1. MAGALIES WATER 2004/5 FINANCIAL AND CORPORATE PERFORMANCE
Presentation to Parliament 24 March 2006

2. TABLE OF CONTENTS Introduction Vision and Mission
Area of Supply and Operations
Current Activities and Projects
Major Achievements in 2004/5
Mechanisms to achieve and strengthen service delivery
Strategic Challenges faced by the Board and plans to overcome them

3. TABLE OF CONTENTS
Future Planning and the Strategic Plan of Magalies Water for 2005/6 and going forward
Implications of the President’s 2005/6 State of the Nation address on Magalies Water’s service delivery
Financial Performance

4. “TO BE THE LEADING PROVIDER OF QUALITY WATER SERVICES”
MAGALIES WATER VISION
The VISION of Magalies Water
is to
“TO BE THE LEADING PROVIDER OF
QUALITY WATER SERVICES”
35 Years of Existence

5. AREA OF SUPPLY AND OPERATIONS
Magalies Water has been a provider of high quality water for over 35 years and continues to maintain this standard. This was achieved as a result of well established relationships with our Stakeholders as well as Benchmarking our services with international standards and players.

6. AREA OF SUPPLY AND OPERATIONS
North West Province
Limpopo Province
Gauteng Province
km² in three provinces

7. MAGALIES WATER AREA OF SUPPLY
Limpopo
NorthWest
Gauteng

8. MUNICIPAL DEMOGRAPHICS
STANDS
POPULATION
TOTAL
2005/6
URBAN
PERI-URBAN
RURAL
(Population)
Moretele LM
40 000
11 600
69 600
Madibeng LM
6 500
7 900
32 500
47 400
79 900
Moses Kotane LM
2 520
18 450
10 917
12 600
92 250
65 502
Rustenburg LM
2 500
7 700
800
14 800
Rustenburg LM (Bulk)
Thabazimbi LM
27 798
Tshwane Metro
33 000
17 500
1 300
17 800
Nokeng-Tsa- Taemane LM
32 634
BelaBela LM
45 450
Modimolle LM
31 584
Bulk Consumers
1 602
Total:
TABLE 1:

9. TOTAL NUMBER OF CONSUMERS FOR THE 5 LARGEST MUNICIPALITIES
TABLE 2:

10. KEY SERVICE AGREEMENTS
MUNICIPALITIES
Thabazimbi Local Municipality
Modimolle Local Municipality
Bela-Bela Local Municipality
Rustenburg Local Municipality
Nokeng Tsa Taemane Local Municipality
Moses Kotane Local Municipality
Madibeng Local Municipality
Moretele Local Municipality
City of Tshwane Metro - Temba and Hammanskraal areas (Bulk and Retail Services)
OTHER CONSUMERS
Amandelbult Platinum Mine
Swartklip Platinum Mine
Rhino Andalusite Mine
Bafokeng Rasimone Platinum Mine
Premier Mine
Royal Bafokeng Administration
Northam Platinum Mine

11. KEY SERVICE AGREEMENTS ….
Rand Water
Sun City Hotel
Carousel Hotel
Pretoria Portland Cement (PPC)
Zonderwater Correctional Services
Baviaanspoort Correctional Service
Agricultural Research Institute
Hydrological Research Institute

12. OPERATIONAL PERFORMANCE
AND
ACTIVITIES/PROJECTS

13. ACTIVITIES/PROJECTS
Magalies Water subscribes to the views of DWAF that water is a scarce commodity in South Africa and that the construction of expensive new schemes can be eliminated or at least be postponed through the implementation of water conservation and demand management measures. Water conservation and demand management measures implemented by Magalies Water include the following:
Setting of maximum allocations for higher classes of consumers.
Communicating with consumers to make them aware of the need to restrict water consumption.
Actively monitoring and controlling water-network losses and UFW.

14. ACTIVITIES/PROJECTS (Cont…)
During the year under review, Magalies Water has contained water tariff increases between 0% - 6.8% within previously set targets without compromising the financial sustainability of the organisation.
Despite challenges faced due to external factors such as deteriorating raw water quality and drought, operational costs are being contained and attempts are made to manage increases in the future.
Time frames on an annual basis are currently established in order to assess the implementation of the strategies as well as evaluate progress on the set goals.

