1. PRESENTATION TITLE Presented by: Name Surname Directorate Date BRIEFING TO THE WATER AND SANITATION PORTFOLIO COMMITTEE WATER SECTOR INSTITUTIONS STRATEGIC OBJECTIVES, TARGETS AND BUDGET PROJECTIONS 2015/16 -2017/18 DIRECTOR GENERAL’S (MS MARGARET–ANN DIEDRICKS) OPENING REMARKS 29 APRIL 2015

2. PART A POLICY AND LEGISLATIVE MANDATES

3. Policy & LegislationDescription White Paper on Water & Sanitation, 1997 Recognised a need for water boards and public sector entities. Water Services Act, Act No 108 0f 1997 Give Minister the powers to establish and disestablish water boards and outline the procedure for appointing Board members. National Water Act, Act 36 of 1998 Gives Minister the power to establish and disestablish Catchment Management Agencies and outline the procedure for appointing board members Strategic Framework for Water Services Recommended the Institutional Reforms in the sector. Public Finance Management Act, Act No.1 of 1999 National Public Entities listed as Schedule 3A and 3B under PFMA. National Water Resource Strategy-2 Chapter 8 on Water Management Institutions including plan to establish 9 CMAs and Regional Water Utilities Raw Water Pricing Strategy, 2007 Defines Water Resource Management functions to be charged to users and funding framework for CMAs National Development Plan, 2012 Regional Water Utilities, CMAs and National Infrastructure Agency to be created.

4. LEGISLATIVE REQUIREMENTS FOR ENTITIES PLANNING ENTITYCOMPLIANCEDATELEGISLATIONSUBMIT TO Water BoardsWater Boards submits their Corporate Plan, projected revenue and expenditure. Shareholders Compact Business Plan 31 MayPFMA Sec 52 TR 29.1 TR 29.2.1 WSA: Sec 40.4 Minister and National Treasury TCTATCTA submits its Corporate Plan and projected of revenue, expenditure and borrowings Shareholders Compact 28 FebruaryPFMA Sec 52 TR 29.1 TR 29.2.1 Minister and National Treasury WRCWRC submits its 1 st and Final draft of their Strategic Plan 1 st draft: 1 October Final: 1 April TR 30.1.1 TR 30.1.2 Minister and National Treasury CMAsCMAs submits their 1 st and final draft of their Annual Performance Plan 1 st draft: end August 2 nd draft: end November Final: end January TR 30.1.1 TR 30.1.2 Minister and National Treasury

5. Water & Sanitation sector institutions Trans Caledon Tunnel Authority (Schedule 2 of PFMA) Komati Basin Water Authority (Schedule 3A of PFMA) Water Research Commission (Schedule 3A of PFMA) Water Boards (Schedule 3B of the PFMA) Amatola Water Lepelle Water Bloem Water Magalies Water Mhlathuze Water Rand Water Overberg Water Sedibeng Water Umgeni Water Minister Catchment Management Agencies (Schedule 3A of the PFMA Breede- Gouritz Limpopo Inkomati- Usutu Pongola- Mzimkhulu Berg-Olifants Doorn Olifants Orange Tsitsikamma- Mzimvubu Vaal Komati Basin Water Authority (Schedule 3A of PFMA) Komati Basin Water Authority (Schedule 3A of PFMA) Financial year : 1 April to 31 March Financial year : 1 Jul to 30 Jun

6. The key role of Water Sector Institutions is to support South Africa as a developmental state to deliver on Government Developmental Objectives through : 1. Using water for promoting socio-economic developmental agenda. 2.Reducing inequality through access to water and job creation. 3.Leveraging additional investments for infrastructure development 4.Enabling rural communities to use water for rural livelihoods. 5.Promoting greater citizen participation in decision making 6.Allowing for innovation and knowledge generation. Relevant Advantages of Water Institutions 6

