STANDING COMMITTEE ON APPROPRIATION Presented by Mr Onesmus Ayaya Chief Financial Officer Department: Water Affairs (DWA) 2 November 2009

Presentation Outline Comments on MTBPS MTEF Allocations Efficiency Savings Earmarked Funding – MTEF PERIOD Budget Bids Departmental Allocation Before and After Transfer of Functions Rollover of Funds Virement Unforeseeable and Unavoidable Expenditure Earmarked Funding - Current Financial Year Transfer of Functions Re-Scheduling of Earmarked Funds 2

1. Job Creation COMMENTS ON MTBPS Create jobs in rural areas under construction and EPWP Filling of vacant post in regions to be less dependant on consultants Appointment of SMMEs to create jobs and trigger economic growth 3

Comments on MTBPS 2. Rural development focus Targeted procurement to support economic opportunities for HDIs Increased allocations to Working for Water and Working for Fire Preferential employment opportunities in rural areas where DWA projects are implemented Utilisation of SMMEs to encourage their contribution to economic growth Investments in in water resource infrastructure to make more water available for economic growth and development in selected rural areas 4

COMMENTS ON MTBPS 3. FIGHTING CRIME AND CORRUPTION Firm action on findings emanating from investigation of all fraud hotline-reported cases Targeted internal audit focus on controls around supply chain management Implementation of awareness campaigns to address fraudulent activities Use of regular payroll audits to prevent and identify ghost employees 4. ENHANCING THE QUALITY OF EDUCATION Learning academy established and bursary scheme used to support young engineer Use of interns to expose young graduates to the world of work 5

Comments on MTBPS 5. Contribution to improved health outcomes Purchase of packaged plants in the fight of Cholera outbreaks Support to provision of clean running water Rehabilitation of reticulation and treatment works Implementation of water conservation and demand management is selected municipalities Eradication of bucket system in line with human settlement plans Targeted support to municipalities to address water and sanitation bottlenecks 6

MTEF BUDGET ALLOCATION -2010/11-2012/13 INCLUDING EARMARKED FUNDING 7

MTEF BUDGET ALLOCATION -2010/11-2012/13 INCLUDING EARMARKED FUNDING PROGRAMMES – NEW STRUCTURE 2010/11 R’000 2011/12 ADMINISTRATION 863 900 900 835 WATER MANAGEMENT 365 782 387 729 NATIONAL WATER RESOURCE INFRASTRUCTURE PROGRAMME 2 433 360 2 618 057 REGIONAL MANAGEMENT 3 858 619 4 693 414 WATER SECTOR REGULATIONS 213 818 241 188 TOTAL ALLOCATION 7 735 479 8 841 233 2012/13 R’000 944 772 407 115 2 739 959 4 937 086 253 247 9 282 179 8

RECOMMENDED EFFICIENCY SAVING BY NATIONAL TREASURY -2010/11-2012/13 PROGRAMMES – NEW STRUCTURE 2010/11 R’000 2011/12 ADMINISTRATION 8 642 15 325 WATER MANAGEMENT 5 041 8 940 NATIONAL WATER RESOURCE INFRASTRUCTURE PROGRAMME 32 406 57 469 REGIONAL MANAGEMENT 15 843 28 096 WATER SECTOT REGULATIONS 2 881 5 108 TOTAL ALLOCATION 64 813 114 938 2012/13 R’000 20 306 11 845 76 146 37 227 6 769 152 293 9

MTEF BUDGET ALLOCATION -2010/11-2012/13 EXCLUDING EFFICIENCY SAVINGS PROGRAMMES – NEW STRUCTURE 2010/11 R’000 2011/12 ADMINISTRATION 855 258 885 510 WATER MANAGEMENT 360 741 378 789 NATIONAL WATER RESOURCE INFRASTRUCTURE PROGRAMME 2 400 954 2 560 588 REGIONAL MANAGEMENT 3 842 776 4 665 318 WATER SECTOR REGULATIONS 210 937 236 080 TOTAL ALLOCATION 7 670 666 8 726 295 2012/13 R’000 924 466 395 270 2 663 813 4 899 859 246 478 9 129 886 10

