WATER BOARDS SUBMISSIONS HEARINGS- 19 & 20 MARCH 2007

First Draft

Background

The Constitution of South Africa (Act 108 Of 1996) recognises that Legislatures have an important role to play in overseeing the performance of Departments and its Public Entities. Section 65 of the Public Finance Management Act requires that Ministers table the annual reports for the Department and Public Entities for which they are responsible by 30 September each year. The Public Finance Management Act (PFMA) states the action to be taken if reports are tabled late and the Joint Rules of Parliament also states the course of action to be taken when a Public Entity fails to appear before the Committees in Parliament.

The Minister may by notice in the Government Gazette, in terms of the Water Services Act, 108 of 1997, establish a Water Board. The primary activity of a Water Board is to provide water services to other Water Services Institutions (WSI) within its service area.

On the 29 of September, the Minister of Water Affairs & Forestry tabled Trans Caledon Tunnel Authority (TCT A). Umgeni-, Rand-, Pella Drift-, Namakwa-, Mhlatuze-, Albany Coast- and Amatole Water Annual Reports were tabled in November 2006. Bloem-, Botshelo-, Bushbuckridge-, Lepelle -Northern-, Magalies-, Overberg-, Sedibeng Water Board Annual Reports were submitted in March 2007. All Annual reports were submitted with Financial Statements to Parliament in terms of Section 65 (1) (a) of the Public Finance Management Act 1999 (Act No.1 of 1999). Ikangala Water Board presented their annual report despite their report not being tabled in Parliament.

Introduction

On the 19 & 20 March 2007 the Portfolio Committee on Water Affairs and Forestry hosted Hearings on the submissions of the Water Boards Annual Reports for 2005106. All the Water Boards, the TCTA, Department of Water Affairs and Forestry (DW AF) and SALGA were invited to give presentations on the Water Boards Annual reports and financial statements; oversight conducted over the Water Boards and issues pertaining to the relationship between the Water Boards and the Municipalities, respectively.

Officials from the Department of Water Affairs and Forestry (DW AF) responsible for oversight of the work of Water Boards, responded to the recommendations of the previous Committee report on the Water Board Hearings for 2004/05 and reported on their oversight conducted for the year of 2005/06

The aims of the Hearings were:

· Establish if the Water Board have conformed to the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA).

· DW AF to respond to the recommendations of the Committee's report for the Water Board Tablings in May 2006

· Conduct oversight of the public entities that are established to carry out water provision on behalf of DW AF

· Establish if the Annual Reports of the Water Boards conform with their Strategic Plans

· Establish if the strategic plans requested last year from DWAF incorporate issues highlighted in the State of the Nation Address.

· SALGA was requested to present on the challenges that exist between the Water Boards and the Municipalities especially around the Debt that is owed to the Water Boards from the Municipalities.

The Documents the Committee used to guide it in its oversight function were:

1. National Treasury Guidelines to Legislative Oversight

2. The Public Finance Management Act, Chapter 6

3. The Municipal Finance Management Act

4. Analysis by DWAF of the Water Boards' 2005 Annual Reports, including its Audited financial statements.

5. Composite Financial Appraisal of Annual Reports (2005/06), prepared by Ms. S Dawood.

6. Oversight of Annual Reports Water Boards: Questions to Consider, 15 March 2006, prepared by Ms. S Dawood.

7. Report of the Committee on Water Affairs and Forestry on Oversight of the 2004/05 Annual reports and oral presentations of Water Boards dated 17 May 2006

All Water Boards, the TCTA, SALGA and DWAF were present and gave oral presentations and responses to the issues members raised.

Summary of presentations

Department of Water Affairs and Forestry Oversight of the Water Boards

· The Committee requested feedback on recommendations made in the Committee Oversight Report on the Water Boards Annual reports for 2004/05.

· It was highlighted in that report the oversight role plays and the impact that role has on the Water Boards

· The Availability of Strategic Plans of the Water Boards. It was highlighted that this stifles the Committees oversight role, since the performance of the Water Boards cannot be measured against its objectives for the period under consideration

· The figures in the updated presentation are vastly different from the figures submitted to the Committee less that a week earlier.

· None of the Committees questions were adequately answered.

Umgeni Water Board

· Municipality was without water and the Water Board assisted.

· Plan with the Department of Education for schools in the Area

Sedibeng

· Provides from Source to tap

· Signed Service Agreement with local municipality .

