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Budget mystery: how much has been spent this year?

By Martin Czernowalow

Despite the country needing serious investment in its aging and dilapidated water infrastructure, government remains tight-lipped about how much has been spent this year.

 The South African government has allocated billions of rands this year for the upgrade and construction of bulk waterworks over the medium term, as the country finds itself in the midst of a severe and prolonged drought.

However, there is currently little information about how and where this budget allocation is being spent. While neither Rand Water, nor the Department of Water and Sanitation would answer specific questions around government investment in infrastructure, it is understood that billions are being spent on various water infrastructure projects across the country.

According to finance minister Pravin Gordhan’s budget speech earlier this year, budget allocations for water infrastructure this year take into account the special needs of drought-affected areas and the need to address water losses in critical supply networks.

“The Regional Bulk Infrastructure Grant programme has been allocated R15-billion over the medium term for the construction of the bulk water and sanitation infrastructure,” he stated.

This year, the Department of Water and Sanitation has already reprioritised R502-million to deliver water, protect springs, and refurbish boreholes in response to drought conditions. Funds have also been provided for feed and support for livestock farmers, as well as disaster relief measures. Gordhan also revealed that additional drought response allocations would be made, as required, in the adjustments appropriation later this year.

According to National Treasury, over the medium term, the Department of Water and Sanitation will continue to develop and rehabilitate water infrastructure, including dams, canals, water treatment works, reservoirs, and pipelines to connect households.

“A total of R15-billion has been allocated to the regional bulk infrastructure grant to upgrade and refurbish ageing water infrastructure. In addition, R12-billion has been allocated to the water services infrastructure grant to improve water supply in poor communities, and R5.5-billion to the Water Trading Entity for capital projects, including work to address acid mine drainage,” says National Treasury in a statement.

According to the treasury, water boards, the Trans-Caledon Tunnel Authority, and municipalities also raise their own funding for water infrastructure projects.

Medium-term projects

Over the medium term, the Department of Water and Sanitation and its implementing agencies will initiate phase 2C of the Olifants River Water Resources Development Project and the Steelpoort pumping station. Phases 2B and 2D of the Olifants River project are due to start over the medium term and are scheduled for completion in 2020.

Other projects to be completed during the medium term include the transfer of water from Xonxa Dam to Lukhanji Local Municipality, in the Eastern Cape, at a total project cost of R444-million. The project will alleviate the municipality’s water shortfall and benefit the area’s 52 050 households. The Wolmaransstad Wastewater Treatment Works Project in the North West Province will also be completed over the medium term, at a total cost of R154-million.

“To improve households’ access to water and sanitation, the Department of Water and Sanitation will provide funding and institutional support to municipalities and implementing agents to complete 234 small water and wastewater services projects.

“The Trans-Caledon Tunnel Authority and the Lesotho Highlands Development Agency are implementing phase 2 of the Lesotho Highlands Water Project. Design and procurement for the construction of the Polihali Dam is under way. The dam will help meet growing demand and further augment the Vaal River system by 2.9 billion cubic metres per year. The Trans-Caledon Tunnel Authority will operate and maintain the existing delivery tunnel in South Africa, while the Lesotho Highlands Development Agency will implement the project in Lesotho,” says the treasury.

However, KPMG has been critical of government’s approach to water infrastructure, saying that while President Jacob Zuma briefly touched on the water infrastructure in his State of the Nation Address, he did not provide detail on how the issue will be approached.

Instead, says KPMG, he merely highlighted short-term relief projects that are currently under way, like Operation Hydrate.

Siyanda Ralane, a consultant in financial services at KPMG, notes that in Kwazulu-Natal, an initial sum of R352.6-million plus an additional R96.6-million have been set aside to mitigate the impact of the drought.

“However, a long-term solution would be needed to address water wastage through water demand management programmes at a local government level. At a national level, adequate investment must be made to ensure a more sustainable means of managing the available water resources,” he says.

Falling short

Ralane argues that while the previous budget set aside R12.4-billion for water infrastructure development (including R7.9-billion for water resource infrastructure), it fell short of what was needed. Due to the current state of the economy, it is expected that the amount set aside in the 2016/7 budget will be even less.

“This means that infrastructure implementation will have to be done over a longer period. In this case, care must be taken to complete the implementation before the next El Niño,” Ralane says.

Currently, South Africa’s aging water infrastructure is in need of a major overhaul, as some 55% of wastewater treatment plants, especially the smaller ones, do not meet effluent standards. In addition, some do not even measure effluent quality.

Government launched a Green Drop certification for municipal wastewater treatment, which shows that as of May 2011, seven out of 159 water supply authorities were certified with the green drop and 32 out of 1 237 wastewater treatment plants were certified with the green drop. In 2009, when 449 wastewater treatment plants had been assessed, according to official government data, 7% were classified as excellently managed, 38% “performed within acceptable standards” and 55% did not perform within acceptable standards.

According to Bluewater Bio, an international firm that specialises in wastewater treatment, out of 1 600 wastewater treatment plants in South Africa (not all of which were included in the Green Drop assessment) at least 60% are not meeting regulatory compliance requirements.

According to a study by the South African Water Research Commission in partnership with the South African Local Government Association, published in June 2013, 44% of wastewater treatment plants included in a representative sample used inappropriate and unnecessarily expensive technologies. “There is a lack of funding for maintenance because of low tariffs, insufficient collection, and the absence of ring-fencing of revenues for the purpose of maintaining assets, so that municipalities run assets to failure,” says Bluewater Bio.

Underspending worries

Yet, despite the need for South Africa to upgrade its water infrastructure, another concern among those within the water industry is that the state could fail to spend its entire budget allocation, as was the case last year.

Despite the current water crisis, it was revealed at the end of last year that the Department of Water and Sanitation failed to spend a hefty R2-billion of its budget in 2015. Meanwhile, the department’s request to the Auditor-General that the amount be rolled over to the current financial year was refused, meaning its allocation in this financial year was R2-billion less.

At the time, Department of Water and Sanitation spokesperson Sputnik Ratau said the reduction in budget meant that the department would have to rethink its spending on infrastructure.

Democratic Alliance shadow deputy minister of water and sanitation Leon Basson expressed concerns that the underspending would halt sorely needed projects, such as the Nooitgedacht Water Scheme, which is supposed to supply water to the Nelson Mandela Bay metro. The project has been delayed repeatedly because of a lack of funding.

Meanwhile, apart from the backlog with water infrastructure works, water and sanitation minister Nomvula Mokonyane has also come under fire for not releasing the Blue Drop and Green Drop reports for 2014, which sheds light on the quality of drinking water and the state of affairs at the country’s water-treatment plants.

Last year, the Department of Water and Sanitation acknowledged that more than R800-billion would be needed over the next decade to upgrade dysfunctional water infrastructure across South Africa.

Questions regarding government’s spending so far this year on water infrastructure went unanswered by the Department of Water and Sanitation, while Rand Water said it could not comment at this time, as its figures are yet to be audited.


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