EARMARKED FUNDING -2010/11-2012/13 Description of Earmarked Projects 2010/11 R’000 2011/12 Learning Academy 20 000 Property Management - Rental of Buildings 156 000 170 593 Additional Capacity – Human Resources 7 000 7 420 Working for Water 579 497 814 777 Working on Fire 184 436 242 502 Masibambane 200 000 - Bulk infrastructure 839 000 1 475 340 Water Services Operating Subsidy 848 667 667 792 Compliance Monitoring & Enforcement 5 000 10 000 Total 2 839 600 3 408 424 2012/13 R’000 21 000 179 123 7 791 855 516 254 627 - 1 549 107 711 682 10 500 3 589 346 11

MTEF BUDGET ALLOCATION -2010/11-2012/13 EXCLUDING EARMARKED FUNDING AND EFFICIENCY SAVING PROGRAMMES – NEW STRUCTURE 2010/11 R’000 2011/12 ADMINISTRATION 672 258 687 497 WATER MANAGEMENT 360 741 378 789 NATIONAL WATER RESOURCE INFRASTRUCTURE PROGRAMME 2400 954 2 560 588 REGIONAL MANAGEMENT 1 186 176 1 444 907 WATER SECTOR REGULATIONS 210 937 236 080 TOTAL ALLOCATION 4 831 066 5 307 861 2012/13 R’000 716 552 395 270 2 663 813 1 518 427 246 478 5 540 540 12

REQUEST FOR ADDITIONAL FUNDING CURRENT EXPENDITURE – PRIOR TO BUDGET SCALED DOWN PRIORITY AREA 2010/11 R’000 2011/12 Water Conservation and Water Demand Management 200 000 220 000 Rainwater Harvesting Programme 51 700 84 400 Natural Resource Management Programme (WfW) 395 567 722 056 Funding for New Deputy Minister 8 733 9 269 Water Licensing Backlog Eradication 20 000 TOTAL CURRENT EXPENDITURE 676,021 1,055,725 2012/13 R’000 242 000 105 420 2 272 800 9 732 10 000 2,639,952 13

REQUEST FOR ADDITIONAL FUNDING CAPITAL EXPENDITURE – PRIOR TO BUDGET SCALED DOWN PRIORITY AREA 2010/11 R’000 2011/12 Olifants River Water Resource Development Project 1 405 000 5 441 000 Mooi - Mgeni Transfer Scheme 625 000 470 000 Komati Water Augmentation Project 325 000 787 000 Mokolo and Crocodile River (west) Water Augmentation Project 60 000 56 000 Refurbishment Infrastructure 1 000 000 2 000 000 Regional Bulk Infrastructure 1 354 000 2 093 000 Upgrading and expansion of the National Water Resources Monitoring Networks 17 000 48 000 Dam in Mzimvubu River Catchment - Emergency Project to Address the Water Crisis at Giyani TOTAL 4 786 000 10 895 000 2012/13 R’000 1 527 000 106 000 532 000 58 000 3 000 000 2 838 000 50 000 - 8 111 000

REQUEST FOR ADDITIONAL FUNDING CURRENT EXPENDITURE – AFTER BUDGET BIDS SCALED DOWN PRIORITY AREA 2010/11 R’000 2011/12 Water Conservation and Water Demand Management 60 000 95 000 Rainwater Harvesting Programme 30 000 33 000 Natural Resource Management Programme (WfW) 27 000 31 665 Funding for New Deputy Minister 8 754 9 291 Water Licensing Backlog Eradication - TOTAL CURRENT EXPENDITURE 125 754 168 956 2012/13 R’000 120 000 36 000 33 200 9 756 - 198 956 15

REQUEST FOR ADDITIONAL FUNDING CAPITAL EXPENDITURE – AFTER BUDGET BIDS SCALED DOWN PRIORITY AREA 2010/11 R’000 2011/12 Olifants River Water Resource Development Project 306 000 703 000 Mooi - Mgeni Transfer Scheme - Komati Water Augmentation Project Mokolo and Crocodile River (west) Water Augmentation Project Refurbishment Infrastructure 600 000 1200 000 Regional Bulk Infrastructure 1 354 000 2 093 000 Upgrading and expansion of the National Water Resources Monitoring Networks 17 000 48 000 Dam in Mzimvubu River Catchment 6 000 20 000 Emergency Project to Address the Water Crisis at Giyani 98 000 47 000 TOTAL 2 381 000 4 111 000 2012/13 R’000 2 519 000 - 3 000 000 2 838 000 50 000 40 000 8 447 000

Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions) Programme 2009/10 Original Budget R’000 Adjust- ments Adjusted Budget 2009/10 2009/10 Actual % spent Available Budget Administration 795,353 47,231 841,809 329,320 39% 512,489 Water resource management 3,895,794 183,741 4,076,631 1,586,809 40% 2,489,822 Water Services 2,717,039 123,419 2,842,452 922,770 33% 1,919,682 Forestry 485,641 2,006 489,653 261,955 53% 227,698 Total 7,893,827 356,397 8,250,224 3,100,854 38% 5,149,691 17

Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions) Economic classification Programme Adjusted Budget 2009/10 2009/10 Actual R’000 % spent Available Budget Compensation of Employees 1,408,746 601,836 43% 806,910 Goods and Services 2,355,097 874,252 37% 1,480,845 Interest and Rent on land 782 69 9% 713 Transfers and Subsidies 4,393,951 1,550,832 35% 2,843,119 Payments for Capital Assets 91,648 73,865 81% 17,783 Total 8,250,224 3,100,854 38% 5,149,370 18

Reason for under spending Late submission of invoices in respect of services already rendered. Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at tender phase, the expenditure is anticipated to increase in the third quarter of this financial year Non-payment of general wage increase, it was anticipated (As projected) that the expenditure will kick in July 2009. These increases are now anticipated to be paid in October as per DPSA directive Protracted delays in reaching agreements with municipalities to transferring staff and water schemes. 19

Departmental Allocation- After transfer of functions Programme 2009/10 Original Budget R’000 Virement Rollover and Additional Funding Shifting of Functions Adjusted Budget 2009/10 Administration 795,353 (14,086) 35,208 (3,934) 812,541 Water resource management 3,895,794 (65,386) 318 200 (27,605) 4,121,003 Water Services 2,717,039 77,466 45,953 - 2,840,458 Forestry 485,641 2006 (487,647) Total 7,893,827 399,361 (519,186) 7,774,002 20

DEPARTMENTAL ALLOCATION – AFTER TRANSFER OF FUNCTIONS Economic Classification Programme Original Budget 2009/10 Virement Rollover and additional funding Shifting of Functions Adjusted Budget Compensation of Employees 1,327,863 21,366 33,408 (358,582) 1,024,055 Goods and Services 2,115,255 171,962 69,880 (145,968) 2,211,129 Transfers and Subsidies 3,337,704 479,247 296,073 (6,683) 4,106,341 Interest and Rent on land 782 (782) Payments for Capital Assets 1,114,223 (672,575) (9 076) 432,477 Total 7,893,827 399,361 (519,186) 7,774,002 N.B. Payment for capital figures for either virement or shifting of functions have an error as they do not add up to the adjusted budget 21

Rollover of Funds from 2008/09 Financial Year Description of Services Amount Requested R’000 Amount Approved Continuation of the construction of De Hoop Dam 232,253 Implementation of Regional Bulk Infrastructure 5,253 Cholera Outbreak in the Limpopo and Mpumalanga Provinces 40,000 TOTAL 277,506 237,506 Def: Funds appropriated but not spent in a particular financial year may be rolled over to a subsequent year subject to approval of the National Treasury 22

Reason why funds were not spent -Rollover of funds Delays in the conclusion of the negotiations to finalise the memorandum of agreement with the 23 different mines. Exceptional high rainfall prevented contractors from making anticipated progress Late submission of invoice in respect of Regional Bulk Infrastructure with multiple errors on calculation of bill of quantities Reason why funds were not spent -Rollover of funds 23

Virement (Shifting of Funds in terms of Section 43 of PFMA During a financial year, some deviations between actual expenditure and the allocated budget for that specific financial year may occur. Unforeseen circumstances may require the revision and subsequent adjustment of the original planned projects and/or estimated costs involved in the execution of activities. Virement is subject to the following Shifting between programmes may not exceed eight percent (8%) Virement may not be applied to amount appropriated for transfer to institution Virement may not be applied to amount appropriated for capital expenditure to defray current expenditure Virement may not be applied to earmarked funds 24

Virement (Shifting of Funds in terms of Section 43 of PFMA Virement – 2009/10 financial year Programmes Virement Administration (14,086) Water Resource Management (65,386) Water Services 77,466 Forestry 2,006 Net Effect 25

