MHLATHUZE WATER BOARD 1

GRAPHICAL AREA OF SUPPLY 2

OVERVIEW OF THE WATER BOARD  Mhlathuze Water (MW) area of supply covers some 37,000km² stretching from uThukela River in the south and up to East Coast to Mozambique and Swaziland borders, around Vryheid and back to the uThukela River.  MW operational area covers 4 WSA’s in KZN:  uMkhanyakude District Municipality  Zululand District Municipality  uThungulu District Municipality  uMhlathuze Local Municipality  Supply Bulk Water and Sanitation services to Industries & Water Services Authorities in its area of operation 3

SHC 2014/ Performance Objective Outcomes /Impact IndicatorsMeasureTarget 2014/15 Actual 14/15 Comments/Corrective Action 1. Water Quality Compliance Water quality standards met Test results, SANS 241 % complianceRisk-defined health - ≥95% Risk-defined operational - ≥93% Accute Health - 1 Micro - ≥97% Accute Health - 1 Chem - ≥97% Chronic Health - ≥95% Aesthetic - ≥93% 100% 99.7% 100% Target exceeded. 2. Non-Revenue Water Reduced levels of unaccounted for water (UAW) Water lost as a % of total water produced %<5%1.82%Target met. 3. Reliability of supply No unplanned interruptions to supply exceeding 24 hours % number of days supply disrupted divided by total number of possible supply days %<1%0%Target met. 4. Financial Reporting Compliance unqualified audit report Annual external audit Qualified/ Unqualified Unqualified Audit Opinion Unqualified (Clean Audit) Target met 5. Staff Turnover Optimal staff retention % staff leaving%8% (2% is the quarterly target) 5.26%Target exceeded. 6. Board Member Attendance Improved performance of fiduciary duties/governance Annual attendance %80%81.8%Target met.

SHC 2014/2015 continue 5 Performance Objective Outcomes /Impact IndicatorsMeasureTarget 2014/15 Actual 14/15 Comments/Corrective Action 7.Effective Internal Controls And Risk Management No repeat or unresolved findings Internal audit reports Number repeatsNo repeats findings Target met Number unresolved No unresolved findings Target met 8. Bulk Supply Agreements Concluded With Municipalities / Other Customers Statutory and service level agreements in place Municipalities/ other customers with bulk supply agreements %100% Target met. 9. Improve Financial Ratios Improved viability and sustainability Financial ratiosLiquidity Target exceeded Gross profit margin % (Primary Activities) 84% Target met. Gross profit margin % (Secondary activity) 11.8%20.60%Target exceeded Net profit margin % (primary activity) 14% 21.6%Target exceeded Debt/ Equity ratio Target met Return on assets %8.2%9.00%Target exceeded Debtors days #45 days34.98Target exceeded

SHC 2014/2015 continue 6 Performance Objective Outcomes /Impact IndicatorsMeasureTarget 2014/15 Actual 14/15 Comments/Corrective Action 10. Increase BBBEE Spend Spend increased and increased new entrants % of spend increased and # of increased new entrants % increaseMaintain above 51% of discretionary spend 60%Target exceeded # new entrants 20 new entrants 98Target exceeded 11. Manage Costs Within The Approved Budget No over expenditure/losses Financial reports% variance5% (over/under budget)2% over budget Within target 12. Capital Expenditure Infrastructure available to meet demands Overall project expenditure within R target % variance75% spent 84.79%Target met. Overall project completion dates within targets % variance80% (20% quarterly target) 90%Target exceeded. 13. Increased access to Services Contribution to national objectives No. of new projects DOE & DBE DWS DEA 144 (based on the number of schools) DOE 15 3 Target not met. 39 DOE projects were cancelled due to the fact that the budget was retracted by DOE. Target met.

