1. 1 Finance strategic outputs Presented by Mr Onesmus Ayaya Chief Financial Officer Department: Water Affairs (DWA) 18 August 2009

2. 2 outline Key functional areas Overview of the past key achievements Past challenges facing the branch Key Performance Areas Rationale for selecting the KPAs Funding  WTE  MEA Monitoring Departmental expenditure trends Departmental indicate 2010 MTEF allocations

3. 3 Key functional areas in the branch Supply Chain and Asset Management Revenue and debtors management Financial Accounting and Reporting Management Accounting Budget and Planning (including expenditure management)

4. 4 Overview of past Key achievements The separation of the Department’s two accounts, namely; Main Account and the Water Trading Entity The strengthening of the capacity was also realized through the filling of key management position to provide effective leadership in financial management Verification and valuation of major bulk water supply assets Creation of an updated asset register Development of financial management processes and policies Implementation of Enterprise Resource Planning systems for WTE Verification and valuation of biological assets

5. 5 Past Challenges facing finance Clean audit (financial management and skills) Non-integrated financial systems for MEA Minimal transformation in terms of organisational systems and processes Financial governance: relationship between regions and head office

6. 6 Past Challenges facing finance (cont) Systems that requires proper implementation and post implementation refinements– long term, user requirements (SAP, LOGIS etc) Inadequate capacity (lack of skilled resources) Improperly linked staff to either Main Account or Trading Entity Extensive infrastructure assets – magnitude, spatial distribution/location: Auditable assets plans needed

7. 7 Wte specific challenges extent of infrastructure 240 schemes 334 dams (34 billion cum storage) 6929 km canals 171 km tunnels 990 km pipelines 56 pump stations – 211 MW Other infrastructure  28 wastewater treatment works  34 water treatment works  2581 buildings  3006 measuring facilities (1070 hydro, 1724 geohydro,212 meteorological stations) Land – 795,563 Ha plus 137,264 Ha servitudes

8. 8 WTE CHALLENGES Escalating risk of service failure  renewal backlogs are R10 billion and growing  infrastructure maintenance is insufficient  insufficient funding - price capping and exemptions reduce potential income from R4.4 billion pa (adequate) to actual of R1.8 billion pa (completely inadequate) Customer complaints over raw water tariff increases Ineffective and inefficient structure of the sector as a whole Multiple WTE roles – regulator, custodian, planner, constructor Organisation’s technical capacity eroded (even if additional funding made available, the WTE will need commensurate increase in skills and capacity, and improved systems) Less than satisfactory processes for billing, collection, budgeting, expenditure control, and reporting Less than satisfactory financial and asset management systems Negative cash-flow

9. 9 Key Performance Areas Strategic GoalStrategic objectives Create a value driven, effective and responsive department Improve financial management Organisational growth and development

10. 10 Rationale for selecting the KPAs Qualified audit reports and opinions of the previous financial years Financial management is crucial to the successful functioning the org since it relates to how resources available to the organisation are used.

11. 11 Main Account: Funding specific to financial Management Cost elementAmount 2009/10 Amount 2010/2011 Amount 2011/2012 Amount 2012/201 3 Compensation to employees 63,741 65,78369,96573,463 Goods and services 30,714 48,19953,38056,049 Payments for capital assets 5,181 7,2979,0959,550 Total99,636121,278132,441139,063

12. 12 Monitoring Review of milestones achieved in the action plan formulated to address financial weaknesses identified by AG Bi-weekly review of specific projects supported by external service providers at dedicated steering Committee meetings. In Year monitoring (financial and non financial reports) Quarterly reports Financial statements as at 30 September Inputs to the Annual Report

13. 13 DEPARTMENTAL EXPENDITURE TRENDS YearActual R‘000 Budget R‘000 2004/053,776,9463,823,112 2005/063,717,0883,935,636 2006/074,305,6504,660,303 2007/085,385,4615,862,513 2008/096,511,3007,036,616 % Expend 99 94 92 93

14. 14 2008-09:BUDGET VS Actual Expenditure Programme2008/09 Budget R’000 2008/09 Actual R’000 Under- spending Administration682 088681 758330 Water resource management 3 499 8123 001 347498 465 Water Services2 348 0312 341 8166 215 Forestry506 685506 64837 Total7 036 6166 531 569505 047

