PRESENTATION TO PORTFOLIO COMMITTEE ON WATER AFFAIRS AND FORESTRY WATER BOARDS : GENERAL ISSUES 19-20 March 2007 Silas Mbedzi Chief Director: Institutional Oversight

DWAF’s LEGAL MANDATE Water Boards are established & regulated by the Minister of DWAF i.t.o.: Water Services Act PFMA & Treasury Regulations Municipal Finance Management Act Division of Revenue Act Municipal Structures & Systems Act

DWAF’s OVERSIGHT ROLE Compliance to PFMA Ensure that various committees of Water Boards operate effectively Audit committee Human Resource committee Procurement committee Hay Grading remuneration of CEO & Executives Minister approves stipends of board members: policy document developed to ensure consistency regarding board practices and remuneration

DWAF’s CHANGING ROLE DWAF’s present & future role: regulator of WSA Current role Business plans are scrutinized to determine whether 5 year plans seem viable & if appropriate services are provided to communities; DWAF issues directives on corrective measures to be taken Financial performance is appraised through the Annual Reports; DWAF provides guidance during individual appraisal sessions Future role (additional to current role) More close scrutiny is required, i.e. quarterly performance appraisals to determine whether business plans are implemented. Compare actual performance to projected performance in the business plan. Consolidate water board financials to DWAF Annual Report

DWAF’s FUTURE ROLE AS SECTOR LEADER Establish norms & standards and ensure compliance, e.g. water quality & drinking water standards. Provide guidance to Municipalities on sustainable WSI & Institutional Reform Process. Monitor & evaluate WSIs’ business proposals to determine viability of service provides.

INSTITUTIONAL REFORM PLAN Roles & responsibilities of water boards i.t.o. Water Services Act & Municipal Systems Act Boundary issues – water boards don’t operate on municipal boundaries Governance of water boards – Minister appoints board members

PUBLIC/PRIVATE INITIATIVES A need exists to involve private/public sector in water related matters, e.g. Rand Water with another Municipality or smaller water boards Midvaal Water Company, DWAF’s interaction needs to be developed Challenges: Minister to consider oversight/regulatory responsibility in the PPI

CONSOLIDATED FINANCIAL PERFORMANCE OF WATER BOARDS Total ‘06 Total ‘05 %age Sales R5,9 billion R5,6 billion 5% Income before interest R1,1 billion R1,0 billion 9% Finance Cost R420 million R507 million -17% Net income R875 million R604 million 45% Fixed Assets R9,3 billion R8,9 billion 4% Investment R571 million R1,094 billion -48% Current Assets R2,4 billion R3,4 billion -28% Current Liabilities R1,5 billion R3,5 billion -57% Long term debt R4 billion R4,3 billion 7%

CONSOLIDATED FINANCIAL PERFORMANCE OF WATER BOARDS Name of Water Board Revenue Operating Expenditure 2004/5 (Previous) 2005/6 (Current) Amount % of Total Albany Coast 2,536 0.05% 2,761 1,721 0.07% 1,386 Amatola 88,922 1.59% 95,907 1.62% 36,511 1.42% 41,941 1.57% Bloem Water 157,478 2.81% 173,667 2.93% 104,074 4.06% 141,093 5.27% Botshelo 54,577 0.98% 52,045 0.88% 74,540 2.91% 102,453 3.82% Bushbuckridge 37,716 0.67% 44,563 0.75% 44,467 1.73% 21,169 0.79% Ikangala 1,175 0.02% 1,383 2,988 0.12% 1,247 Lepelle 159,761 2.86% 179,656 3.03% 63,414 2.47% 73,386 2.74% Magalies 175,589 3.14% 140,108 2.36% 144,554 5.64% 120,820 4.51% Mhlathuze 143,710 2.57% 166,437 102,856 4.01% 109,845 4.10% Namakwa 7,734 0.14% 9,231 0.16% 8,615 0.34% 14,904 0.56% Overberg 16,559 0.30% 20,473 0.35% 15,353 0.60% 16,397 0.61% Pelladrift 5,711 0.10% 5,664 5,455 0.21% 5,745 Rand Water 3,460,099 61.84% 3,672,119 61.96% 1,274,793 49.70% 1,331,948 49.73% Sedibeng 274,896 4.91% 278,388 4.70% 163,322 6.37% 146,416 5.47% Umgeni 1,008,352 18.02% 1,084,544 18.30% 522,444 20.37% 549,775 20.53% Total 5,594,815 100.00% 5,926,946 2,565,107 2,678,525

FIXED ASSETS & EXTERNAL DEBT Name of Water Board Fixed Assets 2005-06 R’000 External Debt Albany Coast Amatola Bloem Water Botshelo Bushbuckridge Ikangala Lepelle Magalies Mhlathuze Namakwa Overberg Pelladrift Rand Water Sedibeng Umgeni 12 238 250 839 660 096 11 562 60 686 64 720 369 533 573 233 213 543 96 133 36 352 9 200 4 285 693 268 972 407 363 1 280 57 147 362 989 75 663 10 596 313 1 855 586 86 795 204 474 33 147 32 369 1 843 1 615 081 325 115 2 606 905 Total 7 320 163 7 269 303

2005/06 TARIFF COMPOSITION Composition of tariffs: Johannesburg Water & Rand Water Raw water 43,33% Water Board’s contribution 32,01% Municipality’s contribution 24,66% (Supported by Lesotho Highlands Project) Durban Metro Raw water 7,37% Water Board’s contribution 41,83% Municipality’s contribution 50,8% (Supported by dams built in the 1960’s)

PROPOSED TARIFF MODEL New Guidelines being prepared for determining bulk potable water tariffs Consulted extensively with SAAWU In line with Treasury requirements on capital structure of public entities Ensures that inefficiency costs are not passed on to the consumer 4-step approach proposed Benchmark input forecast costs Compile excel cashflow/ financial model Prepare pro-forma tariff table Submit to DWAF for approval

WATER BOARDS RECEIVING SUBSIDIES 2006 2005 Sedibeng Water R26,5m R33,5m Botshelo Water R32,8m R29,7m Bushbuckridge Water R10,3m R13,3m Magalies Water -R 4,0m R 3,6m Ikangala Water R 0,0m R 2,5m TOTALS R65,6m* R82,6m *Balance of RDP grants received, after project expenditure has been deducted

CONSOLIDATED SUBSIDIES PAID TO WATER BOARDS Declining Trend

TOTAL MUNICIPAL DEBT TO WATER BOARDS

CORPORATE SOCIAL INVESTMENT

BORROWING CAPACITY National Treasury established guidelines limiting the borrowing powers of water boards (Gazette in 2002) Water boards need to obtain National Treasury approval to exceed their borrowing limits via DWAF to Guarantee Certification Committee at National Treasury

THE END THANK YOU