SHC 2014/2015 continue 7 Performance Objective Outcomes /Impact IndicatorsMeasureTarget 2014/15 Actual 14/15 Comments/Corrective Action 14. Engagement in Secondary Activities Extent of involvement % of total turnover 63%61%Target not met due to the external work that was suspended by DOE. 15. Achieve Statutory Reporting Compliance Reporting compliance achieved Statutory submissions made on time Submission dates met/missed Submission dates met 3 rd Quarterly Report submitted on 14 May 2015 (deadline 15 May 2015). Business Plan and Shareholder Compact submitted on 28 May 2015 (deadline 31 May 2015). Target met. 16. Jobs CreatedPermanent and contract (direct) Total Number of jobs created Number 5 118Target exceeded. (Due to the transfer of CoU Staff) Temporary (indirect) Total NumberNumber500 (quarterly target is 125) 768Target exceeded. 17. Corporate Social Responsibility Initiatives Good corporate citizenship Number of initiatives Number and and value At least 9 initiatives for R1.2 m 14 initiatives to the value of R Target exceeded. 18. Training And Skills Development Skills and capacity building Training courses, learner-ships, bursaries Total Number of training, learnership and bursaries 108 (quarterly target is 27) 118Target exceeded.

Financial Performance 2014/2015  Bulk water volumes increased by 21% mainly due to the increase in raw water volumes. (RBM and City of uMhlathuze (Esikhaleni) and the increase in potable water supply to the City of uMhlathuze for Richards Bay. 8

Financial Performance 2014/2015  Although the tariffs for the all the schemes shows a downward trend for the past five years, revenue increased overall by 44% generated from better than expected bulk water volume sales. This resulted from the drought situation in KwaZulu Natal, whereby Mhlathuze Water was in a position to supply the City of uMhlathuze with water from the Mhlathuze River and Nsezi Water Treatment Plant. 9

Financial Performance 2014/2015  Mhlathuze Water has maintained strong operating surpluses. Overall, the surplus for the year of R89,9 million (2014: R79,1m) reflects an increase of 14% from the previous year. 10

CAPITAL EXPENDITURE 2014/2015  Capital expenditure increase by 9% from the previous year. The three major projects that contributed to the increase are: – Nsezi Balancing Reservoir (20ML) - R17 million – City of uMhlathuze Pump upgrade - R56 million – Re-route B-line to C-line - R12 million 11

Audit Opinion 2014/2015  KPMG Inc. were appointed for the 2014/2015 financial year audit.  Annual financial statements were prepared in accordance with SA GAAP, the relevant provisions of Water Services Act in a manner required by PFMA.  MW received a Unqualified (Clean) Audit Opinion for the 2014/2015 year.  All internal controls were considered as relevant. 12

1 st Quarter 2015/2016 Performance on Key Strategic Objectives: 13 Performance Objective Outcome/ Impact Indicators/ Calculation Measure Performance Targets Comments Target 2015/16 Target Quarter 1 Actual Quarter 1 Variance 1Bulk potable water quality compliance Water quality standards met Test results, SANS 241 Class 1: Class 2: % compliance95% 100%5%Target exceeded 2Manage avoidable water losses Reduced avoidable water losses in treatment and distribution systems Avoidable water lost as a percentage of water produced %<5% 3.80%-1.2%Target met 3Reliability of supply No unplanned interruptions to bulk supply exceeding 24 hours Number of days supply interrupted as a % of possible supply days %<1% 0%1%Target exceeded 4Increased access to Services Contribution to national objectives of extending services Actual CAPEX spend on expansion related projects (initiatives by the Minister) as % of budget %80%20%17%-3%Target not met.