7. KEY STRATEGIC FOCUS AREAS OF INSTITUTIONS 1.Developing, financing and managing national water infrastructure (TCTA, KOBWA, WTE) SIP 1,SIP3,SIP4,SIP6,SIP 9,SIP 18 2. Managing water resources at the catchment level (CMAs) 4. Managing local water resource farmers and the transformation of the water sector with respect to irrigated agriculture (WTE, Water User Associations SIP 18) 3. Managing regional water infrastructure and supporting local government in the delivery of water services (Water Boards) 5. Providing Water Knowledge hub for South African citizens All in line with national developmental objectives of poverty eradication, creation of jobs, equitable economic growth, sustainable development 7

8. GOVERNANCE PROTOCOL FOR ENTITIES List of documents submitted to the MinisterLegislation Policy StatementsSec 39 of Water Services Act, 1997 Shareholder CompactsTreasury Regulation 29.2 Strategic PlansTreasury Regulation 30.1.1 Corporate Plan & projection of revenue, expenditure & borrowings Sec 52 of PFMA, 1999 Treasury Regulation 29.1 Business PlansSec 40 of Water Services Act, 1997 Schedule 4 of National Water Act, 1998 Quarterly ReportsTreasury Regulation 29.3.1 Annual ReportsSec 44 of Water Services Act, 1997 Sec 55(1)(d) & 65 of PFMA, 1999 Tariff IncreasesSec 42 of MFMA, 2003 Financial misconduct procedures reportTreasury Regulation 33.3.1 Materiality & Significance FrameworkTreasury Regulation 28.3.1 8

9. Governance protocol for entities Strategic intent statement / DWS strategic plan Minister meets with Chairpersons of entities to outline the Strategic Intent which is used to articulate her vision and her expectations of the entities. The DWS Strategic Plan is a guide to entities in terms of vision and strategic direction Shareholder compact Minister and The Boards conclude a shareholder compact annually (Treasury Regulation 29.2). Documents the mandated key performance measures and indicators to be attained by the entity in delivering the desired outcomes and objectives as agreed between the entity Board and the Minister Corporate plan Entities submit corporate plans and budgets annually to Minister and National Treasury at least one month before the start of financial year (PFMA Sec 52). Entities corporate plan must contain implementation details to attain the key performance measures and indicators outlined in shareholder compact and desired outcomes and objectives outlined in the strategic intent statement. Performance monitoring & evaluation Quarterly reporting Annual Reports including financial statements submitted by end of November every year. Tariff Submissions to Parliament by 15 March every year. Reporting to Portfolio Committee –once a year. 9

10. Relationship between institutions and DWS 10 WB 9 WB 9 WB 2 WB 2 CM A 2 CM A 1 Water board 1 TCTA Minister DWS Parliament Public institutions report to the public and Parliament through Annual Reports and Annual Financial Statements and to the Department with quarterly performance reports WRC Minister appoints boards; approves shareholder compacts, Corporate Plans & Annual Reports Portfolio Committee reviews reports and plans (hearings, visits) (1) Oversee institutional establishment ; (2) Oversee governance (manage board appointment processes, training etc.); (3) Oversee shareholder compact ; (4) Oversee business plans, quarterly performance reports and financial statements etc. (1) Oversee institutional establishment ; (2) Oversee governance (manage board appointment processes, training etc.); (3) Oversee shareholder compact ; (4) Oversee business plans, quarterly performance reports and financial statements etc.

11. Contribution to government outcomes Effective water resources management critical foundation to achieve the above outcomes 11 10 Protected and enhanced environment and natural resources 10 Protected and enhanced environment and natural resources 6 Efficient economic infrastructu re 6 Efficient economic infrastructu re 9 responsive, accountable, effective & efficient local government 9 responsive, accountable, effective & efficient local government 4 Employment & inclusive growth 4 Employment & inclusive growth 7 Vibrant & sustainable rural communities 7 Vibrant & sustainable rural communities

12. PART B ENTITIES PLANS FOR 2015/16 FINANCIAL YEAR Strategic objectives Performance indicators Spending focus; and Budget allocation for 2015/16 Jobs Creation

