1. Annual report for the 2015/16 financial year
Magalies Water
PRESENTATION TITLE
Presented by:
Name Surname
Directorate
Date

2. CONTENTS
Part 1: Overview of financial performance
Part 2: Overview of non-financial performance
Part 3: Tariff management
Part 4: Kgetleng Rivier Local Municipality drought relief measures

3. Part 1: overview of financial performance

4. Statement of financial performance – audited outcomes: 30 June 2016
2015
Variance
REVENUE
Revenue from exchange transactions
10%
EXPENDITURE
Employee benefits costs
15%
Operating expenditure
11%
Depreciation, armotisation and impairment
29 413
32 984
-12%
SURPLUS
34 330
35 160
-2%

5. Statement of Financial Position – Audited outcomes: 30 June 2016
2015
Variance
ASSETS
Current Assets
Cash and cash equivalents
36 412
17 130
53%
Receivables from exchange transactions
-46%
Financial Assets
-76%
Inventory
23 153
22 037 5%
Non-current Assets
Property Plant and Equipment
18%
Intangible Assets
40 877
19 387
Total Assets 9%
LIABILITIES
14%
Current Liabilities
10%
Payables from exchange transactions
Non-current liabilities
15%
Financial Liabilities: Deferred Income
EQUITY 4%
Accumulated Surplus
Total equity and liabilities

6. Key financial ratios 2016 2015 Commentary Liquidity: Current Ratio 1.6
2.3
Liquidity decreased due to collections from debtors and funds utilised for capex programme.
Cash generated from operations
R217million
R130million
Positive cash was generated by Magalies Water from its own operations
Debtors days
50 days
62 days
Reduction in creditors days was mainly due to collection from debtors, especially the Department of Water and Sanitation
Creditors days
27 days
46 days
Processes for timely payments of creditors were instituted.
Return on Equity 4% 5%
Magalies Water profitably traded from its own operations

7. Analysis of expenditure
Compensation of employees
30.5%
Goods & services
69.5%

8. Analysis of Irregular expenditure
(a) Non compliance with Procurement Policy: R3million incurred without following compliance to the procurement policy. Employees implicated have been subjected to disciplinary hearings
(b) CIDB Regulation not complied with in awarding the contract: R3.4million incurred in the 2015/16 financial year. The contract was evaluated in three phases and awarded to a single contractor in This irregular expenditure was first reported in the 2013/14 financial year and therefore successively reported from the previous financial years
(c) Non compliance with delegations of authority: R9million was incurred and relates to a contract that was paid over the original contract value. This expenditure was first reported in the 2013/14 financial year and therefore successively reported from the previous financial years.
(d) Non compliance with Preferential Procurement Regulations: R50.5million was incurred in the 2015/16 financial year. This irregular expenditure was first identified in the 2014/15 financial year and thus successively reported from the prior financial year. Various Bid Committees have been trained in technical aspect of the Preferential Procurement Regulations
No financial losses were suffered by Magalies Water in the conduct of above transactions

9. Fruitless and Wasteful Expenditure
2015/16
2014/15
R'000
Opening balance 5
Fruitless and wasteful expenditure – relating to current year 4 46
Fruitless and wasteful expenditure condoned during the financial year
(51)
Fruitless and wasteful expenditure relates to a supplier who charged interest on account. This was due to technical challenges encountered during implementation of the SAP system

10. OVERVIEW OF audit report

11. Analysis: Audit Opinion
2011/12
2012/13
2013/14
2014/15
2015/16
Unqualified
Number of matters raised in the management letter - annually

12. Part 2: overview of non-financial performance (PERFORMANCE AGAINST THE SHAreholder compact)

13. Analysis: achievement of the strategic oriented goals

14. Analysis of performance-Customer and Stakeholder perspective
Performance Objective
Indicators
Target: 2015/16
Actual Performance: 2015/16
Achievement indicator
Water quality compliance
Test results, SANS 241
Acute health-100%
Chronic health-97%
Operational-95%
Aesthetic -95%
Acute %
Chronic health – 99.5%
Operational -95.7%
Aesthetic – 96.6%
Non-revenue water
Water lost as a % of total water produced 5%
5.9%
Reliability of supply
% number of days supply disrupted / total number supply days 0%
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)