15. 15 MAIN ACCOUNT: REASON FOR UNDERSPENDING The unspent budget allocation of R505,047 million is mainly due to the under expenditures on the De Hoop Dam project.  The Department requested the National Treasury to utilise the funds that could not be spent on this project for other projects (Nandoni and Inyaka water treatment works and the Hluhluwe regional water scheme), but the request was not approved- R265m  Unpaid invoices as at 31 March 2009: R227m Action taken by the department:  The Department requested the National Treasury to roll-over R272,3 million of the underspending to the 2009/10 financial year for the continuation of the De Hoop Dam project.

16. 16 Explanation Disbursements of the funds i.r.o De Hoop was not made as a result of the delays in the conclusion of the negotiations to finalise a memorandum of agreement with the 23 different mines. The memorandum records the principles for the sharing of the project cost and was essential to conclude the negotiations prior to the commencements with preparations for project implementation. Against this situation, the DWA requested the NT for approval to utilised the unspent funds for the benefit of other bulk water supply infrastructure projects that were nearing completion. The necessary approval was not received from the National Treasury and consequently these funds remained unspent within the Vote while WTE continued to implement the relevant bulk water services projects using funds meant for recurrent expenditure items. Had the approval from NT been received R262,67 million would have been paid out to the WTE to augment the Capex on other bulk water infrastructure projects.

17. 17 Challenges identified 95% expenditure trends Possible decline in donor funding Significant portion of the budget that is earmarked Funding of new programs, projects and structure changes Possible establishment short funding and capacity constraints Opex and CAPex plansInflation costs and possible implementation delays Office accommodation costs to be provided for regions Internal and external coordination of projects Multi-sector programme risks Specialised service delivery consultants – possible budget shortfalls

18. 18 2009/10: Earmarked Vs Un- earmarked

19. 19 Exchequer funding earmarked in 2009/10 Thus the total amount earmarked for the 2009/10 financial year for the Department amounts to R3 170 163 000 for the following purposes: 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 funding3 170 163 000

20. 20 Changes on 2009 MTEF Baseline

21. 21 Office of the DG 2009/10 Chief Directorate: Main Appropriated Adjusted Appropriated Director-General and Personnel 104,235 Chief Operating Officer 5,032 Director : Corporate Planning 3,878 CD: Internal Auditing 15,649 Director : Transformation 5,679 DDG: Special Programmes 3,000 DDG: Regulations 3,000 CD: Nat Water Resource Infrastructure 4,703 Total: Office of the DG 145,176

22. 22 Branch: Corporate Services 2009/10 Chief Directorate: Descriptions Main Appropriat ionAdjusted appropriation Office of DDG: Corporate Services 5,868 Chief Information Officer 86,336 Director: Administration 231,256 Director: Legal Services 12,213 CD: Human Capital Solutions 98,416 Director : Gender and Disability 8,747 CD: Communication Services 26,550 Total: Branch Corporate Services 500,518

23. 23 Branch: Finance 2009/10 Chief Directorate: Descriptions Main Appropria tion Adjusted appropri ation Office of Chief Financial Officer 22,042 CD & Pers: Finance 99,636 Total: Branch Finance 121,678

24. 24 Branch: Policy and Regulation 2009/10 Chief Directorate: DescriptionsMain Appropriation Adjusted appropriation Office of DDG : Policy and Regulation 3,515 CD: Resource Directed Measures 23,000 CD: Institutional Oversight 94,000 CD: Intergrated WR Planning 90,000 CD: Policy and Strategic Coordination 18,822 CD: International Relations 21,178 CD: Information Management 165,000 CD: Water Use and Conversation 248,706 Total Summary: Policy and Regulation 664,221

25. 25 Branch: National Water Resource Infrastructure 2009/10 Chief Directorate: Descriptions Main Appropriation Adjusted appropriation Infrastructure Development and Rehabilitation - Augmentation to WTE 1,989,201 Infrastructure-KOMATI BASIN WATER AUTHORITY (KOBWA) 180,000 Total 2,169,201