15. ACTIVITIES/PROJECTS (cont..)
The Magalies Water Board has established a Central Laboratory Facility with a view to provide quality monitoring of potable water to all municipalities in its service area. It also has the capability for the monitoring of sanitation plants;
The Board has entered into partnerships with a number of municipalities for the operation of bulk potable water and sewage plants.
The abovementioned efforts are viewed against the background of the Constitutional obligation of WSA’s to provide water services; requirements of the MFMA.
Table 3 Below– Outlines current Sanitation Projects

16. SANITATION PROJECTS 2005-2010 TABLE 3 Scenario Disposal scheme
Population
Unit discharge
Industrial discharge
Total discharge
Including 10% infiltration
Total industrial reuse
(year end)
(persons)
(l/c/day)
(Ml/day)
Rustenburg STW
2005
210
6.2
35.5 9
2010
8.2
45.4 20
Boitekong STW
72 114 95 -
7.5
87 573
9.2
TABLE 3
Approximately consumers are currently served through the Sanitation System

17. COMMUNITY WATER SUPPLY & SANITATION PROGRAMME & PROJECTS
Magalies Water has assisted Municipalities with the implementation of its refurbishment projects – transfer of assets. Project at Danhouse, Sespond and One-and-Ten villages in Moretele was successfully implemented during March 2005.
Other projects include the following:
A number of projects were implemented in 2005 co-operation with both Local- & District Municipalities. Subject to funding, these projects will be carried forward to subsequent years:
Basic sanitation: Ratjiepane, Moretele R2.0 mil
Basic sanitation: Mabeskraal Moses Kotane R3.5 mil
Basic sanitation: Boitekong Rustenburg R1.5 mil
Basic Water: Disteneng Moretele R1.26 mil
Basic Water: Cyferskuil Moretele R0.3 mil
Basic Water: Tweelaagte Moses Kotane R1.4 mil
Basic water: Bapong Moses Kotane R1.2 mil
Source Augmentation: Derby Kgetleng River R2.02 mil
Installation of connections: Jericho Madibeng R1.6 mil
TOTAL = R14.78 Mill

18. COMMUNITY UPLIFTMENT PROJECTS
2005/6
Project Description
R/million
Upgrade La Patrie – Mabeskraal pipeline (Vaalkop) 12
Extension of Doornhoek – Ledig supply system (Vaalkop)
13,26
Construction of Kameelfontein reservoir at Wallmannsthal
7,5
Construction of Nokeng pipeline at Wallmannsthal 3
Upgrading of Cullinan school area booster pump station
0,4
TOTAL = R39.8 mill

19. INFRASTRUCTURE Excess of 1 500 km pipelines (including reticulation)
40 reservoirs with a total storage capacity in excess of 250Ml
Capital Infrastructure investment of +/- R800 million over the past 5 years
Capital Infrastructure expenditure approved in 2004/5 = R69 million
R149, 5 Mill to be spent over the next 5 years on pipeline and Infrastructure maintenance

20. MAJOR ACHIEVEMENTS IN 2004/5

21. MAJOR ACHIEVEMENTS IN 2004/5
Implementation of Future Corporate Strategy that focused on: (a) Appointment of New BEE Suppliers and Professional Service Providers
(b) Management Transformation - 50% of Executives are Currently HDI
Implementation of New Organisational Structure
ISO Accreditation in 2005
Balance Sheet improvement (Long term loan reduction of R107 mill)
Asset Management Improvement Plan (AMIP)
PMR Diamond Award (For Public Sector Entity Service Delivery)
Twinning Agreement with Nkana Water in Zambia

22. MAJOR ACHIEVEMENTS IN 2004/5
Successful participation in the R550 million RTWST project in 2005
Successful participation in the R250 million RWST project in 2005
Successful attainment of gender balance in Magalies Water
Unqualified financial report by Independent Auditor (Never qualified by the Auditor in 35 years)
Successful Involvement in the Water Loss Program in City of Tshwane Metro

23. MAJOR ACHIEVEMENTS IN 2004/5
Implementation of balanced tariff increases ranging between 0% - 6.8%
Signed MoU with Rand Water and Ikangala Water to service the WH Region of Bronkhorstspruit
Successfully established a Central Laboratory Facility thru purchasing the Rustenburg LM Lab for +/- R1mill
As implementing agent, successfully implemented DWAF projects to the value of R15 mill

24. MAJOR ACHIEVEMENTS IN 2004/5
Appointment as implementing agent for municipalities in establishing basic water services
Successful disbursement of the donation of R18 million which was made available to 4 Key Municipalities for Water Services Projects directed to Water Services Projects
Gold Award under Public Sector at Rustenburg Show and Exhibition

25. MECHANISMS TO STRENGTHEN SERVICE DELIVERY

26. MECHANISMS TO STRENGTHEN SERVICE DELIVERY
Partnering with other Water Boards or Water Utilities on Joint Ventures to identify the most effective Sanitation Models and Processes. This means Joint Task Teams would be established to conduct research and publish information regularly on findings.
Progressive cost reduction in operational expenses and settlement of long term debt, and passing benefits of economies to consumers
Vigorously pursuing relationships with WSA’s and fostering appointment as implementing agent in establishing basic water services inclusive of basic sanitation services;

