Partnering with our Customers

As part of our commitment to improving customer value, service delivery and customer retention, we continued to conduct our Customer Value Management Survey. The survey which is conducted by an independent research organisation seeks to understand market perceptions of our service as well as the impact of changes and improvement we may have made. Through such engagement, we seek to ensure that we better understand customers’ needs and to ensure that all our customers have access to sustainable good quality uninterrupted water services. For the year under review, the overall customer satisfaction was 83.8%. In compliance with the water supply contracts we have signed with our customers, we also continue to conduct Service Level Evaluation. For the year under review, we achieved 96.8% Service Level Evaluation. In addition, various forums have been set up which provide us with an opportunity to engage directly with the customers, ensuring that their concerns and inputs are addressed in a timely manner. We continue to hold regular technical meetings with all our customers to ensure that there is integrated planning of water services to ensure continuity of water supply.

2009 2010 2011 Overall Satisfaction 75% 84% 83%

We also continue to provide 24 hour customer service support and have developed, implemented and monitoring adherence to set turnaround times.

We have also established the Rand Water Forums which form a key communication tool between us and our customers and stakeholders. The Forums provide a platform where water related issues can be discussed and solutions proffered. We have aligned the functions of the Forums to our strategic corporate objectives in order to ensure that we derive the most value that we can from their workings.

23 Our Approach to the Management of Our Infrastructure and Strategic Assets

A defi ning feature of a utilities provider such as Rand Water is the size and value of infrastructure in relation to annual turnover, and the intention to maintain these assets indefi nitely to provide specifi ed levels of service. It follows that proper management of fi xed assets is a key success factor of the utility – supporting achievement of agreed service levels to customers at minimum long term cost.

Our infrastructure is a multi-billion rand asset that needs to be managed and leveraged in order to extract maximum value, and monitored to minimise risk. Although 70% of infrastructure expenditure work currently takes place in the form of augmentation to meet the growth in demand, other projects are initiated because of the need to reduce operating costs, improve water treatment processes, enhance plant safety and extend the life of existing assets.

As we enter the maturity phase in our lifecycle, we expect that demand will continue to grow, though there will ultimately be a slow-down in annual growth rates in the long term. Due to a period of rapid growth in demand, much of our infrastructure capacity has been added in the last few decades. As rates of growth slow down, the rate of investment in new infrastructure tends to slow down as well, while the average age will increase. However, we are cognizant of this and in order to create clear accountability for lifecycle management of this growing, ageing asset base, we have set up an asset management department which coordinates and optimizes the use of the infrastructure. We also take note of best practices in respect of design, operation, maintenance, rehabilitation and disposal of the infrastructure. Thus, the management of the existing assets is carried out in conjunction with our plans for the augmentation of infrastructure - all with a view to facilitating our ability to respond to growth in demand.

24 Infrastructure

We operate a network of 3 500 km of pipelines, two large combined pumping and purifi cation stations (situated at and Zuikerbosch), four booster pumping stations (Zwartkopjes, Palmiet, Mapleton and Eikenhof) and a number of enclosed reservoirs. Two-thirds of the value of this infrastructure, estimated to be worth R70-billion at replacement value, is made up by our pipeline infrastructure.

Planning

After decades of expansion to meet the challenge of infrastructural development and population growth, our current infrastructure is adequate to meet our customers’ needs in the areas we service until 2012. This is in itself remarkable considering that in 1965, we were only supplying 1 000 Megalitres a day (Ml/d) and that demand is expected to increase four-fold to 4 000 Ml/d by 2012.

In order to address the growth in demand post-2012, we have embarked on a project that focuses on meeting the demand for water in 2020 and beyond and we are doing this by focusing on infrastructure refurbishment and development. At present, we are working with a 20 - year planning horizon, driven mainly by projections and forecasts of future water needs of our consumers. This involves extensive research and analysis of trends and usage patterns, as well as discussions with various stakeholders on their expectations.

Planning and management of assets is undertaken on the basis of supply systems, matching system capacity with projected customer requirements:

25 We draw raw water primarily from the System. Two river stations – Zuikerbosch and Vereeniging – abstract, purify and pump into the network some 98% of the water supplied to our customers. About 90% of this water is further pumped by four primary booster stations situated on the southern side of the ridge. The portions of the network supplied by each pumping station are indicated by colour coding all signifi cant customer supply points on the map as follows:

• Zuikerbosch / Vereeniging direct (brown) – southern and northern Free State (localized), in addition to supply to all booster pumping stations.

• Eikenhof (pink) – western and north-western , the West Rand and greater Rustenburg.

• Zwartkopjes (green) – central Johannesburg and a high-lying portion of the East Rand.

• Palmiet (blue) – eastern and northern Johannesburg, large parts of Tshwane, and western portions of Ekurhuleni.

• Mapleton (yellow) – central and eastern parts of Tshwane and Ekurhuleni, and selected areas in .

Projected growth in water demands

Our municipal customers account for 92% of total demand, with direct supply to mines making up most of the balance. Periodically, we consult with our major customers and the information gathered from such consultations assists us in updating our projections of demands on the network. The latest forecast carried out indicates a continuation of the trend of gradually decreasing rates of annual demand growth.

We now supply a predominantly urban, domestic consumer base. Population growth is the main driver of demand growth, with the economy having a secondary affect. Worldwide, urbanising populations exhibit reduced rates of population growth and in South , this effect is magnifi ed by the impact of AIDS on fertility and mortality rates. A recent demographic study, undertaken on our behalf, confi rmed this trend.

