1. EDI HOLDINGS ANNUAL REPORT (2005/6) PHINDILE NZIMANDE - CEO
PRESENTATION TO THE NCOP’s SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS
CAPE TOWN
PHINDILE NZIMANDE - CEO
28 February 2007

2. TABLE OF CONTENTS 28 February 2007 OVERVIEW ANNUAL REPORT
Introduction
Mandate of EDI Holdings
Corporate Governance
Performance
Our Future
Acknowledgements
ANNUAL REPORT
Highlights
Revised Strategic Approach / Strategic Pillars
Staff Establishment
Employee Management Level / Job Level / Gender Classification - Graphs
Employee Racial Classification – Total / Males / Females - Graphs
Employment Equity Statistics
ANNUAL FINANCIAL STATEMENTS
Report of the Auditor-General to Parliament
Statement of Financial Position
Statement of Financial Performance
Cash Flow Statement
PLANS FOR THE FUTURE
ACKOWLEDGEMENTS
28 February 2007

3. OVERVIEW
PHINDILE NZIMANDE
28 February 2007

4. OVERVIEW: WHO WE ARE EDI Holdings is a 100% state owned company
We were established in 2003 to restructure the electricity distribution industry in SA
Our parent Ministry is Minerals & Energy
We are based in Tshwane, with regional representation I Cape Town; Nelson Mandela Bay and eThekwini
Our mandate is to restructure the EDI into financially viable and sustainable Regional Electricity Distributors (REDs) for the benefit of the economy and the people of SA
We maintain a full-time staff complement of between 50 and 60 employees
We rely on Service Providers to scale up and down resources
28 February 2007

5. OVERVIEW: INTRODUCTION
The Annual Report is presented in compliance with the Public Finance Management Act (Act No. 1 of 1999):
Fairly presents the state of affairs of the company,
Its business,
Its performance against predetermined objectives, and
Its financial position at the end of the year in terms of Generally Recognised Accounting Practice (GRAP).
The annual financial statements are the responsibility of the Accounting Authority, i.e. the Board of Directors of EDI Holdings.
The office of the Auditor-General has audited EDI Holdings’ financial statements, and issued an unqualified audit report .
28 February 2007

6. OVERVIEW: MANDATE OF EDI HOLDINGS
Our mandate is guided by the White Paper on Energy for South Africa (1998) and the Blue Print on EDI Reform (2001).
The main object of EDI Holdings is to restructure the electricity distribution industry and invest in financially viable independent REDs in South Africa in accordance with national Govt policy in order to ensure a more effective and efficient electricity distribution industry capable of providing affordable and accessible electricity to consumers.
RED1 was established in accordance with the Presidential deadline, as outlined in the President’ State of the Nation Address of 21 May 2004.
28 February 2007

7. OVERVIEW: CORPORATE GOVERNANCE
The Board of Directors is established as the Accounting Authority
Annual Financial Statements presented in terms of Generally Recognised Accounting Practice
EDI Holdings Board direct and guide the business in compliance with applicable legislation and has instituted the necessary policies and monitoring procedures to give effect thereto, through the following Board Committees:
Audit and Risk Management Committee
Internal Audit Function - outsourced
Risk Management Function - outsourced
Human Capital and Remuneration Committee
Finance and Procurement Committee
Operations Management Committee
28 February 2007

8. OVERVIEW: CORPORATE GOVERNANCE
EDI Holdings maintains world class systems of corporate governance by:
subscribing to the principles of good governance;
adhering to and encouraging good governance practices and the highest ethical behaviour;
continuing to comply with the broad principles set out in the King II Report; and
assessing its systems of governance for improvement on an ongoing basis.
EDI Holdings endeavours to observe all principles of corporate governance in all dealings with its stakeholders
EDI Holdings will continue to comply with relevant shareholder, statutory and treasury requirements
Regular compliance submissions are made to relevant authorities
28 February 2007

9. OVERVIEW: PERFORMANCE
EDI Holdings complied with Corporate Governance, Shareholder, Statutory and Treasury requirements, in all its dealings with Stakeholders.
The 1st RED was launched in the City of Cape Town on 1 July 2005 in line with the Presidential deadline.
Creation of RED 1 represents an instructive pilot project for the overall EDI restructuring process.
In line with the Cabinet decision of 14 September 2005 the company;
Commenced with preparatory work for establishment of Metro REDs,
Established a Multi Stakeholder Forum, and
Developed a model to determine the viability of establishing a National RED and or other REDs.
28 February 2007

