastructure, then what we are doing to ourselves as a country is locking ourselves into the growth path that we have now. And, clearly, that is something that we as the portfolio committee think we need to address seriously.
The portfolio committee is also of the view that major political decisions need to be made in respect of the availability of new water resources in the near future to address these major possible inhibiting factors on a realistic and reasonable upward growth path for our nation. The government's goal of creating a developmental state, with a progressive, rapid and sustainable growth path, and which is people-orientated requires, inter alia, major investment by the government to ensure a rapidly expanding and sustainable water resource base.
The portfolio committee is also of the view that the department should review its water infrastructure investment patterns of the past few decades, to move them more rapidly away from the apartheid growth paradigm we have slowly been moving away from in the past two decades, and bring them more in line with a different developmental paradigm, which is more in tune with the objectives of a progressive developmental state.
Here I always use this example: if you were to fly by helicopter over the north of the Eastern Cape, then, as you flew over Kokstad you would see a sea of water wherever you looked - farm dams and municipal water sources - but as soon as you went over the hill that took you to the old Transkei, you did not see a shimmer of water, you did not see anything for many kilometres.
Now, if you are a developmental state, the idea is that you create capacity in certain areas where people can empower themselves so that they can undertake certain economic activity. So, if we are locked into a paradigm in which we build dams only where we have had economic growth until now, we will be seriously inhibiting the capacity of our people to be able to be empowered and overcome the issues they want to overcome.
I know that the Minister has already started this debate herself. So, what we are really looking at is to start a new debate to change the mindset from the existing paradigms of thinking on development, as they come from the legacy of our past, and to really start finding new ways of looking at that development path. This is a major political discussion that we as a committee will definitely engage in, and I know that the Minister is also engaged in this.
Government's investigation through a team of experts into the challenges we face around acid mine drainage, especially in the Johannesburg area, has led to a comprehensive report being compiled, which has now been adopted by Cabinet, with an action plan and a budget allocation. The portfolio committee has decided to conduct public hearings on this matter, in May/June this year, at which time we will also request responses from the Chamber of Mines and the owners of the different mines that are causing or contributing to the problem. The portfolio committee has acknowledged that institutional changes are in progress in the department, and whilst an overview was provided, detailed briefings on certain issues will require further scrutiny by the portfolio committee. We will, for example, be looking at further engagements around the ...