Business Case forthe Pongola-Umzimkulu Catchment Management ...

More documents

Recommendations

Info

Business Case for the Pongola-Umzimkulu Catchment Management Agency and centralised management of the system, are appropriate. All risk is borne by DWA and this is supportive of a fledgling CMA. • Following the establishment of the Pongola-Umzimkulu CMAand the secondment of any relevant staff from DWA, the Pongola-Umzimkulu CMAwill need to be focused on stakeholder buy-in and becoming a credible, customer-oriented organization within the WMA.The CMA must seek to cement its credibility and legitimacy around its role in the new WMA and must be able to respond to queries on water use authorisation and associated billing soon after establishment. Concurrently, the CMA will encounter a range of establishment costs as area office premises are secured across the three areas and information systems are developed. At this stage of development of the CMA, the billing and collection cycle will be split between the CMA and DWA as follows: The CMA will take over the customer relations responsibility, begin to set water use charges and undertake revenue collection. DWA will ensure that the CMA has access to key systems such as WARMS that assist the CMA with issues regarding registration of water use The centralised DWA SAP system will be used for billing, debt management and financial accounting, with WRM charges submitted to DWA by the CMA. Transfers from the trading account and the DWA main account will be made to the CMA account according to the arrangements agreed to in the CMA business plan. These transfers will include funds generated through WRM charges, establishment support funds 17 from DWA and any requisite operational support. • During consolidation of the CMA, DWA staff will have been transferred, the financial, information and HR systems strengthened and the CMA will have assumed its fiduciary and governance responsibilities, and the billing and debt management function will be decentralised to the CMA: Account payments would be directly to the CMA account and relevant entries would be made by the CMA onto SAP. Limited or no payments would be due to DWA for WRM functions (as these would largely have been taken up by the CMA as legally mandated), but there may be payments for WRC levy and/or Working for Water (WfW) projects if these are included in this invoice. Operational financial support from DWA may be required where a subsidy has been introduced for the agricultural/forestry sectors (i.e. capping of the WRM charge at 2c/ kl escalated at CPI per annum) or where the CMA is not able to recover the costs of delivering efficient and effective WRM services through user charges, due to low affordability of charges following redress and allocation reform. Accordingly, risk is shared between the CMA and DWA, with the business plan as the key reference for the financial and governance audit. • After the CMA takes up the responsible authority functions, it assumes full responsibility for cost recovery and is largely financially self-sufficient. At this point, the CMA may develop its own billing, debt and/or financial management systems, with oversight and support from DWA. 17 Including:- i) establishment infrastructure, ii) setting up financial, HR and information systems, iii) developing a first CMS and iv) extending participation. In addition, there are a number of once-off strategic interventions, including:- i) transformation, ii) classification, iii) compulsory licensing, and iv) development of functioning information systems and water use databases. Department of Water Affairs 46
Business Case for the Pongola-Umzimkulu Catchment Management Agency Risk is shifted to the CMA in its entirety, with the CMA fully accountable for fiduciary management and corporate governance. The business plan serves as the framework for audit and DWA oversight; DWA will remain responsible for financial support necessary to make the CMA financially viable where reasonable costs of the CMA cannot be covered by water resource management charges. 9.4 Financial analysis The financial analysis presented below is based on a financial model for the CMA for the 5 years 2013/14 to 2018/19. It is based on calculated expenditure, differentiating salary, overheads, outsourcing and capital repayment costs, with recovery through a combination of water use charges and financial support. It takes account of a number of issues, including possible non-payment by some users. 9.4.1 CMA Expenditure Based on the assumption that the Pongola-UmzimkuluCMA would be fully functional after 6 years 18 , Table 4presents the possible increase in costs over the six years with 6% inflation per annum. When the CMA is fully function, expenditure will be approximately R 84 million per annum. Table 4: CMA costs (R '000) TOTAL Costs 2 013 2 014 2 015 2 016 2 017 2 018 Governance Board R1 500 R1 590 R1 685 R1 787 R1 894 R2 007 R1 500 R1 590 R1 685 R1 787 R1 894 R2 007 Office of the CEO Staff R1 665 R3 538 R3 703 R3 878 R4 063 R4 260 R1 665 R3 538 R3 703 R3 878 R4 063 R4 260 WR Planning Staff R0 R3 474 R4 684 R6 276 R7 182 R7 894 Outsourcing R0 R3 000 R4 800 R2 400 R2 800 R3 200 R0 R6 474 R9 484 R8 676 R9 982 R11 094 Water Resource Management Staff R4 260 R8 517 R15 208 R21 524 R27 148 R36 354 Outsourcing R0 R2 400 R3 600 R4 800 R6 000 R6 000 R4 260 R10 917 R18 808 R26 324 R33 148 R42 354 Corporate (admin & finance) Staff R3 028 R5 224 R8 100 R11 209 R12 742 R14 419 Outsourcing R0 R0 R0 R0 R0 R0 Overheads R3 373 R4 050 R5 033 R7 619 R8 731 R10 215 R6 401 R9 275 R13 133 R18 828 R21 474 R24 634 TOTAL COSTS R13 826 R31 792 R46 813 R59 492 R70 561 R84 349 Staff R10 453 R22 342 R33 380 R44 673 R53 029 R64 934 Outsourcing R0 R5 400 R8 400 R7 200 R8 800 R9 200 Overheads R3 373 R4 050 R5 033 R7 619 R8 731 R10 215 18 year 1 - initial functions, year 3 - intermediate and year 6 - fully functional Department of Water Affairs 47
Page 1 and 2: Business Case for the Pongola-Umzim
Page 45: Business Case for the Pongola-Umzim
Page 83: Business Case for the Pongola-Umzim

Business Case forthe Pongola-Umzimkulu Catchment Management ...

Create successful ePaper yourself

Delete template?

Save as template?