Presentation to the Portfolio committee of Water and Environmental Affairs

1. BUSHBUCKRIDGE WATER ANNUAL REPORT FOR 2009/10 TARIFF 2011/12 AND STRATEGY 2011/12 Presentation to the Portfolio committee of Water and Environmental Affairs

2. BACKGROUND • Established in 1997 by the Minister of Water Affairs and Forestry in accordance with the Water Services Act. • Mandated to provide water services to other water service institutions. • Area of operation include the BLM and part of the Nsikazi area in MLM. • Legislative imperatives include corporate governance, PFMA, MFMA, WSA, NWA. • Area Ml/day Population • Bushbuckridge Local Municipality Area (BL1) (8 PWTW) 96 700 000 • Mbombela Local Municipality Area (MLM) (6 PWTW) 71 500 000 • ( MLM) (1WWTW) 3.5 • BOARD OF DIRECTOR • The term of the current board of directors is from February 1, 2010 – March 31, 2014. • There was overlap in terms of office of BoDs. • The board comprises 9 members, namely:

3. BACKGROUND….CONT SERVICE AREA

4. MISSION, VISION, & VALUES Page 1 • MISSION • BW strives to provide sustainable water and sanitation services, contributes to water resource management and provide service through optimal utilisation of appropriate resource to enhance socio-economic development • VISION • To be the best public water service utility • VALUES • Customer first • Investment in human resources • Accountability and transparency • Service Excellence • Sound financial responsibility • Environmental stewardship • Social responsibility

5. MAJOR ACHIEVEMENTS & CHALLENGES

6. Achievements • 95% implementation of the Minister’s directives w.r.t. first phase • Reviewed the corporate governance policies and board charter in line with the King III best practices; • Increase revenue on sale of potable water and management contract by 11% and 13% respectively but still faced challenges with full cost recovery; • Increased profitability on the Nsikazi Project (Management contract) by R900 000 from –R10 000 loss but the payments were three months in arrears at the end of financial year; • Increased the potable water supply by 6% • Increased monthly payment of invoices by 40% (R3Million to R5Million per month) 62% payment of monthly invoices • Complied with the requirement of SANS 241 as amended in terms of drinking water quality • Achieved transformation and corporate citizenship targets through:- • Supported economic growth policy objectives on BBBEE discretional use by 71% purchases of goods and services from BBBEE companies or entities; • Contributed to national government targets for skills development through employment of temporary employees, leanership and internships.

7. Challenges • Debt recovery • Bushbuckridge Local Municipality R128M • Disestablished Bohlabela District Municipality R 26M • -Lack of Long term Service Level Agreements • Currently operating on short term contractsat MLM and BLM • Infrastructure challenges • Transfer of assets (DWA) • Aged and inadequate infrastructure • Risk of technical insolvency • going concern • Debt recovery • Cash flow constrains

8. NON FINANCIAL PERFORMANCE

9. SUMMARY OF NON FINANCIAL PERFORMANCEPages 48-52 • Goal 1: Exploring and exploiting strategic ways for organisational financial sustainability & business development • Achieved organisational stability; • Strengthened the organisational capacity by filling critical vacancies; • increasing efforts in the areas of training and staff development

10. SUMMARY OF NONFINANCIAL PERFORMANCE • Goal 1: Cont.... • The Minister appointed a new Board. • Improved good governance by ensuring that compliance with relevant legislations was observed; • Increased organisational visibility by improving relations with stakeholders; • Increased BBBEE discretional spending; • Improved relationship with the organised labour. • Setting up processes to improve debt collection

11. SUMMARY OF NONFINANCIAL PERFORMANCE ...CONT • Goal 2: Promote institutional relations • Undertaken programmes on water conservation and demand management • Implementing the corporate social responsibility programmes by donating jojo tanks to the communities and other NGO’s, and donated soccer boots to various schools. • Improved stakeholders relations; • Goal 3: Providing sustainable water and sanitation services • Increased the volume of portable water by 10% in the BLM area and decrease of 5% in the MLM area • Complied with water quality standards (SANS 241) • Other Reportable Performance Area • Finalised the case of the suspended Chief Executive • Reviewed the governance structures • Reviewed the corporate governance policy (Board charters and committee terms of references

12. FINANCIAL PERFORMANCE

13. SUMMARY OF FINANCIAL • PERFORMANCE

14. SUMMARY OF FINANCIAL • PERFORMANCE

15. INDEPENDENT AUDITORS REPORT

16. SUMMARY OF THE INDEPENDENT AUDITOR’S REPORT • Independent Auditors: Stabilis Inc • BW received a qualified Audit report with emphasis on the following matters: • Basis of qualification • Trade Receivables Valuation –The trade received on outstanding debt of R167,630,525 and R 26,478,120 owed by BLM and BDM respectively is R0.00. Provision of doubtful debts on the outstanding debt is R 82,399,855 • Emphasis of Matter • Payments of invoices by BLM-the existence of material uncertainty which may cast doubt inability to continue with the business • Fixed Assets transferred during 1999/2000 without transferring ownership ( Non Compliance with section 73(2)(a) of WSA) • Forensic audit report - R644,654 not yet recovered • Exceeded borrowing limits by R196 000