Performance on Key Strategic Objectives: 14 Performance Objective Outcome/ Impact Indicators/ Calculation Measure Performance Targets Comments Target 2015/16 Target Quarter 1 Actual Quarter 1 Variance 5Financial reporting compliance Unqualified audit report Annual external auditUnqualified report with no matters of emphasis (Clean Audit) N/A Annual Target 6Improve key financial ratios Improved viability and sustainability Current RatioRatio Target exceeded Gross profit margin % (primary activity) %78%79%85%6%Target exceeded Gross profit margin % (secondary activity) %6%12%25%13%Target exceeded Net profit margin (primary activity) %13%14%24%10%Target exceeded mainly due to savings on other operating expenses Net profit margin (secondary activity) %1% -1%-2%Target not met, mainly due to IA fees o/s from DWS due to VAT issue - resolved in Sep, expect payment in Oct. Delay in payment on RBIG projects. Debt equity%0.37% 0.44%-0.07%Target not met, expected to improve when capital payments are due in Nov, Dec, May and June. Return on AssetsRatio7% 9%2%Target exceeded Debtors daysNumber45days42 days38 days4 daysTarget exceeded Repairs and maintenance as % of PPE and %3%0.75%0.33%-0.42%Target - 1.5% of maintenance cost against the PPE value of R658 million is expected to be spend at end of Dec Staff remuneration as % of total operating expenditure %13%12%13%1%Target met

Performance on Key Strategic Objectives: 15 Performance ObjectiveOutcome/ ImpactIndicators/ Calculation Measure Performance Targets Comments Target 2015/1 6 Target Quarter 1 Actual Quarter 1 Variance 7Increase BBBEE expenditure in relation to operational projects Spend increased and increased new entrants awarded contracts in the financial year Spend% achieved51% 81%30%Target exceeded 8Manage costs within the approved budget Actual expenditure compared with budgeted epxenditure for the quarter Financial reports% increase5% 4%-1%Within target - increase in energy cost, more pumping is required due to drought in the KZN area. 9Capital expenditure programme Infrastructure available to meet demands Overall project expenditure within R target % variance80%20%14%6%Target not met, expenditure is expected to improve in the 2nd quarter, as a lot of projects are in progress. Overall project completion dates within targets % variance85%21%30%11%Target exceeded. 10Engagement in secondary activities Growth in turnover from secondary (other activities) % of total turnover %54% 58%4%Target exceeded 11Bulk supply agreements concluded with municipalities/other customers Statutory and Service Level Agreements in place Municipalities/Ot her Customers with bulk supply agreements %100%N/A Annual Target

Performance on Key Strategic Objectives: 16 Performance Objective Outcome/ ImpactIndicators/ Calculation Measure Performance Targets Comments Target 2015/16 Target Quarter 1 Actual Quarter 1 Variance 12 Implementation of Ministerial directives New Ministerial directives issued are implemented on time Progress against implementation plan %80%N/A Annual Target 13Support Rural Development Total Number of identified rural Municipalities supported Signed contracts, MOUs etc Number2 N/A11 Target met 14Achieve statutory reporting compliance All statutory reports submitted on time Submission dates met %100% 0%Target met. 15Staff levelsOptimal staff retention Staff turnover%8%2%0.37%1.30%Target met. 16Training and Skills Development Skills and capacity building LearnershipsNumber Target exceeded Bursaries employees Number Target exceeded Graduate Programmes Number Target exceeded

Performance on Key Strategic Objectives: 17 Performance Objective Outcome/ ImpactIndicators/ Calculation Measure Performance Targets Comments Target 2015/16 Target Quarter 1 Actual Quarter 1 Variance 17Jobs CreatedPermanent and contract (direct) Total numberNumber (0.25) Target not met Temporary (indirect)Total numberNumber Target exceeded. 18Board Effectiveness Improved performance of fiduciary duties/governance Board Member attendance of all Board/committee meetings %80% 63.6%-16.4%Target not met. Decision making: % number resolutions taken by the board vs number of resolutions required %80% 84.6%4.6%Target exceeded 19Effective Internal Controls and Risk Management Internal audit findings dealt with Internal audit reportsNumber of repeat findings 3N/A N/A Q1 audit is scheduled to start on 02 November 2015 Number of unresolved findings 3N/A Q1 audit is scheduled to start on 02 November 2015

