1. ANNUAL REPORT PRESENTATION Celebrating a decade of water services delivery in a democracy

2. TARIFFS K NAICKER TARIFFS WATER BOARD ACCOUNTABILITY P CAMAY WATER BOARD ACCOUNTABILITY P CAMAY ANNUAL REPORT H KASAN

3. CONTENT Rand Water profileRand Water profile Customer Sales profileCustomer Sales profile Sales trendSales trend Cost of raw waterCost of raw water Projected input costs vs CPIXProjected input costs vs CPIX Gross profitGross profit ProfitabilityProfitability

4. CONTENT CONT Value creationValue creation Return on assetsReturn on assets Business performance IndicatorsBusiness performance Indicators Performance HighlightsPerformance Highlights Social responsibility trendSocial responsibility trend Future developmentsFuture developments Decade of Service Delivery - ReviewDecade of Service Delivery - Review

5. Rand Water profile Largest water utility in AfricaLargest water utility in Africa Bulk water supply increase to 3 414 M /d (3340M /d : 2003)Bulk water supply increase to 3 414 M /d (3340M /d : 2003) Supplies 12 million people dailySupplies 12 million people daily Sole area of service 18 000 km²Sole area of service 18 000 km² 13 000 km² joint area of service with other Water Boards13 000 km² joint area of service with other Water Boards

6. Rand Water profile cont Turnover : R3 258 bn ( R2 884 bn : 2003)Turnover : R3 258 bn ( R2 884 bn : 2003) Assets : R5 232 bn (R4 892bn : 2003)Assets : R5 232 bn (R4 892bn : 2003) Staff employed : 3 097 (3 108 : 2003)Staff employed : 3 097 (3 108 : 2003) Corporate ISO 9001 : 2000 accreditedCorporate ISO 9001 : 2000 accredited All plants ISO 14001 accreditedAll plants ISO 14001 accredited

7. CUSTOMER SALES PROFILE

8. SALES TREND

9. COST OF RAW WATER

10. PROJECTED INPUT COSTS VS CPIX

11. GROSS PROFIT

12. PROFITABILITY

13. VALUE CREATION

14. RETURN ON ASSETS %

15. PROFITABILITY Why generate large surplus (profit) ? Capital investment planned for next 5 years = R2,5 billionCapital investment planned for next 5 years = R2,5 billion To access funds (debt) at lowest cost to fund capital investmentTo access funds (debt) at lowest cost to fund capital investment No loans from governmentNo loans from government No guarantees from governmentNo guarantees from government Ensure sustainabilityEnsure sustainability Not profiteering but recovering cost of capitalNot profiteering but recovering cost of capital

16. BUSINESS PERFORMANCE INDICATORS KPIUnit2001200220032004 Profit Margin %3,87,89,711.5 Net income per Employee R’ 000 25.8362.3090.44121.08 Interest cover X1,62.12.83.6 Return on Assets %5.17.59.09.9 Ave costs of capital %13.4513.0013.0012.00

17. BUSINESS PERFORMANCE INDICATORS BUSINESS PERFORMANCE INDICATORS CONT Debt/Equity%99%98%84%69% Credit Rating AAAAAAAA Assets T/O Ratio X0.60.60.70.8 Current Ratio X1.11.21.51.8 Operational costs/kℓ sold Cents9098.998106 KPIUnit2001200220032004

18. BUSINESS PERFORMANCE INDICATORS Employee Productivity Ratios 2001200220032004 Employees3249310531083097 K sold 1,097,437,8361,147,865,3471,216,342,5851,252,828,263 K per employee 337,777369,683391,359404,530 RevenueR’0002,180,1502,480,7272,884,4053,258,055 Income per employee R’000671,02798,95928,061052,00 Profit per employee R’00025.8362.3090.44121.08

19. PEFORMANCE HIGHLIGHTS Surplus : R375 millionSurplus : R375 million Revenue: R3 258 millionRevenue: R3 258 million Cash generated from operationsCash generated from operations Increase in salesIncrease in sales 33% 13 % 9,1% 2,2%

20. PERFORMANCE HIGHLIGHTS cont Customer SLA evaluationCustomer SLA evaluation Customer Satisfaction IndexCustomer Satisfaction Index Training spend ( as % of Total Payroll)Training spend ( as % of Total Payroll) Designated groups at managementDesignated groups at management BEE spendBEE spend 20032004 89% 77% 6,6% 60% 42,3% 88% 77% 7% 64% 46%

21. SOCIAL RESPONSIBILITY TREND Categories200220032004 Schools Programme R445 692 R615 503 R639 279 Health HIV/Aids 485 002 505 248 R637 652 Community Development R325 125 R361 435 R548 055 CBPD ( Part sourced externally) R18 824 178 R16 281 989 R14 840 968 FoundationN/AN/A R3 000 000 Total Spent R20 079 992 R17 764 175 R19 665 954 Jobs created 435648

