Briefing on Current Expenditure and their Performance Trends Presentation to the Standing Committee on Appropriation: Water & Environmental Affairs Briefing on Current Expenditure and their Performance Trends Presentation by Ms. Nthabiseng Fundakubi Acting Chief Financial Officer 22 March 2011 1

Expenditure outcome for the third quarter ended 31 December 2010 Programme Adjusted Budget 2010/11 R’000 Actual Exp % spent Available budget Administration 967 498 563 664 58 403 834 Water Management 402 939 218 834 54 184 105 National Water Resource Infrastructure Programme 2 238 232 1 725 962 77 512 270 Regional Management 4 354 342 2 481 073 57 1 873 269 Water Sector Regulations 240 182 82 470 34 157 712 Total 8 203 193 5 072 003 62 3 131 190 2

Expenditure outcome for the third quarter ended 31 December 2010 Economic classification Programme Original budget 2010/11 R’000 Actual Exp % spent Available budget Compensation of Employees 1 133 453 716 684 63 416 769 Goods and Services 2 596 370 1 340 849 52 1 255 521 Interest and Rent on land - 705 (705) Financial Transaction In Assets and Liabilities 92 (92) Transfers and Subsidies 3 353 542 2 976 129 89 377 413 Payments for Capital Assets 1 118 828 37 544 3 1 081 284 Total 8 203 193 5 072 003 62 3 131 190 Reason for under spending Unfilled vacant posts throughout the department contributed to under – expenditure, it is anticipated approximately R70 million will not be spend in this current financial year Late submission of invoices in respect of services already rendered such as Fleet management Services (Phakisa) and IT Services (Arivia.) Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at the construction phase, the expenditure is anticipated to increase in the following months of the last quarter of this financial year. Direct transfers to municipalities in respect of Water Services Operating Subsidy could not be transferred to municipalities as result of non-compliance with DORA, these funds are anticipated to be transferred in following months. A close of business in construction industries during December 2009 holidays had an impact towards the infrastructure expenditure trends as it has been halted during that period. The infrastructure branch indicated that the entire infrastructure budget will be spend before the end of the year. 3

Expenditure outcome water services operating subsidy and regional bulk infrastructure as at 31 December 2010 EARMARKED PROJECTS Adjusted Budget 2010/11 R’000 Actual Exp % spent Available budget Regional Bulk 893 000 403 539 46 489 461 Water Service Operating Subsidy 875 560 751 051 86 124 509 4

Reasons for under spending as at 31 December 2010 Unfilled vacant posts as well as challenges of the unavailability of suitable candidates, especially engineers who must meet OSD criteria Outstanding invoices in respect of Diner’s Club, Phakisa World and Auto Page for goods and services already rendered as a result of disputes Incorrect submission of payment certificate which prolong the payment period in respect of Accelerated Community Infrastructure Project. Delays by municipalities in appointing implementing agents in respect of the refurbishment of waste water treatments plants Delays by municipalities in submitting incorrect payment certificate as result, documents had to be returned to various municipalities Protracted delays in finalizing transfer of staff to various municipalities 5

Reasons for under spending as at 31 December 2010 The Climate Survey Programme which was put on hold . The approval is now granted and part of expenditure is expected to be disbursed in the last quarter of the financial year. Delays in approval of the Training and Development plans Late redistribution of the Masibambane budget allocation. Delays in appointing mechanical and electrical contractors by municipalities. 6

Reasons for slow expenditure and possible under expenditure Long procurement and design process of projects by municipalities Contract administration problems in municipalities Non performing contractors Slow processing of payments by DWA Limited institutional capacity to project manage Delays caused by suppliers Delays in EIA and abstraction permits WSA reluctant to continue / commit due to partial funding or tenders are much high than estimates 7 7

Reasons for under expenditure Projects encountering challenges Limpopo Giyani Bulk Water Drought Relief (R 54 million) Region and Mopani District Municipality differ in the technical options of the project. Slow process to finalise the implementation of the project and Management intervention was needed. Budget reallocated to other Olifantspoort WTW and Mogolakwena BWS Mametja Sekororo Bulk Water Supply (R 7 million) The design of the project has been completed but no further action was taken by the Mopani District Municipality for the implementation and Management action was needed. R 7 million has been reallocated. Moutse Bulk Water Supply (R 20 million) During the second half of the financial year the Minister requested that R20 million be allocated to the Moutse Project. The approval process took a long time and it is anticipated that only R 13 million will be spent 8

Projects encountering challenges Mpumalanga Acornhoek Bulk Water Supply (R 37 million) Municipality did not have the capacity to implement the project and requested the Department to implement the project which took a long time to be approved. There is also a legal action between the department and the previous suppliers. It is expected that the contractor will be on site middle February 2011. R 12 million of the budget has been reallocated and later during the year the remaining R10 million has been reallocated to the Bloemendal Project Bloemendal Bulk Water Supply (R 10 million) On 30 October 2010 the various stakeholders signed the agreement for the implementation of the project. Due to escalation cost the parties had to agree to the co-funding portion. All agreements are now in place and R 10 million will now be spent 9