26. 26 Branch: Operations Regions (WRM) EXPENDITURE TO DATE: 31 JULY 2009 Chief Directorate: Descriptions Main Appropriation Adjusted appropriation Office of DDG: Operations Regions 8,267 Eastern Cape Region 137,923 Western Cape Region 101,906 KwaZulu Natal Region 72,763 Mpumalanga Region 63,271 Gauteng Region 44,173 North West Region 41,275

27. 27 Branch: Operations Regions (Cont) 2009/10 Free State Region 35,911 Northern Cape Region 52,293 Limpopo Region 91,835 Working For Water - Cape Town Office 272,851 Regional Support and Co-ordinations 32,275 Augmentation to WTE - Proto CMA's 107,835 Total Summary: operations regions 1,062,578

28. 28 Branch: Operations Regions (WS) EXPENDITURE TO DATE: 31 JULY 2009 Chief Directorate: Descriptions Main Appropriati on Adjusted appropriatio n Eastern Cape Region 334,110 Western Cape Region 32,557 KwaZulu Natal Region 200,737 Mpumalanga Region 288,943 Gauteng Region 67,817 North West Region 156,045

29. 29 Branch: Operations Regions (WS) EXPENDITURE TO DATE: 31 JULY 2009 Free State Region 95,125 Northern Cape Region 103,792 Limpopo Region 959,906 Manager: National Transfer 15,990 Manager: Sanitation 86,393 CD: Regional Support and Co- ordination 315,758 Total Summary: operations regions 2,657,173

30. 30 MAIN ACCOUNT: 2009 MTEF ALLOCATIONS- Economic Classification MTEF Estimate 2009/10 R’000 2010/11 R’000 2011/12 R’000 CoE1 327 8631 314 0861 399 588 Goods and Services2 113 2552 902 9643 318 860 Capital assets1 114 223972 6851 623 420 Total 7 893 8278 292 9259 463 127

31. 31 2010-MTEF Allocation New Programme Stricture 2009/10 R’000’ 2010/11 R’000’ 2011/12 R’000’ 2012/13 R’000’ Administration805,095863,798900,728945,766 Water Management345,0777365,782387,729407,115 National W.R. Infrastructure 2,277,0362,433,3602,618,0572,739,959 Regional Management 3,360,9353,858,7214,693,5214,936,092 Water Services184,716213,818241,188253,247 TOTAL6,972,8597,735,4798,841,2239,282,179

32. 32 Donor funding (R’000’)

33. 33 WTE: Revenue Vs Expenditure

34. 34 MTEF allocation - WTE Operational activities2009/102010/112011/12 Revenue 1,599,784 1,798,403 2,074,410 Raw Water 1,563,784 1,762,403 2,038,410 Sundry Income 36,000

35. 35 MTEF allocation – WTE (cont..) Operation & Maintenance costs 1,206,811 1,265,944 1,336,040 Compensation of Employees 340,506 357,191 373,264 Goods & Services 588,256 617,081 644,850 Support services 278,048 291,672 317,926

36. 36 MTEF- allocation – WTE (cont) Operating surplus/deficit from core business 392,973 532,458 738,370 CAPEX FUNDED FROM OPERATIONS 392,973 532,458 738,370 Movable assets - - Refurbishment 392,973 436,986 485,928 Betterment - 95,472 252,441

37. 37 MTEF allocation – WTE (cont…) INFRASTRUCTURE DEVELOPMENT 1,744,913 1,853,806 1,992,036 Support services (Schedule) 416,453 465,934 508,633 Movable assets 104,570 13,480 106,327 Less: allocated to operations (278,048) (291,672) (317,926) Projects direct & side support 1,501,938 1,666,064 1,695,001 Funded by Augmentation 1,744,913 1,853,806 1,992,036

38. 38 MTEFallocation – WTE (cont) SUBSIDISED ACTIVITIES CMA (Proto) Revenue 184,740 193,792 202,513 Raw Water 184,740 193,792 202,513 Operational Costs 279,332 316,617 349,124 Compensation of Employees 165,455 181,244 194,489 Goods & Services 113,877 135,373 154,636 Capital Expenditure - - - Movable assets - - Operating surplus/deficit (94,592) (122,825) (146,611) Funds by Augumentation 94,592 122,825 146,611

39. 39 I thank you