1. Public Hearings on Division of Revenue Bill, 25 February 2009 Presentation by Department of Water Affairs and Forestry 1

2. Content Progress in water and sanitation delivery Schedule 7 Grants Bulk Infrastructure Operation and maintenance Grant Schools and Clinics Challenges in DORA Recommendations

3. Departmental MTEF allocation 2009/10 R’000 2010/11 R’000 2011/12 R’000 Administration Water Resource Management Water Services Forestry 795.4 3 895.8 2 717.0 485.6 857.4 4 352.6 2 560.2 522.7 893.6 4 917.8 3 068.6 583.1 Total expenditure estimates 7 893.88 292.99 463.1

4. Basic Sanitation Progress (Meeting RDP standards 2008) 199420012008 Access to 48%57%73% Backlog (Below RDP) 52%43%27% 48% Improvement

5. Basic Water Supply Progress (Meeting RDP standards 2008) 199420012008 Access to 59%71% 88% (95%*) Backlog41%29% 12% (5%*) Backlog more than Halved * The 12% Backlog represents: People/hh below RDP standard of which: 5% have no access to formal water infrastructure and, 7% have access to formal water infrastructure but below RDP standards

6. GROUNDWATER & WATER QUALITY CHALLENGE Scattered rural settlements (high poverty) Low economic development potential Groundwater dependent (with water quality risks) Limited surface water development potential Water reticulation needs (with O&M challenges) WATER AVAILABILITY CHALLENGE Extensive water backlogs (villages) Water stressed areas Local WR limitations Water quality challenges Water demand management need Requires WR development (De Hoop & others) Requires major regional bulk infra High capital and O&M cost Major funding needs WATER DISTRIBUTION CHALLENGE Extensive water backlogs (scattered) Within water-rich WMA (but no access) Requires WR developments Requires major regional bulk infra High capital and O&M cost (topography) Major funding needs Formal Historic Basic Water Service Challenges CONTEXT of CHALLENGE water availability and accessibility topographic and physical challenges impacting on capital and operating costs bulk infrastructure dependency with associated funding and implementation time frames total life-cycle management with associated skills and sustainable management phased approach providing for interim solutions while addressing longer-term sustainable development

7. Background Division of Revenue Bill allocates funds to municipalities (Water Services Authorities) through the Municipal Infrastructure Grant Water Services Authorities have constitutional mandates to provide water services Division of Revenue Bill does not specify usage of funds, this is done through policy DWAF through its regulatory and support role influences Water Services Authorities to use funds for Water Services DWAF receives conditional grants for special purposes, e.g. Schools & Clinics and Regional Bulk Infrastructure 7

8. Schedule 7 Grants DWAF administers the Regional Bulk Infrastructure Grant Backlogs in Water and Sanitation at Clinics and Schools grant allocated over the 2007 MTEF period is sufficient to address school backlog of 3 459 as confirmed in September 2007 by National Department of Education Operation Subsidy 8

9. MTEF Conditional grants allocations 2009/10 R ’ 000 2010/11 2011/12 Water services operating subsidy 1.113,778570,000380,000 Regional bulk infrastructure grant 611,500839,0001,475,340 Water and sanitation at schools and clinics 350,000 R315m -

10. Bulk Infrastructure Allocation R 300 million 2007/08 R 450 million2008/09 R 611.5 million2009/10 R 839.0 million2010/11 R 1475.3 million2011/12

11. Purpose of the Bulk Infrastructure Prog Distinguish between direct service delivery of Supporting reticulation schemes that MIG is targeting Water availability & scarcity (Link Water Resource Strategy and planning) Benefit of scale Integrated management (multi users) Institutional aspects & arrangement (ownership, implementation, O&M) Socio-Economic development Financial issues (Viability & funding) Implementation options Sustainable management (water resources, O & M)

12. Expenditure 2008/09 to date See attached tables for individual project progress REGION BUDGET ALLOCATION EXPENDITURE FEBRUARY 2009 DIFFERENCE% EASTERN CAPE75,650,00043,577,00832,072,99258% FREE STATE36,900,00016,356,85220,543,14844% GAUTENG3,800,0003,780,81819,18299% KWAZULU NATAL86,800,00073,107,06013,692,94084% LIMPOPO138,700,000103,544,69935,155,30175% MPUMALANGA28,700,00026,000,0002,700,00091% NORTH WEST45,550,00044,258,8061,291,19497% NORTHERN CAPE28,600,00011,081,16517,518,83539% WESTERN CAPE2,300,0000 0% HEAD OFFICE3,000,0002,798,681201,31993% TOTAL450,000,000324,505,088125,494,91272%

13. Progress on implementation 08/09 1.9 new feasibility studies have been started 2.26 feasibility studies have been compiled and evaluated 3.4 implementation projects have been completed 4.21 implementation projects are currently in construction phase 5.9 implementation projects are still in design phase and 4 are in tender phase

