Presented by: Mr. PS Ngomana Chairperson Mr. NA Mashele Chief Executive 1 OVERVIEW
¾ Established in 1997 by the Minister of Water Affairs and Forestry in terms of the Water Services Act (Act. No. 108 of 1997) ¾ Mandated to provide water services to other water service institutions. ¾ Currently operates in the Bushbuckridge Local Municipality and part of the Mbombela Local Municipality in Nsikazi area within the Ehlanzeni District Municipality.
Area Ml/day Population Bushbuckridge Local Municipality Area (BLM) (8 PWTW) 96 ±900 000 • Two Plants owned by DWA and Six plants owned by BLM
Mbombela Local Municipality Area (MLM) (6 PWTW) 71 ±800 000 ( MLM) (1WWTW) 3.5 • All Plants owned by MLM
BOARD OF DIRECTOR – appointed 01 February 2010 Appointed – 01 Feb 2010 Mr. P Ngomana (Chairperson) Adv. G Khoza (Deputy Chairperson) Adv. H Mbatha Ms. C Van Rensburg (CA. SA) Ms. C Makwela Ms. S Khoza Rev. R Ngomane
Mr. M Vilakazi 2 M C Pd h FEEDBACK ON ISSUES RAISED BY PCWEA IN 2011
3 Issues Raised By PCWEA -2011
1. Turnaround Strategy ¾ BW developed a Turn Around Strategy to respond to the challenges it faces ¾ The Strategy focused on the following issues: • Long Outstanding debts by WSAs • Lack of Long Term Supply Contracts with customers • Capital Infrastructure Invest Plan • Internal Capacity • Illegal connections
¾ BW established Task teams comprising of Board members and officials ¾ Sought intervention from National and Provincial Departments wherever necessary (Treasury ,Cogta, DWA etc) ¾ Task teams met BLM and MLM representatives(Political leadership, MMs and officials).
4 Issues Raised By PCWEA -2011 Cont.... 2. Debt Management ¾ Bushbuckridge Local Municipality • R208,4 mil – June 2011 • Escalated by R41 mil since June 2010 – due to flat rate payment against total invoiced • BLM signed acknowledgement of debt of R190 mil and agreed to be pay R95 mil on instalments • Instalments of R5 mil per month ring-fenced debt starting January 2012 • Instalments to be revised in June 2012 • Only R13 mil of R20 mil due paid to date • Engagements continuing with WSA to find sustainable solution
¾ Disestablished Bohlabela District municipality • R26,4 mil – June 2011 • Debt collectors engaged
¾ Mbombela Local Municipality • R10,4 mil – June 2011
• Debt settled in full in July 2011(late payment) 5 Issues Raised By PCWEA -2011 Cont....
3. Contract – Service level agreements
¾Bushbuckridge Local Municipality
•A three year Bulk supply contract has been signed, annually reviewable •A possible extension to a five year contract •A committee of officials established to jointly manage the contract
¾Mbombela Local Municipality • Passed a resolution to cancel the month to month contract and sign a five years supply contract • Parties to agree on key deliverables before end of financial year • A draft contract agreed to and to be considered by BW Board in May 2012 • DWA – Institutional Oversight consulted during the formulation of the draft contract
6 Issues Raised By PCWEA -2011Cont....
4. Infrastructure Implementations ¾BW in the process of compiling a 20 year Capital Infrastructure Plan through funding from DWA
¾Cotga-MP
• BW signed an agreement to implement projects on behalf of Cogta-MP to the value of R23 mil • Projects completed as agreed with Cogta-MP and the receiving Municipalities • 5% agency fee was paid to BW for the implementation of the projects
¾DWA-MP
• BW signed an agreement to implement projects on behalf of DWA-MP to the value of R4,5 mil • Projects completed as agreed with DWA-MP and the receiving Municipalities • 5% agency fee to be paid to BW for the implementation of the projects
7 Issues Raised By PCWEA -2011 Cont....
5. Internal Capacity
¾All vacancies filled at Management level ¾Areas highlighted as critical to be addressed were:
• Director : Water Services • Director : Engineering & Planning Services • Company Secretary • Manager: Business Development • Manager: Supply Chain Management • Manager Scientific Services
