1. MHLATHUZE WATER/AMANZI
PRESENTATION ON THE 2015/16 ANNUAL REPORT
Presented by
Mr Mthokozisi P. Duze
(Interim Chief Executive)
08 March 2017

2. ANNUAL REPORT 2015/2016
Audit Report
KPMG Inc. were appointed for the 2015/2016 financial year audit.
Mhlathuze Water opted to implement GRAP (Generally Recognised Accounting Practice for the year ended 30 June 2016 as a result of the withdrawal of SA GAAP from 1 December 2012.
There were no material differences in the financial statement upon transition to GRAP, due to the fact that accounting policies applied with SA GAAP are not materially different to those applied under GRAP.
MW received a Unqualified (Clean) Audit Opinion for the 2015/2016 year.
All internal controls were considered as relevant.

3. Corporate Performance Scorecard 2015/16
Performance objective
Outcome/
Impact
Performance Indicator
Projected
Target 2015/2016
Actual
2015/2016
Comments
Performance Perspective
Organisational Efficiency and Effectiveness 1.
Bulk potable water quality compliance
Water quality standards met
Test results, SANS 241
95%
100%
Target exceeded. 2.
Manage avoidable water losses
Reduced avoidable water losses in treatment and distribution systems
Avoidable water lost as a percentage of water produced
<5% 3%
Within target. 3.
Reliability of supply
No unplanned interruptions to bulk supply exceeding 24 hours
Number of day’s supply interrupted as a % of possible supply days
<1%
0.54%
Target met. 4.
Increased 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%
85%

4. Corporate Performance Scorecard 2015/16
Performance objective
Outcome/
Impact
Performance Indicator
Projected
Target 2015/2016
Actual
2015/2016
Comments
Performance perspective
Financial Performance 5
Financial Reporting compliance
Unqualified audit report
Annual external Audit
Unqualified report with no matters of emphasis (Clean audit)
Target met. 6
Improve Key Financial Ratios
Improved viability and sustainability
Current ratio
1.60
1.84
Target exceeded
Gross surplus margin % (primary activity)
78%
85%
Gross surplus margin % (secondary activity) 6%
26%
% Net surplus margin (primary activity)
13%
16%
% Net surplus margin (secondary activity)  1%
Within Target
Debt Equity
0.37
0.32
Return on Assets 7%
7.75% 
Target met

5. Corporate Performance Scorecard 2015/16
Performance objective
Outcome/
Impact
Performance Indicator
Projected
Target 2015/2016
Actual
2015/2016
Comments
Performance perspective
Financial Performance 6
Improve Key Financial Ratios (continued)
Improved viability and sustainability
Return on Assets 7%
7.75% 
Target met
Number of debtors days
45 days
41 days
Target exceeded
Repairs and maintenance as % of PPE and Investment Property (Carrying Value) 3%
3.80%
Staff remuneration as % of total operating expenditure
13%
14%
Target not met due to increase of internship by 42% which is recoverable from SETA. 7
Increase BBBEE expenditure relative to operational projects
Spend increased and increased new entrants awarded contracts in the financial year
% Spend
New entrants
51%    10
68.45% 14

6. Corporate Performance Scorecard 2015/16 cont..
Performance objective
Outcome/
Impact
Performance Indicator
Projected
Target 2015/2016
Actual
2015/2016
Comments
Performance perspective
Financial Performance 8
Manage costs within the approved budget
Actual expenditure compared with budgeted expenditure for the year
Financial reports
+5% or -5%
+4.91%
Within target 9
Capital Expenditure
Infrastructure available to meet demands
Overall project expenditure within Rand target
80%  
83%
Target exceeded
Overall project completion dates within targets 
85%
91%
Target exceeded. 10
Engagement in secondary activities
Growth in turnover from secondary activities
% of total turnover
54%
60%

7. Corporate Performance Scorecard 2015/16 cont..
Performance objective
Outcome/
Impact
Performance Indicator
Projected
Target 2015/2016
Actual
2015/2016
Comments
Performance perspective
Customer/Stakeholder Interaction 11
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 12
Implementation of ministerial directives
New ministerial directives issued are implemented on time
Progress against implementation plan
80%
91.50%
Target exceeded 13
Support rural development
Total number of identified Municipalities supported
Signed contracts, MOU’s etc 2 1
Target not met due to discussions with other municipalities not being successful within the timeline 14
Achieve statutory reporting compliance
All statutory reports submitted on time
Submission dates met

8. Corporate Performance Scorecard 2015/16 cont..
Performance objective
Outcome/
Impact
Performance Indicator
Projected
Target 2015/2016
Actual
2015/2016
Comments
Performance perspective
Organisational Capacity 15
Staff levels
Optimal staff retention
Staff turnover 8%
4.34%
Within target 16
Training and skills development
Skills and capacity building
Learnerships 12
Target exceeded
Bursaries employees
Graduate Programmes 24 4 30 3
Target not met due to 2 resignations 17
Jobs created
Permanent and contract (direct)
Total number 5
Target not met due to moratorium on the filling of new positions.