10. OVERVIEW: OUR FUTURE
The achievements for the year have laid a foundation for the attainment of EDI restructuring objectives.
The outcome of the modelling exercise will assist Cabinet in deciding the optimal end state of the industry to ensure the establishment of financially viable and sustainable REDs
Key Challenges to be overcome, working closely with our stakeholders include:
Enactment of enabling legislation,
Development of a shared vision among stakeholders,
Preparations and readiness for RED Day One
28 February 2007

11. ANNUAL REPORT
28 February 2007

12. HIGHLIGHTS ESTABLISHMENT OF RED1 … 1
City of Cape Town (CCT) followed required legislative prescription prior to choosing the RED as the vehicle for electricity service provision:
Municipal Systems Act (MSA) – Sections 78 and 80
Municipal Finance Management Act (MFMA) – Section 84
Registered by EDI Holdings as company – 02 November 2004
RED established as a Municipal Entity by City of Cape Town – 31 May 2005
Licensed by NERSA
Commenced Operations – 01 July 2005
28 February 2007

13. HIGHLIGHTS ESTABLISHMENT OF RED1 … 2 Various agreements concluded:
Service Delivery Agreement (SDA) between CCT and RED 1
Operating and Transitional Plan for Transfer Agreements (OTPTAs) between
RED 1 and CCT Electricity
RED 1 and Eskom (Cape Town Metro Portion)
RED 1 Board appointed
Business Plan and Budget Approved
28 February 2007

14. HIGHLIGHTS Stakeholder Engagement
EDI Holdings embarked on an intensive stakeholder engagement process to brief various stakeholders about the EDI restructuring process and the 14th September 2005 Cabinet, with the aim to:
Clarify the revised restructuring approach
Minimise uncertainty in the industry
Continue to debate issues relating to staff within the EDI
28 February 2007

15. HIGHLIGHTS
Completion of Industry Modelling within stipulated time frame
A representative Multi Stakeholder Forum (MSF) established
Peer Review and Independent validation of the model
Completed and submitted to DME on time & within budget
Preparatory Work Towards Other Metro REDs
Developed a generic Day One definition, agreed with all stakeholders
Developed of regional roadmaps for Metro RED creation
Created Governance structures for Metro RED establishment
28 February 2007

16. Revised Strategic Approach Strategic Pillars
Mandate
INDUSTRY LEADERSHIP
CREATION
OVERSIGHT
ADVOCACY
EDI Holdings
are the catalyst & the
champion of the
EDI Restructuring
process:
Proactive and continuous Advocacy
Provide Industry
thought
Leadership, guiding &
influencing the
restructuring process
Establishment of
viable REDs
EDI Holdings plays an oversight
role in the success
of the REDs;
through efficiency
Improvements
Vision, Mission and Values
28 February 2007

17. Revised Strategic Approach
EDI Holdings is a flexible learning organisation that is highly responsive to
changes in the restructuring environment.
Having been in existence for three years and armed with the practical experience of launching RED 1, it was necessary to review the company’s strategic approach, owing to complexities brought about by:
a lack of enabling legislation,
varying stakeholder interests, and
uncertainty regarding the desired industry end-state
Our organisational structure has been realigned to revised strategy.
A three year plan has been developed to ensure implementation of the cabinet decision and duly submitted to DME
28 February 2007

18. Staff Establishment
28 February 2007

19. Staff Establishment (continued)
28 February 2007

20. Staff Establishment (continued)
TABLE OF TOTAL EMPLOYEES BY RACIAL COMPOSITION
28 February 2007

21. Staff Establishment (continued)
TOTAL EMPLOYEES BY RACIAL COMPOSITION
28 February 2007

22. Staff Establishment (continued)
MALE EMPLOYEES BY RACIAL CLASSIFICATION
28 February 2007

23. Staff Establishment (continued)
FEMALE EMPLOYEES BY RACIAL CLASSIFICATION
28 February 2007

24. Staff Establishment (continued)
EMPLOYMENT EQUITY
Employment equity figures for “Black”, “Female” and “Disabled” employees:
“Black” employees (i.e. African, Asian and Coloured):
Target = 70%; Actual = 72% (over-target by 2%)
“Female” employees
Target = 50%; Actual = 66% (over-target by 16%)
“Disabled” employees):
Target = 10%; Actual = 4% (under-target by 6%)
BASIS OF REMUNERATION
All EDI Holdings posts have been evaluated according to the T.A.S.K. grading systems. This system has been used to update job profiles and benchmark salary structure.
28 February 2007

