1. Overview on water boards annual reports and tabled tariffs
Presentation to the Portfolio Committee: Water & Environment
Overview on water boards annual reports and tabled tariffs
Ms Thoko Sigwaza Chief Director: Institutional Oversight 1

2. Policy and legislative mandate
Water Services Act, Act 108 of 1997
Public Finance Management Act (PFMA), Act 1 of 1999, as Schedule 3(B): National Government Business Enterprises
White Paper on Water Supply and Sanitation, 1994
Strategic Framework for Water Services, 2003

3. Minister of Water and Environmental Affairs is the only shareholder
Oversight role of DWA
Minister of Water and Environmental Affairs is the only shareholder
Compliance imperatives
Legislation mandating the compliance
Policy Statements
Sec 39 of Water Services Act, 1997
Shareholder Compacts
Treasury Regulation 29.2
Corporate Plan & projection of revenue, expenditure & borrowings
Sec 52 of PFMA, 1999
Treasury Regulation 29.1
Business Plans
Sec 40 of Water Services Act, 1997
Quarterly Reports
Treasury Regulation
Annual Reports
Sec 44 of Water Services Act, 1997
Sec 55(1)(d) & 65 of PFMA, 1999
Tariff Increases
Sec 42 of MFMA, 2003
Financial misconduct procedures report
Treasury Regulation
Materiality & Significance Framework
Treasury Regulation

4. Top management in water boards
Name of water board
Name of Chairperson
Name of Chief Executive
Amatola
Ms RN Mlonzi
Ms N Gwabeni
Bloem
Mr TB Phitsane (Acting)
Dr B Malakoane
Botshelo
Ms GS Lebeko-Ratlhagane
Mr S Bokaba
Bushbuckridge
Mr P Ngomana
Mr NA Mashele
Lepelle Northern
Mr MJR Mpai
Mr LA Leballo
Magalies
Prof MI Jahed
Mr M Dlamini
Mhlathuze
Ms D Myeni
Mr V Botes
Overberg
Mr Y Emeran
Mr AP Potgieter
Pelladrift
Mr NR Williams
Vacant
Rand
Adv MM Petlane (Acting)
Mr P Sechemane
Sedibeng
Mr RT Takalani (Acting)
Umgeni
Mr A Mahlalutye
Mr M Msiwa

5. Establishment dates Name of water board Province Year Age Amatola
Eastern Cape (EC)
1997
13 years
Bloem
Free State (FS)
1991
19 years
Botshelo
North West (NW)
1998
12 years
Bushbuckridge
Mpumalanga (MP)
Lepelle Northern
Limpopo
Magalies
Gauteng (GP), NW
1969
41 years
Mhlathuze
KwaZulu-Natal (KZN)
1980
30 years
Namakwa [Disestablished in 2011]
Northern Cape
1978
32 years
Overberg
Western Cape
1993
17 years
Pelladrift
Rand
GP, NW, MP, FS
1904
106 years
Sedibeng
FS, NW
1979
31 years
Umgeni
KZN
1974
36 years
Ikangala (MP) was disestablished in 2009
Albany Coast EC was disestablished in and operations merged with Amatola

6. Alignment with government prioritiesNo
Abridged outcome
DWA priority
Water board contribution 4
Employment
Economic, rural development, food security, land reform
3. Strengthening regulation
R8 billion water sales for 09/10
6 322 existing jobs
116 new jobs created 6
Infrastructure
R2.3 billion budget for CAPEX 2010 7
Rural development
Limited success, but moving to ensure bulk services are accessible for rural municipalities 9
Local government
Local government to deliver water services
Provide bulk services to local government and secondary support on retail activities 10
Environment
Promote sustainable and equitable WRM
DWA water resource management (WRM)
O & M of DWA infrastructure 12
Public service
Build capacity to deliver quality services
Some WBs support municipalities to develop water related infrastructure