· Passed tariff within CPIX

Pelladrift

· Boards Term expired in 2005

· Board still in the process of appointing board; the CVs are with DWAF .

· Black mountain, the Mining Company has written off debt owed to it by the Water Board

Lepelle

· Made commitment to the committee to collect outstanding debt owed to it.

Bushbuckridge

· Rand Water is Covering Services in that area

· Qualified Audit report for the second year, yet Board has done nothing/ very little to correct this.

Amatole

· Approximately 250 employees

· Manages Water Service assets to the value of R250 million

· Proposed tariff increase within CPIX, benefits of this to be passed on to consumers

· Increase capacity of Water treatment plants.

· Indicated that the quality of raw water supplied to it is deteriorating.

· Supports National initiatives by DW AF

· Reduced debt from R18.2 million to R15.7 million

· Transfer of Assets problematic, the board was established in 1998, but has not had assets handed over to it to this date from DW AF.

Overberg

· Have a positive net surplus

· Does not have a qualified Audit report.

DW AFS Response

· Answers to the Portfolio Committee's questions

− Compliance with PMFA/MFMA

− Five year business plans: 11 WBs submitted

− Borrowing Limits: Limits determined by National Treasury

− Stipends of Board Members: Determined by the Minister-all water Boards are complying

− Demographics of Water Boards: All Water Boards are represented ito race & gender; persons with disabilities need to be accommodated.

− External debt: National Treasury sets guidelines on borrowing limits, all Water Boards are in compliance

− Pressure to collect Debt: most Municipalities do not ring-fence monies for Water Charges

− Debtor days more that 90 Days- Water Boards have to follow-up with WSAs, the Minister has also intervened in several cases on this issue.

− Subsidies will be phased out in approximately 3 years

− Institutional reform impact on Water Boards: implementation of plans is on tract, but dependant on serious negotiation.

· DWAF also supplied written responses to issues the Committee raised in the previous year's report and the questions that the committee should consider.

Namakwa

· This is a very small board and its viability needs to be established.

· The section 78 Process will give guidance on the viability of this board

Botshelo

· "Year of Turmoil"

· Many controversial issues highlighted about previous members of the Board

· New CEO appointed end of last year.

· Botshelo covers 42% of the North West Province

· 75% of population served are rural inhabitants

· Supplies from source to tap and Waste Water treatment.

· Strategic objectives, operations and training of staff were reviewed.

· Challenges still faced include collection of outstanding debt and the outcome of Section 78 process

· Qualified Audit report received due to:

− A Loss of R36, 3 million

− Accounting procedures not followed

− Property on the BW's books registered under the Mafikeng Local Municipality

· Viability was also questioned due to the high level of indebtness and outstanding debt.

TCTA

· Explanation of Tariffs costs passed on to end user.

· Exit strategies explained: well planned and inclusive of the Community .

· Assured Committee that indebtness will decrease with time

Rand Water

· Largest Water Utility in Africa- supplies 11 million people with water.

· Currently giving guidance to Ghanian Water Projects.

· Skills transfer to municipalities highlighted by Committee.

· Commended by the Committee due to report focussed on issues that the Committee hold dear.

Bloem Water

· Major achievements ito performance:

− Finaincial

− DW AF transfer Agreements

− Bulk Water Supply Agreement with Manguang Local Municipality

− PMR Awards- one of the top 500 Companies

· Board's focus is

− Institutional reform

− Strategic Objectives

− Attention to Labour relations

− Youth development

· Debt is a major concern for this board

· Mechanisms in place to strengthen Service Delivery

Ikangala

· DW AF to give guidance on the Disestablishment of the Board.

· The Board thanked the Committee for intervening on this matter.

· Concerns raised since the Board has done very little! nothing to negate qualified Audit report

Mhlatuze

· Financially secure and viable

· Covers 4.5 WSA in the Zululand area

· Aligned Strategic plan to DWAF's objectives in water service delivery .

· Strategic objective is to provide support the WSA

· Signed key strategic network and partnership agreements with University of Zululand, 2 Municipalities and 2 Water service providers.

· Have not received any subsidies or assets from Government

· Challenges include supplying water to rural areas, ensuring that water services enable economic development and waste water management.

Albany

· Run within budget, but any large scale projects will require assistance from DWAF.

