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2. 2 TABLE OF CONTENTS 1.Introduction 2.Area of service and operation 3.Corporate Governance 4. Major achievements in 2005/2006 5. Strengthening Service Delivery 6. Strategic Challenges and Remedial Plan 7. Financial performance

3. 3 1. Introduction Long term strategies for sustainability are embedded in annual report Progress on all strategic imperatives are highlighted Ongoing strategic reviews aligned to performance management system Short interval business reviews to focus on key priorities Presentation based on performance reviews and audited financial statements

4. 4 2. AREA OF SUPPLY AND OPERATION

5. 5

6. 6 Service Level Agreements LOCAL MUNICIPALITIES Matjhabeng Local Municipality Nala Local Municipality Maquassi Hills Local Municipality Greater Taung Local Municipality Phokwane Local Municipality Moshaweng Local Municipality Ga-Segonyane Local Municipality Kagisano Local Municipality Bophirima District Municipality OTHER CONSUMERS Beatrix (2 Mines) Harmony (6 Mines) President Steyn Gold Mine Ster Diamante Mine

7. 7 3. CORPORATE GOVERNANCE

8. 8 Corporate Governance Board appointment Performance contract –Executive and Senior Management Committees –Board (Executive, Remuneration, Audit Committees) –Management( Executive, Management, Divisional, Procurement, Bursary, Trustee, Safety & Health Committees etc)

9. 9 Corporate Governance (Cont.) Committees continued –Labour Forums –Stakeholders ( Co-ordinating Committee, Catchment Management Committee, Provincial Water Sector Forums, etc.)

10. 10 4. MAJOR ACHIEVEMENTS IN 2005/2006

11. 11 Operational Performance The following savings were achieved on processes : ― R 2.1m for Energy ― R 0.8m for Chemical ― R 1.3m for Procurement Water quality maintained at Class 1 except for periodic colour and turbidity.

12. 12 Project Consolidate Sedibeng Water carried out the following projects under project consolidate in Phumelela Local Municipality: Site functional assessment, skills audit and technical gap analysis at the Water Purification and Sewage Treatment Plants Seconded and trained operators in Warden and Memel WTP. Refurbishment of Warden WTW Refurbishment of Memel Water & Sewage Treatment Works and training of temporary operators. Upgrading of Warden Bulk Sewer (in progress) Capacity building: SETA training of operators within the Free State( Wepener, Ladybrand, Bethlehem & Xhariep)

13. 13 Market development Presentations on the capability statement of Sedibeng Water, technical audits on treatment works, service agreements and the establishment of co-ordinating committees were conducted. Sedibeng Water assisted the following municipalities in line with the signed Strategic Support contracts: –Siyanda DM –!Kheis LM –Kgatelopele LM –Mier LM –Kai!Garib LM

14. 14 Commercial Equity Average BEE expenditure is 40% Annual targets set were met Promoting BEE participation though ― Hand holding and training of SMME ― monitoring and verifying of BEE status ― Encourage establishment of BEE companies and joint ventures

15. 15 Corporate Social Investment Invested approximately R1.3m to communities within our service area. The programme concentrated on the following: ― NGO initiated by youth focusing on education ― Youth entrepreneurial venture ― Special needs and farm schools ― Learnership on Water Purification Process Operation.

16. 16 Human Resources (Cont.) Training Financial assistance(24 employees) ABET (154 employees) Learnership in Water Purification and Process Operation(10 employees and 10 community members) Experiential training (6 students) About 95% of learners who participated in the above programmes were absorbed within the organisation Focus on courses such as Leadership, management, finance etc.

17. 17 Human Resources Employment Equity EE targets as per plan exceeded Appointments aimed at addressing gender balance and disability Specific functional levels receiving undivided attention e.g. superintendent level

18. 18 Customer interaction Weekly ― Interaction with Ward Committees ― Improved responsive time and reduction of interruptions ― Reduction of complaints ― Improved performance in line with SLA Monthly Co-ordinating Committee meetings Customer satisfaction monitoring system with KPI is in place

19. 19 Other Assisted Local and District Municipalities in the following: ― Infrastructure refurbishment projects in the North West ― Water quality analysis and scientific services Tendered for the management of Vaal Gamagara Government Water Scheme Appointed as an implementing agent for the Masibambane Civil Society Programme Market penetration and diversification ― Scientific Services ― water quality monitoring ― environmental management ― operations and maintenance services ― community capacity building on water quality related issues

20. 20 5. STRENGTHENING SERVICE DELIVERY

21. 21 Strengthening service delivery The following water conservation and demand management measures are implemented by Sedibeng Water: –An electronic methodology is used to conduct bulk water mass balance in the Free State region –Household pre-paid meters are installed and the reticulation network losses are actively monitored in the North West region Sedibeng Water has contained water tariff increases at 6% without compromising the financial sustainability of the organisation.