Total average daily demand for our network is projected to increase from the current 3900 Ml/d to around 5200 Ml/d in 2025. This gives an average rate of demand growth of 2% per annum over this period. The three metros that we supply –Johannesburg, Ekurhuleni and Tshwane – are all projected to grow at this rate. The metros consume 75% of water supplied from our network.

Projected peak demands by main system

Through the computer based network hydraulic modelling process, we are able to forecast customer demands and respond accordingly at each signifi cant supply point. This system allows for the estimation of peak fl ows in each pipeline, and peak demands on each of the pumping stations. Results for each of the major systems are given in the table below (quoted capacities exclude standby units). In our planning of the expansion of the network, we have taken into account our existing capacity constraints, as well as the need to maintain the ability to take existing infrastructure out of service for rehabilitation, without disrupting supply to customers and the result is our anticipated year of expansion that we have termed “Proposed year of augmentation” in the following table.

26 Peak demand forecasts and augmentation dates for main pumping stations

Station Design Proposed Proposed Projected peak day demands (Ml/d) capacity additional year of 2015 2020 2025 2030 2035 (Ml/d) capacity augmentation (Ml/d) (fi rst phase) Zuikerbosch 3900 1200 2016 3910 4500 4030 4550 4080 Vereeniging 1400 Nil N/A 1400 1400 1400 1400 1400 Clarens Scheme Nil 1000 2025 1000 1000 2000 Eikenhof 2000 Nil N/A 1400 1550 1700 1840 1980 Zwartkopjes 800 200 2013 700 760 820 880 930 Palmiet 1870 600 2015 1880 2100 2300 2500 2700 Mapleton 960 300 2017 920 1040 1140 1240 1340

Our aim, in maintaining and expanding its infrastructure is to secure and sustain water supply in terms both quality and quantity – essentially, the core of our business. Our plans are to spend R8 billion over the next fi ve years on upgrading and refurbishing our water supply infrastructure. Of this amount, we have allocated 70% to augmentation schemes, with the remaining 30% will be allocated to renovations and upgrades of existing infrastructure.

Capital Expenditure Forecast

                R' millions                                    

27 Expanded area of service

Implementation of pipeline from Bloemendal pumping station to Delmas.

In October 2008, in conjunction with the Department of Water Affairs, the Mpumalanga Provincial Department of Provincial and Local Government and the Delmas Local Municipality, we entered into an agreement to undertake a 34km pipeline project between Bloemendal pumping station to Delmas. In terms of the agreement, we were appointed as the implementing agent to construct the 500mm diameter water pipeline and will continue to operate and maintain the water pipeline after construction.

Western Region

We were appointed as the implementing agent for the Mpumalanga Western Highveld Region by Department of Water Affairs. Our appointment is for the management, operation and maintenance of the water supply services in the southern part of the Western Highveld Water Supply Scheme. This also includes the Kungwini bulk water supply services in the area of Bronkhorstspruit, Ekangala and Ekandustria. Our involvement in the short term support intervention has positively impacted the following aspects of bulk potable water services provision:

• Water quality

• Water supply management

• Equitable distribution to cross-border communities

The Department of Water Affairs has extended our appointment, with the added responsibility of providing services to the entire Western Highveld Region.

Capital Works and Capital Projects

Table: Our Capital Expenditure as at 30 June 2011

Budget Category Budget Actual Expenditure Variance Variance RR R%

Independent Capital Projects 1,074,055,238 969,517,257 (104,537,981) 90% Supplementary Budgets: Moveable Assets 60,000,000 42,911,271 (17,088,729) 72% Land and Rights 4,600,000 4,427,912 (172,088) 96%

TOTAL 1,138,655,238 1,016,856,440 (121,798,798) 89%

During the period of review, our actual capital expenditure in the augmentation and rehabilitation of infrastructure and assets amounted to R1 017 million. Of this, R970 million was for infrastructure under Independent Capital Projects, R43 million for moveable assets and R4.4 million for land and rights. The overall expenditure was R1 017 million against an overall budget of R1 139 million, translating to 89% of the capital expenditure.

The value of approved work to end of June 2011 under the Independent Capital Projects budget amounted to R7 919 million of which the outstanding value of approved work in progress amounts to R1.5 million. The work includes numerous projects necessary to ensure that we are able to meet the needs of its consumers throughout its area of supply in the most effi cient and cost effective manner. Overall these projects range in value from R200 000 to over R1,000 million.

28 Major Capital Projects

Expenditure occurred on more than 300 projects during the fi nancial year. However, the top fi ve projects accounted for more than 40% of the total capital expenditure. These fi ve projects involve augmentation, upgrading and extension of pipeline routes, refl ecting the importance and value of pipelines in proportion to our total infrastructure.

BG3 raw water pipeline augmentation

This 3500 mm diameter pipeline increases the capacity of our system supplying raw water under gravity from the to the Zuikerbosch purifi cation and primary pumping station. The pipeline runs parallel to the existing 3500 mm diameter BG2 pipeline, the largest diameter pipeline in the Rand Water network. Fabrication and installation of pipe is in progress, with completion planned for 2012.

The new pipeline is being laid between the BG2 and the river. A signifi cant portion of the excavation is in rock, requiring blasting close to the existing line. Sections of the line are also close to the river bank, and constant pumping to remove water from the trench will be required. Installing such a large pipeline under these conditions represents a huge engineering challenge, and careful planning, monitoring and control is needed.

