1. PRESENTATION TO PCWEA – 17 APRIL 2013 1

2. OVERVIEW OVERVIEW  Established in 1997 by the Minister of Water Affairs and Forestry in accordance with the Water Services Act.  Mandated to provide water services to other water service institutions.  Currently operates in the Bushbuckridge Local Municipality and part of the Mbombela Local Municipality in Nsikazi area within the Ehlanzeni District Municipality. AreaMl/dayPopulation Bushbuckridge Local Municipality Area (BLM) (8 PWTW)96 454 817(Census 2011) Two Plants owned by DWA and Six plants owned by BLM Mbombela Local Municipality Area (MLM) (6 PWTW) 71568 647(Census 2011) ( MLM) (1WWTW)3.5 All Plants owned by MLM BOARD OF DIRECTOR  The term of the current board of directors is from February 1, 2010 – March 31, 2014. Appointed – 02 Feb 2010 Mr. P Ngomana (Chairperson) Adv. G Khoza (Deputy Chairperson) Adv. H Mbatha – Resigned June 2012 Ms. C Van Rensburg (CA. SA) Ms. C Makwela Ms. S Khoza – Resigned June 2012 Rev. R Ngomane Mr. M Vilakazi Mr. C Padayachee 2

3. ACHIEVEMENTS FROM TURN AROUND STRATEGY 3

4. 4 Debt owed by WSAs to BW  Bushbuckridge Local Municipality R240,2 mil – June 2012 Escalated by R31,8 mil since June 2011 and R72 mil since June 2010 BLM signed acknowledgement of debt of R190 mil and agreed to be pay R95 mil on instalments Instalments of R5 mil per month ring-fenced debt starting January 2012 Only R13,8 mil of R30 mil historic debt paid to date Additional R25 mil paid in December 2012 towards historical debt Credit control measures put in place including appointment Debt collectors  Disestablished Bohlabela District municipality R26,4 mil – From July 2006 to June 2012 (No interests included) Debt collectors appointed to collect this debt  Mbombela Local Municipality R14 mil – June 2012 Debt settled in full (late payment)  R18 million grant from DWA

5. 5 Supply Contracts  BLM A three years Bulk supply contract be signed and to be reviewed in 2014 A possible extension to a five year contract A committee of officials established to jointly manage the contract  MLM Parties to agree on Key deliverables before end of financial year A draft contract offer made by MLM, being discussed by BW DWA – Institutional Oversight consulted during the formulation of the draft contract

6. 6 Capital Infrastructure Projects  A 20 years Capital Infrastructure Plan being compiled, to be completed June 2013  Challenges faced due to short term contracts with WSAs.  Cogta-MP BW entered into agreement to implement projects on behalf of Cogta-MP to the value of R23 mil Projects completed as agreed with Cogta-MP and the receiving municipalities 5% agency fee was paid to BW for implementation of the projects  DWA-MP BW entered signed agreement to implement projects on behalf of DWA-MP to the value of R4,5 mil Projects completed as agreed with DWA-MP and the receiving municipalities 5% agency fee to be paid to BW for implementation of the projects A water purification package plant was implemented in Albert Luthuli LM(Carolina Town) to the value of R1,1 mil under the Rapid Response project.

7. 7 Metering/Illegal connections Metering  BW completed a study with the intention to address metering challenges in BLM  Study recommends the establishment of 20 new metering points  DWA approved R2,5 million grant to address the new metering points  Rand Water appointed as implementing agent to install new meters  A steering committee comprising of BW, Rand Water and BLM established to oversee the implementation of this project Illegal connections  The study Identified the existing illegal connections  The report discussed with BLM and decision to be taken on which illegal connections to formalized or removed  BLM to fund the metering/formalization of illegal connections Other projects funded through DWA grant  Telemetry and Scada system  Blue Drop certification  Refurbishment and pumps replacement  A total of R18 millions already transferred