13. CATCHMENT MANAGEMENT AGENCIES

14. INKOMATI-USUTHU (IUCMA) AND BREEDE- GOURITZ (BGCMA) STRATEGIC OBJECTIVES Water resource protection Water use management Integrated water resource planning Stakeholder interaction and empowerment Governance Strategic support

15. Stakeholder Perspective Financial Perspective Developmental & Environmental Advice stakeholders on protection & use of water, ensure community participation. Ensure collection of water use charges and Value for money. Water Resource Planning (CMS), Resource Protection & Waste, Compliance Monitoring & Enforcement, Developing Human Resources, Sharing knowledge & creating partnerships. River Systems Operations, Registration of Water Use, Support licensing process. Establishment of Water User Associations Learning & Growth CMA SCORE CARD Ensure effective, efficient and sustainable management of water resources in the Water Management Area 15

16. SUMMARY OF IUCMA PERFORMANCE PROGRAMME SUB-PROGRAMMEINDICATORS2015/16 TARGETSRATIONALE Water use management Water use registrations finalised Record of recommendation of water use applications finalised General authorisations confirmed Audit reports completed for water use compliance Letters sent to water use to apply for validation and verification of water use 10 Water use registrations finalised 100% of agricultural temporary transfers applications finalised 30% verification in Inkomati 50% validation in Usuthut 8 compliance audit reports completed Statutory requirement function to be performed in terms of NWA Water resource protection Water quality monitoring points and samples Reaction to pollution incidents Warning letters / directives issued for water use contraventions 2712 samples taken to monitor water quality 100% of pollution incidents dealt with 1 catchment monitored for river health 292 water quality inspections conducted Integrated water resource planning Catchment Management Strategy Land use planning and rezoning applications commented on Water quality objective report completed Finalise integrated water quality management framework Institutional and stakeholder relations Learner awareness campaigns Support to HDIs projects and water related forums and WUAs and IBs 38 stakeholder empowerment workshops conducted 20 stakeholder interactions 4 newsletters developed and circulated Generating and managing knowledge (Information systems) Effective information management100% electronic document management system maintained Strategic supportCompliance to all planning and reporting prescripts100% compliance GovernanceCompliance to governance requirements100% compliance

17. SUMMARY OF BGCMA PERFORMANCE PROGRAMME SUB-PROGRAMMEINDICATORS2015/16 TARGETSRATIONALE Water use management Water use registrations finalised Record of recommendation of water use applications finalised General authorisations confirmed Audit reports completed for water use compliance Letters sent to water use to apply for validation and verification of water use 70% Water use registrations finalised 80% water use licences (record of recommendation) finalised 100% general authorisations confirmed 60 audit reports completed 150 validation and verification letters sent Statutory requirement function to be performed in terms of NWA Water resource protection Water quality monitoring points and samples Reaction to pollution incidents Warning letters / directives issued for water use contraventions 70 water resource points monitored 100% of pollution incidents dealt with 2 water quality monitoring projects implemented Integrated water resource planning Catchment Management Strategy Land use planning and rezoning applications commented on Water quality objective report completed 50% Catchment Management Strategy completed 100% land rezoning applications commented on 2 water quality objectives reports completed Institutional and stakeholder relations Learner awareness campaigns Support to HDIs projects and water related forums and WUAs and IBs 300 learners reached during various water campaigns 4 newsletters developed and circulated 10 social responsibility projects supported 18 water related forums maintained Generating and managing knowledge (Information systems) Effective information management30% SAP implementation 100% electronic document management system maintained Strategic supportCompliance to all planning and reporting prescripts100% compliance GovernanceCompliance to governance requirements100% compliance

18. WATER BOARDS

19. STRATEGIC OBJECTIVES Ensure viability and sustainability. Stakeholder engagement. Appropriate planning for adequate water resources. Water demand management. To ensure sustainable growth. Effective and efficient communications. Ensure compliance with legislative prescripts and policies. Financial sustainability.