Vlakfontein Reservoir to Mamelodi pipeline augmentation

This project strengthens an existing route, supplying water under gravity from Vlakfontein Reservoir, north of Benoni, through to eastern and central areas of Tshwane Metro. In addition to growth in existing areas of supply, the pipeline supports supply to an extended area of service, including the Mpumalanga Western Highveld Region discussed above.

Installation of the fi rst leg, a 1500 mm diameter pipeline from Vlakfontein Reservoir to Rietvlei nature reserve, south-east of , is in progress. This leg supplies growth along the route, and terminates at the point of supply to the major Garsfontein Reservoir zone of Tshwane Metro. Extension to the Mamelodi termination is at planning stage, and will be informed by growth in demand to the east of Pretoria, and in the expanded area of service.

Brakfontein to Hartbeespoort Dam Scheme

This project will initially strengthen the supply to Diepsloot and environs. Subsequent stages supply Mnandi and other growth areas between Midrand and Pretoria, and will extend the regional bulk supply to areas around Hartbeespoort Dam.

Installation of the fi rst portions of the scheme (H33, H34 pipelines) is complete, and is assisting supply to the Diepsloot supply zone of Johannesburg Water. The system extension along a new route towards Hartbeespoort Dam (H35 pipeline) is close to completion.

Upgrade of N7, N8 pipelines from Secunda to Bethal

This eastward leg of our infrastructure supplies water into Mpumalanga. The portion from Secunda to the termination at Bethal was acquired from the municipality, and contains small diameter asbestos cement pipes. These are being replaced with steel pipes to increase capacity and improve reliability.

An interesting feature is that much of the pipe that we are using to replace the asbestos cement pipes is essentially recycled. We are using pipes that we recover from elsewhere in the network where the pipes have become too small for current needs. If the pipe still in acceptable condition, we refurbish it and use it in the relatively low capacity portions of the network, thus achieving substantial cost savings in the process.

H14 Lyttelton to Rosslyn pipeline: partial deviation and augmentation

A portion of our pipeline network runs over dolomite rock. Dolomitic ground conditions can affect infrastructure due to the formation of

29 sink holes, although risk and severity will vary signifi cantly from place to place. In the worst case, as occurs along the eastern portion of the H14 pipeline, sinkhole activity force the relocation of affected pipelines.

The H14 pipeline is part of a system that supplies municipal reservoirs in central Pretoria. The eastern portion of the line is being rerouted and increased in capacity. It runs closer to the municipal reservoirs, allowing portions of the municipal pipework, also affected by the dolomitic activity, to be taken out of service.

Pipeline renovation

Less than 10% of our 3 500 - km pipeline network is constructed out of concrete pipes, with the rest of our pipelines manufactured from steel. We are currently undertaking a project to renovate or replace all the concrete pipelines – about 200 km – with steel pipes where their condition has deteriorated beyond our accepted norms. This will be an on-going exercise and we will continue to assess the conditions of our entire network and schedule remedial action as appropriate. We have found that steel pipes are more suitable than concrete pipes, as steel tends to develop leaks, rather than rupture, while concrete is more likely to rupture and cause potential damage to people and property.

Some of our pipelines are 70 years of age, with the overall majority aged between 15 and 50 years. A programme of refurbishment, renovation and replacement is therefore essential. A range of techniques have been employed, including aerial surveys of its pipeline network by use of thermal remote scanning technology. Through thermal remote sensing, leaks in large diameter pipes are detected. This allows for early repairs and helps to reduce water wastage.

During the survey, digital seamless maps are produced and geographically modifi ed for use in government or council Geographic Information Systems. High-resolution infrared images are produced as well as high defi nition video output linked with Global Positioning System information.

30 Specifi c Pipeline Renovation Projects

The phased reconditioning of the 1800mm diameter O2 pipeline has been an on-going project since its commencement in the previous fi nancial year. The 32km - long pipeline, which runs from Alberton to Kempton Park, has taken two years to re-condition because of the length of the pipeline and the need to avoid operational disruption, particularly at peak demand periods. The project involves inserting steel lining into fi ve kilometres of the O2 pipeline, as well as fi xing and renovating the joints and valve chambers.

Installation of Cathodic Protection System on the Rand Water pipeline network

Our pipeline network is exposed to corrosion from stray current sources, corrosive soils, and microbiological corrosion, that results in metal loss and threatens the integrity of the pipeline network. It is therefore necessary that we implement measures to mitigate against such corrosion.

We are undertaking the implementation of Cathodic Protection (CP) System on the basis of the geographical regions of the pipeline network and the pumping stations. We have undertaken and completed Cathodic Protection and Corrosive surveys on the entire pipeline network as well as the pumping stations. The installation of Cathodic Protection at Zwartkopjes, Zuikerbosch and Vereeniging and the regions is in progress and the anticipated completion date for the entire network is 2014.

Online Laboratories at various sites

The purpose of our Online Laboratory project is to implement 20 new laboratories that will provide real time, reliable and accurate information with regards to the various water quality parameters at our purifi cation and primary booster sites. Our operational staff will

31 use the information gathered to monitor and control the various chemical dosing processes, to ensure that a high level of water quality is maintained. The total cost of the project is projected to be approximately R110 million.

Hydro-electric power generation

Following requests for proposal by Eskom, we undertook a detailed study of the potential for generating power at four sites within our bulk supply network. The results of this study were presented in 2009, and a decision was taken at that time to defer the proposal. The study concluded that capital expenditure of R400 million would be required to utilize the generating potential of these sites. It was indicated that the project would be strongly fi nancially positive over time, using the tariff scale proposed by Eskom.

