STANDING COMMITTEE ON APPROPRIATIONS Presented by Mr Onesmus Ayaya Chief Financial Officer Department: Water Affairs (DWA) 21 October 2009

Presentation Outline Expenditure Trends Quarterly expenditure: 2009/10 financial year (FY) Reasons for under expenditure Allocation before and after transfer of functions Rollover of funds Virement (Shifting of Funds): 2009/10 FY Unforeseeable and unavoidable expenditure: 2009/10 FY Earmarked funding Transfer of functions Re-allocation of funds earmarked 2

Expenditure Trends Year Actual R‘000 Budget 2004/05 3,776,946 3,823,112 2005/06 3,717,088 3,935,636 2006/07 4,305,650 4,660,303 2007/08 5,385,461 5,862,513 2008/09 6,511,300 7,036,616 % Expend 99 94 92 93 3

Quarter 1 actual expenditure: ending in 30 June 2009 Programme 2009/10 Original Budget R’000 2009/10 Actual % spent Available Budget Administration 795,353 120,982 15% 674,371 Water resource management 3,895,794 848,258 22% 3,047,536 Water Services 2,717,039 452,022 17% 2,265,017 Forestry 485,641 123,175 26% 362,466 Total 7,893,827 1,544,977 20% 6,348,850 4

Quarter 1 actual expenditure: ending in 30 June 2009 Economic classification Programme Adjusted Budget 2009/10 2009/10 Actual R’000 % spent Available Budget Compensation of Employees 1,327,863 287,816 22% 1,040,047 Goods and Services 2,113,255 393,295 20% 1,719,960 Interest and Rent on land 782 5 1% 777 Transfers and Subsidies 3,337,704 891,240 27% 2,446,464 Payments for Capital Assets 1,114,223 (27,379) 0% 1,141,602 Total 7,893,827 1,544,977 6,348,850 5

Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions) Programme 2009/10 Original Budget R’000 Adjust- ments Adjusted Budget 2009/10 2009/10 Actual % spent Available Budget Administration 795,353 47,231 841,809 329,320 39% 512,489 Water resource management 3,895,794 183,741 4,076,631 1,586,809 40% 2,489,822 Water Services 2,717,039 123,419 2,842,452 922,770 33% 1,919,682 Forestry 485,641 2,006 489,653 261,955 53% 227,698 Total 7,893,827 356,397 8,250,224 3,100,854 38% 5,149,691 6

Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions) Economic classification Programme Adjusted Budget 2009/10 2009/10 Actual R’000 % spent Available Budget Compensation of Employees 1,408,746 601,836 43% 806,910 Goods and Services 2,355,097 874,252 37% 1,480,845 Interest and Rent on land 782 69 9% 713 Transfers and Subsidies 4,393,951 1,550,832 35% 2,843,119 Payments for Capital Assets 91,648 73,865 81% 17,783 Total 8,250,224 3,100,854 38% 5,149,370 7

Reason for under spending Late submission of invoices in respect of services already rendered. Projects (e.g. sanitation backlogs in schools and clinics and Regional Bulk Infrastructure) are still at tender phase; the expenditure is anticipated to increase in the third quarter of this financial year Non-payment of general wage increase, it was anticipated (as projected) that the expenditure will kick in July 2009. These increases are now anticipated to be paid in October as per DPSA directive Protracted delays in reaching agreements with municipalities to transferring staff and water schemes. 8

Allocation: after transfer of functions Programme 2009/10 Original Budget R’000 Virement Rollover and Additional Funding Shifting of Functions Adjusted Budget 2009/10 Administration 795,353 (14,086) 61,317 (3,934) 838,650 Water resource management 3,895,794 (65,386) 249,127 (27,605) 4,051,930 Water Services 2,717,039 77,466 45,953 (425,263) 2,415,195 Forestry 485,641 2,006 (487,647) Total 7,893,827 356,397 (944,449) 7,305,775 9

Allocation: after transfer of functions Economic classification Programme Original Budget 2009/10 Virement Rollover & additional funding Shifting of Functions Adjusted Budget Compensation of Employees 1,327,863 21,366 59,517 (358,582) 1,050,164 Goods and Services 2,115,255 171,962 69,880 (219,231) 2,135,866 Transfers and Subsidies 3,337,704 479,247 227,000 (6,683) 4,037,268 Interest and Rent on land 782 (782) Payments for Capital Assets 1,114,223 (672,575) (359,171) 82,477 Total 7,893,827 356,397 (944,449) 7,305,775 10

Rollover of funds from 2008/09 FY Description of Services Amount Requested R’000 Amount Approved Continuation of the construction of De Hoop Dam 232,253 Implementation of Regional Bulk Infrastructure 5,253 Cholera Outbreak in the Limpopo and Mpumalanga Provinces 40,000 TOTAL 277,506 237,506 Def: Funds appropriated but not spent in a particular financial year may be rolled over to a subsequent year subject to approval of the National Treasury 11

Reason why funds were not spent: Rollover of funds Delays in the conclusion of the negotiations to finalise the memorandum of agreement with the 23 different mines. Exceptional high rainfall prevented contractors from making anticipated progress Late submission of invoice in respect of Regional Bulk Infrastructure with multiple errors on calculation of bill of quantities 11

