Rand Water Integrated Annual Report 2013 -2014 1
Rand Water’s Integrated Annual Report is our principal statement Achieve Operational to our Shareholder and Integrity and Use Best stakeholders. It covers our Fit Technology non-financial, financial and operational performance in relation to our strategic objectives. It allows the reader to assess Rand Water’s ability Achieve a High to create and sustain value in Performance Culture the short, medium and long term. The Report also makes references to our divisional Positively Engage units and their key focus areas. Stakeholder Base
INFORMATION IN THIS REPORT
Rand Water will submit a copy of this Integrated Report to the Association of Chartered Certified Accountants (ACCA) South Africa as part of the adjudication process for the ACCA South African Awards for Sustainable Reporting. The learning from Achieve Growth our participation in this process will contribute to Rand Water maintaining a global standard for its integrated reporting.
If you would like to provide comment on the nature of our integrated reporting, please contact our Corporate Communications division via the Rand Water Maintain Financial Health Customer Service Centre – 0860 1010 60 or email [email protected]. and Sustainability
An electronic version of this Report is available on our website www.randwater.co.za 2 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
Introduction
An African on the Move 04
Strategic Performance
Chairperson’s Report 14 Members of the Board 18 Board Profiles 19 Outgoing Board Members 23 Chief Executive’s Review 24 Executive Profile 28 Corporate Governance 30 Chief Financial Officer’s Review 46
Corporate Governance and Risk
Rand Water’s Risk Review 50 Rand Water’s Group Governance 62 COO Portfolio Annual Submission 78
Operating Performance
Managing our Environmental Footprint 118
Governing Stakeholder Relations
Strategic Human Capital Management 128 Rand Water in the Media 146 Marketing and Stakeholder Relations 148 The Rand Water Foundation 150
Financial Reporting and Disclosure
Consolidated Annual Financial Statements 160 Rand Water Integrated Annual Report 2013 -2014 3
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY 4 Rand Water Integrated Annual Report 2013 -2014
AN AFRICAN
GIANT
ON THE MOVE z zZ ZVVZV
Rand Water and Integrated Reporting 05 A Profile of Rand Water 07 Our Strategic Objectives 08 A Vision-Led, Values Driven African Giant 09 Where We Work in South Africa 11 Chairperson’s Report 14 Members of the Board 18 Board Profiles 19 Outgoing Board Members 23 Chief Executive’s Review 24 Executive Profile 28 Rand Water Integrated Annual Report 2013 -2014 5
RAND WATER AND INTEGRATED REPORTING
This integrated annual report builds on the progress, insights and feedback received during the year under review and will provide an overview of Rand Water’s financial and non-financial performance. This Integrated Report reflects our commitment to integrated reporting
The compilation of this Report has been aligned to the requirements of the across the organisation for the review by
z zZ ZVVZV King Code of Governance Principles for SA (King III Code), the International our Shareholder and the benefit of all our Integrated Reporting Framework and complies with the Global Reporting stakeholders. Initiative (GRI) Guidelines. We have also remained mindful of the Public Finance Management Act, 1999 (Act 1 of 1999) as amended, and its references to annual reporting. The guidelines and criteria for good reporting, monitoring This Report was tabled before the Group and evaluation systems, and service delivery indicators recommended by Audit Committee and subsequently National Treasury have also informed the compilation of this report. approved at a meeting of the Board of Rand Water on 16 October 2014. For ease of reading and information accessibility, this Report has been prepared in the first person. The terms ‘Rand Water’, ‘Rand Water Group’, ‘we’, ‘us’ and ‘our’ all refer to Rand Water and our associated operations and initiatives, Using the International Integrated unless otherwise stated. References to the year under review or the financial Reporting Committee (IIRC) structure of year in this Report refer to the period 1 July 2013 to 30 June 2014. the six capitals (financial, manufactured, human, natural, social and intellectual) SCOPE OF THE REPORT and how we build or deplete them are The Rand Water Integrated Annual Report is published annually, and addressed in this integrated report, while is then tabled before the Parliament of the Republic of South Africa by not specifically referred to in this manner. the Minister of Water and Sanitation. The Report provides information We also reference the eight material on our operations, financial, non-financial performances and integrated sustainability issues viz; responsible sustainability developments for the year ended 30 June 2014. The Report growth, services and customers, supply focuses on the business of Rand Water in South Africa and internationally. The chain management, occupational health material content in this Report should be referenced in conjunction with our and safety, employee development, Consolidated Annual Financial Statements also contained herein. The Report community engagement, resource has been approved by the Board of Rand Water and has been signed on their use and efficiency; and environmental behalf by the Chairperson, Adv Matshidiso Hashatse and the Chief Executive, management. Mr Percy Sechemane.
6 Rand Water Integrated Annual Report 2013 -2014
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Rand Water Integrated Annual Report 2013 -2014 7
A PROFILE OF
RAND WATER 12.3m GAUTENG CONSUMERS OF OUR PRODUCT Rand Water is the largest water utility in Africa. Our customer base includes 73 metropolitan municipalities, local municipalities, mines and large industries. We have an RAND WATER internationally acknowledged reputation for providing water of high quality that ranks ACADEMY GRADUATES among the best in the world. We have consistently met nationally accredited standards 2013/14 on water quality. Our geographical expansion has seen us provide water and sanitation services in Mpumalanga, the Free State and North West provinces. With respect to 3 500 expansion on the Continent, we study the bilateral and regional trade agreements RAND WATER entered into the South African government with a view to pursuing advantages that EMPLOYEES
exist in those new markets.
z zZ ZVVZV
RAND WATER The provision of high quality bulk water services.
RAND WATER BULK SANITATION FOUNDATION Extending sanitation services to Through social partnerships; water service authorities and supporting communities in the institutions within and beyond our management of water, sanitation traditional area of supply. and the environment.
SECTOR GROWTH AND RAND WATER ACADEMY DEVELOPMENT Addressing key human resource, Providing sectoral support in leadership, technological and process challenges in the governance, financial management, water and sanitation sector. operations and maintenance.
WHERE WE ARE BASED OUR FOCUS AND POSITIONING Head Office in Glenvista, Johannesburg, South Africa We pride ourselves on the important role we play in the Two large pumping and purification stations, at economic heartland of Southern Africa. Vereeniging and Zuikerbosch. With our experience and excellence we are able to provide Four main booster stations at Zwartkopjes, Palmiet, local authorities in South Africa and the region with Mapleton and Eikenhof. solutions to their water sector challenges. Thirteen tertiary pumping stations and a number of We are aware of the necessity to play an increasingly enclosed reservoirs and secondary booster stations. pivotal role in the water sector. A multi-billion rand regional pipeline network of We intend to pursue growth within the mandate given to approximately 3 500km. us by the Water Services Act. 8 Rand Water Integrated Annual Report 2013 -2014
OUR STRATEGIC OBJECTIVES
In order to attain our strategic intent, Rand Water has set the following strategic objectives, which will focus and direct the business activities of the organisation over the planning period. Each of the Rand Water strategic objectives are underpinned by specific goals, defined key activities and targets.
These are broadly categorised as follows:
Achieve Operational Integrity Positively engage
and use Best Fit Technology Stakeholder Base z zZ ZVVZV To ensure compliance to all statutory and To promote and implement initiatives that have a regulatory requirements. socio-economic development impact. To promote safety, health, environment and To reduce legal risk and thereby minimise the quality (SHEQ). financial and reputational impact on Rand Water. To increase protection of Rand Water’s To improve awareness of Rand Water to external assets and personnel. stakeholders. To ensure continuous supply of water to To respond appropriately to Rand Water’s environment. customers. To ensure the quality and reliability of Rand Water assets. To effectively co-ordinate Rand Water’s Achieve Growth information and communication To ensure that Rand Water infrastructure meets technology and knowledge management current and future demand. To maintain the quality of water. To promote growth through new areas of supply. To improve internal processes within the To promote growth through new product streams. Rand Water Group.
Maintain Financial Health and Sustainability Achieve a High Performance Culture To promote prudent financial To build integrity within the organisation. management. To build employee morale and satisfaction. To achieve optimal investment To build internal skills and capacity. portfolio performance. To retain employees through an attractive environment. To mitigate all financial risks for the To transform Rand Water’s employee profile. Rand Water Group. to reflect demographics of area of supply. To ensure that assets are fully utilised. To provide required assurance at Board level. To ensure that tariff is determined To retain Rand Water’s institutional knowledge. accurately from Rand Water’s environment. Rand Water Integrated Annual Report 2013 -2014 9
A VISION-LED, VALUES DRIVEN AFRICAN GIANT
VISION DELIVERING ON To be a provider of sustainable, universally competitive water and sanitation OUR STRATEGIC solutions for Africa.
FOCUS AREAS
During the year under review, we z zZ ZVVZV MISSION STATEMENT To deliver and supply world class affordable, reliable, and good quality made progress towards achieving our water and related services to all stakeholders through: vision through delivery on our growth Safe, efficient transport, sustainable and innovative business practices; strategy of positioning Rand Water as Empowered employees; the preferred water services partner. Mutually beneficial strategic relationships; and At our Board and Executive strategic Legislative compliance and best practice. planning sessions, we continued to refine our strategic focus areas in the VALUES context of our material matters.
We ploughed back our net income generated into upgrading and expanding infrastructure. We made Equity good progress with our capital investment programme which was designed to meet demand projections. Spirit of We will continue to work with our Caring Partnership Shareholder, the Department of Water and Sanitation on their development of national water pricing strategy. We remained committed to improving our processes and limiting expenses, in order to keep consumer costs contained.
Integrity Excellence 10 Rand Water Integrated Annual Report 2013 -2014
SELF APPRAISAL In order to ensure that our strategic growth objectives are achieved and built on the solid foundation of our existing business, it is important for us to do a self appraisal of our successes. Our business and functions have continued to operate sustainably, underpinned by sound governance.
Customer Satisfaction Survey Occupational Safety, Rand Water’s supply to our customers is based on the Health and Environment Rand Water General Water Supply Conditions. Central
The enforcement of Occupational Safety, Health and
to this is our customer satisfaction obligations. We z zZ ZVVZV Environmental legislation has been embedded within our continued to ensure that the organisation’s reputation project management processes, from project-initiation to among our customers is maintained. project-handover.
Quality Health and Safety Management Reliability of Supply We continued to participate in, Systems We met all our daily peak demands and support all the relevant HIV/ The successful maintenance of our during the year under review, Aids programmes and initiatives ISO 9001:2008 certification during thus abiding by our Bulk Water of government. Our site HIV/Aids the year under review confirms Supply Contracts. Committees consist of committed the maturity level of our Quality staff, under the guidance of our Management Systems. Strategic Human Capital Portfolio.
Product Quality Blue Drop Certification We continued to monitor the quality of our potable water We set very high standards for ourselves with regard to the against the national drinking water standard and benchmark supply and quality of potable water. In recognition of our our performance against the World Health Organisation work our Blue Drop Certification awards have (WHO) non-organic drinking water quality guidelines. increased during the year under review. We also received During the year under review, we were consistent in special recognition for helping municipalities achieve their maintaining delivery of drinking water meeting the SANS Blue Drop status. 241 national drinking water standard. Rand Water Integrated Annual Report 2014 11
WHERE WE WORK IN
SOUTH AFRICA
z zZ ZVVZV
Rustenburg Local Municipality Govan Mbeki Local Municipality Ngwathe Local Municipality Lesedi Local Municipality Royal Bafokeng Nation Victor Khanye Local Municipality Metsimaholo Local Municipality Emfuleni Local Municipality Madibeng Local Municipality Thembisile Hani Local Municipality Tshwane Metropolitan Municipality Joburg Water Ekurhuleni Metropolitan Municipality Westonaria Local Municipality Merafong Local Municipality Randfontein Local Municipality Mogale City Local Municipality 12 Rand Water Integrated Annual Report 2013 -2014
OUR KEY RELATIONSHIPS Rand Water recognises the significance of our stakeholders towards the sustainability of our business.
Our Shareholder The Government of the Republic of South Africa, through the Department of Water and Sanitation, and duly represented by the Minister of Water Affairs and Sanitation, is our sole shareholder. The relationship between Rand Water and its Shareholder is governed by the provisions of the Water Services Act No 108 of 1997.
Our Board The Board of Rand Water is appointed by the Minister of Water Affairs and Sanitation and duly represented by the Department of Water and Sanitation, in accordance with the provisions of the Water Services Act No 108 of 1997. We have a unitary Board structure, which consists of a majority of non- executive members and an executive member. The positions of the Chairperson (non-executive) and
that of the Chief Executive are segregated.
z zZ ZVVZV Our Customers Our customers include municipalities, the industrial and mining sectors. We interface directly with all our customers, notably through our Regional Account Executives and Water Forums. We regularly solicit their feedback on our products and services.
Our Investors We keep our investors regularly updated on our financial position and other matters related to our business. We host roadshows with our investors and engage with the South African media on the release of our annual and interim financial results.
Our Employees Our employees remain central to our success. We communicate with our employees via weekly electronic newsletters, a quarterly newsletter and the intranet. Plans have been developed to engage our employees more intensively with regard to the sustainable development of our business.
Provincial We have built sound relationships with the provincial authorities within our area of supply. Our Legislators relationships have been largely collaborative, and we are in the process of formalising these relationships by signing Memoranda of Understanding between ourselves and the provincial legislatures.
The Media We continue to build on the recommendations made by our Board-approved Media Relations Strategy. We co-operate with both the print and electronic media based in South Africa and abroad, on matters related to our product and services, governance, Rand Water Foundation (RWF) projects and brand marketing management.
Communities Through our sponsorship policy, the work of the Rand Water Foundation and our Water Wise community and Civil Society based initiatives, we have garnered an incisive view of the needs and interests of the communities in Organisations our area of supply.
Vendors and We promote the objectives of our Commercial Equity policy and have structures in place to ensure that Suppliers our supply chain management process remains fair, transparent, equitable and cost effective.
Tertiary Our work with tertiary institutions remains a priority for us with respect to attracting young professionals Institutions into the water sector. Rand Water supports Research Chairs at the Universities of Johannesburg and Pretoria.
Auditor-General As a public utility, we are accountable to both the Auditor General and National Treasury. We report /National Treasury regularly on our financial and operational performance to both bodies.
Rand Water Integrated Annual Report 2013 -2014 13
z zZ ZVVZV
14 Rand Water Integrated Annual Report 2013 -2014
A sustainable future for Rand Water
CHAIRPERSON’S REPORT
z zZ ZVVZV
Adv. Faith Matshidiso Hashatse Rand Water Integrated Annual Report 2013 -2014 15
We acknowledge that the need for development as a people driven process is fundamental. It is clear that the expectation for the sector is not only to satisfy people’s basic needs but also to contribute to the growth of a dynamic economy. The building of partnerships and collaborations with all relevant Stakeholders, especially in the technical fields, is a feature that defines the spirit and intent of the Rand Water Academy. Considering the extent and intensity of our operations, we have had a good safety performance record during the year under review. At Rand Water we also acknowledge that a good way to maximise our positive sustainability impact is through partnerships with like-minded individuals, groups and organisations.
Dear Rand Water Stakeholder, bulk water supply infrastructure, wastewater systems, and also provide technical assistance to municipalities. TWENTY YEARS OF DEMOCRACY We are positioning ourselves to dynamically respond The milestone of 20 years of democracy provides all of to the challenges we face and to rise to the call from us, as South Africans, individuals and entities, with the our Shareholders and the Department of Water and opportunity to reflect on how we have contributed to Sanitation for collective action between all the partners
the building of our democracy and the attainment of in the water sector. The collective goal is our country’s
z zZ ZVVZV the promises of our Constitution. The Constitution is mission to achieve universal access to water. something for which South Africa is admired, as a bold departure from our country’s shameful past, towards As a distinctive and proudly South African organisation, a society that is built and based on respect for human Rand Water embraces its commitment to leverage our rights. Looking back, we can see that our society has experience and meet the challenges and developmental changed significantly, but we can also see the work that needs of the communities we serve. Our strategic still lies ahead of us. focus and objectives are being shaped and re-shaped by the areas in which we operate, which have been In the realisation of the right to dignity through rapidly changing as our area of operation extends. We the provision of services to previously unserviced are compelled by these changes to make additional communities, it is clear that great strides have been infrastructural, human capital, environmental and social made. There is, however, far more to be done, coupled investments in the sector to advance our footprint in a with acute recognition of the fact that several of our much larger, more challenging area of supply. communities are still waiting for services to reach them. Our investment plans in the coming years will underpin Water access, in general, is a positive services story. our growth strategy, with the intention of sustainably Statistics South Africa (Stats SA) records that 94.8 percent expanding our business interests. We also have to of South Africans now have access to clean and safe honestly grapple with and identify the key risks that drinking water, compared to 59 percent in 1994. This this new way of doing business will bring. These are means that the water sector has a backlog of 5.2 percent mentioned in this report, and include our concerns about to deal with as a matter of urgency. the deterioration of raw water quality.
In addition to this, innovative and creative ideas are We also acknowledge that it is only through working required to strengthen and enhance a solution-oriented together with Government and other key role players, approach to the improvement and extension of the that solutions to these profound challenges will be water sector. This sector, like all the other sectors in South found. We therefore intend to work in an increasingly Africa, is taking this opportunity to critically review its collaborative way with our colleagues and partners to achievements over the past twenty years and develop its address this and other matters of common interest. plans for the next twenty. We recognise this as the only way to ensure that our water resources are conserved, managed and used in a THE KEY ROLE OF sustainable manner, whilst at the same time accelerating SA WATER BoardS socio-economic development in the country. This, Water Boards in South Africa play a key role in the South we believe, will provide a framework for us to build African water sector. As the Rand Water Board, we operate sustainable value in the Rand Water of the future. 16 Rand Water Integrated Annual Report 2013 -2014
SHAREHOLDER AND to the water value chain we cannot continue to plan in isolation STAKEHOLDER ENGAGEMENT of other related sectors if we are to effectively and sustainably The Department of Water Affairs and Sanitation (DWS) is deal with the challenges we face. Rand Water’s Shareholder and the custodian of South Africa’s water resources. Rand Water values open, constructive EXTENSION OF SERVICE AREA and effective engagement with our Shareholder and OF RAND WATER Stakeholders. These engagements inform our strategy During the year under review, in terms of Section 28 of and determine the allocation of our human and financial the Water Services Act, 1997 (Act No. 108 of 1997) notice investments to continue delivering sustainable growth in was given of the extension of the service area of Rand the years ahead. Water to include the upper Vaal and the entire area of Mpumalanga province, as well as the service area of the During the year under review, our Shareholder’s strategic then Bushbuckridge Water Board. focus was realigned from the Department of Water Affairs (DWA) to the Department of Water and Sanitation (DWS). We are humbled by the confidence placed in us, and also
mindful of the service delivery protests in Mpumalanga in
One of its primary responsibilities is the formulation and z zZ Z implementation of policy governing this sector. The Department recent times that have highlighted communities’ frustrations is tasked with striving to ensure that all South Africans gain access with the lack of delivery of water and sanitation services. to clean water and safe sanitation. Our engagements with the We have been working hard at realigning our plans in order Shareholder to understand the implication of its reconfiguration to be able to respond to the challenges of this extended area. continues on an ongoing basis. Our immediate task and focus was to assess the existing We acknowledge that the need for development as a infrastructure asset base in this new area of growth, in order to people driven process is fundamental. Wide international determine how we can utilise this to deliver on the expectations. experience confirms the view that the provision of It is essential that we deliver and advance on the project services in underserved communities will fail if the people milestones in full, on schedule, within budget and with the themselves are not directly involved. The involvement required quality to meet the expectations of our Shareholder. and empowerment of people is thus a cornerstone of the We are driving significant projects that are already approach being proposed and embraced by us. We have underway, and have begun activating other key initiatives. seen that water and sanitation issues in particular, can Engagements with key stakeholders in this extended area, easily become a focus for conflict within and between including provincial and local government departments communities, and we need to jointly find ways to work and communities, is essential in order to facilitate us to differently and avoid such conflicts. develop a greater understanding of the area and its needs within the shortest period of time. The development of effective delivery mechanisms must contribute to Government’s goals of achieving peace and THE NEED FOR SECTOR SKILLS security for all. The new Minister of Water and Sanitation, DEVELOPMENT Honourable Nomvula Mokonyane, has, on many occasions The Department of Water and Sanitation and others in the affirmed the importance of the provision of infrastructure sector have ambitious plans and strategies that seek to and services. She emphasises water and sanitation services guarantee water security for the future. The Department’s as key elements for the realisation of human rights; plans are detailed in its Second National Water Resource especially the right to dignity and the right to life. Strategy (NWRS-2), based on future water demand and supply options. All these plans, when implemented, will It is clear that the expectation for the sector is not only to satisfy ensure that South Africa does not run out of water, as people’s basic needs but also to contribute to the growth of a has been predicted. These strategies require technical dynamic economy; one that is increasingly able to provide all expertise in order to be realised, and an analysis of the age South Africans with opportunities for a better life. Water supply profile of the required experience skills reveals an ageing and sanitation should thus be integrated into programmes for cohort, nearing retirement. The Department’s Annual the provision of other basic needs. Our cooperation with the Performance Plan for 2013/14 therefore has specific targets various public organisations involved in the planning and for recruitment and training of engineers and scientists to delivery of basic services is therefore essential. As contributors expedite the project of building technical skills in the sector. Huge commitment and focus is required in order to build Rand Water Integrated Annual Report 2013 -2014 17
the sector’s required capacity. The building of partnerships During the year under review, a significant financial and collaborations with all relevant Stakeholders, especially disbursement was made through the Foundation, which in the technical fields, is a feature that defines the spirit and focused on long-term contributions to school sanitation intent of the Rand Water Academy. projects, education, skills development and job creation. In doing so, several thousand individuals were direct and During the year under review, the academy produced 73 indirect beneficiaries of our corporate social investment work. graduates who have all been placed in various municipalities. These graduates completed eighteen months of rigorous LOOKING FORWARD training at the Academy and play an important role in Based on our strong financial and operational performance increasing the skills pool at the municipalities. There are also during the year under review, we, the Board of Rand Water, numerous monitoring and evaluation systems in place to are confident that Rand Water is well positioned. We have provide support to the graduates in order for them to thrive a stable executive management team and a sustainable and function at their full potential. growth strategy, and we trust that this will continue to
benefit the sector during this era of increased responsibility.
SUSTAINABLE PERFORMANCE z zZ Z The Board is proud of the operational and financial results Of added benefit is the reconstitution of the Board by the that were achieved during the year under review. This is Shareholder during the year under review. As this new Board largely due to Rand Water’s ability to manage those factors begins its term of office it is encouraging to note the extensive within its control. In this arena it is evident that Rand and varied qualifications and experience that reside within the Water continues to deliver a stable and solid operational collective. This will no doubt prove invaluable in the ensuing performance. In many ways this is testament to the strength years to lead the organisation through the challenging times of our strategies, notwithstanding the external factors ahead in terms of meeting growing obligations and the new which sometimes adversely influence the implementation mission of the Rand Water of the future. of our plans.Considering the extent and intensity of our operations, we have had a good safety performance record APPRECIATION during the year under review. Our recordable disabling injury We acknowledge with appreciation the support and rate (DIFR), safety rate for our employees and contractors, engagements with our Shareholder, as well as the confidence stood at 0.30%, improving on 0.33% from last year. This is an shown in Rand Water. The Board also extends its thanks to exceptional achievement. all our Stakeholders for the fruitful and robust engagements with us that serve to strengthen our understanding of the SUSTAINABLE COMMUNITY environment and help to shape our approach. PARTNERSHIPS As with all the other aspects of our work, we fundamentally My gratitude goes to my fellow Board members for their understand the importance of ensuring that future contributions, insights and commitment to the affairs of Rand generations grow up with a full understanding and Water. I am particularly appreciative of those longstanding appreciation of the value of water and the need to conserve members of the Board for their continued support to Rand this precious resource. At Rand Water we also acknowledge Water. I would also like to convey our appreciation to the that a good way to maximise our positive sustainability former members of the Board, whose term of office ended impact is through partnerships with like-minded individuals, during the year under review, for their service and dedication. groups and organisations. In this respect, we are involved in a number of community and educational initiatives Our appreciation is especially extended to the Chief Executive, through our Water Wise sub-brand, aimed at instilling our Percy Sechemane, and his Executive Team for unlocking the sustainability mindset and impacting on behaviour and growth potential of Rand Water. Our sincere congratulations practices around conserving and respecting water. are extended to the staff of Rand Water for their value and contribution as they continue to strive to exceed the We also strive to establish genuine relationships with the expectations of our Shareholder and Stakeholders. communities within our area of supply, and part of how we demonstrate this is through the investments made by the Rand Water Foundation, our principal social investment arm. Adv. Faith Matshidiso Hashatse CHAIRPERSON 18 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
MEMBERS OF THE Board
Adv. Matshidiso Hashatse Ms. Sophie Molokoane-Machika Mr. Percy Sechemane z zZ ZVVZV Chairperson Deputy Chairperson Chief Executive
Ms. Busiswa Cwengile Bam Mr. Dawood Coovadia JP Mr. Nandha Govender
Ms. Lakela Kaunda Mr. Lefadi Makibinyane Mrs. Nomsa Georgina Judy Mbileni
Mr. Isaac Mmushi Ms. Mathabo Marian Nakene Prof. Frederick A. O. Otieno Rand Water Integrated Annual Report 2013 -2014 19
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
Board PROFILES
Adv. Faith Matshidiso Hashatse First appointed to the Board of Rand Water on 01 April 2009, currently serving as Chairperson of the Board of Rand Water. Academic qualifications: Bachelor of Journalism and Media Studies, LLB, LLM.
She has over 20 years working experience during which time she has worked in various sectors including Telecommunications Regulation, and in the areas of Fundamental Human Rights and Gender Equity. She has over 12 years experience and involvement as a Non-executive Director in
several institutions and companies; in sectors that include water utilities, economic and small business development, Tourism and
z zZ ZVVZV National Park Management. Adv Hashatse is currently Executive Director: Corporate Services at the City of Cape Town, responsible for the management of Human Resources Department, Employment Equity Department, Occupational Health and Safety, Employee Wellness, Information Systems and Technology, and Customer Relations Department. She previously served as a Director of Equity and Institutional Culture and Deputy Dean of Students at Rhodes University.
Ms. Sophie Molokoane-Machika Member of the Board of Rand Water as from: 12 June 2012. Re-appointed as Deputy Chairperson effective 01 April 2014. Academic qualifications: currently in progress with her Degree in Public Sector Management. Has obtained a Certificate Programme in Municipal Development (CPMD) with Wits Business School, Certificate in Public Administration, Housing Management, Community Education, Method and Cost Estimates at Washington Neighborhood Reinvestment Institute USA; Certificate in Strategic Management at Whitehead Morris Seminar, Certificate in Community Management Development, Policy Formulation, Project Management, Research and Interviewing Skill and Statistics at Khanya College, Certificate in Core Councillor Train the Trainer Programme at UNISA, Certificate in Transport Management, Diploma in Public Sector Management.
Ms. Molokoane-Machika is the former Executive Mayor of the Madibeng Local Municipality and has 17 years of experience in local government including serving as the National Deputy Chairperson of the South African Local Government Association (“SALGA”). She was appointed by the Department of Cooperative Governance and Traditional Affairs (“COGTA”) to train Councillors. She was a member of Board of directors of Invest North West and is currently a member of North West Development Cooperation Board of directors.
Mr. Percy Sechemane Chief Executive Member of the Board of Rand Water as from: 01 September 2008. Academic qualifications: BCom, MBA.
Dinizulu Kumalo Percival Sechemane (Percy) is a former CEO of Landis & Gyr, and a former COO for Red One. He also held senior positions (i.e. General Manager) in Eskom - Regional Manager for Western Region and the City of Cape Town. During his career, Mr Sechemane always operated in the engineering space. 20 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
Board PROFILES
Ms. Busiswa Cwengile Bam Member of the Board of Rand Water as from: 01 April 2014. Academic qualifications: BA Personnel Management, BA Honours (Sociology), Management Advancement Programme (MAP), Project Management Diploma.
Ms. Busiswa Cwengile Bam is currently owning and managing Buchule HR Services, a black owned
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company offering Human Capital Management Solutions. She is currently a Board Member of Ithala VZV. z zZ ZV Development Finance Corporation and also serves as Chairperson of the Human Resources and Remuneration Committee. She served as Manager: Training and Development at the International Convention Centre Durban; Manager: Skills Development and Acting Academy Manager at Ports Academy of South Africa. She has extensive experience in Human Capital Management garnered in the private and public sectors.
Mr. Dawood Coovadia JP Member of the Board of Rand Water as from: 01 April 2005. Academic qualifications: BCompt (Hons), BCompt, CA (SA), MIBA, CMC, FIMC, FIAC, FCIS, FIIASA, GIA (SA), CAT (UK), M Inst D.
Mr. Dawood Coovadia is a Chartered Accountant in private practice under the style, Coovadia Associates. He is also an Internal Auditor, Risk Analyst, Corporate Governance and Management Consultant. Mr Coovadia has over 25 years experience in Finance, Auditing, Taxation and Strategy. Apart from his professional practice he serves on various Boards in the public sector in a non-executive role and he is the Chairman of several Audit and Risk Committees..
Mr. Nandha Govender Member of the Board of Rand Water as from: 01 April 2014. Academic qualifications: Bachelor of Science in Mechanical Engineering, Eskom’s Vision Leadership Programme, Eskom’s Leadership Journey Through Experiential Learning.
Mr. Nandha Govender is professionally registered with the Engineering Council of South Africa, a Certified Director with the Institute of Directors and member of the National Society of Black Engineers. He is currently the General Manager: Water and Environmental Operations at Eskom. He currently serves as a Non-Executive Director on the Board of Johannesburg Water (Pty) Ltd. He served as a former member and Deputy Chairperson of the Inkomati Catchment Management Agency. He is Eskom’s representative on the Water Sector Leadership Group and Eskom lead on the South African Strategic Water Partners Network: Effluent and Wastewater Working Group. He was a former member of the United Nations CEO Water Mandate Steering Committee. He served as Eskom Member on various TCTA project committees established to fund and implement bulk water infrastructure for Eskom’s power stations. Rand Water Integrated Annual Report 2013 -2014 21
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
Ms. Lakela Kaunda Member of the Board of Rand Water as from: 01 April 2014. Academic qualifications: Masters Degree (MPhil) in South African Politics and Political Economy, Bachelor of Arts Honours in Politics, Bachelor of Journalism and Media Studies, Diploma in World Politics.
Ms. Lakela Kaunda is currently the Deputy Director-General and Head of Private Office of the President
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VZV.
of the Republic of South Africa. She is an experienced executive with more than 20 year’s experience in z zZ ZV government and media. She has worked as a Journalist, Government Communicator, Political Manager and Strategist.
She served as an Editor of the Evening Post in Port Elizabeth, Chairperson of the South African National Editors Forum, Assistant Editor of the Natal Witness in Pietermaritzburg, Spokesperson of the Deputy President of the Republic of South Africa, Head of Communication and Special Advisor on Communication to the Minister of Social Development, Public Relations Officer to the MEC for Economic Affairs in KwaZulu-Natal Province and the Manager in the Office of the President of the African National Congress.
Mr. Lefadi Makibinyane Mr Lefadi Makibinyane was appointed to the Board of Rand Water on the 01 April 2009. He was further re- appointed as a member of the Board on the 01April 2014 for his second term. Academic Qualifications: MBL; B.Eng(Hons); MDP(Project Management) Professional Accreditations: C.Eng; MIChemE(UK), MIChemE (SA).
Mr. Makibinyane is currently the Chief Executive Officer of the Consulting Engineers South Africa and serves on the Boards of the Gauteng Partnership Fund (GPF); Construction Industry Development Board( CIDB); Green Building Council of South Africa (GBCSA) and Built Environment Professionals Export Council (BEPEC).
He has over 23 years working experience spanning various economic sectors including Mining, Petrochemicals, Packaging, Food & Beverages, Development Finance, Export Credit Agency, Investment Banking, Utilities and Consulting Engineering.
Ms. Nomsa Georgina Judy Mbileni Member of the Board of Rand Water as from: 01 April 2014. Academic qualifications: Baccalaureus Procurationis (B.Proc), Higher Diploma in Corporate Law.
Mrs. Nomsa Georgina Judy Mbileni is an Admitted Attorney, currently practising under the legal firm N Mbileni, J Tohlang-Nkopane as a Director. She is a Commissioner of the CCMA and serves on the following Public Service Bargaining Councils as a Conciliator and Arbitrator: Education Labour Relations Council (ELRC), General Public Service Sector Bargaining Council (GPSSBC) and Public Health. She was a Non-Executive Director of Yokogawa SA (Pty) Ltd from 2000 until 2013. She currently serves on the Board of Funda Community College as a Non-Executive Director. She is an accredited Facilitator and a member of the Law Society of South Africa and an Acting Judge of the Labour Court of South Africa. She has over 17 (seventeen) years of labour law experience. 22 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
Board PROFILES CONTINUED
Mr. Isaac Mmushi Member of the Board of Rand Water as from: 01 April 2014. Academic qualifications: Bachelor of Science in Electrical Engineering, Masters of Science in Engineering Management (Incomplete), Certificate in Ministry Leadership, PRINCE2 and Managing Successful Programmes.
Mr. Isaac Mmushi has years of experience in maintenance and operations, project design, construction, project and programme management of electrical network infrastructure. He has management and
leadership experience in engineering environment and within the non-profit organization spanning over many years. He continues to be
z zZ ZVVZV involved in some of the NPO on a governance level. Currently he is the General Manager of Windfall Properties (Pty) Ltd, an independent power producer and he reporting to the Board of directors.
Ms. Mathabo Marian Nakene Member of the Board of Rand Water as from: 01 April 2014. Academic qualifications: Bachelor of Science, Bachelor of Science Honours, Masters of Science in Project Management, Program in Project Management, Certificate in Interior Décor, Board Leadership Core Programme.
Ms. Mathabo Marian Nakene is a certified project manager currently providing IT project management services to the Department of Home Affairs. She also owns a project management consulting company and manages an interior décor and design business. She is a member of the Project Management South Africa and the Institute Directors of South Africa. She has served as a Non-Executive Director at the Cross-Border Road Transport Agency. Ms. Nakene has a solid record in project, programme and portfolio management that covers public and private sector, research and academia. She has extensive experience in project management, corporate governance, IT governance, performance management, risk management, procurement management and contract management, largely in the IT industry and specifically in the public sector.
Prof. Frederick A. O. Otieno Member of the Board of Rand Water as from: 01 April 2005. Re-appointment date : 01 April 2014. Academic qualifications: PhD (Civil), MBA, MSc, BSc (Civil) (Eng) (Hon), PrEng, FSAICE.
Professor FAO Otieno is a professional engineer in South Africa and the United Kingdom. A Fellow of the South Africa Institute of Civil Engineers and the Water Institute of Southern Africa, he is currently a Professor of Civil Engineering and the Deputy Vice Chancellor: Technology, Innovation and Partnerships, at the Durban University of Technology. He has worked as a Consulting Engineer, researcher and entrepreneur in Civil and Water Engineering and Environmental Management. Professor Otieno has served as president of WISA, and is a non- executive director, and a member of numerous organisations. Rand Water Integrated Annual Report 2013 -2014 23
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
OUTGOING Board MEMBERS
Adv. Mosotho Petlane
Member of the Board of Rand Water as from:
1 June 2002 - 31 May 2014. z zZ ZVVZV
Dr. Michael Ellman Ms Phumelo Ndumo Ms. Noluphumzo Noxaka Member of the Board of Member of the Board of Member of the Board of Rand Water as from: Rand Water as from: Rand Water as from: 1June 2002 - 31 May 2014. 1 April 2005 - 31 May 2014. 1 April 2009 - 31 May 2014.
Ms. Thembisile Nwedamutswu Ms. Ferhina Saloojee Mr. Mdibanisi Tsheke Member of the Board of Member of the Board of Member of the Board of Rand Water as from: Rand Water as from: Rand Water as from: 1 April 2009 - 31 May 2014. 1June 2002 - 31 May 2014. 1June 2002 - 31 May 2014. 24 Rand Water Integrated Annual Report 2013 -2014
CHIEF EXECUTIVE’S REVIEW
z zZ ZVVZV
Percy Sechemane Rand Water Integrated Annual Report 2013 -2014 25
Harnessing this experience, our Shareholder is now entrusting us with the water supply and sanitation needs of more and more people.
Maintaining financial health and sustainability remains an essential pillar of Rand Water’s strategy.
In the year, we established the Innovation Hub to help meet challenges in the water and waste water sector.
Rand Water recognises the role it can play in providing water solutions to rural communities.
In the year ahead, we will accelerate our work in our new service areas, securing water sources, augmenting our network and connecting households across the region to it.
Dear Rand Water Stakeholder, It covers the upper Vaal water management area and the area of the recently disestablished Bushbuckridge Rand Water had a good 2013-14 financial year, in which Water Board, including responsibility for a regional bulk we continued to provide a reliable and continuous supply infrastructure system serving mostly the rural JS Moroka of world-class potable water to our customers centred and Thembisile Hani local municipalities. This builds on around Gauteng, the engine room of Africa. Acting on new and formalises the role that Rand Water is already playing
directives from our Shareholder, we also further extended in assisting in these areas, and is in clear alignment with z zZ ZVVZV our services beyond our base business, offering assistance the government’s National Development Plan and the to the Shareholder and becoming an implementing New Growth Path. agent of some of their projects for water Boards and municipalities across a wider swathe of the country. These MAINTAINING OUR directives mark a significant development for Rand Water PERFORMANCE RECORD and build on directives received in the 2012-13 financial Details of Rand Water’s performance against objectives year, which resulted in our greater participation in the in the year to the end of June 2014 are provided on page provision of bulk wastewater treatment. They also support 173 and in our self-appraisal scorecard on page 10, where our strategic objectives to achieve growth and positively we measure our performance in terms of reliability of engage our stakeholder base, while delivering on our clear supply; product quality; customer satisfaction; health and development mandate. safety; quality management systems; occupational safety, health and environment; and Blue Drop certification. Our LEVERAGING OUR SKILLS risk table on page 50-52 provides more on the risks the AND EXPERIENCE business faces and what we are doing to mitigate them. For more than a century Rand Water has focused its efforts on abstracting raw water from the Vaal River basin, treating, In the year, Rand Water supplied an average of 4 183 transporting and storing it, and ultimately delivering megalitres a day (Mℓ/d) of potable water. This reflects a potable water to municipalities and, to a smaller extent, 2.4% increase in the year and compares to our installed mines and industries around Johannesburg. Harnessing capacity of over 5 300 Md. Peak day demand was this experience, our Shareholder is now entrusting us with 4 923 Mℓ/d, compared to 4 697 Mℓ/d the previous year. the water supply and sanitation needs of more and more people in one of the world’s most water-stressed countries. Accelerating urbanisation in Gauteng, whose population From servicing a population of some 12 million in Gauteng, is expanding quicker than any other province, means our newly defined service area covers a population of up that demand is growing faster than originally predicted. to 19 million people, and represents more than 40% of the However, through our capital investment programme we country’s GDP. This includes Mpumalanga and parts of the are extending our capacity to meet the projected increases. Limpopo (Greater Groblersdal and Greater Marble Hall), We now expect to add another 600 Mℓ by 2017-18. By 2030, North West (Rustenburg and Madibeng) and Free State Rand Water’s infrastructure is projected to increase to Percy Sechemane (Maluti-a-Phofung, Dihlabeng, Nketoana) provinces. some 6 500 Mℓ/day, facilitated by strong cash flows and 26 Rand Water Integrated Annual Report 2013 -2014
financing through the group’s domestic medium-term note within our own operations and secondly packaged, where programme. relevant, into a market-ready offering to be implemented on a global basis. Maintaining financial health and sustainability remains an essential pillar of Rand Water’s strategy. I am pleased to report Some of the projects the Innovation hub will focus on will be that the group delivered on this objective in the year, posting to develop systems and processes to facilitate the innovation an 18.6% rise in net income for the year to R1.18 billion as process and to unleash the creativity and ingenuity that total revenue increased 11.8% to R8.66 billion. In her report resides within every employee, design and develop a on page 47, the Chief Financial Officer spells out the group’s simple employee understood process for developing and solid financial performance. channelling of ideas and solutions.
DIVERSIFYING WATER RAND WATER
SOURCES, INNOVATING AND ACADEMY UPDATE
In 2013/14, Rand Water also increased its support to z zZ ZVV SECURING SKILLS Given the strong water demand growth we are witnessing, other educational institutions, investing in research and Rand Water – in partnership with the Department of Water development by funding a total of seven university chairs for and Sanitation (DWS) – is looking at diversifying our water the next five years. sources for Gauteng as well as for our new areas of supply. The Rand Water Academy continues to create capacity and Among the options we are considering is that of reclaiming capability to deliver specific water-related training to alleviate water from acid mine drainage (AMD) and waste water the skills gaps that exist in the sector. The Board has applied treatment works, which can be treated to standards suitable to the Shareholder to allow the Academy to be corporatised, for industrial use. This would then mean that some potable info a not-for-profit-company which means it would operate water could be diverted away from industry and towards as an independent, separate entity, but still provide essential households. However, we await the stakeholders’s decisions skills to the group. with regard to the optimal financing, operating and maintenance model for any AMD activities. WATER DEMAND MANAGEMENT We continue to search for ways to improve our internal During the period under review RW experienced a significant processes, service delivery and technology. In the year, we increase in demand wherein peak volume supplies of 4 697 established the Innovation Hub to help meet challenges in Mℓ/day were breached impacting on the reserve capacity the water and waste water sector. Among the hub’s initial of the system. In Gauteng, non-revenue water levels are work will be to look at ways to treat (handle, dispose and reported to be in excess of 30%, which is water that is lost in reuse) sludge created during the water treatment process, as the municipal system. It is thus imperative that aggressive well as opportunities to use the sludge for onward processing water demand initiatives are implemented to address the and the development of new products and solutions. high levels of demand. In this light Rand Water working together with SALGA has implemented a Water Demand INNOVATION HUB Management Fund. This special fund will assist to alleviate In alignment with Rand Water’s mission and strategic the high non-revenue water. objectives, the aim of the Innovation Hub of Rand Water is to draw on the creativity, ideas, solutions and technologies RURAL DEVELOPMENT both inside and outside the organisation and to increase its Rand Water recognises the role it can play in providing water capacity to systematically identify and develop incremental solutions to rural communities. The Rand Water model aims and breakthrough innovations which can be implemented to tackle not just water service backlogs, but to bring on Rand Water Integrated Annual Report 2013 -2014 27
Board the following: is anticipating to start tapping the money market by issuing Job creation; short term paper and roll them to the bond market once a Training of the community, especially in water related skills; sizable ticket is accumulated. Financial resources; Graduate training through the Rand Water Academy and In the year under review, the DWS separated responsibility Sustainability; all of these create a lasting and sustainable for economic regulation and institutional oversight by solution to the communities that are assisted by Rand introducing a function in the department to regulate raw Water. water users and suppliers of potable water. In the new financial year, we look forward to the launch of this function, As part of Rand Water’s comprehensive model, Rand Water which will work to ensure the predictability, consistency and recognises that communities do not necessarily have the transparency of regulation in the water sector. financial resources. However, there are many ways in which
these communities have in turn assisted Rand Water in APPRECIATION
project execution. Communities have assisted in project I would like to thank both the outgoing and new members z zZ ZVV coordination, resource mobilisation, and leadership and of the Board of Rand Water for their guidance in the year, knowledge management and sharing. This is the type of as well as our Shareholder, represented by the Honourable equity that enables the timeous, efficient and effective Minister Nomvula Mokonyane and the Director General of delivery of projects, even though these communities would the Department of Water and Sanitation for their valuable not necessarily have contributed financially. strategic oversight and support in the year. My appreciation also goes to all our other partners and stakeholders – To date, Rand Water has assisted the following district including National Treasury, our employees, customers, municipalities: funders, suppliers and the communities in which we operate: Ehlanzeni District Municipality; thank you for your contribution to our on-going success. Nkangala District Municipality; Dr Keneth Kaunda District Municipality; In the year ahead, Rand Water will continue to focus on Ngaka Modiri Molema District Municipality; delivering on its strategy, including achieving operational Bojanala District Municipality; integrity with the use of best-fit technology, as well as Sekhukhune District Municipality and achieving a high-performance culture. The challenges the Fezile Dabi District Municipality. water sector faces are many, but we are willing and able and – above all – prepared to deliver. We will not disappoint. LOOKING AHEAD In the year ahead, we will accelerate our work in our new service areas, securing water sources, augmenting our network and connecting households across the region to it. Our significant efforts to extend the capacity of our existing Percy Sechemane, B.com, MBA base infrastructure will continue uninterrupted. CHIEF EXECUTIVE Glenvista We will focus on creating a sustainable solution to address the October 2014 needs of people across the provinces in which we operate. In particular, we believe that an ‘investment centre’ model is most appropriate: creating a number of self-sustaining nodes which are able to earn revenue from a mix of urban and rural customers and raise debt on their own. Rand Water 28 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
EXECUTIVE PROFILE
1 Mr. Percy Sechemane Chief Executive Portfolio Integrating Committee
member as from:
1 September 2008 z zZ ZVVZV
2 Ms. Matshidiso Nyembe Chief Financial Officer Portfolio Integrating Committee member as from: 18 May 2009
Responsibilities: 3 • Funding Mr. Sipho Mosai Chief Operating Officer • Group Treasury Portfolio Integrating Committee • Rand Water Medical Scheme member as from: 1 April 2009 • Rand Water Provident Fund • Financial Control Responsibilities: • Financial Planning • Operations • Scientific Services • Strategic Asset Management • Sector Growth and Development Rand Water Integrated Annual Report 2013 -2014 29
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
4 5 Ms. Fikile Sithole Dr. Fawcett Ngoatje Group Governance Executive Group Shared Services Executive Portfolio Integrating Committee Portfolio Integrating Committee member as from: 1 September 2008 member as from: 1 July 2008
Responsibilities: Responsibilities:
• Forensic Audit • Risk Advisory Services
z zZ ZVVZV • Internal Audit • Corporate Communications • Legal Services • IT and Knowledge Management • Regulatory Services • Logistic Services • Strategic Projects • Marketing and Stakeholder Relations • Supply Chain Management • Strategic Programmes
Ms. Matshidiso Nyembe Chief Financial Officer Portfolio Integrating Committee member as from: 18 May 2009
Responsibilities: • Funding 6 7 • Group Treasury Ms. Wayida Mohamed Mr. Vusi Kubheka • Rand Water Medical Scheme Strategic Human Resources Group Strategy Executive Executive • Rand Water Provident Fund Portfolio Integrating Committee Portfolio Integrating Committee • Financial Control member as from: 1 July 2012 member as from: 20 April 2009 • Financial Planning Responsibilities: Responsibilities: • Corporate Planning • Compensation and Information • Corporate Research and Development • Employee Relations • Financial and Economic Planning • Organisational Development and Design • Talent Management • Rand Water Academy 30 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
CORPORATE GOVERNANCE
COMMITTED TO GOOD
GOVERNANCE
z zZ ZVVZV
SUMMARISED CORPORATE GOVERNANCE REPORT We are committed to good governance and compliance with recognised best-practice codes and legislation. We believe that our conduct should be underscored by sound corporate governance practice that include transparency Ms. Pertunia Mohlabi was appointed as the Group Company Secretary on 07 September 2009. She has a BProc, LLB, LLM and accountability for all at (Corporate Law) and a Post Graduate Certificate in Banking Law and Financial Markets. She is an Admitted Attorney of Rand Water including our the High Court of South Africa and a certified Ethics Officer through Ethics SA. Board, Executive and Staff.
Responsibilities: Governance, Secretariat Services, Ethics Management, Policy and Records Management. Rand Water Integrated Annual Report 2013 -2014 31
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
CORPORATE GOVERNANCE
Rand Water Board was officially established on 08 May 1903 in terms of the Rand Water Board Incorporation Ordinance No . 32 of 1903, published in the Transvaal Government Gazette, which was later repealed. Rand Water is now governed in terms of Section 84 of the Water Services Act No. 108 of 1997 (“the Act”). It is an organ of state and a public entity
listed in Schedule 3B of the Public Finance Management z zZ ZVVZV Act No. 1 of 1999 (“the PFMA”). The Government of the Republic of South Africa, through the Department of Water and Sanitation (“the Executive Authority”), duly represented by the Minister is the sole Shareholder of Rand Water.
Rand Water’s governance philosophy is derived from and informed by a regulatory framework which include but not limited to the King Report on Corporate Governance (King III), the Water Services Act (“WSA”) (Act No.108 of 1997), the Public Finance Management Act (“PFMA”) (Act No. 01 of 1999), and the Public Sector Corporate Governance protocol.
Rand Water upholds and promotes the principles of sound financial management and subscribes to the highest standards of corporate governance. Sound corporate governance principles define and direct the responsibilities of Rand Water as an entity, the Board, the Portfolio Integrating Committee as the executive committee, prescribed officers and all other employees of Rand Water.
SHAREHOLDER’S COMPACT Regulation 29 of the National Treasury Regulations issued in terms of the PFMA provides that the Accounting Authority for a Public Entity listed in Schedule 3B, must, in consultation with its Executive Authority, annually conclude a Shareholder’s Compact. 32 Rand Water Integrated Annual Report 2013 -2014
The Shareholder’s Compact outlines the key performance KING REPORT OF CORPORATE measures and indicators to be attained by the public entity GOVERNANCE (KING III) as agreed between the Accounting Authority and the The Board of Rand Water recognises its responsibility as an Executive Authority. To monitor the performance of Rand Accounting Authority and it is committed to a culture of Water, quarterly performance reports are submitted to the sound corporate governance. To this end, Rand Water Group Shareholder confirming whether Rand Water has achieved subscribes to the principles of the King III. its objectives. In addition, the Shareholder meets with Rand
Water annually to discuss the shareholder’s compact and the In assessing its conformance to the applicable governance expectations in relation thereto. The shareholder’s compact standards, Rand Water reviews its compliance within the is concluded annually between the Minister and the Board of guiding principles of King III. Through the Governance Rand Water. Assessment Instrument sourced from the Institute of
Directors Southern Africa’s (“IODSA”), Rand Water constantly CORPORATE GOVERNANCE and continuously monitors its governance register to ensure z zZ ZVV
Rand Water’s corporate governance is underpinned by seven that all structures operate within the proper governance pillars which are accountability, transparency, responsibility, parameters. The level of compliance across the Rand Water fairness, ethical leadership, effective compliance and Group is monitored regularly. sustainability. The Board is the governing body of Rand Water.
It provides strategic direction and retains full and effective For the year under review, the governance compliance control of the business. As the Accounting Authority, the assessment was extended not only to Rand Water but also its Board ensures that the mandate of Rand Water is fulfilled in subsidiaries and other Rand Water entities. The summary of accordance with the strategic objectives of the Shareholder. the results obtained are as follows: The Chief Executive is accountable to the Board and is Rand Water obtained a “AAA” rating which is the Highest responsible for the operational activities and performance of Application standard of King III. the entity. Rand Water Foundation obtained a “AAA” rating which is the Highest Application standard of King III. During the period under review, Rand Water revised its Rand Water Provident Fund obtained a “AA” rating which is corporate governance framework to integrate and align with a High Application standard of King III. applicable policies, codes, legislation and standards. The Rand Water Medical Scheme obtained a “AA” rating which governance framework describes the various governance is a High Application standard of King III. structures that control the internal environment at Rand
Water. The principle of “apply and explain” as recommended in King III is applied in instances where certain aspects of the report Rand Water is committed to the highest level of corporate are not adopted by Rand Water. governance, integrity and ethics. The Board is ultimately responsible for ensuring that governance standards are adhered to and it is assisted by management with an objective of instilling a culture of compliance and good governance throughout the Rand Water Group. This is reinforced by constant and visible leadership that direct the organisation by promoting its values. Rand Water Integrated Annual Report 2013 -2014 33
King III Application Register
No. Chapter Relevant Practice Applied / Explanation / Compensating King III Partially Applied Practices Principle / Not Applied
1 Chapter 2 Principle There is succession planning in Partially Applied The appointment process is 2.16 place for the chairman. managed by the Minister of Water and Sanitation and Rand Water is not privy to the succession planning for the Chairperson of the Board. 2 Chapter 2 Principle The Chief Executive should not be Partially Applied The Chief Executive is not a member
2.17 a member of the remuneration of the Remuneration and Audit
committee, Audit Committee Committees. However, in terms of z zZ ZVV or Nomination committee but schedule 1 of the Water Services should attend by invitation only. Act, the Chief Executive is part of the panel to appoint Board members. 3 Chapter 2 Principle The nominations committee Partially Applied The appointment process of the 2.18 makes recommendations for Board of Rand Water is managed by appointment as director based on the Minister of Water and Sanitation. all of the following: However, at subsidiary level, the - knowledge and experience gap Nominations Committee makes on the Board; recommendations to the Board - integrity of the candidate; and of Rand Water as a shareholder - skills and capacity of the considering the stipulated criteria candidate. for appointment of Members within the Subsidiary Boards. 4 Chapter 2 Principle Independent non-executive Partially Applied Schedule 1 of the Water Services 2.18 directors serving for longer Act states that a member of a than nine years are subjected water Board is appointed for a to a rigorous review of their period of office determined by the independence and performance Minister, which may not exceed by the Board. four (04) years. A member of a water Board may be reappointed and reappointment is limited to three (03) consecutive terms of office. In this instance, the principles of King III do not override the Water Services Act as the enabling legislation. 5 Chapter 2 Principle The results of performance Partially Applied The results of performance 2.22 evaluations are constructively evaluations are communicated to used to identify training and the Minister of Water and Sanitation development needs for directors. as part of the policy requirements. Rand Water also utilise the results of the performance evaluation to improve on the development and training of Board members based on the findings. 34 Rand Water Integrated Annual Report 2013 -2014
VALUES AND ETHICS communicated to new employees as part of the induction The Board of Rand Water is the ultimate responsible body to programme and all employees are requested to sign an annual provide effective leadership based on ethical foundation, to declaration confirming their compliance with the requirements cultivate and promote an ethical corporate culture. The Board of the Code of Ethics policy. of Rand Water is responsible for monitoring the effective implementation of the ethics management programme. The In addition, a Code of Conduct (“the Code”) has been developed programme aims to assess risks and opportunities relating for the Board of Rand Water and its Subsidiary Boards to serve as to ethical business conduct, foster ethical standards and a fundamental guide for ethical behaviour and its interactions raise awareness regarding ethics through training, reporting with stakeholders. Through effective ethical leadership, the and advice. Corporate Governance requires effective and Board sets the tone at the top, thereby encouraging ethical responsible leadership to ensure that the company is run conduct at Board level. The ethics management practices
ethically, in a transparent and accountable manner. and the ethical behaviour are underpinned by the ethical foundation of the organisation. z zZ ZVV
Our five values of equity, caring, integrity, spirit of partnership and excellence are embedded in all business operations through STATEMENT OF COMPLIANCE a Code of Ethics which the Board and all employees have The Board of Rand Water confirms that the entity applied all pledged to uphold. In view thereof, the Board has approved a principles as set out in King Report of Corporate Governance Code of Ethics which sets out Rand Water’s commitment and (King III) where appropriate and practical. Explanations were approach to conducting business ethically, and in the best provided where applicable. In all our operations, values remain interests of all stakeholders. the driving force in achieving our objectives. The Rand Water compliance approach is grounded in the organizational
Rand Water promotes ethical behaviour and through its values, hence the encouragement to all employees to act systems and processes, it has given life to the ethical culture professionally, with integrity, uphold compliance requirements that is cultivated across the organisation, demonstrating its and apply the highest ethical standards. commitment to sound governance principles. Rand Water has implemented and is in the process of finalising significant The Rand Water Compliance is centralised and decentralised ethics management interventions to ensure the application in other areas of the business. However, the Compliance and conformance with the ethical standards as recommended Framework supports and enables all the portfolios to take by King III. responsibility in ensuring compliance management, adherence and monitoring in all areas of the business.