We have now included the amount of R400 million in our 5 year investment forecast, starting in 2011 - 12, and this will allow for fi nalisation of institutional methodology and agreement with Eskom and other parties.

Research and Development

We undertook a restructuring of the Strategic Assets Management Division and this restructuring has allowed pipeline research and development to be expanded to include other disciplines of engineering. Recruitment of staff is underway and a period of consolidation of previous research work is taking place together with the application of research fi ndings to current engineering projects.

Our board has approved an intellectual property policy that we intend to utilise in improving the state of our infrastructure. To this end, we are currently undertaking research work into the reduction of pipeline hydraulic friction losses through the use of antimicrobial additives in rigid polyurethane linings for steel pipes with the help of suitably qualifi ed consultants and contractors, the Universities of the Witwatersrand and Pretoria and the Water Research Commission. We also intend on carrying out research work to compare continuous and discrete anodes for the cathodic protection of steel pipes in the near future.

Hartbeespoort Dam Biological Remediation Programme (Harties Metsi a Me)

We were appointed as the Implementing Agent for the Hartbeespoort Dam Integrated Biological Remediation Programme by the Department of Water Affairs in June 2006 to address and restore the dam from its current hypertrophic status.

The following has been achieved through the programme to date:

• Development of a 100% biological remediation plan for the restoration of water quality based on Integrated Water Resource Management principles;

• 5200m2 of damaged riparian vegetation has been rehabilitated;

• 2500m2 of fl oating islands have been developed to compensate for areas where riparian vegetation rehabilitation is not an option;

• Implementation of food web restructuring is the fi rst of such an initiative in the country. 93 tonnes of coarse fi sh (carp and catfi sh) already removed;

• Physical removal of biomass (algae and hyacinth) from the dam water surface. To date more than 16 000 m3 of algae, 37 600 m3 of hyacinth and 1 270 m3 of debris have been removed from the dam;

• All ‘waste’ material is recycled and reused for benefi cial purposes, therefore no waste is generated by the programme and more than 1 000m3 of compost has already been produced.

• Development piloting of online Integrated Water Use Licence registrations for housing estates around the dam with envisaged roll-out to the entire catchment and nationally.

• Sustainable employment has been created for over 70 people from the local communities with intensive training and

32 development plans for capacity building;

• Buy-in, commitment and support from estate owners around the dam regarding the intiative of the programme;

• Development of training material;

• Communication and awareness creation to various stakeholder groups including schools through the Information and Communication Centres established at the dam wall;

• Development of a comprehensive Resource Management Plan (RMP) document after intensive public participation and involvement which will specify the rules and restrictions related to the management of the water body as well as provide direction on the establishment of a Water Management Institute.

The project is funded by the DWA with a total investment of R100 million to date. We, as Rand Water, are now at a point of fi nalising a new 5 year business plan for the remediation programme which will see the full scale implementation of the operational activities with piloting and possible implementation of more cost intensive options. It is envisaged that the programme will eventually be handed over to a Water Management Institute, one of the outcomes of a comprehensive Resource Management Plan development process, which will continue the efforts currently being undertaken by the Metsi a Me Programme.

33 The Impact of Our Operations on the Environment

During the year under review, we again placed a very high premium on the quality of our water, and provided a product that met both the national drinking water standards and adhered to the World Health Organisation non-organic drinking water quality guidelines. To sustain our performance, we did not only rely on compliance monitoring but have also implemented an extensive integrated water quality management plan throughout our entire water supply chain. This risk-based system is able to proactively identify problems and employs pre-defi ned corrective protocols for those determinants that have the highest probability of failure.

We monitor the rivers and dams in our catchment area extensively. We have more than 500 online monitoring devices installed at key points throughout our water supply chain that are capable of providing real time water quality information that is necessary for the optimal functioning of our water treatment systems while enabling on-going water verifi cation. We also continue to participate in all catchment and national water forums where we are able to keep abreast of any activities that may compromise the quality of our water sources. In so doing, we have produced water quality reports that have focused on the cumulative trends in water quality and have shared this information with the Department of Water Affairs. We have not been hesitant to lobby our interest where water quality is compromised and this is evident in our involvement with endeavours to fi nd solutions to, amongst other issues, the eutrophication of water sources from malfunctioning sewer plants and the decanting of Acid Mine Drainage in the various water basins in Gauteng.

In respect of the eutrophication of water sources through sewerage spillage, we have been at the forefront of seeking solutions in this area and, where we have been given the opportunity, we have gone forward to implement the solutions with much success.

In respect of the Acid Mine Drainage, the Government appointed an Inter-Ministerial Task Team to investigate the matter and the team released its technical report which outlines the steps that will be taken in the implementation of short-term solutions on this matter. We have, as Rand Water, also investigated the potential impact of the Acid Mine Drainage on our operations and while we are comfortable that our operations may not be affected in the short term, we have taken the opportunity to develop our own long term responses to the issue and stand ready to assist the Government should our assistance be required. As portions of our infrastructure are located close to some of the mining locations that are starting to decant, we believe that we are well placed to pump water from the mining sites at minimum additional cost and our infrastructure is of suffi cient scale to deal with the bulk volumes involved. We have had recent successful experience in dealing with Acid Mine Drainage at the Brugspruit Acid Mine Drainage Plant Refurbishment and Emfuleni Waste Water Treatment Plant, for example, where we have been involved with interventions in operations, maintenance and effl uent compliance matters.

An informed stakeholder base is important to us and in this regard the www.reservoir.co.za website provides comprehensive water quality information with regards to the source and drinking water quality. We have received positive feedback on the content of the website from the public, research institutions and water quality consultants.

