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PRESENTATION TO SELECT COMMITTEE ON FINANCE – DoRA & CONDITIONAL GRANTS

PRESENTATION TO SELECT COMMITTEE ON FINANCE – DoRA & CONDITIONAL GRANTS. Water Services Implementation Programme (CAPEX) & Water Services Operations Subsidy (OPEX). Department of Water Affairs and Forestry. Presented by DWAF 12 March 2002. Presentation Outline.

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PRESENTATION TO SELECT COMMITTEE ON FINANCE – DoRA & CONDITIONAL GRANTS

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  1. PRESENTATION TO SELECT COMMITTEE ON FINANCE – DoRA & CONDITIONAL GRANTS Water Services Implementation Programme (CAPEX) & Water Services Operations Subsidy (OPEX) Department of Water Affairs and Forestry Presented by DWAF 12 March 2002

  2. Presentation Outline • DoRA AND CONDITIONAL GRANTS FOR CAPEX & OPEX • Exposition for Conditional Grants - DoRA • Backlog’s • DWAF’s Monitoring Capacity • DWAF’s Framework on Indirect Grants to Local Government • DWAF’s CWSS-P and “Indirect Grant” • Way Forward • The Presentation is split between CAPEX and OPEX

  3. Water Services Implementation Programme (CAPEX) CAPEX

  4. Exposition for Indirect Grants – DoRA (1) • Criteria used for Conditional Grants – per Financial Year & MTEF • Needs based backlog as determined by 1996 Census • Guideline 1st Order Allocation as Determined by DWAF WS Committee consists of: • Water: 75% • Sanitation: 10% • Sustainability: 10% • Management: 5% • Total 100%

  5. Exposition for Indirect Grants – DoRA (2) • Criteria for Conditional Grants – per Financial Year & MTEF • Needs based backlog ex 1996 Census • Water backlog: • 14.3 million require basic level service, 25l/person per day within 200m • 7.2 million served by March 2002 • 7.1 million to be served by 2008 • Strategic target to focus local government

  6. Exposition for Indirect Grants – DoRA (3) • Criteria for Conditional Grants – per Financial Year & MTEF • Needs based backlog ex 1996 Census • Sanitation backlog: • 18.0 million require basic level service, VIP toilet household • , Bucket Eradication, Clinics, etc • 0.6 million served by March 2002 • Delivery by 2010 • Strategic target to focus local government

  7. Exposition for Indirect Grants – DoRA (4) • Compliance with SA Constitution – Section 214 • DWAF’s programmes compliant: • Grants target national objectives e.g. MTSO eradicate poverty; sec 214 (a) & (c) • Grants ensure municipalities provide basic water and sanitation.sec 214 (d) • Projects selected and funds allocated in line with developmental needs (Therefore E.Cape, KZN and Limpopo gets the major share of such funds. sec 214 (f)) • Programmes is flexible; responds to crises such as cholera outbreaks; sec 214 (j)

  8. Exposition for Indirect Grants – DoRA (5) Emphasis on FBW • Equitable share unconditional grant; • 2003/04 will have so -called soft conditions • Free Basic Water (FBW) only possible in poorer municipalities with equitable share • Some municipalities not using it for this purpose (public hear about the money but do not enjoy FBW) • A portion of R 822 million in 2003/04 earmarked for FBW on conditions • DWAF monitors implementation of FBW • DWAF will feed back to DPLG and NT to enforce conditions • Municipalities have duty to meet purposes of sec 214 of Constitution

  9. Allocation Trends from 2000/01 to 2003/04 (1) • Allocation Trends • Example below to Provinces/Regions • From 2001/02 Allocations to DM’s/WSA’s in DoRA • Derived from backlog requirements - allocations to Provinces/Regions • Allocation to DM/WSA’s via agreements with local municipalities • Final allocation published in DoRA Specific Details at the end of Presentation

  10. Allocation Trends from 2000/01 to 2003/04 (2) • Compliance with SA Constitution – Section 214 • Allocation based on 1996 backlog – per Province/Region • Investigate people served nationally and per region • Determine cost/capita nationally and per region • Criteria applied to balance , nationally and per region Specific Details at the end of Presentation