· Challenges

− Located in Geological Dry zone

− Population has quadrupled

− Majority of Population cannot pay for services

− Excess wastage of water due to perception

· To overcome Challenges:

− Albany Water Board is currently working with private developers to upgrade water production capacity

− Secured a MIG funding for additional storage reservoir

Magalies .

· Supplies three Provinces with services, in total 34 000 km2

· Renegotiation with mines can strengthen position of the Board to collect outstanding Debt.

· Need to review tariff model.

· Qualification received on the retail debtors

SALGA

· Background: WSAs, Overview of the South African Water Supply chain .

· Good Practices: Agreements between various Municipalities and Water Boards

· Challenges:

− Completion of the Section 78 of the Municipal Systems Act

− Tariff policy formulation and enforcement .

· Price of retail water is set too low .

· Municipal Debt:

− Debt recovery mechanism needs to be developed

− Current Debt outstanding is R40 billion

− Water is constitutionally protected, hence it is not easy to disconnect non-paying debtors

· Suggested Way Forward:

− Review of estimated costs of basic services in order to introduce different average service costs for municipalities with relatively comparable costs of services.

− Undertake to resolve debt owed by municipalities to Water Boards with national Treasury

− Facilitate and resolve the signing of bulk agreements

− DWAF and SALGA to approach National Treasury on the said

− Debt issues

− Put Debt Collection mechanisms into entire value chain

− Ring-fencing of water services costs

DWAF closing remarks

· Improvement in the performance of DWAF

− Structured process for looking ahead at issues, not being reactive - eg proactive about ensuring that WBs got their tariffs in on time; (OW AF got its own tariffs on in time); audits of legal and technical compliance of certain water boards - to give idea of problems/challenges vs what we are being told Process of checking in advance that processes are underway to replace boards before their time expires

− Communication improving

− Considerable improvement still required, including

− internal reorganisation and capacity enhancement w.r.t this function. Some proposals on the table in this regard

− more structured recording of and reporting on recommendations of committee

− more structured and proactive interaction with water boards

− tougher regulatory role

· More extensive analysis of financial statements of water boards

· Board training and capacity building

· Evaluating team w.r.t appointment of boards etc

· General improvement or stability in performance of water boards

− Tariffs in on time and negotiations done with LG etc

− Financial viability good in most water boards

− Alignment with the imperatives of government and contribution to water services targets

− Lepelle - good CEO in place, grappling with issues there

· Key challenges are:

− Ikangala - disestablishment - point well taken regarding the non-communication with Ikangala re disestablishment. Not sure where this went wrong in DWAF, but will take it up and ensure formal communication is made to the Board.

− Botshelo, BBR, re viability. Study underway w.r.t BBR

− Lepelle - re stabilizing organization after year of turmoil.

− Mhlatuze - CE on "leave" pending investigation of problems between him and Board

− Namakwa - process with provincial government to look at provision of water services in the area should the mines close.

· Reporting quarterly still a challenge - have written letters from minister- need to follow up now, and get tougher on WBs that aren't compliant.

· Legal compliance audit on some boards and technical audit on some boards

Chairperson's closing remarks

· Thanked all for attending and giving inputs and making the effort to report to the Committee in the manner that they did.

· Congratulate DWAF on the deliverance of the Strategic Plan of all the Water boards

· Summary of presentations to be provided to members.

· Issues before the Board this year should be incorporated into a review of Policies.

· South Africa has undergone many changes in the 13 yrs of democracy.

· How has the Department and the Water Boards been able to respond to these changes?

· Thanks to SALGA for the presentation, as this enables the Committee to engage with issues around the debt owed to the Water Boards.

· Main issues:

− Section 78

− Loans (OBSA), is it possible for the Water Boards to do with out these loans

− The Strategic Plans submitted to the Committee: What Ms Schreiner said should be taken into consideration, the reports should come automatically to the Committee

− DWAFs oversight role

− Institutional reform: the Water Boards spoke of this process fearfully, how do we ensure that the Department proceeds with this in an inclusive way

− When is the Legislation of the said Agency coming to Parliament?

· Thanks to Ms Schreiner for availing herself. She has a great knowledge and passion for the sector. The Chairperson asked if the Committee can call on Ms Schreiner in the future.

· The Chairperson thanked the staff, Ms January, Ms Siebritz and Ms Dawood

· The Chairperson also thanked the members and commended them on their inputs into the hearings.