8 Issues Raised By PCWEA -2011 Cont....
5. Illegal/Unauthorized Connections/Metering project
¾BW commissioned a project to investigate all connections in bulk supply pipeline ¾Include bulk pipelines operated by WSA and water losses ¾So far 80% completed pipelines operated by BW are clear of illegal connections, have losses within acceptable limits <5% ¾Losses in pipelines operated by WSA reported as and when detected, addressed by WSA ¾Meters of BW pipelines ordered and to be completed by June 2012 subject to the finalization of the funding by DWA ¾Flat rate payment to be discontinued as soon as new meters are operational
9 ANNUAL FINANCIAL STATEMENTS
10 Annual Financial Statement
Statement of Financial Position as at 30 June 2011 2011 2010 % Change Assets R R Non- Current 57 142 070 55 420 725 3.11% Current Assets 118 160 662 118 074 382 0.07% Total Assets 175 302 732 173 495 107 1.04%
Equity 115 989 634 128 323 569 -9.61% Capital Contribution 68 355 117 68 355 117 0.00% Retained Income 47 634 517 59 968 452 -20.57% Liabilities 59 313 098 45 171 538 31.31% Non-Current *BLM – Bushbuckridge Local Municipality Liability 3 070 427 3 014 643 1.85% **Bohlabela District Municipality (Disestablished) ***Mbombela Local Municipality Current Liability 56 242 671 42 156 895 33.41% ------Total Equity and Liabilities 175 302 732 173 495 107 1.04% Contingent Liabilities • DWA – Raw Water Charges R16 920 373 • Legal Cost – CE dispute R250 000 • Provident fund administrators - 9.989% Claiming R1 381 554
11 2010/11 Annual Financial Statement Cont...
Statement of Comprehensive Income – Year Ending 30 June 2011
2011 2010 % Change R R % Water Sales 93 308 244 78 881 154 18% Operating and Maintenance 34 442 465 27 978 505 23% Discounting of revenue 6 208 000 8 679 789 -28% Revenue 121 542 709 98 179 870 24% Other operating income 371 659 376 418 -1% Direct operating cost -81 045 210 -60 940 920 33% Other operating expenses -14 452 170 -11 297 280 28% EBITDA 26 416 988 26 318 088 0.4% Depreciation -2 227 823 -2 189 892 2% Investment Revenue 5 179 945 5 790 166 -11% Finance Cost -321 669 -371 657 -13% Provision for Doubtful debt -41 381 376 -15 427 720 168% Surplus/Deficit -12 333 935 14 118 985 -187% Operating profit -17 192 211 8 700 476 -298% Gross Profit 40 497 499 37 238 950 9% Profit/ Earning Margins (%) EBITDA margin (%) 22% 27% -19% Gross Profit margin (%) 33% 38% -12% Operating profit margin (%) -14% 9% -260% 12 AUDIT REPORT
13 2010/11 Audit Report
14 PERFORMANCE AGAINST STRATEGIC OBJECTIVES
15 2010/11 Annual Performance Information 1. Provide bulk water and sanitation services 1.1 Reliability of supply - Increase the volumes of water supplied by 5.5% -Reduced unaccounted for water by 3.98%
1.2 Water quality - 100% compliance to SANS 0241 for potable water - 98% compliance to effluent standards
2. Entrench sound financial management and corporate governance 2.1. Financial Management - Increased revenue by 18% and 23% in BLM and MLM respectively - 70% collection of revenue on invoiced in both BLM and MLM~ based on flat rate payment agreement - Unqualified audit report
2.2. Corporate governance - 90% attendance of planned Board and Board committee meetings - Improve stakeholder relations engagements
16 2010/11 Annual Performance Information Cont… 3. Optimize stakeholder interaction and engagement
3.1 Stakeholder relations - Improve stakeholder relations engagements 3.2. Business Development - 2 draft long term agreements completed( Bushbuckridge and Mbombela Local Municipalities)
4. Optimise human capital investment
4.1. Human resources - 0.5% staff leaving the institution - 45% implementation of Employment Equity plans-
17 CAPEX
18 2011/12 Capital Infrastructure Expenditure ¾82% under-spent on capital budget for movable assets – cash flow constraints ¾The following projects were implemented during 2011/12:
Total Project Project Description Ownership Funder Status Value of assets Abstraction Sabie River - Cork Desilting facilities (Sand to be trapped) 1 000 000 Department of Complete Abstraction Mutlumuvi River Desilting facilities (Sand to be trapped) 1 000 000 Corporative Complete Abstraction Motlamogale River Desilting facilities (Sand to be trapped) Bushbuckrid 1 000 000 Governance and Complete Treatment Dingledale Package Plant (Villages, Dingledale only) ge Local Traditional 1 500 000 Complete Refurbishment of Package Plant Municipality Affairs: Abstraction Thulamahashe WTW : Upgrading of Plant components 3 000 000 Mpumalanga Complete Booster Pump Station Dwarsloop WTW: Pump & Panel 2 500 000 (CoGTA) Complete Subtotal 10 000 000 Kanyamazane WTW - Clear water sump- Treatment Purification Plant 4 000 000 Complete Inadequate storage Kanyamazane WTW Refurbishment - Treatment Purification Plant 1 000 000 Complete dilapidated infrastructure CoGTA Water Tankers : Nsikazi North & South Scheme: 2 x 16000litre tankers 2 800 000 Complete Mbombela Kanyamazane Regional Scheme Raw Water Pump Station) Packed High Local 2 500 000 Complete Lift pumps Municipality Nsikazi South Scheme Boreholes & Jojo tanks 3 079 000 Complete Nsikazi North Scheme: Drill, Equip, Electrification, Securing & Supply & 2 821 000 Department of Complete Install Jojo Tanks Water Affairs Nsikazi North Scheme: Ground water investigation & borehole siting (56 300 000 Complete Sites) Subtotal 16 500 000 Grand R 26 500 000 Total 19 2011/12 Strategic objectives
Strategic Objectives The organisation’s objectives are articulated as:
To provide bulk water supply and sanitation services 9 Reliability of Water supply 9 Water Quality Compliance 9 Reduction of Water losses
To entrench sound corporate governance and financial management Financial Management Co-operate Governance
To optimise stakeholder interaction and engagement Stakeholder relationship Business Development
To acquire, develop and manage infrastructure for bulk water and sanitation services Infrastructure development Operation and Maintenance
To promote effective water resource management Environmental Management
Optimize human capital investment Humana resource Organizational Transformation 20 SUMMARY of Progress Against Strategic objectives…….
To provide bulk water supply and sanitation services 9Reliability of Water supply •10% water supply volume increase 9Water Quality Compliance • 100% compliance with SANS 241 9Reduction of Water losses • Reduce unaccounted for water to 5%
To entrench sound corporate governance and financial management 9Financial Management • Improved financial ratios •27% Historic debt recovery (agreed R30 million for 2011/12) 9Cooperate Governance • 100% Board performance assessment • 74% Board attendance •80% high level risks addressed
To optimise stakeholder interaction and engagement 9Stakeholder relationship & Business Development • 1 Contract signed with Bushbuckridge Local Municipality (Debt collection and water supply) • 1 Draft Service level agreement with Mbombela – to be approved by Board in May • Projection implementation contracts will DWA and CoGTA • 3 forums attended and resolution implemented
To acquire, develop and manage infrastructure for bulk water and sanitation services • 100% implementation of planned Infrastructure projects Optimize human capital investment 9Human resource • 0.1% staff leaving the institution 9Organizational Transformation •46% Employment Equity 21 Alignment Water board Strategy to Gov. Outcomes
22 2012/13 Tariff Structure
Pro-Forma Tariff Table Year Proposed Tariff for
2012/2013 F Year 1 (R/Kl) DWA / charge 0.183 Direct scheme operations costs 2.252 Overheads 0.845 Depreciation 0.303 Income statement surplus 0.295 Sub-Total 3.9
Projected water sales (kl) 36 135 000 Projected revenue (R ) 140 384 475.00 Projected costs (R ) 132 477 787.36 Projected surplus (R ) 7 906 687.64 Reserves (R ) 42 796 267.47 Projected surplus as a percentage of Reserves 18.48%
Debt service cost 10.58% Debt / (Debt + Equity) ratio 0.02 Capex and Refurbishment (R ) 11 870 619.00
23 2012/13 Tariff Structure Cont... Consideration of Eskom Increases No material impact on the tariff Initial BW estimate was 18% 16% increases was effected but no material changes
Complied with Regulatory frameworks Water Services Act, 108 of 1997 s10 Norms and standards for tariffs Municipal Finance Management Act No. 56 of 2003 Section 42