20. Selected objectives & indicators for water boards 20 Performance Objective AlignmentOutcomes /Impact IndicatorsMeasure Ministerial OutcomesDWS Strategic Plan 1. Water Quality Compliance MO A, OP1, Ta) & c). MO B, OP2, Ta) SO 2.5 & 3.4 Water quality standards metTest results, SANS 241% compliance 2.Non Revenue WaterMO A, OP1, T a) MO B,OP2, T a) SO2.2, 2.5, 2.6,&2.7 Reduced levels of unaccounted for water (UAW) Water lost as a % of total water produced % 3. Reliability of supplyMO A > G OP1, Ta), b) & c). OP2, Ta) So1.1, 1.2&1.3No unplanned interruptions to supply exceeding 24 hours % number of days supply disrupted divided by total number of possible supply days % 4. Financial Reporting Compliance MO A > GSO 6.5 & 6.6unqualified audit reportAnnual external auditQualified/ Unqualified 5. Increased Access to Services MO A, B &D OP1, Ta), b) & c). OP2, Ta) SO 1.1,1.2, 1.3,2.2 and 4.1 Contribution to national objectives CAPEX spend /projectsCAPEX spend or number of expansion projects

21. WRC

22. WRC STRATEGIC INTENT The WRC serves as SA’s water-centred knowledge hub providing the nation with knowledge for sustaining its most precious resource, water. The WRCs strategy for knowledge creation and its research portfolio is underpinned 4 main key strategic areas:  Water resource management  Water linked ecosystem  Water use and waste management  Water utilisation in agriculture

23. TCTA

24. TCTA Strategic Objectives Deliver to all mandates provided by the Minister, in accordance with specifications and within the agreed timelines and budget Facilitate social transformation and build sustainable communities by providing jobs and empowerment Operate the business projects and processes in a cost-effective manner, conscious of the imperatives of PFMA 24

25. TCTA Strategic Objectives cont. Build the knowledge and capability of the organisation to generate lessons for project improvements, in pursuit of greater efficiencies in water delivery Ensure the continuous availability of high- calibre human capital for delivering on organisational mission into the future, while remaining a value-adding agile entity. 25

26. TCTA contribution to government 26 OutcomesGovernment OutcomesDepartment PrioritiesTCTA Contribution 4 Decent employment through inclusive economic growth (1) Contribute to Economic Growth, Rural Dev, Food Security and Land Reform (outcomes 6, 7 and 9) Emphasis on job creation in all construction contracts and Providing cost effective water infrastructure as an enabler for economic growth 5 A Skilled and capable workforce-Through the projects and internal training develop entrepreneurship in small business and up-skill the workforce to enable South Africa to compete in the world markets 6 Efficient, competitive and responsive economic infrastructure network (1) Contribute to Economic Growth, Rural Dev, Food Security and Land Reform (outcomes 6 and 7) (3) Strengthening the regulation of the water sector - (outcome 6 and 10) Providing a comprehensive financial and implementation package to ensure the most cost effective solution Support to other water sector institutions to enable them to deliver on their mandate 7 Vibrant, equitable and sustainable rural communities with food security for all 8 Sustainable human settlements and improved quality of household life (1)Contribute to Economic Growth, Rural Dev, Food Security and Land Reform (outcomes 6, 7 and 9) Provision of affordable infrastructure as well as responsible resettlement programmes inclusive of economic livelihood 9 A responsive, accountable, effective and efficient local government system (4) Support local government to deliver water services (outcome 9) Support to other water sector institutions to enable them to deliver on their mandate 10 Environmental assets and natural resources that are well protected and continually enhanced (2) To promote Sustainable and Equitable Water Resources Management (outcome 10) Contribute to the development of knowledge in the sector (desalination, water reuse) (3) Strengthening the regulation of the water sector (outcome 6 and 10) Participation in the workshops on Institutional Reform and Realignment 12 An efficient, effective and development oriented public (6) Build capacity to deliver Quality ServicesComprehensive internal training programme to enable TCTA to deliver quality products in the most efficient manner.

