1. BRIEFING THE PORTFOLIO COMMITTEE ON WATER AND SANITATION
WATER TRADING ENTITY
Presented by:
Mr D Mashitisho
Director-General
23 May 2017
PRESENTATION TITLE
Presented by:
Name Surname
Directorate
Date

2. CONTENTS Detailed explanation of the WTE overdraft
WTE 2017/18 budget and impact of overdraft on 2017/18 financial year
Debt owed to WTE by Municipalities and Water Boards
Challenges in respect to debt collection

3. DETAILED EXPLANATION ON THE WTE OVERDRAFT

4. NATIONAL TREASURY BUDGET ALLOCATION OVER MTEF
National Treasury allocations
MEDIUM TERM EXPENDITURE FRAMEWORK 
2016/17
2017/18
2018/19
Total
R’000
Original allocation per published ENE
National Treasury reduction 28 January 2015
MTEF allocation received on 28 January 2015
National Treasury reduction 2 November 2015
MTEF allocation received on 2 November 2015
National Treasury increase/(reduction) 31 October 2016
MTEF allocation received on 31 October excluding AMD
TOTAL CUTS BY NATIONAL TREASURY  

5. COMMENTS ON THE BUDGET ALLOCATION-NATIONAL TREASURY
The main reasons that National Treasury indicated to the Entity for the budget cuts were that the Entity was under spending on capital projects and can use its accumulated surpluses to fund its capital needs.
It was expected that the Entity should collect debts owed to it and use revenue generated through increase in tariffs as a source of funding.
 The assumptions used as a basis of budget reduction did not take into account the following factors:
 The assertion of accumulated surplus indicated by National Treasury consists of non-cash items and therefore did not take into account that accumulated surplus does not translate into cash as it can be seen from the difference between the surplus of R3.5 billion and the cash and cash equivalents of R42 million in the audited financial statements for the year ended 31 March 2016.

6. WTE BUDGET ALLOCATION FOR 2016/17 AND ASSUMPTIONS MADE REGARDING DEBTORS COLLECTIONS

7. ASSUMPTION MADE DURING THE BUDGET ALLOCATION-2016/17
In compiling the budget mentioned above the WTE made the following assumptions;
Out of total amount of R9.8 billion of revenue billed, R7.8 billion will be collected from the water users.
Augmentation of R1.5 billion will be received from National Treasury.
The amount of R2.9 billion of long outstanding debt (over 150 days) was to be received from the Water Boards and Municipalities and the R200 million owed by companies will be collected through the debt collector.
The Main Account receivables relating to water services projects were to be paid in the current financial year.
The WTE assumed 100% collection with regards to the Capital Unit Charge – as such taking the bad debt risk of the Trans Caledon Tunnel Authority (TCTA).
The assumptions that were made took into consideration the budget pressures and the fact that National Treasury budget cut was drastic.

8. Budget allocation 2016/17
The 2016/17 approved budget was very specific that:
“The budget allocation was made on the assumption that the projected revenue will be collected from accounts receivable” and
“The intervention of Cooperative Governance and Traditional Affairs (COGTA) AND National Treasury (NT) will be required for the collection of this long outstanding debt.”
Clearly this intervention by COGTA and NT did not happen, hence the current overdraft of R2.9 billion as at 22 February 2017

9. WTE 2017/18 budget and impact of overdraft on 2017/18 financial year

10. SOURCE OF REVENUE -2017/18 Source of Funding R9.7 billion Augmentation
Allocation R1,410 million
CMA’s R173 million
Exchange Revenue
TCTA R4,439 million
CMA’s R376 million
NWRI R 3,153 million
Construction Revenue
R200 million

11. Expenditure breakdown
Augmentation Fund
NWRI support
R320 million
Finance branch
R259 million
Capital Infrastructure projects
R500 million
Acid Mine Drainage
Exchange Revenue
Operations & Maintenance R1,000 million
Rehabilitation & Betterment
Catchment Management Agencies
R556 million
Rehabilitation of Conveyance Systems
R126 million
TCTA payments
R4,512 million
Operational projects
R530 million
Construction
R200 million
Total Expenditure Budget = R9 billion