Consistent with its long history of integrity and good corporate citizenship, the Rand Water Board Members and employees As part of its continued commitment to maintenance of are committed to conducting business in accordance with international standards and best practice in conducting the highest ethical standards. The Ethics programme is its business, Rand Water Group has embedded effective Rand Water Integrated Annual Report 2013 -2014 35
compliance methodologies, principles and requirements in all POLICY FRAMEWORK areas of the business. In order to engender confidence in the Rand Water is committed to the optimal management of quality of work and its operations, Rand Water subjects itself to the policy development and Compliance. During the year independent assessment of its systems, processes, policies and under review, Rand Water developed a comprehensive Policy controls by different assurance providers. Governance Framework. This framework was developed to ensure that there is a consistent and standard approach towards The Board is satisfied that Rand Water Group has complied with all policy drafting, monitoring, and adherence; and that the the applicable laws, standards, codes, rules and regulations and appropriate operational requirements and quality standards it has implemented further controls to mitigate non adherence. are applied within the process. The framework also intends to ensure that Rand Water Policies and procedures are aligned to INFORMATION MANAGEMENT Legislation, Government Priorities, Shareholder Outcomes and
AND CONFIDENTIALITY Rand Water Strategy. Rand Water recognises that the preservation, integrity z zZ ZVV
and security of the entity’s physical and electronic records, Rand Water Policy Governance Framework is supported by information and systems are critical. Information Management policies and guidelines issued by Government and/or the is a vital asset to the entity and to ensure its validity, Rand Water Department of Water and Sanitation. To effect and align with has revised and adopted information security policies through the policy direction thereto, Rand Water ’s Policy Governance the IT Governance programme to safeguard the integrity of our Framework provides for a context in which our regulatory, systems, authenticity and confidentiality of the information legislative and corporate governance practices are implemented as well as protection of the records. To this end, the Board is in line with those guidelines from Government /Department of satisfied that the information assets are managed effectively in Water and Sanitation. line with the requirements of King III.
Rand Water policies are reviewed and updated on an annual Rand Water recognises its responsibility to the public by basis to ensure alignment to new business requirements and implementing and maintaining sound records management updates in the legislative environment. practices. Rand Water has well-organised systematic approach and a sound records management programme governed by THE BOARD OF RAND WATER the Records Management and Archival Policy of Rand Water, The Board is ultimately responsible for the performance and Promotion of Access to Information Act, 2000, the National strategy of Rand Water. The key purpose of the Board is to ensure Archives and Records Service of South Africa Act, 1996 which the prosperity of the entity, collectively direct the company’s provides the legal framework for all public entities. affairs, whilst meeting the interests of the Shareholder and stakeholders. By ensuring that they don’t absolve and abdicate Furthermore, Rand Water has complied with the requirements their responsibilities, the Board has selectively delegated of the Promotion of Access to Information Act, 2000, ISO certain powers and functions to the Board sub-committee and standards, other legislation and guidelines for the year under the Chief Executive. review. 36 Rand Water Integrated Annual Report 2013 -2014
The Board further oversees the management of risk, monitor and make informed decisions. performance; ensure compliance and sustainability within the The Board is satisfied that its current members have the required organisation. The Board’s paramount responsibility is to ensure skills, experience and expertise to carry out its responsibilities, that Rand Water upholds the highest standard of governance to achieve its objectives and create Shareholder value over the and also creates value through its positive performance. long term.
COMPOSITION OF THE BOARD CHANGES IN BOARD The Department of Water and Sanitation, duly represented by COMPOSITION IN 2013/14 the Minister, is responsible for the appointment of the Members The term of office of the previous Board of Rand Water lapsed of the Board of Rand Water in accordance with the provisions of at the end of March 2013; however the Minister of Water and the Act. Sanitation extended their term of office until a new Board has
been appointed. A new Board was appointed by the Minister
The Board of Rand Water is a unitary body which as at the year of Water and Sanitation on 01 April 2014, but the Board z zZ ZVV ended 30 June 2014 comprised eleven (11) Independent Non- commenced its services on 01 June 2014. executive Members and one (1) Executive Member being the Chief Executive. BOARD CHARTER The Board Charter sets out the roles and responsibilities of the The positions of the Chairperson and the Chief Executive are Board; it is reviewed annually to ensure its relevance and it separated and their duties are clearly segregated. The Chairperson has been adopted by the Board. It sets the parameters within of the Board is an independent Non-Executive Member and is which the Board will operate and ensures the application of the supported by a Deputy Chairperson who is also independent non- principles of good corporate governance in all dealings of the executive member. Board.
The CE is appointed in terms of Section 36 of the Water Services ROLES AND RESPONSIBILITIES Act and is also the Accounting Officer in terms of the PFMA. The OF THE BOARD Chief Executive is accountable to the Board for the performance The Board’s primary responsibilities are as follows: of all financial, human resources, administrative functions and Fulfil its role as the focal point of corporate governance and operations of Rand Water and any other duties that may be as such must exercise leadership and judgment in directing delegated to him by the Board. Rand Water so as to achieve sustainable prosperity for its stakeholders. The composition of the Board reflects a majority of Independent Retain full and effective control over Rand Water in a Non-executive Members who are appointed by the Shareholder. manner based on integrity, transparency, accountability and responsibility. The Non-executive Members who are selected to serve on the Give strategic direction to Rand Water and in the process Board have extensive knowledge and experience and are able to regularly consider the present and future strengths, contribute effectively to the business strategy, decision-making weaknesses, opportunities and risks to Rand Water and the formulation of strategic policy. The Chief Executive is having regard to the dynamics of the changing external the only Executive Member of the Board; however, the other environment. executives have a standing invitation to attend Board meetings Succession Planning. to contribute their insight regarding the day-to-day operations, Set the risk tolerance level in accordance with the adopted thereby enabling the Board to identify goals, provide direction strategy, overseeing the identification and evaluation of Rand Water Integrated Annual Report 2013 -2014 37
key risks as well as the risk management process. training needs. Specific plans of actions are in place to address Take the necessary steps to ensure that there is a robust gaps or deficiencies. The Board utilises an independent service system of internal controls in the effectiveness of which provider to conduct the Board evaluation. regular assurance is received through risk centric internal audits. For the year under review, Board evaluation was not undertaken Institute a robust policy and procedure for the management due to appointment of a new Board within the quarter of of conflicts of interest. conducting the evaluation process. Overall, the Board was Define the levels of materiality, reserving specific powers to satisfied with various aspects of Board governance and that it and delegating other matters, with the necessary written during the period under review, the Board was functioning authority to management. properly. Safeguard compliance with all relevant laws and regulations,
audit and accounting principles, and Rand Water’s code of DELEGATION OF AUTHORITY
ethics. The Board has the authority to lead and control the business z zZ ZVV of Rand Water, including the authority to delegate its powers. BOARD INDUCTION, TRAINING AND DEVELOPMENT The Board defines the levels of materiality in relation to the The organisation conducts a comprehensive induction and a business of Rand Water and it has reserved specific powers for customised training to the Rand Water business for all newly its decision making. It is the Board’s aim to ensure that Rand appointed Board Members to ensure that they are cognisant of Water remains a sustainable and viable business; and the their roles and responsibilities, fiduciary duties, applicable laws, functions are executed within a well-developed governance rules and regulations. This is supported by a formal induction structure. programme which covers all areas of business, applicable laws, corporate governance, site visits to Rand Water plants and A comprehensive Delegation of Authority Framework (“the projects etc. DoA”) has been developed in accordance with Section 5 of the PFMA. The DoA defines the limits of authority designated to Furthermore, the organisation is committed to the continued the Board subcommittees and the Chief Executive and further development of Board Members so that they may build on outlines how those authorised limits are cascaded to specified their expertise and cultivate a deeper understanding of the positions of responsibility within the business through a Rand Water operations, business requirements, governance protocol process as stipulated therein. The DoA does not in any standards and applicable legislation. A Board training and way divest the Board of its responsibilities, authority and duties. development plan is availed annually to assist in this regard. The Delegation of Authority Framework is reviewed annually BOARD EVALUATION to ensure its relevance, conformance and alignment to best In terms of Principle 2.22 of King III annual evaluation should be practise, business and Shareholder requirements. undertaken by the Board including the assessment of individual members and the sub-committees of the Board. The focus of BOARD REMUNERATION evaluation is Board development. In adopting this principle, the The Remuneration of Board members is determined by the Board notes that by conducting the evaluation process, it has Department of Water and Sanitation, duly represented by the acknowledged the first step of the development process and Minister. The process is governed by a Policy regarding Board that performance evaluation assists them in identifying their practices and remuneration of Board members issued by the 38 Rand Water Integrated Annual Report 2013 -2014
Department.
RAND WATER GOVERNANCE STRUCTURE
Rand Water Board
z zZ ZVV Human Resources Group Audit Group Risk Capital Investment Treasury Nominations and Remuneration Committee Committee Committee Committee Committee Committee
Portfolio Integrating Committee
Policy Asset Information Corporate Property Supply Chain Encroachment Review Management Technology and Risk Steering Management Committee Commitee Committee Communication Committee Committee Committees* Steering Committee
* Supply Chain Management Committees comprise: Bid Specification Committee (BSC) Infrastructure Bid Evaluation Committees (BEC) Bulk Chemicals Professional Services Bid Adjudication Committees (BAC) Rand Water Integrated Annual Report 2013 -2014 39
Board of Rand Water and the Board Subcommittee Membership as at 30 June 2014
Members Board Group Group Risk Treasury Nominations Capital Human Audit Committee Committee Committee Investment Resources and Committee Committee Remuneration Committee
Adv. F Hashatse × × Chairperson1 ©
Ms. S Molokoane- × × × × × Machika © Deputy
Chairperson2
z zZ ZVV Ms. BC Bam × × Mr. D Coovadia × × × © Mr. N Govender × × × × ©3 Ms. L Kaunda × × × × Prof. FAO Otieno × × × × ©4 Mr. L × × × × × Makibinyane © Ms. NGJ Mbileni × × × × Mr. I Mmushi × × × × Ms. MM Nakene × × × × × Mr. DKP × × × Sechemane Chief Executive
© Denotes Chairperson Note 1 - 4: effective 1 June 2014 Note 2: Ms Machika was appointed as the Deputy Chairperson of the Board effective 1 June 2014 40 Rand Water Integrated Annual Report 2013 -2014
Board of Rand Water and the Board Subcommittee Membership as at 30 June 2014
Members Board Group Group Risk Treasury Nominations Capital Human Audit Committee Committee Committee Investment Resources and Committee Committee Remuneration Committee
Adv. MM Petlane x x Chairperson up until 31 May 2014 Ms. T x x © Nwedamutswu6
Deputy
Chairperson up z zZ ZVV until 16 April 2014 Dr. MJ Ellman x x x x Ms. S Saloojee x x x x © x Ms. P Ndumo x x x Ms. N Noxaka x x x x Mr. M Tsheke x x © x
© Denotes Chairperson
BOARD SUB-COMMITTEES other executives as well as assurance providers such as The Sub-Committees are responsible for assisting the Board the Internal and External Auditors attend the Committee in discharging its responsibilities as delegated within their meetings without any voting rights. specific focus areas. The Committee was established by the Board of Rand Water
Each Sub-Committee acts within the ambit of clearly defined to assist it with meeting its responsibilities in compliance with terms of reference which sets out the specific responsibilities Section 51 of PFMA and the National Treasury Regulations. as approved by the Board. The Terms of Reference are The Committee has an independent role with accountability periodically reviewed in order to ensure alignment with the to both the Board and the Shareholder. The Committee serves governance standards and any applicable legislation. as an independent oversight and advisory body responsible, inter alia, for the financial reporting and financial information,
Roles and Responsibilities of the Board Sub-Committees: risk management processes, internal financial control and Group Audit Committee consists of six (6) non-executive compliance thereto, internal and external audit, performance members who are all independent. One (1) of which is a Board monitoring and evaluation, ethics, sustainability and member of the Rand Water Foundation. The Chief Executive, legislative and regulatory compliance. the Chief Financial Officer, the Group Governance Executive, Rand Water Integrated Annual Report 2013 -2014 41
Treasury Committee consists of six (6) non-executive members Provides the Board and the Shareholders with an who are all independent. The Chief Financial Officer and other authoritative and credible view of the performance of executives attend the Committee meetings without any Rand Water. voting rights. Group Risk Committee consists of eight (6) non-executive The Committee was established by the Board of Rand Water members and two (02) executive members, being the Chief to oversee the operations of the Treasury function including, Executive and the Group Shared Services Executive. The non- guiding Treasury Policies, assisting with the overall treasury executive members are all independent, one (1) of which strategy and monitoring the risks associated to the treasury is a Board member of the Rand Water Foundation Board. function with the powers and duties set out in its Terms of The Chief Operating Officer, the Chief Financial Officer, the Reference. Group Governance Executive and other executives attend the
Committee meetings without any voting rights.
Capital Investment Committee consists of seven (7) non- z zZ ZVV executive members who are all independent. The Chief The Committee was established by the Board of Rand Water to Operating Officer, the Chief Financial Officer, the Group assist and support it in accordance with the risk management Governance Executive and other executives attend the frameworks and enterprise-wide risk management plan. Committee meetings without any voting rights. The These include the following: Committee was established by the Board of Rand Water to Approval of an enterprise-wide risk management plan optimally control the major capital investment that falls within that meets the requirements of Rand Water’s stated the scope of the “Primary Activities” and “Other Activities” as philosophy; defined in the Act in order to achieve a high level of confidence Implementation by management of the approved risk of investors in Rand Water’s credit worthiness. The Committee management process; approves Capital Investment projects. Oversight of implementation and effectiveness of risk management, including obtaining assurance thereon; and Human Resources and Remuneration Committee consists of Regular review and improvement of the risk management five (5) non-executive members who are all independent. The strategy. Chief Executive, the Chief Financial Officer, the Group Human Resources Executive and the Group Strategy Executive attend Nominations Committee consists of four (4) members, one the committee meetings without any voting rights. (1) of which is the Chief Executive. The other three members of the committee are non-executive members who are all The Committee was established by the Board of Rand Water to independent. The Committee was established by the Board of assist the Board with the following: Rand Water to assist the Board in ensuring that: Overseeing development of remuneration policies for The Board has the appropriate composition for it to non-executive members that create value for Rand Water execute its duties effectively; over the long term and to oversee the application thereof. Board members are appointed to Sub-Committees Directing the administration of the bursary scheme. through a formal process; and Overseeing the establishment and implementation of Induction and on-going training and development of human resources policies that promote an equitable, Board members take place. progressive and legally compliant working environment. 42 Rand Water Integrated Annual Report 2013 -2014
Rand Water Board and Sub-committees: Summary of Meeting Attendance for the period July 2013 - June 2014 Current Board
Members Board Group Group Risk Treasury Nominations Capital Human Audit Committee Committee Committee Investment Resources and Committee Committee Remuneration Committee
Adv. F Hashatse 3/10 2/8 3/4 Chairperson Ms. S 10/10 4/4 4/4 5/5 Molokoane-
Machika
Deputy z zZ ZVV. Chairperson2 Ms. BC Bam5 1/1 Mr. D Coovadia3 8/10 8/8 3/3 Mr. N Govender5 1/1 Ms. L Kaunda5 1/1 Prof. FAO 8/10 3/4 1/4 4/5 Otieno3 Mr. L 9/10 5/8 2/3 Makibinyane3 Ms. NGJ Mbileni5 1/1 Mr. I Mmushi5 1/1 Ms. MM Nakene5 1/1 Mr. DKP 10/10 2/4 Sechemane Chief Executive
Note 2: Ms Machika was appointed as the Deputy Chairperson of the Board effective 1 June 2014.
Note 3: Re-appointed for another term effective 1 June 2014.
Note 4: There were no Nominations Committee meeting held in the period under review.
Note 5: Newly appointed Board members were allocated to sub-committees on 14 June 2014 and there were no sub-committees scheduled for the month ended 30 June 2014. Rand Water Integrated Annual Report 2013 -2014 43
Outgoing Members Board and Sub-committees Summary of Meeting Attendance for the period July 2013 – 31 May 2014
Members Board Group Group Risk Treasury Nominations Capital Human Audit Committee Committee cCommittee Investment Resources and Committee Committee Remuneration Committee
Adv. MM Petlane 9/9 Chairperson up until 31 May 2014 Ms. T 1/9 2/5
6
Nwedamutswu z zZ ZVV. Deputy Chairperson up until 16 April 2014 Dr. MJ Ellman 9/9 7/8 2/3 3/4 Ms. S Saloojee 8/9 4/4 3/3 4/4 5/5 Ms. P Ndumo 5/9 5/8 2/3 Ms. N Noxaka 7/9 7/8 4/4 3/4 Mr. M Tsheke 9/9 4/4 4/4
Note 6: Resigned from the Board of Rand Water on 16 April 2014. 44 Rand Water Integrated Annual Report 2013 -2014
RAND WATER SUBSIDIARIES process and a formal Shareholder’s Compact which is Rand Water has two wholly owned subsidiaries namely Rand approved by the Rand Water Board on an annual basis. Water Services (Pty) Ltd (“RWS”) and Rand Water Foundation (“RWF”). RAND WATER EXECUTIVE MANAGEMENT RWF was established in 2001 as a Non-Profit Company (NPC) to The Chief Executive is the principal executive decision making carry out the Corporate Social Investment (CSI) programmes authority within governance structures of Rand Water, of Rand Water. The RWF is mandated to promote and support supported by the Portfolio Integrating Committee (“PIC”), the delivery of water services to communities within and responsible for overseeing key operational and commercial outside of Rand Water’s areas of supply and to coordinate, decisions in relation to, amongst others: administer and manage Rand Water’s CSI resources by Management of the business affairs of the Rand Water undertaking community development projects in partnership Group; with various donors and relevant stakeholders. Proposing and implementing strategies and policies for Rand Water;
Principle 2.24 of King III stipulates that a Governance Prioritisation of the allocation of capital, technical and Framework should be agreed between the Group and its human resources; subsidiary Boards. To implement this principle, the Board Authorisation of capital and operational expenditure of Rand Water and Rand Water Foundation Board agreed to within the ambit of the Committee’s delegation of develop a Subsidiary Governance Framework which was authority; adopted as a governing document between the parties as Establishing best management practices and standards;. well articulating the reporting requirements. Developing and maintaining a strong, effective internal control and risk management environment;
In addition, the subsidiary Boards remain accountable to the Monitoring the progress and reporting in terms of Board of Rand Water as the Shareholder through a protocol Performance Management; Rand Water Integrated Annual Report 2013 -2014 45
Reviewing and recommending all reports for submission Board Members have unrestricted access to the services of the to the Board and its sub-committees; and Group Company Secretary who is responsible to the Board for Monitoring the preparation of the annual budgets, annual ensuring that proper corporate governance principles are reviews of Policy Statements as well as the Five Year adhered to. The Group Company Secretary ensures compliance Business Plan. with Board and/or governance procedures, develops systems and processes to enable the Board to discharge its functions The above is subject to statutory limits as well as the Board’s efficiently and effectively. The Group Company Secretary is limitations on delegation of authority to the CE. also responsible for the flow of information to the Board and its committees and also facilitates training of Board members. GROUP COMPANY The Group Company Secretary advises the Board on corporate SECRETARY governance and ethics matters, monitors compliance, Ms. Pertunia Mohlabi is the Group Company Secretary of provides guidance on Board duties, responsibilities and Rand Water, overseeing the Secretariat function of the Group, powers. Furthermore annual work plans for the Board and including the subsidiaries and other Rand Water entities. The Board-subcommittees are prepared to enable formalised Group Company Secretary is professionally qualified and has process of executing Board and committee functions. experience gained for a period of over ten (10) years. The Group Company Secretary acts as the primary point of The performance of the Group Company Secretary is evaluated contact between the Board and Executive Management. by Board Members on a quarterly basis and annually through formalised performance review process. The Board supports The Board of Rand Water is satisfied that Group Company and empowers the Company Secretary. The Group Company Secretary is fit and proper to perform the duties in accordance Secretary reports administratively to the Chief Executive and with the applicable legislation. is accountable to Board. 46 Rand Water Integrated Annual Report 2013 -2014
CHIEF FINANCIAL OFFICER’S REVIEW
z zZ ZVVZV
Ms. Matshidiso Nyembe Rand Water Integrated Annual Report 2013 -2014 47
Our work to cultivate new revenue streams as well as in taking on the responsibility of so- called ‘implementing agency’ projects continued to bear fruit.
We continued to advance our capital investment programme designed to meet demand projections for water within Rand Water’s area of supply. In the year ahead, the focus of Rand Water will be on maintaining the sustainability of our operations, and ensuring that the group’s solid base is secure.
Dear Rand Water Stakeholder, departments and include, for example, operating wastewater treatment works, providing emergency Rand Water’s Financial Results for the year to 30 June water supply projects, and establishing and operating 2014 demonstrate the group’s efforts to produce reticulation systems. As the chief executive outlined in his sustainable returns to allow it to accelerate delivery report on page 25, the scale of our implementing agency of its development mandate. By reinvesting earnings work has been expanded significantly in the year under in vital water infrastructure, we will be able to extend review. Group operating expenses increased by 57% to water supply and sanitation services to many millions R867 million mainly due to an increase of sales related to
more South Africans for years to come, in line with the the cost of implementing agency contacts. z zZ ZVVZV directives of our Shareholder. LIMITING INCREASES IN As can be seen on the table on page 173, Rand Water’s OUR COST OF SALES record in the year against key financial performance It is Rand Water’s policy to recover all its operational costs indicators continued to be good. We have achieved from the set tariffs. In the year, we worked to keep input cost 5.58% for gross margin on secondary activities, which is increases in check, recording a rise of 10% (2013: 8%). The above the target of 5%. The Capital Expenditure (Capex) cost of raw water is determined by the DWS pricing strategy spending for the year under review amount to 88% as which links this to producer price inflation. In 2014, Rand compared to the 95% target. Water’s cost of raw water increased by 8.9%, of which 1.6% was attributed to volume growth and 7.3% increase relate Higher revenue, better operational efficiencies and to the average price increases of water purchases. greater earnings from new revenue streams (in bulk sanitation and water demand management) supported Rand Water’s second largest input cost is that of energy an 18.6% rise in net income for the year to R1.18 billion. required to pump water to our customers. In the year, energy costs increased 9.7%, after a 16% rise the previous Total revenue increased 11.8% to more than R8.66 billion, year. This was a result of our various energy-efficiency as growing demand lifted the volume of water sold by initiatives which include using variable-speed drives on 2.4% (2013: 2.5%), and as the bulk water tariff increased our pumps and greater use of off-peak times to pump 9.82% (2013: 11.3%). This tariff as determined through the water to customers. Labour costs rose 8.4%, broadly in consultation with the South African Local Government line with the general salary increase awarded in the year. Associations (SALGA), Department of Water and Sanitation The labour environment in South Africa continues to be (DWS) and other impacted stakeholders constitutes our challenging, with strikes across many sectors. Although charge to customers, made up mainly of municipalities, we did not experience any strike action, the wage along with some mines and industries. Approximately negotiation process was lengthy and difficult and the 90% of the Group’s revenue comes from six municipalities. settlement higher than we had anticipated. Employee numbers increased to 3 500 at year end from 3 214. This Our work to cultivate new revenue streams as well as in taking included 271 employees transferred from the recently on the responsibility of so-called ‘implementing agency’ disestablished Bushbuckridge Water Board. Ms. Matshidiso Nyembe projects continued to bear fruit. As a result, other operating income expanded by more than two-thirds to R729 million. Chemical costs, which had declined 30% the previous Implementing agency services are those projects we year, rose 45% in the 12 months to the end of June 2014. carry out on behalf of municipalities and government This increase had been expected after the anomaly of 48 Rand Water Integrated Annual Report 2013 -2014
2013, when some of our lime plants were out of commission internally generated funds (accumulated profits and cash for scheduled maintenance. As a result of increased turbidity reserves) after providing for the group’s liquidity requirements. in the raw water, we are currently dosing at about 9mg/l of The group increased our borrowing programme through organic coagulants relative to a budget of 6.5mg/l. In line the issuances of two new bond, RW23 and RW28. These two with higher levels of capital expenditure in the year, detailed bonds were funded through our domestic medium-term below, depreciation rose 19.4%. note programme, and the proceeds were used to fund the expansion of our network. In December 2013, we raised R1 INCREASING CASH GENERATED billion in the debt capital market: R665 million through the FROM OPERATIONS RW28 bond, and R335 million through the RW23 bond. Net cash from operating activities increased 20.9% to nearly R1.43 billion, supported by greater revenue. The amount The group’s debt-to-equity level at year end was 29.32% of net cash utilised in investing activities increased in the (2013: 22%) – below our target of 50% and indicating that
year (mainly due to the acquisition of property, plant and significant capacity is still available to fund future cartel equipment), while we raised R1 billion in the bond market. expenditure spent. Our Shareholder and National Treasury z zZ ZVV
The net effect was that cash reserves at year end were little have set the group’s approved borrowing limit at R8.3 changed at R871.5 million (2013: R863.9 million). billion of which R5.8 billion is for core business requirements until 2018 and R2.5 billion is conditional limits for growth INVESTING FOR THE FUTURE business. Net interest income rose to R71 million (2013: R43 We continued to advance our capital investment programme million) as borrowing costs continued to be capitalised to designed to meet demand projections for water within Rand qualifying assets. Capitalised borrowing costs in the year Water’s area of supply. Capital expenditure rose 40% to R2.45 amounted to R204 million and are expected to increase in billion related to the core business. This has led to a 22.2% increase line with our capital investment programme over the next in the value of property, plant and equipment in the year. five years.
Of the R2.5 billion capital investment, R867 million was Rand Water’s long term credit rating in the year: AA+(zaf)/ spent on the augmentation and renewal of the Palmiet and Stable and short term F1+(zaf). The credit profile of Rand Water Eikenhof systems. The augmentation program on Palmiet is supported by its regional monopoly position in the greater and Eikenhof systems is on track and ahead of schedule, Gauteng region. In June 2014, Standard & Poor’s ratings respectively. Despite the sharp increase in capex, spending services lowered the long-term foreign currency sovereign came in below forecast (at 88% of our budget) because of credit rating on South Africa to ‘BBB-’ from ‘BBB’. It also lowered interruptions in the procurement process for a new system at the long-term local currency rating to ‘BBB+’ from ‘A’ and the our Zuikerbosch Purification and Pumping Station. Although long-term foreign currency rating to ‘BBB-’from ‘BBB’ work on the main treatment plant system (station 5) was delayed, we are pleased to report that much of the auxiliary THE RAND WATER work proceeded. Annual Infrastructure Development Report PROVIDENT FUND (AIDR) describes the installation of a 1 200Ml/d plant, installed The Rand Water Provident Fund is administered in terms of in phases. Station 5A will ensure that additional capacity of Section 13B of the Pension Funds Act. Rand Water provides 600 Ml/d will be in place by 2017 /18. Station 5B will be an benefit administration and financial services group Old additional 600Ml/d by 2022. Mutual provides investment administration services. Membership of the Fund is restricted to employees. The The investment in Hydro-generated power will require significant Fund is governed by a Board of trustees, five of whom are investment and we will be communicating more detail about this elected by members and five of whom are elected by Rand option once all our statutory approvals have been completed. Water. In the year under review, the Board of trustees held The Board has already endorsed this option. It is Rand Water’s six meetings. In addition, two Audit Committee meetings policy to fund rehabilitation and replacement projects from and two Investment Committee meetings took place. The Fund’s objective is to provide retirement and other benefits Rand Water Integrated Annual Report 2013 -2014 49
for members, and benefits in the event of their death. There provisional basis and have recognised goodwill amounting are three investment choices and three membership class to R58 million. This goodwill is made up of the net assets and options. Risk benefits are underwritten by Momentum. The liabilities of BBR after impairment of R276 million outstanding Fund’s membership at year-end was 2 924, and the Fund’s debtors. This is because the debt has been long overdue and value was R1.8 billion, up from R1.6 billion a year earlier. collectability thereof is in question as a result of disputes between the parties. We are currently undertaking a BBR The default investment strategy for the Fund is inflation due diligence exercise and expect to complete it during the (CPI) plus 3-5% over any five-year period. The Fund has three course of the 2014/2015 financial year. investment choices and the performances are provided below: In the new financial year, we will continue discussions with our Strategy Target Achieved Shareholder on sustainable solutions for BBR as well as other Benchmark Return service areas new to Rand Water. Possible solutions include
the transfer of the ownership of bulk water infrastructure
Inflation Matching 6.6% 7.4%
from municipalities to Rand Water, possibly in lieu of the z zZ ZVV CPI plus 3-5% 10.9% 17.9% municipality’s right to debt owing to it. We will also further CPI plus 5-7% 13.0% 22.9% our engagements with our Shareholder and National Treasury on funding and pricing in these new service areas. We are THE RAND WATER confident of progress in this regard in the year ahead, as well as MEDICAL SCHEME with regard to the national pricing strategy for raw water. The Rand Water Medical Scheme is self-administered and membership is restricted to employees and former retired Rand Water will continue working to customise our employees of the group and their dependents. The Scheme operating model in our new service areas, using a target is governed by a Board of trustees made up of five people pricing methodology based on affordability, the use of elected by members, and five elected by Rand Water. In the shared Rand Water services, the redeployment of some staff, year under review, the Board of trustees held 6 meetings. lower costs and the transfer of the ownership of bulk water Its audit and risk committee and pricing and investment infrastructure to Rand Water. committee both held 2 meetings. We also plan to launch the Water Demand Management The Scheme has R126 million assets under Rand Water Treasury Fund in the year ahead. Managed by Rand Water, the Fund management and has been invested in line with Regulation 29 will collect from municipalities a charge equivalent to 1% of the Medical Scheme Act No. 139 of 1998. At year-end, the of the tariff for 2014/15, or about R60 million. It will finance Scheme’s solvency ratio was 79.5%, compared to the statutory various projects to help reduce municipalities’ water losses. minimum of 25%. The number of lives it covered was 8 390. The After an initial pilot phase, we intend to expand the Fund Scheme continues to closely monitor developments relating to as a vehicle of water demand management, inviting the the introduction of national health insurance in South Africa, as participation of interested development finance institutions. well as amendments to the Medical Schemes Act Cognisant of the responsibilities we have to continue to deliver on our development mandate, we look forward to a LOOKING AHEAD challenging and successful year ahead. In the year ahead, the focus of Rand Water will be on maintaining the sustainability of our operations, and ensuring that the group’s solid base is secure, even as we significantly widen our service offering and service area. Since assuming responsibility in April for providing the Ms. Matshidiso Nyembe, CA (SA) services of the now-disestablished Bushbuckridge Water CHIEF FINANCIAL OFFICER Board (BBR), Rand Water has accounted for the transfer Glenvista of BBR activities in the 2013/14 financial records on a 16 October 2014 50 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
Rand Water’s Risk Review
ENTERPRISE-WIDE RISK MANAGEMENT The role of the Board in risk management King III Code requires that the Board be responsible for the governance of risk. The Board approved Enterprise-Wide Risk
Management (EWRM) Framework and methodology is in
. z zZ ZVVZV place. Risk committees are also in place including the Board Risk Committee (BRC). The BRC assists the Board in carrying out its responsibilities. This committee sits on a quarterly basis and reports to the Rand Water Board on risks facing the organisation and how they are mitigated. These risks are identified and ranked in the risk assessment workshop that is conducted on an annual basis. Mitigating plans are developed for each risk and progress on management thereof is monitored and reported on quarterly to the Corporate Risk Committee, Portfolio Integrating Committee, Board Risk Committee and the Board.
During the financial year under review, the following top ten Strategic Risks were identified by the business. A lot of effort and resources have been channeled towards effectively managing these risks. The progress made towards managing the risks is reported to the Board and risk committees on a quarterly basis
The 2013/14 financial year strategic risks 1. Risk Name Deterioration in raw water quality Strategic Objective: Achieve Operational integrity and best fit technology.
2. Risk Name: Encroachment over pipeline servitudes and properties Strategic Objective: Achieve Operational integrity and best fit technology. Rand Water Integrated Annual Report 2013 -2014 51
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
3. Risk Name: Existing long term supply contracts Strategic objective: Achieve Operational integrity and best fit technology.
4. Risk Name: Optimisation of Critical Installations
Strategic objective: Achieve Operational integrity and best fit
. technology. z zZ ZVVZV
5. Risk Name: Non-revenue water in the municipal system Strategic Objective: Maintain Financial Health and Sustainability
6. Risk Name: Supply chain management process Strategic Objective: Maintain Financial Health and Sustainability
7. Risk Name: Legal compliance Strategic Objective: Achieve Operational integrity and best fit technology.
8. Risk Name: Capacity to supply/inability to supply potable water to customers Strategic Objective: Achieve Operational integrity and best fit technology.
9. Risk Name: Price volatility Strategic Objective: Maintain Financial Health and Sustainability
10. Risk Name: Contract Management Strategic Objective: Maintain Financial Health and Sustainability 52 Rand Water Integrated Annual Report 2013 -2014
Risk Management Methodology
Level Impact Impact Business Reputational Legal and Social and Risk Value Regulatory Community (basis points) 1. Extreme 100 Extreme event with Extreme international Significant fine/ Extreme, widespread the potential to lead public/media outcry. imprisonment. social impact to collapse of business Damaging NGO Breach of mandate Irreparable damage and is fundamental campaign. Social/ to highly valued to the achievement legal licence to cultured heritage
of objectives. Non operate severely
z zZ ZVV achievement of Rand threatened Water mandate 2. Major 50 Major event that Serious adverse Major breach of Persistent social issues can be endured but national media/ regulation/major Serious damage which may have a public/NGO litigation to/infringement prolonged negative attention. Social/ to valued cultured impact and extensive legal licence to heritage consequence operate questioned 3. High 25 High impact events, Concerted attention Serious breach of On-going social which can be from media and/ regulation with issues managed but require or heightened report to authority High damage to additional resources community concern valued cultural and management heritage effort 4. Moderate 13 Events of which can Moderate, adverse Minor legal/non Moderate medium- be managed under local public compliance/breach term social impact on normal operating media attention/ of regulation local population conditions complaints Moderate damage to heritage 5. Minor 6 Events of which Public concern No legal issues but Low-level social or consequences can restricted to local breach of company cultural impact readily be absorbed complaints guidelines Minor repairable under normal damage to common operating conditions. place structures 6. Insignificant 3 Frequent minor risks Negligible Negligible Minor negative that do not disrupt impact, no corrective business, or with no action necessary adverse health effect Must be monitored or injuries Rand Water Integrated Annual Report 2013 -2014 53
RISK FINANCE AND ADMINISTRATION As demonstrated in the Strategic Risk Register above, Rand Water has controls in place to mitigate the possible risk identified. However, mishaps do happen and these may result in huge financial losses. This is why Rand Water purchases insurance cover from the market. The risks on the Risk Register and controls thereto are taken into account when negotiating premiums. Different classes of insurance are purchased to protect Rand Water against possible mishaps.
BUSINESS CONTINUITY MANAGEMENT The possible eventualities referred to above may lead to disruption of business that is why Rand Water has the Business Continuity Policy in place. Even though the organisation has purchased insurance covers, operations can be extremely disrupted. When this happens, a plan has to be in place to ensure timeous recovery from the impact of an incident. Business Continuity Management
plans are in place for key Rand Water functions. Some of these plans have been tested during the period under review and found
z zZ ZVV to be effective. In addition, disaster simulation exercises have been conducted to test preparedness of responsible employees and management during 2013/2014 financial year and were found to be adequate.
OCCUPATIONAL HEALTH, SAFETY, ENVIRONMENT AND QUALITY (SHEQ) In striving for excellence and continual improvement in the SHEQ field, the organisation met its Disabling Injuries Frequency Rate (DIFR) targets. Compliance to environmental legislation and increasing use of improvement reports coupled with document control from a Quality Management System (QMS) has been enhanced.
Over and above the SABS certification surveillance audits, third party, internal audits and legal audits were carried by the specialist in the relevant system. The results of all these audits were excellent in terms of compliance to all SHE legislation and to the ISO certification requirements. These audits also serve as a good tool to embed the culture of compliance to legislation as well as implementation of SHEQ best practices which result in a safe and conducive work and surroundings.
This SHEQ culture is being transferred to Rand Water suppliers and customers. This is done through induction as well as inclusion of SHEQ requirements in the precurement of all goods and services. It is a Rand Water standard that all SHEQ requirements are incorporated in the Project Management Cycle, namely from project initiation phase up to the handover of the project including the Procurement process.
Environmental Management – ISO 14001:2004 Corporate Environmental Status Rand Water’s SHEQ policy provides the strategic framework for the company’s environmental management system which translates in the setting of environmental objectives and targets. These objectives address areas such as waste minimisation, the conservation of energy and other natural resources and environmental protection. 54 Rand Water Integrated Annual Report 2013 -2014
This policy is supported by corporate instructions, procedures, practices and standards that govern the company’s operations and are basic to its environmental management programs. These documents cover areas such as chemical and waste management, energy management, environmental evaluation of suppliers, product stewardship, incident prevention and reporting, and environmental impact assessment for the upgrade of our infrastructure and construction of pipelines and reservoirs.
Environmental Incidents An incident is an unplanned or undesired event that adversely affects a company’s operations. Incidents include work-related injuries, occupational illnesses, property damage, spills, fires or near miss events that could have resulted in any of these. See the total incidents that the company had in the 2013/2014 financial year as depicted in the table below.
Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun-
13 13 13 13 13 13 14 14 14 14 14 14
Chemical z zZ ZVVZ Number Contaminated 0 1 1 2 2 1 0 0 1 0 1 1 of soil Incidents Fire Incidents 0 0 0 0 0 0 0 0 0 0 0 1 Oil Spillages 0 0 1 1 0 0 0 0 0 0 1 0 Unauthorised 0 0 0 0 0 0 0 0 0 1 0 0 Waste Disposal
Rand Water Environmental Incidents Section 24 (1) of the Occupational Health and Safety Act stipulates that certain types of incidents, occurring at work or arising out of/in connection with the activities of persons at work, or in connection with the use of plant or machinery, in which persons are involved must be reported to the provincial director. According to subsection (c), the following environmental incidents endangering the health and safety of any person must also be reported to an inspector: Where a dangerous substance was spilled; Where the uncontrolled release of substance under pressure took place; Where machinery or any part thereof fractured or failed resulting in flying, falling or uncontrolled moving objects; and Where machinery ran out of control.
As seen in the above graph, Rand Water did not suffer any reportable environmental incidents on site. The most recorded minor environmental incidents were those of Ferric, Sludge and Poly spills. These are attributed to damaged pipes or from inadequate measures used during off-loading of the substances. This is followed by oil spills from parked or broken vehicles. It is to be noted that these are of a minor scale and therefore are not reportable to authorities.
Rand Water Integrated Annual Report 2013 -2014 55
z zZ ZVVZ
56 Rand Water Integrated Annual Report 2013 -2014
Vereeniging Statistics
Month Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- 13 13 13 13 13 13 14 14 14 14 14 14 Dust fall out (mg/m2/day) 0 175 204 85 201 126 0 65 0 46 61 0
250
200
150 z zZ ZVVZ
100
50 Dust fall-out mg/m2/day
0 Jul-17 Jan-18 Jun-18 Oct-17 Apr-18 Feb-18 Sep-17 Mar-18 Dec-17 Nov-17 Aug-17 May-18
Occupational Health and Safety – OHSAS 18001:2007 workplace. The OH&S programme elements delivered a list of In line with the continual improvement the organisation risk control measures as well as very effective action plans to further reduced the disabling injury rate (DIFR) target from prevent incidents from occurring. 0.50 to 0.45. The actual performance for the period 2013/2014 was 0.30 DIFR compared with DIFR of 0.33 for previous financial In meeting the OHSAS 18001:2007 SABS certification year. The ultimate goal is ZERO INJURIES at the workplace. conditions, a legal OH&S audit was carried out. Excellent audit results were obtained regarding compliance to the applicable This improvement is also confirmed by the reduced number OH&S legislations. of claims from the Federated Employers’ Mutual Assurance (FEMA). In the current year Rand Water met and exceeded the target by 9.1% and improved the DIFR from 0.33 to 0.30. This is The Occupational Health and Safety (OH&S) programme depicted by the graph on page 57. focused on the identified unsafe acts and conditions. The OH&S strategy concentrated on the task observation, mini- hazardous identification and risk assessment as well as incident investigations on all incidents occurring at the Rand Water Integrated Annual Report 2013 -2014 57
Year Actual DIFR Target DIFR
2009/10 0.53 0.80 2010/11 0.47 0.60 2011/12 0.35 0.55 2012/13 0.33 0.50 2013/14 0.30 0.45
The graph below depicts the accomplishment of the DIFR target over a five year period
0.9
z zZ ZVVZ 0.8 0.7 0.6 0.5
0.4 DIFR 0.3 Target 0.2 0.1 per 200 000 man-hours worked Disabling injury frequency rates
2009/10 2010/11 2011/12 2012/13 2013/14
Quality Management Systems (QMS) – ISO 9001:2008 During the period under review, emphasis was placed on Effective document control and continuous improvement streamlining our Policies and corporate procedures to ensure are some of the benefits Rand Water is ripping from the QMS. standardisation and better control on the organisation’s Operating manuals, procedures, safe operating procedures documents. To accomplish this the Policy Review Committee’s and forms are of the high standard in the organisation. membership included the Quality Management System (QMS) aspect. All QMS manuals were reviewed during the reporting period to incorporate all identified gaps and also in line with the In compliance with the International Standard Organisation continuous QMS improvements. (ISO), bi-annual audits are carried out by the South African Bureau of Standards (SABS) our current certification body. In Good progress has been made in the implementation of an both of these audits the organisation successfully maintained electronic Quality Management System. the ISO 9001.2008 certificate. This again, confirmed the continuous maturity level of the Quality Management Systems. Contractor management In these SABS audits our QMS was found to continuously In-line with the organisation’s capital expenditure targets comply with all ISO 9001:2008 requirements. as well as in meeting the organisations growth strategy a 58 Rand Water Integrated Annual Report 2013 -2014
number of capital projects are undertaken to expand and Although some challenges in data collection still have to be maintain the integrity of our infrastructure to meet the overcome, concerted effort to fully monitor the contractors’ nation’s potable water and sanitation demands. The Board, performance in all the facets of project management is in place. the executive management and all involved in these projects Occupational Health, Safety and environmental specification are committed to ZERO INJURIES, ZERO degrading incidents are introduced from the design stage right up to the hand over as well as timeous delivery of these projects. stage. It is also well entrenched in all the tendering processes to ensure that SHE issues are well provided for and implemented In pursuit of the above, the Rand Water management by the contractors awarded the projects. teams continued to enforce the compliance to legislation especially the Occupational Health, Safety and Environment This safety performance for the construction industry is within (SHE) matters as critical facet of project management. The the acceptable limits. The trends showed that most of the legislation and the Organisation’s SHE requirement has been incident came from excavations, man-machine interface and
integrated into the project management process from the inadequate and non-adherance to procedures where they are
z zZ ZVVZ project initiation to hand over. adequate.
Over and above the self - monitoring conducted by the The safety performance was marred by an unfortunate fatality contractors, Rand Water also conducts its frequent SHE by one of our Principal Contractors sub-contractor at one of inspections to verify and ensure that the contractors adhere the projects. This avoidable incident occurred at the Principal to their SHE plans. Deviations are reported to the project team Contractor’s site just before the shift commenced. The incident and follow-up done to ensure that the deviation are corrected. involved the use of plant equipment – construction vehicles.
The graphs below depicts the Disabling injury frequency rates (DIFR) per 200 000 man hours worked. The set targets were met.
Rand Water – Contractors Contractors Disabling injury frequency rates (DIFR) Disabling injury frequency rates per 200 000 man hours worked per 200 000 man hours worked 2.50 2.5 2.00 2 1.50 1.51 1.00 1 0.50 DIFR 0.5 0.00 0 2012/13 2013/14 Jul-17 Jan-18 Jun-18 Oct-17 Apr-18 Feb-18 Sep-17 Mar-18 Dec-17 Nov-17 Aug-17 May-18
MTH DIFR Target YTD DIFR DIFR Target Rand Water Integrated Annual Report 2013 -2014 59
Waste Management All waste streams have been identifies and disposed of in Waste like expired chemicals is incinerated in licensed accordance with Waste Management regulations as well as incinerators. Asbestos sheeting from building refurbishment complying with the Local Municipal by-laws. and old heaters is disposed at the Platkop - the licensed site for all asbestos contaminated equipment. A centralised contract managed at corporate level deals with all hazardous waste from sites. A licensed and ISO 14001 certified Fluorescent tubes are all collected after use and disposed of at waste vendor is currently contracted to handle Rand Water Holfontein disposal sites where the mercury contained in the hazardous waste. Stringent procedures are adhered to when tubes is stabilised with appropriate chemicals in encapsulated collecting, transporting and disposing the hazardous waste. pits. Sewer is collected by the hygienic super suckers and Licensed disposal sites are used and waste is disposed as per its disposed of at the local municipal Waste Water Treatment
rating to the appropriate hazardous waste site. facilities.
z zZ ZVVZ Hazardous Waste Disposed Tons
Fluorescent tubes 13.55 Contaminated oil 8.24 Laboratory 0.22 Asbestos sheets and heaters 1.12 Sewer 98.76 Sodium hypochlorite 9.22
The graph below depicts the Hazardous Waste Disposed Non-hazardous waste like papers and cardboards are separated from other domestic waste for recycling. Hazardous Waste 2013-2014 16 An initiative has commenced on turning food waste into 14 compost. This initiative will alleviate the overloading of sewer 12 10 lines with crushed food waste. 8 6 4 SHEQ Achievements for the year 2 Rand Water achieved the following SHEQ targets: 0 ISO 9001:2008 – Certification maintained and received
Sewer high standards comments from the SABS auditors OHSAS 18001:2007 – Certification successful Laboratory Fluorescent ISO 14001:2004 – Certificate successfully maintained.
Contaminated oil Contaminated Disabling injury frequency rate target of 0.45 met Sodium hypochlorite Asbestos sheets & heaters Asbestos
Tons 60 Rand Water Integrated Annual Report 2013 -2014
OCCUPATIONAL HEALTH Occupational Injuries MANAGEMENT Rand Water’s SHEQ Policy stipulates that all incidents must Occupational Health Programme be reported to management. This includes the occupational The Occupational Health Programme aims to maintain the injuries and diseases that occur at the workplace. Accurate highest degree of well-being of all employees, and minimise statistical reporting of Injury-on-Duty (IOD) cases is kept financial losses, through the maintenance of a safe and healthy by Rand Water. These are archived in compliance with the workplace, targeted employee monitoring, and effective legislation requirements. While the Occupational Health Clinics remedial actions to correct unacceptable deviantions. do service and capture IOD cases, the official documentation and investigations are conducted mostly by the Risk
This is achieved through the provision of medical and Departments. In addition, despite continuous education and technical expertise to achieve improvements in the working training regarding reporting of IODs, employees still tend to environment, adaptation of work to the individual worker, and deviate from the correct reporting lines resulting in inaccurate
promotion of the health and welfare of workers. In this way statistical capture at the clinics.
z zZ ZVVZ the services decrease the incidence of occupational injuries, diseases, deaths and related disability. The objectives are: The Occupational Health Practitioners (OHP) remain actively involved in management of the IODs across Rand Water. The
To comply, as a minimum, with legal requirements Occupational Medical Practitioner (OMP) is mostly involved at regarding the Occupational Health and Safety Act the return evaluation of employees after injury management (Act no. 85 of 1993) and Regulations. however the OMP may be involved with treatment and To continuously identify and assess occupational and management if he/she is on-site at the time of injury. The OMP environmental hazards and recommend actions necessary also remains available for telephonic advice. to eliminate or control these. To identify and manage adverse health effects arising Upgrades and improvement of site clinics from workplace conditions (including compensation and Rand Water embarked on two projects to upgrade the clinics rehabilitation where possible). at two sites. This done in order to continuously improve on To encourage employees to maintain a reasonable degree occupational medical services delivered to all employees. This of general health and fitness. will assist the organisation to meet the future ever growing To achieve a high level of co-operation between demands of these services within the organisations as well as management and employees on safety, health and supporting the organisation GROWTH strategies. environment control programmes. Rand Water Integrated Annual Report 2013 -2014 61
Rand Water uses and outsourced Occupational Medical are set, are integrated and synchronised to be of most value Practitioner who performs all legislated occupational medical to the company, its people and the communities within which services at the site clinics and/or offices of Rand Water. This the group operates. resource supports the Rand Water Occupational Health Nurses in providing the high quality and efficient medical services. Rand Water has adopted an “Organisational Health” approach Local public medical facilities are used as when required. refers to a strategic, co-ordinated strategy for managing all the facets of health in the organisation. The challenge, as Rand Water occupational services has been providing the well as the scope of managing the health and wellness risk following medical and occupational health services during the within an organisation and especially in a diverse group of reporting period, as part of an ongoing service: organisations, has become a lot broader and more complex. Occupational Health Programme; All the issues need to come together in a single integrated and Guidance to the existing limited Primary Health Care holistic picture.
Programme;
z zZ ZVVZ Ill Health Management and Medical Incapacity; Rand Water - Occupational Health Programme Injury on duty management; Occupational health and safety is a cross-disciplinary area Health promotion; and concerned with protecting the safety, health and welfare General health matters in accordance to medical advisory of people engaged in work or employment. The goal of all services. occupational health and safety programs is to foster a safe work environment. As a secondary effect, it may also protect Consulting services co-workers, family members, employers, customers, suppliers, The EOH Health strategic consulting model, is ideally suited nearby communities, and other members of the public who to assist the Wellness Manager/ HR Manager/SHEQ Manager are impacted by the workplace environment. It may involve in fast tracking organisations to best-practice in health and interactions among many subject areas, including occupational wellness management, thereby supporting company goals medicine, occupational (or industrial) hygiene, public health, and objectives. safety engineering, chemistry and health physics.
Health and wellness strategy development, aligned with business strategy that outlines the future direction and on which short, medium and long term objectives and targets 62 Rand Water Integrated Annual Report 2013 -2014
RAND WATER’S GROUP GOVERNANCE
Rand Water is a good corporate citizen and thus ensures that in its business activities it always upholds a high standard of governance. It achieves this through its
executive management represented in
z zZ ZVVZ various governance structures. These existing structures thus give collective assurance to the organisation on compliance with the King III governance principles, Public Finance Management Act and other material governing legislation and best practices. In keeping with Rand Water’s highest corporate governance principles, governance standards are met, by encouraging a culture of compliance and good governance throughout the organisation. THE GROUP FORENSIC SERVICES The Board is cognisant of the fact that White Collar Crime could influence the performance of any organisation and realises the need to mitigate these unforeseen criminal activities. Rand Water subscribes to the highest standards of integrity, behaviour and ethics, recognising that good corporate governance is critical to the successful growth of the organisation. Rand Water Integrated Annual Report 2013 -2014 63
Accordingly the Board, PIC and Employees comply with the code of corporate practices and conduct as recommended by King III. The Rand Water Group is committed to an open governance process through which its stakeholders derive assurance that the business is being managed ethically
and according to prudently determined risk parameters in
compliance with legislation and international best practices. z zZ ZVVZ In addition to the King III codes of governance, Rand Water affiliates to the International and South African Chapters of the Association of Certified Fraud Examiners, the body that recommends and advises on the governance of white collar crime and further applies the standards that are set out by the King III report.
An Integrated Fraud Management Framework and White Collar Crime Risk Assurance Map have been developed and are continuously applied as assurance tools on the governance of White Collar Crime risk within Rand Water. These activities are guided by the Group Forensic Services Charter that is approved by the Board through the organisations Group Risk Committee on a three year cycle. It is from these assurance tools that Rand Water draws its Annual Forensic Plan.
The Group Forensic Services activities follow a risk based approach in that it draws influence from various business units. Group Forensic Services further interfaces with the Organisation’s Risk Management Division in ensuring that these risks are recorded and adequately monitored. Through this framework, the Board acknowledges that fraud is one of the Top Ten risks items in Rand Water’s enterprise risk register and the organisation continues to put measures in place to mitigate such. 64 Rand Water Integrated Annual Report 2013 -2014
The independence of Group Forensic Services is assured through the direct engagements and reporting requirements that it has to the Board, Board Committees (Group Audit and Risk Committees) and the Portfolio Integrated Committee.
It is one of the essential internal assurance providers that the organisation relies on. It therefore plays a vital role in identifying related Fraud risks, reporting and registering same, developing mitigating measures and monitoring effectiveness of controls put in place.
Following are the highlights of the Group Forensic Services for the current period of reporting: The Group Forensic Services process focuses on Pro-Active prevention and in this regard the Division: – Conducted awareness sessions throughout the organisation in respect of Protected Disclosure responsibilities, Code of Ethics duties and fraud prevention and combating of corrupt activities responsibilities by staff members in the entity.
– Initiated investigations into various processes and initiated Pro-Active audits into identified areas throughout the organisation
in order to mitigate fraud risk exposure. z zZ ZVVZ – Conducted Lifestyle Audits on the majority of senior staff members throughout the organisation in order to ensure that lifestyles are commensurate with known income streams and declared interests. – Conducted vetting on all new staff appointments, new vendor and supplier applications and debtor profiles.
The Group Forensic Services division maintains the following strategic objectives: Develop partnerships, credibility and trust with all stakeholders in Rand Water; Instil a culture of crime awareness and responsibility within Rand Water; Detect, investigate and prevent criminal conduct within the organisation; Reduce crime, corruption and dishonest behaviour in the organisation; and Maximise recovery of financial losses and prevent future losses.
The Board reviewed the effectiveness of the controls aimed at mitigating white collar crime for the current reporting period through the assistance of and assurance provided by the Group Internal Audit and including formal confirmations received from the Portfolio Integration Committee. Further consideration has been given to the entire forensic framework, which includes its charter and annual audit forensic plan. Based on the foregoing and the performance of the business during the current period of reporting, the Board is satisfied that Group Forensic Services provided the assurance required and the assurance tools in place are effective.