25. ANNUAL FINANCIAL STATEMENTS (ABRIDGED)
FOR THE YEAR ENDED 31 MARCH 2006
28 February 2007

26. ANNUAL FINANCIAL STATEMENTS: INTRODUCTION
The Annual Report is presented in compliance with the Public Finance Management Act (Act No. 1 of 1999):
Fairly presents the state of affairs of the company,
Its business,
Its performance against predetermined objectives, and
Its financial position at the end of the year in terms of Generally Recognised Accounting Practice (GRAP).
The office of the Auditor-General has audited EDI Holdings’ financial statements, and issued an unqualified audit report
The finances of EDI Holdings are and continue to be properly managed
28 February 2007

27. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2006
2005
Note
R'000
ASSETS
Non-current assets
10 398
13 819
Plant and equipment 2
9 283
12 079
Intangible assets 3
1 115
1 740
Current assets
15 460
31 220
Trade and other receivables 4
809
1 755
Staff loans 7
Cash and cash equivalents
14 648
29 458
TOTAL ASSETS
25 858
45 039
NET ASSETS AND LIABILITIES
Net Assets
Contribution from owners 5
Current liabilities
Current portion of deferred income 6
13 400
13 471
Trade and other payables
7 100
16 410
Provisions 8
5 358
15 158
28 February 2007

28. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL POSITION : COMMENTS
Non Current Assets
No major asset acquisitions
25% reduction from last year largely due to depreciation of assets
Current Assets
Significant reduction (50%) in Cash and cash equivalents is reflective of the reduction in our Current Liabilities as cash was largely applied to pay suppliers of goods and services, as well as staff costs
Current Liabilities
57% reduction in Trade and other payables due to cash utilised to settle creditors
Reduction in provisions due to utilisation of consulting services previously provided
28 February 2007

29. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL PERFORMANCE FOR YEAR ENDED 31 MARCH 2006
2 006
2 005
Note
R '000
INCOME
Government grants 6
64 847
99 747
Interest received 9
1 111
3 534
TOTAL INCOME
65 958
EXPENDITURE
Administrative expenses 10
21 488
65 725
Audit fees 11
152
161
Depreciation and amortisation
2 and 3
3 577
1 381
Loss on disposal / Write-off of assets
107 -
Marketing costs
2 652
2 896
Project expenses
204
128
Staff costs
32 540
25 669
Other operating expenses
5 238
7 321
TOTAL EXEPENDITURE
NET INCOME / (DEFICIT) FOR THE YEAR
28 February 2007

30. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL PERFORMANCE FOR YEAR ENDED 31 MARCH 2006: COMMENTS
Government Grants
Apparent 35% reduction in Govt grants from R99m to R64m mainly due to previously received grant income deferred and only recognised last year
Expenditure
67% reduction in Admin expenses from R66m to R21m is largely due to the reduction in technical preparatory work executed in the previous year
Increase in Staff costs by 27% from R26m to R32m is due to scaling up of resources at EDI Holdings to undertake and accelerate restructuring projects
28 February 2007

31. ANNUAL FINANCIAL STATEMENTS (abridged) CASHFLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2006
2005
Note
R'000
Cash flows utilised in operating activities
Cash receipts
946 42
Cash paid to suppliers and employees
( )
( )
Cash generated from operations
12.1
( )
( )
Interest received
1 111
3 534
Net cash outflow
( )
( )
Cash flows from investing activities
( 261)
( )
Intangible assets
( 51)
( 1 860)
Capital refurbishments
( 27)
( 5 662)
Furniture and equipment
( 229)
( 6 429)
Less: Proceeds from disposal of furniture and equipment 46 -
( )
( )
Cash flows from financing activities - Government Grant
64 776
54 027
Increase/(decrease) in cash and cash equivalents
( )
( )
Cash and cash equivalents at beginning of the year
29 458
60 859
Cash and cash equivalents at end of the year
12.2
14 648
28 February 2007