  11. DWAF’s Monitoring Capacity (1) • DWAF performs the following monitoring functions: • M&E system tracks expenditures, people served, jobs created, KPIs, etc. • M&E basis evaluation on DoRA allocations to DM/WSA’s • Reports to DWAF’s MANCO, Minister, external stakeholders • PFMA regulated monthly reporting to National Treasury’s • M&E ensures KPIs for water and sanitation infrastructure to local government achieved

  12. Budget Year 0 Budget Year 1 Budget Year 2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun DWAF’s Monitoring Capacity (2) Year 1 Commences Implementation of Year 1 Programme and Budget Regional Monthly Cash Flows DWAF Reports to National Treasury according to PFMA Reconciliation of Expenditures and Programme Performance (Audit Review) Quarterly Programme Reviews and Reporting to National Treasury Submit allocation adjustments to DoRA based on Quarterly Review DoRA Allocation adjustments approved by NT Alignment of Programme adjusted DoRA

  13. DWAF’s Framework on Indirect Grants to Local Government (1) • Before indirect grants are made, local government must: • Undertake water service planning (e.g. WSDP) and budgeted for O&M • Be able to implement, operate and maintain the services. • Demonstrate acceptable expertise • Establish mechanisms for reporting • Establish service provision agreements with the DWAF.

  14. DWAF’s Framework on Indirect Grants to Local Government (2) • Contextual issues regarding Indirect Grants: • Projects are managed and monitored internally by DWAF • Build Operate, Train and Transfer (BoTT) was the preferred mechanism • Infrastructure transferred to local government • Local government operates and maintains project • Revenue used to operate, maintain and sustain services

  15. Indirect Grant Continuance • Grant should continue for strategic reasons: • The water backlog needs to be eradicated in 2008 • Projects need to be sustainable • The sanitation backlog needs to be eradicated in 2010 • Projects need to be sustainable • Existing bucket systems to be eradicated by 2005 • Grant helps build Local Government’s capacity to deliver integrated services • multi-year programme approach requires a stable funding arrangement

  16. DWAF’s Framework – Way Forward (1) It is envisaged that: DWAF Local Government • Leadership and Custodianship • Policy development • Performance measurement • Guides compliance with Best Practice • Norms and Standards • Service Delivery • Capacitated • Providing water and sanitation services to the community as part of an integrated service delivery programme • Receiving income from the community • Sustainable service Delivery

  17. Local Government Grows Budget Responsibility CAPEX and OPEX n Years Year 1 Year 2 Year 3 Transformation and Capacity Building in Sector and Local Government DWAF’s Framework – Way Forward (2) • Progressive Transformation DWAF DWAF Phasing Out Local Government Grows

  18. Water Services Operations Subsidy (OPEX) OPEX

  19. Background • DEPT OF WATER AFFAIRS AND FORESTRY: • Managing many schemes from former Homelands • Funded schemes as an interim measure until transfers effected • “Water services provider” for 321 water schemes • 8094 staff attached to the 321 schemes

  20. Background • LOCAL GOVERNMENT: • Constitution : Local Government responsible for water services • Municipal Systems Act, the Water Services Act and the Municipal Structures Act regulate Local Government responsibility for water services. • Local Government is the Water Services Authority (WSA) responsible for ensuring access to Water Services.

  21. Extent of Transfer Programme • In 1994 DWAF inherited former Homeland schemes comprising : • 321 bulk schemes • 3027 rudimentary infrastructure • 8094 personnel • Operational finance (Trading Acc4) = R699 mil for 2002/3 • Post 1994 DWAF implemented capital projects: • 1003 Water, 336 Sanitation and 235 Management projects • 375 completed projects form part of the current transfer package • 182 completed projects inside existing schemes • 193 completed projects outside existing schemes