22. FUTURE DEVELOPMENTS RAND WATER SERVICES Providing water services value adding to municipalities in South AfricaProviding water services value adding to municipalities in South Africa Back-up supply for SASOL R40 million pipelineBack-up supply for SASOL R40 million pipeline NEPAD initiativesNEPAD initiatives

23. FUTURE DEVELOPMENTS FUTURE DEVELOPMENTS cont INFRASTRUCTURE PROJECTS BRAKFONTEIN/RUSTENBURG 80 KM PIPELINE : R450 million currently doing environmental impactBRAKFONTEIN/RUSTENBURG 80 KM PIPELINE : R450 million currently doing environmental impact WESTERN HIGHVELD REGION PROJECT :WESTERN HIGHVELD REGION PROJECT : R113 million of which R40 million is from Rand Water

24. FUTURE DEVELOPMENTS FUTURE DEVELOPMENTS CONT. A total of R2,5 billion capital investment is planned over the next 5 yearsA total of R2,5 billion capital investment is planned over the next 5 years R962 million in infrastructure development projects in progressR962 million in infrastructure development projects in progress

25. DECADE OF SERVICE DELIVERY - REVIEW

26. DECADE OF SERVICE DELIVERY Participated in Presidential Lead projects Winterveldt, Bushbuckridge (R142m)Participated in Presidential Lead projects Winterveldt, Bushbuckridge (R142m) The project facilitated supply through 3 500 communal standpipes – benefiting approximately 1 million peopleThe project facilitated supply through 3 500 communal standpipes – benefiting approximately 1 million people R215 million worth of projects implemented by CBPDR215 million worth of projects implemented by CBPD Winterveldt sanitation project – more than 2 540 toilets for Winterveldt built (R8,3m) benefiting 25 000 peopleWinterveldt sanitation project – more than 2 540 toilets for Winterveldt built (R8,3m) benefiting 25 000 people

27. DECADE OF SERVICE DELIVERY Integrated Water Demand Management Interventions: R60 millionIntegrated Water Demand Management Interventions: R60 million Established Rand Water Services Pty (Ltd)Established Rand Water Services Pty (Ltd) Launched Rand Water FoundationLaunched Rand Water Foundation Significant Transformation within the organizationSignificant Transformation within the organization Designated group – Management levelDesignated group – Management level 64% (33% : 2000) Women representation in management, professional and supervisory – 28,2% (22% : 2000)Women representation in management, professional and supervisory – 28,2% (22% : 2000)

28. RAND WATER IS

29. Tariff Setting & Accountability Rand Water Water Affairs & Forestry Portfolio Committee October 2004

30. ISSUES Municipal Financial Management Act: 6 months advance noticeMunicipal Financial Management Act: 6 months advance notice National Treasury & SALGA: 40 days for considerationNational Treasury & SALGA: 40 days for consideration Bulk Water Supply Contract: prior consultation and information sharingBulk Water Supply Contract: prior consultation and information sharing Core/Primary activity vs. non-coreCore/Primary activity vs. non-core

31. ISSUES – Core vs. Non-core CORE Bulk Water Bulk Sanitation Rand Water Board NON-CORE Retail Water Community Projects Business Devt. Farm Operations Pipe Manufacturing Rand Water Services (Pty) Ltd

32. PROCESS DWAF raw water pricingDWAF raw water pricing Board prelim. approvalBoard prelim. approval Customer Consultation & Information SharingCustomer Consultation & Information Sharing Board prelim. approvalBoard prelim. approval Submission to Treasury and SALGASubmission to Treasury and SALGA Board final approvalBoard final approval Customer NotificationCustomer Notification Parliamentary approvalParliamentary approval Aug. 2004 Sept. 2004 Oct. 2004 Dec. 2004 March 2005

35. Water Board Accountability Presentation to the Portfolio Committee

36. Introduction Water Board accountability covered by a number of measuresWater Board accountability covered by a number of measures Presentation covers the broad requirements ofPresentation covers the broad requirements of Water Services Act, 1997Water Services Act, 1997 Public Finance Management Act, 1999Public Finance Management Act, 1999 Other requirementsOther requirements

37. Water Services Act, 1997 Water Services Act, 1997Water Services Act, 1997 Water Boards are established in terms of the Water Services Act, 1997Water Boards are established in terms of the Water Services Act, 1997 Executive Authority – Minister of Water Affairs and ForestryExecutive Authority – Minister of Water Affairs and Forestry Has principal oversight over water boardsHas principal oversight over water boards

38. Water Services Act, 1997 The Minister must review the provision of water services to water services authoritiesThe Minister must review the provision of water services to water services authorities Makes recommendations to Parliament on the establishment, functions and disestablishment of water boardsMakes recommendations to Parliament on the establishment, functions and disestablishment of water boards Must monitor operational and financial performance of water boardsMust monitor operational and financial performance of water boards

