1. Annual Report for the 2016/17 Financial Year
Magalies Water Board
PRESENTATION TITLE
Presented by:
Name Surname
Directorate
Date

2. CONTENTS
Part 1: Overview of Financial Performance
1.1. Overview of the Audit Report
Part 2: Overview of Non-Financial Performance
Part 3: Tariff Management

3. Part 1: overview of financial performance

4. Statement of financial performance – audited outcomes: 30 June 2017
2016
Variance
R ’000 %
REVENUE
Revenue from exchange transactions
17%
EXPENDITURE
Employee Costs
13%
Cost of Sales
-9%
Operating Expenditure
-18%%
Depreciation, Amortisation and Impairment
52 469
35 215
48%
SURPLUS
95 270
50 977
86%

5. Statement of Financial Position – Audited outcomes: 30 June 2016
2017
2016
Variance
R ’000 %
ASSETS
Cash and cash equivalents
30 174
36 412
-21%
Trade and Other Receivables
17%
Investments 4%
Inventory
22 380
23 153
-3%
Assets
27%
Total Assets
25%
LIABILITIES
Non-current liabilities
43%
EQUITY 7%
Total equity and liabilities

6. Key Financial Ratios Achieved Not Achieved 2017 2016 Commentary
Liquidity: Current Ratio 2
2.3
An amount equivalent to depreciation was transferred from Operations Bank Account to investments; a strategy used to optimally invest for future infrastructure CAPEX Replacement and/or Expansion Programmes.
Cash Generated from Operations
R585 mil
R217mil
Positive cash was generated from MWB operations
Average Debtors days
55 days
50 Days
The Average Debt Collections Days exceeded by 5 days; some Municipalities were sluggish in paying up. Ongoing Stakeholder engagements are intensified particularly because restrictions agreed upon are not yielding the desired outcome (payments). Secondary services to the relevant Municipalities shall continue.
Creditors days
30 Days
22 Days
MWB Controls have been effective
Return on Equity 8% 4%
MWB profitably traded from its own operations

7. Analysis of Expenditure

8. Analysis of Irregular Expenditure
Opening balance - 01 July
 145
 38 671
Irregular expenditure related to capital expenditure
41 156
63 094
Irregular expenditure related to procurement policy
466
3 039
Irregular expenditure identified during audit
4 616 -
46 383
Expenditure condoned during the year
(41 767)
( )
145
Irregular expenditure reported in the previous years but not condoned - R
(a) Non-compliance with Preferential Procurement Regulations Section 4 - R41 million
This R41 million was identified in the 2014/2015 financial year as an irregular expenditure on CAPEX; payments were made during the 2016/17 financial year. This the classification is in line with the definition of irregular expenditure in the National Treasury Guidelines.
(b) Non-compliance with Procurement Policy - R
This R relates to various procurement transactions on of goods and services without following proper procurement policy. The employees who transgressed the policies have been subjected to disciplinary process.
(c) Irregular expenditure identified during the audit – R3.19million.
No National Treasury approval was secured for the R3.19m worth of deviations as per the National Practice note 3 of 2016/2017.
A R1.07 million is flagged as irregular; the award process to the preferred bidder was found to be unfair.
An other R relates to the quotations where comparative schedules were done on amounts exclusive of VAT.
Investigation will be done in accordance with the National Treasury guideline and action will be taken against the employees who transgressed the regulations.

9. Fruitless and Wasteful Expenditure
Fruitless and wasteful expenditure incurred in the previous financial year was erroneously omitted for condonation.
2016/17
2015/17
R '000
Fruitless and wasteful expenditure
Opening balance - 01 July 4 -
Expenditure incurred during the year 2016/17

10. PART 1.1: OVERVIEW OF THE audit report

11. Analysis: Audit Opinion
Annual Trend: Matters Raised Through the Auditor’s Letter to Management
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
Unqualified

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
Achieved
Not Achieved
Objective
Indicators
Target: 2016/17
Actual: 2016/17
Achievement indicator
Water Quality Compliance
Bulk Potable Water quality compliance to SANS 241:2015 Standards
Acute 1 ≥ 97%
Acute 2 ≥ 97%
Chronic health ≥ 95%
Aesthetic ≥ 93%
Operational ≥ 93%
Acute 1 = 99.2%
Acute 2 = 99.2%
Chronic health = 99.3%
Aesthetic = 96.8%
Operational = 95.4%
Non-revenue Water
Percentage Average Water Losses
Plant <8%
Distribution <5%
Plant = 3.35%
Distribution = 3.38%
Reliability of Supply
Loss of Service Exceeding 48 Hrs
<15 days
0 days
Sales Volumes
Number of Kilolitres Sold
Kilolitres
Kilolitres
98,94% or 1,06% below Target

15. Analysis of Performance - Customer and Stakeholder Perspective
Achieved
Not Achieved
Performance Objective
Indicators
Target: 2016/17
Actual: 2016/17
Achievement Indicator
Increased Access to Services
Actual spend on expansion related projects (initiatives by the Minister as a % of Budget)
100% of the DWS allocated funding
61% of the DWS allocated funding
Due to 7 months’ work stoppage. Community Issues have since been resolved.
Municipalities
Bulk Supply Agreements concluded
% municipalities with bulk supply agreements
100%
Implementation of Ministerial Directives
% Progress against implementation plan 0%
Achieve Statutory Reporting Compliance
% Submission dates met