APPLICATION OF KING III PRINCIPLES This table gives reference to each of the applicable King III principles and how, in broad terms, they have been applied by the Group Forensic Services. The information should be read in conjunction with the detailed narrative on the application of these principles, as contained above. Rand Water Integrated Annual Report 2013 -2014 65
Principle Content Compliance Comment
1.2 The Board should ensure that Compliant The Board, Management and Employees commit to the company is and is seen conducting business in accordance with the highest standards to be a responsible corporate of integrity, behaviour and ethics and this is assured through citizen. its entire chain of governance. 1.3 The Board should ensure that Compliant Group Forensic Services actively promulgates the the Company’s ethics are organisation’s Code of Ethics through road shows and managed effectively. awareness programs throughout the organisation .The Rand Water Hotline provides an anonymous reporting facility where staff and other Stakeholders can report unethical conduct. (2.9) – 6.1 The Board should ensure that Compliant The Board, Management and Employees commit to the company complies with conducting business in accordance with the highest standards applicable laws and considers of integrity, behaviour and ethics and this is assured through
adherence to non-binding its entire chain of governance. z zZ ZVVZ rules, codes and standards. Public Finance Management Act. Criminal Procedures Act. The Prevention and Combating of Corrupt Activities Act. Protected Disclosures Act. International standards as prescribed by the Association of Certified Fraud Examiners. International standards for the Professional Practice of internal Auditing. 6.2 The Board and each individual Compliant Through regular educational awareness sessions, director should have a working management and staff are made aware of applicable understanding of the effect legislation, its implications and their role in combating White of the applicable laws, rules, Collar Crime. codes and standards on the company and its business. 6.3 Compliance risk should form an Compliant Group Forensics utilises the RUBI case management system integral part of the company’s in managing fraud related risk and in addition compiles an risk management process. annual risk register that forms an integral part of Corporate Risk Register. Compliance monitoring forms part of this process 2.11 The Board should appreciate Compliant By giving great attention to the management of White Collar that stakeholders’ perception Crime Risk, the Board is gives cognizance to the need for the affect the company’s organisation to be perceived as ethically compliant and by reputation. that it consequently preserves its integrity. 2.14 The Board and its directors Compliant Through its engagement in the monitoring and should act in the best interest recommending measures to curtail fraud, the Board portrays of the company. interest in the organisation’s ethical behaviour.
3.8 Internal Assurance Providers Compliant Group Forensics utilises RUBI case management system in - The audit committee should managing fraud related risk and in additions compiles an be an integral component of annual risk register that forms an integral part of Corporate the risk management process Risk Register. [chapter 3 – fraud risk]. 66 Rand Water Integrated Annual Report 2013 -2014
THE GROUP INTERNAL AUDIT ensure that areas of concern from the business are reviewed (GIA) and independent assurance is provided. The GIA also considers In line with the Standards from the Institute of Internal global risks that may impact Rand Water. Auditors (‘IIA’), Rand Water acknowledges that its Internal Audit Division is one of the key cornerstones of effective Management, through the Portfolio Integrating Committee, organisational governance. Water is one of the crucial factors is informed about all reports that are sent to the Audit investors scan in deciding whether to invest in a country or Committee to ensure that organisational concerns are not, Rand Water provides this basic need to the economic addressed in audit plans and execution is aligned, relevant hub of Africa. It is crucial that it provides uninterrupted and contribute towards the common goal. quality supply of water. GIA plays an integral part in providing assurance that Rand Water can deliver bulk water services to GIA recruited Specialist in its arsenal in a bid to craft
make Gauteng and other service areas to remain attractive for capabilities to deliver expectations and developing an aligned
investment. set of resources to enhance value add, give informed advice z zZ ZVVZ and recommendations and align to business needs.
GIA provides reasonable independent assurance and consulting services to improve risk management, internal GIA is transforming its design by applying a holistic approach controls and governance, and adds value to business processes. and taking purposeful action to be a trusted business advisor. GIA reports administratively to the executive member of The following attributes characterise a balance between Portfolio Integrated Committee, Group Governance Executive assurance and advisory services, to protect Rand Water and and functionally to the Audit Committee. This reporting deliver measurable value: structure safeguards GIA’s independence and objectivity. Risk Focus; Quality and Innovation;
Approach Business Alignment; Group Internal Audit follows a risk based approach. The plans Talent model; starts with the determination of business objectives and Stakeholder Management; where the business is going, and populating the corporate risk Cost Effectiveness; register facilitated by the Risk Advisory Services department Technology; and is used, amongst other measures, in developing audit plan to Services culture. Rand Water Integrated Annual Report 2013 -2014 67
Compliance GIA have a material and influential effect on the entire value In executing its responsibilities GIA adhere to IIA Standards chain of the organisation. This is evident in the trend analysis and Code of Ethics, King 111 and PFMA. Internal audit is reports which it prepares. It provides an overview on each reviewed by independent external reviewer accredited by IIA portfolio and organisation’s improvement on internal controls. (Quality Assurance Review-QAR) every five years to ensure The controls maturity have improved gradually over the years that it maintains world class quality standard. GIA obtained and repeat findings reduced, even though there may have Generally Compliance status from the recent QAR which is been spikes in some portfolios during the preceding reports. the highest accolade. This confirms that GIA is at par with its Various operational controls and financial internal controls global peers. were enhanced and proved to be reliable and stable.
Reporting Highlights
Internal Audit’s activities are focused on adding value to the CA in Training accreditation for new trainees.
control environment whilst rendering independent assurance Implementation of Continuous Auditing. z zZ ZVVZ to the Group Audit Committee and to the Board on, inter alia: Full implementation of Quality Assurance. the effectiveness and adequacy of internal financial control; and on operational and compliance activities; and governance systems. effectiveness of the mitigation plans
Below is a graphical overview of how internal controls have improved:
Total Findings Total Findings 200 120 100 150 80 60 100 40 20
No. of Findings No. 50 of Findings No. 0 2011 2012 2013 2014 0 2011 2012 2013 2014 Medium 93 56 33 17 No. 186 155 82 98 High 93 99 49 64 68 Rand Water Integrated Annual Report 2013 -2014
Below is a graphical overview of how internal controls have improved:
Repeat Findings
25 20 15 10 5 0 Repeat Repeat Repeat Repeat Repeat Repeat Findings Findings Findings Findings Findings Findings
No. of Findings No. 2009 2010 2011 2012 2013 2014
No. 21 11 0 0 0 0
z zZ ZVVZ
Combined Assurance Principle 3.5 of King III recommends a combined Based on the audit plan approved by the Board, it can be assurance model as a method of providing a concludes that the scope of the audit meets the requirements coordinated approach to all assurance activities. GIA of King III and other applicable public sector related legislation. facilitates the combined assurance process, relevant GIA is evaluated by the audit committee annually and by the forums and frameworks have been established and business for each review to ensure that the stakeholder needs work/exercises that were aimed at addressing the are met and improvements are implemented where necessary. 10 top risks that were identified in the preceding reporting period, have been completed.
The lines of defence in combined assurance are what the business has in place to protect itself from risk exposure. GIA is a critical third line of defence, Management so effectiveness of this function directly impacts perception about risk profile of the organisation and the commitment of senior management and the Board to effective risk governance. GIA provides overall Internal External opinion on how the risks are mitigated. It provides an Assurance Assurance Providers Providers indication on the residual risk or exposure to risk after taking into account the existing controls.
Risk Areas Affecting Company
Combined Assurance Rand Water Integrated Annual Report 2013 -2014 69
Accordingly, combined assurance is influenced by the following contributors and in the following manner:
Organisational concerns/risks are addressed in the audit plan and execution of audit through comments and input received from the Portfolio Integrated Committee. IA engages regularly with external auditors to discuss the scope of work of the Internal Audit Division and how the external auditors will rely on such work to avoid duplication. Compliance is a critical part of assurance. Internal Audit thus reviews compliance in all areas of audits. This ranges from legislative compliance to regulations, best practices, policies and processes. Internal Audit has a dedicated Specialist Auditor SHEQ that deals specifically with quality assurance activities and in particular: Health & Safety, Environmental issues and SABS accreditation.
Internal Audit adopted a risk based approach to give assurance on risks identified by business; Risk Management division
facilitates and develop the corporate risk register. IA cover all top risks on the corporate risk register in developing its audit plan. z zZ ZVVZ Internal Audit has a dedicated Specialist Auditor Finance, a Chartered Accountant that deals with Finance and Treasury audits. Internal Audit reviews adequacy and performance on operational related activities, projects, day to day operations, and strategic expansion and growth projects. IA is part of IT Steering Committee to add value on governance of new and existing projects, IT Projects are mixed to give holis- tic view of the state Rand Water IT governance. 70 Rand Water Integrated Annual Report 2013 -2014
Application of King III principles This table gives reference to each of the applicable King III principles and how, in broad terms, they have been applied by the Group Internal Audit. The information should be read in conjunction with the detailed narrative on the application of these principles, as contained above.
Principle Content Compliance Comment
7.1 The Board should ensure that there is Complied All activities of internal audit department are reported an effective risk based internal audit. and approved by the Audit Committee of the Board. 7.2 Internal audit should follow a risk Complied IA audit plan is aligned to corporate risks, an based approach to its plan. assessment of high risk areas using audit methodology is also used. 7.3 Internal audit should provide a written Complied The assessment is prepared annually.
assessment of the effectiveness of the z zZ ZVV company’s system of internal controls and risk management. 7.4 The audit committee should be Complied IA reports directly to Audit Committee(AC), and the responsible for overseeing internal Head of Internal Audit engage with the AC chairperson audit. privately. 7.5 Internal audit should be strategically Complied Internal Audit report administratively to Group positioned to achieve its objectives. Governance Executive , a PIC member.
3.10 The audit committee should report to Complied Internal Audit do conduct governance audits including the Board and shareholders on how it Board and its committees, without any limitation of has discharged its duties. [Chapter 3 – scope and report to the Audit Committee. Public Sector perspective – Assurance to be given to the audit committee, be it by internal audit or any other source, on implications of the accounting officer, any member of the accounting authority or any official, in financial misconduct, including fraud corruption and negligence.] Rand Water Integrated Annual Report 2013 -2014 71
THE GROUP LEGAL Compliance Framework – it was reported in the SERVICES preceding financial term that the Division plans to create Principle 6.1 of King III requires the Board to ensure that a framework for management of legislative compliance. the Company complies with applicable laws and in 6.3 it This has been duly completed by Group Legal Services recommends that a Compliance Register is to be an integral and Internal Audit and will be submitted to the Board, for part of the company’s risk management process. approval in the next financial year. Once approved, a Legal Compliance Tool (automated) will be utilised to monitor,
Rand Water’s Group Legal Services plays a vital role in manage and regulate the legal environment ensuring overseeing compliance with legislation, codes and standards. compliance by the Organisation. For the current reporting It thus gives the required assurance and highlights areas of period, Rand Water is comfortable that the Board and risk that the Board has to give attention to. In its compliance the business at large has been made aware of applicable
assurance exercise, the PIC and the Board has been given legislation, codes and standards, and compliance thereto comfort of and has approved the following compliance is strictly monitored. Group Legal Services and Internal z zZ ZVV
activities, which are aimed at mitigating risk: Audit have processes in place to ensure compliance to Contracts Management Framework – in mitigating changes in the legislative and regulatory environment. risks that emanate from contractual arrangements, the The current processes include web based alerts on a daily Division has a contract management framework that is basis of Bills, White papers, draft and amended legislation. geared at interlinking all business units that are essential The regulatory environment is scanned on a daily basis in contracting framework. This is to assist the business to establish the impact of new or amended legislation in identifying contractual requirements, associated risks on Rand Water. In addition, Rand water subscribes to and applicable contractual measures from the time a the Parliamentary Monitoring Group which provides project is identified through to the dictation of terms that early notification of public hearings, committee and would govern procurement of related goods & services, Parliamentary programmes and status reports on Bills. negotiation of terms on award and contract monitoring. Within the corporate risk register, attention is duly given This framework functions as a tool to give assurances on to risk items that are compliance related. Rand Water has the governance of the contracting value chain. also endorsed a decentralised compliance model and this model is embedded organisational – wide.
72 Rand Water Integrated Annual Report 2013 -2014
z zZ ZVVZ
Legal Risk Register – Group Legal Services together with litigation risk is adequately governed and can confirm that Corporate Risk Advisory Services has compiled a Legal in the current reporting period, litigious matters that were Risk Register, on identified legal risks, to compliment attended to had no adverse come backs and that risks that the Corporate Risk Register, from a legal compliance were identified were duly attended to. Group Legal Services perspective. All risk controls and further mitigation actions continues to assure that related risks are monitored and to minimise the risk exposure are documented and are managed from their source. under continuous review to ensure that they remain relevant. The Legal Compliance Register and Checklist In its additional ancillary activities, the Division continues warrant that the Rand Water Group complies with legal to give ad-hoc advices on various topics that have an effect and regulatory requirements and same is the fundamental on the operations of Rand Water and additionally affiliates driver for a controlled legal management environment to various committees that serve these operations. These within Rand Water. affiliations are with different core portfolios within Rand Water and they span from Procurement, Operations, Strategic Asset Litigation Strategy – it is in the nature of business of Rand Management, Finance, Risk and the like. Rand Water is thus Water that there may be litigious issues that arise from comfortable that compliance risks are identified through cross time to time and it is thus essential to have a framework activities that the Group Legal Services engages in and these that governs this space. Rand Water oversees and manages are at all times highlighted in the Organisation’s Risk Register litigious matters through the framework that incorporates and complimented by the Legal Risk Register. the business units affected, a dedicated litigations specialist and a selection of problem specific outsourced legal In the current reporting period, Group Legal Services services from a panel of external attorneys. The framework highlights the following activities as material events: is such that it requires that risks that may be identified at Development of the Compliance Framework and Register; each litigious matter are highlighted on the Corporate Risk Contracting Strategies. It is planned that a Contracts Register and Legal Risk Register and are attended to in Management Tool, that complements this new framework policies & work processes within the divisions concerned. is to be considered and introduced, in collaboration with Group Legal Services thus assures that Rand Water’s the IT governance framework. Rand Water Integrated Annual Report 2013 -2014 73
Based on the activities carried out by the Group Legal Services, and complimented by Group Internal Audit and Group Forensic Services in the current reporting period, the Board, can confirm that it has received the assurance it requires to the effect that Rand Water adequately addresses the governance of compliance and overall provides the necessary Legal Services that the organisation needs.
Principle Content Compliance Comment
6.1 The Board and each individual director Complied Group Legal Services continuously runs legislative should have a working understanding workshops, publishes through the internal media of the effect of the applicable laws, platforms, drafts opinion and informally gives advices. rules, codes and standards on the This ensures that the business at large and the Board company and its business. are aware of applicable legislation, its interpretation, its application and what the business does in compliance thereto. 6.2 Compliance risk should form an Complied As part of its core activities and its interactions with integral part of the company’s risk various business units within Rand Water, the Group
management process. Legal Services identifies compliance risks, registers z zZ ZVVZ same, develop mitigation measures an monitors same continuously. 6.3 The Board should delegate to Complied Through its appointed Group Governance Executive, management the implementation of the Legal Services division has been duly mandated an effective compliance framework to ensure produce the compliance framework and and processes. oversee its implementation. 6.4 The audit committee should report to Complied Rand Water is a government entity listed in Schedule the Board and shareholders on how it 3B of the Public Finance Management Act. In generally has discharged its duties. [chapter 3 – the King Principles compliment the provisions of Public Sector perspective – Assurance PMFA. However, where there are inconsistencies, Rand to be given to the audit committee on Water assumes the “Apply or Explain” approach. In this compliance with PFMA, MFMA and The regard Group Legal Services assures compliance with Division of Revenue Act]. the applicable legislation in particular those that are specific to the public sector. 74 Rand Water Integrated Annual Report 2013 -2014
Compliance with other legislative requirements The organisation continues to seek further measures that In generality Rand Water has to comply with various legislative would assist the government in its endeavours of building requirements. Group Legal Services oversees such compliance the economy through the inclusion of the business owned by and in particular the overriding legislation which gives Rand previously disadvantaged groups. Water its existence; The Constitution, National Water Act, Water Services Act and the Public Finance Management Act. On Ethics In collaboration with Group Forensics and Internal Audit, the SUPPLY CHAIN MANAGEMENT Supply Chain Management division regularly evaluates its Rand Water continues to subscribe to best practice in the ethics behavioural levels. This is not limited to only the officers governance of procurement and it further continues to within Rand Water, but also extends to contractors appointed comply with the prevailing legislation in the Public Sector. In its through the SCM processes. Through the use of an Integrated continued effort to ensure compliance, Rand Water constantly Fraud Management Framework and White Collar Crime Risk
looks at the overall systems and procedural arrangements Assurance Map, assurance on the governance of White Collar z zZ ZVVZ that are aimed at ensuring that the procurement process is Crime risk within Rand Water has been provided to the Board aligned to appropriate levels of control and integrity. The key and for the current period, the Board is satisfied with the ethics components of a governance structure are: level amongst the stakeholders involved in the SCM process. appropriate procurement policies that are aligned to prevailing legislation; On General Practice procedures defining how the process should be managed; Through the procurement division, the organisation ensures allocation of roles and responsibilities so that roles are that it contributes to encouraging its stakeholders to comply segregated and appropriately capable staff manage the with legislative requirements that affect the society and the key processes; and economy; e.g. it is its requirement that contractors are to controls and review processes to monitor the performance be compliant with taxation and the CIDB requirements. The of the procurement process. organisation further recognises the importance of allowing fair market competition and thus monitors all activities that
Rand Water constantly strives to meet the set governance appear to be anti-competitive. The SCM division plays a pillars and is proud to state that from previous reporting vital role in ensuring that award of contracts are not seen as period, improvements have been made and processes put contravening or defeating the principles underpinned in the in place to address material areas that need attention. In Companies Act and the constitution. the reporting period, it is acknowledged that supply chain management/process is amongst the top 10 risks in Rand As one of its highlights for the current period of reporting, Water. The organisation continues to monitor and improve the Supply Chain Management division has enhanced its the mitigation measures in place. legislative Compliance requirement. Rand Water achieved a target of 92% during the reporting period. An Enterprise GOOD CORPORATE Development Strategy (EDS) was approved by the Board. CITIZENSHIP On BBBEE Applicable Legal Principles Rand Water vigorously pursues uplifting enterprises that fall This table makes reference to prevailing legal principles within the previously disadvantaged groups. Its policies make and best practices and how, in broad terms, they have been clear statements on giving preferential points to corporation applied by the Supply Chain Management division. that portray attractive empowerment ratings. Rand Water Integrated Annual Report 2013 -2014 75
Principle Content Compliance Comment
Principle The Board is to ensure that the Complied Through the SCM division, Rand Water plays an 1.2 {par company is and is seen to be a enormous role in improving the economic position 19 of the responsible corporate citizen {As a of South Africa through its continued award of Report} – responsible corporate citizen, the commercial contracts to suppliers and service King III company should protect, enhance providers within its operating area. and invest, in the wellbeing of the economy, society and natural environment. of the economy. Responsible corporate citizenship implies an ethical relationship of responsibility between the company and the society in which it operates.}
Section 38 General responsibilities of accounting Complied Rand Water’s supply chain process ensures that there z zZ ZVVZ – PFMA officers. is segregation of duties amongst officers within this [similar 1) The accounting officer for a division and it further operates with assistance from - S217 Con- department, trading entity or 3 distinct SCM committees (Specification, Evaluation stitution constitutional institution and Adjudication committees) which are in turn (a) must ensure that that department, constituted of officials from various business units in trading entity or constitutional order to ensure the integrity of these committees. institution has and maintains (iii) an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective. Article 15A 16A3 – Development of Supply Complied Activities within the SCM division are governed by – Treasury Management Systems and a supply chain management policy which sets out Regula- effectiveness thereof; the tools & standards of performance. Segregation tions 16A5 – training, competency and of authority and the interface with SCM committees capability of staff; ensures the integrity of this division. Rand Water is thus 167 – disposal & letting of Assets; comfortable that officers employed in this division and 16A8 – compliance with ethical its committees are fit & proper persons. standards; and 16A9 – avoiding abuse of SCM Systems. 2.1 – 6.1 The Board should ensure that the Complied The SCM division is periodically audited by Rand Water’s – King III company complies with applicable internal audit division in order to given assurance Principle laws and considers adherence to non- to compliance to the laws, policies and process. binding rules, codes and standards. Any noncompliance concerns are reported and are [General compliance with e.g. BBBEE, adequately given attention to mitigate risk. Competition Law, etc. within the procurement environment.] 76 Rand Water Integrated Annual Report 2013 -2014
IT GOVERNANCE compliance assessment performed once every three King III puts an obligation on the Board to be responsible for years. Annual internal and external ISO 9001 assessments, information technology (IT) governance. Rand Water adopted independent IT governance compliance assessments and an IT governance framework and associated charter that was on-going independent assurance audits are also undertaken. approved by the Board. Rand Water has an IT strategy that was Internal Audit also audits IT as a strategic focus area in terms approved by the Board and is reviewable on a five year cycle of its three year rolling plan and annual plans. and is aligned to Rand Water’s performance and sustainability objectives. Management is responsible for implementing General Statement on IT achievements IT governance, as delegated by the Board. Rand Water’s IT The on-going IT services provided the organisation with function has an internal IT controls framework that is based a secure IT environment, with a core ICT infrastructure on CoBIT. availability of 99.5% resulting in an IT user satisfaction rating
of 92%. The IT systems are effective and the adequacy of the
systems landscape is improved by enhancing existing systems z zZ ZVVB Reporting Information Technology is functionally responsible to its or implementing additional system, where feasible. IT supports Portfolio Executive, the Group Shared Services Executive, who and is involved in corporate initiatives such as strategic asset presents the quarterly IT performance reports to the Portfolio management, the blue drop audit, social investment, Rand Integrating Committee. It is additionally responsible to report Water Academy and the Bushbuckridge Water incorporation quarterly to the Audit Committee on financial systems as well into Rand Water. as to the Risk Committee and the Board of Rand Water on IT performance, including IT governance and IT risks. This assists Applicable Legal Principles the Board in determining whether the IT objectives are met as This table gives reference to each of the applicable King III well as ensuring compliance to the requirements of the King principles and how, in broad terms, they have been applied by III Code regarding IT governance. the IT function. The information should be read in conjunction with the detailed narrative on the application of these Quality Assurance principles, as contained above. The IT Compliance Framework The quality of the IT function is assessed based on the provides a complete list of all other legislative provisions and IT compliance checklist via an independent legislative standards that Rand Water have to comply with. Rand Water Integrated Annual Report 2013 -2014 77
Principle Content Compliance Comment
5.1 The Board should be responsible Compliant An IT strategy, aligned to the corporate strategic for information technology (IT) objectives, was approved by the Board. This is governance. supplemented by an IT value proposition, IT balanced score card and a green IT strategy that are aligned to the IT strategy. 5.2 IT should be aligned with the Compliant An IT strategy, aligned to the corporate strategic performance and sustainability objectives, was approved by the Board. This is objectives of the company. supplemented by an IT value proposition, IT balanced score card and a green IT strategy that are aligned to the IT strategy. 5.3 The Board should delegate to Compliant The responsibility for the implementation of an IT management the responsibility for the governance framework was delegated by the Board
implementation of an IT governance to management by approving the IT governance
framework. framework, charter and implementation roadmap z zZ ZVVB as well as monitoring the implementation via the IT performance reports. 5.4 The Board should monitor and Compliant Significant IT investments are considered by the evaluate significant IT investments and capital investment committee of the Board, as per expenditure. the delegated authority matrix of Rand Water. The progress of these IT investments is monitored by the Board via the IT performance reports. 5.5 IT should form an integral part of the Compliant IT related risks are included in the Rand Water strategic company’s risk management. risk register, which is approved and monitored by the Board. An IT operational risk register exists and is based on the enterprise risk management framework. Operational IT risks, assessments and progress regarding the primary risk mitigation actions are monitored by the Board via the IT performance reports. 5.6 The Board should ensure that In Progress The effectiveness of information security measures information assets are managed for information assets are monitored by the Board via effectively. internal assurance reports and the IT performance reports. Information and classification as well as compliance to the POPI Act are being implemented and progress is monitored by the Board via the IT performance reports. 5.7 A risk committee and audit committee Compliant IT is a standing item on the agendas of the audit should assist the Board in carrying out and risk committees of the Board including the its IT responsibilities. financial systems report for the audit committee and the IT performance report for the risk committee. Independent assurance reports on IT are presented to the audit committee by both internal and external audit functions.
Within the Rand Water Framework, has to be compliant the Promotion of Access to Information Act No. 2 of 2000 (PAIA), Protection of Personal Information Act No. 4 of 2013 (POPI), the Regulation of Interception of Communications and Provision of Communication- related Information Act No. 70 of 2002 (RICA) and the Electronic Communications and Transactions Act, Act No. 25 of 2002. 78 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
COO PORTFOLIO ANNUAL SUBMISSION
INTRODUCTION Rand Water is the biggest water Board in Africa and continues to grow year after year, while ensuring reliable, world class quality water to its area of supply. In the 2013/2014 fiscal year, Rand Water supplied an average of 4 183 mega litres
(Mℓ) per day of potable water to our customers, up from the z zZ ZVVZV previous year’s 4 106 Mℓ per day. The peak day demand was 4 923 Mℓ/day in January 2014, compared to 4 697 Mℓ/day in 2013. Rand Water has always placed a very high premium on the quality of its water and as such has again provided water that met both the national drinking water standards as well as the World Health Organization’s drinking water quality guidelines. Central to the growth and reliable potable water supply is the operations portfolio which has four divisions as presented by figure no.1, designed to: Ensure reliable potable water production and logistics; Ensure world class quality potable water; Respond to business growth and revenue diversification; and Ensure proper systematic asset management.
Ensures reliable Ensuring continuous potable water world class quality production and logistics potable water
1. Operations 2. Scientific Services
3. Sector 4. Strategic Growth Asset Management
Responds to Ensuring proper business growth systematic assets and diversification management Rand Water Integrated Annual Report 2013 -2014 79
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
OPERATIONS The Operations Division is constantly striving towards high performance excellence in support of Rand Water’s vision, mission and strategic objectives. The operations Division is the largest division within Rand Water and is responsible for
abstraction, purification/ treatment, pumping and distributing z zZ ZVVZV of potable water in compliance to SANS 241:2005 standard. As the task of ensuring that Rand Water maintains its world class standard of providing the earth’s most precious resource to our customers is in the hands of this division, a staff complement of 1 858 has been carefully sourced from a range of diversely trained specialists in fields such as Engineering, Chemistry, Maintenance, Finance, Procurement, Risk, Health and Safety, Human Resources and Labour Relations. This was an important factor in the composition of the division in order to ensure that the major sites are equipped to meet the growing future demands of the water industry. The changes within the industry requires more innovation, efficiency and preparedness for the challenges of the future. This staff compliment is distributed with the three pumping stations (of which two has production capacity) and bulk distribution as presented by the figure below:
Vereeniging Pumping Station (with production capacity)
Bulk Water Zuikerbosch Operations Distribution Pumping Station
Zwartkopies Pumping Station (with production capacity) 80 Rand Water Integrated Annual Report 2013 -2014
Vereeniging Pumping Station The total staff complement for Vereeniging is 464 and is This was the first river intake pumping site, constructed and responsible for all activities in areas of Administration, put into operation in 1923. It is situated 37 km upstream of Operations, Maintenance, Process Quality and Risk Control the Barrage and about 2.4 km from Vereeniging city centre. Management, coordinated by a line manager. The Vereeniging Pumping Station has successfully met Rand Water requirements in regard of the potable water produced Zuikerbosch Pumping Station in the past 50 years. The plant receives its raw water from the In April 1949 Rand Water realised that the 1946 scheme Vaal River catchment. The raw water quality is acceptable (Vereeniging Station), was not sufficient to supply enough and fairly stable from this catchment. This plant is also able water to consumers after 1950, hence the establishment of to abstract from the barrage catchment although this is not the Zuikerbosch Water Treatment Plant. The Treatment Plant presently done due to the poor raw water quality. officially commenced production on 15 July 1954. At the time,
the plant was established as a base station.
The treatment plants main purpose is to remove all suspended z zZ ZVVZ particles and the inactivation of pathogenic as well as As a result of its geographical location, the site cost of the production of non-corrosive palatable drinking water abstraction is low due to its water being gravity fed as opposed according to Rand Water production specification and hence to electrical pumping to the treatment works. also meeting the SABS specification (SANS 241). The pumping plant objective is to pump the purified water to the VVS system, Zuikerbosch Water Treatment Plant comprises of four (4) Eikenhof system and Zwartkopjes system from where further Water Treatment Plants and associated pumping facilities. pumping is done to conclude the Rand Water value chain. The main activity of the site is to abstract raw water, purify it to potable water standards and pump it into the distribution The plant capacity has been increased over the years as network. There are four (purification and pumping stations at Rand Water demand has increased. Significant investment in Zuikerbosch. The different station capacities are: upgrading production capacity to sustainably produce the Station 1: 80 Mℓ/d quality and quantity required has taken place over the past Station 2: 320 Mℓ/d decade. The plant is able to treat 1 400 Mℓ of purified water Station 3: 1 000 Mℓ/d and pump 1 800 Mℓ. The plant operates 24/7 and has been Station 4: 1 800 Mℓ/d used as a base load production of 1 200 Mℓ over the past year. Further updates on production capabilities are planned as The sites purifies and supplies water to all four booster plants of Rand Water’s needs change. Rand Water; i.e. Zwartkopjes, Palmiet, Eikenhof and Mapleton.
Annually, in line with Rand Water’s infrastructure development The total staff complement for Zuikerbosch is 501 and plan, projects are initiated to upgrade and expand is responsible for all activities in areas of Administration, infrastructure at Vereeniging according to Rand Water’s Operations, Maintenance, Process Quality and Risk Control planning projections of demand. Due to the operating costs Management, each area coordinated by line managers. associated with Vereeniging and the space constraints, very limited expansion projects had been undertaken. However, Zwartkopjes Pumping Station many projects have been initiated and approved which focuses Zwartkopjes Pumping Station is Rand Water’s oldest booster on plant life extension and reliability of Potable Water supply. pumping station, established in 1907 on the Zwartkopjes farm. It has under its control Palmiet, Eikenhof and Mapleton Rand Water Integrated Annual Report 2013 -2014 81
booster pumping stations. All these sites are situated to the of supply. The Rand Water customer base consists largely of south of Johannesburg within close proximity to each other. municipalities, mines and industries. Zwartkopjes and its satellite pumping stations disinfect and boost the potable water pressures received from Vereeniging These Regions, sub-divisions and responsibilities for districts and Zuikerbosch Purification and Pumping Stations. are as follows: Zwartkopjes and its satellite sites receive an average of North Region: 4350Mℓ of potable water from Zuikerbosch and Vereeniging Forest Hill, Germiston, Benoni and Esselen Park. Purification Plants daily. South Region: The following are the daily bulk distribution of potable Amanzimtoti, Meyerton, Barrage, Bloemendal and Brakpan. water delivered by Zwartkopjes (760 Mℓ), Palmiet (1670 Mℓ),
Eikenhof (1200 Mℓ) and Mapleton (740 Mℓ). Our primary West Region:
functions as Booster Stations are to increase system pressures Zuurbekom, Libanon, Krugersdorp, Waterval and Rustenburg. z zZ ZVVZ and effect secondary disinfection. Rustenburg which used to be managed under Krugersdorp has The total staff complement for Zwartkopjes is 423 and become a stand-alone district. This change was necessitated is responsible for all activities in areas of Administration, by the growing water supply needs of Rustenburg and its Operations, Maintenance, Process Quality and Risk Control surrounding area, driven by the mining activities in the area. Management, each area coordinated by line managers. All the functions and activities of BWD are managed and co- Bulk Water Distribution ordinated from a central location called Central Depot. This is Bulk Water Distribution (BWD) is a department within the the place where all other supporting Sections are situated. Operations Division of Rand Water. BWD’s overall responsibility is to supply potable water of acceptable quantity and quality The total staff complement for Bulk Water Distribution is 534 to Rand Water’s customers at all times. and is responsible for all activities in areas of Administration, Operations, Maintenance, Process Quality and Risk Control This involves day to day operations and maintenance of Management, each area coordinated by line managers. 3 200 km of pipelines, 57 larger reservoirs, 13 tertiary pump stations and five tertiary chemical dosing plants. A total of The Process Department 1 600 Bulk Consumer meters are read on a monthly basis and The Process Section is principally an inter-station function. It these meters are the cash registers of Rand Water. acts as support to the treatment, pumping and distribution sites as follows: Bulk Water Distribution attained accreditation of one of its meter test rigs from South African National Standards (SANAS) The Process Section is principally an inter-station function. It organisation. A process is underway to get accreditation of provides support to the treatment, pumping and distribution the second meter test rig. sites as follows: Panfontein exists to accept all Water Treatment Residue The distribution area of supply is divided into three regions, (WTR) produced by the purification stations, treat this waste (West, South and North) which are further sub-divided into product, reclaim the usable supernatant water and dispose fourteen districts located strategically throughout our area of the resulting thickened WTR. It is the storage site for WTR, 82 Rand Water Integrated Annual Report 2013 -2014
thus allowing the purification stations to be able to continue chemical budget. In addition it manages water quality functioning effectively without concerns of WTR disposal. data from sites by trending, identifying and reporting Performance Monitoring and Enhancement Section is areas of concern or non-compliance to specifications that responsible for the effective use of operational energy may have long term effects on Rand Water’s infrastructure. consumption within Rand Water in order to minimise cost Total staff complement of 38. and enhance competitive positions of the Organisation. It manages all activities related to the consumption The Divisional Support Section of the operational energy with the main focus on the The Divisional Support Section provides advice and elimination of waste, maximise efficiency and optimise assistance to all sites/Sections within the division on all supply of energy. This Section is responsible for all spheres matters pertaining to: of operational energy management including: budgeting, – Finance such as budgets, variance reports
budget control, pumping loads of the pumping stations – the business planning process
to supply the consumer demand, including the budget for – Project financing z zZ ZVV raw water, training, compliance to the acts, compliance to – Performance measurement the SA Energy Efficiency codes and all technical aspects – Service level agreements, regarding operational energy management. – Delegations of authority Water Quality Services Section is responsible for managing – Audits the procurement process for bulk chemicals from an – Inventory operational perspective. It acts as the liaison link in the bulk – Procurement chemical supply chain. This Section prepares the annual The Section also offers support with regard to all Rand
Department of Water and Rand Water Municipalities Sanitation (DWS) (Water Services Provider) (Water Services Authorities)
Catchment & water Bulk Water Treatment Bulk Water Distribution Retail Water Distribution transfer schemes (Production) End Consumers
Raw Water Purification Drinking Water
Water Quality Assurance Source Water Quality Production Water Quality Bulk Distribution Retail Water Quality Water Quality
(consists of 4 Sections above) Scientific Services Scientific Services Rand Water Integrated Annual Report 2013 -2014 83
Water policies and procedures and SAP. implementation of the short-term solutions is on schedule. Together with the site Administration Managers and Risk This involves the neutralisation of the water in all three basins Control Managers this Section ensures that common and discharging the saline water into the Tweelopiespruit, standards exist across all our sites/departments in order Klip- and Blesbokspruit rivers respectively. Only the Klip- to ensure that the Division functions efficiently and and Suikerbosrant rivers will impact the Vaal River, as the effectively. This team effort has been critical in bringing Tweelopiespruit drains towards the Limpopo River. about consistency in the application of corporate standards and policies at all sites.
SCIENTIFIC SERVICES The Scientific Services division employs 144 staff members
and utilises an annual budget of about R100 million. There
are four departments within the Scientific Services Division. z zZ ZVV They are Analytical Services, Process Technology, Water Quality Specialist Services and Divisional Support Services. Our success lies in our teamwork. Each department within Scientific Services division plays a vital role in ensuring that we deliver according to our slogan: “Quality water for life!” Figure 1: Discharge of Acid Mine Drainage (AMD) into raw water resources. Water Quality Specialist Services Source Water Quality An additional concern with respect to acid mine water is the The Vaal Dam is the hub of water supply in the Vaal River rapid establishment of new mines and the high number of System. Rand Water, Sasol (Sasolburg and Secunda), Eskom pending mining applications for new coal mines to satisfy and Mittal Steel, as well as, downstream users such as irrigators, Eskom’s increased demand. Most of these mines are in the upper Midvaal and Sedibeng Water, are supplied or supported with reaches of the Vaal River’s catchment, and will destroy the lifeline water released from Vaal Dam. of Rand Water’s consumers if pollution cannot be curtailed.
The quality of the region’s water resources came under the Sewage contamination remains a major concern, apart from spotlight again during the year and received extensive media the treatment works operated by the larger metros, practically attention. This was as a result of a number of incidents and none of the works in the catchment area are operated at a discoveries made that caused major concerns about the level where effluent of acceptable quality is discharged into efficiency of the management structures and interventions the environment. related to water resources. Catchment Management The decanting of acid mine drainage from various mines in Source Water Quality staff actively engage with stakeholders the Johannesburg region received attention in the media. at Catchment Forum level to address water management Numerous television and radio programmes covered the issues. Water quality reports are produced and discussed, matter. The decanting of this water presents serious threats highlighting both “hot spot” issues as well as cumulative with respect to possible sinkhole formation and obviously trends in water quality. These reports are also shared with the pollution of receiving streams. The Cradle of Humankind DWA and are published on the www.reservoir.co.za website. World Heritage Site is also under threat. Fortunately, the Rand Water is represented on the Steering Committee for the 84 Rand Water Integrated Annual Report 2013 -2014
establishment of the Vaal Catchment Management Agency that permanent spillages and flooding are the order of the day. (CMA), as the protection of its source waters is vital to its ability to provide an uninterrupted supply of world class potable water. Compliance to effluent standards has increased significantly at some WWTW’s. The fact that action is being taken as a Due to the prominence and successes of Rand Water, the result of public pressure is comforting. It is also an indication Minister of Water Affairs has directed Rand Water to also take that awareness levels among the general public are fairly over catchment management functions in Mpumalanga as high. People are making use of the catchment forums, and part of the expansion of the organisation’s service area. information made available by Rand Water, to inform and educate them.
Monitoring
The rivers and dams in the catchments of Rand Water’s area of
interest are extensively monitored and a great deal of effort goes z zZ ZVVZ into communicating the water quality status of the catchments to the consumers. This takes place through involvement in each and every Catchment Forum and the Upper Vaal Water Management Area’s website, (www.reservoir.co.za) which is maintained by Rand Water. Rand Water fulfils the role of independent water quality “auditor” and facilitator in these forums, as it has the most comprehensive database of chemical, biological, and microbiological data. There therefore exists a high level of trust between Rand Water staff and the public. Figure 2: Raw sewage from leaking and broken manholes in the Sebokeng area, south west of Johannesburg. As a result of the increasing water quality problems, economic Eutrophication and the Vaal Barrage pressures and uncertainties surrounding incidents such as fish Although there has been a general improvement (mainly due kills, Rand Water installed a number of electronic monitoring to the engagement of Rand Water staff with authorities and units at selected sites in the Vaal and Wilge Rivers and the stakeholders), spillages of raw sewage continued to affect the Vaal River Barrage Reservoir catchments. These instruments Barrage reservoir with high levels of nutrients and faecal bacteria. measure flow at weirs as well as selected water quality variables. The instruments are linked to data loggers equipped Although an improvement in the effluent from some with cell phone technology, through which the data is sent to sewage treatment plants has already been observed, a central server. This real time information of the determinants spillages still arise from pipeline bursts and pump failures. measured is available on line to staff in the Water Quality The improvements can be ascribed to Rand Water’s vigilant Specialist Services Department of Rand Water. monitoring and reporting of spills, combined with the “Green
Drop” assessment by the Department of Water Affairs. Rand This system vastly improves response time to pollution Water’s Bulk Sanitation department has also been appointed incidents, as well as significantly improves Rand Water’s as management contractors by the Emfuleni municipality, to information base, which contributes to a better understanding manage the three sewage treatment works in the area on its of the dynamics of the Vaal River system. Some examples of behalf. Unfortunately, some of the semi-formal areas seem to be such improved knowledge base are the recent flooding in under permanent threat as sewer lines are in such a poor state the Vaal system, the occurrence of fish kills and tracking the Rand Water Integrated Annual Report 2013 -2014 85
impact of Acid Mine Drainage (AMD) on the receiving system. of directives have been issued by DWA to some of the towns in the catchment, instructing them to improve their effluent The Vaal Dam Catchment Area management from waste water works. Unfortunately this has A number of water quality issues have been identified with not had the desired effects. regard to the current water quality status in the Vaal River system. Some issues impact the full length of the Vaal River In the long-term, increased pressure is expected from while others are localised in nature. The overall trend in the population expansion and development in the Vaal River Vaal River system is one of increasing salinity levels all of which catchment, which in turn will increase pollution levels. This have and will continue to have an impact on the raw water in turn will necessitate additional measures and strategies to quality supplied to the Vaal Dam and therefore ultimately on maintain acceptable pollution levels in the Vaal River system. Rand Water’s operations.
Law enforcement regarding pollution has been practically
The increase in Total Dissolved Solids (TDS) and concomitant
non-existent for many years. A lack of human resources in z zZ ZVVZ increase in constituents such as chloride and sulphate has major government departments is the biggest concern resulting in implications on domestic, industrial and agricultural water them being unable to police the Vaal Dam catchment. It is only users. The occurrence of microbiological pollutants as localised through continuous actions of the catchment forums, Rand problems is also an emerging concern. This is indicative of Water staff and other stakeholders, that these problematic sewage works and related infrastructure not being properly areas have been highlighted and are now gradually being operated, managed and maintained. Coal mining activities addressed by the Department of Water and Sanitation and in the upper reaches of the Vaal River are rapidly increasing. local municipalities. A number of directives have been issued In addition, a huge number of additional applications for by the Department to some of the towns in the catchment, mining rights are being processed by the relevant government instructing them to improve their effluent management from departments. These are already impacting on the water quality waste water works. The establishment of the Blue Scorpions of the Vaal River, and, if not regulated effectively, will have has unfortunately not had any significant effect yet, largely similar effects on the river than what the coal mining in the due to capacity problems. Witbank area had on the Olifants River (where crocodiles have died as a result of poor water quality). Serious attention should be given by municipalities to upgrade the sewage infrastructure, minimise the ingress of Eutrophication is the other key water quality challenge in storm water into the sewer systems during high flow events, the Vaal River System and has resulted in algal blooms and and minimise operational spillages. Improved quality of growth of water hyacinth. Of importance is the fact that these the sewage effluent will contribute to the environmental blooms are occurring more frequently and more severely sustainability of the Vaal River ecosystem. than what was historically experienced. Impacts have also resulted in economic implications for water users and large The Vaal Barrage Catchment Area expenditure to control it. The Vaal Barrage catchment receives extensive volumes of water from point source discharges. The point source Municipal wastewater effluent is the principal contributor discharges include the major wastewater treatment works run to eutrophication and degradation of the Vaal River by Johannesburg Water, ERWAT and Metsi-a-Lekoa as well as aquatic system, it is also one of the impacts that are easily discharges from gold mines. The bulk of the salt load from the mitigated because they are easily identified, measured, and mines is being discharged from Aurora (formerly Grootvlei) susceptible to control by policies and regulation. A number and ERPV. There are also industrial effluent discharges, the 86 Rand Water Integrated Annual Report 2013 -2014
largest being from SAPPI Enstra, Sasol (Sasolburg) and the human populations who use the Barrage catchment river storm water runoff from Mittal Steel Vanderbijlpark. The systems for domestic and recreation uses. The occurrence of discharge volumes from the wastewater treatment plants will high numbers of E.coli, Giardia and Cryptosporidium cysts in grow with time as the water requirements grow and the level all the tributaries of the Barrage is major cause for concern. of services are improved with the expansion of water borne sewage systems in the urban areas. Regarding the eutrophic status of the Vaal River system, the Vaal River downstream of the Vaal Dam is severely impacted The two most important water quality issues to be managed resulting in degradation of ecological integrity. It must be in the Barrage catchment for most of the sample points are noted that the Vaal Barrage catchment is described as a serious biological (in the form of faecal coliforms) and chemical (in “hotspot” with the highest levels of pollution (bacteria, algae, the form of gold mining and industrial impacts through heavy metals, salts and nutrients) recorded throughout the
manganese, sodium and sulphate). The threat of acid entire Vaal River system. The pollution levels in the Klip River
mine drainage (AMD) will hopefully be partially mitigated and Rietspruit catchments of the Vaal Barrage catchment are z zZ ZVVZ through the implementation of the short- to medium term unacceptably high and the scale of nutrient inputs far exceeds interventions by the Department of Water Affairs. Irrespective the capacity of the natural environment to assimilate the of the quality of such water, these decants will have major waste discharged into these river systems. effects on the overall hydrology of the catchment. The Central Basin neutralization plant was scheduled to be commissioned Rand Water still successfully and vigilantly implements the towards the end of the reporting period, with TDS values > Vaal River Complex Structure Plan of 1996, which provides 4,000 mg/ℓ expected to be discharged into the Vaal Barrage guidance for the control over development in the riparian zone via the Klip River catchment. of the Barrage reservoir. The purpose of the structure Plan is to protect the river from dense urbanisation on the banks, which The more difficult issue of water quality management is that presents a pollution risk to the water. Although the Structure of controlling diffuse sources of pollution. In this regard, the Plan requires consensus for the approval of development biological impact of uncontrolled wastewater runoff from plans from various municipal and government offices, Rand informal settlements, burst pipes due to lack of maintenance Water is often the only party to oppose development and and general lack of waste management has seen deterioration accordingly has been experiencing more and more pressure over the year in biological water quality. to relax its stance in this regard. In the interest of protecting the Vaal River system, however, Rand Water has maintained stringent application of the relevant legislation.
As part of its commitment to providing factual and relevant information, Rand Water staff regularly provides input and comment on various Environmental Impact Assessments (EIA’s) that occur within its area of interest. This is done by linking up with various departments within the organisation to provide effective comment to the EIA process thus ensuring that water resources are effectively protected and not significantly degraded through developmental impacts. Figure 3: Burst manholes in the catchment and poor infrastructure Thismaintenance can and result will in leadthe continual to potential discharge harmful of raw sewage effects into on the Whilst formal channels, such as the EIA process allows Rand the river systems of the Vaal Barrage. Rand Water Integrated Annual Report 2013 -2014 87
Water to interact with stakeholders and developers, more Water quality in the bulk distribution network informal interactions take place on a daily basis where staff Water Quality Supply to Local authorities are on site investigating pollution incidents, meeting with The supply of good quality potable water is of highest priority municipal staff or providing direct assistance to stakeholders. to Rand Water. To this effect, Rand Water provides water that It is through these interactions that a high level of trust has is safe for human health for lifetime consumption. Rand Water been developed between Rand Water staff and the public places a high premium on public health protection. To ensure often to the point where Rand Water has been asked to this, Rand Water has adopted the SANS 241 drinking water mediate between disputes. Numerous requests for Rand quality standard for compliance with national legislation Water data are also received on a regular basis to assist in for the delivery of safe drinking water to local authorities solving pollution incidents as the organisation’s information and commitment to Blue Drop Regulation certification is viewed as being credible and unbiased. requirements. This was achieved by implementing stringent
water quality monitoring and assessments throughout
Production Water Quality Assurance Rand Water’s entire supply chain. The drinking water quality z zZ ZVVZ Rand Water has extensive measurement capacity consisting of delivered to Rand Water local authorities during this financial three ISO9001 certified site labs, over 500 online instruments year was of acceptable quality. All physical, chemical and and an ISO17025 accredited laboratory. Extensive monitoring biological health related parameters were compliant to SANS programmes have been documented and complied to. 241 drinking water quality standard. To enable improved water The online instrument upgrade programme for the two quality monitoring, an online instruments upgrade programme production sites of ZB and VG has been completed. An is in progress for the Booster sites. Additionally, a plan to install online instruments upgrade programme is in progress for the online instruments in the bulk distribution network is currently Booster sites. An online instrument upgrade programme is underway. being planned for the distribution network. Water Quality Benchmarking Water Quality Management System One of Rand Water’s water quality verification activities is to Rand Water is committed to a documented systematic benchmark itself against international organisations to ensure risk based water quality management system. In line with that the current activities are in line with the industry best this, a Water Quality Safety Plan (WQSP), which is based practises. In order to conduct water quality benchmarking, on Hazard Analysis and Critical Control Point (HACCP) and Rand Water has selected the World Health Organisation (WHO) ISO9001 principles, has been documented and the fourth water quality guidelines to benchmark itself against. Rand revision completed as part of continuous improvement. A Water’s results compare favourably with the WHO water quality detailed water quality risk register has been established and guideline. the fourth revision completed. In addition, an organisation wide multi-stakeholder water quality management standing Independent external audit on water quality supplied committee has been functional for the last 11 years, which To ensure confidence of customers in the quality of the water meets on a monthly basis. The organisation was audited supplied by Rand Water, an independent water quality audit by the Department of Water and Sanitation for Blue Drop is conducted monthly. This is another safety barrier that Rand certification. The results of the audit have not yet been Water has put in place to reinforce customers’ confidence that released; however provisional feedback report from DWA was the water that they receive from Rand Water is indeed safe for positive. human consumption. The organisation subjects itself to an independent system to assess water quality supplied to local 88 Rand Water Integrated Annual Report 2013 -2014
authorities via an external party. This audit is facilitated by an compounds have been detected at levels that are a concern external ISO 17025 accredited analytical facility (auditor) who to human health. Monitoring of organic parameters is performs all the required South African National Standard subject to an ongoing investigation as the measurement of (SANS 241) for drinking water analyses on randomly selected these parameters is complex, and new emerging organic samples within our supply system on a monthly basis. contaminants are being discovered often and limited analytical capacity is available in South Africa. The selected company acts independently of Rand Water and any parties that conduct water quality monitoring in Rand Department of Water and Sanitation Blue Drop System Water’s distribution network. During the current financial The Department of Water and Sanitation has established the year, the Council for Scientific and Industrial Research (CSIR)’s Blue Drop System (BDS), which enables the department to Analytical Services team was used. The results obtained by monitor the performance of every Water Services Institution.
the auditor as assessed against the SANS 241: 2006 national All Water Services Institutions should register and upload
standards indicate that Rand Water has delivered safe and information such as supply systems, laboratory used for z zZ ZVVZ wholesome water to its customers during the year under analysis, water quality monitoring programmes, process review. controllers and data, to mention few, on a continues basis. Rand Water’s information is being updated on the system Organic contaminants continuously as per the BDS requirements. The occurrence of organic contaminants in the drinking water value chain (from source to tap) is a growing concern for the Retail Water Quality drinking water industry and its consumers given the adverse Consumer Complaints health risks these contaminants can cause to the general public. There were thirty one consumer complaints that required These adverse health effects include endocrine disruption, further technical investigation by Rand Water during the 2013- toxicity, teratogenicity, mutagenicity and carcinogenicity. In 2014 reporting period. These complaints are summarised in the interest of public health, monitoring programmes have the Table on Page 89. The majority of the complaints were been developed for an extended list of potential organic related to the aesthetic quality of the water (taste, odour and contaminants. The identified organic contaminants include colour). All of the consumer complaints were successfully industrial chemicals, pesticides, disinfection by-products addressed and reported to the relevant local authorities. An and cyanobacteria toxins. An assessment of the identified increasing number of consumer complaints are being referred contaminants is conducted biannually in order to determine to the relevant local authority technical staff for further potential risks to customers. investigation, as the level of competence of staff in these authorities has improved over time. Results of organic compounds that have been assessed in the Rand Water drinking water value chain. None of these Rand Water Integrated Annual Report 2013 -2014 89
Consumer Complaints July 2013 - June 2014
Thembisile Metsimaholo
Merafong Aesthetic: Colour/Visual Aesthetic: Taste Midvaal Aesthetic: Odour Johannesburg Water Aesthetic: Taste and odor Tshwane Health Govan Mbeki Chemical Municipalities Inverterbrates
Westonaria
Water Quality z zZ ZVVZ Ekurhuleni
Emfuleni
Mogale City
0 2 4 6 8 10 12 Number of companies
Examples of some complaints investigated: Investigations revealed that the problem originated on site as Complaint 1: Chemical the RTT samples had distinct chemical smell and Ekurhuleni Representative from RTT logistics complained of a chemical samples had no smell (the water supplied was SANS 241 smell coming out of their taps. The company employs more compliant). Municipality supplied RTT with water tankers. The than 5 000 employees. Rand Water visited the site together problem on site was due to the refurbishment of drinking water with officials from the municipality. Samples were collected tanks that were recently painted (resulting in chemical leaching from: from paint coating). Water analysis carried out confirmed the Sample points in the area (suburb); presence of organic compounds (1-ethyl-4methylbenzene, Ekurhuleni supply to the site; and benzofuran). Number of samples at different locations on site. 90 Rand Water Integrated Annual Report 2013 -2014
results of the water coming from the tap complied with the Complaint 2: Water Quality required SANS 241 drinking water standard. Consumer was A representative from the municipality contacted Rand Water informed of the results and he was satisfied with the response to assist with the complaint investigation. The community and the action taken by Rand Water. complained that the water supplied via water tankers had a bad taste and smell. Investigations carried out by Rand Water Complaint 4: Invertebrates together in the presence of a municipal representative revealed Consumer found a worm in her water when she poured water that the water tankers were recently cleaned and refilled by into her favourite cup. Tap water sample from the tap was taken the Municipal service provider. Presence of high pH from the and the worm was taken for identification. The results of the samples taken was an indication that the solvent used to clean water taken did not show any reason for concern (it was SANS the tankers was not properly rinsed out. 241 compliant) and the worm was identified as Dipteral species (common fly family i.e. two winged insect including flies,
Complaint 3: Water Quality midges and mosquitoes). There was no evidence linking the fly
z zZ ZVVZ Consumer reported that when he filled a glass of water to take with the LA and Rand Water supply. to bed at night, it sometimes happened that in the morning the water had turned black. He kept the sample and insisted that Consumer Complaints Service Evaluations the matter be further investigated and for Rand Water to find The service evaluations done by customer services department the cause of the problem. Investigations carried out by Rand on the complaints investigated indicated that complainants Water revealed that the black particles were fungi (emanating were satisfied with the action taken. These were some of the from the environment inside the residence) that accumulated direct comments from customers. and contaminated the open water overnight. The water quality
“I appreciate that Rand Water and the municipality are working on the problem” “It is relieving to know that the water is safe to drink” “The Rand Water people were very accommodative and helpful” “I appreciate all the attention given to my problem” Rand Water Integrated Annual Report 2013 -2014 91
Tap Analysis Programme The Tap Analysis Programme has been operational for 16 years. This voluntary programme monitors water quality in the households of the end consumer. The programme monitors 73 sample points covering 12 municipal areas that are supplied by Rand Water. Municipalities participating in the tap programme use the water quality data generated through the program as part of their water quality monitoring programme. The data collected confirms the excellent water quality that is supplied to the end consumer. The Programme is reviewed annually to include areas not covered within our area of supply. The figure below shows the Tap programme coverage in Rand water area of supply.
Moretele Moretele Kgetiengrivier Local Municipality of Madineng
Kgetiengrivier
City of Tshwane z zZ ZVVZ Local Municipality of Madineng Rustenburg
Mogale City
City of Randfontein Johannesburg Ekurhuleni Delmas
Emalahlani Delmas Merafong Westonaria City Ventersdorp Lesedi Govan Mbeki
Emfuleni Midvaal Toikwe City Council
Metslmaholo
Ngwatna
Technical Meetings Water Quality Technical meetings are being held bimonthly, between the Water Quality Specialist Services Department and municipalities within Rand Water’s service area. These meetings were initiated in 2007 with the bigger municipalities and then expanded to include most of the municipalities in the Rand Water supply area. We are currently holding these technical meetings with all eighteen municipalities within our service area. The meetings with eighteen customers are scheduled to take place bimonthly or quarterly, depending on the agreement between Rand Water and individual municipalities. The aim of these meetings is to assist the municipalities to improve on the management of drinking water quality. As bulk supplier, Rand Water assists municipalities and ensures alignment in water quality aspects to meet the blue drop requirement though the technical meetings. 92 Rand Water Integrated Annual Report 2013 -2014
Municipalities Assessed Year of Assessment % Blue Drop score Rand Water Interventions
Year 2009 2010 2011 2012
1. City of Johannesburg 100 98.38 97.69 98.92 2. City of Tshwane 95 96.36 97.22 99.2 3. Ekurhuleni 96 96.83 97.44 98.95 4. Emfuleni 72 95.75 96.42 96.87 5. Lesedi* (lesedi main) NA 58.82 87.12 93.24 Rand Water assisted with the improvement of drinking water management system through technical meetings. Lesedi (Devon) NA NA 89.72 93.65 Rand Water assisted with the improvement of drinking water management system through technical meetings.
