MAGALIES WATER 20045 FINANCIAL AND CORPORATE PERFORMANCE

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MAGALIES WATER 2004/5 FINANCIAL AND CORPORATE
PERFORMANCE Presentation to Parliament 24 March
2006
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TABLE OF CONTENTS

• Introduction
• Vision and Mission
• Area of Supply and Operations
• Current Activities and Projects
• Major Achievements in 2004/5
• Mechanisms to achieve and strengthen service
  delivery
• Strategic Challenges faced by the Board and plans
  to overcome them

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TABLE OF CONTENTS

• Future Planning and the Strategic Plan of
  Magalies Water for 2005/6 and going forward
• Implications of the Presidents 2005/6 State of
  the Nation address on Magalies Waters service
  delivery
• Financial Performance

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MAGALIES WATER VISION
The VISION of Magalies Water is to TO BE THE
LEADING PROVIDER OF QUALITY WATER SERVICES 35
Years of Existence
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MAGALIES WATER MISSION STATEMENT

• Magalies Water shall pursue and attain its vision
  by
• Optimising operational resources and
  technologies
• Influencing and contributing to healthy water
• resources
• Ensuring staff equity, competence and capability
• Complying with relevant legislation, standards
  and guidelines
• Building customer and community capacity and
• relationships

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AREA OF SUPPLY AND OPERATIONS
Magalies Water has been a provider of high
quality water for over 35 years and continues to
maintain this standard. This was achieved as a
result of well established relationships with our
Stakeholders as well as Benchmarking our services
with international standards and players.
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AREA OF SUPPLY AND OPERATIONS

• North West Province
• Limpopo Province
• Gauteng Province
• 34 000 km² in three provinces

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AREA OF SUPPLY
MAGALIES WATER AREA OF SUPPLY
Limpopo
NorthWest
Gauteng
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MAGALIES WATER BULK SUPPLY
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MUNICIPAL DEMOGRAPHICS
TABLE 1
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TOTAL NUMBER OF CONSUMERS FOR THE 5 LARGEST
MUNICIPALITIES
TABLE 2
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KEY SERVICE AGREEMENTS

• MUNICIPALITIES
• Thabazimbi Local Municipality
• Modimolle Local Municipality
• Bela-Bela Local Municipality
• Rustenburg Local Municipality
• Nokeng Tsa Taemane Local Municipality
• Moses Kotane Local Municipality
• Madibeng Local Municipality
• Moretele Local Municipality
• City of Tshwane Metro - Temba and Hammanskraal
  areas (Bulk and Retail Services)
• OTHER CONSUMERS
• Amandelbult Platinum Mine
• Swartklip Platinum Mine
• Rhino Andalusite Mine
• Bafokeng Rasimone Platinum Mine
• Premier Mine
• Royal Bafokeng Administration
• Northam Platinum Mine

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KEY SERVICE AGREEMENTS .

• Rand Water
• Sun City Hotel
• Carousel Hotel
• Pretoria Portland Cement (PPC)
• Zonderwater Correctional Services
• Baviaanspoort Correctional Service
• Agricultural Research Institute
• Hydrological Research Institute

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OPERATIONAL PERFORMANCE AND ACTIVITIES/PROJECTS
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ACTIVITIES/PROJECTS

• Magalies Water subscribes to the views of DWAF
  that water is a scarce commodity in South Africa
  and that the construction of expensive new
  schemes can be eliminated or at least be
  postponed through the implementation of water
  conservation and demand management measures.
  Water conservation and demand management measures
  implemented by Magalies Water include the
  following
• Setting of maximum allocations for higher classes
  of consumers.
• Communicating with consumers to make them aware
  of the need to restrict water consumption.
• Actively monitoring and controlling water-network
  losses and UFW.

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ACTIVITIES/PROJECTS (Cont)

• During the year under review, Magalies Water has
  contained water tariff increases between 0 -
  6.8 within previously set targets without
  compromising the financial sustainability of the
  organisation.
• Despite challenges faced due to external factors
  such as deteriorating raw water quality and
  drought, operational costs are being contained
  and attempts are made to manage increases in the
  future.
• Time frames on an annual basis are currently
  established in order to assess the
  implementation of the strategies as well as
  evaluate progress on the set goals.

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ACTIVITIES/PROJECTS (cont..)

