ANSWERS TO PORTFOLIO COMMITTEE’S QUESTIONS 20 March 2007 Silas Mbedzi Chief Director: Institutional Oversight

COMPLIANCE WITH PFMA/MFMA All WBs complied with most of PFMA & MFMA requirements Some WBs did not comply with quarterly reporting on Shareholders Compact - new requirement of the PFMA Quality of reporting is problematic Some WBs don’t comply with sec 41 of MFMA National Treasury ensures compliance with LG MFMA CSI/ADVERTISING/FUNCTIONS Purpose: To market themselves

FIVE YEAR BUSINESS PLANS 11 WBs submitted BPs to Minister Albany Coast-, Ikangala-, Namakwa- & Pelladrift Water did not submit BPs, being small WBs - delays due to the non-completion of Sec 78 processes In future all WBs must submit as required in PFMA DWAF’s analysis of BPs is done annually & can be made available to Portfolio Committee BORROWING LIMITS Limits are determined by National Treasury Umgeni- & Mhlathuze Water requested in the past to borrow more than the set limit – process to be followed through Minister of DWAF & Guaranteed Certification Committee of NT to approve request

STIPENDS OF BOARD MEMBERS Stipends are determined by the Minister All water boards are complying Policy on stipends ensures consistency & equal treatment of Board Members DEMOGRAPHICS OF WATER BOARDS Water Boards are well represented i.t.o. race & gender – persons with disabilities need to be accommodated more

CAPACITY Water Boards have adequate capacity Some WB’s assist Municipalities with their operations EXTERNAL DEBT National Treasury applies borrowing limits - in line with the PFMA requirements All water boards are in compliance STRATEGIC PLANS ALIGNED WB’s Strategic Plans are all aligned with their Annual Reports and that of DWAF (Some work still need to be done on specific targets) Quarterly reports are also an alignment with Strategic Plans

DO REGIONAL OFFICES COMPILE REPORTS Not yet, but Regional Offices will be the direct contact with WBs on day-to-day operational issues MUNICIPAL CONTRACTS WITH WBs Municipalities sign short term contracts Municipalities have power to choose with whom they want to do business DWAF & DPLG need to address the signing of contracts Sec 78 process complicates process of signing of agreements

PRESSURE TO COLLECT DEBT Most municipalities do not ring-fence monies received from water charges Municipalities do not regard payment of accounts to WBs as a priority service Bulk of WBs operate in rural areas where affordability is very limited or non-existent In terms of Treasury Regulations WBs must exhaust all avenues to recover debt Most WBs have a policy on writing off of unrecoverable debt

AMATOLA WATER TRANSFER AGREEMENT Resolution has been taken to finalize the institutional reform issues Issues are being addressed by Directorate: Water Services Sector Development LEPELLE NORTHERN WATER’S FINANCIAL STATE Several meetings were held to resolve matter on BaPhalaborwa debt Efforts are continuing to reach an amicable solution as indicated by Lepelle

MAGALIES WATER: ACCOUNTING APPROACH Meeting was held between DWAF & Magalies on 28 March 2006 to discuss matter MW appointed new external auditors They recommended significant changes in the format, content & presentation of FS to be fully compliant with GAAP & IFRS These changes resulted in 2 key qualifications for FS R4 million subsidy – for the operation of rural water schemes, which will end in 2008/2009

SENCE IN MAINTAINING A WATER BOARD FOR ONE MUNICIPALITY DWAF embarked on sec 78 process for Ikangala Water Albany Coast Water Botshelo Water & Central District Municipality Some pilot municipalities Studies will provide DWAF with indicators of the options to be followed

DEBTOR DAYS – MORE THAN 90 DAYS WB’s have to follow up with WSAs Minister intervened between: Lepelle N & Baphalaborwa Mhlathuze & Mkhanyakude Umgeni & Umsunduzi Botshelo & Central District Municipality Bushbuckridge & Bohlabela/BBR Municipality and lately Mbombela

SUBSIDIES: DWAF ASSISTANCE TO REDUCE DEPENDENCY Requested WBs to reduce on operational expenses & improve systems Section 78 process is under way with Central District Municipalities Clear decline in subsidies Will ultimately be phased out (approximately 3 years)

INSTITUTIONAL REFORM: IMPACT ON WB’s Implementation of plans are on tract Plans dependent on: Municipalities signing contracts Section 78 process concluded in favour of WBs Serious negotiation required Relations between WBs & Municipalities must be developed (DWAF has undertaken to play a direct role in strengthening relations)

INSTITUTIONAL REFORM;SECTION 78 PROCESSES IN TERMS OF THE MUNICIPAL SYSTEMS ACT AND THE TRANSFER OF ASSETS FROM DWAF TO WSA AND THEIR IMPACT ON WB’S A full process exposure and the inter-relationship between the 3 will be done during closing which will entail: Outlining the process being followed Where the process is The envisaged outcome of the process The role of WSA in the unfolding process Intervention by DWAF

CONCLUSION Processes are subject to compliance with legislative requirements and are therefore time-consuming Correct procedures & full compliance with policies & agreements necessitates extended negotiations & interaction with various interested parties DWAF is committed to conclude all processes effectively & efficiently within the shortest time limit possible within the parameters of relevant legislation

THE END THANK YOU