Projects encountering challenges North West Madibeng Water Treatment Works (R 20 million) The Madibeng Local Municipality is under administration and requested the department to implement the project. The designs developed by the consulting engineer was of poor quality. Magalies Water has been appointed to implement the emergency work and the development of the designs. R 8 million has been reallocated Free State Sterkfontein Bulk Water Supply (R 50.050 million) Although the project was progressing well the past few years, during this year some problems were encountered with the contractors but this problem has now been resolved. The tender process for the supply of steel pipes took longer than expected and R 8 million has been reallocated to the Eastern Cape 10

Expenditure outcomes as at 18 March 2011 Programme Adjusted Budget 2010/11 R’000 Actual Exp % spent Available budget Administration 899 934 783 488 87 116 446 Water Management 402 939 285 628 71 117 311 National Water Resource Infrastructure Programme 2 238 232 2 235 851 100 2 379 Regional Management 4 422 996 3 901 530 88 520 476 Water Sector Regulations 240 082 117 494 49 122 588 Total 8 203 193 7 323 993 89 879 200 11

Expenditure outcome as at 18 March 2011 Economic classification Programme Original budget 2010/11 R’000 Actual Exp % spent Available budget Compensation of Employees 1 133 453 940 811 83 192 642 Goods and Services 2 596 529 1 828 293 70 768 236 Interest and Rent on land - 2 191 (2 191) Financial Transaction In Assets and Liabilities 91 (91) Transfers and Subsidies 3 353 542 3 445 895 103 (92 353) Payments for Capital Assets 1 119 669 1 106 710 99 12 959 Total 8 203 193 7 323 991 89 879 202 Reason for under spending Unfilled vacant posts throughout the department contributed to under – expenditure, it is anticipated approximately R70 million will not be spend in this current financial year Late submission of invoices in respect of services already rendered such as Fleet management Services (Phakisa) and IT Services (Arivia.) Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at the construction phase, the expenditure is anticipated to increase in the following months of the last quarter of this financial year. Direct transfers to municipalities in respect of Water Services Operating Subsidy could not be transferred to municipalities as result of non-compliance with DORA, these funds are anticipated to be transferred in following months. A close of business in construction industries during December 2009 holidays had an impact towards the infrastructure expenditure trends as it has been halted during that period. The infrastructure branch indicated that the entire infrastructure budget will be spend before the end of the year. 12

Expenditure outcome water services operating subsidy and regional bulk infrastructure as at 18 March 2011 EARMARKED PROJECTS Adjusted Budget 2010/11 R’000 Actual Exp % spent Available budget Regional Bulk 893 000 803 629 90 89 371 Water Service Operating Subsidy 875 560 921 200 105 (45 640) 13

Expenditure outcome as at 18 March 2011 ADMINISTRATION ECONOMIC CLASSIFICATION Original budget 2010/11 R’000 Actual Exp % spent Available budget Compensation of Employees 315 294 235 223 75 80 071 Goods and Services 532 744 524 068 98 8 676 Interest and Rent on land - 47 (47) Financial Transaction In Assets and Liabilities 91 (91) Transfers and Subsidies 11 902 5 085 43 6 817 Payments for Capital Assets 39 994 18 974 21 020 Total 899 934 783 488 87 116 446 Reason for under spending Unfilled vacant posts throughout the department contributed to under – expenditure, it is anticipated approximately R70 million will not be spend in this current financial year Late submission of invoices in respect of services already rendered such as Fleet management Services (Phakisa) and IT Services (Arivia.) Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at the construction phase, the expenditure is anticipated to increase in the following months of the last quarter of this financial year. Direct transfers to municipalities in respect of Water Services Operating Subsidy could not be transferred to municipalities as result of non-compliance with DORA, these funds are anticipated to be transferred in following months. A close of business in construction industries during December 2009 holidays had an impact towards the infrastructure expenditure trends as it has been halted during that period. The infrastructure branch indicated that the entire infrastructure budget will be spend before the end of the year. 14

Expenditure outcome as at 18 March 2011 WATER MANAGEMENT ECONOMIC CLASSIFICATION Original budget 2010/11 R’000 Actual Exp % spent Available budget Compensation of Employees 136 712 130 101 95 6 611 Goods and Services 256 358 146 361 57 109 997 Interest and Rent on land - 19 (19) Financial Transaction In Assets and Liabilities Transfers and Subsidies 750 1 089 (45) (339) Payments for Capital Assets 9 119 8 058 88 1 061 Total 402 939 285 628 71 117 311 Reason for under spending Unfilled vacant posts throughout the department contributed to under – expenditure, it is anticipated approximately R70 million will not be spend in this current financial year Late submission of invoices in respect of services already rendered such as Fleet management Services (Phakisa) and IT Services (Arivia.) Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at the construction phase, the expenditure is anticipated to increase in the following months of the last quarter of this financial year. Direct transfers to municipalities in respect of Water Services Operating Subsidy could not be transferred to municipalities as result of non-compliance with DORA, these funds are anticipated to be transferred in following months. A close of business in construction industries during December 2009 holidays had an impact towards the infrastructure expenditure trends as it has been halted during that period. The infrastructure branch indicated that the entire infrastructure budget will be spend before the end of the year. 15