Lesedi (Endicott) NA NA 87.77 93.65 Rand Water assisted with the improvement of drinking
water management system through technical meetings. z zZ ZVVZ 6. Midvaal 60.5 76.25 85.73 85.95 Rand Water assisted with the improvement of drinking water management system through technical meetings. 7. Mogale city 92 97.75 97.32 98.79 8. Randfontein 64 87.31 95.24 97.54 9. Westonaria(1) Westonaria: Bekkersdal NA 88.28 84.37 95.29 Westonaria: Glenharvie NA 88.28 84.42 95.29 Westonaria: Suurbekom NA 88.28 84.42 84.42 Rand Water assisted with the improvement of drinking water management system through technical meetings. 10. Merafong* Carltonville NA 77.34 86.41 95.26 Fochville NA 77.34 86.36 89.05 Rand Water assisted with the improvement of drinking water management system through technical meetings. Wedela NA 77.34 86.98 90.76 Rand Water assisted with the improvement of drinking water management system through technical meetings. 11. Metsimaholo NA NA 43.06 94.18 Rand Water assisted with the improvement of drinking water management system through technical meetings. 12. Delmas - - - - Technical meetings established. 13. Ngwathe NA 48.16 68.45 54.73 Technical meetings established. 14. Thembisile NA 39.88 27.77 70.91 Technical meetings established. 15. Rustenburg 59 95.1 95.69 95.14 Rand Water assisted with the improvement of drinking water management system through technical meetings. 16. Madibeng - - - - Technical meetings established. 17. Royal Bafokeng Adm - - - - Technical meetings established. 18. Govan Mbeki NA 78.88 77.59 77.55 Rand Water assisted with the improvement of drinking water management system through technical meetings.
*Municipalities (17 municipalities + 1 administration body), NA= Not assessed Rand Water Integrated Annual Report 2013 -2014 93
Mpumalanga Phase 1 – Bushbuckridge Water Rand Water Rand Water Analytical Services is comprised of dedicated, On the 1st April 2014 the Minister of Water Affairs dis- ISO 17025 accredited facilities, with four main laboratories: established the Bushbuckridge Water Board and directed Microbiology, Hydrobiology, Organic Chemistry and Rand Water to take over the supply of bulk potable water in Inorganic Chemistry. Each of these laboratories remain fully the BBR demarcated area of supply. The area of supply covers accredited by SANAS (South African National Accreditation Bushbuckridge and Mbombela Local Authorities which form System) demonstrating their compliance to international best part of the Ehlanzeni District Municipality, 15 Water Treatment practices with respect to the production of analytical data. Works (WTW), with a treatment capacity of 220 Mℓ/day supply In addition, these laboratories participate in various national water to 1, 5 million people. and international proficiency testing schemes to monitor their performance against peer laboratories, thus demonstrating Field assessments of all 15 WTW’s, including raw and final confidence in their technical competence and data integrity.
water quality assessments have been undertaken as part of a due diligence exercise. A consolidated status quo report will Together, these four laboratories test for the suite of analyses z zZ ZVVZ
form the foundation of future action plans to optimise water as stipulated in the South African National Standard for quality assurance in this service area. potable water (SANS 241). Over and above this standard, these laboratories also analyse Rand Water’s samples to check Analytical Services for water quality compliance with international standards as Water quality at Rand Water is managed throughout the defined by the World Health Organisation. value chain, beginning in the catchment, following up at the purification stations, continuing into the distribution network The Inorganic Laboratory has recently finalised the and culminating at consumers taps. This rigorous program optimisation of the laboratory process flows in order to entails proper sampling from all designated sample points, expand analytical capability to accommodate additional followed with testing of the water samples by Rand Water workloads arriving from various Waste Water Treatment Analytical Services, which is Rand Water’s fully accredited Plants. These efforts are to support the expansion of Rand laboratory. Each year many thousands of samples are taken Water into the sanitation sector. The Inorganic laboratory in this manner, and data obtained on these samples are used produces data on metals, trace elements, ionic content, and to monitor and manage water quality, ensuring the consistent the aesthetic qualities of water. The newly introduced process supply of safe and healthy drinking water. The water quality flows segregate the production of data for potable water from data produced by Rand Water Analytical Services underpins that for waste water. the water quality assurance programme. The complexities developing in the catchment with respect Throughout each twenty four hour shift, production staff to water quality are providing significant challenges to the at the purification stations and booster sites also produces Organic laboratory. Parent compounds and metabolites of an water quality data on basic variables, and this data is utilised array of pharmaceutical products and cosmetics have been by operators for quality control purposes. Similarly, each detected in certain waste streams. The Organic laboratory production site at Rand Water has on-line instruments therefore embarked on analysing for endocrine disruptor producing data on basic variables, throughout each day and compounds to pro-actively monitor for the prevalence of each night. The reliability of all this water quality data is assured these compounds. Although Pharmaceutical and Personal by Rand Water Analytical Services, with the coordination of a Care Products (PPCPs) and Endocrine Disruptor Compounds proficiency testing scheme and related technical support. (EDCs) are not regulated in the supply of potable water in 94 Rand Water Integrated Annual Report 2013 -2014
South Africa, Rand Water has pro-actively embarked on All four laboratories support a variety of skills development monitoring for these compounds in its supply chain. programs, including experiential student training, bursars, and graduate development (Rand Water internal graduates The focus of the Hydrobiology laboratory is aquatic toxicity, and National treasury graduates). These initiatives require algae and algal toxin monitoring, aquatic invertebrate significant effort and resources from the laboratory to assessment and aquatic bio-monitoring. Scientists from the accomplish required goals. To comfortably accommodate all Hydrobiology laboratory are collaborating with North West such students, a student office was recently created in the University and the University of Adelaide, Australia on the laboratory building. predictive modelling of toxic cyanobacteria in source water. Recent developments with the water authority in Singapore Process Technology have initiated collaboration between water operators at the The Process Technology Department seeks to pro-actively
Singapore utility and Rand Water Hydrobiologists to assist influence the choice of water treatment solutions at Rand
operators in Singapore with invertebrate monitoring. Water in order to facilitate the production of the best quality z zZ ZVVZ water at the least cost. This entails the identification and The Microbiology laboratory focuses on analysing water implementation of the most appropriate technology in samples for bacteria, protozoans and viruses. The classical combination with the most advantageous treatment regime. techniques used in this laboratory are gradually being replaced by technologically advanced molecular techniques. Key projects undertaken and focus areas in the year under review: This change over provides for rapid detection of organisms with the confidence required of such analytical tests. The Evaluation of Water Treatment Chemicals microbiology laboratory developed and implemented a new One of Process Technology’s core functions is to verify the molecular based method for the rapid detection of Vibrio technical suitability of water treatment chemicals currently cholerae in water. The newly implemented method was also in use at Rand Water. Comprehensive evaluations undertaken successfully accredited by the accreditation authority. This on chemicals submitted for tender purposes in this review laboratory has also introduced a method for the genotyping of period included polyacrylamide for the thickening of water protozoans which positions the laboratory to forewarn Rand treatment residue, polymeric based coagulants, powdered Water of potential threats in raw water quality. Laboratory activated carbon, ferric chloride and fine filter sand. staff engages in collaborative work with their peers both nationally and internationally, and also present their findings The Department also conducts an on-going review of alternate at various conferences. chemical treatment options in order to ensure that Rand Rand Water Integrated Annual Report 2013 -2014 95
Water utilises the most appropriate treatment regime. Two Process Optimisation projects relating to alternate chemicals were undertaken in In keeping with topical issues in water quality and treatment 2013/14, being an empirical assessment of a rare earth metal options, an investigation using recently developed techniques coagulant for primary coagulation and the continuation of the for the fractionation of natural organic matter (NOM) was assessment of chlorine dioxide as a potential co-disinfectant. undertaken. The study monitored NOM in the source water An experimental pilot scale system has been constructed for and its removal through the treatment process. A further pilot the latter investigation which is scheduled to be completed by scale investigation into the application of granular activated June 2015. The outcome of the study on the rare earth metal carbon (GAC) showed that the removal efficiency of NOM coagulant indicated that the current coagulation regime is increased by 20%, chlorine demand decreased by 37% and still valid as it outperformed the rare earth product in terms of total trihalomethanes (THMs) decreased by 58%. both turbidity and colour removal.
Process Technology conducts plant capability assessments on
Water Quality Investigations an annual basis as a requirement of the Blue Drop assessment. z zZ ZVVZ A project team, comprising representatives of various Identified parameters of concern included aluminium, colour, disciplines and departments, was established to implement dissolved organic carbon, iron, nitrate/nitrite and turbidity. real time water quality monitoring throughout the distribution The current water treatment process was found to be quite network. Process Technology serves in a technical and capable of meeting the SANS 241 drinking water quality advisory capacity on the team overseeing the specifications standard. Water treatment processes for future consideration for related instruments. include the natural organic matter removal methods.
An investigation into the prevalence of antibiotic resistant Alternative Treatment Technology bacteria (ARB) in the Rand Water network was conducted on Evaluation of alternative water treatment options is source and final water. The study was a qualitative approach continuously conducted at Process Technology. Currently to screen for the presence of ARBs. Quantification of the ARBs membrane technology is being evaluated for potable water that impact on treatment process, water quality and public production. A pilot plant consisting of hybrid coagulation and health is still being investigated. a submerged ultrafiltration membrane process for potable water production was commissioned successfully. The A project on biofilm monitoring in conjunction with the pilot plant consists of an adsorption pre-treatment process Strategic Asset Management Division is in progress. The using powdered activated carbon (PAC) and coagulation/ investigation is conducted on a dedicated pipeline (referred flocculation followed by a membrane filtration step. It will be to as the R5 pipeline) designed and commissioned by the SAM used to evaluate the treatment of Vaal Dam water to potable division for research and development. The total length of the standards. This hybrid process will also be investigated as an pipeline is 13 km. The pipeline consists of two different types alternative process for filter backwash water treatment. of antimicrobial pipe linings including epoxy. The objectives of the investigation include quantification of various aspects Water Wise Education relating to hydraulic capacity, water quality, disinfectant “We’re coming to you live from our studio in Johannesburg depletion and biofilm formation. Strategic Asset Management South Africa. Don’t pick up your remote and change the is currently busy with the design of the biofilm sampling channel because this is something you don’t want to miss… device. It’s time for Lady Blue, our hard core Eco Warrior and her fantastic talk show guests on her show ‘Love and Respect’,” boomed the voice over the loudspeaker. 96 Rand Water Integrated Annual Report 2013 -2014
Jewish National Fund (Walter Sisulu Environmental Centre, Mamelodi) and Walter Sisulu National Botanical Garden, Roodepoort.
During the year under review 582 programmes, roadshows and exhibitions were held with 66 548 learners, teachers and adults. The quality of the education service, as evaluated by teachers, was 95.3% which proves that the team continues to offer an educational service that the teachers and learners are satisfied with.
Apart from the regular programmes offered at each of the
Water Wise Education Centres there have been a number of z zZ ZVVZ highlights for the 2013/2014 financial year: The Human Resources Department approached the WWET for assistance with the Johannesburg South Career In this financial year the Water Wise Education Team (WWET) Expo which was held in Orange Farm at the end of July. embarked on the development of a new Water Wise Roadshow From 29 July to 2 August 2013 workshops were facilitated for schools programmes. The roadshow takes on the form of at ArcelorMittal for Science Week. There was a good the audience watching a television and changing the channel turnout from nearby schools and an adult group from the to three different shows: Adult Education Centre attended the workshops. ‘Love & Respect Talk Show’: where the six meanings of National Science week was run from 29 July to 2 August being Water Wise are interactively discussed; in Secunda at the Osizweni Centre. WWET staff worked ‘The Wheel of Life Game Show’: where teams of children hard and helped many learners understand how water are asked water-related questions for points and to win is purified by Rand Water in the hope that they would the Water Wise Life Saver Trophy; and conserve it for future use. ‘In Search of Blue Talent Show’: where Manzi is a finalist in The annual Sasol Techno X Exhibition in Sasolburg took a talent show and is competing against Dewdrop, a hippy place from 19 to 23 August. The WWET ran 2 workshops flower child. per day at the Vereeniging Purification Station; had an The whole WWET was involved in the development of the new onsite exhibit entitled “The Science behind Water Wise roadshow, from script, to songs, to soundtrack, to training Gardening”; and performed Manzi’s Water Wise Roadshow DVD. It has been a great interactive experience for the whole every day. The team also worked closely with Sasol New team and they have bought into the new roadshow with a Energy on the “Water Sense: Busa Metsi” stand, where an great deal of enthusiasm. The team will start implementing industrial theatre and “How to fix a leaking tap” activity, the roadshow from the next financial year where it will be used developed by the WWET, was used to educate learners. The as a stand-alone roadshow and facilitated at the end of every Sasol New Energy stand won third overall place in the Sasol school programme. This roadshow is another entertaining Best Exhibit Awards thanks to the super teamwork between activity added to the many activities already offered at the five the WWET and Sasol. Through these partnerships the Water Water Wise Education Centres, namely: Wise message is spread even further. Delta Environmental Centre, Victory Park; On 18 and 19 September Arbor workshops were held Rand Water Nature Centre, Glenvista; at Reahile and Rondebuilt Primary schools. The schools Vereeniging Purification Station; planted trees which were donated and the WWET helped Rand Water Integrated Annual Report 2013 -2014 97
and taught learners how to plant trees and care for trees. water quality. The WWET team facilitated an interactive The team facilitated Blue Droplet workshops in partnership exhibit over the three days educating the public on the with Ekurhuleni Municipality in places like Kwa Thema and importance of being Water Wise and looking after rivers. Tsakane. The event was officially opened on 5 October, Saturday by The Mazda Wildlife Fund vehicle sponsorship contract at Mr Karl Lubout (RWQS) from Rand Water. All shirts hung Delta Environmental Centre was extended for another on the line were donated to various charities in the Vaal year. Many thanks to the Mazda Wildlife Fund for their area. ongoing support. The team facilitated a Water Wise Roadshow on Coca-Cola Canners of South Africa donated rainwater 27 September during the Blue Drop Conference which harvesting tanks to Monde Primary School due to the was held at the Emerald Hotel in Vanderbijlpark. WWET’s working relationship with them. For Maths Week the team facilitated workshops at
The facilitation of the Life Sciences project at the Rand Sci-Bono Science Centre from the 14-18 October 2013.The
Water Nature Centre and at Delta Environmental Centre, in workshops were on water quantity auditing and water z zZ ZVVZ partnership with the Gauteng Department of Education, saving. The workshops also assisted learners in grade 4-7 has been a great success with many schools requesting with mathematical conversions. this service. There is a huge demand for this programme. The annual Christmas for Kids function was held on five The WWET took time to support the Rhino Day celebration December for Etelang Pele Community Services. It was on 21 September 2013. The day was organised by the biggest Christmas for Kids event held in the seven SANParks and the Gauteng Alliance schools were invited years of its running with over 300 children being treated to the march which was in Pretoria. to a special Water Wise day, a Christmas party, and In September, staff performed a roadshow in partnership gifts sponsored by Rand Water staff. Thanks to all that with Lesedi Local Municipality. They are looking forward contributed and participated on all levels. to working with the WWET on future programmes. The team staff assisted Corporate Communications with The WWET assisted the Vereeniging Station with their an exhibit and a Manzi “Meet and Greet” at the Randfontein Arbor Day Celebrations by partnering with them and show on 1 and 2 March where 2 000 people from various helping to educate the staff and boys at the Emfuleni Boys ages and backgrounds were exposed to Manzi and the six Shelter in Vanderbijlpark on how to be Water Wise. Staff Meanings of Being Water Wise. also got their hands dirty by “digging in” and helping to prepare vegetable beds and plant vegetables. The annual Vereeniging Clean-up Campaign took place on 26 September and was well attended by staff children with approximately 100 participants. Many bags of refuse were collected and disposed of properly. The WWET were involved in breaking a world record on the weekend of 4 to 6 October at the Rotary River Festival held at Stonehaven on Vaal. The World Record was for the longest washing line (5km) over an open water source with almost 7 000 shirts hung on the line. The initiative was organised by the Rotary Club and the main sponsor was OMO who also launched their phosphate free washing liquid which could have positive impacts on raw Rand Water was approached by Unilever to assist them in 98 Rand Water Integrated Annual Report 2013 -2014
developing an interactive educational presentation in line taking shape as the present facility is too small to cope with the Grade 1-7 school curriculum for “The Omo Water with the school groups that are hosted there. Wise Challenge”. The WWET developed an interactive Nicole Fergusson, who was the Water Quality Advisor – presentation and trained up the OMO EcoReps in order Education at Delta Environmental Centre, immigrated to to facilitate the presentation in Gauteng, KwaZulu-Natal, Australia at the end of 2013. Mr Tumi (William) Nissel has Eastern Cape and the Western Cape. Further to this taken over the position at Delta from 1 April 2014. The educational initiative schools were also encouraged to WWET welcomes him to Rand Water and the WWET. collect the caps of Omo and Skip bottles and the schools with the highest number of caps collected could win a The team also developed a number of Water Wise education rainwater harvesting tank for their school. Water Wise materials: branding was on all the material distributed to schools as Four advertorials in the Spur Restaurant’s Totem Magazine
part of the challenge. for September, December, April and June.
During Water Week in March Spoornet invited the WWET Afrikaans Water Wise worksheets on the Classroom z zZ ZVVZ for a Water Wise Roadshow for their staff in Pretoria and website and the Water Wise website. Germiston. Colouring in activities for nursery school learners. A water awareness campaign was held with 11 schools A Water Wise booklet for Foundation Phase. in the Kagiso and Randfontein area together with the Department of Education and Library Services. Two Water Wise Holiday Programmes for staff children were The annual Yebo Gogga exhibition at Wits University took organised for the financial year: place from 14-18 May with the theme “Rainbow World” The December 2013 Holiday Programme was to with WWET’s theme being “Rivers are Rainbows of Life”. Honeydew A-maize-ing Mazes. After the maze activity the This exhibition consisted of a 6 m hexagonal tent which learners came back to Rand Water to view the “Pollution had an image of a river from mountain to sea on the Revolution” Industrial Theatre; and outside and an underwater scene on the inside, which The April 2014 Holiday Programme was to the Boswell depicted the impacts of human activities on the river. 219 Wilkie Circus in Daleside. visitors visited the Yebo Gogga exhibition. World Environmental Day was celebrated in Atteridgeville, The Water Wise Education Team will continue to develop new Tshwane on 5 June together with a range of partners. The edutaining methodologies in order to spread the Water Wise educational service of the WWET was exposed at this message to all its young customers. exhibition. A cleanup of the Braamfonteinspruit took place on 7 June which was organised by the community. The WWET undertook water quality testing activities with the scouts. 18 schools attended a Gauteng Environmental Education Alliance annual youth seminar at Marakele National Park from 27-29 June. Learners presented their green school projects and they also had discussions around environmental issues with the theme being “Climate Change”. The lapa at Rietvlei is being revamped so that the WWET based at Rietvlei can have a decent large facility in order to host school groups. The plans for a new Water Wise facility in Vereeniging are Rand Water Integrated Annual Report 2013 -2014 99
STRATEGIC ASSET The KPA’s are listed in the table below, grouped under the MANAGEMENT areas of strategic planning, enablers and controls, execution A defining feature of utilities such as Rand Water is the size and assess/improve. and value of infrastructure or fixed assets in relation to annual turnover, and the intention to maintain these assets Asset Management Key Performance Areas indefinitely to provide specified levels of service. It follows Rand Water’s infrastructure is a multi-billion rand asset that that proper management of fixed assets is a key success factor needs to be managed and leveraged in order to extract of the utility – supporting achievement of agreed service maximum value, and monitored to minimise risk. Although levels to customers at minimum long term cost. 60% of infrastructure expenditure work currently takes place in the form of augmentation to meet the growth in demand,
Asset Management is the systematic and coordinated the remaining 40% covers renewal projects that replace or
activities and practices through which Rand Water optimally extend the life of existing assets, reduce operating costs,
improve treatment processes or enhance plant safety. z zZ ZVVZ manages its assets, their associated performance, risks and expenditures over their lifecycles for the purpose of achieving its organisational strategic plan. It is a relatively As Rand Water enters a more mature phase, demand growth is new formalised way of conducting business adopted by projected to continue, but with a long term decline in annual world leading infrastructure companies. It is a holistic and growth rates. Due to a period of rapid growth in demand, much integrative approach to the managing of assets over its whole of the infrastructure capacity has been added in the last few life, from inception to disposal. It is a strategic discipline which decades. As rates of growth slow, the rate of adding infrastructure enhances the quality of decisions made by organisations with will slow, and the average age will increase. However, as long as regards to its assets. there is growth in demand, the total capacity and replacement value of existing infrastructure will increase.
Typical results achieved by the effective implementation of Asset Management are: In order to create clear accountability for lifecycle management Increases in customer satisfaction, sustainability, profitability, of this growing, ageing asset base, the Assets Department availability, reliability, maintainability, resilience, flexibility, will coordinate lifecycle Asset Management practices. Best compliance, efficiency, effectiveness, safety, etc. practice will be confirmed for design, operation, maintenance, Decreases in life cycle cost of assets, capital expenditure, rehabilitation and disposal of assets. Management of operational expenditure, supply failures, asset failures, the existing assets will be planned in conjunction with unplanned shutdowns, carbon emissions, etc. augmentation to meet demand growth.
The international standard, ISO 55000, specifies requirements Progress to-date for an organisational asset management system, and was The following achievements confirm the progress made in formally published in January 2014. Rand Water has targeted setting up and improving structured and auditable asset accreditation in terms of ISO 55000 by 2016. To check on management practices: progress, external asset management maturity assessments The Blue Drop assessment requires plant condition and were carried out in November 2012 and June 2014. These performance assessments and, where applicable, capital assessments confirm steady progress on 17 KPA’s, measuring investment plans, to confirm that plant will be able to all asset related activities across the organisation, whether continue providing required levels of service. The 2014 strategic, operational, financial, IT, HR, SHERQ or other Blue Drop assessment confirmed an A+ rating for asset business component. management within Rand Water. 100 Rand Water Integrated Annual Report 2013 -2014
The technical asset register is being expanded to provide Rand Water is ensuring it is ready for the demands of 2030 more detailed coverage of all asset categories, to a and beyond by focusing on infrastructure renewal and level enabling lifecycle management of infrastructure development. Rand Water works on a 20-year planning components based on design life, maintenance horizon for projects, driven by forecasts of future water requirements and other key criteria. The adequacy of the consumer needs and the need to maintain the capacity of asset register for these purposes was also included in the existing infrastructure. This involves analysis of trends and Blue Drop assessment. usage patterns, assessment of condition and performance Lifecycle strategies are being developed for all key of infrastructure, compliance with evolving legislation, and asset classes, including expected rates of deterioration, discussions with various stakeholders on their expectations. maintenance and capital refurbishment or replacement Planning and management of assets is undertaken on the interventions. This supports, inter alia, a 20 year view basis of supply systems, matching system capacity with of capital expenditure for the organisation. The capex projected customer requirements:
forecast is based either on identified projects, or on current z zZ ZVV condition, projected design life and replacement values. Rand Water primarily draws raw water from the Vaal River System. An Asset Management Steering Committee has been Two river stations – Zuikerbosch and Vereeniging – abstract, purify established as a sub-committee of the PIC. Representatives and pump into the network some 98% of the water supplied to on the AM Steercom cover most areas of the business, take our customers. About 90% of this water is further pumped by responsibility for assigned KPA’s, and monitor progress four primary booster stations situated on the southern side of towards improvement targets. the Witwatersrand ridge. The portions of the network supplied by each pumping station are indicated by colour coding all significant Infrastructure customer supply points on the map as follows: Rand Water operates a network of 3 500km of pipelines, two Zuikerbosch / Vereeniging direct – southern Gauteng and large combined pumping and purification stations (situated northern Free State (localized), in addition to supply to all at Vereeniging and Zuikerbosch), four main booster pumping booster pumping stations. stations (Zwartkopjes, Palmiet, Mapleton and Eikenhof) and a Eikenhof – western and north-western Johannesburg, the number of enclosed reservoirs and secondary booster stations. West Rand and greater Rustenburg. At least 60% of the value of this infrastructure, estimated to Zwartkopjes – central Johannesburg and a high-lying be worth R80 billion at replacement value, is located in Rand portion of the East Rand. Water’s pipelines infrastructure. Palmiet – eastern and northern Johannesburg, large parts of Tshwane, and western portions of Ekurhuleni. Augmentation and Renewal Planning Mapleton – central and eastern parts of Tshwane and After decades of expansion to meet the challenge of Ekurhuleni, and selected areas in Mpumalanga. infrastructural development and population growth, Rand Water’s infrastructure continues to be adequate to meet its Projected growth in water demands customers’ needs in our expanding areas of service. This is in Rand Water’s municipal customers account for more than itself remarkable considering that in 1965, Rand Water was 90% of total demand, with direct supply to mines making up supplying 1 000 Megalitres a day (Mℓ/d) and that demand has most of the balance. Periodically, Rand Water consults with increased more than four-fold to 4 300 Mℓ/d. major customers and updates projections of demands on the network. Rand Water Integrated Annual Report 2013 -2014 101
The latest forecast indicates a continuation of the trend 4 000 Mℓ/d to around 5 500Mℓ/d in 2030. This gives an average of gradually decreasing rates of annual demand growth. rate of demand growth of 1.75% per annum over this period. Rand Water now supplies a predominantly urban, domestic The three metros supplied by Rand Water – Johannesburg, consumer base. Population growth is the main driver of Ekurhuleni and Tshwane – consume 75% of this water. demand growth. Worldwide, urbanising populations exhibit reduced rates of population growth. In South Africa, this effect Projected peak demands by main system is magnified by the impact of AIDS on fertility and mortality Through the hydraulic modelling process, forecast demands rates. Demographic studies undertaken on behalf of Rand are added at each significant supply point. This allows the Water, confirm this trend. estimation of peak flows in each pipeline, and peak demands on each of the pumping stations. Results for each of the Total average daily demand for the Rand Water network is major systems are given in the table below (quoted capacities
projected to increase from the current demand slightly above exclude standby units).
z zZ ZVV
Station Design capacity Proposed Proposed year of Projected peak day demands (Mℓ/d) (Mℓ/d) additional augmentation 2009 2010 2011 2012 capacity (Mℓ/d) (first phase)
Primary pumping Zuikerbosch 3900 1200 2017 4300 4800 5300 5800 Vereeniging 1400 Nil N/A 1300 1300 1300 1300 Booster pumping Eikenhof 2000 Nil N/A 1470 1610 1750 1880 Zwartkopjes 800 200 2015 760 780 840 880 Palmiet 1870 600 2015 2000 2190 2380 2570 Mapleton 960 300 2017 990 1080 1180 1270
Capital Expansion Programme Planned projects The last Rand Water augmentation was undertaken during The planned projects are listed under two main categories, the 1990’s and this was referred to as the 92 scheme, this namely: programme increased the design capacity from 4 500 Mℓ/d Augmentation projects that have the primary purpose of to 5 300 Mℓ/d. The current 2009 Additional Water Supply increasing the capacity to meet growth in demand and Scheme and general capital programme is aimed at ensuring area of service; and security of water supply, both quantity and quality of water supplied, and the first phase will increase design capacity from Renewal projects, including upgrade, rehabilitation and 5 300 Mℓ/d to 5 900 Mℓ/d. This programme is a combination replacement projects that have the primary purpose of of augmentation and renovations. Rand Water plans to spend maintaining existing capacity to supply both quantity and R13 billion over the next five years on our water supply quality. infrastructure, 2015 to 2019. Of this amount, 60% is allocated to augmentation schemes, with the remaining 40% allocated Some projects, particularly involving pipelines, will serve a to renovations and upgrades of existing infrastructure. dual purpose. 102 Rand Water Integrated Annual Report 2013 -2014
The capital expenditure plan incorporates capital investment The Augmentation and Renewal plan is set to affect the following of R7.6 billion for augmentation, R5.4 billion for renewal, systems over the five year period as depicted in the table below. R6.8 billion for growth projects outside the core business and R0.3 billion for moveable assets for the period 2015/19. System Augmentation Renewal Total (R’m) (R’m) (R’m) The five year plan continues to be dominated by projects Eikenhof 492 694 1,186 associated to the 2009 AWS scheme. Phase 1 of the 2009 Mapleton 956 734 1,690 scheme aims to deliver an additional 600 Mℓ/day by 2017/18. Palmiet 2,106 929 3,035 It is anticipated that the major contribution towards renewal Primary 3,641 2,096 5,737 expenditure will be associated to pipeline refurbishment Zwartkopjes 453 954 1,407 and replacement and to a lesser degree civil, mechanical, Total 7,647 5,406 13,055
automation and electrical works.
z zZ ZVVZ
The top five projects within the five-year period are the following:
Capital Project Estimated Cost (R’m) System Augment/ Renewal
Zuikerbosch – Station 5, phase 1 2,770 Zuikerbosch Augment O6 Palmiet to Klipfontein pipeline 972 Palmiet Augment Hydro power 424 Various Augment Refurbish B1, B2 Pipelines 325 Zwartkopjes Renewal B17 Zuikerbosch – Palmiet pipeline 223 Palmiet Augment
The average ratio between Augmentation and Renewal is expected to be 60/40 respectively over the total 5 year planning horizon.
Infrastructure Plan (2015-2019) Infrastructure Plan (2015-2019)
14 000 Piplines 5406 Pumping 12 000 726 Purification 543 10 000 4829 Purification 8000 Other 6000 1484 4000 5469 1155 1000 2000 1043 1075 1133 0 1627 1648 1640 1722 1010 7647 2015 2016 2017 2018 2019 Total Eikenhof Mapleton Palmiet Primary Zwartkopjes Total
Augmentation Renewable Rand Water Integrated Annual Report 2013 -2014 103
Expanded area of service Capex, 3 year performance and 5 year plan Capital Projects Despite the persisting global financial strain, Rand Water has 4000 continued to improve its capital expenditure performance 3000 year on year and the completion of projects. The Rand Water 2000 capacity expansion programme has shown remarkable progress in the past few years of projects implementation. 1000 The significant number of commissioned projects is evidence 2011 2012 2013 2014 2015 2016 2017 2018 of the progress that has been made so far. The completion of projects has ensured continued assurance of securing of Plan - R’million Actual - R’million
water supply.
Rand Water 2009 Additional Water Supply Scheme z zZ ZVVZ Augmentation of Rand Water’s capacity to supply potable water is undertaken under an Additional Water Supply Scheme (which provides integrated capacity to meet the demand over a defined period) or under an Independent Capital Work Project (in which an independent facility or amenity is added to the infrastructure, or an existing facility extended or increased in capacity). A planned programme of renovation and upgrading work is also required, in conjunction with augmentation, to improve the performance and increase the lifespan of elements of the infrastructure.
AUGMENTING THE NETWORK
Augmenting for 2015 to 2030 cycle Project growth in peak day demand = 1600 Mℓ/d over 15 years Growth split between four booster systems
Eikenhof Zuikerbosch Palmiet Mapleton system - system - system - system - 400 Mℓ/d 300 Mℓ/d 600 Mℓ/d 300 Mℓ/d growth growth growth growth
North West Jhb Northern Jhb Eastern Tshwane Central Jhb West Rand Tshwane Ekurhuleni Southern Areas Rustenburg Madibeng Mpumalanga
Primary system - 1200 Ml/d growth 104 Rand Water Integrated Annual Report 2013 -2014
The 2009 Additional Water Supply (AWS) Scheme, including the Addition of 250 Mℓ/d filtration capacity at System 2 by projects listed below. November 2015. This is currently in construction phase. The Installation of Station 5 at Zuikerbosch pumping station, estimated project cost is R300 million. with estimated completion of phase 1 (600 Mℓ/d) by Construction of 400 Mℓ/d Sedimentation system at System December 2017. The roads and services project has 3 by December 2015. This is currently in construction phase. been completed and construction project is currently in The estimated project cost is R260 million. tendering phase. The estimated project cost is R3 billion. Duplication of the Lethabo – Vereeniging (B19) raw water Construction of 225Mℓ/d Sedimentation system at Vereeniging pipeline by June 2015. Project is currently in construction pumping station by June 2016. This is currently in the design phase. The estimated project cost is R700 billion. phase. The estimated project cost is R300 million. Construction of Engine Room 3B at Palmiet pumping station by September 2015. Project is currently in construction Upgrade of Bloemendal pumping station by December 2015.
phase. The estimated project cost is R400 million. This is currently in the construction phase. The estimated z zZ ZVVZ Augmentation of the Klipfontein – Brakfontein pipeline project cost is R100 million. (H39 and H42). H42 pipeline is currently in construction phase to be completed June 2015 and H39 pipeline project Installation of G37/H47 pipeline by March 2015. This is currently is also in construction phase to be completed in December in construction phase. The estimated project cost is R400 million. 2015. The combined estimated project cost is R600 million. Partial augmentation of the Palmiet – Klipfontein pipelines Installation of F47 pipeline by October 2014. This is currently in (O6) system by November 2016. Project is currently construction phase. The estimated project cost is R200 million. in construction phase. The estimated project cost is Installation of portion of Waterval pipeline (Q5) by October R1.4 billion. 2014. This is currently in construction phase. The estimated Augmentation of the Zuikerbosch – Palmiet (B17 and B18) project cost is R205 million. pipeline. Project is currently in construction phase. B18 portion is planned to be completed by February 2015 and SECTOR GROWTH AND B17 portion by October 2015 and. The estimated project DEVELOPMENT cost is R1.6 billion. The Board of Rand Water approved the establishment of Installation of additional capacity at Mapleton pumping Sector Growth and Development Division in 2011 in order to station by 2017. Project is currently in design phase. It is streamline the corporate growth strategic objectives. This was planned to be completed by December 2016. The estimated prompted by the: project cost is R500 million. Greater demands on State Owned Enterprises (SOEs) to contribute to national socio-economic development goals; Augmentation projects under Independent Capital Works Rand Water seizing market opportunities to create water The Independent Capital Works implies that an independent services capacity in areas where it is lacking (smaller water facility or amenity is added to the infrastructure, or an existing Boards, municipalities, etc.); facility extended or increased in capacity. The following major Rand Water’s risk mitigation of having only one source of capital projects are programmed for implementation: income being potable water; View service delivery shortfalls as opportunities to deliver Upgrade of purification systems at Zuikerbosch pumping station: on Water Services Act mandate; and Construction of 200 Mℓ/d Sedimentation system at System Establish and show sector leadership as the biggest Water 2 by February 2015. This is currently in construction phase. Utility in Southern Africa. The estimated project cost is R250 million. Rand Water Integrated Annual Report 2013 -2014 105
It is with this strategy that the organisation’s national footprint The departments and their related activities carried out during is beginning to be recognised. Several growth strides have the 2013/14 financial year are discussed below: been achieved since the establishment of Sector Growth and Development Division. Water Services Department This department have carried out the following projects
The Division comprises of support departments (Business during the year under review. Development and Strategic Customer Partnerships) and Emergency Pipeline and Operation and Maintenance of WTW revenue generating departments (Water Services, Bulk in Msukalikwa Local Municipality Sanitation, Water Demand Management and Catchment Rand Water was appointed by the Department of Water Management Services). and Sanitation in January 2013 to investigate water supply shortages in the Msukalikwa Local Municipality area. In order The revenue generating departments are tasked with the to alleviate the water supply problems, it was resolved that
responsibility of growing the business by providing;
a 12 km; 350 mm pipeline should be installed to supply raw z zZ ZVVZ Management support, infrastructure upgrades, process water from the Southern Water Works (SWTW) to the Northern optimisation, training. Water Works (NWTW). Operation and maintenance of water and wastewater treatment (including acid mine drainage and water reuse) The construction of the pipeline was completed within four Water quality management services. months. Water use and demand management services to reduce non-revenue water. Catchment management services to preserve the quality of raw water in rivers and dams. 106 Rand Water Integrated Annual Report 2013 -2014
Water services operations and maintenance in Msukaligwa Repair/replace/refurbish pumping units; and Municipality. Telemetry and SCADA Systems In November 2013 Rand Water was appointed for the Emergency Support Project for the alleviation of water The implementation of the abovementioned projects would shortage in Ermelo and Wesselton. The main objective was assist Bushbuckridge Water Board to produce authentic to improve the quality and quantity of potable water and water bills, improve efficiency of treatment schemes and capacity building as well as process technology upgrade. management thereof. This includes the Operations and Maintenance of five water purification works in Ermelo, Davel, Breyten, Lothair, 49 Metering and Billing Processes boreholes as well as the reservoirs in the Msukaligwa Local Metering has been a challenge between the Bushbuckridge Municipality area over a period of three years. A total budget Water Board and the Bushbuckridge Local Municipality. of R16,3 million over the three year period was allocated for These problems could be attributed to, but not restricted
the Operations and Maintenance project. to, intermittent water supply, unauthorised connections z zZ ZVVZ and sudden changes in pressure and meter location. The Sasol Pipeline Project project was for the supply and installation of meters and the Rand water has been involved in the design, construction, construction of chambers to house the meters. supervision, operations and maintenance of a 13.5km long, 600mm diameter steel pipe which supply raw water to SASOL Pumps Replacement and Refurbishment plant in Secunda. The project has been running since 2006 To maintain good customer satisfaction and good service and was extended for another five years in January 2012. delivery levels, demands the utmost in pumping reliability and performance. The project includes pump and associated Operations of the ESKOM Grootvlei Power Station Water equipment replacements, repairs, overhaul to ensure Treatment Plant reliability and longevity of the pumping equipment. Rand Water was appointed by ESKOM for R11.4 million for operations of the Grootvlei power station WTW from The investigation revealed that pump upgrades are required September 2010 – August 2014. The Grootvlei Power Station at Hoxani and Edinburgh water treatment works and the Water Treatment Plant purifies raw water from the Vaal Dam refurbishment of two major pump sets at the raw water pump and pumps it to the Power Station via a 45 km underground station at Inyaka dam. pipeline. The water is further treated at the power Station to boiler feed water and is also used for cooling processes. The plant pumps an average of 26.1 Mℓ per daily.
Bushbuckridge Water Refurbishment Project Following a Ministerial directive issued on 2nd February 2010, Rand Water (RW) was appointed by the Department of Water and Sanitation for an amount of R18 million, to assist Bushbuckridge Water. Following an investigation, the following projects were prioritised and funded for implementation; Establishment and implementation of metering and billing; Rand Water Integrated Annual Report 2013 -2014 107
Other interventions under this contract would include the Improvement of Water Supply in Katanga (Democratic provision of standby lime dosing facilities, replacement of poly Republic of Congo) dosing pumps, repairs to existing lime dosing facilities, electrical Rand Water was appointed by the Department of Water and panel installations and upgrades, telemetry and SCADA. Sanitation as an implementing agent for the Katanga Water supply improvement in the DRC. The purpose of this project The Telemetry will also allow for data on reservoir levels etc. was to improve the condition of the water supply schemes in to be captured remotely. It works in conjunction with SCADA Lubumbashi, Katanga District in the DRC. (supervisory control and data acquisition), a system that is used to monitor and control industrial processes. The objective was to increase pumping capacity (replace old pumps and motors), increase reliability of supply, reduce water The system would assist BWB’s water management in areas losses, increase availability of pumps, improve water quality in
such as water quality and equipment (reservoirs) surveillance. the prioritised areas and enhance equipment sustainability.
z zZ ZVVZ Blue Drop Certification The project budget was R22 million and forms part of the There was a need to assist Bushbuckridge Water Board with African Renaissance projects coordinated through the compliance to Blue Drop requirements. In order to achieve Department of Water and Sanitation. The completion date Blue Drop certification, a water system must achieve 95% or was September 2014. higher when assessed against the Blue Drop requirements. Institutional Support to Botshelo Water Board These requirements include the overall management The Minister took a decision to intervene in Botshelo Water after systems and policies in place to ensure clean safe water. The realising that the utility require support in a couple of disciplines assessment covered the following areas: which include but not limited to leadership, governance, Water Safety Planning; financial management, operations and maintenance. The Drinking water quality compliance; Minister requested Rand Water to second officials in strategic Management accountability and local regulation; and positions to provide the necessary support in order to turn Asset Management. around Botshelo Water. Additional support is made available by Rand Water as and when required. The project commenced in Msukaligwa Water Supply Crisis Project July 2012 and is expected to be completed by December 2014. Rand Water was appointed by the Department of Water and Sanitation, Msukaligwa Local Municipality and Gert The project scope included the entire value chain required to Sibande District Municipality as the implementing agent for manage a water utility. This includes, but not limited to; operation the second phase of Msukaligwa Water Supply crisis project and Maintenance, corporate services, finance and administration, for an amount of R97million. The Department of Water and policy formulation, Human resource management, infrastructure Sanitation, the Premier of Mpumalanga and Msukaligwa Local development and management, Board governance and Municipality declared the project as an emergency due to compliance reporting. The Rand Water team managed to water shortages and the quality of water in Msukaligwa. achieve improvement in water quality, infrastructure reliability, stakeholder relations corporate governance and reporting, audit The project was funded by the following stakeholders opinion and payment for services. Cooperate Governance and Traditional Affairs Mpumalanga Department of Water and Sanitation; Refurbishment of the North West Province - Hot Spots Msukaligwa Local Municipality; The Department of Water and Sanitation (DWS) (NW) Rand Water; and appointed Rand Water as their implementing agent to Gert Sibande District Municipality. resolve water problems at some of the identified hot spots in 108 Rand Water Integrated Annual Report 2013 -2014
the North West Province for an amount of R20.8million. The Municipality were still getting drinking water through the residents of the villages identified in North West Province Asbestos Cement (AC) pipes. These pipes have been installed relied on groundwater as a water resource. The existing water in the 1950’s. They are vulnerable to change in temperature infrastructure consisting of boreholes and localised water and had become dilapidated and porous. They burst so often networks had not been properly maintained for many years. that the water losses was around 57%. This area was therefore identified as a hot spot by the DWS Rand Water’s brief survey of the villages indicated a lack of maintenance or resource management at these villages. Most The objective of the project was to replace AC pipes with of the problems associated with the schemes were attributed the High-Density Polyethylene (HDPE) pipes to reduce water to failure of the electro–mechanical pumping equipment losses, improve water supply in the area and revenue for the rather than the aquifer reserve and individual borehole yield municipality. The AC pipes will be replaced with HDPE pipes
capacities. Most of the bore pumps needed rehabilitation so since the area is dolomitic.
that they can augment the water production and ultimately z zZ ZVVZ improve water supply in the villages. The following specific Outputs were required in respect of each of the objectives: The key objectives of the hot spot intervention included: Installed HDPE pipes with diameter between 100 mm and Conduct pump tests on the boreholes to be rehabilitated; 200 mm; Re-drilling of collapsed boreholes; Improved water supply around the area; and Rehabilitate existing boreholes and equip new boreholes; Reduced water losses. Install Jojo Tanks in new area of supply; Conduct retro fitting of communal taps; Water Supply Augmentation in Mogale City Local Municipality Construct secure shelters for Borehole pumps; Mogale City Local Municipality area has grown over the years Supply and installation of bulk water meters; and was no longer coping with the peak demands. When Repair roof to booster Pump station; there are minor interruptions such as power failure, it took Supply and installation of billing meters; days to stabilise the network. Switch from diesel power to Eskom Grid; and New water distribution infrastructure to extend water The area was then identified as one of the hotspots by the supply services. Department of Water and Sanitation (DWS). Rand water was appointed as the Implementing Agent to resolve these Works on the Ganyesa Village has been completed. This problems for an amount of R3 million. involved among other retrofitting of four existing bores with new pumps, re-drilling of three collapsed boreholes The project covered the following scope: and retro fitting 120 communal taps. The intervention has Upgrade of the existing 2 Mℓ pump station and major substantially increased water accessibility to the residents of inlet pipe to the sump and associated valves. Ganyesa village to levels above the RDP (Reconstruction and Upgrade automation and controls at the pump station to Development Plan) targets as set out by the government. ensure new pumps are fully automated. Replace the existing diesel pump with a new pump that Replacement of Asbestos Pipes in Westonaria Municipality will assist during electrical failures in the area. Rand Water was appointed by DWS as the implementing Design and connect the existing 15 Mℓ reservoir to the agent for the replacement of Asbestos pipes in Westonaria for 20 Mℓ dome reservoir so as to augment the existing water an amount of R5million. Some areas around Westonaria Local supply during peak demands. Rand Water Integrated Annual Report 2013 -2014 109
Water Demand Conservation and Management Sanitation (DWS) for the following municipalities namely Rand Water’s approach towards reducing the water loss Ekurhuleni Metro and Randfontein LM in Gauteng, Moqhaka focuses both internally and externally. LM in Free State and Matlosana LM in North West. Below are the four pillars that underpin the Rand Water’s Water Demand Management (WDM) strategy: WoL programme has also been included in the Presidential 1. Extensive Capital Programmes are underway to reduce Special package on the economic sector and employment the losses caused by aging infrastructure (Rand Water cluster. infrastructure). 2. Water Demand Management initiatives that are directed Ekurhuleni Metro War on Leaks towards assisting our customers to reduce their water Government has prioritised the repair of leaks as South Africa consumption. is a water scarce country.
3. Alternative products as a surrogate to potable water needs.
4. Water restrictions may be enforced should the demand Randfontein Local Municipality in Gauteng z zZ ZVVZ continue to grow. The Department of Water and Sanitation (DWS) appointed Rand Water as an implementing agent for war on leaks at three (3) municipalities. The programme is meant to serve as a demonstration national pilot programme. The project entails Capital Programmes the recruitment of 99 unemployed youth who are being trained as community plumbers.
Targeted areas included Mohlakeng and Toekomsrus Township Water Demand in Randfontein LM; Joubertina Township in Matlosana LM and Management Phomolong and Relebohile townships in Moqhaka LM. The
Other project was valued at R6.6 million in total for all three projects Products Deliverables: 99 local youth were trained to an accredited NQF i.e Grey Water level 4 basic plumbing skills. 6 000 households within each municipality were audited and are currently being retrofitted by Supply these trained youth plumbers. Restrictions
Water Conservation and Demand Management Support Programme: Rustenburg Local Municipality
In addition to the extensive Rand Water pipelines renewal The Rustenburg Local Municipality has been experiencing programme, the following projects have been implemented excessive water demand (normal and peak demands) resulting through partnerships with the Department of Water Affairs in low pressure in high lying areas scanty/no water supply. and beneficiary municipalities: As the major bulk water supplier to Rustenburg, Rand Water was requested to assist in the technical advisory capacity by
War on Leaks (Wol) Projects assessing the nature, extent and cost of current water challenges The War on Leaks (WoL) is a crucial special purpose with emphasis on management of non-revenue water, and intervention programme aimed at reducing water losses and recommending appropriate water demand management consumption at domestic level. Rand Water was appointed options for possible funding and implementation. as an Implementing Agent by the Department of Water and 110 Rand Water Integrated Annual Report 2013 -2014
Rand Water made available a total amount of R850 000.00 Pioneering of an inland waters buoy marker system which to undertake the study. The Business Plan was completed has been adopted by SAMSA for implementation to all and submitted to the municipality for consideration and inland water bodies; implementation. Development of various models of floating wetlands to compensate for areas where riparian vegetation Effluent Reuse rehabilitation is not an option; Rand Water commissioned a study to identify the potential of More than 4 000 individual floating wetlands placed on effluent reuse within its area of service in an effort to alleviate the dam; the pressure on existing water resources for potable use. The Implementation of food web restructuring is the first of study identified a significant potential for reuse particularly such an initiative in the country. 282 tonnes of coarse fish in the industrial and mining sectors within the City of (carp and catfish) already removed; Johannesburg and Rustenburg areas. Physical removal of biomass (algae and hyacinth) from the
3 3
dam water surface. To date 42 680 m of algae, 141 677 m z zZ ZVVZ Water quality requirements for different potential user of hyacinth and 6 080 tons of debris have been removed groups as well as bulk supply infrastructure requirements and from the dam; additional retrofitting on the customer side were qualified All ‘waste’ material is recycled and reused for beneficial and costed in the business plan. Written commitments to take purposes, therefore no waste is generated by the programme; up the treated effluent at industrial grade water were also Pilot sediment dredging at the Crocodile River mouth and obtained from potential customers to ensure the feasibility of bulk sampling of the “jelly layer” sediment at the dam wall; the project. Final engagements and discussions are currently Sustainable employment has been created for over 110 underway with identified end-users before proceeding with people from the local communities with intensive training construction of grey water reuse scheme. and development plans for capacity building; and Intensive upgrading of a communication and awareness Acid Mine Drainage centre at the dam wall to facilitate communication Catchment Management Department and awareness creation to various stakeholder groups The Department of Water and Sanitation (DWS) has extended including schools. the appointment of Rand Water as the Implementing Agent for
the Hartbeespoort Dam Biological Remediation Programme The project is funded by the DWS with a total expenditure of beyond phase 1 of the programme (development and pilot R152 million to date. It is envisaged that the programme will implementation). eventually be handed over back to the Department of Water and Sanitation who will continue the efforts currently being The following achievements were made through the undertaken by the Metsi a Me Programme. programme: Development of a complete biological remediation Strategic customer partnerships plan for the restoration of water quality. This is the first Customer Service of its kind in in Africa to adopt an integrated biological At the center of every service the organisation offers customer approach to address water quality issues; service. From overall sales effort point of view, customer Rand Water Integrated Annual Report 2013 -2014 111
service plays an important role in an organisation’s ability to generate revenue. Good customer service is the lifeblood of any business. You can offer promotions and slash prices to bring in as many new customers as you want, but unless you can get some of those customers to come back, or give you repeat sales, your business won’t be profitable for long. Hence customer service is key in Rand Water.
Customer Value Management Survey (CVM) As Rand Water’s vision is to be a provider of sustainable, universally competitive water and sanitation solutions for Africa, it is therefore necessary for Rand Water to take into account what customers expect in the future, as well as how it will partner with its customers and suppliers in meeting and exceeding customer needs. As part of its commitment to improving customer value, service delivery and customer retention, Rand Water conducts an independent annual Customer Value Management Survey (CVM).
This survey seeks to assess changes in the market’s perceptions plus the impact of changes and improvements within Rand Water.
z zZ ZVVZ Summary of 2014 Customer Value Management Survey (CVM)
Index Score Comparison 2009 2010 2011 2012 2013 2014 Statements n=134 n=69 n=119 n=162 n=150 n=150 Change
Overall Price Perception Score N/A N/A N/A N/A N/A 83.6 –
Overall Product Index Score 86.2 92.6 86.2 88.8 96.9 88.6 -8.3
Overall Forward Planning Index Score 82.9 87.4 86.3 85.8 71.1 84.9 13.8
Overall Water Demand Management Index Score 83.6 84.7 82.9 84.3 74.3 88.7 14.4
Overall Operations & Maintenance Index Score 83.0 87.1 83.4 84.1 85.3 89.2 3.9
Overall Billing & Administration Index Score 82.3 89.6 80.8 81.2 89.7 92.5 2.8
Overall Strategic Competency Index Score 84.0 89.6 86.4 88.2 92.2 92.9 0.7
Overall Communication Index Score 81.6 83.4 81.9 82.1 78.7 81.7 3.0
Overall Relationship Index Score 83.9 87.6 86.6 84.5 88.1 89.9 1.8
Overall Price Index Score 73.5 79.6 77.1 73.5 77.7 79.2 1.5
Overall Image Index Score 85.2 89.1 85.9 85.5 86.2 86.1 -0.1
Overall RAE Index Score 80.0 84.8 81.5 79.6 85.5 87.3 1.8
Overall Emotional Drivers Index Score 84.6 89.3 86.8 85.3 87.5 88.1 0.6
Overall CVM Score 82.5 87.1 83.8 83.8 84.4 87.1 2.7 112 Rand Water Integrated Annual Report 2013 -2014
The 2014 Customer Value Management (CVM) survey revealed Summary of 2014 Service Level Evaluations (SLE’s) significant improvement in a number of individual index score categories. Overall, the 2014 CVM Index Score increased by 2011 2012 2013 2014 2.7% - from 84.4% in 2013 to 87.1 in 2014. Evaluation 95.30% 97.00% 97.70% 95.54% Score Most importantly is that some of the index score categories were limited to certain respondent segments. This was The 2014 SLE results shows a non-significant decline from not done in order to disadvantage some respondents over 97.7% (2013) to 95.54% (2014) however it is still above the others; but was done in order to present specific questions organisational target of 90% Bulk Water Contract Compliance. and research areas to applicable respondent segments. Out The Service Level Evaluation process in the mining sector was of the 13 individual index score categories included in the in a way affected by the long mining strike which meant a
CVM survey, only two decreased from their 2013 levels. These decline in the number of respondents who at the centre of
two categories were the overall product (a decrease of 8.4%) the Service level evaluation were despondent due to strikes. z zZ ZVVZ and overall image (a decrease of 0.1%) scores. A significant The Mines rated Rand Water 93%, while industries and direct contributing factor to the decrease seen in the overall product consumers rated Rand Water 96.28% and Municipalities category may be attributed to the increased number of water 95.8%. This could have contributed to a decline of 2.16%. quality specialists who rated this particular category. Forums We have also seen significant increases in forward planning The Forums are a networking vehicle between Rand Water and Water Demand management of 13.8% and 14.4% and its Customers. Rand Water has two forums which are respectively. Overall operations and maintenance also had an Water Services Forum and, Mining and Industry Forum which improvement of 3.9%. The other attributes had non-significant serve as a communication vehicle for information sharing improvements. In general, the survey shows that Rand Water with all municipalities, industries and direct customers in the was perceived positively by its key customers. Rand Water area of supply.
