1. PORTFOLIO COMMITTEE ON WATER AND ENVIRONMENTAL AFFAIRS MAHOMED VAWDA Acting Chief Director: Institutional Oversight Dept of Water Affairs Dept of Water Affairs WATER BOARDS TARIFFS for 2009/2010 30 June 2009

2. 2 DWA RAW WATER TARIFF Set i.t.o. Pricing Strategy Four components to charges: –Operation and maintenance cost –Depreciation charges –Return on asset charge –Water resource management charge Charges based on off budget schemes (TCTA etc.)

3. 3 RAW WATER PRICE VERSUS SELLING PRICE (after treatment and distribution) COST PRICE 2008 SELLING PRICE 2008 %AGE DIFFERENCE AmatolaR0.948R3.29771% BloemR0.204R3.21393% Lepelle NR0.184R2.37392% MhlathuzeR0.284R1.76983% OverbergR0.935R3.92590% RandR1.516R3.30654% SedibengR1.374R4.2067% UmgeniR0.180R2.95293%

4. 4 TARIFF INCREASES (1) Reduced Tariff (Tabled in Parliament) (2009/10) Proposed Tariff (2009/10) Previous Tariff (2008/09) Albany CoastR4.01 (4%) R3.85 Amatola Water(Amatole DM) R4.97 (5%) (Buffalo City) R4.18 (7%) R5.25 (11%) R4.31 (10%) R4.73 R3.91 BushbuckridgeR3.05 (3,7%) R2.94 BloemR3.56 (10%)R3.73 (15%)R3.24 BotsheloR3.14 (18%)R3.27 (23%)R2.66 Lepelle Northern R3.17 (3,8%)R3.32 (8,8%)R3.05 MagaliesR2.52 (7%)R2.65 (12%)R2.36

5. 5 TARIFF INCREASES (2) Reduced Tariff (Tabled in Parliament) (2009/10) Proposed Tariff (2009/10) Previous Tariff (2008/09) MhlathuzeR1.47 (14%)R1.54 (19%)R1.29 NamakwaR6.36 (73%)R6.55 (78%)R3.68 OverbergR3.12 (8.5%)R3.27 (13,5%)R2.88 PelladriftR1.90 (11,8%) R1.70 RandR3.47 (8.3%)R3.72 (15,3%)R3.21 SedibengR5.23 (5%)R5.58 (12%)R4.98 UmgeniR3.27 (6.5%) R3.21 (6.5%) R3.27 (6,5%) R3.21 (6,6%) Others R3.07 Ethekweni R3.01

6. 6 NORMS FOR BULK POTABLE WATER TARIFFS (1) Water Boards: –May set a single tariff for its whole supply area –May set a separate tariff for each scheme or each water treatment plant Free basic water is only provided to households at the retail level Subsidisation or cross-subsidisation of free basic water is a municipal concern & not within the responsibility of WBs

7. 7 NORMS FOR BULK POTABLE WATER TARIFFS (2) Municipalities receive an equitable share of the national revenue in order to fulfill its function of supplying basic services Accordingly stepped tariffs does not form part of the bulk potable water tariff structure Tariff increases may be smoothed out over time to take into consideration projected future infrastructure development costs Operating surpluses may be earned to finance future capital expansion and refurbishment, repayment of debt and contingencies

8. 8 OVERSIGHT ROLE w.r.t. TARIFFS WBs must consult with municipalities on their proposed tariff increases (Sec 42 of MFMA, 2003) WBs must request NT & SALGA to provide written comments I.t.o. sec 42 of the MFMA, WBs must submit (i) the proposed amendments, (ii) the comments received & (iii) an explanation of how such comments were taken into account, to the Minister to note The Minister must table the amendments in Parliament Neither the Minister nor the PC has a mandate to approve or reject tariff increases Tariff increases must be tabled on or before 15 March 2009, if the increases are to take effect from 1 July 2009

9. 9 ACHIEVEMENTS in TARIFF PROCEDURE WBs met timelines for consultation in terms of MFMA Received feedback from NT and SALGA A directive, issued by the Minister to WBs, to decrease their proposed tariffs, on account of current economic problems, was implemented by WBs Revised tariffs tabled on 13 March 2009 Strong financial position of majority of WBs allowed for reduced tariff increases

10. 10 CHALLENGES IN TARIFF INCREASES (1) Albany Coast Water infrastructure has limited capacity, but financial position adequate for operations AmatolaReticulation contracts & fund management require review BloemForecast shows declining financial results as a result of below than acceptable volume increases BotsheloInsolvent entity - proposed increase is unsustainable Bushbuck -ridge Municipality may not have capacity to meet revenue & debtor repayment assumptions made by Board BWT plants do not have capacity to meet short term increases in demand as they are unable to borrow on the basis of their balance sheet Lepelle NDebt collection from some municipalities is a significant challenge

11. 11 CHALLENGES IN TARIFF INCREASES (2) MhlathuzeViable entity, but capital investments should be reviewed to ensure financial payback & sustainability Tariff increase of 19% is high, however, there are agreements in place with industrial users who are able to pay the required tariffs Tariff to domestic users were decreased in line with Minister’s recommendation NamakwaEntity is not viable – needs Business Turnaround Strategy & financial support package to be sustained Tariff increase of 78% is unacceptable – alternative method of supply should be considered OverbergBusiness performance is sound. However, this is a small WB, covering a large rural community, which requires huge investment in infrastructure MagaliesTreasury management is critical & maintenance and capex plan requires implementation

12. 12 CHALLENGES IN TARIFF INCREASES (3) PelladriftEntity is trading below breakeven Tariff structure requires extensive revision and major capital refurbishment is required to support the mines & rural community RandMature business with significant cash resources DWAF requested RW to revise tariff increase, but RW will need to spend R7 billion on CAPEX over the next five years SedibengExpenses should be carefully monitored and CAPEX program implemented UmgeniStrong return to profitability in recent years New investments should be carefully evaluated, given high debt levels and projected growth into rural areas

13. 13 SUPPORT to WBs by DWA Monitor consultation process with Municipalities Facilitate meetings between WBs and NT, when required Facilitate timeous tabling of tariffs in Parliament

14. 14 THANK YOU