DWA CONSOLIDATED REPORT ON THE PERFORMANCE OF THE TRANS-CALEDON TUNNEL AUTHORITY (TCTA) AND THE WATER RESEARCH COMMISSION (WRC) 2011/12 FINANCIAL YEAR Prepared for the Portfolio Committee on Water and Environmental Affairs April 2013

PURPOSE The purpose of this presentation is to provide a strategic overview of the performance of the TCTA and the WRC for the financial year, both from an institutional performance and financial performance perspective

THE SHAREHOLDER MANAGEMENT Strategic Intent Statement Vision and objectives as outlined in the National Water Resources Strategy 2 Shareholder Compact Minister annually concludes a shareholder compact (TR 29.2) (Not applicable to WRC) Documents the mandated key performance measures and indicators to be attained by the TCTA in delivering the desired outcomes and objectives as agreed between the Board and the Minister Corporate Plan TCTA submits corporate plan and budget annually to Minister and National Treasury at least one month before the start of financial year (PFMA Sec 52) WRC submits strategic p lan and budget annually to Minister on 1 April of each year Corporate/Strategic Plans must contain implementation details to attain the key performance measures and indicators outlined in shareholder compact and desired outcomes and objectives outlined in the strategic intent statement 3 Quarterly reporting Annual Reports Entities reporting to Portfolio Committee –once a year Performance Monitoring & Evaluation

NWRI WB 2+1 WB 2+1 WB 3 WB 3 REPORTING AND GOVERNANCE CMA 9 CMA 2 CMA 1 Water board 3 TCTA Minister DWA Institutional oversight (national & regional) DWA Institutional oversight (national & regional) Parliament Public institutions report to the public and Parliament through Annual Reports and to the Department with quarterly performance reports WRC Minister appoints boards; approves shareholder compact Portfolio Committee reviews reports and plans (hearings, visits) (1) Oversee institutional establishment ; (2) Oversee governance (manage board appointment processes, training etc.); (3) Oversee shareholder compact ; (4) Oversee business plans, quarterly performance reports and financial statements etc. (1) Oversee institutional establishment ; (2) Oversee governance (manage board appointment processes, training etc.); (3) Oversee shareholder compact ; (4) Oversee business plans, quarterly performance reports and financial statements etc. 279 WUAs &Irrigation Boards

TCTA STRATEGIC INTENT Deliver on all the directives provided by the Minister Ensure that all project activities facilitate social transformation and build sustainable communities by providing jobs and empowering women, youth and the disabled Operate the business and its projects and processes in a cost effective manner Build the knowledge and capability of the organisation Ensure the continuous availability of high calibre human capital for delivering on the organisational mission into the future The strategic intent of the TCTA is to assist the shareholder (DWA) to realise national development goals. TCTA’s corporate goals are aligned with the strategic agenda of Government. The strategic goals for the reporting year were as follows:

PRIMARY PURPOSE OF TCTA The primary purpose of TCTA is to raise finance and manage the repayment of the debt for each project on behalf of DWA. DWA cannot do this as a Government Department cannot borrow money

RANGE OF TCTA’S ACTIVITIES TCTA is a multi disciplinary state owned entity specialising in project financing, implementation and liability management. TCTA’s products and services are as follows: Project Management and Implementation of bulk raw water infrastructure Project design Project construction Environmental compliance Land acquisition Operation and Maintenance (Outfall tunnel North of LHWP) Debt management Structuring and raising project finance Knowledge management Risk management Operation and maintenance Socio-economic transformation Tariff setting

TCTA GOVERNANCE The Governing Board of the TCTA is appointed by the Minister. The current Board was appointed in August 2010 for a four year term. As part of the 13 member Board, the Minister appoints two non executive directors, one from DWA and one from National Treasury for the purposes of stakeholder representation.