Service Level Evaluation (SLE) Through the forums, Rand Water gets to know and understand Rand Water has entered into Bulk Water Supply Contracts with the challenges in each of its customer segments around the its customers to record the current and continued provision of delivery of water services and offering appropriate solutions bulk water supply services so that it can render the services in through member participation. This financial year the forums an efficient, equitable, cost effective and sustainable manner. managed to address Climate Change, Water losses and Acid In order to determine if the organisation meet this objective, Mine Drainage (AMD) which are the three main challenges facing Rand Water conducts annual Service Level Evaluation surveys the Country at the moment. Other topics include water quality, with its customers. SLEs’ focus on the actual compliance to the environment and encroachment, etc. Rand Water also uses the Bulk Water Supply Contract and measure the following: forums to consult with its customers when setting tariffs. a. Continuity of water supply to bulk customers b. The metering process, including meter installation and Summary of Forum Evaluations upgrade turnaround times c. Billing proficiency 2011 2012 2013 2014 d. Customer service Evaluation e. Call Centre efficiency 94% 100% 80% 98% Score Rand Water Integrated Annual Report 2013 -2014 113
Customer Service Centre (CSC) phase-in approach and sub-dived as follows: The Customer Service Centre is a central point of contact for Upgrading of Sebokeng WWTW by 100 Mℓ/day; Rand Water. It is an important strategic asset that can improve Upgrading of Meyerton WWTW by 15 Mℓ/day; the company’s image, and enhance the customer experience. Construction of new 150 Mℓ/d Sedibeng WWTW; and Achievements for the year under review: Construction of Sedibeng Reclamation Plant. Resolved 80% of queries at first hand. The purpose of the first call resolution is to appropriately address the Upgrading of Sebokeng WWTW customer’s need the first time they call, eliminating the The 100Mℓ/d upgrade of Sebokeng Waste Water Treatment need for a second call. Works (WWTW) will be done in two 50Mℓ/d phases, namely; Call average handle time is capped at the Call Centre Module 6 and Module 7. The phase one of the project consists Standard of three minutes. of demolition work of the existing bio filter wastewater
Knowledge Management System was upgraded to: treatment plant, bulk earthworks, construction of a new 50Mℓ/
– Reduce training time. day bio nutrient removal wastewater involving structural z zZ ZVVZ – Improve call handling and response times. concrete works, mechanical, electrical, pipework, buildings – Increase staff satisfaction and morale. and access roads. The project commenced on 07 October 2013, starting with demolition work for the old wastewater Some of achievements include successful implementation of treatment works` structures. the following systems: Call Back option; The demolition work of the then existing bio filter plant was Multi queuing system; and completed in March 2014; materials suitable for re-use in the Workflow system. works have been stockpiled on site. The overall civil progress during year under review is at 8% with expected completion Bulk sanitation date of the whole project being 2017. The primary objective of Rand Water’s Bulk Sanitation Department is to extend sanitation services to water service Upgrading of Meyerton WWTW authorities and institutions within and beyond Rand Water The Meyerton Wastewater Treatment Works upgrade forms areas of supply. Rand Water`s partnership with municipalities an integral part of Sedibeng Regional Sanitation Project and and Department of Water and Sanitation main focus is to composed of the following projects: address the sanitation challenges such that the environmental Refurbishment of the old secondary sedimentation tank; assets and natural resources are protected for a long and Extension of the treatment works by 15 Mℓ/day; and healthy life for all South Africans. Upgrade of Rothdene pump station and construction of new rising main. Projects Sedibeng Regional Sewer Scheme (SRSS) (R4.2 billion) Refurbishment work of the old secondary sedimentation tank On November 2012, Rand Water was appointed as an is underway at 15% towards completion. The construction Implementing Agent (IA) by DWS to implement the SRSS work of the other mentioned two projects is expected to within the Sedibeng District Municipality. The scheme is commence during September 2014. The entire duration for addressing overcapacity of Wastewater Treatment Works and Meyerton Wastewater Treatment Works upgrade is estimated sewer networks and pump stations, improve the effluent at three years ending 2017. quality discharge by these WWTWs and unlocking economic developments within the Sedibeng District. The scheme is 114 Rand Water Integrated Annual Report 2013 -2014
Extension of Hannes Van Niekerk WWTW in Westonaria Local to be in early July 2014. The Civil, Mechanical and Electrical Municipality contractors are 100%, 100 % and 98% complete respectively. Westonaria is one of the Presidential key node developmental areas. A large number of the population is targeted for local Through this project we achieved the following milestones: government’s housing projects which will increase the need A large number of local and surrounding community for the wastewater treatment works. Further, the bucket members were trained; system eradication in the Westonaria Local Municipality will Training of staff to adapt to changes in incoming flow; and also be additional hydraulic and organic load to the capacity Overcoming difficult dolomitic conditions with design. of the Hannes van Niekerk wastewater treatment works. Therefore, it is important that this growing population is To ensure effective continuous operation of the plant, catered for in terms of the infrastructure and basic services for Westonaria signed a management agreement contract with
each and every South African citizen. Rand Water for a period of three years for the operation of
Hannes Van Niekerk WWTW. z zZ ZVVZ Extension of Hannes van Niekerk wastewater Treatment Plant Operation and Maintenance of Vaal Marina Water Treatment Waste water effluent compliance was a challenge prior to Plant in Midvaal Local Municipality extension of this plant as the demand was exceeding capacity In November 2013, Rand Water entered into a 32 months of existing works. The discussions led to Department of Water partnership agreement with Midvaal Local Municipality for Affairs appointing Rand Water as an implementing agent for provision of Operations and Maintenance of Vaal Marina extension of Hannes van Niekerk wastewater treatment plant Water Treatment Plant. in Westonaria Local Municipality. The plant is designed with treatment capacity of 10 Mℓ/d; the The total project cost for the project is R275 million including average operating capacity is 1.40 Mℓ/d for period of eight hours VAT. The current capacity of the Hannes van Niekerk and seven days a week. The plant is currently treating an average wastewater treatment works is 22 Mℓ/d. The estimated of 39 Mℓ/month. The overall SANS 241 compliance of the water future developments in 2020 require an estimated 46.9 Mℓ/d treatment works for the year under review is displayed figure capacity, which require a further extension requirement of below. 25 Mℓ/d. According to the geotechnical investigations which Vall Marina WTW compliance 2013/14 assessed the extent of the dolomitic conditions in the area, 100 it was concluded that the suitable land available will only 90
accommodate 15 Mℓ/day. 100 100 100 100 100 100 100 100 80 70 The excess effluent will be pumped to the proposed new 60 Zuurbekom wastewater treatment works. The Civil, Mechanical 50 and Electrical works designs and tender documentation for 40 100 100 100 100 100 100 100 100 the 80Mℓd new Zuurbekom wastewater treatment works is 30
complete. % compliance 20 83
10 100 100 100 100 100 100 100 The Hannes van Niekerk wastewater treatment works project 0 commenced on January 2012 when the Civil contractor Jan-18 Jun-18 Apr-18 Apr-18 Feb-18 Feb-18 Mar-18 Dec-17 Nov-17 Nov-17 established site. The Mechanical and Electrical Contractor were May-18 appointed during October 2012. The dry commission of the Microbiological Physical Chemical works was done in June 2014 with expected full commissioning Rand Water Integrated Annual Report 2013 -2014 115
Operations and Maintenance of Tweefontein Wastewater (i) install standby generator as back-up electricity supply to Plant in Thembisile Hani Local Municipality: the treatment works and Rand Water entered into operations and maintenance of (ii) to curb illegal dumping of toxic chemicals through the Tweefontein K Waste Water Treatment with Thembisile Local enforcement trade effluent by-laws. Municipality in 2009. The overall effluent compliance of the works for the 2013/14 was 62.7, which decreased by 8.1% when Rand Water is also providing the process advisory services compared to that of the previous year. This was mainly due to the municipality in KwaMhlanga East and West oxidation to constant power failures which the plant experienced and ponds. Through Rand Water’s advice and recommendations illegal dumping of toxic trade effluent into the Municipality’s to the Municipality, both oxidation ponds were upgraded and outfall sewer. Rand Water recommended to the municipality three Process Controllers were permanently appointed.
to:
Operations and Maintenance of Sebokeng, Rietspruit and z zZ ZVVZ Leeuwkuil Waste water Treatment Plants as well as Pump Tweefontein WWTW - Compliance: 2013/14 Stations in Emfuleni Local Municipality In September 2009, Rand Water entered into a five year 100.0 90.0 partnership agreement with Emfuleni Local Municipality 80.0 70.0 for operations and maintenance of sewage pump stations 60.0 50.0 and three Wastewaters Treatment Plants, capacity building, 40.0 30.0 implementation of Industrial Effluent Monitoring Programme 20.0 (IEMP), process upgrade and plant refurbishment. 10.0 0.0 % compliance The overall final effluent compliance of the wastewater treatment Jul-13 Jan-14 Jun-14 Oct-13 Apr-14 Feb-14 Sep-13 Mar-14 Dec-13 Nov-13 Nov-13 Aug-13 Aug-13 May-14 works for the year under review is tabulated below. This has been 2013/2014 achieved through the commitment of Rand Water and Emfuleni Local Municipality’s management and technical staff.
Month Sebokeng Rietspruit Leeuwkuil
Jul-13 100 97 93 Aug-13 91 83 94 Sep-13 94 88 100 Oct-13 98 93 100 Nov-13 97 84 97 Dec-13 100 88 96 Jan-14 100 78 100 Feb-14 94 78 94 Mar-14 100 88 97 Apr-14 100 73 100 May-14 97 82 94 Jun-14 100 82 92 Year Ave 98 85 96 116 Rand Water Integrated Annual Report 2013 -2014
Emfuleni WWTW’s monthly compliance 2013/14 100
90
80
70 Sebokeng
60 Rietspruit 50 Leeuwkuil 40
30
20
10 z zZ ZVVZ
0 Jul-13 Jan-14 Jun-14 Oct-13 Apr-14 Feb-14 Sep-13 Mar-14 Dec-13 Nov-13 Aug-13 May-14 Year Ave Year
Pump stations Maintenance load on the Works. Both Rietspruit and Leeuwkuil WWTW Rand Water is providing maintenance to all the 44 sewer eventually discharge into the tributary of the Upper Vaal River. pump stations throughout the Emfuleni Local Municipality. Thus it is critical that industries discharging to the wastewater Rand Water has placed more than 24 dedicated personnel at treatment works are effectively monitored and controlled the pump stations. accordingly.
Since taking over the maintenance of the pump stations, Based on the effective industrial effluent monitoring spillages have been reduced by 75% with the availability programme, industries are now paying industrial effluent been increased by over 80%. The municipality sometimes tariff. The revenue generated contributes to the operation request assistance from Rand Water on ad-hoc basis for the and maintenance of the Municipalities wastewater treatment maintenance of their sewer networks which is not part of the plants. contractual agreements. Capacity Building and Skills Transfer Industrial Effluent Monitoring Programme Rand Water Bulk Sanitation personnel are continuing to Since Rand Water partnered with Emfuleni Local Municipality, provide skills transfer to operational staff at the wastewater Industrial Effluent Monitoring programme was developed treatment works within Emfuleni Local Municipality’s WWTWs. based on the Municipal by-Laws. Industrial Effluent Specific training programme was developed to cater for the Monitoring programme includes the monitoring of the specific needs of the Municipality industries discharging into the municipal sewer system whereby the polluters/industries are categorised, monitored, Refurbishment of Brugspruit Water Pollution Control Plant controlled and appropriately billed. Currently, ten large water (Acid Mine Drainage Plant) users (wet industries) discharge effluent to two Emfuleni Rand Water was appointed by Department of Water and municipal wastewater treatment works (Rietspruit and Sanitation in November 2013 to refurbish and operate the Leeuwkuil WWTW) and contribute 1.6% of the hydraulic Brugspruit Water Pollution Control Works for 18 months in Rand Water Integrated Annual Report 2013 -2014 117
eMalahleni Local Municipality. The plant discharges into Feasibility study in all the waste water treatment plants of Brugspruit, a tributary of the Klipspruit, draining into the the Ngwathe Local Municipality. upper Olifants River. A number of defunct and flooded underground mines commenced decanting at Ferrobank The refurbishment of the plant resumed in January 2014 and resulting in Acid Mine Drainage seeping and flowing from old is at 98% completion with expected practical completion date underground workings which had direct negative impact on to be in July 2014. the tributaries, Klipspruit draining to the upper Olifants River and further downstream on Loskop dam. Rand Water was appointed by the National Department of Human Settlement (DHS) on the 16th January 2014 as an The design capacity of the plant is 10 Mℓ/day, a modern Implementing Agent (IA) for the eradication of bucket system lime dosing system which neutralises the collected Acid in Mpumalanga and Gauteng Province. The scope of work
Mine Drainage water and removes the bulk of the toxic included the following:
metals, specifically iron, manganese and aluminium. The Design the Urine Diversion Toilets; z zZ ZVVZ refurbishment phase of the plant included carrying out several Procure materials; investigations to determine the current state of the plant and Dig pits and erect toilet structures; specific tests were carried on the process equipment for both Appointment of local labourers; and northern and southern process plants. Subsequently, the Provide training on Health and Hygiene. scope of work was developed, refurbishment schedule was finalised and refurbishment work was executed from February During the year under review, 11 bucket sanitation 2014. systems were eradicated in Dipaleseng Local Municipality, Mpumalanga. The project did not only provide temporary The plant is expected to be commissioned as a pilot project employment to 12 local people, but permanent appointment in July 2014, using the Japanese based technology (reverse was created for two local people within the local authority. osmosis). The objective of the pilot plant is to determine The project was completed and successfully handed over to the feasibility of treating acid mine drainage water from the beneficiaries on the 30 April 2014. Brugspruit plant to the potable or industrial grade water standard. Department of Water and Sanitation, Free State: Assessment of Wastewater Treatment Plants Refurbishment of Vredefort Wastewater Treatment Plant in In order to improve service delivery and swift turnaround time Ngwathe Local Municipality for the implementation of water and sanitation infrastructure Rand Water was appointed by the Department of Water and projects, the Department of Water and Sanitation and Free Sanitation (DWS) as the implementing agent for the refurbishment State Provincial Government agreed to utilise Water Boards to of Vredefort Waste Water Treatment Works (WWTW). The assist Green Drop compliance. Thus, Rand Water was tasked to appointment of Rand Water by DWS was effective from 01 April conduct detailed equipment condition assessments of Water 2013. and Wastewater Treatment Works including pump stations in the Free State Province. The following Municipalities were assessed: The scope of work included the following: Ngwathe Local Municipality; Plant assessment of the WWTW and the pump stations; Dihlabeng Local Municipality; Refurbishment of the Vredefort WWTW which included Nketoane Local Municipality; mechanical, electrical, civil structures and cleaning of the Moqhaka Local Municipality; and sludge holdings ponds; and Mafube Local Municipality. 118 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
MANAGING OUR ENVIRONMENTAL FOOTPRINT
The responsible management of our environmental footprint makes sound business sense. It
helps us enhance our efficiencies and is critical in maintaining our z zZ ZVVZV
social licence to operate. We acknowledge that the ultimate success of our business and the well-being of our communities depend on a healthy environment, and on maintaining access to our critical natural resource – water!
AUTHORISATIONS AND COMPLIANCE MONITORING Rand Water has applied for Water Use licenses (WUL) in line with Section 21(C & I) of the Water Act, Basic Assessments in line with the Environmental Impact Assessment requirements of the National Management Act and Heritage permits for decommissioning old (60 years and older) structures from the National Heritage Act.
Rand Water has continued to engage actively with the authorities being the Department of Environment (DEA) (bi- monthly) and the Department of Water and Sanitation (DWS) (monthly). Rand Water also provided an awareness session on need for pipeline maintenance to DWS and DEA. Officials from DEA were also hosted and inducted on the H42 pipeline construction project as well as other construction sites around Pretoria in order to enhance their awareness. Rand Water Integrated Annual Report 2013 -2014 119
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
The success of obtaining and monitoring authorisation has been largely attributed to team work between key role players within Rand Water, (SAM-programme and project managers, Land and Right’s-Survey and Negotiations, GIS, Legal Services and Scientific Services). The alliance between the departments
has been a fruitful exercise with good levels of co-operation
demonstrated through regular meetings. z zZ ZVVZV
Additional resources have been allocated in the form of Environmental Assessors and Environmental Control officers which demonstrate the importance Rand Water has placed on the requirements of compliance with the environmental legislation. In addition two graduates joined the EMS Section for a limited two year period and have contributed tremendously.
For the financial year under review, Rand Water received four (4) Environmental Authorisations from Department of Environmental Affairs (DEA), see table below.
Environmental authorisations received during 2013/14
Date of Type of Pipe line or Authorisation number authorisation authorisation project 13 September DEA/EIA/0001561/2012 RoD ZKB 2013 Emergency overflow pipeline 10 March DEA/EIA/14/12/16/3/3/1/832 RoD F46 2014 24 April 2014 DEA/EIA/14/12/16/3/3/1/627 RoD Zoekfontein Hydro power Plant 28 May 2014 DEA/EIA/14/12/16/3/3/1626 RoD O6 120 Rand Water Integrated Annual Report 2013 -2014
Also during 2013/14 a total of (14) Emergency Management Plan (EMP) approvals and amendments were obtained for maintenance type of works in regulated areas of wetlands. In such cases the environmental authority approves an environmental management plan (EMP) for this work, in terms of listing notice 1 item 18 of the National Environmental Management Act.
Water Use Licences received during 2013/2014
Date of issue of licence Authorisation number Type of authorisation Pipe line or project
08 August 2013 08/C22/CI/2124 WUL S4 Van Dyk to Rynfield 23 August 2013 08/C22F/CI/2224 WUL B19 and VG residue line 17 November 2013 16/2/7/C21/W157 WUL Erosion on various pipelines 08 December 2013 03/A21B/CI/2383 WUL H27, H16, H39,- Klipfontein pipeline
08 December 2013 03/A21B/CI/2383 WUL H39
z zZ ZVVZ 12 February 2014 16/2/7/A210/W347 WUL H34, H35, H36Brakfontein to Hartebeespoort 02 February 2014 01/A22H/CI /2345 WUL P7 Rustenburg 23 May 2014 03/A21A/CI/2498 WUL R5 Phase 2 23 May 2014 03/A23D/CI/2512 WUL H42
General Authorisations
Date authorisation Authorisation number Type of authorisation Pipe line or project recieved 22 October 2013 16/2/7/c221/w157 WUL GA G37/H37 pipes crossing Ekurhuleni Shamrock road North ridge. 11 November 2013 16/2/7/C223/E001 WUL GA ZBK rising of canal wall - maintenance sub drains. 20 November 2013 16/2/7/C223/E001 WUL GA ZKB Emergency overflow pipeline. 22 November 2013 08/C22F/CI/2224 WUL amend B19 and VG residue line.
During the financial year, a total of four (4) Heritage Impact Assessments permits were authorised for one pipeline project namely the R5 pipeline, phase 2. (Table 4)
HIA permits awarded
Date permit granted Reference number Type of authorisation Pipe line or project
17 April 2014 Permit ID: 1625 HIA R5 17 April 2014 Permit ID: 1626 HIA R5 17 April 2014 Permit ID: 1628 HIA R5 17 April 2014 Permit ID: 1627 HIA R5 Rand Water Integrated Annual Report 2013 -2014 121
The activities requiring authorisations to be obtained has increased annually in accordance with the requirements of Rand Water for authorisations. The table below indicates monitoring of authorisations undertaken during 2013/14.
Monitoring undertaken over the last few years
Authorisations Exemptions GA WUL/ WUL NEMA/ HIA WASTE ECA TOT per received year to Directive/ ECA year date Amend/ exemption 2013/2014 14 4 9 4 4 0 35
ENVIRONMENTAL During this period 39 projects were monitored by 10
Environmental Control Officers (ECO) as indicated in Table 6.
COMPLIANCE MONITORING TO z zZ ZVVZ AUTHORISATIONS The ECO’s have retained an average compliance score over Rand Water self regulates Environmental Authorisations, the year of above 90%. The minimum compliance target set Water Use licenses, waste license or permits, and approved for compliance for projects is 90%. No public complaints EMP’s by the authorities (Gauteng Department of Agriculture were received that could not be addressed internally without and Rural development (GDARD), DEA and DWA). The internal having to escalate them. Weekly and monthly reports have monitoring is audited by an independent auditor every three assisted in co-ordinating and monitoring of performance on months. A total of 42 independent external audits were a continuous bases. An ECO protocol for the management conducted during the year under review and received an of environmental audits was finalised. To further enhance average compliance score of above 90%. internal compliance a negative scoring system on projects for any repeating unaddressed non compliances, was introduced.
Projects and authorisations monitored
Year No of ECO’s. Number of authorisations being Number of authorisations being monitored monitored with authorisation. with RW generic EMP, Exemptions and S24G 2013/14 10* 31 19
(*3 staff were contracted in to assist with specific projects)
A total of 39 different construction and rehabilitation related projects were monitored for compliance (Table 7).
The following projects were monitored for the year 2013-2014
Project types Numbers
Construction phases 25 Rehabilitation phases 14 122 Rand Water Integrated Annual Report 2013 -2014
The authorities (DEA/DWA/GDARD) undertake their own independent audits of projects to monitor compliance. No major findings were raised or reported by them. Table 8 below reflects which sites were visited.
Authorities’ visits
Authorities’ visits Number of visits Sites visited
DEA 3 (H42, B19 and VG sludge line) DWA 4 (B19, BG3, VG ash and ZKB waste dump) GDARD 4 (L17, F35, H14 and ZKB upgrade)
DMR 1 (Sebokeng)
ENVIRONMENTAL REHABILITATION z zZ ZVVZ As part of rehabilitation Rand Water monitored, maintained and reinstated erosion and land that occurs over and adjacent to Rand Water properties, reservoirs and pipeline servitudes. The implementation of 31 Rehabilitation Projects for 2013 - 2014 financial year has covered approximately 236 hectares of foot print area (including erosion interventions, maintenance and rehabilitation after construction) (Table 9). At the Weltevreden Park reservoir site, the rehabilitation of the site has allowed for improved biodiversity and an ecosystem that will more closely resemble the Highveld, by re-vegetating unwanted roads and maintained bird nesting/ roosting boxers as well as bat boxes.
Table 9: Comparison of rehabilitation work over the last three years.
Description of activity 2013/14 2012/13 2011/12
Total number of projects 31 27 21 m2 Rehabilitated 2 362 230 447 086 613 902 Pipe encasing (m3) 2 023 0 0 Irrigation installations (m2 ) 5 500 5 730 6 700 Fence line restored (m) 280 0 1 302 Alien invaders removed 120 ea 192 ea 122 320 m2 Re-grassing (m2 ) 247 329 344 294 608 000 Indigenous trees planted 1 906 1 050 1 698 Grass blocks/Reno/gabions (m3) 7 635 1 430 19 655 Rand Water Integrated Annual Report 2013 -2014 123
The database of all erosion cases recorded has been likened to dolomitic areas or old mining areas. Three cases increasing. Every year Rehabilitation officers monitor Rand reported. Waters infrastructure to identify soil erosion problems. All Overflow (OF): refers to erosion caused by flow channels of cases listed on the database have been generated through water from roof surfaces reservoirs. Nine cases reported. proactive onsite inspection. River Crossing (RC) and Wetlands (W): refers to erosion occurring on pipelines that cross rivers, wetlands or The Rand Water pipeline network is divided into three regions. drainage lines. 22 cases reported. Most erosion cases where reported from the Western region Storm Water (STM): refers to erosion cases caused by storm 59, followed by the southern region with 50 cases and water (mainly municipal). 49 cases reported. northern region with 43 cases. Scouring (SC): refers to erosion relating to the scouring activities. 11 cases reported.
The cases of erosion reported were identified as being caused Sewerage water (SW) or waste water sewage systems.
by either of the following: Three cases reported. z zZ ZVVZ Traffic, vehicles or people (TR): this relates to the Streams, (ST) rivers or drainage lines. Nine cases reported. continuous movement of vehicles and people across Leaks (L), 13 cases reported. the Rand Water servitude on the same position. 11 cases reported. Since the work on erosion control was started in 2004 the Activities relating to informal mining (M), occurring on or causes of the different erosion at each site were plotted. The adjacent to the Rand Water servitude. Zero cases reported. main cause of erosion being increased storm water runoff. This Poor construction reinstatement (PCR): this relates to issues can be attributed to the increase of built-up environment as such as insufficient backfilling after construction, unlevelled well as increased “flash” rainfall events. Flash rainfall (however areas and inadequate encasing of pipes (at water courses). not proven) could be linked to climate change predictions. This is mainly from historical aspects. 15 cases reported. The second cause of erosion cases has been found to be Poor rehabilitation (PR): refers to areas where there was where Rand Water pipes have crossed a river or stream. poor or no rehab undertaken after construction. This is mainly caused from historical aspects. One case reported. Trees (T): refers to the effects of exotic alien invading trees on Rand Water’s servitude or properties. Four cases reported. Sinkholes (SI): refers to ground subsidence or collapses 124 Rand Water Integrated Annual Report 2013 -2014
HORTICULTURE AND With the implementation of the water recycling system SUSTAINABILITY within the Nursery, Rand Water saved an average of 7 521 Rand Water continues to maintain land and landscapes across litres/day(2.7 Mℓ/yr) of water in this financial year. The water the organisation and continues to contribute positively into consumption from July 2013 to June 2014 was 35 585 litres/ the Blue Drop status of Rand Water. day (12.9 Mℓ/yr) as opposed to 43 106 litres/day (15.7 Mℓ/yr) the previous financial year.
Work across the organisation is undertaken by means of internal staff and outsourced contracts at selected sites To ensure that all felled trees from site are used without waste such as Panfontein, Analytical, Process technology, some a wood splitter was purchased and used to recycling of tree reservoir and servitude sites and the Water Wise. To ensure stumps too large to be processed through the wood chipper. that the standard of maintenance is kept high, a standardised All other parts of felled trees are chipped to produce mulch.
monthly Site Maintenance Evaluation Checklist was adopted to measure site maintenance standards and ensure that In support of sustainable biodiversity, the Head Office of Rand z zZ ZVVZ
all aspects of site maintenance are addressed as well as Water is situated on the grounds of a 160 hectare indigenous highlighting areas requiring attention. nature site. The site is managed according to an environmental management plan with all plants on site being indigenous as
The in-house Nursery has received a long awaited computer well as encouraging fauna to inhabit the site. There has also software programme to aid in electronic stock control, been collaboration between Rand Water and SANBI (Walter propagation and dispatch records. Sisulu Botanical Garden) with regard to plant collections and matters related to herbariums.
Sustainability Focus on the Nursery’s use of domestic potable water has Invasive Alien Plant removal programmes continued across all continued and the recycling of sample water collected from sites. kiosks on the station has been extended to a further two shade houses within the nursery. Rand Water Integrated Annual Report 2013 -2014 125
WATER CONSERVATION collaborative research projects. In this period numerous Rand Water’s environmental brand Water Wise has grown projects commenced including a PhD study to determine from strength to strength since its establishment eighteen water conservation practices within the ornamental years ago. This can be attributed to the support and horticultural industry. Two MSc studies, the first to investigate synchronisation between Water Wise teams in multiple phytoremediation options for Rand Water’s sludge disposal site portfolios. The EMS subSection of Water Wise focuses on water at Panfontein and the second, to determine water consumption conservation awareness to an adult market and practical of plants in different hydrozones have also been initiated. All outdoor applications (vegetable production and grounds) to these projects will provide useful information regarding water schools within the Rand Water supply area. conservation for which data is not readily available.
To enhance the Water Wise messages to the appropriate adult Environmental related projects such as the “Determination of
target audiences, these have been subdivided to include alien invasive plants on selected Rand Water properties” as well as the ‘green industry’ and golf courses as these are high end “Archeological and environmental management plan for Reitvlei z zZ ZVVZ
water users, office and residential parks, rural and informal Nature Area” have concluded and are being implemented at communities, school food gardens and the public at large. the various Rand Water properties to ensure that Rand Water is actively conserving water and the environment. For each of these audiences, the Water Wise message has been communicated through the combined use of research, In addition, a project on ”Grey water use in the home” was displays, exhibitions, demonstration gardens, awards, talks and completed during the year and the final report submitted to demonstrations and the continuous development of educational Rand Water. material such as z-folders, booklets and media articles. During the year under review customer Water Wise Awareness
Research Projects and observational research was undertaken. Research The 2013/14 financial year marked the second of a three conducted at Water Wise exhibitions at external events showed year memorandum of understanding with UNISA to facilitate that people still feel that the implementation of Water Wise practices will make a difference to water saving (95.2%), while 126 Rand Water Integrated Annual Report 2013 -2014
92% of people interviewed feel that it is important to save The Water Wise garden at Walter Sisulu National Botanical water. A significant 89.2% of people interviewed felt that the Gardens also attracted 220 862 visitors this past year including Water Wise information they have received has helped them individuals, school groups, pensioners and families. to save water, while 78.7% would like to receive more Water Wise information and awareness. More than 77% of the people The Water Wise demonstration garden at the Vereeniging interviewed felt that more education and information on water Pumping Station was extended in the 2013/14 period to conservation would encourage them to save water. The need incorporate additional space for learner activities. This for more information is a trend that has been evident over the includes a sensory garden trail, a vegetable patch irrigated by years that Water Wise has conducted awareness research. a rain water harvesting tank, a succulent garden, a rough veld area and extensive signage. Percentage of people interviewed who feel that education on
water conservation would encourage them to save water. The Delta and Walter Sisulu demonstration gardens were included in an observational research study to determine the z zZ ZVVZ
100 visitor perception towards the garden as well as to highlight 90 areas for improvement within the gardens. 80 70 60 Awards 50 Once more, Water Wise awarded annual trophies at two 40 30 garden design shows, namely Lifestyle Garden Centre and 20
Percentage ( % ) Percentage Garden World Garden Centre. These awards recognise 10 0 landscape students, schools and established landscapers who 2010 2011 2012 2013 2014 incorporate Water Wise principles into their designs with the aim of changing the public perception of trendy landscapes.
Panfontein rehabilitation In addition, a trophy for the best Water Wise landscape is One of the newly commenced research projects aims to also awarded annually to professional landscapers who form investigate phytoremediation options for the Panfontein part of the South African Landscapers Institute (SALI). This sludge disposal site. This project proposal has been reviewed award is presented at the South African Green Industries by the Rand Water and UNISA teams. Council (SAGIC) convention and was won by Cape Contours for their work done on the Mitchell’s Plain Hospital garden in Cape Town. Demonstration gardens, projects, awards, displays and educational material This year, a new Water Wise award was also implemented Demonstration Gardens within the golf industry for the most Water Wise golf course. The Water Wise garden at Delta Environmental Centre receives This very exciting new award has triggered the support approximately 15 000 visitors a year. The upgrades made to from golf courses to actively aspire to implement water the garden in the previous financial year have ensured that conservation practices. the garden is user friendly and can practically demonstrate Water Wise principles. Schools/prisons and community agricultural projects Currently there is active engagement with a total of 30 Rand Water Integrated Annual Report 2013 -2014 127
schools to assist them with the practical aspects of setting invasive plants and new information on sustainable tourism. up and maintaining vegetable gardens and associated water The monthly newsletter has been revamped and is distributed collection systems. There is also active involvement with to all major sites of the organisation for dissemination to all three prisons groups (under the banner of Hlumelelisa), Rand Water staff. A separate monthly newsletter is also sent and 16 cooperative farming groups in various community out to the public on water conservation. At the end of the organisations in the Sebokeng, Sharpeville and Soweto areas financial year a total of 634 subscribers were signed up. to assist with water conservation aspects of vegetable garden production and skills transfer. For the 2013/14 financial year, the Water Wise team set up a total of 19 displays and exhibitions which reached a Displays and educational material minimum of 592 889 visitors (refer to Table 1). Ultimately, a The educational material is regularly distributed at displays, return on exposure of R0.41 per visitor was estimated to have
talks and events throughout the year. been achieved. A total of 68 technical water conservation
advertorials were also produced in 25 different magazines z zZ ZVVZ In addition the Water Wise website, which has between 7 000 based on specific adult target audiences, reaching a minimum and 8000 monthly visitors from around the world, has been of 3 679 862 readers collectively for the year (refer to Table 10) updated with new material on food gardening as well as alien
Intervention for creating water conservation awareness to adult market
Intervention No. of events / advertorials No. of people reached Return on exposure
Displays and exhibitions 19 592 889 R0.41 Advertorials 68 3 679 862 R0.16 128 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
STRATEGIC HUMAN CAPITAL MANAGEMENT
OUR PEOPLE To meet business challenges today and tomorrow, organisations must maximise the potential of their workforce – the human capital which is pivotal to their success – while
increasing efficiency. This requires transforming traditional Human Resource functions into a comprehensive human z zZ ZVVZV
capital management (HCM) strategy, that is, employee processes and knowledge must be integrated with business processes and strategies.
In an expanding economy, human resources are scarce, and it is important to attract and retain the best people. In a recessionary economy, human capital is a major expense that needs to be controlled effectively. But no matter what the global economic situation may be, companies need maximum insight and flexibility to manage human capital and to perfect the ability to adapt to ever-changing circumstances.
With a comprehensive human capital management, Rand Water can define a more strategic HR policy that applies throughout the organisation – one that motivates employees to support business goals, allows firms to respond to change, and improves the organisations bottom line. And one that enables organisations to track, monitor, plan, simulate, and execute that strategy precisely. A comprehensive human capital management strategy achieves this by integrating all relevant human resources processes.
Alignment of Corporate and Group Human Resources objectives It is in the best interest of the organisation if Corporate objectives are aligned with those of the Group Human Resources Portfolio. This is captured in the figure across: Rand Water Integrated Annual Report 2013 -2014 129
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
Key organisational themes
z zZ ZVVZV
technology Achieve a High Achieve Growth and Sustainablity Positively Engage Stakeholder Base Achieve Operational Performance Culture integrity and use best fit Maintain Financial Health
Inform
Enable Internal and External Stakeholder Management Attract, develop (grow) and retain out talent Efficiencies and Effectiveness Performance Management ROI (Investment decisions, budget allocation)
Key human capital themes 130 Rand Water Integrated Annual Report 2013 -2014
Key initiatives undertaken during 2013/14 financial year: Capacity Building manages the ladder of development of Phase two of Productivity Programme employees through a system of policies and processes that Handover of the National Treasury Graduates to the ensures growth in employees’ skills and competency levels. It Municipalities for the completion of their training aims to: Programme Ensure that business and training requirements will inform Roll out of the General Managers Programme to Senior capacity building initiatives; Managers Train and develop employees to perform in their roles; Appointment of a Wellness Service Provider to assist Optimise business operations and support growth employees and their immediate families in support of the initiatives; Employee Assistance Programme which forms part of the Ensure alignment to the National Skills Strategy when Wellness Strategy focusing on some initiatives especially those aligned to
functional and legislative requirements;
TALENT MANAGEMENT Ensure design of customised programs to accelerate z zZ ZVVZ Training / Capacity Building organisational change, agility and capability; To ensure alignment to the strategic objective of a “high Integration with the Employment Equity Plan to ensure performance culture”, the Capacity Building Department is fairness; focused on capacitating employees within Rand Water to meet Monitor, track and evaluate business impact of core these requirements. Capacity Building supports the business capacity building initiatives as well as measure return on by driving skills development through accredited and credit training spend and value add; and bearing programmes that are designed to enhance Rand Ensure alignment with the Water Sector Skills needs. Water’s human resources in their current and potential future roles. Empowering Rand Water to support the Presidential Skills Development Initiatives outcome of “A skilled and capable workforce to support an Capacity building reaches out, supports, and drives skills inclusive growth path”, the Capacity Department is geared development initiatives that speak not only to Rand Water, to create a strong pipeline of technical and business skills but also caters to the wider water sector. Rand Water, through through; Technical and Water related Learnerships, Corporate a number of annual programmes detailed in the table across, Business and Leadership Programmes, Engineering and is committed to the development and capacitation of internal Science bursars, Graduate in Training programmes, Internship employees, unemployed individuals, graduates and other Programmes and Apprenticeships, functional, technical and trainee categories that collectively represent its potential talent legislated training. Legislative and functional training are pool from which it can source current and future employees. prioritised and executed through our Workplace Skills Plan (WPS) and forms part of our skills development initiatives. These ensure that employees are capacitated to perform optimally in their roles and jobs. These initiatives also ensure the drive that Rand Water has a sustainable skills pool to source from and is aligned with the Water Sector Skills needs. Rand Water Integrated Annual Report 2013 -2014 131
The table below indicates the Skills Development Programmes undertaken during the 2013/14 financial year.
Skills Employed (18.1) Unemployed (18.2) Grand Development Total Female TOT Male TOT Female TOT Male TOT Projects A C I W A C I W A C I W A C I W Internal 48 2 6 3 59 65 3 2 6 76 0 0 0 0 0 0 0 0 0 0 135 Bursaries External 0 0 0 0 0 0 0 0 0 0 24 0 2 0 26 23 0 0 0 23 49 Bursaries ABET 10 0 0 0 10 27 1 0 1 29 0 0 0 0 0 0 0 0 0 0 39 Apprentice- 0 0 0 0 0 0 0 0 0 0 10 0 0 0 10 14 0 0 0 14 24
ship
Graduates / z zZ ZVVZ 0 0 0 0 0 0 0 0 0 0 19 0 1 0 20 11 1 1 0 13 33 Interns CMD 5 0 0 1 6 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 7 Bookkeeping 1 0 0 0 1 3 1 0 1 5 0 0 0 0 0 0 0 0 0 0 6 Business Adm 1 0 0 0 1 3 1 0 1 5 0 0 0 0 0 0 0 0 0 0 6 Learnerships 12 0 0 0 12 25 1 0 4 30 6 1 0 0 7 12 1 0 0 13 62 Grand Total 70 2 6 3 81 117 5 2 11 135 59 1 3 0 63 37 2 1 0 40 338
Career Expos and Campus Visits provide support to the Bursar. Rand Water currently funds Rand Water participates in Career Expos as part of its career Bursars at the following institutions of higher learning: awareness drives. The Career Expos are conducted to bring University of Pretoria; exposure to the learners regarding the following: Tshwane University of Technology; Careers available within the water sector and various fields Vaal University of Technology; of study; University of Limpopo; Disciplines awarded Bursaries at Rand Water; University of cape Town; Provide information about various job opportunities including North West University; artisan programs apprenticeships and learner ships); and University of South Africa; To enable capacity building initiatives by providing Witwatersrand University; and capacity way ahead of demand in the organisation and Durban University of Technology. the water and sanitation sector. Rand Water Bursars are required to do vacation work as part of Career Expos that Rand Water Capacity Building participated their contractual arrangement with the organisation. in 2013/14 financial year: The Joburg South Career day and Expo 24-25 July 2013 Blue Drop Training WISA Conference - Wet skills 23-29 May 2014 Water Technology Training (WTT), under Capacity Building is currently overseeing the entire Rand Water Blue Drop The Campus Visits are conducted to all Rand Water Bursary Training profile for Process Controllers (PCs) and Supervisors. holders.The purpose of the campus visits is to foster a closer This is in accordance with the revised Regulation 17 of the relationship between the Bursar and the organisation and to Water Services Act (No. 108 of 1997)/ Regulation 2834 (of 132 Rand Water Integrated Annual Report 2013 -2014
1985), outlining that there shall be no person operating and Water and Wastewater Treatment Process Control (at a Water Treatment Works without a Process Controller NQF Level 3). According to Schedule III of Regulation 17, the license. One of the criterion for Blue Drop Award is Process Process Controllers shall acquire a shift in their current class Controller Licensing. In order to meet this requirement, once they are certified. Rand Water PCs, depending on the Process Controllers should be appropriately qualified “Class of works” as defined in the regulation a plant must be coupled with relevant years of experience. For the training classified as follows: cycle 2013/2014, WTT trained 46 learners comprising of 33 Zuikerbosch and Vereeniging (Class B Plants): PC’s should Process Controllers, ten Assistant Process Controllers and range from Class II to V; and three Laboratory Assistants on the qualification: Water and Zwartkopjes and Barrage, (Class E Plants): PC’s should Wastewater Treatment Process Operations(at NQF Level 2) range from Class I to V.
Leadership Development
Name of initiative Brief explanation Male Female Total z zZ ZVVZ
New Manager The New Managers Programme (NMP) is Wits Business School’s entry level 14 13 27 Programme programme for managers. It is oriented at new managers or managers growing from a technical specialist to a general management role.
The NMP is a first step for career progression into a general and senior management position, where the ability to understand all the different areas in a business and to adopt new and improved ways of managing self and others is a key criterion of success. Management The Management Advancement Programme (MAP) is designed to 12 14 26 Advancement assist managers in developing a well-rounded approach to managing a Programme department or a business unit.
The modules covered in the programme are human resources, economics, operations management, finance and accounting, strategy and marketing. The programme is aimed at middle managers who want to fast-track their careers. General Management An intensive programme designed specifically for senior managers. 4 4 8 Programme It is designed to broaden strategic and long-term thinking and build (progressing to new FY) leadership confidence. Women Development Rand Water took the strategic decision to conduct a study of the 99 99 Programme – training needs of women employees with a view to gaining a fuller Diagnostics using understanding of their aspirations and needs. Focus Groups and Questionnaire Women Leadership Management Development: A catalyst for the advancement of women in 11 11 Seminar the labour market. Embracing gender diverse leadership for innovation in the 21st century. Women and Entrepreneurship – Sharing personal triumphs and challenges encountered in the self-employment journey. Executive Coaching Executive coaching is designed for senior management: divisional 1 1 managers, executive managers, and general managers. This service is offered to them to receive individual coaching by a dedicated specialist in the area of interest. The aim is to facilitate a process whereby senior management can get assistance in order to exceed their expected goals. Rand Water Integrated Annual Report 2013 -2014 133
Performance Management The performance management unit initiated a program to The Performance Management system specifically supports create a Key Performance Indicator (KPI) library for employees, and contributes to the strategic objective of “Achieving a High which will assist managers and supervisors in identifying Performance Culture”. The performance management system common and consistent KPI’s per job profile. Currently 350 serves as a tool that Rand Water uses to manage the strategic KPI sets have been created. In order to enhance the project and functional performance indicators of the organisation per outcome, the KPI Library phase two intends to merge the organisational unit and ultimately per employee. initial project with the productivity project to identify ideal productivity targets per function. Rand Water sets performance targets at three levels in the organisation, namely: Rand Water uses a concept called the generic KPI’s which Organisation – approved at Board allows the organisation to cascade strategic outputs to Portfolio – Approved by the Chief Executive the relevant levels of the organisation. Generic KPI’s are
Division/Department/Individual – Approved by next level mandatory for all employees in the organisation. There were z zZ ZVVZ line Manager six generic KPI’s created for the current financial year, which exclude functional KPI’s and has the following objective as per This demarcation ensures that there is cascading of targets table below: and alignment throughout the various organisational levels.
Generic KPI Objective
1. KPI – Absenteeism rate The KPI measures the ability to reduce absenteeism in Rand Water. 2. KPI – Audit findings The KPI is to ensure that internal control weaknesses identified in the business are attended to by the responsible person and the risks are mitigated. 3. KPI – Employee Engagement Survey Rand Water defines employee engagement as “the state in which employees feel passionate about their work and freely invest in it of themselves, their time and their effort”. The KPI supports where employee engagement equates to maximum employee contribution to the organisation’s success plus maximum personal satisfaction in their roles. 4. KPI – Employment Equity The KPI emphasises to correctly reflect the demographics of South Africa. (National Statistics). 5. KPI – Operational and Controllable The KPI measures the ability of managers to effectively and efficiently manage budgets Expenditure maintained within within set quarterly parameters. This ensures that the organisation is best able to manage budget cash reserves; enter capital markets for additional funds at predetermined times. 6. KPI – Staff leaving turnover rate The KPI measures the ability of managers to retain their staff.
The Performance management process also supports and seeks to promote, improve, and optimise health, well-being, feeds into Capacity Building processes such as the Personal and high performance of Rand Water employees”. Development Plan (PDP) by allowing managers to identify skill gaps of employees and contributes to the upliftment of The Integrated Wellness model focuses on 6 dimensions of skill and knowledge levels of employees. wellness which are the key components of the framework, namely physical, social, occupational, spiritual, intellectual EMPLOYEE RELATIONS and emotional well-being. Wellness The Employee Wellness Programme in Rand Water is a One of the programme’s objectives is managing the impact “comprehensive, multidisciplinary, and people system that of health and psycho-social problems on the company’s 134 Rand Water Integrated Annual Report 2013 -2014
productivity by looking at issues such as absenteeism and its which derive from highest utilisation of sick leave at 80%. In financial impact, medical care costs, insurance claims costs the past three years our target has always been 3.3% and we as well as other indirect costs. Investment in the wellness of have met the target by just a margin (see the table below). employees is one of Rand Water’s important principles based on one of its values of being a caring employer. Creation of a A lot of work was done to curb absenteeism in the workplace healthy and safe working environment is an integral aspect of including cascading absenteeism as one of the generic KPI’s ensuring continuous growth in productivity of the workplace. down to individual employee level. This is the second year that we have maintained this KPI to all employees as we believe Absenteeism Management that attendance is everyone’s responsibility in the workplace. Absenteeism management is the key driver for the Employee In the financial year of 2013/14, we have seen a decrease in Wellness Programme more so that it impacts negatively on the absenteeism rate.
the business. Rand Water faces high absenteeism rate trends
z zZ ZVVZ Leadership Development
Financial Year Target Actual
2011/12 3.3 3.73 2012/13 3.3 3.28 2013/14 3.3 2.94
Prevalence of HIV/Aids through counselling, treatment literacy and healthy lifestyle Our corporate HIV/Aids Triple Zero strategy as well as our education. HIV/Aids and other life threatening diseases policy are part of the broad integrated wellness strategy. HIV/Aids is viewed HIV Counselling and testing (HCT) Campaigns no differently to any other life-style disease such as diabetes, Rand Water undertakes the HCT campaign annually as part hypertension, etc. This stance is taken to eliminate the of its wellness calendar to all its sites. The HCT campaign perceived stigma of the disease. was originally undertaken to support the South African government’s national drive to encourage people to know As part of the Wellness strategy, Rand Water provides HIV their HIV status and to access counselling and treatment at the counselling and testing (HCT) services, support, treatment and earliest possible stage. This campaign is intensified in order to care through our disease management programme as part of maintain the momentum of ensuring that HIV testing remains the medical aid benefit for employees and their dependents. a regular part of health seeking behaviour. This is undertaken Some of our HIV and Aids awareness campaigns are done with the support of our Wellness Champions who volunteer to during our Wellness Weeks and the annual observation of the assist their peer with relation to wellness matters. World Aids Day. During the 2013/2014 financial year the campaign took place Our dynamic onsite Wellness Practitioners provide support in September to October 2013 and there has been a decrease not only to infected employees who have disclosed their in terms of new infections in this financial year. status, but also to employees who are also facing personal problems related to HIV that are impacting on their work Our prevalence rate decreased from 11% in 2012/13 financial performance. Support to HIV positive employees is given year to 7% for 2013/14 financial year. Rand Water Integrated Annual Report 2013 -2014 135
Employee Assistance Employee Relations Rand Water also provides psycho-social support to its The labour relations climate has seen unprecedented volatility employees through its Employee Assistance Programme and long strikes in South Africa for the year under review. Rand (EAP). Employee Assistance Program (EAP) is a voluntary, work- Water weathered the storm. The company continues to pump based program that offers free and confidential assessments, quality water in time. Salary negotiations were conducted at short-term counselling, referrals, and follow-up services to plant level. They were robust and protracted, however, they employees who have personal and/or work-related problems. ended amicably.
We have contracted a new service provider to provide 24 Levels of unionism have decreased from 83.33% the previous hour support line to all employees and their immediate year to 77.39% for the year under review. The non-unionised dependants. The new supplier was launched in April 2014. employees increased from 16.66% to 22.61%. South Africa Some of the services provided are telephone counselling Municipal Workers’ Union (SAMWU) continues to dominate
through a toll free line or please call me service, face to face at 56.15% from 63.83% last year, while United Association of z zZ ZVVZ counselling, Life Management, Financial Wellness, Legal South Africa (UASA) increased from 19.5% to 21.24% for the Advice and other services. year under review.
Employment Equity Union Membership as at 30 June 2014 The Rand Water 2013/14 Employment Equity Report is an indication of the organisation’s continuous commitment to the process of transformation. This year’s report, not only does it focus on the Employment equity results, but also briefly makes a comparison with the previous year’s results. Of utmost significance is the organisational commitment towards gender empowerment as can be witnessed by the increased target of employment of females into management positions. This target has increased from 47% in 2012/2013 to 60% for this financial year. Our participation in the Technogirl Programme is one other significant factor in our efforts to increase gender representation, albeit as a long-term goal. SAMWU UASA No Union
As at 30 June 2014 the number of all staff at Management (M-Q bands) stood at 949, representing a 4.63% growth from the previous year’s total of 907 of these 79.80% (758) were Africans, Coloureds and Indians. This population has grown by about 6.46% from the previous year’s total of 712. Additionally, 102 of the 104 employees appointed at M-Q bands were ACI, representing 96.05% against a target of 75%. Across the organisation the number of ACI stood at 2 849 out of the total staff compliment of 3 229, translating into 88.23%. The number of ACI appointments was 247 out of the total number of 257 overall appointments. This translates into 96.10% of ACI appointments. 136 Rand Water Integrated Annual Report 2013 -2014
Employment equity status as at 30 June 2014 (M-Q)
Category Band Total Staff Demographics Demographics Appointment Appointment Target % % % ACI M – Q 949 753 79.80 102 96.04 75 FEMALES M – Q 949 405 42.67 60 57.00 60
Technogirl In its effort to ensure gender representation, Rand Water embarked on a number of programmes. One such programme is Technogirl. Technogirl is a programme that focuses on exposing girls of a school going age to careers in scarce fields. This is intended to increase the number of females who select careers within these fields. This is done through a process of job shadowing (girl learners are placed in companies and other organisations, under the mentorship of people who work in these fields). Rand
Water started the programme by placing 60 pupils in Grade 9 to be part of the initiative for the next 4 years. z zZ ZVVZ
Number of girls per area of operation
Area of girls Number of girls
Operations 12 Maintenance 17 Process Quality 7 Strategic Asset Management 8 Bulk Sanitation 2 Scientific Services 14 Total 60
Ziyagezana Excellence Awards Rand Water celebrated its eleventh employee recognition awards on 05 December 2013. Like any employee recognition programme, the Ziyagezana Excellence Awards aim to promote a high performance culture and a positive work environment by acknowledging and appreciating the discretionary effort and sterling contributions of employees. Rand Water Integrated Annual Report 2013 -2014 137
Participation Co-operation and Partnership Managerial level employees Rand Water, through its participative structures, has Managerial and senior professional employees operate continued to encourage and foster a collaborative platform on a pay-for-performance remuneration philosophy. The for consultation, joint problem-solving and information- remuneration structure utilised at these levels is a Total Cost sharing, underpinned by the values of the organisation. The to Company methodology which allows the employees participation, co-operation and partnership structures have flexibility in structuring their packages. The increases at afforded management and the trade unions of Rand Water these levels are performance based and the increases are the opportunity to practically and effectively engage on influenced by market movements in terms of CPI, predicted matters that affect employees resulting in more creative and increases as well as affordability to the organisation. Increases sound decision-making. to remuneration packages for these levels for the year under review were within budget and mandate as approved by the For the year under review, the Constitution of the Stakeholders’ Human Resources and Remuneration Committee.
Forum has been jointly revised to improve on the effectiveness and efficiencies of the participative structures and processes. The remuneration for the Portfolio Integrating Committee z zZ ZVVZ
The Stakeholders’ Forum also reached consensus on the members is based on information sourced through salary criteria of an additional category of the Ziyagezana Excellence surveys, referencing the economic indicators such as inflation Awards, namely the Values Champion of the Year nomination. as well as benchmarks in the market in terms of predicted and granted increases. Increases for this level of employee are COMPENSATION AND approved by the Board. INFORMATION Variable Remuneration Reward Approach In line with Rand Water’s pay-for-performance remuneration The Rand Water Total Rewards Model emphasises the philosophy, the Short Term Incentive (STI) is aimed at linking importance of a total rewards approach to create employee employee reward to organisational, portfolio and individual engagement in the organisation. A balanced approach to performance and success. The scheme is aimed at driving remuneration, benefits as well as recognition is crucial in the attainment of key strategic value for the organisation ensuring a sustainable and healthy working environment and reward performance above the norm. The targets that where employees are fully engaged. It is crucial to ensure that are approved by the Board on annual basis are measured employees understand and appreciate the value of a total on a quarterly basis and create greater line of sight between rewards offering which includes all elements of extrinsic and individual input as well as organisational performance. intrinsic rewards.
During the year under review, Rand Water paid out an Guaranteed Remuneration Incentive Bonus to all qualifying employees as approved by Bargaining unit employees the Human Resources and Remuneration Committee and the Annual salary increases for employees falling within the ambit Board of Rand Water. of the central bargaining forum are negotiated between management and labour represented by the two recognised Remuneration of Board Members unions SAMWU and UASA. The salary increases for the 2013/14 Rand Water Board financial year were within budget and mandate as approved The remuneration rates (monthly stipend and hourly rates by the Human Resources and Remuneration Committee. as applicable) for Board members of the Rand Water Board are advised annually by the Department of Water and Sanitation through a schedule detailing the rates for the 138 Rand Water Integrated Annual Report 2013 -2014
various categories of Board members. The fees for the Rand Development and Design team has made in the support of Water Board were updated in accordance with the schedule the Rand Water’s strategic objectives and business drivers. received. The Organisation Development and Design department had Rand Water Foundation a two pronged delivery framework in order to segregate The remuneration rates (monthly stipend and hourly rates) between the operational efficiencies and effectiveness as for Board members of the Rand Water Foundation Board were well as the strategic delivery. During the financial year under obtained by referencing the increase percentage as advised review, the business requirements in an area of operational from the Department of Water and Sanitation for the Rand effectiveness saw a sharp increase due to the growth and Water Board. The remuneration rates for the Rand Water expansion of the business. The team’s major focus was on Foundation Board are benchmarked as 70% of the rates of the enabling the review of operating models, structures and Rand Water Board. delivery of functions aligned directly with enhancing the
productivity levels.
z zZ ZVVZ ORGANISATIONAL DEVELOPMENT AND DESIGN The Organisation Design and Development’s strategic Looking at this past year, it gives us pleasure to report Initiatives for the financial year under review contributed on the contribution and value add that the Organisation directly to the Rand Water’s Strategy. Rand Water Integrated Annual Report 2013 -2014 139
Rand Water Strategy
High Financial Ops Integrity & Stakeholder Growth Performance Health & Technology Management Culture Sustainablity
Strategic programmes/initiatives
Strategy alignment Building Modeling Transformational leadership Business re-engineering
Organisational culture z zZ ZVVZ Streamline governance structures Support of growth initiatives Transformation and change management Productivity initiatives
Five Year View of the Odd Strategic Initiatives The Transformation and Change Strategy was finalised and Enabling the Bushbuckridge Water Board (BWB) integration: transformation and change management interventions In April 2014, the announcement of the extension of service began from April 2014 to ensure a smooth transition and buy- area for Rand Water to incorporate the Mpumalanga region in by employees of the former BWB was obtained timeously. resulted in the Organisation and Design offering being The levels of buy-in within the organisation are high and the extended to deliver the following business transformation case for Rand Water’s take-over of the BWB operations was components for BWB: seen as compelling. The process is intended to impact every 1. The roll out of the Transformation Journey and enabling employee and ensure that they are all hand held with the the process of integration. adaptation of Rand Water’s culture and way of business. 2. Facilitation of the Change management process.
