LEPELLE NORTHERN WATER BOARD ANNUAL REPORT 2015/16 & DWS INTERVENTION PROJECTS 24 FEBRUARY 2017

Contents DWS INTERVENTION PROJECTS Water supply interventions in Giyani & Nandoni Water supply interventions in Tzaneen Wards ANNUAL REPORT 2015/16 Part 1: Overview of financial performance Part 2: Overview of non-financial performance

DWS INTERVENTION PROJECTS Water supply interventions in Giyani & Nandoni

APPROACH TO MOPANI INTERVENTION Water supply interventions in Giyani & Nandoni APPROACH TO MOPANI INTERVENTION The interventions was categorised and prioritised as follows: Critical/short - term emergency projects milestone Medium/long – term emergency projects milestone Other projects milestones

Water supply interventions in Giyani & Nandoni MOPANI CRITICAL/SHORT-TERM PROJECT MILESTONES   ALL EMERGENCY WORKS COMPLETED AND TO BE HANDED OVER TO THE RELEVANT AUTHORITIES Project Status 16 Priority Villages Groundwater Augmentation Completed Nkhensani Hospital Groundwater Augmentation Giyani WWTW 1.5Ml/day (package plant) Giyani WWTW (refurb-existing plant) Morogholo Transfer Pumpstation Kremetart Transfer Pumpstation Khanyisa Booster Pumpstation Nsami Water Treatment Plant (Refurb of old plant) Nsami Water Treatment Plant (New) Kremetart High & Low Reservoirs

MOPANI MEDIUM-LONG TERM PROJECT MILESTONES Water supply interventions in Giyani & Nandoni MOPANI MEDIUM-LONG TERM PROJECT MILESTONES Project Summary Scope Construction Progress Completion date Pipeline A Length of 37.9 km (incl branches) 63% 30 June 2017 Pipeline B Length of 81.8 km (incl branches) 78% Pipeline C1 & D1 Length of 11.3 km (incl branches) 98% 30 March 2017 Pipeline C2 & D2 Length 24km (including branches) 10% 31 Dec-2017 Pipeline D outline Length of 107.7 km (incl branches) 73% Pipeline F1 Length of 45.3 km (incl branches) 54% 30 September 2017 Pipeline F2 Length of 21.8 km (incl branches) 80%

MOPANI MEDIUM-LONG TERM PROJECT MILESTONES Water supply interventions in Giyani & Nandoni MOPANI MEDIUM-LONG TERM PROJECT MILESTONES Project Summary scope Design Progress Construction progress Completion date Giyani Village Reticulations design Feasibility study, Planning, detail designs, finalize designs, permits and procurement. 100% The construction to commence on confirmation of funds by DWS and Sourcing of Service Provider/ Contractor.   To be confirmed upon finalization of the Contracts New (Biological Nutrient Removal) BNR plant Construction of the new 14ML/d BNR plant. Phase 1 (Movable 1.5Ml/d Package plant completed). Phase 2 construction to commence on confirmation of funds by DWS and Sourcing of Service Provider/ Contractor To be confirmed upon contract finalization Nandoni WTW upgrade Upgrading of the existing WTW Construction work to commence on confirmation of funds by DWS and Sourcing of Service Provider/ Contractor To be confirmed upon contract finalization Command Reservoir – Giyani Construction of 35ML reservoir Construction work to commence on confirmation of funds by DWS and Sourcing of Service Provider/ Contractor Distribution Reservoirs Construction of 50 elevated steel tanks to be connected to the bulk pipelines

