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Department of Water and Sanitation 2018/2019 Financial Year Budget Policy Speech: Minister G E Nkwinti (MP)

22 May 2018

House Chairperson
Honourable Members
Cabinet Colleagues - Ministers and Deputy Ministers
Your Excellencies Ambassadors
Esteemed guests
Ladies and gentlemen

We can best honour the lives of our Icons, President Nelson Rolihlahla Mandela [Be the Legacy] and Mama Albertina Nontsikelelo Sisulu [A Woman of Fortitude], by truly living the values of the Movement:

  • Loyalty
  • Integrity
  • Selflessness
  • Sacrifice
  • Service
  • Honesty
  • Humility

Politically, both these revolutionary nationalist Icons were groomed, moulded and nurtured by yet another Great Icon of our Liberation Struggle, Tata Walter Sisulu. This is a tough adjustment. But, It's A Must!

1. Ministerial Induction Period

Honourable House Chairperson, let me start by thanking my predecessor, Minister Nomvula Mokonyane, for preparing a comprehensive hand-over note for me; and, personally, taking me through it. That hand-over note and comprehensive briefing gave me a good sense of what I was to inherit in the Department. I appreciate that induction immensely.

My insight into what I was getting into was further deepened by the Top Management of the Department, the Chairpersons and Chief Executives of the Water Boards and Catchment Management Agencies, the Water Research Commission, the piercing interrogations by the Portfolio Committee on Water and Sanitation and the steady pursuit of answers by the Select Committee of the National Council of Provinces.

On my first visit to the Department's Offices in Pretoria, I could not enter the premises. NEHAWU had barricaded entry. It was on strike. A day or two later we met with the leadership; set up a joint task team to look at the issues; and, three or four days thereafter we met to receive the report and agreed on the way forward. I wish to commend NEHAWU's leadership, including its shopstewards in the Department, for its contribution to my induction.

On the 5th and 12th of May, 2018, I undertook the following visits:

  • On the 05th I visited Clanwilliam Dam in the West Coast, accompanied by MEC Bredell of the Western Cape Government. We met leaders of the District and Local Municipalities, as well as farmers, both established and emerging. These leaders spoke with one voice in requesting that we proceed with the project of raising the dam's wall. The site establishment and the N7 diversion have been completed.
  • On the 12th I visited the Giyani Emergency Water Service Project. I had a briefing by municipal and traditional leaders. This session was followed by a community one. Out of these engagements, the following things emerged: (i) bulk infrastructure has been laid, but not a single drop of water has reached households; (ii) out of frustration and anger, people have started vandalising the infrastructure; and, (iii) the security personnel, which had been guarding boreholes, have been withdrawn. The people implored us to prioritise reticulation; to add 38 more villages to the 55 that had been prioritised; and, to afford them an opportunity to participate in decision-making processes by creating a community-based steering committee.

Listen to the people speaking for themselves:

The project, commonly known as Khato (by local people) referring to a subcontracting company whose trading name was popularised by the heavy machinery and trucks they displayed at the onset of the project and that made people to believe all their water troubles and agonies are gone, but of late (2017), the people observed a Great Depression in contractor activities. They observed that:

  • The heavy machineries are gone;
  • Job shedding is happening (only 130 general workers to date);
  • Security guards who looked after the 154 boreholes have left, leaving the boreholes exposed to theft and vandalism;
  • Even local subcontractors are complaining about non-payments;
  • Water supply is collapsing daily and the boreholes and their high tech are broken and not repaired;
  • Prospects of long term projects like command and distribution reservoirs as well as household reticulation are sceptical; and,
  • Many strikes are being realised every month and communities are too disillusioned and are resorting to violence and vandalism.