3. Leadership Alignment. Coupled with the Transformation Journey, of critical 4. Stakeholder Management and engagement. importance to the functioning of the operations, a full AS- 5. Define the Operating Model for the Phase I, Phase II and IS business value chain and Structure was completed in Phase III of the changing Rand Water’s business model. view of designing the To-Be structure for the Rand Water 6. Designing of the interim structure for the former BWB site. Bushbuckridge site. This is under review and will soon be 7. Support the business alignment process. presented to the Governance Structures for approval and 8. Employee transitional arrangements and impact assessments. implementation. 9. Culture assessment and defining of initiatives to support the former BWB employees with adopting to the Rand Water’s Culture. 10. Change Agent Network establishment and capacitating the Ex-BWB employees with management of change. 140 Rand Water Integrated Annual Report 2013 -2014
Productivity Programme Design phase - identifying opportunities for improvement, The Rand Water Productivity Programme is a three year the productivity implementation approach and business initiative that was launched in June 2013. This is a strategic priorities as well as creating an enabling environment; initiative that is a direct response to the Rand Water economic Implementation phase - implementation of the productivity pressures and the turnaround and growth strategic objectives improvements solutions across the organisation; and and is aimed at enhancing the productivity levels in order to Monitoring and Evaluation. attain the desired business efficiencies. In line with the program journey, the programme has entered The main objective of the programme is to analyse the current into the second year of the journey. The Assessment phase levels of productivity across the organisation, identify potential was completed within its first year of launch. productivity gaps, identify opportunities for improvement as well as implement the optimal productivity solution. Productivity Programme Achievements (Assessment Phase)
Productivity Assessment Phase and Outcome - Rand Water
z zZ ZVVZ The benefits of this programme include but are not limited; Assessment Report Continuous employment; Efficient business; The key outcome of the Assessment phase was the assessment True reflection of the cost of running our business; report which provides a baseline of the current productivity Improved quality of life and work; and levels across Rand Water. Productivity gains which will be passed onto all stakeholders including employees. The assessment report was generated for both the support and core business and is currently in review to ensure the Productivity Programme Approach accuracy and integrity of the final productivity baseline for The journey of the Productivity programme comprises the Rand Water. following phases;
Assessment phase – defining the Rand Water productivity The Assessment report is key in informing the Design and baseline; Implementation phase to ensure that the investment made has a direct impact on the business bottom line . Rand Water Integrated Annual Report 2013 -2014 141
PRODUCTIVITY SENSITISATION The Productivity Programme Exhibitions were conducted at all Rand Water sites. The aim of the exhibitions was to create awareness about the program as well as to inspire a productivity culture across all organisational levels.
The table below depicts the level of participation at the Exhibitions.
Productivity Exhibitions Participation per Site
Site Date Number of people
Zuikerbosch 13/08/13 187 Vereeniging 27/08/13 289
Zwartkopjes 29/08/13 265 Panfontein 03/09/13 18 z zZ ZVVZ
BWD 04/09/13 291 Pipelines 17/09/13 49 Nursery 18/09/13 109 Eikenhof, Mapleton and Palmiet 01/10/13 31 Scientific Services 03/10/13 131 Rietvlei Exhibition 30-31/10/13 584 Total 1 954
Training The first phase of the productivity training was delivered at all Rand Water sites. This intervention was aimed at capacitating employees with the productivity concept and techniques to implement productivity opportunities.
Productivity Training Participation per Site
1400 1352
1200
1000
800 658 600 500 525 451 448 406 398 377 400 340
140 200 140 10098 97 3528 90 81% 88% 111% 80% 49% 98% 93% 85% 100% 100 Analytical Zuikerbosch Vereeniging Zwartkopjes Panfontein Rietvlei Pipelines EMS BWD Services Number of Employees Employees Trained Percentage 142 Rand Water Integrated Annual Report 2013 -2014
Implementation of Productivity Interventions Background To prepare for the implementation of the productivity Rand Water as the largest water utility has clearly articulated solutions, the mini business units were established with a view its intent to play a role in skills and capacity development to embed the productivity culture and enable all business in the sector and thus embarked on a Graduate Internship functions to own the productivity solutions. Program - (Water and Waste Water) funded under the auspices of National Treasury to assist Municipalities with capacity and Operational Efficiencies infrastructure-support related projects. The Rand Water’s business has matured and the growth
has imposed a need for continuous improvement and The Graduate Internship Program’s mandate is to train reconfiguring of the current operating models and structures. and develop unemployed graduates from Gauteng and During the 2013/14 financial year, the following areas were Mpumalanga to generate a pipeline of skills for local Water reviewed with the intention to streamline the service offering Service Authorities in the following fields of Scientists, Process
and increase output levels: Controllers, Engineers and Artisans. z zZ ZVVZ Sanitation Department – in view of increasing the core
capability in-house; The programme is geared towards professionalisation and Scientific Services – Streamlining the business process registration of the candidates in the respective fields. This is efficiencies and better utilisation of the resources with idle in support of Professional, Vocational, Technical and Academic time; Learning (PIVOTAL) programmes which are a key pillar of the Support the Finance Centre of Excellence and Shared National Skills Development Strategy III. Service future operating model projects; and Treasury Mandate – in view of supporting the cost The Academy aims at providing an opportunity for developing containment, Rand Water embarked on the assessment of and professionalising qualified unemployed graduates for the the utilisation of consultants versus the internal resource Water and Waste Water Sector, the programme is mandated to to run key strategic projects. focus on the following Qualifications:
RAND WATER ACADEMY BSc /B. Eng graduate Engineering – (Civil, Chemical and Mechanical). BSc graduates Environmental Science & Hydrology. Graduate diploma (Civil, Chemical Mechanical). Graduate Diploma (Water Care). National Technical Certificate –NTC- Artisans (Electrical, Fitter and Turner).
120 graduates were recruited and approved by the National Treasury and thereafter admitted for professional development at the RWA for a period of 18 months.
Deployment to Municipalities The 18 months of training at Rand Water were completed in December 2013 after a Technical Onsite bench work phase. For that phase of training, the graduates were placed internally at Rand Water plants. The project has two phases, 18 months Rand Water Integrated Annual Report 2013 -2014 143
onsite at RWA sites- Zuikerbosch, Vereeniging, Central depot Training in February to June 2014 for nominated municipal staff and Zwartkopjes- for Water Treatment related training and together with the graduates deployed in those municipalities. externally at Waste Water plants of City of Tshwane and East This training was provided in order to assist the municipalities/ Rand Water Care Company- (ERWAT) and a further 18 months WSAs with compliance to the Green and Blue Drop System. at the recipient municipalities. The municipal staff that participated in the training includes Process Controllers, Water Quality Generalists, Supervisors, A total of 73 graduates were deployed at the following Biochemist and General Workers. recipient municipalities during the period of 13 – 17 January, 2014: To ensure adequate training of the graduates at the municipalities, Govan Mbeki Local Municipality, resources such as portable test kits have been provided to Emalahleni Local Municipality; graduates to monitor quality parameters and training is thus Thembisile Hani Local Municipality; provided on how to optimally utilise the Blue Drop and Green
City of Tshwane Metropolitan Council; and Drop Portable Test Kits. This is in light of municipalities that do z zZ ZVVZ Ekurhuleni Metropolitan Council (ERWAT – Kempton Park). not have the necessary infrastructure to provide an enabling environment for the graduates’ development. Official Ministerial Handover of graduates On 28 February 2014, The Minister of Water and Sanitation, Technical Training was delivered to the identified municipalities Mrs Edna Molewa presided over the formal handing over where participants, graduates and municipal staff were trained of 73 Rand Water Academy (RWA) graduates to recipient on how to conduct analysis as per Operational Manual of a municipalities. These were graduates on the National specific Treatment works using the Green Drop and Blue Drop Treasury Internship program who completed their 18-months Portable Test Kits to control the treatment works processes. vocational training in the fields of Environmental Science, Setting Up of Water and Wastewater Laboratories Engineering and Process control. Rand Water Academy realised an initiative of setting up the The RWA offers a three-year vocational program to Water and Wastewater Laboratories with the objective of professionalise and develop qualified unemployed graduates providing graduates with relevant practical experience for as with workplace skills to make them employable. long as they are still within the programme, to prepare them for deployment at various Municipalities. This initiative was done in two phases: Phase 1 : Setting up of Water Laboratory; and Phase 2: Setting Up of Wastewater Laboratory.
Phase 1: Setting up of Water Laboratory was executed and rolled out in December 2013 with the support Scientific Services Division (Chemistry Laboratory and Hydrobiology).
Water Laboratory, Rand Water Academy Zuikerbosch Technical training The purpose of this pilot training was to equip graduates with A key component of the Municipal Placement phase is the the knowledge of how to operate and conduct analysis by capacitation of the municipalities with skills and related using different equipment prior to deployment. The graduates resources. The Rand Water Academy conducted Technical are expected to provide technical assistance, monitor and 144 Rand Water Integrated Annual Report 2013 -2014
manage water quality in the following aspects: underwent the training – (nine operational employees and one Catchment; support). Treatment; Environment; The following topics were investigated: Distribution; and Transboundary challenges on benefit sharing on the Point of use (consumers). livelihood of the Basotho community on the Lesotho Highlands Water Project. International Technical Training Developing of a Stage-Discharge relationship for Mvudi During the year under review, the International Office for River at Maungani in Limpopo Province, South Africa. Water (IOW) provided technical training to permanent staff Determination of the relationship between groundwater of Rand Water related to energy consumption optimisation, level changes and rainfall, on selected boreholes in maintenance, health and safety and to conduct practical Mhinga and Vhurivhuri Villages, Limpopo Province, South
works on pedagogical facilities. Africa. z zZ ZVVZ Water situation in a rural South African community: a case The French National Training Centre for Water Professions study of Malamulele area, Limpopo Province, South Africa. (CNFME) in Limoges and La Souterraine , in cooperation with
the University and the New National School of Engineers Graduates participating in the Wet skills in Netherlands of Limoges receives about 4 000 professional trainees per Poster presentations submitted for the International Water Week year from across the globe, covering all specialisations and were of a high standard meeting international specifications. positions relating to design, implementation, operations The following poster presentations were undertaken: and maintenance, management, based on the “on-the-job” Smart Water App; training principle. The focus is on using real-size educational Efficient and cost effective solution to address water and pilot units that reproduce a professional environment for sanitation challenges in rural area’s in South Africa; trainees and simulate all standard or exceptional situations Transforming waste into business; and encountered in daily tasks. Business wise training development and delivery. A total of ten employees from the Operations Division Rand Water Integrated Annual Report 2013 -2014 145
The other Project in Rand Water Academy includes streamlining of existing Standard Operating Procedures to The setting up of FIPAG Academy in Mozambique ensure uniform practices of HR functional activities across The project is a four year project and will be implemented all the sites. in collaboration with a consortium of partners. The overall The market analysis conducted through surveys to deliverable is a FIPAG Academy for Professional Development understand industry benchmarks around employer in Water and Sanitation. The role of the Rand Water Academy branding and also to inform the baseline position to shape in this project is mostly related to the implementation of the HR interventions within Rand Water. business plan milestones related to the FIPAG Academy as Subscription to the e-recruitment portal as part of well as advising in the set-up of training facilities that are to be migrating to the integrated talent acquisition as well refurbished and equipped, and assisting in the development as increasing awareness on the usage of Employee/ of curricula for vocational training of the academy at FIPAG Management Self Service (ESS/MSS). Head Office in Maputo. Driving key projects such as the HR Help Desk and
profiling specification requirements for HR Solutions z zZ ZVVZ HUMAN RESOURCES such as Employee File Management, Exit and Attachment OPERATIONS Surveys, etc. The Division has focused around the main initiatives intended Skills modeling to address skills retention and knowledge to strengthen operational efficiencies necessary for the management targeting the ageing workforce across the Strategic Human Capital Portfolio to play a pivotal role in business. supporting Rand Water’s growth strategy. Strengthening project interface around key Strategic Human Capital initiatives impacting heavily across the The main initiatives implemented during the period under business. review range from the following, namely: Mobilising support and buy-in to establish the Rietvlei The launch of the HR Learning Sessions on the Workplace Site Forum, based at Head Office. 19 September 2013, to serve as a platform to build a Roll out of e-recruitment. common identity in order to have a shared meaning and values driving our motto (i.e. Building HR with a Purpose). The finalisation of the Business Process Mapping and 146 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
RAND WATER IN THE MEDIA
WATER SECTOR TOPICS IN THE MEDIA 2013-14
Scarce Skills During the year under review, we have endeavoured to
promote the establishment of the Rand Water Academy as
z zZ ZVVZV one of the vehicles to address the skills shortages in the water sector; and as resource to meet the skills requirements of our municipal partners.
The Rand Water Academy was reported on SABC2’s Morning Live; on current affairs programmes on the SABCs Regional Radio Stations; ANN7; and various national, regional and local print media.
Trust in the Water Sector During the year under review, we paid special attention to:
Associating our brand in international and local media with numerous water sector-related conferences and seminars.
We were profiled in national media as sponsors to numerous municipal and provincial sector events.
There was a significant increase in positive reporting of Rand Water during the year under review, a media analysis shows that our sub-brand with Water Wise has made steady inroads with communities throughout our area of supply. Rand Water Integrated Annual Report 2013 -2014 147
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
RAND WATER IN THE MEDIA
ACCOLADES IN 2013-15 Rand Water’s 110 Year Commemoration Celebrations were We have advanced our reputation of always being also reported on, with specific references to the successes accessible to the media, and have formally responded in water quality and service delivery highlighted. to all media queries. Our Executives and Specialists have participated in numerous media interviews during the
year under review. While we do not approach media
Access to Rand Water’s social investment funding. z zZ ZVVZV relations for the purpose of receiving publicity, we focus our work on the affirmation of the Rand Water brand in the media. Any accolade or recognition attributed to Whilst we acknowledge that the number of applicants our us in the media serves as an external affirmation of the Foundation receives far outweighs the available funds. The validity of the work that we are doing. We are proud of Rand Water Foundation’s coverage in social responsibility being awarded numerous awards during the year under activities also increased. review including;
The most noted stories included the Foundation’s Top 500 South Africa’s Best Companies partnerships with municipalities; the work done with the in rejuvenation of green spaces in urban centres; and support for sanitation services in the basic education South Africa’s Top Empowered sector. Companies
Environment Sustainability Issues Rand Water’s efforts in preserving the environment were also highlighted during the year under review. There were a Numerous PMR Golden Arrow Awards number of reports on our work in environmental education. The rand Water brand was reported on during national environment events, including World Wetlands Day, National Water Week and Arbor Day. 148 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
MARKETING AND STAKEHOLDER RELATIONS
Marketing and Stakeholder Relations Division is the custodian of the Rand Water brand. The division’s main objective is to create a unique Rand Water brand awareness to enable for its repositioning to support the organisation’s strategic
objectives.
z zZ ZVVZV The initiatives below have been implemented in an effort to support the organisation’s objectives.
BRAND BUILDING INITIATIVES Rand Water and Ekurhuleni Metropolitan Municipality - Blue Drop Campaign partnership
We have established a partnership with Ekurhuleni Metropolitan Municipality in an effort to improve public awareness on the quality of tap water in Gauteng Province. The Ekurhuleni Metro has achieved platinum in the last Blue Drop audit.
The Blue Drop Programme has been implemented by the Department of Water Affairs as an incentive-based certification programme to acknowledge excellence in drinking water quality management.
Radio We have commissioned public awareness advertising initiatives that were broadcast on several regional and local radio stations, published in some national newspapers and placed on the billBoards. The message was Ekurhuleni supplies clean, safe and world class tap water. Some of the radio stations included Kaya FM 95.9, Talk Radio 702, 94.7 Highveld Stereo. Rand Water Integrated Annual Report 2013 -2014 149
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
MARKETING AND STAKEHOLDER RELATIONS
Two national newspapers Daily Sun, The Star and several street poles were also utilised to publish the Blue Drop message.
We have also used a number of internal communication
channels to educate employees on what the Blue Drop status
means. These included different types of posters, screen z zZ ZVVZV savers, payslips, intranet and the Blue Drop Truck Artwork. A number of adverts were also placed in national magazines as part of Marketing’s effort to profile the Rand Water brand.
Some of the magazines included the Financial Mail, JSE Supplement, SA Athletics, Water and Sanitation, Transform SA and Green Business Journal.
During the Water Week in March we have positioned Rand Water as a leader in the industry by creating an advert with a message which encouraged communities to realise the importance of saving water. The advert was broadcast on Kaya FM, 94.7 Highveld Stereo and several local radio stations.
We have supported the Rand Water 110 years celebration ceremony by creating a series of adverts that were broadcast on Kaya FM, 94.7 Highveld Stereo and local radio stations in the Vaal.
INTERNATIONAL DELEGATIONS In the last financial year, Rand Water hosted representatives from The Kingdom of Jordan, the Republic of Ethiopia, Southern African Development Countries (SADC) and a delegation from the Mexican Embassy. The objective of the visits was to share experiences in best practises relating to Integrated Water Resources Management (IWRM). 150 Rand Water Integrated Annual Report 2013 -2014
SPIRIT OF PARTNERSHIP EXCELLENCE CARING EQUITY INTEGRITY
THE RAND WATER FOUNDATION
THE FOUNDATION IS MANDATED TO: Promote the delivery of water related services to communities in the areas falling within and outside Rand Water’s area of supply;
Coordinate, administer and manage Rand Water’s
z zZ ZVVZV Corporate Social Investment (CSI) resources by undertaking community development projects in partnership with various donors and relevant stakeholders; and Play a strategic developmental role that may require decisions that are not always optimal from a commercial perspective, but contribute to Rand Water’s socio economic developmental imperatives, Department of Water and Sanitation (DWS)’s developmental priorities, and National Government’s broader objectives and the growth and development in South Africa and Africa.
VISION To become a socio-economic change agent of Rand Water signifying care and quality in eradicating poverty, and improving living standards within communities.
MISSION STATEMENT The Rand Water Foundation serves to advance the quality of life of communities and their surrounds; through partnerships; leading to sustainable provision and management of water, sanitation and environment, contributing towards job creation, transfer of skills and poverty eradication. Rand Water Integrated Annual Report 2013 -2014 151
ACHIEVE OPERATIONAL ACHIEVE A HIGH POSITIVELY ENGAGE ACHIEVE MAINTAIN FINANCIAL INTEGRITY AND USE BEST PERFORMANCE STAKEHOLDER GROWTH HEALTH AND FIT TECHNOLOGY CULTURE BASE SUSTAINABILITY
THE RAND WATER FOUNDATION
VALUES Rand Water Foundation strategic interventions carry both elements Rand Water Foundation Stands for: of social transformation, and capacity building, towards enterprise
development in them, drawing in
service providers from previously z zZ ZVVZV Transparency Development Caring and and disadvantaged communities through Accountability Empowerment preferential procurement processes, contributing towards both social and economic development of communities.
Partnerships Quality Assurance
STRATEGIC AGENDA: The Rand Water Foundation Strategy entails:
Support of the core Primary focus on business of Rand Water water, sanitation being bulk water and environmental supply and sanitation interventions at solutions. community level.
“Hands Up, Developmental impact than Hands and sustainability on Out community communities within and development outside Rand Water ’s area approach”. of supply. 152 Rand Water Integrated Annual Report 2014
Key Focus Areas: The 2013-2014 Rand Water Foundation Programmes and Water and Sanitation: Supports the provision of water Projects: and basic sanitation in communities while maximising citizens’ access to water and proper sanitation. Implementation of most of the Rand Water Foundation projects is on-going with each year’s performance reviewed. Projects include; Community Basic Sanitation (Schools, Implementation of projects during the year under review Households and Clinics); Municipal Support through Capacity went as follows: Building on Wastewater Treatment plants maintenance and operations; Rainwater Harvesting; Fixing of Domestic Water Water and Sanitation Projects Leaks; and Rural Communities Water Supply. The following projects were implemented and concluded as per plans: Schools Sanitation, Schools Rain Water Harvesting;
Environmental Conservation: Refers to safeguarding the War on Water Leaks-Water Demand Management and
inter-dependence of ecology, and creation of pleasant Conservation; Rural Communities Water Supply. The total z zZ ZVVZ and healthy surrounds through the following projects: budget spent was R4,8m. Biodiversity Protection, Rural and Urban Landscaping and Greening, Wetlands Rehabilitation, Management of Alien Schools Sanitation Projects Vegetation, River Cleaning initiatives, and Environmental Rand Water Foundation continues to restore hope and Educational initiatives. dignity among the learning population in the country by ensuring that schools are equipped with adequate water Enterprise Development: This programme entails and sanitation infrastructure and facilities. The project in the developmental activities aimed at enabling and year under review focused on ensuring long term sustainable promoting an empowering environment for emerging source of water supply to meet the development needs of entrepreneurs, enhancing competitiveness and the Gauteng schools. The project benefited a total number capabilities at an entrepreneurship level including of seven schools within Winterveldt and Hamanskraal, Cooperative Development. Tshwane Metropolitan Municipality, Gauteng through: Installation of jojoba tanks to improve water storage. Education and Trainining: Contributes towards quality of basic education within the country. The Programme Schools Rainwater Harvesting Supports primary, and secondary education. The initiative is aimed at Schools Water Supply, Demand Management and Households Poverty Eradication through: Health, including HIV and AIDS: Support health initiatives undertaken within communities by government and Non- Installation of rain water harvesting equipment (jojoba Governmental Organisations (NGOs). The programme tanks and gutters) 20 schools; contributes towards combating HIV & AIDS, malaria and other Encouraging schools and nearby communities to grow diseases through interventions such as awareness campaigns food gardens for households poverty eradication and on these diseases, preventative and support measures. food security; Conducting schools community awareness on using Non-Government organisations (NGOs) Support water wisely; and Programme: Aimed at supporting special community Utilising local service providers in project based projects through funding/grants, as well as training implementation creating temporary jobs for local and development. communities and also promoting previously disadvantaged through enterprise development. Rand Water Integrated Annual Report 2014 153
The following 20 schools, located in the Diepsloot, Cosmo schools in Alexander Township, Johannesburg Metropolitan City and Orange Farm communities, within the City of Municipality in 2012/13. Johannesburg Metropolitan Municipality have benefited from the 2013/14 initiative: War on Water Leaks-Water Demand Management and Conservation Johannesburg North District - Cosmo City and Diepsloot Schools: Implemented within the Randfontein Local Municipality in Bair Athol Primary Mohlakeng and Toekomsrus communities, the project continues Cosmo City Junior Primary to manage water demand and ensure conservation through: Cosmo City Primary No 1 Training of 33 local community members on plumbing Cosmo City West Primary and fixing of water leaks; Itirele-Zenzele Comprehensive School Door-to-door education on water conservation;
Lion Park Primary School Re-enforcing partnership and enabling channels of
Musenga Vhadzimu Primary communication between the municipality and local z zZ ZVVZ Paradise Bend Primary communities; Tirisano Mmogo Junior Secondary Encouraging ownership and care for the water Zandspruit Primary infrastructure within the municipality, as well as reporting of water leaks; and Johannesburg South District-Orange Farm Schools: Creating employment opportunities, transferring skills and Mandume Primary School promoting social entrepreneurship within the municipality. Intlonipho Primary School Pudumo Primary The project has on an overall provided accredited plumbing Itemoheng Primary training to the local community members, and water leakages Zonkezizwe Primary were eradicated. A total number of 2 600 Households have Radipabi Primary been successfully retrofitted. Reamohetsoe Primary Laus Deo Primary The Rand Water Foundation water demand management Vulanindlela Secondary projects continue to support the business of Rand Water Orange Farm Secondary School by fulfilling water demand management and conservation objectives. The projects further contribute towards addressing The total schools population by then was 19 421 schools. the presidential outcomes of job creation, skills development The project has in the past two years benefited a total and poverty eradication. The Rand Water Foundation has been number of 30 schools in Gauteng i.e. 15 schools in Tembisa, implementing this project in Randfontein Local Municipality Ekurhuleni Metropolitan Municipality in 2011/12, and 15 for the past three years now. 154 Rand Water Integrated Annual Report 2013 -2014
Rural Communities Water Supply-Supingstad and Rehabilitation of Wetlands Lekgopung Communities Rehabilitation of wetlands is aimed at conserving water As one of its strategic objectives, the Rand Water Foundation and environment, including protection of biodiversity seeks to support the core business of Rand Water by through interventions such as: Gabion structures; Concrete promoting community access to clean safe drinking water structures; Earth works; Ecologs; and Re-vegetation, and sanitation services by undertaking projects that ensure contributing towards catchment management. Through sustainable delivery of clean water and sanitation services at wetlands rehabilitation, erosion is controlled and water community level (villages, schools, households and clinics) table is raised. The Foundation has in the year under review further promoting health and hygiene within communities. successfully rehabilitated wetlands in the following areas: Klipkop Nature Reserve, Tshwane; and The Supingstad and Lekgopung Rural Communities Water Zamdela Community Park, Metsimaholo Local Municipality.
Supply project is aimed at supporting rural communities’ water
supply in the Supingstad Village and its satellite village of The project has during the year under review created a total z zZ ZV Lekgopung within the Ramotshere Moiloa Local Municipality number of 93 jobs for local community members, while on the (RMLM) for which the Ngaka Modiri Molema District other hand developing a total of 15 emerging entrepreneurs. Municipality (NMMDM) is the designated Water Services Authority (WSA), contributing towards the achievement of the Clearing of Alien Vegetation Presidential and Shareholder outcome of rural development. Implemented in the Thabo Mofutsanyane Municipality The project implementation has during the year under review (Bethlehem, Kestell and Clarens) in the Free State, the began with the process of geohydrology undertaken to test project aims at controlling the spread of invasive alien the existing boreholes for both sustainable yield and quality species using labour intensive approach. A one-stop shop in the area. Out of a total number of sisteen (16) boreholes, for the management of invasive plants optimising co- a total number of eight boreholes were tested, and water operative governance, partnerships, transformation and skills found to be of drinkable quality. The Rand Water Foundation development of local communities, the project continues to: will in the current year continue to test the remaining eight Conserve the ecological integrity of natural ecosystems. boreholes, while on the other side rehabilitating the eight Promote water security in terms of quality and quantity. tested boreholes for actual water supply to communities. Ensure water demand management and conservation. Create jobs for the unemployed within the Thabo Environment Conservation Projects Mofutsanyane district (currently employing 108 local The following projects were implemented and concluded community members). as per plans: Rehabilitation of Wetlands; Clearing of Alien Optimise socio-economic development of the affected Vegetation; Rural/Urban Greening and Landscaping; and communities of Thabo Mofutsanyane district. the Community Education and Awareness Raising. The total Promote enterprise development through contracting budget spent was R9, 3m. of emerging entrepreneurs for service provision and supply of material. Contribute to the increased water volumes to the Vaal River, thus creating more water supply. Clear invasive plants for underground water protection (Has cleared 631 hacters in the year under review).
The project has increased jobs for local communities from f 53 in 2012/13 to 108 jobs in 2013/14. The clearing plan of 1 647 hectares in 2013/14 was 100% fulfilled. Rand Water Integrated Annual Report 2013 -2014 155
Rural and Urban Landscaping and Greening Initiatives within Gauteng. Education takes forms of workshops within Greening as a collection of activities to restore wetlands communities, and communities’ trips to Rand Water Plants and riverine corridors, provides nature-based spiritual and whereby communities are taken through processes of water recreational amenities. Planting trees not only assists in treatment. During the year under review, the project benefited beautifying and softening the landscape-but creates public more than one thousand (1,000) community members. places that are a source of pride and joy to residents and provide children with safe and enjoyable environment for Enterprise Development Projects playing. It also restores the water and air purifying services The following projects were implemented and concluded at associated with ecosystems in rural and urban areas. the total budget spent of R5.6m as per plans:
Greening Zamdela The Bantubonke Hydroponics Farming Cooperative Ltd
Implemented in Metsimaholo local municipality of the Implemented in the Bantubonke Community within the
Fezile Dabi District in the Free State, the Greening Zamdela Sedibeng District Municipality, the project is aimed at z zZ ZV project aims at implementing an integrated approach eradicating poverty within the community of Bantubonke to planting, care, management of vegetation in the area, through sustainable job creation, food production, and thus reducing pollution and increasing associated benefits skills transfer, and entrepreneurship development. such as reduced soil erosion, beautification of environment and increased surface infiltration through trees planting, Project Highlights: landscaping and parks development. An 18 tunnel hydroponics fresh produce facility. Expanded market supply and contracting. Sustainable job creation- Has created 20 permanent local jobs and ten temporary jobs in the year under review. Enterprise Development-Is currently developing 20 emerging entrepreneurs through a cooperative development. Skills transfer on hydroponics farming and entrepreneurship. In addition to the one community park developed scratch Household Poverty eradication and Food Security. in 2012/13 namely; Tailor Park, featuring play equipment, Creating wealth for the community and building social recreational facilities, waterborne ablution facilities, beautiful cohesion. landscaping and indigenous trees, and water connections Legacy of Sustainable Infrastructure-State-of-Art pack the Foundation has developed two more parks namely; house with office space, ablution blocks, and training, Achimoto and Golden Ash in partnership with the SASOL and entertainment facilities, paved with palisade Corporate in the year under review. The project has created surrounding fence. 120 jobs for local communities and has supported Six Small, Income generating and investments. Micro, Medium Enterprises (SMMEs) as well as local suppliers. A registered cooperative.
Community Education and Awareness Raising Koppies Greenhouse Farming Job Creation Project The Foundation continues to educate communities on the A similar model the Bantubonke project, the Koppies importance of water and environment conservation for wise Greenhouse is implemented in the Koppies Community water usage, and demand management. Educational activities area within the Ngwathe Local Municipality of the Fezile have during this year focused on various communities Dabi District in the Free State. In its second year of 156 Rand Water Integrated Annual Report 2013 -2014
implementation the project has so far achieved as follows: Education and Training Projects: Sustainable Infrastructure Development - Palisade In support of the basic education in the country the Surrounding Wall was constructed. Foundation implemented the following projects in 2013/14 Job Creation- Fifteen local community members have at a total cost of R4.8 m: benefited from the wall construction job. A total number of 15 SMMEs were developed through Back to School Education Support Project material supply and service provision. More than two thousand from 20 schools around Gauteng received full school uniform, stationery and lap desks from The Agro-Processing Infrastructure Development Project the Foundation in 2013/14. The project has also benefited In partnership with the Gauteng Department of Agriculture more than 15 cooperatives that made or manufactured the and Rural Development, the Foundation has provided agro- school uniform. These emerging entrepreneurs were afforded
processing equipment and infrastructure to cooperatives, a capacity building opportunity from the socio-economic
smallholder farmers and resource poor farmers in order development perspective. While promoting basic education, z zZ ZVVZ to enhance market access opportunities resulting in job the Foundation is also positively contributing to issues of socio- creation and poverty eradication. Implemented in most economic development through enterprise development. rural parts of Gauteng, the project has: Empowered a total number of 60 emerging farmers Early Childhood Development Support through agro-processing equipment and agricultural The Rand Water Foundation has in 2013/14 upgraded the inputs; and Kgotlelelo Educare Centre in De Beerspoort within the Dr JS Continued to create and sustain a total number of 650 jobs. Moroka District Muncipality in Mpumalanga Province. The following interventions were undertaken to ensure that the The project benefited the Maize Triangle projects around crèche is upgraded: Gauteng Province located in Magaliesburg (Mogale Construction of child user-friendly ablution blocks-ECD City); Bronkhorspruit (City of Tshwane); Randfontein, standards compliant. Blesbokfontein and Vlaakplaas (Emfuleni); and Randfontein. Installation of the Septic Tank. Water Supply-Three Jojo Tanks and Borehole. SMMEs Development Palisade Fence was installed. The Rand Water continues to create self-sustained Greening and Landscaping. communities that are able to participate in economic activities Plastering and painting of the existing structure. by supporting Small Medium and Micro Entrepreneurial Construction of the new dining hall. projects through sponsorship, business skills development Food Gardening. and training as well as preferential procurement: Outdoor Play Equipment. A total number of five emerging businesses received sponsorship from the Rand Water Foundation during Work at the Khulani ECD Centre in Soshanguve, Tshwane had the year under review. Among projects supported are just begun with the surrounding fence (palisade) installed. the Poultry and Piggery farming projects undertaken within the Vaal Maize Triangle. Adopt-a-Learner Study Support Grant A total number of one hundred and 184 SMMEs were The Rand Water Foundation is currently providing financial contracted through preferential procurement process as support to a total number of ten learners at Jeppe Girls High suppliers and service providers. School through the Ruth First Trust. The learners will benefit Achieved 109% spend towards B-BBEE transformation from the study support grade for a period of five years form agenda in terms of Enterprise Development. Grade 8 till Grade 12. Rand Water Integrated Annual Report 2013 -2014 157
Primary and Secondary Curriculum Support and Schools Community Education and Awareness Raining on HIV and Mobile Libraries AIDS In addition to the above mentioned projects, the Foundation Aimed creating awareness of the HIV and Aids pandemic has also undertaken two more education support projects within communities, the project had in 2013/14 targeted namely; Curriculum Support and Schools Mobile Libraries a total number of ten schools within the Johannesburg projects benefiting a total number of 27 schools within Central District that includes Soweto and Lenasia with a Gauteng. The projects contribute towards fulfilling the total learner population of 1 350. Shareholder Non-Core Outcome of an improved quality of basic education. Non-Government Organisations (NGOs) Health, including HIV and AIDS projects Support Projects
Health projects during the year under review include; Above and beyond the long term developmental projects,
Orphans and Vulnerable Children (OVC) support, Community the Foundation continues to ensure an overall community z zZ ZVVZ Home Based Care, Community Based Health Infrastructure empowerment through among others, support of the Development and Community Education and Awareness NGOs sector. In the year under review, the Foundation has Raising on HIV and Aids. Projects were implemented at a supported a total number of 38 NGOs at total value of R3.3 total cost of R2.1million. million. NGOs support is ensured through grants, NGOs training and development, and interventions through OVC Support Corporate Staff Involvement. The project continued to support a total number of 300 orphans and vulnerable children within the Diepsloot Conclusion community area through holistic interventions inclusive of; The Rand Water Foundation has on an overall implemented a psychosocial counselling, homework support, health issues, total number of 26 projects, at a total cost of R66m partnership teenage pregnancy and child support grants especially funding creating 2 183 jobs for local communities, while those child headed households. at the same time ensuring skills development, poverty eradication, and promoting enterprise development. A total Community Home Based Care number of 184 SMMEs were supported through Rand Water The project has in 2013/14 successfully trained a total Foundation’s developmental interventions in the year under number of 40 unemployed local community members as review. home based care givers in Nkangala Regions 1-7 within the Tshwane Local Municipality. The purpose of home based In closing, the Foundation acknowledges and appreciates care health intervention is to reduce highly populated contribution made through partnerships with other health care facilities. stakeholders namely; The Gauteng Department of Agriculture and Rural Development (GDARD), Gauteng Community Based Health Infrastructure Development Department of Education (GDE), Department of Water and The project contributed funding of R1.0 million towards Sanitation (DWS), City of Tshwane Metropolitan Municipality upgrading of the Kalafong Hospital’s Emergency Unit (CTMM), Fezile Dabi District Municipality (FDDM), SASOL, and Paediatric Ward in support of the Gauteng Health and the Randfontein Local Municipality (RLM). Department. The Paediatric Ward will now benefit a total number of approximately 700 children. 158 Rand Water Integrated Annual Report 2013 -2014
Bulk Distribution Water Quality Report: July 2013 - June 2014
Parameter Units of Specifications (based on No of results Achieved compliance levels measure SANS241: 2005)
Required compliance (1) Class I Class II 95% min to 99% min to Class I Class II SPECIFICATIONS Chemical and Physical properties Colour (mg / l as Pt) < 20 ≤ 50 5 373 99.9% 100.0% Conductivity (mS / m) < 150 ≤ 370 9 437 100.0% 100.0%
pH (pH units) ≥ 5 to ≤ 9.5 ≥ 4 to ≤ 10 9 437 100.0% 100.0%
z zZ ZVVZ Turbidity (NTU) < 1 ≤ 5 13 674 99.9% 99.9% Total Dissolved Solids (mg / l) < 1000 ≤ 2400 9 436 100.0% 100.0% Taste (FTN) < 5 ≤ 10 5 215 100.0% 100.0% Odour (TON) < 5 ≤ 10 5 214 100.0% 100.0% Organic Determinants Total Trihalomethanes (ug / l) < 200 ≤ 300 5 262 100.0% 100.0% Phenols as C6H5OH (ug / l) < 10 ≤ 70 2 570 100.0% 100.0% Dissolved Organic (mg / l) < 10 ≤ 20 5 126 100.0% 100.0% Carbon Micro Elements Antimony (μg / l as Sb) < 10 ≤ 50 5 384 100.0% 100.0% Arsenic (μg / l as As) < 10 ≤ 50 5 384 100.0% 100.0% Cadmium (μg / l as Cd) < 5 ≤ 10 5 428 100.0% 100.0% Chromium (Total) (μg / l as Cr) < 100 ≤ 500 5 429 100.0% 100.0% Cobalt (μg / l as Co) < 500 ≤ 1000 5 429 100.0% 100.0% Cyanide (Recoverable) (μg / l as CN) < 50 ≤ 70 5 067 100.0% 100.0% Lead (μg / l as Pb) < 20 ≤ 50 5 428 100.0% 100.0% Mercury (μg / l as Hg) < 1 ≤ 5 5 368 100.0% 100.0% Nickel (μg / l as Ni) < 150 ≤ 350 5 429 100.0% 100.0% Selenium (μg / l as Se) < 20 ≤ 50 5 384 100.0% 100.0% Vanadium (μg / l as V) < 200 ≤ 500 5 429 100.0% 100.0% Macro Elements & Miscellaneous Determinants Aluminium (mg / l as Al) < 0.3 ≤ 0.5 5 429 100.0% 100.0% Ammonia (mg / l as N) < 1 ≤ 2 5 428 100.0% 100.0% Calcium (mg / l as Ca) < 150 ≤ 300 5 429 100.0% 100.0% Chloride (mg / l as Cl) < 200 ≤ 600 5 429 100.0% 100.0% Copper (mg / l as Cu) < 1 ≤ 2 5 429 100.0% 100.0% Fluoride (mg / l as F) < 1 ≤ 1.5 5 429 100.0% 100.0% Iron (mg / l as Fe) < 0.2 ≤ 2 5 428 99.8% 100.0% Magnesium (mg / l as Mg) < 70 ≤ 100 5 429 100.0% 100.0% Rand Water Integrated Annual Report 2013 -2014 159
Bulk Distribution Water Quality Report: July 2013 - June 2014
Parameter Units of Specifications (based on No of results Achieved compliance levels measure SANS241: 2005)
Required compliance (1) Class I Class II 95% min to 99% min to Class I Class II Macro Elements & Miscellaneous Determinants continue Manganese (mg / l as Mn) < 0.1 ≤ 1 5 428 100.0% 100.0% Nitrate & Nitrite (mg / l as N) < 10 ≤ 20 5 429 100.0% 100.0% Potassium (mg / l as K ) < 50 ≤ 100 5 429 100.0% 100.0%
Sodium (mg / l as Na) < 200 ≤ 400 5 429 100.0% 100.0%
z zZ ZVVZ Sulphate (mg / l as SO4) < 400 ≤ 600 5 427 100.0% 100.0% Zinc ( mg / l as Zn) < 5 ≤ 10 5 429 99.7% 99.7% Microbiological E. Coli minimum minimum of of 99% of 95% of the the original (cfu per 100 ml) original results and repeat/ 13 800 99.9% 99.9% shall be non- consecutive detected results shall be non- detected Other Determinants as required by supply contract Free chlorine and ≥ 0.2 min 95% (mg / l) 13 773 95.6% monochloramine compliance FOR MONITORING/REPORTING PURPOSES ONLY (2) Guideline Achieved compliance levels 95 % Min 99 % Min 95 % Min 99 % Min compliance compliance Microbiological Standard Plate Count (cfu per 1 ml) < 100 < 5000 13 738 99.1% 100.0% Total Coliforms (cfu per 100 ml) Not detected < 10 13 800 99.1% 99.8%
Notes: (1) Specification date of effect : July 2006. (2) Guideline derived from SANS 241: 2005 operations alert and industry practices. 160 Rand Water Integrated Annual Report 2013 -2014
RAND WATER
Consolidated Annual Financial Statements
for the year ended 30 June 2014 z zZ ZVVZV
Statement of Responsibility by the Board 161 Report of the Audit Committee 162 Independent Auditor’s Report to Parliament 165 Board Report 168 Income Statement 182 Statement of Comprehensive Income 183 Statement of Financial Position 184 Statement of Changes in Equity 185 Statement of Cash Flows 186 Significant Accounting Policies 187 Notes to the Annual Financial Statements 201 Rand Water Integrated Annual Report 2013 -2014 161
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
STATEMENT OF RESPONSIBILITY BY THE BOARD
In accordance with the Water Services Act 108 of 1997, and the Public Finance Management Act, Act 1 of 1999, as amended, the Board is required to prepare consolidated annual financial statements that comply with South African Statements of Generally Accepted Accounting Practice.
The Board is responsible for ensuring that complete, accurate and reliable accounting records form the basis for preparing consolidated annual financial statements. The consolidated annual financial statements include judgments and estimates that are reasonable and prudent, made by management, reviewed and accepted by the Board. The Board also ensures that accounting policies are appropriate to the Group’s circumstances. In order to achieve this objective the Board rely on the systems of internal control set up and maintained by management.
Independent internal auditors assist the Board in their task of ensuring that internal controls are adequate and operate as intended throughout the financial year under review. The internal controls include a risk-based system of internal accounting and administrative controls designed to provide reasonable, but not absolute, assurance that the assets are safeguarded and transactions executed and recorded in accordance with generally accepted business practices, as well as with the Group’s policies
and procedures. The Board has, however, the ultimate responsibility for this system of internal controls and reviews the effectiveness z zZ ZVVZV of its operations primarily through the Audit Committee.
The Board has every reason to believe that the Group has adequate resources in place to continue in operation in the foreseeable future and has for this reason adopted the going concern basis in preparing the consolidated annual financial statements.
The external auditors, Nexia SAB&T, who were given unrestricted access to all financial records and related data, including minutes of the Board and committees of the Board, have audited the consolidated annual financial statements. The Board believes that all representations made to the independent auditors during their audit are valid and appropriate. Their unqualified audit report on the consolidated annual financial statements is presented on pages 165 to 167.
The Board is of the opinion that the consolidated annual financial statements fairly present the financial position of the Group at 30 June 2014, and the results of its operations and cash flows for the year then ended. Material facts or circumstances between the accounting date and the date that the report has been signed have been disclosed in the consolidated annual financial statements.
The consolidated annual financial statements, which appear on pages 168 to 230, have been approved by the Board on 16 October 2014 and signed on its behalf by:
Adv Matshidiso Hashatse Mr Dinizulu Kumalo Percival Sechemane CHAIRPERSON CHIEF EXECUTIVE 162 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
REPORT OF THE AUDIT COMMITTEE
We are pleased to present our report for the financial year ended 30 June 2014. 1. Audit Committee terms of reference
The Audit Committee reports that it has complied with its responsibilities arising from Section 77 of the Public Finance Management Act, Act 1 of 1999 as amended and Treasury Regulation 27.1 and that it has adopted formal terms of reference as its Audit Committee charter that has been approved by the Board. The Committee has conducted its affairs in compliance with its terms of reference and has discharged its responsibilities therein. 2. Audit Committee members, meeting attendance and qualifications
The Committee is independent and consists of at least three independent, non-executive members. It meets at least four times per year as per its items of reference. Attendance of meetings, dates of appointments as well as qualifications of the members are included in the governance report.
3. Roles and responsibilities z zZ ZVVZV
Statutory duties
The Committee’s role and responsibilities include statutory duties per the Public Finance Management Act, Act 1 of 1999 as amended, and further responsibilities assigned to it by the Board. The Committee is satisfied that it complied with its legal, regulatory and other responsibilities.
External auditor appointment and independence
The Committee ensured that the appointment of external auditors complied with the applicable legislation relating to the appointment of auditors. The Committee in consultation with executive management agreed to the engagement letter, terms, audit plan and budgeted audit fees for the 2014 year.
The Committee has satisfied itself that the external auditors were independent of the Group, which includes consideration of compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors. Requisite assurance was sought and provided by the external auditors that internal governance processes within the audit firm support and demonstrate its claim to independence.
Financial statements and accounting practices
The Committee has evaluated the consolidated annual financial statements of Rand Water and the Rand Water Group for the year ended 30 June 2014 and based on the information provided to the Audit Committee considers that the consolidated annual financial statements comply in all material respects with the requirements of the Water Services Act, Act 108 of 1997, the Public Finance Management Act, Act 1 of 1999 as amended, and South African Statements of Generally Accepted Accounting Practice. The Committee concurs that the adoption of the going concern premise in the preparation of the consolidated annual financial statements is appropriate. The Committee is satisfied with the quality and timeliness of the information availed to the Committee for oversight purposes. The Committee has recommended the adoption of the consolidated annual financial statements by the Board. Rand Water Integrated Annual Report 2013 -2014 163
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has: - reviewed and discussed with the external auditors’ and accounting authority, the audited consolidated annual financial statements; - reviewed the external auditors’ management letter and managements’ response thereto; - reviewed changes in accounting policies and practices; - reviewed compliance with legal and regulatory provisions; - reviewed significant adjustments resulting from the audit; and - reviewed and discussed with the accounting authority, the performance information submitted to the external auditors. During the year, the Committee met with the external auditors, without management being present, and confirmed that there were no unresolved issues.
Internal financial controls
The Audit Committee is satisfied that internal controls and systems have been put in place and that these controls have functioned effectively during the period under review. The Committee has overseen a process by which Internal Audit has
performed audits according to a risk based audit plan where the effectiveness of risk management and internal control systems, z zZ ZVVZV including financial internal controls were evaluated. The findings of these evaluations formed the basis for the Committee’s recommendation in this regard to the Board, in order for the Board to report thereon as well as through discussions with external audit on the result of their audits that an adequate system of internal control is being maintained to: - reduce the Group’s risk to an acceptable level; - meet the business objectives of the Group; - ensure the Group’s assets are adequately safeguarded; and - ensure that the transactions undertaken are recorded in the Group’s records.
The Audit Committee is satisfied with the content and quality of monthly and quarterly reports prepared and issued by the Group during the year under review.
Going concern
The Committee has reviewed managements assessments of the going concern status of the Group and has made recommendation to the Board accordingly.
Internal audit
In line with the Public Finance Management Act, Act 1 of 1999 as amended (PFMA) and the King III Report on Corporate Governance requirements, Internal Audit provides the Audit Committee and management with assurance that the internal controls are appropriate and effective. The Committee is responsible for ensuring that the Group’s internal audit function is independent and has the necessary resources, standing and authority within the Group to enable it to discharge its duties. Furthermore, the Committee overseas cooperation between internal and external auditors and serves as a link between the Board and these functions.
The Committee considered and approved the internal audit charter. The Internal Audit function’s annual audit plan and three year strategic plan were approved by the Committee. The internal audit function reports administratively to the Group Governance Executive and functionally to the Audit Committee and has responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of the Group’s operations. The Internal Audit manager has direct access to the Committee primarily through its Chairperson. 164 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
REPORT OF THE AUDIT COMMITTEE
From the various reports of the Internal Auditors, it was noted that no matters were reported that indicate any material deficiencies in the systems of internal control. Risks that have been identified through various processes are being addressed. The Committee is satisfied with the effectiveness of the internal audit function.
Expertise and experience of the Chief Financial Officer and finance function
The Committee has satisfied itself that the Chief Financial Officer has appropriate expertise and experience. The Committee has considered and has satisfied itself of the appropriateness of the expertise and adequacy of resources of the finance function and experience of the senior members of management for the financial function.
Governance of risk
The Committee oversees the implementation of the policy and plan for risk management taking place by means of risk management systems and processes through the organisation’s Board Risk Committee. The Committee is satisfied that
appropriate and effective systems are in place for risk management.
z zZ ZVVZV The Audit Committee accepts the audit opinion of the external auditors on the consolidated annual financial statements and recommends that the audited consolidated annual financial statements be accepted and read together with the report of the external auditors.
Mr Lefadi Makibinyane CHAIRPERSON – RAND WATER GROUP AUDIT COMMITTEE 16 October 2014 Rand Water Integrated Annual Report 2013 -2014 165
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
INDEPENDENT AUDITOR’S REPORT TO PARLIAMENT
Report on the consolidated and separate financial statements
Introduction
We have audited the consolidated and separate financial statements of the Rand Water and its subsidiaries as set out on pages 182 to 230, which comprise the consolidated and separate statement of financial position as at 30 June 2014, the consolidated and separate statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information.
Accounting Authority’s responsibility for the consolidated and separate financial statements
The Board, which constitutes the accounting authority is responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with South African Statements of Generally Accepted Accounting Practice (SA
Statements of GAAP) and the requirements of the Public Finance Management Act of South Africa and the Water Services Act,
Act No 108 of 1997, and for such internal control as the accounting authority determines is necessary to enable the preparation of z zZ ZVVZV consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with the Public Audit Act of South Africa, the general notice issued in terms thereof and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and separate financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated and separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and separate financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the financial position of Rand Water and its subsidiaries as at 30 June 2014 and its financial performance and cash flows for the year then ended, in accordance with South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) and the requirements of the Public Finance Management Act of South Africa and the Water Services Act, Act No 108 of 1997. 166 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
INDEPENDENT AUDITOR’S REPORT TO PARLIAMENT
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the PAA and the general notice issued in terms thereof, we report the following findings on the reported performance information against predetermined objectives for the selected objectives presented in the annual report, non- compliance with legislation as well as internal control. We performed tests to identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, we do not express an opinion or conclusion on these matters.
Predetermined objectives
We performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected objectives presented in the annual performance report of the public entity for the year ended 30 June 2014: Objective 1: Water Quality Compliance on page 173 Objective 2: Non Revenue Water on page 173 Objective 3: Reliability of Supply on page 173
Objective 7: Effective Internal Controls and Risk Management on page 173
z zZ ZVVZV Objective 12: Capital Expenditure on page 173 Objective 13: Increased access to Services on page 173 Objective 17: Corporate Social Responsibility Initiatives on page 173 Objective 19: Good Governance on page 173
We evaluated the reported performance information against the overall criteria of usefulness and reliability.
We evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned objectives. We further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National Treasury’s Framework for managing programme performance information (FMPPI).
We assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.
We did not raise any material findings in respect of the usefulness and reliability of the reported performance information for: Objective 1: Water Quality Compliance on page 173 Objective 2: Non Revenue Water on page 173 Objective 3: Reliability of Supply on page 173 Objective 7: Effective Internal Controls and Risk Management on page 173 Objective 12: Capital Expenditure on page 173 Objective 13: Increased access to Services on page 173 Objective 17: Corporate Social Responsibility Initiatives on page 173 Objective 19: Good Governance on page 173
Compliance with laws and regulations
We performed procedures to obtain evidence that the public entity had complied with legislation regarding financial matters, financial management and other related matters. Our findings on material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the PAA, are as follows:
Expenditure management
As disclosed in Note 41 of the consolidated annual financial statements, the accounting authority did not take effective and/or appropriate steps to prevent irregular expenditure, as required by Section 51 (1)(b)(ii) of the PFMA. Rand Water Integrated Annual Report 2013 -2014 167
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
INDEPENDENT AUDITOR’S REPORT TO PARLIAMENT INDEPENDENT AUDITOR’S REPORT TO PARLIAMENT
Procurement and contract management Goods, works or service were not procured through a procurement process which is fair, equitable, transparent and competitive as required by the PFMA Section 51(1)(a)(iii). Sufficient appropriate audit evidence could not be obtained that contracts and quotations were awarded to suppliers whose tax matters have been declared by the South African Revenue Services to be in order as required by the Section 14 of the Preferential Procurement Regulations.
Internal control
We considered internal control relevant to our audit of the financial statements, Report on Predetermined Objectives and compliance with legislation. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on non-compliance with legislation included in this report.
Leadership
The matters indentified and reported under the compliance with laws and regulations section above, were as a result of z zZ ZVVZV non-adherence with procurement and contract management policies and procedures.
OTHER REPORTS
Audit-related services and special audits
The accuracy of the Water Research levy payment. These reports covered the periods July 2013 to December 2013 and January 2014 to 30 June 2014 respectively and were issued on 28 March 2014 and 12 September 2014 respectively.
In respect of the issue of Notes under the Domestic Medium Term Note (DMTN) programme. This report covered the period 1 July 2013 to 10 December 2013 and was issued on 10 December 2013.
Compliance under Section 13B (1) of the Pension Funds Act (1956). This report covered the period 1 July 2012 to 30 June 2013 and was issued on 13 December 2013.
Compliance with regulation 68 of the regulations to the National Credit Act, 2006, (“the regulations”). This report covered the period 1 July 2012 to 30 June 2013 and was issued on 17 December 2013.
The review of the National Treasury Consolidation Template for the period ending 30 June 2014.
Compliance with conditions determined under the Compensation for Occupational Injuries and Diseases Act, 1993. This report covered the period 1 March 2013 to 28 February 2014 and was issued on 17 April 2014.
Nexia SAB&T Per: A Darmalingam Director Registered auditor
16 October 2014 168 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT
1. Introduction
The Board is pleased to present it’s report and the audited consolidated annual financial statements for the year ended 30 June 2014. In the opinion of the Board, the consolidated annual financial statements fairly represent the financial position of Rand Water and its subsidiaries as at 30 June 2014 and the results of its operations and cash flow information for the year then ended. 2. Going concern
The consolidated annual financial statements have been prepared on the going concern basis. The Board has every reason to believe that the business has adequate resources to continue as a going concern in the foreseeable future. The going concern assessment was undertaken taking into consideration the following: The Group has adequate committed credit facilities from its lenders to fund its operations and meet its financial obligations in the normal course of business for the foreseeable future;
A funding strategy and plan has been developed to ensure that the Group is able to successfully fund its capital expenditure
programme without breaching the set financial parameters; z zZ ZVVZV The Group has adequate undrawn funding facilities and has set aside a liquidity buffer amounting to R690 million to cater for the liquidity requirements that may arise in the course of business; The operational and financial risks of the Group have been reviewed to determine their impact on the business under various conditions, and mitigating initiatives, strategies and controls are in place as reflected in the business and risk management plans of the Group and the Portfolios; The accumulated reserves of the Group has improved by 15% compared to the prior year; The gearing ratio reflected at 29.32% is below the set target of 50%; The interest cover and cash interest cover are significantly better than the target of 3,0 times; and Cash flow forecasts which are assessed by the Board on a quarterly basis indicate that the Group will be able to meet its obligations. 3. Post balance sheet events
The Board is not aware of any matter or circumstance arising since the end of the financial year. 4. Public Finance Management Act (Act 1 of 1999 as amended)
The Public Finance Management Act, Act 1 of 1999 as amended (PFMA) is the Group overarching piece of legislation and it supersedes any other applicable legislation in our business. PFMA compliance is one of the key business regulatory imperatives. The Organisation continues to ensure that this compliance is managed effectively in its daily activities.
The Board’s commitment with regard to measures that are designed to detect and prevent irregular expenditure in terms of Policies and Frameworks that it has endorsed has remained unchanged.
The Board has considered the PFMA provisions relating to fruitless and wasteful expenditure and has in turn approved the framework for reporting with regard thereto. In terms of the materiality framework, as agreed with the accounting authority, and Section 55(1)(d) of the PFMA, any material losses due to criminal conduct or irregular or fruitless and wasteful expenditure that exceed the materiality level must be reported. Rand Water Integrated Annual Report 2013 -2014 169
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT BOARD REPORT
The materiality framework further encourages the reporting of theft, non-compliance with legislation etc, and these have to be reported despite the level of materiality.
During the year under review the Group identified approximately R15.668 million worth of fruitless, wasteful and irregular expenditure of which R1.054 million is recoverable by means of civil litigation. These identified items have been disclosed in note 41 in the notes to the consolidated annual financial statements.
The Board’s commitment to a Zero tolerance approach to fraud, corruption, misappropriation of funds and theft has remained unchanged.
None of these identified instances were condoned and the Group has opened criminal and civil cases against the relevant parties in order to recover the identified losses and instituted disciplinary measures in accordance with Section 51(e) of the Public Finance Management Act, Act 1 of 1999 as amended (PFMA) which states that:
“The Accounting Authority must take effective and appropriate disciplinary steps against any employee of the public entity who:
I. Contravenes or fails to comply with a provision of this Act;
z zZ ZVVZV II. Commits an act which undermines the financial management and internal control systems of the public entity; and III. Who makes or permits irregular expenditure or a fruitless and wasteful expenditure”
In order to ensure that sound governance protocols are observed and maintained, the Group utilises a dedicated Forensic Services Division, under the leadership of the Group Governance Executive, mandated to initiate reactive investigations into allegations and reports of criminal conduct, unauthorised expenditure and irregular expenditure.