Expenditure outcome as at 18 March 2011 NATIONAL WATER RESOURCE INFRASTRUCTURE ECONOMIC CLASSIFICATION Original budget 2010/11 R’000 Actual Exp % spent Available budget Compensation of Employees Goods and Services Interest and Rent on land Financial Transaction In Assets and Liabilities Transfers and Subsidies 2 238 232 2 235 851 100 2 381 Payments for Capital Assets Total Reason for under spending Unfilled vacant posts throughout the department contributed to under – expenditure, it is anticipated approximately R70 million will not be spend in this current financial year Late submission of invoices in respect of services already rendered such as Fleet management Services (Phakisa) and IT Services (Arivia.) Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at the construction phase, the expenditure is anticipated to increase in the following months of the last quarter of this financial year. Direct transfers to municipalities in respect of Water Services Operating Subsidy could not be transferred to municipalities as result of non-compliance with DORA, these funds are anticipated to be transferred in following months. A close of business in construction industries during December 2009 holidays had an impact towards the infrastructure expenditure trends as it has been halted during that period. The infrastructure branch indicated that the entire infrastructure budget will be spend before the end of the year. 16

Expenditure outcome as at 18 March 2011 REGIONAL MANAGEMENT ECONOMIC CLASSIFICATION Original budget 2010/11 R’000 Actual Exp % spent Available budget Compensation of Employees 619 919 525 928 85 93 991 Goods and Services 1 682 840 1 103 040 66 579 800 Interest and Rent on land - 2 125 (2 125) Financial Transaction In Assets and Liabilities Transfers and Subsidies 1 050 974 1 191 590 113 (140 616) Payments for Capital Assets 1 068 273 1 078 847 101 (10 574) Total 4 422 006 3 901 476 88 520 476 Reason for under spending Unfilled vacant posts throughout the department contributed to under – expenditure, it is anticipated approximately R70 million will not be spend in this current financial year Late submission of invoices in respect of services already rendered such as Fleet management Services (Phakisa) and IT Services (Arivia.) Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at the construction phase, the expenditure is anticipated to increase in the following months of the last quarter of this financial year. Direct transfers to municipalities in respect of Water Services Operating Subsidy could not be transferred to municipalities as result of non-compliance with DORA, these funds are anticipated to be transferred in following months. A close of business in construction industries during December 2009 holidays had an impact towards the infrastructure expenditure trends as it has been halted during that period. The infrastructure branch indicated that the entire infrastructure budget will be spend before the end of the year. 17

Expenditure outcome as at 18 March 2011 WATER SECTOR REGULATIONS ECONOMIC CLASSIFICATION Original budget 2010/11 R’000 Actual Exp % spent Available budget Compensation of Employees 61 528 49 559 81 11 969 Goods and Services 124 587 54 824 44 69 763 Interest and Rent on land - Financial Transaction In Assets and Liabilities Transfers and Subsidies 51 684 12 280 24 39 404 Payments for Capital Assets 2 283 831 36 Total 240 082 117 410 49 122 588 Reason for under spending Unfilled vacant posts throughout the department contributed to under – expenditure, it is anticipated approximately R70 million will not be spend in this current financial year Late submission of invoices in respect of services already rendered such as Fleet management Services (Phakisa) and IT Services (Arivia.) Projects such as backlogs in sanitation at schools and clinics and Regional Bulk Infrastructure are still at the construction phase, the expenditure is anticipated to increase in the following months of the last quarter of this financial year. Direct transfers to municipalities in respect of Water Services Operating Subsidy could not be transferred to municipalities as result of non-compliance with DORA, these funds are anticipated to be transferred in following months. A close of business in construction industries during December 2009 holidays had an impact towards the infrastructure expenditure trends as it has been halted during that period. The infrastructure branch indicated that the entire infrastructure budget will be spend before the end of the year. 18

Reasons for under spending as at 18 March 2011 Unfilled vacant posts still a challenge however the department embarked on the recruitment drive project Outstanding invoices from the big accounts; Diner’s Club, Phakisa World, Arivia, AGSA, travel agencies. 19

Reasons for under spending as at 18 March 2011 The validation and verification process currently being conducted by a service provider is on a slow pace and is affecting the Enforcement Unit in terms of spending because they are currently waiting for the process to be finalised after which they can take further steps against unlawful water users. Delays in approving of the service providers 20

THANK YOU 21