TCTA’s CURRENT MANDATE AND DIRECTIVES Lesotho Highlands Water Project – South Africa portion of the Delivery Tunnel North Lesotho Highlands Water Project – fulfilling all South African financial obligations to the Government of Lesotho Advisory services to water management institutions, water boards and DWA Berg Water Project Vaal River Eastern Subsystem Augmentation Project Mooi-Mgeni Transfer Scheme Phase 2 Komati Water Scheme Augmentation Project Olifants River Water Resource Development Project Phase 2 Mokolo-Crocodile River Water Augmentation Project Phase 1 Metsi Bophelo Borehole Project Acid Mine Drainage: pump station and neutralisation plant Refurbishment of Mooi-Mgeni Transfer Scheme – Phase 1

PROGRESS AGAINST MANDATE AND DRIECTIVES ProjectDate Received Implementation Status as of 31 March 2012 Next Key MilestonesPlanned LHWP 1: Delivery Tunnel North 12 December 1986Delivering water. In operation and maintenance Debt Management in accordance with approved strategies Debt Repayment 2023 LHWP 1: To fulfil all the Republic’s financial obligations in terms of or resulting from the Treaty 3 August 1994 (and incorporated into amended Notice of Establishment 24 March 2000) Debt Management in accordance with approved strategies Advisory Services to Water Management Institutions, Water Boards and DWA Open ended directiveProvided services to: DWA Bloem Water Sedibeng Water uMgungundlovu Municipality Completed during Berg Water Project: Dam and Supplementary Pumping Scheme 6 May 2002Construction complete and handed over to DWA for O & M Final account to be settled subject to arbitration Debt Repayment March 2029

PROGRESS AGAINST MANDATE AND DRIECTIVES ProjectDate Received Implementation Status as of 31 March 2012 Next Key Milestones Planned Vaal River Eastern Subsystem Project: Pump Station and 131 km pipeline 6 October 2004System commissioned and delivering water Defects liability period not commenced on pump stations or pipeline Handover of Works to DWA Debt Repayment Aug March 2028 Mooi Mgeni Transfer Scheme – Phase 2 29 November 2007 Construction commenced in Feb 2011 Impoundment Debt Repayment Dec Olifants River Water Resources Development Project: Pipeline 17 June 2008 (directive revised 12 March 2012) Construction commenced in March 2012 Water DeliveryDec 2013 Komati Water Scheme Augmentation Project: Pump station and Pipeline 29 September 2008 Construction commenced in January 2011 Water Delivery Debt Repayment Dec

PROGRESS AGAINST MANDATE AND DRIECTIVES ProjectDate Received Implementation Status as of 31 March 2012 Next Key Milestones Planned Mokolo -Crocodile Water Augmentation Project: Pump Station and Pipeline 19 May 2010Construction commenced in Sept 2011 Debottlenecking Water Delivery Debt Repayment Dec 2012 Sep Metsi Bophelo Borehole Project: Boreholes in 6 Provinces 2 March 2011Construction commenced in September 2011 and completed the technical works Eastern Cape, Mpumalanga, KwaZulu Natal, North West, and Free State in March Boreholes handed over to Water Service Authorities June 2012 Acid Mine Drainage: Pump Stations and Treatment Plant 6 April 2012Tender evaluation complete. Award dependent on available funds Pumping and treatment to prevent breaching of Environmental Critical Level in Central Basin June 2013 Lesotho Highlands Water Project 2: Funding Awaiting directiveFunding strategy still under discussion and awaiting Government approval Raising of fundingUnder negotiation with LHDA/LHWC

FINANCE

PROJECT SURPLUSES AND DEFICITS Each project is accounted for separately. Throughout the project life-cycle, the projects reflect net surpluses and deficits depending on the phase and repayment profile of the project At the end of the debt repayment period these balance themselves off to zero

DEBT CURVE ON LHWP

REATIONSHIP WITH WATER TRADING ACCOUNT The physical assets are recognised in the books of the Water Trading Account as well as the liability for the Water Trading Account to pay tariffs to TCTA TCTA reflects a financial asset in its books representing the future tariff payments to be received from DWA over the projects debt repayment period A close working relationship has been forged between TCTA and the Water Trading Account, with tangible strides made in improving customer billing and leverage on expertise

TCTA AS A GOING CONCERN TCTA is satisfied that given the certainty of cash-inflows from the Department of Water Affairs, that TCTA will have sufficient resources to continue in operational existence for the foreseeable future and for this reason the going concern basis continues to be adopted in preparing the financial statements for the ended 31 March 2012

