PARLIAMENTARY PORTFOLIO COMMITTEE ON WATER AND ENVIRONMENT

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PARLIAMENTARY PORTFOLIO COMMITTEE ON WATER AND
ENVIRONMENT
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Presentation Overview
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• OVERVIEW OF THE WATER BOARD
• FEEDBACK ON ISSUES RAISED BY PORTFOLIO COMMITTEE
  IN 2011
• ANNUAL REPORT 2010/11
• Annual Financial Statements
• Audit Report
• Summary of water boards performance against key
  strategic objectives and KPIs
• STRATEGIC OBJECTIVES 2011/12
• Strategic objectives
• Summary of progress to date against key strategic
  objectives and KPIs
• CAPEX
• BULK WATER TARIFF INCREASES 2012/13
• Motivations for proposed increases via the MFMA
  process
• Adjustments to proposed MFMA process increases as
  a result of a reduced ESKOM price increase
• KEY STRATEGIC FOCUS AREAS FOR 2012/13
• CURRENT CHALLENGES EXPERIENCED BY WATER BOARD

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OVERVIEW OF THE WATER BOARD
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Magalies overview

• Established under the Water Services Act, 108 of
  1997
• Originally Vaalkop Water Board
• Schedule 3B Public Entity i.t.o PFMA
• Primary Activity-Provider of Bulk Water Services
  (S29 wsa/1997)
• Secondary Activities-Bulk sanitation services,
  implementing agent, etc. (S30wsa/1997)
• Main sources of Raw Water abstraction
• Crocodile River
• Pienaars River
• Supply area spans over North West, Gauteng and
  Limpopo
• Supply area cover an area of 42 000 square kms

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ISSUES RAISED BY THE PORTFOLIO COMMITTEE IN
2011
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Debtors 2010/11

Item R'M Action taken
Total Debtors balances 79
Amount in dispute-RWST 12 Discussions with the Trust in progress. Promise to pay has been made
Amount owed by Madibeng 6 Requested DWA to intervene
Debtors age-current 42
Debtors age-30 days 8
Delinquent Debtors 11 Follow up Legal action
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ANNUAL REPORT 2010/11
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Financial position summary
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Financial performance summary
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Key ratios

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Audit report significant qualification matters

Area Issues Progress to date
Property, plant Equipment Documentation not supplied in time for audit purposes Document inadequate to comply with audit requirement vReview of asset management policy, vBi-annual verifications of assets vMonthly ledger reconciliations
Completeness of expenditure Auditors could not rely on the existing system of recording expenditure vIndividual creditors reconciliations vAutomation of supply chain and creditors systems
Other income Income recovered from other activities more than expenses incurred vReview of cost recovery transactions and follow up on outstanding items
Revenue Rates that differed from those approved by the Board used vTariffs implemented as approved by the Accounting Authority
Prior period errors Note on the financial statements not reflecting on all the corrected prior period errors vProcedures to identify prior period errors implemented and disclosure to be done according to IFRS
Irregular expenditure Expenditure made in contravention to policy vContracts for chemicals in place vRegister to control irregular expenditure
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Performance against strategic objectives-significa
nt KPIs 2010/11
Performance area Indicator Target Actual achieved (v)/not achieved (X)
Strategic objective to ensure availability and supply of sustainable water services Strategic objective to ensure availability and supply of sustainable water services Strategic objective to ensure availability and supply of sustainable water services Strategic objective to ensure availability and supply of sustainable water services Strategic objective to ensure availability and supply of sustainable water services
Increase in volumes supplied Volumes growth 6 1.6 X
Water quality compliance 241 Class 1 standards 95 98.4 v
Water losses Water lost to water produced 5 3 v
Supply reliability number of days supplied to number of days interrupted gt95 gt95 v
Staff turnover staff resignations to total complement lt5 3.8 v
Bulk water supply agreement Agreements concluded with Municipalities 100 100 v

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Performance against strategic objectives-significa
nt KPIs 2010/11
Performance area Indicator Target Actual achieved (v)/not achieved (X)
Strategic objective to ensure financial sustainability Strategic objective to ensure financial sustainability Strategic objective to ensure financial sustainability Strategic objective to ensure financial sustainability Strategic objective to ensure financial sustainability
Financial performance Solvency ratio 2 5.9 v
Debtors collection 30 days 117 days X
Return on assets 3 2.0 X
variance on total costs 5 below budget 8 below budget v
Strategic objective to comply with shareholders requirements Strategic objective to comply with shareholders requirements Strategic objective to comply with shareholders requirements Strategic objective to comply with shareholders requirements Strategic objective to comply with shareholders requirements
Submission of critical documents Timely submission of SHC and CP 31 May 2011 31 May 2011 v
Annual Report 30 November 2011 30 November 2011 v

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STRATEGIC OBJECTIVES 2011/12
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Key strategic focus areas
FOUNDATION

• To achieve sustainable financial returns
• Manage financial risks effectively
• Achieve value for money, effectiveness and
  efficiency in resource deployment

• To provide sustainable and affordable water
  services
• Conduct effective Section 30 business
• Contribute to the extension of supply to
  un-serviced areas