22. 22 Strengthening service delivery (Cont.) Research on dealing with the varying water quality in the Free State region is carried out in an attempt to manage increases in the future Sedibeng Water owns a SANAS Accredited Central Laboratory used for potable and sewage water analysis and tests with a view of extending these services to municipalities and other stakeholders Sedibeng Water has entered into different contracts with a number of municipalities for the provision of bulk potable water and reticulation, and the operation of sewage plants

23. 23 Strengthening service delivery (Cont.) Sedibeng Water assisted Municipalities with the implementation of refurbishment projects and the transfer of assets The following projects were carried out: –Basic Water  Moshaweng LM R4.65m  Bophirima DM R3.69m –Supply of operators to Phumelela WTW R0.33m –Sanitation  Refurbishment of Warden WTW R0.21m  Refurbishment of Memel STW & WTW R0.43m  Bulk Sewer Upgrading: Warden R2.26m Total Cost R11.57 million

24. 24 Strengthening service delivery (Cont.) Cost reduction in operational expenses ( energy, chemicals and procurement) and the settlement of long term debt Continuously pursuing enhancement of relations with WSAs and DWAF Appointment as implementing agent in the provision of basic water and sanitation services and training

25. 25 Strengthening service delivery (Cont.) Assisting the WSA’s in accelerated service delivery through Project Consolidate Participation in water sector forums and other stakeholder relationship management initiatives that addresses accelerated service delivery Acceleration of transformation and equity/gender balance Dedicated focus on training and development

26. 26 6. STRATEGIC CHALLENGES

27. 27 Strategic challenges Obtaining support from DWAF to maintain raw water tariff increases below inflation in line with water boards potable water tariff increases Concluding multi- year water tariff agreements with stakeholders Raw water deterioration at the middle and lower Vaal River Renewal of the WSA/WSP Service Level Agreements Managing the uncertainty created by the institutional reform process

28. 28 Strategic challenges (Cont.) Manage relationship with municipalities to jointly deal with accelerated service delivery challenges Augmentation of water supply infrastructure to Maquassi Hills Local Municipality Continuously ensure that potable water quality in the North West region meet required standards

29. 29 Strategic challenges (Cont.) Successfully managing the impact of HIV/AIDS Accelerating transformation efforts to balance gender and disability Maintaining and improving employee and customer satisfaction Maintaining water tariff increases at inflation target levels and still remain sustainable

30. 30 7. FINANCIAL PERFORMANCE

31. 31 Financial Overview for the previous five years Consolidated Abridged Income Statement Description20062005200420032002 (Rm) Revenue283,782278,865257,411236,631193,467 Cost of Sales98,84091,02590,49572,48560,707 Gross Surplus184,942187,840166,916164,146132,760 Operating Costs167,924184,639157,772135,514122,713 Net operating Surplus17,0183,2019,14428,63210,047 Net Finance Charges15,27819,05835,75837,37439,558 Net Surplus Before Subsidies 1,740(15,857)(26,614)(8,742)(29,511) Subsidies26,52733,47139,67737,27046,164 Net Surplus After Subsidies 28,26717,61413,06328,52816,653

32. 32 Financial Overview 2005/2006 Income Statement – Free State Region Description20062005Percentage Variance (Rm) Revenue235,399222,5395.78% Cost of Sales107,044103,4563.47% Gross Surplus128,355119,0837.79% Government Grant780292167.12% Other Income4,2735,754-25.74% Operating Costs82,77376,4678.25% Net operating Surplus50,63548,6624.05% Net Finance Charges15,31419,214-20.30% Net Surplus/(Loss) for the year35,32129,44819.94%

33. 33 Financial Overview 2005/2006 Income Statement – North West Region Description20062005Percentage Variance (Rm) Revenue35,70023,84149.74% Cost of Sales11,1707,14256.40% Gross Surplus24,53016,70046.89% Government Grant20,09425,638-21.62% Other Income2,4511,30987.24% Operating Costs50,65147,8995.75% Net operating (Loss)(3,576)(4,252)-15.60% Net Finance Charges2848-71.43% Net Surplus/(Loss) for the year(3,548)(4,204)-15.60%

34. 34 GRAPH: Financial Performance R’000

35. 35 Consolidated Abridged Balance Sheet Description2006 (Rm) 2005 (Rm) Percentage Variance Non-Current Assets448,202437,1042.55% Current Assets120,870108,93110.96% Total Assets569,072546,0354.22% Equity243,657211,94014.97% Non-Current Liabilities250,638257,272-2.58% Current Liabilities74,47776,823-3.05% Total Equity & Liabilities569,072546,0354.22%

36. 36 Financial Ratio Analysis 20062005200420032002 Profitability Working ratio 0.940.990.960.880.95 Operating ratio1.08 1.13 1.111.041.17 Rate of return on assets 0.03 0.01 0.02 0.06 0.02 Assets turnover ratio 0.48 0.46 0.41 Surplus margin ratio 0.01 -0.11 -0.10 -0.04 -0.15 Debtors collection period in days 98.40 98.60 85.60122.10 109.90 Accounts Receivable turnover 3.78 3.75 4.37 3.03 3.44 Short-Term Liquidity Current Ratio 1.62 1.42 1.45 1.28 1.17 Long Term Solvency Debt service/Interest cover ratio 1.11 0.09 0.26 0.77 0.26 Long term debt ratio 0.49 0.52 0.49 0.59 0.65 Debt equity ratio 1.33 1.58 1.43 1.99 2.29

37. 37 FREE STATE REGION: Business Performance Indicators Description20062005200420032002 Total Turnover (Rm)235,399222,540207,866192,534170,306 Water Purchases36.5938.4840.0634.6432.19 Electricity Purchases4.404.535.315.144.35 Salaries & Wages18.5216.7015.7913.1816.00 Maintenance4.876.416.096.455.44 Finance Costs14.1015.6717.5120.0123.67 Expenses as a % of total turnover

38. 38 Description20062005200420032002 Total Turnover (Rm)58,59650,85846,76144,72229,325 Water Purchases16.3210.6115.4512.9420.06 Electricity Purchases2.142.822.691.932.54 Salaries & Wages48.0549.2647.6539.7556.20 Maintenance9.3119.3216.1513.5920.86 NORTH WEST REGION: Business Performance Indicators Expenses as a % of total turnover including subsidies received

39. 39 Sedibeng Water obtained an unqualified audit opinion again THANK YOU