1. Public Hearings on the Division of Revenue 2006/07 Department of Water Affairs and Forestry
Trevor Balzer: Acting CFO
Helgard Muller : CD Water Services
Richard Machaba : Manager National Transfers
Lerato Mokoena : National Transfers
8 March 2006

2. Contents Relevant Grants and areas of impact
Operating and transfer subsidies
Operating expenditure
MIG (conditions, bucket eradication and SMIF)
DWAF Concerns
Conclusion

3. DoRB: Relevant Grants & Areas of Impact
Water services operations & maintenance grant
Equitable share: impact on free basic services and sustainable management
Municipal Infrastructure Grant (MIG): Grant for basic water supply and sanitation infrastructure
Provincial Infrastructure Grant (PIG): Grant for water services infrastructure for schools & clinics
Housing and sustainable settlement grant: Provide associated water services
Capacity building grants.

4. WATER SERVICES OPERATING AND TRANSFER SUBSIDY
Progress to date:
Behind our target, still anticipate being able to finalise all transfer agreements by the proposed revised target date of 31 March 2006.
Some municipalities, particularly those with weak administrative and technical capacity, where special arrangements will have to be made..
Progress can be summarised as follows (to 28 February 2006) :
39 agreements signed (70%);
1841 staff transferred (23%);
544 staff seconded (7%);
149schemes with a total asset value of approximating R3,246 million transferred (50%), and
Refurbishment total expenditure R340 million (40%).

5. WATER SERVICES OPERATING AND TRANSFER SUBSIDY
Division of Revenue Bill 2006:
Allocations for 2006/07 reflected in:
Schedule 6 – Specific Purpose Recurrent Grant allocation, R500 million (where transfer agreements have been concluded)
Schedule 7 – Allocation in kind to Municipalities for designated programmes, R490,5 million (where transfer agreements are still under negotiation and staff still on the payroll of the DWAF ).

6. WATER SERVICES OPERATING AND TRANSFER SUBSIDY
SCHEDULE
2006/07
2007/08
2008/09
Schedule 6
Schedule 7
TOTAL

7. 2006 to 2009 DoR Allocations for OPERATION AND MAINTENANCE, HR AND REFURBISHMERNT (By Province)
Region
2006/07
2007/08
2008/09
Western Cape (1%)
6,550
4,341
4,899
Northern Cape (2%)
20,451
17,808
13,244
Eastern Cape (9%)
83,930
85,821
108,904
Free State (3%)
26,615
19,862
27,351
KwaZulu Natal (4%)
37,160
41,880
44,547
Mpumalanga (17%)
172,063
169,836
175,153
Limpopo (54%)
530,573
567,601
599,722
North West (9%)
96,571
113,565
129,386
Gauteng (1%)
16,587
19,611
27,794
Total
990,500
1,040,025
1,131,000

8. 2006 to 2009 DoRB Allocations for REFURBISHMERNT (By Province)
Region
2006/07
2007/08
2008/09
Western Cape (1%)
700
Northern Cape (4%)
8,368
5,000
436
Eastern Cape (6%)
2,279
2,086
18,256
Free State (2%)
7,877
KwaZulu Natal (12%)
12,179
15,400
18,000
Mpumalanga (6%)
8,166
3,994
11,602
Limpopo (40%)
39,042
70,364
39,562
North West (24%)
23,145
35,733
29,708
Gauteng (5%)
2,184
3,658
11,000
Total
103,940
136,235
128,564

9. 2006 to 2009 DoRB Allocations for REFURBISHMERNT (By Province)
Region
2006/07
2007/08
2008/09
Western Cape (1%)
700
Northern Cape (4%)
8,368
5,000
436
Eastern Cape (6%)
2,279
2,086
18,256
Free State (2%)
7,877
KwaZulu Natal (12%)
12,179
15,400
18,000
Mpumalanga (6%)
8,166
3,994
11,602
Limpopo (40%)
39,042
70,364
39,562
North West (24%)
23,145
35,733
29,708
Gauteng (5%)
2,184
3,658
11,000
Total
103,940
136,235
128,564

10. WATER SERVICES OPERATING AND TRANSFER SUBSIDY
Specific provision made in Section 13 of the draft Bill to adjust allocations to Municipalities once transfer agreements are concluded and staff transfers concluded.
Date for conclusion of transfer agreements 31 March 2006, 7 Agreements Will not be concluded by this date.
Conditional Grants will be incorporated into Local Government equitable share from 2008/09 onwards
Important condition for transfers : Necessary capacity must be in place in the receiving institution for the implementation of the conditional grant (NT and DPLG will have to assist in this regard).