  22. Extent of Transfer Programme • DWAF owned Asset Values • R 9,95 billion Replacement Value • R 7,13 billion Present Value • R 710 million Total Refurbishment Cost • Water Service Authorities • In terms of powers and functions allocation: • 84 WSA’s will be affected by transfers (2 Metro’s, 18 District and 64 Local Municipalities

  23. Effective date of authorisations Latest effective date of transfer 100% subsidy starts reducing 1 July 2003 30 June 2005 1 July 2006 Time-frame for Transfers • Commenced 1 April 2002 • Same WSA Transfer Agreements already started • Latest effective date for transfer is 30 June 2005 • As of 1 July 2005 DWAF will no longer be operating or maintaining water services works

  24. Budget for Transfers • Budgets regulated by Division of Revenue Act. Initially a “grant in kind” until transfer agreement is in place

  25. Estimate of Population Served by DWAF - Operated and Maintained Infrastructure • Estimation of population served regarding Operations and Maintenance Infrastructure

  26. Water Services Operating and Transfer Subsidy (via augmentation to the Water Trading Account) Covers DWAF’s costs as interim WSP (operation, maintenance and staff costs related to provision function and refurbishment). Whilst DWAF is the interim WSP the operating subsidy is treated as a GRANT IN KIND utilised by DWAF until the effective date of transfer. Upon the effective date of transfer the operating subsidy is treated as a CONDITIONAL GRANT (direct transfer) which is paid to the WSA to cover the operation and maintenance costs, the staff costs of those staff that have been transferred and agreed transfer related costs. DWAF is interim WSP WSA or its appointed WSP operates the scheme Equitable share Conditional Grant phasing out Grant in kind Effective date transfer Termination date Commencement date Transfer Migration on Grant Funding

  27. Division of Revenue Act - Operating Subsidy • Financial framework within DORA must cover hang-over period 31 March to 30 June • Conditional grant has two components: operating (O) and staff (HR) components Operating Subsidy Grant in Kind utilised by DWAF until effective date of transfer Conditional Grant (direct transfer) to WSA from effective date of transfer

  28. Conditional Grant:O and HR components (1) • 100% O Component from 1 July 2003 until 30 June 2006 - decreases 30% p/a over 3 years until 30 June 2009. • 100% HR Component from date of transfer for 3 years (until June 2008) – then decreases 30% p/a. • HR component ONLY for staff transferred • Budget figures indicative. Only converted into conditional grant and in municipal budgets after transfer agreement

  29. Conditional Grant:O and HR components (2) • Migration of O Component • Migration of HR Component

  30. Conditional Grant Transfer Subsidy Component • New component of grant to provide for ‘once-off costs’ for transfer: • Refurbishment/rehabilitation • Processes to facilitate and support transfer • Sustainability (functional, financial, HR) assessments • Land and legal issues • Available from 2003/04 financial year for a 3 year period until 2006/07 financial year • Terms will be negotiated in the Transfer Agreement

  31. PRESENTATION TO SELECT COMMITTEE ON FINANCE – DoRA & CONDITIONAL GRANTS DISCUSSION

  32. DETAIL CAPEX

  33. DETAIL CAPEX

  34. A A B B National Treasury National Treasury C C DWAF Regulate/Resolve & Communication of Power & Functions iro Water Services Institutions Steering Committee / Reference Group Steering Committee / Reference Group DWAF DPLG National Treasury SALGA Policy & Regulation PIMMS 9X Regions A. Muller, K. Pelpola Organisation Local MISP Z. Mathe, T. Mpotulo Government 9X Regions & RPM’s CMIP Functional/Operational Organisation DWAF’s Framework – Way Forward Detail • Powers & Functions – DWAF’s Role DWAF Regulate/Resolve & Communication of Power & Functions iro Water Services Institutions DWAF DWAF DPLG DPLG National Treasury SALGA SALGA Policy & Regulation Policy & Regulation PIMMS PIMMS 9X Regions 9X Regions Organisation Local Organisation Local Strategy, Monitoring and Leadership MISP MISP Government Government 9X Regions & RPM’s 9X Regions & RPM’s CMIP CMIP Functional/Operational Organisation

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