OTHER PROJECTS MILESTONES CONT. Water supply interventions in Giyani & Nandoni OTHER PROJECTS MILESTONES CONT. Project Summary scope Design Progress Construction progress Completion date Nandoni – Nsami Bulk pipeline Implementation of bulk pipeline from Nandoni – Giyani 100% Construction in progress – Excavation, removal of the old pipes and installation of new pipes in progress. March 2018 Namakgale WWTW Upgrade of the Namakgale WWTW 60% Engineering designs in progress.  The designs expected to be completed by end March 2017. The construction to commence on confirmation of funds from DWS. Raising of Tzaneen Dam Raising of Tzaneen dam (3m). 90% Removal and stockpiling of material from the dam basin and the blasting of the spillway crest in progress. Removal and stockpiling of the material from the dam basin to be completed by end March 2017. The blasting of the spillway to be completed by July 2017. New Nwamitwa Dam Planning and design new Nwamitwa dam. The construction to commence on completion of the designs, availability of funds and procurement of the Contractor. To be confirmed upon contract finalization Nkambako/ Bambanana Bulk pipeline Implementation of bulk pipeline in Nkambako/ Bambanana The construction to commence on confirmation of funds by DWS and Sourcing of Service Provider/ Contractor. To be confirmed upon contract finalization

OTHER PROJECT MILESTONES Water supply interventions in Giyani & Nandoni OTHER PROJECT MILESTONES Project Summary scope Design Progress Construction progress Completion date Boreholes Revitalization of existing 154 boreholes (with package plants) – Augmentation to the water scheme while the Bulk Pipelines in progress. 100% 95% The electrification of boreholes is required to complete the remaining scope of work. Operations and maintenance support Repairs on existing lines ± 270 km’s Pump stations = 9 Reservoirs = 14 As and when required Ongoing

Water supply interventions in the Wards To address the challenges at 5 wards in Tzaneen, bigger water supply systems are being installed within municipalities inline with master plan as opposed to the small schemes which were currently in use. Noting: For projects implemented by WSA:MDM, their information were requested from MDM to updated the progress but Nkombako/Bambanana bulk pipeline that is Implemented by LNW

Intervention projects done are as follows progress of water supply projects at wards 24, 25, 26, 27 and 34 villages within the Greater Tzaneen Local Municipality Project Summary scope Design Progress Construction progress Anticipated Completion date Responsible Tours bulk water supply(upgrading of tours treatment works Construction of Pre-Treatment works, 1 flocculation channels , 2 clarifiers, 3 rapid gravity sand filters , 1 new clear water tank , 1 new pump station , 1 chlorine room and access road 100% 25% (The implementation is moving forward as per implementation plan) 22  June 2017 WSA: MDM Tours bulk line Upgrading of Tours bulk line 10% 0% Delay was due to technical report approval To be confirmed upon design finalization Thabina bulk water supply Construction of water reticulation in Thabina village 98% 23 December 2016 Close out report to be submitted Lephephane bulk water scheme Refurbishment of 8 eight boreholes, sitting, drilling and equipping of 5 boreholes, construction of a pump station and a clear water tank and bulk pipe line of 17km Ongoing The Contraction is behind schedule due to community strike which resulted in the stopping of the project (Planned program of work was delayed and now revised to March 2017) Nkambako bulk pipeline Extension of the Nkambako bulk pipeline Construction work to commence on confirmation of funds by DWS and Sourcing of Service Provider/ Contractor To be confirmed upon contract finalization Implementing Agent – LNW Intervention projects done are as follows

annual report 2015/16 Part 1: overview of financial performance

FINANCIAL PERFORMANCE FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 June 2016   Audited Outcome 2015/16 2014/15 Variance R'000 % Revenue Revenue from exchange transactions ( Primary) 459 199 441 549 3% Revenue from non-exchange transactions ( Secondary) 166 265 97 330 41% Expenditure Employee benefit costs 245 360 169 460 31% Operating expenditure 241 031 405 758 69% Fair value adjustments 4 067 3639 10% Finance cost 1 601 1416 11% Depreciation, amortisation and impairment 29 955 28 096 6% Loss on disposal of fixed assets Surplus/(deficit)from operating activities 103 450 69 490 32%

STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 JUNE 2016   2016 2015 VARIANCE R'000 % ASSETS Current Assets Cash and cash equivalents 79 996 217 796 1.73% Receivables from exchange transactions 539 768 236 901 56% inventory 6 145 5 371 12% Non-Current Assets Property, Plant and Equipment 648 699 559 886 14% Intangible assets 3 415 4 240 25% Investments 68 228 59310 Total assets 1 346 251 1083 504 19% LIABILITIES Current Liabilities Payables from exchange transactions 281 064 169 741 40% Employee benefits Finance lease liability Financial liabilities: Non-Current Liabilities 65 558 17 584 73% Financial liabilities Total liabilities 346 622 187 325 46% Total net assets NET ASSETS Reserves ( Equity) Accumulated surplus 458 156 0% Pumping cost reserve ( Reserve) 541 473 438 023 20% Net assets ( Equity) 999 629 896 179 11%

Ratios Liquidity The current ratio : 2.4 Cash flow from operations The cash and cash equivalent at the end of the year amounted to R79,9m Return on assets The ratio on return on assets is 12%. This illustrates the entity’s effectiveness in using its investment in assets. Debtor days in sales During the period under review, the debtor days’ analysis reflected an increase to 625 days This is due continuous non-payment by our major customer Other ratios applicable Gross Profit Margin is 53% Debt to equity is 32% Net profit margin is 23%

Expenditure outcome: 31 June 2016 Dashboard as at 31 June 2016 Working days till FY end   Total expenditure to date R 485 156 % Programme (R'000) Budget Expenditure Variance % Spent Administration 64 270 57 205 7 065 11% Water Sector Management Water Infrastructure Management Regional Implementation and Support Water Sector Regulation International Water Cooperation Total Compensation of employees on operating expenses 35% Goods & services on operating expenses 65% Analysis of current payments

Irregular, Unauthorised, fruitless and wasteful expenditure Analysis: No Irregular expenditure reported during the 2015/16 financial year No unauthorized expenditure reported during the 2015/16 financial year No fruitless or wasteful expenditure relating to current year

CONTIGENT LIABILITIES AND ASSETS 2015/16 2014/15 Variance % Variance R'000 Contingent liabilities Total Contingent assets 6553 3853 2700 70% Notes Legal claim : A service Provider was ordered to pay R3.5 plus interest with legal costs to LNW in respect of lost assets within the organization. The board is of the opinion that this claim is probable to be met in full in the near future. Land claim : LNW purchased a farm in 2003 which became a subject of successful land claim . The value of the farm was R2.7m. Land claim Commissioner took possession of the farm in 2005and did not pay any money to LNW . The latter is currently under legal dispute.

Analysis: matters relating the audit report per year 2011/12 2012/13 2013/14 2014/15 2015/16 Qualified (9) Qualified (8) Qualified (3) Qualified (2) Qualified (1) Unqualified Emphasis of matter The accounting authority did not take effective steps to collect all money due to the Lepelle Northern Water, as required in terms of section 51(1)(b)(i) of the PFMA, as 80% of total accounts receivable was provided as doubtful debt.

Trend analysis: Matters relating the audit report

Action plan Major Finding Root Cause Action Lepelle Northern Water had receivables for water sales totalling R410 million at 30 June 2016, of which R328 million had been outstanding for more than 90 days. The recoverability of these amounts is doubtful. Management is encouraged to continue with their concerted efforts to collecting long outstanding debt Non payment by WSA Signing of the settlement agreement with the affected WSA

Explanatory notes PPI no Milestones that were not achieved Comments on deviations 1 Tolerable organisational Residual Risk Certain risks identified during the review required budget and was not available at the point in time but allocated for next financial year. 2 Capital projects DWS did not pay on time the money that was bridge-funded on the directives issued to LNW 3 Debtors day (1102) Mopani’s old debt still a challenges and recently DWS. 4 Compliance to DWS effluent general standards Municipality did not approve the budget that was meant to upgrade some of the wastewater works’ capacity to match the high volumes of the influent. Strategy to overcome under performance PPI no 1 on attendance of planned training : The strategy to overcome under performance will be to develop a pre-selection of institutions to ensure that training works better. PPI no 2 on vacancy rate for engineers and scientists: PPI no 5b on expenditure of departmental budget: PPI no 6 internal audit plan:

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