27. Financial Model 27 Funding is off-Balance Sheet. Funding relies only on implicit guarantees from Treasury (excluding Lesotho Highlands (LHWP), which is explicitly guaranteed) All projects are ring-fenced, i.e. no cross-subsidisation is allowed Debt repayment is funded through water tariffs, over 20 years Costs of infrastructure reflected as asset until debt fully repaid, then handed back to DWS (LHWP – intangible asset – right of receipt of water – owned by Lesotho Highlands Development Authority)

28. Financial Model (cont….) Full cost recovery from water sold to end-users Constant tariff in real terms which increases with: –Consumer Price Index annually –Projects may need to increase borrowings in the first number of years after completion to maintain constant tariff Deficit is intended to ensure on-going affordability for end users; the deficit reverses after a few years, and is not related to TCTA’s feasibility as a going concern.

29. Overview of water sector entities budget Medium term budget Rand thousan d 2014/152015/162016/172017/18 TCTA 3 985 0004 370 0005 836 0008 233 000 CMAs 96 202586479624280668193 WRC 280 381311 334258 502270 543 Water Boards 15 738 65915 394 53419 248 52221 204 516 TOTAL 20 100 24220 662 34725 967 30430 376 252 29

30. Overview of water sector staff establishment for 2016/17 30

31. Jobs created and Estimated 2014/15 and 2015/16 EntityJobs Created 2014/15Estimated 2015/16 1. Amatola Water501546 2. Bloem Water7161963 3. Lepelle Northern Water15120 4. Magalies Water539570 5. Mhlathuze Water597588 6. Overberg Water615 7. Rand Water35568870 8. Sedibeng Water 371750 9. Umgeni Water1847600 10. Breede CMA00 11. Inkomati CMA1510 12. TCTA 32422309 13. WRC514 Total 10 95917 355 [1] [1] Disestablished –debt transferred to Sedibeng Water [2] [2] Disestablished –debt transferred to Rand Water [3] [3] Disestablished –debt transferred to Sedibeng Water

32. Debt owed to water boards by municipalities - end of Feb 2015 Name of water board OUTSTANDI NG BALANCECURRENTDAYS 30DAYS 60DAYS 90DAYS 120+ARREARS Amatola 24 963 54124 208 020755 521000 Bloem Water118 306 03942 533 5154 322 4421 412 75111 745 90458 291 42775 772 524 Botshelo Water191 207 1187 875 2747 539 4366 720 6225 991 714163 080 072183 331 844 Bushbuckridge Water397 868 14320 230 68318 396 62416 806 660 325 627 516377 637 460 Lepelle Northern Water369 861 59043 465 80912 742 11112 914 1418 974 774291 764 755326 395 781 Magalies Water61 688 15126 024 3917 294 8543 038 1535 410 37419 920 37935 663 760 Mhlathuze Water26 049 77617 988 8328 060 944000 Overberg Water1 885 4811 421 73862 43061 63060 915278 768463 743 Pelladrift Water673 826252 875217 006203 94500420 951 Sedibeng Water1 150 481 46361 443 28865 126 90344 926 44448 799 706930 185 1221 089 038 175 Rand Water941 702 148915 159 92326 390 979151 2460026 542 225 Umgeni Water206 493 547193 090 79313 140 13771 46593 26197 89113 402 754 TOTAL3 545 704 0121 374 326 487172 218 46288 851 990117 433 7591 792 873 3142 171 377 525 DEBTORS AGE ANALYSIS 100.00%38.76%4.86%2.51%3.31%50.56%61.24%

33. CONCLUSION Water Boards have provided indicative targets and financial projections as their plans will only be submitted end of May 2015. Cost recovery issues remain a challenge with negative impact on planning for 15/16 and beyond.