• The Magalies Water Board has established a
  Central Laboratory Facility with a view to
  provide quality monitoring of potable water to
  all municipalities in its service area. It also
  has the capability for the monitoring of
  sanitation plants
• The Board has entered into partnerships with a
  number of municipalities for the operation of
  bulk potable water and sewage plants.
• The abovementioned efforts are viewed against the
  background of the Constitutional obligation of
  WSAs to provide water services requirements of
  the MFMA.
• Table 3 Below Outlines current Sanitation
  Projects

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TABLE 3
SANITATION PROJECTS 2005-2010
Approximately 400 000 consumers are currently
served through the Sanitation System
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COMMUNITY WATER SUPPLY SANITATION PROGRAMME
PROJECTS

• Magalies Water has assisted Municipalities with
  the implementation of its refurbishment projects
  transfer of assets. Project at Danhouse,
  Sespond and One-and-Ten villages in Moretele was
  successfully implemented during March 2005.
• Other projects include the following
• A number of projects were implemented in 2005
  co-operation with both Local- District
  Municipalities. Subject to funding, these
  projects will be carried forward to subsequent
  years
• Basic sanitation Ratjiepane, Moretele R2.0 mil
• Basic sanitation Mabeskraal Moses Kotane R3.5
  mil
• Basic sanitation Boitekong Rustenburg R1.5 mil
• Basic Water Disteneng Moretele R1.26 mil
• Basic Water Cyferskuil Moretele R0.3 mil
• Basic Water Tweelaagte Moses Kotane R1.4 mil
• Basic water Bapong Moses Kotane R1.2 mil
• Source Augmentation Derby Kgetleng River R2.02
  mil
• Installation of connections Jericho
  Madibeng R1.6 mil

TOTAL R14.78 Mill
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COMMUNITY UPLIFTMENT PROJECTS
2005/6
TOTAL R39.8 mill
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INFRASTRUCTURE

• Excess of 1 500 km pipelines (including
  reticulation)
• 40 reservoirs with a total storage capacity in
  excess of 250Ml
• Capital Infrastructure investment of /- R800
  million over the past 5 years
• Capital Infrastructure expenditure approved in
  2004/5 R69 million
• R149, 5 Mill to be spent over the next 5 years on
  pipeline and Infrastructure maintenance

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MAJOR ACHIEVEMENTS IN 2004/5
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MAJOR ACHIEVEMENTS IN 2004/5

• Implementation of Future Corporate Strategy that
  focused on (a) Appointment of New BEE Suppliers
  and Professional Service Providers
• (b) Management Transformation - 50 of
  Executives are Currently HDI
• Implementation of New Organisational Structure
• ISO 14001 Accreditation in 2005
• Balance Sheet improvement (Long term loan
  reduction of R107 mill)
• Asset Management Improvement Plan (AMIP)
• PMR Diamond Award (For Public Sector Entity
  Service Delivery) - 2005
• Twinning Agreement with Nkana Water in Zambia

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MAJOR ACHIEVEMENTS IN 2004/5

• Successful participation in the R550 million
  RTWST project in 2005
• Successful participation in the R250 million RWST
  project in 2005
• Successful attainment of gender balance in
  Magalies Water
• Unqualified financial report by Independent
  Auditor (Never qualified by the Auditor in 35
  years)
• Successful Involvement in the Water Loss Program
  in City of Tshwane Metro

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MAJOR ACHIEVEMENTS IN 2004/5

• Implementation of balanced tariff increases
  ranging between 0 - 6.8
• Signed MoU with Rand Water and Ikangala Water to
  service the WH Region of Bronkhorstspruit
• Successfully established a Central Laboratory
  Facility thru purchasing the Rustenburg LM Lab
  for /- R1mill
• As implementing agent, successfully implemented
  DWAF projects to the value of R15 mill

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MAJOR ACHIEVEMENTS IN 2004/5

• Appointment as implementing agent for
  municipalities in establishing basic water
  services
• Successful disbursement of the donation of R18
  million which was made available to 4 Key
  Municipalities for Water Services Projects
  directed to Water Services Projects
• Gold Award under Public Sector at Rustenburg Show
  and Exhibition

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MECHANISMS TO STRENGTHEN SERVICE DELIVERY
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MECHANISMS TO STRENGTHEN SERVICE DELIVERY

• Partnering with other Water Boards or Water
  Utilities on Joint Ventures to identify the most
  effective Sanitation Models and Processes. This
  means Joint Task Teams would be established to
  conduct research and publish information
  regularly on findings.
• Progressive cost reduction in operational
  expenses and settlement of long term debt, and
  passing benefits of economies to consumers
• Vigorously pursuing relationships with WSAs and
  fostering appointment as implementing agent in
  establishing basic water services inclusive of
  basic sanitation services

