1. BUSHBUCKRIDGE WATER
ANNUAL REPORT FOR 2009/10
TARIFF 2011/12
AND
STRATEGY 2011/12
Presentation to the Portfolio committee of Water and Environmental Affairs

2. BACKGROUND
Established in 1997 by the Minister of Water Affairs and Forestry in accordance with the Water Services Act.
Mandated to provide water services to other water service institutions.
Area of operation include the BLM and part of the Nsikazi area in MLM.
Legislative imperatives include corporate governance, PFMA, MFMA, WSA, NWA.
Area Ml/day Population
Bushbuckridge Local Municipality Area (BL1) (8 PWTW)
Mbombela Local Municipality Area (MLM) (6 PWTW)
( MLM) (1WWTW) 3.5
BOARD OF DIRECTOR
The term of the current board of directors is from February 1, 2010 – March 31, 2014.
There was overlap in terms of office of BoDs.
The board comprises 9 members, namely:
Term ended 0 Feb 2010
Appointed – 02 Feb 2010
Ms. TP. Nyakane – Maluka (Chairperson)
Mr. P Ngomana (Chairperson)
Rev. R. Ngomane (Deputy Chairperson)
Adv. G Khoza (Deputy Chairperson)
Mr. C. Phiri
Adv. H Mbatha
Mr. BL. Mavuso (resigned 06 March 2009)
Ms. C Van Rensburg (CA. SA)
Ms. N. Kubayi
Ms. C Makwela
Mr. N. Nxumalo (resigned October 2009)
Ms. S Khoza
Mr. M. Makhweyane
Rev. R Ngomane
Ms. B. Ngobeni (resigned 20 March 2009)
Mr. M Vilakazi
Mr. C Padayachee

3. BACKGROUND….CONT
SERVICE AREA

4. MISSION, VISION, & VALUES Page 1
BW strives to provide sustainable water and sanitation services, contributes to water resource management and provide service through optimal utilisation of appropriate resource to enhance socio-economic development
VISION
To be the best public water service utility
VALUES
Customer first
Investment in human resources
Accountability and transparency
Service Excellence
Sound financial responsibility
Environmental stewardship
Social responsibility

5. MAJOR ACHIEVEMENTS &
CHALLENGES

6. Achievements
95% implementation of the Minister’s directives w.r.t. first phase
Reviewed the corporate governance policies and board charter in line with the King III best practices;
Increase revenue on sale of potable water and management contract by 11% and 13% respectively but still faced challenges with full cost recovery;
Increased profitability on the Nsikazi Project (Management contract) by R from –R loss but the payments were three months in arrears at the end of financial year;
Increased the potable water supply by 6%
Increased monthly payment of invoices by 40% (R3Million to R5Million per month) 62% payment of monthly invoices
Complied with the requirement of SANS 241 as amended in terms of drinking water quality
Achieved transformation and corporate citizenship targets through:-
Supported economic growth policy objectives on BBBEE discretional use by 71% purchases of goods and services from BBBEE companies or entities;
Contributed to national government targets for skills development through employment of temporary employees, leanership and internships.

7. Challenges Debt recovery Bushbuckridge Local Municipality R128M
Disestablished Bohlabela District Municipality R 26M
-Lack of Long term Service Level Agreements
Currently operating on short term contracts at MLM and BLM
Infrastructure challenges
Transfer of assets (DWA)
Aged and inadequate infrastructure
Risk of technical insolvency
going concern
Cash flow constrains

8. NON FINANCIAL PERFORMANCE

9. SUMMARY OF NON FINANCIAL PERFORMANCE Pages 48-52
Goal 1: Exploring and exploiting strategic ways for organisational financial sustainability & business development
Achieved organisational stability;
Strengthened the organisational capacity by filling critical vacancies;
increasing efforts in the areas of training and staff development
Staff Movement
Passed away
Retired
Resigned
Discharged
Leanership and interns
New appointments 1 2 5 9
Skills Development
Course
Participants
NQF 2 24
Computer literacy 9
Water Quality management 2
Employee Breakdown
Top Management
Mid Management
Professionals
Skilled
Semi-skilled
Total
Males 2 4 10
135 12
163
Female 1 7 35 18 63
226

10. SUMMARY OF NONFINANCIAL PERFORMANCE Trade union membership
Goal 1: Cont....
The Minister appointed a new Board.
Improved good governance by ensuring that compliance with relevant legislations was observed;
Increased organisational visibility by improving relations with stakeholders;
Increased BBBEE discretional spending;
Improved relationship with the organised labour.
Setting up processes to improve debt collection
Trade union membership
Trade union
Percentage
NEHAWU
56%
SAMWU
33%
PSA 5%