17. BULK WATER TARIFF FOR THE 2011/2012

18. INPUT COST OF BULK WATER

19. INPUT COST OF BULK WATER The following financial assumptions were considered:

20. NORMS FOR BULK POTABLE WATER TARIFFS • Water boards • May set a single tariff for its whole supply area. • May set a separate tariff for each scheme or each water treatment plant – motivated by differentials in the cost of supplying to different customers. • The subsidization or cross subsidization of free basic water is a municipal concern and not within the capability of water boards. • Tariff increases may be smoothed out over time to take into consideration projected future infrastructure development costs.

21. TARRIF STRUCTURE Cost structure Keys = VC: Variable cost = FC: Fixed cost

22. TARRIF APPORTIONMENT • Variable Cost Component R1.94 (Raw water, Electricity, Chemicals, Maintenance) • Fixed Cost Component R1.76 (Salaries and Admin Cost) Tariff for 2011/2012 R3.70 NB * = Proposed tariff review, due to upgrading of certain water works

23. TARRIF STRUCTURE • Total water consumption is based on an average water loss of 9% • Total water consumption represent the total bulk potable water to be supplied to the municipality

24. COMMENTS FROM STAKEHOLDERS • SALGA • The capital expenditure is significant in amount; • The tariff is lower than the sector average increase; • NATIONAL TREASURY • Proposed tariff increase will lead to a better cost recovery. • The proposed tariff will result in the organisation being financial viability • The capital expenditure is significant in amount; • BUSHBUCKRIDGE LOCAL MUNICIPALITY • We have not received any comments from Bushbuckridge Local Municipality.

25. Bushbuckridge Water Strategic Plan

26. Vision; Mission & Objectives • Vision • “to be a leading water services utility” • Mission • ”to provide affordable and sustainable bulk water and sanitation services through optimal use of resources” • Strategic Objectives • The organisation’s objectives are articulated as: • To provide bulk water supply and sanitation services  • To entrench sound corporate governance and financial management • To optimise stakeholder interaction and engagement • To acquire, develop and manage infrastructure for bulk water and sanitation services • To promote effective water resource management • Optimize human capital investment • Values • Passion and Commitment • Honesty • Integrity • Respect • Service Excellence • Customer Focus

27. 2011/12 PLAN Supply area • Currently servicing area of Bushbuckridge Local Municipality (BLM) and sections of the Mbombela Local Municipality (MLM), both situated in the Ehlanzeni district of Mpumalanga Province. • Planned Expansion and other services • Full coverage of the current supply areas. • Coverage of the entire Ehlanzeni District area i.e. Nkomazi, Thaba Chweu and uMjindi Local Municipalities and roll out to other WSAs within the MP province. • MOUs to conduct assessment on status of infrastructure signed with Nkomazi LM and Thaba Chweu LM. • Assuming Project implementing Agency role for WSAs and other government agencies. • Provision of Scientific Services to WSAs and other institutions. • Water resources management • Assist WSAs with Water Conservation and Demand Management. • Regular monitoring of upstream raw water pollution and advise the regulators on mitigation measures.

28. Alignment to Government Priorities Department of Water Affairs Priority areas. Bushbuckridge Water –Key Strategies • To provide bulk water supply and sanitation services  • Develop and operate bulk water infrastructure • Water quality (Potable water and Waste water) • Development of the Demand Management Strategy • To entrench sound corporate governance and financial management • Corporate governance framework and policies • Debt management strategy • Sustainable tariff structure • CSI • Audit and Risk management • To optimise stakeholder interaction and engagement • Contracts with municipalities and other stakeholders • Partnership with other water institutions • To acquire, develop and manage infrastructure for bulk water and sanitation services • Integrated Infrastructure development Plan • Asset management Strategy • To promote effective water resource management • participate in strategy development for water resource management (CMAs) • Water conservation programmes • Consideration of environmental impact on activities of BW • Optimize human capital investment • Skills development programme • Performance management systems (Board to level one employees) 1. Contribution to economic growth and social development 2. Ensure sustainable and equitable water resources management 3. Promoting rural development 4. Effective support to local government 5. Improving the Department’s capacity to deliver services 6. Contribution to global relations

29. Budget Estimates

30. Budget Estimates

31. Budget Estimates

32. Thank you