TCTA BONUSES NAMEPOSITIONBONUS R’000 TOTAL SALARY (incl bonus ) R’000 J NdlovuCEO J NhlaphoCOO H NazeerCFO L RadzumaCRO J ClaassensExec: PM R MatabaneExec: HRM1 973 C BleekerExec: Enterprise Support Services Z MbeleExec: Project Finance L MnisiExec: Company Secretary O BusariExec: Knowledge Management

TCTA JOB CREATION PROJECTMMTS-2ORWRDP-2KWSAPMCWAP-1TOTAL S Unskilled local Semi-skilled Africans Other (skilled & staff) Total

TCTA: SUMMARY & CONCLUSION The TCTA is playing an increasing strategic role in the sustainable development and use of raw water resources. Despite the current challenges in its operating macro- economic environment and its multi-project arrangements, the TCTA has reported satisfactory results for the 2011/12 financial year by achieving the majority of its contracted deliverables.

WRC OVERVIEW The WRC derives its mandate from the Water Research Act, Act no 34 of In terms of its mandate the WRC is to perform the following functions: Promoting co-ordination, co-operation and communication in the area of water research and development Establishing water research needs and priorities Simulating and funding water research according to priority Promoting effective transfer of information and technology Enhancing knowledge and capacity building within the water sector

WRC STRATEGIC INTENT The WRC serves as South Africa’s water centred knowledge hub providing the nation with knowledge for sustaining its most precious resource, water. The WRCs strategy for knowledge creation and its research portfolio is underpinned by its four main key strategic areas (KSAs) these being: Water resource management Water linked ecosystems Water use and waste management Water utilisation in agriculture

WRC GOVERNANCE The Governing Board of the WRC is appointed by the Minister for a four year term and is the Accounting Authority (AA) for the institution in terms of the PFMA. The Governing Board is constituted of independent non executive members with the exception of the Chief Executive and the Director General of the Department of Water Affairs who serve in an ex officio capacity.

WRC PERFORMANCE Revenue 2011/12 During the year under review the WRC continued to leverage levy income by striving to obtain funds from other sources to support water research. Indicator 2011/12 Budget 2011/12 Year-end Actual Levies as % of total income86%83% Other sources of income as % of total income (rental of facilities & equipment) 14%17% Leveraged income as a % of other income * 80%79% Income Indicators *Leveraged income includes all other income with the exception of interest received

WRC PERFORMANCE (continued) Research Spend (Allocation)

WRC PERFORMANCE (continued) Research Spend (% utilized) KSA Planned % allocation of funds % of funds utilised for research projects Water Resource Management 26 (28)28 (31) Water-Linked Ecosystems14 (13)17 (20) Water Use and Waste Management 33 (36)34 (29) Water Utilisation in Agriculture 27 (23)21 (20) The actual % of funds utilised for research projects in each of the KSAs, relative to the allocated funds and is summarised in the table below. (2010/11 data in brackets)

WRC PERFORMANCE (continued) Annual Audit The WRC obtained an unqualified audit report of its annual financial statements for 2011/12 financial year.

WRC PERFORMANCE (continued) Statutory Compliance The WRC complied with all statutory reporting requirements for the reporting period including: strategic plans business plans budget quarterly reports other relevant statutory submissions

WRC PERFORMANCE (continued) Research Portfolio During the year under review, the WRC managed 322 research projects at various stages of project life cycle, of which about 79% (259 projects) were active projects. In addition 133 reports were published. Financial Year2011/122010/11 Total No of projects No of active projects No of new projects7477 No of finalised project9676 No of solicited projects101109

WRC BONUSES NAMEPOSITIONBONUSESTOTAL INCOME (incl bonuses) DP NaidooCEO R KfirFormer CEO NB PatelCFO GR BackebergExecutive Manager JN BhagwanExecutive Manager E KararExecutive Manager R LutchmanExecutive Manager HG SnymanExecutive Manager MS LiphadziExecutive Manager