The following is recommended:

  • A turnaround plan to prioritise Nandoni pipeline and 35 mega litres command reservoir in order to increase water sourcing.
  • Connecting the new bulk line into the existing village distribution reservoirs and household connections.
  • Starting to fundraise for the 50 distribution reservoirs and household reticulations.
  • Minimum approach to household reticulations in all villages in order to prevent further vandalism of the bulk lines (new and old).
  • Safety of boreholes and package plants is important and must be budgeted.
  • Well-coordinated multi-stakeholder (private, public and community) involvement in fundraising for the last phases of the project.
  • Increased involvement of local people in subcontracting and employments.
  • The 38 villages which are excluded from the intervention should also be considered.

Just to remind the Honourable House, our Constitution provides for, amongst others, representative and participatory democracy; and, this is what the people of Giyani are asking for. We dare not fail them!

2. The outcome of these Induction Sessions is that:

(a) We have developed a Five Pillar Turn-around Strategy, aspects of which can only take effect in the next Medium Term Strategic Framework (MTSF) period (2019-2024):

  • A National Water Resources and Services Authority: RSA
  • " A National Water Resources and Services Regulator: RSA
  • A Water Resources and Services Value Chain
  • A Water Resources and Services Master Plan
  • Institutional Rationalisation and Organisational Alignment.

(b) We have streamlined the organogram of the Department as follows:

  • Office of the Director-General
  • " Chief Operations Officer
  • Planning, Monitoring and Evaluation
  • Infrastructure Build and Maintenance
  • Water and Sanitation Resources and Services Reform Regulator
  • International Obligations and Integrated Governance
  • Finance Management Services
  • Corporate Support Services.

(c) We have decided to reduce construction costs by prioritising the Department's Construction Unit on all infrastructure build projects; and,
(d) accordingly, reprioritised the budget; and, could be grateful if Parliament were to approve.

Honourable House Chairperson and Members of this August House, we are going to visit all the project sites that are in the Projects Register of the Department, so that we could listen to communities and assess progress. If what I heard and saw during the Giyani Project Visit is anything to go by, working in silos and being too bureaucratic is not going to take forward the cause of changing people's lives for the better. There, bulk water infrastructure has been laid (National Government) but reticulating the water to the households and industries is not happening because of lack of capacity (municipal government). The consequence is that the provision of decent sanitation resources and services (National Government) is not possible in the shortest possible time.

The most bizarre thing is that during Phase One of the Project, a staggering R3.5bn has been spent; but, according to the people, not a drop of water has reached households and industries! Given the delivery model, even with the silo approach and bureaucratic fixation referred to in the paragraph above, such an amount of money without achieving the intended social objective, sits uncomfortably in one's conscience.

3. Budget Proposals

3.1. Current budgetary challenges emanating from previous financial years

Historical contractual commitments which were not adequately budgeted for the preliminary commitments for which contracts have been signed and service providers are currently rendering services amount to R7.5billion of which R6.3billion is for our infrastructure projects and R1.1billion is for our operational goods and services. Of this figure, R2billion is expected to be paid to the service providers in the current financial year. We have also noted with concern that in certain instances, contracts without a value have been entered into, and these pose difficulty in accurately budgeting for them, which leaves the Department vulnerable. Our bucket eradication program falls into this category, and this has historically caused unauthorised expenditure caused by overspending in the bucket eradication program. R292million overspending was reported in the Sanitation program in 2016/17, and additional overspending will be reported for the 2017/18 financial year.

Poor project management within the Department has created a situation whereby service providers are accelerating the work at a much faster pace than what the Department had budgeted for. A typical example is our project in Giyani which was initially planned to be completed over 5 years; and, was budgeted for accordingly. However, the work was accelerated and completed within a 2,5year period.

There is poor alignment between the budget and the project milestones; and, in certain instances, the project milestones are much ahead of the budget.

There are also crucial projects like the War on Leaks which have not been budgeted for by the Department. Urgent intervention is required in our project management as well as contract management to ensure that the project planning is aligned with the available budget and to prevent our projects from being ahead of the available budget.