7. Audited reports Name of water board 2009/10 2008/09 Comment Albany
Unqualified
No change
Amatola
Qualified
Improvement
Bloem
Botshelo
Disclaimer
Bushbuckridge
Lepelle Northern
Magalies
Regressed
Mhlathuze
Namakwa
Overberg
Pelladrift
Rand
Sedibeng
Umgeni
Namakwa Water is yet to submit their annual report
Magalies and Botshelo submitted their annual reports after due date

8. Consolidated Financial Performance
Total ’10
Total ‘09
% change
Volumes (kl)
-0,2%
Sales
R8 billion
R7,7 billion
4,4%
Operating expenses
R4,9 billion
R4,3 billion
15,4%
Net income
R886 million
R1,3 billion
-31,8%
Fixed Assets
R12,4 billion
R11 billion
12,7%
Investment
R402 million
R608 million
-33.8%
Current Assets
R5,4 billion
R5,3 billion
0.9%
Current Liabilities
R2,9 billion
R3,4 billion
-13.4%
Long term debt
R2,7 billion
R2,3 billion
14.0%
Cash on Hand
R3,8 billion
-10,5%

9. Consolidated Ratios 2009/10 2010 2009 Gross profit percentage of sales
64,38%
66.41%
Net profit percentage of sales
10,87%
16.99%
Return on Asset (Net income/total assets)
4,84%
7,69%
Return on Equity (Net income/equity)
7,45%
12,3%
Current Ratio
1,85
1,56
Debtors days 84 69
Creditors days
176
173
Debt to assets (total debt / total asset)
35%
38%
Debt to equity (total debt / total equity)
54%
60%

10. Annual Surplus/Deficit in R’000
WATER BOARD
SURPLUS
DEFICIT
Albany Coast (9 months)
630
Amatola
17 584
Bushbuckridge
10 956
Bloem
16 619
Botshelo
9 894
Lepelle Northern
5 383
Magalies
4 121
Mhlathuze
21 160
Namakwa
Annual Report outstanding
Overberg
391
Pelladrift
2 075
Rand
Sedibeng
44 265
Umgeni

11. Budget vs Actual Surplus was budgeted at R1 billion
Actual surplus was R886 million mainly due to the following:
Under achievement in sales volume due to implementation of WC/DM and better than expected rainfalls
Overruns in operating cost, especially for energy and chemical cost
Higher than expected impairment of asset value
Increased provisions for doubtful debt
Higher than expected raw water cost

12. CAPEX budget for next 5 years (1)
Planned spending is estimated at R 12 billion
Short and long term cash reserves are R 3.8 billion
Likely borrowing to finance CAPEX is R 8.5 billion
Surplus must be viewed in relation to asset management plan to ensure effect gearing of debt

13. CAPEX budget for next 5 years (2)
Water board
2011
2012
2013
2014
2015
Total
R000
Amatola
71 511
Bloem
35 600
92 800
Botshelo
Bushbuckridge
10 721
5 569
4 950
9 660
6 400
37 300
Lepelle Northern
58 795
47 230
46 775
45 355
33 000
Mhlathuze
90 144
23 586
20 532
Magalies
30 612
Overberg
10 815
3 800
1 850
2 400
20 715
Pelladrift
1 450
5 000
5 010
2 150
5 400
19 010
Rand
Sedibeng
20 844
16 700
15 800
10 800
11 000
75 144
Umgeni

14. Oversight of WBs
Total bulk potable water volume supplied by WBs: 2.3 billion kiloliters per annum
Total authorised abstraction: 2.36 billion cubic meters per annum
WBs under spent on CAPEX by an average of 13.4% (previous year 14.5%). Total CAPEX spending for the current year was R1.5 billion
Rand Water contributes 60% to consolidated turnover, Umgeni 20% and other 11 WBs 20% 14

15. Municipal debt to water boards – Jun 2010
Outstanding balance
Current
30 days
60 days
90 days
120 days and over
Total arrears
Albany Coast
Amatola
Bloem
Botshelo
Bushbuckridge
Lepelle Northern
Magalies
Mhlathuze
Namakwa
Overberg
Pelladrift
93 011
97 438
Sedibeng
Rand
Umgeni
Total
Debtors age analysis
100%
45.37%
6.88%
4.43%
3.90%
39.42%
54.63%