14. Challenges WSA reluctant to continue / commit due to partial funding or tenders are much high than estimates Long procurement and design process of projects –Estimated period of time between approval and commencement of projects is 8 months due to planning requirements Contract administration problems: (Free state, BEE contractors are unhappy at the delay in payments and have stopped working) Non performing contractors (i.e. Jagerfontein FS) Limited capacity within WSA exacerbated by Staff turnover Slow processing of money spent (estimated R 80 million spent but yet not processed

15. Interventions to address challenges 1.Institutional capacity will be re-evaluated for all new projects and DWAF/Water Boards other delivery models are being investigated 2.New RO officials will be appointed and made accountable, Operations manual is been develop to assist with functions. 3.A more stringent monitoring process from National Office will be applied to identify project problems early. 4.Research/policy initiatives will be implement to identify how to reduce bottle necks in design process 5.Projects will be set performance expenditure targets. Those not performing re-allocation of funding will be done by July 09

16. Conditions All receiving WSA’s to conclude formal agreements by 31 March 2009 Transfer of appropriate staff by 31 March 2009 Subsidy reduced by 30% each year (2009 – 2012) with the difference incorporated into equitable share The necessary capacity must be in place in the receiving WSA’s for implementation of the grant DWAF to continue monitoring the implementation till 2011/12 Water Services Operating Subsidy Grant

17. Progress (31 Dec’08) 57 agreements signed (95%) 4494 staff transferred (58%) 3104 staff seconded (42%) 1702 schemes (including rudimentary schemes) with a total asset value of R 6,235 million transferred (97%) Refurbishment total expenditure R 676 million (50%)

18. Water Services Operating Subsidy Grant Output Operating of water services schemes and improved revenue collection Schemes transferred refurbished to standards outlined in the agreed policy framework and All affected staff transferred Challenges Finalising the staff transfers this financial year. Non – reporting by WSA’s.

19. Water Services Operating Subsidy Grant Targets –3 Transfer agreements to be concluded –3575 seconded staff transferred –Ensure that schemes transferred are properly operated and maintained –Improve reporting by WSA ’ s

20. What is working in Division of Revenue Bill? Significant funding flowing to Municipalities for Infrastructure –Municipalities especially cities are major economic drivers –Based on needs of communities –52% should support Water and Sanitation Delivery is increasing –Some Water Services Authorities will meet Water Services Targets –Challenge is those municipalities with a demonstrated lack of capacity to deliver 20

21. Issues for debate in Division of Revenue Bill? (1) There is limited direct control by sector departments on how funds are spent. –Shortcomings in reporting at municipal level make control impossible –Sector conditions have not been incorporated into the Bill Essential planning is not mandated in the Bill and this prevents effective performance evaluation The allocations are not being adjusted in accordance with the delivery performance of the Municipalities. 21

22. Issues for debate in Division of Revenue Bill? (1) The need for flexibility to move funds to where they can be used effectively. Differentiated approach in Section 23 where cities are to play a more prominent role in service delivery should be investigated More funding will be needed than is currently provided in order to eradicate backlogs, especially in Regional Bulk Infrastructure and for eradicating rural backlogs Ring-fencing of water services budgets, especially in rural areas, are excluded from the Bill, this should be done urgently as this is the only way the sector will meet its targets 22

23. Recommendations Reporting responsibilities of municipalities has to be improved to effectively measure performance The concept of an “infrastructure performance framework” raised in 15 (the MIG for Cities) is welcome, as it provides control information for the municipal programmes. The possible role of DWAF and other national departments is supporting planning and implementation of water services in rural areas where municipalities lack capacity should be investigated Differentiated approach for smaller rural municipalities should be initiated. 23

24. Recommended changes to the Bill Section 11, 2(c) should require the submission of monthly reports within 20 days after the end of each month Section 18 (Integrated housing) should include the same monitoring conditions as Sections 11 and 16. Section 24 (b1) must include control measures to ensure that grant conditions are met and that proper planning takes place 24

25. Recommended changes to the Bill (2) The MIG framework must be adjusted to align to the objectives to be attained in the DORA The conditions and framework of the bill should be revised to take into account requirements for an integrated approach towards basic services The role of the Cities by giving them the flexibility to deliver in their areas –The initiation of the Differentiated approach and the supporting City Budget Forum –DWAF will support delivery of integrated services through Cities, 25

26. Recommended changes to the Bill (2) Delivery through WSAs to continue where the capacity has been demonstrated DWAF is best placed to deliver in low-capacity rural areas and the differentiated approach has been silent on this. Elimination of backlogs in informal settlements to be supported by an enlarged mandate for Cities Division of Revenue Bill has done good by strengthening the role of cities in delivering services in their areas as this assist the country in leveraging their capacity and resources BUT it has been silent on areas/municipalities where there is no capacity to deliver We at DWAF believe we are best placed to support delivery in rural areas and we can initiate processes to do so to ensure that funding is placed where there is capacity to deliver as demonstrated through bucket eradication. 26

27. Thank you 27