9. Corporate Performance Scorecard 2015/16 cont..
Performance objective
Outcome/
Impact
Performance Indicator
Projected
Target 2015/2016
Actual
2015/2016
Comments
Performance perspective
General Performance
Board effectiveness
Improved performance of fiduciary duties/governance
Board Member attendance of all Board/committee meetings
80%
75.41%
Target not met due to meetings being rescheduled at short notice.
Decision making: % number resolutions taken by the board vs number of resolutions required
87.80%
Target exceeded
Effective internal controls and risk management
Internal audit findings dealt with
Internal audit reports
<3 2
Within target.
Within target
Good governance
Improved controls and risk mitigation
Breaches of materiality and significance framework
<5

10. Corporate Performance Scorecard 2015/16 cont..
Performance objective
Outcome/
Impact
Performance Indicator
Projected
Target 2015/2016
Actual
2015/2016
Comments
Performance perspective
General Performance
Corporate social responsibility initiatives
Good corporate citizenship
Number of initiatives undertaken 5 7
Target exceeded
Health and Safety within working environment
Reduced number of disabling injuries
Number of disabling injuries
1.75
0.26
Within target

11. Operating Performance
The current year operating surplus decreased by 1% from the prior year mainly due to the 32% increase in electricity costs. The surplus for the year reflects an increase of 63% from the previous year due to assets which were sold to DWS at the Thukela-Goedertrouw Scheme for R57 million.

12. Statement of Financial Performance for the year ended 30 June 2016
The statement of Financial Performance below indicates the movement in revenue and expenditure and gives the % increase or decrease for all different categories for the prior and the current year.

13. Bulk water volumes
Bulk water volumes decreased overall by 7% mainly due to the drought restrictions that were imposed by the Department of Water and Sanitation and the City of uMhlathuze on water usage.

14. Bulk Waste water volumes
Bulk Waste water volumes remained fairly constant for the years and is based on contracted demands. When customers exceed their daily demand limits they are charged and excess demand tariff, and the extra volumes are added to the contracted volumes.

15. Revenue
Sale of goods and services reflects and increase of 7% mainly due to the 7% tariff increase and are categorised under three business segments, namely Bulk water, Waste water and Other activities. The graph below indicates the percentage of involvement in each business segment.

16. External Projects (not reflecting in the Statement of Financial Performance)
Apart from its Primary activities Mhlathuze Water administers External Projects (Section 30 activities) for various government Institutions to the value of R426 million in the 2016 financial year. The costs are fully recovered from these departments.

17. Expenditure
Total overall expenditure increased by 8%, which is mainly due to electricity cost increased by 32%. The increase from Eskom imposed by NERSA, as well as the increase from the City of uMhlathuze was included. The Tugela Goedertrouw Scheme is running at full capacity due to the drought in the KwaZulu-Natal area.

18. Statement of Financial Position as at 30 June 2016.

19. Statement of Financial Position as at 30 June 2016.
Total Assets increased by 15% from the prior year.
The two biggest contributors were:-
Receivables from exchange transactions which increased by 29 % due to Section 30 activities as compared the previous year.
Property plant and equipment that increased by 13%.
The four major projects acquired in the year are:-
a) Nsezi Balancing reservoir R37,5 million
b) 2nd Balancing reservoir R35,4 million
c) City of uMhlathuze Pump upgrade R8,1 million
d) Nsezi WTP Empangeni Pump Station R8 million

20. Statement of Financial Position as at 30 June 2016.
Liabilities Current liabilities increased by 21% due to the increase in section 30 activities under Payables from exchange transactions. Non current liabilities decreased by 13% mainly due to loan repayments on the two fixed term loans from Nedbank and Rand Merchant Bank which is repayable bi-annually.

21. Supply Chain Management
Total spend on goods and services for the 2015/2016 financial year was R839 million, of which R574 million (68.45%) was spent with companies that are more than 51% black-owned, and R162 million (19.30%) was spent on empowered companies. The target for 2015/2016 was 51% of discretionary spend and the actual achieved was 68.45% as per the graph below.

22. Employment Equity profile as at 30 June 2016
This year, our recruitment and retention strategies have continued to focus on employment equity. The number of female employees has shown a slight increase on the previous year: 46% to 47% in 2015/2016. There are 1.69% of employees who have indicated that they have a disability; compared to 2.81% in the previous year. More efforts are being made to continue to improve on these statistics by refining our recruitment and retention strategies and tactics.

23. MID-YEAR PERFORMANCE 2015/2016
Surplus of R45,1 million comparing to budgeted
surplus of R18,9 million, positive variance of R26,2 million.
Complied with water quality standards.
100% reliability of supply, no unplanned interruptions.
74% of Ministerial directives implemented.
Current ratio (liquidity) 2.52 against 2.33 target.
Return on assets 8.14% against 4% target.
B-BBEE of 76.79% against 51% target.

24. MID-YEAR PERFORMANCE 2015/2016
HR TARGETS
Staff turnover 1.32%, target of 8%, positive variance of 6.68%
Disabling Injury Frequency Rate (DIFR) 0.24 target 0.75.
Capital Expenditure
Capital expenditure at 22.26% (R36,6 million) of budget. Total committed 19.04% (R31,3 million) (Total Budget R164million)

25. Unqualified audit (Clean audit)
ACHIEVEMENTS
Unqualified audit (Clean audit)
CHALLENGES
The 2015/2016 year was dominated by the drought crisis – Level 4 restrictions were implemented.
National Treasury (NT) delay in approving Borrowing limits
NT did not approve the original application on Borrowing limits, which can lead to Funding constraints and delay Capital Infrastructure programmes