11. SUMMARY OF NONFINANCIAL PERFORMANCE ...CONT
Goal 2: Promote institutional relations
Undertaken programmes on water conservation and demand management
Implementing the corporate social responsibility programmes by donating jojo tanks to the communities and other NGO’s, and donated soccer boots to various schools.
Improved stakeholders relations;
Goal 3: Providing sustainable water and sanitation services
Increased the volume of portable water by 10% in the BLM area and decrease of 5% in the MLM area
Complied with water quality standards (SANS 241)
Other Reportable Performance Area
Finalised the case of the suspended Chief Executive
Reviewed the governance structures
Reviewed the corporate governance policy (Board charters and committee terms of references

12. FINANCIAL PERFORMANCE

13. Discounting of Revenue and debtors in terms of ISA 39
SUMMARY OF FINANCIAL
PERFORMANCE
Volume of water sold
2010
2009
25,694,187
24,149,817
R3.07
R2.94
Income Statement 2009/10
2010
2009 R
% variance
Revenue
98,179,870
88,467,097
10%
Cost of sales
(19,256,613)
(12,983,687)
33%
Gross profit
78,923,257
75,483,410 4%
Operating & Admin cost
(73,761,507)
(71,003,968)
Finance income
5,790,166
1,980,870
66%
Finance cost
(371,657)
(692,762)
-86%
Other income
376,418
246,229
35%
Surplus
10,956,677
6,013,779
45%
Nsikazi Project
2010
2009 %
Income
27,978,505
24,845,324
24%
Expenditure
(27,033,460)
(24,855,715) 4%
Surplus
945,045
(10,391)
99%
Discounting of Revenue and debtors in terms of ISA 39
2010
2009
2008 R %
Before Discounting
106,859,659
95,814,963
79,722,100
17%
Discounting
8,679,789
7,347,866
492,149
93%
 Net
98,179,870
88,467,097
79,229,951
10%

14. Statement of financial position
SUMMARY OF FINANCIAL
PERFORMANCE
Statement of financial position
2010
2009
Assets R
Non - Current Assets
7,349,865
12,435,961
Current Assets
118,074,382
92,618,542
125,424,247
105,054,503
Equity and Liabilities
Equity
80,252,712
69,296,030
Liabilities
45,171,535
35,758,473
Current Liabilities
42,156,892
32,565,498
Total Equity and liabilities
Audited
2010
2009
2008
Current ratio
2.98
2.84
3.05
Debt Equity ratio
0.53
0.52
0.37
Debtors days
427.53
376.70
314.74
Debt coverage
4.45
2.37
1.81
Return on Assets
149.1
48.4
24.8

15. INDEPENDENT AUDITORS REPORT

16. SUMMARY OF THE INDEPENDENT AUDITOR’S REPORT
Independent Auditors: Stabilis Inc
BW received a qualified Audit report with emphasis on the following matters:
Basis of qualification
Trade Receivables Valuation –The trade received on outstanding debt of R167,630,525 and R 26,478,120 owed by BLM and BDM respectively is R0.00. Provision of doubtful debts on the outstanding debt is R 82,399,855
Emphasis of Matter
Payments of invoices by BLM-the existence of material uncertainty which may cast doubt inability to continue with the business
Fixed Assets transferred during 1999/2000 without transferring ownership ( Non Compliance with section 73(2)(a) of WSA)
Forensic audit report - R644,654 not yet recovered
Exceeded borrowing limits by R

17. BULK WATER TARIFF FOR THE 2011/2012

18. INPUT COST OF BULK WATER
RAW WATER CHARGES
COST OF RAW WATER SUPPLIED FROM DWAF
DIRECT STAFF & LABOUR COST
ALL DIRECT COST OF STAFF WHO ARE RESPONSIBLE FOR O&M OF SCHEMES & PLANT
DIRECT ENERGY COST
ESKOM CHARGES FOR BOTH FACILITY & USAGE FOR PUMPING, PURIFICATION & PLANT LIGHTING
CHEMICALS
FULL COST OF CHEMICALS USED FOR DOZING OF WATER
MAINTENANCE
COST OF ROUTINE MAINTENANCE OF PLANT & EQUIPMENT

19. INPUT COST OF BULK WATER
REFURBISHMENT
COST OF SUBSTANTIAL REPAIR OR REPLACEMENT OF PLANT & EQUIPMENT WHICH DOES NOT FORM PART OF ROUTINE MAINTENANCE
OVERHEAD ALLOCATION
PORTION OF HEAD OFFICE AND OTHER INDIRECT COSTS ALLOCATED TO EACH SCHEME
The following financial assumptions were considered:
ASSUMPTION
Actual
Budget
Projected
09/10
10/11
11/12
12/13
13/14
14/15
CPI
6.9%
6.0%
5.7%
5.4%
5.6%
Salaries and wages
10.9%
10.0%
9.5%
8.5%
9.0%
Interest rate
10.3%
11.0%
11.5%
Energy cost
31.3%
24.8%
25.2%
26.1%
7.3%
7.5%

20. NORMS FOR BULK POTABLE WATER TARIFFS
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 – motivated by differentials in the cost of supplying to different customers.
The subsidization or cross subsidization of free basic water is a municipal concern and not within the capability of water boards.
Tariff increases may be smoothed out over time to take into consideration projected future infrastructure development costs.