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MECHANISMS TO STRENGTHEN SERVICE DELIVERY

• Assisting WSAs in Project Consolidate
  initiatives through partnerships and secondment
  of selected personnel
• Utilisation of Water Forums and Other Stakeholder
  Relationship Management initiatives to address
  their concerns
• Acceleration of transformation and Equity /
  gender balance internally thereby boosting morale
  among staff
• Deliberate encouragement and prodding of staff to
  further their education and learning successful
  implementation of ABET (Out of 71 registered
  candidates, 47 were successful in various Levels
  of ABET Qualifications)
• Increased Spend in Training and Development

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STRATEGIC CHALLENGES FACED BY MAGALIES WATER AND
PLANS TO OVERCOME THEM
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STRATEGIC CHALLENGES FACED BY MW

• Obtaining Support from DWAF regarding the above
  average / Inflation raw water tariff increases
  whilst the Water Board is expected to increase
  tariffs in line with Inflation targets
• Need for the improvement of the fast
  deteriorating raw water quality in such
  catchments areas as the Hartebeestpoort and
  Roodeplaat dams
• Finalisation of the WSA/WSP Service Level
  Agreements
• Reduction of UFW in areas of operation
• Managing the uncertainty created by the
  Institutional Reform process

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STRATEGIC CHALLENGES FACED BY MW

• Accelerating assistance offered to Municipalities
  to deal with Project Consolidate challenges
• The Need to align and meet the challenges posed
  by the President in his 2006 State of the Nation
  address regarding water
• Continuously ensuring that the quality of potable
  water produced and delivered remain quality
  consistent
• Successfully managing the impact of HIV/AIDS at
  Magalies Water (Negotiating with ABSA for an
  Employee Support Program to assist MW in managing
  Voluntary disclosure)
• Accelerating access of Sanitation to all
  consumers in MW areas of operation

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STRATEGIC CHALLENGES FACED BY MW

• Accelerating Transformation efforts to balance
  gender at all levels of management, as well as
  Disability
• Maintaining and Improving employee and Customer
  satisfaction
• Ensuring that the Business Development Division
  becomes fully functional and focused
• Reduction of Operational Expenses
• Maintaining tariff increases at inflation
  targeted levels

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DEALING WITH STRATEGIC CHALLENGES

• Efforts and Discussions already pursued with DWAF
  to limit future tariff increases to Inflation
  levels a study already completed and submitted
  to DWAF to highlight this anomaly
• Raw Water Deterioration A study has been
  initiated and discussions currently pursued with
  DWAF to assist in the management of the Raw water
  relevant catchments
• Finalisation of WSA/WSP Agreements Draft
  Agreements have already been compiled and
  submitted to all affected WSAs to finalise the
  contracts
• UFW / Water Loss Management - Further projects
  such as the STIP Project in CTMM need to be
  initiated. Already other projects in Moses
  Kotane are being implemented

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DEALING WITH STRATEGIC CHALLENGES

• Institutional Reforms continuous communication
  and information dissemination is currently
  performed and staff are regularly updated
• Project Consolidate (PC) Assistance Target
  teams and proposal development as well as
  laboratory services, among others are being
  undertaken to assist WSAs in their efforts to
  deal with PC challenges
• Quality Standards - The establishment of a
  Centralised Laboratory facility was primarily
  aimed at accelerating the testing of raw, potable
  and sewage water to ensure quality products
• Sanitation access - MW as an Implementing agent
  is already engaged with DWAF and affected WSAs
  to accelerate basic and advanced sanitation
  provisioning to affected communities

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DEALING WITH STRATEGIC CHALLENGES

• Customer Satisfaction Surveys (both independent
  and MW driven) have been identified as the key to
  determination of customer satisfaction the 2005
  PMR Award for Service excellence is just but one
  driver
• Employee Satisfaction a Performance Management
  System has been introduced to reward key
  performers and to develop inadequate performers
  (Board members also trained)
• The Training and Development spend has also been
  systematically increase to encourage personal
  development of staff
• Reduction of Operational Expenses Service
  providers and suppliers to MW are being
  systemically informed that MW would not accept
  increases above inflation This is assisting
  tremendously in efforts to reduce OPEX

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DEALING WITH STRATEGIC CHALLENGES

• Reduction in OPEX consolidation of business
  processes has been undertaken through the
  restructuring of the Organisational Structure in
  order to further reduce OPEX.
• HIV/AIDS Management Voluntary campaigns have
  been undertaken to date, including participation
  in national campaigns such as HIV/AIDS Week,
  World Aids day, etc
• MW does not provide ARVs nor is there a budget
  allocated for each beneficiary treatment. Plans
  are being made to establish a mobile clinic

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FUTURE PLANNING FOR 2005/6 AND GOING FORWARD
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FUTURE PLANNING FOR 2005/6 AND GOING FORWARD