27. MECHANISMS TO STRENGTHEN SERVICE DELIVERY
Assisting WSA’s in “Project Consolidate” initiatives through partnerships and secondment of selected personnel;
Utilisation of Water Forums and Other Stakeholder Relationship Management initiatives to address their concerns;
Acceleration of transformation and Equity / gender balance internally thereby boosting morale among staff
Deliberate encouragement and prodding of staff to further their education and learning – successful implementation of ABET (Out of 71 registered candidates, 47 were successful in various Levels of ABET Qualifications)
Increased Spend in Training and Development

28. STRATEGIC CHALLENGES FACED BY MAGALIES WATER AND PLANS TO OVERCOME THEM

29. STRATEGIC CHALLENGES FACED BY MW
Obtaining Support from DWAF regarding the above average / Inflation raw water tariff increases whilst the Water Board is expected to increase tariffs in line with Inflation targets
Need for the improvement of the fast deteriorating raw water quality in such catchments areas as the Hartebeestpoort and Roodeplaat dams
Finalisation of the WSA/WSP Service Level Agreements
Reduction of UFW in areas of operation
Managing the uncertainty created by the Institutional Reform process

30. STRATEGIC CHALLENGES FACED BY MW
Accelerating assistance offered to Municipalities to deal with “Project Consolidate” challenges
The Need to align and meet the challenges posed by the President in his 2006 State of the Nation address regarding water
Continuously ensuring that the quality of potable water produced and delivered remain quality consistent
Successfully managing the impact of HIV/AIDS at Magalies Water (Negotiating with ABSA for an Employee Support Program to assist MW in managing Voluntary disclosure)
Accelerating access of Sanitation to all consumers in MW areas of operation

31. STRATEGIC CHALLENGES FACED BY MW
Accelerating Transformation efforts to balance gender at all levels of management, as well as Disability
Maintaining and Improving employee and Customer satisfaction
Ensuring that the Business Development Division becomes fully functional and focused
Reduction of Operational Expenses
Maintaining tariff increases at inflation targeted levels

32. DEALING WITH STRATEGIC CHALLENGES
Efforts and Discussions already pursued with DWAF to limit future tariff increases to Inflation levels – a study already completed and submitted to DWAF to highlight this anomaly
Raw Water Deterioration – A study has been initiated and discussions currently pursued with DWAF to assist in the management of the Raw water relevant catchments
Finalisation of WSA/WSP Agreements – Draft Agreements have already been compiled and submitted to all affected WSA’s to finalise the contracts
UFW / Water Loss Management - Further projects such as the STIP Project in CTMM need to be initiated. Already other projects in Moses Kotane are being implemented

33. DEALING WITH STRATEGIC CHALLENGES
Institutional Reforms – continuous communication and information dissemination is currently performed and staff are regularly updated
Project Consolidate (PC) Assistance – Target teams and proposal development as well as laboratory services, among others are being undertaken to assist WSA’s in their efforts to deal with PC challenges
Quality Standards - The establishment of a Centralised Laboratory facility was primarily aimed at accelerating the testing of raw, potable and sewage water to ensure quality products
Sanitation access - MW as an Implementing agent is already engaged with DWAF and affected WSA’s to accelerate basic and advanced sanitation provisioning to affected communities

34. DEALING WITH STRATEGIC CHALLENGES
Customer Satisfaction – Surveys (both independent and MW driven) have been identified as the key to determination of customer satisfaction – the 2005 PMR Award for Service excellence is just but one driver
Employee Satisfaction – a Performance Management System has been introduced to reward key performers and to develop inadequate performers (Board members also trained)
The Training and Development spend has also been systematically increase to encourage personal development of staff
Reduction of Operational Expenses – Service providers and suppliers to MW are being systemically informed that MW would not accept increases above inflation – This is assisting tremendously in efforts to reduce OPEX

35. DEALING WITH STRATEGIC CHALLENGES
Reduction in OPEX – consolidation of business processes has been undertaken through the restructuring of the Organisational Structure in order to further reduce OPEX.
HIV/AIDS Management – Voluntary campaigns have been undertaken to date, including participation in national campaigns such as HIV/AIDS Week, World Aids day, etc
MW does not provide ARV’s nor is there a budget allocated for each beneficiary treatment. Plans are being made to establish a mobile clinic

36. FUTURE PLANNING FOR 2005/6 AND GOING FORWARD…

37. FUTURE PLANNING FOR 2005/6 AND GOING FORWARD…
Consolidating the new Organisational Structure and “milking” the benefits of consolidation to pass these to our consumers
Capacitating the Business Development Division so that it identifies viable projects and becomes profitable
Strengthening Magalies Water Capabilities in the Bulk Sanitation business
Preparing Strategic Plans for bulk supply in support of the municipalities WSDP’s especially in cases where the WSDP’s have not been completed;
Participating in the process of establishing WSDP’s of municipalities;