The most severe impact of climate change will be on the world’s fresh water resources. We, as Rand Water, have noted that the cause and effect of climate change is being fully assessed by the global political agenda, and its impact on international trade markets is starting to manifest itself. It is our view that both the public and private sectors have a signifi cant role in addressing the impact of climate change and we will respond as necessary to remain abreast of developments in this area. We will proactively implement actions in our business that will align our approach with the position adopted by the Government of .

As a country, we are a signatory to the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. South Africa, as a developing nation, currently has no obligations to reduce greenhouse gas emissions. However, we share the Government’s commitment to continuing development in a sustainable manner that will result in benefi ts to the economy, society and the environment. South Africa is therefore supportive of an approach that embraces this balance and has adopted what has come to be called Sustainable Development Policies and Measures. The approach supports the fact that as a country we must fi rst contribute to global efforts to combat climate change while ensuring the sustainability of our economy and society.

As an organisation, we acknowledge the potential effect of climate change on our business and we have initiated a process to include

34 climate change planning procedures in all aspects of our business planning. This includes the calculation of our carbon footprint, a comprehensive risk assessment process, and the implementation of a corporate climate change strategy. All these will be launched in the 2011 - 2012 fi nancial year.

Our Climate Change Strategy will unpack our commitment to responding to Climate Change by developing measures that will deal with risks arising from climate change which may impact on our product. Some of the risks that we have identifi ed include the list below and the remedial action that we are taking is addressed in this report:

• Security of water supply

• Extended maximum water demand periods

• Algal blooms

• Waterborne diseases

• Damage to infrastructure

Our Catchment Area

Some of these issues identifi ed in the preceding section have had impact on the entire Vaal River system whilst others are of a more localised nature. Our studies have indicated that the increase in salinity and related macro-ions have the greatest impact on the usage of the Vaal River as a source of raw water. Furthermore, an increase in Total Dissolved Solids (TDS) and the concomitant increase in constituents such as chloride and sulphate, have signifi cant implications on domestic, industrial and agricultural water users.

35 The occurrence of microbiological pollutants as localised problems is also of concern. We believe that this is indicative of sewage works located along the river system that are not being properly operated, managed or maintained. There are also coal mining activities located on the upper reaches of the Vaal River system which are on the rise. These mining activities are already impacting on the water quality of the Vaal River, and, if not regulated effectively, will potentially have a detrimental effect on the catchment area as has occurred on the Olifants River as a result of the coal mining activity in the Witbank area. Eutrophication, which is the process by which a body of water acquires a high concentration of nutrients, especially phosphates and nitrates, is another challenge for the Vaal River system.

It has resulted in algal blooms and the growth of water hyacinth. It is very likely that municipal wastewater effl uent is the major contributor to the eutrophication and degradation of the Vaal River aquatic system. It is also one of the impacts that is also the most easy to mitigate because infringements can be located, measured, and monitored through the available policies and regulation.

We envisage that there will be an increase in pressures on the River mainly due to a growth in population numbers and developments in the River’s catchment, which will increase pollution levels. This will require additional measures and strategies to maintain acceptable pollution levels. Law enforcement against pollution has unfortunately been non-existent for several years, likely due to the shortage of human resources in the relevant government departments that are required to police the Vaal River. We believe that the efforts of the catchment forums continue to play an important role for our organisation and other stakeholders involved with the River, that have resulted in the pollutions concerning the River being addressed by the Department of Water Affairs and the respective municipalities. The Department of Water Affairs has issued a number of directives to some of the towns in the Vaal River catchment area, directing them to improve the effl uent management at their waste water works. We believe that municipalities have to upgrade the sewage infrastructures, minimise the ingress of storm water into the sewer systems during high fl ow times, as well as to take steps to minimise operational spillages. Ultimately, it is only a signifi cant improvement in the quality of the sewage effl uent that will contribute toward the environmental sustainability of the Vaal River ecosystem.

Blue Drop Certifi cation

The Department of Water Affairs continuously assesses the performance of Water Services Authorities’ performance in the entire area of the Authority’s jurisdiction. Water Services Authorities that are awarded Blue Drop status are required to comply with 95% of the weighted criteria in the biannual assessment. Evaluation will be per drinking water services system (from catchment to consumer) and are aggregated for each Water Services Authority. Increasingly comprehensive and stringent criteria are applied to facilitate an incremental and continuous improvement approach to drinking water management practices. The Water Services Authority responsible for the provision of water is required to ensure that the following criteria are met in each drinking water services system:

• Water Safety and Security Plans: Comprehensive, preventative drinking water quality management must be practiced according to a Water Safety and Security Plan for the drinking water supply system. The Water Safety and Security Plan must be reviewed at least every 3 years.

• Process Controllers: The water works and Process Controllers are required to be registered according to the relevant legislation (Revised Regulation 17 of the Water Services Act (No. 108 of 1997) / Regulation 2834 under the Water Act of 1956; 1985 Requirements) and the Process Controllers must be licensed according to the Class of water treatment works. The water treatment works must have a site-specifi c Operator’s Manual to guide Process Controllers.

• Drinking Water Quality Monitoring: A suitable monitoring programme, in accordance with the requirements of the latest version of SANS 241 Drinking Water, is required to be implemented to sample the quality of potable water supplied to citizens in their drinking water services system.