11. Revised Operating & Transfer Subsidy 20005/06
O&M
Refurb
Total
Region
Gazette
Revised
Western Cape
5,616
5,516
760
6,376
6,276
Northern Cape
17,284
11,399
12,376
10,682
29,660
22,081
Eastern Cape
79,992
74,489
6,772
4,800
86,764
79,289
Free State
17,677
10,202
27,879
KwaZulu Natal
22,438
22,554
12,505
17,488
34,943
40,042
Mpumalanga
119,653
117,921
11,184
11,984
130,837
129,905
Limpopo
476,036
482,804
34,555
36,558
510,591
519,362
North West
69,270
21,931
21,377
91,201
90,647
Gauteng
12,803
3,380
6,150
16,183
18,953
820,769
814,433
113,665
120,001
934,434

12. DWAF OPERATING SUBSIDY: OPERATION AND MAINTENANCE EXPENDITURE AS AT 28 February 2006 - 2005/2006

13. DWAF OPERATING SUBSIDY: REFURBISHMENT 28 February 2006 - 2005/2006

14. 1. Equitable Share allocation
2005/06
2006/07
2007/08
2008/09
R 9,64 b
R 18,06 b
R 20,08 b
R 22,78 b
* Total Value

15. Equitable Share: Water services relevance per household Allocation per month
Total allocation per poor hh
Water supply
With infrastructure
No Infrastructure
R 130 pm
R 45 pm
R 30 pm
R 10 pm
Sanitation
Note:
* Not sufficient to support free waterborne sanitation

16. 3. Municipal Infrastructure Grant (MIG) Allocation
Purpose: Basic Services Infrastructure support
2005/06
2006/07
2007/08
2008/09
R5436m
R6265m
R7149m
R8053m
MIG Total
R2758m
R3113m
R3499m
R4322m
Water & Sanitation
R 200 m
R 400 m
R 600 m -
Buckets
Additional allocation (Potential share in)
R 129 m
R 72 m
R 38 m
SMIF
R 28 m
R 30 m
R 50 m
Bulk services

17. MIG Funding Assessment
R 1,9 b
R 2,1 b
R 2,6 b
Water Supply
R 1,2 b
R 1,4 b
R 1,7 b
Sanitation
Available funds (Target allocation)
2006/07
2007/08
2008/09
Actual requirement:
Supply (to achieve 2008 target) requires at least R4 b/a
Sanitation (to achieve 2010 target) requires at least R4 b/a (Waterborne/Dry mix solution)
 Less than 50% of funding requirement available
Exclude refurbishment needs.

18. DoRB 2006/07: DWAF Concerns
DWAF appreciates the grants and associated allocations to support the achievement of sector goals
DWAF supports principle that Water Service Authorities are responsible for providing sustainable & effective water services.
Principle in DoRB sounds fine that MIG is part of municipal capital budget but in practice it is only true for metros and cities. In most of municipalities MIG is only source.

19. DWAF Concerns – Principles
However, this principle should be subject to:
National sector regulation
Cabinet decision that National sector departments are to be held responsible & accountable for sector performance
Critical targets to be achieved between 2007 & 2010
MIG is a conditional grant which requires conditions adherence
Concern regarding Municipal performance i.t.o. implementation capacity & incorrect allocations.
Concern regarding quality delivery as well as sustainability, viability & appropriateness of projects.

20. DWAF Concerns – Enabling Tools
The MITT (DWAF & partners) through the MIG policy therefore developed and implemented various actions & processes to facilitate & enable sector departments to fulfill its functions, to enable effective MIG management as well as to ensure quality delivery
This is reflected in:
the conditions set
registration process implemented (Objective to strategically monitor progress, to ensure conditions compliance & to facilitate implementation monitoring)
Effective reporting system developed (financial issues, implementation actions and sector outcome performance).

21. DWAF Concerns – Project Registration
The draft DoRB 2006/07, however is restricting many of the initiatives as well as disabling sector departments to fulfill its role
Funds are now directly transferred to Municipalities on a program basis with no reporting or referencing to projects
According to section 16 the framework for Schedule 4 may not include any condition for a national department to approve any specific project or budget.
Although not said in DoRB, Treasury is not keen to allow project registration. This is taking place despite all national departments approval of the policy and consensus between all sector leaders that project registration is an essential and critical element in the MIG business.

22. DWAF Concerns – Monitoring & Reporting
Section 16 of the Bill indicates that no reporting on spending or projects will be allowed other than that required by Treasury.
This is totally unacceptable as this will make it impossible for sector departments to fulfill their national monitoring & leadership role.
It will also disallow the transfer agent (DPLG) to assess & monitor grant compliance (as required by the act)
The present Treasury reporting system is not project focused, it is financially & program focused; sector needs have not been consulted and reporting cycles are not appropriate
Serious problems are at present being experienced regarding incorrect targeting of funds (higher levels of service and not targeting the goals;

23. DWAF – Conclusions
Previous DoRA’s linked capital investment with O&M plans (refer to 3 year capital & O&M plans required), now only capital plans required: Is sustainability of project an outcome that must be supported?
Conflicting statement: National departments to enforce compliance with conditions & to monitor performance, but …
New proposals make such actions difficult or to some interpretations impossible.
Proposal: recommended that Section 16 of the Bill be amended or taken out

24. “Some for all forever”