Comments from Stakeholders Bushbuckridge Local Municipality – Accepted the 5% increase National Treasury – Commented on 5% increase; Raised concerned on debt recovery SALGA – Commented on 5% increase; Raised issues of low raw water rates, low tariff in terms of the industry Mbombela Local Municipality Tariff Charging rates per management contract – Tariff based contract is being finalized with MLM
Recommendation 5% increase on the Tariff
24 Alignment Water board Strategy to Gov. Outcomes
25 Alignment to Government Priorities Ministers DWA strategic STRATEGIC GOALS AND OBJECTIVES FRAMEWORK Outcome objectives Alignment alignment To provide water services Outcome A, D SO 1.1, SO 1.2, SO o Water volumes (production, distribution) 1.3, SO 2.2, SO 2.6, o Water quality SO 3.2 o Sanitation (treatment, discharge of effluent) SO 3.4,
To provide water supply infrastructure services Outcome B, D, E SO 1.1, SO 1.2, SO o Infrastructure installations (water infrastructure assets, bulk 1.3, SO 2.2, SO 2.6, pipelines, connections, metering) o Infrastructure maintenance (pipelines, reservoirs, pump stations, metering, water pressure systems, boreholes)
To optimise stakeholder interaction Outcome D SO 3.1, SO 3.4 SO o Education / Awareness creation (campaigns, events, information 4.1, SO 5.1, SO 5.2 sharing, outreach programmes) o Stakeholder relations management (advocacy, knowledge sharing, stakeholder establishment maintenance) o Input into external regulatory instruments
To ensure business development (existing and new business) Outcome D, E SO 4.1, SO 5.1 SO o Product / service development 5.3 o Market development
To promote effective water resource management Outcome A, SO 2.5, SO 2.7 o Water usage (sourcing, discharging) o Environmental management 26 Key Strategic Focus for 2012/13
27 2012/13 Key Strategic Focus Goal 1: To provide water services Water volumes (Production, Distribution) Increase production by 5% Manage water losses below 10%
Water quality Achieve blue drop status (drinking water quality) 100% compliance with SANS 241 and ISO 9001
Goal 2: To provide water supply infrastructure services Infrastructure Installations 100% completion of the infrastructure projects Minimum 70% of planned job creation is achieved 100% implementation of infrastructure maintenance plans
Goal 3: To optimise stakeholder interaction Education / awareness creation (Campaigns, Events, Information sharing, Outreach programmes) Education / awareness creation programmes conducted Stakeholder relations management (Advocacy, Knowledge sharing, Stakeholder establishment maintenance) Stakeholder forums / working groups / service delivery partnerships
Goal 4: To ensure business development (existing and new business) Product / service development Alternative service delivery mechanisms (Private partnerships) Market development 28 New market opportunities (PIA, Service areas) 2012/13 Key Strategic Focus Cont....
Goal 5: To promote effective water resource management Environmental management •80% of planned environmental management programmes achieved
Goal 6: To ensure internal business excellence Business management / leadership •100% Compliance to materiality and significance framework •100% Corporate governance issues detected versus corrected •70% Board performance rating
Human resource management •<3% Staff turnover •35% Employment equity targets planned versus achieved
Financial management •40% of historic debt to be recovered •80% BBBEE discretional use •Unqualified audit opinion
Information / communication technology management (ICT) •55% ICT master plan implementation progress
29 Current Challenges
30 Challenges -Debt recovery • Bushbuckridge Local Municipality – not adequately budgeting for water services • Insufficient information on current demand • Insufficient support offered by other government departments in persuading WSAs to pay for rendered services • Unwillingness by EDM & BLM to settle the debt for the disestablished Bohlabela DM
- Infrastructure challenges •Transfer of assets (Inyaka and Hoxani water schemes) •Aged and inadequate capacity of infrastructure
- Risk of technical insolvency •Going concern •Debt recovery •Cash flow constrains
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