32. CABINET DECISION: PLANS FOR THE FUTURE…1
Having considered technical submissions on:
The financial viability of the different RED models;
The institutional and governance arrangements for the REDs; and
How the various models respond to the restructuring policy objectives.
The Cabinet (on 25 October 2006) approved the following:
That 6 wall to wall REDs be implemented;
That the REDs be established as public entities and be regulated according to the PFMA and the Electricity Regulation Act;
That Eskom becomes a shareholder in the respective REDs for a transitional period and that they reduce their shareholding over time;
That DME, through EDI Holdings, will oversee and control the REDs;
That a roadmap will be put in place to move from the current scenario into the future industry structure
That a strategy needs to be developed to deal with capital investment requirements for the REDs
That EDI Restructuring legislation will be introduced; and
That a National electricity pricing system will be developed
28 February 2007

33. PLANS FOR THE FUTURE…2
Six Wall to Wall Regional Electricity Distributors (REDs) geographically anchored by the metropolitan cities, covering the whole of South Africa both rural and urban areas;
Positioned as preferred distributors of enhanced electricity services to customers;
RED will be companies registered as Public Entities under the PFMA and incorporated under the Companies Act
Independent Boards and sound Governance Arrangements that will take full accountability for business performance and effective electricity delivery,
Shareholding will be divided between national government holding a minimum of 51%, and the remainder to be held by local government;
28 February 2007

34. PLANS FOR THE FUTURE…3
Operationally capacitated entities with full operational control and businesses transferred from Eskom and Municipalities;
Financially viable entities with a business strategy as well an asset investment strategy that will ensure sustainable and reliable quality of supply and revenue flow in perpetuity serving all South Africans;
Bundled Electricity Distribution Business with clearly demarcated
Wires – Asset centric with the focus on reliable electricity delivery; and
Retail – Customer centric with the focus on segmented customer service to ensure that each customer category receives appropriate focused attention
Enabling working environment, employing empowered and highly skilled people with the ability to leave, but a strong desire to remain (retention of skills) contributing to the socio-economic development of their immediate communities
28 February 2007

35. PLANS FOR THE FUTURE…4
Progressive Employers of Choice, that value employees and are committed to continuous improvement of customer service and business processes;
REDs to be setup seamlessly with minimum disruption to service delivery for the consumers
Product of a negotiated deal and buy-in by all Stakeholders
EDI Holdings will continue to provide thought leadership and strategic advice on EDI restructuring in order to influence policy and strategic direction
All tasks will be accelerated to ensure delivery of the REDs
Consolidation of RED1 to ensure full transfer of distribution businesses and staff (Take steps required to ensure alignment with 25 October Cabinet Decision)
Oversight of the REDs once they are established
28 February 2007

36. Geographic representation of REDs boundaries
Provincial Boundaries
Cape Town UniCity
Ekurhuleni Metro
Nelson Mandela Metro
Johannesburg Metro
eThekwini Metro
Tshwane Metro
28 February 2007

37. PLANS FOR THE FUTURE…5 Key Considerations and Implementation Enablers:
Governance of the REDs;
Promulgation of Asset Transfer Framework to enable effective and orderly transfer of assets from local government and Eskom to the REDs;
National Tariff Harmonisation Framework to ensure rationalisation of tariffs nationally;
Infrastructure Investment Strategy;
Salary Harmonisation Framework;
Surcharge principles;
Consolidation of RED 1 in the Western Cape to ensure that the pilot is a success.
28 February 2007

38. ACKNOWLEDGEMENTS We sincerely appreciate:
The leadership and guidance of the then Minister of Minerals and Energy, Ms Lindiwe Hendricks and Deputy Minister Ms Lulu Xingwana;
The leadership and support of the erstwhile Chairman of EDI Holdings and Director General of the DME, Advocate Sandile Nogxina;
The Chairman and Board of Directors of EDI Holdings
All our Stakeholders, including all spheres of Government, Eskom, SALGA, City of Cape Town, Labour, Business, the Parliamentary Portfolio Committee and all Political formations
The Management and staff of EDI Holdings.
28 February 2007

39. THANK YOU
28 February 2007