16. Municipal debt to water boards
Total arrears is 10.6% of total sales.
Division of Revenue Act requires that the equitable share for water be paid directly to municipalities.
Where municipalities face financial difficulty, they use the water equitable share for other purposes, leaving water debt owed to WBs unpaid.
Changes in legislation should be considered where the equitable share is paid directly to WBs for water provided. 16

17. Achievements The current ratio suggests a positive cash flow
No State guarantees issued to support water boards
No significant demand on Government to finance expansion of WB’s bulk infrastructure
Water Boards provided bulk water in 11 of the systems where Blue Drop Certificates were achieved
Positive contribution to National imperatives
Technical and engineering support provided to local government 17

18. Challenges and way forward
Proposed way forward
Refurbishment and extension of infrastructure
Obtain external loan funding
Raw water quality
Firm application of legislation and support from CoGTA
Staff retention and skills shortages at remote WBs
WBs to consider pooling skills and deploying them to where needed
Lack of bulk water service provider contracts
Resolve with support of CoGTA
Security of service delivery over medium to long term
Monitor CAPEX plans
Debt payment by municipalities
Ongoing mediation support of NT and CoGTA
Equitable share paid to municipalities
Amendment of DORA to allow NT to withhold equitable share from municipalities in arrears and pay WBs directly

19. Tabled Tariffs increases

20. Background in tariff setting process
Potable bulk water tariffs are not proposed by the Department, but are determined by WBs
WBs must consult with municipalities on their proposed tariff increases (Sec 42 of MFMA, 2003)
WBs must request NT & SALGA to provide written comments
NT and DWA plays a monitoring and advisory role
I.t.o. sec 42 of the MFMA, WBs must submit (i) the proposed amendments, (ii) the comments received & (iii) an explanation of how such comments were taken into account to the Minister ,
Minister must table the amendments in Parliament
Tariff increases must be tabled on or before 15 March 2011, if the increases are to take effect from 1 July 2011 20

21. Tabled tariffs for 2011/12 Name of water board % increase Amatola
8.65% Buffalo City
8% Amatola DM
10% Ndlambe LM
Bloem
Systems tariff of R3.50 [from multiple to single tariff system]
Botshelo
18%
Bushbuckridge
7,27%
Lepelle Northern
10.22%
Magalies
16% Modimole, Bela Bela, Rustenburg, Tshwane
28% Wallmanstal
6% Nokeng tsa Taemane
Mhlathuze
14%
Namakwa
10,2%
Overberg
15%
Pelladrift
20%
Rand
12,9%
Sedibeng
8,5%
Umgeni
6,1%

22. Impact of tariff increases
Enable WBs to finance future CAPEX thereby reducing reliance on loans.
Borrowing to finance CAPEX is estimated at R8.5 billion, partial funding of CAPEX will allow for smoothing of tariff especially in the initial years when the newly developed infrastructure will not be fully utilised.
Pressure to reduce tariffs will result in a higher level of borrowing for infrastructure development, which will effectively increase tariffs to unaffordable levels in the future.
From an operational point of view, the increase in energy, chemicals, labour and other cost resulted in higher than inflationary tariff increases. 22

23. Challenges and way forward
Insufficient engagements during consultation process
Align business plans and tariff increases
NT, SALGA and municipalities do not provide meaningful written comments in all instances
This is due to stringent timelines that will require legislative review
Consultation processes does not require consent, concurrence or agreement
Conflicting legal opinions
Fragmented tariff regime for the entire water value chain
Establish Economic Regulator that will require new legislation. Target date: 2014
DWA both player and referee in tariff setting process

24. Conclusion FOR WBs TO REMAIN SUSTAINABLE:
There must be an ability to attract and retain the necessary skills to operate and maintain the service effectively.
There must be a secure and adequate financial base & economies of scale.
There must be the management capability to translate human and financial resources into effective service delivery.
The governance environment must support good management.
There must be accountability for performance.
Tariff regime for the entire water sector [Independent Regulator]. 24 24

25. THANK YOU