21. TARRIF STRUCTURE Cost structure 35 373 975m3/year Amount % Amount p/m
Keys = VC: Variable cost
= FC: Fixed cost
m3/year
Amount %
Amount p/m
Raw Water (vc)
4.84
Electricity (vc)
9.60
Maintenance (vc)
12.06
Chemicals (vc)
6.76
Refurbishment (vc)
7.68
Capex (vc)
11.39
Salaries (fc)
31.04
Administration cost (fc)
16.62
TOTAL
100

22. Average for year ending 30 June
TARRIF APPORTIONMENT
Variable Cost Component R1.94
(Raw water, Electricity, Chemicals, Maintenance)
Fixed Cost Component R1.76
(Salaries and Admin Cost)
Tariff for 2011/2012 R3.70
NB * = Proposed tariff review, due to upgrading of certain water works
Average for year ending 30 June
Actual
Projected
10/11
11/12
12/13
13/14
14/15
Bulk Water Tariff
DWA
1.48
1.64
1.79
1.95
2.13
Bulk Potable Water Tariff
BWB
3.45
3.70
* 3.90
* 4.02

23. TARRIF STRUCTURE
Total water consumption is based on an average water loss of 9%
Total water consumption represent the total bulk potable water to be supplied to the municipality
M3/year
M3/day
Total Water Consumption
96 915

24. COMMENTS FROM STAKEHOLDERS
SALGA
The capital expenditure is significant in amount;
The tariff is lower than the sector average increase;
NATIONAL TREASURY
Proposed tariff increase will lead to a better cost recovery.
The proposed tariff will result in the organisation being financial viability
BUSHBUCKRIDGE LOCAL MUNICIPALITY
We have not received any comments from Bushbuckridge Local Municipality.

25. Bushbuckridge Water
Strategic Plan

26. Vision; Mission & Objectives
“to be a leading water services utility”
Mission
”to provide affordable and sustainable bulk water and sanitation services through optimal use of resources”
Strategic Objectives
The organisation’s objectives are articulated as:
To provide bulk water supply and sanitation services 
To entrench sound corporate governance and financial management
To optimise stakeholder interaction and engagement
To acquire, develop and manage infrastructure for bulk water and sanitation services
To promote effective water resource management
Optimize human capital investment
Values
Passion and Commitment
Honesty
Integrity
Respect
Service Excellence
Customer Focus

27. 2011/12 PLAN Supply area Planned Expansion and other services
Currently servicing area of Bushbuckridge Local Municipality (BLM) and sections of the Mbombela Local Municipality (MLM), both situated in the Ehlanzeni district of Mpumalanga Province.
Planned Expansion and other services
Full coverage of the current supply areas.
Coverage of the entire Ehlanzeni District area i.e. Nkomazi, Thaba Chweu and uMjindi Local Municipalities and roll out to other WSAs within the MP province.
MOUs to conduct assessment on status of infrastructure signed with Nkomazi LM and Thaba Chweu LM.
Assuming Project implementing Agency role for WSAs and other government agencies.
Provision of Scientific Services to WSAs and other institutions.
Water resources management
Assist WSAs with Water Conservation and Demand Management.
Regular monitoring of upstream raw water pollution and advise the regulators on mitigation measures.

28. Alignment to Government Priorities
Bushbuckridge Water –Key Strategies
To provide bulk water supply and sanitation services 
Develop and operate bulk water infrastructure
Water quality (Potable water and Waste water)
Development of the Demand Management Strategy
To entrench sound corporate governance and financial management
Corporate governance framework and policies
Debt management strategy
Sustainable tariff structure
CSI
Audit and Risk management
To optimise stakeholder interaction and engagement
Contracts with municipalities and other stakeholders
Partnership with other water institutions
To acquire, develop and manage infrastructure for bulk water and sanitation services
Integrated Infrastructure development Plan
Asset management Strategy
To promote effective water resource management
participate in strategy development for water resource management (CMAs)
Water conservation programmes
Consideration of environmental impact on activities of BW
Optimize human capital investment
Skills development programme
Performance management systems (Board to level one employees)
Department of Water Affairs Priority areas.
1. Contribution to economic growth and social development
2. Ensure sustainable and equitable water resources management
3. Promoting rural development
4. Effective support to local government
5. Improving the Department’s capacity to deliver services
6. Contribution to global relations