Accruals and payables from the previous financial year

The Department has a preliminary figure of R1.8billion of accruals from the previous financial year, which could not be paid in the previous year due to insufficient funds. This will have a carry through effect in the current year as it will require the current year's budget to be used to pay the accruals instead of utilising it for the activities as outlined in our Annual Performance Plan.

Funds appropriated to the Department which have been locked towards direct transfers to Municipalities

The Department has been allocated a budget of R15.5billion for the 2018/19 financial year. I have, however, noted that R5.4billion of this budget is for direct transfers to Municipalities under schedule 5B of the Division of Revenue
Act (DORA) for our Water Services Infrastructure Grant (WSIG) as well as Regional Bulk Infrastructure Grant (RBIG). This allocation is meant for fully functional Municipalities who can run on their own with the least degree of oversight from the Department. These funds are locked and cannot be used towards anything else except transfers to the Municipalities, regardless of whether the Municipalities are spending or not.

We also have indirect transfers under schedule 6B of DORA of only R3.5 billion under the Water Services Infrastructure Grant and Regional Bulk Infrastructure Grant. This is meant for Municipalities that are in distress and don't have the necessary resources and capacity to implement projects on their own; and, need a higher level of oversight from the Department. The Department has a peculiar budgeting challenge wherein budget constraints exist under schedule 6B where we've allocated only R3.5billion, yet where we have allocated more money (R5.4billion) under schedule 5B, the Municipalities are unable to spend the money. This indicates that there is a mismatch somewhere in our allocation of funds between schedule 5B and schedule 6B of DORA.

Details are contained in Annexures A and B hereto.

4. What is to be done: Achieving more with less.

  • Reprioritise and streamline Department spend to align it with Annual Performance Plans, with a view to reducing unauthorised, irregular, fruitless and wasteful expenditure;
  • " Review delegation of powers, with a view to reactivating and rebuilding the Construction Unit towards the formation of a State-controlled Construction Company with the following share equity regime: " State = 51%
  • Historically Disadvantaged Individuals = 30%
  • Direct Investment = 19%
  • Hasten the establishment of the transformation of the Water Trading Entity, into a Water Trading Agency to be located in the Financial Management Services Branch.
  • " Hasten the establishment of Catchment Management Agencies in the remaining 7 Regions; and the polluter pays principle will be enforced; Identify all open-ended deals and contracts with a view to approaching a Court of Law to have them declared null and void in order to arrest the uncontrolled growth of accruals;
  • Engage National Treasury and the Department of Cooperative Governance and Traditional Affairs (COGTA) to address the perennial problem of billions of municipal grant funds that are either unspent or irregularly spent, for which the DWS must account. The Department is committing to working closer with COGTA to ensure that bulk water projects that were completed in municipalities without reticulation services, are provided with such reticulation in the current financial year;
  • All outstanding (2007/2008) bulk and reticulation projects will be prioritised for completion this financial year;
  • Take disciplinary and other consequence management measures; and, engage law enforcement state agencies where such actions are necessary;
  • Establish a National Water Resources and Services Advisory Council, with emphasis on the following technical skills: Planning, Finance, Design, Construction, Maintenance and Project Management; and,
  • " Approach Cabinet for condonation of accruals that remain after every measure has been taken to reduce and, ultimately, eliminate them.

5. Conclusion

Honourable House Chair and Members, the Governing Party is transforming South Africa into a developmental state. The architects of such a state cannot just be government alone. It is the people themselves, together with their public representatives, participating in policy development, implementation and evaluation of progress. This Budget Policy Speech has sought to reflect what could be, if our people were involved directly, working with their public representatives, in turning South Africa into a developmental state.

I wish to thank my esteemed guests for taking time off their busy schedules to come and listen to our Budget Vote Presentations.

Back to the beginning. I searched for the monthly Calendar Comments by our Icon, Nelson Mandela. For the month of May, he has the following to say:

Do not judge me by my successes. Judge me by how many times I fell down and got back up again.

Honourable House Chairperson and Members of this August House, I humbly commend these Budget Proposals for the Financial Year 2018/19.

I thank you.

     
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