38. FUTURE PLANNING FOR 2005/6 AND GOING FORWARD…
Preparing Business Plans for extension of water services reticulation within villages;
Establishing community liaison committees in order to create relationships and to compile information on the most needy communities.
Aggressively pursuing the establishment of bulk water supply and O&M contracts with municipalities;
Pro-actively investigating the establishment of operating rules for raw water sources;

39. FUTURE PLANNING FOR 2005/6 AND GOING FORWARD…
Maintaining Water Forums with Municipalities and all Stakeholders in an effort to support them in their role as WSA’s;
Transfer of knowledge to Municipal Officials in an effort to equip them for their task as WSA’s; and to assist with “Project Consolidate”
Allocating Funding in order to conduct research on Water Conservation, Sanitation, establishment of Infra-structure to forward plan.
Establishing Organisation wide EWRM Models and Risk Scenarios in order to manage uncertainty

40. BEE PROCUREMENT

41. BEE PROCUREMENT The BEE spend between 2003 – 2005 is as follows: 2003
2004
2005
(Rm)
BEE Spend
R47,661 (48.4%)
R50,778
(44.1%)
R54,833
(47.2%)
Non BEE Spend
R50,765 (51.6%)
R64,354
(55.9%)
R61,136
( 52.8%)

42. IMPLICATIONS OF STATE OF NATION ADDRESS ON MW SERVICE DELIVERY

43. IMPLICATIONS OF STATE OF NATION ADDRESS
Through our Implementing Agency status for the WSA’s, MW facilitates the eradication and acceleration of access to Sanitation to meet the 2007 ASGISA goals
Transfer of skills to Local Government – via the Rustenburg Infrastructure Management Project – to accelerate Project Consolidate deliverables
Working with Provincial Government in attaining the goals of the Provincial Growth & Development Strategy (PGDS) – Member of Infrastructure and Construction Working Group
Together with WSA’s, MW will put additional Infrastructure Development plans forward to access part of the R372billion

44. IMPLICATIONS OF STATE OF NATION ADDRESS
MW has already invested more than R800 million for Infrastructure refurbishments in the last 5yrs, with plans for a further R150million in the next 5yrs
Several proposals are at different stages of completion to assist WSA’s in O&M programs as part of infrastructure projects management
MW Board already consist of 50% women at Board level in line with the ASGISA goals of placing women at decision making levels of public service
Learnerships are being accelerated to advance youth training and development

45. IMPLICATIONS OF STATE OF NATION ADDRESS
Raising capital through the Board’s balance sheet for infrastructure development on behalf of Stakeholders
MW’s BEE and SMME development initiatives have ensured that in 2004 procurement from these entities was already at 44.1% = (R51 million), of total procurement
Adoption of community agencies and centers by MW ensures that community development is accelerated
All Infrastructure programs, Basic water provision, sanitation, etc are all channelled at alignment with NEPAD goals

46. FINANCIAL PERFORMANCE

47. SUMMARY: BUSINESS PERFORMANCE INDICATORS

48. BUSINESS PERFORMANCE INDICATORS
MAGALIES WATER
2005
2004
Accounts Receivable / Debtor’s days
60,07 days
47,94 days
Working Ratio
0,66
0,26
Operating Ratio
0,86
0,51

49. FINANCIAL PERFORMANCE

50. Non-Current Liabilities Total Reserves & Liabilities
FINANCIAL OVERVIEW
Consolidated Balance Sheet - Magalies Water
Description
2005
(Rm)
2004
Variance (%)
Non-Current Assets
796,982
843,110
-5.47%
Current Assets
51,996
41,496
25.30%
Total Assets
848,978
884,606
-4.03%
Capital & Reserves
747,233
690,976
8.00%
Non-Current Liabilities
41,028
153,275
-73.23%
Current Liabilities
60,717
40,355
50.46%
Total Reserves & Liabilities
R255,8 million currently in the Investment Account

51. Surplus / (Deficit) Before Appropriations
FINANCIAL OVERVIEW
Consolidated Income Statement - Magalies Water
Description
2005
2004
Variance (%)
(Rm)
Revenue
189,486
164,348
15.20%
Cost of Sales
91,836
77,673
18.23%
Gross Surplus
97,650
86,676
12.66%
Operating Expenses
95,519
74,661
27.90%
Surplus / (Deficit) Before Appropriations
47,360
49,269
(3.87%)

52. LOAN STRUCTURE Magalies Water – Long Term Commitments Outstanding
Description
2005
2004 Rm
DWAF – WALLMANNSTHAL WTW (2027)
5,237
5,487
STANNIC
0,00
66,167
SCMB
33,177
104,831
In the year under review, MW has settled the long term debt of R107 Mill

53. AUDIT OPINION
Unqualified Audit Opinion by the Auditor General, Treasury and External Auditors of Magalies Water for 35 years now!!!!

54. THANK YOU