29. PROJECTED INCOME STATEMENT Medium Term Expenditure Framework
Budget Estimates
PROJECTED INCOME STATEMENT
Medium Term Expenditure Framework
Forecast
2011/12
Budget Year
Original Budget
Adjusted Budget
Full Year Forecast
2012/13
2013/14
2014/15
2015/16
R' Thousand
Turnover
161,358,214
4,149,868
165,508,082
181,631,058
191,289,678
200,536,899
212,551,392
- Bulk portable water
122,040,214
5,792,650
127,832,864
137,174,300
145,054,650
152,452,470
163,505,274
- Operation and maintenance
39,318,000
(1,642,782)
37,675,218
44,456,758
46,235,028
48,084,429
49,046,118
Less: Variable Costs
(28,060,000)
(7,020,721)
(35,080,721)
(35,381,625)
(38,229,750)
(41,640,975)
(45,113,235)
- Raw water purchased
(6,305,000)
279,581
(6,025,419)
(7,344,878)
(8,231,115)
(9,542,925)
(10,688,076)
- Energy
(10,343,000)
(3,459,634)
(13,802,634)
(14,940,450)
(15,985,350)
(17,104,500)
(18,344,576)
- Chemicals
(11,412,000)
(3,840,667)
(15,252,667)
(13,096,298)
(14,013,285)
(14,993,550)
(16,080,582)
Contribution Margin
133,298,214
(2,870,852)
130,427,361
146,249,433
153,059,928
158,895,924
167,438,157

30. PROJECTED INCOME STATEMENT CONTINUES Medium Term Expenditure Framework
Budget Estimates
PROJECTED INCOME STATEMENT CONTINUES
Medium Term Expenditure Framework
Forecast
2011/12
Budget Year
Original Budget
Adjusted Budget
Full Year Forecast
2012/13
2013/14
2014/15
2015/16
Less: Fixed Operating Costs
(141,427,000)
8,072,772
(133,354,228)
(132,951,000)
(132,447,619)
(137,300,848)
(143,143,945)
- Staff costs
(47,072,000)
(439,227)
(47,511,227)
(54,018,608)
(58,487,378)
(61,845,713)
(66,329,527)
- Maintenance and Refurbishment
(21,949,000)
(8,381,545)
(30,330,545)
(25,187,663)
(21,409,513)
(28,299,620)
(30,351,342)
- Other Operating Costs
(20,241,000)
(1,364,206)
(21,605,206)
(23,228,205)
(25,085,855)
(27,152,715)
(29,460,696)
- Provision for doubtful debts
(52,165,000)
18,257,750
(33,907,250)
(30,516,525)
(27,464,873)
(20,002,800)
(17,002,380)
Other Income
374,000 -
400,000
1,279,084
1,506,077
1,615,268
Net Profit before Depreciation
(7,754,786)
5,201,920
(2,552,867)
13,698,433
21,891,393
23,101,154
25,909,480
Less: Depreciation
-6,555,000
4,573,849
-1,981,151
-6,959,453
-12,171,000
-10,099,000
-8,079,200
Operating (Deficit)/Surplus before net finance costs
(14,309,786)
9,775,769
(4,534,018)
6,738,980
9,720,393
13,002,154
17,830,280
- Finance Income
53,000
114,619
167,619
546,842
1,151,176
1,355,470
1,434,904
- Finance Expense
-136,000
-108,000
-67,000
Net Surplus/(Deficit)
(14,392,786)
9,890,388
(4,502,399)
7,177,822
10,804,569
14,357,623
19,265,184
Accumulated earnings at the beginning of the year
-8,022,000
21,122,856
13,100,856
8,598,458
15,776,280
26,580,849
40,938,472
Accumulated earnings at the end of the year
(22,414,786)
31,013,244
60,203,655

31. Medium Term Expenditure Framework
Budget Estimates
Proposed CAPEX
Medium Term Expenditure Framework
Forecast
2011/12
Budget Year
Description
Original Budget
Adjusted Budget
Full Year Forecast
2012/13
2013/14
2014/15
2015/16
Refurbishments
1,390,000
4,980,000
6,370,000 -
6,500,000
500,000
Buildings
17,159,040
Motor Vehicles
981,000
(181,000)
800,000
1,000,000
Computer Equipments and Software
635,000
141,000
776,000
250,000
60,000
100,000
5,195,000
Plant and Equipment
2,513,000
5,612,500
8,125,500
4,500,000
13,274,703
16,195,000
Furniture and Fittings
50,000
221,000
271,000
200,000
105,000
20,879
5,569,000
10,773,500
16,342,500
4,950,000
20,934,703
17,400,000
23,874,919

32. Thank you