This monitoring programme, and any amendments, must be registered with, and approved by, the Department of Water Affairs. It must be representative of a minimum of 80% of the population served in the town and/or the volume of water supplied and any samples must be taken and analysed according to the monitoring programme. Both operational and compliance monitoring are required to be undertaken.

36 • Drinking Water Sample Analysis: The samples are required to be analysed in laboratories which are either ISO/ IEC 17025: 2005 accredited or are DWA - approved per method of analysis as defi ned in the Department of Water and Environmental Affairs’ Drinking Water Quality Laboratory Strategy.

• Submission of Drinking Water Quality Results: All results from the monitoring programme must be submitted to the Department of Water Affairs at a monthly frequency, or on request from the Department of Water Affairs.

• Drinking Water Quality Compliance: The results of the water quality monitoring programme must comply with the requirements of the latest version of SANS 241: Drinking Water. The water supplied in the drinking water services system must be classifi ed as “EXCELLENT” according to the latest version of SANS 241.

The Blue Drop Certifi cation programme of 2011 verifi ed the status of drinking water quality and the management of supply systems of 162 municipalities countrywide. Seven municipalities in Rand Water’s area of supply were awarded Blue Drop Certifi cation (Johannesburg 97,69 %, Ekurhuleni 97.44%, Mogale 97.32%, Tshwane 97.22%, Emfuleni 96.42 %, 95.24 %, Rustenburg 95.69%) of these (Johannesburg, Ekurhuleni and Mogale) were ranked in the top ten municipalities nationally. The City of Johannesburg was rated the top municipality, and Gauteng was rated the top province in the country with regards to the quality of its tap water.

Our energy consumption

The supply of electricity in South Africa continues to constitute a challenge for us and given that we anticipate signifi cant demand in our area of supply, we are continuously working at improving our energy consumption and are instituting more effi cient pumping plants.

In terms of security of supply of electricity, our water supply network is regarded as a protected supply and as such, we are not subject to interruptions. We have also taken steps to improve the electricity supply network and are in the process of upgrading the supply network to the Zuikerbosch Pump Station. Despite our assured supply, we are working at reducing our consumption and are looking into options on cogeneration of electricity to reduce our strain on the national grid.

We have also identifi ed the increasing cost of electricity as a risk. Being one of our major inputs, any increases in its price have a direct bearing on the cost of our end product - potable water. It is anticipated that electricity costs will continue to increase above the rate of infl ation and this in turn poses a risk around our ability to meet our obligation to provide potable water at the least possible cost. In order to mitigate this risk, we have developed processes that will enable us to monitor our electricity usage and where possible, minimise our consumption.

37 Environmental Rehabilitation Projects

During the year under review, the decanting of acid mine drainage into the waterways within our area of supply received signifi cant local and international media coverage. Acid mine drainage (AMD), refers to the outfl ow of acidic water from (usually abandoned) metal or coal mines. Depending on the area where the decanting occurs, the water may contain toxic heavy metals and radioactive particles. These are dangerous for people’s health, as well as plants and animals and pose serious threats with respect to possible sinkhole formation and obviously the pollution of receiving streams. Environmental activists and trade unions have also voiced their concern with the potential association of acid mine water and the increased activity in the mines to feed demand for coal. Since most of the activity is in respect of mines to be established in the upper reaches of our Vaal River catchment area, it is a source of concern for us.

The contamination of South Africa’s water sources with raw sewage is a national concern, and this was highlighted by the release of the Department of Water Affairs’ 2010 Green Drop Certifi cation Report. The Report indicated that only 5% (40 out of the 821 assessed) of municipalities in the country achieved the Green Drop certifi cation. The Department awards Green Drop certifi cation to municipalities that have complied with 90% of the criteria set for wastewater management.

Our partnerships in this regard with municipalities and Department of Water Affairs have provided opportunities to address the sanitation challenges so that our country’s environmental assets and natural resources are sustainably protected for all South Africans.

Our Bulk Sanitation Services are sanctioned by the Water Services Act No 108 of 1997 and includes:

• assessment of wastewater treatment plants and providing site specifi c recommendations to municipalities to ensure effl uent compliance to Department of Water Affairs’ Green Drop Certifi cation audit;

• the provision of management and maintenance of the wastewater treatment works;

• capacity building and the training of process controller;

38 • industrial effl uent monitoring programme;

• refurbishment and process upgrade of water and wastewater treatment works;

• the management of the pump station; and

• the refurbishment of Acid Mine Drainage.

Our key Bulk Sanitation projects during the year under review were rendered both within and outside of the area of supply. Some of the projects undertaken are as follows:

Emfuleni Local Municipality

Our fi ve year partnership with the Emfuleni Local Municipality has seen us assisting in the building of capacity in the operation and maintenance of sewage pump stations and three Wastewater Treatment Plants, the implementation of Industrial Effl uent Monitoring Programme (IEMP) and process upgrades. These interventions have resulted in an improvement in effl uent compliance of the wastewater treatment and their compliance to Green Drop Certifi cation requirements. We also established an Industrial Effl uent Monitoring Programme (IEMP) where the activities of ‘wet’ industries are assessed, categorised and properly billed by using the municipal by - laws as a regulatory tool in order to contain the levels of effl uent being discharged into the municipal sewer networks.

We have already observed that the implementation of the IEMP is yielding positive results with the majority of the industries in Emfuleni making efforts to comply. The organic loads discharged by industries have decreased signifi cantly by 19% for the 2010 - 2011 fi nancial year as compared to that of the previous year. A decrease in the percentage of uncontrolled raw sewage spillage in to the Vaal River from the sewer pump stations has also been observed. This is largely due to our recommendations contained in an implementation plan that included the refurbishment of aging pipelines, valves and pumps at the critical pump stations in Vereeniging area. We also recommended the availability of stand-by vacuum tanker services and maintenance personnel for the pump stations, should the need to arise to react on an emergency.