Performance on Key Strategic Objectives: 18 Performance Objective Outcome/ ImpactIndicators/ Calculation Measure Performance Targets Comments Target 2015/16 Target Quarter 1 Actual Quarter 1 Variance 20Good Governance Improved controls and risk mitigation Breaches of materiality and significance framework Number<5N/A Annual Target 21Corporate Social Responsibility Initiatives Good corporate citizenship Number of initiatives undertaken Number Target not met. Four initiatives approved in the 1st quarter to be implemented in the 2nd quarter. 22Health and safety within working environment Reduced number of disabling injuries Number Within target

External Project-CAPEX Jozini bulk supply Project budget summary Approved budget R2,074billion R980million - Bulk Only (DWS) R74million – Reticulation Only (COGTA) Non-approved Budget R1,02billion (Reticulation. Zone ) Expenditure to date R752million Project Progress Bulk Pipelines, reservoirs and pump stations74% Complete Reticulation (No more funding approved)30% Complete Current financial year 2015/16 Budget:R290 million Expenditure:R142,7 million (End Sept 2015) 19

Hluhluwe Bulk Water Supply 20 Project budget summary R96million Approved budget R96million - Bulk Only (DWS) Expenditure to date R160million(Actual cost of works) Additional R22million approved for the next Phase, but allocation not yet received from DWS. Project Progress – Phase 4 Bulk Pipelines, reservoirs and reticulation - 98% Complete

Dukuduku Resettlement - Water Supply 21 Project budget summary R143million Approved budget R143million - Bulk Only (DWS) Expenditure to date R136million Project Progress Bulk Pipelines, reservoirs and pump stations75% Complete Current financial year 2015/16 Budget:R15 million Expenditure:R10 million (End Sept 2015)

Hlabisa - Bulk Water Supply 22 Project budget summary R205million Approved budget R205million - Bulk Only (DWS) Expenditure to date R197million Project Progress Bulk Pipelines, reservoirs and pump stations98% Complete Current financial year 2015/16 Budget:R8 million Expenditure:R3 million (End Sept 2015)

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Presentation to the DWS – 2015 first quarter report

Where do we derive our mandate Section 29 Section 30 Magalies Water Strategy

Vision, Mission, Core Strategy, values

Water Services Authorities being served MunicipalityProvince Moses Kotane Local MunicipalityNorth West Rustenburg Local MunicipalityNorth West Thabazimbi Local MunicipalityLimpopo Bela Bela Local MunicipalityLimpopo Modimolle Local MunicipalityLimpopo City of Tshwane Metropolitan MunicipalityGauteng April 2014

Bulk Water Services Infrastructure April 2014 NameDesign Capacity (ML/day) Pipeline length (km) Reservoir storage capacity (ML/day) Vaalkop WTP Klipdrift WTP Cullinan WTP1610 Wallmannsthal WTP Total

Where do we serve the Water Services Authorities April 2014 MunicipalityVaalkopKlipdriftWallmannsthalCullinan Moses Kotane Local MunicipalityX Rustenburg Local MunicipalityX Thabazimbi Local MunicipalityX City of Tshwane Metropolitan Municipality XXX Modimolle Local Municipality X Bela Bela Local Municipality X

Map of Supply Area April 2014

Strategic Trajectory

32 F F F F A B E D D C G G G H B H H Part A: Northern part of Rustenburg LM including RBA (PWS SOUTH) Part B: Southern parts of Kgetlengrivier LM, with possible extensions to Groot Marico and Zeerust (PWS SOUTH) Part C: Mankwe region of Moses Kotane LM (PWS NORTH) Part D: Madikwe region of Moses Kotane LM (PWS NORTH) Part E: North eastern Moses Kotane LM and part of Thabazimbi LM (PWS NORTH) Part F: Moretele North, Madibeng North, Bela Bela, Modimolle, Mokgoopong, Dr JS Moroka (KLIPVOOR) Part G: Brits, Hartbeespoort and southern parts of Madibeng LM (Mining Belt) Part H: Supply to CoT via Klipdrift, Wallmannsthaal & Cullinan System Business Growth through capital expansions with area of supply coverage

Performance for the quarter

Thank you