NAMAKWA WATER BOARD ANNUAL REPORT 2008

BACKGROUND The Namakwa Water Board provides potable water to Nama Khoi Municipality & De Beers Namaqualand Mines. The area of responsibility included the towns of Steinkopf, Okiep, Concordia, Carolusberg, Nababeep, Springbok and the mining communities at the De Beers Namaqua mines The area of responsibility is in the arid north western part of the Northern Cape were the Orange River is the only sustainable source of water. Pumping water from the Orange River is costly because of distance and elevation to be pumped

ACHIEVEMENTS & CHALLENGES Challenges : -The Municipality do not have the capacity to take over the Water Board (Section 78 investigation funded by DWAF). - The Board not able to pay creditors. - Various pipeline failures occurred due to age of infrastructure resulting in communities left without potable water. (Dec’07 Concordia 4 days) Achievements : - Temporary appointment of consultants to perform managerial duties June’08 - Omissions reported by Auditors resolved - Involve various stakeholders in seeking resolution to financial crises of Board eg. DG,Department of Water Affairs, MEC for Local Government Northern Cape Province, District municipality, Customers - Received operational grant from disaster fund (Namaqua District Municipality)

REPORT OF INDEPENDENT AUDITORS Unqualified Opinion In our opinion the financial statements present fairly, in all material respects, the financial position of the entity at 30 June 2008 and the results of its operations and cash flows for the year ended in accordance with IFRS. Emphasis Of Matter Without qualifying our opinion, we draw attention to note 11 to the financial statements which indicates the existence of a material uncertainty which may cast significant doubt on the entity’s ability to continue as a going concern. Report On Other Legal And Regulatory Requirements In accordance with our responsibilities in terms of sections 44 (2) and 44 (3) of the Auditing Profession Act, we report that we have identified certain unlawful acts or omissions committed by persons responsible for the management of Namakwa Water Board which constitute reportable irregularities in terms of the Auditing Profession Act, and have reported such matters to the Independent Regulatory Board for Auditors.

PERFORMANCE SUMMARY Board made a loss of R 17 mil 2008 vs. profit of R 2,6 mil 2007(R 12 mil remission of debt included in 2007) Operating loss of R 1,4 mil 2008 & profit of R 3,9 mil 2007 mainly due to increase in salaries & operational cost & write down of debts & asset scrapping Debtors decreased by R 1,5 mil(R0,698 non recoverable written off) Creditors Increased by R0,8 mil (Mainly Raw water purchased from Water Affairs) Relook at accounting policy resulting in non Cash based funds written off to provide a more realistic view of entity.

FINANCIAL PERFORMANCE 2007/2008 NOTES2008 R 2007 R Revenue Other Income Administration Expenses( )( ) Other Operational Expenses( )( ) Financing Costs( )( ) Loss before remission of debt( )( ) Remission of debt (Loss)/Surplus for the year( ) INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) NOTES2008 R 2007 R ASSETS Non-Current Assets Property, Plant and Equipment Current Assets Fixed Investments Trade and other Debtors Cash and Cash Equivalents Total Assets EQUITY AND LIABILITIES Funds and Reserves Retained Income Non-Distributable Reserves Revaluation Reserve Maintenance Fund Retainer Fees Special Fund Total Liabilities Non-Current Liabilities Long Term Loans Current Liabilities Trade and other Creditors Bank Overdraft Total Equity and Liabilities

CASH GENERATED BY OPERATIONS 2008 R 2007 R (Loss)/Surplus for the Year( ) Adjustments for: Depreciation Interest Received( )( ) Interest Paid Remission of Debt-( ) Assets Scrapped Operating income before changes in working capital ( )

STRATEGIC PLAN 2009/2011 The strategic goal for the Board is to get out of its current cash flow crisis and to become self sustainable. This will be attain by : Secure short term financial assistance Reduce cost of operations Reach agreement with Municipality to take over distribution Recovery of actual cost of service Remission of Debt - Water Affairs loan Reach agreement with DBSA for rescheduling of loan Secure funding for urgent capital replacement

CAPITAL EXPENDITURE PRIORITIES 2009/2011 The Flocculation dosing pumps, Lime feeders and Chlorinators are all defect, which is directly impacting the quality of water and the health of operators. Urgent replacement required of ±26km section of the main pipeline between Vrieskloof and Okiep. The lining of the pipeline has broken up, causing corrosion and blockading of the pipeline and frequent pipeline failures, resulting in the community been left without potable water. Replacement required of ±9 km section of the pipeline between Okiep and Nababeep. The pipeline has reach the end of its economical life and leaks occur on the line. As this line is not accessible by road, maintenance cannot be carried out on the line. Replacement required of ±5 km section of the pipeline between Okiep and Carolusberg. The pipeline has reach the end of its economical life and leaks occur on the line. Replacement required of ±9 km section of the pipeline between Okiep and Concordia. The pipeline is use to pump water under high pressure and has reach the end of its economical life. The Metering equipment to measure extraction and distribution needs to be replace as meters is not working. This is also necessary to determine water losses and leaks on pipelines. The communication and telemetric control between reservoirs and pump stations which is needed to monitor reservoirs levels and communication between operators need to be replace or upgraded to ensure reservoirs levels are monitor accurately and pumps are activate in correct sequence to prevent pipeline burst. Other short term replacement that needs to be made includes: The housing for operators have not been maintained properly and needs upgrading to repairs insure the availability of personnel. Two vehicles for technical and repair personnel needs to be replaced urgently. The Lifting equipment on the trucks used to transport pumps & pipes need to be repaired as it not safe or effective currently. Access roads especially for the Nababeep pipeline needs to be upgraded as the pipeline is not accessible for repairs.