Out of 12 municipalities that were assessed in the 2010 - 2011 Green Drop audit in Gauteng, Emfuleni Local Municipality was ranked in position seven with respect to its compliance.

Thembisile Hani Local Municipality

Our partnership with the Thembisile Hani Local Municipality to provide bulk sanitation services began in 2009, and included the provision of operational, maintenance and capacity building services to its Tweefontein Wastewater Treatment Works. A highlight for us in addressing the skills shortage that existed at the municipality, we appointed, through the Rand Water Foundation, four local unemployed Science-Engineering graduates for the period at the Wastewater Treatment Works to be trained and capacitated as process controllers.

The need for a Regional Sanitation Scheme in the Vaal

We have noted that there is a need for a regional sanitation scheme in the Vaal region of Gauteng. The current over- burdened hydraulic capacity at the Sebokeng Wastewater Treatment Works in Emfuleni Local Municipality (operated and maintained by ourselves and the Municipality) and that of the Meyerton Wastewater Treatment Works at the Midvaal Local Municipality is making it extremely diffi cult for the individual treatment systems to meet their legislative requirements and their adherence to Green Drop Certifi cation compliance.

The latest Green Drop audit results indicated a distinct variance in compliance by the two Plants. Even though there are improvements from the previous audit, we have stressed that urgent interventions are necessary in order to address the non-compliance of effl uent discharge, as well as the need for technical capacity to be developed by the two municipalities.

During the year under review, we undertook a feasibility study on behalf of the Midvaal Local Municipality to examine the effi ciency of

39 its Meyerton Wastewater Treatment Works. The outcome of our study, which included a statistical analysis of raw sewage disposal, an analysis of the existing wastewater treatment infrastructure, made recommendations among others, for a signifi cant extension to the Plant.

Following our recommendations made to the Emfuleni Local Municipality in 2009 which included the upgrading of the Sebokeng Wastewater Treatment Works in order to improve hydraulic capacity, we can report that design work for its upgrade has reached an advanced stage. During the year under review, we were also appointed by Emfuleni as the Project Manager to oversee an Environmental Impact Assessment of the upgrade of its Sebokeng and Rietspruit Wastewater Treatment Works.

Brugspruit Water Pollution Control Plant (Acid Mine Drainage Plant)

In September 2008, we were appointed by the Department of Water Affairs to refurbish and commission the Brugspruit Water Pollution Control Plant in Mpumalanga. The scope of our work included the replacement of all the Plant’s electrical and mechanical equipment, its civil structures, and commissioning the plant to its full operation.

The Plant was successfully refurbished and commissioned in August 2010. The Department of Water Affairs commended us on “the quality of its work that enabled us for achieving our goals of protecting our water resources and providing the required water services to our communities, thereby contributing to the alleviation of poverty and unemployment”. We have subsequently been re-appointed to operate and maintain Brugspruit where we remain committed to providing solutions against the threat of acid mine drainage.

40 Moqhaka Local Municipality

Following our assessment of its water and wastewater treatment plants in January 2010, the Moqhaka Local Municipality in the Northern Free State appointed us as Service Provider for the refurbishment of mechanical equipment at its Kroonstad Wastewater Treatment Plant. Our work was completed in December 2010 and formally handed back to the Municipality.

An important aspect of our work was to establish measures that would minimise the community’s exposure to health hazards due to the non- compliant discharge of effl uent into the Vals River, which also posed an environmental threat. At all phases of our operations, we employed the services of local companies and workers in order to create jobs, address poverty and to contribute toward local economic development. eMalahleni Local Municipality

In April 2010, the eMalahleni Local Municipality in Mpumalanga approached us to assist with the challenges it was experiencing with respect to water services, most notably for the refurbishment of its Klarinet 2&3 and Bush sewer pump stations. The scope of our work included the re-instating and refurbishment of all damaged and missing mechanical and electrical equipment as well as the re-building of civil structures and installation of palisade fence.

At the close of our assignment in March 2011, we had refurbished all the sewer pump stations utilising local services providers most notably for the cleaning and removal of the sludge from the pump stations. The procurement of electrical, mechanical and civil materials were done locally in order to address job creation.

From a health perspective, residents from the Municipality’s adjacent Klarinet 3 Township are no longer exposed to the negative effects of sewage spillage as a consequence of the overloaded Wastewater Treatment Works. The Department of Water Affairs also appointed us for the refurbishment of the Municipality’s Riverview Wastewater Treatment Works. The project commenced in January 2011 and we anticipate it to be completed by the end of August 2011. This major goal of the project is to minimise the discharge of non-compliant fi nal effl uent to the Olifants River.

The quest for innovation

We are engaged with a Finnish wastewater treatment technologies company on research to improve wastewater effl uent quality through the introduction of tested technology and chemicals. These technologies have been proven to reduce odour and microbiological pollution when they are used at wastewater treatment plants. We are also in talks with a Japanese company on innovative mechanisms to address acid mine drainage at the eMalahleni Local Municipality. This is with a view of re-using the effl uent from the Brugspruit Acid Mine Drainage Plant for industrial and potable water use. We anticipate installing a pilot plant later this year which will be operational for at least fi ve years.