• Consolidating the new Organisational Structure
  and milking the benefits of consolidation to
  pass these to our consumers
• Capacitating the Business Development Division so
  that it identifies viable projects and becomes
  profitable
• Strengthening Magalies Water Capabilities in the
  Bulk Sanitation business
• Preparing Strategic Plans for bulk supply in
  support of the municipalities WSDPs especially
  in cases where the WSDPs have not been
  completed
• Participating in the process of establishing
  WSDPs of municipalities

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FUTURE PLANNING FOR 2005/6 AND GOING FORWARD

• Preparing Business Plans for extension of water
  services reticulation within villages
• Establishing community liaison committees in
  order to create relationships and to compile
  information on the most needy communities.
• Aggressively pursuing the establishment of bulk
  water supply and OM contracts with
  municipalities
• Pro-actively investigating the establishment of
  operating rules for raw water sources

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FUTURE PLANNING FOR 2005/6 AND GOING FORWARD

• Maintaining Water Forums with Municipalities and
  all Stakeholders in an effort to support them in
  their role as WSAs
• Transfer of knowledge to Municipal Officials in
  an effort to equip them for their task as WSAs
  and to assist with Project Consolidate
• Allocating Funding in order to conduct research
  on Water Conservation, Sanitation, establishment
  of Infra-structure to forward plan.
• Establishing Organisation wide EWRM Models and
  Risk Scenarios in order to manage uncertainty

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BEE PROCUREMENT
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BEE PROCUREMENT

• The BEE spend between 2003 2005 is as follows

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IMPLICATIONS OF STATE OF NATION ADDRESS ON MW
SERVICE DELIVERY
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IMPLICATIONS OF STATE OF NATION ADDRESS

• Through our Implementing Agency status for the
  WSAs, MW facilitates the eradication and
  acceleration of access to Sanitation to meet the
  2007 ASGISA goals
• Transfer of skills to Local Government via the
  Rustenburg Infrastructure Management Project to
  accelerate Project Consolidate deliverables
• Working with Provincial Government in attaining
  the goals of the Provincial Growth Development
  Strategy (PGDS) Member of Infrastructure and
  Construction Working Group
• Together with WSAs, MW will put additional
  Infrastructure Development plans forward to
  access part of the R372billion

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IMPLICATIONS OF STATE OF NATION ADDRESS

• MW has already invested more than R800 million
  for Infrastructure refurbishments in the last
  5yrs, with plans for a further R150million in the
  next 5yrs
• Several proposals are at different stages of
  completion to assist WSAs in OM programs as
  part of infrastructure projects management
• MW Board already consist of 50 women at Board
  level in line with the ASGISA goals of placing
  women at decision making levels of public service
• Learnerships are being accelerated to advance
  youth training and development

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IMPLICATIONS OF STATE OF NATION ADDRESS

• Raising capital through the Boards balance sheet
  for infrastructure development on behalf of
  Stakeholders
• MWs BEE and SMME development initiatives have
  ensured that in 2004 procurement from these
  entities was already at 44.1 (R51 million), of
  total procurement
• Adoption of community agencies and centers by MW
  ensures that community development is accelerated
  
• All Infrastructure programs, Basic water
  provision, sanitation, etc are all channelled at
  alignment with NEPAD goals

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FINANCIAL PERFORMANCE
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SUMMARY BUSINESS PERFORMANCE INDICATORS
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BUSINESS PERFORMANCE INDICATORS
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FINANCIAL PERFORMANCE
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FINANCIAL OVERVIEW
Consolidated Balance Sheet - Magalies Water
R255,8 million currently in the Investment Account
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FINANCIAL OVERVIEW
Consolidated Income Statement - Magalies Water
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FINANCIAL OVERVIEW
Magalies Water Bulk Income Statement (Vaalkop,
Wallmannsthal, Klipdrift Cullinan)
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FINANCIAL OVERVIEW
Magalies Water - Retail (CTMM) Income Statement
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FINANCIAL OVERVIEW
Magalies Water - Retail (Bojanala) Income
Statement
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FINANCIAL OVERVIEW
Magalies Water Roodeplaat Temba Water Services
Trust Income Statement
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FINANCIAL OVERVIEW
Magalies Water Rustenburg Water Services Trust
Income Statement
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APPROPRIATIONS
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APPROPRIATIONS
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LOAN STRUCTURE
Magalies Water Loan Stock Outstanding
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LOAN STRUCTURE
Magalies Water Long Term Commitments Outstanding
In the year under review, MW has settled the long
term debt of R107 Mill
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AUDIT OPINION

• Unqualified Audit Opinion by the Auditor General,
  Treasury and External Auditors of Magalies Water
  for 35 years now!!!!

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THANK YOU