12. INFRASTRUCTURE PROJECTS -2017/18
Olifants River Water Resources Development Project (Phase 2A): De Hoop Dam
9 404
Groot Letaba River Development Project (GLeWAP): Nwamitwa Dam
40 000
Groot Letaba River Development Project (GLeWAP): Raising of Tzaneen Dam
50 000
Dam Safety Rehabilitation Programme (DSRP)
Olifants-Doorn River Water Resources Project: Raising of Clanwilliam Dam
13 025
Mdloti River Development Project: Raising of Hazelmere Dam
Mzimvubu Water Project
75 000
Olifants River Water Resources Development Project (Phase 2D): Bulk Distribution Scheme
52 093
SUB-TOTAL INFRASTRUCTURE PROJECTS
Acid Mine Drainage
TOTAL

13. Amounts to be paid from Main Account
EXISTING AUGMENTATION PROJECTS
2017/18
R'000
Mzimvubu Water Project
(In total R250 million has been budgeted for this project)
Olifants River Water Resources Development Project (Phase 2B): Bulk Distribution Scheme
30 000
Goedetrouw Transfer Scheme
(An amount of R250 million will be claimed from the national drought disaster fund)
50 000
TOTAL

14. 2017/18 Budget surplus
The 2017/18 budget reflects a surplus of R748 million which will go towards reducing the overdraft as at 31 March 2017.
This is negatively affecting the 2017/18 financial year as this money could have been used to fund projects.

15. COLLECTION OF DEBT INCLUDED IN 2017/18 BUDGET
No collection of debt has been included in the 2017/18 budget.

16. DEBT OWED TO WTE BY MUNICIPALITIES AND WATER BOARDS

17. Municipalities Age analysis as at the 31 March 2017

19. Comments
Municipalities continue not to pay the accounts, however they were handed over to legal for summoning.
45 summons issued ( 3 court judgment granted)
138 still in legal collection process
74 municipalities not handed-over as some of them were paying their accounts. Assessment is being done so that those that are not paying can be handed-over.

20. Water Boards Age analysis as at the 31 March 2017

21. AMOUNT OWED TO WATER BOARDS AMOUNTING OWING @ 31 MARCH 2017
BALANCE AS AT 19 MAY 2017
R'000
UMGENI WATER -
SEDIBENG
5 112
RAND WATER
PELLA DRIFT WATER BOARD
OVERBERG WATER
NAMAKWA WATER BOARD
MHLATHUZE WATER
11 000
MAGALIES WATER
LEPELLE NORTHERN WATER
52 447
IKANGALA WATER BOARD
BOTSHELO WATER (PART OF SEDIBENG WATER)
BLOEM WATER
AMATOLA WATER BOARD
ALBANY COAST WATER BOARD
TOTAL
68 559

22. Comments……..cont.
Most of Water Boards are paying with the exception of Sedibeng Water
Final demand letter will be sent to Sedibeng Water.
Water restriction will be considered if they continued not to pay the accounts.
Rand Water is not paying for old debt on Bushbuckridge. They have promise to pay the current debt.
Lepelle not paying due to the fact that DWS is owing them.

23. Strategies undertaken/to be taken to collect outstanding debt.
Restricting water supply
National Water Act allows the DWS to restrict or suspend the flow of water to defaulting water users.
This strategy will have a negative impact on the communities which may result to un-rest as the municipalities will not have enough water to deliver to the communities.
Restriction or suspension of water supply will affect will also affect economic activities that are happening at local level.

24. CHALLENGES IN RESPECT TO DEBT COLLECTION

25. Challenges Municipalities not budgeting for raw water charges.
Refusal by municipalities to pay for raw water without valid reasons.
Changes in municipal boundaries ( amalgamation). The receiving municipality refuse to pay the debt transferred to them.
Municipalities claims that most of the residents are indigent.
Municipalities not billing their users due to poor revenue management
Changes in leadership.
Customer disputes.
Inability to implement credit control mechanism ( i.e. restricting the supply of water).
Water Boards are being owed by municipalities.
Intergovernmental process take long to conclude.
Legal processes takes long as DWS must wait for the courts date.

26. THANK YOU