The Group has an Integrated Fraud Risk Management Framework that ensures that proactive audits and investigations into processes and procedures are initiated in order to identify, manage and control commercial crime risk.
In the current year under review, the Board extended this Division’s mandate to not only report its activities to the Group Audit Committee but also to the Group Risk Committee in alignment with the Integrated Risk Management Framework.
For the year under review the Forensic Services Division delivered in terms of it’s strategic objectives by initiating investigations and audits into reported and detected misconduct and where these allegations were substantiated disciplinary action was taken and criminal and civil action initiated where required.
For the year under review the Group continued to execute the implementation of the Fraud Prevention Plan that was unconditionally accepted by National Treasury in 2010 and rolled out in the Organisation during 2011, by conducting numerous White Collar Crime awareness programs and fraud training workshops for Managers.
The Fraud Prevention Plan focuses on proactive measures that include raising staff awareness levels in respect of governance responsibilities and includes proactive measures such as staff and vendor screening, the screening and rating of customers, debtors and revision of policies and procedures.
Group Forensic Services developed and implemented a White Collar Crime Risk Register methodology during the 2013 / 2014 financial year that was approved by the Board. During the year under review this methodology was implemented throughout the Organisation and resulted in a White Collar Crime Risk register that is presented to the Portfolio Integrated Committee as well as the Group Risk and Audit Committees bi-annually. The White Collar Crime Risk register identifies and evaluates controls that are in place to mitigate white collar crime risk in the organisation. 170 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT
All activities, outcome of investigations and audits as well as progress on the implementation of activities, as directed by the Fraud Prevention Plan are reported to management on a monthly basis and to the Group Audit and Risk Committee on a quarterly basis. All initiatives in respect of the Fraud Prevention Plan and other preventative initiatives are constantly monitored and benchmarked in order to ensure that the organisation maintains its corporate citizenship responsibilities.The Public Finance Management Act (PFMA) is the Group’s supreme piece of legislation and it supersedes any other applicable legislation in our business. PFMA compliance is one of the key business regulatory imperatives. The organisation continues to ensure that this compliance is managed effectively in its daily activities.
The Board has re-affirmed its Policy Statement with regardz to measures that are designed to detect and prevent irregular expenditure in terms of Policies and Frameworks that it has endorsed. 5. Water Services Act No. 108 of 1997
The Rand Water Board was established in terms of Section 84 of the Water Services Act, No. 108 of 1997 (“the Act”) and it operates
in accordance with the mandate espoused in the Act. The Board is committed to compliance with the Water Services Act and is of
z zZ ZVVZV the opinion that Rand Water and its subsidiaries comply in all material respects. 6. Functions
The Rand Water extracts raw water from the Vaal River basin, then treats, transports and stores it in order to deliver potable water to municipalities, mines, industries and small consumers. Raw water is also delivered to certain industries by agreement. The organisation also engages in secondary activities, which are deemed to be supportive of the primary activities.
The Rand Water Foundation was established to carry out the Corporate Social Investment (CSI) Programme of Rand Water. Established in 2001, the Foundation is registered as a Non Profit Company (NPC) and developmental entity of Rand Water. Rand Water Foundation has been operational since 2003.
The Foundation is mandated to: promote and support the delivery of water services to communities in the areas falling within and outside Rand Water’s area of supply; coordinate, administer and manage Rand Water’s Corporate Social Investment resources by undertaking community development projects in partnership with various donors and relevant stakeholders. In addition to its mandate, the Shareholder acknowledges that Rand Water Foundation has a strategic developmental role that may require decisions that are not always optimal from a commercial perspective, but contribute to Rand Water’s socio economic developmental imperatives, Department of Water and Sanitation’s developmental priorities, and National Government’s broader objectives and the growth and development in South Africa and Africa.
The Foundation’s strategic interventions include elements of social transformation and capacity building for emerging enterprises, drawing in service providers from previously disadvantaged communities through preferential procurement processes, and contributing towards both the social and economic development of communities.
Rand Water Services (Pty) Ltd was established in 2000 to develop and pursue the commercial aspects of Rand Water’s business in the water services industry. The Water Services Act, Act 108 of 1997 requires Rand Water to ring fence other business activities from the regulated water services. Rand Water Services (Pty) Ltd was therefore established in order to tap into the potential of the water industry by allowing business partnerships and joint ventures with private and public companies in developing water infrastructure with a national and pan-African focus. In November 2010 the Rand Water Board took a decision to integrate the operations of Rand Water Services (Pty) Ltd into Rand Water. Rand Water Integrated Annual Report 2013 -2014 171
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT BOARD REPORT
On 22 January 2014, at the Vitens Rand Water Services shareholders meeting held at Rand Water, the Boards deliberated steps to be taken to finalise the liquidation and or closure of the joint venture. The members resolved that Vitens and Rand Water Services agree on a buyout of the Rand Water Services 49% shareholding in Vitens Rand Water Services as this proposal appears to be more viable than the alternatives. The members also agreed that the buyout would be in according to the following terms and conditions: a. The sale of Rand Water Services 49% shareholding at a value of one Euro; b. Full redemption of the outstanding loan in line with the terms and conditions of the loan agreement; c. Provision of necessary indemnities and warranties; d. Confirmation that there are no outstanding warranties and surety ships; e. Compliance with all applicable legislation and agreements governing the initial transaction; f. The sale agreement of shares to be in line with South African law; and g. The contract which will give effect to the sale of shares will be drafted between the parties to formalise the resolution.
In terms of Section 54 of the PFMA a public entity must in writing inform the relevant Treasury and submit the relevant particulars of the transaction to its Executive Authority for approval of the transaction where the entity is acquiring or disposing of a significant
shareholding in a company (S54(c)). Rand Water is currently in the process of attaining approval from National Treasury. z zZ ZVVZV
7. Board Term
In terms of Section 35(1) of the Water Services Act, Act No 108 of 1997, the Minister of Water and Sanitation may appoint members of the Board from time to time. The term of office of the Board is regulated in accordance with Schedule 1 of the Act. The term of office of the Board Members lapsed at the end of March 2014, however, the Minister of Water and Sanitation extended the Board Members’ term until appointment of the new Board. The new Board was appointed by the Minister effective 01 April 2014, however the operational activities of the new Board conceded on 01 June 2014. 8. Registered address
The following are the registered business and postal addresses of the Group: Business address: Postal address: 522 Impala Road PO Box 1127 Glenvista Glenvista 2058 2000 9. Corporate business plan
Rand Water embarked on a growth strategy in November 2009. It is with this strategy in mind that the organisation’s national footprint is beginning to be recognised. In line with the Ministerial outcomes and the Presidential Outcomes, the organisation has begun to play a recognised national role.
This alignment ensures sustainability and much needed synergy in the water sector. This collaborative effort between Department of Water and Sanitation and Rand Water provides a proactive stance to service delivery and the financial year 2012/2013 saw Rand Water receiving four ministerial directives. These directives were to offer assistance and become an implementing agent to water Boards and municipalities. The directives are as follows: Sedibeng Regional Sewer Scheme (SRSS), Botshelo Water Board, Ermelo Water Supply Emergency Project and the Molopo Eye to Mahikeng pipeline investigation and replacement project. On 24 March 2014, the Honourable Minister of Water Affairs approved a government gazette notice to extend the service area of Rand Water to include the upper Vaal Water Management area and the entire area of the Province of Mpumalanga overlapping with the operational area of the Bushbuckridge Water Board. Board member attendance
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BOARD REPORT
In support of the national government’s infrastructure investment, Rand Water will continue to be an implementing agent to municipalities in terms of sanitation solutions, water demand, acid mine drainage and all other water related issues.
These are key priorities of both the National Development Plan and the New Growth Plan.
Strategically Rand Water is focusing more on growth and social and economic development, viz; Expansion of geographical area; Innovation; Rural development; and Domestic and International partnerships.
In line with this expansion, Rand Water intends to fully participate in rural development, through the Intermediate Water Supply Programme Strategy (IIWSS) and committed to its objectives. Rand Water will align itself to the process and make the relevant
resources available in support and implementation thereof, as agreed upon as part of the programme.
z zZ ZVVZV Twenty three District Municipalities have been identified through a comprehensive search, and Rand Water intends to engage with a target number of these District Municipalities.
Rand Water’s infrastructure is projected to increase to some 6600 mega litres per day by the year 2030 and the capital expenditure programme has identified this important part in ensuring that Rand Water is able to meet this key mandate in to the future. The Rand Water system operates as a network, to which components are continuously being added and upgraded.
Rand Water continues to search for ways to keep abreast of its market and to improve on internal processes through effective processes, services delivery and technologies. Innovation will ensure that Rand Water continues to be the catalysts of the water sector and the global footprint is extended through award winning breakthroughs and solutions to water related challenges. With this in mind, Rand Water had set itself a target of establishing the Rand Water Innovation Hub in the financial year ending 30 June 2014.
The Rand Water Academy is successfully undertaking its key mandate and delivering on one of the ministerial outcomes.
The Academy continues to create capacity and capability to deliver specific water-related training to alleviate the critical skills gaps that exist in the water sector.
In spite of challenges in the water sector, the organisation is maintaining determined path, in line with a 2030 vision. The organisation continues to meet key capital expenditure targets; water quality standards; and continuous supply to its bulk customers. Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT BOARD REPORT
10. Performance for the year
An overview of the Rand Water company performance against objectives is contained in the table below:
Performance objective Key perfomance indicator Target Perfomance result
Water quality compliance Compliance SANS 241 Class 1 >= 95% Achieved 99.65% Compliance SANS 241 Class 2 >= 99% Achieved 99.98% Non revenue water Water lost as a percentage of total water produced <= 3.9% Achieved 3.5% (1) Reliability of service Number of days supply disrupted divided by total number 0 days Achieved 0 days of possible supply days Financial reporting Unqualified external audit report 100% Achieved 100% compliance Qualified external audit report 0% Achieved 0% Staff turnover Percentage of staff leaving <= 5% Achieved 2.45% (2)
Board member attendance Annual attendance >= 80% Achieved 80%
Effective internal controls No repeat on unresolved internal audit findings z zZ ZVVZV 0 findings Achieved 0 findings and risk management Bulk supply agreements Municipalities/other customers with bulk supply concluded with agreements 100% Achieved 100% municipalities/other customers Improve financial Net income margin (primary activities) >=12.8% Achieved 16.5% (3) perfomance Net income margin (secondary activities) >= 0.5% Achieved 1.5% (4) Gross margin (primary activities) >= 25.9% Achieved 27.3% (5) Gross margin (secondary activities) >= 5% Achieved 5.58% (6) Debt equity <= 37% Achieved 28.6% (7) Return on assets >= 7.1% Achieved 8.98% (8) Debtors days <= 33 days Not achieved 34 days Increase BBBEE spend Percentage of spend increased and increased new entrants >= 85% Achieved 92.66% (9) Manage costs within the No over expenditure/losses <= 15% Achieved 1.2% approved budget Capital expenditure Percentage variance of overall projects expenditure <= 5% Not achieved 8% (10) against target Percentage variance of overall project completion dates <= 5% Achieved -1% against target Increased access to services Capital expenditure spend of number of expansion projects >= 26% Not applicable (11) Engagement in secondary Total turnover (Rm) activities >=R 372m Achieved R 652 (12)
Achieve statutory Statutory submissions made on time 100% Achieved 100% reporting compliance Jobs created Number of permanent and contract staff (direct) >= 3 268 Not achieved 3 229 Number of temporary (indirect) RWF and RW Contractors >= 1 900 Achieved 4 816 (13) Corporate social Percentage spent on corporate social responsibility >= 95% Achieved 100% responsibility initiatives initiatives Training and skills Total number of graduates enrolled by the Rand Water >= 30 Not achieved 19 (14) development Academy Good Governance Breaches of materiality and significance framework <= RNil Achieved RNil Corporate social Number of identified Rural District Municipalities >= 4 Achieved 7 responsibility initiatives supported by Rand Water
* Financial calculations exclude incentive bonus provisions which are not guaranteed. Board member attendance
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BOARD REPORT
11. Performance information explanations
Explanations for variances that are more than 10% to target are provided below, whether positive or negative:
1. South Africa faces a major challenge in respect of water lost that cannot be accounted for. This measure aims to reduce the quantity of water lost in the water purification process. The organisation has systems in place that monitor water losses and ensures maximum recovery of waste water. The target has therefore been achieved. Actual water loss 3.5% achieved against a target of 3.9%.
2. The measure focuses on optimal staff retention by measuring the percentage of staff leaving the organisation. Only 2.45% of staff against a target of 5% left the organisation. This is mainly as a result of programmes aimed at improving employee loyalty.
3. This ratio measures the profits after taxes on bulk water sales. It is the percentage of sales left after all the expenses are deducted.
The actual result is greater than target as a result of the additional potable water sales volume (4%) and savings on fixed costs
resulting from internal efficiencies and cost containment initiatives. z zZ ZVVZV
4. This ratio measures the profits after taxes on non-bulk water (secondary activity) sales. It is the percentage of sales left after all the expenses are deducted. The achievement of 1.5% in comparison to the target of 0.5% is attributable to the increase in secondary activity revenue (68%).
5. This is an indication on whether the average mark up on bulk water sales is sufficient to cover expenses and generate a profit. It shows the relationship between sales and the direct cost of goods sold. Actual result of 27.3%, exceeded the target of 25.9%. The increase in the gross profit margin is attribute to the reduction in direct costs achieved from internal efficiencies and cost containment initiatives.
6. This is an indication on whether the average mark up on non-bulk water (secondary activity) sales is sufficient to cover expenses and generate a profit. It shows the relationship between sales and the direct cost of goods sold. Rand Water achieved 5.58% against a target of 5%. The higher gross profit margin was achieved as a result of utilizing Rand Water’s limited resources over a greater spread of projects.
7. The indicator measures the level of external funding sources versus internal funding sources. The organisation, mainly as a result of additional cash generated by the business and improved cash flow management, achieved 0.28 against the target of 0.37.
8. This indicates the organisation’s ability to utilise the assets employed in the business efficiently and effectively, to earn a good return. Rand Water achieved 8.98% against a target of 7.1%, as a result of improved margins.
9. Broad-Based Black Economic Empowerment (BBBEE) aims to advance economic transformation and enhance the economic participation of black people in the South African economy. Year to date Rand Water BBBEE exceeded the target by 7.66%. The increase in BBBEE spend is the culmination of an extensive effort in BBBEE monitoring and management. The target is determined from nationally set criteria. The increase in BBBEE spend is attributable to awarding most of procurement budget to BEE compliant companies which scored high during the adjudication process. Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT BOARD REPORT
10. Rand Water annually budgets for expenditure on replacement and augmentation of its ageing infrastructure. It is important that these budgets are spent as planned to ensure current and future water requirements are adequately met. Target tolerance levels were set. Overall project completion within target dates was met. The overall expenditure was underspent by 8% due to the review of the contracting strategy.
11. This measures the actual amounts spent on growth projects as a percentage of budgeted expenditure. The stretch is limited to 100 percent. As at 30 June 2014 Rand Water did not allocate any capital expenditure to growth projects. However, Rand Water’s experience is that growth projects can be directed by the Minister; can be ad hoc and/or can arise during the year. The measure is how much is spent on that project as a percentage of the budget. The target is currently 26% of budgeted capex for that project that will arise during the year.
At the present moment, Rand Water is yet to spend any capital expenditure on growth projects. Expansion projects exclude bulk potable water projects within Rand Water’s area of supply. Projects of this nature depend significantly, on external stakeholders in their execution. Therefore, this measures capital expenditure on projects that have gone through all the levels of approvals
and contracting.
z zZ ZVVZV
12. As part of its growth strategy Rand Water seeks new business opportunities in the non-bulk water sales arena. The revenue generated from these activities exceed the target by R280million (75%) mainly as a result of additional work undertaken on behalf of other municipalities.
13. Rand Water remains committed to national initiatives aimed at boosting the economy and ensuring social equality. One such initiative is job creation. The target for temporary (indirect) jobs created was met. The target for Permanent and contract (direct) jobs created was not met. In line with the national directive, Rand Water placed a moratorium on the filling of vacancies.
14. Annually Rand Water sets targets in respect of strategic objectives for the organisation to be measured against. These are agreed with the Shareholder. The under performance is due to the Rural Development Graduate Project within the Rand Water Academy, which was put on hold and partially implemented based on availability of funds. 12. Financial performance
2010 Actual 2011 Actual 2012 Actual 2013 Actual 2014 Actual
Revenue Rm 4 988 5 891 6 838 7 751 8 665 Net income for the year Rm 302 536 778 997 1 182 Property, plant and equipment Rm 6 346 7 155 8 417 9 907 12 111 Capital expenditure Rm 910 1 017 1 481 1 748 2 448 Interest bearing borrowings Rm 630 646 1 193 1 516 2 513 Accumulated reserves Rm 6 222 6 756 7 534 8 512 9 750 Potable water bulk tariff R/kl 3,4987 3,9921 4,5071 5,0163 5,5090 Net interest paid (received) 11 16 (43) (43) (71) Board member attendance
176 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT
The Group has produced solid results for the financial year ended 30 June 2014 which have been achieved during a challenging economic environment.
The Group achieved a 18.6% increase in net income from R997 million to R1 182 million. The improvement in net income generated is attributable to increase in revenues driven by increasing consumption volumes by 2.7% compared to the previous year, increase of 67.7% in operating income as a result of traction gained in pursuit of new revenue streams within bulk sanitation and water demand management, as well as efficiencies gained.
Net interest income has increased to R71 million as borrowing costs continue to be capitalised to qualifying assets during the year. Capitalised borrowing costs amounted to R204 million (2013: R98 million) and are expected to increase in line with the capital investment programme over the next five years.
The 65.5% increase in long-term loans is as a result of the tap issue on the RW023 and RW28 Domestic Medium Term Note (DMTN)
programme of R1 000 million that was exercised during the year, thereby increasing long term loans to R2 512 million.
z zZ ZVVZV The Group incurred capital expenditure of R2 448 million for the year under review which includes borrowing costs of R204 million. The expenditure also incorporates costs majority of which relates to the augmentation and rehabilitation of infrastructure which has resulted in an increase in property, plant and equipment to R12 billion. The Group is undertaking major infrastructure renovations to ageing infrastructure. The capital expenditure increased by 40% compared to the previous year.
It is Rand Water’s policy to recover all operational costs in the tariffs set, as well as to fund rehabilitation/replacement projects from internally generated funds. The tariff increased by 9.82% for the year.
Revenue Bulk Tariff
10 000 6 8 000 6 000 4 4 000 2
2 000 Rand
R million 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Actual Actual
13. Business performance
2010 Actual 2011 Actual 2012 Actual 2013 Actual 2014 Actual
Net income margin % 6,14 9,04 11,39 12,86 13,64 Income per employee R'000 101,33 175,96 247,02 310,16 367,90 Average cost of capital % 13,00 13,00 11,49 10.02 9,98 Debt-equity ratio 0,14 0,14 0,20 0,22 0.29 Return on assets % 3,75 6,05 6,71 7,57 8,96 Assets turnover ratio 1,32 1,24 1,26 1,34 1,48 Current ratio 1,45 1,31 1,18 1,09 1,03
The 2014 net income margin is 6% higher than that achieved in the prior year. This increase is as a result of higher revenues generated and operational efficiencies. This has also contributed to an increase in the income per employee. Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT BOARD REPORT
In addition it is expected that the group will maintain Return on Assets its investment grade credit rating of Fitch Rating (A- and 10 F3) and Standard & Poor ((BBB+ local currency) and BBB- 8 6 (foreign currency)) as well as the gearing and cash interest 4 cover ratios at target levels. 2 Percentage 0 2010 2011 2012 2013 2014 The decrease in the current ratio is due to the reduction in the available cash reserves and a related increase in the trade and Actual other payables which have arisen as a result of a significant Net Income Margin increase in contracts payable to suppliers in respect of capital 15 expenditure incurred. The cash reserves have been utilised to 10 fund the capital expenditure programme. 5
The increase in return on assets may be attributed to an Percentage 0
2010 2011 2012 2013 2014
increase in the operating incomes in the organisation for the
z zZ ZVVZV 2014 financial year. Actual
14. Operational performance
2010 Actual 2011 Actual 2012 Actual 2013 Actual 2014 Actual
Volume sold (Including Ave 3 720 4 095 4 205 4 309 4 413 consumption accrued to 30 June) mgl/d Number of employees at year 3 029 3 030 3 153 3 214 3 500 end *
An increase in consumption by customers has resulted in a increase of approximately 2.4% in the average megaliters of water sold, which is attributable to higher Volume Sold demand requirements experienced in the year under review as compared to previous years. 6 000 4 000 The headcount also increased by 0.59% during the 2 000 financial year. 0 2009 2010 2012 2013 2014 Megalitres/day * Included in 2014 is 271 employees relating to the Actual employees of the disestablished Bushbuckridge Water Board. Refer to Note 39 for further details. Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT
15. Remuneration Report
Reward Approach
The Rand Water Total Rewards Model emphasizes the importance of a total rewards approach to create employee engagement in the organisation. A balanced approach to remuneration, benefits as well as recognition is crucial in ensuring a sustainable and healthy working environment where employees are fully engaged. It is crucial to ensure that employees understand and appreciate the value of a total rewards offering which includes all elements of extrinsic and intrinsic rewards.
Guaranteed Remuneration
Bargaining unit employees
Annual salary increases for employees falling within the ambit of the central bargaining forum are negotiated between management and labour, represented by the two recognised unions SAMWU and UASA. The salary increases for the 2013/2014 financial year
were within budget and the mandate as approved by the Human Resources and Remuneration Committee. z zZ ZVVZV
Managerial level employees
Managerial and senior professional employees operate on a pay-for-performance remuneration philosophy. The remuneration structure utilised at these levels is a Total Cost to Company methodology which allows the employees flexibility in structuring their packages. The increases at these levels are performance based and the increases are influenced by market movements in terms of CPI, predicted increases as well as affordability to the Organisation.
Increases to remuneration packages for these levels of employees for the 2013/2014 financial year was within budget and the mandate as approved by the Human Resources and Remuneration Committee.
Chief Executive and Portfolio Integrating Committee Executives
The annual increase for the Chief Executive as well as the Portfolio Integrating Committee was implemented in May 2014 backdated to July 2013.
The remuneration practice with respect to the determination of annual package increases for the Chief Executive, vests with the Rand Water Board, with the concurrence of the Shareholder.
The remuneration for the Portfolio Integrating Committee members is based on information sourced through salary surveys, referencing the economic indicators such as inflation as well as benchmarks in the market in terms of predicted and granted increases. Increases for this level of employee are approved by the Board.
Variable Remuneration (Short-term Incentive Scheme)
In line with Rand Water’s pay-for-performance remuneration philosophy, the Short term Incentive Scheme (STI) is aimed at linking employee reward to organisational, portfolio and individual performance and success. The scheme is aimed at driving the attainment of key strategic values for the organisation and reward performance above the norm. The targets, that are approved by the Board on annual basis are measured on a quarterly basis and create greater line of sight between individual input as well as organisational performance.
For the 2012/2013 financial year Rand Water has paid out an Incentive Bonus to all qualifying employees as approved by the Human Resources and Remuneration Committee and the Board of Rand Water. Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT BOARD REPORT
Remuneration of Board Members
Rand Water Board
The remuneration rates (monthly stipend and hourly rates as applicable) for Board members of the Rand Water Board are advised annually by the Department of Water and Sanitation through a schedule detailing the rates for the various categories of Board members. The fees for the Rand Water Board were updated in accordance with the schedule received.
Rand Water Foundation
The remuneration rates (monthly stipend and hourly rates) for Board members of the Rand Water Foundation Board were obtained by referencing the increase percentage as advised from the Department of Water and Sanitation for the Rand Water Board. The remuneration rates for the Rand Water Foundation Board are benchmarked as 70% of the rates of the Rand Water Board.
15. Rand Water Board Members’ and Executives Earnings z zZ ZVVZV
Rand Water
Fees for Salary Other cash Performance Contributions Total Total services benefits incentive to retirement, 2014 2013 as Board bonus medical and member life cover benefits In Thousands of Rands
Executive Board Members DKP Sechemane (Chief Executive) – 2 863 507 1 942 21 5 333 5 321
Non-Executive Board Members MM Petlane (Chairperson) ^ 1 230 – 85 – – 1 315 1 173 M Hashatse (Chairperson) 188 – 4 – – 192 535 BC Bam * – – – – – – – MJ Ellman ^ 381 – 27 – – 408 504 N Govender * – – – – – – – L Kaunda * – – – – – – – NGL Mbileni * – – – – – – – I Mmushi * – – – – – – – MM Nakene * – – – – – – – PM Ndumo^ 206 – 6 – – 212 255 FO Otieno 319 – 30 – – 349 429 F Saloojee^ 416 – 13 – – 429 465 M Tsheke ^ 621 – 94 – – 715 702 D Coovadia 323 – 35 – – 358 320 LL Makibinyane 447 – 23 – – 470 621 S Molokoane-Machika * – – – – – – – P Noxaka ^ 265 – 10 – – 275 630 T Nwedamutswu ^ 215 – 5 – – 220 548 SF Molokoane 304 – 43 – – 347 230
4 915 – 375 – – 5 290 6 412 Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT
Fees for Salary Other Performance Contributions Total Total services cash incentive to retirement, 2014 2013 as Board benefits bonus medical and member life cover benefits In Thousands of Rands
Executives S Mosai (Chief Operating Officer) – 2 282 380 1 287 16 3 965 3 450 M Nyembe (Chief Financial Officer) – 2 163 134 1 190 15 3 502 3 275 FM Ngoatje (Group Shared Services Executive) – 1 764 341 992 13 3 110 3 045 N Sithole
(Group Governance Executive) – 1 640 207 949 12 2 808 2 603 z zZ ZVVZV W Mohamed (Strategic Human Capital Executive) – 1 605 207 899 11 2 722 2 415 V Kubeka (Group Strategy Executive) – 1 682 352 970 11 3 015 2 166
General managers B Xaba (GM Strategic Asset Management) – 1 629 233 865 14 2 741 2 630 Prof. H Kasan (GM Scientific Services) – 1 789 277 918 17 3 001 2 872 M Mkhize (GM Bulk Water Operations) – 1 956 417 1 045 22 3 440 3 337 M Letsoalo (GM Marketing) – 1 376 367 774 14 2 531 2 505 T Bekker (GM Information Technology) – 1 472 120 706 11 2 309 2 266 RS Mathebula (GM Sector Growth and Development) – 1 253 311 666 9 2 239 2 234 MJ Manyi (GM Strategic Programmes) – 1 586 41 – – 1 627 1 319 – 22 197 3 387 11 261 165 37 010 34 117 4 915 25 060 4 269 13 203 186 47 633 45 850
* Appointed during the year ^ Board term ended during the year Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
BOARD REPORT BOARD REPORT
Rand Water Foundation
Fees for Salary Other Performance Contributions Total Total services cash incentive to retirement, 2014 2013 as Board benefits bonus medical and member life cover benefits In Thousands of Rands
Non-Executive Board Members M Tsheke (Chairperson) * – – – – – – – MM Kabi 168 – 19 – – 187 183 M Dooms 205 – 24 – – 229 193 NP Lekubu 183 – 22 – – 205 159 ML Mngomezulu 162 – 22 – – 184 166
FO Otieno (Chairperson) ^ 305 – 20 – – 325 262
z zZ ZVVZV 1 023 – 107 – – 1 130 963 Executive Mohlatleho Sekoaila – 802 356 475 – 1 633 1 637 (General Manager Foundation) – 802 356 475 – 1 633 1 637
* Appointed during the year ^ Board term ended during the year Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
INCOME STATEMENT
Group Rand Water
In Thousands of Rands Notes 2014 2013 2014 2013
Continuing operations Revenue 2 8 664 894 7 751 214 8 664 894 7 751 214 Cost of sales 37 (6 273 313) (5 678 186) (6 273 313) (5 678 186) Gross income 2 391 581 2 073 028 2 391 581 2 073 028 Other operating income 3 729 167 434 991 716 000 405 965 Staff costs 4 (1 073 945) (937 227) (1 064 412) (929 479) Depreciation (55 696) (57 172) (55 662) (57 154) Amortisation (12 231) (8 918) (12 231) (8 918) Operating expenses 5&6 (867 105) (550 696) (861 710) (531 951) Operating income 6 1 111 771 954 006 1 113 566 951 491 Finance income 7 75 182 46 087 74 901 45 814
8 (4 542) (3 244) (4 542) (3 237) Finance expense z zZ ZVVZV Net income from continuing operations 1 182 411 996 849 1 183 925 994 068 Discontinued operations Loss for the year from discontinuing operations 19 (606) (50) – – Net income for the year 1 181 805 996 799 1 183 925 994 068 Net income attributable to: Net income for the year from continuing operations 1 182 411 996 849 1 183 925 994 068 Loss for the year from discontinuing operations (606) (50) – – Net income for the year 1 181 805 996 799 1 183 925 994 068 Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
STATEMENT OF COMPREHENSIVE INCOME
Group Rand Water
In Thousands of Rands Notes 2014 2013 2014 2013
Net income for the year 1 181 805 996 799 1 183 925 994 068 Other comprehensive income: Exchange differences on translating foreign operations (196) (285) - - Available-for-sale financial assets adjustments 13 (1 258) (19 223) (1 258) (19 223) Other comprehensive income for the year net of taxation (1 454) (19 508) (1 258) (19 223)
Total comprehensive income 1 180 351 977 291 1 182 667 974 845
z zZ ZVVZV
Board member attendance
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STATEMENT OF FINANCIAL POSITION
Group Rand Water
In Thousands of Rands Notes 2014 2013 2014 2013
Assets
Non-Current Assets Property, plant and equipment 11 12 110 426 9 906 880 12 150 837 9 947 476 Intangible assets 12 202 894 187 307 202 894 187 307 Investments in subsidiary 14 – – 4 474 4 474 Investments 13 483 193 300 878 483 193 300 878 Loans receivable 15 2 020 2 100 2 020 2 100 12 798 533 10 397 165 12 843 418 10 442 235 Current Assets Inventories 16 244 815 239 445 244,815 239 445
Trade and other receivables 17 1 411 322 1 104 856 1 402 058 1 093 722 z zZ ZVVZV Loans receivable 15 2 968 3 253 2 968 3 253 Cash and cash equivalents 18 871 514 863 910 854 279 851 933 2 530 619 2 211 464 2 504 120 2 188 353 Assets of disposal groups held for sale 19 1 589 1 802 – 303 Total Assets 15 330 741 12 610 431 15 347 538 12 630 891
Equity and Liabilities
Equity Accumulated reserves 9 750 414 8 511 656 9 785 416 8 544 342 9 750 414 8 511 656 9 785 416 8 544 342 Liabilities Non-Current Liabilities Interest-bearing borrowings 20 2 510 093 1 514 586 2 510 093 1 514 586 Retirement benefit obligation 23 345 922 325 420 345 922 325 420 Income received in advance 22 200 742 182 182 187 513 173 974 Provision for rehabilitation costs 35 57 462 50 423 57 462 50 423 3 114 219 2 072 611 3 100 990 2 064 403 Current Liabilities Interest-bearing borrowings 20 2 458 1 818 2 458 1 818 Trade and other payables 24 2 460 827 2 022 298 2 458 674 2 020 328 2 463 285 2 024 116 2 461 132 2 022 146 Liabilities of disposal groups held for sale 19 2 823 2 048 – – Total Liabilities 5 580 327 4 098 775 5 562 122 4 086 549 Total Equity and Liabilities 15 330 741 12 610 431 15 347 538 12 630 891 Board member attendance
Rand Water Integrated Annual Report 2013 -2014 185
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
STATEMENT OF CHANGES IN EQUITY
Foreign Fair value Transfer of Total Accumulated Total currency adjustment Function reserves funds equity translation assets- reserve available- for- sale reserve In Thousands of Rands
Group Balance at 01 July 2012 (215) – – (215) 7 534 580 7 534 365 Changes in equity Total comprehensive income for the year (285) (19 223) – (19 508) 996 799 977 291 Total changes (285) (19 223) – (19 508) 996 799 977 291 Balance at 01 July 2013 (500) (19 223) – (19 723) 8 531 379 8 511 656
Changes in equity
Total comprehensive income for the year (196) (1 258) – (1 454) 1 181 805 1 180 351 z zZ ZVVZV Transfer of function – – 58 407 58 407 - 58 407 Total changes (196) (1 258) 58 407 56 953 1 181 805 1 238 758 Balance at 30 June 2014 (696) (20 481) 58 407 37 230 9 713 184 9 750 414
Rand Water Balance at 01 July 2012 – – – – 7 569 497 7 569 497 Changes in equity Total comprehensive income for the year – (19 223) – (19 223) 994 068 974 845 Total changes – (19 223) – (19 223) 994 068 974 845 Balance at 01 July 2013 – (19 223) – (19 223) 8 563 565 8 544 342 Changes in equity Total comprehensive income for the year – (1 258) – (1 258) 1 183 925 1 182 667 Transfer of function – – 58 407 58 407 – 58 407 Total changes – (1 258) 58 407 57 149 1 183 925 1 241 074 Balance at 30 June 2014 – (20 481) 58 407 37 926 9 747 490 9 785 416 Board member attendance
186 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
STATEMENT OF CASH FLOWS
Group Rand Water
In Thousands of Rands Notes 2014 2013 2014 2013
Cash flows from operating activities Cash receipts from customers 8 647 467 7 500 584 8 389 654 7 508 418 Cash paid to suppliers and employees (7 087 464) (6 271 094) (6 834 854) (6 276 726) Cash generated from operations 25 1 560 003 1 229 490 1 554 800 1 231 692 Finance income 75 182 46 087 74 901 45 814 Finance expense (206 197) (98 629) (206 197) (98 622) Tax received – 3 107 – – Cash flows of discontinued operations 38 90 151 – – Net cash from operating activities 1 429 078 1 180 206 1 423 504 1 178 884
Cash flows from investing activities
Acquisition of property, plant and equipment 11 (2 216 211) (1 624 683) (2 215 896) (1 624 664) z zZ ZVVZV Proceeds from disposal of property, plant and 1 000 1 227 1 000 1 227 equipment Acquisition of intangible assets 12 (27 816) (18 641) (27 816) (18 641) Transfer of functions 39 5 472 – 5 472 – Increase in investments (183 573) (320 101) (183 573) (320 101) Loans receivable repaid 365 535 365 535 Net cash utilised in investing activities (2 420 763) (1 961 663) (2 420 448) (1 961 644)
Cash flows from financing activities Interest-bearing borrowings repaid (710) (208 469) (710) (208 469) Increase in interest-bearing borrowings 1 000 000 526 364 1 000 000 526 364 Net cash from financing activities 999 290 317 895 999 290 317 895
Net increase/(decrease) in cash and cash equivalents 7 604 (463 562) 2 346 (464 865) Cash and cash equivalents at the beginning of the year 863 910 1 327 472 851 933 1 316 798 Total cash and cash equivalents at end of the year 18 871 514 863 910 854 279 851 933 Board member attendance
Rand Water Integrated Annual Report 2013 -2014 187
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1. Presentation of Consolidated Annual Financial Statements
The consolidated annual financial statements of Rand Water, an organisation domiciled in South Africa, for the year ended 30 June 2014 comprise Rand Water and its subsidiaries (including a special purpose entity) and the group’s interest in a joint venture (together referred to as “the group”).
The consolidated annual financial statements were authorised for issue by the Board on 16 October 2014.
1.1 Statement of compliance
The consolidated annual financial statements of the group have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice (SA GAAP), the Water Services Act, Act 108 of 1997, and the Public Finance Management Act, Act 1 of 1999 as
amended.
1.2 Critical judgments and estimates made in applying the accounting policies z zZ ZVVZV
The preparation of financial statements in conformity with statements of SA GAAP requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors, including making assumptions concerning future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are accounted for prospectively.
In the process of applying the group’s accounting policies as set out below, management has made the following judgments that have a significant risk of causing material adjustment to the amounts recognised in the financial statements:
Useful lives and residual values
The useful lives and residual values of property, plant and equipment as well as the useful lives of the intangibles are reviewed at each reporting date. The useful lives are estimated, by management, based on historic analysis and other available information. The residual values are estimated based on useful lives as well as other available information.
Post-retirement benefit obligation
Management has enlisted the expertise of actuaries in the calculation of the post-retirement benefit obligation. The actuaries have used various assumptions in the calculation and these assumptions, as well as the carrying amount of the liability, have been disclosed in note 23 to the annual financial statements.
Provisions and contingent liabilities
Various estimates and assumptions have been applied by management in arriving at the carrying value of provisions that are recognised in terms of the relevant accounting policy. Management further relies on input from the group’s lawyers in assessing the probability of items of a contingent nature. Board member attendance
188 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.2 Critical judgments and estimates made in applying the accounting policies (continued)
Special purpose entity
Management has also applied significant judgment in assessing whether the substance of the relationship between the group and the special purpose entity “Rand Water Foundation” indicates that the entity is controlled by the group.
As such, the Rand Water Foundation has been consolidated into the financial position and results of the Rand Water Group.
Trade receivables and loans receivable
The group assesses its loans and receivables for impairment at each reporting date. In determining whether an impairment loss should be recorded in the income statement, the group makes judgments as to whether there is observable data indicating a
measurable decrease in the estimated future cash flows from a financial asset.
z zZ ZVVZV Available-for-sale financial assets
The group follows the guidance of AC133 to determine when an available-for-sale financial asset is impaired. This determination requires significant judgment. In making this judgment, the group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.
Allowance for slow moving, damaged and obsolete stock
An allowance for stock to write stock down to the lower of cost or net realisable value. Management have made estimates of the selling price and direct cost to sell on certain inventory items. The provision for the write down is included in the inventory note.
Restoration, rehabilitation and environmental costs
Costs for restoration of site damage, rehabilitation and environmental costs are estimated using either the work of external consultants or internal experts. Management uses its judgment and experience to provide for and amortise these estimated costs over the life of the asset.
Fair value estimation
The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the group is the current bid price.
The fair value of financial instruments that are not traded in an active market (for example, over-the counter derivatives) is determined by using valuation techniques. The group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the reporting date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments. Board member attendance
Rand Water Integrated Annual Report 2013 -2014 189
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.3 Basis of preparation
The consolidated financial statements are presented in South African Rand, rounded to the nearest thousand. The financial statements are prepared on the historical cost basis, except that the following assets and liabilities are stated at their fair value: derivative financial instruments and financial instruments classified as available for sale, and the cash flow statement is measured on a cash basis. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all years presented, unless otherwise stated. The accounting policies have been applied consistently by the group entities.
1.4 Basis of consolidation
The consolidated annual financial statements incorporate the financial statements of Rand Water and all entities, including special
purpose entities, which are controlled by the Rand Water.
z zZ ZVVZV Investments in subsidiary
In Rand Water’s separate annual financial statements, investments in subsidiary are carried at cost less any accumulated impairment.
The cost of an investment in a subsidiary is the aggregate of: the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the company; plus any costs directly attributable to the purchase of the subsidiary.
Subsidiaries are all entities (including special purpose entities) controlled by Rand Water. Control exists when Rand Water has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities. The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the financial statements of subsidiaries to bring their accounting policies in line with those of Rand Water.
The financial statements of subsidiaries are included in the consolidated annual financial statements from the date that control commences until the date that control ceases. The investment in the subsidiary is measured at cost less accumulated impairments in the parent entity. The cost of an investment in a subsidiary is the aggregation of the fair value, at the exchange date, of assets given, liabilities incurred or assumed, and equity instruments issued by the entity; plus any costs directly attributable to the purchase of the subsidiary. An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.
Special purpose entities are consolidated when the substance of the relationship between the group and the entity indicates that it is controlled by the group.
Investment in joint venture
Joint ventures are entities over whose activities the Group has joint control. Joint control is the contractually agreed sharing of control over an entity, and exists only when the strategic financial and operating decisions relating to the entity require the unanimous consent of the venturers. Joint ventures are accounted for by applying the proportionate consolidation method on a line-by-line basis. In respect of its interests in jointly controlled operations or jointly controlled entities, the Group recognises in its financial statements the assets that it controls, the liabilities that it incurs, the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the joint venture. Board member attendance
190 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.4 Basis of consolidation (continued)
The joint venturer’s share of losses is recognised to the extent that the cumulative reserves are reduced to nil, except to the extent that the Group has incurred or guaranteed obligations in respect of the joint venture.
Translation of foreign operations
A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At each balance sheet date: foreign currency monetary items are translated using the closing rate; non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. z zZ ZVVZV
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous annual financial statements are recognised in profit or loss in the period in which they arise.
When a gain or loss on a non-monetary item is recognised directly in equity, any exchange component of that gain or loss is recognised directly in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.
The assets and liabilities of the foreign operation are translated into Rand at the closing rates of exchange ruling at reporting date. Income and expenses of the foreign operation are translated into Rand at the rates of exchange ruling at the transaction date.
Exchange differences on translation of foreign entities are taken directly to other comprehensive income. All translation adjustments recognised directly in other comprehensive income are released to profit or loss upon the disposal of the foreign operation.
Transactions eliminated on consolidation
Intra-group transactions and balances are eliminated on consolidation, together with any unrealised gains or losses arising on intra- group transactions. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group’s interest in those entities, while unrealised losses are eliminated in the same way, but only to the extent that there is no evidence of impairment.
Business Combinations The group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.
Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which arise as a result of the contingent consideration are not affected against goodwill, unless they are valid measurement period adjustments.
The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions are recognised at their fair values at acquisition date, except for non-current assets (or disposal group) that are classified as held-for-sale and discontinued operations, which are recognised at fair value less costs to sell. Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.4 Basis of consolidation (continued)
Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date.
On acquisition, the group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for group purposes. This excludes lease agreements and insurance contracts, whose classification remains as per their inception date.
Non-controlling interest arising from a business combination is measured either at their share of the fair value of the assets and liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination, and disclosed in the note for business combinations.
In cases where the group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured
to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the year. Where the existing z zZ ZVVZV shareholding was classified as an available-for-sale financial asset, the cumulative fair value adjustments recognised previously to other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment.
Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non- controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree.
Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed.
1.5 Revenue
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown, exclusive of value added tax rebates and discounts, after eliminating sales within the Group.
Goods sold and services rendered
Revenue from the sale of water is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenue comprises primarily the net invoiced value of water sales, exclusive of value-added tax, at declared tariffs arising from normal trading activities. Income from services rendered is recognised in the income statement in proportion to the related costs.
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the balance sheet date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: - the amount of revenue can be measured reliably; - it is probable that the economic benefits associated with the transaction will flow to the group; - the stage of completion of the transaction at the balance sheet date can be measured reliably; and - the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable. Board member attendance
192 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.6 Finance income
Interest income comprises interest received or receivable on loans, trade receivables and funds invested. Interest is recognised in the income statement when it is probable that economic benefits associated with the transaction will flow to the Group, using the effective interest rate method over the period to maturity.
1.7 Other cost of sales
The related cost of providing services recognised as revenue in the current period is included in cost of sales. Other cost of sales consists of the related cost of providing services recognised as revenue.
1.8 Finance cost
Finance expenses comprise interest payable on borrowings calculated using the effective interest rate method. The interest
expense component of finance lease payments is also recognised in the income statement using the effective interest rate method. z zZ ZVVZV
1.9 Taxation
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of prior periods.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related benefit will be realised.
1.10 Property, plant and equipment
The cost of an item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the group; and the cost of the item can be measured reliably.
Owned assets
Items of property, plant and equipment are stated at the cost of acquisition or construction, less accumulated depreciation and impairment losses. Cost includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
The cost of self-constructed assets includes the cost of materials, direct labour, borrowing costs, the initial estimate, where relevant, of costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads. Where components of an item of property, plant or equipment have different useful lives, they are accounted for as separate items of property, plant or equipment and depreciated separately over their respective useful lives. Board member attendance
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RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.10 Property, plant and equipment (continued)
Major spare parts, standby and servicing equipment held by the Group are classified as property, plant and equipment if they are expected to be used in more than one year. If used in less than one year they are classified as inventory. Spare parts and standby equipment that can only be used in connection with a specific item of property, plant and equipment are also accounted for as property, plant and equipment.
Leased assets
Leases of property, plant and equipment, where the Group assumes substantially all the risks and rewards of ownership, are classified as finance leases. Lease payments are accounted for as described in the relevant accounting policy.
Subsequent costs
The Group recognises in the carrying amount of property, plant and equipment the cost of major inspections and replacing part of z zZ ZVVZV such an item when the cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised as expenses as incurred.
Depreciation
Depreciation is charged to the income statement based on a straight-line basis over the estimated useful life of each component of an item of property, plant and equipment. Depreciation commences when the asset is available for its intended use by management.
Land, artwork and assets under construction are not depreciated. All other property, plant and equipment, including capitalised leased assets, are depreciated on a straight-line basis over their estimated useful lives or the term of the lease, whichever is shorter. Major repairs are depreciated over the remaining useful life of the related asset or to the date of the next major repair, whichever is shorter.
The estimated useful lives are as follows:
Asset Category Estimated useful life (years) Land Indefinite Buildings Building structures 50-80 Building components 10-20 Plant and machinery Plant structures 10-80 Plant components 3-50 Reservoirs 80 Dams 40-100 Pipelines Pipeline structures 25-75 Pipeline components 20-75 Furniture and fixtures 3-10 Motor vehicles 6-25 Office equipment 3-10 IT equipment 3-10
The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. Board member attendance
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SIGNIFICANT ACCOUNTING POLICIES
1.10 Property, plant and equipment (continued)
The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
1.11 Intangible assets
Intangible assets An intangible asset is recognised when it is probable that the expected future economic benefits that are attributable to the asset
will flow to the entity; and the cost of the asset can be measured reliably.
z zZ ZVVZV Acquired computer software is capitalised on the basis of the costs incurred to acquire and bring into use the specific software. Costs associated with researching or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the development of identifiable software products controlled by the Group, that will probably generate economic benefits beyond one year that can be measured reliably, are recognised as intangible assets. Costs include employee costs incurred as a result of developing software and an appropriate proportion of relevant overheads.
Servitudes are rights granted to the Group for an indefinite period of time. The life of the servitude will remain in force as long as the relevant infrastructure is still in use. A servitude will only become impaired if the infrastructure to which the servitude is linked is derecognised.
The useful life of water rights is estimated based on the relevant contractual agreements. The useful life is re-assessed annually and will be adjusted if necessary. Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.
Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
Amortisation Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with indefinite useful lives are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use.
The estimated useful lives are as follows:
Asset category Estimated useful life (years) Water rights 40-60 Servitudes Indefinite Computer software 3-15 Board member attendance
Rand Water Integrated Annual Report 2013 -2014 195
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.12 Leases
Leases where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.
Group as a lessee Finance lease liabilities and leased assets are capitalised at the lower of the fair value of the leased asset or the present value of minimum lease payments. Each lease payment is allocated between the capital and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest portion of the lease payment is charged to the income statement over the lease period and the corresponding capital portion is included under long-term liabilities.
Operating lease payments, if not insignificant, are charged to the income statement on a straight-line basis over the period of
the lease.
z zZ ZVVZV Group as lessor Rental income derived from operating leases, if not insignificant, is recognised in the income statement on a straight- line basis over the term of the lease.
1.13 Income received in advance
Income received in advance consists primarily of capital contributions received from customers, benefiting specific projects, which are recognised when it is probable that the contribution will be received, future economic benefits will flow to the entity and these benefits can be measured reliably. The contribution is recognised to the extent that there are no further obligations arising from the receipt thereof.
The deferred income relating to these contributions are recognised on the following bases: Capital contributions received relating to items of property, plant and equipment are initially recorded as income received in advance. The contributions are subsequently recognised as revenue over the economic useful life of the related asset once the related service has been performed or the asset is brought into use. Contributions relating to income are credited to the income statement when the related expense is incurred.
1.14 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use.
The amount of borrowing costs eligible for capitalisation is determined as follows: Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary investment of those borrowings. Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.
The capitalisation of borrowing costs commences when expenditures for the asset have occurred, borrowing costs have been incurred, and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation is suspended during extended periods in which active development is interrupted. Board member attendance
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SIGNIFICANT ACCOUNTING POLICIES
1.14 Borrowing costs (continued)
Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are complete.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
1.15 Financial instruments
Investments
The long term financial instruments held by the Group are classified as being available for sale and are stated at fair value with any resultant gain or loss recognised directly in equity. When these investments are derecognised, the cumulative gain or loss
previously recognised directly in equity is recognised in profit or loss. Where these investments are interest bearing, interest z zZ ZVVZV calculated using the effective interest method is recognised in profit or loss.
The fair value of financial instruments classified as available for sale is the quoted bid price at reporting date. Financial instruments classified as available for sale are recognised/derecognised by the Group on the date it commits to purchase/sell the investment.
Other short term money market financial instruments held by the Group are classified as being held to maturity and are stated at amortised cost.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest rate method, less impairment losses. A provision for impairment of trade receivables is recognised when there is objective evidence that the Group will not be able to recover all amounts due.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, bank balances and investments in money market instruments that mature within 90 days and are initially measured at fair value and subsequently measured at amortised cost.
Interest bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. The discount or premium on the issue of loans is amortised over the period from acquisition to maturity so that a constant rate of interest is paid on the loan. The amortised amount is recognised in the income statement.
Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost, with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.
Trade and other payables
Trade and other payables are initially recognised at fair value and are subsequently measured at amortised cost. Board member attendance
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SIGNIFICANT ACCOUNTING POLICIES
1.15 Financial instruments (continued)
Classification
The group classifies financial assets and financial liabilities into the following categories: Held-to-maturity investment Loans and receivables Available for sale financial assets Financial liabilities measured at amortised cost
Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition.
Initial recognition and measurement
z zZ ZVVZV Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments. The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available for sale financial assets.
For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.
Impairment of financial assets
At each reporting date the group assesses all financial assets, other than those at fair value through profit or loss, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.
For amounts due to the group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment.
Impairment losses are recognised in profit or loss.
Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available for sale.
1.16 Inventories
Inventories are stated at the lower of cost, determined on the weighted average cost basis, and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated selling expenses. Write- downs to net realisable value are expensed in the period that they occur.
The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
When inventories are derecognised, the carrying amount of those inventories are recognised as an expense. Board member attendance
198 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.17 Impairments
The carrying amounts of the Group’s assets, other than financial assets, deferred taxation assets and inventories, are reviewed at each reporting date to determine whether there is an indication of impairment. If any such indication exists, the recoverable amount is estimated to determine the extent of the impairment loss.
For assets that have indefinite useful lives, the recoverable amount is estimated at each reporting date and whenever there is an indication that the asset may be impaired.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. The impairment losses recognised in respect of cash- generating units are allocated to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
When a decline in the fair value of an available-for-sale financial asset has been recognised directly in other comprehensive
income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in z zZ ZVVZV other comprehensive income is recognised in profit or loss even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset that was previously recognised in profit or loss.
Calculation of recoverable amount
The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (the effective interest rate computed at initial recognition of these financial assets). Receivables with a shorter duration are not discounted.
The recoverable amount of other assets is the greater of their net selling price and their value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Reversal of impairment
An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment was recognised.
In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
An impairment loss in respect of an investment in an equity instrument classified as available for sale is not reversed through profit or loss. If the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognised in profit or loss.
1.18 Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution plans are recognised as an expense in the income statement as incurred. Board member attendance
Rand Water Integrated Annual Report 2013 -2014 199
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.18 Employee benefits (continued)
Long-term service benefits
The Group’s net obligation in respect of long-term service benefits, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is actuarially calculated at reporting date every year, using the projected unit credit method, and is discounted to its present value. The actuarial gain or loss is recognised in profit or loss.
Short-term service benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. z zZ ZVVZV
Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. If benefits are payable more than 12 months after reporting date then they are discounted to present value.
1.19 Provisions and contingent liabilities
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. If the effect is material, provisions are determined by discounting the expected future cash flows that reflect current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group or a present obligation that arises from a past event but is not recognised because it is not probable that an outflow of resources embodying economic benefit will be required to settle the obligation or the amount cannot be measured with sufficient reliability. Contingencies are disclosed in note 32.
Environmental restoration and decommissioning obligations
An obligation to incur environmental restoration, rehabilitation and decommissioning costs arises when disturbance is caused by the development of a sludge disposal site. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are recognised in the income statement over the life of the operation, through the depreciation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at its net present values and recognised in the income statement as water purification progresses. Board member attendanc
200 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
SIGNIFICANT ACCOUNTING POLICIES
1.19 Provisions and contingent liabilities (continued)
Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work (that result from changes in the estimated timing or amount of the cash flow or a change in the discount rate), are added to or deducted from the cost of the related asset in the current period. If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in the income statement. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy set out above.
Annual contributions will be made to dedicated environmental rehabilitation trusts to fund the estimated cost of rehabilitation during and at the end of the life of the relevant site.
1.20 Segment reporting
A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject z zZ ZVVZV
to risks and rewards that are different from those of other segments. The Group has no reportable segments, subject to risks and rewards that are different from those of other segments.
1.21 Non-current assets held for sale and disposal groups
Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets held for sale (or disposal groups) are measured at the lower of its carrying amount and fair value less costs to sell. A non- current asset is not depreciated (or amortised) while it is classified as held for sale, or while it is part of a disposal group classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are recognised in profit or loss.
1.22 Cash flow statement
The cash flow statements of the Group have been prepared based on the direct method.
1.23 Transfer of functions
Following the Minister’s gazette on intergrating Bushbuckridge Water Board as of 1 April 2014, the Group in application of the provisions made in AC101 has adopted the provisions within GRAP105.
All assets acquired and liabilities assumed in a transfer of functions as of the transfer date are measured at their carrying amounts. The difference between the carrying amounts of the assets acquired, the liabilities assumed and the consideration paid to the transferor is recognised in accumulated reserves for the period.
The entity has a 12 month period in which to finalise the carrying amounts of assets acquired and liabilities assumed referred to as the measurement period. Any measurement period adjustments are recognised as an adjustment to the amount recognised in accumulated reserves.
Refer to note 39 for details on the assets acquired and liabilities assumed. Board member attendanc
Rand Water Integrated Annual Report 2013 -2014 201
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
2. Revenue
Water sales 8 664 894 7 751 214 8 664 894 7 751 214
3. Other operating income
Recoverable projects income 701 948 383 516 701 948 383 516 Other income 27 219 51 475 14 052 22 449 729 167 434 991 716 000 405 965
4. Staff costs
z zZ ZVVZV Executive Board members 4 502 6 958 3 391 5 321 Non-executive Board members 6 421 7 478 5 289 6 412 Board members’ fees and emoluments 10 923 14 436 8 681 11 733 Salaries 1 139 723 986 759 1 134 873 980 829 Contributions to defined contribution plan 105 773 95 449 105 773 95 449 Other staff costs 394 791 373 266 392 349 374 151 Transferred to cost of sales (577 264) (532 683) (577 264) (532 683) 1 073 945 937 227 1 064 412 929 479
Other staff costs include the post retirement medical aid benefit expense of R20.5 million at 30 June 2014 and R31.6 million at 30 June 2013, as a result of the actuarial valuations.