WRC JOB CREATION 2011/ students on funded projects 6 new appointments at the WRC

WRC ACHIEVEMENTS AGAINST KNOWLEDGE GENERATION INDICATORS ObjectiveIndicatorsTarget 2011/12 Achieved 2011/12 Improve knowledge on water resource management To increase the cumulative knowledge by initiating new research projects addressing water management 31 To provide the country with supportive knowledge via finalised projects 1332 To search for new innovative approaches to support water management 22 Enhance the knowledge on healthy ecosystems and preserve biodiversity To increase the cumulative knowledge by initiating new research projects addressing ecosystem health and biodiversity 67 To provide the country with supportive knowledge via finalised projects 514 To search for new innovative approaches to support ecosystem management 23

ObjectiveIndicatorsTarget 2011/12 Achieved 2011/12 Improve the knowledge base on water use and waste management, addressing the domestic, mining and industrial use of water To increase the cumulative knowledge by initiating new research projects addressing water use and waste management 2630 To provide the country with supportive knowledge via finalised projects 2838 To search for new innovative approaches to water use and waste management 714 Improve the knowledge on productive water utilisation in agriculture To increase the cumulative knowledge by initiating new research projects addressing productive water utilisation in agriculture 66 To provide the country with supportive knowledge via finalised projects 12 To search for new innovative approaches to support productive utilisation of water in agriculture 33 WRC ACHIEVEMENTS AGAINST KNOWLEDGE GENERATION INDICATORS (cont)

ObjectiveIndicatorsTarget 2011/12 Achieved 2011/12 Improve knowledge dissemination To enhance public understanding of water research (measured as volumes/cumulative number of issues of The Water Wheel) 66 To cumulatively increase the numbers of technical and policy briefs 3036 To improve the dissemination of water research (measured as volumes/cumulative number of issues of Water SA) 45 To engage the sector in knowledge-sharing events (number of workshops) 2021 Enhance research capacityTo increase the number (cumulative) of students supported by research projects WRC ACHIEVEMENTS AGAINST KNOWLEDGE DISSEMINATION AND CAPACITY BUILDING INDICATORS

ObjectiveIndicatorsTarget 2011/12Achieved 2011/12 Improved financial performance Maintain income growth (income growth is measured as meeting the budgetary target of 10% of income) Meet budget target in full 13% achieved Maintain high level of research ratio (measured as research funding and support as percentage of total income) 74% (revised budget) 75% achieved Improve cash-flow management (measured against availability of cash for effective operation) R25 m. More than R25 m. cash available – achieved R90 m., which is i.r.o. research project commitments Enhance effective financial management Improve quality budget planning and reporting (measured as the percentage deviation between actual and budget at year-end) 10%6% achieved Improve response to audit results (measured as a percentage of the previous year’s internal audit queries addressed and an unqualified vs. qualified external audit) 70% (internal audit) Unqualified report (external audit) 87.5% achieved (62.5% fully; 25% partially) Decrease roll-over of research funds (measured as the deviation from the budgetary figure for roll- over of research project funds) 20%8% roll-over achieved WRC ACHIEVEMENTS AGAINST FINANCIAL INDICATORS

ObjectiveIndicatorsTarget 2011/12 Achieved 2011/12 Improve the system for fund management To expand Fund Management System to include short-term projects To conduct a pilot consisting of 10% of short- term projects Pilot fully implemented Improve stakeholder relationships Enhance WRC relationship with the research community (number of WRC 101 courses) 24 Improve human resource management Improve equity (measured by percentage of new appointments being EE) 90% of new appointments are EE 83% Enhance staff skills by training (measured against in-house and external training courses (cumulative)) 2 in-house training courses 5 external training courses 3 in-house, 12 external training courses completed WRC ACHIEVEMENTS AGAINST SUPPORT SYSTEMS & PROCESSES INDICATORS

WRC: SUMMARY & CONCLUSION The Commission is a unique, valuable and strategic research entity that plays an important role in the water sector and water research by establishing needs and priorities, stimulating and funding research, promoting the transfer of information and technology and enhancing knowledge and capacity building in the water sector. The Commission has reported satisfactory results for the 2011/12 financial year.

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