8. ANNUAL FINANCIAL STATEMENTS 8

9. 2011/12 Annual Financial Statement 8% Growth in revenue to R131.5 million 11% Increase in EBITDA to R22.8 million 1% reduction of direct operating cost 7% increase of the tariff to 3.70 46% recovery of the historic debt of R30 million as per agreement recovery of invoiced amount in Mbombela Local Municipality 87% 60% recovery of the invoice in Bushbuckridge Local Municipality Statement of Comprehensive Income Year ended 30 June 12 2012 2011Change R R% Water Sales 101,085,561 93,308,2448% Services Rendered 33,267,520 34,442,465-3% Discounting of revenue 2,844,166 6,208,000-54% Revenue131,508,915 121,542,7098% Other operating income613,406 371,65965% Direct operating cost-85,594,351 -86,465,660-1% Other operating expenses -23,699,435 - 14,805,54960% EBITDA22,828,535 20,643,15911% Deprecation-2,342,703 -2,229,5605% Investment Revenue11,234,394 5,179,944117% Finance Cost-328,816 -321,6702% Provision for Doubtful debt-81,357,686 -41,381,37697% Surplus/Deficit-49,966,276 -18,109,503176% Operating Loss-60,871,854 -22,967,777165% Gross Profit45,914,564 35,077,04931% Profit/ Earning Margins (%) Gross Profit margin (%)35% 29% Operating profit margin (%)-46% -19%

10. 2011/12 Annual Financial Statement Continues…………. Statement of Financial Position as at 30 June 2012 % Change 20122011 AssetsRR Non- Current56,385,46757,142,070-1.32% Current Assets85,256,197118,160,660-27.85% Total Assets 141,641,664175,302,730 -19.20% Equity60,247,790110,214,066 -45.34% Capital Contribution68,355,117 0.00% Retained Income-8,107,32741,858,949-119.37% Liabilities81,393,87465,088,664 25.05% Non-Current Liability2,885,3083,070,427-6.03% Current Liability78,508,56662,018,23726.59% Total Equity and Liabilities 141,641,664175,302,730 -19.20% The amounts owing by BLM from the start of 2011 to the end of 2012 have increased as follows: 30 June 201230 June 2011 RR Outstanding debt at the beginning of the year 208 401 925167 630 525 Invoices raised with regard to current water supplied 115 237 540106 371 399 Repayments received by BLM in respect of current invoices raised 69 489 32365 600 300 Repayments received by BLM in respect of historical debt due 13 906 233 Outstanding balance at the end of the financial year 240 243 904208 401 925 Provision for doubtful debts in relation to the amount outstanding 178 660 82797 303 141 In order to ensure that sufficient cash is collected to cover its budgeted expenses, the board will Increase the minimum monthly payments owing by BLM from R6.3 million to R8.5 million. Reduce the water pressure to the BLM when the municipality fails to pay agreed amounts. Employ the services of debt collectors in order to recover the amounts outstanding by the BLM.

11. AUDIT REPORT 11

13. PERFORMANCE AGAINST STRATEGIC OBJECTIVES 13

14. 2010/11 Annual Performance Results 1.Provide bulk water and sanitation services 1.1 Reliability of supply - Increase the volumes of water supplied by 1.66% -Managed to achieved average unaccounted for water of 6.2% 1.2 Water quality - 98 % compliance to SANS 0241 for potable water due to old infrastructure -No out break of water-borne diseases reported 2.Entrench sound financial management and corporate governance 2.1. Financial Management - Increased revenue by 8% in BLM - 60% recovery of revenue on invoices in BLM~ based on flat rate payment agreement -87% recovery of revenue on invoices in MLM -46% recovery of R30 million historic debt per contract - Unqualified audit report 2.2. Corporate governance - 87% attendance of planned Board and Board committee meetings 3.Optimize stakeholder interaction and engagement 3.1 Stakeholder relations - Improve stakeholder relations engagements 3.2. Business Development -SLA signed with BLM

15. 2010/11 Annual Performance Results…. 4. Optimise human capital investment 4.1. Human resources - 1.5% staff leaving the institution - 29% implementation of Employment Equity plans-

16. CAPITAL INFRASTRUCTURE EXPENDITURE 16

17. 2011/12 Capital Infrastructure Expenditure  Grant funding from Cogta-MP and DWA  95% of projects completed within schedule: Project Description Municipal Area Total Project Value FunderStatus Abstraction Sabie River - Cork Desilting facilities (Sand to be trapped) Bushbuckrid ge Local Municipality 1 000 000 Department of Corporative Governance and Traditional Affairs: Mpumalanga (CoGTA) Complete Abstraction Mutlumuvi River Desilting facilities (Sand to be trapped)1 000 000Complete Abstraction Motlamogale River Desilting facilities (Sand to be trapped)1 000 000Complete Treatment Dingledale Package Plant (Villages, Dingledale only) Refurbishment of Package Plant 1 500 000Complete Abstraction Thulamahashe WTW : Upgrading of Plant components3 000 000Complete Booster Pump Station Dwarloop WTW: Pump & Panel2 500 000Complete Subtotal 10 000 000 Kanyamazane WTW - Clear water sump- Treatment Purification Plant Inadequate storage Mbombela Local Municipality 4 000 000 CoGTA 95% Complete Kanyamazane WTW Refurbishment - Treatment Purification Plant dilapidated infrastructure 1 000 000Complete Water Tankers : Nsikazi North & South Scheme: 2 x 16000litre tankers2 800 000Complete Kanyamazane Regional Scheme Raw Water Pump Station) Packed High Lift pumps 2 500 000Complete Nsikazi South Scheme Boreholes & Jojo tanks3 079 000 Department of Water Affairs Complete Nsikazi North Scheme: Drill, Equip, Electrification, Securing & Supply & Install Jojo Tanks 2 821 000Complete Nsikazi North Scheme: Ground water investigation & borehole siting (56 Sites) 300 000Complete Subtotal 16 500 000 Grand Total R 26 500 000