16. Analysis of Performance - Finance Perspective
Achieved
Not Achieved
Performance Objective
Indicators
Target: 2016/17
Actual : 2016/17
Achievement Indicator
Achieve Sustainable Financial Returns
Current Ratio 2
Gross Profit Margin
16%
24%
Net Profit Margin
10%
19%
Return on Assets 4% 5%
Debtors Days
50 days
55 days
Repairs & Maint. as % of PP& E
1.2% 3%
Staff Costs as a % of OPEX
<30%
29%
Compliance to Financial Reporting / Audit Report
Unqualified
Increase Operational Expenditure i.r.t Operational Projects
% of CAPEX Contracts awarded to BBBEE
40%
48%
Engagement in Secondary Activities
% of total turnover 0%
# Rural Municipalities Identified for Support
Signed MOUs 3
Capital expenditure programme
%Overall Capital Projects completed in target milestones
>90%
63%

17. Analysis of Performance - Processes Perspective
Achieved
Not Achieved
Performance Objective
Indicators
Target: 2016/17
Actual: 2016/17
Achievement Indicator
Board Effectiveness
% Board Members Meetings: Attendance to all Board / Committees
85%
96%
Decision making (Resolutions): % Required vs. Passed
100%
Effective Internal Controls & Risk Management
# Internal Audit Findings
0 Repeat
5 Unresolved
Good Governance
Breaches of Materiality & Significance Framework
0 Breaches
Corporate Social Responsibility
#Initiatives Undertaken
4 Programmes
8 Programmes

18. Analysis of Performance - Learning and Growth Perspective
Achieved
Not Achieved
Performance Objective
Indicators
Target: 2016/17
Actual: 2016/17
Achievement Indicator
Staff levels
Staff turnover
<3%
1.63%
Jobs Created
Total # Direct 20 41
Total # Indirect 50 90
Total # Graduate Programme 3 4
Training and Skills Development
Training Courses
Bursaries,
Internships,
Learner-ships,
Internal & External
Bursaries: 10
Internships:10
Learnerships
NQF Level 2: 10
NQF Level 3: 20
Internships: 11
NQF Level 3: 15
Safety of Employees
Disabling Injury Frequency Rate
<1
0.85
Increase BBBEE Spend 
% of CAPEX Contracts Awarded to BBBEE Companies
40%
48%

19. Part 3: TARIFF MANAGEMENT

20. Funding Philosophy Magalies Water Board is a Self-funding Entity
No reliance on National Government Grants or Subsidies for operations
The entity operates on a commercial business principles’ basis
Has adequate reserves to continue as a going concern Entity

21. Considerations in Tariffs Determination
Water Tariffs / Pricing: The increase in the price of raw water is determined in line with
the DWS’s National Raw Water Pricing Strategy.
National Treasury’s Inflation targeting parameters
Affordability of the End Users
MWB’s Financial sustainability i.e., costs of operations, maintenance of infrastructure, equipment and plants as well as the capital tariffs factors
Capital tariffs to make provision for current and future capital expansion
Cost drivers towards competitiveness, as informed by the market forces, i.e., consideration of the prevailing economic conditions.

22. Proposed tariffs – 2017/18
Proposed Tariffs adjustments for each of the four (4) MWB Schemes were as follows:
Plant
2017/18
R/KL %
Increase
2016/17
Vaalkop
5.79 9%
5.28
12%
Wallmannsthal
9.19
8.38
Klipdrift
6.98
10 %
6.33
Cullinan
6.57
6.02
10%

23. Tariffs Determination Process – 2017/18
Tariffs Adjustments for raw water took into account the inputs from the following elements
Consultation processes that were carried out with customers in compliance with Section 42 of the MFMA.
Incorporation of the written comments received from the WSA’s and other stakeholders into the decision making process.
End User affordability which is considered through the efficiencies extracted from our operations
In summary, MWB Tariffs are independently determined per MWB’s Bulk Water Scheme; four of them as shown in the previous slides.

24. CONCLUSION
MAGALIES WATER

25. SUMMARY – 2016/17 FIN. YR PERFORMANCE
Strategically, 88% of its pre-determined strategic objectives set for the year were achieved; an improvement for the previous year that - hopefully – all our stakeholders, are proud of.
Financially, we submitted to our Shareholder an unqualified audit and a ‘bankable’ R95mil this past financial year
Socio-economically (Learning and Growth) , through job creation, bursaries and other CSI-typical interventions, we nudged the plight of the poor – be it in terms of eradicating poverty, unemployment and others ills – towards achieving a prosperous South Africa, as part of the collective.
On our core process and people, safety in operations for all business partners and staff, property and planet earth have been prioritised. To our staff / critical assets, we kept to our mission to move our 0.85 DIFR recorded towards a zero in the near future; we rolled out some interventions to protect the environment further as well.
Underachievement dampened our spirits; but we are back on course. Water is life and we delivered 1,06% less ‘life’ / water than we planned; we are definitely not happy that we could not achieve our target. Communities are back on-board and through engagements, the 12% of unachieved strategies will be dealt with.

26. Thank you