15. Analysis of performance-Customer and Stakeholder perspective
Performance Objective
Indicators
Target: 2015/16
Actual Performance: 2015/16
Achievement indicator
Increased access to services
Actual spend on expansion related projects (initiatives by the Minister as a % of budget)
50%
43%
Bulk supply agreements concluded with municipalities
% municipalities with bulk supply agreements
100%
Implementation of ministerial directives
% progress against implementation plan
Achieve statutory reporting compliance
% submission dates met
Partially achieved
(50 – 99%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)

16. Analysis of performance-Finance perspective
Performance Objective
Indicators
Target: 2015/16
Actual Performance: 2015/16
Achievement indicator
Improve financial ratios
Current ratio 2
1.6
Gross profit margin
17%
Net profit margin
12%
Return on Assets 5% 4%
Debtors days
50 days
Repairs and maintenance as % of PPE
5.3%
Staff costs as a % of operating expenditure
33%
30%
Financial reporting compliance
Unqualified Audit report
Unqualified opinion
Increase operational expenditure in relation to operational projects
% of operation expenditure awarded to SMME
20%
27%
Manage costs within the approved budget
Expenditure variance
10% 9%
Engagement in secondary activities
% of total turnover 6%
Capital expenditure programme
Overall capital projects completion milestone within target
100%
65%
Partially achieved
(50 – 99%)
Achieved
(100%)
Partially achieved
(50 – 99%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Partially achieved
(50 – 99%)

17. Analysis of performance-Processes perspective
Performance Objective
Indicators
Target: 2015/16
Actual Performance: 2015/16
Achievement indicator
Board effectiveness
% Board members attendance of all Board/Committee meetings
100%
96%
Decision making:%number of resolutions vs number of resolutions required
Effective internal controls and risk management
Number of internal audit findings
0 Repeat findings
0 Unresolved findings
Good governance
Breaches of materiality and significance framework
0 breaches of materiality and significance framework
Corporate Social Responsibility
Number of initiatives undertaken
6 CSI programmes
Partially achieved
(50 – 99%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)

18. Analysis of performance-Learning and Growth perspective
Performance Objective
Indicators
Target: 2015/16
Actual Performance: 2015/16
Achievement Indicator
Staff levels
Staff turnover 3%
1.32%
Jobs Created
Total Number-Direct 24 22
Total Number-Indirect
500
259
Training and skills development
Training courses, learner-ships, bursaries
Internal and external bursaries-30
Internships-10
Learnerships-20
Internal and external bursaries-36
Increase BBBEE spend
% of contracts awarded to black owned companies awarded on the capital expenditure
30%
43%
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)
Achieved
(100%)

19. Performance Indicators not achieved
Performance Objective
Indicators
Target: 2015/16
Actual Performance: 2015/16
Factors that contributed to partial achievement of performance objectives
Capital expenditure programme
Overall projects expenditure to budget
92%
39%
Project expenditure and milestones were not met due to funding shortfalls as funding was not available to carry out the committed capital expenditure budget to an amount of R1 billion. Projects milestones and expenditure were however prioritised on the basis of available funding to an amount of R395 million which was fully utilised for the financial year. A funding model, which is aligned to
the capital expansion master plan and budget will be
implemented in the 2016/17 financial year.