Reason for Virement Programme1: Administration 1.1 Budget of R 14.086 million was shifted to Water Services due to reallocation of inflationary adjustment that was initially allocated during Estimate of National Expenditure process in this programme. Programme2: Water Resource management 2.1 Budget of R65.386 million was shifted to Water Services and Forestry due to the following reasons: 2.1.1 Unfilled positions as a result of newly created structures; 2.1.2 Re-allocation of water use conservation and water demand management to the respective regions. 2.1.3 Funds were incorrectly allocated under goods and services in this programme for the purchase of machinery and equipment 3 Programme3: Water Services 3.1 Budget of R77.466 million was shifted to this programme as result of re-allocation of inflationary adjustment that was initially allocated in programme 1: Administration as well as re-allocation of water use and conservation and water demand management 26

Unforeseeable and Unavoidable Expenditure Section 30(2)(b) of the PFMA and Treasury Regulations 6.6, provides for the allocation of additional funds through an adjustment budget to finance unforeseeable and unavoidable expenditure Unforeseeable and Unavoidable expenditure relates to expenditure that could not be anticipated at the time of finalising the budget (ENE) National Treasury has recommended an amount of R124,144 million to Cabinet for approvals. Below are the details 27

Unforeseeable and Unavoidable Expenditure Description of Services Amount Requested R’000 Amount Approved Difference Additional Fund for the new Deputy Minister 8,267 3000 (5,267) Additional funds for the purchase of packaged plants to prevent Cholera 49,000 40,700 (8,300) Additional fund for Working for Water 74.700 22,127 (52,573) General salary adjustments 58,317 Drought Relief to the Western Cape1 53 700 TOTAL 185 667 177,844 7,823 The difference means that the department must reprioritise the budget and shift budget (virement) to fund the shortfall 28

EARMARKED FUNDING Earmarked funding are allocations earmarked by National Treasury for a specific purpose and may not be used for other purposes. Below are earmarked allocations for 2009/10 financial year before adjustments Total of earmarked funds amount to R3 170 163 000 Rent of buildings 138 331 000 Working for Water 455 724 000 Working on Fire 123 608 000 Refurbishment of water scheme 30 000 000 De Hoop Dam (Phases 2B to 2G) 600 000 000 Additional capacity: Internal Audit and Finance 6 000 000 Sanitation at school and clinics 350 000 000 Regional Bulk infrastructure 611 500 000 Operating subsidy (Water Services) 855 000 000 Total earmarked funding 3 170 163 000 29

2009/10: Earmarked Vs Un- earmarked Before Adjustments 30

TRANSFER OF FUNCTIONS The president of Republic of South Africa has announced during his state of the nation address that functions of Sanitation services and Forestry will reside with the Dept. of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. Where a function is to be transferred between votes during a financial year, National Treasury must be consulted in advance to facilitate any request for the resulting transfer of funds voted for that function in terms of section 33 of the PFMA. In the absence of an agreement between the affected departments on the amount of funds to be transferred, National Treasury will determine the funds to be shifted. Transfer of functions: National Treasury approval must be obtained before seeking approval from the Minister of Public Service Administration for a transfer of a function to another sphere of government 31

TRANSFER OF FUNCTIONS (cont.) Budget of R519,186 million will be surrendered to the Department of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. 1.2 Department of Agriculture and Fisheries 1.2.1 Operational budget in the Office of DDG: Forestry R3.934 million 1.2.2 Forestry Budget (as per ENE) R485.641 million 1.2.3 Compensation of employees in respect of support services R27.605 million 1.2.4 Forest land management R2.006 million TOTAL 519.186 million 32

1.1 Delays in signing Memorandum of Agreement with the mining sector RE-SCHEDULING OF FUNDS EARMARKED FOR INFRUSTRACTURE PROJECTS(DE HOOP DAM) FOR OTHER PURPOSE National Treasury has granted the Department to reschedule earmarked funds of R502 million owing to. 1.1 Delays in signing Memorandum of Agreement with the mining sector 1.2 Delays in reaching Water Supply agreements with individual mines due to the global economic crisis As result of this, the Department will only be able to spend R98 million of R600 million The Department therefore requested the National Treasury to utilise R502 million as follows 33

2.1 To further the following infrastructure projects - R297 million RE-SCHEDULING OF FUNDS EARMARKED FOR INFRUSTRACTURE PROJECTS(DE HOOP DAM) FOR OTHER PURPOSE DWA requested the National Treasury to reschedule R502 million as follows 2.1 To further the following infrastructure projects - R297 million 2.1.1 Nandoni Water Treatment Works 2.1.2 Inyaka Water Treatment Works 2.1.3 Hluhluwe Regional Water Scheme 2.2 Augmentation to the Water Trading Entity – R205 million is a result of infrastructure projects undertaken by WTE in 2008/09 financial year 34

I thank you 35