5. Auditors’ remuneration
Fees 2 455 1 891 2 309 1 747 Board member attendance
202 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
6. Other operating expenses
Operating income before interest and taxation includes: Advertising 6 903 5 771 6 903 5 771 Bad debts 4 931 8 930 4 626 8 930 Courses and seminars 31 134 22 967 30 910 22 756 Consultant fees 37 124 59 744 37 124 59 744 Insurance costs 25 372 37 138 25 372 37 138 Machine hire and rental 1 218 1 062 1 218 1 062 Loss on sale of property, plant and equipment 234 2 618 234 2 618
Software licences 20 325 16 144 20 325 16 144
z zZ ZVVZV Telephone and cell phone costs 4 582 5 434 4 494 5 345 Travel and accommodation 22 371 17 680 21 452 17 072 Other overheads 112 981 (16 852) 108 791 (34 729) Recoverable projects cost of sales 597 592 388 353 597 952 388 353 Gain on foreign exchange (117) (184) – – 864 650 548 805 859 401 530 204 7. Finance income
Interest on investments 71 351 44 237 71 351 44 237 Interest on loans to employees and subsidiaries 2 520 880 2 239 607 Interest on trade and other receivables 1 311 970 1 311 970 75 182 46 087 74 901 45 814 8. Finance expense
Interest on interest bearing borrowings 211 201 98 622 211 201 98 622 Interest capitalised (refer to note 11) (204 042) (98 092) (204 042) (98 092) Amortised discount on issue interest bearing borrowings (4 652) (636) (4 652) (636) Other interest paid 2 035 3 350 2 035 3 343 4 542 3 244 4 542 3 237 9. Taxation
Reconciliation of the tax expense Reconciliation between accounting income and tax expense. Net income before taxation 1 182 411 996 849 1 183 925 994 068 Income tax effect at 28% (335 487) (279 118) (334 880) (278 339)
Tax effect of adjustments on taxable income Tax exempt incomes 335 487 279 118 334, 880 278 339 Tax expense – – – –
Rand Water Services Vitens BV is the only tax paying entity in the Group. In terms of Section 10(1)(cA) read with Section 1(b) of the Income Tax Act 58 of 1962, Rand Water is exempt from income tax. During the 2013 financial year Rand Water Services (Pty) Ltd applied and received tax exemption under the same provisions in the Income Tax Act. Rand Water Foundation has also been approved as a non-profit organisation, and is exempt from normal income tax. Board member attendance
Rand Water Integrated Annual Report 2013 -2014 203
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
10. Secondary activities
Included in operating income before interest are the following income/(losses) derived from secondary activities undertaken by Rand Water. These activities have been ring fenced in terms of the requirements in Section 42 of the Water Services Act, Act 108 of 1997.
Farming (1 582) (1 485) (1 582) (1 485) Community based projects 361 (1 003) 361 (1 003) Specialised services 398 (1 793) 398 (1 793) Emhlangeni Pipe (10 955) – (10 955) – Rand Water Academy – – – –
Loss on secondary activities (11 778) (4 281) (11 778) (4 281) z zZ ZVVZV
11. Property, plant and equipment
2014 2013
Cost Accumulated Carrying Cost Accumulated Carrying depreciation value depreciation value
In Thousands of Rands
Group
Land 13 378 – 13 378 10 728 – 10 728 Buildings 1 514 654 (404 281) 1 110 373 1 196 298 (353 327) 842 971 Plant and machinery 3 027 158 (1 078 305) 1 948 853 2 825 113 (986 003) 1 839 110 Furniture and fixtures 31 628 (23 292) 8 336 25 800 (19 759) 6 041 Motor vehicles 130 277 (58 058) 72 219 127 033 (50 300) 76 733 Office equipment 60 120 (42 670) 17 450 51 627 (34 884) 16 743 IT equipment 173 529 (150 106) 23 423 164 886 (139 256) 25 630 Pipelines 5 730 715 (886 221) 4 844 494 4 864 581 (776 530) 4 088 051 Assets under construction 4 071 900 – 4 071 900 3 000 873 – 3 000 873 Total 14 753 359 (2 642 933) 12 110 426 12 266 939 (2 360 059) 9 906 880
Rand Water
Land 13 378 – 13 378 10 728 – 10 728 Buildings 1 514 654 (404 281) 1 110 373 1 196 298 (353 327) 842 971 Plant and machinery 3 027 158 (1 078 305) 1 948 853 2 825 113 (986 003) 1 839 110 Furniture and fixtures 31 628 (23 292) 8 336 25 800 (19 759) 6 041 Motor vehicles 130 277 (58 058) 72 219 127 033 (50 300) 76 733 Office equipment 60 120 (42 670) 17 450 51 627 (34 884) 16 743 IT equipment 173 332 (150 106) 23 226 164 874 (139 256) 25 618 Pipelines 5 730 715 (886 221) 4 844 494 4 864 581 (776 530) 4 088 051 Assets under construction 4 112 508 – 4 112 508 3 041 481 – 3 041 481 Total 14 793 770 (2 642 933) 12 150 837 12 307 535 (2 360 059) 9 947 476 Board member attendance
204 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
11. Property, plant and equipment (continued)
Opening Additions Transfer of Disposals Transfers Borrowing Depreciation Closing Balance function of costs Balance Bushbuckridge capitalised Water Board In Thousands of Rands
Reconciliation of property, plant and equipment - Group 2014
Land 10 728 – 2 650 – – – – 13 378 Buildings 842 971 – 4 709 (160) 312 569 – (49 716) 1 110 373
Plant and
machinery 1 839 110 – – (944) 211 413 – (100 726) 1 948 853 z zZ ZVVZV Furniture and fixtures 6 041 4 768 811 (4) – – (3 280) 8 336 Motor vehicles 76 733 4 011 922 (740) – – (8 707) 72 219 Office equipment 16 743 8 552 89 (15) – – (7 919) 17 450 IT equipment 25 630 10 815 718 (74) – – (13 666) 23 423 Pipelines 4 088 051 – 45 890 (53) 797 100 – (86 494) 4 844 494 Assets under construction 3 000 873 2 187 971 – – (1 320 986) 204 042 – 4 071 900 9 906 880 2 216 117 55 789 (1 990) 96 204 042 (270 508) 12 110 426
Reconciliation of property, plant and equipment - Group 2013
Land 10 728 – – – – – – 10 728 Buildings 736 107 – – – 142 951 – (36 087) 842 971 Plant and machinery 1 806 277 – (2 972) – 124 896 – (89 091) 1 839 110 Furniture and fixtures 5 221 4 228 (15) – – – (3 393) 6 041 Motor vehicles 80 122 7 151 (612) (303) – – (9 625) 76 733 Office equipment 10 528 11 966 (83) – – – (5 668) 16 743 IT equipment 24 490 17 552 (93) – – – (16 319) 25 630 Pipelines 2 772 785 – (70) – 1 390 166 – (74 830) 4 088 051 Assets under construction 2 970 730 1 590 064 – – (1 658 013) 98 092 – 3 000 873 8 416 988 1 630 961 (3 845) (303) – 98 092 (235 013) 9 906 880 Board member attendance
Rand Water Integrated Annual Report 2013 -2014 205
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
11. Property, plant and equipment (continued)
Opening Additions Transfer of Disposals Transfers Borrowing Depreciation Closing Balance function of costs Balance Bushbuckridge capitalised Water Board In Thousands of Rands
Reconciliation of property, plant and equipment - Rand Water 2014
Land 10 728 – 2 650 – – – – 13 378 Buildings 842 971 – 4 709 (160) 312 569 – (49 716) 1 110 373
Plant and
machinery 1 839 110 – – (944) 211 413 – (100 726) 1 948 853 z zZ ZVVZV Furniture and fixtures 6 041 4 768 811 (4) – – (3 280) 8 336 Motor vehicles 76 733 4 011 922 (740) – – (8 707) 72 219 Office equipment 16 743 8 552 89 (15) – – (7 919) 17 450 IT equipment 25 618 10 594 718 (63) – – (13 641) 23 226 Pipelines 4 088 051 – 45 890 (53) 797 100 – (86 494) 4 844 494 Assets under construction 3 041 481 2 187 971 – – (1 320 986) 204 042 – 4 112 508 9 947 476 2 215 896 55 789 (1 979) 96 204 042 (270 483) 12 150 837
Reconciliation of property, plant and equipment - Rand Water 2013
Land 10 728 – – – – – – 10 728 Buildings 736 107 – – – 142 951 – (36 087) 842 971 Plant and machinery 1 806 277 – (2 972) – 124 896 – (89 091) 1 839 110 Furniture and fixtures 5 221 4 228 (15) – – – (3 393) 6 041 Motor vehicles 80 122 7 151 (612) (303) – – (9 625) 76 733 Office equipment 10 528 11 966 (83) – – – (5 668) 16 743 IT equipment 24 481 17 532 (93) – – – (16 302) 25 618 Pipelines 2 772 785 – (70) – 1 390 166 – (74 830) 4 088 051 Assets under construction 3 011 337 1 590 065 – – (1 658 013) 98 092 – 3 041 481 8 457 586 1 630 942 (3 845) (303) – 98 092 (234 996) 9 947 476 Board member attendance
206 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
11. Property, plant and equipment (continued)
Transfers
Transfers includes the transfer of assets between property, plant and equipment, non-current assets held for sale and/or intangible assets.
Leased assets
Office equipment
During the year the Group has leased equipment under a finance lease agreement. The net carrying amount of the leased equipment at 30 June 2014 is R5 million (2013: R6.3 million). The leased equipment secures lease obligations of R4.7 million
(2013: R6 million) (see Note 21).
z zZ ZVVZV Capital expenditure
Rand Water undertakes a number of capital projects. Total budgeted capital expenditure, including intangible assets, was estimated at R2.5 billion, of which R2.4 billion (including borrowing costs) was achieved in the current financial year.
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
Borrowing costs capitalised
Borrowing costs capitalised to qualifying assets 204 042 98 092 204 042 98 092 Capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation 9.98 % 10.02 % 9.98 % 10.02 %
Security
Land with a carrying value amounting to R 2.6 million was pledged as security over a mortgage bond as detailed in Note 20.
Depreciation
Depreciation is split between cost of sales and depreciation on the face of the Income Statement (see Note 37 for depreciation reclassified as cost). Board member attendance
Rand Water Integrated Annual Report 2013 -2014 207
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
2014 2013
Cost Accumulated Carrying Cost Accumulated Carrying amortisation value amortisation value
In Thousands of Rands
12. Intangible assets
Group
Computer software 154 051 (104 132) 49 919 134 364 (94 953) 39 411 Water rights 162 535 (82 940) 79 595 162 535 (79 889) 82 646 Servitudes 73 380 – 73 380 65 250 – 65 250
Total 389 966 (187 072) 202 894 362 149 (174 842) 187 307 z zZ ZVVZV
Rand Water
Computer software 154 051 (104 132) 49 919 134 364 (94 953) 39 411 Water rights 162 535 (82 940) 79 595 162 535 (79 889) 82 646 Servitudes 73 380 – 73 380 65 250 – 65 250 Total 389 966 (187 072) 202 894 362 149 (174 842) 187 307
Opening Closing In Thousands of Rands Additions Amortisation Balance Balance
Reconciliation of intangible assets - Group 2014
Computer software 39 411 19 686 (9 178) 49 919 Water rights 82 646 – (3 051) 79 595 Servitudes 65 250 8 130 – 73 380 187 307 27 816 (12 229) 202 894 Reconciliation of intangible assets - Group 2013
Computer software 43 191 5 267 (9 047) 39 411 Water rights 85 698 – (3 052) 82 646 Servitudes 51 876 13 374 – 65 250 180 765 18 641 (12 099) 187 307 Reconciliation of intangible assets - Rand Water 2014
Computer software 39 411 19 686 (9 178) 49 919 Water rights 82 646 – (3 051) 79 595 Servitudes 65 250 8 130 – 73 380 187 307 27 816 (12 229) 202 894 Reconciliation of intangible assets - Rand Water 2013
Computer software 43 191 5 267 (9 047) 39 411 Water rights 85 698 – (3 052) 82 646 Servitudes 51 876 13 374 – 65 250 180 765 18 641 (12 099) 187 307 208 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
12. Intangible assets (continued)
Transfers
Transfers includes the transfer of assets between property, plant and equipment and intangible assets.
Indefinite useful lives
Servitudes are rights granted to the Group for an indefinite period of time. These servitudes consist of land expropriated by Rand
Water containing infrastructure owned by the Group and used in the production of revenue. The life of the servitude will remain
in force as long as the relevant infrastructure is still in use. Servitudes are not amortised but are assessed by means of an annual z zZ ZVVZV impairment test. The recoverable amount is determined through the results of the value in use and fair value less costs to sell impairment tests. The results of which have indicated that no impairment is required.
13. Investments
Available-for-sale Bonds 483 193 300 878 483 193 300 878
Non-current assets Available-for-sale 483 193 300 878 483 193 300 878
Fair value information
Rand Water holds an investment of R320 million in the Republic of South Africa R186 stock. Fair values were estimated using the Johannesburg Stock Exchange formerly known as the Bond Exchange of South Africa market rates. The coupon rate is 10.5%, which is paid bi-annually. The final tranche of the investment will mature on 21 December 2026. On 29 April 2014 the organisation made an additional investment of R100 million on the R186 bond.
On 22 April 2014 Rand Water invested R100 million in the Republic of South Africa R209 stock. Fair values were estimated using the Bond Exchange of South Africa market rates. The coupon rate is 6.25%, which is paid bi-annually. The final tranche of the investment will mature on 31 March 2036.
Fair value hierarchy of available for sale financial assets
For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of the inputs used to make the measurements. Currently all available for sale financial assets are categorised as Level 1 which represents those assets which are measured using unadjusted quoted prices for identical assets.
Level 1
Bonds 483 193 300 878 483 193 300 878
During the 2014 financial year a fair value adjustment loss of R1.26 million (2013: R19.22 million) was recognised in other comprehensive income. Rand Water Integrated Annual Report 2013 -2014 209
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Opening Loss in other Purchases Closing balance comprehensive balance income
13. Investments (continued)
Reconciliation of available for sale investments - Group 2014
Bonds 300 877 (1 258) 183 573 483 193
Reconciliation of available for sale investments - Rand Water 2014
Bonds 300 878 (1 258) 183 573 483 193
Group Rand Water z zZ ZVVZV
In Thousands of Rands 2014 2013 2014 2013
14. Investments in subsidiary
Equity investment – – 12 500 12 500 – – 12 500 12 500 Impairment of investment – – (8 026) (8 026) – – 4 474 4 474
The equity investment in subsidiary represents the 100% shareholding in Rand Water Services (Pty) Ltd.
At 30 June 2014 the investment remained impaired using the Net Asset Value method. The impairment was calculated utilising net asset and liabilities figures derived from the annual financial statements, of Rand Water Services.
15. Loans receivable
Employee loans: - Non-current portion 2 020 2 100 2 020 2 100 - Current portion 2 968 3 253 2 968 3 253 4 988 5 353 4 988 5 353
The employee loans represents micro loans granted to employees and is shown net of impairments of R0.4 million (2013: R0.4 million). The loans are unsecured with repayment periods varying from 1 to 3 years, and the closing interest rate is 11,5% (2013: 10,5%). Rand Water is registered with the National Credit Regulator as a credit provider in terms of Section 40 of the National Credit Act, Act 34 of 2005.
16. Inventories 79 187 64 556 79 187 64 556 Raw materials, chemicals and water inventory 165 628 174 889 165 628 174 889 Maintenance and consumable stores 244 815 239 445 244 815 239 445
Inventories are shown net of impairment losses amounting to R49 942 (2013: R187 233) recognised in the year. 210 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
17. Trade and other receivables
Water debtors 1 009 912 830 961 1 010 260 830 961 Prepayments 104 117 98 117 104 117 98 117 VAT 10 003 17 101 – 9 800 Recoverable work-in-progress – 21 410 – 21 410 Recoverable project debtors 184 355 75 327 184 355 75 318 Other receivables 102 935 61 940 103 326 58 116 1 411 322 1 104 856 1 402 058 1 093 722
Trade receivables are shown net of impairments amounting to R38 million (2013: R33 million) recognised in the year, determined
z zZ ZVVZV by reference to past default experience.
18. Cash and cash equivalents 871 514 863 910 854 279 851 933 Bank and cash balances
Bank and cash balances include positive bank balances, cash on hand and call deposits.
19. Discontinued operations
Profit and loss (67) (50) – – Expenses (67) (50) – – Net (loss) profit before tax (539) – – – Tax (606) (50) – –
Assets and liabilities – 303 – 303 Other assets
Assets of disposal groups 1 589 1 499 – – Cash and cash equivalents 1 589 1 499 – –
Liabilities of disposal groups 637 533 – – Trade and other payables 1 413 826 – – Current tax payable 773 689 – – VAT payable 2 823 2 048 – –
The five year Ghana Urban Water management contract held by Aqua Vitens Rand Limited the 100% subsidiary of Vitens Rand Water Services BV concluded on 5 June 2011. The contract has not been renewed therefore the company has ceased operations and is the process of winding up.
On 22 January 2014 the Board resolved that Rand Water Services would sell its 49% share in the Joint Venture, Vitens Rand Water Services to Vitens Evides International B.V for 1 Euro. The sale is expected to be finalised before the end of the 2015 financial year.
On 30 June 2014 motor vehicles amounting to R303 thousand which were held for sale were sold at an auction for R625 thousand. Rand Water Integrated Annual Report 2013 -2014 211
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
20. Interest-bearing borrowings
Held at amortised cost
Unsecured bond issues 2 505 715 1 510 367 2 505 715 1 510 367 Mortgage bond 2 115 – 2 115 – Finance lease liabilities 4 721 6 037 4 721 6 037 2 512 551 1 516 404 2 512 551 1 516 404 Non-current liabilities
At amortised cost 2 510 093 1 514 586 2 510 093 1 514 586
z zZ ZVVZV Current liabilities At amortised cost 2 458 1 818 2 458 1 818
The unsecured bond issues consist of: RW21 bond issued through the Group’s registered Domestic Medium Term Note programme of R5 billion at an issued nominal value of R984 million redeemable at nominal value on 21 April 2021. The interest payable is fixed at coupon 9,97% and payable bi-annually. For the financial year ended 30 June 2013 the Group tapped into its Domestic Medium Term Note programme of R5 billion by issuing RW21 bond, also redeemable in 2021 with a nominal value of R500 million, increasing the nominal value of RW21 bond to R1 484 million.
On 5 December 2013 the Group raised two bonds through the Group’s registered Domestic Medium Term Note programme of R5 billion namely; RW23 Bond which matures on 10 December 2023 and the RW28 Bond which matures on 10 December 2028.The interest payable is fixed at coupon 9,51% and 10,245% respectively and payable bi-annually.
The bonds are listed on the Johannesburg Stock Exchange formerly the Bond Exchange of S.A.
The mortgage bond formed part of the liabilities assumed with the inclusion of the Bushbuckridge Water Board into Rand Water (refer to Note 39). The Standard Bank mortgage bond is repayable in monthly instalments of R23 115. The interest payable on the bond is at the prime lending rate minus 2%. The mortgage bond is secured by Portion 1 of farm Bellevue no 104 JU, White River with a carrying value of 2.6 million (refer to Note 11).
The finance lease liabilities consist of leased equipment which are secured by property, plant and equipment to the value of R4.7 million (2013: R6.03 million). The average lease term is 36 months and the interest rate is fixed at 17.09% over the lease term. All leases have fixed repayments and no contingent rents are payable.
During the year under review there were no breaches or defaults in respect of interest bearing borrowings. All contractual obligations have been met.
The face value and carrying amounts of outstanding loans were as follows: Terms and debt repayment schedule
Face value Unsecured bonds 2 505 716 1 510 367 2 505 716 1 510 367 Secured mortgage bond 2 115 – 2 115 – Finance lease liability 4 720 6 037 4 720 6 037 2 512 551 1 516 404 2 512 551 1 516 404 212 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
20. Interest-bearing borrowings (continued)
Carrying amount Unsecured bonds 2 505 713 1 510 367 2 505 713 1 510 367 Mortgage bond 2 115 – 2 115 – Finance lease liability 4 720 6 037 4 720 6 037 2 512 551 1 516 404 2 512 551 1 516 404
Nominal Year of interest rate maturity
Finance lease liability 17.09% 2016 Unsecured bond: RW21 9.97% 2021 z zZ ZVVZV
Unsecured bond: RW23 9.51% 2023 Unsecured bond: RW28 10.245% 2028 Secured bond: Standard Bank Mortgage Bond 7.25% 2032
21. Finance lease liabilities
Minimum lease payments due - within one year 2 937 2 632 2 937 2 632 - in second to fifth year inclusive 2 533 4 887 2 533 4 887 5 470 7 519 5 470 7 519 Interest - within one year 572 814 572 814 - in second to fifth year inclusive 178 668 178 668 750 1 482 750 1 482 Principal - within one year 2 365 1 818 2 365 1 818 - in second to fifth year inclusive 2 355 4 219 2 355 4 219 4 720 6 037 4 720 6 037
The Group’s finance leases consist of equipment leased under a finance lease agreement. The average lease term is 36 months and the interest rate is fixed at 17.09% over the lease term. All leases have fixed repayments and no contingent rents are payable.
22. Income received in advance
Non-current liabilities 200 742 182 182 187 513 173 974
Income received in advance consists of capital contributions received from customers for the construction of assets. Capital contributions to the value of R2 583 thousand (2013: R855 thousand) have been recognised in other income for projects where the construction of the asset has been completed. Rand Water Integrated Annual Report 2013 -2014 213
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
23. Retirement benefits
Carrying value
Balance as at 1 July 325 420 293 800 325 420 293 800 Interest cost 26 997 23 827 26 997 23 827 Service cost 9 681 8 800 9 681 8 800 Employer contributions (12 635) (11 990) (12 635) (11 990) Actuarial (gain)/loss (3 541) 10 983 (3 541) 10 983
345 922 325 420 345 922 325 420
Liability for defined benefit obligation z zZ ZVVZV
Rand Water has an obligation to continue to fund a portion of employees’ contributions to the Rand Water Medical Scheme after retirement. The liability is actuarially calculated each year in accordance with the stated accounting policy.
Movements in the net liability for defined benefit obligation recognised in the statement of financial position
Net liability for defined benefit obligation at beginning of the year 325 420 293 800 325 420 293 800 Net expense recognised in the income statement 20 502 31 620 20 502 31 620 Net liability for defined benefit obligation 345 922 325 420 345 922 325 420
Expense recognised in the income statement
Staff costs 20 502 31 620 20 502 31 620
Liability for defined benefit obligations
Principal actuarial assumptions: Discount rate 8.06 % 8.29 % 8.06 % 8.29 % Health care cost inflation 6.87 % 6.99 % 6.87 % 6.99 % Membership continued at retirement 100.00 % 100.00 % 100.00 % 100.00 %
Rates of early retirement Increase of 1% Decrease of 1% Sensitivity analysis Retirement benefit obligation 55 511 45 165
The above displays the effect on the liability should the real discount rate increase or decrease by 1%. Similar results are achieved should the medical scheme contribution rate increase or decrease by 1%. 214 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
24. Trade and other payables
Trade payables 1 744 952 1 480 527 1 744 953 1 480 527 Amounts received in advance 11 067 65 051 11 067 65 051 VAT 25 709 – 25 709 – Accrued leave pay 67 738 60 022 67 738 60 022 Accrued bonus 298 523 260 449 298 523 260 449 Includes other payables 312 838 156 249 310 684 154 279 2 460 827 2 022 298 2 458 674 2 020 328
25. Reconciliation of net income to cash generated from operations
z zZ ZVVZV Net income before taxation 1 181 805 996 799 1 183 925 994 068
Adjustments for: Depreciation and amortisation 282 737 247 113 282 712 247 095 Loss on sale of assets 234 2 618 234 2 618 Interest income (75 182) (46 087) (74 901) (45 814) Finance expense 4 542 3 244 4 542 3 237 Increase in retirement benefit obligation 20 502 31 620 20 502 31 620 Gain on forex translation (117) (184) – –
Changes in working capital: Increase in inventories (5 370) (63 085) (5 370) (63 085) Decrease in trade and other receivables (306 466) (251 196) (308 729) (242 796) Increase in trade and other payables 438 758 228 831 438 346 228 380 Increase in income received in advance 18 560 79 817 13 539 76 369 1 560 003 1 229 490 1 554 800 1 231 692
26. Financial instruments
Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
Credit risk Liquidity risk Market risk
The Board has also established a Treasury Committee to oversee the operations of the treasury function including, guiding treasury policies, assisting with the overall treasury strategy and objectives while ensuring that the risks concomitant to the treasury function are monitored and managed within the constraints of the treasury policies. The Treasury Committee monitors the liquidity risk, credit risk, investment risk and interest rate risk exposures by evaluating both the internal and external market strengths and weaknesses in order to identify opportunities and mitigate any threats as a result of market conditions. The Treasury Committee ensures that treasury activities are in compliance with all regulatory bodies and acts. The Board of Rand Water undertakes the ultimate responsibility of approving any recommendations made by the Treasury Committee related to risk, policies, procedures and strategies. Rand Water Integrated Annual Report 2013 -2014 215
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
26. Financial instruments (continued)
Credit risk
Credit risk is the risk that a customer or counterparty to a financial instrument will cause a financial loss for the Group by failing to discharge an obligation. Credit risk arises primarily through the provision of water services and centralised treasury activities.
Credit risks can also arise from cash and cash equivalents, trade receivables and derivative financial instruments. These risks are effectively managed in terms of the Board-approved financial risk management framework that specifies the investment and counterparty policies.
The overall objective of the Group’s approach to credit risk management is:
to minimise any losses that could result from counterparty or issuer failure, ensuring the protection of current and future cash
reserves; and z zZ ZVVZV to enhance liquidity by investing in liquid instruments, project and maximise the rate of return on investments.
Trade and other receivables
Exposure to credit risk is influenced mainly by the individual characteristics of the Group’s customers.
Water debtors:
The Group’s main source of income is derived from the sale of bulk potable water to local municipalities. These customers have entered into a Bulk Water Supply Agreement with the Group and are not required to provide any security. Approximately 90% of the Group’s revenue is attributable to sales transactions with six major customers.
Other medium to large entities such as mines and industries have also entered into a Water Supply Agreement with the Group. As water is considered a basic need and a critical resource, no credit limits are set on the accounts. These customers are required to provide security. The value of the security is based on the following criteria: the type of customer, the size of the customer meter and the value of an average month’s consumption. The security is made up of deposits and demand guarantees from financial institutions that can be exercised against overdue invoices. The collateral held amounts to R12 million (2013: R11 million).
Recoverable project debtors:
These debtors comprise mainly government institutions, which fund the various projects. Each project has its own contractual obligations, which are negotiated and agreed upon by the contracting parties before commencement of the project. The Group currently holds an amount of R11 million (2013: R65 million) worth of prepayments from funders.
Other debtors:
Other debtors consist mainly of leases, encroachments, staff and sundry debtors, which are incidental to the nature of the business and its operations. Applicants enter into agreements with the Group. Debtors who do not have agreements in place transact with the Group on a prepayment or cash-on-delivery basis.
The Group has well established credit control procedures to monitor activity on customer accounts and allow for remedial action, should the customer not comply with payment terms. The Group’s standard payment terms are 30 days from date of invoice. 216 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
26. Financial instruments (continued)
The following table reflects the number of years that the water and recoverable project customers have transacted with the Group, the number of customers per ageing category and the relevant carrying amounts before impairment.
No of active Carrying amounts customers 2014 2013 0-5 years 213 268 458 104 885 6-10 years 273 28 664 30 654 >10 years 580 883 613 809 611 1 066 1 180 735 945 150
More than 80% of the Group’s customers have been transacting with the Group for more than 6 years. In terms of value, these
customers make up more than 77% (2013: 89%) of the balance due at the reporting date. Based on past experience, losses
have occurred infrequently. In monitoring customer credit risk, customers are grouped according to their credit characteristics, z zZ ZVVZV including customer type, ageing profile and existence of previous financial difficulties. Customers that are graded as “high risk” are placed on a restricted customer list. Methods used to encourage timely settlement include the negotiation of payment arrangements, discontinuation or limitation of water supply and the charging of interest on overdue accounts.
Loans receivable
Loans receivable consist of micro loans granted to employees. These loans are unsecured however the credit quality of the loan book has been assessed as a low risk by reference to historical default rates, as loan repayments are deducted directly from the employees salaries. Employees are also required to take out an insurance policy which covers the balance due to Rand Water in the instance of death or retrenchment.
Investments
The Group limits its treasury counterparty exposure by dealing only with well-established financial institutions with high credit ratings assigned by international credit-rating agencies. The Group’s exposure to counterparty is managed within approved credit limits that are reviewed and approved by the Board on an annual basis.
The counterparty limits are expressed as a percentage of the lower of the limits set from; credit rating from rating agencies; or that of the counterparty’s Tier One Capital Reserves; or a percentage of the surplus cash.
The group limits its exposure to credit risk by investing only with counterparties with a minimum long-term rating of “A+” and short-term rating of “F1”.
TheLong maximum Term Rating exposure to credit risk per long term rating at the reporting date was as follows: 2014 2013 AAA/F1+ 522 193 300 878 AA+/F1+ 493 000 634 000 AA/F1+ 64 098 82 686 A+/F1+ 150 000 135 000 F1+ (conduits) 100 000 –
Management does not expect any counterparty to fail to meet its obligations and hence no investment has been impaired, during the current and prior years. Rand Water Integrated Annual Report 2013 -2014 217
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
26. Financial instruments (continued)
Exposure to credit risk:
The carrying amount of financial assets (including disposal groups) represents the maximum credit exposure that the entity is exposed to.
Available for sale financial assets 483 193 300 878 483 193 300 878 Loans and receivables(1) 1 230 598 1 093 109 1 231 337 1 089 275 Cash in bank and on hand 871 514 865 409 854 279 851 933
2 179 016 2 259 396 2 173 211 2 242 086
z zZ ZVVZV (1) Loans receivable excludes prepayments, manual debtors and VAT.
The maximum exposure to credit risk for trade receivables by type of customer is:
Potable water consumers: - Municipalities 892 381 769 694 892 381 769 694 - Mines 32 510 33 396 32 510 33 396 - Industries 1 474 2 540 1 474 2 540 - Direct consumers 25 449 17 327 25 449 17 327 Non-potable water consumers 11 544 9 999 11 544 9 999 Recoverable project customers 212 497 103 524 212 497 103 524 Sundry and intercompany debtors (2) 4 880 8 670 4 880 8 670 1 180 735 945 150 1 180 735 945 150
The above balances are shown before impairments. The Group’s most significant customer, a local municipality, constitutes R299 million (2013: R265 million) of the trade receivables carrying amount.
The tables below reflect the ageing and impairments in respect of water and recoverable project debtors. The Group numbers include the subsidiaries trade debtors. Includes customers with credit balances.
(2) Includes Bushbuck Ridge debtors.
Gross Impairment Gross Impairment 2014 2014 2013 2013
Group
Current 868 437 – 755 299 – Past due 31-60 days 211 254 – 121 878 – Past due 61-120 days 36 476 – 20 819 – Past due >121 days 64 568 (37 973) 47 154 (32 963) Total 1 180 735 (37 973) 945 150 (32 963) 218 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
26. Financial instruments (continued)
Gross Impairment Gross Impairment 2014 2014 2013 2013
Rand Water
Current 868 437 – 755 299 – Past due 31-60 days 211 254 – 121 878 – Past due 61-120 days 36 476 – 20 819 – Past due >121 days 64 568 (37 973) 47 154 (32 963) Total 1 180 735 (37 973) 945 150 (32 963)
The movement in the allowance account for impairment in respect of trade and other receivables during the financial year is as
follows: z zZ ZVVZV
Group Rand Water 2014 2013 2014 2013
Balance at 1 July 32 963 24 162 32 963 24 162 Impairment allowance adjustment 5 010 9 089 5 010 9 089 Impairment loss recognised – (288) – (288) Balance at 30 June 37 973 32 963 37 973 32 963
The allowance account is used to record impairment losses until the Group is satisfied that no recovery of the amount owing is possible. At that point, the amount considered irrecoverable is written off against the trade receivables account directly.
Impairment losses are recognised based on experience with customers where the Group has sufficient reason to believe that the amounts may not be recovered or who have already been handed over to the legal department for recovery.
The Group believes that no impairment allowance is necessary in respect of all other trade receivables past due as these customers have a good track record.
Liquidity risk
Liquidity risk is defined as the risk of failure to meet all financial obligations on a timely basis, when due, and in the right currency without incurring above normal costs. The Group’s approach to managing liquidity risk is to ensure it will always have sufficient liquidity lines to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Liquidity is held primarily in the form of money market instruments such as call deposits, negotiable certificates of deposit, as well as liquid debt issues from government. Investments are guided by instrument, tenure and duration limits aimed at ensuring sufficient liquidity, consistent with the Rand Water’s liquidity requirements from time to time.
The Group’s policy is to ensure that it has sufficient cash on demand, in a form of cash and near cash equivalents, to meet expected operational and capital expenses for a period of 90 days, including the servicing of financial obligations. In addition to holding a minimum level of liquidity in the form of cash and near cash equivalents (liquid market securities) as described above, the Group has at its disposal a variety of funding sources should the need arise. These include uncommitted credit lines with reputable financial institutions and committed facilities with financial and development finance institutions (DFI). Rand Water Integrated Annual Report 2013 -2014 219
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
26. Financial instruments (continued)
As at 30 June 2014 the Group had committed and uncommitted facilities of R7.0 billion (2013: R6.0 billion):
Committed Institutions Facility Total Total Expiry Amount Utilised Unutilised Banks July 2014 500 000 – 500 000 DMTN – 5 000 000 2 505 716 3 525 973
Uncommitted Institutions Facility Total Total
Expiry
Amount Utilised Unutilised z zZ ZVVZV DFI July 2014 1 000 000 – 1 000 000 Banks – 500 000 – 500 000
Uncommitted facilities represent undrawn lines of credit where the bank has an agreement with Rand Water to make available an amount (up to the maximum specified) in loans on demand from the Group. The Group is under no obligation to actually take out a loan at any particular time.
Committed facilities are those lines of credit where the Group and the bank have clearly defined terms and conditions which bind the bank to lend the Group up to the amounts stated in the agreement. Interest would be payable at a rate of prime minus 100 basis points or alternatively negotiated through the money market.
The liquidity requirement of the Group is reviewed on an ongoing basis in order to ensure that necessary steps can be taken to secure access to cash at the right time. The Group uses cash flow forecasts and maturity gap analysis to assess and monitor its liquidity requirements and risk levels. Cash flow forecasts and maturity gap reports forms part of the financial risk report which is reviewed and analysed by the Treasury Committee on a periodic basis.
The following are the contractual maturities of financial liabilities for the Group, including interest payments and excluding the impact of netting agreements:
At 30 June 2014 Less than 1 Between Between Over Total year 1 &2 years 2 &5 years 5 years Unsecured bond issues: RW21 – – – 1 505 713 1 505 713 Unsecured bond issues: RW23 – – – 335 000 335 000 Unsecured bond issues: RW28 – – – 665 000 665 000 Secured bond issues: Standard Bank Mortgage bond – – – 2 115 2 115 Finance lease liabilities 2 365 2 355 – – 4 721 Trade and other payables 2 402 900 – – – 2 402 900
At 30 June 2013 Less than 1 Between Between Over Total year 1 &2 years 2 &5 years 5 years Unsecured bond issues: RW21 – – – 1 510 367 1 510 367 Finance lease liabilities 1 818 4 219 – – 6 037 Trade and other payables 1 939 517 – – – 1 939 517 220 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
26. Financial instruments (continued)
Effective interest rate (%) 2014 2013 Unsecured bond issues: RW02 – 13% Unsecured bond issues: RW21 9.97% 9,97% Unsecured bond issues: RW23 9.51% – Unsecured bond issues: RW28 10.245% – Secured bond issues: Standard bank Mortgage Bond 7.25% – Finance lease liabilities 17.09% 17,09%
Market risk
Market risk is the risk that Rand Water’s income and capital will be adversely affected by movements in the level or volatility of market rates or prices such as interest rates and foreign exchange rates. The overarching objective of market risk management
within Rand Water is to protect the Group’s net income against adverse market movements through containing the innate interest z zZ ZVVZV rate and foreign currency risks within acceptable parameters.
Market risk management within Rand Water is centralised in the Treasury Department and is governed by the Treasury policy, incorporating interest rate and currency risk parameters. As with all risk management policies of Rand Water, the market risk management policy resides under the authority of the Board.
Foreign currency risk
The Group is exposed to currency risk on management fees, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group entities, primarily the Euro. Interest on borrowings is denominated in currencies that match the cashflows generated by the underlying operations of the Group, primarily Euro. The Group’s investment in related parties is not hedged as this currency position is considered to be of long term in nature.
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
The Group’s exposure to currency risk was as follows, based on notional amounts:
Current assets Bank and cash, Euro 110 027 1 589 1 499 – – (2013 : Euro 116 633)
Liabilities Trade and other payables, Euro 99 646 (1 439) (2 048) – – (2013 : Euro 159 336)
The following significant exchange rates applied during the year:
Average rate Spot rate at reporting date
2014 2013 2014 2013 EURO 14.15 11.57 14.44 12.86 Rand Water Integrated Annual Report 2013 -2014 221
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
26. Financial instruments (continued)
Sensitivity analysis for exposure to currency risk A 10% strengthening of the Euro against the following currencies at 30 June would have increased/(decreased) equity and profit or loss by the following:
2014 2013
In Thousands of Rands 10% 10% 10% 10% increase decrease increase decrease
Group 216 (216) 55 (55)
Rates:
Euro spot rate 15.88 12.99 14.15 11.57 z zZ ZVVZV Euro average rate 15.57 12.73 12.73 10.41
A 10% weakening of the Euro against the above currencies would have had the equal but opposite effect on both currencies, on the basis that all other variables remain constant.
Interest rate risk The Group manages its interest rate risk by maintaining an appropriate mix between fixed and floating interest rate investments. The borrowings are at fixed interest rates and consists of the RW21 bond and the new issue of the RW23 and RW28 during the financial year. The interest rate profile of the Group’s interest bearing financial instruments, including financial instruments of disposal groups, is as follows:
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
Fixed rate instruments
Financial assets 483 193 300 878 483 193 300 878 Financial liabilities (2 510 433) (1 516 404) (2 510 433) (1 516 404) (2 027 240) (1 215 526) (2 027 240) (1 215 526) Variable rate instruments
Financial assets 2 308 529 1 804 730 2 021 294 1 796 256 Financial liabilities (2 118) – (2 118) – 2 306 411 1 804 730 2 019 176 1 796 256
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a change in interest rates at the reporting date would not affect profit or loss. 222 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
26. Financial instruments (continued)
Cash flow sensitivity analysis for variable rate instruments A change of 50-100 basis points in interest rates at the reporting date would have increased or decreased equity and profit by the amounts shown below. This analysis assumes that other variables remain constant.
Profit Equity
In Thousands of Rands Increase Increase Decrease Decrease Increase Increase Decrease Decrease of 1% of 0,5% of 0,5% of 1% of 1% of 0,5% of 0,5% of 1%
Group
30 June 2014
Financial assets 4 397 2 199 (2 199) (4 397) 4 397 2 199 (2 199) (4 397) z zZ ZVVZV
30 June 2013 Financial assets 6 353 3 177 (3 177) (6 353) (6 353) (3 177) 3 177 6 353
Rand Water
30 June 2014 Financial assets 4 397 2 199 (2 199) (4 397) 4 397 2 199 (2 199) (4 397)
30 June 2013 Financial assets 6 353 3 177 (3 177) (6 353) (6 353) (3 177) 3 177 6 353
27. Financial assets by category
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
The fair values of assets, including assets of disposal groups, together with the carrying amounts, for the Group and Rand Water are as follows:
Carrying amount/Fair value
Available-for-sale financial assets 483 193 300 878 483 193 300 878 Loans and receivable 2 206 229 1 860 401 2 177 384 1 843 091 2 689 422 2 161 279 2 660 577 2 143 969
Basis for determining fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments. Rand Water Integrated Annual Report 2013 -2014 223
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
27. Financial assets by category (continued)
Securities
The fair value of available-for-sale financial assets is based on quoted market prices on the Johannesburg Stock Exchange formerly known as the Bond Exchange of South Africa at the reporting date without any deduction for transaction costs. Held- to-maturity investments are quoted at amortised cost.
Trade and other receivables
For receivables with a remaining life of less than one year, the nominal amount is deemed to reflect their fair value. All other
z zZ ZVVZV receivables are discounted to determine the fair value.
Interest rates used for determining fair value
The interest rate used to discount estimated cash flows, where applicable, are based on the government yield curve at reporting date plus an adequate constant credit spread to discount financial instruments.
Receivables 2,0%-15,5% (2013: 2,0%-15,5%)
28. Financial liabilities by category
The carrying amounts and fair values of liabilities, including liabilities of disposal groups, for the Group and Rand Water are as follows:
At Amortised Cost
Unsecured bond issues 2 505 716 1 510 367 2 505 715 1 510 367 Secured mortage bond 2 115 – 2 115 – Finance lease liabilities 4 720 6 037 4 721 6 037 Trade payables 2 402 900 1 939 517 2 400 747 1 937 013 4 915 451 3 455 921 4 913 298 3 453 417
Basis for determining fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments.
Trade payables
For payables with a remaining life of less than one year, the nominal amount is deemed to reflect the fair value. All other payables are discounted to determine the fair value.
Interest rates used for determining fair value
The interest rate used to discount estimated cash flows, where applicable, are based on the government yield curve at reporting date plus an adequate constant credit spread to discount financial instruments. 224 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
28. Financial liabilities by category (continued)
Loans and borrowings 9.90% - 17.09% (2013: 9.97% - 17.09%)
29. Capital management
The overall objective of the Group’s capital management strategy is to maintain a strong capital base so as to maintain stakeholder and market confidence and to sustain future development of the business. The Group considers long-term loans, cash reserves and accumulated income as its capital. Long-term loans and cash reserves are managed through the process of reviewing all associated risks, including liquidity and credit and interest rate risk. The detail of how these risks are managed is disclosed in note 24. It is also the policy of the Group to maintain a strong debt: equity and interest cover ratio as this plays an important role in the Group’s credit rating which impacts positively on the cost of funding. Accumulated income is managed through a number of initiatives and processes including planning and budgeting for long- term operational growth, capital expansion and
maintaining or improving cost efficiencies. z zZ ZVVZV
The Group manages the planning of the water revenue process closely as it is the Group’s policy to reasonably recover all current and future operational and capital expenditure for its operational existence. The water tariff is regulated by the processes as determined by the Department of Water Sanitation. The tariff is developed from sound financial principles and takes into consideration cost drivers as well as the difficult environment of the water industry including a financial analysis of previous trends and current and future environmental and economic conditions.
A comprehensive capital expenditure programme has been developed which indicates that the Group will require funding of approximately R8.3 billion over the next five years. It is the Group’s policy to fund the capital expenditure programme through internal resources, that being accumulated incomes and cash reserves after providing for the Group’s liquidity requirements. Additional funding requirements will be funded through the debt capital market and other external funding. Rand Water Treasury’s focus is to re-establish itself in the domestic capital markets. The funding plan will also place more emphasis on moving towards an active portfolio management strategy. This strategy should see Rand Water Treasury introducing new funding instruments that will lead to the achievement of the following objectives: - establishing liquid benchmark bonds; - lengthening the maturity profile of the debt portfolio; - diversifying the investor base; - matching asset and liabilities’ cash flows and maturities; and - minimising the cost of borrowing within an acceptable level of risk.
In 2010, the Board approved the establishment of the Domestic Medium Term Note (DMTN) programme, which will be used to raise funds through the issuing of commercial paper and medium to long-term bonds at different rates and terms in the domestic bond market as and when it is required. The programme was registered for R5 billion.
The Group’s Funding Plan, together with the required borrowing limits of R8.3 billion pertaining to the core business requirements for the five years ending 2018, have been approved by the shareholder (Department of Water and Sanitation) and the National Treasury. Rand Water Integrated Annual Report 2013 -2014 225
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
30. Commitments Operating leases
Operating lease rentals are payable as follows:
Group as lessee Minimum lease payments due - within one year 1 597 1 272 1 597 1 272 - in second to fifth year inclusive 3 108 2 756 3 108 2 756 - later than five years 2 668 2 052 2 668 2 052
7 373 6 080 7 373 6 080
The Group leases a number of office and residential facilities under operating leases. The leases run for periods of between one and z zZ ZVVZV three years, with an option to renew the lease after that date. Lease payments are subject to an annual escalation to reflect market rentals. None of the leases include contingent rentals.
Group as lessor The future minimum lease payments are as follows: - within one year 2 609 2 691 2 609 2 691 - in second to fifth year inclusive 8 907 10 351 8 907 10 351 - later than five years 16 722 18 799 16 722 18 799 28 238 31 841 28 238 31 841
The Group leases out a number of properties under operating leases. These property leases do not qualify as investment property as the properties were purchased for future operational use and the related income is incidental in nature. During the year ended 30 June 2014, R1 million (2013: R1 million) was recognised as rental income in the income statement. Property leases consist mainly of vacant land and therefore little or no cost has been realised for repairs and maintenance.
Included in the disclosures above are the commitments that have arisen from those arrangements that contain deemed operating leases.
Capital commitments Contracted for but not provided 9 539 598 4 182 085 9 539 598 4 182 085 Authorised but not contracted for 6 094 058 9 833 472 6 094 058 9 833 472 15 633 656 14 015 557 15 633 656 14 015 557
The Group is committed in respect of capital expenditure including expected contract price adjustments.
This expenditure will be financed from internal resources and out of loans.
31. Retirement benefit information
Employees are members of the Rand Water Superannuation Fund; the Rand Water Provident Fund or the South African Municipal Workers’ Union National Provident Fund.
On 1 July 1997, the Rand Water Retirement Fund was merged with the Rand Water Superannuation Fund.
The superannuation fund is a defined benefit fund, which requires an actuarial valuation every three years. The last actuarial valuation of the fund was conducted as at June 2014 as the superannuation fund is in the process of voluntary liquidation. 226 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
32. Contingencies
General claims: Various proceedings were instituted against Rand Water during the 2014 financial year. The amounts being claimed from Rand Water total approximately R63.1 million. Rand Water’s legal advisors believe that Rand Water has reasonable defences and that the probability of loss will be minimal. Accordingly, no provision has been made in the annual financial statements.
Detail of the claims are as follows: - R10 million in respect of property expropriated by Rustenburg Municipality on behalf of Rand Water. - R36 million claim for alleged infringement of a patent in respect of Rand Water’s co-generation tender. - Two claims totaling R6.9 million being an alleged breach of contract by Rand Water resulting in damages incurred by the claimants. Rand Water has instituted a counter claim. - R0.2 million claim in respect of work allegedly completed by a supplier.
- R18.7 million claim against Rand Water for removal of pipeline and rental from 1972 when pipeline reported in the 2013
financial year was adjusted to R10 million, which is the estimate for removing a pipeline only. z zZ ZVVZV
Guarantees
At 30 June 2014, the Group has contingent liabilities in respect of guarantees given to third parties that amount to R7.9 million (2013: R9.3 million).
33. Related parties
The Group has a related party relationship with its subsidiaries and with its executive officers and Board members. As Rand Water is a state-controlled entity, it also has a related party relationship with all other entities within the same sphere of government. Unless otherwise disclosed, all transactions with related parties are on an arms length basis at market related prices.
Transactions with key management personnel
Key management personnel compensations are detailed in the Board Report (point 15) and total remuneration for the Board and executives are included under staff costs (see note 4).
None of the key management personnel had or has any significant influence within any entity with whom the Group has had significant transactions with.
Subsidiaries Country of incorporation Ownership interest
Rand Water Services (Pty) Ltd South Africa 100% Rand Water Foundation South Africa 100%
Joint Venture Vitens Rand Water Services BV Netherlands 49%
Rand Water Services (Pty) Ltd is a 100% owned subsidiary of Rand Water.
Rand Water Foundation is a not for profit company. The company is a special purpose entity as defined.
Vitens Rand Water Services BV is a jointly controlled entity, based in the Netherlands, of which Rand Water Services (Pty) Ltd holds 49%. Rand Water Integrated Annual Report 2013 -2014 227
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Rand Water Services Rand Water Foundation
In Thousands of Rands 2014 2013 2014 2013
33. Related parties (continued)
The following transactions were carried out with the subsidiaries:
Transactions with related parties Contribution to subsidiaries – – 43 503 34 859
Year-end balances arising from transactions
Receivables 1 1 940 8 249
Rand Water Services Rand Water Foundation z zZ ZVVZV
In Thousands of Rands 2014 2013 2014 2013
Group entities The Group is 100% controlled by the government of South Africa represented by the Department of Water and Sanitation. Rand Water and its subsidiaries are schedule 3B Enterprises in terms of the Public Finance Management Act. The related parties of Rand Water consist mainly of government departments and state-owned enterprises and other public entities in the national sphere of government.
Department of Water and Sanitation Transactions with related parties: Sales of goods and services 438 931 319 686 438 931 319 686 Purchases of goods and services 4 023 265 3 707 951 4 023 265 3 707 951 Statutory liabilities – – – – Interest received – – – –
Year-end balances arising from transactions Allowance for doubtful debts – – – – Receivables 108 079 44 792 108 079 44 792 Payables 657 145 648 884 657 145 648 884
Payables and receivables are due within 30-60 days from date of invoice. Interest receivable/payable is in accordance with normal market practice. Other public entities Transactions with related parties: Sales of goods and services 8 116 036 178 105 8 116 036 178 105 Purchases of goods and services 1 201 919 1 025 694 1 201 919 1 025 694 Statutory liabilities 318 008 461 393 318 008 461 393 Interest received 393 20 393 20
Year-end balances arising from transactions Allowance for doubtful debts 18 420 899 18 420 899 ReceivablesPayables 1 051 014 15 437 1 051 014 15 437 130 787 86 863 130 787 86 863
All receivables/payables are due within 30 days from date of invoice. Interest receivable / payable is in accordance with normal market practice. 228 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Opening Change in Closing Interest Balance estimate Balance
34. Subsequent events There are no subsequent events that the Group is required to report on.
35. Provision for rehabilitation costs
Reconciliation of provision for rehabilitation costs - Group - 2014
Environmental rehabilitation 50 423 3 823 3 216 57 462
Reconciliation of provision for rehabilitation costs - Rand Water - 2014
Environmental rehabilitation 50 423 3 823 3 216 57 462 z zZ ZVVZV
The rehabilitation cost relates to the sludge waste disposal site at Panfontein. The Group has an obligation to undertake restoration, rehabilitation and environmental work at the end of the sludge disposal sites useful life. During the current financial year a provision for the present value of the anticipated costs were raised.
During the current year the useful life of the sludge waste disposal site was reviewed from 8 years to 5 years. The original estimate was based on 40 drying beds being upgraded and that the upgraded beds would not have water losses. The result was that only 20 drying beds were upgraded. These changes resulted in a R 3.2 million adjustment on the rehabilitation liability for Panfontein.
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
36. Revenue
Sale of water 8 664 894 7 751 214 8 664 894 7 751 214
37. Cost of sales
Sale of goods Opening water inventory 30 703 33 993 30 703 33 993 Water purchases 3 614 695 3 320 776 3 614 695 3 320 776 Labour 577 264 532 593 577 264 532 593 Energy 1 457 441 1 328 644 1 457 441 1 328 644 Chemicals 258 041 177 732 258 041 177 732 Depreciation 212 394 177 828 212 394 177 828 Amortisation 3 153 3 180 3 153 3 180 Other direct expenses 175 314 149 526 175 314 149 526 Other direct income (19 886) (15 383) (19 886) (15 383) Closing water inventory (35 806) (30 703) (35 806) (30 703) 6 273 313 5 678 186 6 273 313 5 678 186 Rand Water Integrated Annual Report 2013 -2014 229
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
38. Cash flows of discontinued operations
Cashflows from operations 90 151 – –
39. Transfer of functions
Bushbuckridge Water Board
In the Government Gazette No.37342, issued on 14 February 2014, the Minister of Water and Sanitation extended the service area for Rand Water to include the upper Vaal Water Management area and the entire area of the Province of Mpumalanga
overlapping with the operational area of the Bushbuckridge Water Board. z zZ ZVVZV
Effective 1 April 2014 Bushbuckridge Water Board was intergrated into Rand Water. As of 30 June 2014, only provisional carrying amounts have been taken onto the books of Rand Water for the purposes of disclosure.
A Surplus of R58 million arose from the inclusion of the former BushBuckridge Water Board has been accounted for in accumulated reserves.
Fair value of assets acquired and liabilities assumed
Property, plant and equipment 55 789 – 55 789 – Inventories 1 944 – 1 944 – Trade and other receivables 97 090 – 97 090 – Cash and cash equivalents 5 472 – 5 472 – Interest-bearing borrowings (2 185) – (2 185) – Trade and other payables (99 703) – (99 703) – Total identifiable net assets 58 407 – 58 407 – Surplus on transfer (58 407) – (58 407) – – – – –
40. Accounting Frameworks As from 1 December 2012 the South African Generally Accepted Accounting Practice (SA GAAP) framework was withdrawn for year ends beginning after 1 December 2012. The Accounting Standards Board (ASB) is in process of deciding which accounting framework will be applied to Schedule 3B Public Entities.
41. Irregular, fruitless and wasteful expenditure and criminal conduct For the year under review the Group recorded R15.7 million of expenditure incurred as a result of criminal conduct and irregular expenditure. The Group has instituted disciplinary measures and opened criminal and civil cases against the relevant parties. The organisation has recovered approximately R111 thousand (including prior year incidences) of the recorded losses. No fruitless and wasteful expenditure has been recorded for the year. 230 Rand Water Integrated Annual Report 2013 -2014
RAND WATER Consolidated Annual Financial Statements for the year ended 30 June 2014
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Group Rand Water
In Thousands of Rands 2014 2013 2014 2013
41. Irregular, fruitless and wasteful expenditure and criminal conduct (continued)
Irregular expenditure and criminal conduct: R15,7m Details of the current financial year movement is as follows:
Procurement of services through the Single Source Selection process could have been avoided: R12 927 381 The Supply Chain Management Policy for Rand Water in so far as the Single Source Selection process is concerned, was applied, however a better competitive approach could have been employed if sufficient time had been given.
Invalid Tax clearance certificate: R1 390 968 A tender was awarded without a valid tax clearance certificate which is a deviation from the National Treasury Practice Note 8 of 2007/08 Paragraph 6.1.
Theft of motor boat engine: R17 000 A motor boat engine was stolen at the Panfontein site. Criminal cases have been opened. Losses will be recovered from insurance.
Theft of petty cash box: R569.30 A petty cash box was stolen from the Rietvlei building. Criminal case has been opened.
Defrauding the bursary scheme: R1 041 100 An employee has defrauded the Rand Water bursary scheme to the value of R1 041 100. Criminal case has been opened, amount to be recovered through legal process.
Failure to implement an award: R285 000 Failure to implement an award by Bargaining Council to the value of R285 000.
The reconciliation of the balance of the expenditure is as follows:
Opening balance 11 259 4 974 9 827 4 791 Current year movements 15 668 12 189 15 668 10 940 Amounts condoned/recovered/cases closed (111) (5 904) (111) (5 904) 27 816 11 259 25 384 9 827
The expenditure is included in the following line items: Staff costs – 2 – 2 Other expenditure 15 644 6 985 15 644 5 736 Inventory 6 5 060 6 5 060 Property, plant and equipment 18 142 18 142 15 668 12 189 15 668 10 940 Rand Water Integrated Annual Report 2013 -2014 231