1. BLOEM WATER ANNUAL REPORTING 2008/2009 AND 2010/2011 TARIFF INCREASES
PRESENTATION TO THE PORTFOLIO COMMITTEE ON
WATER & ENVIRONMENTAL AFFAIRS
4 May 2010
Presented by: Chairperson: Dr B Malakoane
Acting Chief Executive: Mr O Stadler

2. Contents Introduction Content Page Service Area Strategic Overview
Overview of Bloem Water
Achievements
Challenges
Financial Analysis
Process for Water Tariffs
Conclusion

3. Service Area

4. Strategic Overview Vision
Assuring sustainable provision of quality water services, for life!
Mission
By creating a leading, value-driven, effective and responsive Institution using adaptive best practice methods in anticipating tomorrow’s problems today

5. Strategic Overview (Continued)
Strategic Intent and Values
The strategic priorities and objectives (set to ensure the realisation of the strategic intent and Provincial goals and projects) are summarised as follows:
Ensure universal access to safe and affordable basic water
To manage financial affairs to meet current and future obligations
Build, operate and maintain infrastructure
Ensuring sustainable and equitable water resources management
Transformation
Aligned and effective institution
Pursuing African advancement and enhanced International cooperation and redevelopment

6. Overview of Bloem Water
In referring to the Board, Bloem Water has a fully functional Board as well as Board Committees in place exercising oversight and providing strategic direction to the organization.
Operational effectiveness: Effectiveness in Bloem Water has been achieved by focussing on quality assurance, cost management and delivery systems with the aim of fostering continuous improvement and the constant evaluation thereof.
Bloem Water is committed to the funding of water quality management and related projects. The aim is to extend this reputation by taking on additional responsibility in support of DWA and assisting municipalities through value added customer service, problem resolution and extensive involvement in identified support programs. These programs shall be extensive enough to include various investment programs in corporate social investment and youth development, via various educational projects.
A transformation strategy was developed and approved by the Board. The roll out plan is envisaged to be finalised by June 2010.
The Board is of the view that as a Water Board, Bloem Water will be capable of playing a critical, pivotal and vital role in developing the capacity of water services authorities as well as municipal water service providers.

7. Overview of Bloem Water (Continued)
Areas of service – Central and Southern Free State
Local Municipalities
- Mangaung
- Kopanong
- Mantsopa
- Naledi
District Municipalities
- Motheo
- Xhariep

8. Achievements Provide potable water on a continuous basis
Proper implementation of preventative maintenance programs
Proper and timely implementation of demand and CAPEX plans
Improve the ratio of assets to water provision
Render support services to stakeholders, eg IA projects, Community projects
Render water supply chain services to/with stakeholders through partnerships
Skills development initiatives internally and externally

9. Challenges Outstanding Municipal Debt
- Mangaung Local Municipality (R30 mil)
- Naledi Local Municipality (R12 mil)
CAPEX and Operational Demands
- Directive to reduce tariff increase by 5% during 09/10 impacts on future requirements
Future Volume Demands
- WSA not pro active and limited
consultation

10. Challenges (Continued)
Funding to Local Municipalities
- WSP to render support in water services
- Legislative Compliance
Operation and Maintenance
- Welbedacht Dam Siltation and Tienfontein Pump station (Water Quality)

11. Financial Analysis External Audit Report
- No Qualification
- Opinion that financial statements presents the financial position
Overview of financial performance for period 1 July 2008 to 30 June 2009:
Income Statement
- Income lower than contractual requirements and budget
- Expenditure aligned to treated volumes and budget
- Finance revenue inflated by interest charges on debtors.
- Finance cost aligned to budget.
Balance Sheet
- Non current assets marginally lower than budget as not all CAPEX projects were concluded
- Current assets marginally higher than budget as funding is committed for CAPEX projects (current and future)
- Non current liabilities aligned with budget
- Current liabilities aligned with budget
Proposed tariff in respect of projected inflation at the time of the consultation process – catered for payment of existing loan obligations and capex requirements required for the business plan period of a 5 year horizon. Tariff structuring also takes cognizance of low economic activities in certain areas eg Gariep, Naledi, 008/08- 4,9% tariff increase.

12. Financial Analysis (Continued)
Indicators and Financial Actions
- Continued Solvency
- Ongoing Liquidity
- Remain a Going Concern
- Debtors position worsened
- Cash position remained stable
- Debt ratios remained high due to CAPEX requirements
- Water sales lower than budgeted for
- Streamlining of the pension fund in terms of Funding the deficit
Net profit of R44,2 million, of which R42,8 million was transferred to capital replacement and development fund as well as the insurance fund.

13. Process for Water Tariffs
Bloem Water conducted a budget process whereby the Board mandated management to consult with its municipal clients as required by Section 42 of the MFMA.
The consultation process resulted in municipalities agreeing to a 10% increase and above.
Following the above, consultation with National Treasury and DWA resulted in the acceptance of a 10% increase on tariffs.
- Tariff increase for 2010/11 in Shareholders Compact reflected increase of 7% but was before the Minister of Water and Environmental Affairs directive to reduce tariff for 2009/10 by 5% (15,3% to 10,3%).
- Expected increases for inflation is higher, O & M expenditure higher, e.g. electricity, chemicals, raw water, etc.

14. Process for Water Tariffs (Continued)
The implication of the above incorporates and encapsulates inter alia the following:
- An increase in the raw water cost of up to 12,9%
- An increase in chemical cost: 20%
- An increase in electricity cost: 30%
- CAPEX: The proposed tariff resulted in the downscaling of required CAPEX projects in relation to future years. It impacts on National Treasury requirements regarding the debt service ratios – disallowing Bloem Water to obtain foreign funding the debt service ratio of above 25%

15. Conclusion
In the year under review Bloem Water has become even more responsive to municipal needs with regional offices becoming more proactive in problem resolution and improving support and services to Municipalities as well as extensive customer service and satisfaction. In many instances we are going beyond our mandate of being a bulk services provider only to also playing a role in supporting municipalities with operational issues from a reticulation perspective as the sustainability of municipal services is key to our functioning as well as being essential to the communities we serve.
Bloem Water’s future remains contingent both on the willingness of actors within and outside to continue to search for better ways of working together and on the availability of resources upon which these agents of change are able to draw- both financial and human – thus the continued efforts at ensuring financial viability and the introduction of extensive learnership and on the job training programmes to ensure the continued development of human resources both within Bloem Water and at municipal level.
There are exciting possibilities which all our stakeholders ought to embrace and unite in the realisation of our public service mandate.
Questions:
Honorable member Arendse- how are we dealing with capex expenditure challenges
We requested and tariff approved – however NT worried about our finances – treasury concern –how did we get to it- explain!
Have we been requested to assist in what we doing well
Money received for attending board meetings by board members
Depreciation – how many of the pipelines are older than 35 years.
WSA good deals re – yes thru tariff s
Requested assistance from dept?
Multi-stakeholder forums- sound exciting and do we receive support and if so in what form
Debt payment ratio – what are we doing-
Poor people management is the people problem solved
Profits- what are the plans made to spend the profits?
Water is vrot- assist with the statements made –how do we arrive at a situation where these statements are made.