41 Leveraging off Information Technology

Green Information Technology

We compiled a Green Information Technology (IT) strategy and long term plan in support of our sustainability objectives. The Green IT initiative is aimed at reducing the carbon footprint that results from information and communications technology and their related operations. While we have compiled our strategy in this area, we are yet to roll it out and our intention will be to adopt a measured approach to implementing the overall strategy with the intention of ensuring that we focus on generating positive returns and value for the organisation, including cost reduction or cost avoidance as well as the long term sustainability requirements and objectives of the organisation. We will also implement processes that will facilitate the measurement of the benefi ts yielded and thus management of the process on an on-going basis.

Virtualisation and consolidation

A server and storage virtualisation and consolidation initiative was launched in 2009 with the aim of avoiding the physical expansion of our data centre, while centralising all enterprise application servers and improving the energy effi ciency of the data centre. To keep up with increased user demands for computing power and storage space as well as to avoid the power demands of traditional tower and rack mounted servers, many data centres are being forced to expand their physical plant at an alarming rate and we would have been no exception.

42 Therefore, we selected a server virtualisation facility and a blade server format as our server architecture in response to a critical and growing need to increase server performance and availability. This structure enabled us to centralise enterprise application servers and implement new IT solutions without increasing the size, cost and management complexity that is incumbent on an ever growing data centre.

The new virtualised blade format servers are physically smaller in dimension, consume less energy and generate less heat than their rack-mounted counterparts. Blade servers consolidate power and system level functions into a single, integrated chassis and enable the addition of servers and other components such as communications and peripheral connections via easy-to-install blades. Blade server technology greatly increases server density, lowers power and cooling costs, eases server expansion and simplifi es data centre management. Blade servers are not just a new way to package traditional computing components. Rather, they are integrated systems designed to deliver server performance in effi cient, high density, easy to expand, and easy to manage units. In addition to the improved server format, virtualisation software was used to consolidate the physical server environment. This facility enables maximum usages of server resources by creating virtual server resources that tap physical resources as needed by the application usage.

The overall result of this initiative was that the physical size of the data centre remained the same and there was a reduction in the physical server fl eet whilst a number of new IT solutions were implemented and all enterprise IT applications were centralised. As at the end of June 2011, the number of physical servers in our data centre has been reduced by forty four per cent from one hundred and twenty to sixty-seven of which twenty per cent of the reduction was achieved in the 2010 - 11 fi nancial year. The reduction in the number of physical servers has thus far resulted in the reduction in the number of racks used from nine to six, as well as a reduction in the volume of cabling required.

The virtualisation and consolidation of the server and storage environment is already a signifi cant step towards the implementation of an internal cloud computing environment. External cloud computing and software-as-a-service as a means of reducing the initial capital investment and physical IT infrastructure will be considered as an acceptable architecture for an IT solution as and where feasible and cost effective over the useful life of the system.

We will also review the designs of the current data centre and server rooms and we hope to optimise their functionality by using concepts such as the hot/cold aisle confi guration by 2015 with the aim of further reducing the energy consumption by the supporting facilities.

The virtualisation of the end user computing environment will be investigated and considered within the next two years with a view of replacing at least fi fty per cent of the desktop personal computing devices with more energy effi cient terminals by end of 2015.

Convergence in technology

The convergence in technology, such as document output technologies and telecommunications (unifi ed communications), was also exploited which resulted in a single enterprise network that catered for voice, data and telemetry, instead of three separate networks, as well as a consolidation and reduction of document output devices that catered for printing, copying, faxing and scanning. The managed printing solution was implemented three years ago and has thus far resulted in a reduction in the number of devices of approximately eighty eight per cent, from approximately nine hundred devices in 2008 to approximately hundred and ten devices as at end June 2011. e-Waste

Future contracts for the leasing of equipment and/or IT consumables will include a requirement related to the disposal of waste. The fi rst tender and contract that will include a requirement for the disposal of equipment and printer cartridges will be the managed printing solution contract to be effective from 1 April 2012. Further e-waste related initiatives, such as personal computers, will be investigated and considered during the next two years.

43 Process Automation and Digitisation

The reduction of paper usage will be partially addressed via an initiative to automate business processes and document management. A document management system was implemented in the previous fi nancial year and was supplemented with a records management system in 2010 - 11 for the management of records in an electronic format. This environment will be part of our future systems architecture to automate business processes as well as the fl ow of documents throughout the organisation. This is a longer term initiative that will commence in the 2011 - 12 fi nancial year.

An electronic faxing solution was implemented and made available throughout the organisation in 2010 - 11 with the aim of reducing the paper-based faxes received by our staff. It is expected that this solution will be deployed throughout our organisation over the next twelve to eighteen months.

The vision of a connected Rand Water includes the connection of all our sites to the enterprise network and will also provide remote access to our staff. The remote access solution was implemented in 2010 - 11 and made available to employees. This solution aimed at providing access to our IT systems remotely and will reduce the need for employees to travel to their normal place of work in order to access our IT systems and information. The connection of all our sites to the enterprise network aims at reducing the need for staff at the smaller sites to travel to another more equipped site in order to access IT systems and information. As at end June 2011, twenty two of the our sites had been connected to the enterprise network and the remaining four sites should be connected by end June 2012 Further solutions aiming at reducing the amount of travel will be investigated and implemented, where feasible, during the next two to three years, including video and teleconferencing between our sites.

The digitisation of the Board, Board Committees and selected management meetings will be addressed in early 2011 - 12 via the use of tablets. This solution will reduce the amount of paper and consumables used for the printing of meeting packs as well as the travelling in order to distribute the packs to the members of these meetings.

44