• Strengthen internal controls
• Conform to best practices
• Board role clarity
• Improve audit opinion

• Ensure sustainable use of resources
• Ensure sustainable impact on the environment
• Ensure sustainable impact on the environment and
  the society

• Financial

Learning and growth

• Customer

• Developmental and Environmental

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Summary of progress to date against key strategic
objectives and KPIs 2011/12As at Dec 2011
Scorecard perspective Indicator Target Actual achieved (v)/not achieved (X)
Strategic objective to achieve sustainable financial returns Strategic objective to achieve sustainable financial returns Strategic objective to achieve sustainable financial returns Strategic objective to achieve sustainable financial returns Strategic objective to achieve sustainable financial returns
Financial Solvency ratio 2 5.9 v
Return on assets 3 3 v
total costs to total income 90 83 v
Strategic objective to provide sustainable and affordable water services Strategic objective to provide sustainable and affordable water services Strategic objective to provide sustainable and affordable water services Strategic objective to provide sustainable and affordable water services Strategic objective to provide sustainable and affordable water services
Customer Volumes growth 3 1.6 X
Water quality SANS 241 compliance 95 98 v
Strategic objective to ensure sustainable use of resources/to ensure sustainable impact on the resources Strategic objective to ensure sustainable use of resources/to ensure sustainable impact on the resources Strategic objective to ensure sustainable use of resources/to ensure sustainable impact on the resources Strategic objective to ensure sustainable use of resources/to ensure sustainable impact on the resources Strategic objective to ensure sustainable use of resources/to ensure sustainable impact on the resources
Environmental Water losses 5 3 v

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CAPEX Reserves R 374 mil No capital charge on
current tariff Only operational tariff
charged New Infrastructure Investment required
R 1.2 bil Access Moses Kotane, Bakgatla Kgafela
RBA, Rustenburg, Thabazimbi Job Creation 700
temporary 6 000 permanent ? Mines
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CAPITAL PROGRAM
Existing Infrastructure Capacity upgrades
Infrastructure Refurbishments (Area East) New
Infrastructure Pilanesberg North South Scheme
(Area West)
Stakeholders
AREA WEST (PWS) Thabazimbi, Moses Kotane,
Rustenburg LMs, RBA Mines Maseve, Wesizwe,
Platmin DWA Shareholder Funder District
Municipalities cf. Bojanala Platinum
District DBSA Bank
AREA EAST Nokeng-Tsa-Taemane CoT WSA
WSP
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Capex Program
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LAY-OUT OF EXISTING PROPOSED INFRASTRUCTURE
Section-B 750mm Pipeline
Padda Junction
Tuschenkomst 35Ml Reservoir
Section-B
Section-A
Section-B
La Patrie Reservoirs
Roodekopjes to Vaalkop canal
VAALKOP WTW
Evergreen Take off
Section-A
Pilanesberg South
Mafenya Reservoir
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BULK WATER TARIFF INCREASES 2012/13
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Volumes growth
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Capacity Utilization
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Scheme Design capacity (Ml/day) Capacity utilisation (Ml/day) Capacity utilisation
Vaalkop 210 185 88
Klipdrift 18 22 122
Walmannsthal 12 12 100
Cullinan 14 11 63
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Customer Profile
Scheme Domestic Government Mining Industrial
Walmannsthal v Affluent v x x
Klipdrift v x x v
Vaalkop v v v v
Cullinan v v v x
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Tariff principles

• Scheme based tariff-Magalies Water supply from
  four various schemes across three provinces
  (North-West, Gauteng, Limpopo)including different
  catchments
• Costs are ring-fenced per scheme
• Walmannsthal tariff is high due to augmentation
  of supply into the Nokeng- Tsa-Taemane now (CoT)
  area
• No benefits in terms of economies of
  scale-therefore increase unit costs particularly
  at Walmannsthal and Klipdrift

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Motivations for the price increase cost drivers
(R/kl)

Scheme 2011/12 raw water electricity chemicals salaries other costs 2012/13
Vaalkop 3.20 0.00 0.13 -0.01 0.02 0.15 3.49
Klipdrift 3.77 0.12 0.09 -0.02 0.03 0.02 4.01
Walmannsthal 4.45 0.27 0.13 -0.05 0.14 0.32 5.26
Cullinan 3.69 0.11 0.06 -0.05 0.04 0.15 4.00
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Tariff increases per scheme R/kl

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KEY STRATEGIC FOCUS AREAS FOR 2012/13
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Strategic progression

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Key strategic focus areas

• Strengthen internal controls
• Improve audit opinion
• Best practices

MISSION-ROLLOUT

• Grow business
• Footprint (infrastructure development)
• Volumes
• Revenue

• Sustainability and Growth

• Governance

• Good Corporate Citizenship

• CSI Transformational Projects

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CURRENT CHALLENGES AND STRATEGIC
INTERVENTIONS
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CURRENT CHALLENGES

• WSA/WSP Municipalities
• WSAs preference for private sector even in the
  presence of capable WB
• Slow T/A funding processes
• Erratic payment levels by WSAs
• Deteriorating water quality
• Energy cost

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THANK YOU