39. Water Services Act, 1997 Oversight through: Policy StatementOversight through: Policy Statement In terms of Section 39(1) every water board must prepare and adopt a policy statementIn terms of Section 39(1) every water board must prepare and adopt a policy statement Policy statement must be submitted to the Minister, the relevant Province(s) and must be accessible to the PublicPolicy statement must be submitted to the Minister, the relevant Province(s) and must be accessible to the Public The Minister can issue a directive for a water board to amend a policy statementThe Minister can issue a directive for a water board to amend a policy statement

40. Water Services Act, 1997 Oversight through 5 year Business PlanOversight through 5 year Business Plan Section 40 requires water boards to prepare and adopt a five-year business planSection 40 requires water boards to prepare and adopt a five-year business plan Business plan must be submitted to the MinisterBusiness plan must be submitted to the Minister The Minister may require a water board to amend its business planThe Minister may require a water board to amend its business plan

41. Water Services Act, 1997 Oversight through Annual StatementsOversight through Annual Statements Section 44 requires a water board to issue an Annual Report and audited financial statementsSection 44 requires a water board to issue an Annual Report and audited financial statements The Annual Report and audited financial statements must be submitted to ParliamentThe Annual Report and audited financial statements must be submitted to Parliament Numerous other obligations range from:Numerous other obligations range from: Ring fencing of additional activitiesRing fencing of additional activities Discontinuation and limitations of water servicesDiscontinuation and limitations of water services

42. Water Services Act, 1997 Policy statements, business plans and annual reports appraised annually by the Department of Water Affairs and Forestry and findings presented to the Minister to inform decision making regarding water boardsPolicy statements, business plans and annual reports appraised annually by the Department of Water Affairs and Forestry and findings presented to the Minister to inform decision making regarding water boards

43. Appointment of Board Members Board members appointed by Minister of Water Affairs and ForestryBoard members appointed by Minister of Water Affairs and Forestry Schedule 1 of the Act provides the procedure for the appointment of Board membersSchedule 1 of the Act provides the procedure for the appointment of Board members Constitution of a selection panelConstitution of a selection panel Consists of Chief Executive, Provincial representative(s), Ministerial representative and Person of good repute within service areaConsists of Chief Executive, Provincial representative(s), Ministerial representative and Person of good repute within service area Call for public nominations for Board members in water board’s service areaCall for public nominations for Board members in water board’s service area Selection panel makes recommendations to the MinisterSelection panel makes recommendations to the Minister

44. Appointment of Board Members Section 35 requires:Section 35 requires: That the Board must be representative of water services authorities that receive services from the water boardThat the Board must be representative of water services authorities that receive services from the water board Other interests served by the Board are representedOther interests served by the Board are represented Broad population is representedBroad population is represented Local Government representation determined through consultation by the Minister with relevant organisations in the service area that represent municipalities (the South African Local Government Association etc)Local Government representation determined through consultation by the Minister with relevant organisations in the service area that represent municipalities (the South African Local Government Association etc)

45. Appointment of Board Members Previous Rand Water Board consisted of representatives fromPrevious Rand Water Board consisted of representatives from Municipalities : Women : Men : Current Board has Representatives municipalities women menCurrent Board has Representatives municipalities women men Municipalities : 7 Women : 7 Men : 12 One member of Provincial Legislature also includedOne member of Provincial Legislature also included

46. Public Finance Management Act, 1999 National Treasury also has oversight over financial performanceNational Treasury also has oversight over financial performance Minister of Water Affairs and Forestry given executive authority over water boardsMinister of Water Affairs and Forestry given executive authority over water boards

47. Recent Developments to Monitor Water boards 1.Shareholders compact in terms of Treasury Regulations Act 2.Quarterly reports in terms of Treasury Regulations

48. 1.Shareholders Compact It is a requirement of Treasury RegulationsIt is a requirement of Treasury Regulations May 2002( Regulation 29.2 ) May 2002( Regulation 29.2 ) It sets parameters of the relationshipIt sets parameters of the relationship Includes performance measures and indicators which must be attained by a water boardIncludes performance measures and indicators which must be attained by a water board

49. 2. Quarterly Reports Are a requirement of Treasury Regulations May 2002 (Regulation 29.3)Are a requirement of Treasury Regulations May 2002 (Regulation 29.3) The purpose is to monitor and evaluate performance as contained in the Shareholders CompactThe purpose is to monitor and evaluate performance as contained in the Shareholders Compact To effect timeous corrective actionTo effect timeous corrective action

50. Other Mechanisms to Ensure Accountability New National Task Team led by Department of Public Enterprises to strengthen regulatory role of government over parastatalsNew National Task Team led by Department of Public Enterprises to strengthen regulatory role of government over parastatals Development of mechanism to monitor Board performanceDevelopment of mechanism to monitor Board performance Ensure good corporate governanceEnsure good corporate governance Bulk Water Services Model ContractBulk Water Services Model Contract Borrowing Limits set by National TreasuryBorrowing Limits set by National Treasury Adherence to King II on Corporate GovernanceAdherence to King II on Corporate Governance Reporting to Portfolio Committee as and when requiredReporting to Portfolio Committee as and when required CE salaryCE salary

51. THANK YOU