18. 2013/14 Tariff Structure 18

19. 2013/14 TARIFF STRUCTURE Consideration of Eskom Increases  No material impact on the tariff  Initial BW estimates was 16%  9.6% increases was effected but no material changes Complied with Regulatory frameworks  Water Services Act, 108 of 1997 s10 Norms and standards for tariffs  Municipal Finance Management Act No. 56 of 2003 Section 42 Comments from Stakeholders  Bushbuckridge Local Municipality – Accepted the 12.5% increase  National Treasury – Commented on 12.5% increase; Raised concerned on debt recovery  SALGA – Commented on 12.5% increase; Mbombela Local Municipality Tariff  Charging rates per management contract  Tariff based contract is being finalized with MLM  Charge within BLM rate for the first year of the contract

20. 2013/14 TARIFF STRUCTURE Continues Initial Tariff prior the NERSA – Energy Approval = 9.6% Year Proposed Tariff for Tariff anticipated in 201420152016 Fy Year 1Fy Year 2Fy Year 3 (R/Kl) DWA / CMA charge 0.4970.5250.554 Direct scheme operations costs 2.1812.4182.723 Overheads 0.9760.9800.979 Depreciation 0.0650.0740.078 Income statement surplus 0.6690.6990.692 Sub-Total 4.394.705.03 Projected water sales (kl) 38,507,500 40,432,875 42,454,519 Projected revenue (R ) 169,103,280189,987,535213,450,995 Projected costs (R ) 143,331,853 161,727,088184,084,887 Projected surplus (R ) 25,771,42728,260,44729,366,108 Reserves (R ) 86,331,064 116,556,769 164,550,742 Projected surplus as a % of Reserves 29.85%24.25%18% Debt service cost 10.58% 11.00% Debt / (Debt + Equity) ratio 0.01 0.00 Capex and Refurbishment (R ) 16,009,84516,874,377 17,701,221

21. 2013/14 TARIFF STRUCTURE Continues YearProposed Tariff forTariff anticipated in 201420152016 Fy Year 1Fy Year 2Fy Year 3 (R/Kl) DWA / CMA charge0.4970.5250.554 Direct scheme operations costs2.1622.3982.700 Overheads0.9760.9800.979 Depreciation0.0650.0740.078 Income statement surplus0.6680.6980.692 Sub-Total4.374.685.00 Projected water sales (kl) 38,507,500 40,432,875 42,454,519 Projected revenue (R ) 168,351,709 189,143,146 212,502,324 Projected costs (R ) 142,613,157 160,904,937 183,107,967 Projected surplus (R ) 25,738,552 28,238,208 29,394,357 Reserves (R ) 86,331,064 116,556,769 164,550,742 Projected surplus as a percentage of Reserves29.81%24.23%18% Debt service cost10.58% 11.00% Debt / (Debt + Equity) ratio0.01 0.00 Capex and Refurbishment (R ) 16,009,845 16,874,377 17,701,221 ItemFy Year 1Fy Year 2Fy Year 3 201420152016 ASSUMPTIONS CPI6.0%5.6%5.5% Increase in water sales (percentage) 5.0% Volume of water billed (kl) 38,507,500 40,432,875 42,454,519 Proposed tariff increase12.0%7.0% Proposed Tariff (c/kl)437.19467.80500.54 Volume raw water purchases (kl) 42,358,250 44,476,163 46,699,971 Assumed raw water tariff (c/kl)0.4520.478 0.504 Final Tariff after consideration of Eskom 9.6% increase Propose 12%

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23. Challenges Board vacancies hampers smooth operations of Board committees Deteriorating financial condition of BLM impacting on financial viability of BW. Escalating debt for Bushbuckridge local municipality Failure to attract suitably qualified personnel to fill vacancies. Inability to meet CSI project targets due to cash flow constraints Backlog in refurbishment and maintenance due to cash floe constraints 23

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