Virement (Shifting funds in terms of Section 43 of PFMA) During a financial year, some deviations between actual expenditure and the allocated budget for that specific financial year may occur. Unforeseen circumstances may require the revision and subsequent adjustment of the original planned projects and/or estimated costs involved in the execution of activities. Virement is subject to the following Shifting between programmes may not exceed eight percent (8%) Virement may not be applied to amount appropriated for transfer to institution Virement may not be applied to amount appropriated for capital expenditure to defray current expenditure Virement may not be applied to earmarked funds 13

Virement (Shifting funds in terms of Section 43 of PFMA) Virement 2009/ 2010 financial year Programmes Virement 1. Administration (14,086) 2. Water Resource Management (65,386) 3. Water Services 77,466 4. Forestry 2,006 Net Effect 14

Reason for Virement Programme1: Administration 1.1 Budget of R 14.086 million was shifted to Water Services due to reallocation of inflationary adjustment that was initially allocated during Estimate of National Expenditure process in this programme. Programme2: Water Resource management 2.1 Budget of R65.386 million was shifted to Water Services and Forestry due to the following reasons: 2.1.1 Unfilled positions as a result of newly created structures; 2.1.2 Re-allocation of water use conservation and water demand management to the respective regions. 2.1.3 Funds were incorrectly allocated under goods and services in this programme for the purchase of machinery and equipment 3 Programme3: Water Services 3.1 Budget of R77.466 million was shifted to this programme as result of re-allocation of inflationary adjustment that was initially allocated in programme 1: Administration as well as re-allocation of water use and conservation and water demand management 15

Unforeseeable and Unavoidable Expenditure Section 30(2)(b) of the PFMA and Treasury Regulations 6.6, provides for the allocation of additional funds through an adjustment budget to finance unforeseeable and unavoidable expenditure Unforeseeable and Unavoidable expenditure relates to expenditure that could not be anticipated at the time of finalising the budget (ENE) National Treasury has recommended an amount of R124,144 million to Cabinet for approvals. Below are the details 16

Unforeseeable and Unavoidable Expenditure Description of Services Amount Requested R’000 Amount Approved Difference Additional Fund for the new Deputy Minister 8,267 3000 (5,267) Additional funds for the purchase of packaged plants to prevent Cholera 49,000 40,700 (8,300) Additional fund for Working for Water 74.700 22,127 (52,573) General salary adjustments 58,317 TOTAL 131,967 124,144 7,823 The difference means that the department must reprioritise the budget and shift budget (virement) to fund the shortfall 17

Earmarked funding Rent of buildings 138 331 000 Working for Water Allocations by National Treasury for a specific purpose and may not be used for other purposes. Below are earmarked allocations for 2009/10 financial year. Total of earmarked funds amount to R3 170 163 000 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 funding 3 170 163 000

2009/10: Earmarked Vs Un-earmarked before adjustments 19

Transfer of functions The president of Republic of South Africa has announced during his 2009 State of the Nation Address that Sanitation services and Forestry functions will reside with the Dept. of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. Where a function is to be transferred between votes during a financial year, National Treasury must be consulted in advance to facilitate any request for the resulting transfer of funds voted for that function in terms of section 33 of the PFMA. In the absence of an agreement between the affected departments on the amount of funds to be transferred, National Treasury will determine the funds to be shifted. Transfer of functions: National Treasury approval must be obtained before seeking approval from the Minister of Public Service Administration for a transfer of a function to another sphere of government 20

Transfer of functions 1.1 Department of Human Settlement Budget of R944,449 million will be surrendered to the Department of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. 1.1 Department of Human Settlement 1.1.1 Provision of sanitation in schools and clinics R350.000 million 1.1.2 Acceleration of access to sanitation projects R43.870 million 1.1.3 Operational budget of sanitation unit R31.393 million TOTAL 425.263 million 21

Transfer of functions 1.2 Department of Agriculture and Fisheries Budget of R944,449 million will be surrendered to the Department of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. 1.2 Department of Agriculture and Fisheries 1.2.1 Operational budget in the Office of DDG: Forestry R3.934 million 1.2.2 Forestry Budget (as per ENE) R485.641 million 1.2.3 Compensation of employees in respect of support services R27.605 million 1.2.4 Forest land management R2.006 million TOTAL 519.186 million 22

Re-scheduling of funds earmarked for infrastructure projects (De Hoop Dam) for other purpose National Treasury has granted the Department to reschedule earmarked funds of R502 million owing to. 1.1 Delays in signing Memorandum of Agreement with the mining sector 1.2 Delays in reaching Water Supply agreements with individual mines due to the global economic crisis As result of this, the Department will only be able to spend R98 million of R600 million The Department therefore requested the National Treasury to utilise R502 million as follows 23

Re-scheduling of funds earmarked for infrastructure projects (De Hoop Dam) for other purpose DWA requested the National Treasury to reschedule R502 million as follows 2.1 To further the following infrastructure projects - R297 million 2.1.1 Nandoni Water Treatment Works 2.1.2 Inyaka Water Treatment Works 2.1.3 Hluhluwe Regional Water Scheme 2.2 Augmentation to the Water Trading Entity – R205 million is a result of infrastructure projects undertaken by WTE in 2008/09 financial year 24

I thank you 25