20. Part 3: TARIFF MANAGEMENT

21. Funding Philosophy Magalies Water is a self-funding entity
No reliance on National Government Grants or Subsidies for operations
The entity operates on a commercial basis
Has adequate reserves to continue as a going concern

22. Considerations in determination of tariffs
National Water Pricing Strategy - The increases in the price of raw water are determined by the DWS in terms of the Raw Water Pricing Strategy.
Affordability to end users
Financial sustainability to ensure recovery of operations and maintenance costs
Capital tariffs to make provision for current and future capital expansion
Cost drivers informing the tariffs are competitive, and are determined by the market forces - prevailing economic conditions have been considered in determining the tariffs
Inflation targeting – The inflation rate has been taken into account

23. Tariff determination process
Tariffs are indicative of operational and prevailing economic conditions
The tariff structure consists of operations and maintenance component and capital tariff
Tariffs are scheme based and independently determined per bulk water scheme on four bulk water schemes owned by Magalies Water
Affordability to end consumer is considered through harvesting of efficiencies in our operations
Consultation processes is carried out with customers in compliance with Section 42 of the MFMA
Written comments received from the WSA’s and other stakeholders are taken into account

24. Proposed tariffs – 2017/18 Plant Tariff-2016/17 R/KL % increase
Vaalkop
5.28
11.63%
5.79
9.66%
Klipdrift
6.33
12.08%
6.98
10.27%
Wallmannsthal
8.38
12.33%
9.93
9.67%
Cullinan
6.02
9.65%
6.57
9.14%

25. Part 4: Kgetleng Rivier Local Municipality drought relief measures

26. Background of the intervention
Swartruggens and Borolelo are supplied with potable water from the Swartruggens Water Treatment Plant (WTP)
The demand from the dam exceeds the yield of the dam and the area runs out of water during the dry season of every year
Dam is silted up and constructed in an area where slate or mudstone dominates the geology of the basin hence the dam leaks

27. Water Demand Projections – sourced from census 2011
Average annual daily demand:
250ℓ per capita for formal areas; and
125ℓ per capita for informal
Summer peak factor of 1.5
20 % allowance for losses and unaccounted for water.
Overall seasonal peak demand is equal to 4.5 Mℓ/d
DWS all town study – 5 Mℓ/d

28. Long Term Solution

29. Medium Term Solutions Importing raw water from the Lindleyspoort Dam
Increasing the storage of the Swartruggens Dam to increase the safe yield
Importing water from the dolomite areas some 40 km to the south of town; and
Re-using treated sewage effluent

30. Dolomitic Water Import water from the dolomites; and
Augment raw water supply at the Swartruggens Dam
Quick solution – Can take approximately 4 months to implement
Water tested – positive results (quality & quantity)
Pipeline designs completed
Land issues resolved
EIA Authorisation
Implementation ready

31. Source Development

32. Route Analysis
Route A (Preferred): makes use of the shortest path, gravitating water from the dolomite area to the Swartruggens Water Treatment Works.
Route B: using an alternative route, the water has to be pumped for the first half where after the water gravitates to the Swartruggens Water Treatment Works with the ability to gravitate water to Mazista. more input energy from the boreholes. It was calculated that the first 20km of the pipeline will have to be pumped. The additional energy required was calculated at 40.57Kw.

33. Hydraulic Analysis
Dynamic Pressure (m)

34. Hydraulic Analysis
Option 1 - A combination of GRP PN10 (22km) and PN25 (13km) material
Option 2 - A combination of GRP PN 10 (32,5km) and PN25 (1,5km) material including a Pressure reducing valve
Option 3 – A combination of uPVC (22km) and oPVC PN 25 (13km); and
Option 4 – uPVC the entire route including a pressure reducing valve

35. Total project cost estimates for the four options
22km PN10 GRP 13km PN25 GRP
32.5km PN10 GRP 1.5km PN25 GRP Pressure reducing valve
22km Class 9 uPVC 13km PN25 oPVC
32.5km Class 9 uPVC 1.5km Class 16 uPVC Pressure reducing valve
Total Construction Value (excl. VAT)
R129,640,752
R122,091,088
R112,067,952
R110,095,888
Professional Fees and Disbursements
R22,108,089
R21,017,162
R19,568,819
R19,283,856
Total Project Value (excl. VAT)
R151,784,841
R143,108,250
R131,636,771
R129,379,744
Total Project Value (Incl. VAT)
R173,000,000
R163,150,000
R150,070,000
R147,500,000

36. Thank you